European Management Journal Vol. 22, No. 3, pp.
327–336, 2004
Pergamon
doi:10.1016/j.emj.2004.04.010
Communication and
Co-operation on Projects
Between the Project
Owner As Principal and
the Project Manager as
Agent
J. RODNEY TURNER, Erasmus University, Rotterdam
RALF MÜLLER, Umeå University, Sweden
Research shows the best project performance is
obtained when there is high collaboration between
client and project manager, and medium levels of
structure, when the project manager and project
owner work together in partnership, and the man-
ager is empowered. Unfortunately, this is not how
it happens on many projects. There is mistrust, even
conflict, between owner and manager, and the
owner sets tight constraints within which the man-
ager must work. Project owners mouth partnership
and empowerment, but implement conflict and
tight control. In this paper, we offer the principal-
agency relationship between client and project
manager as one reason for this. However, we offer
communication between the client and project man-
ager as a way of reducing this problem. We suggest
what communication the client needs from the pro-
ject manager, and what communication the project
manager needs from the client to minimize the
impact of the principal-agency relationship. We
report the results of an international study into
communication needs on projects. We establish that
the communication needs of project participants are
best served by a mixture of formal and informal
communication, and of written and verbal com-
munication. We also establish that communication
and emotion are closely linked on projects.
 2004 Elsevier Ltd. All rights reserved.
European Management Journal Vol. 22, No. 3, pp. 327–336, June 2004
 2004 Elsevier Ltd. All rights reserved.
Printed in Great Britain
0263-2373 $30.00
Keywords: Projects, Communication, Principal-
agency Theory, Cooperation, Empowerment, Trust
Introduction
In this paper we describe the role of communication
between the project owner and project manager
within the framework of principal-agency theory,
their impact on collaboration between and
empowerment of project participants, and the impli-
cations for contracting in projects. A project is under-
stood to be:
a temporary organization to which resources are assigned
to undertake a unique, novel and transient endeavor, man-
aging the inherent uncertainty and need for integration in
order to deliver beneficial objectives of change (Turner and
Müller, 2003).
The owner of the project is the person or group who
provides the financial resources for its delivery,
accepts project milestones and project completion
(PMI, 2000), is accountable for the investment in the
project, and receives value from the operation of the
facility delivered (Turner, 2000). The project manager
acts on behalf of the owner and manages the project
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PROJECT MANAGEMENT
delivery on a day-to-day basis. Most people know
from practical experience that the best results are ach-
ieved from this relationship if there is good
cooperation between the project owner and project
manager, and if the manager is properly empowered
(Scott, 2001), and this has now been confirmed by
research, (Müller, 2003). But, it is not the way it
often happens.
As in other delegated tasks, the owner and project
manager are in a principal-agency relationship
(Bergen et al., 1992; Jensen, 2000). The owner does not
have access to the same information as the manager,
and does not know why the project manager makes
the choices they do on their behalf (the adverse selec-
tion problem) and whether they are making the best
selections on their behalf (the moral hazard problem).
There is an information asymmetry between them
that creates the potential for mistrust. The project
manager manages the project on behalf of the owner,
which gives the owner a strong need for information
over the entire course of the project. The owner is
particularly interested that:
1. the end deliverable will meet their functional
requirements
2. the right project process is being followed to suc-
cessfully deliver the required end deliverables in
the optimum way
3. the project will meet the required quality, budget
and schedule requirements
4. appropriate control mechanisms are in place to
achieve the above
5. the project manager is behaving in a professional
and trustworthy manner.
The owner needs confidence in the knowledge that
the project is performing in a way to achieve a suc-
cessful outcome for them. Most project managers
want to deliver the owner’s requirements because
they are interested in maintaining an ongoing
relationship. Thus the project manager also needs to
know that they are making the right choices on behalf
of the owner. We report the results of an inter-
national study into communication on projects and
identify that communication needs to be written and
verbal, and that it needs to be formal and informal.
Communication is also closely linked to emotion in
projects, which explains why, although people would
like to collaborate on projects and empower the pro-
ject manager, there is a tendency to mistrust,
resulting in tight control.
Collaboration and Structure on Projects
Most people know from anecdotal experience the
best results are achieved on projects when:
❖ the client and project manager work together in
partnership, (Scott, 2001)
328
❖ the project manager is empowered to take
decisions about the best way of achieving the pro-
ject’s outcomes taking account of unforeseen cir-
cumstances as the project evolves (Turner, 2003).
Projects are uncertain (Turner, 1999; Turner and
Müller, 2003) and so the process for their delivery
often cannot be precisely determined from the start
(Turner, 2003). The project manager needs to be
empowered to adapt the process as the project
develops (Huemann et al., 2004). Also, the purpose
of organizing a project should be to create a cooperat-
ive, collaborative context for the parties to work in.
Levitt and March (1995) say about organizing any-
thing, routine operation or project:
The problem of organizing [is] seen as one of transforming
a conflict (political) system into a cooperative (rational)
one. A conflict system is one in which individuals have
objectives that are not jointly consistent. It organizes
through exchanges and other interactions between strategic
actors. A cooperative system is one in which individuals
act rationally in the name of a common objective.
Müller (2003) showed, as this anecdotal and theoreti-
cal experience predicts, that high performing projects
are correlated with high levels of collaboration and
medium levels of structure (Figure 1a). If the client
wants the best out of their project, they are best to
empower the project manager with medium levels of
structure and to create a cooperative environment in
which client and project manager can work well
together. Figure 1 shows that all high performing
projects in Müller’s sample were clustered around
medium levels of structure and high levels of collab-
oration. Unfortunately Figure 1 also shows that high
collaboration and medium structure were only neces-
sary conditions for high performing projects, not suf-
ficient conditions. Low performing projects were
scattered all over the space (Figure 1b), though high
collaboration tended to lead to better project per-
formance (Figure 2).
Müller defined structure as combining clearness of
methodology and extent of organizational mech-
anicity. Thus, it reflects to what extent the client
defines the project process and imposes formal con-
trol and communication structures. Best project per-
formance is not obtained by tight control, nor by
anarchy, but by empowerment. He defined collabor-
ation as combining clearness of objectives and
relational norms. It reflects the clarity of the end
deliverables and the nature of the working relation-
ship between the client and project managers.
The project management literature suggests the pro-
ject owner should empower the project manager, and
strive to have a cooperative working relationship
with them. Here is quantitative evidence that this is
true. Unfortunately, many clients continue to impose
high levels of structure and a culture of conflict on
projects. They do this out of fear that the project man-
European Management Journal Vol. 22, No. 3, pp. 327–336, June 2004

Figure 1 Structure and Collaboration Levels on High and Low Performing Projects
Figure 2 Improving Performance with Increasing
Structure and Collaboration
ager will seek to maximize their own utility out of
the project not that of the client, and the only way to
stop this is by using tight structures and low collab-
oration. Principal-agency theory (Bergen et al., 1992;
Jensen, 2000) potentially explains why this might
happen.
Principal-Agency Theory as it Applies
to Projects
A principal-agency relationship arises when one
party (the principal) depends on another party (the
agent) to undertake some action on the principal’s
behalf (Bergen et al., 1992). Jensen (2000) defines an
agency relationship as a contract under which one
party, the principal, engages another, the agent, to
perform some service on their behalf which involves
delegating some decision-making authority to the
agent. If the aim of both parties is to maximize their
economic position, then there is good reason to
European Management Journal Vol. 22, No. 3, pp. 327–336, June 2004
PROJECT MANAGEMENT
believe that the agent will not always act in the best
interests of the principal. Thus principal-agency
theory explains the potential for conflict of interest
that arises between the project manager and owner,
because
people will not act in the interest of others (their principals
or partners) to the exclusion of their own preferences
(Jensen, 2000).
Thus delegation of decision-making authority from
principle to agent is problematic because:
❖ the interest of principal and agent will typically
diverge if both are utility maximizers
❖ the principal cannot perfectly and costlessly moni-
tor the actions of the agent
❖ the principal cannot perfectly and costlessly moni-
tor and acquire the information available to or pos-
sessed by the agent (Barney and Hesterly, 1996;
Jensen, 2000).
Agency theory suggests creating structures
(including contracts) and incentives that minimize
the conflicts of interest between the parties (Jensen,
2000). Jensen identifies four agency costs associated
with those structures and incentives:
1. the costs of creating and structuring contracts
between the client and project manager
2. the monitoring expenditures by the principal
3. the bonding expenditures by the agent
4. a residual loss arising because the manager’s
decisions do not optimize the project’s outcomes
for the client, either because the manager is behav-
ing opportunistically, or because they do not fully
understand the owner’s requirements.
Moe (1995) summarizes the tension between the prin-
cipal and agent as two agency problems:
The adverse selection problem: During the project, the
manager (as agent) knows more about the project
329
PROJECT MANAGEMENT
than the owner (as principal). The manager knows
more about the substantive project issues (listed in
the introduction) as well as his own personal traits
such as honesty and diligence. So the owner cannot
be totally certain about why the manager makes the
decisions he does, and whether he is making the right
choices on the client’s behalf.
The moral hazard problem: The project manager has his
own interests. He will do what is best for himself,
and only do what is best for the owner if their inter-
ests are aligned.
This is addressed in agency theory by realigning the
interests of the principal and agent through contracts,
designed in a way that the actions regarded as most
appropriate by the principal yield the highest payoff
for the agent (Bergen et al., 1992). In cases where pro-
ject objectives cannot be defined precisely, the objec-
tives are communicated through dialogues using
examples and generalizations. This leads to behavior-
based contracts. Contrarily, clear specifications of
project deliverables lead to outcome-based contracts
(Hendry, 2002).
However, contracts cannot be written to cover all
eventualities in a project (Turner, 2003), and an
opportunity for agents to take advantage of a situ-
ation arises frequently. Multi-tasking environments,
such as projects, provide opportunities for undiscov-
ered low performance in tasks insufficiently meas-
ured (Holmstrom and Milgrom, 1991). As empirically
shown by Harrison and Harrel (1993), the presence
of a situation of adverse selection can lead to
decisions that are rational in the eyes of the agent, but
irrational in the eyes of the principal, so that failing
projects are continued instead of terminated.
Barney and Hesterly (1996) showed that agency
theory is criticized for taking an inherent investor
view only and for assuming that humans are prim-
arily motivated by financial gains. For the context of
projects this is balanced by Sharma (1997), who ident-
ified four different ways project managers are con-
trolled in their work, these are:
❖ self-control through the degree of altruistic
behavior of the agent
❖ control through the professional community,
through their codes of ethics and professional
standards
❖ control through the agent’s firm, their employer
❖ control through the formal and informal efforts by
the principal or client to overcome the infor-
mation asymmetry.
Among those four control mechanisms professional
certification is increasingly used to foster confidence
on the side of the principal in the agent’s competence
and trustworthiness (Turner and Müller, 2003). These
are bonding costs paid for by the agent. However,
330
overcoming information asymmetry requires con-
sideration of the principal’s information needs.
The Owners Needs for Communication
from the Manager
Because of the adverse selection problem and the
moral hazard problem, the project owner knows less
about the progress of a project than their agent, the
project manager. However, the owner also cannot be
certain that the project manager shares their objec-
tives. Therefore the owner will potentially be uncer-
tain about the project’s progress, and it is infor-
mation, communication from the project manager,
that will give them the necessary information. In this
section, we review the owners’ need for communi-
cation to allay their concerns. Following Graham
(2003), we can consider some of the questions the cli-
ent wants answering from the communication they
receive.
Questions of Product and Process
The client wants to know that the project will deliver
a product that will meet their performance require-
ments, to generate the revenues expected of it. It
must have appropriate functionality and quality of
finish. The client also wants to know that an appro-
priate project process has been designed that will
deliver the correct product, and that it is being fol-
lowed. Configuration management data (Turner,
2002) will be a key element of satisfying this com-
munication need.
Questions of Project Performance
The client wants to know that work is being under-
taken at a rate that the product will be ready at a
time and cost that the investment in it will be repaid.
They want to know that adequate resources are being
applied to make appropriate progress, in a timely
and efficient manner. For this the client needs analyti-
cal data. Müller (2003) found clients have a much
greater desire for analytical data than project man-
agers seem willing to give (Figure 3). There is no
overlap between owners’ desires for analytical data
and what mangers are inclined to supply. There was
also a substantial difference between the owner’s
desire for communication and their perception of
project performance between low and high per-
forming projects:
High performing projects: The client had a much
greater desire for communication, but also a lower
perception of project performance than the project
manager. The client’s interest in performance is
another necessary condition for project success.
European Management Journal Vol. 22, No. 3, pp. 327–336, June 2004

Figure 3 The Owner’s Desire for Analytical Data vs the
Manager’s Willingness to Supply It
Low performing projects: The client had less of a desire
for communication, but coupled with that was a
higher perception of project performance than the
project manager.
Thus we see where the owner seeks to understand
what is going on through communication the project
performs better, but the concern that drives them to
seek the information manifests itself in a lower per-
ception of project performance. If the owner is con-
cerned, and seeks to allay his concern through com-
munication, the project performs better. But, we saw
above that the owner should not allay his concern by
imposing too much structure on the project and pro-
ject manager, and should not allay his concern by
working with the project manager in a non-collabor-
ative way. (Some clients respond to the moral hazard
problem by treating the project manager with disre-
spect. That is not a good idea.)
Questions of Trust and Surprise Avoidance
The client wants to know that the project manager
(agent) can be trusted, to undertake the work com-
petently and ethically and in the owner’s best inter-
ests. The owner wants to know that the manager
understands his requirements, and is taking
decisions in his best interest. The client wants to
avoid the adverse selection problem and the moral
hazard problem. Müller (2003) found that trust, as
a result of frequent collaboration between client and
sponsor, was a topic often viewed as being of the
highest importance in the buyer – seller relationship.
But, trust usually existed where informal communi-
cation was used.
A major aspect of communication was to ensure the
avoidance of surprises. Where informal communi-
cation was used, this was achieved by developing a
feeling of ‘knowing what is going on on the other
side’. Where formal communication was used there
European Management Journal Vol. 22, No. 3, pp. 327–336, June 2004
PROJECT MANAGEMENT
was a need to balance the effort required to produce
formal reports with the need for continuous updates.
Where trust is lost, there is a loss of collaboration.
Many clients, misguidedly, respond to the adverse
selection and moral hazard problems by imposing
formal structures, and associated formal communi-
cation structures. We will show that that leads to low
performing projects, and describe three paths to loss
of collaboration. Projects are uncertain and it is neces-
sary to empower the project manager through
medium levels of structure (Huemann et al., 2004).
Thus, the client needs to respond to the twin prob-
lems through high collaboration and trust, and an
appropriate balance of formal and informal com-
munication, not through inappropriate levels of
structure and formal communication. We expand
further on that below, but first we give an overview
of the communication needs of project managers.
The Manager’s Needs for
Communication from the Owner
A project manager’s need for communication
changes over the life-cycle of a project. During the
early stages, the manager needs to know the owner’s
actual requirements and project context. Both sets of
information are needed to develop a ‘big picture’ of
the endeavor, to provide the manager with sufficient
information to base decisions during the project on
the overall strategic or business objectives that are to
be accomplished. Related information about objec-
tives, specifications, priorities and possible con-
straints are needed during the planning stages.
Throughout the implementation stage the communi-
cation needs change from provision of data by the
owner, to review and acceptance of plans and deliv-
erables together with early warnings if the client can
not fulfil his obligations stated in the project plan. At
the close of the project, the owner needs to provide
information about the degree to which the overall
business objective was achieved with the project; that
is, how well the project outcome did fulfil the expec-
tations. That allows the project manager to draw les-
sons learned for future projects and provide adequate
information to the project team and other stake-
holders.
This begs the question of how much information is
enough for a project manager to make rational
decisions. Simon’s (1957) theory of bounded ration-
ality explains humans’ intended but only limited
rational behavior, and how they simplify their
decision processes by satisfying rather than maximiz-
ing efforts and information in finding appropriate
courses of action. Using bounded rationality, it can
be seen that project managers may compromise on
the information needed for them to understand the
overall objectives of a project. Satisfying behavior
331
PROJECT MANAGEMENT
leads them to stop asking for more in-depth infor-
mation at a level when the project objectives are only
partially understood. The associated lack of under-
standing of the project context prevents the manager
from understanding the overall strategic or business
objective of the project, which prevents project man-
agers from full collaboration with the project owner,
because of the differences in knowledge about the
project. Collaboration, however, is a key condition
for high performance in projects.
Communication on Projects — Manager
to Owner
The project management literature frequently out-
lines the importance of good communication for suc-
cess in projects (Hartman, 2000; Müller & Turner,
2001; Standish Group, 1998; Oz & Sosik, 2000; Keller,
2001; PMI, 2000). However, the generic nature of the
majority of project management textbooks and art-
icles does not allow for clear recommendations on
how project managers should communicate with their
clients in a given project situation. Rather than that,
the literature provides a variety of possible com-
munication frequencies and contents subjects and
leaves it to the practitioners to adjust their communi-
cation practices to their project’s situation. These gen-
eric recommendations are discussed in this section
and contrasted with the empirical research findings
on communication structures in projects (Müller,
2003).
Communication Frequency
This refers to the number and timings of the project
managers’ communication with the client. The rec-
ommendations from the literature can be classified as
calendar driven or event driven. The former is com-
munication at daily, weekly, bi-weekly or monthly
intervals, and the latter communication at project
phase or milestone completion.
While project management methodologies often rec-
ommend monthly and milestone reports, many
authors of journal articles recommend more frequent,
but less formal communication, through frequent
phone calls or by use of continuously updated project
related Internet web-sites (Müller, 2001). While these
authors claim their practices reduce bureaucratic
overhead, they run the risk of ‘overloading’ clients
with unnecessary details or simply too much infor-
mation in a short timeframe. This can lead clients to
ignore the information and to become concerned
about their knowledge about the project status, or
tempts them to get involved at a detailed level and
start to micro-manage the project themselves,
undermining the project manager’s authority. Müller
(2003) showed that project managers and their clients
332
distinguish between three communication fre-
quencies:
❖ continuous communication, daily or at least
weekly interaction — this is the most preferred fre-
quency across all projects
❖ fixed interval communication, at bi-weekly or
monthly intervals — this frequency is most pre-
ferred in high performing projects with high levels
of collaboration
❖ variable interval communication, at milestone or
project phase end achievement — this is occasion-
ally preferred in order to reduce communication
efforts in projects. It shows a risky decrease in at
least one party’s interest in the project, and can
lead to a decrease in collaboration and subsequent
project failure
This suggests that it is regular, daily or weekly com-
munication that gives the client as principal the gre-
atest comfort that they are being kept informed of
project progress and of the decisions being taken by
the manager on their behalf. It is this that builds the
greatest trust in the project manager as agent. It may
be expensive, but it is part of the agency costs of the
project fulfilling the client’s information needs and
the manager’s bonding needs.
Communication Content and Media
Project managers use a variety of contents and media
for their communications with clients. Formal reports
are perceived by clients as the most credible source
of information (Johnson et al., 1994). The contents of
these reports should be based on the project plan and
use defined control criteria for measuring progress
and forecasting time and cost for completion (Turner,
1999). The review of project management literature
(Müller, 2001) showed that six different categories of
formal communication contents are suggested.
These are:
❖ Status and achievements: reports based on the pro-
ject plan showing plan adherence in terms of
schedule, budget, and implemented functionality.
This is the traditional triple-constraints (budget,
time, and functionality) and the most basic form
of status reporting.
❖ Changes to the project: agreed upon changes in pro-
ject scope, plan, risks, quality requirements, etc,
which require a re-baselining of the project plan.
❖ Issues and open items lists: a continuously main-
tained list of current issues and ‘open items’ that
need to be resolved for project delivery.
❖ Next steps in the project: an update for the client on
the near term activities within the project. It is the
forward-looking update and complements the
backward looking status and achievement reports.
❖ Quality and progress measure: the agreed upon qual-
ity metrics, such as defect measurements on the rate
of software defect discovery and total defects. It
European Management Journal Vol. 22, No. 3, pp. 327–336, June 2004

also comprises integrated project performance
measures, such as earned value management, which
integrates scope, schedule and resource for per-
formance measurement.
❖ Trends in the project: the tendencies within the pro-
ject detected through analysis of project progress,
such as increasing schedule deviation over time,
often calculated from the project’s quality and pro-
gress measures.
Appropriateness of media is a controversial issue in
the literature. As discussed above, some authors from
the industry perceive formal written reports, as sug-
gested by methodologies, as bureaucratic overhead
and prefer the use of more interactive media, thus
turning away from formal, durable and auditable
media with all its consequences in case of legal
actions between the project parties. Müller (2003)
showed that communication contents and media are
intertwined and cannot be separated. Practitioners
distinguish between four different communication
modes:
❖ Personal project reviews: face-to-face meetings with
in-depth discussion of all the contents factors
listed above
❖ Project analysis: information on quality metrics and
project trends, provided through all media (face-
to-face, verbal and written)
❖ Written status reports: written information about
current status and achievements, issues, changes,
next steps and other items needing communi-
cation. These other items are potentially followed
up through verbal (telephone) or face-to-face com-
munication
❖ Verbal updates: brief and timely verbal updates
from the project manager on status and achieve-
ments, issues, changes, next steps
Quick verbal updates are especially appreciated by
clients as a means for reassurance of their correct
understanding of formal written reports provided to
them. The importance of this type of complementary
reporting is shown by the impact of the type of com-
munication media on the effectiveness in communi-
cation. Use of written reports caused ineffective com-
munication by increasing the gap in the project
manager’s and client’s understanding about the pro-
ject’s performance. Contrarily, face-to-face communi-
cation at regular intervals closed this gap and fos-
tered communication efficiency. Face-to-face
communication actually fulfilled the client’s infor-
mation needs better because it gave them greater con-
fidence that they had a true picture of project pro-
gress, and it satisfied the manager’s bonding needs.
This shows the need for a balance in formal and
informal communication. We now outline the charac-
teristics of both.
European Management Journal Vol. 22, No. 3, pp. 327–336, June 2004
PROJECT MANAGEMENT
Formal and Informal Communication
on Projects
Formal communication takes place along official
channels between the project manager and client by
which they provide each other with timely infor-
mation (PMI, 2000). It focuses communication to pro-
ject related matters concerning the respective organi-
zations (Johnson, 1993). Thus formal communication
should follow an expressed purpose and agenda
(Cooper, 2000). PMI (2000) defines reports and
briefings as indicative of formal communication,
whereas ad-hoc conversations are seen as informal
communication. Formal situations and the associated
communication are often referred to as being regi-
mented, deliberate and impersonal in nature; as
opposed to informal situations which are charac-
terized by behavioral spontaneity, casualness, and
interpersonal familiarity (Morand, 1995). Speakers in
formal communication are said to be more commit-
ted to the topic communicated than to the relation-
ship between the two parties, whereas in informal
communication they are more committed to the
relationship than to the topic (Mead, 1990).
While formal communication is perceived as slow in
speed and high in accuracy, informal communication
is perceived to be high in speed and low in accuracy
(Mullins, 1999). This was supported by research done
by Johnson et al. (1994), which showed that formal
communication is more credible than informal com-
munication. This also explains research results which
showed that managers receiving formal project
reports feel more in control of the project (Kraut and
Streeter, 1995). A summary of the differences of for-
mal and informal communication is provided in
Table 1.
People’s perceptions of what constitutes formal as
opposed to informal communication, are formed
through their culture, environment and the situation
in which their communication occurs (Mead, 1990).
That implies that the borderline between formal and
informal communication in the daily work of project
sponsor and manager is not easily identifiable.
Müller (2003) showed the extent to which informal
and formal communication were used was determ-
ined by the frequency of interaction and the potential
audience of the report. One-to-one interactions
between project manager and client were mostly
informal, using face-to-face meetings. Few or major
project issues identified at these meetings were cap-
tured in emails, so they were not forgotten. The meet-
ings outcomes and emails were then used to produce
the periodic formal project report, which was poten-
tially distributed to a wider audience, such as senior
management in both organizations. With an increas-
ing number of readers not personally involved in the
project the nature of the report contents shifted from
trust building (knowing what’s going on) to clear and
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PROJECT MANAGEMENT
Table 1 Differences between Formal and Informal Communication
Characteristic Formal communication
Situation Regimented, deliberate, impersonal Casual, spontaneous, interpersonally familiar Morand (1995)
Commitment Higher for topic than for relationship Higher for relationship than for topic
Credibility of contents High
Style Reports, briefings, etc.
Speed Slow
Accuracy High
formal report on control metrics. So control substi-
tuted trust in cases were informal communication
was not possible. The client’s fear of a moral hazard
problem as stated above, expressed as the desire for
objective project data, like analysis data and other
control metrics, increases with geographic distance
because of the impossibility to build up trust through
informal communication. This is balanced through a
request for analytic data in formal reports, but also
through use of verbal communication (phone calls)
to check the credibility of the report contents.
Loss of Comfort Leading to Loss of
Collaboration
Müller (2003) explored three paths by which a failing
project, or a loss of communication can lead to falling
collaboration, as the client tries to maintain his levels
of confidence and trust, Figure 4. Starting from the
equilibrium point, with high collaboration and
medium structure, and bi-weekly or monthly reports,
we follow the three paths as follows:
Path 1 — Failing projects leading to higher frequency
reporting: this happens if the project gets into dif-
ficulty. There is a loss of trust in the project man-
ager’s competence, or in the project process. Perhaps
the project manager is replaced, but the client now
imposes higher structure and more frequent
Figure 4 Falling Collaboration and Changing Com-
munication with Falling Project Performance
334
Informal communication Source
Mead (1990)
Low Johnson et al.
(1994)
Ad-hoc conversations, memos etc. PMI (2000)
Fast Mullins (1999)
Low Mullins (1999)
reporting to deal with the problems. Empowerment
did not work before. But also, there may not be time
left now to experiment with different approaches to
the project’s delivery. However there is empirical evi-
dence that this is the time to empower the project
manager even more (Turner and Keegan, 2004),
though that requires great trust in the project man-
ager’s competence, which may now be lost.
Path 2 — Remote working leading to falling collaboration:
this happens if one party loses interest in communi-
cation, particularly the client, perhaps because he has
a false idea of the project’s performance, as described
above. It can also occur if the project is on a remote
site. There can be a loss of clarity of objectives and a
loss of relational norms. Van Fenema (2002) describes
appropriate control and communication processes for
remote working.
Path 3 — Misaligned objectives through informal
reporting: this happens through informal infrequent
reporting. The client’s objectives become misaligned
from what the manager is doing. That may be
through bounded rationality or opportunism.
Because the communication is infrequent, the man-
ager loses sight of what the client wants, or because
the client is not taking sufficient interest, the project
manager begins to pursue his own agenda. In this
case, the client needs to reimpose some structure
through more formal communication, which may, in
itself, lead to a better working relationship. The client
also needs to reclarify the objectives with the project
manager. Of course, if trust in the project manager’s
ethical behavior has been lost, it may be necessary to
replace the project manager.
Communication and Emotion on
Projects
Thus we see that communication on projects is linked
to at least four emotions:
1. trust
2. interest in the project
3. the perception of progress
4. comfort and the need for control
European Management Journal Vol. 22, No. 3, pp. 327–336, June 2004

Trust
Hartman (2000) defines trust in project management
as a complex construct with three different ‘flavours’:
Emotional trust: the ability to be able to get on
with somebody and work with them
Ethical trust: the confidence that the other party
will not behave opportunistically, (the inverse of
the moral hazard problem)
Competence trust: the confidence that the other
party knows what they are doing and has the
competence to achieve a successful outcome
Communication can help build trust on a project, and
a breakdown in communication can lead to a break-
down in trust.
❖ Emotional trust can lead to an appropriate balance
of formal and informal communication.
❖ A loss of ethical trust can lead to more frequent
reporting, a breakdown in cooperation and to the
client imposing more structure.
❖ Likewise a loss of competence trust can lead to
more frequent reporting and the client imposing
more structure.
This allows project managers to analyze the reasons
why clients impose rigid structures and to develop
ways to increase trust where needed, so that clients’
comfort levels are achieved which allow for collabor-
ation and high project performance.
Interest in the Project
A high interest in the project on behalf of the client
leads to better performance. If the client shows inter-
est through asking for appropriate levels of
reporting, the project manager will respond to that
interest through better performance. If on the other
hand, the client loses interest, there will be a break-
down in collaboration.
Perception of Progress
Perception of progress is linked to interest. If the cli-
ents are concerned about progress, they will take an
interest in the project and demand appropriate levels
of reporting. If the client has an overoptimistic view
of progress, then that can lead to a lack of interest
and a breakdown in collaboration as above.
Comfort, Performance and the Need for Control
Given that perception of progress is a manifestation
of interest (as described above), we can now conclude
that the client’s overall comfort level is a function of
trust and interest.
European Management Journal Vol. 22, No. 3, pp. 327–336, June 2004
PROJECT MANAGEMENT
Conclusion
We explored communication on projects against the
background of principal-agency theory. We ident-
ified that on the best performing projects the client
develops medium levels of structure with high col-
laboration with the project manager. This gives a
good, trusting, working relationship between them,
while empowering the project manager to deal with
the risk that inevitably arises on projects, but also
leaving the client some control.
However, to make this relationship work, appropri-
ate communication is required to deal with the cli-
ent’s concerns associated with the principal-agent
relationship between them and the project manager.
The client wants to know that the project is being
undertaken in such a way as to deliver the products
as agreed, to appropriate functionality and quality,
and at a time and cost that will let them make a pro-
fit. They also want to know that the project manager
is taking decisions in their best interest, has the com-
petence to do the work and is behaving ethically.
Also most project managers want to do the best job
possible for the client, to understand the client’s
requirements and deliver them to the best of their
ability. They also know that it is in their best interest
to keep the client comfortable and to convince the
client of their competence and ethics, thereby bond-
ing with the client and encouraging the client to
maintain high collaboration and medium levels of
structure. A number of communication forms are
appropriate, but the best results are achieved by
incorporating:
1. A balance of formal and informal communication
2. Maintaining regular (daily or weekly) face-to-
face meetings
3. Providing quantitative data to analyze perform-
ance where appropriate and as required by the cli-
ent.
This leads to mutually satisfying information
exchange, which is a building block for long-term
business relationships.
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