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Project Management in Small and Medium-Sized Enterprises
Project Management in Small and Medium-Sized Enterprises
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IJMPB
2,2 Project management in small
to medium-sized enterprises
A comparison between firms
282 by size and industry
Received 16 September 2008 J. Rodney Turner
Accepted 15 December 2008 Centre of Project Management, Kemmy Business School,
University of Limerick, Limerick, Ireland and
Lille School of Management, Paris, France
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Ann Ledwith
Enterprise Research Centre, University of Limerick, Limerick, Ireland, and
John Kelly
Centre of Project Management, Kemmy Business School,
University of Limerick, Limerick, Ireland
Abstract
Purpose – Small to medium enterprises (SMEs) play an important role in the economy, in terms of
employment and their contribution to national wealth. A significant proportion of that contribution
comes from innovation. SMEs are also the engine for future growth in the economy. Project
management has a role to play in managing that innovation and growth. The purpose of this paper is
to find the extent to which SMEs use projects, project management and the tools of project
management, and to determine what differences there are by size of company and industry.
Design/methodology/approach – A questionnaire was developed to examine the extent to which
small firms carry out projects, the resources they employ, the way they measure project success and
the tools and techniques that they use. The questionnaire was answered by 280 companies from a
range of industries and sizes.
Findings – It is found that companies of all sizes spend roughly the same proportion of turnover on
projects, but the smaller the company, the smaller their projects, the less they use project management
and its tools. Surprisingly, hi-tech companies spend less on projects than lo-tech or service companies,
but have larger projects and use project management to a greater extent. They also use the gadgets of
project management to a greater extent.
Research limitations/implications – It is concluded that SMEs do require less-bureaucratic
versions of project management, perhaps with different tool sets than the more traditional versions
designed for medium-sized or large projects, and with different versions for medium, small and micro
projects. For all firms, the important success factors are client consultation; planning, monitoring and
control; and resource allocation are also identified.
Originality/value – The findings suggest the need for further research into the nature of those “lite”
versions of project management designed for SMEs.
Keywords Small to medium-sized enterprises, Innovation, Project management, Economic growth
The potential contribution of SMEs to the economy leads to the conclusion they need to
increase their competitiveness and quality to match or exceed the competition.
We would expect the use of project management to play a significant role in the
management of innovation and growth in SMEs, but in a way that is tailored to meet
their needs. Project management is a well-established discipline that defines in the
tools and techniques required to define, plan and implement projects. However, project
management was developed initially in the heavy engineering industries, particularly
construction, defence, aerospace and ship-building (Morris, 1994). It subsequently
evolved to address smaller projects, but medium-sized projects in large firms (Turner,
2008). For instance, it is recognized that the PRINCE2e process (Office of Government
Commerce, 2005) is appropriate for medium-sized projects but not very small projects,
and especially not small projects in SMEs, because it is highly bureaucratic (Payne and
Turner, 1999). Thus, while many researchers have addressed the issues surrounding
the management of projects within large firms (White and Fortune, 2002; Bryde, 2003;
Thomas and Mullaly, 2008), little has been published to date about the management of
projects in SMEs.
Ghobadian and Gallear (1997) described differences between SMEs and larger
organizations. In particular, they identified the following:
.
Processes. SMEs require simple planning and control systems, informal
evaluation and reporting.
IJMPB .
Procedures. SMEs have a low degree of standardization, with idealistic decision
2,2 making.
.
Structure. SMEs have a low degree of specialization, with multi-tasking, but a
high degree of innovativeness.
.
People. Because of the higher consequence of failure in SMEs, people prefer
tested techniques.
284
Ledwith (2004) and Murphy and Ledwith (2007) have conducted initial investigations
into project management practices in SMEs in high-tech and service industries in
Ireland. They identified, that SMEs should follow a structured process for selecting
their project management practices, by identifying: their strategic objectives;
appropriate success criteria and key performance indicators for their projects; and
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thus appropriate success factors; and thus appropriate project management tools and
techniques, which meet the criteria outlined above.
SMEs need project management to manage their innovativeness in a focused manner,
and to achieve growth and satisfy their strategic objectives in a way that minimizes the
high-inherent risk. But SMEs have been found to have poor project management practices
(Owens, 2006; Ledwith, 2004). Typically, they do not have systems in place to monitor and
control projects and they have ill defined project management roles and structures
(Owens, 2006). We would expect the project management procedures in SMEs to conform
to the principles outlined by Ghobadian and Gallear (1997) as listed above. They must
provide simple planning and control, and informal evaluation and reporting. They must be
usable by everybody in the organization and support the idealistic decision making. Thus,
we would expect SMEs to require a “lite” version of project management, less bureaucratic
than the traditional versions designed for large engineering projects, and less bureaucratic
than some recent versions designed for medium-sized projects (Office of Government
Commerce, 2005). At the Centre for Project Management at the University of Limerick, we
are conducting research to determine the nature of this lite version of project management
appropriate for SMEs.
We conducted this initial investigation to confirm some of the assumptions above,
particularly that while SMEs use project management, their projects are smaller and
they make less use of the tools and techniques of project management than larger
organizations. Thus, we wish to answer the following questions:
.
To what extent do SMEs use projects, project management and the tools and
techniques of project management?
.
Are there differences by size of company and by industry?
.
Does this point to the need for a “lite” version of project management for SMEs?
In the next section, we describe our methodology. We then describe our results by size
of company and by industry. The results point to the need for a “lite” version of project
management for SMEs.
Methodology
We developed a questionnaire to examine the extent to which small firms carry out
projects, the resources they employ, the way they measure project success and the tools
and techniques that they use. The questions used are shown in the appendix.
SMEs are not a homogonous group, in recognition of this we decide to target three Project
separate groups of firms, those operating in areas of high technology, hi-tech SMEs, management
those operating in low-technology industries, lo-tech SMEs and those operating in the
services sector, services SMEs. in SMEs
The questionnaire was administered in three waves between 2007 and 2008. Initially,
hi-tech firms were targeted, a sample of over 200 firms operating across a range of
sectors that included medical devices, telecommunications, electronics and general 285
engineering were contacted and sent an online questionnaire. Valid responses were
received from 38 firms. The second wave of data collection targeted SMEs in the service
sector; again over 200 questionnaires were distributed this time to firms in the
hospitality, financial services, construction and automobile sectors. In total 51 valid
responses were collected. Finally, the questionnaire was administered to over 200 SMEs
operating in the lo-tech sector, primarily firms operating in the food, paper and plastics
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industries. This resulted in a further 29 responses. The overall response rate for the
study was approximately 20 per cent.
Table I shows our 118 respondent companies, divided into micro, small and medium
companies, and hi-tech, lo-tech and service industries.
We hade sufficient responses from each type to be able to compare responses by size
of company and by industry.
Use of projects
Table II shows the percentage of turnover spent on projects in the three sizes of company.
We see there is very little difference by size. About half of all companies in each of
the three sizes spend less than 20 per cent of turnover on projects, whereas about
5-10 per cent spend over 80 per cent. On average, all three sizes of company spend around
a third of their turnover on projects.
This is consistent with the conclusion of Anbari et al. (2008) that about one-third of
the economy is project based. However, when we look at size of projects undertaken,
Table III, unsurprisingly there is a difference by size of firm.
Percentage
0-20 20-40 40-60 60-80 80-100 Average
Table II.
Micro 45.8 16.7 16.7 12.5 8.3 34 Amount of turnover
Small 50.0 17.2 20.7 1.7 10.3 31 spent on projects by size
Medium 44.4 19.4 16.7 13.9 5.6 33 of company
IJMPB In micro companies, over half the projects undertaken are less than three months
2,2 duration, whereas in small companies the largest number is in the 3-6 month bracket
and in medium-sized companies in the 6-12 month bracket. Project duration appears to
increase with company size.
Table IV shows the number of people working on projects. Unsurprisingly, very few
micro companies have more than ten people working on projects, but 12 per cent do,
286 suggesting they are using contractors. There is very little difference between small-
and medium-sized companies in 10-30 bracket, but more than three times the number
of medium-sized companies have more than 30 people working on projects than the
other two size of company.
Thus, as firms grow in size, they do not do more projects as a percentage of
turnover, but projects grow in size. This is consistent with the findings of Ghobadian
and Gallear (1997) that in smaller companies people prefer trusted techniques because
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, 3 months (%) 3-6 months (%) 6-12 months (%) .12 months (%)
Use of projects
Table VII shows the percentage of turnover spent on projects by companies in the three
industries.
Surprisingly, the least amount is spent on projects in the hi-tech industries, where
63 per cent of companies spend less than 20 per cent of their turnover on projects, and
the largest amount by lo-tech companies, where 62 per cent of companies spend more
than 20 per cent. Companies from the service industries lie in between. On average,
companies from the hi-tech industries spend 24 per cent of their turnover on projects;
hi-tech companies to be doing bigger projects than service industries, whereas it is the
other way around. Thus, it would seem that the nature of hi-tech projects is that they are
smaller and of projects in the service industry that they are larger. Looking at the size of
project teams, Table IX, the findings of hi- and lo-tech companies are reversed.
In fact, with lo-tech companies, the number of companies with teams sized 1-10 and
10-30 is almost the average for small and micro companies, suggesting that the
numbers are mainly due to size of company. The exception is with teams of more than
30 people, where lo-tech companies have the largest number and more than for small
and micro companies. With hi-tech companies, the figures do not reflect at all the
figures for small and medium companies, which comprise companies from the hi-tech
sector. Hi-tech companies have smaller teams than the averages for those sizes of
Percentage
0-20 20-40 40-60 60-80 80-100 Average
Table VII.
Amount of turnover Hi-tech 63.2 18.4 10.5 2.6 5.3 24
spent on projects by Lo-tech 37.9 13.8 20.7 6.9 20.7 42
industry Service 41.2 19.6 23.5 11.8 3.9 34
,3 months (%) 3-6 months (%) 6-12 months (%) .12 months (%)
half the rest each of micro and medium. Thus, the use of project management seems to
be related to size of company rather than the nature of the industry.
the advanced tools appeal to them more than the lo-tech companies, but still less
than for the hi-tech ones.
Discussion
The results are not very surprising and confirm our expectations, but they are
important for that reason. SMEs use projects and project management. There was no
difference in the amount of turnover spent on project management, being roughly
one-third for all sizes of company, medium, small and micro. Since SME’s account for
about 70 per cent of the private sector economy (see above), we can see that about
20 per cent of the private sector economy is projects in SMEs. Projects in SMEs is
something that receives very little attention in the project management community, but
they contribute the same to the economy, 20 per cent as large infrastructure projects
(Anbari et al., 2008) and so should receive the same attention.
The smaller the company, the smaller the size of project they undertake. Thus, we
can conclude: smaller companies undertake smaller projects.
Companies make greater use of project management as they increase in size, being
more likely to employ professional project managers, and being more likely to recognize
project management as an identifiable process. Further, larger companies are more likely
to use the tools and techniques of project management, especially the gadgets such as
MS-Project, Gantt charts, CPM and earned value. Only the largest companies from the
hi-tech industries feel the need to use stage-gate reviews. There is nothing to suggest that
smaller companies are frightened of project management, but we can conclude: smaller
companies require project management procedures tailored to the smaller projects they
undertake. They need less process (Turner et al., 2008).
Turner et al. (2008) have identified that the tools most important to smaller
companies are requirements management and resource scheduling, with work
breakdown, milestone planning and quality management the next most important.
Comparing by industry, lo-tech companies spend most of their turnover on projects,
followed by service companies. Lo-tech companies undertake the smallest projects, but
that may explained by the fact that they tended to be smaller companies in our sample.
Hi-tech companies were more likely to employ project managers, recognize project
management as an identifiable process and use the tools and techniques of project
management. Particularly, they made greater use of the gadgets. Whether that is
because their projects demand it, or the gadgets are more likely to appeal to the type of
person working for a hi-tech company there is no evidence. However, the use of
stage-gate reviews is consistent with the finding of Turner (2008) that hi-tech projects Project
require them. management
in SMEs
Project success
We also gathered data on project success. First, we asked our respondents to report the
success of their projects against the triple constraint, budget, schedule and performance.
We asked them to rate success on a scale of 1-5, where 1 is unsuccessful and 5 very 291
successful. The results are shown in Table XII by size of company and industry.
Micro companies reported better outcomes on budget and schedule than the
other two sizes of company, and medium-sized companies reported better
outcomes on performance. However, these results were not statistically significant.
Lo-tech companies reported better outcomes against all three success criteria than
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service companies, and service companies reported better outcomes than hi-tech
companies. The difference between hi-tech companies and lo-tech companies was
statistically significant, and so we conclude: lo-tech companies achieve better project
outcomes than hi-tech companies.
This is perhaps to be expected, since we expect projects in hi-tech companies to be
of higher risk and complexity.
We also asked our respondents to rate the importance of success criteria and identify
significant success factors for their projects. We asked them to rate the importance of the
following seven success criteria as suggested by Müller and Turner (2007):
(1) budget;
(2) schedule;
(3) quality standards;
(4) specification;
(5) appreciation by users;
(6) appreciation by stakeholders; and
(7) appreciation by project personnel.
With differences by size of firm, the only significant difference was appreciation of
project personnel was rated significantly lower by micro firms than the other two.
This is consistent with micro firms not having dedicated project personnel. There were
more differences by industry. Budget and schedule were less important in hi-tech firms
than they were in service firms. This would be consistent with their inferior outcomes,
except there was no difference with lo-tech firms. Appreciation by users was more
important in service firms than those from the other two industries, and appreciation
The only difference in the rating of importance by either size of firm and industry was
resource allocation was thought to be more significant by medium-sized firms than
either micro or small firms. This is interesting because Turner et al. (2008) report that
resource allocation is thought to be the most important planning tool by most of the
firms they have interviewed. Thus, firms are identifying internally that resource
allocation is important to them and that is supported by these results.
Finally, we investigated whether project success as shown in Table XII is correlated
with the importance given to the success factors. The results are reported in Table XIII.
We see that for all firms, the factors contributing most to success are: client
consultation; planning, monitoring and control; and resource allocation. The first of
these was identified as being one of the most important by Pinto and Slevin (1988), and
is repeated for micro- and medium-sized firms. The importance of planning, monitoring
and control is consistent with the use of these tools as shown in Tables VI and XI. We
also identify the importance of resource allocation again. Client consultation was also
important in small firms. However, there are not clearly identifiable differences
between firms based on size. Where there are differences is between firms by industry.
There were no correlations with hi-tech firms, suggesting that other success factors are
From the analysis of the use of projects, project management and project tools,
we conclude that SMEs do require “lite” versions of project management, with simplified
tool sets than the more traditional versions designed for medium-sized or large projects,
and with different versions for medium, small and micro projects. Further, SMEs need to
be guided as to what tools sets they should use, not given a longer list from which they
need to choose (Turner et al., 2008). We also identify that for all firms the important
success factors are client consultation; planning, monitoring and control; and resource
allocation. In firms, from the service industry, senior management support and risk
management are also important.
This is of interest to researchers, trainers and consultants to develop “lite” versions
of project management for SMEs. Different versions may also be required for different
industries. The conclusion will also be of interest to practitioners, since it may confirm
what they already know, that they should be selective of the amount of project
management process they implement dependent on the size of their projects and the
industry they come from.
The results will form the basis of our research at the Centre for Project Management
at the University of Limerick to develop the “lite” versions of project management.
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