independent project analysis · databases that now number over 23,000 projects with a total capital...

1IPA CONFIDENTIAL

Independent Project Analysis

Leading Complex ProjectsEd Merrow

2IPA CONFIDENTIAL

IPA Viewpoint on Capital Projects

• IPA evaluates projects—large and small—for owners around the world

• In a typical year, we evaluate about 800 major projects and add them to our projects databases that now number over 23,000 projects with a total capital value of over US$5 trillion

• For each project we capture the record of the project from business case development through early years of operation

• 10 to 15 percent of those projects are what we call large and complex projects

• As a project management community about 80 percent of the projects that we do are deemed by their business sponsors to successes; when we follow best practice the percent rises to about 95 percent

• But when we look only at large complex projects our success rate plummets to about one third of projects

3IPA CONFIDENTIAL

Track Record of MegaprojectsMegaprojects Are Either Quite Good or Horrid

SuccessFailure

65% of Megaprojects Are Failures

We deem a project to be a failureif one or more of the following occurred:

Costs Grew 25%+Cost Competitiveness 25%+Execution Schedule Slipped 25%+Severe and Continuing Production Problems—2 years Yes

4IPA CONFIDENTIAL

• They were successes because they followed a particular set of good practices; success was not at all random

• So why do so few megaprojects follow these good practices?

• It can’t be ignorance; best practices are not new and have been well known for the last 15 years

• We rationalized some of the results to the complexity of these projects, which makes getting work done difficult, but the successful projects were as difficult and complex as the failed projects

• But, through this research, we now believe it actually has to do with the nature of leadership of these complex projects

• Most megaproject directors are selected from the ranks of successful middle-sized project managers

• Is that selection process effective…..?

But 1 in 3 Megaprojects Are Stunning Success!

5IPA CONFIDENTIAL

Complexity Occurs in 3 Dimensions

Most megaprojects are complex in all three dimensions

Scope Complexity1

Shaping Complexity2

Organizational Complexity3

When a project has three or more distinct sub-projects, the scope is too complex for the project director to supervise all

When a project has a significant number (4 or more) of external and/or internal stakeholder organizations, e.g., partners, government agencies, NGOs, local communities

When a project’s organization requires a central hub that supports work but does not directly manage the work

6IPA CONFIDENTIAL

Leadership Is Difficult in a Complex Project

Mac

roEx

tern

al

Stak

ehol

ders

Partners Regulators NGOs Governments Etc.

Mid

dle

Commercial Operations ProductionWellsReservoir

Mic

roFa

ciliti

es

Exam

ple Engineering

Environment, Health, & Safety

Procurement

Construction

Legal

Contracts

Project Controls

Etc.

Facilities

Project Leader’s Common Situation: Responsibility without Authority

7IPA CONFIDENTIAL

• E&P projects are usually large and complex—technically, organizationally, and politically

• Project leader position (project manager, project director) is more important in large complex projects than in small, simpler ones

• Large E&P projects are harder to manage than their counterparts in other industries because most:

‒ Are joint ventures

‒ Entail complex relationships with governments and regulators

‒ Are organized internally with 5 somewhat autonomous functions that must work together intimately to succeed

The Effect of Complexity

8IPA CONFIDENTIAL

Management v. Leadership

Project Management Project Leadership

• Good planning of deliverables

• Proper allocation of work

• Sequencing all work correctly

• Holding everyone accountable through good controls

• Articulating a clear vision for the project

• Getting all stakeholders to agree and cooperate

• Generating strong followership from the team

• Being a leader of leaders

vs.

When a project becomes sufficiently complex, leadership is necessary rather than management alone

9IPA CONFIDENTIAL

• As projects become more complex, the project manager role shifts from that of a manager to that of a leader

• Unfortunately, the manager and leader skillsets and personality requirements are not the same

• Yet complex project leaders are mostly selected based on their success with middle-size projects

• We believe that the mismatch of requirements contributes very substantially to the poor track record we have accumulated in large complex projects everywhere

Our Basic Thesis

10IPA CONFIDENTIAL

Motivation and Goals of This Study

• The decline in oil prices is accelerating the demographic shift that was already occurring in the ranks of project leadership

• To put the right people in place for the right project we need a better understanding of what generates leadership success in projects

Tom Wolfe

• What distinguishes the successful leaders from the also-ran leaders of major projects?

‒ The right experience

‒ The right temperament

‒ The right stuff!

12IPA CONFIDENTIAL

Databases and Methods

Role of Experience

Personality and Emotional Intelligence

Leadership Content and Style

Conclusions and Implications

Outline

13IPA CONFIDENTIAL

• 422 projects for the 262 PLs that answered surveys

• Average Authorization Year: 2009

• Average Project Cost (2016 US$): 200 million

Non-Megas• 56 current and past projects

for the PLs that answered surveys

• Average Authorization Year: 2011

• Average Project Cost (2016 US$): 1.55 billion

Databases and Method

Megaprojects

• Online survey of PLs in the Field Development Database• 56 PLs responded out of ~100 surveys sent• Includes PLs from 17 companies• 160+ questions around background personality

(Big 5 Attributes), and leadership• About 30-40 minutes to complete

Project Leadership Survey

14IPA CONFIDENTIAL

• The individuals surveyed were selected by the companies, so there is no expectation of randomness

‒ Better-than-average projects were selected on the whole

• Over half of the surveys were returned but with big differences by company

‒ In some companies all PLs asked returned the surveys

‒ In others, very few did

• This result was not random; it reflects the degree of control or impotence of the projects organization

Surveyed Project Leaders

15IPA CONFIDENTIAL

The PL Personality BIG 5 Scale AttributesA Well-Established and Validated Instrument

1 2 3 4 5 6 7

SpontaneousNot Process-boundNot Many Rules

ConscientiousOrganized

Self DirectedControlling

AgreeableSuspiciousConfrontationalUn-sacrificing

TrustingCompliant

Affectionate

OpenSkepticalRationalConventional

CuriousCreative

Open to Changes

ExtrovertedQuietCautiousSolitary

OutgoingAdventurous

Novelty Seeking

NeuroticInattentiveTake RisksEven Tempered

Hyper-vigilantRisk-averse

Tend to Worry

16IPA CONFIDENTIAL

Ironic Validation: Conscientious People Responded to Our Survey Earlier!

Big

5 C

onsc

ient

ious

ness

Sca

leLe

ssM

ore

Earlier LaterTiming of Response

Pr < 0.06

17IPA CONFIDENTIAL

The Emotional Intelligence ScalesAnother Well-Established and Validated Instrument

Schutte, N.S, Malouff, J.M., Hall, L.E., Haggerty, D.J., Cooper, J.T., Golden, C.J. and Dornheim, L. (1998) “Development and validation of a measure of emotional intelligence”, Personality and Individual Differences 25, 167-177.

Scale Name Description

Recognize Own Emotions

How quickly and easily does a person recognize their own emotional situation?

Recognize Others’ Emotions

How easily does one grasp how others are responding emotionally to a situation?

Regulating Emotions How good is one at controlling one’s own emotions?

Social Skills How well does one get along with others and make them feel at ease?

Use Emotions Does a person know how to use emotions to motivateothers?

Optimism Is that glass half full?

18IPA CONFIDENTIAL

Fox and Hedgehog Measure

• This distinction, popularized by Isaiah Berlin, is useful for understanding characteristic ways of thinking

• We used a standard battery of questions to understand whether our project leaders displayed any patterns in this regard:

“A Fox knows many things, but a Hedgehog knows one important thing” -Archilochus c.680-645BC

Foxes are generalists, eyes-to-the-horizon types that do not like to spend too much time on a single issue

Hedgehogs focus on a particular subject and know it extremely well; they specialize and are truly expertsAs a group, engineers tend toward being Hedgehogs

19IPA CONFIDENTIAL


Role of Experience




Outline

20IPA CONFIDENTIAL

• More than getting old

• Career path and progression

• Experience in other industries

• We expect some backgrounds are more helpful to leaders of complex project than others

• But remember, experience is only valuable if one has the capacity to learn

Experience

21IPA CONFIDENTIAL

• We believe this is an example of learning

• When teams are missing one or more key functions, projects fail

• Experienced project leaders know this and push for the right team members from the moment they join the project

• Experienced leaders review the team makeup as one of their first activities on a new project

Experienced Leaders Fill All Roles

1

4

7

10

13

16

19

22

Integrated Team Non-IntegratedTeam

Year

s of

Exp

erie

nce Pr < 0.01

+1 Std. Dev.

-1 Std. Dev.Mean

Sample

Average

22IPA CONFIDENTIAL

• We hypothesized that more diverse experiences for our project leaders would generate better ability to diagnose and fix problems

• We examined work in other industries and different jobs within their company as indicators of more diverse backgrounds

The Effects of Varied Backgrounds

23IPA CONFIDENTIAL

Utilities & Infrastructure, 43%

Industrial21% Chemicals,

22%

Any Experience Outside Oil & Gas Relates to Improved Performance (Even if it was early in career)

0.3

0.8

1.3

1.8

2.3

2.8

3.3

3.8

4.3

4.8Yes No

Pr < 0.09

+1 Std. Dev.

-1 Std. Dev.Mean

Asset $/BOE Index

Bet

ter

Wor

sePL Has Experience Outside Oil & Gas

27% of PLs Have Had Experience In Other Industries

24IPA CONFIDENTIAL

Experience in Roles Other Than Project Manager

Perc

enta

ge o

f Res

pond

ents

0%

10%

20%

30%

40%

50%

60%

NOV* HUC** Business Operations ProjectControls

ConstructionManagement

**Hookup & Commissioning*Non-operated venture

25IPA CONFIDENTIAL

0%

20%

40%

60%

80%

100%

Yes No

• 59% of respondents worked as NOV reps but they make up nearly 80% of successful leaders

• We speculate that time on NOVs is a period of intense learning for (prospective) project leaders

• Time to watch others make mistakes

• Time to reflect on what works and what doesn’t

Better Leaders Often Spent Time on NOVs*

Pr < 0.01

Perc

enta

ge o

f Suc

cess

ful P

Ls

PL Previously Spent Time on an NOV

*Non-Operated Venture

26IPA CONFIDENTIAL

Perc

enta

ge o

f Res

pond

ents

0%

10%

20%

30%

40%

50%

60%

NOV* HUC Business Operations ProjectControls

ConstructionManagement

*Non-operated venture

Experience in Roles Other Than Project Manager

Does Business Experience Help?

27IPA CONFIDENTIAL


Role of Experience




Outline

28IPA CONFIDENTIAL


• Personality is believed to be largely fixed before adulthood

• The literature is not clear about whether emotional intelligence can be taught or developed later in life

Temperament

• The personality characteristics that make certain things easier, or more difficult, for different individuals

• We expect some temperaments are more suited to complex project leadership than others

29IPA CONFIDENTIAL

Complex Project Leaders are Mostly Foxes

Foxes78%

Hedgehogs22%

Are generalists, eyes-to-the-horizon types that do not like to spend too

much time on a single issue

Focus on a particular subject and know it extremely well; they specialize and are truly experts

Almost all of our respondents are engineers and engineers tend to be hedgehogs…

But our respondents are overwhelmingly foxes

30IPA CONFIDENTIAL

Megaproject Leaders Must be Foxes to Cope With Project Complexity

Megaproject leaders are more likely to be foxes than non-mega project leaders

FoxHedgehog

Freq

uenc

y

1 2 3 4 5 6 7 8FoxHedgehog

Non-Mega PLs Mega PLs

1 2 3 4 5 6 7 8

Freq

uenc

y

failures successes

31IPA CONFIDENTIAL

• We find this result unsurprising; in our study of non-E&P project leaders we found that “foxiness” increased with project size and complexity

• The projects being executed by our respondents are large and complex and require the ability to look over and juggle a wide variety of tasks successfully

• The basic profile of the megaproject leader is a generalist

• “Foxiness” clearly relates to better projects in our sample

Why Foxes?

32IPA CONFIDENTIAL

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00Fox Hedgehog

Fox vs. HedgehogCost Index and Asset Cost Growth

+1 Std. Dev.

-1 Std. Dev.Mean

Cost Index-20%

0%

20%

40%

60%

80%Fox Hedgehog

Cost Growth

+1 Std. Dev.

-1 Std. Dev.Mean

Pr < 0.04 Pr < 0.02

33IPA CONFIDENTIAL

The Role of Personality

• Our average project leader was close to the middle on most attributes of personality measured by the Big 5

• The averageness of the sample hides the importance of personality

• Some traits are associated with success and others with failure

• Let’s look at the best of our projects and the worst…

WorseBetter

‒ Achieved cost or schedule target‒ Cost Index: <= 1.00 OR

Execution Schedule Index: <= 1.00

‒ Did not meet cost and schedule targets

‒ Cost Index: > 1.00 ANDExecution Schedule Index > 1.00

34IPA CONFIDENTIAL

Better and Worse

B = Better W = Worse

BWLess Agreeable

MoreAgreeable

BWLess Conscientious

More Conscientious

B WIntrovert Extrovert

B WRelaxed Neurotic

BWClosed OpenPr < 0.05

Pr < 0.02

35IPA CONFIDENTIAL

• A little more agreeable

• Much more open‒ As a group engineers tend strongly toward the closed end of this scale Preference for black and white

Not prone to “creative” solutions

‒ Openness is the dimension most associated with the ability to gather more information for decision-making

Successful Project Leaders

The generalist learner is prototypical successful project leader

36IPA CONFIDENTIAL

Emotional Intelligence and Success

Scale Sign Z-score withSuccess

Statistical Significance Comment

Recognize Own Emotions + 1.96 .05 Successful leaders have good

self-awareness

Recognize Others’ Emotions + 1.68 .09 Relationship to project success is

obvious

Regulating Emotions + 0.18 .86 This is the only EI scale that

shows no relationship

Social Skills + 1.78 .08 Key to effective teamwork

Use Emotions + 1.12 .26 Directionally correct; some components are significant

Optimism + 2.0 .05 This is a measure of emotional strength in face of difficulties

37IPA CONFIDENTIAL

• The personality profile of the successful large complex project leader doesn’t resemble a cross-section of engineers

• The profile also doesn’t look a lot like that of project leaders of smaller, simpler projects

• Successful complex project leaders are open—as open as psychologists and lawyers

• Successful leaders are systematically high on all emotional intelligence scales

Summarizing Experience & Temperament

The successful project leader is the experienced, neurotic, generalist who is open to others’ views

38IPA CONFIDENTIAL


Role of Experience




Outline

39IPA CONFIDENTIAL

• Personality characteristics and emotional intelligence do not magically change project outcomes

• Rather, they shape the tasks that leaders actually do‒ Personality and emotional intelligence affect the things one is good at doing

‒ Everyone tends to do more of the things we are good at and less of what we are not

• Personality and EI shape the extent to which the right practices are actually followed

The Causal Links

40IPA CONFIDENTIAL

Generalist Orientation

Open Personality

High Emotional Intelligence

Varied Experience

Project Outcomes

Causal mechanisms to trace how PL characteristics shape project results

Project Leader Traits

Project Leader Tasks

Project Practices

From Traits to Tasks and Practices

41IPA CONFIDENTIAL

Personality and E-Intelligence Shape TasksTasks Project Leaders Spend Time On During Projects

Significantly Less Time Significantly More TimeBig 5 Personality Scales

Openness Work Process and Engineering Communication and People Management

Conscientious People Management Communication and Contracting

Extrovert People Management and Contracting

Neurotic Contracting Project Management

Emotional Intelligence ScalesRecognize Own Emotions Project Management People Management

Recognize Others’ Emotions Project Management People Management

Regulate Emotions Project Management Contracting

Social Skills Work Process, Project Controls, and Project Management People Management

Use Emotions Work Process People Management and Contracting

Optimism Project Controls People Management and Contracting

42IPA CONFIDENTIAL

• Those with more open personalities and high emotional intelligence tended to focus on:‒ Communication

‒ People management

‒ Contracting

• Those lower on these scales tended to focus on:‒ Project management tasks

‒ Controls and engineering

‒ Work process

• The first group understood their job to be leadership; the second felt their job was project management

PMs and Leaders

43IPA CONFIDENTIAL

-40%

-30%

-20%

-10%

0%

10%

20%Yes No

Those That See Stakeholder Management as Value-Adding Get Better Results

Pr < 0.04

+1 Std. Dev.

-1 Std. Dev.Mean

Cost Growth

Bet

ter

Wor

se

0.70

0.80

0.90

1.00

1.10

1.20

1.30Yes No

Pr < 0.06

+1 Std. Dev.

-1 Std. Dev.Mean

Execution Schedule Index

Stakeholder Management Perceived as Value-Adding PL Task

Stakeholder Management Perceived as Value-Adding PL Task

44IPA CONFIDENTIAL

Project Leaders Should Not Do Others’ Work

Goo

dFa

irIn

adeq

uate

Poor

Bes

t

FEL Index

Pr < 0.06

No

Yes

Engineering/Technical Tasks Important for PL

0.90

1.00

1.10

1.20

1.30

1.40

1.50Cost Index

Pr < 0.05

No

Yes

Engineering/Technical Tasks Important for PL

0.90

1.00

1.10

1.20

1.30

1.40

1.50Execution Schedule Index

Pr < 0.02

No

Yes

Project Controls Is a Common PL Task

45IPA CONFIDENTIAL

Communication and People Do FEL

Goo

dFa

irIn

adeq

uate

Poor

Bes

t

FEL Index Project Controls Index

Fair

Poor

Def

icie

ntG

ood

Spends Time on People Management

Does NOTSpend Time on People Management

Values Communication

Does NOT Value Communication

Pr < 0.001Pr < 0.05

Spends Time on People Management

Does NOTSpend Time on People Management

Values Communication

Does NOT Value Communication

Pr < 0.001Pr < 0.04

46IPA CONFIDENTIAL

• Successful leaders manage to balance a paradox:‒ Good project leaders listen to everyone, but

‒ Jealously guard their decision-making prerogatives

• The key is that they are genuine listeners:‒ They will change their mind if the evidence is good

‒ They never do “fake listening”

• But they and they alone will make the final decisions‒ No need for consensus

‒ No group-think

‒ No going along to be a good sport

Listening and Decision-Making

47IPA CONFIDENTIAL


Role of Experience




Outline

48IPA CONFIDENTIAL

• Good leadership is very important to the performance of major projects—perhaps too important

• The leaders of successful megaprojects have a very different profile than project managers generally or engineers generally

• Only a small subset of technical employees are good candidates for these positions‒ They need to be identified early in their careers

‒ Given assignments that provide broader backgrounds

• Most companies do not appear to have screening criteria and development paths that lead to a coherent cadre of major project leaders

• Assignment appears based on characteristics of last project (or favoritism) rather than the needed leadership qualities


49IPA CONFIDENTIAL

What Is the “Right Stuff”?

Profile of a Successful Leader for Complex Projects:

Savvy, generalist fox

Very open to others’ input

Strong focus on people issues

Experience as a non-operating partner rep on joint ventures

No experience working in the business (unless predictable but high cost is desired result)

Desired personality characteristics are easy to measure, but that is hardly ever actually done Very high emotional intelligence

50IPA CONFIDENTIAL

Concluding Thought

“The hard stuff is easy.

It’s the soft stuff that is really hard.”—Leader of the most complex successful

gigaproject ever done

51IPA CONFIDENTIAL

THANK YOU!

independent project analysis · databases that now number over 23,000 projects with a total capital...

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