Project Perspectives

The annual publication of International Project Management Association
2009
ISSN 1455- 4178
€8.0 0
Vol. XXXI
Table of Contents
4 How does a CEO choose the right way to run his
organization’s programmes and projects?
Alan Harpham
10 Project Management in Global organizations -
Experience of a practitioner
AgnesRoux-Kiener
14 Factors influencing design and performance of the
business model of a project-based firm
Jaakko Kujala, KarlosArtto and Annaleena Parhankangas
18 The Global Project Management Support at MAGNA
STEYR
Wolfgang Danzer
23 What Western Project Management can learn from
Chinese Culture, Philosophy and Management Approach
JerzyStawicki, Ding Ronggui and Otto Zieglmeier
28 The prerequisites and steps to develop Corporate Project
Portfolio Management (PPM)
Matti Haukka
32 Maturity of Petromas a Project Oriented Company and
Plans for Further Development
Peter Crerar and Dagmar Zuchi
38 The Dichotomous Nature of Motivation in Collocated
and Virtual Project Environments
Ravikiran Dwivedula, Christophe Bredillet and Philippe Ruiz
44 Ecological and business aspects of offering life-cycle
services in the project business
Saara Kujala
54 Project Management On Stage
Helgi Thor Ingason and JensThordarson
62 ONE SIZE FITS ALL - Implementation of a holistic and
scalable project management methodology
ThomasGschossmann and Hermann-Josef Weber
66 Project Governance - The Role And Capabilities Of The
Executive Sponsor
Lynn Crawford and TerryCooke-Davies
74 Automotive project management - More Lessons to
Learn!
Reinhard Wagner
80 Unexpected urgent emergency projects - Lessons for all
project managers
Stephen Wearne
84 Project Management of Total Care®Projects in the
Construction Industry
Ali Imran Khan, Tiew Ying Ting, Andrew Gale and Mehmood
Alam
92 Knowledge Oriented Project Management
Stanisław Gasik
Dr. Kalle Kähkönen
Chief Research Scientist
VTT - Technical Research Centre
of Finland
Enabling Business
With Projects
Acknowledgement to IRNOP 2007 and IPMA WC 2007
conference organizers.
Several papers of this issue have been picked up fromIRNOP
2007 and IPMA WC 2007 conferences. The original proceedings
papers have then been updated and or otherwise changed by the
authors to meet the needs of Project Perspectives.
Published by
The Project Management Association Finland (PMAF) in
co-operation with International Project Management
Association (IPMA). PMAFis:
- Forum and a meeting place for project professionals
- Developer of project thinking and knowledge
- Active partner within the international project community
PMAFserveswith
- Two project management journals(Finnish & English)
- YearlyProject Dayconference and frequent theme events
- Project management certification
http://www.pry.fi/index_eng.htm
Editorial Board: Kalle Kähkönen (Editor in chief), Aki Latvanne
ISSN 1455-4178
Editorial
T
hroughout various lines of businesses projects have
proved to be flexible and valuable means to achieve
change in modern world. Thus it is not wonder that
projects increasingly exist as inherent parts of companies'
operational practice. Across the integration of company op-
erations and projects we are learning important lessons and
shaping our knowledge about the content and appearances
of projects and their management in varying conditions.
Examples of practical challenges that we are covering in
this issue are
- Viewing frameworks of top management over critical
projects
- Meeting commercial objectives of companies with
projects and their portfolios
- Alignment of project management approach to the
requirements of global business
- Ecological implications of current practice
- Diversified and distributed project environments
The examples above are demonstrating the emergence of
new requirements when projects are embedded in business op-
erations. Although projects and their management are widely
considered as a separate profession there is a clear need to
preset this together with other management paradigms and
doctrines. Vice versa, the other well established management
teaching (for example company, human and communication
management) must acknowledge and incorporate projects and
their management inside their own doctrines.
The implications of project based operations to the struc-
tures of companies and their management are profound.
Apparently, being knowledgeable in this respect shall provide
a substantial competitive advantage for various business ma-
noeuvres and required changes in the modern world.
4 www.pry.fi
Most CEOs now have some awareness of programme and project management if not detailed
knowledge. Most organisations use programmes and projects, implicitly or explicitly, to deliver their
change strategies in order to survive and prosper in the world of business, government and ‘not
for profit’ sectors. To date most have relied on employing specialist staff familiar with project
management to select the way they run their projects. In recent times however most CEO’s want
to know when the outcome of the projects and programmes are to be delivered and their quantum
rather than when they will receive the outputs and at what cost. The benefits used to justify the
business case were built on these forecast benefits and their timing. The choice of programme and
project approach is becoming increasingly important to achieve satisfactory delivery. This paper
looks at where a CEO might seek and select guidance.
How does a CEO choose the right
way to run his organization’s
programmes and projects?
Introduction
Projects and programmes have been around a very
long time. As we showed in our paper for the IPMA
World Congress 2002 (Harpham, 2002), the history
of the study of project and programme manage-
ment (PPM) is relatively recent. This is certainly
true if we exclude wonderful ancient projects such
as the pyramids or the burial place of the Emperor
in Xi’an, China that some of us were privileged to
see at the last IRNOP Conference, about which
little is known because the project managers were
executed at the end of the project lest the secrets
of the Pharaoh’s or Emperor’s last resting place on
earth were to escape. How lucky we are to be alive
and able to write about our projects!
In the paper we showed a table of this history
of project and programme management in recent
times, since the last World War. The table now
shows the development of the best practice ap-
proaches developed by the Office of Government
Commerce (OGC) in the UK – namely Managing
Successful Projects with PRINCE2 (PRINCE, 2007),
a methodology for managing projects and Manag-
ing Successful Programmes (OGC, 2007a). Office
of Government Commerce has also developed
Management of Risk: Guidance for Practitioners
(OGC, 2007b) and the ITIL : IT Infrastructure Library
(OGC, 2007c). It also includes the development of
Bodies of Knowledge by Professional Membership
bodies.
At the same time as PPM has been develop-
ing so have other disciplines including Change
Alan Harpham
The APM Group
United Kingdom
Management and Leadership (Harpham & Kip-
penberger, 2006; Harpham et al, 2006). Leadership
is as complex as it ever was and the theorists have
as many theories as there are leaders! (Cameron &
Green, 2005). One thing is becoming clearer, and
that is that effective leaders help organisations
to develop a common vision and then direct its
implementation. Their focus, unlike programme
and project managers is on the outcome of the
programme and project more than the output.
The outcome is their focus and indeed the pro-
grammes and projects themselves are a means to
this end and not the end in themselves, despite
the wishes of some PPM managers! The whole
purpose of programmes and projects is usually to
bring about strategic change(s) within organisa-
tions that enable them to transform themselves
and their capability in their chosen markets (De
Hertogh et al, 2006).
This means that more organisational leaders
and Chief Executive Officers (CEOs) of commer-
cial organizations are recognising the need for
effective processes that enable them to bring
about organizational changes in a way that they
can mange not only the outputs but also the
outcomes. Many have learnt that Programme
and Project Management can act as an excellent
tool to assist in managing this activity. However
it is also true to say that many CEOs have little
or no background in PPM and are unsure where
to start. This paper is intended to help them and
those that advise them.
Proj ect Perspecti ves 2009 5
Body of knowledge and Competence
baselines
The Professional Bodies and the Body of
Knowledge
Body of Knowledge is a term that has developed
in some professions as a statement of all the
knowledge associated with that profession. The
profession of project management, despite the
large number of members of the Project Manage-
ment Institute (PMI based in US, with international
offices) with nearly 200,000 members world wide,
and the considerable number belonging to the
International Project Management Association
and its member associations, is still in the process
of establishing itself as a profession. Given recent
experiences of the governance of some profes-
sions connected with infamous business scandals
it may not represent such an honor to become a
profession!
Never the less, the PMI, the International Proj-
ect Management Association (IPMA – originally
a federation of European PM Associations, but
now with a wider reach) and the Association for
Project Management in the UK (APM – now ap-
parently wishing also to be a global player) are
all keen to establish PM or PPM as a profession.
Each has developed its own Body of Knowledge,
or in the case of IPMA its International Compe-
tence Baseline, now on version 3 (IPMA, 2007)
and the latest addition of the three. The PMI
originally developed its PMBOK®in 1985 and is
now on version 3 (PMI, 2004). APM developed its
first Body of Knowledge a little later in 1992 but
is now on version 5 (APM, 2006). PMI have now
also produced their Standards for Programme
Management and Portfolio Management in 2005
(PMI, 2005a, PMI 2005b) albeit these do not seem
to have been so well received in the market place
as the PMBOK®.
The difficulty with a Body of Knowledge (BoK) is
its potential vastness and where to stop. The BoK
could be potentially huge if it were to literally
carry all the knowledge that could be associated
with PM, even bigger for PPM. For example our
papers in Shanghai on change management and
leadership, the softer, interpersonal skills and so
on have traditionally been left out of the BoKs.
An analogy might be the Bible with its 68 books,
in effect a library of books. As we now know
historically many other books were left out when
the ‘orthodox’ Bible was agreed upon by the then
Church. We also know at Nicea they agreed upon
a Creed thereby excluding some Christians from
‘orthodox’ Christianity and making them ‘heretics’.
Is that how we should think of the PPM BoK, as
a library of subjects each containing a library of
books? Heaven forbid we should agree a PPM creed
and thereby create PPM heretics. It is interesting
to observe however that it has been difficult to
get one agreed professional body with one BoK.
Indeed the existing BoKs, and for this purpose I
include the ICB are all very different. The PMI is
and always has had a focus on process, the IPMA
Figure 1. Development History of PPM
Network Planning
Integrated Project Control Systems
PM’s Interpersonal skills
PM’s Competency
Key roles/responsibilities
PM BOK®
APM Body of Knowledge
PRINCE2
Management by Project
Programme Management
Benefits Management
Managing Succesful Programmes
Maturity Models
Management of Risk
Activity 1950’s 1960’s 1970’s 1980’s 1990’s 2000’s
6 www.pry.fi
- ICB on competence and the APM’s originally
closer to competences, now a bit broader. As Pe-
ter Morris outlined in his keynote speech at the
Moscow IPMA World Congress he felt the main
problem with the Profession was that the Profes-
sional Bodies were far too narrow with their BoKs
(Morris, 1999a) also similarly outlined in his paper
from the Centre for Research in the Management
of Projects at UMIST entitled Updating the Proj-
ect Management Bodies of Knowledge (Morris,
1999b). Peter Morris also refers to the need to
keep any BoK manageable and points away from
NASA’s much bigger work at that time.
What can be said is that all three of the BoKs
cover the basic agreed tenets of Project Manage-
ment, whilst so far only the PMI (among the three)
has published on Programme Management.
What is good Project and Programme
Management?
Good project management is about delivering the
agreed project outputs to an agreed time, cost,
quality and performance. This is all good ‘stuff’ and
for the main part what the existing BoKs cover, and
cover well – the generics of project management.
However as we have already said above the CEO is
more interested in outcomes that will deliver the
strategy set by the Board. This requires the focus
to move more to the outcomes of projects and
programmes – the benefits usually used to justify
the project or programme business case in the first
place. All too often using straight forward project
management the CEO finds him or herself in a
blind spot after accepting the business case and
giving the go-ahead for programmes and projects.
S/he may lucky to receive lots of excellent progress
reports about the project outputs perhaps even
with good forecasts of likely final delivery time
and cost, when what s/he really wants to know is
‘if and when’ s/he will receive the business benefits
and whether they are to the quantumand at a rate
expected. Programme Management has begun to
address this shortcoming, but only recently and up
until 2005 not by the professional associations or
institutes (and then only by the PMI).
Good Programme Management provides the
glue between the business strategy and the proj-
ects being undertaken. It should maintain a focus
on delivery of the benefits. It helps to ensure the
organisation is focused on doing the right projects
in the right priority to benefit the overall business
– see Figure 2, from my previous paper Successful
Programme Management or Managing Successful
Programmes (Harpham, 2002).
To summarize good programme management
provides the CEO with some control over his/her
investments in transforming the organisation
to better match the opportunities it faces in its
market place. So how to get effective programme
and project management in place?
How to get effective PPM into an
organization?
Effective total PPM organization needs three
things:
- Good Governance
- Good Processes and
- Good People.
Good Governance to establish the right PPM
organizational approach and methods, to select
and approve the right programmes and projects
and to monitor and control them effectively -
what some would call ‘total PPM’.
Good Processes that enable anyone in the or-
ganization to speak the same PPM language with
the same understanding and to make sure that
anyone working in the system understands how
programmes and projects are organized and run.
Good People who know and understand the
selected process, approach and methodology, as
well as having a good understanding of the total-
ity of PPM. Good PPM leaders also have effective
leadership and interpersonal skills (Harpham &
Kippenberger, 2006; Harpham et al, 2006).
What is a methodology and Best Practice?
A project management methodology is a precise
set of processes that determine the way in which
an organization will organize and manage its
projects. Best Practice is the bringing together
of a set of processes that are considered to be
the best process for each activity in the project
management cycle.
The Office of Government Commerce in the
United Kingdom and its predecessor the CCTA
(Central Computer and Telecommunications
Agency) decided in 1992 to develop its Best Prac-
tice in project management which it called PRINCE
(Projects in a Controlled Environment) – somewhat
of a misnomer given that the project environment
(or context) is seldom controllable, and rarely by
the project manager or owner! PRINCE is now
PRINCE2 (PRINCE, 2007) (a second version). The
OGC is the authority for best practice in com-
mercial activities in UK Government. As such it
has also developed its best practice approach for
managing progammes (of projects) in a publication
in 1999 called Managing Successful Programmes
(OGC, 2007a).
Figure 2. The link between Strategy and Projects
Results & Benefits
Dream
Tasks
Project
Programmes
Strategies
Visio
Objective
Broad
Specific
Direction
Coherence
Achievement
Action
Proj ect Perspecti ves 2009 7
From these humble beginnings in the public
sector the demand for these two publications has
grown and grown. The TSO was given the task of
managing these publications along with other
Best Practice publications and the APM Group was
asked to establish an accreditation process for pro-
fessionals using this Best Practice. The scale of this
has grown into a world-wide phenomenon now
used as much by the private sector as the public
sector. Earlier this year the 200,000 examinee in
PRINCE2 was accredited, and there are more than
3,000 examinees taking an APMG exameach week
somewhere in the world.
We believe, and most of the leaders of the
professional bodies in PPM agree with us, that the
PRINCE2 methodology and the MSP approach are
complementary to the Bodies of Knowledge, cov-
ering one part of the BoK in more detail and not
claiming to represent total PPM as the BoKs do.
How to decide on the right approach?
Most established organisations are looking for a
solution that is easy to adopt, has low cost main-
tenance, and has access to lots of practitioners
thereby reducing the potential induction training
costs.
When I was a practicing management consul-
tant in the mid-1980s I had a major telecom-
munications client who asked us to help them
develop a way of managing a major telecoms
project. In point of fact it turned out to be a major
programme of projects worth in excess of £1.5
billion. We set about designing a project man-
ager’s handbook with a framework of processes
for managing this vast set of projects which had
already been approved by the Board on a two-line
approval based on an economic study. The Board’s
approval failed to specify the ‘what’ or ‘how’ of
the project, only the ‘why’ – there being neither
a project definition document nor plan. The de-
velopment of the project (programme) definition
and plan became a £30 million exercise in its own
right and took two years to complete.
The development of the Project Manager’s
Handbook (PMH) cost the best part of £500,000
and the roll-out training a further £500,000 as far
as I can recall. Not a token amount by any means.
The organisation went on to adopt the PMH as
the corporate approach to managing its internal
projects. More recently this same organisation
has decided rather than investing further sums
of money in maintaining and developing its own
methodology it would adopt PRINCE2. This costs it
relatively little money to procure for an organiza-
tion wide license, ensures that it is using a process
that a number of users invest time and effort in
maintaining and developing together with the
undertaking of OGC to maintain and develop it,
as with their other Best Practice products. Fur-
thermore through the APM Group’s accreditation
work it knows it has more than 250 competing
Accredited Training Organisations to choose from
world wide for its PRINCE2 training with nearly
500 Approved Trainers. In addition there are over
200,000 accredited PRINCE2 personnel world
wide to select from. All it has to do is to tailor
the method to its own purposes and there are Ac-
credited Consulting Organisations with Registered
Consultants that can help them to do this.
What in some circles they call a ‘no brainer’, i.e.
a decision that hardly calls for any brain power
or work!
But back to the question of determining the
right approach. I would recommend that the
first thing is to choose between the various total
PPM training on offer based on the BoKs i.e. do
you want to go with PMI, IPMA or APM? If you
are a truly global organisation this will point you
towards the PMI as it has the most coverage, but
the others are all used quite extensively. This will
give useful all round training on the basic tenets
of good PM.
There are agreed PM syllabi based on the BoKs
established within the professional associations
and qualifications at various levels that cover the
students’ knowledge and understanding at vari-
ous levels. There are many providers of training
courses in a competitive market usually teaching
programmes based on these syllabi and usually
with accreditation from the professional body
concerned.
When it comes to a methodology, as indicated
above this is rapidly becoming a ‘no brainer’.
PRINCE2 and MSP are the established market
leaders world-wide. For both PRINCE2 and MSP
there is a list of all accredited training organisa-
tions (ATO) that offer training in either or both.
If you intend to use both it makes sense to start
with an ATO who can offer both, and who has the
kind of regional spread that you require or plan to
require. APM Group has established offices in US,
Australia, Holland and China as well as the UK and
is constantly planning for new territories. Exams
have been offered in more than 50 Countries and
in over 10 languages. Truly world coverage.
Clearly a training organisation that can offer
both the more general BoK type training as well
as the more specific PRINCE2 or MSP training is
likely to provide the best overall match.
For those just starting out with PRINCE2 or
MSP, or those wanting to radically raise their game
there are also Accredited Consulting Organisations
(ACO) with specific Registered Consultants who
can advise on how to introduce or improve the
organization’s performance at PPM. Currently
there are more than 20 ACOs, with over 50 Reg-
istered Consultants. Having recently obtained our
accreditation with the Institute of Management
Consultants to offer their internationally recogn-
ised CMC®qualification we expect this number to
grow significantly in the near future. These ACOs
also have access to a number of specific tools to
help in their work including an OGC based ma-
turity model P3M3 (Portfolio Programme Project
Management Maturity Model), the On-line Profiler
(for assessing the competences of individuals on
programmes and projects – hard and soft skills and
behaviours), the IPMA’s/GPM Project Management
Excellence model (which can compare individual
projects and their processes and results), and a
new product we are developing called PST (Project
Success Tracker – an analytical tool for assessing
the likely success of a project during its life and
making recommendations to bring it back on track
when it is found to be off-track).
8 www.pry.fi
Conclusion
A s the paper shows it is a relatively easy decision
facing the CEO of an organization wishing to
choose the right approach to selecting training
for his/her staff and the right processes to focus
on. Use the materials developed by the Profes-
sional Bodies for the generic knowledge and
skills training. Use OGC’s Best Practice processes
and approaches for developing the organization’s
own methodology and approach to managing its
projects and programmes, i.e. PRINCE2 and MSP.
Use Accredited Organisations to get training and
consulting support. Finally they should use Pro-
fessional Bodies, User Groups and APMG’s on-line
networks to stay in touch with the community,
developments in PPM and through these networks
have the ability to influence the future of PPM to
theirs and others’ benefit.
Acknowledgment
I would like to thank all the authors of all the Of-
fice of Government Commerce, UK’s Best Practice
publications, and those responsible in The Office of
Government Commerce and its partners for Pub-
lications and Accreditations, namely the TSO and
the APM Group for their work on developing OGC’s
Best Practice publications and accreditations.
See www.ogc.gov.uk ; www.tso.co.uk ; and www.
apmgroup.co.uk for more information. I would
also like to thank all those who have contributed
to the development of the various BoKs and the
ICB through their writing.
Alan Harpham
BSc MBA (1975) FAPM FCMC
Alan is ‘part-time Chairman of the APM
Group, (www.apmgroup.co.uk), with a port-
folio of other interests including being a
director of majorsporty (www.majorsporty.
com), chair of the Ecumenical Board of
Workplace Ministry Hertfordshire and Bed-
fordshire (www.workplaceministry.org.uk), a
board member of The International Centre
for Spirit at Work (www.spiritatwork.org).
He has been a director of P5 – the Power of
Projects and Subject Matters, MD of Nichols
Associates (now the Nichols Group), and a
former Director of the MSc in Project Man-
agement at Cranfield University’s School of
Management. He is a former chair of MODEM
and a former Council member of the APM.
He focuses on business start-ups, programme
and project management and executive
coaching – individuals and teams.
References
Harpham, A. (2002)
Successful programme Management or Managing
Successful Programmes. IPMA World Congress,
Berlin 2002.
PRINCE (2007)
Office of Government Commerce, UK. Managing
Successful Projects with PRINCE2 Manual 2005,
5th Impression 2007.
OGC (2007a)
Managing Successful Programmes – Delivering
Business Change in Multi-project Environments.
New Edition due in 2007, Office of Government
Commerce, UK
OGC (2007b)
Management of Risk : Guidance for Practitioners,
4th Impression (with amendments) 2005. New Edi-
tion due 2007, Office of Government Commerce,
UK.
OGC (2007c)
ITIL – The IT Infrastructure Library. Version 3 is
due for publication in 2007, Office of Government
Commerce, UK.
Harpham, A. and Kippenberger, T. (2006)
Change Management and Programme and Project
Management. IPMA World Congress, Shanghai
2006
Harpham, A., Kippenberger, T. and Winter, K. (2006)
Inspirational Leadership and PPM. IPMA World
Congress, Shanghai 2006
Cameron, E. and Green, M. (2005)
Making sense of Change Management, Kogan
Page, USA.
De Hertogh, S., Van Den Broecke, E., Vereecke, A.,
Viaene, S. and Harpham, A. (2006)
A multi-level approach to programobjectives:
definitions and managerial implications, Vlerick
Leuven Gent Working Paper Series 2006/11, Vlerick
Leuven Gent Management School, Belgium.
IPMA (2007) International Project Management As-
sociation. ICB – IPMA Competence Baseline v 3.
PMI (2004)
PMBOK version 3 - 2004, Project Management
Institute. USA.
APM (2006)
Body of Knowledge version 5 – 2006, Association
for Project Management, UK.
PMI (2005a)
The Standard for Programme Management 2005,
Project Management Institute. USA.
PMI (2005b)
The Standard for Portfolio Management 2005,
Project Management Institute. USA.
Morris, P.W.G (1999a)
Project Management in the Twenty-First Century
Trends across the Millennium. Keynote speech
IPMA/Sovnet Congress, Moscow, Sept 1999.
Morris, P.W.G (1999b)
Updating the Project Management Bodies of
Knowledge, a paper for the Centre for Research in
the Management of Projects, UMIST 1999.
Proj ect Perspecti ves 2009 9
Vision is not born by accident. It is learned.
Tieturi Informator is the leading IT and project management trainer in the Nordic countries. | Business is evolving, you should too.
www.tieturi.fi
TIETURI – YOUR PARTNER IN PROJECT DEVELOPMENT
Project management skills constitute key competence areas within
successful organisations. Competetive advantages are achieved by
individuals simultaneously managing issues and leading people in rapidly
changing environments.
Achieving objectives and obtaining results require capacities in balancing
project scope, resources and time. This is done through efficient project
tools, within high-quality project management systems.
Let Tieturi help you achieve your goals. With 25 years of tailor-made
training solutions we have what it takes to make you a winner. As the leading
provider of Project Management and ICT training in the Nordic and Baltic
countries we are ready to meet your challenge.
Our training courses stretch over the whole project life-cycle. We cover
needs on both programme and project level, relating to both management
and leadership skills. We provide:
· Public courses
· CusLomer specilc Lailor·made courses
· 1raininq and cerLilcaLion proqrammes
· Web based and blended learninq soluLions
· Conlerences and seminars
When choosing Tieturi, your training experience will be based upon the
newest technological innovations, interactive training methods and latest
research tested in real-life situations. Our motivated and experienced
trainers are at your service.
Look into our product portfolio or tell us your needs. We are listening.
For more information please contact us
www.tieturi.fi | kurssit@tieturi.fi | +358 9 4315 5333
10 www.pry.fi
The globalization of projects, the extensive use of project management by all functions, and the introduction of best
practice change management into project management have a major impact on the culture and ways of working of
project teams, the way they build coalitions around their project, the innovation process, the way projects are organized
and the development of the project management capability.
Most of the projects before were small with low
risk of damaging the organization. Now global
projects require big investments with high risk to
the organisation.
Also project members come from different
horizons with their own culture. Global Project
management has to be flexible enough to be
working in all cultures, whether in Asia, Latin
America, Africa, Europe or North America. This
challenge called for a One Project Management
global language and approach that would fit all
cultures.
The adoption of project management for all
innovations (a product, a factory, an IT system,
an HR program) and functions
When Project Management was introduced sys-
tematically in IT, the language and culture of PM
was still appropriate. But if you try to speak the
language of project management to marketing or
to HR professionals, you quickly realize that they
would reject project management if you do not
make it accessible to them.
And these two functions need project manage-
ment as much as the other functions. As HR and
Finance administrative tasks are being outsourced,
the remaining tasks are to support the business in
improving the organisation. This is mainly done
through projects.
This cross-functionalisation of project manage-
ment is calling for a simplification of the language
used while keeping all the benefits from the Proj-
ect Management techniques.
The introduction of best practice change
management into project management.
This third challenge came fromthe realization that
change management and project management
had a lot in common. Every project introduces a
change, every change is a project. Change manage-
ment techniques have to be embedded into project
management as much as project management has
Project Management in Global organizations –
Experi ence of a pract i t i oner
Introduction
This paper summarizes knowledge fromexperience
as a practitioner of working with IBM from1971 to
1993 and with Unilever from 1993 to 2006. Work-
ing in IT, in HR and in Organisation, I was involved
in several projects in all functions, across the
world, leading global HR IT projects, working with
the marketing teams to launch products in the
market place, with R&D to replace the functional
organization by an organization by projects and
lately working with the HR function to introduce
project management in HR.
In 1990, I presented a paper to the IPMA Con-
gress in Vienna on “Project Organisation – a step
to transformthe traditional pyramid”, based on my
IBM experience, focusing on how project manage-
ment was influencing the rest of the organisation.
This time the focus is on how the organisation is
impacting project management.
This paper will review the trends impacting
projects today and their impact on project man-
agement.
Trends impacting projects in global
organizations
Globalization of Projects
Companies in the Fast Consumer Good Industry
used to work locally, particularly the European
ones. The challenge of working globally came later
than in the Computer and car industries but it had
the same effect on project management.
Projects which were done before very close to
the market place, in direct contacts with stake-
holders are now more and more done regionally
for Foods and globally for Home and Personal
Care. Before, each country could have its own
way of managing projects, following local best
practice and local Project Association guidelines.
Now, project teams, even if there are physically
located in a country, have to follow a global ap-
proach, working with and for global stakeholders.
Agnes Roux-Kiener
Organisation
Transformation
France
Proj ect Perspecti ves 2009 11
to be embedded into change management.
In Europe, Change managers as a profession
started to exist in the mid 90’s, in replacement of
the previous organisation departments. Change
management as a discipline was then developed
mostly by HR. Some change managers in charge of
major re-organisation or mergers projects started
to use the techniques of project management and
embedded project management techniques into
change management.
Many of the issues of the marketing projects
are the same as for the HR change projects, e.g.
the role of leaders in project management, the
importance of culture for a project, how to in-
volve everyone in the change, the importance of
communication.
This is leading to the assumption that the char-
acteristics of change have a lot in common with
project management:
Change is holistic
If you tackle only some aspects of change, like
changing your structure but not paying attention
to your culture or changing your process and not
paying attention to your strategy and vision for
the business, you will deteriorate performance
instead of improving. For project management it
is the same, if you just do project planning and do
not pay attention to project culture or stakehold-
ers, you will be less successful.
Change is about building coalitions
You build coalitions in change management in
order to minimize resistance to change. The key
word here is involvement. Someone who is in-
volved understands why the change is happening
and progressively will go with the change instead
of resisting to it. Too often we still think that once
the technicalities of our project are done, then
the implementation is easy. When the problems
only start…..
Change is a process
Change is a process that can be split into three
sub-processes: planning for change, energizing
the organisation and implementing change. The
business is always tempted to go directly from
planning to implementation. Best practice tells
that you have to take time to analyze the culture,
the resistance you could face to implement the
solution you are proposing. You need to energize
the organization and to build extended coalitions
instead of by-passing people resisting to change,
instead of putting them in front of the fait ac-
compli.
Change is an art, not a science
This is also valid for project management. Even if
there are many things we can solve with science
and math, each project is like a piece of art, differ-
ent fromanything that was done before, for which
the skills of each member of the project team will
be assembled as for an artistic creation.
Impact of these trends on project management
We shall now look at the impact of these three
trends on different aspects of project manage-
ment: project culture, energizing project teams,
building coalitions, innovation process, project
structure and governance, and development of
the project management capability.
Impact on project culture
In my paper “Project organisation – a step to
transform the traditional pyramid”, I defined the
values of a project culture as Team Based, Team
Empowerment, Networked, Task Oriented, Result-
Focused and Temporary. In a global organisation,
I would add a seventh value, Diversity.
In order to build high performing teams in glob-
al organization, the culture needs to appreciate
diversity. For people to respect others, they need
to understand that diversity is enrichment and not
a threat, that a team is much more effective for
a global project if they represent the diversity of
the world. You can use all kind of tests for team
profiling in order team members understand how
different they are and how to overcome the dif-
ficulties of working together.
How do you create a global project culture?
First priority is to create a common language
as language shapes culture. The glossary has to be
inspired by the external best practice and adapted
to your company culture. Different definitions
may cause problems to global organizations. Dif-
ferent functions will use the external differences
as an excuse to continue to use their project
language.
It may be useful to publish a checklist of things
to do as a support to all project teams and explains
what happens if you do not follow these principles.
The principles have to be understandable by all
functions. The level of the checklist needs to leave
enough flexibility for adaptation.
It may be useful as well to develop a toolbox
that will be common to all projects, flexible
enough to fit all kind of projects. It will have to
be updated as the knowledge of the organisation
progress. There could be a short list of common
tools and common tasks for simple projects and,
for complex projects, a longer list from which to
pick and choose.
To avoid resistance to tools developed externally
to the function, it is advisable to select and build
tools with a cross functional group of people who
represent their function. And to plan for a com-
munication plan that would address the different
functional needs.
Impact on energizing project teams
It is obvious that a project should have a team but
how the team is involved in the project work is
very often an issue. There are still projects today
managed within closed doors, the project leader
or planner doing most of the work and just asking
advice to team members.
To avoid this to happen, you have to build your
tools, your process and your overall approach on
a team basis. You have to insist on the need to
spend time to energize the project teamduring the
project life and to energize the whole organization
when launching the project.
Global teams will be very often located around
the world. The kick off meeting becomes then a
very important event. If there is only one face
to face meeting of a global team, it needs to be
12 www.pry.fi
the process has to be defined in a way that it will
be applicable to all functions: which tasks (kick
off meeting, defining a project brief, stakeholder
interviews, risk assessment) have to be performed
and when.
Portfolio management becomes even more
important in global organizations as global proj-
ects demand big level of resources. The portfolio
process allows lots of small projects initially, some
of them making it to the study phase and few of
them to the implementation phase and ensures
they are all aligned to the business strategy.
Project management is sometimes defined as a
separate process from the gate process. Instead of
considering only one process, project management
preparing the gate decisions and the gate decisions
driving the project management process. If you
have two separate processes, project managers
can do all the right things for project management
but be unable to pass the gates effectively. And
project managers could perceive the gate process
as additional work and time lost.
Impact on Structure and Governance of Projects
When introducing project management in all
functions and countries, most probably you will
discover a palette of different names for project
management positions. For heads of project
for example, you could find the title of project
leader or the title of project manager. Which one
to choose?
For the organisation outside of the project or-
ganisation, the trend is to focus on the leadership
role of managers. Leadership is not only at the top
but dispersed at all levels of the organisation. To be
consistent, you need the same emphasis for people
heading projects. You can then opt for the title of
project leader for the project head.
To assist the project leader and in order he can
devote time to his people and the external world,
you can create the position of project planner or
manager for large projects. His key role is to ensure
the methodology is followed, to monitor the plan
and to organize meetings.
For small projects the project leader will play
the role of project planner as well.
In very large projects, change managers are
being appointed, dedicated to the project. They
support the project leader in team development,
in stakeholder management and in communica-
tion. For small project, the project leader will play
that role.
Global projects can assembled teams of 25/30
people. Creating sub teams is the only solution
in order that the core team would be below 10,
ideally 6 to 8. Sub team heads are part of the core
team. The extended team includes also members
who are not dedicated to the project and who do
not need to be at all meetings. They meet at key
milestones (before or after decision meetings) and
focus on planning.
At the start of the project, the project leader
works with a sponsor or his manager. As the
project is progressing, it needs a formal steering
group composed of key stakeholders. Its role is
to take decisions and to guide and support the
project team. As projects get bigger, stakeholder
management gets very complex and the steering
the kick-off. During this kick-off it is important
to have time for team building. You can use a
personality test in advance and then build an
experience of diversity based on the test results.
At the end of the kick off meeting, participants
should be convinced it is better to work as a team
than individually and should have defined their
ways of working together.
Also in the kick off meeting, the team needs to
spend time defining a vision for their project. It
will help thembuild a common message to the rest
of the organization at the emotional level. When
people experience communicating with emotions,
they learn at the same time how to communicate
with stakeholders.
Regularly you can recommend they perform a
team assessment. It could be an assessment on
team stages: Storming, forming, norming and
performing or on team effectiveness based on a
pre-defined list.
Impact on building coalitions
Building the coalitions or managing stakeholders
is a crucial activity for global projects. You need to
have common tools to support the project teams
in this activity.
They may need a tool to analyze the organiza-
tion around them, looking at formal structures,
decision making processes, informal power struc-
tures & networks, culture and climate and external
factors. They may need a tool for building an
integrated communication plan and for preparing
an influencing plan for selected individuals who
are resistant to the project.
They need a tool to prepare stakeholder inter-
views, understanding who has power and interest
in the project and another one to understand
who is intellectually and emotionally ready for
the project. The first one is very often used for
Project management, the second one for change
management. You can argue which one is the best
but the truth is that they are both useful but at
different stages of the project.
At the start of the project, you do not know
your stakeholders and you need to identify who is
going to have power and influence on your project
and who has a stake and interest. You position
individuals on the matrix before the interview and
check after the interview. For the whole duration
of the project, this matrix has to be kept updated
by the project team.
When the project approaches launch, you
hopefully know your stakeholders. You need now
to build a communication strategy to overcome
resistance to change from groups of people. You
need to identify which groups intellectually under-
stand well your project outcome and which groups
emotionally buy-in your project outcome.
Impact on the Innovation process
The innovation process was designed initially for
Research and development. Progressively other
functions started to use it as well for creating
new processes and program for the organization.
It brought discipline in the way new programs,
like reward program, IT systems, were introduced
to the business.
From idea generation to launch of a solution,
Proj ect Perspecti ves 2009 13
Agnes Roux-Kiener
Consultant, Organisation Transformation
agnes.roux-kiener@wanadoo.fr
After 22 years experience in IBM France and
IBM Europe Middle East & Africa in IT, HR
and Organisation, Agnes joined Unilever in
1993 as Head of Organisation Effectiveness,
World-wide. As an internal consultant, she
was supporting leaders to change their
organisations, running workshops and de-
veloping simple tools and frameworks for
process, change and project management.
She retired and created her own Consultancy
Company in 2006. She is a member of the
French SMAP (IPMA) and a member of its
scientific committee.
group can play an important role in case of issues
with stakeholders. The chairman of the Steering
group is an ambassador to the project and has a
high stake in its achievement.
Impact on the development of the project
management capability
Project management capability should be devel-
oped in liaison with Process management. When
you look at a toolbox for project management
and for process management, most of the tools
are common (e.g. stakeholder management, risk
management, cause effect analysis). Even a proj-
ect network is not very different from a process
mapping. For our employees, it is much better to
align these tools fromthe start instead of teaching
different tools for the same purpose.
The development of a capability matrix can
be very useful. A capability matrix identifies the
required skill for a position, e.g. a team member
needs to have a basic awareness of project gov-
ernance when a project leader needs to be fully
knowledgeable about it. A project planner has
to be fully knowledgeable in project planning
when a project leader needs to be able to assess
a project plan.
Training offerings need to be based on the
capability matrix and built as one process. There
should be a mix of skill training (e.g. risk manage-
ment, communication management), using case
studies, project life-cycle training on real projects
or applied learning, competency training (e.g. stra-
tegic influencing, breakthrough thinking). These
trainings should be coupled with a certification
process where people are encouraged to apply to
external certification.
A Community of practice is a key enabler of a
project management capability development. It
includes internal and external facilitators, project
leaders, project planners and change managers.
They define the standards to be used, identify best
practice and translate them into simple tools and
principles to be used by all.
In summary
Global businesses need a common and simpler ap-
proach to project management that fits all culture
and all functions.
Introducing best practice change management
leads to a focus on leadership and visioning,
employee involvement and team building, stake-
holder management and communication.
Portfolio management, gate management and
project management gain to be organized as one
process.
Within the project team, there are advantages
to differentiate the project leadership and the
project management roles and to introduce a
change management role.
To build the project management capability,
training should include project skill, project com-
petency and project life cycle. A community of
practice of project managers / facilitators / train-
ers may take a lead role in building the project
management capability.
This is empirical knowledge which I hope will
be useful for Researchers to develop the Project
Management capability for the future.
Literature connected to this paper
Gareis, R. (1990)
Handbook of Management by Projects, Manz,
Vienna, Austria.
Wheelwright S. C. and Clark, K. B. (1995)
Leading Product Development: The Senior Manag-
er’s Guide to Creating and Shaping the Enterprise,
Free Press, New York, USA.
Kotter, J.P. (1996)
Leading Change, Harvard Business School Press,
USA.
Binney, G. and Williams, C. (1997)
Leaning into the Future: Changing the Way People
Change Organisations, Nicholas Brealey Publish-
ing Ltd.
Peters, T. (1999)
The Project 50 (Reinventing Work): Fifty Ways to
TransformEvery “Task” into a Project That Mat-
ters!, Alfred A. Knopf, Inc., New York, USA.
Trompenaars, F. and Hampden-Turner, C. (2004)
Managing People across Cultures, Capstone Pub-
lishing Ltd., London, UK.
14 www.pry.fi
In this paper we analyze factors influencing design and performance of the business model of a
project-based firm. We adopt a perspective of a project supplier firmthat has constantly multiple
simultaneous delivery projects in its ‘project production line’. The business model explains the
underlying economic logic of how the project supplier delivers value for its customers at appropri-
ate costs. The design and selection of a business model is mainly influenced by several contextual
factors in the firm’s business environment. In addition, when analyzing the rationales behind the
selection of specific business models, we must take account that knowledge held by managers
about their business environment is limited, and the choices of various business models are biased
by earlier experiences of the firm. The contextual factors affecting the design and performance of
the business model include factors both at the level of the firm’s business and environment and
at the level of individual projects. The contextual factors include, among others, project complex-
ity, interdependence between projects, customers’ strategies, industry-specific standard practices,
generally accepted methods of doing business in the market segment, and the competitive situation
in the market. Understanding of contextual factors affecting the selection and performance of the
business model enables managers to design business models that consistently provide balanced
long-termand short-termbusiness benefits for both the project supplier firmand its customers.
Factors influencing design and
performance of the business
model of a project-based firm
Corresponding author:
Prof. Jaakko Kujala
University of Oulu
Prof. Karlos Artto
Helsinki University of
Technology (HUT)
Prof. Annaleena
Parhankangas
New Jersey Institute of
Technology (NJIT)
Introduction
The increasing importance of project-based modes
for controlling and organizing work in different
industries has been recognized by several research-
ers (Gann & Salter 2000, Arenius et al. 2002) and
it has even been said to represent a new logic of
organizing in market based economics (Whitley
2006). Also project research is expanding in scope
to analyze challenges related to achieving busi-
ness targets through projects. Project business is
an emerging research field, which takes a business
oriented perspective to study project, project-
based firms and industries (Artto 2008). Project
business can be defined as “the part of business
that relates directly or indirectly to projects, with
the purpose of achieving objectives of a firm or
several firms” (Artto & Wikström 2005). While
this definition covers both internal development
projects and customer delivery projects, our focus
in this paper is a business of a project supplier
firms that has several project in its production line
(Artto et al. 1998).
The business of a project-based firm can be
addressed through a concept of business model,
which is a statement of how company makes
money (Stewart & Zhao, 2000) or how technologi-
cal inputs are transformed into economic outputs
(Chesbrough, 2003). Project-based organizations
have different types of business models. However,
the existing literature is scarce that would explain
what the contents of such various business models
are. Furthermore, there is no existing theory that
explains selection, design and performance of the
business model of project-based organizations. In
this paper we adopt a contingency approach to
research which contextual factors should be taken
account in the selection and design of a business
model a project supplier firm.
As there are many interpretations of the content
of the business model concept, we first introduce
what we consider as key elements in a business
model. We then identify and classify contextual
factors in project business, which influence se-
lection, design and performance of the business
model of a project-based firm. Finally, managerial
implications of the research are discussed and
avenues for further research are proposed.
Business model
Business model defines the underlying economic
logic that explains how a firm can deliver value
to the customer at an appropriate cost (Magretta
2002). Based on their comprehensive review of
business model literature, Morris et al. (2005) iden-
tified three general categories of business model
definitions, including economic, operational, and
strategic, with each comprised of a unique set of
decision variables. The economic level of a business
model identifies revenue sources, pricing meth-
odologies, cost structures, margins, and expected
volumes. At the operational level, the business
model focuses on the internal processes that en-
able the firm to create value, such as production
or service delivery methods, administrative pro-
cesses, resource flows, knowledge management,
and logistical streams. Definitions at the strategic
level deal with the overall direction of the firmand
cover issues related to the firm’s market position-
Proj ect Perspecti ves 2009 15
ing, interactions across organizational boundaries,
and growth opportunities.
For this paper we adopt a definition of business
model modified from Chesbrough and and Rosen-
boom (2002), who identified six key features that
must be addressed by a business model:
- How will the firm create value (value
proposition)?
- For whom will the firm create value (po-
tential market segments)?
- How will the firm position itself in the
marketplace (position within the value
network)?
- How will the firm make money (cost struc-
ture and profit potential)?
- What is the firm’s source of competitive
advantage?
The starting point for creating a business model
is to define a value proposition to the customer.
At its most simplest form, it may be a technical
solution to meet a customer specification, but in
most businesses suppliers are increasingly claiming
to be solutions providers, which provide value for
the customer by improving their business processes
(Galbraith 2002). At the same time, a firm must
define an innovative product and/or a service
offering that can be are tailored to potential cus-
tomer in different market segment (Davies 2004).
The increasing complexity of projects makes it dif-
ficult for any single firmto own all capabilities and
resources. Thus, a firmmust decide which resources
to subcontract and how design appropriate gover-
nance arrangements between independent firms
in the supply chain. The options range from purely
competitive tendering, long term relationships, to
a hierarchical mode of governance (Winch 2006).
The positioning in the marketplace also includes
a role and delivery scope, which project supplier
takes for different project deliveries. The economic
focus in the business model forces to consider cost
structure and profit potential that are related to a
value proposition for different market segments.
The profitability is closely related to competition
and firm’s competitive advantage in the markets,
which according resource based view can be
based on the value of the product/solution, and
the rareness and imperfect substitutability of this
solution. (Barney 1991). On a more strategic level,
a project supplier may consider whether it will
focus on becoming low cost supplier or select a
differentiation strategy.
Contextual factors in project business
Contingency theory suggests that there is no
optimal strategy for managing organizations
(Donaldson, 1996) and choice of a most desirable
business model depends on several contingency
factors (Zott & Amitt 2008). In project research
there has been much effort to create a project
theory that would explain how projects should
be managed in their environments by taking into
account various contingency factors, such as
complexity, uncertainty, scope and size (Shenhar
& Dvir 1995; Shenhar 2001; Andersen 2006). These
contingency factors need to be taken into account
when defining a business model of a project-based
firm. For example, Wikström et al. (2008) proposes
that project complexity impacts how services can
be integrated into a project business. Additionally,
the cost of the total project lifecycle is a signifi-
cant contextual factor, because it relates business
volume and profit potential of maintenance and
other after sales services. It is also an important
element to be taken into account in the customer
investment decision and thus relates to the value
proposition of a project supplier.
The discourse of project marketing identifies
the uniqueness of individual projects, technical
and organizational complexity of the project of-
fering, the discontinuity of demand and business
relationships between projects as central features
of the business of a project-based firm (Mandjak
& Veres, 1998). In addition, large projects often
involve considerable extent of financial commit-
ment and risk carrying capacity of the parties,
which makes project size as an important con-
textual factor to consider (Cova, Ghauri, & Salle,
2002). The interrelationship between projects has
also been recognized as an important factor that
has to be taken into account. Verma and Sinha
(2002) identified three types of interdependencies,
namely the resource, technology and market inter-
dependences and they are applicable also in cus-
tomer delivery project context. Information links
between projects are also important for learning
and the transfer of knowledge between projects. In
addition, the success of any business model is also
influenced external factors such as competition
and customer preferences. In Table 1, we introduce
the most relevant contextual factors that define
the performance of a business model.
We claim that these contextual factors explain
the differences between businesses of project
supplier firms. Thus firms cannot directly copy suc-
cessful business models from other companies in
different market, but they need to be tailored to fit
specific businesses. Also, when comparing success-
ful business models applied by their competitors,
project supplier firm has to evaluate, whether it
can more effectively implement similar business
Table 1. Contextual factors in project business
Business environment related factors:
- Customers’ strategies and preferences
- Accepted methods of doing business in the market segment
(industry dominant logic)
- Competitive situation
- The distribution of capabilities and resources in the value chain
Project-based firm related factors:
- Market and technological uncertainty
- Resource, market and technological interdependence between
projects
- Discontinuity between delivered projects to a customer or
market segment
- Relative size and frequency of project deliveries
Project related factors:
- Project novelty – newness of the technical solution to the
market
- Project uniqueness –similarity of a project compared to
previously delivered projects
- Technical and organizational complexity of a project
- Uncertainty related to project goals, technology or implemen-
tation process
- Distribution and total cost in project lifecycle
The cost of the
total project
lifecycle is a
significant
contextual factor
16 www.pry.fi
model. For example, competitors may
have competences or resources that
are not available in the supply chain,
which makes their business model dif-
ficult to imitate. Traditionally technical
product has been considered as the
most important element in ensuring
competitive advantage, but especially
in mature markets it is difficult to dif-
ferentiate with products and project
suppliers are combining their product
with services (Artto, Wikstöm, Helstöm
& Kujala, 2008). System integration, the
capability to integrate complex systems
including product and services, has be-
come one of the key competences for
project supplier firms (Hobday, Davies &
Prencipe, 2005). It is also difficult to cre-
ate and imitate, which makes it possible
for a project supplier to gain sustainable
competitive advantage with a superior
system integration capability.
The impact of contextual factors
on the design and performance
of the business model
External business environment related
factors are the primary drivers for select-
ing a specific business model. Customer
strategies, competition and industry
dominant logic constraint the choices
available in the markets, but innovative
project supplier firm may take a lead in
proposing new ways of doing business
and expand their scope of delivery. For
example they may provide support for
feasibility study and investment decision
process or after the delivery to respon-
sibility to operate the system. However,
the adaptation of new types of business
models is influenced by whether they are
accepted by customer and they provide
competitive advantage. Supplier can
extend its role only when the customer’s
strategy is compatible with the aimed
role (Helander & Möller, 2007). In some
cases applying new business models may
require “educating” the customers on
new ways of doing business or involving
them more closely in the design of new
under control and use of subcontracting
for project deliveries. Another example
would be after sales services provided
to the customer. If technological solu-
tions are mature and standardized in
the industry, there might be a lot local
competition from small service firms,
which makes it difficult to maintain
margin levels for a larger project sup-
plier with higher overhead costs. In
figure 1 we present a framework which
explains how contextual factors influ-
ence selection, design, and performance
of a business model.
Conclusion
In this paper we identify relevant con-
textual factors which have to be taken
into account when defining the busi-
ness model of a project supplier firm.
Business level factors, such as customer
strategy, dominant logic in the industry
and competition can be considered as
constraints to which type of techni-
cally effective business models can be
implemented in practice and provide
competitive advantage to create profit-
able business. Cognitive limitations in
the rationality in of the managerial deci-
sion making process emphasize the role
management in the design and selection
of a business model. The contextual
factors in project based-firm and in in-
dividual projects influence performance
of selected business model.
From a managerial point of view, the
purpose of this paper is to help manag-
ers to analyze their project business and
to select the most profitable business
model. The list of contextual factors can
also be used to provide as a communica-
tion tool i.e., as a check list of factors to
discuss about, when discussing factors
that have influence on running business
with customers and subcontractors. As
such, the factors can be used to create
a shared understanding of the business
logic and to help designing the business
model that provides benefits for all
firms in the value chain, with balanced
short-term and long-term benefits.
Project supplier firms may also attempt
to influence the contextual factors for
their business advantage. For example,
modular design has been introduced as
a means to standardize project compo-
nents and reduce interdependences be-
tween them, which allow different types
of business approaches in the design of
a value chain (Hellstöm, 2005).
Our research expands the contingency
approach in project research related to
individual projects (cf. “one size does
not fit for all projects”, see Shenhar
2001) to the business of a project-based
firm. In accordance to Shenhar and Dvir
(1996), who claim that the contingency
approach could provide a basis for the
Figure 1. Contextual factors influence the selection, design and performance
of the business model of a project based firm
Customers’ strategies
and preferences
Accepted methods for
doing business in the
market segment
Competitive situation
Distribution of capa-
bilities and resources
in the value chain
Value proposition
Market segmentation
Position in the value
network
Cost structure and
profit potential
Source of competitive
advantage
Business perfor-
mance of a project
supplier firm
Managerial decisions
making process
Project and project-
based company related
contextual factors
Business environment Design of a business model
Performance of the
business model
types of products or services.
The distribution of capabilities and
competences in the value chain impacts
the project supplier firm’s role in the
value chain. From a project supplier
point of view, the challenge is that the
implementation of new business models
often requires different competences
and capabilities, which have to be taken
into account when positioning the com-
pany in the value chain. All firms’ in
the value chain are looking for most
profitable position and have their own
strategies and related business models.
The project supplier firm must select
a role that fits its strategic objectives
and provides competitive advantage.
For example, for a small supplier with
superior technical stand-alone product,
the most profitable position is to stay in
the role of subcontractor as compared
to become a system integrator with
large responsibility for overall system
delivery.
In the selection and design of a busi-
ness model it must be understood that
the knowledge held by managers about
the business environment is biased by
earlier successes of the firm(Chesbrough
and and Rosenboom, 2002). This process
is also cognitively limited by dominant
logic prevailing in the industry, which
filters out new ideas and causes path
dependent behavior. Differences in risk
attitude may also have significantly in-
fluence on managerial decision making.
Thus the choice of a business model is
not only constraint by external business
environment, but cognitive limitations
in the rationality of managerial decision
making process.
The success of the select business
model is influenced by contextual fac-
tors on the project and project-based
firm level. For example, if projects are
delivered to a market segment or geo-
graphical region on a rather infrequent
basis, the cost structure has to be
tailored to take account into changes
in demand by keeping the fixed cost
Proj ect Perspecti ves 2009 17
theory of project management, we
propose that contextual factors that
explain the emergence and performance
of different types of business models
could provide a basis for a theory of
project business.
References
Andersen E.S. (2006)
Toward a project management theory
of renewal projects. Project Manage-
ment Journal 37(4): 15-30
Artto K., WikströmK. (2005)
What is project business? International
Journal of Project management 23:
343-353
Artto K., WikströmK., HellströmM., &
Kujala J. (2008) Impact of services on
project business, International Journal
of Project Management, (forthcoming
2008)
Barney J. (1991)
Firmresources and sustained competi-
tive advantage, Journal of Management
Studies, 17(1): 99 - 120
Chesbrough, H, Rosenbloom, R.S. (2002)
The role of business model in capturing
value frominnovations: Evidence from
Xerox Corporation’s technology spin-off
companies. Industrial and Corporate
Change 11(3): 529-555
Chesbrough, H.(2003) Open Innovation:
The New Imperative for Creating and
Profiting fromTechnology. Harvard
Business School Press, Boston, MA.
Cova B., Ghauri P. and Salle R. (2004)
Project Marketing - Beyond Competitive
Bidding. Wiley.
Gann D.M., Salter A.J. (2000)
Innovation in project-based, service-
enchanced firms: the construction
of complex products and systems.
Research policy 29:955-972
Galbraith J.R. (2002).
Organizing to deliver Solutions. Organi-
zation Dynamics 31(2):194-207
Heide J.B., Miner A.S. (1992)
The Shadow of the Future: Effects of
Anticipated Interaction and Frequencey
of Contact on Buyer-Seller Cooperation.
Helander A., Möller K. (2007)
Systemsupplier’s customer strategy.
Industrial Marketing Management 36:
719–730
HellströmM. (2005)
Business concepts based on modularity:
a clinical inquiry into the business of
delivering projects, Doctoral Disserta-
tion, Åbo Akademi University, Åbo Aka-
demi University Press, Turku, Finland
Hobday M., Davies A., & Prencipe A. (2005)
Systems integration: a core capability
of the modern corporation, Industrial
and Corporate Change, 14(6): 1109-
1143
Mandják T., & Veres Z. (1998)
The D-U-C model and the stages of the
project marketing process, In: Halinen
K., Nummela. (Ed.) 14th IMP annual
conference proceedings (pp. 471−490),
Turku School of Economics and Busi-
ness Administration, Turku, Finland
Morris, M., Schindehutte, M., Allen, J.
(2005)
The entrepreneur’s business model:
toward a unified perspective. Journal of
Business Venturing, 58, 726-735.
Shenhar A.J., Dvir D. (1996)
Toward a typological theory of proj-
ect management. Research policy 25:
607-623
Shenhar A.J., (2001)
One size does not fit all projects: ex-
ploring classical contingency domains.
Management Science 47(3): 394-414
Stewart D.W, Zhao Q. (2000)
Internet marketing, business models,
and public policy. Journal of Public Pol-
icy and Marketing 2000;19(Fall):287–
96.
Whitley R. (2006)
Project-based firm: new organizational
formor variation of a theme. Industrial
and Corporate Changes, 15:1, 77-99
Prof. Jaakko Kujala
Dr. Jaakko Kujala is professor of project and
quality management at Department of Industrial
Engineering and Management at University of
Oulu and adjunct professor at Helsinki University
of Technology, where he is working with project
business research group at BIT research centre. He
has over ten year international work experience
in automation system project business before
joining the academia. His research interests in-
clude: 1) project sales and marketing process,
2) global project networks and project stakehold-
er management, and, 3) business models for project-based organizations.
E-mail: jaakko.kujala@oulu.fi
Annaleena Parhankangas
Dr. Annaleena Parhankangas is an associate
professor at New Jersey Institute’s School of
Management and the holder of the Henry J. Leir
Professor Bio-Business. During the past years, she
has also worked as professor at Helsinki University
of Technology and as a visiting scholar at Rensse-
lear Polytechnic Institute, the Wharton School of
Business, and Chalmers University of Technology,
Sweden. Her research interests centers around the
questions of how inter-organizational relationships of technology-based
ventures affect the direction and speed of technology development and
commercialization. She is also interested in comparing the nature and out-
come of entrepreneurial and innovative activities in different countries.
E-mail: parhanka@amd.njit.edu
ti f h i t
j
t d 3) b
Karlos A. Artto
Dr. Karlos Artto is professor of project business
at the Department of Industrial Engineering and
Management at the Helsinki University of Tech-
nology (HUT), Finland. His current research in-
terests include: 1) management of project-based
organizations and strategic management of mul-
tiple projects, project portfolios, and programs;
2) management of innovation, technology, R&D,
new product development and operational
development projects in different organizational
contexts; 3) project networks and project delivery
chains, and; 4) risk management, with the emphasis on management of
business opportunities in uncertain business environments. For more infor-
mation, the Project Business research group’s site at HUT is: http://pb.hut.fi/
E-mail: karlos.artto@hut.fi
WikströmK., HellströmM., Artto K.,
Kujala J., & Kujala S. (2008). Drivers
and barriers for adopting services in
project-based firms, European Academy
of Management EURAM, 8th Annual
Conference, May 14-17, 2008, Ljubljana
& Bled, Slovenia
Winch G. M. (2006).
The governance of project coalitions
– towards a research agenda, pp.
324-343, In: Lowe D., (ed.) & Leiringer R.
Commercial management of projects:
defining the discipline, Blackwell pub-
lishing, UK
18 www.pry.fi
With over 100 years of experience, MAGNA STEYR is the leading global, brand-independent engineer-
ing and manufacturing partner to the Original Equipment Manufacturer (OEM) in the automotive
industry. The increase of global activities forces MAGNA STEYR to align their project management
approach to the global requirements and cultural differences. Therefore the company standardized a
simple project management approach groupwide and is implementing this approach with a support
to the functional departments and business units as well as the projects itself.
Dr. Wolfgang Danzer
MAGNA STEYR
The Global Project Management Suppor t at
This project management approach called
MAGNA STEYR Project Management [MSPM] was
also established to have one face to the customer
regarding project management and to assure a
quality standard within projects.
Company Description
Magna Steyr is a company of Magna International
Inc. in Canada. Magna International is one of the
world’s biggest automotive suppliers. It has more
than 84.000 employees at 229 production sites
and 62 development sites in 23 countries. In 2007,
Magna International achieved a sales volume of
26 billion $.
Introduction
MAGNA STEYR is the leading global, brand-inde-
pendent engineering and manufacturing partners
to the OEMs. The goal of MAGNA STEYR is to
systematically pursue the company’s expansionist
policy by gaining market shares, acquiring new
customers and penetrating new markets both in
and outside Europe.
To facilitate the collaboration over all locations,
MAGNA STEYR set up its own project management
approach as a global group standard in the year
2005 derived from internal experience, state-of-
the-art project management and the PhD thesis
of the author of this article.
Figure 1. 100 Years of Experience at MAGNA STEYR
MAGNA STEYR
Proj ect Perspecti ves 2009 19
With over 100 years of experience, MAGNA
STEYR’s range of services makes us the lead-
ing global, brand-independent engineering and
manufacturing partner to the Original Equipment
Manufacturer (OEM) and positions us at the cut-
ting edge of the automotive supply industry. We
do not, however, wish to be solely a partner to our
customers, but also strive to consolidate our lead-
ing position in the industry with our own ideas and
new developments. Engineering and assembly of
complete vehicles, development and manufactur-
ing of components and systems, and innovations
on the road to the automotive future - vehicles are
not merely our business, but our passion.
In concrete terms, this means
- we are innovative and constantly seek new
and better solutions for our partners,
- we take a proactive approach to our busi-
ness responding quickly and flexibly to our
partners’ needs and
- our partners can totally rely on us and our
stability in every situation.
MAGNA STEYR has global capabilities with 16 facil-
ities, and 9,850 employees in 2007 located throughout
North America, Europe and Asia Pacific.
Customer
MAGNA STEYR’s diverse customer base includes
Audi, BMW, Chrysler, Fiat, Ford, General Motors/
Saab, IVECO, Jeep, Mercedes-Benz, Porsche, Smart,
Stewart & Stevenson, Volkswagen, Volvo and their
respective operating divisions and subsidiaries.
Product Listing
Engineering
- Advance Development
- Product Development Process
- Styling
- Vehicle Concepts / Innovations
- Complete Vehicle
- Body & Trim
- Chassis Modules
- Drivetrain & All-Wheel Drive Systems
- Engine Integration
- Electrics/Electronics
- Prototype & Low-Volume Production
Vehicle Assembly
- Production Process
- Complete Vehicle Assembly (Body-in-
white, Paint, Assembly)
- Completely Knocked Down
Components, Modules & Fuel Systems
- Body Modules
- Fuel Systems
Services
- Production Planning
- Accredited Materials Testing
- Product Lifecycle Management
- Metrology
- Homologation
- Risk Management
Space Technology
- ARIANE Propellant Feed Lines
- Thermal Control Systems
- Satellite Propulsion System
- Cryogenic Fuel Lines
- Automotive Applications
- Manufacturing Technologies
Fit for Going Global
The increase of global activities force MAGNA
STEYR to align their project management approach
to the global requirements and cultural differenc-
es. Therefore the company standardized a simple
project management approach groupwide. Before
starting to describe the approach some interesting
global aspects should be discussed as some theses.
To point out the impact this theses are verbalized
the other way around to their meaning.
1. Business Language is English ?
2. Culture has no influence on projects ?
3. Roles are always the same ?
Business Language is English ?
The business language within a project is most
important to the project effort. As an outcome
of an internal research out of lessons learned the
project culture and communication within project
is one of the top 3 issues initiating problems.
Even if English is well settled as business lan-
guage worldwide at a top level of management,
collaboration within a project can be made im-
possible if one or both of intercultural partners
is not able to communicate in the set business
language.
Using translators within projects can ease that
problem but still sometimes you cannot avoid
playing chinese whispers. One of the most inter-
esting examples was a translation from german
to english to german and at least to the forein
language due to agreements within the project
and translation requirements.
Culture has now influence on projects ?
“In Europe he was an excellent manager. He was
highly skilled and had an exceptional ability to
get things done. Surprizing all he failed due to his
character. Here in Europe it was common to use a
biting tone, but here in China it did not work out
fine, which was not understandable for him …”
Quotations like this give an example of how
important cultural aspects are. And even if we
are aware of them it is necessary to put a highly
effort into the collaboration to overcome these
cultural differences.
Roles are always the same ?
Terms and their definition are as different as cul-
tures itself. Sometimes roles and their definitions
vary fromone department to the other even within
one company. Therefore MAGNA STEYR sets a fo-
cus on the ensurance that the social relationships
are promoted within the project team so that the
project targets can be achieved jointly. One of the
tasks there is to clarify the various roles, which has
to be done anew for each project.
Project Management at MAGNA STEYR
What is MAGNA STEYR Project Management
MAGNA STEYR Project Management [MSPM] is
a project management approach derived from
the knowledge of the most experienced project
managers at MAGNA STEYR. Therefore MSPM is
our project management approach which uses
corporate knowledge and wording, but of course
follows the state-of-the art approach to project
20 www.pry.fi
- To assure a quality standard within proj-
ects
To facilitate collaboration we defined only a
few necessary terms and generic methodologies
because the common understanding for the ap-
proach enables to work on the content of the
project to reach the targets and avoids discussions
about the basic methodology.
Our customers are used to a unique quality
level and flexibility, therefore they expect the
same quality and flexibility all over the world. To
ensure this we standardized our generic project
management approach.
To ensure a quality standard within projects we
considered newest and most innovative manage-
ment approaches as well as the experience of our
best project managers during the creation of the
project management standard MSPM.
Successful projects as an impact of good project
management lead to satisfied customers and re-
awarded new business
Definition of a Project
To give a distinction between what has to be a
project at MAGNA STEYR, and therefore has to fol-
low the guideline of MSPM, the company specified
some characteristics of projects.
Projects:
- are unique
- are target-oriented
- have a specified time
- have limited resources
- are complex
- are possibly corss-funcional
Knowing that, still a black-or-white decision
cannot be made if it is a project or not. Therefore
three hard facts have been installed to decide
whether it is a project or not:
- project must be defined
- project has been ordered by the internal
customer
- project manager responsible for the results
has been nominated. Decision-making
powers have been clarified, also regarding
all the resources
Following this criteria a project is a project at
MAGNA STEYR if there is somebody within the
management beside the PhD thesis of the author
of this article.
MSPM as a general and generic approach to
project management has to be taken for all types
of projects within the company and is valid as a
group standard MAGNA STEYR worldwide.
To document the specific knowledge regarding
specific types of projects the company decided to
standardize this in so called guide lines that are
based on MSPM and that describe a framework for
the specific type of project like for the product-
development process.
Within specific projects project manuals are
written as an documented agreement of how to
reach the set project targets within the project
team. This project manual also is based on MSPM
and the particular guide line.
Why MAGNA STEYR Project Management
The reason for MAGNA STEYR to set up a proj-
ect management standard within the company
worldwide was to:
Achieve the goals of the company with proj-
ects
- Facilitate collaboration
- Have one face to the customer
Figure 3. Model of the Project Management Approach at MAGNA STEYR
Figure 2. MSPM as principal basis for guidelines
and project manuals
Proj ect Perspecti ves 2009 21
organization who needs the project and is willing
to spend the resources for a project, somebody
has taken over the responsibility for and is able to
reach the set targets for this projects, acting like a
entrepreneur for a specified time, and those two
people agreed upon the definition of the project
and signed a so called project definition sheet.
Definition of Project Management at MAGNA
STEYR
At MAGNA STEYR we defined project manage-
ment [Fig. 2] as planning, controlling, assuring and
improving of coordinated activities with start and
finish dates, undertaken to achieve project-specific
objectives conforming to specific requirements, in-
cluding the constraints of time, cost and resources
as well as lessons learned for further projects.
This project management approach is based on
the cognition of the PhD theses of the author of
this paper (Danzer, 2006) where the improvement-
oriented management loop (planning, controlling,
assuring, improving) is derived from the constitu-
ent parts of the superordinate concept of qual-
ity management within the ISO 9000:2005 (ISO,
2005), the Sheward-Circle (Deming, 2000), well
known also as “Plan-Do-Check-Act” methodology
(PDCA), as well as the constructivist (Maturana &
Varela, 1987; Luhmann, 1987), and kybernetical
approach (von Foerster, 1991).
The target of the improvement-oriented man-
agement loop is to obtain legitimacy, effective-
ness, and efficiency. Simplified legitimacy can be
obtained by the fullfilment of project specific
requirements, which is measurable on the basis
of the satisfaction of stakeholder of the project.
Within the policy of MAGNA STEYR the mission
is stated to fulfill the requirements and expecta-
tions of our stakholders (customers, employees,
shareholders, suppliers and environment) recon-
ceiving profitability and sustainability considering
best possible fulfillment of the requirements in
quality, environmental, health and safety as well
as security.
Effectiveness can be obtained by reaching the
set targets, and efficiency means that the targets
are reached with minimized resources.
Planning
Within MSPM planning means the agreeing of
the project targets derived from the specific re-
quirements as well as the processes and resources
necessary for achieving the targets.
Controlling
Controlling includes the monitoring of the
achievement of the targets and process implemen-
tation, as well as the agreement and monitoring
of the necessary counter measures for achieving
the targets.
Figure 5. Step Controlling of the improvement-
oriented management loop
Assuring
Assuring covers documented releases of the re-
sults and approvals (verification/monitoring of
the achievement of the project targets, valida-
tion/monitoring of the usability). The proof if
the targets have been achieved focus on hard
facts that lead to releases. The approvals need a
proof of fitness for use which is based on fulfill-
ment of requirements and the satisfaction of the
stakeholders. Therefore assuring needs a strong
interaction with the stakeholders and focus on
soft facts as well.
Figure 6. Step Assuring of the improvement-
oriented management loop
Improving
The step improving contains the adjustment of
the targets, processes and resources to meet the
requirements of the stakeholder. As an impact of
improving the level of skills to fullfill requirements
increases. While improving it has to be taken into
consideration that every change of agreed speci-
fications needs change management.
Figure 4. Step Planning of the improvement-
oriented management loop
Figure 7. Step Improving of the improvement-
oriented management loop
22 www.pry.fi
Project Management Support
Decentral approach
A general principle of MAGNA is the decentral
approach. Regarding project management that
means that MAGNA STEYR was not going the way
to have a hugh central PM office but to support
the internal customer of projects and the project
managers local with so called MSPM assignees that
are linked to the MAGNA STEYR project manage-
ment support department.
Support instead of order
Another principle is to leave the responsibility
for project management at the project manager.
Instead of giving order how to work with specific
methodologies our project managers only get the
simple but common framework of MSPM and are
supported how to use it. For different types of
project a more detailed guideline, containing the
documented knowledge of the company to this
type of project, is given to the project manager.
This gives enough help for being better and faster
but also leaves enough flexibility to adapt the
methodologies to the requirements of specific
projects.
Conclusion
MAGNA STEYR as the leading engineering and
manufacturing partner for OEMs in the automo-
tive industry aligns their activities regarding the
project management approach on the require-
ments of quality, flexibility and globalization.
To do so a simple but common approach was
derived from the experience of the most success-
ful project managers and cognitions within the
scientific community.
To get the benefit out of this approach a sup-
port function for the functional departments, the
business units, and, of course, for projects was
implemented.
Still, the approach has just a support func-
tion, the people are those who lead projects to
success.
References
Danzer, W. (2006)
Knowledge-oriented Quality Management (orig.
Wissensorientiertes Qualitätsmanagement). PhD
Thesis. Technical University Graz. 2006
ISO (2005) EN ISO 9000.
Quality management systems – Fundamentals and
vocabulary. Beuth, 2005
Deming, W.E. (2000)
Out of the Crisis, First MIT Press edition, USA.
Maturana, H. and Varela, F. (1987)
Der Baumder Erkenntnis, Scherz Verlag, Munchen.
1987 ; paperback edition, Goldman Verlag, 1990
Luhmann, N. (1987)
Soziale Systeme, Grundriß einer allgemeinen Theo-
rie. Frankfurt a.M.: Suhrkamp, Germany.
von Foerster, H. (1991)
“Ethik und Kybernetik zweiter Ordnung”, Kyber-
nEthik, Merve, Berlin, in von Foerster, H. (1993),
pp.60-83.
Dr. Wolfgang Danzer
has studied mechanical engineering and
economics at the Technical University, Graz
and economics and business management
at the University of Queensland, Australia.
Since 2000 he works at MAGNA STEYR be-
ing responsible for process management,
supplier quality assurance, knowledge
management and project management
and since 2005 exclusively for project
management support worldwide. 2006 he
finished his PhD-thesis about knowledge-
oriented quality management. Experience
as project manager he gained e.g. in devel-
oping and implementing a web-based
management platform, integrating three
new locations into the MAGNA STEYR and
now as project manager doors&closures
within a development project of a new car.
E-mail: wolfgang.danzer@magnasteyr.com
Proj ect Perspecti ves 2009 23
Chinese civilization is characterized by the quite different philosophy, culture and management
approach. The paper looks at the Chinese philosophy and management, differentiating between
Confucianism, Taoismand Buddhism, trying to find out what western project management can
learn fromChinese culture, philosophy and management approach
Confucianism– how to make plans and how
to manage
The most influential contribution of Confucius is
so-called “Li”, which provided principles for Chi-
nese to build and deal with lots type of Guanxi.
One of the most important tasks to make a proj-
ect plan is to arrange a kind of suitable Guanxi
among stakeholders. “Stakeholder” is playing a
very important act in modern project management
principles. It is well known that the requirements
and expectations of stakeholders should be clearly
defined and involved in project objectives, and the
relationships should also be written in business
contracts accordingly. However, business contracts
cannot include many elements that make stake-
holders happy or satisfied.
An effective organization for a project is a
well built Guanxi network rather than a lifeless
organization chart. There are no pure business
relationships among project stakeholders. Guanxi
is a very subtle word, which cannot be simply
replaced with “relationship” although they are
similar to some extent. Relationships can be com-
paratively clearly defined, while Guanxi can only
be felt among people sharing the same culture
or the same sense. In other words, Guanxi can
never be written in business contracts. An ideal
Guanxi is to make a psychological environment
where people can feel nature and go without
saying. Without Guanxi, a project is difficult to
be executed smoothly and even more difficult to
make stakeholders satisfied.
Taoism– how to act in accordance with nature
Taoist philosophy and principles are rooted in an
understanding of the Way or Tao. Tao is the shape-
less force or Non-being which brings all things
into existence and then nurtures them (Laozi). Tao
manifests itself through natural principles. One of
them is the concept of complementary opposites
– yin and yang elements. There is no life without
death, no good without evil, no day without night
and the normal operation of universe needs all
these elements to be in equilibrium. Another Taoist
Jerzy Stawicki
PMM, JS PROJECT
Poland
Ding Ronggui
Management School
Shandong University
China
Otto Zieglmeier
Oz-Consulting
Germany
What Western Project Management can learn from
Introduction
21st century brings new challenges to projects
and project management. The economy is chang-
ing, the globalization extends its scope and the
network society is becoming closest vision than
ever. Projects, especially in hi-tech industry are
becoming more complex, project team members
better educated and have also bigger require-
ments. Due to globalization the number of inter-
national, cross-cultural projects is growing. Project
management extends from managing one project
and group of projects to program management
and to project-based organization and to port-
folio management, having close integration with
company strategy.
Though the project management is also chan-
ging, there are still many failed projects, with
budget overruns, delays and not keeping the plan-
ned scope and even not delivering the expected
business value. Therefore the project management
community is strongly seeking some new ideas
and concepts, which could be used in project
management in XXI century.
One of the areas sought through is the Chinese
civilization with quite different philosophy, culture
and management approach. Sometimes we even
hear, that XXI century will be the century of East.
Therefore the paper looks at the Chinese philoso-
phy and management, trying to find out what wes-
tern project management can learn from Chinese
culture, philosophy and management approach.
The paper starts with review of the key elements
of Chinese philosophy, culture and management,
continues with comparison of Chinese and Wes-
tern management and concludes with lessons
learned for Western project management.
Chinese Philosophy, Culture and
Management Review
Chinese management is based on the three pillars
– three approaches embedded in the philosophy of
Confucianism, Taoism and Buddhism. These three
approaches also reflect the plan-do-check-act
(PDCA) circle.
Chinese Culture, Philosophy
and Management Approach
24 www.pry.fi
principle is the circular movement or reversion of
all universe elements. According to that principle
universe elements – animals, human beings, vari-
ous forms of matter – ultimately return to their
natural state. Wu-wei or “non-action” is the next
principle. Wu-wei means to let events take their
natural course of action, just restrain from action
to let the things happen in a natural way. So per-
fect match with the nature through “non-action”
enables accomplishment of impossible.
The important part of Taoism deals with lea-
dership and leaders characteristics. According to
Taoists the ideal leader maintains a low profile and
leads people mostly by example. According to Lao
Tzu (Laozi): “The Master doesn’t talk, he acts. When
his work is done, the people say, “Amazing, we did
it, all by ourselves””. Taoismalso puts high value on
flexibility of the leader and his adaptation to the
changing situations and changing demands. The
Taoist leader should also recognize the dynamic
nature of reality and constant and circular nature
of changes.
Taoist philosophy also takes a holistic, system
view on the universe and all other systems, trea-
ting universe as a whole, not as a collection of
individual parts.
There is also final aspect of Taoist philosophy
worth to be mentioned as a summary. Taoism can
be treated as a specific approach to perception,
learning and acting with and within everything,
which happens in every-day life. It is an approach
giving people joy, fun and internal harmony, and
also happiness.
Buddhism– how to review everything
One key word of Buddhism is leniency, which
provides a subtle principle for Chinese while they
are reviewing people’s work. Hating to be managed
and liking to manage are human nature to some
extent, especially for Chinese, so that it is very
important to make concessions to avoid trouble.
A big mistake in management is that the perfor-
mance appraisal has been over used. Talking about
performance appraisal, we usually mean “people’s
performance appraisal”, i.e. we do this kind of work
based on a wrong assumption that all performance
are made by people and good performance could
be realized only if people work well. According
to systems thinking however, good performance
can only be got based on the harmonious systems
consisting of people, processes and tools etc.
Because of leniency, we have to make conces-
sions to avoid trouble. And because of having to
make concessions to avoid trouble, we are forced
to shift our attention from people to systems to
find the real way to improve performance.
Comparison of Chinese and Western
Management
Taking into account the three pillars of Chinese
management presented in p.2 and comparing
them to the traditional Western thinking, we end
up with quite different management approaches,
which are used in Chinese culture region and in
the West. Some of the differences are presented
in the following paragraphs.
Unlike the Western, Chinese usually prefer
Guanxi to the money rewards. Although many Chi-
nese are not as rich as people in developed western
countries, they pursue higher spiritual satisfaction
from their work. “Face” is one of the most impor-
tant words in Chinese public relationships. While
the Western work according to pre-defined rules,
Chinese act according the roles they accept. While
the Western take results as objectives, Chinese
enjoy the process getting the results. While the
Western doing things independently, Chinese work
happy in interactive teams. While the Western try
to define requirements, Chinese consider how to
uncover the hidden expectations of stakeholders.
While the Western look at things analytically, i.e. to
find what is inside it, Chinese are more interested
in its whole attributes and the relationships among
its elements. While the Western take work and life
are different, Chinese take work as a part of life.
While the Western think the best result is high
performance, Chinese think it is most valuable to
make people happy. While the Western take tasks
as the object of managers, Chinese take people as
the core of management.
The Western management philosophy and
approach is based on thoughts and beliefs deeply
rooted in the whole Western civilization. One of
these is rational approach. Therefore Western
management adopts “precision” methods and is
trying to obtain all the relevant information, make
the detailed analysis and make decisions based on
these detailed analysis. The decisions are based on
hard facts rather than soft factors and intuition.
And the focus is the result.
Typical for the Western approach is also focus
on analysis and details, not on the whole system
Table 1. Differences between Western and Chinese management.
West East
Rewards, bonus, money Guanxi
Rules Roles
Result Process
Individuals Interactive teams
Requirements Expectation
Analytical Systemic thinking
Work vs. life Work & life
Performance Happy people
Task People
Proj ect Perspecti ves 2009 25
and synthesis. Managers are looking for local
optimum, overlooking global one. Focus is often
on short term solution, not the long ones. Mana-
gement is closely connected with rules and law,
quite the opposite to the renzhi approach, used in
East. Legal contract is the key for preparing and
making business, while it kills every business in the
East. What counts most in business is efficiency
and professionalism.
In Western approach the strongest individuals
and companies will survive, while in the East the
most flexible with ability to adapt to the situa-
tion will survive. For the western management
the individual interest is the most important.
For the Chinese the group interest is the most
important.
There are also differences in communication
style. The communication style of Western mana-
gement is direct and very precise, there is no room
for insinuations and not clear phrases. The message
should and usually is concrete: “Yes” means yes
and “No” is commonly used.
The summary comparison of the two approaches
is presented in table 1.
Western Project Management – what We
Can Learn fromChinese Approach
The analysis of the Chinese philosophy and man-
agement approach and also of the requirements
for western project management in XXI century
leads to conclusion that lessons learned for west-
ern project management can be discussed under
the following points.
High level thinking, approach and philosophy
of project management
One of the most important – in author’s opin-
ion - lessons learned is the necessity to take
a higher worldview, by combining a western
things-oriented, divided worldview with a Chi-
nese human-centered, integrated worldview [2].
It means in practice a combination of western
approach using starting with parts of the system,
analyzing these parts using logical analysis and
seeking one, absolute truths with the quite dif-
ferent Chinese approach. The Chinese philosophy,
based on Confucius and Lao Tse, is trying to find
solution to human problems. It is also based on the
assumption, that human behaviors are driven by
human feelings (Confucius). According to Lao Tse
the ultimate reality (Tao) can never be an object
of reasoning and he advocates human harmony
with cosmos. What western project management
should adopt from Chinese approach is the system
approach: analyzing the whole system, treating
various elements as inter-connected, using intui-
tive synthesis. In practice it means, that we should
treat project management as a system, consisting
of portfolio management, program management
and project management and start every activity
in PM with that system picture in mind. The other
point is that western project management should
really forget to try to look for one, best solution.
One of paper authors is already practicing the
Chinese approach by giving the answer “well, it
depends” to various questions put by his customers
from project management world.
The other high level lessons to be learned from
Chinese approach are importance of seeking the
balance and harmony and equality in every activity
and balance and harmony between various ele-
ments of the system. One of the consequence of
these approach should be also a change of “a black
and white” or “good and bad” approach, deeply
rooted in western culture. Western “tyranny of
OR” makes the people, including project managers
think in terms: either A or B and exclude the option
both. In Chinese world right and wrong are treated
as something relative rather than absolute. As (Wei
Wang, 2006) put it: “right or wrong depends on
who sees it and when and where”. That approach
has deep consequences in human resource mana-
gement area of PM and will be discussed further
within the paper.
Human factor in project management
The recognition of importance of human resources
and human factor in modern project management
is growing in the last decades. It seems however,
that one of the challenges of XXI century project
management is understanding human nature more
deeply and stronger capturing of hearts and minds
of project stakeholders, especially project team
members and team leaders. Here also the Chinese
approach can be of great value.
In opposition to the western approach, assu-
ming management of people and arrangement
of work, the Chinese view is that we can manage
work and we can arrange – not manage – people.
The arrangement can be understood as keeping
people happy and making them want just what
the leader also wants.
Table 2. Leadership and management aspects. Based on Wei Wang, 2006.
Aspect Leadershi p Management
Theoretical basis Art Science
Ultimate goal Personal interests Organizational results
Focus People Things
Activities Informal Formal
Hallmark Change Stability
Source of power Personal Organizational
Thinking Lateral Logical
Decision making Intuition Analysis
Development Learning Training
26 www.pry.fi
Also people, relations between them and in-
teractive teams are the core components of the
Chinese approach (see p. 3). The roles are more
important than rules, teams than individuals and
what is most important: relations more important
than rewards and bonuses. Thus the whole appro-
ach is human-centered and as such should also be
adopted by XXI century western PM.
Managing projects means managing people
in project. Due to project nature, project ma-
nagement is more difficult than just managing
organizational unit. Management consists mainly
of human aspects subtlety. And Chinese approach
helps understand that.
Increasing importance of leadership
Very interesting lesson can be drawn from the
analysis of Chinese characters constituting words
“management” and “leadership” (Wei Wang, 2006;
Johnson, 1999). In the first case the focus is on
things, in the latter focus is on people. Following
these line of reasoning and taking into account
just presented discussion about human factor
in PM (4.2) we end up with the conclusion that
project manager in XXI century should be more a
project leader, than manager, though both aspects
– leadership and management – should stay in
balance and harmony, as discussed previously.
The most important aspects of leadership and
management are presented in the following
table.
Taoist wu-wei principle
One of the Taoist philosophy principles – wu wei –
advises the non-active approach, non-acting with
no intervention into the outside world. According
to (Laozi) “Contriving, you are defeated; Grasping,
you lose. The sage doesn’t contrive, so she isn’t
beaten.” Wu-wei means, that though there are
no activities, everything is done. The trick is that
everything is done and done very easily, because
it is in harmony with nature – with the normal
state of things.
The practical implication for project managers
is as follows: the starting point of the project
should be identification of the nature of project
elements: stakeholders, project team, culture of
the organization in which the project is to be exe-
cuted. Then the gap analysis should be conducted
to identify the biggest gaps between the “normal”
state of project elements and the state planned
at the end of the project. If there is no big gap,
i.e. we can expect project being done in harmony
with its elements, than we can also expect, that
things – project will be done quickly. When there
is a big gap a strong resistance to change can be
expected. In such a case various change mana-
gement approaches, like developed by E.Goldratt
(Goldratt, 1998) should be used.
The other practical implication is connected
to the inherent project variations. If the level of
variation is such, that it can be treated as sta-
tistical, controlled variation, so called common
cause (Deming, 1986), being intrinsically part of
the process, meaning the normal, nature state of
process, than no action – wu wei – is required
from project manager. The key ability of project
manager become the ability to identify the source
of variation: special, generating instability, not
normal state of the system and common – just
controlled variation. In the first situation no ac-
tion can worsen the situation, but in the second
any action can result in the same situation, i.e.
project problems.
Push vs. pull in project management – wu-wei
implementation
Another example of wu-wei principle practice
is connected with the push vs. pull approach in
management. Production management applies
pull approach in Kanban way of managing produc-
tion. Instead of using pull approach – just pulling
the parts into production cell, Kanban is using the
opposite approach: the parts are delivered – pulled
– just when they are demanded.
The same “pull” approach can be used in project
management. The traditional project environment
is a “push” environment, in which work is pushed
into the system as quickly as possible. In practice
this means that project task will be started asap.
Such systemis characterized also by quickly outda-
ted schedules, not resolved resource conflicts and
lack of precise prioritization mechanisms. In the
“pull” system work is released as late as possible
(alap), with consideration of the ability of the
whole system to realize it.
The other example comes form the multi-
project environment. The common practice in
many companies is just “push” approach – pushing
new project into organization, resulting in “bad
multitasking” and constant shuffling of resour-
ces, priority changes and delays of all projects.
Those companies, which try the opposite - “pull”
approach – staggering projects and taking into
consideration the whole project system and its
ability to process all the projects get unusual
results (Realization, 2006).
Yin-Yan dialectics and harmony in project
Another Taoist principle tells about the dialectics
of yin and yan elements. Both are interrelated, too
much of one of these elements leads to its collapse
and increase of the other.
Surprisingly that principle applies perfectly to
the world of project management. Too much con-
trol over the project lead to disaster and loose of
control. Too precise schedule is indeed worthless:
it is not possible to manage project with such a
schedule. Too much documents and bureaucracy
generates mechanisms to avoid them and make
things easier.
Simple lesson for the project
manager is as follows:
avoid extremes, keep project
elements in harmony.
Proj ect Perspecti ves 2009 27
Conclusions
The paper after presenting the key concepts of
Chinese philosophy, culture and management,
made a quick comparison of Chinese and Western
management and concluded with some lessons
learned drawn from Chinese approach.
It seems, that in the era of networking society
some of the Chinese concepts, especially those
addressing the human factor in project mana-
gement can and should be adopted by Western
project management. Teamwork, strong leadership
and detailed stakeholders management belong to
that category.
The other concepts that should also be at least
a source of inspiration if not directly implemented
are:
- non-acting (wu-wei) approach
- strive for harmony between various proj-
ect elements
- etc.
Also the “pull” approach to project tasks and
whole projects, substituting traditional “push”
approach, should be considered as an alternative
approach to releasing project work into the project
system.
We should be conscious, that every management
philosophy and approach is directly connected to
the culture and way of thinking adopted by the
society in which it is based. Therefore the obvious
conclusion: what works well in one environment,
can not work in the other.
Another conclusion is connected with the fact,
that at least some of Chinese management ele-
ments are used by the TOC project management
(Newbold, 1998). Holistic, system approach of the
whole project system, looking for global optimum,
not for the local ones and “pull” principle are
examples from TOC approach.
Conclusion part of the paper is also a good place
to ask the question about practical experience
with such a mix of Western and Chinese project
management methods. One of the paper authors
is practicing some of these methods and some
experience – on the project portfolio level – are
described in (Stawicki & Mueller, R. (2007).
References
Laozi, Tao Te Ching, chapter, 64, www.mindgazer.org/
tao/#Tao.
Wei Wang (2006) The China Executive. 2W Publish-
ing.
Goldratt, E. (1998) Project Management the TOC Way,
The North River Press.
Deming, W.E. (1986) Out of he Crisis, Cambridge, MA,
Massachusetts Institute of Technology, Center for
Advanced Engineering Study,
Stawicki, J. and Mueller, R. (2007) FromStandards to
Execution: Implementing Programand Portfolio
Management, paper submitted to XXI IPMA Con-
gress, Cracow 2007.
Newbold, R. (1998) Project Management in the Fast
Lane, St.Lucie Press, 1998.
Realization (2006) Realization ‘s Annual Customer
Conferences, CD, Realization 2006
Johnson, C.E. (1999) Emerging Perspectives in Leader-
ship Ethics, Proceedings from1999 annual confer-
ence for International Leadership Association,
October 22-24, Atlanta, Georgia USA.
Jerzy Stawicki
PhD, PMP, CPMP
Dr Stawicki is an
independent, free-
lance consultant and
university lecturer,
managing his own
firm JS PROJECT. He
graduated from War-
saw University of Technology (Poland).
He specializes in consulting and training in
the area of project, project portfolio and
program management, as well as building
project-based organizations. Other areas
of his professional activities are: ERP/MRP
II systems and Theory of Constraints.
He is certified as PMP by PMI (2003) and
as CPMP: Certified Project Management
Professional, Level C by IPMA (2004). He
can be reached at:
jerzy.stawicki@jsproject.pl.
Ding Ronggui
Professor
School of Manage-
ment, Shandong Uni-
versity, 250100, China.
E-mail: Ding_rgui@
sdu.edu.cn
Born in 1967, received
his PhD degree from
Tianjin University. His research interest
includes Project Governance, Project Orga-
nization Management etc. He is honored
as ‘excellent talent’ by China Ministry of
Education
Otto Zieglmeier was
a well-known expert
and a very influential
person in global proj-
ect management com-
munity. He followed
studies of chemical
technology, more than
25 years with Chemi-
cal Industry World Leaders and associ-
ated SMEs in senior and top international
management posts worldwide.
Since 1994 he was a consultant focusing
on international management excellence
transfer, including interim jobs in financial
and budgetary control of projects for the
European Commission and as managing
director in the automotive supply sec-
tor. He was a registered consultant at the
European Commission. Since 2003, Otto
played a decisive role, in particular at the
ExBo level as a Vice President of IPMA. We
will remember Otto Zieglmeier with the
deepest respect.
Ti ji U i i Hi
l I d t W ldL
28 www.pry.fi
Matti Haukka
Project Institute Finland ltd
Espoo, Finland
Core question: How big part of your human resources are
allocated to project work?
Example: Resource
allocation in
”process” company
Core Business Processes
Development Processes
- Processes and IT
- Services and products
- HR
- New businesses etc.
Other Processes
- Administration
- Marketing etc.
Recurring
process -
non-project
No projects
20%
5%
10%
20%
2%
20%
2%
20%
1%
Simple
Project
Normal
Project
Complex
Project
The prerequisites and steps to develop
This paper will present how to start developing the PPM systemand what are the developing
steps and key elements of this system. The paper also presents what the necessary prerequisites
of PPM systemare and what is critical when trying to build PPM Processes as a part of company’s
management system.
Introduction
The share of activities being carried out in organi-
sations on project basis has increased sharply in
the past decade. Projects are carried out in the
entire organisation. At large multinationals like
banks, oil companies and insurance companies,
there are sometimes hundreds or even thousands
of projects being carried out simultaneously. At a
certain moment, there is a need for taking stock
of all current projects and mapping out things like
how much of the capacity is being taken up, and
what kind of investment budget is required.
The future of most companies is depending on
capability to implement strategies effectively and
faster. Procedures and methodologies to prioritize
projects are becoming extremely important and
needs to control on-going projects are increasing.
This means that management has to change their
focus when developing a new management system
and governance model.
The Main Prerequisites of Functioning PPM
Recognize the value of your Project Portfolio (PPM)
The value of projects to the company should be
estimated and management should really be aware
of it. In a company that is delivering projects to its
external customers (delivery projects) the value is
well considered. But in the case of internal project
portfolio, it usually isn’t.
First the value can be measured by estimat-
ing the significance of strategic change, need
of developing new products and processes etc.
Practically the value of projects can be measured
by dividing all working processes to project work
and non-project work and estimating the amount
of resource allocation to both processes. Figure 1
shows an example how this can be done. In most
companies the amount of resources allocated on
project work is surprisingly big and this should be
better noticed by management.
Developing a single project model that
supports an effective PPM
In many organisations several project models and
practices are used in different types of projects.
This is quite natural and certainly helpful in indi-
vidual projects. However, when several models are
being applied the following problems occur:
- An extensive project may include different types
of subprojects. An IT-project e.g., is often a part
of a larger whole.
- The same resources take part in different types
of projects and need to learn several PM prac-
tices.
- Strategic programs and project portfolios often
include different types of projects. Program and
portfolio management requires consistency in
the management practices of projects.
A generic project model requires that the
management process is clearly separated from
the implementation process of the project. It is
important that different implementation pro-
cesses could be managed according to the same
management processes (examples of implemen-
Figure 1. An example how the amount of resources allocated on
projects can be measured and made aware.
Corporate Project Portfolio
Management (PPM)
Proj ect Perspecti ves 2009 29
Example: Resource
allocation in
”process” company
Core Business Processes
Development Processes
- Processes and IT
- Services and products
- HR
- New businesses etc.
Other Processes
- Administration
- Marketing etc.
Recurring
process -
non-project
Strong PM
Processes needed
20%
5%
10%
Simple
Project
Normal
Project
Complex
Project
Example: Resource
allocation in
”process” company
Core Business Processes
Development Processes
- Processes and IT
- Services and products
- HR
- New businesses etc.
Other Processes
- Administration
- Marketing etc.
Recurring
process -
non-project
PPM Processes
needed
20%
5%
10%
Simple
Project
Normal
Project
Complex
Project
tation processes are the system work
model, product development process
and order-delivery-process). A generic
project model links the management of
different projects to the management
system of the entire organisation.
In order to keep the project model
(management process) generic, it should
not be linked too tightly with the phases
of the implementation of the project,
which differ of course in different types
of projects. The concept of the Project
Management Institute’s publication A
guide to the project management body
of knowledge (PMBOK) is good in this
respect.
The management processes are
grouped into five process groups:
- initiation
- planning
- executing
- monitoring & controlling
- closing
Management related to the process
groups is carried out during the entire
project.
The planning e.g., continues through-
out the project and not just between
some decision points. However, it is
important that certain management ac-
tions are clearly linked with the decision
points controlled by the management
and the portfolio (Figure 2).
Classifying the projects by
complexity (=risk level)
Typically when organisations start to
implement PPM, they consider only the
largest and most complex projects. What
then happens is that huge amount of
projects and use of resources are left
without proper control, when in fact
the small and medium sized projects are
using the most resources. These projects
should be managed by PPM processes
as well.
The solution could be to classify proj-
ects by their complexity. Only the most
Figure 3. Strong and competent PM processes are needed for complex projects. Yet, certain small and less complex
projects should be managed by PPM processes as well.
Figure 2. The framework of generic project Model
Initiation
G0 G1 G2 G3
MS MS
G4 G0
Planning
Project Implementation Level
Project Management Level
Project Portfolio Management Level
Executing, Monitoring & Controlling
Closing
PE
Project
deliverable
Project
proposal Project
plan
PE
report
Project
charter
Final
report
Progress
reports
complex projects (A projects) should be
managed using strong PM processes. But
all projects, including the less complex
projects, should be considered as a part
of Project Portfolio, even though strong
and competent PM is not needed as
much. Of course there still exists a cer-
tain amount of small development ac-
tions that are not considered as projects,
but the uncontrolled use of resources to
these actions should not be significant
(Figure 3).
In addition, classifying projects by
their complexity gives management a
good understanding of the risk level of
the whole project portfolio.
Building PPM Processes as a part of
corporate management system.
The organisational structure of a com-
pany should be re-engineered so that it
considers the main roles and unites both
PM and PPM. It means that project own-
ers’ role should be emphasized more and
PPM board and Project Management
Office (PMO) should be established. PMO
supports and develops these processes
and is responsible for all PPM adminis-
tration if needed. After all, this needs
supportive IT systems.
Developing the PPM Model and
Methodologies
A method of keeping a database of all
on-going projects creates the founda-
tion for PPM. This alone brings a chal-
lenge. Many line managers would have
to start a two-week investigation when
being asked which projects are going on
in their organisation.
The first level of portfolio manage-
ment maturity is reached when this
aspect is in order.
Many would possibly have to start a
new investigation when being asked:
“What is the status of these projects?”
The second level of maturity is reached
when the reporting is working. There is
still a long way to go to the stage where
projects are systematically evaluated,
30 www.pry.fi
visible decisions are taken in phases, attention
is paid to resources and the strategically most
important projects are carried out without delay.
When the reporting also covers forecasts of proj-
ects’ real benefits and their evaluation continues
till the projects are finished, only then can we start
talking about advanced PPM (Figure 5).
The essential challenge in portfolio manage-
ment is doing the right things and having the abili-
ties to do them. Traditional project management
concentrates more on doing things right.
Personnel resources are often the critical issue.
“Do our projects take longer because we do not
have enough resources for them?” is a good test
question. If the answer is “yes” then the conclu-
sion should be that there are too many projects
going on at the same time. However, this doesn’t
normally concern major investments and procure-
ment projects because their critical factor is money
and their resources are mostly external. Manage-
ment processes have been made much tighter as
far as controlling expenses are concerned. There
still exists a misconception that resources don’t
entail expenses in projects, at least not capital
outlays. This persistent misconception leads to
ineffective development, longer projects and a
waste of resources.
Strong decision points (gates) are needed to
help project prioritization. Weak projects are dis-
continued immediately and only the good ones
are carried out. This should be the objective for
project portfolio decision-making. Challenges rise
fromthe fact that there are usually too many good
projects. On the other hand, choosing the right
projects is also a question of forecasting, which is
sometimes difficult to get right.
A project model with defined decision points
(so-called Gate model) is a solution, in which deci-
sions concerning various projects are taken with
gates (G). The idea is to diminish the uncertainty
related to a project while the project information
is increasing and becoming clearer. The problem is,
however, that the gate model is sometimes used
like a tunnel with the same diameter from the
beginning to the end. Instead, it should be more
like a funnel which effectively stops projects in
their early stages making sure that only the best
projects receive the necessary resources.
The gate model should include project compari-
son. One should start managing portfolios instead
of just evaluating individual projects. No project
should pass the gate unless it has been compared
against other on-going projects requiring the same
resources. It is advisable that when the project
execution has been finally accepted, the project
should not be prioritized any more!
Passing the gate guarantees the availability
of resources to the project for the next phase.
The decision-making on projects within a project
portfolio should be visible and based on compa-
rable project information. A lottery machine in
which all good projects appear in numbers would
be a solution (better than nothing!). Whenever
resources become available it would pick the next
project in public. Since this cannot be done, there
should be a method by which every project can
be presented in a way that makes comparison
possible. This would be easy if clear investment
calculations could be made of every project. Since
this is not always possible, other methods should
also be investigated. One good solution is to ap-
ply Balanced Score Card (BSC). The uncertainties
related to both business benefits and implemen-
tation (project complexity) should also be taken
into account in project evaluation (comparison).
Tables and diagrams help communication and are
creation of an overall picture.
Conclusions
When implementing a PPM system, the question
is actually of the need for changes in an organisa-
tion’s management culture. The time allocated to
management should be reconsidered, in middle
management in particular. This will not happen
Figure 5. Maturity levels of PPM. Knowing the development steps and
key elements of a PPM system helps management to
set objectives and time schedule for development work.
The business benefits of all projects are evaluated
afterwards and this causes continuous development
Project selections and prioritization is done
transparently and through systematic procedures
Resource needs are planned for all projects
(eg. Procedures to solve resource conflicts)
Awareness of the balance, status
and progress of all projects
Awareness of Ongoing Projects
(Project Database)
E
f
f
e
c
t
i
v
i
n
e
s
s

o
f

p
r
o
j
e
c
t

b
u
s
i
n
e
s
s
F
a
s
t
e
r

i
m
p
l
e
m
e
n
t
a
t
i
o
n

o
f

s
t
r
a
t
e
g
i
e
s
Figure 4. Example of organisational structure of a
project-oriented company
Company X
BU 1
PPM
Board
BU 2 BU 3
Common
services
PM Office
Project
Project
Ownership
Portfolio of all
development
projects
Proj ect Perspecti ves 2009 31
unless the evaluation and reward systems in or-
ganisations are changed in order to pay attention
to the successes in project work as well. The more
important strategic change and development are
to organisations, the more crucial these issues will
become. This requires that a strong project culture
is developed at all levels of the organisation.
When developing the culture, the PPM maturity
levels may help the organisation to progress step
by step. But before developing PPM, the organi-
sational competence and processes of individual
projects should be on a certain level. A generic
project model for individual projects should be
implemented and clear classification criteria for
project types and complexity levels should be
defined. All these processes should supported by
project oriented organizational structure.
The Main Findings and Proposals
The main prerequisites for each maturity level of
PPM are the following. Companies should take care
of these necessary actions before dreaming of any
remarkable improvements to PPM itself:
Step1:
Implement a harmonized project management
model with necessary and transparent decision
points (gates, toll gates). In the same time make
sure that each project has an owner (sponsor)
who is carrying the ultimate responsibility for
the project success.
Step2:
Establish a Project Management Office (PMO)
with necessary resources and ensure that each
project is managed and reported according to
the same main framework.
Step 3:
Ensure that each project is planning and updat-
ing resource plans of proper quality. Develop the
competence of project managers accordingly.
Step 4:
Organize a Project Portfolio Management Board,
which is putting enough management effort on
PPM, emphasizing mostly the initial decision
points of projects and using systematic and
transparent procedures in it.
Step 5:
Organize your PMO so, that it has enough re-
sources to support post-project appraisals and
to develop both the strategic and PPM processes
further.
Additonal practical notices for setting up Proj-
ect Portfolio Management systems:
1. Objectives. Depending on the value of projects,
the management should set the development
objectives and estimate the development ef-
fort.
2. Models. The project model should be generic.
3. Priorities. The biggest challenge is setting
priorities in projects.
4. Decision making. Make the quality of solu-
tion visible in project comparison and decision
making.
Literature
APM, Directing Change: A guide to governance of
project management
PMI, A Guide to the Project Management Body of
Knowledge, Third Edition
Matti Haukka (1959-), male, M.S. in Engi-
neering, Senior Consultant and Partner of
Project Institute Finland ltd.
Matti Haukka has provided tailored project
management training for various compa-
nies and worked as a PM consultant for
several organizations of different fields
since 1989. At Project Institute Finland
he has been in charge of developing the
ABC Project model™and held numerous
presentations about the topic in interna-
tional project management conferences.
Today he mainly trains experienced project
managers, members of steering groups and
board of directors and provides consulting
services for clients who want to develop
their project management culture. His
specialty is project models and portfolio
management. He also functions as the
leader of “Portfolio Management and Pro-
gram Management – SIG team” in Project
Management Association Finland.
Phone: +358 500 506004
e-mail: matti.haukka@projekti-instituutti.fi
PMI, The Standard for Project Portfolio Management
Project Institute Finland ltd, ABC Project Model ver.
2.0
Matti Haukka
Towards visible and systematic Project Portfolio
Management, IPMA World Congress on Project
Management, Budapest 19-20 June 2004
Matti Haukka
Harmonizing the Project Management practices
across the boarders – experiences with the merged
companies in Nordic Countries, IPMA World
Congress on Project Management, Budapest 19-20
June 2004.
Matti Haukka
Towards transparent project portfolio manage-
ment, NORDNET Symposium, Copenhagen,
October 2005.
Gerard Geurtjens and Matti Haukka
IPMA Advanced training course H : Managing
Corporate Project Portfolios, Copenhagen March
2006, 2007 and 2008 and Shanghai 18-20 October
2007
Matti Haukka
The prerequisites of functioning Project Portfolio
Management, IPMA World Congress, Shanghai,
October 2006
32 www.pry.fi
Peter Crerar
JKX Oil and Gas
PETROM 2004-07
Romania
Dagmar Zuchi
Roland Gareis Consulting
Austria
Maturity of Petrom as a Project
Oriented Company and Plans
for Further Development
“Companies and parts of companies (such as
business units) which use projects and pro-
grammes to fulfill complex and relatively unique
business processes, can be defined as “project
oriented companies”, i.e. POCs. This paper de-
scribes the maturity dimensions of a project
oriented company and possible ways of further
developing such a maturity with the example
of Petrom.
Reasons for Petromto develop as a
Project Oriented Company (POC)
In December 2004, Petrom was incorporated into
the OMV Group. As part of this exercise, integrat-
ing activities were performed in order to facilitate
the merger of Petrom into OMV. One of these
activities was to establish a new process for the
execution of Capital Investment Programme (CIP)
projects in the Exploration and Production Busi-
ness Unit. For this process, project managers and
project team members of these CIP projects have
been trained in the new process and in particular
in the management and controlling of projects.
So one of the reasons for the development
of Petrom as a project oriented company was
the development of personnel resources in new
project management techniques and in the use
and application of available project management
tools. With this, a better planning of the project
start as well as better project control during the
Figure 1. Maturity of Petrom E&P as a project oriented company
POU Maturity:
PETROM: 2,46
Project
Management
Programme
Management
Assurance of
Management Quality
in Projects and
Programmes
Assignment of a
Project or Programme
Project Portfolio Coordination
and Networking between Projects
Organisational
Design
Personnel
Management
Process
Management
3,02
1,65
2,44
3,42
1,87
1,99
2,64
1,81
Proj ect Perspecti ves 2009 33
project execution was established. Petrom aimed
to achieve its objectives and targets quicker as
well as to enhance quality assurance and control.
Nowadays, Petrom’s suppliers and contractors have
also been asked to introduce project management
according to the standards of Petrom as a result
of which their performance is improving.
Petromas a Project Oriented Company
Prior to privatisation, Petrom exercised little by
way of internationally recognised project manage-
ment practices. It is therefore a good candidate to
monitor as it progresses along the road to becom-
ing a Project Orientated Company.
Currently, the research project entitled “Proj-
ect Orientation [Romania]” is being undertaken
in Romania. This project is part of the research
program “Project Orientation [International]”
being conducted by the PROJEKTMANAGEMENT
GROUP of the Vienna University of Economics
and Business Administration, Austria. (www.poi.
pmgroup.at).
The objectives of Project Orientation [Romania]
are:
- Analysis of the maturities of some 20
project-oriented companies in Romania
- Analysis of the maturity of Romania as a
project-oriented nation
- Development of strategies for the further
development of the project-oriented com-
panies and of the project-oriented nation
- The maturity models used for the research
are based on ROLAND GAREIS Manage-
ment of the Project Oriented Company®.
Petrom E&P is one the entities participating. In
the following figure, the competencies per dimen-
sion of the project oriented company are visible.
The total maturity is represented by the area and
the maturity ratio. The represented “maturity” is
the output of a facilitated workshop in which
2 representatives of Petrom E&P analysed the
maturity with the questionnaire of the maturity
model.
It is obvious, that Petrom E&P has an average
maturity ratio as a project oriented company of
2,46%.
The strength within Petrom E&P lies in the “as-
signment of projects”. Through the implementa-
tion of the CIP process, the assignment of capital
projects is well defined and followed. Furthermore,
Petrom E&P has a high maturity in “project man-
agement”, followed by “personnel management”
and “assurance of management quality”, achieved
through well established project management
processes and methods, as well as offered trainings
and consulting activities.
Petrom E&P has areas for improvements in
„Programme management“, „project portfolio co-
ordination“, „organisational design“ and „process
management“. As it will be shown later in this
paper, Petrom has started activities for 2007 to
further develop these competencies.
History of Establishing Petromas POC
During the last 2 years, PetromE &P has conducted
about 20 Project Management trainings at both
the headquarters and the Regional Operating
Area offices throughout the country for about
300 people.
In December 2005, 5 workshops for the develop-
ment of Project Management Standards for the
5 most important project types (such as “Parc/
Tank Farm Modernization”, “Abandonment”) were
launched and on the basis of that, a consulting
of key projects for Petrom E&P in the start and
controlling phase were undertaken.
What has been achieved is that over 300 people
have been put through basic project manage-
ment training and some of these have received
more specific training ie for Project Managers
and for other specific project team functions. In
addition, Petrom has recently introducted Project
Programme training.
Very few of the projects exercising modern
project management have gone through the
complete project cycle and therefore none of
Petrom’s staff have currently experience of this
complete cycle.
Figure 2. Identity model (Gareis/Stummer, 2006)
Past
Context
Supplier
Customer
Future
34 www.pry.fi
Cent ral PMO
Objectives
- Assurance of professional project, programme and project portfolio management for all
projects and programmes
- Professional management of cross-regional projects and programmes
Project and programme management services
- Management of cross-regional projects and programmes
- No support services for regional projects
Project portfolio management services
- Maintaining the project portfolio database for cross-regional projects and programmes
- Providing project portfolio reports
Organizational design services for all projects and programmes
- Providing procedures and templates
- Providing software
- Providing Frame Contracts
- Benchmarking
Personnel management services for all projects and programmes
- Setting standards
- Organizing training, consulting, auditing and coaching
- Promoting project management as a profession/career
- Management of the central pool of project and programme management personnel
Processes and methods
- Develop process ownership
- Investment programme planning
- Project or programme assignment
- Project and programme management
- Project consulting, project auditing
- Project portfolio coordination
- Networking of projects
Roles/Personnel
- Head: Central Projects Department
- Project management experts
- Project portfolio managers
- Programme managers
- Secretariat
Communication structures
- Central PMO meetings
- Meetings of the central PMO with regional and local PMOs
Culture
- Values: Professional, international, cooperative, project mind set
- Slogan: Project Management - a new profession
Infra-structure
- Office
- ICT: Homepage, project management software, …
History
- Establishment after the acquisition and re-organization of the company
- Recruitment and qualification of project managers for the division
Social environments
- E&P business unit
- Other business units
- Contractors and suppliers
- Authorities
- Project Management Associations
- Consultants
Figure 3. The “identity description” of the central PM Office
Proj ect Perspecti ves 2009 35
Future Steps in Establishing PetromE&P
as a POC
Petrom aims to further develop itself as a project
oriented company and plans therefore a number
of activities for 2007. In the following text, some
of these activities are described along the dimen-
sions of the maturity model. Special focus will be
given to the organisational design and to person-
nel management.
With respect to “project management”, in 2007,
project management activities for non capital
projects will be started. Project managers and
project team members who are responsible for IT,
HR, Organisational projects etc. are to be provided
with procedures for project management and will
be offered trainings in project management and
associated social competencies.
The role of the project owner was only briefly
considered in previous trainings and has been
impacted by changes within the organisation. It
is intended that consulting will be introduced to
further develop the maturity of project manage-
ment and project ownership (see below).
Concerning “programme management”, at
the beginning of March 2007 a first training in
the topic was launched as only recently Petrom
decided to establish programmes as organisa-
tional differentiation. Large investment activities
planned for the next couple of years make this
organisational form of programmes a competitive
advantage within the company to better handle
the scope of the activities.
The ”management quality in projects or pro-
grammes” will continue to be assured through
consulting activities for the E&P key capital proj-
ects that were launched in 2006 and are planned
for 2007. Furthermore, networking is encouraged
and experiences are beginning to be shared to the
benefit of all.
”Portfolio management” is still under develop-
ment. However, Petrom E&P’s portfolio projects
have to respect some internal rules regarding
quality, timing, cost, etc. and at the same time the
optimum portfolio needs to achieve the desired
strategic goals and constraints. All proposed proj-
ects are included into a portal driven process using
a request format filled in by the project manager.
After this step, the data are transferred into a
SharePoint database. The projects are analyzed
using standardized economic evaluation and the
results are stored into an Oracle database. Taking
into account the required strategies, portfolio
optimization is created and the first planning of
capital expenditure is proposed. New opportunities
which appear after this proposal will be analyzed
in the next portfolio optimization which takes
place quarterly.
Organizational Design
Concerning the development of “Organizational
design”, Petrom E & P decided due to the size of
the organisation and the geographical spread
throughout the country, to establish PM offices
(PMOs) on the following levels: central, regional
and local. Project tasks were undertaken at each
of these different levels and overlapping occurred.
The process has not been transparent for either
project managers or the organisational units.
Therefore in 2007, the differentiation in the 3
PM Offices will be described in order to further
develop the maturity in fulfilling the various
expectations.
The PM office as an organisational unit within
Petrom can be perceived as an organisation in
itself. In consequence the following identity model
can be used to describe this “organisation”.
The identity model describes an organisation ac-
cording to its structures, which can be documented
by its objectives, services and markets, processes,
organization chart, roles, communication struc-
tures, culture, personnel, infra-structure and
budget. As social systems, the organisation can be
additionally “identified” with its context, described
through history and social environments.
In the figure 3 the “identity description” of the
central PM Office is given as an example. This
description exists accordingly for the regional and
also for the local PM Offices. With this further de-
velopment of the PM related organisational design
of Petrom E&P, the maturity will increase.
To devel op the maturi ty of
proj ect owners, appropri ate
structures must be created
and the awareness of the
rol e must be i ncreased.
Personnel Management
For the development of “personnel management”,
this will happen as project management gets
more and more established and recognized as
a profession and full time project managers are
established. Project managers are being certified
according to IPMA and further certifications are
planned. Furthermore, standard project manage-
ment training courses for 2007 for all PM person-
nel are offered.
A key success factor in projects and programmes
is the performance of the role “project or project
programme owner”. In practice other names are
also used for this role, such as project/programme
sponsor or project/programme steering commit-
tee.
To assure an appropriate performance, the right
persons for this role have to be selected. The proj-
ect and/or programme owner should have knowl-
edge and experience to perform this role in the
project or programme management process. This is
based on a clear role perception, on competences
in project/programme management, and appropri-
ate relationships to relevant environments. The
project/programme owner role is to be understood
and accepted by the project/programme team and
by representatives of relevant environments, such
as the client, suppliers, etc.
To develop the maturity of project owners,
appropriate structures must be created and the
awareness of the role must be increased.
Through adequate process development of the
project oriented company, the understanding and
acceptance of the role can be supported. In pro-
cedures for project management and standardized
36 www.pry.fi
Figure 4. Role description project owner team (Gareis, 2004)
Rol e: Proj ect owner t eam
Objectives
Realize project-related company interests
Coordinate project and company interests
Assign the project to the project team
Lead the project manager
Support the project team
Position in the organization
Reports to the Project Portfolio Group
Part of the project organization
Project manager reports to the project owner team
Tasks
Tasks in the project start
Select the project manager and essential project team members
Agree on objectives with the project team
Contribute to the design of the project context
Ensure the availability of resources
Ensure the use of the company’s project management standards
Participate in the project start workshop
Contribute to the initial project marketing
Tasks in project coordination
Communicate with representatives of relevant environments
Continuous project marketing
Tasks in project controlling
Make strategic project decisions
Strategic project controlling
Continual information about the project context
Continually ensure the availability of resources
Contribute to conflict solving
Hold project owner meetings
Occasionally participate in project meetings and project workshops
Contribute to project marketing
Promote change in the project
Tasks in resolving a project discontinuity
Define a project discontinuity
Collaborate in the resolution of a project discontinuity
Collaborate in the development of and decisions about immediate measures
Collaborate in the cause analysis
Decide about alternative strategies
Collaborate on the performance of corrective measures and checks on their success
End a project discontinuity
Tasks in project close-down
Performance evaluation
Exchange feedback with project team
Participate in project close-down workshop
Ensure know-how transfer into the permanent organization
Formal project approval
Ensure adequate structures for the post-project phase
Environment relationships
Project Portfolio Group
Project team, project manager
Customers, suppliers
Formal authority
Selecting the project manager
Assigning the project team with the project performance
Changing the project objectives
Purchasing decisions over eur ...
Definition of a project discontinuity
Project stopping
Project approval
Proj ect Perspecti ves 2009 37
Dr. Dagmar Zuchi,
zSPM
Academic background. 1996-2000 PhD at
the University of Economics and Business
Administration, Vienna, 1997 post gradu-
ate programme “International Project
Management” at the University of Eco-
nomics and Business Administration and
the Technical University Vienna, 1994
exchange programme at the Erasmus Uni-
versity Rotterdam, The Netherlands.
Professional career. 2003-2006 Trainer
and consultant of ROLAND GAREIS
CONSULTING in the field of project and
process management, project manager
for the ROLAND GAREIS CONSULTING.
2003-2006 lecturer at the University of
Economics and Business Administration,
the bfi Vienna and the Donau University of
Krems. 2003 Certification as Senior Project
Manager through PROJEKT MANAGEMENT
AUSTRIA. 2000-2003 Working in CRM, or-
ganizational development, and call center
implementation projects for two energy
suppliers in Austria; roles: project manager
and project team member, responsible
for defining and implementing business
processes.
Peter Crerar graduated as a Chemical
Engineer in 1970 and worked for BP until
1987 when he commenced working for
British Gas. For both companies, Peter
focussed on the project management of
upstream development projects for both
oil and gas fields mainly in the North Sea
but also in the Middle East and North
America.
In 1997, Peter left BG to become a project
management consultant and undertook
major developments both onshore and
offshore in Europe and Australasia.
More recently, Peter spent 3 years in
Romania introducing project management
practices into Petrom Exploration and Pro-
duction following their privatisation and
take-over by OMV, an Austrian integrated
oil and gas company, in 2002.
templates, role descriptions of the project owner
will facilitate the understanding of the role. In
the description of the project management sub
processes, specific attention should be directed
towards the assignment process, in which the
project owner is playing an important part.
In the personnel management structures of
the project oriented company, the project owner
should be well considered. PetromE&P established
a two day training course but has only undertaken
a limited number of courses till now.
Conclusion
A success factor of a project oriented company
is the perception of projects and programmes as
possibilities of organisational differentiation. Ac-
cordingly, the organisational structures must be
established in order to enhance the objective of
“project orientation”. In this paper the different
dimensions of a project oriented company, such as
“assignment of projects”, “project management”,
“personnel management”, “assurance of manage-
ment quality”, “Programme management“, “project
portfolio coordination“, “organisational design“
and “process management“ are described using
the example of Petrom. Special focus was given
to the “organisational design”, in describing the
structure of the PM Offices within Petrom along
the identity model and to “personnel develop-
ment”, in describing the importance of the role
of the project owner and ways to develop their
competencies.
References
Cleland, D.I. (Hrsg), 2006
Global Project Management Handbook:
planning, organizing, and controlling interna-
tional projects, McGraw-Hill.
Gareis, R. (2004)
Happy Projects!, Second Edition, Manz Verlag,
Vienna, 2004
Gareis, R. / Stummer, M. (2006)
Prozesse & Projekte, Manz Verlag, Vienna,
2006
Jankulik, E.; Kuhlang P., Piff R., 2005
Projektmanagement und Prozessmessung:
Die Balanced Scorecard im projektorientierten
Unternehmen, Publicis Corporate Publishing,
Erlange
38 www.pry.fi
Dr. Ravikiran Dwivedula
University of Hyderabad
India
Prof. Christophe Bredillet
ESC Lille School of
Management
Dr. Philippe Ruiz
ESC Lille School of
Management
The Dichotomous Nature of
Motivation in Collocated and
Virtual Project Environments
In this paper, we compare collocated and virtual
project environments fromthe motivation stand-
point. Project management literature reveals
strong relation between motivation and team
performance that assumes 3 dimensions—Nature
of Work, Rewards, and Communication. Through
a survey of 132 respondents, we compare how
characteristic are these three dimensions of the
collocated and virtual project environments.
While the one tail t-tests show that these two
groups are similar, the principal component
analysis reveals the ‘dichotomous nature of
motivation in project environments – Internal
Motivation Factor, and External Motivation Fac-
tor that comprehensively profiles motivation in
the project environments.
Introduction
Motivation, in the context of project environ-
ments is closely related to performance. This view
is supported by various theories of motivation (
c.f. McClelland, 1961; Locke, 1968; Vroom, 1964).
Further Armstrong (2003) defines motivation as a
force that energizes behaviour by providing goal
direction to the individuals. Thus, when defining
motivation, the emphasis is both on individual
effort and performance orientation. This is more
relevant to project management as projects are
bound by performance objectives such as budget,
schedule, scope, quality, and user requirements.
Thus, motivation strictly from the behavioural
perspective alone may not achieve the required
level of performance.
In this paper, through our literature review, we
present a holistic view of motivation in project
environments by theoretically showing the relation
between motivation (drawn from the organiza-
tion behaviour and human resource management
literature) and performance (drawn from project
management literature) to present a model of mo-
tivation relevant to project environments. Next, we
will test this model empirically. We finally discuss
these results. Surprisingly, while the collocated and
virtual project environment seems to be similar
from the motivation standpoint, we observe that
motivation itself is simplistically dichotomised by
these project environments.
Theory
McClelland in his theory of needs (1961) stated
that individual’s motivation is contingent upon
his/her drive to excel in relation to set of standards.
Translating this to a project setting, Garies (2005)
presents the concept of ‘performance motives’.
According to this, individuals are motivated to
achieve performance objectives they set for them-
selves. Similar arguments are traced back to Locke
(1968) when he showed that goal specificity leads
to motivation and performance. In the context
of projects, these goals pertain to schedule dead-
Proj ect Perspecti ves 2009 39
lines, budget constraints, product/process quality,
strategic positioning of project, organizational
learning, overall stakeholder satisfaction, and work
interest (Thamhain, 1998).
Discussing project objectives, Turner (1993)
suggests that objectives are often defined as team
performance metrics for the project team; most
important of which is meeting the customer’s
requirements. From the motivation perspective,
setting and evaluating these metrics against
customer expectations leads to better goal adher-
ence , a feeling of task significance, and therefore
motivation among the team members. In this
direction, enhancing the competencies of the
team members through training, access to project
information, and coaching also motivates them
(Bredillet, 2004).
Thus, the relation between project performance
dimensions and motivation through goal specific-
ity, and employee empowerment through coaching
and knowledge acquisition is clearly visible.
An extension to the above discussion on the
importance of goal specificity in motivating the
project team members is the nature of work itself.
Katz (2005) underscores the importance of chal-
lenging nature of work, feedback on employee
performance, autonomous nature of work, and
task significance as being important to motivate
people on the projects.
In addition to the nature of work, and aspects
of communication such as access to project re-
lated information to the team members, extrinsic
rewards such as opportunities for growth, and
financial benefits also motivate project team
members.
Apart from work, previous studies revealed
that in a project setting, financial rewards tied
to performance, career growth and coaching are
motivating to the employees. These arguments are
grounded in the theory of extrinsic motivation
(Strickler, 2006).
The key issues with respect to individual’s
motivation which emerged from this discussion
of motivation in a project context from a team
member’s perspective are that motivation stems
from nature of work, financial and non-financial
rewards, and goal clarity. While the role of nature
of work and the rewards (financial and non-finan-
cial) goal clarity and clarity of rewards, has been
discussed, goal clarity merits further discussion as
it was emphasised in all the theories of motivation
which we have seen so far. This leads our discussion
towards the definition of goals in project teams
and we briefly touch upon team performance.
Relation between Motivation and Team
Performance in Projects
The relation between performance and motiva-
tion is brought forward by Thamhain (1998). He
argues that imparting project specific training
and giving team members access to project re-
lated information enhances their performance
and motivates them. The motivating potential
of training (Hackman and Oldham, 1976) and
Communication such as knowledge of project
related information (Kaliprasad, 2006) supports
these observations. Further on communication,
Turner (1993) underscores that knowledge of end
user requirements by the project team members
enhances their feeling of task significance which
in turn motivates the employees.
Thus, we present an integrated view of projects
where motivation and team performance are in-
extricable. We infer that the key issues which are
common to motivation and team performance
are related to nature of work, rewards, and com-
munication. These three dimensions are further
discussed below.
An Integrated View of Motivation In
Projects
Through this literature review, we argue that in a
project setting, motivation is inextricably linked to
team performance. There are similarities between
the variables contributing to motivation and team
performance. These variables lie along the three
dimensions of nature of work, rewards, and com-
munication.
We discuss this further below.
Nature of Work
The need to make work more meaningful and mo-
tivating to the employees stems from emergence
of empowered employees. Given the inherent
challenges in the projects today, employees are
required to make decisions. This requires the
senior management to provide a professionally
stimulating nature of work that offers autonomy
and project centric learning opportunities to
the employees. Such an environment leads to a
motivated employee pool that achieves higher
performance on the project (Kerzner, 2003).
Rewards
The relation between rewards, motivation, and
performance is explained by Expectancy Theory
(Vroom, 1964). Apart from the tangible rewards
such as the financial benefits, intangible rewards
such as nature of work in terms of the employees
obtaining feedback on performance and the task
being meaningful (Beech and Brochbank, 1999),
security of advancement, good work-life balance,
and mentoring (Armstrong, 2003) have been found
to enhance motivation and team performance.
Communication
Peoples’ need to communicate is brought forward
by McClelland through the concept of ‘need for
affiliation’ (McClelland, 1961) where employees
are motivated when they communicate and social-
ize with each other. Further, the team members
exchanging task specific information leads to fos-
tering of team spirit among the employees, which
motivates them and enhances their performance
(Verma, 1997). The above discussion bringing out
the key issues which bridge motivation and team
performance, related to nature of work, rewards,
and communication and the organization of the
literature review is summarized in figure 1.
Method
The sample was drawn from the alumni database
of the authors’ university. The respondents were
between 31 and 36 years of age with 11 to 16 years
of professional experience. The participant pool
came from 17 countries and from a wide variety
40 www.pry.fi
of industries ranging from IS/IT to Construction,
Automobile, and Management services. A total of
200 questionnaires were sent out by email/ handed
out in person. We obtained 132 valid responses.
The survey instrument was based on an earlier
instrument used by Marwick (1958). This question-
naire was used to know how characteristics were
the motivation variables of the job environment.
These variables pertained to nature of work, re-
wards, and communication. Thus, we identified
13 original variables pertaining to these three
dimensions. These are summarized in the table 1.
Every question was asked several times but in a
slightly different form, to build in reliability which
was checked using Kaiser-Meyer-Olkin (KMO)
measure of sampling adequancy.
For the purpose of this study, we defined vir-
tual team as physically dispersed group of people
engaged in attaining common goals (Hinds and
Bailey, 2003). Further, virtual ness lies across a
‘continuum’ and not as being absolutely collocated
or absolutely virtual. We obtained a measure of
collection vs. distribution using a combination of
questions such as:
“What percentage of time do you spend
telecommuting (working from home) in a
typical working week?”
“On your current project, what percentage of
the workforce is working from a distance?”
“Would you say that your current project is
collocated or distributed?”
Data Analysis
A two pronged approach was employed. By using
a one tail t-test, we explored if there are any dif-
ferences between the collocated and the virtual
project environment with respect to nature of
work, rewards, and communication. We observed
strong affinities between these two groups (t =
Di mensi on Vari abl e
Nature of Work Enjoyable Nature of Work
Being Involved in Critical Project Activities
Training for Learning
Strong Team Spirit
Autonomy at Work
Rewards Mentoring by Top Management
Performance based Financial Rewards
Future Career Opportunities
Feedback on Performance
Project Accommodating Personal Life
Communication Easy Access to Project Related Information
Comprehension of End-User Requirements
Ease of Information Exchange/ Communication
Table 1.
Figure 1. Organization of Literature Review.
NATURE OF WORK
Job Characteristic Model
- Interesting Nature of Work
- Challenging Nature of Work
- Training Opportunities
McClelland’s Theory of Needs
- Interesting Nature of Work
- Team Spirit
Goal Setting Theory
REWARDS
Equity Theory
- Financial Rewards
Expectancy Theory
- Performance based Financial
Rewards
Control Theory
- Feedback on Performance
COMMUNICATION
Organizational Learning
- Access to project Information
in Organization’s
MIS/Knowledge Repositories
High Project Quality
- Understanding User
Requirements
Proj ect Perspecti ves 2009 41
1.71 significant at p =.06). We then combined
the two samples and applied Principal Component
Analysis (PCA) to see what were the underlying
factors that explain the similarities in these two
groups. We obtained a Kaiser-Mayer-Olkin (KMO)
of .89 which validates our factor structure.
Observations
Two distinct factors – Internal Motivation Factor
and External Motivation Factor emerged. These
two factors comprehensively explained the char-
acteristics of the collocated and the virtual project
environments from the motivation standpoint.
These factors explained 58.9% of variance. The
factor loadings of variables are summarized in
the figure 2.
Discussion
The results of our analysis support results of
previous research. The variables loading onto
External Motivation Factor subscribe to the Ex-
trinsic Motivators (O’Driscoll and Randall, 1999)
while that of Internal Motivation Factor relate to
Intrinsic Motivators (Hwang, 2005). In the context
of projects, the results of the study confirm the
findings of Strickler (2006) who observed that
extrinsic motivation relates to financial benefits,
and growth opportunities.
Factor 1. Internal Motivation Factor
The internal motivating factor, as discussed earlier
contains variables which are directly related to the
team members’ work. White (1959) suggests that
job dimensions such as autonomy, challenging
work environment, and responsibility are closely
associated and load onto the factor Intrinsic
Motivation. Our observations on being involved
in critical project activities (challenging work
environment) and work autonomy support this
argument. Further extending the understanding of
intrinsic motivation, Piccollo and Colquitt (2005)
state that interesting, challenging and exciting
nature of work is motivating to the employees.
Apart from the nature of work in terms of be-
ing interesting, providing autonomy to the team
members and being challenging; an opportunity
for the individuals to enhance their competence
is a source of motivation (Deci, 1975). This is best
brought to the fore when the individuals are as-
signed activities which are important (posited
as the variable ‘being involved in critical project
activities’) and when they are provided training
opportunities which enhance their competence
and learning of the job (Hackman and Oldham,
1976). O’Neal (1998) in her discussion on what is
most motivating to the employees working in a
technology intensive environment suggests that
apart from the nature of work itself (in terms of
it being interesting, autonomous, and challeng-
ing) relationship with colleagues; engendering
team spirit is a vital aspect of motivating work
environment.
Factor 2. External Motivation Factor
Armstrong (2003) defines a reward as an umbrella
component which contains monetary and non-
monetary rewards as its sub-components. In case
of project environments, financial rewards are
Figure 2. Results of Principal Component Analysis.
Internal Motivation Factor
External Motivation Factor
Ease of Information Exchange/ Communication
Easy Access to Project Related Information
Being Involved in Critical Project Activities
Enjoying Nature of Work Itself
Training for Learning
Comprehension of End-user Requirements
Mentoring by Top Management
Feedback on Performance
Performance Based Financial Rewards
Future Career Opportunities
Project Accommodating Personal Life
Strong Team Spirit
Autonomy at Work
.80
.78
.75
.70
0.0
.69
.65
.64
.63
.83
.73
.65
.65
.59
42 www.pry.fi
motivating when tied to specific performance
targets (Eisenberger, Rhoades, and Cameron, 1999).
This is because it increases the self-efficacy of
the employees which in turn leads to motivation.
Though the motivating potential of the financial
rewards as a ‘stand alone’ may not be abiding, it
symbolizes many intangible goals and is directly
or indirectly linked to the satisfaction of the basic,
security, and self-esteem needs of the employees
which bind people to their jobs (Goldthorpe et.,
al., 1968).
Similarly mentoring the employees leads to
their career advancement, and thence motiva-
tion among the employees (Ragins et., al., 2000).
Further, different expressions of mentoring such
as career advancement, feedback on performance,
and increase in financial rewards are motivating
to the employees (Kram, 1985).
In consonance with this view where the financial
and the non financial rewards are complementary
to each other, this factor loads variables pertaining
to financial rewards (‘performance based financial
rewards’) and non financial rewards (‘mentoring
by top management’, ‘future career opportunities’,
‘project accommodating personal life’ and ‘feed-
back on performance’). These views are supported
by Weitz et. al. (1986) who suggest that extrinsic
motivation relates to recognition, money, and
growth, which are second level outcomes derived
from the job performance itself. In the context
of projects, these results have been support by
Mahaney and Lederer (2006) who identified flex-
ible work schedule, time off, and opportunity
to work from home (connoting to the variable
‘project accommodating personal life’), annual
performance review (connoting to the variable
‘post project evaluation feedback’), financial bonus
(connoting to the variable ‘performance based
financial rewards’), and job promotion (connot-
ing to the variables ‘future career opportunities’
and ‘mentoring by top management’) as being
interrelated.
Conclusion
We comprehensively explained motivation in
collocated and virtual project environments by
simultaneously examining issues related to mo-
tivation and team performance in a multivariate
fashion. Three dimensions of Nature of Work,
Rewards, and Communication were investigated
using one tail t-tests and principal component
analysis. The two project environments showed
similarities and further seem to comprehensively
explain motivation through 2 factors – ‘Internal
Motivation Factor’, and ‘External Motivation Fac-
tor’. The internal motivation factor which is directly
related to the work of the team member covers
work characteristics such as interest, challenge,
autonomy, and opportunities to enhance job
specific competencies of team members.
On the other hand, the external motivating
factor shows that the financial and non financial
rewards which are related to monetary benefits,
work-life balance and career enhancement are
complementary to each other. This interpretation
of motivation in terms of these two factors finds
support in the theory and further reflects the na-
ture of the current project organizations which are
not exclusively collocated or virtual in nature.
We encourage future researchers to study ad-
ditional variables such as leadership, organization
culture, and project success which can enhance
our understanding of motivation in collocated
and especially virtual projects.

References
Armstrong, M. 2003.
A Handbook of Human Resource Management
Practice. London: Kogan Page
Beech, N., & Brochbank, A. 1999.
Power/Knowledge and Psychological Dynamics in
Mentoring. Management Learning, 30(1): 7-25
Bredillet, C. 2004.
Projects: Learning at the Edge of Organization. In
P.G. Morris & J.K. Pinto (Eds.), The Wiley Guide to
Managing Projects: 1112-1136. Hoboken, NJ: John
Wiley & Sons Inc
Garies, R. 2005.
Happy Projects!Sche Verslags-und Universitätsbu-
chhandlung GmbH, Vienna: MANZ
Hackman,.R., & Oldham, R.1976.
Motivation through the design of work: Test of a
theory. Organization Behavior and Human Perfor-
mance, 16: 250-279
Hinds, P., & Bailey, D. 2003.
Out of Sight, Out of Sync: Understanding Conflict
in Distributed Teams. Organization Science, 14:
615-632
Hwang, Y. 2007.
Investigating the Antecedents of and Identifica-
tion in Technology Mediated Learning. Proceed-
ings of Midwest Decision Sciences Institute
Meeting,Chicago, IL.
Kaliprasad, M. 2006.
The Human Factor I: Attracting, Retaining, and
Motivating Capable People. Cost Engineering,
48(6): 20-26
Katz, R. 2005.
Motivating Technical Professional Today. Research
Technology Management, 48: 19-27
Kerzner, H.2003.
Project Management: A Systems Approach to
Planning, Scheduling and Controlling (8th ed.).
Hoboken, NJ: John Wiley & Sons Inc.
The external motivating factor shows that
the financial and non financial rewards are
complementary to each other
Proj ect Perspecti ves 2009 43
Dr. Ravikiran Dwivedu-
la, PhD
Ravi holds a PhD in
Strategy, Programme
& Project Management
from ESC Lille School
of Management. He is
currently teaching proj-
ect management and conducting executive
training sessions at School of Management
Studies, University of Hyderabad, India. Ravi
had earlier worked in France and Singapore.
He has published widely including at the
IRNOP VII and IRNOP VIII research confer-
ences, and at EURAM (European Academy
of Management) research conferences.
Pr. Christophe N. Bre-
dillet, PhD, D.Sc.
Lille School of Manage-
ment Research Group,
ESC Lille
Email: c.bredillet@
esc-lille.fr
Professor Christophe N. Bredillet, PhD, D.Sc.,
is the Dean, and Director of Postgraduate
Programmes & Studies, and Professor of
Strategic Management & Programme/Proj-
ect Management at Lille School of Manage-
ment (ESC Lille). He is strongly involved in
PM Professional Associations and Research
Networks. He is Editor of the Project Man-
agement Journal. His main interests and re-
search activities are in the field of principles
& theories of programme/project manage-
ment, bodies of knowledge, standards and
business dynamics. These research activities
are grounded on situational and praxeologi-
cal approaches and on a constructivist point
of view.
Dr. Philippe Ruiz, PhD
Associate Professor of
Statistics and Research
Methods, Co-Director
of the PhD Programme
Lille School of Manage-
ment Research Group,
ESC Lille
Dr. Philippe Ruiz, PhD, is Associate Professor
of Statistics and Research Methods as well
as Co-Director of the PhD Programme at
the ESC Lille Graduate School of Manage-
ment. Previously, he was responsible for
the INSEAD Social Science Research Centre
(ISSRC). His major research interests are in
the field of Project Management and Deci-
sion Sciences (e.g., Information Theory and
the Measurement of Complexity applied to
Project and Programme Management).
Locke, E. A.1968.
Toward a Theory of Task Motivation and Incen-
tives. Organizational Behavior and Human Perfor-
mance, 3: 157-89.
Mahaney, R C., & Lederer, A L. 2006.
The Effect of Intrinsic and Extrinsic Rewards for
Developers on Information Systems for Project
Success. Project Management Journal, 37(4):
42-54
Marvick, D. 1958.
Expectations concerning power in a bureaucratic
arena. Administrative Science Quarterly,2: 542-560
McClelland, C.1961.
The Achieving Society. Princeton, NJ: D Vannos-
trand Co
O'Driscoll, M P., & Randall, D M. 1999.
Perceived organisational support, satisfaction
with rewards, and employee job involvement and
organisational commitment. Applied Pscyhology,
48(2): 197-209
Piccolo R F, & Colquitt, J. A. 2006.
Transformational Leadership and Job Behaviors:
The Mediating role of Job Characteristics. Acad-
emy of Management Journal, 49: 327-340
Ragins, B.R., Cotton, J.L., Miller, J.S. (2000).
'Marginal Mentoring: The effects of type of men-
tor, quality of relationship, and programdesign on
work and career attitudes. Academy of Manage-
ment Journal , 43(6): 1177-1194
Strickler, J. 2006.
What really motivates people. Journal of Quality &
Participation, 29(1): 26-28
Thamhain, H.J.1998.
TeamBuilding. In J.K. Pinto (ed.). The Project Man-
agement Institute: Project Management Hand-
book: 267-278.Project Management Institute, San
Francisco: Jossey-Bass
Turner, R.J.1993.
The Handbook of Project-Based Management:
Improving the Processes for Achieving Strategic
Objectives. Berkshire, England: McGraw-Hill
Verma, V. K. 1997.
Managing the Project Team. Newtown Square, PA:
Project Management Institute
Vroom, V. 1964.
Work and Motivation. NY: John Wiley & Sons Inc
Weitz, B A, Sujan, H, Sujan, M. 1986.
Knowledge, Motivation, and Adaptive Behavior:
A Framework for Improving Selling Effectiveness.
Journal of Marketing, 50: 174-191
White, R W. 1959.
Motivation reconsidered: the concept of compe-
tence. Psychological Review, 66: 297-333
P f Ch i h
D Phili R i PhD
44 www.pry.fi
Life-cycle services that are offered for maintain-
ing, upgrading and revitalizing project products
have an increasing importance in the business of
project-based firms. Especially service types that
are based on offering system’s functionality or
output, for example in a formof a build-operate
(BO) contract have interesting implications on
the project supplier’s and the customer’s busi-
nesses. Life-cycle services can also potentially
promote ecological sustainability. This paper
analyses the ecological and business aspects of
offering life-cycle services and their relevancy
in project business. Service literature and spe-
cific literature on ecological services are used
to address the theme. The paper concludes that
while simple maintenance services do not pro-
mote ecological sustainability, availability- and
especially performance-based services have the
potential to do so. It was also found that simple
maintenance services have the least business
benefits for both the supplier and the customer,
while availability-based services bring the most
business benefits for both parties. Performance-
based service contracts have the potential for
providing great business benefits but are also
perceived risky by both the suppliers and the
customers. Therefore their benefits and draw-
backs are industry and context specific.
Ecol ogi cal and busi ness aspect s
of of f eri ng l i f e- cycl e ser vi ces i n
t he proj ect busi ness
Saara Kujala
Helsinki University of
Technology
Finland
Introduction
Increasing levels of consumption and environ-
mental degradation are an international concern
(Mont, 2002). Services that can potentially de-
crease goods manufacturing and consumption
have been suggested to be one of the means
that enhance sustainable development without
compromising the welfare and growth (White,
Stoughton & Feng, 1999). Term functionality is
often used in the ecological perspective on services
(Baines et al., 2007; Mont, 2002) to describe how
ecological benefits can be achieved by introduc-
ing services that deliver customer value through
offering the system’s functionality instead of its
ownership and by decoupling material consump-
tion from value creation for the user.
Outside the environmental context, services
have an increasing importance on the project-
based firms’ businesses. The firms that deliver
projects offer their customers various types of
services during the life-cycle of the delivered
project product (Davies, 2004; Artto, Wikström,
Hellström & Kujala, 2007; Kujala, Artto, Wikström,
& Kujala, 2008). Life-cycle services can include, for
example, system’s maintenance, repair, spare-parts
provision, optimization, upgrading and finally
decommissioning of the system. Project suppliers
also take responsibility in operating the capital
goods systems for their customers.
Figure 1. Capital goods value stream (Source: Davies, 2004)
Earlier
stages
Manufacture
Systems
integration
Operational
services
Service
provision
Final
consumer
Added
value
Services Manufacturing
UPSTREAM
(Backwards) Vertical moves (Forwards)
DOWNSTREAM
Raw materi al s,
i ntermedi ate
goods, pri mary
product
manufactures
Desi gn and
physi cal l y make
components &
subsystems
Desi gn &
i ntegrate products
& systems
Mai ntai n and
operate products
& systems
Buy i n
mantenance &
operati onal
capaci ty to
provi de servi ces
to fi nal consumers
Consumpti on of
servi ce by fi nal
consumer or end
user (e.g.trai n
passenger)
Proj ect Perspecti ves 2009 45
Although the ecological perspective on services
promotes the concept of functionality, the litera-
ture on project and industrial services is controver-
sial on whether it is beneficial for a project supplier
to take such a deep involvement in operating its
customers’ equipment or even engage in new kinds
of ownership arrangements. The following research
question is therefore addressed:
– What are the relevant ecological and busi-
ness benefits of offering life-cycle -ser-
vices in project business?
The focus of the research is on capital goods,
which are defined here as large, tangible systems,
equipment or infrastructures that are uniquely
manufactured according to a customer’s specifi-
cation and delivered in the form of a project. The
research question is answered by conducting a
literature analysis on two different lines of litera-
ture. The literature on the product-service system
(PSS) is used to analyze the ecological perspective
on life-cycle services and it is completed with the
literature on industrial and project services that
mostly concentrates on the business aspects on
offering services.
The changing role of capital goods
suppliers in providing life-cycle services
Until recent years, capital goods industry con-
centrated on either manufacturing of systems
or operating them (Davies, 2004). Recently, con-
centration on core capabilities has led the capital
goods buyers to demand for more services and,
consequently; many project companies that tradi-
tionally manufactured parts for larger capital good
systems are now expanding their service offering
by taking on the responsibility of also integrating
the systems. Offering integrated high-value solu-
tions that combine both products and services,
specialized for the customers’ needs indicates a
move “downstream” in the value stream (Davies
2004) as illustrated in Figure 1.
However, some project-based firms have not
been satisfied with just designing and integrating
products and systems but are willing to go further
downstream. A supplier may assume some of the
customer’s business risks by offering extended
life-cycle service contracts where revenues are
either fixed or based on the system availability
(Oliva & Kallenberg, 2003). Some firms accept
more responsibilities by adopting a role of a per-
formance provider (Helander, 2004), consequently
adopting some of the customer’s key processes.
Also Davies (2004) recognizes that the next step
downstream for a systems integrator is to start
providing operational services that include run-
ning and maintaining a system (see Figure 1). For
example, Build-operate (BO) contracts extend the
project supplier’s responsibility fromdesigning and
integrating project products and related services
to maintaining and operating the delivered system
for years or even decades following the project
delivery, thereby changing the business parties’
focus from the system delivery to the system
functionality.
Contract types for life-cycle services
This section presents three possible contract
types for life-cycle services in the project busi-
ness based on the industrial services literature.
These are simple maintenance, availability-based
service and performance-based service contracts.
The characteristics of the three service contract
types are presented in Table 1. The table also
introduces corresponding product-service system
types in its second column, which are addressed
in section 4.
Simple maintenance contracts (Table 1) are
usually based on ad-hoc maintenance needs. These
transactional services could include, for example,
reactive maintenance, repair and spare-parts sales
without any extensive product responsibilities or
co-operation between business parties (Oliva &
Kallenberg, 2003).
Availability-based service contracts (Table 1)
that share some operational risk between the
business parties (Oliva & Kallenberg, 2003) require
more co-operation and commitment between the
business parties than simple maintenance con-
tracts. Similarly, Stremersch, Wyuts and Frambach
(2001) discuss full-service maintenance contracts
that guarantee a maximumdownturn for a system
and have a beneficial influence on the system’s
total cost level. Finally, in a performance-based
service contract (Table 1), the project supplier
is contractually committed to sharing risks and
responsibilities with the customer in a way that
truly contributes to the customer’s business per-
formance (Helander & Möller, 2007). The authors
also note that performance-based contracts usu-
ally require the supplier to take over some of the
customer’s key operations.
Ecological view on life-cycle services
The product service –system (PSS) is a special case
of “servicizing” and one of the concepts that are
designed to promote sustainable development
without compromising welfare and growth (Figure
2). It is used as an ecological framework for this
paper. The three different types of product-service
systems are presented in Table 1 in parallel to the
different service contract types to emphasize the
analogy in the characteristics between them.
Goedkoop et al. (1999) define a product service
-system as “A system of products, services, net-
works of ‘players’ and supporting infrastructure
that continuously strives to be competitive,
satisfy customer needs and have a lower environ-
mental impact than traditional business models”.
Ser vi ce
cont ract t ype
PSS Descri pt i on
Simple mainte-
nance contract
-
Transactional maintenance
activities without long-term
commitment
Availability-
based service
contract
Product-ori-
ented PSS
Services to guarantee a well-
functioning product. Some of
the operational risks are shared
with the customer.
Performance-
based service
contracts
Use- or
Result-orient-
ed PSS
Provision of the system’s
functionality or output through
services that truly contribute to
the customer’s performance
Table 1. Service contract types during the project product’s life-cycle
46 www.pry.fi
According to Baines et al. (2007), the emphasis of
product service –systems is on the “sale of use”
rather than the “sale of product”.
Ecological benefits of product service -systems
are well illustrated in the example described by
Rothenberg (2007). There Gage, a company spe-
cializing in cleaning solvents used in car painting,
introduced a chemical management service for
Chrysler, its main customer. Instead of selling
solvents it took over the chemical management
activities at the customer’s site, ensuring the sol-
vents’ more efficient use and thereby ultimately
reducing the amount of chemicals needed in
painting the vehicles. In the chemical management
service the supplier’s compensation is often based
on the result provided, e.g. the number of vehicles
painted. Consequently, the supplier can earn more
profit with manufacturing and selling less.
The three different types of product-service
systems are defined by the relative importance
of the product- and service components in the
total system and their value proposition for the
customer (Baines et al., 2007). These are:
- A product-oriented PSS
- A use-oriented PSS
- A result-oriented PSS
A product-oriented PSS (Table 1) can include
maintenance, repair, re-use and recycling of the
system as well as services to help the customers
optimize the application or a product through
training and consulting (Baines et al., 2007). The
authors further state that suppliers provide these
services to extend the system’s life-cycle and to
guarantee a well-functioning product. The prod-
ucts are also designed taking their end-of-life
into account.
Use- and result-oriented PSS types (see Table 1)
are based on the sale of functionality. The supplier
either provides the system for the customer’s use
or operates it offering the customer agreed out-
put (Mont, 2002; Baines et al., 2007). The supplier
has the ultimate responsibility of operating the
system. The supplier of the system may even keep
the system, for example a jet engine, on its own
balance sheet and sell the customer kilowatt-hours
produced through a long termperformance-based
contract.
Ecological and business aspects of
offering life-cycle services
The following discussion analyzes the ecological
and business aspects of the three different service
contract types. The analysis is based on service
business literature and product service –systems
literature, as well as on literature with emphasis
on ecological and sustainable services.
Ecological and business considerations in
simple maintenance contracts
Project suppliers need to offer life-cycle services
that go beyond simple maintenance in order to
realize ecological benefits. Transactional main-
tenance that is based on ad-hoc needs may
lead to the optimization of the cost of a single
spare-part or maintenance effort (Stremersch,
Wyuts & Frambach, 2001) and consequently sub-
optimization of the system’s total life-time value.
Artto et al. (2007) found that project suppliers
see their installed base of systems as a market for
spare-parts and maintenance sales rather than
considering possibilities for extensive life-cycle
services such as operating, maintaining, revital-
izing and optimizing. Fromthe business viewpoint,
Stremersch, Wyuts and Frambach (2007) state
that service margins remain thin in transactional
services but the total cost of the system during
its lifetime may actually increase. A shortsighted
view of the service potential of a delivered system
has ecological drawbacks. It does not maximize the
product’s useful life-time and end-of-life value.
When the project supplier’s service profit is tied
on spare-parts sales, it may be tempted to engage
in opportunistic behavior and design spare-parts
that are not as long-lived as would be techni-
cally possible. Also, Oliva and Kallenberg (2003)
note that suppliers feel that increasing services
reduce their replacement sales. In consequence,
the system may wear out and have to be replaced
sooner than would optimal. On the other hand,
keeping a worn-out system running can also be
harmful for the environment if there are more
efficient systems available. The environmental
legislation needs to be up-to-date to direct the
project products’ proper use, as is also suggested
by White et al. (1999).
Sub-optimization of the total cost may happen
already in the project design phase. An example
could be a mechanical process system subcontrac-
tor that delivers the process equipment system
to the main contractor of a new plant and has
two types of process equipment with different
expected life spans and prices. Since the main
contractor’s responsibility ends at handing the
plant over to the user, its main interest is to
decrease the total cost of the project and it is
therefore bound to order the less expensive and
less durable process system from the subcontrac-
tor. From the plant user’s point of view it would
be more economical to install the more expensive
mechanical process system that lasts for 15 years
instead of having to replace the cheaper system in
7 years’ time. In addition, decreased consumption
Figure 2. Evolution of the product service –system concept
(Source: Baines et al. 2007)
Product service
-system
Product(s)
and
Service(s)
Service(s)
and
Product(s)
Service(s) Product(s)
S
e
r
v
i
c
i
z
a
t
i
o
n

o
f

p
r
o
d
u
c
t
s
P
r
o
d
u
c
t
i
z
a
t
i
o
n

o
f

s
e
r
v
i
c
e
s
Proj ect Perspecti ves 2009 47
and manufacturing of the system parts would also be more
supportive to the sustainable development. However, complex
ownership arrangements hinder optimization of the total cost
and ecological benefits.
Ecological and business considerations in availability-
based service contracts
Availability-based service contracts can improve a product’s
useful life-time and promote ecological benefits. Since the
pricing is fixed over an agreed period and based on the system
availability, the service contract encourages the supplier to
minimize the need of services and spare-parts to maximize its
profits. Business-wise, Stremersch, Wyuts & Frambach found
that availability-based contracts yield higher margins than
transactional maintenance. However, also the customers are
often more interested in the value offered by the solution than
of the price alone (Helander & Möller, 2007). In addition, a
fixed maintenance cost is less risky for the customer.
By taking on an availability-based service contract, the
supplier can better exploit the capacity of its existing service
organization (Oliva & Kallenberg, 2003). If the supplier holds
a large installed base of systems it can stabilize its capacity
utilization and gain more profit. That can also be more ecologi-
cal if the same service center can serve a higher number of
customers instead of a new center having to be installed for
each one. The service provider could also offer its customers
additional optimization, training or upgrading services that
improve the product’s performance, increase energy and raw
material savings and further decrease the need of mainte-
nance. These possibilities are also addressed by Mont (2002).
In contrast to the process plant example at the end of the
previous section, foresight on life-cycle service potential and
requirements could also lead the supplier to design long-
lasting, eco-efficient products from the start in order to
maximize its expected revenue from the service agreement.
Mont (2002) argues that anticipations on future product
take-back legislations and appropriate product manufactur-
ing in response might lead to future competitive advantage.
Furthermore, increased co-operation may help the supplier to
recognize the customer’s changing needs and technological
potential early and to create co-innovations and competitive
advantage for both parties (Meier & Massberg, 2004).
Ecological and business considerations in performance-
based service contracts
Performance-based service contracts provide the most eco-
logical potential. Under a performance-based service contract,
the system’s use costs are placed on the systemsupplier, giving
Li t erat ure argument Ref erence
Concl usi on - Ecol ogi cal
i mpl i cat i on i n proj ect busi ness
Si mpl e
mai nt enance
Installed base seen as a market for
spare-parts sales and maintenance
Artto et al. (2007)
Durability of spare-parts may not be
optimal
Suppliers feel that maintenance
reduces replacement sales
Oliva & Kallenberg
(2003)
Replacement rate of the system parts
may not be optimal
Life-cycle cost of the system main-
tenance not considered
e.g. Stremersch, Wyuts
& Frambach (2001)
System life-time and life-time value
not maximized
Avai l abi l i t y- based
ser vi ce cont ract
(Product-oriented
PSS)
Services for ensuring long-lasting,
well-functioning product
Baines et al. (2007)
Needed supplier commitment realized
in long-term service contracts
Fixed- or availability-based pricing
over contract period
Oliva & Kallenberg
(2003)
Spare-parts and maintenance seen
as cost center ->consumption mini-
mized
Additional upgrading and refurbish-
ing increase system's total value and
lifetime
Mont (2002)
Longer life-time, reduced consumption
of raw material and energy
Anticipation of future take-back
regulations create competitive ad-
vantage
Mont (2002)
Design for maintenance, eco-efficiency
and easy modifications beneficial
Per f ormance-
based ser vi ce
cont ract
(Use- and result-
oriented PSS)

Most ecological benefits Baines et al. (2007)
System life-time and end-of-life value
maximized, disposal cost considered
already in design
System remains in project supplier's
ownership
Mont (2002); Baines
et al. (2007)
Supplier brings the product's use
available to the customer
Mont (2002)
Maintenance cost carried by the
supplier, design for maintainability,
longevity
Supplier operates the product and
brings output available for the
customer
Mont (2002)
Operating cost carried by supplier,
design for efficient operations, energy
savings and low resource consump-
tion
Possibility to recycle and reuse
spare-parts in ithe nstalled base of
systems
Meier & Massberg
(2004)
Decreased spare-parts consumption
and manufacturing
Anticipation of future take-back
regulations create competitive ad-
vantage
Mont (2002)
Design for minimum resource con-
sumption, reuse & modifications
Table 2. Ecological aspects of the three contract types
48 www.pry.fi
Table 3. Business aspects of the three contract types.
Li t erat ure argument Ref erence
Conscl usi on - Busi ness
i mpl i cat i on i n proj ect
busi ness
Mai n
benef i t
Si mpl e
mai nt enance
Transparent pricing leads to
narrow margins (0,5%)
Stremersch, Wyuts
and Frambach (2001)
Short-sighted view on life-cy-
cle costs, which can be sig-
nificant over system life-time.
Lower margin for supplier.
No benefit
or negative
benefit
Customers shop for cheapest
rates
Stremersch, Wyuts
and Frambach (2001)
Life-cycle cost of the mainte-
nance not considered
Stremersch, Wyuts
and Frambach (2001)
System lifetime shortens and
total cost of system increases.
Supplier
Avai l abi l i t y-
based ser vi ce
cont ract s
(Product-
oriented PSS)
High service margins (10-
15%) and less price transpar-
ency
Stremersch et al.
(2001); Davies (2004)
Beneficial business for supplier Supplier
Customer's focus on life-
cycle costs and system's value
in use
Helander & Möller
(2007); Stremersch et
al. (2001)
System lifetime cost decreases
and usable lifetime increases
Supplier and
customer
Supplier shares operational
risks with customer
Oliva & Kallenberg
(2003); Helander &
Möller (2007)
Customer knows service cost;
supplier in best position to
service the system
Supplier and
customer
Supplier can exploit the
capacity of its existing service
organization
Oliva & Kallenberg
(2003)
Supplier can offer attractive
service deals without compro-
mising profit
Supplier and
customer
Design of maintanable and
reliable systems
Davies (2004)
Supplier can offer attractive
service deals without compro-
mising profit
Supplier and
customer
Recognition of change in
customer's requirements &
technological potential
Meier & Massberg
(2004)
New co-projects, co-innova-
tions, competitive advantage
for both
Supplier and
customer
Life-cycle services increase
product's availability, usabil-
ity and efficiency
Meier & Massberg
(2004)
Competitive edge for the
customer
Customer
Per f ormance-
based ser vi ce
cont ract s
(Use or result
-oriented PSS)
Thin margins, customers
reluctant to share gains
Artto et al. (2007),
Helander & Möller
(2007)
Customers in power in fiercely
competed markets
Customer
Customers concentrate on
core competence and out-
source system's use and
maintenance
Oliva & Kallenberg
(2003); Meier &
Massberg (2004)
Compensation on system out-
put ->customer's business risk
reduced
Customer
Supplier reputation as
important as promised plant
performance
Stremersch, Wyuts
and Frambach (2001)
Customer's risk related to
choosing a poor supplier
increases
No benefit
Supplier creates competen-
cies that enable it to take
over customer's key processes
Davies (2004);
Helander & Möller
(2007)
Dependency may hinder com-
petition, supplier neutrality and
increase prises
Supplier or
no benefit
Recognition of change in
customer's requirements, co-
innovations
Meier & Massberg
(2004)
Customer expects the supplier
to provide it the competitive
edge
Depends on
capabilities
Supplier has room to realize
innovations not otherwise
realizable
Meier & Massberg
(2004)
Quick implementation of
innovative components in self-
operated systems
Supplier and
customer
Supplier-owned assets may
enhance protection, utiliza-
tion, reliability and design
Baines et al. (2007)
Innovations can be easily pro-
tected in self-operated systems
Supplier
Design for maintenance and
usability
Baines et al. (2007)
System's usability, maintain-
ability and take-back value
Supplier
Proj ect Perspecti ves 2009 49
the supplier an incentive to design systems that
are easy to operate and that consume a minimum
amount of energy and raw materials. Meier and
Massberg (2004) suggest that project suppliers
could also recycle and reuse valuable, modular
system parts in their installed base of systems
in order to increase eco-efficiency and decrease
the supplier’s maintenance cost. Additionally,
ownership of the system would give the supplier
a possibility to take advantage of the product’s
end-of-life value.
To illustrate these benefits, Baines et al., (2007)
describe an efficient result-oriented PSS innovated
by Rolls-Royce. The company leases its jet engines
to airplane operators instead of selling them
and takes charge of the maintenance activities
under a performance-based contract (Baines et
al., 2007). This way, Rolls-Royce has an incen-
tive to maximize its engines’ eco-efficiency and
maintainability already in design. In addition, by
owning the asset, Rolls-Royce has an incentive
to increase the products’ useful life-time and
maximize their end-of-life value. Baines et al.
(2007) also highlight that by maintaining a direct
access to the asset, the supplier can collect valu-
able data on the product performance and use.
Hence, the supplier is able to improve the asset’s
service schedule, improve engine efficiency and
asset utilization and; consequently, reduce total
costs and environmental impact.
From the business perspective, performance-
based service contracts are more complicated.
Artto et al. (2007) found evidence that system
suppliers may be willing to accept thin margins
from their service outsourcing contracts in face
of a fierce competition. In addition, Helander and
Möller argue that while the customer is eager to
share the operational risks with the supplier it is
less willing to share the realized benefits from
superior performance. Sharing of the risks also
affects the situation. Since the supplier is compen-
sated based on the system output, the customer’s
risk is reduced efficiently. On the other hand, the
customer must choose the service supplier very
carefully as in a performance-based contract the
supplier usually takes over some of the customer’s
key processes (Oliva & Kallenberg, 2003; Helander
& Möller, 2007) and provides it the competitive
edge it needs to stay in the game. However,
Helander (2004) and Helander and Möller (2007)
found that customers often fear that relying
completely on one supplier reduces competition,
increases prices or may even lead the supplier to
turn into a competitor. Nevertheless, a close co-
operation between the supplier and the customer
can help to realize co-innovations, technological
development and more efficient protection of new
innovations, consequently providing competitive
advantage for both of the business parties.
Conclusion
The findings of the literature analysis in the previ-
ous section are summarized in the following two
tables. Table 2 presents the conclusions on the
ecological benefits of the three service contract
types and Table 3 the conclusions on the business
benefits of the same three contract types. Then,
based on the analysis results, the three types are
discussed to create an understanding of their rela-
tive positions, which are summarized in Figure 3
at the end of this section.
Simple maintenance contracts were not found
to provide ecological benefits as they may un-
necessarily increase spare-parts consumption
and do not fully exploit a system’s lifetime value.
From the business perspective, industrial services
literature provided evidence that transaction-
based services have low margins as customers tend
to shop for the cheapest spare parts. On the other
hand, short-sighted view on the service cost may
decrease a system’s life-time and may actually
increase the system’s total cost. Therefore, simple
maintenance seems to provide fewer opportunities
for business and ecological benefits than avail-
ability- and performance-based services. Based on
these findings, simple maintenance was placed on
the lower left corner of Figure 3. However, simple
maintenance contracts are an easy and rather safe
choice for a project supplier whose priority is not
to engage in more extensive service co-operation
with its customers.
Availability-based service contracts seemed to
provide both business- and ecological benefits.
The supplier can design the equipment for easy
maintenance, upgrades and extended lifetime
but also organize its service activities in the most
effective way to minimize spare-parts consump-
tion and maintenance cost. Additional training,
optimization and upgrading services increase the
system’s performance and bring about ecological
and business benefits for both parties. It was also
found that close co-operation can lead to new
co-projects, innovations and competitive advan-
tage for both parties. Consequently, this service
contract type is placed higher up in Figure 3 than
simple maintenance deals in both ecological- and
business axes.
Services based on performance-based service
contracts are more complicated than the two
other contract types. In addition to placing the
system’s maintenance and operating costs to the
supplier, different ownership arrangements may
also place the disposal cost of the main system
to the supplier, thus encouraging the supplier to
design the product for low energy and resource
consumption, high take-back value and longev-
ity. Therefore, performance-based services offer
higher ecological potential than availability-based
services and are placed higher up in Figure 3.
However, business benefits are more controversial.
It was discovered that the supplier may have to
accept significant business risk in exchange of thin
profits in heavily competed markets. The customer
can outsource operational risk but has to accept
the risk of under-performing partner, or worse,
a partner that turns out to be a competitor. On
the other hand, the supplier can, and is expected
to, exploit its knowhow of the system it operates
and maintains by introducing performance-
increasing new innovations to the system. It can
also protect these innovations better. Based on
these controversies, Performance-based services
are placed somewhat further left in Figure 3 than
availability-based services. However, the literature
provided ample of examples of potential business
benefits that could in some environments and
50 www.pry.fi
Saara Kujala is a
graduate student at
the Department of
Industrial Engineering
and Management at
Helsinki University of
Technology (HUT) and
her major is project
management. She is a
member of the Project Business –research
group at BIT Research centre, where her
research focus is on the impact that ser-
vices have on the project business. She is
also interested in ecological sustainability
and energy market issues. Her past experi-
ences also include studies at the École
Nationale Supérieure d’Arts et Métiers in
Aix-en-Provence, France.
business relationships be successful. Therefore,
these services are placed further right in Figure 3
than simple transactional maintenance.
Increased ecological benefits can be gained if
both contract parties actively seek to reduce the
environmental impacts of their systems and opera-
tions. Effects of these actions may be considerably
higher than the ecological impacts studied here,
regardless of the ownership and service arrange-
ments between business parties. The advantage
of the ecological impacts studied in this paper is
that they are automatically realized with the use
of appropriate service contracts if the supplier
behaves in the most efficient way. The chose of
the most appropriate service contract type is de-
pendent on many factors. Customer- and supplier
strategies, regulations, business environment and
prevailing business practices can either facilitate
or prevent the use of a certain service model. They
appear to be especially important in controversial
performance-based services that seem to offer
considerable potential but also pose high risks
on the parties. Industry-specific enhancing and
hindering conditions for utilizing certain service
contracts should be studied in order to make
more grounded argumentation for or against any
service models.
References
Artto, K., Wikström, K., Hellström, M. & Kujala J.,
2007. Impact of services on project business. Paper
presented at Eighth International Conference of
the International
Research Network on Organising by Projects, IRNOP
VIII Research Conference, September 19-21, 2007,
Brighton, U. K
Baines, T., Lightfoot, H., Evans, S., Neely, A.,
Greenough, R., Peppard, J., Roy, R., Shehab, E.,
Braganza, A., Tiwari, A., Alcock, J., Angus, J., Bastl,
M., Cousens, A., Irving, P., Johnson, M., Kingston,
J., Lockett, H., Martinez, V., Micheli, P., Tranfield, D.,
Walton, I., & Wilson, H., 2007. State-of-the-art in
Product Service-Systems. Proceedings of the insti-
tution of mechanical engineers, Part B-Journal of
engineering manufacture. 221: 1543-1552.
Davies, A., 2004
Moving base into high-value integrated solutions:
A value streamapproach. Industrial and Corporate
Change. 13 (5): 727
Goedkoop M et al., (1999)
Product service-systems, ecological and economic
basics. Report for Dutch Ministries of Environment
(VROM) and Economic Affairs (EZ).
Helander, A. & Möller, K., 2007
Systemsupplier's customer strategy. Industrial
marketing management. 36(6):719-730.
Kujala, J., Artto, K., Wikström, K. & Kujala, S., 2008.
The role of services in the business of a project-
based firm. Paper to be presented in PMI 2008
research conference, 13-16 July, 2008, Warsaw,
Poland
Meier, H. & Massberg, W., 2004
Life cycle-based service design for innovative
business models. CIRP Annals - Manufacturing
Technology. 53(1): 393-396.
Mont, O., 2002
Clarifying the concept of product service-systems.
Journal of Cleaner Production. 10(3): 237-245.
Oliva, R., & Kallenberg, R. 2003
Managing the transition fromproducts to ser-
vices.
International Journal of Service Industry Manage-
ment. 14(2): 160-172.
Rothenberg, S., 2007
Sustainability through servicizing. MIT Sloan Man-
agement Review. 48 (2): 82-91.
Stremersch, S., Wuyts, S. & Frambach, R.T., 2001
The purchasing of full-service contracts: An ex-
ploratory study within the industrial maintenance
market. Industrial marketing management. 30(1):
1-12.
White, A., Stoughton, M. & Feng, L., 1999
Servicizing: The quiet transition to extended prod-
uct responsibility. Report by Tellus Institute.
L
o
w
H
i
g
h
Low High
E
c
o
l
o
g
i
c
a
l

b
e
n
e
f
i
t
s
Business benefits (supplier or customer)
Performance-
based services
Availability-
based services
Simple
maintenance
Figure 3. Ecological and business benefits of life-cycle
services in project business
” IPMA cert ificat ion has given
me self- knowledge, an ext ended
net work and verificat ion of
my compet ence”
Per- Olof Sandberg
Program Manager,
Major Programs
SEB Bank, Sweden
The world leader in project management cert if icat ion
Put t he power of IPMA
Cert if icat ion t o work f or you
IPMA is a world leading project management organisat ion wit h over 40 0 0 0 members
in 45 count ries around t he world. The IPMA cert ificat ion is recognised worldwide.
Global corporat ions benefit f rom IPMA’s int ernat ional presence and recognit ion.
It enables t hem t o use t he same cert ificat ion for t he ent ire company in all count ries.
For more informat ion about t he IPMA cert ificat ion and t he IPMA Compet ence Baseline
(ICB) please visit www.ipma.ch
54 www.pry.fi
Helgi Thor Ingason
Jens Thordarson
Faculty of Engineering
University of Iceland
Iceland
Project Management
The professional theaters in Iceland execute
their project management in different ways but
there are however some general trends. Some
well known project management techniques
are used but there is a great potential for im-
provements, e.g. by introducing more advanced
time management methods and by applying a
project assessment for collecting information on
successes and mistakes in the production, to be
used as a baseline for coming productions. The
role of a “stage manager”seems to be unfilled
in the Icelandic theaters and this may have
consequences for the quality of the productions.
The PMBok may not be the best project manage-
ment knowledge base for using as a reference
in the theater because of its technical structure
and context.
Introduction
The theater as a business model is an interesting
concept for academics in project management
science as well as professionals from traditional
business enterprises. The objectives of a stage
production are likely to be more than just increas-
ing the share value of the theater owners. There
are many interested parties who may have very
different views on the success of a production.
The forces at work in the theater are not entirely
the same as in the conventional business environ-
ment. The motivation, the inspiration, the drive,
the creativity and the synergy of tight teamwork
– these factors seem to be found quite often in
the environment of the theater.
A particular stage production is a good example
of a project, defined as follows in the ISO10006
standard: “Unique process, consisting of a set of
coordinated and controlled activities with start
and finish dates, undertaken to achieve an objec-
tive conforming to specific requirements, including
the constraints of time, cost and resources” (ISO,
2003). The work presented in this paper was in-
spired by an urge to investigate how the projects
within the theater are managed as compared to
traditional project management methodology. In
continuation, to assess if the theater can benefit
from more traditional project management ap-
proaches.
Literature Review
The literature review for this work consisted of
three main topics: project management standards,
environment of the theater and previous related
research.
Traditional project management standards re-
ferred to in this work are the Competence Baseline
(ICB) version 3.0 issued by IPMA – The International
Project Management Association (IPMA, 2006), the
ISO standard on quality in project management
(ISO, 2003) and finally the Project Management
Body of Knowledge (PMI, 2004). The ICB version
3.0 was issued in the fall of 2006 and was not
available when this research was carried out. ICB
contains a structured reflection of some 46 core
competences required for project management and
divides those into behavioral competences, tech-
nical competences and contextual competences.
O n S t a g e
Proj ect Perspecti ves 2009 55
Figure 1. Performing Arts Value Chain (Preece, 2005).
Viability
Governance
Administration
Fundraising
Outreach
P
r
o
g
r
a
m
m
i
n
g
P
e
r
s
o
n
n
e
l
P
r
o
m
o
t
i
o
n
P
r
o
d
u
c
t
i
o
n
S
u
p
p
o
r
t

a
c
t
i
v
i
t
i
e
s
P
r
i
m
a
r
y

a
c
t
i
v
i
t
i
e
s
This threefold emphasis is represented graphically
by “the eye of competence” – expressing the view
that the project manager has of the project and its
context. He uses his eyes to gather information,
applies his competence in project management to
analyze the information, considers what options
are open and then takes appropriate action. The
PMBok presents a traditional technical approach
where project management is reflected as a set
of 44 project management processes within nine
knowledge areas; integration management, scope
management, time management, cost manage-
ment, quality management, human resource
management, communications management, risk
management and procurement management.
The application and development of project
management in relation to stage productions in
theaters does not seem to have been explored in
any detail and only few references are found in
literature. Hartman et.al. (1998) present a study
based on 14 projects, including concerts, filmmak-
ing, sport events and theater projects. They start
with the statement that the live entertainment
industry consistently delivers projects on time and
their overall commercial success is better than
some traditional project management oriented
industries, for example construction. In their paper
they examine the practices of the entertainment
industry. They point out some major differences
in project management practices in entertainment
and traditional technical projects and find that
rarely, if ever, the entertainment industry uses
classical project management tools and tech-
niques. The authors identify the primary cause
of project success in the entertainment industry,
which is thought to be the alignment and unity
of the participants.
An interesting example about bad management
techniques in theaters is the scope of a PhD dis-
sertation of Huang Lui Lu (2002), based on a case
study in Taiwan. People working inside theaters
studied by Mr. Lu had strong creative energy but
no administrative experience or training. As a
consequence, managerial issues consumed a lot
of their time and resources. Examples are given of
theaters that had good reputation and successful
box office records but since they had not made
careful plans for the future, they had to close their
business because of unseen problems.
During the 90’s the described situation gradu-
ally started to change and new companies are now
aware of the need for people with administrative
skills capable of organizing resources and solving
problems. This highlights the fact that the theater
industry needs management techniques and PM
methodology is very relevant in that branch. Wirth
(1995) discusses the way standard time manage-
ment and cost control, such as work breakdown
structure (WBS) and project evaluation and review
technique (PERT) fromproject management meth-
odology, can by applied in theatrical productions.
The author concludes that these methods have
merit and deserve further attention by produc-
ers, administrators and students in the theatrical
production community.
A good understanding of the project environ-
ment is considered as one of the key factors for
successful project implementation in traditional
project management methodology. In order to
understand this environment, some sources of
information were investigated. Wikipedia (2006)
gives information on the organizational structure
of a theater production. Wikipedia defines theatri-
cal production management as a sub-division of
stagecraft. The production management team is
responsible for co-ordinating the different sub-
disciplines of the theatrical presentation, as well
as overseeing the stage management team. In
addition, the production management deals with
the logistics of the production itself, procure-
ment of rehearsal space and the booking of the
theater. The tasks listed here would typically be the
responsibility of a stage manager and he would
act as an adjunct to the director in rehearsal. The
director has a different function in the theater as
his role is first and foremost to ensure the quality
and completeness of a theatrical product. Once a
show has opened, the theater director is consid-
ered to have fulfilled his function and after that,
the stage manager is left in charge of all essential
concerns.
Dempster (2006) discusses the impact of uncer-
tainty on entrepreneurial performance in the UK
theater industry. The author gives a good overview
of research on the impact of uncertainty in the
production of creative and cultural goods but con-
56 www.pry.fi
cludes by identifying and evaluating three major
determinants of demand uncertainty – audience
composition, critical acclaim and media coverage
– whose management is key to entrepreneurial
success. Colbert (2003) discusses the specific as-
pects of consumer behavior in the field of culture.
He points out that the fundamental concept in
traditional marketing – meeting customer needs
– does not apply in high arts. The artistic product
does not exist to fulfill a market need, as the arts
manager seeks consumers who are attracted to the
product. Information on attendance for arts events
in the USA in 1997 is presented, showing e.g. that
15,8% of adults attended one or more plays, but
the author points out that findings of 40 years of
research show that the typical consumer of high
art is female, well educated, earns a relatively
high income and holds a white-collar job. These
statistics apply to all industrialized countries.
The objectives of non-profit arts organizations
are discussed by DiMaggio (1987). He suggests that
these organizations serve multiple purposes and
may be judged on such measures as excellence,
access, innovation and participation.
The environment of the performing arts is
presented in terms of its value chain by Stephen
Preece (2005) as shown in Figure 1.
The last activity – viability - is in fact the per-
formance in itself – its capability of success or
continuing effectiveness. This model also expresses
what in traditional project management terms is
referred to as project life cycle.
An important part of the theater environment is
media critics. Their role is discussed by Depenedetti
(2006) and it is stated that success in the arts is
dependent on the consumers, on independent
experts and on the artists themselves. However,
criticismcan have a much stronger commercial im-
portance for small, alternative arts organizations
than it does for mass entertainment companies
which have budgets to drown out negative reviews
by advertising campaigns.
The literature review reveals a lack of overall
assessment of the use of standard project manage-
ment methodology in the theater. This fact was
the inspiration of a research project in an MSc
course on Project Management at the Faculty of
Engineering, University of Iceland, in the spring
of 2006. An extensive survey within the Icelandic
theater community was prepared and executed by
a group of 7 students as a part of this course.
Theaters in Iceland
The population of the Republic of Iceland is slightly
above 300.000 and half of the population lives in
or close to the capital, Reykjavik. People live in
smaller towns on the coastline around the country
as the island's interior is uninhabitable. Many of
the inhabitants participate in hobby acting societ-
ies in their towns, 64 such societies are in opera-
tion around the country and the total number of
participants is 4.000 (The Federation of Icelandic
Artists, 2006). There are however 4 professional
theaters in Iceland and they are located as shown
in Figure 2. The largest theaters are in Reykjavik,
the National Theater and the Reykjavik Theater.
The third one is in Hafnarfjordur, very close to
Reykjavik and the fourth one is in Akureyri, in the
northern part of the country.
It was decided to focus on three of the four
theaters in the study, one state-run and the larg-
est theater in Iceland, but the other two mostly
independent except for some support from their
communities.
Akureyri Theater is Iceland’s only professional
theater outside the capital area. It is run with sup-
port fromthe town of Akureyri, based on an agree-
ment with the Ministry of Education. The theater
was founded early in the 20th century but it only
became a professional theater in 1973 (Leikfelag
Akureyrar, 2006). The theater is positioned in the
heart of the town of Akureyri in north eastern
Iceland, in a newly renovated theater building
which can host 210 people. The repertoire ranges
from classical Icelandic and foreign pieces to new
Icelandic and foreign pieces, children’s plays and
musicals. The theater employs between 4 and 11
full time actors.
Thjodleikhusid - The National Theater – is
located in the capital, Reykjavik, and opened in
Figure 2. The location of professional theaters in Iceland.
Proj ect Perspecti ves 2009 57
Sur vey No. Quest i on Answer t ype
Actors 1
In your opinion, how good is the planning and the
structure in the productions in which you have par-
ticipated?
Numeric & comments
Actors 2
Do you make a time schedule for a production you are
working on?
Numeric & comments
Actors 3
Do managers or directors working on a production em-
phasize the need to be on schedule?
Numeric & comments
Directors 1
Do you split total rehearsal time into smaller phases
and tasks?
Numeric & comments
Directors 2
Do you make a time schedule for the production you
are working on?
Numeric & comments
Interviews 1
Elaborate on your experience regarding time manage-
ment of productions, e.g. your last production.
Text
Interviews 2
How much time is used for preparing productions, e.g.
the time from when the idea is created - until work
starts.
Text
Interviews 3
What methods are used to ensure that time schedules
are kept?
Text
Interviews 4 Do you use Work Breakdown Structure? Text
Interviews 5
Is the original plan used throughout the project or
updated regularly?
Text
Interviews 6 How do you follow up on the project? Text
Table 1. Questions related to Project Management Time Management of PMBok.
Figure 3. The knowledge areas of PMBok [3].
Integration
Management
- processes required to ensure
that the various elements of
the project are properly
coordinated
- consists of project plan
development, project plan
execution and overall change
control
Scope
Management
- processes required to ensure
that the project includes all
the work required, and only
the work required, to
complete the project
succesfully
- consists of initiation, scope
planning, scope definition,
scope verification and scope
change control
Time
Management
- processes required to ensure
timely completion of the
project
- consists of activity definition,
activity sequencing, activity
duration estimating, schedule
development and schedule
control
Cost
Management
- processes required to ensure
that the project is completed
within the approved budget
- consists of resource planning,
cost estimating, cost
budgeting and cost control
Quality
Management
- processes required to ensure
that the project will satisfy
the needs for which it was
undertaken
- consists of quality planning,
quality assurance and quality
control
Human Resource
Management
- processes required to make
the most effective use of the
people involved in the project
- consists of organizational
planning, staff acquisition
and team development
Communications
Management
- processes required to ensure
timely and appropriate
generation, collection,
dissemination, storage and
ultimate disposition of project
information
- consists of communications
planning, information
distribution, performance
reporting and administrative
closure
Risk
Management
- processes concerned with
identifying, analysing and
responding to project risk
- consists of risk identification,
risk quantification, risk
response development and
risk response control
Procurement
Management
- processes required to acquire
goods and services from
outside the performing
organization
- consists of procurement
planning, solicitation
planning,solicitation, source
selection, contract adminis-
tration and contract
close-out
58 www.pry.fi
1950 (Thjodleikhusid, 2006). Around four million
tickets have been sold from the time of opening.
The theater’s operational costs are covered at 75%
by governmental funds and at 25% by ticket sales.
Shows are staged on three stages, the main stage
with a capacity of around 500 seats, a second
stage with around 140 seats and a third stage with
around 180 seats. The National Theater emphasizes
the importance of supporting Icelandic drama
writing by staging new Icelandic drama pieces and
introducing the audience to the most interesting
new development in drama creation from other
countries. The theater also stages classical, children
plays, musicals and operas. Every year, 400 to 500
people have assignments for the theater, artists
and support people.
Hafnarfjordur Theater of Hafnarfjordur town –
close to Reykjavik, was founded in the fall of 1995
by a group of young actors who were supported to
stage a new Icelandic play (Hafnarfjardarleikhusid,
2006). The show brought a lot of attention to the
group; they did around 100 shows in Iceland and
also some shows in Germany and Scandinavia.
Since 1996, the Hafnarfjordur Theater has staged
more than 23 big productions plus many smaller
ones. The theater has staged three productions
every year, including one children’s play. The main
focus of the theater has been domestic playwriting
and the staging of both Icelandic and international
dramatic creations.
The Survey
The knowledge areas by PMBok were used as a
reference for this study. They are shown in more
detail in Figure 4 where some short explanatory
remarks are given. Three surveys of standardized
format were designed on the basis of the knowl-
edge areas, one for face to face interviews with
the top-level managers of each of the theaters;
Tomas Zoega, planning manager of The National
Theater, Magnus Geir Thordarson, CEO of the
Akureyri Theater and Hilmar Jonsson, director and
manager of Hafnarfjordur Theater.
In addition, one online survey for directors and
one online survey for actors were designed. Each
question of the surveys had a reference to a par-
ticular knowledge area of the PMBok. Examples of
such questions and their relation to the knowledge
areas are shown in Table 1.
Similarly, questions were designed for other
knowledge areas and the surveys were thus de-
signed to give a holistic view of the management
practices in the theater, according to the structure
of PMBok. The information gathered this way was
both numeric and in the form of text. In order to
gain an overview of the status of management
practices in the theater with reference to the
PMBok knowledge areas, a simple mapping of the
information into a single numeric parameter was
done. The mapping in itself is a combination of
direct calculation based on the numeric informa-
tion and on discussions and group work involving
the student group and the authors of this paper.
A total of 77 people in the theater industry in
Iceland were asked to participate in the online
surveys, 12 directors and 62 actors. Of those, 4
directors and 18 actors answered and the rate of
response was thus 29%. A natural concern is that
the response rate is not large enough for statisti-
cal processing of the data. However, emphasis was
put on a firm theoretical basis for the research
in general and a high detail of the face to face
interviews. The accumulated data is interpreted
on the basis of the three different perspectives
and as a consequence, a holistic overview of the
management standards in the Icelandic theater
community is obtained.
Results
The perception of the participants regarding the
extent to which each of the project management
knowledge area processes are implemented in the
Icelandic theater is assessed on the basis of the
three surveys. Fig. 4 shows the results of this ex-
ercise. The perception is indicated in steps of 25%
to underline that this assessment is inaccurate in
its nature and can only be used to indicate general
trends. Information on actor perception regarding
procurement management and risk management
is not available. The perception of directors and
actors seems to be comparable.
Following is a summing-up of general results,
based on all three surveys.
Integration management
General project planning processes are used in
the Icelandic theater community, in some cases
intentionally and in some cases not. Productions
are split into phases and each phase has a plan
attached to it. Theater productions are, as is to be
expected, concluded with a celebration that sup-
ports the group dynamics of the production group.
On the other hand there are no formal auditing
procedures – e.g. on how the plans worked out.
Informally some knowledge and experience of
running theater productions is gained within the
theater but this is not kept under control and audit
sessions with the whole group are unheard of.
Theater management in Iceland definitely has
some ideas about project management but in most
cases its full potential is far from being realized.
This is a ground for improvement in the Icelandic
theaters; project management could be used
in much more structured, proactive and useful
ways. It could be presented in a focused way to
the production employees and followed up more
continuously.
Scope management
The scope of the production is in most cases de-
cided by the top management of the theater with
the theater manager leading the way. The scope
decision is a by-product of the choice of pieces
to perform, a choice which usually is made well
in advance of the season. A common problem in
theaters is that the scope with regard to budget
and size of support staff tends to grow larger than
originally planned when premiere dates close in.
This is perhaps because productions often end
up having a different role in the season schedule
from was originally planned. The most common of
such scope slips is in the number of performances,
a consequence of the fact that audience numbers
are hard to predict in advance. Scope slip is very
rarely monitored or acted sufficiently upon in
theaters.
Proj ect Perspecti ves 2009 59
Procurement Management
Risk Management
Communications Management
Human Resource Management
Quality Management
Cost Management
Time Management
Scope Management
Integration Management
Interviews
Directors
Actors
0% 25% 50% 75% 100%
Figure 4. Perception of actors, directors and managers (interviews) regarding the
implementation of project management process in the theater.
Time management
Time plans are certainly made in the theater but
the majority of these seem to be skeletal plans
mostly for rehearsals and not so much for other
tasks. The larger theaters make, out of necessity,
plans on the use of facilities, i.e. when to rehearse,
when to work on the lights, when to work on the
set and so on. Apart from this, the developed time
plans consist mostly of basic plans for the season,
adjusted in accordance with actual data when the
production work starts. The time plans are often
reviewed on weekly meetings and sometimes
monitored by the top management. Nevertheless,
delays are frequent and serious production delays
resulting in a postponed premiere occasionally
take place.
Cost management
While most theaters have yearly budget plans in
place for the whole season, detailed budget plans
for productions are not customary. Directors, who
are most of the time running the show, are not
always aware of budget plans and other employees
are to an even lesser extent. There is a clear op-
portunity for improvement here, both with regard
to the detail of the budget plans and with regard
to downward information flow.
Quality management
The major quality measures are well known in
the theater community but there are different
views about which are the most important ones.
Different views also exist between managers and
actors for example. It is known that some theaters
are very clear about the quality measures and are
constantly reviewing and measuring them. But
in other theaters, the main focus is not clear and
employees and managers have different views of
what constitutes the quality measures, and evalu-
ation is not done in any systematic way.
Human resource management
It seems that in most cases everyone in a theater
production is aware of the responsibilities and
the organizational structure seems to be well
defined. The roles in different productions are
similar, even though different people fill them
- a special organization is thus not formed for a
particular production. The larger theaters have
permanently hired employees and add contracted
labor to that base. The director, art designers and
support department managers decide upon the
need for contracted human resources. Utilization
plans for human resources seem to be rarely made.
In smaller theaters, there is normally a minimal
basis of permanently hired employees and those
theaters seem to be more inclined toward making
plans on the utilization of people.
Communication management
The flow of information within the production
staff is most of the time controlled and moni-
tored. E-mail has become the most used method
of communication along with rehearsal plans.
Rehearsals serve as meetings for many of the
people working on productions. In addition, prog-
ress reports and other announcements are posted
on message boards. Regular production meetings
are probably the most important communication
tool within the higher levels of the production
management.
Risk management
There are varying views of the risks that can be
associated with theater productions. No formal
risk assessment is done for each production but
management and employees alike are aware of
some of the risks involved. This applies mostly to
major material risks such as fires that can ruin
the production. Smaller risks are less documented.
Notably though, the actors often cited the direc-
tor as a large risk factor. This can mean that the
director and his artistic abilities and connection
60 www.pry.fi
with the production are crucial factors. This means
that if the director isn’t able to connect with the
play, the actors will follow and the outcome will
be terrible. In rare cases, productions are cancelled
under such circumstances.
Procurement management
Production procurement plans are made but their
detail varies between theaters. In whole, the scale
and form of contracted work is very different
amongst theaters.
Conclusion
There are large differences between the ways
that Icelandic theaters execute their project
management. Some general trends have however
been identified. For example, it is seen that time
and budget plans are made and followed up - to
different extents. Special project plans are not
made for each production but only for the whole
production season.
Theaters are very project oriented organizations
and could use project management to the fullest
and even to a further extent than many conven-
tional enterprises. Furthermore, theaters are in
many respects similar to conventional companies
and should be run and managed as such. The
same methods and tools can definitely be ap-
plied. Some of these methods have already been
applied but in many areas there is still potential
for improvements. The previous literature on the
subject contains some interesting aspects, some
of which seem to agree with our results while
others do not.
Hartman et. al. (1998) state that projects in
the live entertainment industry are always on
time. Our findings seem to indicate otherwise.
Everyone surveyed in this research indicated that
delays were quite common and most regarded
them as a definite fact of the business. Hartman
et.al. also reported that in spite of good success
with timing, theaters did rarely - if ever - use
traditional project management techniques. Our
results show that, in Icelandic theaters, there are
certainly some good techniques that are absent,
but some of the traditional techniques have been
adopted, like basic timing and budget plans and
some analysis of the project environment – to give
examples. From the interviews and surveys, we
found that project management techniques have
caught on in many aspects but perhaps their use
could be consolidated and they could be used in a
more systematic manner. This is however not the
whole story. As Hartman et. al. reported, another
key success factor for theater production is the
alignment and unity of participants and the ar-
tistic connection within the group and to the play.
The management has to reflect the importance of
these factors.
Lu’s view (2002) that more systematic and busi-
nesslike management is needed in theaters is very
often true in the case of the Icelandic theaters.
If we compare the Icelandic theaters to the gen-
eral description of the production organizational
structure, as it is laid out in Wikipedia (2006), it
is found that the important role of the “stage
manager” seems to go unfilled in the Icelandic
theaters. This puts all kinds of administrative work
in the hands of the directors and consequently,
quality can be lost. The size of the theaters is
definitely an important factor and most managers
agreed that the theaters simply didn’t have the
resources to add a high-ranking stage manager
to the production team.
In general the situation could be much improved
even with some simple methods such as WBS and
PERT, as Wirth suggests (1995). These methods
could bring more coherence to the methods pres-
ently used within the theaters and without much
difficulty that could add greatly to their success.
Dempster (2006) successfully identifies some
of the risks and uncertainties in the theater in-
dustry. To a great extent these factors - audience
composition, critical acclaim and media coverage
– represent a large portion of the uncertainties.
These very important factors in production success
are very difficult to predict. That difficulty poses
a large part of the risk for the Icelandic theaters
since all of them are relatively small and their
financial outcome often depends on very few
productions.
After a production, very little work is done to
evaluate the outcome. Most production cycles
end with a social gathering but little is done in
order to assess success. This is a key project man-
agement method and it seems to be completely
missing from the procedures of Icelandic theaters.
Productions are very similar to each other in many
aspects and there is great potential for lessons to
be learned. The factors evaluated should include
both internal factors such as financial outcome
and artistic success, while external factors such as
influence and popularity should also be addressed.
Finally, all the processes and procedures used in
the theater should be under constant review.
From this, the theaters could benefit highly and
this could reduce the impact of the uncertainties
mentioned above. We think that such a final as-
sessment is crucial in order for the production to
create value and contribute to the theater in a
greater extent, by serving as a basis of knowledge
for other productions.
From our findings it is apparent that some
aspects of project management have been imple-
mented, although rarely to the fullest extent,
within the Icelandic theaters. Most areas can be
significantly improved, but time management
stands out as an important knowledge area where
theaters could do much better by using standard
project management methods. Additionally,
follow-up and evaluation – standard routine in
many conventional business projects - would open
huge improvement possibilities.
On a final, practical note, it should be pointed
out that the PMBok is easily understood by people
with technical background and working on tradi-
tional construction projects. It may not be the best
tool to promote and build up project management
in an environment with little technical resources
and non-technical culture. The PMBok is quite
After a producti on,
very l i ttl e work i s done
to eval uate the outcome
Proj ect Perspecti ves 2009 61
Helgi Thor Ingason is a PhD in process
metallurgy and MSc in mechanical and
industrial engineering. He is an associ-
ate professor at the Faculty of Engineer-
ing, University of Iceland and lectures in
project management, quality management
and facility planning. He is the head of
the MPM - Master in Project Management
- program at the university (www.mpm.
is). Helgi Thor is a member of the Nordica
Consulting Group in Iceland and he is the
co-founder and chairman of Alur, alvinnsla
hf - a recycling company in the aluminum
industry in Iceland. He is an IPMA Certified
Senior Project Manager.
technical in content. Comparing it to the “Eye of
competence”, as presented in the ICB 3.0, shows
that it focuses mainly on technical competences.
A further assessment of project management
practices in the theater should thus be based
on the more recent “Eye of Competence” which
represents a more modern view of the content of
Project Management.
Acknowledgment
Our sincere thanks to the group of MSc students
that executed the survey as a part of the graduate
course given by Dr. Ingason, “Project management
II – project execution” at the Faculty of Engineer-
ing, University of Iceland in the spring of 2006. The
group consisted of the following students: Harald
Schaller, Hulda Hallgrímsdóttir, Jens Þórðarson,
Jóhannes Jensson, Lorenzo Coletti, Roberta Zuc-
chetti and Sigurður Fjalar Sigurðsson. Nína Dögg
Filippusdóttir, actress, who read the manuscript
and gave valuable comments. We are very grateful
for her contribution. We thank Ingi Viðar Árnason
for reviewing the manuscript.
References
ISO, (2003) ISO10006:2003
Quality management systems – Guidelines
for quality management in projects, Interna-
tional Organization for Standardization.
International Project Management Association
IPMA (2006) ICB IPMA Competence Baseline
Version 3.0, The Netherlands, IPMA.
Project Management Institute PMI (2004)
A Guide to the Project Management Body of
Knowledge (3rd edition). Project Management
Institute, USA.
Hartman F., Ashrafi R. & Jergeas G., (1998)
Project management in the live entertain-
ment industry: What is different? Interna-
tional Journal of Project Management, Vol.
16, No. 5, Pergamon.
Lu H., (2002)
A strategic planning model for the perfor-
mance workshop (Taiwan): An internship
report. Texas Tech University.
Wirth I., (1995)
Time Management and Cost Control in The-
atrical Production. Cost Engineering, Vol. 37,
No. 9.
Wikipedia – www.wikipedia.org – September
2006.
Dempster A.M., (2006)
Managing Uncertainty in Creative Industries:
Lessons from Jerry Springer in the Opera.
Creativity and Innovation Management, Vol.
15, No. 3.
Colbert Francois, (2003)
Entrepreneurship and Leadership in Market-
ing the Arts, International Journal of Arts
Management, Vol. 6, No. 1.
DiMaggio P., (1987)
Nonprofit Organizations in the Production
and Distribution of Culture. In “The Nonprofit
Jens Thordarson graduated in 2007 as
M.Sc industrial engineering from the
University of Iceland, specializing in
operations research. He currently works as
manager finance and resources at Icelan-
dair Technical Services, Icelandair's heavy
aircraft maintenance arm.
Sector: A Research Handbook, W. Powell, ed.
New Haven, CT: Yale University Press.
Preece S., (2005)
The Performing Arts Value Chain. Internation-
al Journal of Arts Management, Vol. 8, No. 1.
Stéphane Depenedetti, (2006)
The Role of Media Critics in the Cultural
Industries, International Journal of Arts
Management, Vol. 8, No. 3.
The Federation of Icelandic Artists – www.bil.
is – September 2006.
Leikfelag Akureyrar – www.leikfelag.is – Sep-
tember 2006.
Thjodleikhusid – www.leikhusid.is – September
2006.
Hafnarfjardarleikhusid – www.hhh.is – Septem-
ber 2006.
62 www.pry.fi
ONE SIZE FITS ALL
Implementation of a holistic and scalable
project management methodology
Thomas Gschossmann
Tiba Management Consulting
Munich, Germany
Dr. Hermann-Josef Weber
E.ON AG
Germany
Mergers have established many new corporate groups over the past ten years. These groups consist of formerly inde-
pendent companies, which fused into a “single”group. In consequence, these corporate groups are comprised of a host
of cultures with differing methodologies and approaches in facing business challenges. This clashes with the merger’s
ambition of generating intra-corporate synergy through standardization and harmonization. A way out of this “Tower of
Babel”must be found to create a single project management culture, without negatively impacting the efficiency and
effectiveness of the existing organizations. This was the driving force behind the creation of a “one size fits all”project
methodology for the management of IT projects at a large energy supply corporation. This “one size fits all”approach is
described here, as well as the experience gained during the implementation.
Introduction
Many companies face challenges today that they
never met before. Market globalization requires
collaboration between different cultures and
mentalities, and the speed of innovation forces
innovation on a fast track from inception to the
implementation. No revenues can be generated
with “shelf-ware”. Another challenge is the ex-
plosive growth of complexity, especially in hard-
and software. This complexity must be overcome
with the right methodologies, otherwise it will
lead to chaos. Basically, a fundamental change
in the organization is required. This change must
include a higher degree responsibility on the part
of staff (entrepreneurship) and systemic thinking.
Modern approaches for project management of-
fer both, and provide the tools needed to support
this change.
E.ON AG seized the opportunity to implement
this project management methodology in 2003,
as the logical result of a best practices initiative.
E.ON defined a management standard based on
the best practices as applied to international
standards, such as PMBOK (PMI, 2004), ICB (IPMA
2006), PRINCE2 (PRINCE2, 2006) for use in all of
its subsidiaries.
One important goal was to reduce the learning
curve someone has to undergo moving from one
subsidiary to another. Therefore, the harmoniza-
tion of project organization and standardization
of project management vocabulary was a prime
concern.
E.ON is Europe’s biggest supplier of electricity
and gas. It was originated by a merger of VEBA
and VIAG in 2000. The group consists of ten mar-
ket units in Germany, UK, Nordic, US, Spain, Italy,
Russia and Eastern Europe with a big number of
subsidiary business units. In addition to interna-
tional differences, several large subsidiaries were
formerly state-owned companies in the East
Block. This adds a layer of cultural nuance beyond
language or size of the subsidiary. Thus, the E.ON
subsidiaries have a wide spectrum of IT projects.
Some companies may execute two small projects
per year, while others companies may have two
hundred huge projects.
A more heterogenous environment is hard to
find, and it required a scalable (“One-Size-Fits-
All”) project management approach that is not
country or culture specific. The “One-Size-Fits-All”
approach is described below.
Project framework organization
Single project organization
Business Owner IT Owner
Program Board
Project Team
Project Steering Committee
Business
Project Manager
IT Project
Manager
General Project Management
R
e
v
i
e
w

T
e
a
m
Program
Office
Project
Support
Line organization
Figure 1. Project Organisation Ground Plan
Proj ect Perspecti ves 2009 63
The Creation of a Holistic Model
The holistic model was inspired by the use of a project trouble-
shooting technique. Consultants were called in to figure out
what went wrong with a project, and to deliver a solution.
The technique used was a workshop exercise, in which project
members write cards on which they list the strengths, weak-
nesses, opportunities and risks for the project. These cards
were then affixed to a metaplan drawn on a whiteboard.
When finished, the cards are then clustered.
After a number of trouble shooting sessions, the cumula-
tive results were very intriguing; because in almost cases the
cards could be clustered along four axes. These axes were
Organisation, Methods & Processes, People, and PM Software.
We drew the conclusion that, if these are the core areas that
determine project success or failure; it would make sense to
focus on them and to consider them as fundamental dimen-
sions in each project management model. We chose the name
“the holistic model” to express the unification of these four
very different axes into one scheme. These four dimensions
are described in more detail below.
The Organisation Axis
This axis describes the organisational requirements for the
handling of projects. It contains a description of each role
involved in a project and their corresponding core tasks,
responsibilities, and delegated responsibilities. Secondly, it
describes the problem escalation processes and the formal
paths of escalation through the management hierarchy.
The organization model is a design ground plan - and is
therefore scalable. Depending on the size and complexity given
by a concrete situation in a company, it can be downsized or
upsized to reflect the requirements. The benefit is that the
project organization of a small project in a company with
fewer projects is similarly constructed to the project organiza-
tion in a big project in a company with hundreds of projects.
The project vocabulary and design objects are identical. The
figure 1 charts this ground plan.
There are a lot of latent benefits in
the implementation of this organization
model: There is, for instance, no discus-
sion required about the responsibilities
and delegatory powers of a project
manager. It is identical throughout the
whole group. In cross-unit projects the
effort required for the definition of the
organization is eliminated, because the
understanding in each company is the
same.
This is also true for escalation. After
implementation it is clear how escala-
tion works, and to which level escala-
tions have to be invoked.
Figure 2. First example of project organisation derived
from the ground plan
Figure 3. Second example for a derived project
organisation
BO
Mr.Müller
Business
Project Manager
Ms.Kirk
Mr.Scott Mr.Nösel Ms.Sägebrecht Ms.Feldbusch Ms.Maysel
IT
Project Manager
Mr.Spock
General Project Management
PSC
Messrs.Müller,
Meier, Schulze
ITO
Mr.Meier
BO
Mr.Müller
Business Project Manager
Ms.Kirk
Mr.Scott Mr.Nösel Ms.Maysel
General Project Management
PSC
Mr.Müller,
Mr.Meier
ITO
Mr.Meier
The following two figures (2 & 3) describe a project orga-
nization that is derived from the ground plan.
This example describes an instance where two project
managers from a business unit and IT share the lead in a proj-
ect. E.ON has had good experiences with this type of shared
leadership, although it defies the “Highlander-principle” of
“there can be only one”.
There is a special extension concerning figure 2: The IT Proj-
ect manager, and the team member are external, therefore Mr
Schulze (as the manager of Mr Spock) has a role in the PSC.
The example for a small project presented in figure 3 does
not consider a shared leadership, but is another derivation
of the ground plan.
The Methods & Processes Dimension
This section defines an open, generic, and haptic process
model, which is PMBOK (PMI, 2004) compliant and allows
the connection/linkage of company and project specific
process models (like Rational Unified Process, V-model, UML,
…). The goal is to simplify project planning, performance and
control.
The process model is divided into phases, building blocks and
milestones (we call it checkpoints). The phase model is divided
into hierarchical levels. The reason for choosing this structure
is that it provides a robust process for as many different types
of IT project as possible, at least at project management level.
Process models relating to specific user requirements can also
be ‘plugged in’ to the structure at defined points.
The model has three layers A, B and C as shown in the
figure 4.
The completion of each phase marks a precisely defined
milestone in project content. The phase end points are also
important project milestones. The overlapping of phases is
permitted. Each phase consists of activities characterizing the
work to be done to ensure the successful performance of the
project. Most of these activities, which form the B level in the
above model, refer to processes requiring project management
Figure 4. Architecture of the process model
64 www.pry.fi
input. The only exceptions are some user-specific issues that
are included as placeholders for activities within the business-
side process models. Activities can be shifted between phases,
if there is no negative impact on quality or project targets.
The C level comprises business-side procedural models, which
will vary between individual companies.
Activities are described on both A and B levels. The B level
addresses project management-specific issues. The C level
comprises the activities within business department-specific
process models. Activities within these process models (C level)
are linked to the corresponding B level activities.
The advantages of this structure include the following:
- A and B levels provide the basis for a standard procedural
approach for almost all IT projects within the Group (e.g.
for cross-unit projects),
- existing company-specific procedure specifications are
taken into account; and
- availability of uniformproject status reporting systems over
the entire Group.
The activities are described in the form of building blocks.
The first step is to describe the objective of an activity. This
is essential as the basis for deciding whether the activity is
required in the specific project in question. Next, the prereq-
uisites and outcomes are described. ‘Prerequisites’ relate to
outcomes that must be in place before a certain activity can
start. The concept of ‘prerequisites’ also refers to events that
must have occurred (e.g. “Phase 1 must have been completed”)
before an activity can start. Outcomes are defined as inter-
mediate products that will be in place when the activity in
question has been carried out. Some building blocks provide
guidance in considering legal or company specific regulations
like for SOX (Sarbanes-Oxley Act) or IT Security.
For each phase a set of building blocks was created which
reflect the project management needs. During planning it is
up to the project manager to arrange these building blocks
in the right sequence and to choose the building blocks that
are required to manage a specific project. He will use the
repertoire of building blocks to create his specific model of
the project flow. Depending on the complexity and size of a
project, he will, for instance, intensify the usage of the risk
management building block and its appearance in the proj-
ect plan. The building blocks are presented in the form of a
building kit, that is used during the planning by the project
manager or by the whole team:
Figure 5. Example building kit for phase 0
Regardless of which combination of building blocks are
used, the exit criteria (the block arrow) has to be achieved
for the explicit closure of a phase.
This modular approach for structuring a project ensures that
it can be applied on a wide range of project sizes and types.
The greatest benefit is that the project plans are very similar.
This simplifies audits and the establishment of controlling
and/or performance management systems.
The People Dimension
People are central to project management because success-
ful project implementation requires highly motivated project
participants and quality teamwork. The People Dimension
provides a number of tips and suggestions for the successful
management of the ‘people factor’ in projects. However, it
should be noted that the practice of project management, with
its strong emphasis on teamwork and its cross-departmental
focus, can also contribute much to the development of a
cooperative, cohesive corporate culture in general.
After this section, the tips and suggestions describe how
people can be enabled to act as project leader. It contains a
list of training measures required to lead projects of a specific
type.
PM Software
The ‘IT project management software’ factor complements
the ‘human factor’ in providing an integrated approach to
project management. A certain minimum level of software
support is required in order to enable the project employee
to optimally perform his/her project tasks. Exactly what that
level of required software support is, varies according to the
employee’s role in the project organization. Each project
employee has certain core tasks, as defined in the project
organization’s role definitions.
The exact mix of software tools required depends on the
company and on the project in question. For this reason, a
software requirements analysis should be performed as part of
each project’s quality planning process. The quality planning
process defines a project’s quality objectives and the software
tools required to achieve them.
Roll-Out Experiences
The project management concept is already rolled out at
most of E.ON’s German market and business units. The in-
ternational roll out is currently in progress. The experiences
made so far are:
Feedback on Organisation
- The project‘s temporary organization is useful and in most
cases was accepted uncritically.
- Two project managers leading the project in common is seen
as more of a burden than benefit by some pilot projects.
- The allocation of staff for projects is a problem caused by
the dominance of the permanent organization over the
project.
- Fulltime assignment of staff to a project is seen desirable.
Where this is not possible, explicit (written) agreements
and commitments should be made.
- The project staff of phase 0 should continue in the following
phases in the project.
Feedback on Methods & Processes
- Very early in the project it became transparent that a plan-
ning of tests, especially regarding the test and integration
environment is required. This saved time and money in the
later phases.
- Agreement at project start on the project‘s scope with the
stakeholders was an important lesson learned. This reduced
the probability of later discussions or interpretations about
the scope.
- The building blocks are useful for project execution.
- A default project template would be useful, for which
project complexity/size determines which building blocks
are required.
- Quality management should be embedded into the building
blocks and not be separated into a separate block.
- Phase 0 should be handled at a generic level, because the
investment process is very different from company to
company in the E.ON group (e.g. the approval process).
- Phase 0 runs in some companies very intransparently and
Proj ect Perspecti ves 2009 65
inefficiently (e.g. more than two months for a simple ap-
proval). This approach could optimize the approval process
by standardizing the request documentation.
- The usage of the building blocks should not be obligatory.
The. goal is to provide a „handrail“ not a „girdle“.
- The application of standard methods for typical project
management disciplines (e.g. planning, risk management,
quality management, controlling) will produce better proj-
ect results.
- More discipline in planning and steering of projects is
necessary. This will be supported by this approach.
Feedback on People
- There are deficits in typical project management disciplines
like planning, risk management, quality management and
so on. Training and support for project staff would generate
positive results.
- There are mostly well educated project managers for big
projects. For small project are not enough employees avail-
able, who have the appropriate project management skills.
A selective human resource management for project staff
has to be established in the companies to measure project
leadership qualifications in the staff.
- The working culture in most locations is „Permanent or-
ganisation first“. The result is less planning reliability for the
project leader. A cultural change is absolutely necessary to
appropriately prioritize resource needs.
Feedback on PM-Software
- A software tool for planning and accounting of effort is
useful. An ideal case with an interface to the company‘s
back-office data processing (e.g. accounting for internal
services, order processing, resource planning).
- A tool, which gives an overview over an employee‘s utiliza-
tion would be helpful.
- A tool-supported allocation of project resources, especially
for phase 0, will increase the speed of project start-up.
- In some companies project management tools are probably
available, but there is no support for it and the staff is not
trained to use it.
- A tool for effort estimation would be useful and will allow
more precise effort prediction.
- A document management tool for storing, versioning and
archiving of project documentation would be useful.
Conclusion
The use of a holistic project model improves the collaboration
of project staff, and can allow large enterprises such as E.ON
to achieve both the synergies and economies of scale that
were the goal behind their creation. This model can achieve
noticeable commercial benefits as more and more projects are
deliverable on-time and on-budget.
In addition, this holistic approach must be easily scalable
from small companies to large across all dimensions of the
model.
References
PMI, (2004)
A Guide to the Project Management Body of Knowledge: PM-
BOK Guide (PMBOK Guides), B & T, 2004
International Project Management Association IPMA, (2006)
ICB IPMA Competence Baseline Version 3.0, The Netherlands,
IPMA.
PRINCE2, (2005)
Office of Government Commerce, Managing Successful Projects
with PRINCE2, The Stationery Office Books, UK.
Thomas Gschoßmann
Thomas Gschoßmann works as a
management consulting for com-
panies seeking to ensure success
in project management. He joined
Tiba Management Consulting in
1997 after many years of proj-
ect management experience in
the financial industry, leading
large-scale infrastructure and IT
projects. As a Consulting Partner at TIBA, he has con-
centrated on project management systems at banks
and utilities, providing them pragmatic solutions for
immediate results. He is the lead consultant in the de-
velopment of the holistic project management model
described in this article.
Thomas Gschoßmann (1962), masters in computer sci-
ence, senior consultant at Tiba Management Consult-
ing, Munich.
Phone: +49 (0)178/7318295
e-mail: Thomas.Gschossmann@tiba.de
Hermann-Josef Weber
Born on March 10, 1969 in Wal-
trop. After graduation from high
school, Hermann-Josef Weber
studied mathematics and com-
puter science at the university of
dortmund from 1988 until 1994
and graduated with a degree in
mathematics as diplom-mathe-
matiker. From 1994 until 1996 he
gained a doctorate stipendiate of the german research
association (DFG) at the institute of experimental
mathematics at the university of Essen in the field
of public-key cryptography. He finished his research
activities with a PhD in mathematics and started in
1996 his working career at the Mannesmann Group as
a project leader for customer care and billing systems
(Mannesmann Datenverarbeitung GmbH) and become
a consultant for project consulting and controlling
(Mannesmann Internal Audit GmbH). After 4 years of
working he left the Mannesmann Group to work as a
IT strategy consultant for the strategic consulting firm
A.T. Kearney. He was member of the european Stra-
tegic IT Practice (SITP) and advised companies from
different business areas. In 2003 he got an offer of
E.ON AG's CIO Office to work there as an Application
Manager to steer and coordinate group-wide IT initia-
tives, e.g. implementation of an SAP system to fulfill
the Sarbanes-Oxley Act requirements, standardisation
and harmonisation of an IT project management stan-
dard, coordination of the group-wide IT application
projects for Human Resources. Since the beginning of
2008 he is now a member of the application strategy
department within E.ON AG's CIO Office.
e-mail: hermann-josef.weber@eon.com
66 www.pry.fi
Lynn Crawford
Director, Human Systems
International Limited
Professor of Project
Management, ESC Lille
France and
Bond University
Queensland, Australia
Terry Cooke-Davies
Chairman
Human Systems Interna-
tional Limited
Australia
The executive sponsor plays a vital role in linking corporate and project governance. As the governor
of the project, the executive sponsor is the bridge between the executive teamwho set strategy
for the corporation and the project teamthat implements strategy. The executive sponsor is re-
sponsible for ensuring that the benefits identified in the business case are delivered and that the
programor project can be considered as successful. In doing this, the sponsor must not only act
as governor but as owner of the business case, harvestor of benefits, a friend in high places and
visible champion of the project. Research demonstrates a clear correlation between governance
and sponsor capabilities and project effectiveness or success achieved.
Proj ect Governance
Introduction
Corporate governance has come under intense
scrutiny in recent years, following numerous high
profile corporate collapses. Shareholders and other
stakeholders are demanding increased account-
ability, transparency and ability to implement
strategy. As projects and programs are the vehicles
for delivery of corporate strategies, effective proj-
ect governance, within the corporate governance
framework, has become a serious concern for
organisations, offering company directors clear
visibility and control of non-routine corporate
operations and delivery capability.
The sponsor of a project or program is the
pivotal link between corporate and project
governance. This is the role that articulates the
relationship between three crucial elements of
an organization: top management who set the
strategic direction, business and line managers
who deliver the day-to-day profit, services and
resources, and the manager and team seeking to
deliver the project successfully. Clear definition
and effective performance of the role of the spon-
sor is a vital aspect of both corporate and project
governance and is demonstrably crucial to the
success of programs and projects.
Against a background of forces that are driving
an increasing focus on corporate governance, this
paper provides a definition of project governance
relative to corporate governance. The role of the
sponsor within both corporate and project gover-
nance is described and the importance of the role
in contributing to project success is demonstrated
by reference to research on the capability of or-
ganisations in consistently defining, initiating and
managing a complex portfolio of projects.
Corporate and Project Governance
The Corporate Governance Imperative
An increasing focus on corporate governance can
be traced back to the stockmarket collapse of the
late 1980’s which precipitated numerous corporate
failures through the early 1990’s. Examples of
attempts by governments to improve corporate
governance practices were the Cadbury Code of
Practice (Cadbury, 1992) in the UK, and Strictly
Boardroom: Improving: Governance to Enhance
Company Performance, Australia, first published
in 1993 (Hilmer, 1998). Despite these attempts
at regulation, further pressure on corporations
resulted from the Japanese deflation crisis, from
the early 1990’s through to recent times, the
Asian crisis of finance and governance in the late
1990’s and the bursting of the dot.com bubble in
2000-2001. Weill Gothshal & Manges (Gregory
& Simmelkjaer, 2002) report for the OECD spe-
cifically cites as catalysts for change in corporate
governance practices the collapse of Enron,
Worldcom and Tyco in USA because of the impact
of those events on international financial markets.
However, the OECD also refers to local corporate
failures in UK, Australia, Germany, France, Japan,
Korea and Switzerland, indicating the problems
were widespread.
Allied with executive management excesses and
in some cases outright fraud (OECD, 2004) the
various failures have had widespread impact. Since
the OECD released its “Principles of Corporate
Governance” in 1999 approximately 35 codes or
statements of principles on corporate governance
have been issued in OECD countries (Gregory &
Simmelkjaer, 2002). The most significant of these
has been the Sarbanes Oxley Act, 2002. While the
The Role And Capabilities Of The Executive Sponsor
Proj ect Perspecti ves 2009 67
jurisdiction of this Act is the USA, the influence
of this Act is being felt worldwide as many global
corporations with USA connections are forced to
undergo major Sarbanes Oxley compliance audits.
Organisations in the financial sector are experienc-
ing heightened regulatory pressures including but
not limited to Basel II.
In the past, many senior managers had little
interest in project management, considering it to
be tactical rather than strategic. Others disliked or
were suspicious of project management because it
fosters visibility, transparency and accountability
and this can make it difficult to hide mistakes.
As legislation such as the Sarbanes Oxley Act
now requires company directors to take personal
responsibility for ensuring accuracy and reliability
of corporate disclosures their attitude to transpar-
ency is changing and project management can
be seen as directly assisting senior management
in meeting and fulfilling their legislated obliga-
tions.
Corporate governance can be considered to
encompass relationships between a company's
management, its Board (or management team) its
shareholders and other stakeholders and to provide
the structure through which the objectives of
the company are set, and the means of attaining
those objectives and monitoring performance are
determined (OECD, 2004). Corporate governance
is concerned with
- roles and responsibilities,
- accountability
- disclosure and transparency
- risk management and control
- decision-making
- ethics
- performance and effectiveness
- implementation of strategy
A definition of project governance
Project governance is initiated under the umbrella
of corporate governance and makes a significant
contribution to addressing of the eight concerns
of corporate governance listed above. Projects
and programs as instruments of change are
fundamental to the implementation of strategy.
Project management is specifically concerned
with risk management, control, performance and
effectiveness. A project governance framework
will clearly identify roles, responsibilities and ac-
countabilities and this in itself provides a basis for
decision-making. As mentioned above, disclosure
and transparency are characteristics of good
project management.
Project governance can be defined as ‘a set of
formal principles, structures and processes for
the undertaking and management of projects,
applicable in the context of individual projects,
programs or portfolios of projects which:
- Appoint a governor (or governing body)
for a project
- Define and regulate roles, accountabilities,
decision making and boundary manage-
ment and
- Coordinate project relationships, planning
and control’ (Hazard & Crawford, 2004).
The Pivotal Role of the Executive Sponsor
From the definition of project governance given
above, the pivotal role of the sponsor becomes
immediately apparent. The executive sponsor is the
governor for a project and therefore provides the
link between corporate and project governance.
The executive sponsor, in keeping with the term,
should be a member of the corporate executive.
The Association for Project Management, in a
guide to governance of project management,
states that, “Project sponsors are the route through
which project managers directly report and from
which project managers obtain their formal au-
thority, remit and decisions. Sponsors own the
project business case. Competent project sponsor-
ship is of great benefit to even the best project
managers” (APM, 2004, p. 9).
The Sponsor’s Roles
In most cases, the role of the sponsor is not well
defined and there is considerable variation in the
role across organisations (Crawford & Brett, 2001).
Dinsmore and Cooke-Davies (2006) draw upon
their combined observations of enterprise-wide
project management in organisations to suggest
that there are five separate but inter-related roles
that a sponsor needs to play:
- Governor of the project;
- Owner of the business case;
- Harvester of benefits;
- “Friend in high places” to the programme-
or project manager; and
- Champion of the project.
Before examining the results of some recent
research, it is perhaps valuable to examine each
of these five roles in a little more depth.
Governor of the project
In the context of project governance, this is the
most obvious role of the sponsor, but it is not nec-
essarily straightforward. There are fundamentally
two kinds of work undertaken by any enterprise:
more or less repetitive tasks or processes that recur
regularly and which make up its usual sphere of
operations (business as usual) and more or less
unique activities that are undertaken once, by a
temporary teamto achieve some formof beneficial
change (projects or programmes). In this paper,
the term “projects” has been used generally for
the latter kind of work, regardless of whether
programmes or projects. Nevertheless, the two
kinds of work are fundamentally dissimilar, re-
quiring quite different forms of management and
governance (Turner & Keegan, 1999). In practice,
this means that the task of governing individual
projects is likely to prove challenging for spon-
sors who have risen to the top of their organisa-
tions through successfully managing business as
usual. The extremes of Scylla and Charybdis are
represented by tendencies to either abdicate and
leave things to the project manager and team or
alternatively, to micro-manage and deflect the
project teams from their proper focus on manag-
ing progress towards providing more and more
information to the governance committee.
68 www.pry.fi
Owner of the business case
The business case is important, because it encap-
sulates the basic reason that the project is being
undertaken in the first place. Very few organisa-
tions undertake projects simply for the sake of
doing projects – they are means to an end. Perhaps
to improve the performance of current activities,
or to develop new business, new products, new
markets, or to introduce new technology, new
processes, new ways of working , or even to build
new infrastructure, new physical assets. In each of
these cases, the nature and extent of benefits will
differ, and it is the purpose of the business case to
spell out precisely how the benefits will add value
to the enterprise.
A sound business case is essential to good
corporate and project governance as it makes
transparent the value expected by the business
from the project. It underpins a sound project
charter – itself an essential pre-requisite to sound
scope planning and risk management. It is the
sponsor’s job to ensure, on behalf of the enterprise,
that the business case is accurately articulated
and also, on behalf of the project, to ensure that
the project plan is developed so as to meet the
business case.
Harvester of benefits
Important as the business case is, it is simply
a piece of paper that delivers no value to the
enterprise until it has been transformed into real
benefits. Such benefits can be said to be “har-
vested” or “realized” when the products or services
delivered by the projects are used effectively by
the enterprise to create the benefits foreseen by
the business case. It is a matter of preference
as to whether one thinks of the benefits being
“harvested” (with its connotations of seeds being
planted, crops ripening and eventually the yield
being reaped) or “realized” (with its connotations
of ideas gradually being converted to something
that is real).
In either case, the benefits can not be harvested
until after the project has been completed, its
product or service handed over to its ultimate
users, and then used by them for the benefit of
the enterprise. The sponsor, being part of the
permanent organisation, is better placed to influ-
ence the behaviour of the users than the project
team, which is unlikely to be in existence when
the benefits come through. On the other hand,
the project itself can influence the benefits by the
extent to which the product or service fulfils the
real user requirements and technical performance
specifications, so once again the sponsor is in a
position to ensure the co-operation of the project
team and the permanent organisation during the
life of the project.
Friend in high places
This is, perhaps, the role that is most intuitive for
sponsors to carry out. By virtue of their credibility
and status, sponsors are ideally situated to assist
with the management of high-ranking stakehold-
ers, whether this involves obtaining adequate
resources from hard-pressed line managers, or
winning the hearts and minds of influential
people who are opposed to or disinterested in
the project.
Visible champion of the project
The last of the five primary roles of the sponsor is
actually an amalgam of the first four – it amounts
to emotional leadership of the project so that
people at all levels in the organisation understand
that it is committed to the project and requires the
benefits that will flow from it. It is, perhaps, the
most demanding of the roles, requiring mastery of
three quite distinct worlds: the world of external
reality (focusing on the task), the world of inter-
personal relationships (managing relationships)
and the world of their own behavior, attitudes
and values (sponsor self management).
Although much of the focus of the first four
roles has been on the task, the other two worlds
are equally important. The management of rela-
tionships requires the sponsor to ask himself or
herself questions such as:
- Are all parties involved clear about their
roles?
Figure 1. Conceptual Research Design
Conversat i on
about
Invol ves Cri t eri a f or Success Cri t i cal Success Fact ors
The right com-
bination of…
Senior management.
Strategy implemented.
Productivity improved.
Right projects done.
Projects done right.
Portfolio management. Con-
tinual improvement. Compre-
hensive & reliablemetrics
…the right
projects …
Project governance.
Executive sponsor.
“Client”, “Owner”,
“Operator”.
All benefits realized.
Stakeholders satisfied.
Clear & doable goals; Stake-
holder commitment; Benefits
processes; Project strategy
…done right
Project manager.
Project team.
Time, cost, quality,
scope, technicalperfor-
mance, safety, etc.
Clear & doable goals; Capabile
& effective team; Adequate
resources; Clear technical re-
quirement. Effective planning
& control. Risk management
Proj ect Perspecti ves 2009 69
- Do the right people make the right decisions
about the programme in the right way?
- Is everyone doing what needs to be done for
the desired change to be accomplished?
- Similarly, sponsor self management involves
such questions as:
- Am I devoting sufficient time to the pro-
gramme?
- Do I passionately portray a congruent belief in
the business case?
- Do my behaviour and attitudes encourage the
project manager and team to “think outside of
the box” and look for solutions that will address
the overall project goals?
How does the sponsor contribute to project
success?
The research that will be reported in this paper was
not directed primarily towards project sponsors,
although unlike much other research it recognized
the importance of governance and sponsorship
right from its design stages. The research design
was developed fromearlier research reported else-
where (Cooke-Davies, 2001&2002a&2002b&2004)
and which is summarised in Figure 1 below.
A self-scored questionnaire was developed with
questions probing both the presence or absence
of specific capability areas at each level, and the
degree of success accomplished for each criterion
at each level. Clearly such a method suffers from
some weaknesses: the sample is self-selected and
may not be representative of all projects and all
organisations; respondents are answering from
the point of view of completed projects, which
can lead to “post hoc” bias in their answers (if it
was successful, we must have had good capability
and vice versa); and because the questions have
been carefully selected from previous research, it
is to be expected that many variables will correlate
with each other (high co linearity).
The instrument contains 44 questions about
capabilities: 21 at the organisational level, 10
governance/sponsor and 13 at the project level.
Each question is in the form of a statement that
is answered using a four point Likert scale ranging
fromCompletely Untrue (1) to Completely True (4).
In addition there are 21 questions about success
achieved: 10 organisational; 6 governance/sponsor
and 5 project. The answer to each question is divid-
ed into 4 bands (scored 1 to 4) with an “unknown”
option. In general a score of 3 implies a result in
accordance with expectations, 4 somewhat better,
2 somewhat worse and 1 much worse.
Many of the methodological weaknesses will be
compensated with sufficient data, and at present,
there are 168 valid data records in the analysis re-
ported here at the project level, 117 at governance
level and 30 at organisational level. Respondents
answering at a higher level generally answered at
lower levels as well.
The data was distributed 121 fromUSA, 38 from
UK and 9 from other countries.
A wide variety of industries was represented.
Respondents were senior managers (12), project
sponsors or members of governance committees
(87), people responsible for project processes (19),
project managers (31) and project team members
(19).
Comparison between results at the three levels
Perhaps the first noteworthy result is that only
3% of organisations said that their overall port-
folio of projects meets or exceeds expectations,
and although the picture is somewhat better at
governance/sponsor level (8%) and at project level
(nearly 20%), the majority of projects still fail to
meet expectations and this is still not a picture to
be proud of. (Figure 2).
The picture for capabilities mirrors this to some
extent, although the capabilities appear to be
greater in all cases than the success that they lead
to. The pattern shows that at the project manage-
ment level, most organisations are well on the way
to having the basic project management capabili-
ties in place to a greater or lesser extent, although
this is less true at the governance/sponsor level,
and definitely untrue at the organisational level,
where more than a quarter of all respondents
believe the necessary capabilities to be largely or
fully absent. (Figure 3).
Figure 2. Success Achieved at 3 Levels.
61,3
35,5
3,2
68,4
23,7
7,9
58,6
21,7
19,7
Organization Governance/Sponsor Project
Meet or exceed
expectations
Fail to meet
expectations
Fall seriously short
of expectations
70 www.pry.fi
At the organisational level, this is about as far
as it makes sense to perform analysis, with only
30 sets of data. At the two lower levels, however,
there are some very interesting conclusions that
can be drawn.
Governance/Sponsor Level Capabilities and
Success (Effectiveness)
The data shows that projects are not good at
delivering the benefits for which they are un-
dertaken.
Only 7% of all projects deliver 100% or more of
the benefits expected of them, while more than
two thirds deliver less than 75% of the expected
benefits. And these figures apply only to those
75% of projects that are able to make an estimate
– the remaining quarter are unable to assess the
extent to which any benefits were delivered. And
yet, sponsors are not too dissatisfied with their
projects (See figure 4).
In terms of governance/sponsor capabilities,
there is considerable variation between the worst
(integrated financial systems) which are more ab-
sent than present and the best (goal clarity about
projects and presence of a business case) which are
more present than absent. (see figure 5).
Approximately 26% of the variation in success
is accounted for by variation in the governance/
sponsor capabilities, and there is a clear correlation
between the success achieved and the capabilities
possessed (see Figure 6). There can be no doubt
that a compelling business case can be made for
raising the capabilities of sponsors.
But are all capabilities equally important? What
should be the focus of a programme to improve
sponsor capability? That is where an additional
form of analysis proves to be helpful.
Which Capabilities Matter Most?
A technique known as Classification and Regres-
sion Trees can be used to examine data in order
to find which is the best predictor of a given
result – in the case of this paper, effectiveness
(project success at the governance/sponsor level)
and efficiency (project management success at the
project level, using the classic measures of time,
cost, scope, quality and HSE). This method has the
benefit of not only identifying which factor out
Figure 3. Capabilities at 3 Levels.
60
26,7
13,3
59,8
17,1
23,1
57,3
10,4
32,3
Organization Governance/Sponsor Project
Largely or fully
present
More present
than not
Largely or fully
absent
Figure 4. Degrees of Project Success Achieved.
1 2 3 4
1 2 3 4
Mean project effectiveness
Technical Performance
Sponsor Satisfaction
Customer Satisfaction
User Satisfaction
Benefits linked to Deliverables
Benefits Realized
Proj ect Perspecti ves 2009 71
Figure 5. Governance/sponsor Capabilities (Ranked).
1 2 3 4
1 2 3 4
Mean capability score
Clear Goals
Integrated Financial System
Benefit Realization
Benefit Owners
Predict Benefit Changes
Benefit Tracking
Validated Output
Strategic Options
Stakeholder Support
Business Case
Figure 6. Relationship of Capability to Success.
Non-existent Fully present More missing
than present
More present
than present
Governance/Sponsor Capability
9
5
%

C
I

P
r
o
j
e
c
t

E
f
f
e
c
t
i
v
e
n
e
s
s
Better result
than expected
Results as expected
Results worse
than expected
Terrible results
4
3
2
1
of all those that correlate to success is the best
predictor of success, but then to go deeper into
the data looking for the next best predictor and so
on. It can also give a quantitative prediction of the
improvement in success that can be expected.
The results for effectiveness are shown in figure
7, and for effectiveness in figure 8.
All in all, of the nine capabilities that most
strongly correlate to improved effectiveness (as
measured by benefits delivered, technical perfor-
mance achieved and satisfied stakeholders) and
improved efficiency (as measured by time, cost,
scope, quality and HSE) no fewer than six are
dependent to a greater or lesser extent on the
capabilities and efforts of the project sponsor.
In terms of effectiveness, the sponsor is best
positioned (1) to ensure that all strategic options
are considered before the project is approved, (2)
to ensure that the project is assured of receiving
the resources and that (3) the project team has
the authority necessary to accomplish the projects
goals. In terms of efficiency, the sponsor plays a
large part in (4) assuring the quality of the busi-
ness case on which the project is authorised, in (5)
ensuring that responsibility for realising benefits
rests with the right people in the organisation and
(6) that the technical performance requirements
of the project are such that if achieved, then the
business case will be achievable.
Conclusion
The executive sponsor plays a vital role in link-
ing corporate and project governance. As the
governor of the project, the executive sponsor is
the bridge between the executive team who set
strategy for the corporation and the project team
that implements strategy. The executive spon-
sor is responsible for ensuring that the benefits
identified in the business case are delivered and
that the program or project can be considered as
successful. In doing this, the sponsor must not only
act as governor but as owner of the business case,
harvestor of benefits, a friend in high places and
visible champion of the project. Research dem-
onstrates a clear correlation between governance
and sponsor capabilities and project effectiveness
or success achieved.
72 www.pry.fi
Figure 8. Most Significant Predictors of Efficiency.
Efficiency
Mean = 2.58
N = 157
Mean = 1.89
N = 15
Mean = 2.65
N = 142
Mean = 2.44
N = 67
Mean = 2.72
N = 27
Mean = 2.73
N = 23
Mean = 3.08
N = 25
Mean = 2.97
N = 13
Mean = 3.20
N = 12
Mean = 2.52
N = 94
Mean = 2.91
N = 48
Proven planning methods
Business case
>= Partially
<= Not at all
Fully <= Partially >= Largely <= Largely
<= Largely
Fully
Benefits owners Effective teamwork
Fully <= Largely
Clear technical performance
Figure 7. Most Significant Predictors of Effectiveness.
<= Partially
Effectiveness
Mean = 2.47
N = 114
Mean = 2.0
N = 30
Mean = 2.63
N = 84
Mean = 2.16
N = 12
Mean = 2.51
N = 14
Mean = 2.66
N = 40
Mean = 2.99
N = 18
Mean = 2.35
N = 26
Mean = 2.76
N = 58
Strategic Options Considered
Fully resourced
>= Largely
Fully
<= Partially
<= Partially >= Largely <= Largely
>= Largely
Risk management
Necessary authority
Proj ect Perspecti ves 2009 73
References
APM (2004) Association for Project Management Di-
recting Change. A guide to governance of project
management, High Wycombe, UK.
Cadbury, A. (1992)
Report of the Committee on the Financial Aspects
of Corporate Governance: The Code of Best Prac-
tice (Cadbury Code), London: Gee & Co, UK.
Cooke-Davies, T.J. (2002a)
The "real" success factors on projects. Interna-
tional Journal of Project Management 2002; 20
(3):185-190.
Cooke-Davies, T.J. (2001)
Towards improved project management practice:
uncovering the evidence for effective practices
through empirical research, PhD Thesis. Leeds Met-
ropolitan University: 2001.
Cooke-Davies, T.J. (2002b)
Establishing the Link Between Project Manage-
ment Practices and Project Success; In: Slevin,
D.P., Cleland David I and Pinto, J.K., (Eds.) , Project
Management Research at the Turn of the Milleni-
um: Proceedings of PMI Research Conference, July
2002, Seattle, Philadelphia, PA: Project Manage-
ment Institute, 2002.
Cooke-Davies, T.J. (2004)
Project Success; In: Morris, P.W.G. and Pinto, J.K.,
(Eds.) , The Wiley Guide to Managing Projects,
Hoboken, NJ: John Wiley and Sons, 2004.
Crawford, L. and Brett, C. (2001)
Exploring the role of the project sponsor; In:
Proceedings of the PMI New Zealand Annual
Conference 2001: Project Success: Putting it all
together: Wellington, New Zealand, Wellington,
New Zealand: PMINZ, 2001.
Dinsmore, P.C. and Cooke-Davies, T.J. (2006)
The right projects done right!: Frombusiness
strategy to successful project implementation, San
Francisco, CA: Jossey-Bass, 2006.
Gregory, H.J. and Simmelkjaer, R.T. (2002)
Comparative Study of Corporate Governance
Codes Relevant to the European Union and its
Member States on Behalf of the European Com-
mission, New York: Weil, Gotshal & Manges, LLP,
2002.
Hazard, V. and Crawford, L.H. (2004)
Defining Project Governance; In: Proceedings of
ProMAC Research Conference, 2004: Tokyo, Japan:
Society of Project Management (SPM, Japan),
Nanyang Technological
University (NTU, Singapore) and Tsinghua University
(China), 2004.
Hilmer, F. (1998)
Strictly Boardroom: Improving governance to en-
hance company performance, 2nd edn. Melbourne:
Information Australia, 1998.
OECD (2004). OECD Principles of Corporate Gover-
nance, Revised edn. Paris, France.
Turner, J.R. and Keegan, A. (1999)
The versatile project based organisation: gover-
nance and operational control. European Manage-
ment Journal 1999; 17 (3):296-309.
Lynn Crawford
Director, Human Systems International
Limited
Professor of Project Management, ESC
Lille, France and Bond University,
Queensland, Australia
Dr Lynn Crawford is a world leader in the
field of project management competency.
Her extensive research into the assessment
of competence for project managers has
lead to the development of international
teams of researchers and practitioners in
developing global competency standards
and global bodies of knowledge. Her
extensive research strengths also include
the areas of hard & soft systems, project
governance, program management, and
project categorisation. In her role with
Human Systems she works with major
global corporations to assist them in as-
sessing and developing their corporate
project management capability.
LynnCrawford
Dr Terry Cooke-Davies
Chairman, Human Systems International
Limited, Australia
Terry is the founder and Chairman of Hu-
man Systems International Limited, which
exists to help organisations enhance de-
livery capability and demonstrate results.
Through Human Systems’ global client
network, he is in close touch with the best
project management practices of more
than 100 leading organisations. He has
worked alongside senior leaders and man-
agers in both the public and the private
sectors, to ensure the delivery of business
critical change programmes and enhance
the quality of leadership. Recognised as a
‘thought leader’ on the topics of project
success and organisational maturity, Terry
has reviewed many national and inter-
national standards (including the Project
Management Institute’s OPM3 and the Of-
fice of Government Commerce’s MSP and
PMMM) as a ‘subject matter expert’.
74 www.pry.fi
Reinhard Wagner
University of Applied Sciences
Augsburg
Germany
Source: VDA
Northern America:
2006: 17,0 Mio. (-2%)
2007: 16,4 Mio. (-3%
Western Europe:
2006: 17,1 Mio. (+1%)
2007: 17,2 Mio. (+1%)
Mercosur:
2006: 2,4 Mio. (+13%)
2007: 3,0 Mio. (+27%)
Eastern Europe:
2006: 1,2 Mio. (+4%)
2007: 1,4 Mio. (+17%)
India:
2006: 1,7 Mio. (+7%)
2007: 1,9 Mio. (+13%)
Russia:
2006: 1,7 Mio. (+12%)
2007: 2,4 Mio. (+29%)
China:
2006: 7,2 Mio. (+23%)
2007: 8,8 Mio. (+23%)
Japan:
2006: 5,7 Mio. (-2%)
2007: 5,3 Mio. (-6%)
Automotive project management -
Automotive industry is one of the leading industries and is operating on a global level. Project
Management is well known and implemented in most of the companies all over the world. Neverthe-
less there are more lessons to learn! This paper gives insights in the practice of Automotive Project
Management. It is based on an intensive field study in Germany and shows that project management
is one of the success factors for manufacturers and suppliers. In order to achieve a better market
position in a very competitive market, the companies need to evaluate their performance in project
management on a regular basis and improve their abilities in the field of project management in
general as well as to implement a defined process and culture for continuous improvement.
quo of project management in German automotive
industry and that there are more lessons to learn
for all participants in this industry.
PM as Success Factor in Automotive Industry
The situation in Automotive Industry
In recent years automotive industry has developed
to one of the most important world-wide indus-
trial branches. More than 9 million employees
manufacture more than 50 million vehicles world-
wide. But sales in the “triad” (Northern America,
Western Europe and Japan), the most important
regions for the manufacturers are in saturation for
more than 5 years now (see figure 1). Only emerg-
ing regions like China, India, Russia and Eastern
Europe are supporting the growth of the industry.
In this context automotive industry increasingly
operates on a global level.
Figure 1. Total sales of light vehicles in 2007
Introduction
The automotive industry is far away to be called
an old economy. Nevertheless it was more than
hundred years ago, when the first automobiles
were manufactured in Germany. Today, automo-
tive business is on a global level and accounts for
approximately 15% of the global gross national
product. But there is no doubt, the dynamics of
change is the only thing that is sure for manu-
facturers, suppliers and service providers. They all
need to strengthen their management capabilities,
especially in the field of project management, to
survive in this competitive industry.
This article refers to a survey about the status
quo of automotive project management in Ger-
many, performed by a special working group of
GPM, the German Project Management Associa-
tion. We will show the new demands to project
management in automotive industry, the status
More Lessons to Learn!
Proj ect Perspecti ves 2009 75
Western manufacturers and their suppliers
strongly invest in respective places and con-
tinuously expand their business. Especially for
the German automotive industry Poland is one of
the most important countries in Eastern Europe.
In 2005 more than 520.000 vehicles have been
manufactured in Poland, 214.000 by German
manufacturers. Due to wages being below the
standards of western countries and the availability
of a skilled workforce, there will be a further in-
crease in manufacturing. Some companies are still
looking for new manufacturing sites and business
opportunities.
Project management as success factor
The saturation of traditional markets has a fur-
ther effect in automotive industry: competition
leads to a stronger pressure upon cost, time (e.g.
time-to-market) and product quality. Thus, project
management obtains more importance as a factor
of success. Only by means of professional project
management, manufacturers and suppliers will
survive in this competitive market (Hab & Wagner,
2006). For a technology driven industry like auto-
motive industry professional project management
is therefore crucial for business success.
After analyzing German automotive industry,
there remains much potential to improve. Many
companies have not yet realized the strategic
meaning of project management. There is an
urgent demand of taking action to improve the
status of project management within the com-
panies, to strengthen project management as
core function in the organization and to improve
competitiveness by professionalizing project man-
agement processes and methods.
In this context, the various interaction and
influences on project management have to be
considered (see figure 2). On the one hand project
management has to focus on the needs of the
market and the demands of the chosen strategy.
On the other hand the strategy should clearly show
which function is taken by project management in
a company to give orientation to all participants.
Project management plans and controls the op-
erative execution of projects taking into account
the defined goals considering respective cost and
due times. In order to fulfill this task various pro-
cesses and organizational structures have to be
coordinated. Furthermore, cultural prerequisites
have to be created for an effective collaboration
of different business units and/or companies in
the supply chain of automotive industry.
PM-Survey in Automotive Industry
Design and overall results
In the second half of 2006 a special working
group of GPM German Project Management
Association performed a survey in the German
automotive industry to find out the status quo
and major trends in project management. More
than sixty companies participated in the survey.
Manufacturers like Audi, BMW, Mercedes or Volk-
swagen, suppliers like Autoliv, Dräxlmaier, Hella or
Siemens VDO and several service providers. They
were asked to answer a questionnaire of general
and project related questions (seven dimensions
with six questions). Based on the results of this
survey, thirteen experts out of these companies
participated in intensive interviews, to verify the
results and to come to specific recommendation,
how to improve project management.
Figure 3 shows the overall results in all dimen-
sions of the questionnaire, split up into “impor-
tance”, “existence” and “realization”. It is obvious,
that all dimensions are important for success in
project management. There are project manage-
ment solutions in a vast majority of the companies,
Figure 2. Interaction and influences on project management
Market
Project management
Processes
Strategy
Culture
c
q
t
Structure
Figure 3. Overall results in all dimensions




Existence

Realization

Importance

0,00
0,25
0,50
0,75
1,00
Processes &
Standards
Methods &
Tools
Employees
Leadership
Partnership
Innovation &
Learning
Strategy
76 www.pry.fi
but there is still a lot to improve, especially by
implementing and realizing project management
in daily work life.
Looking at the dimension of “innovation &
learning” there is a severe deviation between the
importance of the dimension, the existence of
adequate solutions for example for continuous
improvement activities and process innovations in
the companies and the application in projects. For
a developed country like Germany with labor costs
and social standards much higher than in the rest
of the world, improvement is urgently needed.
Figure 4 shows the performance of project
management in the German automotive industry.
Most of the companies are satisfied with the goal
achievement in their projects (“in how many proj-
ects do you meet the specified requirements?”). 70
% stay “in quality” within 90% of their projects.
This picture changes if we look on the achieve-
ment of timelines (“in how many projects do you
stay in time?”) and budgets (“in how many projects
do you stay in budget?). Only 30% of the compa-
nies stay in time and 20% in budget within 90%
of their projects. This results on one the hand from
the severe pressure within automotive industry to
reduce time-to-market and the cost of product
creation but on the other hand from inadequate
capabilities in project management. We asked
the same questions in the years 2003 and 2005
and the performance in automotive projects is
getting worse!
In order to achieve a better position in global
competition of automotive industry, the compa-
nies need to evaluate their performance in project
management, to improve their abilities in general
and to install a process as well as a culture for
innovation and learning.
Highlighted results and recommendations
Project management is a well-known concept in
automotive industry and a vast majority of compa-
nies has implemented project management solu-
tions (processes, methods and tools). Nevertheless
the status of project management is not clear
enough. Approximately 1/3 of the participating
companies were complaining because of the poor
status of project management in their company.
Their complaints refer especially to the lacking
19 27 11 1
11 29 15
0% 20% 40% 60% 80% 100%
3
4 14 32 8
100% of projects 90% of projects 75% of projects <50% of projects
Figure 4. Performance in automotive projects
influence project managers have in comparison
to line management. This often leads to conflicts
within the companies and could be avoided by
setting clear priorities between line and project
management and clear definitions of responsibili-
ties, tasks and power of each role.
Often specific project management standards
or procedures are installed but managers do not
refer to these standards or obviously don’t use
them. One of the reasons is that project manage-
ment standards are developed externally does
not meet the specific requirements of the com-
panies´ projects or they are not flexible enough.
Standards should be designed and implemented
by an internal team of experts (an external coach
can assist this team) and should be adaptable to
the different kinds of projects with their specific
needs. In cross-company-collaboration these stan-
dards should be synchronized with the standards
being used in automotive industry, for example
the Automotive Project Management Guide of
AIAG Automotive Industry Action Group (AIAG,
1997) or the Collaborative Project Management
Recommendation (ProSTEP, 2007) of ProSTEP iViP
Association.
Figure 5. How project managers see themselves
Proj ect Perspecti ves 2009 77
Project managers in automotive industry are
complaining about lacking perspectives and career
opportunities as well as lacking support within
their companies.
Only 15% of them think that they have enough
perspectives for personal development. Only few
companies are offering specific development
programs for project personnel. But the more
projects are performed in automotive industry,
the more project oriented development programs
with specific qualification programs, coaching and
mentoring as well as specific career opportunities
are needed.
In figure 5 you see a picture of a project
manager who feels uncomfortable in his project
environment. This project manager sees himself
as “lone-some fighter” who is the only one being
responsible for the achievement of the project
goals and no one, neither (line) management nor
team members are supporting him in his task. The
precise selection of capable project managers,
the strengthening of their leadership skills and
sufficient support by (line) management is there-
fore crucial for success in project management
(Wagner, 2003).
In automotive industry the collaboration be-
tween manufacturers and suppliers is a source
of misunderstandings and severe conflicts. The
power game of several OEM (original equipment
manufacturers) leads to mistrust trouble in the
relationship. All parties know, that they depend
on each other because the supplier account for
more than 2/3 of the value creation in automo-
tive industry. But still the power rests with the
OEM. Nearly 50% of the companies in our survey
feel that opportunities and risks are not shared
on a fair basis between OEM and suppliers. In a
technology-driven industry like automotive indus-
try people tend to approach these problems on a
factual basis. But in-depth studies show us that
different cultures need to be taken into account
and bridged by open communication, fair negotia-
tions and a mutually agreed framework of project
goals, cooperation procedures and collaboration
rules (Pander & Wagner, 2005).
The most important result of our survey is the
deficit in the field of “innovation&learning”. One
of the questions in this dimension was, whether
the companies use a maturity model like the
CMM (Capability Maturity Model) of SEI or the
Project Excellence Model of GPM to analyze the
maturity in project work and project management.
Approximately 60% of the companies do not use
any of these models, some use CMM and others
evaluate their projects by looking at the final
results and the deviations. But how can we learn,
how can we improve the organizational capabili-
ties if we do not know, what the maturity and the
performance is. Therefore we strongly recommend
to use one of the maturity models to analyze the
status of project management, the performance
of the whole project management system in real
project life. This would be a good basis for further
development of the project management system
and the derivation of organizational goals for
“innovation&learning”.
In automotive industry Toyota is a benchmark
in many respects but especially in the field of con-
tinuous improvement philosophy. One of the top
issues of the improvement activities is to reduce
waste (“muda”) in all operational fields. Key issues
in this respect are: continuous organizational
learning activities (“Kaizen”); go see for yourself
to thoroughly understand the situation (“genchi
genbutsu”), make decisions slowly by consensus,
thoroughly considering all options and implement
rapidly. This philosophy depends on pro-active
employees who see the problems and solve them
in teamwork to a maximum extend. If we look
into the results of our survey, we will find a totally
different picture (see figure 6). Only in 15% of the
companies the project teams are really actively
involved in continuous improvement activities.
If there are improvement activities they will be
triggered from outside (e.g. customers) or by the
management system (e.g. audits).
The same results are received when asking
whether the project teams have or take time for a
review meeting or “lessons learned” sessions. Only
25% of the companies are satisfied with learning
from projects (see figure 7). We didn’t ask for
learning in projects but the results would have
been much worse! Most of the teams stated, that
Fully
0.1
0.2
0.3
0.4
0.5
Largely Partly Little Not at all
all participants
Fully
0.1
0.2
0.3
0.4
0.5
Largely Partly Little Not at all
all participants
Figure 6. How much do project teams contribute to continuous im-
provement activities in the field of PM?
Figure 7. Do the project teams have/take sufficient time for a
review of the project (“lessons learned”)?
78 www.pry.fi
Dipl.-Ing. Dipl.-Kfm. Reinhard Wagner
euro engineering AG
Messerschmittstr. 7
D-80992 München
Phone: +49 89 357751117
Fax: +49 89 35775126
Mobile: +49 17 28530099
E-Mail: reinhard.wagner@ee-ag.com
Internet: www.ee-ag.com
Reinhard Wagner has more than 15 years
experience in different managerial func-
tions in the field of engineering services,
especially for Automotive Industry. He
is lecturer for Project Management and
Systems Engineering at the University of
Applied Sciences in Augsburg. As board
member of GPM (German Project Manage-
ment Association) he is responsible for
Research & Development. Since 2002 he
leads a special working group on „Auto-
motive Project Management“ and is co-
author of the first book being published
in Germany on the field of „Automotive
Project Management”.
there is no time or no budget for sharing experi-
ences. But if there is no time for reflexion (Toyota
calls this “hansei”) no improvement will be reached
and this results in a decrease of performance and
competitiveness.
We therefore recommend focusing on improve-
ment activities in project management. This means
to spend more time for reflexion and lessons
learned at the end of a project and to transfer
the results in other projects. But there is also a
need for reflex ion time within the projects. It is
really easy to add another topic to the agenda
of review meetings at each milestone to give the
project team a chance to reflect the key learnings
and to implement improvements while performing
the project. Project managers should be trained
to create an atmosphere of trust and a culture of
open discussion within the project team.
In our survey we found that there often is a
culture of mistrust and problems are not seen as
improvement opportunities but as reasons to at-
tack people (e.g. the project manager). This often
leads to a hiding culture and causes problems in
the realization phase of a project. What we need
is to seek perfection in every project activity and
therefore create a culture of immediate problem
solving by the project team. For this reason, de-
veloping the skills of solving problems and the
ability to continuously improve the project work
are crucial for companies to survive in automo-
tive industry.
Conclusion
Automotive industry has globally developed to one
of the most important industrial branches. Project
management is one of the crucial success factors
because of the intensive competition between
manufacturers and suppliers. Project management
solutions are well known and implemented in the
vast majority of companies. But there are more
lessons to learn! Our survey in German automotive
industry shows severe problems. The companies
are mostly lacking the capability to continuously
improve their processes and to learn from recent
experiences in their projects. But also the overall
status of project management and the status of
the project managers involved in these projects
do not comply with the importance of project
management in this challenging industry. A lot
of improvement needs to be done.
References
Hab, G. and Wagner, R. (2006)
Projektmanagement in der Automobilindustrie.
Effizientes Management von Fahrzeugprojekten
entlang der Wert- schöpfungskette. Gabler.
AIAG (1997)
Automotive Project Management Guide. AIAG.
ProSTEP (2007)
ProSTEP iViP - Collaborative Project Management.
Wagner, R. (2003)
Productivity of knowledge work or the new role of
men at work. In: P. Sachsenmeier, M. Schottenlo-
her. Challenges between competition and collabo-
ration – The Future of the European Manufactur-
ing Industry. Springer, 2003
Pander, S. and Wagner, R. (2005)
Unternehmensübergreifende Zusammenarbeit in
der Automobilentwicklung – durch erfahrungs-
geleitete Kooperation die Grenzen der Planbarkeit
überwinden. Hampp, 2005
Our survey i n German
automoti ve i ndustry shows
severe probl ems. The
compani es are mostl y l acki ng
the capabi l i ty to conti nuousl y
i mprove thei r processes
and to l earn from recent
experi ences i n thei r proj ects.
80 www.pry.fi
Unexpected urgent emergency projects demand instant project management starting fromno
definition of scope, schedule or budget, and also uncertainty as to stakeholders’ interests, priori-
ties or longer-termobjectives. Communications need to be established between all stakeholders
in order to accept performance, cost and other risks. These unusual projects vary in their causes,
the authorities involved, public concern, nature, scale, immediate resources available, uniqueness
and location, but there are common characteristics and therefore potentially common lessons for
anyone in future who has to plan and control such work. The paper draws on a variety of cases to
suggest lessons for such projects and how they can also be opportunities to improve the manage-
ment of all projects.
Unexpec t ed ur gent
emer genc y pr oj ec t s
Stephen Wearne
University of Manchester
Manchester
UK
Introduction
Worldwide our commercial, government and social
systems and services are increasingly complex and
interdependent, and so increasingly sensitive to
natural or man-made damage. They have become
more competitive and they need rapid responses
to surprises. Managing unexpected and emergency
projects has thus become increasingly vital to gov-
ernments and businesses, not only to avoid or to
recover from crippling faults or damage to public
service and business systems but also respond to
unexpected problems and to new opportunities.
Speed of response has become increasingly impor-
tant. It can demand unexpected commitments.
This paper draws on some cases large and small
in various countries, including rapid engineering
work to recover from disasters, the response to a
new business opportunity and the ‘9/11’ search-
and-rescue operations. Case studies in empirical
research are normally planned in advance with the
host organizations and other interested parties. It
is inherent in unexpected projects that observing
themcannot be planned in advance. Study of cases
is therefore inevitably retrospective and dependent
upon the people and information then accessible.
Six cases have been studied by the author, through
interviews, published information and access to
other documents (Wearne, 2006).
Unexpected Urgent Emergency ?
The word ‘unexpected’ is defined in dictionaries
as meaning “not regarded as about to happen”. In
other words the precipitating events demanded
action not envisaged when planning the provi-
sion of resources for new projects or asset main-
tenance.
The word ‘urgent’ is used here with its extreme
meaning that the cost of working as fast as
possible is not a factor in resourcing the work.
Implications of urgency in project selection and
planning are discussed later in the paper.
The word ‘emergency’ is used as commonly
to mean a sudden interruption to plans which
demands action, perhaps envisaged but if so un-
certain as to when or where.
Cases
The six cases which meet these definitions of un-
expected urgent emergency projects are:
- Constructing a temporary power line 9.8kmlong
and connecting work to restore the supply to
the Auckland central business district in 17 days
(1998).
- Installing a temporary deck structure spanning
displaced spans of a major highway bridge over
a remote crocodile-infested river in Northern
Australia in 7½ weeks (1998).
- Restoring the tracks, power and signalling sys-
tems over 1 km of the UK East Coast main rail
line in 2 weeks (2001).
- Sifting, making safe and removing 1.6 million
tons of rubble, hazardous major structural
elements and other wreckage to search for
survivors and then identifiable remains and
clear the “9/11” site, World Trade Center, New
York (2001-2002).
- Constructing an emergency river excess flood
diversion system around Chichester in 2 weeks
(2000).
- Launching the UK ‘Freeview’ nation-wide digi-
tal television transmission system in 6 months
(2002).
Lessons for all project managers
Proj ect Perspecti ves 2009 81
In each case the work was started without a de-
fined scope, plan or budget. Immediate dedication
of whatever resources were available was therefore
needed to form a project team, but though these
six cases varied greatly in size, organization and
resourcing all were similar in the mode and con-
centration of managerial authority:
- Project direction was by frequent meetings of
project team with authorities, experts and all
levels of management making technical and
managerial decisions on the scope of work,
priorities, schedules and resourcing.
- Decisions affecting cost were made on the spot.
Commitments were oral. Recording of decisions
to authorise payment followed.
- Leadership became double-headed or twinned,
with a sponsor’s executive taking responsibility
as ‘Project Director’ for managing relationships
with stakeholders, external authorities and the
media, whilst the ‘Project Manager’ concen-
trated on managing project execution.
- Contractors and consultants were embraced
into project teams to take part in the decisions
on what to do and how to overcome problems.
Known terms of cost-based contract were
used.
- Attention to ‘team building’, between those not
already known to each other.
- Stakeholders, their representatives and the
media were involved early, through direct in-
volvement and consultation groups.
In most cases the project management teams
met twice daily, with all managers operating with
deputies to cover 24/7 working.
In none of the cases were there established roles
or procedures for managing urgent or unexpected
projects. In one case team working was immediate
as two of the parties had shared experience of a
similar project. In another case the person who
became de facto Project Manager had appropriate
technical experience and had been responsible for
some relatively minor emergency work which may
have contributed to his performance and to his
acceptance by all stakeholders.
Comments on the Cases
The frequent management meetings between all
levels replaced the hierarchical procedure normal
in organizations in which proposals for projects
are submitted upwards under rules for presenting
estimates of expected benefits, costs and risks, and
then decisions are given downwards with formal
authority to incur the costs of implementing a
project. The six cases were all judged successful
by their stakeholders, though none were the
result of normal or what may be ‘best’ practice
of progressive development of proposals, evalu-
ation of benefits, costs and risks in a ‘feasibility’
or ‘front end’ study and ranking in a portfolio of
projects planned to achieve a corporate strategy.
The definition of scope followed the decision to
initiate each project, as the work needed became
known.
Forming a full-time team is logical to concen-
trate expertise and authority to meet an urgent
need, as observed by Engwall & Svensson (2003)
in a study of ‘Cheetah’ teams formed ad hoc in
a crisis to resolve unanticipated problems within
projects. Doing so may be thought acceptable only
temporarily in an organization. The conclusion of
the study of Cheetah teams was that they can
achieve much by concentration on a problem,
but that if continued beyond that specific prob-
lem their motivation may not be sustained and
the structure can be disruptive to the rest of the
organization. With rotation of all personnel in
shift working, the 9/11 case showed that such a
team could be effective over months, given the
motivation.
Leadership in which ‘Project Director’ manages
relationships with stakeholders, external authori-
ties and the media, whilst the ‘Project Manager’
concentrates on project execution is nothing new
in principle. What is significant is that it emerged
rather than was chosen consciously, supporting the
socio-technic theory that informal organizations
evolve to make formal systems effective.
Organizational relationships and communica-
tions between all parties are amongst the greatest
problems of normal projects and could have been
a problemin the project teams (Hussain & Wearne,
2005). Urgency might not be expected to inspire
good relationships. What is thought to be ‘best’
practice for starting a project includes team-
building, from the experience that project suc-
cess depends upon the preparation of processes,
people and product (IPMA, 1987). Team building
in advance of the six cases was not possible. And
once these projects were initiated, their senior
managers and external stakeholders might have
been impatient with giving time to team build-
ing. The reports of cases where team members
did not know each other show that giving time
to relationships was recognized as a critical task.
As a result, concentration on a project appears to
have been achieved even where not all a team
could be located together.
Contractors previously shown trust when em-
ployed on normal projects were noted as respond-
ing particularly well to these unexpected demands,
for instance in making their best staff available
and manning for sustained all-hours working.
Cost-based rather than price-based terms of pay-
ment were used in all the contracts reported, as
is recommended when the scope or conditions of
work are uncertain (Ward & Chapman, 1994). In
such contracts the customer directs the contrac-
tor’s use of resources. The ‘alliancing’ mode of
integrated management between customer and
contractor followed was therefore appropriate.
Using known terms of contract supports an ob-
servation from earlier cases that when urgent it
may be quicker to follow established rules rather
than take time trying to get agreement to waive
them (Wearne, 2002).
Experience of normal projects has shown that
project management needs sponsors committed to
supporting project execution (Helm & Remington,
2005). An important function of the sponsor is
taking the risks of investment in the project. The
cases illustrated how double-headed or twinned
leadership was used to achieve this when the scope
and therefore possible cost was uncertain, with the
frequent team meetings as the means of linking
all parties in decisions.
82 www.pry.fi
Lessons for All Projects
In all six cases urgency meant that the cost of
working as fast as possible was not a factor in
deciding to initiate them. The word ‘urgent’ is not
always used precisely. People in various industries
use it as a vague synonym for ‘important’, leaving
unanswered the practical question how much ex-
tra to spend to try to save time (Spink, 2004). The
problem of urgency is not how to work ’fast-trak’
(ECI, 2002). The problem is to agree what extra to
spend to do so compared with the least cost speed
of delivery, with the managerial risk that urgency
is stated only qualitatively and therefore open to
different understandings.
The lesson for all is therefore to ascertain what
any party means if they state that work is ‘urgent’.
The word can mean that instant action is needed
to avoid an immediate threat. It can mean that the
speed of work should depend on the economic or
social value of time. If it means working as fast as
possible, as in the cases, it demands the suspension
of cost as a factor in decisions, though of course
costs should be recorded to provide the basis for
payments and audits.
Previous studies of emergency projects have
shown that initial agreement that a project is
‘urgent’ may decline with time, as the costs of
uneconomic use of resources become apparent.
In other words, the relative importance of time
over cost tends to change during such a project.
This is the opposite of the tendency in normal
projects for urgency to increase and so the relative
importance of cost over time to change. Project
managers and others who control resources allo-
cated for a project initially defined as urgent could
well be criticized for continuing to use resources
uneconomically on work which no longer justified
it. The project manager should therefore be sensi-
tive to possible changes in the priorities during
the work, perhaps before other parties are aware
of them, in order to review the schedule for the
use of resources.
There were instances in the cases that the
projects were managed closer than usual in their
organizations to best practice, for instance in
achieving rapid vertical communication, defin-
ing responsibilities, confidence in accepting oral
instructions, dedication of project teams, and
selection of consultants and contractors based
upon capacity. The explanation may be that the
collective meeting of all hierarchical levels to
meet a new need breaks the unfortunate tendency
for rationality to be modified or at worst lost in
established organizational processes as tragically
identified as a cause of the Challenger failure and
other disasters (Vaughan, 1996, & Wearne). In
other words, in a surprise objectivity may be less
conditioned by precedents.
An exceptional project can be an opportunity to
make changes to simplify systems and processes
to apply to normal future projects. To be ready to
do so these changes need to be agreed in advance
of an opportunity to apply them. This is a task for
those in an organization who oversee its corporate
management of projects, the role required for suc-
cessful project governance (APM, 2004).
Conclusions
The literature and personal experience tell us that
it is wise in business and in public services for a
project to be started only after analysis of whether
it best meets specific objectives and its scope has
been defined, costs estimated, risks analyzed, and
an execution plan and a budget agreed by the
project sponsor and project manager (Meredith
Mantel, 2006; Parnaby, Wearne & Kochhar, 2003;
Turner,1999). So what is different managerially if
a project is unexpected and its implementation
is started immediately, before there is a defini-
tion of its scope, a plan, risk analysis or a budget,
compared with managing a planned project ?
The reports of the cases show that many of the
established lessons of managing projects were
applicable, for instance the value of appointing
an experienced project manager, establishing
an agreed objectives and priorities, employing a
qualified team, team building, open communica-
tions and involvement of all parties in realistic
scheduling, using appropriate contracts, atten-
tion to safety, positive relations with the media
and keeping records (Eastham, 2001). Most of
the technical work required in each case was also
similar to other projects in that industry. The dif-
ferences were in the concentration of authority
and leadership dedicated to the project, linking the
sponsors, other stakeholders and project teams, the
simultaneous involvement of all levels of manage-
ment in instant decision-making, reliance on oral
commitments, making maximum use of all usable
resources and the immediate acceptance of cost
uncertainty.
These differences are particular to the combina-
tion of unexpectedness and urgency. If a project
is unexpected but not urgent, it could be defined
and budgeted in the normal way before starting it.
If already defined but becomes urgent its schedule
can be accelerated as exemplified in ‘fast-trak’
practice. If a project is both unexpected project
and urgent it may seemobvious that commitments
may have to be made orally, all possible resources
used and the consequent cost accepted. Less
obvious until reported from the case studies was
that all interests should be represented as early as
possible in an integrated management structure so
as to provide a dedicated project sponsor working
daily with the project manager.
The six reported cases were unexpected in the
sense that the precipitating events demanded ac-
tion not envisaged when planning the provision of
resources for new projects or asset maintenance.
Whether any of them should have been expected
is not the question here, but it should be noted
that no reviews or audits after them concluded
that those events should have been “regarded as
about to happen” and therefore anticipated and
managed differently. No doubt many unusual
possible demands could be, but infinite imagina-
tion and cost could be needed to foresee and
prepare for all such events. Unexpected projects
and emergencies are rare events - they have to
be rare to be socially and economically tolerable.
Few people therefore have direct experience of
managing them, but anyone may unexpectedly
need to draw on that experience. Managers and all
stakeholders should have systems robust enough
Proj ect Perspecti ves 2009 83
for unexpected problems that may arise during
a project (Weick, & Sutcliffe, 2001). They must
also expect to have to fund and manage some
unexpected projects.
Acknowledgements
Thanks are due to the organizations and indi-
viduals who have provided information and given
comments on drafts for this paper, to the UK
Engineering & Physical Sciences Research Council
for their support for pilot studies of emergency
projects, and to Dr Martin Barnes, Executive Di-
rector, the Major Projects Association, Oxford, for
first suggesting attention to the particular needs
of unexpected projects. The results are of course
entirely the author’s responsibility.
References
Wearne S H (2006)
Managing unexpected urgent projects, Proj-
ect Management Journal, December, 37, 5,
97-102.
Engwall, M. & Svensson, C. (2003)
Cheetah Teams: The Most Extreme Form of
Temporary Organization, European Academy
of Management (EURAM), annual conference,
Milan.
Hussain, R. & Wearne, S. H. (2005)
Problems and needs of project manage-
ment in the process and other industries,
Transactions of the Institution of Chemical
Engineers, Part A – Chemical Engineering
Research and Design, April, 83 (A4), 372-378.
IPMA International Project Management
Association) (1987). Handbook of Project
Start-Up, ed Fangel, M. Zurich: International
Project Management Association.
Ward, S. & Chapman, C. (1994)
Choosing contractor payment terms. Interna-
tional Journal of Project Management, 12 (4),
216-221.
Wearne, S. H. (2002)
Management of urgent emergency engineer-
ing projects, Proceedings of the Institution
of Civil Engineers - Municipal Engineer,
December, 151 (4), 255-263. Reprinted in
IEEE. Engineering Management Review, 33 (3),
2005, 21-31.
Helm, J. & Remington, K. (2005)
Effective project sponsorship – An evaluation
of the role of the executive sponsor in com-
plex infrastructure projects by senior project
managers, Project Management Journal, 36
(3), 51-61.
Spink, D (2004)
Management of Urgent Projects, MSc dis-
sertation, University of Manchester Institute
of Science & Technology.
European Construction Institute (ECI) (2002).
Handbook on Fast Track Projects, Loughbor-
ough: European Construction Institute.
Vaughan, D. (1996)
The Challenger Launch Decision, University of
Chicago Press.
Wearne S H
Organizational Lessons of Failures, Proceed-
ings of the Institution of Civil Engineers, in
press.
APM (Association for Project Management)
(2004). Directing Change: A Guide to Project
Governance. High Wycombe: Association for
Project Management.
Meredith, J.R. & Mantel, S.J. (2006)
Project Management – A Management Ap-
proach, 6th ed. London and New York: John
Wiley & Son.
Parnaby, J, Wearne S.H. & Kochhar, A.K. (2003)
Managing by Projects for Business Success,
London and New York: John Wiley & Son.
Turner, J. R. (1999)
The Handbook of Project-Based Management,
2nd ed, Maidenhead: McGraw-Hill.
Eastham, G. (2001). Private communication.
Weick, K.E. & Sutcliffe, K.M. (2001)
Managing the Unexpected: Assuring High
Performance in an Age of Complexity. New
York: John Wiley & Sons.
Stephen Wearne
University of Manchester
PO Box 88
Manchester M60 1QD, UK
Stephen Wearne was Project Engineer and
Project Manager of large projects in South
America and Japan. He is Senior Research
Fellow, Management of Projects Research
Group, University of Manchester, UK, and
Professor (now Emeritus) of Technological
Management, University of Bradford. He
recently completed a 15 year study of the
greatest problems of project management
and their causes.
Contact: wearne@manchester.ac.uk
84 www.pry.fi
Ali Imran Khan
University of Manchester
UK
TiewYing Ting
Halcrow Ltd
London, UK
AndrewGale
University of Manchester
UK
Mehmood Alam
University of Manchester
UK
Total Care®is a concept developed by Rolls-
Royce in the civil aerospace industry. Total Care®
is about the integration of product design and
aftermarket service to create best value to the
customer’s business needs in civil aerospace. In
the construction industry, there is an increase in
the number of clients seeking to find a project
procurement method which has similarity to
Total-Care.
The main purpose of this review paper is to
identify the project procurement method in the
construction industry similar to Total Care®in
civil aerospace and to identify the key project
management knowledge and experience compo-
nents required to efficiently manage Total Care®
projects in the construction industry.
An extensive review of current research was
undertaken, analysed and discussed. Across
the range of project procurement methods:,
traditional design-bid-build, management
contracting, construction management, design
and build through to Private Finance Initiative
(PFI), PFI is identified as a distinctive method
having characteristics similar to Total Care®.
Therefore, across Total Care®in aerospace to
PFI in construction, it can be noticed that there
is a trend in clients seeking a more integrated
project procurement approach which can provide
best value. However, as the level of integration
of a project increases, it is harder to manage
and it requires a range of project management
knowledge and skills. It is also identified that as
the project manager’s role in PFI is becoming in-
tegrated so, the knowledge and skills fromboth
private and public sector have to be coupled to
increase PFI project management competency.
To fill the knowledge and skills gap in the con-
struction sector, learning fromexperience in the
aerospace sector is considered to be an effective
way of enhancing practice.
Project Management of
Introduction
In the past, airline operators were responsible for
maintaining, repairing and overhauling the aircraft
engines while providing core services of transport-
ing passengers. However, the customer intention
to focus on their core business activity and to
transfer the risks of maintaining the engines to the
supplier has created a new business opportunity
for Rolls-Royce to develop Total Care®packages.
In Total Care®the responsibility of the company
is to provide a long-term integrated menu of
aftermarket services of customers’ engines. In the
construction industry, there is a trend of clients
seeking for best value in procurement of projects
having characteristics similar to Total Care®. As
the process of procuring Total Care®project has
been integrated rather than fragmented, the
project management knowledge and experience
required in managing Total Care®projects would
be different from the non Total Care®(traditional)
procured projects.
Research Scope
In this paper, the origin of Total Care®in civil aero-
space is discussed and its characteristics are used
to match the Total Care®project in construction
industry. The key project management knowledge
and skills required in managing PFI (Total Care®
project in construction) are discussed. The project
management of Total Care®in civil aerospace is
not included in this research.
Research Methodology
The research is started by critically reviewing the
need of Total Care®in aerospace industry, the
project procurement strategies in construction
industry and the general project management
knowledge, skills and tools.
The data collection adopted is the secondary
research method. The secondary research data is
obtained from the literature review based on the
published material. The data is then analysed and
discussed to answer all the research questions.
After data analysis and discussions, the conclusion
of this research is drawn and recommendations
are proposed.
Total Care
®
Proj ects
in the Construction Industry
Proj ect Perspecti ves 2009 85
Figure 1. Traditional and Total Care®model (Cook, 2004).
Rolls-Royce
Eng.Health
Monitoring
Airline
Vendors
Rolls-Royce
Airline
Logistics Provider
Overhaul Base
Predictive
Maintenance
Vendors Logistics Provider
Overhaul Base
Rolls-Royce responsible for Airline’s
non-core business activities
Non-core business activities
Focus on core
business
Core business
Passenger revenues
Traditional model TotalCare model
Literature Review
For the purpose of this research, Total Care®in civil
aerospace industry, project procurement strategies
in construction industry and construction project
management skills required by project managers
are reviewed.
Need of Total Care®in Civil Aerospace
Globalisation has encouraged competition,
changes and uncertainty in the airline industry.
Airline operators are continuously seeking new
ways to transfer non-core business activities such
as maintenance and service of engines with its
attendant risks to the suppliers in order to focus
on their core business activity of transporting pas-
sengers to increase value to their business (Davies
& Hobday, 2005).
Hence, Rolls-Royce the second largest aircraft
engine manufacturer in the world developed the
Total Care®business system which provides that
adds value to customers’ business by avoiding
unplanned costs, reducing operating costs and
maximizing profit (Terrett, 2006). This new busi-
ness model has transformed business from that of
traditional manufacturing organisation to service
provider.
Total Care®delivers a win-win situation to both
customer and the supplier. For the customer, Total
Care®is a way to best manage the risk and cost,
increase customer value whilst maximising profit
and reduce operating cost. For Rolls-Royce, Total
Care®is the best way to secure long-term revenue
streams. Risk to business is reduced because Rolls-
Royce has expertise developed through experience
in handling their own problems. Thus, Total Care®
is seen to be the future of the aerospace industry
(Rolls-Royce, 2006).
Project procurement strategies in the
construction industry
The construction industry plays an important role
in the economic development of a country. Con-
struction is a large and diverse sector of industrial
activity ranging from huge projects such as the
Channel Tunnel, public and residential buildings to
the small-scale renovation and repair of existing
facilities. These projects are procured through dif-
ferent procurement routes peculiar to the clients’
business requirements.
There are several types of procurement strate-
gies for a client to procure a construction project.
These are traditional design-bid-build, manage-
ment contracting, construction management,
design and build and project finance initiative
(PFI). Partnering, alliances, joint venture and
framework agreements are collaborative strate-
gies usually used by contractors to tender in more
complex projects.
The need to change
Project delivery performance in the construc-
tion industry has often been criticised for its
time and budget overruns. This is partly due to
its fragmented approach to contracting by the
traditional methods of separating the design
and construction processes from project delivery.
Fragmentation creates adversarial relationships
and lack of trust within the project delivery teams
which in turn leads to poor working relationships
and hence to poor project delivery performance
(Tenah, 2001). According to Bower (2003) the
fragmented and contractual relations that result
in sub-optimal performance should be replaced
with collaborative working systems and repeated
long-term relationships.
Private Finance Initiative (PFI) system
Under the PFI system, the purchase of an asset by
the public sector is replaced by the purchase of
a service for an annual fee paid to a PFI provider
(Smith, 2003). In PFI, the client (principal) has to
sign only a single contract (concession contract)
with a promoter (a group of specialists). Con-
cession contracts may be defined, according to
(Smith, 2002) as a project based on the granting of
a concession by a principal, usually a government,
to a promoter, sometimes known as the conces-
sionaire, who is responsible for the construction,
financing, operation and maintenance of a facility
over the period of the concession before finally
transferring a fully operational facility at no cost
to the principal. During the concession period (typ-
86 www.pry.fi
ically 25-30 years) the promoter owns, operates
and maintains the facility and collect revenues in
order to repay the financing and investment costs
and make a profit. In this manner, improvements
to public services can be made without upfront
public sector funds (Bower, 2003).
PFI in construction is perceived to have the
closest similarity to Total Care®in civil aerospace.
PFI provider is responsible to designing, building
and operating a facility. The facility is then used to
support the core business of the public sector and
a unitary fee is paid for the services provided. In
Total Care®, Rolls-Royce provides the aero engines
and aftermarket service to the airline operators.
The services provided will then be repaid at a
fixed price by the customers. This phenomenon
indicates that the integrated approach of project
or service procurement is the current trend in
any industry.
Project management in construction
Two of the biggest changes in construction over
the last decade have been in the use of private
sector financing for public sector works (roads,
hospitals, schools, prisons, etc.) and the move
towards partnering and alliances (Morris, 2004).
Froma project management perspective, the use of
PFI has forced project participants to focus on the
‘whole life’ characteristics of facility being built.
This include facilities management, cost-in-use,
whole life performance and integrated logistics
support. The emergence of PFI with long-term
perspectives of operational performance and the
trend towards partnering (including alliances and
joint ventures) are seen as challenges in project
management (Turner, 1995).
As a result of these changes, project managers
are being required to take on activities for which
they have not previously been responsible and
which require different skills that are not ‘core’
skills for project managers (RICS, 2003). Khan
(2006) developed a comprehensive list of project
management tools and skills required by project
managers in different knowledge areas.
Apart from technical competence, general
knowledge and skills are also important for a
project manager to be competent. The general
knowledge identified by (Khan, 2006; Edum-Fotwe
& McCaffer, 2000; Suikki, 2004) are finance and
accounting, sales and marketing, strategic plan-
ning, tactical planning, operational planning, or-
ganisational behaviour, personnel administration,
conflict management, personal time management
and stress management.
Skills are derived fromexperience (Frame, 1999).
Khan (2006) and El-Sabaa (1999) categorise the
abilities needed for a project manager into three
basic developable skills: human skill, conceptual
skill and technical skill. Human skill is primarily
concerned with working with people. The human
skills are mobilising, communication, behaviour,
coping with situation, delegating authority, mak-
ing decisions, political sensitivity, self-esteem and
enthusiasm. Conceptual skill defines the ability
of a project manager to envision the project as
a whole. The conceptual skills include planning,
organising, strong goal orientation together with
the ability to see the project as a whole, the ability
to visualise the relationship of the project to the
industry and the community, and strong problem
orientation. Listed in the technical skills category
are special knowledge in the use of tools and
techniques, project knowledge, understanding
methods, process, and procedures, technology
required, and skills in the use of computer.
The role of project managers to manage PFI
projects and personnel will be seen to be much
more complicated and difficult when compared to
that of traditional project managers. PFI project
managers have to be really competent to ensure
successful project delivery. Therefore, the selection
of project managers with the relevant range of
knowledge and skills (from technical to general
skills) is very important to the overall success
of PFI projects (El-Haram & Agapiou, 2002; Gal-
limore, 1997).
Analysis and discussion
In this section data obtained by secondary research
method is analysed and discussed to answer the
research questions as follows:
Q1: Which strategy of project procurement
is considered as Total Care®in construction
industry?
The common project procurement methods are
traditional design-bid-build, management con-
tracting, construction management, design and
build, PFI/PPP. Among all project procurement
methods, traditional design-bid-build is the least
satisfactory procurement method because it is
fragmented and usually procured based on lowest
bid and often does not promise best value to the
client. Management contracting and construc-
tion management are more suitable to the client
who has little or no knowledge of managing the
project. A management contractor is hired and
will be responsible for managing and controlling
the contractors on behalf of client. This helps to
reduce the risks of delay or cost overrun by assign-
ing a contractor who is good at managing project.
The design and build procurement method is in-
tegrated with the design and construction stage
of the project. The benefit of this procurement
method is that the contractor is invited for the
design feasibility discussion at the design stage
thus ensuring project constructability by reducing
design changes that may occur at a later stage. If
design and build is considered as a simple integra-
tion then Private Finance Initiative (PFI) can be
considered as a much more integrated and compli-
cated procurement method. It integrates from the
project feasibility stage towards operation stage.
The lesser the fragmentation, the greater project
value will be delivered.
This research is attempting to identify the Total
Care®project in construction industry. The FI that
provides the greatest value among all the other
project procurement methods is chosen to be the
Total Care®in the construction industry. The simi-
larity between Total Care®in civil aerospace and
PFI in construction industry can be determined by
comparing the level of fulfilment to the clients’
needs. This comparison is shown in Table 1.
Use of PFI has
forced project
participants to focus
on the ‘whole life’
characteristics of
facility being built.
Proj ect Perspecti ves 2009 87
Q2: What are the differences between traditional public
sector procurement method and PFI?
The fundamental difference between traditional public
procurement method – traditional design-bid-build and the
Private Finance Initiative (PFI) is indicated by best value. At
a period when a traditional design-bid-build is widely used,
the public sector has the tendency to choose the bidder with
the lowest bid. Choosing the lowest bid is good enough as the
public money is saved, but it does not promise that project
will deliver on time, have good performance and on budget.
When the public sector is thinking about saving, the contractor
might think the same way too. At the end, even after time and
cost overrun, the project may not be fit for purpose.
Traditional design-bid-build can only be considered if it can
deliver best value. So, the public sector is moving towards more
innovative procurement methods that can provide best value
- in term of time, cost, performance, risk, safety, functionality
and fitness-for-purpose.
Among PFI, prime contracting and design-and-build, PFI is
the most integrated and distinct in the way of how the project
is being financed. The PFI is privately financed and the public
sector does not use the public money for the project. How-
ever, prime contracting and design-bid-build are still using
the traditional way of financing – the public sector will pay
to the contractors, consultants and designers, depends on the
payment arrangement.
In traditional design-bid-build, the public sector is bear-
ing the cost of project risks for example inflation, supply
shortage or design change whereas, in PFI, the project risk
is totally transferred to private sector by public sector. Since
the project is privately financed, the PFI provider has to raise
the project capital by different financial instruments such as
debt, bond and equity. The raised capital has to be repaid to
the stakeholders over the concession period starting from
operation stage throughout the termination stage of the
facility. So, the PFI provider has to be certain that the project
will generate enough revenue to repay the debt, operate
and maintain the facility and create profit through strategic
project planning. The chances of PFI projects to be successful
are much higher than the traditional design-bid-build. The
National Audit Office report on construction performance
stated that nearly 80% of PFI projects had been delivered on
time and to budget and only 30% of conventionally procured
public projects are completed on time and to budget. Table
2 shows the differences between public sector traditional
procurement method and PFI.
Cl i ent s’ needs Tot al Care® PFI
Focus on core busi-
ness
TC provides engines and aftermarket service
to the client.
PFI is responsible to finance, design, construct and
operate the facility to provide service to the client.
Downsizing – on-go-
ing cost reduction
TC reducing the client’s maintenance and
service costs.
Since PFI is fully or partially privately finance. The
project costs no or less to the client.
Predictability of cost
base
In TC, the client pays a fixed and predictable
fee for the service.
In PFI, the client pays a unitary fee for the service.
Risk transfer
In TC, the client is transferring the risks (engine
performance, product improvements, condi-
tion of asset, etc.) to the service provider.
In PFI, the client is transferring the risks (cost, time,
performance, safety, functionality, fitness-for-purpose)
to the PFI provider.
Table 1. The comparison between Total Care®in civil aerospace industry and PFI in construction Industry
Tradi t i onal desi gn- bi d- bui l d PFI
Client gives detail technical requirements Client gives output specifications
Not privately financed Privately financed
Usually the lowest bid is chosen Select preferred bidder who offer best value
Fragmented (design and construction phases are separate)
More integrated (the SPV is responsible to raise its own capital,
design, construction, operation and generate revenue)
Client pays fee/cost to the designer and contractor Client pays a fixed unitary fee for the service
Partial risk retain No or partial risk retain
Higher cost to obtain facility and facility management is
under the client responsibility
Lower cost. The private sector is responsible to provide the
facilities management and to support client’s core business
Unpredictable cost Predictable cost
Client have to manage both the core business (serving the
public) and non-core business (operating and maintaining
the facility)
Client concentrates only on core business
Small or simple project Large or complex
Short-term Long-term
More contractual interfaces Only one contract to awarding company
Short tender evaluation period Long tender evaluation period
Lower bidding cost Expensive bidding cost
Designer and contractor are individual entity Joint venture of several diversified company
Client role is important Reduced role
Table 2. The comparison of public sector traditional procurement and PFI
88 www.pry.fi
Q3: How the private sector contractor’s role in
traditional project procurement method differs
fromPFI?
In traditional design-bid-build, the design and con-
struction are separate entities. The client assigns a
designer for the detailed drawings, the contractor
is appointed late through competitive tendering.
The constructor has minimum or no control over
the design. The main task of the contractor is to
construct what has been planned and finish the
project according to requirements. The main focus
of the contractor is to finish the project in time
and budget. The contractor has no interest in the
functionality and fitness-for-purpose of the proj-
ect. Therefore, the aim for a contractor to enter the
project is to earn profit. The value is impossible to
be created if the objectives of the client and the
contractor are not aligned.
The situation in PFI is, somehow, different. The
contractor has the ownership of the project. The
main focus of the contractor is shifted fromproject
profit to more customer orientation. It is about
maintaining a long-term relationship with the cli-
ent and adding value into the clients’ business. PFI
is an integrated system and strategic planning is
crucial if the project is to be successful. The project
is integrated fromthe beginning at project feasibil-
ity stage to project operation and decommissioning
stage. As PFI is privately financed and the debt has
to be repaid, strategic planning is needed so the
aims of gaining profit and achieving client business
requirement can be achieved.
The recent trend of collaborative working has
changed the way of how contractors usually work
in the construction industry. In traditional design-
bid-build, the construction work is carried by one
contractor. However in PFI, because of the complex-
ity and long-term perspective of the project, it will
be difficult for an individual contractor to do all the
work. Joint venture from diversified companies is
needed in PFI. The aim of Joint venture is to enter
into a new project opportunity as a single company
and make the project more feasible by pooling
expertise and resources from different members.
Table 3 shows the differences of the contractor’s
role in traditional design-bid-build and PFI.
Q4: Which project management knowledge
and skills are required to determine the
success of a PFI project?
In this section, the discussion will be based upon
the research findings from two researches. The
followings will introduce the research used by
both researchers.
Edum-Fotwe and McCaffer (2000)
The research topic of Edum-Fotwe and McCaffer,
‘Developing project management competency:
perspectives fromthe construction industry’ shows
how project managers can be competent in a
changing construction business environment.
Their study is based on a survey conducted in
UK. The survey was administered by applying two
research instruments, the interview technique
with key professional personnel and a postal op-
tion – questionnaire survey of project managers
within the construction industry. In all, 170 good
responses from practising project managers were
obtained out of 500 questionnaires, which were
sent out for the postal survey, giving a response
rate of 35%.
Table 4 shows the primary knowledge and skill
elements required for developing project manage-
ment competency. Different aspects of experi-
ences that are skill based dominated the elements.
Edum-Fotwe and McCaffer (2000) have used the
equation 1 to perceive the level of importance for
each knowledge and skill elements.
Table 5 shows the secondary knowledge and skill
elements required for developing project man-
agement competency. This table predominantly
reflected elements of an academic nature which
usually form part of many academic programs in
project management.
The researchers identified that the job experi-
ence is much more important than the contribu-
tion of academic programs and formal industry
training to the competency of project managers.
This survey established that in order to be com-
petent in a changing construction environment,
experience is very important (Edum-Fotwe and
McCaffer, 2000).
Tradi t i onal desi gn- bi d- bui l d PFI
No or less control over the design Contractor involves in design stage to ensure constructability
Competitive (many competitors) Less competitive (appointed by client)
Focus on profit Focus on delivering value to the client/public users
Less complicated
More complex and different technical and management knowl-
edge needed
Small to medium projects Large and more complex
An individual company Joint-venture company
The client pays for the construc-
tion cost
The company has to find the capital fund and revenue itself
Facility ownership – client Facility ownership – contractor/SPV
Fragmented team Integrated team
Disrupted value chain Integrated value chain
Usually win-lose Usually win-win
Table 3. Contractor in Traditional design-bid-build and PFI
Proj ect Perspecti ves 2009 89
Table 4. Primary knowledge and skill elements for developing PM competency
(Edum-Fotwe and McCaffer, 2000).
Generi c PM Funct i on Knowl edge and ski l l (k- s) k- s f act or
Technical skills Planning and scheduling 97.3
Construction management activities 89.1
Basic technical knowledge in own field 94.5
Productivity and cost control 82.7
Managerial skills Leadership 98.2
Delegation 96.4
Negotiation 95.5
Decision making 91.8
Motivation and promotion 90.0
Team working 90.0
Time management 82.7
Top management relations 81.8
Financial skills Establishing budgets 94.3
Reporting systems 90.6
Legal skills Drafting contracts 92.4
Communication skills Presentation 95.3
General and business correspondence 90.6
Report writing 88.7
General skills Chairing meetings 96.1
Understanding of organisation 84.5
Table 5. Secondary knowledge and skill elements for developing PM competency
(Edum-Fotwe and McCaffer, 2000).
Generi c PM f unct i on Knowl edge and ski l l s (k- s) k- s f act or
Technical skills Forecasting techniques 74.5
Quality control 72.7
Estimating and tendering 70.9
Material procurement 65.5
Reading and understanding drawings 62.7
Design activities and background 59.1
Site layout and mobilisation 54.5
Managerial skills Human behaviour 76.4
Strategic planning 60.0
Financial skills Project finance arrangement 74.5
Establishing cash flows 65.1
IT skills Project management software 75.6
Spreadsheet 59.3
CAD 55.8
Legal skills Health and safety issues 76.2
Industrial relations 57.1
Communication skills Public speaking 74.5
General skills Marketing and sales 50.5
Public relations 50.1
90 www.pry.fi
The Royal Institution of Chartered Surveyors, RICS
(2003)
The research topic of RICS entitled ‘Project management and the
private finance initiative (PFI)’ studies the adequacies of project
management skills in the public and private sector in PFI.
The study is based on a literature review and an online sur-
vey of RICS Project Management Faculty members. Altogether
701 responses were received. 18 telephone interviews were
conducted incorporating six case studies of clients, SPVs and
consultants based around PFI.
The interviews undertaken show that the project manager’s
role is changing within PFI (RICS, 2003). The interviews found
that traditionally four separate project management roles
existed and were performed by different people. These are,
the employer’s agent and the independent certifier, both of
whom work for the client; the technical adviser and the SPV
representative, both working for the SPV. However, because
of the emergence of holistic or integrated PFI service provid-
ers, these roles now tend to be combined into one function.
These changes mean that project managers are being required
to take on activities for which they have not previously been
responsible and which require different skills that are not core
skills for project managers.
Another output of the research undertaken shows that both
public and private sectors have their strengths and weaknesses
in managing PFI projects. The strengths of the public sector are
client understanding, process understanding and political skills.
Its weaknesses are lack of negotiating skills, management skills,
whole life cycle costing, construction skills, financial modelling,
stakeholder management and people skills. The strengths of the
private sector are PFI and construction experience, financial
modelling, technical and legal advice whereas its weaknesses
are specialist knowledge, whole life costing, client understand-
ing and people skills.
RICS (2003) suggested that training and education in key
project management skills should be provided to fill the gap
between the public and private sector in PFI project. Knowledge
and experience management are needed to retain the project
management knowledge and skills from both sector.
Conclusions
Total Care®in construction industry
Total Care®is the concept developed in civil aerospace industry
by Rolls-Royce to create value to the client through the inte-
gration of product and aftermarket service. From traditional
design-bid-build, managing contractor, constructor man-
agement, design and build to private finance initiative (PFI)/
PPP, PFI is the only procurement method which is similar in
characteristics with Total Care®in civil aerospace industry. In
construction industry, PFI is usually integrated fromthe project
feasibility stage throughout the project operation stage. The
PFI provider is responsible for maintaining, service and oper-
ating the facility to provide support to the client’s business
needs. The identification of Total Care®in the construction
industry indicates that a more integrated project procurement
approach is becoming a trend not only in civil aerospace but
also in the construction industry and may spread into other
industry sectors as well.
Project management knowledge and skills in PFI
In the construction industry today, project managers are faced
with a situation whereby the fundamental roles and functions
they perform are gradually shifting focus. The practising
project managers are not only accountable for the technical
knowledge and skills (such as engineering and construction
accuracy, reliability of the facility and within-cost perfor-
mance) they are also accountable for other non-engineering
(general) knowledge and skills.
The additional project management knowledge and skills
have been identified is: finance and accounting, sales and
marketing, strategic planning, tactical planning, operational
planning, organisational behaviour, personnel administration,
conflict management, personal time management and stress
management. The general skills are often essential for project
managers to function effectively with their knowledge. These
are leading (project, technical and team leadership), com-
municating, negotiating and problem solving. Combination
of these skills together with traditional engineering knowl-
edge will produce a new perspective of project management.
Education and training can provide the basic understanding
of these knowledge and skills, however learning from experi-
ence is considered to be the most effective way of filling in
knowledge and skills gaps.
This research approach has been influenced by the preju-
dices and inaccuracies of the researchers; however, this cannot
be checked.
Recommendation for further research
An alternative approach to this research would have been
to conduct in-depth interviews with practising PFI project
managers. The aim of that research would be to identify key
management competencies of Total Care®projects in the
construction industry. To fulfil the purpose of study, a quali-
tative approach needs to be adopted as the findings would
be measured based on the opinions, views and perceptions
of the project managers from public and private sector and
from traditional design-bid-build to PFI projects in the con-
struction industry.
References
Davies, A. and M. Hobday (2005) The Business of Projects: Man-
aging Innovation in Complex Products and Systems. 2005:
Cambridge University Press, Cambridge.
Terrett, M. (2005) TotalCare - A Dependable Way of Life. 2005
[cited 2006 15th August]; Available from: http://www.investis.
com/rr/downloads/terrettb.
Cook, S. (2004) Delivering service through engineering and prod-
uct expertise. 2004 [cited 2006 20th August]; presentation.
ppt#371,2,Rolls-Royce today]. Available from: http://www.ifm.
eng.cam.ac.uk/service/news/documents/cuea_slides/cook.
Rolls-Royce. (2006) Annual Report and Accounts. 2005 [cited
2006 30th August]; Available from: http://www.rolls-royce.
com/investors/reports/2005/index.html.
Tenah, K.A. (2001) Project Delivery Systems for Construction: An
Overview. Cost Engineering, 2001. 43(1): p. 30.
Bower, D. (2003) Construction Management Series; Management
of Procurement. 2003: Thomas Telford Publishing, London.
Fewings, P. (2005) Construction Project Management: An Inte-
grated Approach. 2005: Taylor Francis, Oxon.
Smith, N.J. (2003) Construction Management Series: Appraisal,
Risk and Uncertainty. 2003: Thomas Telford, London.
Smith, N.J.(2002) Engineering Project Management. 2nd ed. 2002:
Blackwell Science, Oxford, UK.
Turner, J.R. (1995) The Commercial Project Manager: Managing
Owners, Sponsors, Partners, Supporters, Stakeholders, Con-
tractors and Consultants. 1995: McGraw-Hill Book Company,
Berkshire, England.
RICS (2003) RICS. Project Management and the Private Fi-
nance Initiative. 2003 [cited 2006 20th August]; Available
from:http://www.observatory.gr/files/meletes/Project%20man-
agement.
Proj ect Perspecti ves 2009 91
Ali Imran Khan (lead author)
BSc (Hons), MSc,
Research Student
Project Management Special Interest Research Group
Ali Khan is a mechanical engineer with over 5 years
of working experience as a research associate and
professional engineer. He has also held membership of
Pakistan Engineering Council since 1999.
His first degree is in Mechanical Engineering at Uni-
versity of Engineering and Technology, Taxila, Paki-
stan, where he secured top positions in each year and
earned all Gold Medals. He then completed his MSc
in Industrial and Manufacturing Engineering with
distinction from the same university.
Now he is pursuing his doctoral research in the field
of project management at The University of Man-
chester UK in collaboration with Rolls-Royce. Dur-
ing his research he actively participated in VIVACE
integrated R & T project, co-ordinated by Airbus and
co-funded by the European Commission and success-
fully completed his project.
A
P j t M t
Mehmood Alam
BEng MSc, Research Student
Mehmood is a professional aerospace engineer with 4
years experience of working as a Project Engineer in
a hi-techechnology aerospace organisation. Having a
first degree in aerospace engineering, he completed
his MSc in Management of Projects (MOP) with
distinction from The University of Manchester. Now
he is pursuing doctoral studies in the field of project
management from the same university. His research
project is jointly funded by Rolls-Royce, AMEC,
Goodrich and EDS together with The University of
Manchester. He is also working on a research project
in collaboration with the British University in Dubai
(BUiD). He has also held membership of the APM UK
since 2005.
Tiew Ying Ting
Tiew Ying Ting is a civil engineer graduated with a
degree in Civil Engineering from the University of
Technology Malaysia. He recently gained a Master of
Management of Projects degree from the University
of Manchester. Ting is working for Halcrow, a multi-
disciplinary consultancy based in London and is cur-
rently involve in Crossrail project.
Professor Andrew Gale
BSc (Hons), PhD, CEng, FICE,
MCIOB, MACostE
Head Project Management Research Group, School of
MACE, The University of Manchester
Professor Andrew Gale is a graduate of Brunel Uni-
versity and the University of Bath. He spent 13 years
in industry both in the UK and Middle East prior to
beginning an academic career in 1985. He is a char-
tered civil engineer, Professor and Head of the Project
Management Research Group SIG in the School of
Mechanical, Aerospace and Civil Engineering at the
University of Manchester. He has significant experi-
ence in collaborating with Russian higher education
and industry in developing masters level educational
provision for Russian engineers and project managers.
He is a member of the Senate of the British University
in Dubai (BUiD) and leads an academic collaboration
with the Institute of Engineering at BUiD. He is a
member of the Health Monitoring and Through Life
Support Research Group in MACE. He is Programme
Director of the MSc in Project Management Profes-
sional Development Programme, a flexible modular
programme led by an industrial consortium compris-
ing: Rolls-Royce, AMEC, Goodrich and EDS. He has
published over 100 articles and paper (many relating
to gender and diversity). Since joining UMIST (now
The University of Manchester) in 1990 he has secured
and managed over £ 2 million worth of research and
consultancy grants.
Khan, A.I.(2006) Project Management of Product Based, Total
Care and MRMS Programmes in Aerospace (Rolls-Royce). 2006,
University of Manchester.
Edum-Fotwe, F.T. and R. McCaffer (2000) Developing Project
Management Competency: Perspectives fromthe Construction
Industry. International Journal of Project Management, 2000.
18(2): p. 111-124.
Suikki, R. (2004) Project Management Competence Development
Framework in Turbulent Business Environment. Technovation,
2004. 26(5): p. 723-738.
Frame, J.D. (1999) Project Management Competence: Building
Keys Skills for Individuals, Teams and Organisations. 1999:
Jossey-Bass Inc, San Francisco.
El-Sabaa, S. (1999) The Skills and Career Path of an Effective
Project Manager. International Journal of Project Management,
1999. 19(1): p. 1-7.
El-Haram, M.A. and Agapiou, A. (2002) The Role of the Facility
Manager in New Procurement Routes. Journal of Quality in
Maintenance Engineering, 2002. 8(2): p. 124-135.
Gallimore, (1997) P. Perception of Risk in the Private Finance Ini-
tiative. Journal of Property Finance, 1997. 8(2): p. 164-176.
92 www.pry.fi
StanisławGasik
Sybena Consulting
Warsaw
Poland
Knowl edge Ori ented
Proj ect Management
Basic standards of project management are focused on project management processes. Knowledge
Oriented Project Management (KOPM) is an approach to project management focusing in project
management on utilization of the entire knowledge of project management collected by the project
manager or organization. KOPM substantially extends Process Oriented Project Management and
restores the right balance between processes and off-processual knowledge needed for project
management.
Introduction
Basic standards of project management such as
PMBoK (PMI, 2004) or Prince 2 (PRINCE2, 2005)
are focused on project management processes.
Such an approach may suggest that this is the
most important part of the knowledge needed to
achieve success in the area of project manage-
ment. But proper execution of processes may not
guarantee success in this domain. For instance, it
seems that in the area of cost management the
most important success factor is knowledge about
the prices of planned activities (price list). The
process of planning itself is less important than the
price list. There is an analogous situation in other
areas of management: in the area of risk manage-
ment, knowledge about risks threatening a project
is more important than (often overcomplicated)
management processes. It is more important to
know what skills are needed and what resources
are available than to know the (simple) process
of human resources management processes. The
words “is more important” should be interpreted
as implying: “an error may have more significant
consequences in project execution”.
The examples that have been cited show that
the way of conducting project management
processes in all areas of project management, for
example those described in PMBoK, is not what
determines success in project management. A
substantial amount of knowledge beyond that
of project management processes is needed to
achieve this goal. According to my personal
observations, project managers would be more
satisfied by being provided with knowledge needed
for management than with the pure processes of
project management.
Focusing in project management on utilization
of the entire knowledge of project management
collected by the project manager or organization
is called Knowledge Oriented Project Management
(KOPM). The approach to project management
that focuses on project management processes,
which may be found in the most of the publicly
available PM standards, shall be called Process
Oriented Project Management (POPM). As will be
shown later on, POPM is a necessary element of
every instantiation of KOPM.
Project management knowledge has its own
local flavor in most cases and areas. In the cost
management chapters in any project management
standard no price list is included – nor can one be.
One reason is the local specificity (geographical;
imposed by the area of project implementation;
imposed by other factors) of price lists: the prices
of a given type of work in Warsaw differ substan-
tially from those in Los Angeles or India. Other
price lists are needed by civil construction project
managers and others by IT project managers. This
in no way means that one may plan and execute a
project without adequate knowledge of the prices
that prevail in a given project environment.
Collecting the full register of knowledge needed
for project management is not a simple task. Many
Project Management
Knowledge
Off-processual
Knowledge
Processual
Knowledge
Figure 1. General structure of project
management knowledge.
Proj ect Perspecti ves 2009 93
companies strive for many years to possess such
a register. Many consulting companies establish
their value just on their proprietary knowledge
relating to project management. This knowledge
may be acquired in several ways. The three basic
ones are:
- their own experience,
- publications,
- commercially accessible registers and data
bases.
Our approach to PM knowledge is purely empiri-
cal and relies on experience gained by the author
during his work as project manager. The contents
of this paper may be placed within the knowledge
framework defined by Zack (1999) – we describe
the explicit, declarative knowledge – but we did
not want to focus too strongly on theoretical
aspects of knowledge. Instead we focused on prac-
tical aspects which may contribute to everyday
project management work.
Project management knowledge in basic
PM standards
The approaches to full project management
knowledge in three basic PM standards are dif-
ferent.
There is no explicit reference to off-processual
PM knowledge in CMMI (SEI, 2002). This type of
knowledge is sometimes called “declarative knowl-
edge” (Zack, 1999). We call it “off-processual” to
emphasize its relationships to often overvalued
knowledge of processes. The concept of orga-
nizational process assets refers to items directly
referring to “quality and process-performance
objectives”.
There is nothing about off-processual PM
knowledge in Prince 2 either, as it describes proj-
ects from the point of view of their customers. It
is not the project customer’s business to collect
knowledge about project management.
PMBoK is closest to the concept of KOPM. Ac-
cording to this standard, an organization must be
conscious of its Enterprise Environmental Factor
and has to have defined Organizational Process
Assets. Elements of these items are input to several
PM processes. But no knowledge, except for pro-
cessual knowledge, is provided to the reader – it
may not be, as was stated above. According to the
PMBoK Guide “The Project Management Body of
Knowledge is the sum of knowledge within the
profession of project management”. And, quoting
the same publication, PMBoK describes a particular
subset of this knowledge, mainly the PM processes
and organizational issues. PMBoK provides no
precise specification of the kind of knowledge
that is absent from this publication. Probably the
title “Project Management Processes Framework”
would be more suited to this publication. The full
bodies of knowledge in PM may only be developed
locally – but this fact cannot be a rationale for
claiming that the description of PM processes is
the full scope of PM knowledge. If PMBoK were
really focused on full PM knowledge, there would
be a place for direct reference to off-processual
PM knowledge items in the Organizational Proj-
ect Management Maturity Model (OPM3 by PMI,
2003), which is based on PMBoK. If there were
references to the price list etc., we would be
sure that PMBoK concerns itself with the full PM
knowledge. But this kind of knowledge is absent
from OPM3. So PMBoK’s approach to project
management knowledge may not be treated as
a holistic one.
KOPM does not supplant standard process
oriented project management, but substantially
extends it and restores the right balance between
processes and off-processual knowledge needed
for project management.
The full scope of knowledge needed for project
management is described in the next chapters. This
scope has been ordered by knowledge manage-
ment areas defined by PMBoK. These areas have
been extended to include a business management
area (the lack of which is an important shortcom-
ing of PMBoK) and knowledge about the project
management environment of an organization.
Business management
Strategic plan
First of all, every organization must know what
it wants to do. Mission and strategy, treated as a
long-term plan, must direct its everyday business.
Appropriate business categories, their parameters
and their acceptable values must be described
in the strategic plan. Market share, servicing of
particular territories, income level or the set of ser-
vices performed by an organization are examples
of strategic business categories.
Project selection and evaluation criteria
An organization must know what projects it should
perform – it has to define its set of project selec-
tion criteria. These criteria usually refer to strate-
gic business categories and to the organization’s
capabilities – resources, costs, risks. Project evalu-
ation should refer to the criteria that led to the
project’s selection, but the sets of criteria need not
be identical with them. Resource availability may
be an example of a criterion of project selection
which may not be directly used for post-project
evaluation.
Integration management
Project management process
The project management process is one of the
most important elements of every project man-
agement methodology. This process must be uni-
fied and consistent. Prince 2 constitutes a good,
and perhaps the most well-known example of
a consistent project management process. This
methodology does not define separate processes
for different management areas (PMBoK ap-
proach) – it describes just one process fromproject
start to finish.
In PMBoK, the main part of the project manage-
ment process is described in the Project Integration
Management area.
The project management process is probably
the most important part of project manage-
ment knowledge, but we must remember that
this is only one of many such elements.
There may sometimes be very distinct com-
ponents of project management processes (sub
processes), which can be assigned to another area
than that of integration management. Quality
control may serve as an example. But one must
94 www.pry.fi
remember that the general consistency of a project
management process is more important than as-
signing a process to a particular project manage-
ment area. The quality control process makes up
an integral part of the production process.
Lessons learned register
This register contains lessons learned by the orga-
nization’s staff in the course of executing projects.
It may relate to all other elements of knowledge
needed for project management. A lesson learned
should describe the reasons causing a given
situation, possible implications of this situation
and the scope of the lesson's applicability – and
point out other elements of project management
knowledge.
Configuration items
Knowledge needed for effective configuration
management. A set of items classes which should
be put under configuration management. A set
of possible states must be described for every
configuration item.
State changes of configuration items
Element of knowledge needed for effective con-
figuration management. A set of state changes of
configuration items. For each change a stimulus
causing state change must be described. One spe-
cific type of stimulus may be a change of state of
another configuration item.
Scope management
Products
A list of products produced by an organization.
The basic knowledge needed for project initiation
and planning. Every product should be described
by its general characteristics, the time and cost
of producing it, and possible modifications. Pro-
cesses for the production of products should be
known, too.
Structure of products
Organizations should know the structures of their
products. The decomposition of every product
down to the level sufficient for planning work for
its development should be known. Each compo-
nent must be described by its basic characteristics:
name, significance, method of production.
Time management
Activities categorization
In order to develop a set of qualitative or quan-
titative characterizations of activities, every
organization should have some classification of
project-related activities. Such classifications are
usually used for analyzing activities workload or
cost.
Activities lists for development of WBS
elements
Activities needed for producing every WBS ele-
ment should be known. Such lists are usually
prepared for elementary WBS elements. They may
be predefined for more aggregated WBS elements,
mainly in order to describe activities they have in
common with smaller WBS elements, e.g. manage-
ment activities.
Activities workload
Activities workload (number of work hours or
work days) is one of the basic items of knowledge
needed for effective project planning. Workload
may be defined for activity categories or for activi-
ties called for in the production of WBS elements.
The cost of an activity is defined on the basis of
its workload. Duration of activities is defined on
the basis of its workload, too – though the rela-
tionship between these two parameters does not
have to be linear.
Cost management
A price list is the most important knowledge item
applied in the area of project cost management. It
details prices of goods and services being procured
from outside of the organization performing a
project, as well as goods and services being de-
veloped within an organization. The pay rates for
particular qualifications (roles) and for organiza-
tion's workers should be defined separately.
Quality management
Product quality
The quality metrics for every product being de-
veloped in an organization must be known for
successful project planning and execution. Their
acceptable values must be defined, too. There
must be procedures for computing the values of
these metrics.
Human resource management
Project organizational structure templates
Every organization should have predefined ef-
fective organizational structures of projects.
These structures can and should be different for
projects of different type and scale. Every element
of such a template must have defined functions
and roles in order to perform these functions.
Their responsibilities and authorizations should
be specified there, too.
Qualifications and skills
The register of qualifications and skills needed to
produce products developed in an organization.
This register is often of a hierarchical nature.
Qualifications should correspond to defined levels
of proficiency.
Resources
Human resources register. This hierarchy should
reflect the structure of an organization. For ev-
ery staff member there should be a set of her/
his specified qualifications and skills. One of the
qualifications is usually singled out as primary role
of a particular staff member.
Demand for qualifications and skills
There should be a register of demand for qualifi-
cation and skills in every organization. For every
interval (day, week…) the demand for every qualifi-
cation or skill should be specified and documented
in this register. The demand may be expressed in
time units or in FTE.
Staff utilization registers
Every staff member must have his or her own
work assignment schedule. Such a schedule must
Proj ect Perspecti ves 2009 95
contain project identification, assignment status
(reservation / final assignment), and dates of as-
signment.
Activities performed by role
For every role there has to be a list of activity
categories that it may perform. This register may
contain specifications of minimum proficiency
levels, too.
Communication management
Report templates
Reports are the main components of the informa-
tion exchange process. Every organization should
have a predefined set of report templates needed
for project management. Report templates may
take the form of project management system re-
ports, reports fromother databases or they may be
templates produced by computer applications that
assist office automation. Every report template
should include a reporting schedule and indicate
the persons responsible for preparation of reports
and the persons receiving them.
Document templates
People planning a project must have access to
templates of documents needed to carry out
projects. These documents describe decisions made
during project execution (project plan – a deter-
mination about the expected method of project
execution; acceptance protocols – decisions about
product acceptance etc.).
Risk management
Register of risks which may be encountered during
the execution of projects. Risks are usually clas-
sified hierarchically. The description of every risk
should contain its general characteristics, project
elements exposed to it, estimation of risk impact.
Risk symptoms should make up another part of
risk description – early portents of its occurrence.
Risk mitigation procedures and contingency
plans constitute other important elements of risk
description.
Procurement management
Project managers who plan to procure products
or services from outside the organization that is
performing the project, must have knowledge
about potential suppliers (Register of products,
suppliers and price list). A register of suppliers
should be organized in a way allowing for easy
searching for suppliers of needed goods. Project
managers need to know the prices and quality of
offered goods. The organization should collect
some other data about suppliers, such as the solid-
ity (e.g. punctuality) of their services.
Project management support
Project management information system
Contemporary project management is almost
impossible without specialized software support
(Primavera, MS Project…). Project managers must
be skilled in the use of such applications in order to
manage a project effectively and efficiently. Every
organization must have a system of familiarizing
project management staff with such software. The
project management information system is – for
project managers – the most important part of
the organization’s information system.
Organization’s information system
The information system is a set of rules and tools
for processing information needed in project man-
agement. The accounting system, HR systemor the
set of work procedures are the most important
– aside from the PM information system – com-
ponents of this system. Project managers cannot
successfully manage projects without knowledge
about this system.
Product development processes
Projects are carried out with the main aim of
producing certain products or services; one must
remember that project management itself is not
the goal of a project. So the indispensable, main
part of knowledge needed for project management
is the domain knowledge – about products, devel-
opment processes, regulations etc. in the domain in
which the project is performed. Every organization
that performs projects must collect, structuralize
and pass on such knowledge to project teams.
The structure of such knowledge greatly depends
on the knowledge domain, but it must be deeply
integrated with knowledge that relates purely to
project management. CMMI (SEI, 2002) provides
a good example of such integration.
Conclusions – KOPM Applications
Better project management. Knowledge Oriented
Project Management describes the area of project
management in a more complete way than Process
Oriented Project Management does. So the KOPM
model may be applied wherever POPM has been
applied up to now – but with better results. The
basic application of the KOPM approach is its
direct utilization for the entire process of project
management with special stress on the phase of
project initiation and planning. It is impossible to
manage projects effectively and efficiently with-
out complete knowledge that concerns more than
just processes of project management.
Basis for PM training improvement. The model
presented above provides guidelines for project
management staff training. Training that fails
to supply all needed knowledge will not prepare
prospective project managers for effective proj-
ect management. Education providers claiming
that they conduct effective project management
courses while they in fact provide only the pro-
cessual knowledge (a situation very frequently
encountered) are like airline agents that indicate
ticket prices without all the taxes and fees that
are included in the final price.
Systemization of project management knowl-
edge. This paper attempts to present the structure
of the full range of knowledge on project manage-
ment. Our paper is in a sense similar to PMBoK: we
present in a systematic way all registers of project
management knowledge, while PMBoK presents in
a systematic way project management processes
(a subset of the whole subject matter).
The way of ordering an organization’s knowl-
edge in the domain of project management.
Organizations performing projects must order
their knowledge. The paper presents the complete
96 www.pry.fi
set of registers used for the description of such
knowledge.
Basis for assessing the project maturity of an
organization. As there is a complete set of reg-
isters of project management knowledge, their
presence provides evidence of an organization’s
project management maturity. Organizations that
have more knowledge registers are more mature
than those which have fewer of them or do not
maintain them at all.
Improving communication between project
stakeholders. The KOPM model constitutes a bet-
ter basis for effective communication between
organizations engaged in project management.
The company for which the author is currently
working had its risk management method devel-
oped by a consulting company. The initial “final”
product we received under this contract consisted
only of risk management procedures. It took a long
time to explain to contractors that the procedures
alone, without knowledge about possible risks
in our projects, are practically useless. If we had
taken KOPM as the basis for this contract, the
risk of such a misunderstanding would have been
substantially reduced.
Basis for Component Oriented Project Manage-
ment. This paper summarizes project management
practices that the author has seen in many organi-
zations and that are applied without any method-
ological rationale. Developing a foundation for a
more complete approach to project management
than the process-oriented one is the main goal
of this publication. This model may lead to the
development of an even more advanced approach
to project management than KOPM – Component
Oriented Project Management (COPM). Prepara-
tion of independent components for project
management domains (processes, other knowledge
registers, document templates…) is the basis for
such an approach. These components correspond
to knowledge modules that are described in KOPM.
A project manager preparing a project must select
the proper set of components and combine them
into a unitary whole. This is another approach
applied in the domain of project management by
some organizations – though it lacks methodologi-
cal support up to now.
Figure 2. Levels of maturity in project management.
Component Oriented
Project Management
Knowledge Oriented
Project Management
Process Oriented
Project Management
Function Oriented
Project Management
References
PRINCE2 (2005)
Office for Government Commerce, Prince 2 – PRoj-
ects In Controlled Environment, UK 2005
PMI (2004) Project Management Institute
A Guide to the Project Management Body of
Knowledge 3rd Edition, PMI, Newton Square, PA,
USA, 2004
PMI (2003) Project Management Institute
Organizational Project Management Maturity
Model Knowledge Foundations, PMI, Newton
Square, PA, USA, 2003
SEI (2002) Software Engineering Institute
Capability Maturity Model Integration, Carnegie
Mellon University, Pittsburg, USA, 2002.
Zack, M. H. (1999)
Managing codified knowledge, Sloan Management
review, 40(4) Summer, 45-58, 1999
Stanisław Gasik
Sybena Consulting
Warsaw
Poland
e-mail: sgasik@sybena.pl
Experienced project manager and project
management consultant, currently special-
izing in implementing project portfolio
management software tools – Stanislaw
headed implementation of Primavera tools
at large Polish IT company, which was
distinguished with the Primavera Excel-
lence Award in 2006. He was a lecturer in
project management at Warsaw School of
Economics and other Polish educational
institutions. Stanislaw was an active par-
ticipant of IPMA and PMI congresses. He
was a member of the team which devel-
oped PMBoK 3rd Edition. His professional
interests include portfolio management,
maturity models, knowledge management
and supplier-customer relationships in
project management.
The world leader in project management cert if icat ion
” IPMA cert ificat ion has given
me self- knowledge, an ext ended
net work and verificat ion of
my compet ence”
Per- Olof Sandberg
Program Manager,
Major Programs
SEB Bank, Sweden
Put t he power of IPMA
Cert if icat ion t o work f or you
IPMA is a world leading project management organisat ion wit h over 40 0 0 0 members
in 45 count ries around t he world. The IPMA cert ificat ion is recognised worldwide.
Global corporat ions benefit f rom IPMA’s int ernat ional presence and recognit ion.
It enables t hem t o use t he same cert ificat ion for t he ent ire company in all count ries.
For more informat ion about t he IPMA cert ificat ion and t he IPMA Compet ence Baseline
(ICB) please visit www.ipma.ch
Organized by
Get your projects running!
Run safely and quickly throughout the complexity of handling resources,
activities, risks and stakeholders.

Get your project results on time, within your budget and with high quality - Now!
Come to the 22
nd
IPMA World Congress and meet the best
of international project management and
experience best practice in an innovative way!
Start today and plan your stay in Rome.
Get more information from www.ipmaroma2008.it
Your project dreams will become reality!
ROMA, NOVEMBER 9-11,
W
Ä
R
T
S
I
L
Ä
®

i
s

a

r
e
g
i
s
t
e
r
e
d

t
r
a
d
e
m
a
r
k
.
NO SALES CONFERENCE WILL POWER THIS PLACE.
The world has enough talkers. We are doers. We are more than 17,000 men and
women across the globe who are dedicated to achieving our clients’ goals –
including providing power to remote areas. We are the engine of industry, see
what we are doing today at wartsila.com
Competence. Service. Solutions. www.poyry.com
S
h
u
t
t
e
r
s
t
o
c
k
When you succeed, we succeed.
Pöyry is a global consulting and engineering firm. With a network of more than 7300 engineers and
consultants around the world, we combine global service with local presence.
We offer professional services covering all aspects of our clients’ projects, from full conceptual studies to
engineering and complete EPCM services. Known as 4ePCM

, our unique interactive project management
concept covers the whole project lifecycle. It ensures that all project tasks are performed on time, with all
parties knowing their role. 4ePCM

functions are:

• Project supervision
• EPCM project management
• Engineering management
• Procurement management
• Construction management
• Commissioning management
• Project control
• Preparation for operation
• Quality assurance
• Health, Safety & Environment
• Security management
• Permitting assistance
We exist to generate business success for our clients. When you succeed, we succeed.
For more information on EPCM services please contact:
Pöyry
P.O.Box 4, Jaakonkatu 3, FI-01621 VANTAA, Finland, tel +358 10 3311, fax +358 10 33 21818