Cambridge Handbook of Organizational Project Management 1316662241, 9781316662243

Table of contents :
Cover
Front Matter
Cambridge Handbook of Organizational Project
Management
© Cambridge University Press 2017
Contents
Figures
Tables
Contributors
Foreword
Introduction
PART I.

Strategy
INTRODUCTION TO PART I
1. The Nature of Organizational Project
Management through the Lens
of Integration
2. The Business of Projects
in and across Organizations
3. Strategic OPM
Why Companies Need to Adopt a Strategic
Approach to Project Management
4. Strengthening the Connections
between Strategy and Organizational
Project Management
5. Project Portfolio Management
A Dynamic Capability and Strategic Asset
PART II.

Organizations
INTRODUCTION TO PART II
6. The Governance of Organizational
Project Management
7. Project Portfolio Management
The Linchpin in Strategy Processes
8. Program Management
9. Organizing for the Management
of Projects
The Project Management Office
in the Dynamics of Organizational Design
10. Project Governance and Risk
Management
From First-Order Economizing
to Second-Order Complexity
PART III.

People
INTRODUCTION TO PART III
11. Human Resource Management
in Organizational Project
Management
Current Trends and Future Prospects
12. Stakeholders
13. Balanced Leadership
A New Perspective for Leadership in
Organizational Project Management
14. Project Teams and Their Role in
Organizational Project Management
15. REAL Knowledge at NASA
A Knowledge Services Model for the Modern
Project Environment
16. Change Management as an
Organizational and Project
Capability
17. The Behavioral “Glue” in OPM
A Review of Productive Behaviors of Project
Team Members
18. Developing Organizational Project
Management Competencies through
Industry Clusters
PART IV.

New Directions
INTRODUCTION TO PART IV
19. Ethics in Projects
20. Multilevel Value Creation
in Projects, Programs, and Portfolios
Results from Two Case Studies
21. An Inherent Complexity
Projects and Organizations
22. Organizational Project Management
and Sustainable Development (SD)
Managing the Interface of Organization
and Project SD Benefits
23. The Marketing of Organizational
Project Management
24. Shared Space for Organizations
Enablers for Innovative Projects
25. Social Media and Project
Management
Symbolism in Action
Conclusions
Index

Citation preview

Cambridge Handbook of Organizational Project Management In recent years, organizational project management (OPM) has emerged as a field focused on how project, program, and portfolio management practices strategically help firms realize organizational goals. There is a compelling need to address the totality of project-related work at the organizational level, providing a view of organizations as a network of projects to be coordinated among themselves, integrated by the more permanent organization, and to move away from a focus on individual projects. This comprehensive volume provides views from a wide range of international scholars researching OPM at a cross-disciplinary level. It covers concepts, theories, and practices from disciplines allied to management, such as strategic management, organization science, and behavioral science. It will be a valuable read for scholars and practitioners alike, looking to enrich their understanding of OPM and further investigate this new phenomenon. shankar sankaran is Professor of Organisational Project Management (OPM) in Australia at the University of Technology Sydney. ralf mu¨ ller is Professor of Project Management in BI Norwegian Business School in Oslo and a former Associate Dean at the Business School. nathalie drouin is the Executive Director of KHEOPS, an International Research Consortium on Large Infrastructure Projects, the Editor-in-Chief of the International Journal of Managing Projects in Business, a full professor, Department of Management and Technology, School of Management at Université du Québec at Montreal (ESG UQAM), and Adjunct Professor (Honorary Appointment) at University of Technology Sydney, Australia.

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Cambridge Handbook of Organizational Project Management Edited by

SHANKAR SANKARAN University of Technology Sydney

RALF MÜLLER BI Norwegian Business School

NATHALIE DROUIN Executive Director of KHEOPS

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University Printing House, Cambridge CB2 8BS, United Kingdom One Liberty Plaza, 20th Floor, New York, NY 10006, USA 477 Williamstown Road, Port Melbourne, VIC 3207, Australia 4843/24, 2nd Floor, Ansari Road, Daryaganj, Delhi – 110002, India 79 Anson Road, #06–04/06, Singapore 079906 Cambridge University Press is part of the University of Cambridge. It furthers the University’s mission by disseminating knowledge in the pursuit of education, learning, and research at the highest international levels of excellence. www.cambridge.org Information on this title: www.cambridge.org/9781107157729 DOI: 10.1017/9781316662243 © Cambridge University Press 2017 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2017 Printed in the United Kingdom by Clays, St Ives plc A catalogue record for this publication is available from the British Library. ISBN 978-1-107-15772-9 Hardback Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party Internet Web sites referred to in this publication and does not guarantee that any content on such Web sites is, or will remain, accurate or appropriate.

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Contents

List of Figures viii List of Tables x List of Contributors xi Foreword Jörg Sydow xvii Introduction 1 Shankar Sankaran, Ralf Müller, and Nathalie Drouin

PART I

STRATEGY

5

Introduction to Part I Nathalie Drouin

7

1

The Nature of Organizational Project Management through the Lens of Integration 9 Nathalie Drouin, Ralf Müller, and Shankar Sankaran

2

The Business of Projects in and across Organizations 19 Miia Martinsuo, Rami Sariola, and Lauri Vuorinen

3

Strategic OPM 33 Why Companies Need to Adopt a Strategic Approach to Project Management Vered Holzmann, Aaron Shenhar, and Joca Stefanovic

4

Strengthening the Connections between Strategy and Organizational Project Management 44 Kam Jugdev

5

Project Portfolio Management 55 A Dynamic Capability and Strategic Asset Catherine P. Killen and Nathalie Drouin

PART II ORGANIZATIONS

71

Introduction to Part II Ralf Müller

73

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Contents

6

The Governance of Organizational Project Management 75 Rodney Turner and Ralf Müller

7

Project Portfolio Management 92 The Linchpin in Strategy Processes Julian Kopmann, Alexander Kock, and Catherine P. Killen

8

Program Management 106 Peerasit Patanakul and Jeffrey K. Pinto

9

Organizing for the Management of Projects 119 The Project Management Office in the Dynamics of Organizational Design Monique Aubry and Mélanie Lavoie-Tremblay

10 Project Governance and Risk Management 134 From First-Order Economizing to Second-Order Complexity Stephane Tywoniak and Christophe Bredillet

PART III PEOPLE

149

Introduction to Part III Shankar Sankaran

151

11 Human Resource Management in Organizational Project Management 153 Current Trends and Future Prospects Anne Keegan, Martina Huemann, and Claudia Ringhofer 12 Stakeholders 172 Pernille Eskerod 13 Balanced Leadership 186 A New Perspective for Leadership in Organizational Project Management Ralf Müller, Johann Packendorff, and Shankar Sankaran 14 Project Teams and Their Role in Organizational Project Management 200 Nathalie Drouin and Shankar Sankaran 15 REAL Knowledge at NASA 215 A Knowledge Services Model for the Modern Project Environment Ed Hoffman and Jon Boyle

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Contents

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16 Change Management as an Organizational and Project Capability 236 Julien Pollack 17 The Behavioral “Glue” in OPM 250 A Review of Productive Behaviors of Project Team Members Timo Braun 18 Developing Organizational Project Management Competencies through Industry Clusters 268 Chivonne Algeo and Julia Connell

PART IV NEW DIRECTIONS

281

Introduction to Part IV Shankar Sankaran

283

19 Ethics in Projects Øyvind Kvalnes

285

20 Multilevel Value Creation in Projects, Programs, and Portfolios 295 Results from Two Case Studies Karyne Ang and Christopher Biesenthal 21 An Inherent Complexity 311 Projects and Organizations Kaye Remington 22 Organizational Project Management and Sustainable Development (SD) 326 Managing the Interface of Organization and Project SD Benefits Lynn A. Keeys and Martina Huemann 23 The Marketing of Organizational Project Management 344 Rodney Turner and Laurence Lecoeuvre 24 Shared Space for Organizations Enablers for Innovative Projects Kim van Oorschot

357

25 Social Media and Project Management Symbolism in Action Hélène Delerue and Tom Cronje

370

Conclusions 383 Ralf Müller, Shankar Sankaran, and Nathalie Drouin

Index

386

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Figures

1.1 OPM and its lens of integration. 13 2.1 Summary of key business decisions at the front end of the project. 21 2.2 Illustration of the research setting in the construction project networks. 21 2.3 Business issues in project control at the different levels of the PBO. 25 2.4 Summary of key business decision issues in the postproject phase. 25 2.5 Summary of business decisions over the project life cycle. 29 3.1 Strategic project management maturity. 34 3.2 Strategic vs. operational goal projects. 35 3.3 Organizational demographics. 37 3.4 SPMM dimensions’ means. 38 3.5 Maturity dimensions and their impact on project strategic value. 39 4.1 The strategic management process. 46 6.1 Three organizations involved in the management of projects. 76 6.2 Three levels of results on projects. 76 6.3 Three portfolios of which the project is a part. 76 6.4 The investment portfolio of the investor organization. 77 6.5 Four roles in the governance of projects. 81 6.6 Four governance structures for projects. 84 6.7 The cascade from corporate strategy to project strategy 85 7.1 The relationship between intended and realized strategy (based on Mintzberg & Waters, 1985). 93

7.2 A project portfolio perspective of planned and emergent strategic elements. 94 7.3 Cascade model. Extended from Morris & Jamieson, 2005. 94 8.1 A possible management setting in an organization. The effectiveness in managing a group pf multiple projects: Factors of influence and measurement criteria. 108 9.1 Theoretical background within a process approach. 123 9.2 Case A: Organizational design. 125 9.3 Case B: Organizational design. 126 9.4 Case C: Organizational design. 126 10.1 First-order v. second-order risk approaches. 141 10.2 The Norwegian State Project Model – Stage Gate Approval process. 142 13.1 Leading and leadership, vertically and horizontally. 193 15.1 Knowledge services strategic framework. 220 15.2 NASA Knowledge Map and legend. 221 15.3 NASA REAL Knowledge model. 225 15.4 The 4A Word Cloud. 228 15.5 NASA Knowledge Referee process. 231 16.1 Models of the relationship between project management and change management. 245 17.1 Within- and between-project cross-fertilization. 262 17.2 Interdisciplinary cross-fertilization. 263

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List of Figures

19.1 The Navigation Wheel. 288 22.1 Illustrative hierarchy of projects as system actors within SD system. 329 22.2 Individual project SD system actor. 330 22.3 SD-OPM benefits keystone. 333 22.4 SD benefits cocreation process. 337 23.1 Three organizations involved in the management of projects. 345 23.2 The project process and three levels of project results. 346 23.3 The project management process. 350

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23.4 23.5 23.6 23.7

A stakeholder engagement process. 350 A model for emotional intelligence. 351 Four phases of project marketing. 353 Three customers for the contractor’s account team. 354 24.1 Intended and unintended effect of segregation in traffic and the shared space solution. 360 25.1 The dynamic development process for the use of social media by project teams. 378

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Tables

3.1 Correlations of Maturity with Success Dimensions 39 3.2 The Evolution of OPM from Traditional PM to Strategic PM 41 9.1 Description of the Cases 125 9.2 Projects Portfolio/Case 127 9.3 Trajectory of the PMO 128 11.1 Challenges and Potentials of Project Work 155 11.2 Summary of HRM Processes Practices on Projects Identified in the Literature 157 11.3 Summary of HRM Practices and Processes Linking the Project and the Project-Based Organization 160 12.1 Contrasting a Project-Centric Approach and a Stakeholder-Centric Approach 182 14.1 Review of Literature on Themes on Project Teams 205

17.1 Publications with a Focus on Productive Behavior in Projects, 2006–2016 252 17.2 Reviewed Studies on Sharing Behavior 254 17.3 Reviewed Studies on Extra-Productive and Improvising Behaviors 257 17.4 Antecedences of Productive Behavior 260 17.5 Consequences of Productive Behavior 261 18.1 Details of PM Competencies 270 20.1 Reference to Organizations, Interviewee Codenames, and Roles 298 22.1 Project-Oriented Culture 331 22.2 SD, OPM, and Project Compatibility 333 23.1 Stakeholders in the Investment, and Their First Engagement 347 23.2 A Model for Emotional Intelligence 351

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Contributors

Shankar Sankaran is Professor of Organisational Project Management at the Faculty of Design Architecture and Building at the University of Technology Sydney (UTS), Australia, and Core Member of the Built Environment Informatics and Innovation Research Centre and a Chief Investigator of the UTS Centre for Research on Megaprojects. He is an investigator in a PMI Sponsored Research Grant on project leadership led by Ralf Müller and a principal investigator in the PMI Sponsored Research Grant on Governance of Innovation in Portfolios, Programs and Projects (3P). Shankar teaches Organizational Project Management in the Master of Project Management Program at UTS. He has supervised over thirty doctoral students, worked as a chief investigator in two Australian Research Council funded research grants, published/presented over one hundred research papers, served as special issues editor in leading project management journals, edited three books, and contributed over fifteen book chapters. He is on the editorial board of the International Journal of Project Management. Shankar joined academia after several years of experience as a major project manager and senior operations manager in Yokogawa Electric Asia, Singapore. Shankar is the secretary of and a subject matter expert in Work Group 8 of the ISO TC 258 developing standards in the field of project, program, and portfolio management. Ralf Müller is Professor of Project Management and former Associate Dean at BI Norwegian Business School as well as adjunct and visiting professor at many other institutions worldwide. He lectures and researches in leadership, governance, organizational project management, and research methods, which is the subject of his more than 200 academic publications. Among the awards he

received are the 2016 PMI Fellow of the Institute Award, the 2015 PMI Research Achievement Award (a lifetime achievement award), the 2012 IPMA Research Award, and the 2009 Project Management Journal Best Paper of the Year Award. He is Senior Editor of the Project Management Journal and founder of the first PMI Chapter in Europe. Before joining academia, he spent thirty years in the industry consulting with large enterprises and governments in more than fifty different countries for their project management and governance. He also held related line management positions, such as the Worldwide Director of Project Management at NCR Corporation. Nathalie Drouin is Executive Director of KHEOPS, an International Research Consortium on the Governance of Large Infrastructure Projects, the Editor-in-Chief of the International Journal of Managing Projects in Business, Full Professor, Department of Management and Technology, School of Management at Université du Québec at Montreal (ESG UQAM) and Adjunct Professor of the University of Technology Sydney, Australia. She was formerly an Associate Dean, Research at ESG UQAM, and Director of the Graduate Project Management Programs, ESG UQAM. She teaches initiation and strategic management of projects in the Graduate Project Management Programs. Her research has been funded by various research councils. The result of her work has been published in major academic journals and presented at several international conferences. Her work on virtual project teams’ success and organizational capabilities within project context and project management research methods led to the publication of the first book on methods for project management research, Novel Approaches to Project Management Research: Translational and xi

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List of Contributors

Transformational, coedited with Ralf Müller and Shankar Sankaran. She is a member of the PMI Academic Member Advisory Group, the Board of Directors of the Logistics and Transportation Metropolitan Cluster of Montreal (CARGO M), and the Board of Directors of KHEOPS, an International Research Consortium on the Governance of Large Infrastructure Projects. Chivonne Algeo is Associate Professor of Project Management at Monash University and researches on knowledge exchange in projects. She has won international awards for her research, and has twenty years of experience delivering international projects. Chivonne is the chair of the ANZAM Project Organising SIG; a member of PMI; and a Life Fellow of the AIPM. Karyne Ang is affiliated with the University of Technology Sydney (UTS), Australia. Her research into multiple stakeholder perspectives of value in project portfolios could contribute to opportunities for optimizing relevant value constructs for decision-making that are aligned with the organization’s and stakeholders’ strategic intents. Monique Aubry is a professor at the School of Management, UQAM. Her main research interest concerns organizing for projects and organizational design. She is a member of the Project Management Research Chair (www.pmchair.uqam.ca) and the UQAM’s Health and Society Institute. She is Senior Editor at the Project Management Journal. Christopher Biesenthal is a senior lecturer at the University of Technology Sydney. His main research area is project governance. Project governance is primarily concerned with the alignment of different organizational directions. This fuzzy intersection where strategy and project management meet provides grounds to investigate the nature of organizational practices. Jon Boyle is NASA Agency Deputy Chief Knowledge Officer, where he contributes to the development of the overall NASA Technical Workforce. He possesses expertise in Cognitive Neurosciences, Industrial/Organizational Psychology, Knowledge Management, Group

Processes, Human Resources and Workforce Development, Business Strategy, TechnologyEnabled Learning, Research and Development, and Process Improvement. Timo Braun is Junior Professor for Project Management at the Freie Universität Berlin in Germany. He has published on cooperative human behavior in projects and interorganizational networks as well as on cross-organizational perspectives on entrepreneurial processes. His PhD project was honored by the IPMA Germany award for the best doctoral thesis in 2013. Christophe Bredillet is Professor of Organizational Project Management at Université du Québec à Trois-Rivières (UQTR). He is director of the Doctoral program in business administration. His main interests are in Philosophy of Science and Practice and complex/organizational project management. He received the IPMA Research Achievement Award 2016. Julia Connell is an Adjunct Professor of Management, Curtin University and an honorary fellow at the University of Technology, Sydney (UTS). She has published widely on topics related to employment, change and organizational effectiveness as well as consulting to a number of public and private sector organizations on related topics. Tom Cronje has an academic career that consists of lecturing and research in different business management areas, which include collaborative research on social media. He also has industry experience in manufacturing and retail business management, including the development and launching of new products. Hélène Delerue is Project Management Research Chair (www.pmchair.uqam.ca) at UQAM, and holds a PhD in Management (Paris-Dauphine). She is a Full Professor at the Management and Technology Department at Université du Québec à Montréal (ESG UQAM). Her current work focuses on relational risk management in alliance relationships, R&D processes, and R&D project portfolio management.

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List of Contributors

Pernille Eskerod is Full Professor at the Department of Business and Management, Webster Vienna Private University, Austria. She conducts research within change management and project management. She has authored more than one hundred publications, including the book RETHINK! Project Stakeholder Management (2016, with Martina Huemann & Claudia Ringhofer), based on a competitive PMI research grant. Ed Hoffman was the first NASA Chief Knowledge Officer (CKO) in 2011. He focuses on the policies, strategies, processes, and practices for promoting a successful knowledge creation, retention, and sharing culture in support of mission success. He also works with industry, academia, professional associations, and government agencies to develop the agency’s capabilities in program and project management. Vered Holzmann is a lecturer in the Faculty of Management, Tel-Aviv University, and researches the topics of innovation and entrepreneurship, project management and strategy. She manages international projects in the fields of higher education, information systems and software development and served as VP for research and academic affairs in PMI Israel Chapter. Martina Huemann is a professor at the WU Vienna University of Economics and Business, where she heads the Project Management Group in the Department Strategy & Innovation and is the Academic Director of the Professional MBA Program: Project Management. She is cofounder and manager of enable2change, a network of independent experts who translate strategy into action. Kam Jugdev is a Professor of Project Management and Strategy in the Faculty of Business at Athabasca University, Alberta, Canada. Kam enjoys teaching students in project management and strategy. Her research spans competitive advantage, lessons learned, burnout, the free rider phenomenon, and project success/failure. Anne Keegan is Professor of Human Resource Management at UCD School of Business, Ireland.

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She carries out research on HRM and leadership in a project-based organizational context and has published in leading HRM, general management, and project management journals. Lynn Keeys is a visiting research fellow at the Project Management Group, WU Vienna University of Economics and Business and part-time faculty, Boston University Metropolitan College Master’s program in project management. Her interests include the link between organization, program and project strategy, benefits cocreation, and sustainable development as holistic management. Catherine P. Killen is an Associate Professor and the director of the postgraduate project management program in the Faculty of Design, Architecture and Building at the University of Technology Sydney. Catherine’s research focuses on project portfolio management, primarily from a practice-based perspective. She has more than sixty refereed publications in this area. Alexander Kock is Professor of Technology and Innovation Management at the Technische Universität Darmstadt, Germany. His research interests cover project portfolio management, highly innovative projects, the early phases of the innovation process, and university-industry collaboration. He has published over twenty-five journal articles and a widely used textbook on innovation management. Julian Kopmann (PMP) is an expert in project and project portfolio management solutions at Bombardier Transportation. During his PhD studies on value realization through project portfolio management he was in charge of the 6th Multiproject Management Benchmarking Study of the Technische Universität Berlin, Germany. Øyvind Kvalnes is a philosopher with a PhD in Ethics from the University of Oslo. He is an associate professor at BI Norwegian Business School, Department of Leadership and Organizational Behaviour. Mélanie Lavoie-Tremblay is an associate professor at the Ingram School of Nursing, McGill

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List of Contributors

University. She is conducting research to improve organization of care and work for personnel, patients, and the organization. She is a researcher at the Centre de recherche de l’Institut universitaire en santé mentale de Montréal. Laurence Lecoeuvre is Professor and Deputy Director of Masters in Management Program at Université Côte d’Azur, SKEMA, France. Until 2015 she was an Associate Dean of Doctoral Programs and Head of the Department of Management of Projects at SKEMA’s Lille campus. She has twenty years of industry experience as an International Marketing Director. Miia Martinsuo is Professor of Industrial Management at the Laboratory of Industrial and Information Management, Tampere University of Technology, Finland. Her field of research and teaching is industrial operations, particularly in project and service business. Her research interests include: project organizing and lifecycle management; managing project portfolios; the autonomy of development projects; and transformation toward service business. Johann Packendorff is Professor of Industrial Economics and Management at KTH Royal Institute of Technology in Stockholm, Sweden. His research explores issues related to project organization and leadership, project-based work, and projectification of organizations and society. He is a co-organizer of the international “Making Projects Critical” workshop series, and an elected member of the Swedish Project Academy. Peerasit Patanakul is Associate Professor of Management at the Pennsylvania State University, Erie. His research interests include project portfolio management, multiple project management, project strategy, and managing government projects. His works have been published in highly regarded project management journals. He is a coauthor of Case Studies in Project, Program, and Organizational Project Management. Jeffrey K. Pinto is the Andrew Morrow and Elizabeth Lee Black Chair in the Management of Technology in the Sam and Irene Black School of

Business at Penn State University. He is the lead faculty member for Penn State’s Master of Project Management program. He is the author or editor of twenty-four books and over 140 scientific papers. Julien Pollack has managed projects in organizational change, telecommunications, and heavy engineering. He now works at the University of Sydney teaching project management. His research focuses on trends in project management research, and developing project management to meet the needs of ambiguous and contested projects. Kaye Remington teaches postgraduate students at the University of Technology Sydney. Her research interests focus on furthering understanding of projects and programs in dynamic stakeholder environments, with a particular interest in large-scale public sector projects and programs, through the application of complexity theory, psychology, and design thinking. Claudia Ringhofer is a researcher and lecturer at Project Management Group, WU Vienna University of Economics and Business, lecturer at the Danube University Krems and the University of Applied Sciences Steyr (all in Austria). She is a junior expert of the consulting network, enable2change. Rami Sariola is a doctoral student at the Laboratory of Industrial and Information Management, Tampere University of Technology, Finland. His publications appear in International Journal of Project Management and International Journal of Managing Projects in Business. His dissertation deals with suppliers’ role in construction project networks. Aaron Shenhar is Professor of Project Management and Leadership. After his aerospace career, he served at Univ. of Minnesota, Rutgers, Stevens, and Tel-Aviv University. He is founder and CEO of the Diamond Leadership Institute a knowledge-based company, focusing on training and consulting in project management, leadership, and strategy. Joca Stefanovic has a doctorate in technology management from Stevens. After a career in

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List of Contributors

engineering, development, and management positions, he gained extensive experience in areas of computer business: development, marketing/ sales, and support. He founded and grew a company dealing in computer and other hightech equipment from start-up to a multimillion dollar level. Rodney Turner is Professor of Project Management at SKEMA Business School, Lille France, SAIPEM Professor of Project Management at the Politecnico di Milano and Professor and High End Foreign Expert at Shanghai University. He is the author or editor of eighteen books, and editor of The International Journal of Project Management. His research areas cover project management in small- to medium-enterprises, the management of complex projects, governance of project management, including ethics and trust, and project marketing. Stephane Tywoniak is Professor of Complex Project Management at the Telfer School of Management, University of Ottawa (Canada), and

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Academic Lead of the Master of Business Complex Project Management. His main research interest is about how complexity plays out in projects, and how management practices get institutionalized in project-based organizations. Kim van Oorschot is Professor of Project Management at BI Norwegian Business School. Her research focuses on decision making and trade-offs in dynamically complex settings, like new product development (NPD) projects. Her research projects are aimed at discovering so-called “decision traps”: decisions that seem to be good on the short term, but have counterproductive effects on the long term. Lauri Vuorinen is a doctoral student at the Laboratory of Industrial and Information Management, Tampere University of Technology, Finland. His doctoral dissertation focuses on the practice of project control in different project environments. His current research interests deal with project control, project lifecycle value, and multi-project management.

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Foreword

Mats Engwall’s often quoted insight that “no project is an island” has had important implications for researching projects, perhaps the most popular form of temporary organizing. Research has since then increasingly paid attention not only to the temporal and spatial, but also the relational and organizational context of projects. For very good reasons, this has caused more and more researchers to abstain from trying to unearth or formulate “general principles” for project management. Instead, much more contextual and processual approaches are preferred nowadays, reflecting significantly better reflexive project management practice. At the same time, the discipline of project management has profited a lot from management, organization, and network theory developed and advanced in other fields, even from more abstract and formal cultural and social theory. All these theories emphasize the importance of context and process. This Cambridge Handbook of Organizational Project Management picks up these trends and even goes beyond capturing the organization as a relevant context for temporary organizing by investigating project management at the organizational level of analysis. Thereby, it nicely bridges micro-organizational behavior and more macroorganizational theory perspectives. As a consequence, the Handbook is a more than welcome basis for continuing the conversation among researchers in the fields of organizational behavior and theory, and project management – and also among managers and consultants – about sequences of projects, or even entire programs or project portfolios, as forms of temporary organizing embedded in more permanent structures, such as organization in the field of business, public administration, or non-for-profit organizations. The authors of the Handbook, who come from eleven different countries, focus rather strictly on

the organizational level of analysis in which projects, programs, and portfolios interact intricately with each other. More often than not, the required (multi-) project management is supported by specialized, permanent organizational units such as the project management office. The twenty-five contributions to the Handbook, many of which are based on literature reviews and illustrations with the help of case studies, deal with such formal organizational structures. But they also consider the often complementary and/or conflicting informal organizational networks around project teams for instance. Also at the organizational level of analysis, the contributions discuss frequently neglected strategic issues, business aspects of projects, project management as an organizational capability, project and program governance within and across organizations, as well as change management, human resources, extra-role behavior, distributed leadership and stakeholder networks. Considering the limitations of classical approaches to (project) risk management, one chapter deals with the increasing roles of Knightian uncertainties (unknown unknowns, possibly even unknowables). Interestingly also, one of the later chapters discusses regional clusters as an increasingly important context for project and multiproject management. Overall, the three editors of the Handbook seem to have skillfully managed the project of “conceptualizing and compiling a handbook” and produced the desired outcome: a timely, well-structured publication with many insightful chapters providing a much needed organizational perspective on project management and offering manifold insights into this important field of temporary organizing. Jörg Sydow Berlin-Dahlem

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Introduction SHANKAR SANKARAN, RALF MÜLLER, and NATHALIE DROUIN

“An idea can only become a reality once it is broken down into organized, actionable elements.” ― Scott Belsky, Making Ideas Happen: Overcoming the Obstacles Between Vision and Reality

The idea to develop the concept of Organizational Project Management (OPM) from an organization theory perspective started six years ago when the three editors met at the Umeå School of Business and Economics in the winter of 2011. First, we collaborated on a research book on project management (Drouin, Müller & Sankaran, 2013), the aim of which was to urge project management researchers to adopt novel transformational and translational methods in their research to contribute to the development of OPM research methods. This book was successfully published in 2013 and was received favorably by international scholars. We then decided it was time to revisit the latest developments in the growing field of OPM, and Cambridge University Press enthusiastically agreed to publish this book. After looking at the list of authors submitting chapters to the book, CUP suggested that the book be titled the Cambridge Handbook on Organizational Project Management. As far as the authors are aware, this is the first such handbook to promote the concept of OPM. In line with Belsky’s quote, the idea of developing the concept of OPM became a reality as soon as we started to assemble this handbook in an “actionable” manner, with the support and collaboration of eminent scholars and colleagues in the field of project management.

Why This Handbook Now? Over the past two decades, OPM has emerged as an academic field focused on how project, program, and portfolio management practices help firms

strategically to realize organizational goals (Chia, 2013, p. 37). In 2012, Drouin and Besner edited a Special Issue on Projects and Organizations in the International Journal of Managing Projects in Business, which included several papers explaining project management’s relationship to organizations. While Cooke-Davies et al. (2001) acknowledged that “there is a growing recognition that project management involves more than the skillful and competent management of individual projects” (p.1), Drouin and Besner (2012, p.176) noted that “projects are seen as venues for mastering business, implementing changes, innovating and developing competitive advantage.” This means project management transcends the management of single projects by establishing relationships between individual projects and the wider organization through the management of multiple projects (Drouin, Müller & Sankaran, 2013). Aubry, Hobbs, and Thuillier (2007) used the term OPM to describe such an approach, where project-based organizations integrate multiproject management activities to deal with strategic alignment, portfolio and program management, and governance (Aubry, Sicotte, Drouin, VidotDelerue & Besner, 2012). But what is OPM? What is the relationship between OPM and the organization? These are the questions that will be addressed in this handbook. The editors felt that there is a compelling need in the market for an organization-level book that addresses the totality of project-related work in organizations and not just in individual projects for which there are many existing publications. Such a text should address projects from an organizational level by providing a view of organizations as a network of projects (or temporary organizations), which need to be coordinated among themselves and with the more permanent

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Shankar Sankaran, et al.

organization, but away from the focus on individual projects. This handbook is intended to fill this need by (1) clarifying what OPM is, and (2) covering and clearly defining its importance to the organization. It includes concepts and theories from various disciplines allied to project management, such as strategic management, organization science, and behavioral science, to enrich our understanding of OPM. We hope that this multidisciplinary approach will provide guidance to academics to further investigate this new phenomenon. The book also includes a few case studies to aid practitioners in understanding the importance of OPM.

The Sections of This Handbook The handbook has four parts: Strategy, Organizations, People, and New Directions. Each section plays a key role to guide the reader through the journey of understanding and appreciating OPM. Part I fulfils the need for OPM to be considered as a strategic asset for the organization. Part II raises the need to reflect on organizational structure, and Part III highlights the important role of people in organizations. Part IV introduces some emerging concepts that we think will add to adoption of OPM by expanding its reach beyond our current understanding of OPM. The OPM concept seems obvious and quite simple but it is not so easy to achieve in practice. Do not expect the chapters to be in a perfect logical order as the evolution of the OPM concept is certainly not linear. However, to clarify our thoughts, we propose each section to be organized along the following lines: Part I covers Strategy, with an intent to explore the `foundations underlying strategic issues faced by organizations and the role of OPM in order to derive a well-grounded definition of the concept of OPM, and its scope, and contents. By doing this, OPM is positioned as a venue for developing sustainable competitive advantage for firms.

Part II covers Organizations, reflecting on and broadening the current set of theories, concepts, and knowledge discussed in recent years in the literature, with regard to organizational structure and design, and their links to OPM. OPM requires a set of systems, processes, and structures that enable an organization to undertake the right projects and to support them organizationally. This means going beyond the management of single projects to consider the management of networks of internal and external projects and the relationships between the company and the management of multiple projects (Andersen & Jessen, 2003). Part III covers People, as the management of people is recognized to be a key success factor in project management. This part will include research from areas that are allied to OPM, such as sociology, psychology, and human resource management. It will use multidisciplinary approaches to provide guidance on integrating theories, concepts, and approaches from allied fields to complement, expand, and enrich the OPM concept. Part IV includes chapters that we hope will take OPM research to new avenues that are not often addressed in the field of project management but which are essential to increase research quality and generate novel insights. We believe that these chapters cover areas of increasing importance for the future development of OPM.

Why Is It Different? While there are several noteworthy handbooks on project management by prominent scholars, this book takes a new direction by drawing the focus away from individual projects and their management. It has been conceived as an organizationallevel handbook that addresses the totality of project-related work in organizations. Thus it has shifted the focus from individual projects, through the structuring of project management and its projectification, toward the integration of all project management-related activities and dynamic processes in complex environments.

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Introduction

Target Audience The book is positioned as an academic handbook with the aim to highlight and build on the current state of knowledge in the field and to identify future research directions in OPM. OPM has been discussed and used in the literature but it is time to clarify its meaning and related concepts in order to expand and enrich OPM research. The chapters are expected to be prescribed as supplementary readings at postgraduate courses in universities. Case studies in the book would be useful to practitioners. In sum, the idea of OPM that we started with has taken a shape through concrete action as the Handbook of Organizational Project Management with the help of all the contributors to this handbook, who overcame obstacles to turn a vision into reality. The editors have a number of people to thank for helping us to get this book ready. First we would like to thank all the authors from across the world who devoted their time to contribute chapters to the book. We would like to thank Dr. Gita Sankaran for the initial copyediting of chapters and making useful suggestions to improve the content and assisting in the final checking of the chapters during proof reading. Thanks are due to Karyne

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Ang who helped us to project manage the book and to compile the index. We thank Professor Jörg Sydow for writing the foreword. We also thank Professor Stewart Clegg from the University of Technology Sydney for supporting us to write and promoting the idea at the Academy of Management Meeting at Anaheim in 2016. The people at Cambridge University Press deserve our special thanks for working with us closely to release the book as expected, in particular Paula Parish, who was our original contact at CUP, Valerie Appleby, who took over from Paula, Emma Collison, and James Gregory. We would also like to thank Karthik Orukaimani of Integra and his team for project managing the final production and Brian Black for his excellent final copyediting that was appreciated by several of the authors. We would also like to thank many others who have worked in the background at CUP and Integra to get this book ready on time. Thank you to our families for bearing with us when we spent time having late-night Skype meetings to get the handbook ready on time. Finally, we would like to thank our institutions, the University of Technology Sydney, University of Quebec at Montreal (UQAM), and BI Norwegian Business School for their support in providing us with valuable time to edit and write chapters for the handbook.

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PART I

Strategy

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INTRODUCTION TO PART I Nathalie Drouin

Part I of this book is a stepping-stone to elucidate the concept of Organizational Project Management (OPM). It discusses a central connection between OPM and the organization – the strategy. Organizations use strategy to integrate their project management activities in an effective, responsive, and sustainable manner. To explore and deepen these ties between the organization, its strategy and OPM, Part I gathers and blends the views of well-known scholars who have studied these relationships through different lenses for many years. These authors used a multidisciplinary approach, building their knowledge on the shoulders of eminent academics and their theoretical research in the field and by using empirical studies and mixed-methods approaches to develop a better understanding of OPM. Part I begins with a chapter on “The Nature of Organizational Project Management through the Lens of Integration,” by Nathalie Drouin, Ralf Müller, and Shankar Sankaran. From an ontological perspective, OPM is defined as “the integration of all project management-related activities throughout the organizational hierarchy or network.” Using the lens of integration, OPM is recognized as a mechanism that integrates, combines, and embeds project management activities strategically and effectively within the organization. Chapter 2 is “The Business of Projects in and across Organizations,” by Miia Martinsuo, Rami

Sariola, and Lauri Vuorinen. Based on three empirical studies, this chapter outlines the business of projects through the decisions that occur in the different phases of a project’s lifecycle. It challenges project sponsors to “do the right things” in delivery project contexts, and shows how various stakeholders engage with the project network. It suggests that OPM promotes cooperation and communication between stakeholders, and takes into account their evolving needs in critical business decisions over the project’s lifecycle. It is followed by Chapter 3, on “Strategic OPM: Why Companies Need to Adopt a Strategic Approach to Project Management,” by Vered Holzmann, Aaron Shenhar, and Joca Stefanovic. Using a three-dimensional strategic project management maturity model, these authors hypothesize that additional focus on strategic aspects of projects will contribute greatly to the improvement of project business performance. They suggest that OPM should be built in accordance with this premise, predicting that OPM will become more strategic in the future and help projects to focus on achieving business results in addition to the traditional efficiency delivery goals. Chapter 4 by Kam Jugdev on “Strengthening the Connections between Strategy and Organizational Project Management” introduces the reader to selected concepts in strategy by four scholars: Grant, Porter, Barney, and Mintzberg, and highlights their

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key contributions. It also highlights the limitations of the Project Management Institute’s perspective on OPM, proposing that OPM is a tangible and intangible resource and a vehicle for developing sustainable competitive advantage. The last chapter of Part I is Chapter 5 on “Project Portfolio Management: A Dynamic Capability and Strategic Asset” by Catherine P. Killen and Nathalie Drouin, which shows how dynamic capabilities are developed in organizations and how they can create and sustain competitive advantage by enabling organizations to reconfigure resources in response

to change. It highlights that project portfolio management (PPM) as a dynamic capability is also a strategic asset of OPM to implement changes and sustainable competitive advantage in organizations. In sum, it proposes that dynamic OPM is enabled through PPM – and therefore when acting as a dynamic capability, PPM is a strategic asset for OPM. We hope you will enjoy reading this first part of the book and gain a better understanding of OPM viewed through the lens of organizational strategy.

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CHAPTER

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The Nature of Organizational Project Management through the Lens of Integration NATHALIE DROUIN, RALF MÜLLER, and SHANKAR SANKARAN

Introduction This chapter focuses on defining and making sense of what organizational project management (OPM) is through the lens of integration. In this chapter we share our views on how we understand and define OPM so that the authors who have collaborated with us in this book are not only able to understand and critique our view, but can also discuss and relate their particular chapters to OPM. We urge readers of this book to help us improve, clarify, and broaden our initial thoughts on the nature of OPM. We derive our thoughts from the perspective of organizational integration, which we see as a necessity for organizing, and as a task that is becoming increasingly harder to achieve, due to the growing complexity of organizational design (Child, 2005). We argue that new ways of managing projects, by integrating all project management-related activities in an organization, are now needed to deliver projects to meet the continuously growing expectations of stakeholders. We propose our concept of OPM as a way for managers in charge of managing the organization and governing projects to meet these expectations. We begin this chapter by offering a definition of OPM from an organizational theory (OT) perspective. We then present evidence in OT that discusses integration to support our definition. Finally, we discuss the nature of OPM by proposing it as a mechanism for integrating project management-related activities in organizations.

What Is Organizational Project Management? In this section we develop our definition of OPM. The term OPM has two parts – organization and project management. Organization theory (OT) acts as the foundation and lies at the heart of a definition for OPM. Through its key concepts, such as organizational structure, organizational forms, and the concept of integration, OT brings interesting perspectives that help us to grasp the concept of OPM. Therefore, in this chapter we propose a definition of OPM through the lens of OT, with a specific focus on the concept of integration. How did the concept OPM evolve? In 2012, Drouin and Besner edited a “Special Issue on Projects and Organizations” in the International Journal of Managing Projects in Business. This issue included several papers explaining project management’s relationship to organizations. Drouin and Besner (2012, p. 176) noted that “projects are seen as venues for mastering business, implementing changes, innovating, and developing competitive advantage.” They also point out that project management is changing from a focus on the management of individual projects to examining the relationships between individual projects and the wider organization by taking into account the management of multiple projects (Drouin & Besner, 2012). Looking more specifically at the relationship of project management and organizations, several definitions of OPM have been proposed from

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different perspectives. For instance, the Project Management Institute (PMI) takes a management viewpoint, proposing OPM capabilities at the project, program, and portfolio management levels as independent variables, and project performance at the respective level as the dependent variable. In their definition, OPM “is a strategy execution framework that utilizes portfolio, program, and project management as well as organizational-enabling practices to consistently and predictably deliver organizational strategy to produce better performance, better results, and a sustainable competitive advantage” (PMI, 2013, p. 239). Aubry, Hobbs, and Thuillier (2007) use the term OPM to describe an approach by which project-based organizations integrate multiproject management activities to strategically align portfolio and program management, and their governance. These authors have defined OPM as “a new sphere of management where dynamic structures in the firm are articulated as a means to implement corporate objectives through projects in order to maximize value” (Aubry et al., 2007, p. 332). They emphasize the dynamics of organizing and have bridged the view of OPM from management theory to organizational theory. We take Aubry et al.’s definition as our starting point, and enhance its OT perspective by emphasizing the need for “integration” as a key concept for OPM to be adopted in practice. Hence, we define OPM as: The integration of all project management-related activities throughout the organizational hierarchy or network.

Let us now explore the term “integration.” According to the Oxford Advanced Learner’s Dictionary (2016), integration is “the act or process of combining two or more things so that they work together.” Lawrence and Lorsch (1967), who discussed integration and differentiation in complex organizations, defined integration as the collaboration required to achieve unity of effort. We propose that OPM be viewed as the act or process of combining (integrating) project management activities throughout the organization, and point out the importance of collaboration required to achieve unity of effort. Thus, OPM takes a holistic perspective on the project

management-related activities an organization embarks on as an integrative mechanism of PM activities, in a network of strategic and collaborative initiatives governed and supported at the organizational level. The next section explores this definition, further linking it to modern organizational theory and its concept of integration.

Organizational Theory, Project Management, and Integration Organizational Theory in Brief Several prominent project management scholars have argued that OT has the potential to offer helpful insights into the field of project management (Turner & Müller, 2003; Morris & Geraldi, 2011). For instance, some scholars have applied OT to project management research using theoretical perspectives such as the resource-based view (Jugdev & Mathur, 2013), dynamic capabilities (Killen et al., 2012; Petit, 2012; Salunke et al., 2011), absorptive capacity (Killen et al., 2012), and contingency theory (Hanisch & Wald, 2012; Sauser et al., 2009; Engwall, 2003; Andres & Zmud, 2002; Shenhar, 2001) or, more recently, institutional contexts to theorizing project-based organizing (Morris & Geraldi 2011; Lundin et al., 2016). However, in our view, OT’s potential has remained underutilized in the project management arena. OT helps to contribute to the understanding of the structure, functioning, and performance of organizations, and the behavior of groups and individuals within them. Prominent OT scholar Child (2005) recognized that the success of any organization depends on two fundamental requirements, strategy and organization; in other words, paying importance to organizing the organizational activities to link it with its strategy. Child (2005) also observed that if an organization’s structure is at fault, it will not be able to deliver adequately on its strategy, as the formulation of a sound strategy requires the knowledge and insights provided at all levels in the organization. An organization has structural, processual, and boundary-defining facets

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The Nature of Organizational Project Management

(e.g., basic structure distributes responsibilities among the members of the organization to successfully implement its business objectives). Organizational processes comprise integration that ensures adequate coordination between different activities, control that monitors their attainment, and, finally, reward to motivate people (Child, 2005). Child (2005) also highlighted that in an organizational context, there is emphasis on managing relationships between roles and organizational units to achieve a creative and proactive synergy between them, further implying that greater attention should be paid to integration.

OT and Project Management in Brief In this section we point out some views expressed by project management researchers that link OT to project management. Among project management researchers, Packendorff (1994) was one of the first to reflect on the integration aspect of organization theory and its importance to the project management field. He identified three organizational themes as being applicable to projects as temporary organizations. First, projects are seen as temporary organizations that overlap a number of organizational subunits within a permanent organization; second, communication that applies to projects needs to cover the internal organization as well as entities in the external environment; and finally, the applicability of leadership and motivation to projects. Packendorff (1994) also identified some minor themes such as cultural theory, network theory, and the notion of management by projects. Other researchers took the perspective of temporary organizational settings to critique and increase the understanding and role of projects and its relationship with OT. For instance, Lundin and Söderholm (1995) proposed an action-based “theory of the temporary organization,” which identified the four internal dimensions of projects – time, task, team, and transitions – as the cornerstones of temporary organizations. Turner and Müller (2003) took an OT- and organization-wide view by describing the nature of the project as a temporary organization that fulfills the production function of a firm

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through several agency roles within the wider organization. This is closer to what we propose as the OPM perspective, as Turner and Müller (2003) also confirmed the need for integration to deliver beneficial objectives of change resulting from projects. Midler (1995) elaborated on the “projectification” of the firm. Söderlund and Müller (2014) emphasized the impact of the Rethinking Project Management research carried out in the United Kingdom (Winter, Smith, Morris, & Cicmil, 2006), where it was advocated that projects should be looked at from a broader, more holistic perspective. More recently, the International Journal of Managing Projects in Business published a Special Issue on “Reflections of 10 years of rethinking project management – legacy and future” (see Walker, 2016), which explores new perspectives of what project management is and raises the importance of encouraging research that advances reliable and rigorous understanding of project management in organizations. The above shows that a variety of different approaches to integrate projects and their wider organizational context is gaining prominence. However, none of these use an OT perspective to strengthen the integrated and holistic understanding of all project-related activities, such as the one proposed in our definition of OPM. We therefore select the lens of integration, and aim to contribute to a better understanding of OPM through the use of OT to view project management.

The Lens of Integration In this section, we take a closer look at integration, the various views on how to achieve integration and some of the difficulties faced in achieving it. According to Child (2005), integration “signifies coordination, cohesion and synergy between different roles or units in an organization whose activities are different but interdependent in the process of creating value. The concept could be applied to vertical relations (e.g., a cohesive process of control) or to horizontal relations across an organization” (2005, p. 79). We expand on these concepts

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(coordination, cohesion, and synergy) based on the following views by prominent scholars: • People coordinate their efforts so they can do more than any one person could achieve individually. In society, organizations intend to do more through the coordination of the activities of many individuals. “It is the idea of coordination of effort in the service of mutual help” (Schein, 1998 p. 13). According to Schein (1988 p. 15), “coordination is implemented by the laying out of a kind of blueprint of who is responsible for what.” Coordination is a pattern of roles that promote the commonly agreed-upon goals. • Cohesion has been plagued with contradictory definitions and difficulties in being operationalized (Moody & White, 2003). We define “cohesion” in line with Festinger, Schachter, and Back (1950) as a field of forces that act on members to remain in the group. It is the action or condition of cohering; cleaving or sticking together (Oxford English Dictionary, 2000). Cohesive groups should display connectedness. • Synergy is the combined working together of two or more parts of a system, so that the combined effect is greater than the sum of the efforts of the parts (Campbell & Sommers Luchs, 1998). Lawrence and Lorsch (1967) defined integration not as coordination, cohesion, and synergy as proposed by Child (2005) but as the collaboration required to achieve unity of effort (i.e., getting everyone to pull in the same direction) (Hatch & Cunliffe, 2013, p. 101). Organizations use hierarchy as the most common integration mechanism, creating formal reporting relationships that allow managers to coordinate activities and resolve problems through the exercise of authority. Other integration mechanisms include: formal rules, procedures, scheduling, liaison roles, committees, task forces, cross-functional teams, and direct communication between departments (Hatch & Cunliffe, 2013, p. 101). Lawrence and Lorsch (1967) concluded that appropriate methods of integration vary depending on the organization and the relevant environment. For instance, their research shows that the methods of integration favor stable environments where hierarchy and

centralized coordination prevail, while in unstable environments there is a need to bring decisionmaking to lower hierarchical levels and use direct communication with those possessing suitable knowledge. Thus, there are various mechanisms for strengthening integration, from simple arrangements for people to meet periodically to complex, multidimensional structures in which the contributions of specialized units are coordinated through a matrix arrangement (Child, 2005). Achieving integration is challenging and the lack of integration can have regrettable consequences on organizational performance. We often hear people say “the right hand does not know what the left hand is doing,” as a way of expressing the lack of integration, coordination, and collaboration within a firm. Integration could take many forms at different organizational levels and has various loci. For instance, integration occurs between corporate and divisional levels in multinational firms, which requires coordination, cohesion, and collaboration between the two levels to develop and manage business activities. Integration also takes place between functions within an organization. In this case, integration involves organizing the internal peripheries or departments of a firm to collaborate and work together. Securing integration within a firm or across its subsidiaries in a multinational context is traditionally achieved by top managers. According to Child (2005), “new organizational thinking favors the decentralization of such initiatives so that the people directly concerned can come together and decide how to reconfigure capabilities without having to rely on, and wait for, the decision of senior managers distanced from the scene” (2005, p. 90). It is like recreating a microcosm, a process for dealing with the issues at hand. Its purpose is to integrate the people with the relevant knowledge in the situation to make more effective decisions. It is a lateral organization (Galbraith, 1994) that brings together a decision group of the most relevant people to collaborate for performing common tasks. Teams (of all types: project teams, cross-functional teams, etc.) (also see Chapter 14) are one of the most commonly used means for achieving integration in new organizational practices (Child, 2005).

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The Nature of Organizational Project Management

We believe that the lens of integration is an interesting angle to base our understanding of the nature of OPM. Success in achieving integration using OPM lies primarily in an organization’s ability to integrate the project management resources, processes and systems, and apply them flexibly to manage project activities strategically within the organization. OPM facilitates the coordination, cohesion, and collaboration across project management activities and across the organization to manage these activities more effectively. It brings the decision-making required to manage project management activities to the hierarchical levels in an organization that is charged with taking actions that contribute to the success of PM activities. This has to be achieved in a synergistic manner along the hierarchical levels. This creates the PM microcosm to manage PM-related activities successfully at the right hierarchy. In the next section, we expand on the nature of OPM as an integrative mechanism.

The Nature of OPM as an Organizational Integrative Mechanism So far, we have anchored our discussions in trying to understand the contributions of organization theory and its related concept of integration. Based on what we have learnt from these studies, we

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believe that the concept of OPM should be primarily grounded in organization theory. This will contribute to enabling organizational effectiveness by organizing and integrating the resources, and capabilities that allow organizations to perform in specific ways that are critical to business performance (Mohrman et al., 1988). OT and its concept of integration can direct us toward mechanisms that are useful to develop and deploy in an organization to achieve integration. Thus, proposing OPM as an integrative mechanism becomes a matter of emphasizing its strategic implication for the integration of the structures, processes, and practices of all project management-related activities throughout the organizational hierarchy or network in an effective manner. OPM can provide managers with an overall sense of how capable the organization is to manage its projects and related activities. It encourages firms to develop project management knowledge to achieve greater effectiveness. It enables top managers to develop best practices to enhance the quality of information available to the boards of directors and senior management who are responsible for the success of projects. It also helps identifying the skills and know-how required to manage these projects, and strengthen their accountability. Figure 1.1 illustrates the nature of OPM seen through the lens of integration and each component is explained further in this chapter.

ORGANIZATION PROJECT MANAGEMENT RELATED ACTIVITIES

INTEGRATION

Portfolios Programs

INTEGRATION

Governance OPM : The integration of all project management-related activities throughout the organizational hierarchy or network

Organizational Effectiveness

Projects

Figure 1.1. OPM and its lens of integration.

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Project Management-Related Activities We now turn our attention to project management (PM) and how it can contribute to an organization’s strategy using the concept of OPM. This section will also refer to chapters in the book that expand on aspects of PM that can contribute to OPM. Effective project management can help enable projects to be used for profitable, sustainable business. Projects are often created to accomplish an organization’s strategy (Müller, 2009, p. 15), and project management is an effective tool for executing an overall organizational strategy (Cleland & King, 1988). Thus, to utilize projects well, we need to start by understanding why organizations should invest in projects and do this from a perspective linking organizational strategy and projects. This could lead to discussions on the nature of project business (Artto et al., 2001) as well as methodologies used by businesses to deliver their strategies (Shenhar & Dvir, 2007). From an organizational perspective, we need to look at how an organization can effectively integrate the governance and management of its portfolios, programs, and projects to deliver organizational strategies (Müller, 2009). Projects are delivered by multiple organizations working together, which also calls for a discussion on interorganizational projects and collaboration (Clegg et al., 2002). As projects transcend geographical borders, there are also concerns about the risks and opportunities, and the impact of increasing compliance requirements that organizations have to meet, covering local, international, and environmental regulations (Tarantino, 2008). Second, project management scholars have provided influential insights for project-based organizations with regard to linkages between temporary and permanent organizations (Janowicz-Panjaitan, Bakker & Kenis, 2009). This highlights the importance of structuring the management of projects from an organizational perspective. For example, Aubry and LavoieTremblay in Chapter 9 in this book propose a more comprehensive view of the strategic use of PMO using organizational design. Third, the importance of the people delivering projects has gained increasing attention from

the project management bodies of knowledge, and several aspects of people working in projects are increasing in importance to enable the delivery of projects. This will require discussions about human resource management (Huemann et al., 2007; see also Keegan, Huemann, & Ringhofer, Chapter 11 ), stakeholder management (Eskerod & Jepsen, 2013; Eskerod, Chapter 12), leadership (Müller & Turner, 2010; Müller, Packendorff, & Sankaran, Chapter 13), project teams (Bourgault et al., 2009; Drouin & Sankaran, Chapter 14), knowledge management (Disterer, 2002; Hofman & Boyle, Chapter 15; Algeo & Connell, Chapter 18), and change management (Crawford & Nahmias, 2010; Pollack, Chapter 16). Some other worldviews of projects are also gaining prominence in the literature – ethics (Müller et al. 2013; Kvalnes, Chapter 19), value (Thiry, 2002; Ang & Biesenthal, Chapter 20), complexity (Cicmil et al., 2009; Remington, Chapter 21), sustainability, and innovation (Kock & Gemuenden, 2016; see Keeys & Huemann, Chapter 22; and Van Oorschot, Chapter 24). There are similarities between the management of projects in an organization and the production function of a firm (Kock & Gemuenden, 2016). While the production function is charged with producing products and services efficiently, project management is often charged with: (a) delivering bespoke products or services to customers through projects; or (b) implementing strategic initiatives for the firm more efficiently than any other function. In performing these functions, the project manager acts as the CEO of a temporary organization that needs to be aligned continuously with the firm’s strategy, objectives, and capabilities (Turner & Müller, 2003). However, all related project management activities, also need to be governed, integrated, and supported at the organizational level by managers outside the project organization who are involved in decision-making related to projects and who understand the importance of projects and their related activities to the overall organization (see Turner & Müller, Chapter 6 on the governance of OPM).

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Integration and Project Management As discussed earlier, there are various mechanisms for strengthening integration, such as periodic meetings between people or multidimensional structures in which the contributions of specialized units are coordinated through a matrix arrangement. Teams, project teams, and cross-functional teams are the most commonly used means for achieving integration (Child, 2005). Success in achieving integration using OPM lies primarily in OPM’s ability to integrate the project management resources, processes, and systems and apply them flexibly to manage project activities strategically within the organization. OPM creates a microcosm that facilitates the coordination across project management activities (vertically) and across the organization (horizontally) and externally through projects delivered by multiple firms. OPM, as a perspective toward work in an organization, enables the collaboration required to achieve unity of effort of project-related activities. It is a new organizational mechanism that favors the decentralization of the PM initiatives within a firm so that people who are directly concerned with project-related activities are the decision-makers, rather than managers who are distant from the scene. To that end, an OPM perspective streamlines organizational activities to foster project delivery in the most effective and efficient way possible within, across, and outside the organization.

Organizational Effectiveness How does OPM contribute to organizational effectiveness? Some authors argue that the goal-based model is the most appropriate to achieve organizational effectiveness since it proposes that the most effective firms are the ones that accomplish their stated goals (Cameron, 2009). Pfeffer and Salancik, on the other hand, argued for a resource dependence model, stating that organizations are effective to the extent to which they acquire the required resources (in Cameron, 2009, p. 307). Handy (1993) identified over sixty different variables (e.g., leadership, group relations, systems and structures, environment, motivation to work) as factors affecting organizational effectiveness. It is therefore not

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surprising that academics tend to focus on one or a few variables to analyze effectiveness. No universal model of effectiveness has emerged. For more details on organizational effectiveness, we refer readers to the chapter by Kim Cameron in Smith and Hitt (2009). In this chapter, we propose OPM as another mechanism that can contribute to organizational effectiveness. OPM per se is an attempt to organize project activities to link with the organization’s strategy. It comprises power structures within its project components, administrative structures such as project management offices (PMOs), standards in conducting projects, relationships between project governance, program and project management, and relationships and cohesion among and between the team members and other individuals in charge of project activities. OPM is thus the ability to organize project activities not only at the project level, but at the wider organizational level. By shaping the project systems, processes, and structures, OPM has the potential to have an impact on a firm’s effectiveness to achieve competitive advantage. This makes OPM a multidimensional concept, which includes variables such as group relations and dynamics (e.g., goals, tasks, project leader), systems and structures (e.g., control system, power structure, and administrative structure such PMOs), and some variables related to the context (project resources and capacity) (Handy, 1993). Organizations are effective to the extent to which they deploy appropriate resources. Successful management of firms’ project managementrelated activities needs OPM to be exploited as a way of implementing strategies in effective and productive ways through the management, integration, and transformation of all project management activities.

Concluding Remarks In this chapter, we have used a specific perspective toward organizations based on OT, which integrates all project-related work, actors, roles, and processes of an organization. We also extended the view of temporary organizations as an agency to

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fulfill the production function by arguing that the temporary organization (or project) is the organization per se, with all other entities supporting it for effective and efficient project delivery. We integrate the patchwork of existing perspectives, such as those established through initiatives like “Making projects critical,” or “Rethinking project management” and the work of Aubry et al. (2007) and Turner and Müller (2003), who all take the perspective of organizing for OPM. All this leads to the dawn of a new perspective, which is the OPM view (in and of itself constituting a particular worldview) – an ontology. It is now up to the reader to decide whether OPM can become a reality. For those who believe it can, we have provided some justification; and for those who don’t, we provide some food for thought to reconsider their stance. Finally, the contributors to this volume have provided us and the readers with a potpourri of insights and avenues for integration. We are very grateful for their contributions to the book for the development of OPM.

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Moody, J. & White, D. R. (2003). Structural cohesion and embeddedness: A hierarchical concept of social groups. American Sociological Review, 68(1), 103–127, http://dx.doi.org/10.2307/3088904. Morris, P. W. G. & Geraldi, J. (2011). Managing the institutional context for projects. Project Management Journal, 42, 20–32. doi: 10.1002/ pmj.20271. Müller, R. (2009). Project Governance. Aldershot, UK: Gower Publishing. Müller, R. & Turner, R. (2010). Leadership competency profiles of successful project managers. International Journal of Project Management, 28(5), 437–448, http://dx.doi.org/10.1016/j .ijproman.2009.09.003. Müller, R., Andersen, E. S., Kvalnes, Ø., Shao, J., Sankaran, S., Turner, J. R., Biesenthal, C., Walker, D. H. T., & Gudergan, S. (2013). The interrelationship of governance, trust and ethics in temporary organizations. Project Management Journal, 44(4), 26–44, http://dx.doi.org/10.1002 /pmj.21350. Oxford Advanced Learner’s Dictionary. http://www .oxfordlearnersdictionaries.com/definition/english/ integration. Oxford English Dictionary (2000). Oxford: Oxford University Press. Packendorff, J. (1994). Temporary Organizing: Integrating Organization Theory and Project Management. In R. A. Lundin & J. Packendorff (Eds.), Proceedings of the IRNOP Conference on Temporary Organizations and Project Management, March 22–25, Lycksele, Sweden. Petit, Y. (2012). Project portfolios in dynamic environments: Organizing for uncertainty. International Journal of Project Management, 30, 539–553 http:// dx.doi.org/10.1016/j.ijproman.2011.11.007. PMI (2013). A Guide To The Project Management Body of Knowledge (PMBOK Guide), Philadelphia: Project Management Institute. Salunke, S., Weerawardena, J., & McColl-Kennedy, J.R. (2011). Towards a model of dynamic capabilities in innovation-based competitive strategy: Insights from project-oriented service firms. Industrial Marketing Management, 40(8), 1251–1263, http://dx .doi.org/10.1016/j.indmarman.2011.10.009. Sauser, B.J., Reilly, R.R., & Shenhar, A. (2009). Why projects fail? How contingency theory can provide new insights – A comparative analysis of NASA’s Mars Climate Orbiter loss. International Journal of Project Management, 27, 665–679, http://dx.doi.org /10.1016/j.ijproman.2009.01.004.

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Schein, E. H. (1988). Organizational Culture and Leadership. Hoboken, NJ: John Wiley. Shenhar, A. (2001). One size does not fit all projects: Exploring classical contingency domains. Management Science, 47(3), 394–414, http://dx.doi .org/10.1287/mnsc.47.3.394.9772. Shenhar, A. J. & Dvir, D. (2007). Reinventing Project Management: The Diamond Approach to Successful Growth and Innovation. Boston, MA: Harvard Business Review Press. Smith, K. G. and Hitt, M. A. (ed.). (2009). Great Minds in Management. The Process of Theory Development. Oxford, UK: Oxford University Press, 304–330. Söderlund, J. & Müller, R. (2014). Project Management and Organization Theory: IRNOP Meets PMJ. Project Management Journal, 45(4), 2–6, http://dx.doi.org/10.1002/pmj.21442. Tarantino, A. (2008). Governance, Risk and Compliance Handbook. Hoboken, New Jersey: John Wiley & Sons,

Thiry, M. (2002). Combining value and project management into an effective programme management model. International Journal of Project Management, 20(3), 221–227, http://dx.doi.org/10 .1016/S0263-7863(01)00072-2. Turner, J. R. & Müller, R. (2003). On the nature of the project as a temporary organization. International Journal of Project Management, 21(1), 1–7, http://dx.doi.org/10.1016/S02637863(02)00020-0. Walker, D. (2016). Editorial, International Journal of Managing Projects in Business, 9(4), 710–715. http://dx.doi.org/10.1108/IJMPB-072016-0060. Winter, M., Smith, C., Morris, P. W. G., and Cicmil, S. (2006). Directions for future research in project management: The main findings of a UK government-funded research network. International Journal of Project Management, 24 (8), 638–649, http://dx.doi.org/10.1016/j.ijproman .2006.08.009.

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CHAPTER

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The Business of Projects in and across Organizations MIIA MARTINSUO, RAMI SARIOLA, and LAURI VUORINEN

Introduction The goal of organizational project management is to ensure that projects are doing the right things in the right way to fulfill the purpose of the organization. In commercial firms delivering projects, this implies that, in addition to designing and delivering solutions efficiently, projects must also serve as vehicles for business. Project business refers to any project-related business that intends to fulfill a firm’s or network’s objectives (Artto & Wikström, 2005). Where and how does “business” take place in projects? A great deal of attention in project management has addressed activities “after the business” (i.e., the planning, implementation, and control of single projects) and “before the business” (i.e., the marketing and selling of projects). Recently, more research has emerged “above the projects,” such that project portfolio management and program management have begun to link projects with the strategies of their parent organizations. In particular, the selection of a project appears to be a business-critical issue, since prices are fixed, contracts are made, and resources are allocated to fulfill the project objective. In our view, the selection and launch of a project are by no means the only business-defining events in the project’s life cycle. Each delivery project must be managed profitably, such that business value is defined and created throughout the project life cycle, often at the interfaces of different firms. Indeed, many of the business choices made over the life cycle of a project cross the boundaries of different organizations (e.g., Artto et al., 2016; Martinsuo et al., 2010). Project governance and control, however, tend not to take these

cross-organizational and business views sufficiently into account. Earlier research has considered the business-related issues of project life cycles in a very scattered way; therefore, our intent is to build a framework for the critical business decisions that occur over a delivery project’s life cycle. This chapter is concerned with the business of projects. We outline the business of projects through the decisions that occur at the front end of projects, the management control of projects during project execution, and the postproject decisions needed to build continuous customer interaction over the life cycle of product use. More specifically, we ask: 1. How and on what occasions are the key business decisions of projects made? 2. How are the project stakeholders involved in the project’s business decisions? We will illustrate the business aspects of projects through examples from three empirical studies. The scope is delimited to the perspective of the project contractor (i.e., the company designing and delivering projects for customers) and its project network, including subcontractors, component suppliers, and other partners. Although the customer’s viewpoint is not directly covered, many of the contractor’s business decisions reflect, to some degree, the customer’s viewpoint. Further research on investors’ and other network partners’ viewpoints of business decisions is recommended. Our research is focused on component and machine manufacturers, particularly in the construction and mechanical engineering industry. Thus, the attention is on technology-based projects with medium complexity and some degree of 19

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repetitiveness. Among component manufacturers, in particular, projects tend to involve multiple stakeholders, and even if the components are not especially complex, their integrated systems and project networks are. Unique and high-complexity projects, product development, organizational changes, and IT projects are not covered; however, the findings on organizationally relevant business decisions made during the project life cycle may also be valid for these contexts. The remainder of the chapter is structured in the following way. First, we explore the business decisions that occur at the front end of delivery projects and the roles that network partners play in influencing these decisions. Second, we analyze the management controls that require a project to interact with its parent organization and broader business environment during delivery projects. Third, we investigate postproject service use in connection with advanced technologies. We then propose a framework for the key business decisions that occur over the life cycle of a project, with our key message emphasizing projects’ business linkages on three main levels: customer relationships, organization, and business networks. This chapter’s contribution focuses on organizational project management as a multilevel, multifirm issue where business decisions challenge organizations to define, lead, and control projects as vehicles for business and, thereby, complement their view of projects as vehicles for efficient problem solving.

Business Decisions at the Front End of Projects The Front End of Delivery Projects and Early Decisions The value generation of delivery projects is highly influenced by the activities and decisions made during the early phases of such projects. The early phases of project development are critical for engaging in innovative activities and planning project execution in a manner that optimizes value generation (Kolltveit & Grønhaug, 2004). Further, decisions about a project’s business model and related pricing logics have already

been made and justified by these early phases (Kujala et al., 2010, 2011). A key component of a project’s business model that is defined at the front end of the project is the definition of the project’s value proposition (Kujala et al., 2010), which can be used as both a sales argument and a differentiating competitive factor for customers. The value proposition specifies the supplier’s scope of activity and related value in the customer’s process. Despite the importance of these early phases, the value creation potential at the front end of delivery projects has not yet been sufficiently utilized (Kolltveit & Grönhaug, 2004). Paying attention to stakeholders’ needs (Kolltveit & Grønhaug, 2004) and listening to customers’ expectations (Brady et al., 2005) are clearly emphasized at the project front end. Suppliers need to analyze stakeholders’ needs and then to consider and consolidate the stakeholders’ various value drivers and expectations (Aaltonen, 2011). Earlier research has also drawn attention to ways to formulate, assess, and modify projects’ target benefits (Chih & Zwikael, 2015). When companies move toward more complex solutions, they must begin considering the possible value of services to complement their technological systems (Kujala et al., 2010, 2011) and the option of delivering integrated solutions (Brady et al., 2005), even during the beginning phases of their projects. Figure 2.1 summarizes the key business decision issues that must be addressed at the front end of delivery projects. Although the life cycle value of a project does, indeed, take shape quite early, little research is concerned with controlling the emergence of life cycle value when defining, developing, and agreeing upon the concept of the project deliverable. Many project failures can be traced back to what was done or not done at the front end. Selecting the wrong concept at the front end may lead to strategic failures. One such example is the Ciudad Real Central Airport in Spain. The airport, located more than 200 kilometers from the center of Madrid, was intended to serve Madrid and the Andalusian coast with the help of high-speed rail. This concept was found to be overly optimistic and poorly planned. It cost 1.1 billion euros, and the Ciudad Real Central

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The Business of Projects in Organizations

Compiling stakeholder needs to specify the project goal Possibility and decision to bid

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Value proposition to the customer

Business model and earning logic

Delivery model, to optimize lifecycle value

Formulating the target benefits

Figure 2.1. Summary of key business decisions at the front end of the project.

Customer (investor) Design → Decisionmaking on materials

Main contractor

Designers Design → Suggestion on materials and products

Component supplier

Figure 2.2. Illustration of the research setting in the construction project networks. Airport, which opened in 2009, was closed after just three years of operation due to low passenger volumes (Brueckner & Picard, 2015). Clearly, this project failed to properly consider customers’ and stakeholders’ needs.

Example of Component Supplier’s Position and Stakeholder Influence in Decision-Making We studied stakeholders’ activities and roles in decision-making at the front end of construction projects, particularly with regard to securing the

option to bid on and, consequently, win a contract. Figure 2.2 illustrates a typical setting at the front end of a construction project, in which the main contractor engages in a project network with the customer and designers to specify what is being constructed and how. Component and material suppliers enter this project network later, through the contractor’s decision to subcontract. However, suppliers have an interest in influencing decisions at the front end of projects, since this allows them to play a more central role in the project network. This study featured interviews in three component supplier firms in the construction industry,

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interviews with designers, a conceptual and questionnaire study with designers, and interviews with contractor firms. The study began with the perspective of construction component suppliers, to understand their value opportunities and service prospects at the front end of construction projects. One of the early findings was that the suppliers’ personnel felt that they could contribute at the front end of construction projects, but that their role in the project network was restricted by the proposals made by the designers (i.e., architects and structural engineers). Unless the suppliers’ components were directly proposed by the designers, they had limited opportunities to contribute. We became interested in how the suppliers could increase their chances of becoming preferred suppliers and, thus, increase their centrality in the project network. As a consequence, we initiated a study among the designers in order to understand their perspective of the contractors’ decisions and material selections, and their interactions with suppliers (Martinsuo & Sariola, 2015). The findings indicated that designers have a significant influence on contractors’ purchasing decisions, which supported our initial assumption and earlier research (Yang et al., 2011). Architects and structural engineers achieve influence through design specifications (products included in plans) and expertise (influencing the main contractor and its supplier selection), which the main contractors and customers use as guidelines in their decision-making. Based on this study, we argue that suppliers can influence project decision making at the front end of construction projects by marketing their products to designers more effectively and enhancing their relationships with designers. The designer study was continued by developing two theoretical frameworks: one concerning the enhancement of relationships between suppliers and designers (Sariola & Martinsuo, 2015); and the other dealing with the factors that could explain suppliers’ effective project marketing toward designers (Sariola & Martinsuo, 2014) and testing the frameworks empirically with a questionnaire (Sariola & Martinsuo, 2016). In addition to identifying the key expectations of designers toward suppliers, this research provides

knowledge about designers’ behaviors during specification work. In terms of managerial implications, the study suggests practical activities for construction component suppliers to take actions toward and with designers in a project network. In particular, component suppliers should actively engage with designers and should develop their technical capability in order to become trustworthy from the designers’ perspective. The research also encourages component suppliers to collaborate with designers through, for example, joint R&D, since designers experiencing such cooperation are more committed to the supplier relationship. Regardless of the specifications and expertise of a project’s designers, the main contractor may have its own interests or preferred solutions, which can affect decision making at the front end of construction projects. The main contractor holds a central position in construction project networks, and contractors are considered to be drivers of new concepts in the construction industry (Bygballe et al., 2010). It is argued that component suppliers can make significant contributions to innovation, but that this talent is wasted because suppliers are rarely involved at the front end of construction projects (Håkansson and Ingemansson, 2013; Manley, 2008). For this reason, we carried out a further study from the main contractor’s perspective, to discover experiences and practices related to contractor–supplier relationships and suppliers’ innovation potential at the front end of construction projects. The results showed that contractors perceive component suppliers to have innovation potential and that suppliers are often sources of construction innovations. However, the implementation of construction innovations requires deeper relationships and cooperation between suppliers and contractors. The problem is that relationships in construction project networks are largely transactional in nature (Bankvall et al., 2010). The results of our study revealed contractors’ and suppliers’ practices for enhancing contractor–supplier relationships and exploiting suppliers’ potential in construction innovations. The majority of these practices were informal, and interviewees highlighted the importance of interpersonal interactions between

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suppliers and contractors (Sariola, unpublished data). These practices allow suppliers to influence decision making at the front end of construction projects through contractors. In the end, the project customer is usually the one who makes the final purchasing decisions based on the recommendations of the designers and the contractors. Based on these studies, we determined that it is not sufficient for a project’s front-end decision making to understand the dyadic interactions and relationships between two stakeholders. Stakeholders are linked to one another, and they have their own ways of influencing business decision making and innovations at the front end of projects. Thus, in order to understand decision making at the front end of projects, we need to model a comprehensive network of stakeholders’ motives and interactions with other stakeholders.

Business Decisions during Project Execution When a project reaches its implementation phase, one of the main responsibilities of the project manager is to ensure the project’s smooth progress, i.e., control the project implementation. As projects can be considered as vehicles for business, project control should not be only about performance assessment in light of the project’s immediate goals. In addition to monitoring the achievement of objectives, project control can seek to improve these objectives and, thereby, increase or enhance the business value of the project. The preliminary results of an ongoing research study reveal how project control can have a value-promoting dimension. Although the background of project control is in assessing the project performance compared with planned goals, we propose a movement toward project control as a business-oriented- and valueadding decision-making process.

Project Control during Implementation The importance of monitoring and controlling a project’s progress is evident in some form in

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all project management standards (e.g., PMI, 2013), and efficient project control has also been argued to promote project success (Liu, 2015). In its most basic form, project control follows a cybernetic approach, in which the progress of a project is monitored against the values of some predefined goal, and corrective actions are performed if deviations occur. This cybernetic control follows the control approach of a production process. In project management, Earned Value Analysis is an example of a practical control tool that includes many elements of a cybernetic control approach. The main problem of a cybernetic control approach is its focus on minimizing deviations from preestablished objectives. However, in complex organizations, including temporary organizations like projects, clear, preestablished objectives may be absent, and frequent changes are likely. Consequently, a more holistic approach to control is required. The goal of organizational control is to encourage behavior that is “desirable to achieving the organization’s objectives” (Cardinal et al., 2010). Control is practiced by utilizing different combinations of control modes and mechanisms (Kirsch, 1997). Control modes refer to the different groups into which control is divided, such as: market, clan, and bureaucratic control (Ouchi, 1979); or belief, boundary, diagnostic, and interactive control systems (Simons, 1994). There are numerous conceptualizations of organizational control, but the different control modes can typically be grouped into input, behavior, outcome, clan, and self-control (Kirsch, 1997). Within these different control modes, control mechanisms are the practical methods by which control is practiced (e.g., formal meetings, rules, and plans). There is a growing agreement that, instead of a single control mechanism or mode, effective project control requires a control package comprising several control mechanisms and modes. Different antecedents, such as task characteristics (Kirsch, 1996) and project manager and project team characteristics (Kirsch et al., 2010) affect the configuration of a control package. In addition, a control package is not static, but reflects the changes that take place throughout a project’s

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life cycle (Kirsch, 2004). It is also not sufficient to limit the focus to the project manager as a controller; instead, there are multiple stakeholders, each controlling a project in different ways (Kirsch et al., 2002; Soh et al., 2011).

Business Aspects of Project Control The more holistic control studies follow organizational control theories and tend to focus, at least implicitly, on the “iron triangle” of the cost, time, and scope objectives of a project. These basic measures of project success have largely been supplemented with measures of customer benefits, business benefits, and learning (e.g., Shenhar et al., 2001). Consequently, a few project control studies have followed a broader approach to project objectives, including, for instance, applications of a balanced scorecard for project business (Norrie & Walker, 2004), and project health checks (Jaafari, 2007). When projects become more complex and uncertain, simple forms of control are not sufficient. Several studies have analyzed project control in complex projects. Their primary finding has been the central role of social or clan control (e.g., Chua et al., 2012; Kirsch, 2004, Liu, 2015). This finding has been illustrated, in particular, in relation to the uncertainties of complex projects, hindering the ability to define clear project objectives (e.g., Chua et al., 2012). In addition, there is evidence of interactions among different control modes (i.e., a control package) and an emphasis on not utilizing behavioral control in complex projects (Liu et al., 2014). Complex projects can include complex networks of stakeholders, each of which may try to control the project in a different way (Soh et al., 2011; Martinsuo et al., 2010). In particular, the customer of a project can control the organization of the project’s delivery and initiate project changes. Such changes emphasize the need for control ambidexterity, or the ability to simultaneously ensure smooth project progress and remain flexible enough to consider changes (Tiwana, 2010). Project control should not be only about performance assessment in light of a project’s immediate goals. In addition to delivering a project following the project plan, a project team could actively work

toward increasing the project’s delivered life cycle value. This includes, for instance, educating the customer on the use of the solution, its performance enhancement and upgrade possibilities, and justifying the need to combine tangible project delivery with value-adding service elements. Here, many business-oriented decisions are made, to optimize the value of the delivered solution. Further, it is not sufficient for an organization to control the progress of its individual projects separately. Instead, control practices are also required at the project portfolio and organizational levels, to achieve synergies across different projects and, thereby, impacting the project supplier’s business more broadly. Müller et al. (2008) have analyzed focal project portfolio management (PPM) activities (i.e., portfolio selection, portfolio reporting, and portfolio decision making) as control mechanisms. They demonstrate how efficient portfolio control can improve the PPM performance. An earlier, related study reported that single project-level activities can also promote PPM effectiveness (Martinsuo & Lehtonen, 2007). Control is also required to manage the numerous and simultaneous projects implemented by project-based organizations (PBOs) or multiproject organizations (Canonico & Söderlund, 2010). The discussion above has covered many of the elements of complex project environments and their effects on project control. Figure 2.3. summarizes these effects and the different levels of project control.

Example of Business-Oriented Project Control in Different Degrees of Complexity Through a larger research program, we gained access to study project control in a large engineering company. This engineering company (hereafter, EngineeringCo) offers its customers both standard and tailored solutions, with the latter being implemented as delivery projects. These delivery projects include both tangible, physical goods (i.e., machinery) and intangible elements (i.e., services). Two separate case studies were designed, which focused on life-cycle-oriented project control and project control practices in different delivery projects.

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The Business of Projects in Organizations

Multiple projects Controlling the project business of an organization in addition to single projects: controlling a PBO or a project portfolio

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From ensuring to promoting; business benefits

Moving from ensuring progress to promoting lifecycle value: additional benefits for both the delivery organization and the project client Defining goals and tolerating uncertainty and ill-defined objectives: particularly inclusion of social and clan control Ensuring progress according to project plans: possibly even with cybernetic control elements Single project

Iron triangle and plan compliance

Figure 2.3. Business issues in project control at the different levels of the PBO.

Warranty period: how is the promised performance level guaranteed and how is work divided regarding possible product malfunctions and failures Postproject service offerings: what does the project-based firm offer, who are the other service providers, what do the customers need, and what is the competition in services Asset and capacity ownership: who owns and operates the asset and/or capacity, what is the business model, and how are responsibilities shared between the PBF and customer New project opportunity identification: what new projects can emerge either through in this specific customer relationship, or on the basis of a reference from this project, or reputation

Figure 2.4. Summary of key business decision issues in the postproject phase.

The results, first, demonstrated how EngineeringCo promoted additional life-cycle value in project solutions for its customers. In particular, the company combined the achievements of the agreed-upon project plans (the lower elements of Figure 2.4) with added life cycle value for the project customer and, consequently, the project supplier (the upper elements of Figure 2.4). In practice, the promotion of additional life cycle value was achieved through sales argumentation, negotiation, and contract structures (e.g., leasing vs. capital investments).

One of the main difficulties of considering the life cycles of delivery projects was EngineeringCo’s organizational structure. Historically, the company had involved a variety of organizational functions to managing project deliveries and service solutions. In addition, significant effort was required to convince the customers of the feasibility of new contract structures (e.g., leasing and performance-based pricing elements). (Martinsuo & Vuorinen, 2015) The second phase of the study focused on the project control of three different delivery projects.

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The projects varied in terms of size, interrelatedness (i.e., structural complexity), and aspects of uncertainty. The primary result was understanding the project supplier’s tailored approach to project control. In the simpler cases, EngineeringCo and, particularly, the project manager, controlled delivery projects primarily through output control and self-control. As the size and uncertainty of a delivery project increased, additional control was required to actively solve problems and create a shared understanding of project goals. This additional control was practiced primarily as clan control (Vuorinen & Martinsuo, 2016). The previous discussion and the empirical studies illustrate the need for an organizational approach to project control. As Figure 2.3 illustrates, project control should not be limited to the iron triangle objectives of single projects; instead, the focus should be on broader goals and benefits, as well as on project portfolio and organizational levels. In addition, organizations should acknowledge the contextual nature of project control. As both the literature and the empirical studies demonstrate, different projects must be controlled in different ways. Although organizational project management models and rules can be designed, organizations should acknowledge the requirements of control contextuality. In addition, though different organizational functions are typically responsible for delivery projects and service deliveries, this can prevent early promotion of life cycle value during the initial phases of delivery projects. Thus, the move from plan compliance toward a businessoriented life cycle approach requires improved intraorganizational collaboration.

Postproject Business Decisions Services as Postproject Business Companies delivering complex products and systems to their customers often seek additional business by offering services for the life cycle of the product or system. Such services may include the design, installation, training, use, performance, maintenance, repair, upgrade, optimization, modernization, and disposal of the system (Artto et al., 2008; Oliva & Kallenberg, 2003).

Such services enhance the efficiency and profitability of the customer’s asset and business processes. Competitive pressures are forcing PBOs to supply differentiated, high-quality services to complement their product-based offerings (Hobday et al., 2005), and, in fact, PBOs have been considered particularly suitable for producing service-enhanced solutions (Gann & Salter 2000). Services are increasingly discussed in association with project business (e.g., Brady et al., 2005; Hobday et al., 2005; Artto et al., 2008; Wikström et al., 2009), and they can assist in converting a firm’s business logic from products to solutions. However, integrating services into complex solutions is frequently treated as a “packaging” or integration task that precedes solution delivery (Brady et al., 2005), assuming that products and services have already been developed. All phases of a project life cycle may include services. Some preproject activities, such as feasibility studies, design, consulting, and planning, may be delivered as services. In addition, project management and control and other project activities may take the form of services (Artto et al., 2008). Extending the offering of PBOs, however, most frequently deals with postproject activities regarding the maintenance, performance, asset sharing, upgrade, and disposal of the offered system or solution (Artto et al., 2008; Kujala et al., 2008). Services can influence the business of PBOs in many ways throughout a project’s life cycle: through customer entry, customer value, competitive advantage, delivery efficiency, service business, and innovation and learning (Artto et al., 2008; Kujala et al., 2008). Despite the multitude of business opportunities related to services, services have only recently begun to draw attention in project business research. One of the key concerns for PBOs is maintaining business continuity despite the temporary nature of each project and the discontinuity between project deliveries (Hadjikhani, 1996). Services can be considered means to build continuity through customer relationships and to engage in cocreation activities over the life cycle of a project-based asset, whether it is an IT system, a manufacturing equipment or process, or an entire solution for long-term

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The Business of Projects in Organizations

capacity creation. The life cycle capacity of a system or solution requires continuous maintenance and care, occasional upgrades, and eventual disposal, all of which may be highly relevant to the continuous business of a PBO (e.g., Kujala et al., 2013).

The Back End of Delivery Projects and Its Business Potential Earlier research acknowledges four main domains in which postproject business decisions significantly concern the PBO: the warranty period, service offerings, asset ownership, and new project opportunities. Even if a PBO decides not to build long-term relationships with its customers following project delivery, it must still consider these business issues. In particular, an external third-party company may be required for these postproject services, and this company may request the PBO’s guidance (e.g., on product specifications, spare parts, and maintenance instructions) in order to offer its services. Figure 2.4. summarizes the key business decision issues in the postproject phase. The warranty period for a project’s main product requires the contractor’s intense involvement, since the responsibility for the product is still in the hands of the PBO and the costs of product failures are managed by the contractor. Performance guarantees, warranties, limitations of liability, and securities are postproject business issues that should be considered by top management (von Branconi & Loch, 2004). These issues also play an important role in the project contract: that is, failing to fulfill the contract will result in sanctions. The service offerings needed to complement the delivered solution must typically be specified during or before the project (Martinsuo & Lähdeaho, 2011), and service capacity must be set up. It is not self-evident that the contractor will take charge of services; this responsibility could also fall to an external service firm or a competitor. Yet, a PBO needs to have a clear strategy concerning this issue in order to convert project-related service opportunities into business value. Some customers are interested in transferring the responsibility for their capacity or operations to an

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external partner. This implies a shift in ownership and a change in relationship roles. For example, a customer may desire the production capacity of a certain tonnage and be willing to rent/lease this capacity, but not to purchase the equipment or processes. In such cases, the PBO needs to consider whether it is willing to maintain ownership of the product for a longer period of time or prefers to search for alternative funding options (i.e., other than direct sales). Alternatively, a customer may want someone else to operate the process and offer the tonnage, even if it agrees to purchase the equipment and processes. In such a scenario, a PBO must consider whether it wants to offer the service of “operations” to the customer. Since there are external firms that may also want to offer such services, the PBO must decide whether it is in the business of capacity and operations or whether it will allow an external service provider to take on this role. Another important aspect of postproject activities relates to new project opportunities. A single customer could give rise to several opportunities, particularly if the customer is satisfied with the project delivery. Repeat customers are typically considered beneficial because, through each project, a PBO is able to learn more about the customers’ ways of working, and this learning makes working on the succeeding projects easier. Another possibility is that a project customer can be used as a referee in future project proposals (e.g., Jalkala & Salminen, 2010). Since many large projects receive public attention, even the media communication about a project and its success or failure may be reflected in forthcoming project requests. Thus, it is very important for a PBO to identify and utilize opportunities for references and positive media attention in order to attract future projects. A PBO’s reputation and good image are significant parts of its competitiveness; yet, little research has covered such issues.

Example of Services That Build Project Business Continuity We studied the ways in which the provision of services complements machine manufacturers’ project offerings and, in particular, these PBOs’ interest in standardizing service-related processes and

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innovating business models for the services. In particular, we inspected six manufacturing firms’ current states in project-related services, collected data from four software-based service providers involved with these kinds of manufacturers, and examined three manufacturing firms’ postproject service deliveries in more depth. Where earlier research has focused largely on the role of earnings logic in service-related business models, we were more concerned with the service delivery logic and how it can be made more efficient. The focus was on equipment and system manufacturers delivering high-technology, high-value, complex solutions to their customers. Each delivery is unique and offered on a project basis, and the firms operate on demanding, highly competitive and international markets. Services have become highly lucrative for these firms, not only because of their customers’ increasing interest in outsourcing noncore activities to trusted external partners, but because novel remote technologies have begun to enable providers to stay “in tune” with their customers’ processes on a continuous and efficient basis. When remote technologies are used efficiently, systems providers can follow the status and use of the delivered equipment in real time and deliver services that meet their customers’ need. (Martinsuo & Momeni, 2015; Momeni & Martinsuo, 2015) Even when remote technologies are already largely in place, both project suppliers and customers must continue to work on service capacity. Manufacturing firms are now increasing the opportunity to use remote monitoring to achieve various business benefits for use by both customers and the project suppliers’ own service development. We studied the challenges experienced by both the manufacturing firms and the software firms in utilizing equipment life cycle data to activate services and achieve customer cooperation continuity. We found that the key challenges experienced by the personnel involved four issues: revenue realization (moving from “freemiums” to cost-based, added-value services), the processes of using and integrating equipment data into service solutions, data security, and data ownership (Ocaña Flores & Martinsuo, 2015). Services follow a different

business logic than equipment-related projects; for example, there may be a service agreement or service-level agreement based on monthly fees. Thus, compared with project delivery relationships, service relationships with customers must be perceived and managed in new ways. Artto et al. (2016) also have recently proposed that the value creation achieved during business operations needs to be considered in a new way and possibly through multiple alternative scenarios, since this value creation involves multiple organizations, each with unique needs. One of the goals of the manufacturing firms was to learn how to make service delivery more efficient and standardized across different types of customer contexts. We found that some of the services were rather reactive (i.e., they emerged on the basis of direct customer requests for problem solutions or corrections), while others were proactive (i.e., they developed based on the project supplier’s insight into and anticipation of customers’ value potential and needs). All of the companies exhibited high variation in service delivery, and all experienced challenges. Many of the interviewees noted that, while many of the back-office activities in service delivery could be standardized, it was more difficult to forecast or standardize the customer interface of the identification of real customer need, due to the very different contexts of customers’ operations. (Poikonen et al., 2015) These examples highlight the connection between the contractor’s project business and the customer’s continuous operations, as well as the possible role of technology-enhanced services in the contractor–customer relationship. New kinds of challenges emerge when a PBO adopts services as part of its business. Not all customers are ready for such a transformation; however, at the same time, many customers seek to maintain their focus on their core business. Indeed, postproject activities include crucial business decisions, some of which are highly strategic. The issue of “what business we are in” concerns the mission of the firm and can also be changed if the service market begins to offer attractive business possibilities.

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The Business of Projects in Organizations

Conclusions: Life-Cycle View of Project Business This chapter has been concerned with the business of projects, particularly over the life cycles of single projects. The first research question inquired into the ways and occasions for making key business decisions in projects. We have explored the business-defining events that occur over the project life cycle and have shown several examples from our empirical studies, particularly in construction and engineering projects. Figure 2.5. summarizes the business decisions of projects in the different life cycle phases. The contractor’s viewpoint has been emphasized. The majority of previous research has centered on projects’ operative decisions: project resourcing, start, review, and control events, and changes. We have shown that the business of projects deals with a firm’s ability to bid on a project, to define and reach benefits and value related to the project, and to achieve a profitable and sustainable customer

Business decisions over the project’s extended lifecycle

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relationship. These business decisions challenge project sponsors to “do the right things” in delivery project contexts. Even if PPM research does not concern delivery projects, delivery projects must consider key decision events as opportunities for business impact. The second research question asked how the project stakeholders are involved in the project’s business decisions. We have demonstrated that project-related business decisions, particularly at the front end and back end of a project require continuous customer cooperation and stakeholder involvement. It is not only the project network that needs to be considered at the front end, but also the network involved in the operations of the project product. We have also shown how various third parties engage with the project network: for example, designers may play an important role in promoting certain project decisions; component suppliers may seek to enhance their network centrality in order to become favored partners for forthcoming projects; and contractors may need to consider their

Supplier’s perspective

Customer’s perspective

Preproject activities • Possibility and decision to bid • Compiling stakeholder needs for the goal • Value proposition • Business model • Target benefits • Delivery model

Marketing and sales of delivery project

Ideation and preparation of investment project

Negotiations Project execution

• Controlling the business objectives • Promoting lifecycle value • Tolerating and managing uncertainty • Ensuring progress

Design and delivery

Organizing, managing, procurement

Planning and control Postproject activities

• Warranty: guarantee for performance level • Service offerings • Ownership of asset • New project opportunities

Product support

Product use

Business cooperation

Figure 2.5. Summary of business decisions over the project life cycle.

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own network positions when moving toward services or operation partners. We have also shown that, during implementation, project control may take on an interactive business nature, particularly in projects with high degrees of complexity or uncertainty. When projects pursue the delivery of life-cycle value, project control cannot be “isolated” to the project organization; instead, it must span the boundaries of all involved organizations, possibly at different levels. Thus, when multiple stakeholders are involved, negotiations and justifications of decisions may continue throughout project implementation, and uncertainties may lead to new changes. These findings encourage project contractors to consider how they can build different levels of business decisions and different degrees of complexity into their project models in order to govern project operations effectively.

Summary This chapter has developed the foundations for making sound business decisions in the different phases of the project’s life cycle. We have shown that the most relevant business decisions not only span across organizational levels, but they cross the boundaries of firms and organizations involved in the project delivery. Organizational project management, therefore, needs frameworks and practices that enable real-time communication and control at the different levels of the organization, promote a seamless cooperation between contractors and customers, and take the stakeholders’ diverse and evolving needs into account in the business networks with different degrees of complexity. We have mapped the critical business decisions over the project’s life cycle and demonstrated that they complement ordinary technical decisions, thereby encouraging the project sponsors to take a strategic business role in their management task. Our empirical designs were delimited to delivery project contexts with an inherent multiproject setting, i.e., companies having an interest in implementing projects repetitively and multiple projects simultaneously. The focus was on the

contractor’s viewpoint, but linkages to customers, component suppliers and third-party designers also were covered to some degree. Even if the investor’s perspective, and the perspective of change and IT projects, or megaprojects were not covered, many of our ideas may apply to them, too. More research is suggested, particularly to cover the customer’s or investor’s perspective to key business decisions, to map the particularities concerning the multiproject context, and to explore the emergence of business in the project network more broadly when stakeholders possess competing and complementary business interests.

Acknowledgments This research has been conducted as part of DIMECC’s Future Industrial Services (FutIS) research program and the Service Solutions for Fleet Management (S4Fleet) research program funded by the Finnish Technology and Innovation Agency Tekes, companies and research institutes, and coordinated by DIMECC. We gratefully acknowledge their support in this study. We also thank the companies that have participated in the case examples of this study.

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Martinsuo, M., Aaltonen, K., & Lehtonen, P. (2010). Project autonomy in complex delivery projects: Taking and withdrawing autonomy in system and turnkey deliveries. In: Gleich, R., Mayer, T-L., Wagner, R. & Wald, A. (Eds.), Advanced project management (Vol. 2), pp. 95–118. Germany: GPM Deutsche Gesellschaft für Projektmanagement. Martinsuo, M., & Lähdeaho, M. (2011). Developing new services for solution-oriented project business. Paper presented at EURAM 2011 European Academy of Management Conference, 1–4 June, 2011, Tallinn, Estonia. Martinsuo, M. & Lehtonen, P. (2007). Role of single-project management in achieving portfolio management efficiency. International Journal of Project Management, 25, 56–65. Martinsuo, M., & Momeni, K. (2015). Customized service solutions for project business. Paper presented at NFF Nordic Academy of Management conference, 12–14 Aug, 2015, Copenhagen, Denmark. Martinsuo, M. & Sariola, R. (2015). Developing a supplier’s third-party relationships and cooperation in project networks. International Journal of Managing Projects in Business, 8(1), 74–91. Martinsuo, M. & Vuorinen, L. (2015). Project control toward lifecycle value at the front end of delivery projects. Paper presented at NFF Nordic Academy of Management conference, 12–14 Aug, 2015, Copenhagen, Denmark. Momeni, K. & Martinsuo, M. (2015). Remote monitoring systems as enablers for project-related services. Paper presented at IRNOP International Research Network on Organizing by Projects conference, 22–24 June, 2015, London, U.K. Müller, R., Martinsuo, M., & Blomquist, T. (2008). Project portfolio control and portfolio management performance in different contexts. Project Management Journal, 39(3), 28–42. Norrie, J. & Walker, D. (2004). A balanced scorecard approach to project management leadership. Project Management Journal, 35(4), 47–56. Ocaña-Flores, M. & Martinsuo, M. (2015). Use of equipment lifecycle data in industrial services. In Sundbo, J., Fuglsang, L., Sørensen, F. & Balsby, N. (Eds.), Proceedings of the XXV Annual RESER Conference, September 10–12, 2015, Copenhagen, Denmark. Oliva, R. & Kallenberg, R. (2003). Managing the transition from products to services. International Journal of Service Industry Management, 14(2), 160–172.

Ouchi, W. G. (1979). A conceptual framework for the design of organizational control mechanisms. Management Science, 25(9), 833–848. Poikonen, E., Martinsuo, M., & Nenonen, S. (2015). Standardizing the service delivery system for repetitive industrial services. In: Sundbo, J., Fuglsang, L., Sørensen, F., & Balsby, N. (Eds.): Proceedings of the XXV Annual RESER Conference, 10–12 September, 2015, Copenhagen, Denmark. Project Management Institute (PMI). (2013). A Guide to the Project Management Body of Knowledge (PMBOK Guide), 5th ed., Newton Square, PA: Project Management Institute. Sariola, R., & Martinsuo, M. (2014). Effective project marketing toward third parties in a project network. Paper presented at Project Management Institute Research and Education Conference, 27–29 July, 2014, Portland, Oregon, USA. Sariola, R., & Martinsuo, M. (2015). Framework for enhanced third-party relationships in project networks. International Journal of Managing Projects in Business, 8(3), 457–477. Sariola, R., & Martinsuo, M. (2016). Enhancing the supplier’s non-contractual project relationships with designers. International Journal of Project Management, 34(6), 923–936. Shenhar, A. J., Dvir, D., Levy, O., & Maltz, A. (2001). Project success: a multidimensional strategic concept. Long Range Planning, 34, 699–725. Simons, R. (1994). How new top managers use control systems as levers of strategic renewal. Strategic Management Journal, 15(3), 169–189. Soh, C., Chua, C. E. H., & Singh, H., 2011. Managing diverse stakeholders in enterprise systems projects: a control portfolio approach. Journal of Information Technology, 26(1), 16–31. Tiwana, A. (2010). Systems development ambidexterity: Explaining the complementary and substitutive roles of formal and informal controls. Journal of Management Information Systems, 27(2), 87–126. Vuorinen, L., & Martinsuo, M. (2016) Project control in different project types. Paper presented at EURAM European Academy of Management conference, June 2–4, 2016, Paris, France. Yang, J., Shen, G. Q., Ho, M., Drew, D. S., & Xue, X. (2011). Stakeholder management in construction: an empirical study to address research gaps in previous studies, International Journal of Project Management, 29(7), 900–910.

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CHAPTER

3

Strategic OPM Why Companies Need to Adopt a Strategic Approach to Project Management VERED HOLZMANN, AARON SHENHAR, and JOCA STEFANOVIC

Introduction Companies typically implement strategy through the initiation and execution of an array of projects, which they select to achieve the organization’s long-term goals. Each of these projects is initiated to create unique products, services, or processes or to provide improvements in existing ones. Moreover, companies typically initiate interrelated projects to create new value that could not be achieved by a single project but is attainable by the synergetic effect that is generated by the integration of multiple projects (Cooke-Davies, 2004; Cooke-Davies et al., 2009; Aubry & Hobbs, 2011). In a paradoxical way, however, since the establishment of project management as a formal discipline, companies have focused primarily on the operational aspects, namely, on executing processes in the most efficient way. Yet, many surveys show that most projects do not meet their expected goals. For example, the Standish Group study shows that over 70 percent of projects were total or partial failures, failing to deliver on time, budget, or specifications (Hastie & Wojewoda, 2015). Further, even among the projects that successfully met their efficiency goals, many did not achieve the expected business results for their parent companies. Therefore, it appears that the classical and traditional project management processes and tools are no longer sufficient for guaranteeing modern project success (Jugdev & Müller, 2005; Williams, 2005). The strategic approach to project management suggests that while a project should be managed efficiently, it should also be managed effectively

and strategically, to be considered successful. Efficiency is related to the operational management of a project that results in meeting the schedule, budget, and specifications. Effectiveness is related to the achievement of business goals and objectives, and to customer satisfaction. Thus, the effective management of a project requires an alignment with the environment, adjustments of tasks and responsibilities, and purposeful change management throughout the project lifecycle. In addition to the efficient management of a project, which guarantees it is performed as planned, effective management of a project must guarantee it generates value to the customer and users. Strategic management of a project takes these two aspects as necessary conditions for success. Strategic management of a project considers the project’s service and contribution to the company, and is achieved through the appropriate management style, integration with other projects executed by the company, and the synergetic value they generate for the organization. This is not, however, the traditional way in which projects are typically managed. All this requires change. Yet, this change is not obvious. Without the active involvement of an organization in the way it runs its projects, one cannot expect project managers to take the initiative of running their projects in a strategic way. Thus, a proactive approach by the organization is required in order to turn its projects into strategic activities. This is what we call Strategic Organizational Project Management (SOPM). This chapter is focused on studying the strategic aspects of managing projects and their relation to 33

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Vered Holzmann, Aaron Shenhar, and Joca Stefanovic

Strategic Focus Low

High

business success. We explore first the relationship between building a Strategic Focus (SF) in a project, together with additional aspects such as Inspirational Leadership (IL) and Operational Excellence (OE), and their relation to project success. This provides the basis for assessing the strategic maturity of project management. We intend to show that greater strategic focus in project management is associated with better project and business success. Once this proposition is established, we make a case urging organizations to establish their SOPM environments and provide recommendations on how to do that.

Current Maturity Models

High Low Operational Excellence

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Strategic Project Management Maturity

Figure 3.1. Strategic project management maturity.

Expanding on previous research on strategy in project management (Jugdev & Müller, 2005; Cooke-Davies et al., 2009; Patanakul & Shenhar, 2012; Martinsuo & Killen, 2014; Too & Weaver, 2014), we embarked on questions about the organizational strategic value of projects, its recognition, and consequences on project management style. We present here evidence that when projects of high-strategic value are recognized as such, they are managed differently from other projects. In particular, we show that there are practices, behaviors, and considerations in project management that can be associated with strategy implementation, and that strategy-related behavior in a project helps improve project and organizational success. We also discuss other conditions that influence this relationship. We define a Strategic Project Management Maturity (SPMM) model at the project level, which consists of three dimensions: operational excellence, inspirational leadership, and strategic focus (see Figure 3.1). Operational Excellence refers to the extent to which project management activities, such as planning, execution, monitoring, and control, focus on completing the project within time, budget, and specification requirements. A high level of OE indicates that processes were carried out according to the standard guidelines (such as the Project Management Body of Knowledge, PMBOK 2013) and there were no major operational challenges recorded.

Inspirational Leadership refers to the ability of a project manager to inspire the project team, induce team bonding, and ensure team effectiveness to align all project stakeholders with the accomplishment of the project’s goals and objectives.A high level of IL indicates that the project manager has a clear vision that he shares with the team, and that the team members share values, symbols, social activities, and attitudes, and they are motivated to contribute to the project’s success. Strategic Focus refers to the management style used and its implication on value creation, as well as top management support for efforts to integrate the project with other projects contributing to strategic value creation for the company. A high level of SF indicates that project management was aware of the strategic value of the project and acted upon it by, for example, giving business results ultimate precedence over schedule and budget or displaying other characteristic behaviors related to project strategy formulation and execution. A high level of achievements in the SPMM model vectors enables the creation of strategic value, which is the project’s potential contribution to long-term organizational goals. This strategic value builds on a combination of efficiency, effectiveness, and strategy. Hence, strategic value in project management might result from one or more of the following aspects. First, it might be the outcome of a single project that is initiated to

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Strategic OPM

improve competitive advantage through development of new products, services, or processes (Longman & Mullins, 2004; Pinto, 2007; Artto et al., 2008; Patanakul & Shenhar, 2012). Second, it might derive from a strategic managerial approach, which is expressed in achieving business results, such as profit, market share gain, or public utility such as a new highway or tunnel (Mir & Pinnington, 2014; Fernandes et al., 2015; Badewi, 2016). Third, it might also stem from the collective contribution of an array of projects executed by the company. In this case, the value attained by a network of projects is greater than the sum of all individual projects and is intensified by interrelations between projects (Thiry, 2002; Möller et al., 2005; Aubry et al., 2007; Unger et al., 2012).

35

SF High

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High OE : Strategic goal projects : Operational goal projects

Figure 3.2. Strategic vs. operational goal projects.

Empirical Examination We examined the SPMM model in a large number of projects to assess the relationships between the three dimensions of the model and project success. We used a mixed-methods approach in two phases. We first carried out a qualitative case study of thirtyfive documented cases, and then, a quantitative statistical analysis of 157 projects from different industries. The case study analysis was done according to Eisenhard’s (1989; 1991) approach to building theory from case studies and related methods (Shadish, Cook, & Campbell, 2002; Yin, 1984). Our database included 210 cases from different industries. These projects were analyzed for project characteristics, management style, and success. For the purpose of the current study, we selected two subgroups of projects – one that related to new product development, potentially creating strategic positions in markets and businesses, hence with strategic goals; and the other to product upgrades, that is for improving or upgrading an existing product, hence with operational goals. All other cases were eliminated. The final dataset included thirty-five documented cases, for which we looked for withincase, and cross-case patterns. Research findings from the case study analysis phase helped formulate the new SPMM model, with OE, IL, and SF as elements.

A follow-up survey was conducted with a group of senior practicing project managers. The survey tested the relationships between the SPMM elements and project success. Respondents were asked to provide data on finished projects from their experience, based on a five-point Likert scale of a set of scenarios that mostly resembled the situation they experienced in the project on which they reported. They were also asked to evaluate the success of the project using several variables. The questionnaire was distributed electronically to experienced professionals in different areas in the world.

Case Study Results As shown in Figure 3.2, on the operational focus dimension, about half the cases were ranked high (i.e., the processes were carried out according to the standard guidelines such as PMBOK and there were no major operational problems recorded). The other half were ranked low (i.e., standard processes were not efficiently carried out, or not even recognized, or there were major operational problems). In contrast, on the strategic focus dimension, only 20 percent ranked high. In those projects, project management activity was focused on attaining business goals, or on displaying other characteristic

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behaviors related to project strategy formulation and execution, such as giving business results precedence over schedule and budget, and supporting integrative project management. Notably, the correlation between the operational and strategic dimensions was virtually zero. Thus, this supports the notion that these two dimensions are independent. There were fourteen projects that had high strategic importance to their organizations. Of these, only five exhibited a high degree of strategic focus. On the operational dimension, about two-thirds of the projects ranked low. Among the twenty-one projects whose goal was not highly strategic, two-thirds ranked high on the operational dimension, whereas only one was assessed as having high strategic focus. When calculating Pearson correlations between the project goal (coded as highly strategic or not) and the project management style dimensions, the only significant positive correlation was found between the project goal and the strategic dimension of project management style. This suggests that a strategic approach is present more often in projects whose strategic value is recognized. It seems that organizations know how to distinguish between projects with operational goals and those with strategic goals. It is much less clear, however, whether this recognition is realized in the actual practices of their project management approaches. Dealing with strategy needs in these studied projects seems to be mostly reduced to an operational approach, under the assumption that aligning initial project goals with organizational strategy and just maintaining the project within the triple constraint would be sufficient to achieve the organizational strategic goals. In this view, strategy-related behaviors are transformed into a traditional operational behavior. In fact, most of the analyzed case studies did not document any strategic elements in their project management styles. It seems that this limited approach may only work for projects with operational goals and/or low uncertainty. For projects of strategic significance, especially those where uncertainty is high, neglecting the

strategic aspects and reducing project strategy to operational efficiency may have an adverse effect. Generally, there may be a potential conflict between the strategic long-term goals and the operational short-term goals. However, it is often not even recognized as a dilemma, which requires making trade-off decisions. Therefore, such dilemmas are rarely documented and articulated. In a wider sense, applying the concept of project strategy and the strategic extent with which projects are run requires, in addition to having project goals aligned with business strategy, project execution to include conscious and constant reevaluation of needs, competitiveness, and market conditions and aligning them with the operational decisions. Of particular importance is the concept of strategic focus, which means that project teams constantly keep an eye on building and updating the strategic activities needed to achieve the highest competitive advantage and the best value from the project (Patanakul & Shenhar, 2012). Looking at projects as strategic businessrelated processes involves nurturing ongoing strategic behaviors as part of a strategic project management style. The approach was recently named Strategic Project Leadership (Shenhar; 2004, 2015). The difference between this view, and the view almost invariably identified by our studied cases, is significant. Our case study analysis also indicates a positive relationship between the strategic dimension of the project management style and important components of project success. When considering project success as a multidimensional strategic concept (Shenhar et al., 2001), our study found in particular the preliminary indication for a connection between the strategic behavior and the dimension of preparation for the future. This suggests that benefits created by a project typically outlive the project’s completion date and may, in fact, relate to the product’s success throughout its lifecycle. As mentioned in the introduction, the qualitative analysis part of our study served as a preliminary theory-building step, and as an introduction to the second, quantitative, phase, which is discussed below.

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