Research Handbook on the Governance of Projects 1802208062, 9781802208061

Table of contents :
Front Matter
Copyright
Contents
Editors and contributors
Introduction to the Research Handbook on the Governance of Projects
Part I Theoretical, Philosophical, and Conceptual Foundations
1. A philosophy of governance
2. Principles of good governance
3. Classic perspectives on project governance: transaction cost economics, agency theory, and stewardship theory
4. Shareholder and stakeholder theory in governance
5. Systems theories and systems praxis
6. Multi-level governance
7. Governmentality for positive project management
Part II Project Governance
8. Governance of projects and project governance: enabling strategy implementation through projects
9. Social value from megaprojects and their governance
10. Steering committees as governance entities
11. The project management office: governing at the interface of temporary and permanent
12. Governance across the commercial interface on complex engineering projects
13. Contractual and relational governance for sustainability: case study of a PPP megaproject in India
14. Governance through project management methodologies
15. Normalization of deviance in projects: its causes and implications for effective governance
16. Ethics and trust implications of governance
17. The link between governance, decision-making, and project performance
18. Cultural practices of governing megaprojects
19. Social acceptability and governance for public infrastructure projects
20. Learning through evaluation: the missing link in governance of projects
21. Environmental, social, and governance criteria and their relationship with governance of major infrastructure projects
22. New nonprofit organization governance: driving impact by adopting a holistic governance view
23. Boosting quality of megaprojects through governance mechanisms: perspectives of mega water transfer projects in China
24. Governing crises and coping strategies in megaprojects
Part III Governance of Projects
25. Portfolio and program governance
26. Governance of Sustainable Development Goal programs
27. Governance of organizational project management
28. Fairness and justice in the governance of projects
Part IV Governance of Inter-Organizational Networks for Projects
29. Governance of inter-organizational project networks
30. From network governance to metagovernance
31. Toward a theory of resilience governance: insights from megaprojects in China
Part V Practical Examples
32. Governing major projects in healthcare
33. Evolution of space programs governance
34. Governance evolution in university-industry collaborative R&D programs
35. Minimum viable governance for data science initiatives
Part VI Reflections
36. A look ahead
Index

Citation preview

RESEARCH HANDBOOK ON THE GOVERNANCE OF PROJECTS

Research Handbook on the Governance of Projects Edited by

Ralf Müller Professor of Project Management, Department of Leadership and Organization, BI Norwegian Business School, Norway

Shankar Sankaran Professor of Organizational Project Management, School of the Built Environment, University of Technology Sydney (UTS), Australia

Nathalie Drouin Professor, Department of Management, École des Sciences de la Gestion, Université du Québec à Montréal (ESG UQAM), Canada, and Adjunct Professor, University of Technology Sydney (UTS), Australia

© Ralf Müller, Shankar Sankaran and Nathalie Drouin 2023 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA

A catalogue record for this book is available from the British Library Library of Congress Control Number: 2023942050 This book is available electronically in the Business subject collection http://dx​.doi​.org​/10​.4337​/9781802208078

EE VS P

ISBN 978 1 80220 806 1 (cased) ISBN 978 1 80220 807 8 (eBook)

Contents

viii

Editors and contributors

Introduction to the Research Handbook on the Governance of Projects 1 Ralf Müller, Shankar Sankaran, and Nathalie Drouin

PART I  THEORETICAL, PHILOSOPHICAL, AND CONCEPTUAL FOUNDATIONS 1

A philosophy of governance Efrosyni Konstantinou

9

2

Principles of good governance Ralf Müller

3

Classic perspectives on project governance: transaction cost economics, agency theory, and stewardship theory Tuomas Ahola

20

31

4

Shareholder and stakeholder theory in governance Ralf Müller

42

5

Systems theories and systems praxis Shankar Sankaran

50

6

Multi-level governance Alfredas Chmieliauskas, Ralf Müller, Raimonda Alonderienė, Margarita Pilkienė, and Saulius Šimkonis

65

7

Governmentality for positive project management Stewart Clegg and Johan Ninan

78

PART II   PROJECT GOVERNANCE 8

Governance of projects and project governance: enabling strategy implementation through projects Ata Ul Musawir

91

9

Social value from megaprojects and their governance Karyne C.S. Ang, Shankar Sankaran, and Nathalie Drouin

103

10

Steering committees as governance entities Lynn Crawford

116

v

vi  Research handbook on the governance of projects

11

The project management office: governing at the interface of temporary and permanent Monique Aubry and Magali Simard

12

Governance across the commercial interface on complex engineering projects Graham M. Winch

13

Contractual and relational governance for sustainability: case study of a PPP megaproject in India Nicola Thounaojam, Ganesh Devkar, and Boeing Laishram

14

Governance through project management methodologies Miia Martinsuo

15

Normalization of deviance in projects: its causes and implications for effective governance Jeffrey K. Pinto and Kate Davis

124 138

150 161

171

16

Ethics and trust implications of governance Ralf Müller

184

17

The link between governance, decision-making, and project performance Rodney Turner

195

18

Cultural practices of governing megaprojects Alfons van Marrewijk

210

19

Social acceptability and governance for public infrastructure projects Maude Brunet and Sofiane Baba

220

20

Learning through evaluation: the missing link in governance of projects Ole Jonny Klakegg and Gro Holst Volden

235

21

Environmental, social, and governance criteria and their relationship with governance of major infrastructure projects Nathalie Drouin and Yves Genest

251

New nonprofit organization governance: driving impact by adopting a holistic governance view Patrick Renz

263

Boosting quality of megaprojects through governance mechanisms: perspectives of mega water transfer projects in China Florence Yean Yng Ling and Wujuan Zhai

283

22

23

24

Governing crises and coping strategies in megaprojects Rehab Iftikhar

296

Contents 

vii

PART III   GOVERNANCE OF PROJECTS 25

Portfolio and program governance Miia Martinsuo

308

26

Governance of Sustainable Development Goal programs Shankar Sankaran

318

27

Governance of organizational project management Shankar Sankaran

329

28

Fairness and justice in the governance of projects Christine Unterhitzenberger and Kate Lawrence

343

PART IV  GOVERNANCE OF INTER-ORGANIZATIONAL NETWORKS FOR PROJECTS 29

Governance of inter-organizational project networks Jörg Sydow and Timo Braun

356

30

From network governance to metagovernance Ralf Müller

366

31

Toward a theory of resilience governance: insights from megaprojects in China 379 Linzhuo Wang, Xinnan Wang, and Fangwei Zhu

PART V  PRACTICAL EXAMPLES 32

Governing major projects in healthcare Monique Aubry, Marie-Claire Richer, and Mélanie Lavoie-Tremblay

395

33

Evolution of space programs governance Alessandro Paravano, Giorgio Locatelli, and Paolo Trucco

411

34

Governance evolution in university–industry collaborative R&D programs Gabriela Fernandes and David O’Sullivan

429

35

Minimum viable governance for data science initiatives Sandeep Mathur, Shankar Sankaran, Sam MacAulay, and Ivor Tsang

445

PART VI  REFLECTIONS 36

A look ahead Ralf Müller, Shankar Sankaran, and Nathalie Drouin

458

Index462

Editors and contributors

EDITORS Ralf Müller, DBA, MBA, PMP, is Professor of Project Management at BI Norwegian Business School. He is Editor-in-Chief of the Project Management Journal® and a Fellow of both the Project Management Institute (PMI) and the Centre for Excellence in Project Management. Ralf Müller lectures and researches worldwide in leadership, governance, and organizational project management. His research, concepts, and theories appeared in more than 300 academic publications and were acknowledged by IPMA, PMI, Emerald, and others with many awards, including several lifetime achievement awards. Stanford University ranks him as among the top 2 percent of the most influential scientists worldwide. Before joining academia, he spent 30 years in industry consulting with large enterprises and governments in more than 50 different countries for better project management and governance. Projects he worked on span from small up to USD 5 billion in value. He also held related line-management positions, such as the Worldwide Director of Project Management at NCR Corporation. Shankar Sankaran, Ph.D., MEng, BSc, is a Professor of Organizational Project Management at the School of the Built Environment at the University of Technology Sydney (UTS). He teaches advanced level programs on the Master of Project Management Course at UTS including organizational project management, systems thinking, and leading projects. His research interests are in organizational project management, project leadership, systems thinking, and application of socio-technical systems in construction automation. He is current Chair of the Global Accreditation Centre of the Project Management Institute and past President of the International Society for the Systems Sciences, and is leading an initiative called Project Governance for Engineers for the College of Leadership and Management of Engineers Australia. With Ralf Müller and Nathalie Drouin, Shankar has won the 2022 PMI Research Achievement Award, 2021 PMI Cleland Award, 2019 Walt Lipke Project Governance and Control Excellence Award, and 2019 International Project Management Association IPMA Research Award. Nathalie Drouin, Ph.D. (Cambridge University, UK) MBA (HEC Montréal), LLB (Sherbrooke University), is the Chairholder of the Research Chair INFRA-S on Social Value of Infrastructures, Editor-in-Chief of the International Journal of Managing Projects in Business, a full professor at the Department of Management, École des Sciences de la gestion, Université du Québec à Montréal (ESG UQAM), Adjunct Professor at University of Technology Sydney, Australia and former Executive Director at KHEOPS: International Research Consortium on the Governance of Large Infrastructure Projects. She teaches on the Graduate Project Management Programs, ESG UQAM. Her research looks at organizational project management, balanced leadership, and megaprojects. She is a member of the Board of Directors of CARGOM. With Ralf Müller and Shankar Sankaran, she has won the 2022 PMI Research Achievement Award, 2021 PMI Cleland Award, 2019 Walt Lipke Project Governance and Control Excellence Award, and 2019 International Project Management Association IPMA Research Award. viii

Editors and contributors 

ix

CONTRIBUTORS Tuomas Ahola, DSc, is a Professor of Industrial Management at Tampere University, Finland. His research interests lie in the domains of inter-organizational networks, governance, and management of project-based firms. Professor Ahola has extensive experience in studying complex infrastructure projects with research approaches combining multiple types of data. He has published his results in journals including Research Policy, Industrial Marketing Management, Journal of Business Studies, and International Journal of Project Management. Ahola is currently the principal investigator of NordForsk funded project (2020–2023) with international collaborators from Norwegian University of Science and Technology, Copenhagen Business School, and LUT University. The project addresses the role of citizens in the project-based development of cities of the future Raimonda Alonderienė, Ph.D., is a Professor at ISM University of Management and Economics (Vilnius, Lithuania) and Director of People and Organizational Development at Devbridge. She teaches, consults, and publishes research papers and cases. Raimonda has improved her competence at the International Management Teachers Academy in Austria, Germany, Slovenia, Switzerland, and the UK. Her research areas are leadership, human resource management and development, and project management. Karyne C.S. Ang, Ph.D., Med, BBus, previously directed research and marketing portfolios encompassing NPD, brand management, and market segmentation research for multi-national corporations and agencies. Now, she is an award-winning researcher and Senior Fellow (higher education) with inter-disciplinary interests in socio-technical systems, organizational and project portfolio management, stakeholder value, collaborative practices, and decision-making in complex environments. She also conducts research in soft systems methodologies, simulations, and flipped-blended learning. Karyne received the PMI Australia Research Achievement Award for her research on multi-stakeholder value. Karyne holds a Ph.D. from University of Technology Sydney (UTS), MEd (UTS), and a BBus (Marketing) from RMIT in Melbourne, Australia. Monique Aubry, Ph.D., MPM, is Associated Professor in the Department of Management at ESG UQAM in Montréal, Canada. Now retired from full professorship, she pursues her research on two main topics: the development of megaprojects and organizing for projects. The results of her work have been published in major project management journals. She founded the Lab for Transfer on Innovative Practices in Project Context at ESG UQAM. In 2020, she was awarded the PMI Research Achievement Award for her entire career and, in 2012, she received the IPMA Research Award for her research on project management offices. Over the last few years, she has acted as external adviser on the management of public projects for several ministries and public organizations in Quebec, Canada. Sofiane Baba, Ph.D., is Assistant Professor of Strategic Management at the University of Sherbrooke. His current research focuses on strategic processes, legitimation, and change, whether organizational, social, or institutional. His work mainly examines phenomena at the interface of organizations, society, and institutions, with interest in sustainability and social issues. Sofiane’s research has been published in the Academy of Management Journal, M@n@ gement, Journal of Cleaner Production, Journal of Management Inquiry, International Journal of Project Management, Management Decision, and Management International. He holds a Ph.D. in strategy and organizational theory from HEC Montréal.

x  Research handbook on the governance of projects

Timo Braun is Full Professor of Project Management and Digital Transformation at the University of Kassel in Germany. His research interests are inter-organizational projects and underlying project networks as well as their organizational and behavioral foundations, especially in the face of digital transformation. Some of his research is related to the nexus of project organizing and entrepreneurship. Timo has published in all major project management journals and he also founded the scientific network “temporary organizing” which was supported by the German Research Foundation. This network engages junior and senior scholars to collaboratively work on project-related topics. Maude Brunet, Ph.D., is Assistant Professor at HEC Montréal. Her research interests include governance and innovation of megaprojects, public infrastructure projects, and public–private partnerships. She has published in several project management and administrative science journals, and is a former Associate Editor of the International Journal of Project Management. She has more than 15 years of experience in project management, including working as consultant, research assistant, and lecturer. Alfredas Chmieliauskas, Ph.D., is an Associate Professor at ISM University of Management and Economics in Vilnius, Lithuania. He holds a doctorate in computer systems and networks from the Latvian Academy of Sciences and a master’s degree in mathematics from Vilnius University. He also holds an A-level certification from IPMA and is a first national assessor appointed by IPMA. Dr. Chmieliauskas was a Co-Founder and President of ISM University of Management and Economics in Vilnius, Lithuania, and a Co-Founder and President of the Lithuanian Project Management Association. Currently, he also serves as a board member of the Lithuanian Government Strategic Analysis Center (STRATA). As a consultant and owner of a project management consulting company, he has provided training and consulting services to more than 250 business and public sector organizations. His teaching and research areas focus on project, program, and portfolio management; innovation; and change management. Stewart Clegg, Professor at the University of Sydney in the School of Project Management and a Visiting Professor at the University of Stavanger Business School, Norway, publishes in sociology, politics and power relations, management and organization studies, and project management. Stewart is a prolific writer and contributor of over 500 articles to top-tier journals and edited works and is the author or editor of over 50 books. One of these, Paradoxes of Power and Leadership (2021), won the European Academy of Management Best Book Award in 2022. Other recent books are the Elgar Introduction to Organizational Paradox Theory (2021) and Project Management: A Value Creation Approach and Positive Organizational Behaviour (2020). Stewart is a Fellow of the Academy of Management, a Distinguished Fellow of EURAM and ANZAM, and a Fellow of ASSA and an Honorary Member of EGOS, among other honors. Lynn Crawford, DBA, has worked extensively with leading corporations and government agencies, assisting them in project capability development through global knowledge networks. Ongoing research includes project- and program-based competence and careers, productivity, teamwork, wellbeing, and governance. Lynn was instrumental in the formation of the Global Alliance for the Project Professions and is a Life Fellow of the Australian Institute of Project Management, an Honorary Fellow of the APM (UK), and recipient of their Sir Monty Finniston award for lifetime achievement in contributing to project management practice and research.

Editors and contributors 

xi

Kate Davis, Ph.D., is a Senior Lecturer at Cranfield University in the School of Management specializing in the areas of strategic organizational project management, consultancy, and designing and delivering courses that have a real impact. She has particular expertise in the development and implementation of modules with large student numbers, pioneering the development and deployment of technology to improve teaching and learning. She is recognized for innovative approaches to promote interaction with employers resulting in high graduate employment. In 2016, she completed her Ph.D., which examines multiple stakeholder perceptions of project success. She also participates in research projects on the topic of organizational project management. Ganesh Devkar, Ph.D., is a Senior Associate Professor at the Faculty of Technology at the CEPT University, Ahmedabad, India. He holds a Doctorate in Construction Management from the Indian Institute of Technology Madras. He has been researching in the area of public–private partnerships, lean construction, and megaprojects. He has participated in four systematic reviews focusing on delivery of infrastructure such as water supply, sanitation, hygiene, telecoms, electricity, and transport. He received the Young Research Scholar Award from the Project Management Institute India in 2014. Gabriela Fernandes is Assistant Professor at University of Coimbra (Portugal). Her research interests are in project management (PM) and innovation management, particularly in the university–industry R&D collaborations context. She spent 10 years in the coordination and management of projects in different industries. Throughout her career, she served as an executive director of several companies. She developed and taught several PM training courses and, as a consultant, coordinated the implementation of PM systems and PM office structures. She is the author of papers in highly ranked international journals with a total of more than 100 publications, including the book Managing Collaborative R&D Projects. Yves Genest is Vice-President, Strategic Initiatives, at the Canadian Audit & Accountability Foundation (CAAF). Mr. Genest is responsible for the development of projects requiring the expertise and knowledge of CAAF in performance measurement and auditing, in partnership with various stakeholders. He is an experienced audit professional, who has audited a vast array of organizations in the federal government over the past 30 years. He started his career at the Office of the Auditor General of Canada, where he occupied various positions for over 15 years, including Principal of Practice Development. Prior to joining CAAF, he served as Chief Audit and Evaluation Executive at Shared Services Canada, and as Director General, Audit Directorate, at the Public Service Commission of Canada. Rehab Iftikhar, Ph.D., is a Lecturer at the University of the West of Scotland, UK, and has worked as a Research Fellow at UCL. She worked as a Postdoc Researcher at Tampere University, Finland, and earned her Ph.D. degree in Management at Luiss Guido Carli University, Italy, in 2017. Her research focuses on the investigation of crises and their management, accentuating performance, sense-making, and learning in inter-organizational projects. She has published her research in academic journals such as Project Management Journal, IEEE Transactions on Engineering Management, Journal of Knowledge Management, and International Journal of Managing Projects in Business. Ole Jonny Klakegg received his Ph.D. degree in Project Governance in 2010. He is a Professor of Project Management at the Norwegian University of Science and Technology, Trondheim, Norway. Throughout his whole career, he has alternated between practicing in the construction

xii  Research handbook on the governance of projects

industry and working with research and teaching in the university. He was Research Director for the Concept research program between 2002 and 2012 and is now on the advisory board. His current research interests include collaborative project delivery for enhanced value creation and sustainability. Efrosyni Konstantinou, Ph.D., is Associate Professor in Strategic Management of Projects at University College London. Her work focuses on the politics of the self. As a field of study, the politics of the self focuses on the inner discussion with oneself, where senior leaders and experts debate, negotiate, and decide who they will be and, by implication, how they will act, i.e., their identity. Efrosyni’s work is inter-disciplinary focusing on the individual as an agent (sociological perspective), a human (philosophical perspective), and an employee (organization studies perspective), and brings to light the multidirectional and multidimensional nature of human existence. She develops the field of the politics of the self in relation to professionalism, Grand Challenges, executive education, and consultancy in policy and industry. Boeing Laishram is a Professor of Infrastructure Engineering and Management in the Department of Civil Engineering, Indian Institute of Technology Guwahati. He has been associated with both execution of infrastructure projects and financial structuring of infrastructure projects from his experience working with both construction organizations and investment banks in India. His areas of research interests include PPPs, public procurement, sustainable development, BIM and smart cities, and project planning and control. Mélanie Lavoie-Tremblay, RN, Ph.D., is Professor and Vice-Dean of Research, Innovation, and Entrepreneurship at the Faculty of Nursing, University of Montréal, and a regular researcher at the University Institute in Mental Health of Montréal. She is the director of the Centre d’innovation en formation infirmière et apprentissage professionnel. Her research focuses mainly on the attraction and retention of nurses, orientation programs for new nurses, the organization of care and work, the nursing workforce, evaluation programs, and knowledge transfer. Kate Lawrence is a Research Fellow at the University of Leeds. After 25 years working in construction and estate management, Kate completed her Ph.D. in project management at the University of Manchester. Her research interests are in the fields of project management and innovation, in particular engagement between public and private organizations to deliver projects. Florence Yean Yng Ling is a Full Professor in the Department of the Built Environment at the National University of Singapore. Her research is in construction project management focusing on project performance and work outcomes. She has published more than 160 international refereed journal papers and is on the editorial boards of several journals. In 2021, science-wide author databases ranked her among the top 2 percent of scientists in the field of built environment and design. She teaches project management, cost management, and project feasibility. She is a Singapore-accredited quantity surveyor and a Member of the Royal Institution of Chartered Surveyors. Giorgio Locatelli is Full Professor of Complex Projects Business at Politecnico di Milano, School of Management. He spent the years between 2012 and 2021 in the UK, starting as a Lecturer at the University of Lincoln and leaving as a Full Professor at the University of Leeds. His research is about project management and complex project business. His expertise

Editors and contributors 

xiii

is mostly in the energy and space sectors, but he also researched other complex infrastructures, including transportation and sanitation. He attracted about €1,500,000 in research funds. He is listed in the Stanford-Elsevier list of the world’s top 2 percent of scientists. Giorgio advises public and private organizations, and he is a frequent speaker and trainer for public and private organizations. He has authored more than 100 international peer-reviewed publications with nearly 5000 citations. He sits on the editorial boards of International Journal of Project Management, Project Management Journal, Construction Management, and Economics. Samuel C. MacAulay is a world-renowned expert in innovation strategy and a Senior Lecturer at the University of Queensland’s Business School. Sam’s research explores how innovation is shaped by business models, how new products and services are created, and how organizations gain and sustain competitive advantage. This research has focused on industries ranging from semiconductors to infrastructure and is published across leading international journals such as Academy of Management Review and MIT Sloan Management Review. Organizations around the world use this knowledge to inform the management of innovation in settings ranging from delivering complex infrastructure projects through to product development. Miia Martinsuo, DSc (Tech.), is Professor of Industrial Management, especially project and service business, at Tampere University, Finland. She has 20 years of academic experience in project and service business, and industrial experience particularly in organization and process development in engineering industries. Her research interests include project-based organizing; steering and selecting product development project portfolios; the autonomy and control of projects; managing manufacturing and process innovations; and organizational transformation toward service business. Sandeep Mathur is a Director of Active Transport at Transport for NSW, where he manages portfolio, data and analytics functions. He is a Fellow of the Australian Institute of Company Directors, Fellow of the Australian Computer Society, and an Industry Fellow at University of Technology Sydney. He has over 20 years of project/program/portfolio management experience in both the public and the private sectors. He has been on several for-profit and not-forprofit boards in the past 20 years. He teaches portfolio, program, and data management and is also doing doctoral research, “Managing Data Science Initiatives as Exploratory Projects: A New Approach to Program Management,” at UTS. Johan Ninan is an Assistant Professor at the Faculty of Civil Engineering and Geosciences, Delft University of Technology, the Netherlands. His research focuses on megaprojects, stakeholder engagement, collaboration, innovation, and project organizing, with a particular emphasis on the role of digital media. He has published in leading project management journals and is the editor of a book on social media for project management. He has been recognized with the PMI Young Researcher Award, the IPMA Global Young Researcher Award, and the APM Paper of the Year Award. David O’Sullivan is Professor of Industrial Engineering at the School of Computer Science in the National University of Ireland Galway. He is a graduate of the Dublin Institute of Technology, Trinity College Dublin, and University College Dublin. His research interests include innovation management with particular relevance to established industrial and public organizations. He is the author of a large number of peer-reviewed articles and other works, including the books Applying Innovation (Sage); Manufacturing Systems Redesign

xiv  Research handbook on the governance of projects

(Prentice-Hall); Reengineering the Enterprise (Chapman & Hall); and The Handbook of IS Management (Auerbach). He is also the author and presenter of a large MOOC on applying innovation. Alessandro Paravano is a Ph.D. candidate at the School of Management at Politecnico di Milano, where he also works as a Researcher in the Space Economy Observatory. His main research interests encompass the study of the space industry value chain transition, its impacts on nonspace sectors, and the value generated by space projects for the New Space ecosystem. He collaborates with Prof. Matthew Weinzierl at Harvard Business School, and is a Teaching Assistant in the Complex Projects Lab, Polimi MSc course, and a Lecturer on the “Executive Course in Management for the New Space Economy” at Polimi GSOM. He is National Delegate at the International Project/Programme Management Committee (IAF-IPMC) Young Professionals. He was educated at Politecnico di Milano and TU Delft, where he developed his MSc thesis, and he graduated cum laude in management engineering at Politecnico di Milano. His research was awarded with the ESA LPS22 Student and Young Researchers Grant by the EU Commission and the prestigious Award for Italian Students and Young Researchers by the Italian Space Agency. Margarita Pilkienė works at ISM University of Management and Economics (Vilnius, Lithuania) as Director of the Educational Leadership Master’s program. In the Executive School she heads the Applied Organizational Psychology and Human Resource Management modules of the General Management program. As a scholarly practitioner and research fellow, she participates and manages research in international projects and publishes in peer-reviewed international journals. Her main research and teaching areas are educational leadership, project leadership, organizational behavior, and organizational culture. Jeffrey K. Pinto is the Andrew Morrow and Elizabeth Lee Black Chair in Management Technology with the Black School of Business, Penn State, The Behrend College, Erie, PA, USA. He is the recipient of research achievement awards through the Project Management Institute (2009) and the International Association of Project Management (2017). Professor Pinto is the author or editor of 28 books and more than 200 published papers. His research has been published in Management Science, Research Policy, Journal of Management, Expert Systems with Applications, Sloan Management Review, Journal of Management Studies, Journal of Product Innovation Management, and IEEE Transactions on Engineering Management. Patrick Renz, Prof. Dr. oec. HSG, is Professor of the Lucerne University of Applied Sciences and Arts. His work focusses on Leadership, Governance, and Organizational Ethics embracing the contexts of business, social and nonprofit organizations, and religious organizations. He recently launched the initiative Theology and Leadership and was appointed research and teaching fellow of the Faculty of Theology at the University of Lucerne. He is the founder of the Aid Governance Foundation and the Governance Technology AG. He has also fulfilled several executive functions at Procter & Gamble, Swiss Bishop’s Conference, FHNW School of Business, international NGOs as well as IT-Companies. He has lived in 10 countries and worked in 40 countries. Marie-Claire Richer, inf. Ph.D., currently holds the position of Chief Executive Officer of the Quebec Order of Nurses. She is also an Assistant Professor at the Ingram School of Nursing at McGill University and has a doctorate and master’s degree in nursing as well as a master’s degree in management (Henry Mintzberg’s IMHL). A high-level executive for several years in

Editors and contributors 

xv

the health and social service network, she has in-depth experience in managing transformation in large organizations while having the ability to build bridges between practice and research, and vice versa. Magali Simard is an Adjunct Professor in management at the faculty of administration at Université Laval. She holds a Ph.D. in administration, with a specialization in project management, from the School of Management at Université du Québec à Montréal. Her research interests focus primarily on project governance, particularly for digital transformation projects. She is interested in governance and multidisciplinary coordination during the execution of projects/programs and the implementation of changes, as well as in crises in projects. She pays particular attention to the dynamic relationship between projects, programs, portfolios, and organizations, in terms of both structures and practices and of change. Her research work has been published in academic journals such as International Journal of Project Management, Project Management Journal and International Journal of Managing Projects in Business. Saulius Šimkonis, Ph.D., is an Associate Professor at ISM University of Management and Economics with more than 25 years of practitioner experience in project and portfolio management. He defended his doctoral thesis on lessons learned in innovative projects. Saulius provides training and consulting in project, program, and portfolio management. Jörg Sydow is a Professor of Management and Chair for Inter-Firm Cooperation at the School of Business & Economics at Freie Universität Berlin, Germany. He was a Founding Co-Editor of two leading German journals, Managementforschung and Industrielle Beziehungen – The German Journal of Industrial Relations, and is currently a Senior Editor of Organization Studies. He served on the editorial boards of many leading academic journals including not only Organization Studies but also Organization Science, Academy of Management Journal, Academy of Management Review, and Journal of Management Studies. In 2019, with H. Berends he co-edited a volume in the series Research in the Sociology of Organizations titled Managing Inter-organizational Collaborations – Process Views (Emerald), and with T. Braun he was awarded in 2018 the Global Research Award of the International Project Management Association. Since 2021 he has been an Honorary Member of the European Group of Organization Studies. Nicola Thounaojam is currently a Ph.D. candidate in the Department of Civil Engineering at the Indian Institute of Technology Guwahati. She holds a master’s in Construction Engineering and Management from CEPT University, Ahmedabad. Her research interests include PPPs, sustainable development, megaprojects, and institutional theory. She is a member of the American Society of Civil Engineers. Paolo Trucco is Full Professor of Industrial Risk Management and Director of the Polimi– Tsinghua Joint Executive Ph.D. Programme in Innovation with the Politecnico di Milano, School of Management (Italy). He is the Scientific Director of the Observatory on Space Economy and member of the Scientific Board of the Centre for Technology Foresight at Politecnico di Milano. He has authored more than 290 scientific publications and was scientific coordinator or principal investigator in 10 research projects at national and European level. He was educated at Politecnico di Milano, where he completed a Laurea degree program (five years) in industrial engineering with distinction, and the University of Florence, where he received a doctorate in engineering science (doctoral program in quality engineering).

xvi  Research handbook on the governance of projects

Ivor W. Tsang has been the Director of A*STAR Centre for Frontier AI Research since January 2022. He is working at the forefront of big data analytics and artificial intelligence. His research focuses on transfer learning, deep generative models, learning with weak supervision, and big data analytics. In 2013, Prof. Tsang received his ARC Future Fellowship for his outstanding research on big data analytics and large-scale machine learning. In 2019, his Journal of Machine Learning Research paper titled “Towards ultrahigh dimensional feature selection for big data” received the International Consortium of Chinese Mathematicians Best Paper Award. Recently, Prof. Tsang was conferred the IEEE Fellow for his outstanding contributions to large-scale machine learning and transfer learning. Rodney Turner is now retired. He is a Visiting Professor at the University of Leeds, and Honorary Professor at the University of Warwick. Most recently he was Professor of Project Management at SKEMA Business School, in Lille, France, where he was Scientific Director for the Ph.D. in Project and Program Management, SAIPEM Professor of Project Management at the Politecnico di Milano, and Professor and High-End Foreign Expert at Shanghai University. Rodney was editor of the International Journal of Project Management for 25 years until 2017. His current research interests cover the relationship between governance and decisionmaking on projects, stakeholders and customer experience, and the relationship between megaprojects and post-modernism. Rodney is Honorary Fellow and former chairman of the UK’s Association for Project Management, and Honorary Fellow and former President and Chairman of the International Project Management Association. In 2004 he received a lifetime research achievement award from the Project Management Institute, and in 2012 from the International Project Management Association. Ata Ul Musawir, Ph.D., is an Assistant Professor of project management and presently heading the Ph.D. in project management program at Riphah School of Business and Management, Riphah International University, Lahore, Pakistan. He earned his doctoral degree in project management from University of Malaya, Kuala Lumpur, Malaysia. His research has been published in well-reputed journals including the International Journal of Project Management, Project Management Journal, International Journal of Managing Projects in Business, and Journal of Knowledge Management. His main research interests are in the areas of project governance and strategy implementation through projects. Christine Unterhitzenberger, Ph.D., is an Associate Professor in Project Management at the University of Leeds and a Chartered Project Professional. Her research explores perceptions of fairness in projects and their impact on individuals, projects, and organizations. She is also interested in how governance influences desired behavior in project contexts. Her work is situated in the context of large-scale capital investment and infrastructure projects. She has won multiple awards for her research and educational practice and is a leading member of the project research community. Prior to her academic career she was a senior project management consultant in the construction industry. Alfons van Marrewijk, Ph.D., is Full Professor of Construction Cultures at Delft University of Technology and Adjunct Professor at BI Norwegian Business School, Oslo. Furthermore, he is Associate Professor at Vrije Universiteit Amsterdam. He uses anthropological theories and methods for studying inter-organizational collaboration and cultural change in technically oriented organizations and complex megaprojects. Such an approach allows inclusion of the cultural topics of, among others, the everyday life of employees, temporality, socio-technicality,

Editors and contributors 

xvii

rituals, symbols, and organizational spaces. Van Marrewijk has published in journals such as Organization Studies, British Journal of Management, Long Range Planning, International Journal of Project Management, and Project Management Journal. He works in close collaboration with public and industry partners in the construction and infrastructure sector and frequently acts as an expert consultant. Gro Holst Volden, Ph.D., is Director of the Concept research program at NTNU in Trondheim. Her main areas of expertise are within project governance, public decision processes, and appraisal and evaluation of major public investments. Volden received her PhD in project governance and front-end management in 2019. She has long experience in academia as well as the consulting industry and government administration in Norway. Linzhuo Wang, Ph.D., is Associate Professor at BI Norwegian Business School in Oslo, Norway. He conducts research on project resilience, network governance, project governance and digital platforms, and leadership. His work has appeared in more than 25 academic publications and his research has been funded by the Project Management Institute and China Postdoctoral Science Foundation. He has won multiple best-article awards at project management conferences. Xinnan Wang, BA, is a Doctoral Researcher at the School of Economics and Management, Dalian University of Technology, Dalian, China. She conducts research on project governance, network governance, and leadership. Graham M. Winch, MAPM MCIOB, is Professor of Project Management at Alliance Manchester Business School, a role he has held since 2004. He was Academic Director for Executive Education at AMBS, including project leadership programs such as Managing Projects for BP, and Leading Complex Projects Programmes and Portfolios for BAE Systems. He is author of Managing Construction Projects (Wiley-Blackwell, 2010), co-author of Strategic Project Organizing (OUP, 2022), and co-editor of the Research Handbook of Complex Project Organizing (Edward Elgar, 2023). He has published over 60 refereed journal articles, complemented by numerous book chapters, conference papers, and research reports. Wujuan Zhai is a Ph.D. candidate in the Business School, Hohai University, Nanjing, China. She won a full scholarship from the China Scholarship Council and spent a year as a visiting Ph.D. student at the National University of Singapore, Department of the Built Environment. Her Ph.D. research is on engendering socially responsible collective action of stakeholders in mega water transfer projects. Her research interests include water megaproject governance, network governance, and socially responsible collective action. Her research has been published in international refereed journals such as Water Resources Management, Journal of Cleaner Production, and Journal of Urban Planning and Development. Fangwei Zhu, Ph.D., is a Professor and Dean of the School of Economics and Management, Dalian University of Technology (DUT), Dalian, China. He is the Vice-President of DUT, and also the Executive Director of the China Management Case Sharing Center. He conducts research in organizational project management; network governance; and engineering, procurement, and construction project management. The results of his studies have appeared in more than 60 publications, including six books, and six Top-100 Chinese Management Cases over six consecutive years.

Introduction to the Research Handbook on the Governance of Projects Ralf Müller, Shankar Sankaran, and Nathalie Drouin

Governance has developed into one of the most popular management and social sciences concepts in the last decades. A wide variety of contemporary endeavors are nowadays looked at not only as an activity but also as an object of governance. The particular endeavor is hereby often qualified through a prefix. Examples include “global governance” for climate change endeavors, “infrastructure governance” for endeavors to enhance infrastructure, “sustainable governance” to implement a sustainable strategy across a business, “good governance” for endeavors to improve countries’ development, “new governance” for New Public Management by governments. Hence, governance is ubiquitous. By the time of writing this book, the World Bank (2022) stated on its website, “The most recent World Bank Group Surveys with opinion leaders in our client countries confirm that addressing governance is now at the top of countries’ policy.” In a similar vein, the concept of governance pervades the social and other sciences, like sociology, economics, political science, geography, international relations, or public administration. Among the reasons for the popularity of governance is its capability to engage simultaneously with multiple stakeholders from various sectors and levels and their specific objectives and power. The need for such a regulating function arose in many different disciplines and at different times. One of the most prominent examples is the decentralization of power through the neoliberalism turn in the 1970s, when governments started to privatize public enterprises, contracted out public services, and commercialized parts of the public sector (Jessop, 2002). Similarly, New Public Management turned the focus away from governments toward private contractors and special-purpose agencies for producing and delivering public services. New forms of collaborations, such as public–private partnership, emerged and were institutionalized. Complicated structures and coordination approaches emerged from this, both internal and external to private and public institutions. Steering this diversification of responsibilities, accountabilities, and new management and power structures required novel approaches, shifting the emphasis away from managing service delivery toward steering the multitude of players, their legitimacy, accountabilities, authorities, and roles – that is, its governance. Other sectors encountered different pressures, which also manifested themselves as governance issues, like the change from process orientation to project orientation to improve efficiency in production and stay competitive in the market (Midler, 1995; Turner & Keegan, 1999). Moreover, governance varies significantly by context. Governance of a country and governance of a software update for a mobile phone have very little in common, except maybe that in both cases governance defines the limitations within which the leaders and managers are allowed to execute their roles. Hence the need for novel governance approaches emerged in many different sectors and disciplines, leading to a wide variety of context-specific governance approaches, theories, and definitions. This variety is a strength, as it allows us to find (almost) suitable governance 1

2  Research handbook on the governance of projects

approaches or theories for many circumstances, requiring relatively little tailoring to become efficient. This effect is exemplified by looking at two standard works on governance theories in political science, the Edward Elgar Handbook on Theories of Governance (Ansell & Torfing, 2016a) and the SAGE Handbook of Governance (Bevir, 2011), respectively describing 44 and 22 different theoretical approaches for research on governance. Each of these works provides a different coverage of governance, leading to a highly varied and differentiated picture of a landscape for governance. With this variety of theoretical lenses, it is not surprising that the editors of the former handbook conclude, “[t]here is no comprehensive and all-encompassing theory of governance, and the future development of such a theory seems neither likely nor desirable” (Ansell & Torfing, 2016b, p. 10). The academic project management community was introduced to the concept of governance in the late 1990s, with Turner and Keegan’s (1999) work on the versatility of organizations and its implementation through different governance approaches. Since then, governance research has gained substantial traction, especially after 2010, and expanded perspectives from the governance of a single project (a.k.a. project governance) to groups of projects, such as programs or portfolios (a.k.a. governance of projects) and to all project-related activities in an enterprise (a.k.a. organizational project governance) (e.g. Müller et al., 2019). More recently, other diversifications included megaproject governance, governance of inter-organizational networks for projects, knowledge governance in projects, and decision-making in governance. While this diversification of research in project-related governance progressed quickly, the variety of theoretical lenses used in these studies remains primarily limited to only six popular theories. These are agency theory, transaction costs economics, stakeholder theory, shareholder theory, stewardship theory, and resource dependence theory (Biesenthal & Wilden, 2014), with multilevel governance theory and metagovernance as the most recent additions. This Handbook addresses this shortcoming by providing an overview of the current state of research in governance in the realm of projects, outlining governance phenomena worth investigating, and introducing some relatively new theoretical lenses worth pursuing. Through that, it provides practitioners and academics with a broad view of governance, spanning, for example, from the single project to the institutional investor or from sponsor decision-making to inter-organizational networks. This variety provides a rich set of powerful concepts and approaches based on a plethora of different empirically and conceptually assessed phenomena. Each chapter provides a different lens through which to view governance, thereby enriching the development of theory and helping academics develop new research ideas. Some of the discussions on the concepts are partly overlapping, while others are standalone, all contributing to a toolkit for governance researchers, all collected in one place.

DEFINING GOVERNANCE The wide application of the concept of governance brings a large variety of definitions of the concept and issues in positioning governance against neighborhood concepts like management and leadership. Definitions vary, among others, by the scope of the phenomenon to be governed, the state of the governed object, the level of distinctiveness from other management concepts, and perspectives like sectors, processes, people, ethics, and their applied level of normativity.

Introduction 

3

For example, definitions like “the process of steering society and the economy through collective action and in accordance with common goals” are typical for country-level governance (Ansell & Torfing, 2016b, p. 4), while corporate governance is often defined as the corporate control system (Larcker & Tayan, 2011), procedures and processes (Organisation for Economic Co-operation and Development, 2001), relationships between stakeholders (Monks & Minow, 1995), or as the ethical balance between individual and communal goals (Cadbury, 2002), to name a few. In addition to the different ontologies underlying the above definitions (e.g., process versus task), definitions typically carry a particular theoretical perspective. Easily recognizable by the exemplary definitions of corporate governance above, with each expressing a different theoretical lens, such as management theory, organization theory, and ethical theory. Hence governance definitions are characterized by being context-specific, fluid, tailored to the particularities of the governed object and its context, and described from a particular ontological and theoretical perspective. Given this variety, and similarity to the above discussion on governance theory, a comprehensive and all-encompassing definition of governance is neither likely nor desirable to be available in the future. Despite this variety in definitions, the present introduction chapter should provide a starting point for defining governance in the realm of projects so that readers can relate to the chapters as they unfold. Most published articles on governance in the realm of projects are related to the engineering or construction industry and take an economics and control perspective. Thus, popular definitions often paraphrase the Organisation for Economic Co-operation and Development’s definition for the project context, thus covering, among others, project, program, and portfolio governance in organizations: The governance of an organization provides the structure, processes, policies, and value system through which the objectives of the organization are set, and the means of attaining those objectives and of monitoring performance are determined in the best interest of all stakeholders and the corporation itself. (Turner, 2022, p. 9)

An often discussed question is how these governed organizations (i.e., corporations, projects, programs, portfolios, etc.) relate to each other and are governed as a whole. Existing literature suggests that corporate governance comprises all activities of a corporation, including its internal projects as well as those with other companies. Given that, governance of internal projects is a subset of corporate governance. In projects with external organizations, the contracts between the different external partners constitute the smallest common denominator of the governance system of otherwise independent companies. Hence, governance in the realm of projects “coexists within the corporate governance framework and is the means by which individual projects, groups of projects (such as programs or portfolios) and the totality of all projects in an organization are directed and controlled, and managers are held accountable for the conduct and performance of them” (Müller, 2017, p. 14). To avoid confusion of concepts, governance needs to be positioned to its allied concepts of management, leadership, and governmentality. These are often used synonymously to imply governance, even though they carry considerably different meanings. One way of positioning these terms is by using a sociology perspective, assuming that all phenomena in societies (including organizations, projects, etc.) can be reduced to two basic concepts: structure and human agency. Structure refers to the stable arrangements that

4  Research handbook on the governance of projects

make up the organization, including organization structures, policies, role descriptions, etc., that determine or limit people and their decisions in organizations. Human agency refers to the actions and behaviors of people within these structures. People may or may not behave according to the formal structures they are exposed to. Hence, structure and human agency are different concepts based on different ontologies. While humans possess self-reflective capabilities, structures do not. Implementations of structures are mediated by human agency. However, both concepts are mutually constitutive and inseparable and should always be understood in relation to each other (Archer, 2010). Applying this lens at the execution and steering levels of organizations allows identifying differences between the four concepts of governance, management, leadership, and governmentality. The differences are briefly described below and summarized in Table I.1. More details can be found in Müller (2019). Management is about “getting things done” through planning, organizing, executing, and controlling of tasks. To that end, management is a goal-directed activity that provides the structural means for executing tasks. Leadership is a person-oriented social influence (Endres & Weibler, 2017). It encompasses people-oriented concepts, such as motivation, resonance, and charisma, to accomplish objectives through people. It is executed through and for human agency, thereby complementing the structural management for successful task execution and goal accomplishment. Governance, sometimes called “the management of management” (Too & Weaver, 2014), provides the structural framework that steers managers in their role. It defines through processes, policies, etc. what is and what is not allowed in fulfilling the manager role and serves as a gauge to hold managers accountable for their actions and performance. Governmentality describes the ways those in governance positions interact with those they govern. Its people-orientation classifies it as a human agency concept. It is executed at the steering level by governors in charge of steering managers, for example, the chairperson of a project steering group which steers the project manager. The different contexts in which project-related governance emerges are reflected in the organization of this book. It starts with the underlying philosophical and theoretical lenses of governance in the realm of projects, then addresses the governance of individual projects (a.k.a. project governance), which is followed by the governance of groups of projects (a.k.a. governance of projects) and the governance of inter-organizational networks for projects. It ends with a series of case studies that exemplifies governance practices in different sectors. Hence the book takes the reader from underlying philosophical and theoretical basics needed Table I.1  Positioning of governance, management, leadership, and governmentality Structure

Human agency

Steering

Governance Framework for managers to do their tasks and be held accountable for their role

Governmentality Governors’ particular way of interacting with those they govern

Executing

Management Goal-oriented activity to accomplish objectives

Leadership People-oriented activity to accomplish objectives

Source:   Müller, 2019

Introduction 

5

to make sense of reality via governance at different organizational layers toward practical implementations and their particularities and issues. We will discuss this in more detail now. Part I addresses the philosophical, theoretical, and conceptual foundations of governance. It starts by outlining some deeply rooted thoughts on the pros and cons of control, followed by the principles of good governance, which form the base on which today’s governance theories are built. Classic governance theories are subsequently described, like agency, stewardship, shareholder, stakeholder theory, and transaction cost economics. This is complemented by multilevel governance theory and governmentality theory. Part II addresses project governance. This part is divided into three sub-parts. The first addresses project governance as an organizational concept, such as its role in strategy implementation and value creation, but also the enablers, paradigms, and models of governance. This is followed by governance institutions, such as steering committees and project management offices. The second sub-part addresses aspects of the implementation of project governance, starting from focusing on contracts, methodologies, and specifics of, for example, governance of complex engineering or not-for-profit projects. Then the view broadens with chapters on decision-making, normalization of deviation, ethics, and cultural implications for governance. The third sub-part addresses megaproject governance. It starts with governance frameworks for public infrastructure projects and their development and estimation. Chapters follow on the implication of environment, society, and government measures, and the particularities in governing megaprojects for meeting the United Nations Sustainable Development Goals. This sub-part ends with a chapter on risks and coping strategies in megaprojects. Part III addresses the governance of projects by starting with programs and portfolio governance and fairness and justice issues therein. This part includes a broad perspective of governance of organizational project management, comprising project-related activities in an organization. Part IV addresses the governance of networks for projects. It starts with the governance of inter-organizanetworks for projects. Then addresses metagovernance as the underlying ground rules for establishing and governing networks. The part ends with the specific aspect of network resilience. Part V provides four case studies as examples for particular governance implementations. The cases stem from a diverse set of sectors, such as healthcare and space exploration, as well different aspects of governance, such as industry–university collaborations or data science initiatives in infrastructure projects. The book ends with a look forward to the near-term developments in governance in the realm of projects. The book brings together the leading researchers and the current discourse of their particular themes in one volume. We gave the authors the greatest possible freedom to define the scope and depth of their contributions to avoid possible limitations in terms of essential concepts or approaches. The fact that almost none of the invited authors turned down our invitation shows that they see the need for such a volume and are eager to disseminate their findings and share their insights from many years of in-depth investigations into their subjects. A big thank you goes to all the authors in this book. Without their contribution, this work would not have been as comprehensive as it is.

6  Research handbook on the governance of projects

We hope that the book will help managers and other project practitioners develop a broader and more comprehensive understanding of the theoretical and practical approaches to governance. In addition, we hope that the book will help researchers investigate deeper into existing concepts and inspire them to develop new alleys for research. Last but not least, we hope that students at all levels will find the book helpful in providing quick and easy access to the main themes, the variety of underlying concepts and approaches, and their differences.

REFERENCES Ansell, C., & Torfing, J. (2016a). Handbook on theories of governance. Edward Elgar Publishing. Ansell, C., & Torfing, J. (2016b). Introduction: Theories of governance. In C. Ansell & J. Torfing (Eds.), Handbook on theories of governance (pp. 1–17). Edward Elgar Publishing. Archer, M. S. (2010). Morphogenesis versus structuration: On combining structure and action. British Journal of Sociology, 61(Suppl. 1), 225–252. https://doi​.org​/10​.1111​/j​.1468​- 4446​.2009​.01245.x Bevir, M. (2011). The Sage handbook of governance (M. Bevir, Ed.). SAGE Publications Inc. Biesenthal, C., & Wilden, R. (2014). Multi-level project governance: Trends and opportunities. International Journal of Project Management, 32(8), 1291–1308. https://doi​.org​/10​.1016​/j​.ijproman​. 2014​.06​.005 Cadbury, A. (2002). Corporate governance and chairmanship: A personal view. Oxford University Press. Endres, S., & Weibler, J. (2017). Towards a three-component model of relational social constructionist leadership: A systematic review and critical interpretive synthesis. International Journal of Management Reviews, 19(2), 214–236. https://doi​.org​/10​.1111​/ijmr​.12095 Jessop, B. (2002). The future of the capitalist state. Polity. Larcker, D., & Tayan, B. (2011). Corporate governance matters. Pearson Education Inc. Midler, C. (1995). “Projectification” of the firm: The Renault case. Scandinavian Journal of Management, 11(4), 363–375. Monks, A. A. G., & Minow, N. (1995). Corporate governance (4th ed.). Wiley & Sons Ltd. Müller, R. (2017). Organizational project governance. In R. Müller (Ed.), Governance and governmentality for projects: Enablers, practice and consequences (pp. 11–24). Routledge. Müller, R. (2019). Governance, governmentality and project performance: The role of sovereignty. International Journal of Information Systems and Project Management, 7(2), 5–17. https://doi​.org​/ 10​.12821​/ijispm070201 Müller, R., Drouin, N., & Sankaran, S. (2019). Organizational project management: Theory and implementation. Edward Elgar Publishing. Organisation for Economic Co-operation and Development. (2001). Governance in the 21st century. Organisation for Economic Co-operation and Development. http://www​.oecd​.org​/futures​/17394484​ .pdf Too, E. G., & Weaver, P. (2014). The management of project management: A conceptual framework for project governance. International Journal of Project Management, 32(8), 1382–1394. https://doi​.org​/ 10​.1016​/j​.ijproman​.2013​.07​.006 Turner, J. R. (2022). Using principal–Steward contracting and scenario planning to manage megaprojects. Project Management Journal, 53(1), 8–16. https://doi​.org​/10​.1177​/87569728211061836 Turner, J. R., & Keegan, A. (1999). The versatile project-based organization: Governance and operational control. European Management Journal, 17(3), 296–309. World Bank. (2022). Governance. https://www​.worldbank​.org​/en​/topic​/governance

PART I THEORETICAL, PHILOSOPHICAL, AND CONCEPTUAL FOUNDATIONS This part provides the underlying pillars of governance; in other words, the foundations of governance. It starts with a philosophy of governance, then addresses the four underlying principles of good governance, and subsequently introduces the most important classical and contemporary governance theories in the realm of projects. Hence, Part I provides the theoretical foundation for the subsequent parts. Chapter 1 by Efrosyni Konstantinou develops a philosophy of governance. By taking the perspective of human power and control in governance, she identifies that human power and potential are endless therein. However, perfect governance and control are neither desirable nor possible, which leads to governance being an eternal communication of endless possibilities. This philosophical perspective provides the reader with a well-grounded meta-physical introduction to the reality of, and need for, the large variety of approaches, structures, and expressions of governance in projects. The wide variety of different descriptions of governance throughout this book supports that. Chapter 2 by Ralf Müller addresses the commonalities across the large variety of possible governance designs by presenting four principles of governance that should underpin the design, implementation, and maintenance of any governance system. After introducing transparency, accountability, responsibility, and fairness as the most generic governance principles, the chapter addresses how these principles pervade organizational structures. The particular application of principles in the context of projects and project management offices is exemplified by the principles suggested by professional organizations. The chapter finishes by outlining geographical and industry-specific differences in the expression of governance principles. The chapter provides the reader with the building blocks of governance, which forms the basis of the governance theories addressed in the rest of Part I. Chapter 3 by Tuomas Ahola describes the classic governance theories of agency, stewardship, and transaction costs economics and their dyadic perspective in inter-organizational projects. The chapter outlines the underlying assumptions, concepts, and frameworks of the three theories and the particular insight each provides for decision-makers and/or managers. The reader will find the antecedents for deciding through which theoretical lens to view a

8  Research handbook on the governance of projects

governance issue and the implications of different governance theories for designing governance systems. Chapter 4 by Ralf Müller describes the classic corporate governance theories of shareholder and stakeholder orientation. These intra-organizational corporate-wide theories complement the inter-organizational dyadic theories from the previous chapter. The chapter outlines how the shareholder or stakeholder orientation defines the raison d’être of an organization in society as tending toward either pursuing its own financial results or maximizing stakeholder value. The implications of these orientations for managing projects, programs, and portfolios, along with ambidextrous and covert implementation approaches, are discussed. The chapter provides the reader with an oversight of the link and impact of corporate governance on projects and their management. Chapter 5 by Shankar Sankaran introduces systems theory by providing an overview of general systems theory, cybernetics, and social systems theories and systems methodologies under hard systems thinking, soft systems thinking, and emancipatory systems. The chapter describes how systems theories are enacted in practice and applied in the context of projects, programs, and portfolios and ends by categorizing the boundary conditions for these theories. Through this chapter, the reader is provided with an introduction to a family of theories regarded as key in addressing governance for the largest worldwide challenges, such as the Grand Challenges or United Nations Sustainable Development Goals accomplishment. Chapter 6 by Alfredas Chmieliauskas, Ralf Müller, Raimonda Alonderienė, Margarita Pilkienė, and Saulius Šimkonis provides an introduction to multilevel governance theory in inter-organizational project settings. This contemporary concept provides a framework for understanding the governance of complex hybrids of hierarchical and networked organizational settings. It outlines the building blocks of Type I governance for the hierarchical part, Type II governance for the networked part of the setting, and the role of interface organization in linking these two governance regimes. Through that, the chapter provides a framework to understand how governance is spread horizontally between organizations and their entities, and vertically among hierarchical or networked levels and actors. Chapter 7 by Stewart Clegg and Johan Ninan addresses the human side of governance in the form of governmentality as a way to use relations and interactions for the governance of projects. It shows the processes organizations can adopt to generate positive project management. This includes enabling dialogue, spreading positive news about the project, and creating an inclusive project culture by using digital and social media. The chapter provides the reader with ways to manage different stakeholders using soft governance strategies (i.e., governmentality), which comprise complex, albeit subtle, examples of power. A case study exemplifies the theoretical parts.

1. A philosophy of governance Efrosyni Konstantinou

INTRODUCTION In the space of writing three drafts of this chapter, the world has seen some of the greatest expressions of governance in the 21st century. Between 2020 and 2021, the development of the Covid-19 vaccines beat all product development timescales in the pharmaceutical industry, fending off a global existential threat and acting toward the preservation and prosperity of humankind. Soon after, on 24 February 2022, Russia invaded Ukraine, leading to a military project which seriously threatens global security, prosperity, and freedom, if not the very existence of humankind. If nuclear weapons are used, the Ukraine conflict could possibly be the only event to top climate change as a global existential threat for societies all over the world. It seems that in our times, in the beginning of the 21st century, humankind is forcefully oscillating between its preservation and extinction. In response, this chapter builds a philosophy of governance that aims to awaken the endless power and potential in each one of us, and to articulate what this means for the future of humankind. In the following pages, you will read a philosophy, i.e., a worldview of how, in this case, governance fits into life, and more specifically project life in times of Grand Challenges. Firstly, I argue for the endless power and potential of any human being as one of the most general conditions of human existence, along with “birth and death, natality and mortality” (Arendt, 1958, p. 8). One’s endless power and potential is the only condition they can govern and control. Then, I elaborate that perfect governance and control is neither desirable (point 2), nor possible (point 3). Finally, based on the above, governance can be the eternal communication of endless possibilities (point 4). Governance becomes the space where the endless power and potential of human beings defines what can be played in life and projects and transforms into endless new possibilities which can help humankind shape its future and address the Grand Challenges the world is facing. The rest of the chapter refers to the human being/existence in the singular third-person feminine case (she/her/hers/herself), as is common in philosophical texts. Δεν φωνάζεις εσύ. Δεν φωνάζει η ράτσα σου μέσα στο εφήμερο στήθος σου. Δεν φωνάζουν μονάχα οι άσπρες, οι κίτρινες, οι μαύρες γενεές των ανθρώπων στην καρδιά σου. Η Γης ολάκερη, με τα νερά και τα δέντρα της, με τα ζώα, με τους ανθρώπους και τους θεούς της μέσα στο στήθος σου φωνάζει. (Νίκος Καζαντζάκης, Ασκητική) It is not you who is calling out. It is not your generation howling in your ephemeral chest. It is not only the white, yellow, black generations of men calling out from your heart. It is the entire Earth, with its waters and trees, with its animals, people, and gods within you who are calling out. (Nikos Kazantzakis, Ascetic Experience)

9

10  Research handbook on the governance of projects

Point one – Human power and potential are endless, and just about as much as she can be expected to govern and control in each day of her life. Eudemonia as life choice, spirited imagination, unapologetic perseverance, ceaseless will to truth and knowledge, urgency to learn, transcendental human development and a natural, existential call to hope, freedom, creation, and the unknown in herself, in others, and the world make human power and potential endless. Artifacts and manifestations of the endless power and potential of human beings have been huge infrastructure projects, Nobel Prize-winning literary books and poetry, peace treaties, breathtaking art, and groundbreaking knowledge and scientific discovery. Human beings have had a hand in wars, local and global injustices, crime and hurt. Yet, this philosophy does not treat these as expressions of human power and potential, but as manifestations of human weakness and demise. What a fortune to be human! What a burden! What a responsibility! On the back of her endless power and potential, religions have been born, constitutions have been written, families have set ground rules. Similarly, schools of thought, laws, ethics, and societies and their customs have been invented. Such governance structures aim to circumscribe the endlessness of human power and potential, which – almost as a human being itself – maintains the liberty to venture into uncharted directions at any one point and change all that is known as of now, forever. As such, human power and potential remain stubbornly endless and endure governance forms. Margaret Archer (2000) refers to the inherent power of social orders, institutions, and organizations (Hardy & Clegg, 1996) but writes “indeed my key argument maintains that it is precisely because of our interaction with the natural, practical and transcendental orders that humanity has prior, autonomous and efficacious powers which it brings to society itself” (p.7, emphasis added). She – the human being – has the arts on her side – on walls, in music, in books, in relationships, on canvases, in museums and streets – in life. The arts – as, at once, the unruly rebel and eternal friend – help her make connections that the mind has yet to sketch out, and never fail to nudge and awaken her to the endlessness of her power and potential. The arts remind her that the possible exists and it is available to her; it is in her reach. And, by implication, endless power and potential define her human condition, who she is. She is not unique in this. She is identical to her fellow human beings. In the politics of life, no-one is superior or inferior to her in terms of the endlessness of human power and potential. It is one of the most general conditions of human existence. Does this mean she is endless? The short answer is certainly not. Beyond her own natality and mortality, beyond her beginning and end, her human existence is bounded by luck, nature, and the endless power and potential of the Other. Luck, nature, and the endless power and potential of the Other are out of her control. First is luck. Rescher (1995) talks about luck as the countless constellations of events happening between intentionality (what she intends to do) and the actuality of events (what happens), and he urges her to invite luck and chance into her life, albeit with prudence. Underlying his thought is a silent, yet persistent, faith in her holding the power and the potential to explore the randomness brought upon her and into her life by luck. But Rescher (1995) does not believe, and I agree with him, that she has the power or potential to control or govern luck. Secondly, nature as a self-contained, deterministic system has the power to create uninhabitable conditions that extend beyond her control and limit the endlessness of her human power and potential. Goethe (1992) personifies nature, and this is a helpful literary device in a philosophical discussion about governance. Nature has not been subjected to human desire for exploitation. Nature has ruthlessly fought back and inflicted upon her the climate crisis – an existential

A philosophy of governance  11

threat that is tearing apart the social fabric of the global community, by accentuating local and global injustices, and disrupting the global supply chain, which is the backbone of the global economy. Hannah Arendt (1958), echoing Kazantzakis (2007), Foucault (1989), and Nietzsche (1886), starts her book The Human Condition by writing that from the moment that humans looked at the moon and turned away from Earth, which is our home and reflects the deeper relationship we have with ourselves, humankind lost its political voice. Arendt (1958) says she – the human being – cannot speak up for herself if she is removed from herself, signifying in this way our dependence on nature. Finally, she is bound by the Other, every single fellow human being who equally holds endless power and potential. Without the consent and agreement of the Other, she remains distant from the Other. Like her, the Other holds endless power and potential and can critically evaluate and select how to live life, who to work with, what to work on, how dreams, personal aspirations, career plans, and ambitions will be fulfilled. Like her, the Other has endless power and potential to exercise the politics of the self, i.e., judge and choose intentions and make decisions. Suddenly, the deep disclosure of the intentions and the purpose behind the ergon (project) becomes critical. If she does not disclose and gain the consent of the Other on the intentions and the purpose of the project, then the Other may choose to direct their endless power and potential to other purposes, to avoid unwanted work, to actively sabotage the project, her efforts, and the efforts of others on the project. Only confident consent, based on deep understanding of the purpose of the project and how it fits in its context, within its discipline and within a politically, intellectually, and morally ethical space, can direct the endless power and potential of the Other to the project. And consent can only be granted, not seized. In prison, Mandela said “I am free,” signaling unparalleled conviction to remaining the governor of one’s existence, even within the strictest of governance structures. Viktor Frankl (1959) said: “Everything can be taken from a man but one thing: the last of the human freedoms – to choose one’s attitude in any given set of circumstances, to choose one’s own way.” No-one can control the Other. And, as such, governance as control is always incomplete, a lost cause, a delusion of the weakest of humankind, a futile task which misplaces and ultimately wastes human power and potential. Attempts to control luck, the planet, and the Other are pointless. The implication of the complete lack of control over the power and potential of the Other and their endlessness is significant. Any engagement with the project signals a level of agreement on the project by all those involved, both governors and the governed. If she can only govern and control herself, then engaging with the project means that at some level the project appeals to her, perhaps to her own purpose in life, or sentiment, perhaps even to her skills base, or a career plan, or some dimension of herself and her self-identity which she may have not fully articulated but for which the project seems to be providing a home. The presence of polemics, in the form of disagreement, derangement, resistance or resentment, or even strong differing views, does not monopolize the interpretation and meaning of the experience of the project. Even open, outright conflict within the project needs to be evaluated against her decision to engage with the project. Her decision to engage with the project is equally real; perhaps it is quieter, a bit more silent – in the background. But it is as much her decision as is her decision to disagree or feel unhappy in the project. It means that differing views are not powerful enough to make her use her power and potential to leave, change, or escape the project. The decision to engage (agree), the decision to disagree, and the decision to expend her endless power and potential are thus telling of who she is – her self, her identity. She decides in which projects she will position herself. If she engages, she has an active relationship with

12  Research handbook on the governance of projects

the project. We should not forget Marcel Mauss (1950), whose deep, lifelong anthropological studies of archaic tribes identified the structural elements of relationships. Mauss (1950) said a relationship is made up of three obligations: the obligation to give, the obligation to receive, and the obligation to repay. When any one of the three obligations is not honored, the relationship ceases to exist altogether. This means that at the heart of the engagement with the project rests a give-and-take, a live relationship with the project and its people. As such, governance is not something that is enacted upon her, but an agreement between two parties – her and the project. The role of the governor can be defined more precisely in this case. If only she can govern and control her human power and potential, then good governors can strive to evaluate if her power and potential is relevant to the project, bring her on board, and serve her power and potential. Good governors are expert in sensing how willing and able she is to direct, release, and use her power and potential for the project. Good governors do not need to work toward bringing out the best in her or motivating her. She controls that. They only need to use their own power and potential – their experience and expertise – to build the working conditions which remove the barriers stifling her endless power and potential. They can also use their authority to remove her if it turns out she does not believe in the project altogether. This, however, suggests a misjudgment on their part at the selection stage, or a failure to provide good working conditions. Such instances can be reviewed on a case-by-case basis, and working conditions, the wider project environment, and indeed the project itself will be almost automatically tailored to the profile, power, and potential of the team to which she belongs.1 Point two – Perfect governance and control is not desirable. Total control would be a dictatorship of one sort or another, obviously. So, ethically, it cannot be desirable. Yet, so many people seem to be fascinated by control, seeking it out as if it were the be-all and endall of human existence. If, for one second, we assumed there is no issue with a dictatorship, perfect governance and control over oneself and the Other would be synonymous with an unbearable, inhumane life. Perfect governance and control would require our endless power but find no use for human potential. Perfect governance and control would be synonymous with a life where everything is known, there is nothing new to aspire to, nothing new to look forward to, nothing new to apply oneself or one’s potential to. Perfect governance and control would be synonymous with great loneliness, where there would be no reason to reach out to the Other, to understand, listen, make sense of and shape together what might be a future for humankind (and within it, the project). As a human condition it would mean using human power to sustain and uphold the status quo, while human potential would be irrelevant to living now and in the future. In contrast, a moderate level of governance and control allows certain matters to remain unattended and therefore the space for new influences, ideas, questions, and answers to come into play and define new realities. This is especially important in the face of Grand Challenges, such as the climate crisis, the Covid-19 pandemic, and local and global injustices where progress is slow. A moderate level of governance and control allows the observation of luck; an invitation to sense, feel, articulate, and shape what is new in life. It is a prerequisite for a meaningful engagement with the Other and new realities, with life itself. It allows her 1 High-performing teams in the human resources literature suggest such approaches, yet always with a reservation and fear of the endless power and potential that is harbored in the team. This is where trust and relationship management are heavily built on and referenced. In contrast, I am talking about leadership which is grounded in the power and potential of the team.

A philosophy of governance  13

to identify the risks she needs to mitigate and the opportunities she can leverage to scale up her work and potential. She should not be afraid of moderate governance and control; it can be nerve-racking; it is certainly not for the faint-hearted. But it makes her stronger. It shows her what can be played. It gives her the space to apply and make the most of both her power and her potential, as well as the space for a fuller existence. It makes present circumstances escapable and personal decisions about work and life her own. It grants her the responsibility to change them if she so wishes. A moderate level of governance and control makes her accountable about where, how, and why she will conduct herself. Again, this may not be easy, perhaps not even comfortable, but it keeps her in close contact with all that is important to her. It is an invitation to a meaningful life and relationship with herself, that builds on, rather than shies away from, change in the world and within us. Instances of strong, authoritative governance and control may then be justified or even required in the short term, but never become the norm. In the same way that a mother firmly holds the hand of her three-year-old child in a busy street, she may need moments of willful grip in the project, yet with no intention to maintain these in the short-, medium-, or long-term for herself and the Other. She realizes she can expend her power and potential toward listening to that which is changing in and around the project, to that which is being said elsewhere and differently and can bring on new futures and realities. Before moving on to point 3, we must ask: what about those who are powerless? I have argued that human beings – governors and governed – have endless human power and potential. But this assumes that at least at some level, she is aware, and she is free to access her endless power and potential and decide how to expend it. This is an important point, which, in this philosophy of governance, explains why some remain “powerless,” which I define as being unaware of one’s endless power and potential. All socially constructed forces – whether these are social orders, social institutions or organizations, ideological and political regimes, or governance structures – any human, socially constructed order which perpetuates social inequalities and maintains local and global injustices renders human power and potential inaccessible. Social institutions and organizations can perpetuate social inequalities which, in turn, place human power and potential in the distance for some, and in much closer reach for others. So, I maintain that humans have endless power and potential and are all equal by the very observation of their human existence. For the governor who endorses and espouses this philosophy of governance, the greatest of all responsibilities is the sternest of obligations to the Other to recognize social inequalities and command a self that works against social inequalities and the corresponding institutions. She may not be able to radically change the social institutions and organizations which act as barriers for the Other. This may be too tall an order for her human existence, even though luck can help. But even in the absence of luck, she can confidently channel her power and potential and define herself as accountable for her decisions in the project, in the institutions she engages with, and in her relationships. Point three – Perfect governance and control is not possible. Social sciences scholars (see, Thompson, 1999) remind us that notions of absolute control can turn out to be no more than illusions of control. But there is also another counterargument to perfect governance and control. Goethe (1992) reminds us that the world is and will forever remain unknown. The endless power and potential of humans can only be matched by the equally endless uncertainty of the world. This is the fundamental relationship between human beings and the world. Their common denominator is their endlessness. And this endlessness can only be seen through imagination and can only be captured by art. So, there is hope; we can hope. Because we don’t

14  Research handbook on the governance of projects

know. She can only access her endless human power and potential in an equally endless world. Once again, this makes her accountable for herself, as there is no other object (neither luck, the planet, nor the Other) for her efforts. The burden of responsibility to position her endless power and potential politically, intellectually, and ethically in an endless world is her greatest project, her greatest task: her greatest obligation not to the Other this time, but to herself. Her realm of control – i.e., herself – carries a loneliness which can only make her grateful for the Other in her life, in her work, and in creating new futures and realities. If she can share the experience of the burden of her responsibility with the Other, then she can only consider herself fortunate. Goethe (1992) says: “Look in yourselves and you will find all you need to know. Be grateful if someone out there smiles at what you have discovered within you.” He alludes to her being fortunate to be understood by the Other – a fortune which is captured and returned in acts of kindness. Still, she carries the great burden of deciding how to position herself in the world. Every decision, every act of speaking, every action places her, positions her in the world. She is the only one responsible for her position in the world, as she governs her decisions, her speech, and actions. At any one moment, she governs herself in the uncertainty of the world. She becomes the agent of the Self, in conversation with the Self, in an eternally political relationship with the Self. She exercises the politics of the Self – the politics of herself. Point four – Governance as the eternal communication of endless possibilities and the role of theory. If we accept that (a) the human condition is one of endless power and potential and that the world is equally endless, (b) we have the freedom to make decisions, and, most importantly, (c) we can only govern ourselves (not even the project), what is governance? And what is the role and the meaning of the theories of governance that project scholars create?2 Governance is…. … the eternal communication of endless possibilities. Governance defines and creates the space where the endless human power and potential of agents meet. Governance is a mechanism that opens the space for moments of enlightenment where the human power and potential of agents is explored, and groundbreaking thinking takes place. Governance is a mechanism through which curiosity and imagination are awakened and stimulated through the interplay of the endless human power and potential of agents; where I am inspired by the Other. Archer (2000) talks about the “the unrealized potentia of our species” which pre-exists, but comes to life through “human interaction with the world” (p. 17). Parmenides talks about illusion, which can be understood as imagination, as one of the ways of making sense of the world. Max Planck (1971) talks about “creative artistic imagination” (p. 33) across the sciences and arts, as means of starting the exploration of the unknown. And Swift (2008) argues for the identification and debate of anticipated “idealized positions” as possible and desirable manifestations and expressions of the public good. What is known, i.e., existing knowledge and experiences, are inputs that can be used or left behind. Existing knowledge and experiences do not necessarily prescribe what should be done, when, or why. They are precious tools, along with imagination, which need to be used when relevant, depending on the circumstances. Nietzsche (1886) begs us to not place any philosophy (including his own and mine) beyond good and evil, as truth. He urges beware of the “bearers of truth” and calls for philosophers (of which scholars are doctors) to be brave enough to explore “the dangerous ‘perhaps’ in every sense” (p. 8) – to ask and apply ourselves to the difficult questions. For Nietzsche (1886), this 2 For a summary of central governance theories in project governance studies, please see Table 1 in Biesenthal and Wilden (2014) and Chapter 2 in Müller (2009).

A philosophy of governance  15

use of knowledge makes human efforts noble (see Konstantinou & Müller, 2017). Existing knowledge and experiences need to prove their relevance. Their use should move humankind from point A to point B, where point B is a much better place to be. Existing knowledge and experiences may highlight important issues, areas, and views as deserving attention. But in each case, the relevance of such issues, areas, and views needs to be justified, explained, and fully articulated. No domain, knowledge, theory, or experience is important by default. Suddenly, an anarchist tradition (see, Chomsky, 2013) seems relevant to the evaluation of existing knowledge, where knowledge, as empirically or scientifically structured thought, must justify itself, pass the test of relevance, and escape the hierarchical relations of domination which pursue mindless reproduction. Knowledge needs to facilitate and fuel the endless power and potential of the agent. Governance becomes a mechanism for reviewing what is known, and for evaluating how relevant it is to particular circumstances. Governance becomes a hub for critical thought. Governance seeks enlightenment to help her position herself in the world of endless uncertainty. Foucault (1989, p. 323) writes: I cannot help but dream about a kind of criticism that would try not to judge but to bring an oeuvre, a book, a sentence, an idea to life; it would light fires, watch the grass grow, listen to the wind, and catch the sea foam in the breeze and scatter it. It would multiply not judgements but signs of existence; it would summon them, drag them from their sleep. Perhaps it would invent them sometimes – all the better. All the better. Criticism that hands down sentences sends me to sleep. I’d like a criticism of scintillating leaps of imagination. It would not be sovereign or dressed in red. It would bear the lightning of possible storms.

Governance creates moments, links, connections where endless power and potential transforms into endless new possibilities about what the future of humankind (and humanity) can be. Governance defines the meeting points for agents and theories reflect frameworks of thought that can readily be applied when deemed relevant or become the kindling for new thought.

CONCLUSION A final thought. Is all this absurd and crazy? What about the theory suggesting that we can govern and control more than the self (see Table 1.1)? Why propose alternatives? For one and only reason. A philosophy proposes how things can fit together in life (i.e., a way of living life) and therefore cannot be divorced from the time that it is written.3 And our times, the year 2022, are times when (a) we are discovering our endless power and potential to reach and extend boundaries and practices across the world, (b) at the same time, we are called to place and position ourselves in this boundaryless world, to engage with the politics of the self and create an identity when there is none handed down to us, (c) we are realizing that all we have come to believe in, our political ideologies and ideals, have not commanded the cessation of warfare and the end of social local and global injustices, (d) we are realizing that all we know, our existing knowledge, has led to climate change and the very circumstances that are now threatening our existence, and (e) we are literally running out of time to reverse the implications of our deeds. The advent of the 21st century is a time when we can become fatalists 3 See Bernstein (1980) on the philosophy in the conversation of mankind.

16  Research handbook on the governance of projects

Table 1.1  Theories suggesting areas of governance other than the self Author(s), year

Focus of governance

Jones et al. (1997)

Informal social systems within firms and formal contractual relationships; economic activity; network membership.

Müller (2009)

The value system, responsibilities, processes, and policies that allow projects to achieve organizational objectives and foster implementation that is in the best interests of all the stakeholders, internal and external, and the corporation itself.

Turner (2009)

A set of relationships between the project’s management, its sponsor (or executive board), its owner, and other stakeholders; the structure through which the objectives of the project are set; the means of attaining objectives and monitoring performance.

Turner & Keegan (2001)

The management paradigm for the project-based organization, including governance structures, project roles (of the broker and steward), and pressures.

Stoker (2002)

Public order and collective action; forms of regulation; efficiency and provision of public services; organization of actors; social and economic issues; networks of actors; power to command and use of authority; new tools to steer and guide.

Too & Weaver (2014)

Alignment of project deliverables with organizational goals; the performance of projects; business value; project selection; project sponsorship; project management office; projects and program support.

Toivonen & Toivonen (2014)

The relationship, culture, and identity of a project team within its organization.

Pitsis et al. (2014)

The boundaries of the study of project governance; the contribution of project governance to broader management theory and practice.

Clegg et al. (2014)

New form of alliance contracting in the construction industry; management practices of surveillance in the practice of project management.

Biesenthal & Wilden (2014) Successful delivery of projects, programs, and portfolios; organizational transformation; processes and structures, projects and strategic objectives; the alignment of project objectives with organizational strategy and performance. Müller, Pamsel, et al. (2014)

Organizational enablers, including process facilitators and discursive abilities. Note: reference to “self-responsible, selforganizing people” which is defined as “self-controlled, neo-liberal approaches to governmentality” (emphasis added).

Müller, Turner, et al. (2014)

Types of ethical issues (incl. transparency, optimization, relationship issues, power and political issues, illegal actions, role conflicts, and underperforming governance structures); behavioral implications of different governance structures (incl. culture engendered by senior managers); levels of trust.

Bekker (2015)

The conceptualization of project governance. (Continued)

A philosophy of governance  17

Table 1.1  (Continued) Author(s), year

Focus of governance

Joslin & Müller (2015)

The relationship between the use of a project management methodology and project success.

McGrath & Whitty (2015)

The conceptualization and analytical clarity of project governance.

Müller (2016)

The ways in which managers of projects, programmes and portfolios conduct their work and the ways in which senior managers present themselves to others in different types of organisations.

DeFillippi & Sydow (2016)

Project networks, governing and coordinating mechanisms (incl. responsibilities, routines, roles, and relationships), and paradoxical tensions.

Müller et al. (2016)

The frequency of ethical issues in temporary organizations and the role of good governance principles in controlling ethical issues.

Müller et al. (2017)

The relationship between governance and (neoliberal) governmentality.

Derakhshan et al. (2019)

A more inclusive approach which better recognizes the roles, relationships, and positions (mapping) of external stakeholders of the organization.

Riis et al. (2019)

The complex interplay of context- and organization-dependent links that are imperative if the permanent organization is to derive value from its projects; how value is effectively generated.

Müller (2019)

The conceptualization and analytical clarity of project governance; the interaction between governance and governmentality; project sovereignty as a measure of governance; project and organizational performance.

Clegg (2019)

Core governmentality processes and strategies; project team commitment and conflict management; achievement of KPIs.

Turner (2020)

Decision-making and project performance.

Unterhitzenberger & Moeller (2021)

The good governance principle of fairness and organizational justice, i.e., the perception of fairness in the working environment; the implementation and sustaining of fair project governance.

Yang et al. (2022)

Resilience in projects (incl. the intricate relationship among multiple stakeholder organizations, contractual arrangements, design of governance, and stakeholder engagement).

Note:   Theoretical contributions highlighted in bold build on the notion of governmentality and involve discussion of the relationship between governance and the self

and govern ourselves further into the demise of humankind. If what you believe and know threatens your existence, what can you do? We don’t want to become fatalists. This is the time when we can acknowledge our impact on the world, the impact of our desires, pleasures, and decisions, the value of beliefs and knowledge that have led to good (in the Aristotelian sense) and bring this power and potential to our awareness along with a strong sense of responsibility and urgency to save our planet and its species, including humans. We need to take

18  Research handbook on the governance of projects

responsibility and believe that we can change things. If we seek to follow or uncritically adopt knowledge, theories, organizational charts and lines of governance and authority or anything else that does not prioritize our endless power and potential to do good things, we are most likely doomed to make little progress or end up with more of what we already have. In this time and age, governance can only mean building up, leveraging, scaling up, accelerating the endlessness of human power and the potential to turn things around and chase moments of enlightenment which will show new paths. We have evidence that we can do this. We decided to fly, and we created planes which defy our nature. We decided to explore the world, and we built roads, rail, and ships. We decided to communicate and we invented wireless communications. We decided to share knowledge and the internet was born. We felt the need to express ourselves and we created earthshattering poetry and music which give form to feelings and the soul, which – Aristotle said – keeps us, our existence, together. We decided that war is wrong, and we attempted alliances and unions that make us work together. For all our good achievements, we have also governed ourselves into great social inequalities and injustices, frequently against the most vulnerable. We are again at war and have disrupted nature, our home, our selves. But now is not the time to evaluate. There is no time for this. We must just bet on our endless power and potential to imagine, think, and act, including navigating the unknown with the little knowledge we have and shaping new worlds. Today, in the unknown, thinking that governance is anything but the channeling of our endless power and potential into the enlightened creation of a better existence is suicidal.

REFERENCES Archer, M. (2000). Being human: The problem of agency. Cambridge University Press. Arendt, H. (1958). The human condition. The University of Chicago Press. Bekker, M. C. (2015). Project governance – The definition and leadership dilemma. Procedia – Social and Behavioral Sciences, 194, 33–43. Bernstein, R. J. (1980). Philosophy in the conversation of mankind. The Review of Metaphysics, 33, 745–775. Biesenthal, C., & Wilden, R. (2014). Multi-level project governance: Trends and opportunities. International Journal of Project Management, 32, 1291–1308. Chomsky, N. (2013, September 18). Problems of knowledge and freedom. http://www​.youtube​.com​/ watch​?v​=Rz3K6IHI​_Kk Clegg, S. R. (2019). Governmentality. Project Management Journal, 50, 266–270. Clegg, S. R., Pitsis, T. S., Rura-Polley, T., & Marroszeky, M. (2002). Governmentality matters: Designing an alliance culture of inter-organizational collaboration for managing projects. Organization Studies, 23, 317–337. DeFillippi, R., & Sydow, J. (2016). Project networks: Governance choices and paradoxical tensions. Project Management Journal, 47, 6–17. Derakhshan, R., Turner, R., & Mancini, M. (2019). Project governance and stakeholders: A literature review. International Journal of Project Management, 37, 98–116. Foucault, M. (1989). Ethics – Essential works of Foucault 1954–1984. Penguin. Frankl, V. (1959). Man’s search for meaning. Beacon Press. Goethe, J. W. (1992). Γκαίτε – Επιλογή από τα Maximen und Reflexionen. Stigmi. Hardy, C., & Clegg, S. (1996). Some dare call it power. In S. R. Clegg, C. Hardy, & T. B. Lawrence (Eds.), The Sage handbook of organization studies (pp. 754–775). SAGE Publications Ltd. Jones, C., Hesterly, W. S., & Borgatti, S. P. (1997). A general theory of network governance: Exchange conditions and social mechanisms. Academy of Management Journal, 22, 911–945.

A philosophy of governance  19

Joslin, R., & Müller, R. (2015). Relationships between a project management methodology and project success in different project governance contexts. International Journal of Project Management, 33, 1377–1392. Kazantzakis, N. (2007). Ασκητική – Slavatores Dei. (20th εκδοση). Εκδοσεις Καζαντζακη. Konstantinou, E., & Müller, R. (2017, July 13–15). On nobles and slaves: Readings from Nietzsche in the business world [conference session]. The Philosophy of Management Conference, St. Louis, MI, USA. Mauss, M. (2002). The gift: The form and reason for exchange in archaic societies. Routledge (first published 1950). McGrath, S. K., & Whitty, S. J. (2015). Redefining governance: From confusion to certainty and clarity. International Journal of Managing Projects in Business, 8, 755–787. Müller, R. (2009). Project governance. Gower Publishing. Müller, R. (2016). Governance and governmentality for project: Enablers, practices and consequences. Routledge. Müller, R. (2019). Governance, governmentality and project performance: The role of sovereignty. International Journal of Information Systems and Project Management, 7, 5–17. Müller, R., Pemsel, S., & Shao, J. (2014). Organisational enablers for governance and governmentality of projects a literature review. International Journal of Project Management, 32, 1309–1320. Müller, R., Turner, J. R., Andersen, E. S., Shao, J., & Kvalnes, Ø. (2014). Ethics, trust and governance in temporary organizations. Project Management Journal, 45, 39–54. Müller, R., Turner, J. R., Andersen, E. S., Shao, J., & Kvalnes, Ø. (2016). Governance and ethics in temporary organisations: The mediating role of corporate governance. Project Management Journal, 47, 7–23. Müller, R., Zhai, L., & Wang, A. (2017). Governance and governmentality in projects: Profiles and relationships with success. International Journal of Project Management, 35, 378–392. Nietzsche, F. (1886). Beyond good and evil. Penguin Classics. Parmenides. (2003). Παρμενιδης ο Ελεατης: περι φυσιος. Zitros. Pitsis, S. T., Sankaran, S., Gudergan, S., & Clegg, S. R. (2014). Governing projects under complexity: Theory and practice in project management. International Journal of Project Management, 32(8), 1285–1290. Planck, Μ. (1971). Νόημα και όρια της θετικής επιστήμης (Original title: Sinn und grenzen der exakten wissenschaft). University Studio Press. Rescher, N. (1995). Luck: The brilliant randomness of everyday life. University of Pittsburgh Press. Riis, E., Hellstrom, M. M., & Wikstrom, K. (2019). Governance of projects: Generating value by linking projects with their permanent organisation. International Journal of Project Management, 27, 652–667. Stoker, G. (1998). Governance as theory: Five propositions. International Social Science Journal, 50, 17–28. Swift, A. (2008). The value of philosophy in nonideal circumstances. Social Theory and Practice, 34, 363–387. Thompson, S. C. (1999). Illusions of control: How we overestimate our personal influence. Current Directions in Psychological Science, 8(6), 187–190. Toivonen, A., & Toivonen, P. U. (2014). The transformative effect of top project management governance choice on project team identity and relationship with the organization - an agency and stewardship approach. International Journal of Project Management, 32, 1358–1370. Too, E. G., & Weaver, P. (2014). The management of project management: A conceptual framework for project governance. International Journal of Project Management, 32, 1382–1394. Turner, J. R. (2009). The handbook of project-based management. McGraw-Hill. Turner, J. R. (2020). How does governance influence decision making on projects and in project-based organizations? Project Management Journal, 51, 670–684. Turner, J. R., & Keegan, A. (2001). Mechanisms of governance in the project-based organization: Roles of the broker and steward. European Management Journal, 19, 254–267. Unterhitzenberger, C., & Moeller, D. (2021). Fair project governance: An organizational justice approach to project governance. International Journal of Project Management, 39, 636–696. Yang, X., Wang, L., Zhu, F., & Müller, R. (2022). Prior and governed stakeholder relationships: The key to resilience of inter-organisational projects. International Journal of Project Management, 40, 64–75.

2. Principles of good governance Ralf Müller

INTRODUCTION A principle is a natural law, fundamental truth or proposition that serves as the foundation for a system of belief or behaviour or a chain of reasoning. Essentially, a principle is a concept or value that guides actions and behaviours and can apply to individuals, organizations, and societies. (Roden et al., 2017, p. 5)

Principles are used as guidelines when the complexity of a phenomenon is too large to define a measure (such as a process or task) for every state of the phenomenon. Examples are projects. The early understanding of projects and their management was relatively straightforward, as a sequence of conceptualization, planning, implementation and control, and close-out. Contemporary views of projects and project management are much more complex, taking into account the recursive nature of their life cycle stages, various methodologies, various influences of different stakeholder groups, and networks of suppliers, to name a few (Volden & Samset, 2017). The diversity of settings adds to this complexity. The past decades show an increasing diversity of situations where project management and its governance are applied as a way to execute work. In line with that, the applicability of normative concepts like predefined processes, tools, and techniques that apply to all types of projects has declined steadily. A possible remedy for this issue is to take a step back and apply principles instead of normative methodologies. Principles provide for freedom in the choice of actions to be taken to accomplish the desired outcome. Therefore many institutions have developed standards based on principles rather than prescribed processes and techniques, such as the Association for Project Management (APM) (2011) or the Project Management Institute (PMI) (2021). Governance principles are the fundamental norms, rules, and values that guide the design and maintenance of governance structures and practices to steer managers, that is, the framework within which managers can execute their management roles. As such, they are different from management principles, which steer the organization of work and the people who execute the work. Classic examples of management principles are the division of work, centralization of power for work-related decision-making, purchasing processes, employee remuneration, etc. (Fayol, 2016). Management principles may become relevant for organizing the work within projects, but not for the design of the governance system to steer project managers. Using principles in designing governance systems leads to the notion of equifinality – which is the accomplishment of similar states in, for example, projects and their performance while starting from different initial conditions, such as by using different governance systems (Aubry et al., 2022). Hence, principles-based approaches liberate from the dominance of singular, normative, taken-for-granted approaches in designing governance systems. Aubry et al. (2002) showed that significantly different governance approaches for similar types of transition projects could accomplish similar performance levels, irrespective of the governance system being idiosyncratically designed through rational choices or isomorphism by reproducing 20

Principles of good governance  21

other organizations’ approaches without further evaluation. However, this extended freedom of choices and the liberation of managers in designing governance systems comes at the price of higher accountability. Instead of hiding behind “what the good book says,” managers designing governance systems themselves gain higher visibility and accountability and are at higher risk when projects fail. This risk may explain why some managers opt for isomorphism and “imitate each other’s structures, strategies, and practices with little consideration of the potential performance effects” (Miterev et al., 2017, p. 9). The present chapter discusses the underlying principles to be considered when designing governance systems. Hence, the chapter aims to help managers design governance systems tailored for the circumstances and the level of the governed object (e.g., project, program, portfolio, or organizational project management in their particular context). Governance principles have pervaded the realm of projects for quite a while. While some professional organizations already published their governance principles in 2003 (such as APM), others applied their process thinking a bit longer and changed to principles-based standards more recently (such as PMI). Thus, principles became popular because they allow more flexibility than predetermined processes or tasks. We will return to the details of these project governance principles a bit later in the chapter. Principles-based approaches are not limited to the design of project governance structures. They support the design of governance institutions equally well, such as project management offices (PMOs). Studies have shown that there are uncountable different implementations of PMOs (Aubry et al., 2012). Their designs are tailored to the idiosyncratic needs and circumstances of the PMO’s parent organization. Hence it will be impossible to develop a handbook with all possible PMO designs for all possible circumstances. Instead, it is more efficient to develop the best possible PMO design for a given organization using PMO design principles. This approach allows balancing the requirements stemming from the particular services provided by the PMO with the requirements of the wider organization and its market. A booklet by the Association of International Project Management Officers (AIPMO) (Roden et al., 2017) does that. It describes seven design principles for PMOs, which are sufficiently general to cover almost all PMO implementations and sufficiently broad in scope to ensure that no major role of the PMO is left out. The PMO design principles are listed in the Appendix.

GOOD GOVERNANCE PRINCIPLES The nature of the principles applied is, of course, context-dependent. Among the early developers of, for example, corporate governance principles were the Organisation for Economic Co-operation and Development (OECD) (Millstein et al., 1998) and the World Bank Group (Iskander & Chamlou, 2002). Their principles converged into a generally accepted set of core governance principles (Cadbury, 2000), also called good governance principles or practice principles of good corporate governance (Aras & Crowther, 2010). These are transparency, accountability, responsibility, and fairness. We discuss them in the following. Transparency refers to the disclosure of accurate, timely information about performance. The information should be provided in a clear, consistent, and comparable manner. In a project context, governance institutions, like project steering committees, should request this information and strive to standardize and continuously improve disclosure techniques and formats. However, studies have shown that transparency is weak in project reporting, especially

22  Research handbook on the governance of projects

in settings where governance institutions (e.g., sponsors, steering groups) control project managers by enforcing process compliance using authoritative leadership. This approach indicates mistrust on the side of the governance institutions in the project manager’s capabilities to manage the project. Here project managers often withhold the true status of their projects because of their fear of being replaced, the project being closed down, or their hope that the deliverables can be renegotiated with customers later in the project. They do this to save their position for the moment. Contrarily, transparency is typically not an issue in projects where governance institutions control their project managers by the outcome of the projects. Here the governance institutions trust the project manager by not squeezing them into a particular process or method. The project manager reciprocates with openness and trust in the governance institution’s willingness to master potential issues in the project collaboratively and constructively (Müller et al., 2014). Hence, transparency is better in contexts of psychological safety, trust, and flexibility, which are characteristic of principles-based management approaches. Accountability refers to the clarity of roles, rights, and responsibilities to allow governance systems to work efficiently. In projects, accountability refers to the governance institutions and their members, the managers, team members, and key stakeholders and them being answerable to inquiries about their sphere of responsibility. Examples include the project sponsor, who is typically accountable to upper management for accomplishing a project’s business case. Accountability often links to a responsibility not personally executed by the accountable person. For example, the steering group is accountable for the project, but they are not working on the project’s tasks. Studies showed that clearness in accountabilities has a direct impact on project performance. The more clearly the accountabilities are defined, the higher the success rates of projects (Wang et al., 2022). Responsibility refers to applying socially accepted working standards in pursuing organizational objectives (Millstein et al., 1998). It is the professionality with which work is executed. Governance should ensure that individuals, teams, and organizations are encouraged to be trained in and execute socially accepted professional working standards in accordance with laws and professional conventions. In projects, this refers to the use of professional standards for the specific roles employed in a project (e.g., a project management standard issued by a professional project management organization), together with indicators of active pursuance of professionality, such as professional certification or other related qualifications. Studies have shown that responsible governance work, such as governing project execution by project management methodologies, has a significant and positive impact on project performance (Joslin & Müller, 2016). Fairness refers to the fair, ethical, and equal treatment of employees, suppliers, stakeholders, etc., including contracting, hiring, work assignment, and so forth. Moreover, fairness also includes the protection against illegal action, as well as building the awareness that contracts are promises enforceable by law. Ethics and ethical issues in project governance are addressed in detail in Chapter 16. A fifth good governance principle discussed in recent years is sustainability, which “seeks to balance the economic, environmental, and social dimensions of development in a longterm and global perspective” (OECD, 2011, p. 3). However, this discussion does not provide a clear distinction from the fairness principle. Being fair to the planet (and its inhabitants) also means pursuing sustainability with all actions, including governance-related actions. In this chapter, we assume sustainability to be a logical subset of fairness. As a governance topic, it is addressed in Chapter 21.

Principles of good governance  23

The four governance principles are identifiable in almost all well-functioning governance systems. In road traffic, for example, the car’s license plate provides for transparency about the owner of the car, the insurance has to pay in case of accidents and is therefore accountable for what is done with the car, the driver has to drive in a responsible way, for that he/she needs to have suitable training, which shown by having a driver’s license. Last but not least, if someone makes a mistake, such as taking another car’s right of way, fairness demands applying the brake rather than bumping into the defaulting car.

PRINCIPLES AND GOVERNANCE LAYERS The nature of principles as fundamental truth or natural law makes them pervade the entire governance structure of organizations. In the context of projects, this is often portrayed as a four-layer structure of: Corporate governance, where the business goals are defined and the means to pursue them are described in objectives, policies, and ethical principles. Board-level governance, where part of the business executed through projects is defined, along with the role of project management in the organization, and the need for strategic PMOs and other project related governance institutions. Governance of projects, where projects are selected for portfolios and/or grouped for programs, and the governance basics are defined, such as the project execution standards, reporting standards, performance measures, etc. Project governance, where the goal of each project is defined, the resources provided to achieve the goal, and the project’s progress is controlled The four governance principles cut across all four layers, as shown in Figure 2.1. It depicts the dependencies across layers. For example, an incomplete status report at the project governance layer fails to provide transparency about the true status of a project, which compromises

Figure 2.1  The relationship between governance principles and governance hierarchies

24  Research handbook on the governance of projects

the correctness of the portfolio status report at the governance of projects layer. This provides incorrect information to the board, leading to inappropriate decisions affecting the businesswide decisions at the corporate governance layer. Moreover, in addition to these internal issues, the shareholders, stakeholders, and the public are provided with incorrect information, which can have many adverse consequences, including legal and share price implications. These dependencies also work in reverse order. The lack of assigning clear accountabilities at the corporate governance layer leads to a diffuse understanding of which parts of the business are done in projects instead of the production process. This lack of clarity hampers the definition of criteria for project selection into portfolios at the governance of projects layer. This, in turn, opens up redundancies in project governance, such as unclear definition of goals and measures to control progress. Hence, governance principles are not a one-way street. They act as mental guidelines for governance activities. They should be respected and obeyed by actors at all layers of a governance structure, irrespective of the governance structure being a market, hierarchy, or network.

GOVERNANCE PRINCIPLES FOR PROJECTS The APM was the first to publish a set of governance principles for the realm of projects. APM used the term “governance of project management” to describe the governance of projects, programs, and portfolios. Later writers referred with the same term to the governance of an organization’s project management service capabilities, such as training, auditing, use of maturity models, etc. (e.g. Müller, 2009). In the following, we address the governance principles outlined by the professional organizations for project management. APM’s (2011, p. 9ff) list of governance principles for projects are:

1. The board has overall responsibility for the governance of project management. 2. The organisation differentiates between projects and non project-based activities. 3. Roles and responsibilities for the governance of project management are defined clearly. 4. Disciplined governance arrangements, supported by appropriate methods, resources and controls are applied throughout the project life cycle. Every project has a sponsor. 5. There is a demonstrably coherent and supporting relationship between the overall business strategy and the project portfolio. 6. All projects have an approved plan containing authorisation points at which the business case, inclusive of cost, benefits and risk is reviewed. Decisions made at authorisation points are recorded and communicated. 7. Members of delegated authorisation bodies have sufficient representation, competence, authority and resources to enable them to make appropriate decisions. 8. Project business cases are supported by relevant and realistic information that provides a reliable basis for making authorisation decisions. 9. The board or its delegated agents decide when independent scrutiny of projects or project management systems is required and implement such assurance accordingly. 10. There are clearly defined criteria for reporting project status and for the escalation of risks and issues to the levels required by the organisation. 11. The organisation fosters a culture of improvement and of frank internal disclosure of project management information.

Principles of good governance  25

12. Project stakeholders are engaged at a level that is commensurate with their importance to the organisation and in a manner that fosters trust. 13. Projects are closed when they are no longer justified as part of the organisation’s portfolio. The links between these principles and the earlier-discussed OECD principles include transparency: APM principles 1, 2, 5, 6, 8, 10, 11; accountability: APM principles 3, 4, 9; responsibility: APM principles 6, 11, 13; and fairness: APM principles 7 and 12. The Governance of portfolios, programs, and projects practice guide issued by the PMI (2016) and the International Standard ISO 21505, titled Project, programme and portfolio management: Guidance on governance (ISO, 2017), both refer to principles as being important. However, they do not provide a set of principles per se. Instead, they refer to the need to set up principles by upper management for the entire organization.

APPLYING GOOD GOVERNANCE PRINCIPLES IN PROJECTS This section addresses the use of the four governance principles in a project context. Transparency is a frequent subject in project governance studies and is examined from many different perspectives. Traditionally, transparency is attributed to the use of project management methodologies and governance frameworks (Klakegg et al., 2008). For example, in public projects, they are regarded as a means to strengthen accountability because the institution answerable (i.e., accountable) for spending taxpayers’ money should be unambiguously defined. However, a detailed analysis of public project governance schemes in six countries showed significant differences. Volden and Samset (2017) found that only one of six countries’ investigated governance schemes provided good transparency. This one country (Norway) published quality reports, audits, other reports, and final costs and results on a public website, which motivated the institutions to put much effort into their work. The other countries did not practice similar levels of transparency, with some of them providing data only at an aggregate level or with a considerable time lag or did not provide any publicly available data at all. Examples from non-public sectors include Wiesche’s (2021) study, which showed that agile methodologies increase transparency in the development process, backlog, and issue-tracking. This increased transparency helps avoid unnecessary interruptions of software development teams. In addition to methodologies and frameworks, tools and technologies are also reported to foster greater transparency. Tools like building information modeling enable transparency and active project control in the construction industry (Forsythe et al., 2015). A technology associated with improved transparency and traceability is blockchain, whereby consortium blockchain is found to be especially supportive in project contexts (Lu et  al., 2022). Yet another perspective was taken by Unterhitzenberger and Bryde (2019) by showing the impact of consistent and transparent procedures on organizational justice, which, in turn, positively impacts project performance. The above summary gives a short glimpse of the different types of efforts to improve transparency, as it is a paramount principle that makes governance work. Fairness and ethics are rare subjects in project governance research (Turner, 2022). The above-mentioned study by Unterhitzenberger and Bryde (2019, p. 57) on organizational justice showed that project performance improves through “fair treatment of project team members; when resources are allocated fairly; and when the individuals interact in a way that is

26  Research handbook on the governance of projects

characterized by respect, propriety, and dignity.” In a similar vein, studies on governance and ethics showed that governance systems that trust the project manager to make reasonable decisions himself/herself are trusted by the project manager in return. This mutual trust makes project managers use the governance systems. Contrarily, when project managers do not feel trusted by the system and are pushed into a firm and normative governance system that anticipates and predetermines all decisions for the manager, they start circumventing the system when dealing with ethical issues (Müller et al., 2014). Hence, fair treatment of the project manager by the governance system is a key characteristic of a functioning governance system. But fair treatment is not limited to project internal stakeholders, it also applies to external stakeholders, such as clients, suppliers, and the public. Chapter 16 addresses the topic of ethical issues in projects in more detail. Responsibility and accountability are terms often used interchangeably in the project literature. Along with the definitions of the OECD, the text above shows that accountability is about answerability for the results of a task which is typically not executed by the person being answerable for it. Responsibility is about the professionality of executing a task. Hence, the chair of a steering group is answerable (accountable) for project results to upper management, and the systems architect in the project team is responsible for professionally executing her work. In the academic project management literature, accountability is often linked to governance institutions like the steering committees or sponsoring institutions being accountable for project results and achieving business cases, respectively (Aubry et al., 2022). Other governance institutions include PMOs and their accountabilities for project performance (Aubry & Lavoie-Tremblay, 2018), for building project management capabilities (Hobbs & Aubry, 2007), and the adjustment of accountabilities of PMOs due to external and internal changes to the organization (Aubry et al., 2010). Studies on responsibilities often stress those of the different roles in projects, such as the sponsor and the steering committees. For example, Crawford et al. (2008) outline the multiplicity of roles of the steering committee, spanning from supportive to governing while taking into account the permanent organization’s interests as the project parent organization and those of the temporary organization executing the project. While the above literature points out the specific accountabilities and responsibilities, relatively little is published on the strength of the implementation of both and the associated clearness for the individual and institutional stakeholders in projects. A study on governance of inter-organizational project networks addressed this by looking at the level of clearness of accountability and responsibility and their differences by national cultures and project types (Müller et al., 2022; Wang et al., 2022). The study assessed 225 project networks and showed a positive relationship between both principles, as indicated through the upward line in Figure 2.2. Hence, organizations that emphasize the clearness of one of the two principles often also emphasize the other. Figure 2.2 also shows the mean values for accountability and responsibility per country. The data are normalized, with the overall mean of the measures being zero and the scales showing standard deviations. Figure 2.2 depicts the mean values for national projects in the countries indicated and international projects (titled “international”) covering projects executed in more than one country. Large differences can be seen by country, with the UK and United Arab Emirates (UAE) being highest in clearness of responsibilities, and Germany and UAE highest in accountability. The Scandinavian countries Sweden, Norway, and Iceland show a lower expression of the two governance principles. This finding

Principles of good governance  27

Figure 2.2  Accountability and responsibility strength by country aligns with earlier studies that showed a national culture-based tendency for team-based and more informal, consensus-driven working styles within flat hierarchies in Scandinavia. Especially when compared to the more expert-driven, formal, and hierarchical working styles in Germany (Müller et al., 2009). Accountabilities and responsibilities are clearly assigned to individuals in their particular roles in countries like UAE, Brazil, and Lithuania, while they are addressed through group collaboration in the Scandinavian countries. A different picture emerges when looking at the expression of the two governance principles by different types of projects. Figure 2.3 uses the same scales as Figure 2.2 and depicts a much lesser difference between project types than between countries. Transport, IT/telecom, and engineering/manufacturing projects are slightly higher in clearness of accountabilities and responsibilities than construction and education projects. The comparison of Figures 2.2 and 2.3 indicates more variance between national cultures in the expression of the two governance principles than variance between project types. From a global perspective (Figure 2.3), the differences are small, hence the national differences converge into almost the same mean values. This indicates a stronger influence of national culture than industry culture on the implementation of accountability and responsibility principles.

CONCLUSION This chapter has addressed governance principles from a corporate and a project perspective. The trend toward principles as a replacement for normative processes and tasks was discussed, and the four principles of good governance were subsequently introduced. Then the chapter turned toward practice implementation and showed how the four governance principles pervade all layers of organizational hierarchies and networks, linking top management with the

28  Research handbook on the governance of projects

Figure 2.3  Accountability and responsibility strength by project type individual project and the associated two-way communication across organizational layers. This discussion was extended to the principles for the governance of projects as developed by APM. Subsequently, a discussion of the governance principles in the academic project management literature provided a brief insight into the versatility of principles, as indicated by the many different perspectives used to investigate them. The chapter ended with empirical data on the strength of implementing the principles, giving indicators of what to expect in different countries and project types. Governance principles are currently increasing in popularity. It will be interesting to watch this development and apply new principles as they emerge for better governance of projects.

REFERENCES APM (2011). Directing change: A guide to governance of project management. Association for Project Management. Aras, G., & Crowther, D. (2010). Corporate social responsibility: A broader view of corporate governance. In G. Aras & D. Crowther (Eds.), A handbook of corporate governance and social responsibility (pp. 265–280). Gower Publishing Limited. Aubry, M., Hobbs, B., Müller, R., & Blomquist, T. (2010). Identifying forces driving PMO changes. Project Management Journal, 41(4), 30–45. Aubry, M., & Lavoie-Tremblay, M. (2018). Rethinking organizational design for managing multiple projects. International Journal of Project Management, 36(1), 12–26. https://doi​.org​/10​.1016​/j​ .ijproman​.2017​.05​.012 Aubry, M., Müller, R., & Glückler, J. (2012). Governance and communities of PMOs. Project Management Institute. Aubry, M., Richer, M.-C., Lavoie-Tremblay, M., Fortin, C., & Fortin Verreault, J.-F. (2022). Revisiting organizational design in the light of isomorphism and equifinality: Insights from the study of three major transformation projects. Project Management Journal, 53(2), 875697282210755. https://doi​ .org​/10​.1177​/87569728221075577 Cadbury, A. (2000). The corporate governance agenda. Corporate Governance: An International Review, 8(1), 7–15. https://doi​.org​/10​.1111​/1467​-8683​.00175

Principles of good governance  29

Crawford, L., Cooke-Davies, T., Hobbs, B., Labuschagne, L., Remington, K., & Chen, P. (2008). Governance and support in the sponsoring of projects and programs. Project Management Journal, 39(Supplement), S43–S55. Fayol, H. (2016). Henry Fayol’s 14 principles of management. Retrieved March 23, 2016, from https:// www​.academia​.edu​/384009​/ Henry​_ Fayols​_14​_principles​_in​_ Management Forsythe, P., Sankaran, S., & Biesenthal, C. (2015). How far can BIM reduce information asymmetry in the Australian construction context? Project Management Journal, 46(3), 75–87. https://doi​.org​ /10​.1002​/pmj​.21504 Hobbs, B., & Aubry, M. (2007). A multi-phase research program investigating project management offices (PMOs): The results of phase 1. Project Management Journal, 38(1), 74–86. Iskander, M. R., & Chamlou, N. (2002). Overview of corporate governance: A framework for implementation. Word Bank Group. ISO. (2017). Project, programme and portfolio management – Guidance on governance. ISO Copyright Office. Joslin, R., & Müller, R. (2016). The relationship between project governance and project success. International Journal of Project Management, 34(4), 613–626. Klakegg, O. J., Williams, T., Magnussen, O. M., & Glasspool, H. (2008). Governance frameworks for public project develoment and estimation. Project Management Journal, 39(Supplement), S27–S42. Lu, W., Wu, L., & Xue, F. (2022). Blockchain technology for projects: A multicriteria decision matrix. Project Management Journal, 53(1), 84–99. https://doi​.org​/10​.1177​/87569728211061780 Millstein, I. M., Albert, M., Cadbury, A., Feddersen, D., & Tateisi, N. (1998). Corporate governance: Improving competitiveness and access to capital in global markets. OECD Publications. Miterev, M., Engwall, M., & Jerbrant, A. (2017). Mechanisms of isomorphism in project-based organizations. Project Management Journal, 48(5), 9–24. Müller, R. (2009). Project governance. Gower Publishing Ltd. Müller, R., Alix-Séguin, C., Alonderiene, R., Bourgault, M., Chmielauskas, A., Drouin, N., Ke, Y., Minelgaite, I., Pilkienė, M., Šimkonis, S., Unterhitzenberger, C., Vaagaasar, A. L., Wang, L., & Zhu, F. (2022). A (meta)governance framework for multi-level governance of inter-organizational project networks. Production Planning & Control, 1–30. https://doi​.org​/10​.31124​/advance​.19474733​.v1 Müller, R., Spang, K., & Özcan, S. (2009). Cultural differences in decision making in project teams. International Journal of Managing Projects in Business, 2(1), 70–93. Müller, R., Turner, J. R., Andersen, E. S., Shao, J., & Kvalnes, Ø. (2014). Ethics, trust and governance in temporary organizations. Project Management Journal, 45(4), 39–54. OECD. (2011). Sustainable development. https://www​.oecd​.org​/greengrowth​/47445613​.pdf PMI. (2016). Governance of portfolios, programs, and projects: A practice guide. Project Management Institute.  http://www​.pmi​.org/~​/media​/ PDF​/ learning​/ portfolio​-program​-project​-governance​practice​-guide​.ashx Roden, E., Joslin, R., & Müller, R. (2017). PMO principles. IPMO Advisory AG. Turner, R. (2022). Forty years of organizational behaviour research in project management. International Journal of Project Management, 40(1), 9–14. https://doi​.org​/10​.1016​/j​.ijproman​.2021​.10​.002 Unterhitzenberger, C., & Bryde, D. J. (2019). Organizational justice, project performance, and the mediating effects of key success factors. Project Management Journal, 50(1), 57–70. https://doi​.org​ /10​.1177​/8756972818808984 Volden, G. H., & Samset, K. (2017). Governance of major public investment projects: Principles and practices in six countries. Project Management Journal, 48(3), 90–108. https://doi​.org​/10​.1177​ /875697281704800306 Wang, L., Alonderienė, R., Chmieliauskas, A., Drouin, N., Ke, Y., Minelgaite, I., Šimkonis, S., Zhu, F., Unterhitzenberger, C., Müller, R., Mongeon, M., Pilkiene, M., & Vaagaasar, A. (2022). Balancing hierarchy and network: Governance of inter-organizational networks for projects. In In Proceedings of the European Academy of Management (EURAM) Conference, ZHAW School of Management and Law, June 13–17, 2022, Winterthur, Switzerland.

30  Research handbook on the governance of projects

APPENDIX PMO principles (Roden et al., 2017, p. 28). Principle 1: Senior management sponsorship and engagement The scope and effectiveness of the PMO is defined by the level of sponsorship and engagement from senior management. Principle 2: Governance alignment The structure and function of a PMO is designed to fit within and actively support the organizational governance. Principle 3: Consistent, accurate, timely and transparent information The PMO provides consistent, accurate and timely information used to underpin the decisionmaking process (governance) and transparent validation of the data governance. Principle 4: Trusted Challenge Partner to drive value The PMO provides objective, rational and constructive challenge at a project, program, and portfolio level. Principle 5: Adaptive capabilities and services The capabilities and services provided by the PMO are set up and then tailored to the organization in which they operate and the people they serve. Principle 6: Leads by example The PMO exhibits appropriate behaviors and expertise when delivering change and demonstrates the value of the project and program processes and systems and their contribution to project and program success. Principle 7: Continuous improvement mind-set The PMO looks to improve itself and its contribution to the successful delivery of projects and programs within the organization through continuous improvement of its services.

3. Classic perspectives on project governance: transaction cost economics, agency theory, and stewardship theory Tuomas Ahola

INTRODUCTION Inter-organizational projects tie several organizations which are heterogeneous in terms of their resources, practices, and goals temporarily together as a project network. In this project network, the participating organizations form a nexus of treaties (Winch, 2006), which is interconnected by means of relational and contractual ties that influence the behavior of actors participating in the project. In this chapter project governance is defined as the combination of contractual as well as noncontractual mechanisms, such as trust, for coordinating, monitoring, and safeguarding transactions in inter-organizational projects. In particular, we focus on the governance of the commercial interface between the project owner and its suppliers (Winch, 2014, see also Chapter 12 in this volume), but also the governance arrangements that are in place between the suppliers and other actors further down the project supply chain. To date the academic discussion on project governance has been largely concentrated on describing various contractual and noncontractual mechanisms that may be in place, as well as identifying conditions under which certain mechanisms should be favored over alternative mechanisms. As an example, where the main contractor and important subcontractors working on the project have worked with each other in the past, it is increasingly likely that they are able to integrate their processes, leading to increased efficiency and reduced need for using resourceintensive mechanisms for monitoring progress of work such as frequent progress reporting and quality inspections (Eccles, 1981). Earlier research (Ahola et  al., 2014) has shown that the academic discussion on project governance has mostly built on earlier research on project organizing, while the influence of many theories which are widely used in the general management domain has been much more limited. As this is the case, the purpose of this chapter is to examine three widely used theories – transaction cost economics (TCE), agency theory (AT), and stewardship theory (ST) – and consider their implications for project governance. Contractual arrangements between a buyer and a seller (or a principal and an agent) lie at the heart of these theories, and as such they are of high relevance to academics and practitioners working in the field of project governance. To provide an example of how these three theories may contribute to the complex decision-making processes that take place in projects, let’s consider a firm which is responsible for tiling twenty bathrooms in a construction project. In order to increase the profitability of the work, the manager responsible for the delivered entity is now considering the option of further subcontracting the tiling of ten of those bathrooms to a subcontractor. Here, TCE would inform us that there are significant transaction costs that relate to finding a suitable subcontractor, formulating a contract, and overseeing the progress of work. Thus, 31

32  Research handbook on the governance of projects

the manager should decide to subcontract work only if the sum of these transaction costs and the money paid to the subcontractor is lower than what it would cost to do the work internally. An analysis of the same situation from an agency theoretical perspective would highlight that the goals of the firm responsible for the tiling and the subcontractor might conflict with each other. For example, the subcontractor could potentially decide to use low quality materials or a less skilled workforce to reduce its costs and to increase its profits. Furthermore, and depending on how the contract between the firm and the subcontractor is drafted, the firm might later be held responsible for problems that arise (e.g., tiles falling down from the bathroom walls). Finally, ST would highlight the possibility that the subcontractor may very well be willing to invest its best resources in the task at hand, for the good of the project. It is also possible that the subcontractor aims to develop a long-term collaborative relationship with its client. If this were the case, the firm should support the subcontractor so that it is able to perform at its best, for example, by providing the subcontractor a significant degree of autonomy regarding decisions about how to perform the work and what materials to use. All three aforementioned theories provide the manager responsible for the decision with potentially valuable insights. However, to a degree, these insights conflict with each other. TCE emphasizes efficiency, AT emphasizes control, and ST emphasizes autonomy. Essentially, control and autonomy are opposites to each other. This gives rise to the question: under what kind of conditions can the three aforementioned theories provide valuable insights to decision makers responsible for planning and implementing inter-organizational projects? I proceed to explore this question by first introducing the three classic governance theories, discussing their main assumptions, variables, and areas of application. In addition, I provide further examples of how they may apply to project contexts. Following the introduction of the theories, I proceed to discuss their implications for project governance, in particular from the viewpoint of beliefs and attitudes of decision makers, culture, the shadow of the past, project complexity, and multilateral contracting.

TRANSACTION COST ECONOMICS The TCE framework was introduced by Nobel laureate Oliver Williamson during the 70s and 80s (1975, 1985). Drawing heavily on Coase’s (1937) treatise on the boundaries of the firm, TCE is concerned with identifying the economically most efficient governance structure for a given transaction. In a project context, the contracts that are formed between the client, the main contractor, and various subcontractors represent the focal transactions under analysis. A large project may involve dozens if not hundreds of firms and – at least – a similar number of contracts between the involved firms. The TCE framework builds on two assumptions concerning economic actors. First, actors are assumed to be boundedly rational; that is, actors do not always come up with the optimal solution to a decision that they need to make. Second, actors are assumed to be prone to opportunistic behavior, i.e. “self-interest seeking with guile” (Williamson, 1985, p. 47). This means that provided the opportunity to do so arises, an organization involved in a project may prioritize its own self-interest at the cost of the other party involved in the transaction. The concept of transaction cost is fundamental to TCE. Transaction costs can be considered as the economic equivalent of the friction that takes place in the physical world. In a project context, the transaction costs related to contractual arrangements include, e.g., the costs of

Classic perspectives on project governance  33

specifying the scope of the contracted work, announcing the tender, selecting the most suitable contractor, drafting a contract, and monitoring that the contractor carries out its responsibilities as agreed in the contract. Transaction costs occur for both the buyer and the seller and they are very significant, ranging from a few percent to more than 10 percent of the total costs of operations (Merkert et al., 2012; Pearson et al., 2014). According to the TCE framework, three central variables: uncertainty, asset specificity, and frequency of transactions influence the choice between and efficiency of alternative governance approaches. Uncertainty, which closely relates to the concept of risk in project management literature (Macmillan, 2000), refers to lack of knowledge concerning how the business environment will develop as well as lack of knowledge concerning the behavior of actors in this environment. The more the uncertainty, the more complex mechanisms should be put in place to protect from it. As an example, a subcontractor may try to protect from the possibility of material costs raised during the project by including a contractual mechanism to transfer some or all of these price increases to the client. Zhang et  al. (2018) discuss how owners of construction projects purposefully utilize formal contracts to execute power and reduce opportunism from contractors. Asset specificity relates to resources or processes that cannot be easily put to use in other transactions. For example, a subcontractor doing demanding welding work may need to invest in bespoke equipment and/or training that is of little use for work carried out for other clients (Ahola et al., 2017). As such, asset specificity may give rise to lock-ins where the invisible hand of the market mechanism does not operate as theory would dictate. Frequency of transactions is also important. More elaborate – and costly – monitoring and coordination arrangements are often developed for contracts that are large in their scope and duration. Such complex and bespoke arrangements are, however, typically not feasible for repeated smaller transactions, such as buying routine scaffolding work for a construction project. As an example of the use of bespoke mechanisms, Demirel et al. (2022) discuss mechanisms used by private financiers to protect their assets in infrastructure project deliveries.

AGENCY THEORY AT concentrates on the nature and management of principal–agent relationships in which the principal and agent are bound by a contractual agreement (Jensen & Meckling, 1976). In such relationships the principal commissions the agent to act on its behalf by delegating decisionmaking authority to the agent. AT assumes that the principal and agent both seek self-interest and possess idiosyncratic goals, which may – and frequently do – conflict with the goals of the other party. As an example, it may be in the interest of the agent to maximize its personal gain at the cost of the principal. Typical principal–agent relationships discussed in the literature includes the relationships between the board of owners of a firm and the chief executive officer, as well as the relationship between investors and fund managers. Two main variables affecting how agency relationships are likely to be governed by the principal are goal incongruence and information asymmetry. The higher the goal incongruence – that is, the degree to which the goals of the principal and the agent conflict with each other – the more important it is for the principal to utilize governance mechanisms that motivate the agent to act in the best interest of its principal. Such mechanisms may include, for example, monetary or stock option arrangements paid based on agent performance, and penalizing arrangements that harm the agent in case its behavior notably diverges from the

34  Research handbook on the governance of projects

owner’s expectations. In case information asymmetry is high – that is, much information held by the agent is not available to the principal or vice versa – the principal is inclined to employ mechanisms specifically targeted at monitoring the behavior of the agent, such as detailed cost reporting procedures or systems. Principal–agent relationships are commonplace in project contexts. Ahola et al. (2021) concentrated on these relationships across the project life cycle, arguing that sales agents and external consultants represent typical agents used in the project marketing phase, subcontractors and specialized consultants are typical agents employed in the implementation phase, and maintenance partners and service providers are frequently utilized by principals during the operations phase of a project life cycle. Frequent challenges addressed by principals in managing their agents include: agents may serve the competitors of their principals and can potentially leak business critical information; agents may hide problems with quality in their work from principals; and agents serving the principals’ customers may lack motivation to maintain a high level of end-customer satisfaction (ibid.). To counter these problems, project-based firms (as principals of agents) may use specific governance mechanisms such as contractually limiting their agents from serving their competitors, requiring relation-specific investments from agents, and performing quality audits on agents’ premises. Nwajei et al. (2022) argue that AT plays a particularly important role in infrastructure projects implemented with relational project delivery models, such as project alliances, which build on the importance of aligning the goals of key project stakeholders.

STEWARDSHIP THEORY While both TCE and AT have their roots primarily in economics, ST draws mostly on research on psychology and sociology (Hirsch et al., 1987). ST concentrates primarily on identifying and understanding situations in which managers and other agents do not behave in an opportunistic self-interest-maximizing way but rather choose to act as stewards whose motives are aligned with those of their principals (Davis et al., 1997). Instead of emphasizing the propensity of economic actors to seek self-interest, ST posits that pro-organizational, collectivistic behaviors have more utility. Consequently, when a steward has to make a choice between their own gain and the benefits of the broader organization, it is assumed that the steward will choose the latter. Following this assumption, it is in the best interests of the principal to ensure sufficient autonomy of the steward so that it is able to serve the principal to its full potential. In short, according to ST, instead of establishing safeguards and monitoring practices to limit the behavior of the agent, the principal maximizes its utility by empowering the steward to act to the benefit of everyone, the steward, the principal, and society as a whole. In a project setting, individuals as well as organizations may assume the role of a steward. A project manager working for a project-based firm may be highly committed to their employer and prioritize the long-term business benefits of the project-based firm over the short-term cost, scope, and time objectives established for the project, even though these objectives are frequently used for assessing the performance of the project manager (Toivonen & Toivonen, 2014). Similarly, a subcontractor firm working on a project may choose to make significant investments in resources and capabilities that cannot become profitable during the course of a single project, because it is motivated by working for the “good of the shared project” as well as being motivated by the prospect of working together with the same client in subsequent

Classic perspectives on project governance  35

projects. In addition to delivery projects, working together as an inter-organizational team is also vital in project marketing, as the customer expects to know the identities of all organizational actors contributing to the project with a major role (Ahola et al., 2013). It is rather easy to argue that ST conflicts with much of the earlier project research that has characterized project-based industries such as the construction industry as adversarial (Kadefors, 2004) and highlighted the culture of filing claims to maximize own benefits, particularly within the project-based construction industry (Rooke & Fellows, 2003). Indeed, few would disagree that problems and disputes of various intensity between the involved actors are commonplace in many large projects. However, a significant stream of recent project research has also paid considerable attention to relational project delivery models such as project alliances, project partnering, and integrated project delivery (e.g. Lahdenperä, 2012). In these kinds of delivery models, a central purpose of the project organization and the contractual agreements between the involved organizations is to ensure that they all work toward a shared goal, and problems that – inevitably – arise during project implementation are problems shared by all actors, instead of being outsourced to others via shady business practices and unfair and one-sided contractual arrangements. Specific governance mechanisms mentioned in the literature include, for example, multilateral contracting, gain- and pain-sharing arrangements, team-building workshops, and cross-organizational problem-solving arrangements (Lahdenperä, 2012; Kujala et al., 2020). It is important to highlight that relational mechanisms emphasized in relational governance arrangements are insufficient to fully tackle opportunistic behavior found in many projects, but that complementary formal mechanisms are also needed (Galvin et al., 2021). Lieu et al. (2022) have also suggested that boards of complex public–private projects should be broadened and strengthened as this would possibly support the internal organizational governmentality of the project.

DISCUSSION Literature on project governance has highlighted that no governance structure is superior to another as such. Instead, it should be tailored to align with the characteristics of each project and its specific context (Artto & Kujala, 2008; Ruuska et al., 2011). For example, where the project owner is a so-called “strong owner,” (Winch & Leiringer, 2016), i.e., has strong capabilities, for example in engineering and project management, a governance structure in which the owner assumes a coordinative role is likely to be effective whereas in a situation in which the owner lacks such capabilities, coordination of the project is best outsourced to a complementary partner with strong integrative capabilities (Davies et al., 2007). Also, when the technical complexity and novelty of the project deliverable are high, governance mechanisms emphasizing inter-organizational collaboration are likely to be more appropriate than those emphasizing lowest possible costs, such as encouraging suppliers to compete based on lowest price alone. As an example of how the project context may influence the process of tailoring the governance structure, let’s consider the availability of skilled subcontractors in the marketplace. Where high-level expertise is abundantly available for the purposes of the project, the need to resort to quality assurance practices such as supplier auditing is reduced, and where available suppliers are lacking such expertise, the project owner may need to establish bespoke practices for supplier certification and training so that the project may proceed without interruptions related to supplier expertise.

36  Research handbook on the governance of projects

In addition to project-specific and context-specific characteristics that have been discussed in earlier literature on project governance, this chapter draws our attention toward a third perspective; that is, how the context and the underlying assumptions of the individual decision makers representing various organizations working in the project align with those of the three theories discussed above. While their organizational-level decision-making and individuallevel decision-making are different (yet strongly related), project-related decision-making is, to a considerable extent, centered on a handful of powerful individuals, such as the project manager, the project steering group chairperson, etc. As this is the case, scrutinizing beliefs and motives influencing individual-level decision-making is arguably warranted. The contextual elements and the underlying assumptions discussed in the following are: ● ● ● ●

Beliefs and attitudes of key decision makers involved in the project organization National, industry-level, and organizational cultures Shadow of the past, i.e., the shared history of involved project actors Organizational and technical complexity of the project.

Beliefs and attitudes of central decision makers working on a project have a profound influence on its management. From a project governance perspective, a central question is how individuals responsible for subcontracting arrangements, monitoring of suppliers, and coordination of work across organizational boundaries expect people to make decisions and behave in the project. If a shared underlying assumption is that everyone working for the project is prone to opportunistic behavior, it would be rather illogical to invest a considerable amount of time and resources into relational governance mechanisms promoting open information sharing and problem-solving across organizational boundaries. Indeed, it would be more consistent with these beliefs to ensure that carefully drafted contractual safeguards, such as penalties for quality problems and failures to meet the agreed schedule are in place. To continue, monitoring of project progress should be optimized toward detecting problems and finding out who is foremost responsible for them. But contrary to the example above, key decision makers can also have a more trustful view of individuals and organizations (as they are inherently social structures composed of and by individuals). Many do believe that individuals are most productive and innovative when they are trusted and provided with sufficient autonomy to make decisions. And when trusted, people often behave in a trustworthy manner. These beliefs are likely further strengthened if key decision-makers know many representatives of suppliers on a personal level, and have not encountered any evidence of distrustful or opportunistic behavior from them in the past. If this is the case, drafting very detailed contracts with hard in-built sanctions may be considered an indication of distrust, and as such is likely to function as a mechanism to reduce motivation of individuals to perform at their best. Personal-level beliefs are strongly related to organizational, industry, and national-level cultures. Organizations – including project-based firms – differ like night and day regarding their approaches to motivating, monitoring, and rewarding their employees. Industry-wide culture has also been an extensively discussed theme in project research. As an example, the culture of the construction industry has been criticized by many as opportunistic and even adversarial (Kadefors, 2004). However, more recent research has also provided examples of construction projects involving a shared best-for-the-project culture (e.g., Davies et al., 2009). At a national level, highly individualistic cultures such as the US and the UK could potentially promote views that everyone is foremost responsible for their own success and not that

Classic perspectives on project governance  37

of their employer – and even less so that of the project they are currently working for. This is, however, far from certain as the presence of behavioral differences that would be explained by national culture were not supported by Winch et al.’s (1997) study of the Transmanche-Link project involving France and the UK. Thus, at a highly abstract level, the underlying beliefs of TCE and AT are somewhat more aligned with beliefs generally held in individualistic cultures whereas the central tenets of ST are more in line with belief systems of collectivistic cultures. It has been argued that “no project is an island” (Engwall, 2003), and this important statement has implications for governance approaches used in projects as well. Experiences of past collaboration influence behavior today, as do also actors’ expectations of potential future collaboration. The prisoner’s dilemma, which has been widely analyzed in game theory and applied in many areas of science including, for example, economics, also has relevance for project governance. The basic idea in the prisoner’s dilemma is that when two parties collaborate, the total utility is maximized. However, when one actor betrays the other, the betraying actor may benefit at the cost of the betrayed actor. As earlier project research has shown that project-based firms often work with each other from one project to the next, this situation can be considered as an iterated prisoner’s dilemma in which the game is played for several rounds. In practice, this means that if the experiences of all actors of working together have been positive, the likelihood of betrayal (opportunistic behavior) will decrease, but where one or more actors resort to opportunistic behavior during a project, it is likely that the other actors will also resort to such actions in future projects. The shadow of the future – that is, the expectation of future collaboration – is also important here. If all project participants knew that they would not be working with each other ever again, actors would not have the opportunity to “punish” others for opportunistic behavior. From a project governance perspective, a manager whose belief system is more in line with TCE and AT assumptions would look at the situation as a calculus-based game, in which opportunistic behavior is one natural move that actors may select, whereas a manager who thinks more in line with ST would emphasize the fact that total utility is maximized when everybody collaborates openly, and thus individuals and firms have a natural tendency to prioritize cooperative behaviors. These are very different approaches to “playing the game.” Organizational and technical complexity of the project are important antecedents for the project governance structure, as the needs for coordinating and monitoring work vary considerably across projects. For example, projects established to produce relatively simple outcomes, such as standardized apartment buildings, may involve the main contractor and just a handful of subcontractors in clearly assigned roles (such as electrical installations, tiling, painting). In these kinds of projects of relatively low organizational and technical complexity, there is little need for establishing elaborate governance mechanisms that support the autonomy, creative problem-solving behavior, and innovativeness of involved actors. Instead, contracts are typically relatively simple and lump-sum based. In contrast, when the project deliverable is highly unique and inherently difficult to build, such as the construction of a new high-speed train system in a historical city center, the project organization typically consists of a relatively large network of actors. In these kinds of settings, a key requirement for the project governance structure is to enable these actors to work seamlessly together for the benefit of the project, developing innovative designs, and solving problems in cross-organizational teams as they arise. It is somewhat likely that lump-sum contracts and the traditional market-based logic inherent in TCE do not work effectively here. Instead, governance mechanisms such as co-location spaces, cross-functional problem-solving arrangements, and project

38  Research handbook on the governance of projects

culture-building workshops are much more likely to be effective. In addition, the risks and incentives of central project actors may be aligned and connected via project alliance agreements, discussed further below. What unites TCE, AT, and ST is that they all primarily focus on dyadic arrangements between a buyer and a seller, or a principal and an agent. An inter-organizational project can be conceived of as a nexus of multiple transactions (Winch, 2006). In large projects, the number of contracts can be dozens or even hundreds. The problem here, in regard to the three aforementioned theories is that the theories do not direct attention toward the potential interrelatedness of contractual arrangements. As an example, we can consider a building project in which a second-tier subcontractor has ordered materials needed to complete its tasks. Let’s further assume that these materials arrive significantly later than agreed between the secondtier subcontractor and the materials supplier. As a consequence, the second-tier subcontractor will not be able to complete its task and – depending on what is stipulated in the contract – may have to pay compensation to its client, the first-tier subcontractor. But the problem does not necessarily stop here, instead the first-tier subcontractor’s progress may also be hindered, forcing it to pay compensation to the main contractor, which again may need to pay compensation to its client, and so on. The practical implication of all of this is that the contractual arrangements in projects are not independent but interdependent and that the governance structure developed for the project can be considered to be an aggregate of all these formal contracts, plus other noncontractual mechanisms – such as trust and open sharing of information about problems hindering task execution and joint problem-solving mechanisms – that may be in place between involved actors. Indeed, a significant problem hindering the productivity of project organizing is that many if not most of the contracts that are formed today are developed as if they were independent of other contracts. Instead of carefully considering this interdependence, various risk reservations are often made to counter possible negative effects resulting from the undesired behavior and less-than-expected performance of other actors. Multilateral alliance agreements make a notable exception to this rule. In multilateral project contracts, the key actors responsible for the project all sign a single contract which sets the shared rules for behavior in the project, but also ensures that either all actors will make a profit from the project, or all actors will make a loss from the project (Lahdenperä, 2012). As such, perhaps the most important function of multilateral contracting – from the perspective of project governance – is to ensure that the interests of the key actors in a project are strongly aligned. Multilateral contracting is, however, not without its own set of problems. Firstly, multilateral contracts are more complex, time consuming, and costly to develop. In addition, due to the risk of involving a poor-performing partner in the project alliance, the selection of parties needs to be made extremely carefully. Table 3.1 summarizes the main implications of the three classic theories for project governance.

CONCLUSIONS While this chapter focuses on project governance in inter-organizational projects, TCE, AT, and ST do have implications for governance of intra-organizational projects as well. Regarding this stream of literature, TCE highlights the importance of transaction costs internal to a firm. For example, the costs of monitoring the progress of several projects carried out at the same time, and establishing safeguards to protect the firm from potential malfeasance from project

Classic perspectives on project governance  39

Table 3.1  Implications of classic governance theories for project governance Transaction cost economics Agency theory

Stewardship theory

Selection of most efficient governance form

Goal alignment between principal and agent

Supporting agents to promote their performance and personal growth

Assumptions concerning Actors seek self-interest, actor motives actors may be prone to opportunistic behavior, bounded rationality

Actors seek selfinterest, bounded rationality, risk aversion

Actors are trustworthy and act as responsible stewards of assets they control

Main variables

Uncertainty, asset specificity, frequency of transactions

Outcome uncertainty, information available

Agent motivation, trust, organizational and national culture

Key considerations

Make-or-buy decisions

How to motivate and control agents

How to allow agents to perform at their best

Establishment of projectspecific governance structures is one form of asset specificity

Output-based and behavior-based mechanisms may be used to align agent interests with those of the principal

Agents should have high autonomy

Monitoring of other firms in the project is difficult and costly

Lump-sum contracts, while cost-efficient to establish, may motivate the agent to reduce quality at the cost of the principal

Limited need for monitoring, as agents are collectively motivated

Contractual and other safeguards should be in place to control actor behavior

Alliance agreements, while costly to establish, may be used to align interests and share risks related to the project

No real need for safeguarding as agents can be trusted

Governance of projects incurs significant transaction costs that need to be understood (e.g., involvement and coordination across multiple units)

There may be conflicts between the goals of individual project managers and goals of the firm

Project managers should have a major role (possibly chairperson) in project steering group

Not relevant

Possible

The norm

Control

Involvement

General Underlying goal

Implications for governance internal to a project

Implications for governance external to a project

Collective/multi-party contracting

Principal orientation in Efficiency maximization project governance

40  Research handbook on the governance of projects

managers and other team members, are highly significant, and in practice very often underestimated. AT and ST on the other hand direct our attention toward the beliefs and attitudes of the senior management of a project-based firm toward its project managers. Are the project managers – in line with AT thinking – considered primarily as self-interest seekers that may hide information and resort to opportunistic behaviors, or is the expectation, more closely following ST logic, that the project managers are likely to work primarily toward the benefit of the project and the parent organization. We observe that ST logic is currently in conflict with many project management standards and methodologies which build on the assumption that task and control should be divided. Indeed, the attitudes and often implicit beliefs guiding us have very strong implications concerning the specific governance mechanisms used, and also how the individuals working in projects perceive their employer. Is the employer behaving like an enabler or like a distrustful controller?

REFERENCES Ahola, T., Ruuska, I., Artto, K., & Kujala, J. (2014). What is project governance and what are its origins? International Journal of Project Management, 32(8), 1321–1332. Ahola, T., Ståhle, M., & Martinsuo, M. (2021). Agency relationships of project-based firms. International Journal of Project Management, 39(7), 713–725. Ahola, T., Vuori, M., & Viitamo, E. (2017). Sharing the burden of integration: An activity-based view to integrated solutions provisioning. International Journal of Project Management, 35(6), 1006–1021. Artto, K., & Kujala, J. (2008). Project business as a research field. International Journal of Managing Projects in Business, 1(4), 469–497. Coase, R. H. (1937). The nature of the firm. Economica, 4(16), 386–405. Davies, A., Brady, T., & Hobday, M. (2007). Organizing for solutions: Systems seller vs. systems integrator. Industrial Marketing Management, 36(2), 183–193. Davies, A., Gann, D., & Douglas, T. (2009). Innovation in megaprojects: Systems integration at London Heathrow Terminal 5. California Management Review, 51(2), 101–125. Davis, J. H., Schoorman, F. D., & Donaldson, L. (1997). Toward a stewardship theory of management. Academy of Management Review, 22(1), 20. Demirel, H. C., Leendertse, W., & Volker, L. (2022). Mechanisms for protecting returns on private investments in public infrastructure projects. International Journal of Project Management, 40(3), 155–166. Eccles, R. G. (1981). The quasifirm in the construction industry. Journal of Economic Behavior & Organization, 2(4), 335–357. Engwall, M. (2003). No project is an island: Linking projects to history and context. Research Policy, 32(5), 789–808. Galvin, P., Tywoniak, S., & Sutherland, J. (2021). Collaboration and opportunism in megaproject alliance contracts: The interplay between governance, trust and culture. International Journal of Project Management, 39(4), 394–405. Hirsch, P., Michaels, S., & Friedman, R. (1987). “Dirty hands” versus “clean models”: Is sociology in danger of being seduced by economics? Theory and Society, 16(3), 317–336. Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. Kadefors, A. (2004). Trust in project relationships—Inside the black box. International Journal of Project Management, 22(3), 175–182. Kujala, J., Aaltonen, K., Gotcheva, N., & Lahdenperä, P. (2020). Dimensions of governance in interorganizational project networks. International Journal of Managing Projects in Business, 14(3), 625–651. Lahdenperä, P. (2012). Making sense of the multi-party contractual arrangements of project partnering, project alliancing and integrated project delivery. Construction Management and Economics, 30(1), 57–79.

Classic perspectives on project governance  41

Macmillan, F. (2000). Risk, uncertainty and investment decision-making in the upstream oil and gas industry. University of Aberdeen (United Kingdom). Merkert, R., Smith, A. S., & Nash, C. A. (2012). The measurement of transaction costs—Evidence from European railways. Journal of Transport Economics and Policy (JTEP), 46(3), 349–365. Nwajei, U., Bolviken, T., & Hellström, M. (2022). Overcoming the principal-agent problem: The need for alignment of tools and methods in collaborative project delivery. International Journal of Project Management, 40, 750–762. Pearson, T. R., Brown, S., Sohngen, B., Henman, J., & Ohrel, S. (2014). Transaction costs for carbon sequestration projects in the tropical forest sector. Mitigation and Adaptation Strategies for Global Change, 19(8), 1209–1222. Rooke, J., Seymour, D., & Fellows, R. (2003). The claims culture: A taxonomy of attitudes in the industry. Construction Management & Economics, 21(2), 167–174. Ruuska, I., Ahola, T., Artto, K., Locatelli, G., & Mancini, M. (2011). A new governance approach for multi-firm projects: Lessons from Olkiluoto 3 and Flamanville 3 nuclear power plant projects. International Journal of Project Management, 29(6), 647–660. Toivonen, A., & Toivonen, P. U. (2014). The transformative effect of top management governance choices on project team identity and relationship with the organization—An agency and stewardship approach. International Journal of Project Management, 32(8), 1358–1370. Williamson, O. E. (1975). Markets and hierarchies: Analysis and antitrust implications. The Free Press. Williamson, O. E. (1985). The economic institutions of capitalism: Firms, markets, relational contracting. The Free Press. Winch, G. M. (2006). The governance of project coalitions: Towards a research agenda. In D. Lowe & R. Leiringer (Eds.), Commercial management of projects: Defining the discipline (pp. 323–324). Blackwell Publishing Ltd. Winch, G. M. (2014). Three domains of project organising. International Journal of Project Management, 32(5), 721–731. Winch, G., & Leiringer, R. (2016). Owner project capabilities for infrastructure development: A review and development of the “strong owner” concept. International Journal of Project Management, 34(2), 271–281. Winch, G., Millar, C., & Clifton, N. (1997). Culture and organization: The case of transmanche‑link. British Journal of Management, 8(3), 237–249. Zhang, S., Fu, Y., & Kang, F. (2018). How to foster contractors’ cooperative behavior in the Chinese construction industry: Direct and interaction effects of power and contract. International Journal of Project Management, 36(7), 940–953.

4. Shareholder and stakeholder theory in governance Ralf Müller

INTRODUCTION This chapter presents two popular corporate-level governance theories: shareholder and stakeholder. By addressing the corporate level, they describe the underlying assumptions about the corporation’s raison d’être (reason or purpose for existence) and the nature of the corporation as an entity in wider society. Hence, shareholder and stakeholder theory conceptualizes the underlying philosophy governing a corporation’s decision-making and behavior and how corporations’ projects and benefits are identified, planned, and executed. These theories differ from the agency and stewardship theories (see Chapter 3), which describe the dyadic relationship between two entities, such as between people (e.g., project owner and project manager) or organizations (e.g., the project and its project steering committee). Before explaining corporate governance theories, we should define a corporation and its governance. A myriad of definitions exists for both, reflecting the wide variety of perspectives on the concepts. A corporation is generally “an organization or a group of organizations that is recognized by law as a single unit” (Oxford Dictionary, 2022). Corporations are firms owned by their shareholders, with an elected board of directors overseeing and directing the firm’s activities. This structure separates ownership and control “to separate the ratification and monitoring of decisions from initiation and implementation of these decisions” (Fama & Jensen, 1983, p. 302). With this, the firm’s members are prevented from maximizing their own utility because “important decision agents do not bear a substantial share of the wealth effects of their decisions” (Fama & Jensen, 1983, p. 301). This principle is crucial, as violations of it have had severe consequences in the past. Examples of consequences include the financial crisis in 2008, where insufficient control of unscrupulous investment banking and insurance practices resulted in a global economic downturn (Bell & Hindmoor, 2015). A further characteristic of corporations is the limited liability of its owners in respect of debts and lawsuits, compared to the full liability of the firm for these and other claims. Hence, the losses of owners are limited to their investment in shares. In other words, corporations provide opportunities for investors to invest money without the risk of losing everything they own. The third characteristic of corporations is the permanent nature of the organization and the ability of corporations to create an unlimited number of subsidiaries (Annas, 2010), which is especially interesting in international business to cope with different jurisdictions and tax systems. Figure 4.1 depicts the principle structure of corporations. The owners are the shareholders, interacting with the board of directors (BoD). This board is headed by a chairperson and staffed with executive members who are typically directors of the firm, non-executive members who are typically managers external to the firm, and a chief executive officer (CEO) who oversees the work of the company managers. The BoD is supported by several 42

Shareholder and stakeholder theory in governance  43

Figure 4.1  Principle structure of the corporation committees, such as those for developing the corporation’s ethical standards, remuneration policies, or criteria for hiring and remunerating BoD members. Some of the main deliverables of the BoD are the corporate strategy and the policies for implementing this strategy. National differences exist in the structure of the BoD, with countries like the USA allowing the chairperson and CEO roles to be executed by the same person, while other countries, like Germany or the Netherlands, require the roles to be filled by different persons. The latter led to a split of the BoD into a supervisory board and an executive board (indicated in gray). The supervisory board is headed by the chairperson and oversees the work of the executive board, which, in turn, is headed by the CEO and oversees the work of the managers in the corporation (Clarke, 2023). In an earlier publication, Rodney Turner and I described the similarity of this structure with project settings, where the project manager often takes on a role similar to a CEO in a corporation. By reporting to the project steering committee (compared to the supervisory board in a corporation) and overseeing the work of the sub-project managers (compared to the managers in a corporation), the project manager ensures the proper management of the project (the production function of the corporation) (Turner & Müller, 2003). Similar to corporations, the project represents the agency to which resources are assigned to accomplish change or production. Like the CEO, the project manager emphasizes setting objectives and managing and leading human resources over executing the work. With the project manager executing the project management task, a further control institution is needed to separate task execution and control. This control is done by the steering committee, which, in turn, is controlled by the owner of the project (Turner & Müller, 2003). The similarities in governance structures are mirrored in the similarities of corporate and project governance definitions. Many authors paraphrase the long-standing definition of governance by the Organisation for Economic Co-operation and Development, to make it suitable for project governance, like the one in the Introduction chapter: The governance of an organization provides the structure, processes, policies, and value system through which the objectives of the organization are set, and the means of attaining those objectives

44  Research handbook on the governance of projects

and of monitoring performance are determined in the best interest of all stakeholders and the corporation itself. (Turner, 2022, p. 9)

What has this to do with shareholder and stakeholder theory? The answer is that despite the apparently similar structures and definitions of corporate and project governance, significantly different objectives can be pursued within these structures. This includes either primarily serving the shareholders of the company or, alternatively, primarily serving the stakeholders of the organization. Hence, governance provides the framework that allows pursuing very different aims and objectives with the governed object. Examples are given below.

SHAREHOLDER ORIENTATION AND THEORY A shareholder orientation in governance indicates a primarily financial perspective toward the role of the corporation in society, based on the assumption that “the price of a share of stock today fully reflects the market’s best estimate of the value of all future profits and growth that will accrue to that company” (Blair, 2004, p. 174). Historically, corporate governance literature indicates that shareholder-oriented corporations are predominantly found in English-speaking countries subscribing to North American governance principles and the Chicago School of Law and Economics. Their orientation is supported by court decisions, such as those of the Michigan Supreme Court, which emphasizes that corporations should be organized and carried on for, and directors’ powers should be exercised primarily for, the profit of the stockholders (Allen, 1992). More recently, this was superseded during a Business Roundtable in August 2019, when 181 CEOs signed a Statement on the Purpose of the Corporation (2019), through which they committed to lead their companies in the future for the benefit of all stakeholders (Clarke, 2021). Parallel to this recent development is a traditionally stronger stakeholder orientation in Europe and Asia, which changed slightly in recent years toward acknowledging the significance of shareholder orientation, for example, because of its role in the progress toward globalization. However, despite this acknowledgment, European and Asian business leaders, governments, and regulators keep a strong stakeholder orientation by recognizing stakeholder value’s substance (Clarke, 2021). Supporters of shareholder orientation argue that the difficulty of managing a diverse set of stakeholder groups may lead to too much diversification and unclear priorities. The benefits of shareholder orientation arise from the simplicity of focusing managers’ attention on clearly defined goals and a “single bottom line” result. This narrow focus in terms of the responsibilities of firms in their wider social context is typically associated with quantitative objectives and performance measures, which de-emphasizes the more qualitative objectives, like social, relational, and ethical intentions, and the pursuance of corporate social responsibility (CSR) (Williams, 2018). Opponents to shareholder orientation claim that this narrow-minded approach is fatally flawed because of its focus on profit maximization rather than finding a balance between the financial interest of the shareholders and the interests of other stakeholders. They claim that this shareholder orientation has caused the development of numerous disadvantages, including unethical business practices and their related debacles, such as the Volkswagen emission debacle (a.k.a. Diesel Gate) along with those that caused the financial crises in recent decades

Shareholder and stakeholder theory in governance  45

(Brujil, 2022). Other opponents stress the irreconcilability of shareholder priority with the achievement of Sustainable Development Goals objectives. Shareholder theory proposes that maximizing shareholder value is the primary objective of a corporation’s management, accomplished by maximizing the share price, dividends, and, finally, shareholders’ return on investment. The mechanism to accomplish this is the corporate value system, which prioritizes shareholders’ interests over those of other stakeholders because they are the ultimate owners of the corporation’s assets. This value governs all decisions, policies, and actions by the firm (Friedman, 1970; O’Connell & Ward, 2020).

STAKEHOLDER ORIENTATION AND THEORY In his classic work, Freeman (1984, p. 46) defines stakeholders as “any group or individual who can affect or is affected by the achievement of a corporation’s objectives.” Since then, several authors have refined this definition by acknowledging the priority differences of different stakeholder groups, given their particular locus or relationship with the firm in question. Such as the distinction between a company’s internal, external, and distal stakeholders made by Sirgy (2002). Here internal relates to departments and individuals within the firm, external to those outside the firm, and distal to stakeholders indirectly influencing the firm’s survival and/ or growth through their impact on external groups, such as environmental advocacy groups, government agencies, labor units, etc. Sirgy (p.159) concludes that an organization’s survival and growth depend on “the extent to which the managers of internal stakeholders meet the needs of external stakeholders, coordinate with one another, and manage the corporate image in the eyes and minds of distal groups.” Hence, different stakeholder groups should be treated differently and have a differentiated influence on the organization. Stakeholder-oriented organizations focus on meeting the interests of a broader set of stakeholder groups than shareholder-oriented organizations. By doing that, stakeholder-oriented organizations broaden the focus from predominantly financial performance to include social performance through understanding, respecting, and trying to meet the needs of those groups with a stake in the organization’s activities, performance, and outcomes. Jones et al. (2007) see the involvement of stakeholders in company decisions as an expression of corporate ethics. Using a continuum from shareholder to stakeholder orientation, they distinguish between two moralities underlying these ethics: (a) market morality, that is, self-interested firms, and (b) traditional morality, that is, firms having a sense of obligation and duty, honesty and respect, fairness and equity, etc. Each of these two groups develops a particular stakeholder culture that regulates the strength of the stakeholder influence in the organization. Stakeholder culture is “the beliefs, values, and practices that have evolved for solving stakeholder-related problems and otherwise managing relationships with stakeholders” (p.142). They distinguish between cultures with no concern for stakeholders, those with concern for shareholders but no other stakeholders, and those with concern for all stakeholders. By considerably weighing moral considerations against economic benefits, the latter type aims to treat all stakeholders with honor and respect. Hence, taking the interests of their stakeholders into account is an ethical requirement for these organizations, even if this does not appear to be in their own interest. Within this group of stakeholder-oriented firms, they distinguish between moralist cultures, which have “concern for all stakeholders and adherence to principles regardless of economic temptations to discard them” except for situations

46  Research handbook on the governance of projects

that threaten company survival, and altruist cultures, where “[m]oral principles trump all other decision-making criteria, even when firm survival is at stake” (p.149). Stakeholder orientation increases the importance of a firm’s external environment for strategic decision-making. In recent years, stakeholder orientation has become essential for addressing contemporary concerns like CSR, as it impacts the social embeddedness of firms in their external environment. Deeper embeddedness enables better detection of customer and other stakeholders’ needs and desires and identification of future trends and innovations for better economic and social performance (Heblich, 2010). Recent trends in addressing, for example, the Grand Challenges through environment, social, and governance reporting or other global issues amplified the importance of stakeholder orientation (see also Chapter 21 of this volume). Up to the point that some writers argue that stakeholder orientation will be the dominating orientation in the future (Bessire et al., 2010). Stakeholder theory conceptualizes the above stakeholder-oriented behavior of firms, implying that stakeholders should be business beneficiaries (in addition to shareholders) and possess serious decision-making power (Stieb, 2009). Donaldson and Preston (1995) showed that stakeholder theory serves three purposes. It is descriptive, instrumental, and normative. Descriptive means it outlines that organizations have a large variety of stakeholders in addition to shareholders, which all shall be satisfied, albeit not to the same extent. Moreover, organizations must balance their own needs with the often conflicting needs of the stakeholder groups. The instrumental view refers to research showing that organizations practicing stakeholder orientation, ceteris paribus, are more successful in terms of profitability, stability, growth, etc. than those who do not. Research in project management supported this claim by showing a highly significant correlation between stakeholder orientation in project governance (as opposed to shareholder orientation) and project success. Success was hereby measured in terms of 20 success dimensions, covering project efficiency, organizational benefits, project impact, future potential, and stakeholder satisfaction (Joslin & Müller, 2016). The normative view proposes that stakeholders have legitimate interests in essential parts of the organization and should be recognized for that, irrespective of the corresponding interest of the organization. Hence, stakeholder interests should be valid for their own sake and not because of a possible congruency with the interests of other stakeholders or the organization (Donaldson & Preston, 1995). Eskerod and Huemann’s (2013) work in the context of project management distinguishes between “management of stakeholders” and “management for stakeholders.” The former perspective sees stakeholders as resource providers, deciding on their own whether to make contributions to the project or not. The latter and more traditional perspective views stakeholders as individuals or groups with help or harm potential, leading to the well-known stakeholder classification systems in terms of their power and impact, and the related management approaches for these groups. Despite the emerging popularity, especially in the context of contemporary issues, such as CSR; environment, social, and governance; or Grand Challenges, the stakeholder theory is not without criticism. Those who criticize it often point to the vagueness of defining clear borderlines for the theory’s concepts (Donaldson & Preston, 1995). This includes the difficulty in defining decision criteria, for example, in identifying who is and who is not a stakeholder, the priority of stakeholder groups, the criticality and legitimacy of their needs, and so on (e.g., Freeman, 2004). Along these lines, skepticism developed regarding the possibility of operationalizing its concepts with scientific rigor (Key, 1999). Other discussions include the

Shareholder and stakeholder theory in governance  47

question of whether stakeholder orientation is a means to an end or an end in it itself, which refers back to the distinction between managing of or for stakeholders (Goyal, 2022).

IMPLICATIONS FOR PROJECT, PROGRAMS, AND PORTFOLIOS The implications of shareholder and stakeholder orientation of the firm are in setting managers’ and project team members’ expectation in terms of what corporate governance expects them to strive for. This is first and foremost done through objectives and incentive systems, but also through the corporate culture and its value system. The BoD in a corporation with a strict shareholder orientation will expect all managers and employees to prioritize shareholders’ financial return on investment over the needs and desires of other stakeholder groups. Hence, social embeddedness might be of lesser importance. Contrarily, a stakeholder-oriented firm might sacrifice some of its potential monetary gains to improve its relationship with stakeholder groups and society. The implications for portfolio management are obvious. Evaluation and selection criteria for possible projects will primarily be financially driven in shareholder-oriented firms and balance financial and societal criteria in stakeholder-oriented firms. This has implications for the programs and projects of the portfolio, because it may restrict access to scarce resources or lead to project termination if financial objectives are compromised in shareholder-oriented organizations. The shareholder versus stakeholder orientation determines the project governance paradigm (Müller & Lecoeuvre, 2014). This paradigm combines the priority for shareholder or stakeholder orientation and the preferred control approach executed in this portfolio. The four resulting governance paradigms are explained in Chapter 27 of this volume. Depending on the preferences communicated through this paradigm, projects are expected either to contribute predominantly to shareholder returns (i.e., shareholder-oriented firms) or balance the many different needs of the stakeholder groups and the organization (i.e., stakeholder-oriented firms). However, firms are rarely only shareholder or only stakeholder oriented. Reality shows that many, especially larger organizations, prefer one orientation without excluding the other. These organizations often clearly prefer one orientation at the top of their hierarchy (i.e., corporate-level governance) but then tailor their preferences to the specific circumstances of their business units or departments at lower hierarchical levels. Examples include global stock-traded corporations, which indicate a clear shareholder orientation in their strategy, and enforce it in, for example, maintenance departments by prioritizing financial accomplishments. At the same time, projects in their marketing and development departments should take into account the requirements of their different stakeholder groups for designing and developing new products and services. Hence, some organizations use an ambidextrous approach to maximize the accomplishment of their strategic objectives. This ambidexterity implies a situation-contingent use of shareholder versus stakeholder orientation. Some organizations apply a stakeholder orientation as long as their performance is within planned limits and fall toward shareholder orientation when certain performance thresholds get compromised (see Müller & Kvalnes, 2017). These are indicators of an underlying preference for shareholder orientation, as discussed in the section on underlying moralities. In other words, some corporations show a face of stakeholder orientation to their external

48  Research handbook on the governance of projects

environment. However, their true face emerges when things get tough and their priority shifts to their shareholders. A bit of a rough wind can be helpful to identify the real orientation of management, so that project, program, and portfolio managers know what is expected from them behind all the glossy brochures and marketing buzzwords.

CONCLUDING REMARKS This chapter has outlined two of the most essential governance approaches at the corporate level: shareholder and stakeholder. The chapter described the underlying theories and moralities, as well as the behavior of the organization applying these approaches. The chapter went on to explain the impact of these approaches on project, program, and portfolio level decisionmaking through different governance paradigms. This was followed by a discussion of the variety of implementations of these approaches and their underlying theories.

REFERENCES Allen, W. T. (1992). Our schizophrenic conception of the business corporation. Cardozo Law Review, 14(2), 261–281. Annas, G. J. (2010). Corporations, profits, and public health. The Lancet, 376(9741), 583–584. Bell, S., & Hindmoor, A. (2015). Masters of the universe but slaves of the market: Bankers and the great financial meltdown. British Journal of Politics and International Relations, 17(1), 1–22. https://doi​ .org​/10​.1111​/1467​-856X​.12044 Bessire, D., Chatelin, C., & Onnée, S. (2010). What is good corporate governance? In G. Arras & D. Crowther (Eds.), A handbook of corporate governance and social responsibility (pp. 37–59). Gower Publishing. Blair, M. M. (2004). Ownership and control: Rethinking corporate governance for the twenty-first century. In T. Clarke (Ed.), Theories of corporate governance: The philosophical foundations of corporate governance (pp. 174–188). Routledge. Brujil, G. (2022). The value of stakeholder theory: The Volkswagen emission debacle. Journal of Insurance and Financial Management, 5(2), 1–22. Clarke, T. (2021). Corporate governance. Cambridge University Press. Clarke, T. (2023). Comparative corporate governance: A research overview. Routledge. Donaldson, T., & Preston, L. E. (1995). The stakeholder theory of the corporation: Concepts, evidence, and implications. Academy of Management Review, 20(1), 65–91. Eskerod, P., & Huemann, M. (2013). Sustainable development and project stakeholder management: what standards say. International Journal of Managing Projects in Business, 6(1), 36–50. https://doi​ .org​/10​.1108​/17538371311291017 Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal of Law and Economics, 26(June). https://doi​.org​/10​.2139​/ssrn​.94034 Freeman, R. E. (2004). The stakeholder approach revisited. Zeitschrift Für Wirtschafts- Und Unternehmensethik, 5(3), 228–241. https://doi​.org​/10​.5771​/1439​-880x​-2004​-3​-228 Friedman, M. (1970, September 13). The social responsibility of businesses is to increase its profits. The New York Times Magazine. Retrieved October 9, 2013, from http://www​.colorado​.edu​/studentgroups​ /libertarians​/issues​/friedman​-soc​-resp​-business​.html Goyal, L. (2022). Stakeholder theory: Revisiting the origins. Journal of Public Affairs, 22(3). https://doi​ .org​/10​.1002​/pa​.2559 Heblich, S. (2010). Corporate social responsibility in the creation of shareholder value. In G. Arras & D. Crowther (Eds.), A handbook of corporate governance and social responsibility (pp. 489–508). Gower Publishing.

Shareholder and stakeholder theory in governance  49

Jones, T. M., Felps, W., & Bigley, G. A. (2007). Ethical theory and stakeholder-related decisions: The role of stakeholder culture. Academy of Management Review, 32(1), 137–155. https://doi​.org​/10​.5465​/ AMR​.2007​.23463924 Joslin, R., & Müller, R. (2016). The relationship between project governance and project success. International Journal of Project Management, 34(4). https://doi​.org​/10​.1016​/j​.ijproman​.2016​.01​.008 Key, S. (1999). Toward a new theory of the firm: A critique of stakeholder “theory”. Management Decision, 37(4), 317–328. https://doi​.org​/10​.1108​/00251749910269366 Müller, R., & Kvalnes, Ø. (2017). Project governance and project ethics. In R. Müller (Ed.), Governance and governmentality for projects: Enablers, practices and consequences (pp. 181–194). Routledge. Müller, R., & Lecoeuvre, L. (2014). Operationalizing governance categories of projects. International Journal of Project Management, 32(8). https://doi​.org​/10​.1016​/j​.ijproman​.2014​.04​.005 Müller, R., Zhai, L., & Wang, A. (2017). Governance and governmentality in projects: Profiles and relationships with success. International Journal of Project Management, 35(3), 378–392. O’Connell, M., & Ward, A. M. (2020). Shareholder theory/shareholder value. In S. Idowu, R. Schmidpeter, N. Capaldi, L. Zu, M. Del BAldo, & R. Abreu (Eds.), Encyclopedia of sustainable management. Springer. https://doi​.org​/10​.1007​/978​-3​- 030​- 02006-4 Oxford Dictionary. (2022). Corporation. Retrieved June 30, 2022, from https://www​.oxf​ordl​earn​ersd​icti​ onaries​.com ​/definition ​/english ​/corporation​?q​=corporation Sirgy, M. J. (2002). Measuring corporate performance by building on the stakeholders model of business ethics. Journal of Business Ethics, 35(3), 143–162. https://doi​.org​/10​.1023​/A​:1013856421897 Stieb, J. A. (2009). Assessing Freeman’s stakeholder theory. Journal of Business Ethics, 87(3), 401–414. https://doi​.org​/10​.1007​/s10551​- 008​-9928-4 Turner, J. R. (2022). Using principal–Steward contracting and scenario planning to manage megaprojects. Project Management Journal, 53(1), 8–16. https://doi​.org​/10​.1177​/87569728211061836 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. Williams, C. A. (2018). Corporate social responsibility and corporate governance. In J. Gordon & W. E. Ringe (Eds.), The Oxford handbook of corporate law and governance (pp. 634–678). Oxford University Press.

5. Systems theories and systems praxis Shankar Sankaran

INTRODUCTION A focus on the systems view came to prominence when biologist Ludwig von Bertalanffy (von Bertalanffy, 1950) proposed a general systems theory (GST) in the 1950s as a way of unifying science under one umbrella. This prompted management scholars to discuss its relevance to organizations (Katz & Kahn, 1966; Kast & Rosenzweig, 1972). The systems view is having a resurgence to address major global challenges that are highly interconnected, such as provision of secure and safe energy, climate change, and food security (Capra & Luisi, 2019). Although GST was a major step in proposing a theory of open systems in biology and physics, moving away from mechanistic and reductionist ways to understand complex phenomena, the emphasis on holism dates to Greek philosophers like Aristotle who wrote in his Metaphysics that “the whole is something beyond the parts” (Reeve, 2002). This chapter will discuss both the evolution of systems theories and the related methodologies and their relevance to projects and their governance. Systems Terminology Why is a system more than just a sum of its parts? Meadows (2008, p. 12) explains this by stating that a system “may exhibit adaptive, dynamic, goal-seeking, self-preserving, and sometimes evolutionary behaviour.” This is important in the context of projects, which are shaped during execution, steered by governance. While we are familiar with physical systems like a car, social systems like villages, and ecological systems like reefs, systems thinkers are more interested in a systemic view by considering: ● ● ●

the interrelationship between parts of a system; multiple perspectives; and boundaries.

Boundaries are important in systems thinking to decide what is of relevance to an investigation. Boundaries are recognizable in a physical system but with systems thinking the view depends on the context of interest. For example, when an organization wants to understand why projects are performing poorly it may want to look at all the projects as a whole or narrow down the investigation to a few that are facing major issues. The investigation would also be interested in examining interrelationships within a project or between projects. Within a project, conflicts could arise between teams that have different priorities. In the case of interrelated projects, it could be the allocation of resources that is causing friction. Multiple perspectives are also important in projects when different stakeholders’ interests may need to be addressed. 50

Systems theories and systems praxis  51

Another term often used with systems is emergence. This clarifies the question: “Why is the whole more than a sum of its parts?” Emergence is a novel property that is not present in the parts but emerges as the parts are assembled. The familiar example is that of a bicycle that you can ride once its various parts are put together. Emergent properties are important too when teams work together collaboratively to deliver a task (or meet a purpose in the language of systems). Overview of Systems Theories We start our exploration of systems theories with GST. GST was conceived by von Bertalanffy (1968), a biologist, when he found that focusing on the “whole” to study organisms and their relationship to their environment was a better way to understand them than reductionist approaches. Von Bertalanffy distinguished between open and closed systems. A closed system has no exchange with its environment. An example is a pressure cooker. An open system, on the other hand, takes inputs from the environment, transforms them, and then returns them as outputs to the environment. A manufacturing firm is an example of an open system. Von Bertalanffy sought to expand GST beyond biology to “systems in general” (Hammond, 2003, p. 117), with a view to “unifying science” (ibid.). Von Bertalanffy also predicted that unlike closed systems, which could eventually decay, open systems remain stable by their exchanges with the environment. As an example, an organization which finds that its products are becoming obsolete by observing changes in the environment can redress the situation through changes in its strategy using resources in its environment. Ilya Prigogine (1955) used complexity mathematics to show how stable systems can arise from disordered systems applying his theory on dissipative structures. Leifer (1989) used the idea of dissipative structures to explain how organizations transform to survive. A dissipative structure strategy may be appropriate when an organization is pushed out of its capacity to maintain equilibrium (remain stable) when internal and external conditions become turbulent, and the organization is unable to cope. An example is when the chemical powerhouse Imperial Chemical Industries decided to break up in the 1990s as it became difficult to survive. A project is also an open system as it takes inputs from the environment (specifications or contracts) and transforms these into a product or service, to deliver outputs to be used by the environment. The author of this chapter was involved in a transformation project when a project organization he was leading faced tremendous cost pressures and he had to set up subsidiaries in developing countries and outsource work to these organizations to help the parent organization to cope (Sankaran, 2014). Kenneth Boulding, an economist, also helped to develop GST. His contribution to GST is the notion of systems hierarchy to analyze systems at different levels. He used the term “system of systems” to propose nine levels to study systems, starting from frameworks that organize theoretical knowledge in a field to transcendental systems to ask questions about the unknowable (Boulding, 1956). Boulding extended the importance of GST to social sciences in his later works. Odum (1983) contributed to extending GST to ecological systems by suggesting that ecosystems should be studied as systems of nature along with humans. The open systems concept advocated by GST is relevant to projects as they are affected by the environment and also affect the environment in which they are carried out, especially in infrastructure projects. Miller and Lessard (2001) explain how projects are often shaped by the forces present in their environment.

52  Research handbook on the governance of projects

Cybernetics Norbert Weiner (1948), who studied self-guided machines and their communication and control systems, contributed to system theories by introducing feedback, control, and patterns that are relevant to governance. The term cybernetics is derived from the Greek term kybernetes (or steersman), and the role of governance is to steer projects. Early pioneers in cybernetics included mathematicians such as John von Neumann, neuroscientists such as Warren McCulloch, and engineers such as Claude Shannon and Warren Weaver. Cybernetics also spread to humanities and social systems through the work of anthropologists such as Gregory Bateson (1972) and Margaret Mead (1968). Bateson developed a concept of the mind based on cybernetic principles investigating mental processes like learning, memory, and decision-making. Cybernetics later evolved into second-order cybernetics (von Foerster, 1979), which is the cybernetics of observing systems rather than observed systems (Ramage & Shipp, 2009). It still focused on feedback, control, and communication but from an observer’s point of view. Among second-order cybernetic scholars is Stafford Beer (1984), who applied it to management issues and developed the viable system model based on neuro-physiological concepts. The viable systems model has been adapted to governance of projects and programs using a viable governance model, which is discussed in Chapter 26 of this book. An important contribution to second-order cybernetics is by Humberto Maturana and Francesco Varela (1980) through their work on the biology of cognition and autopoiesis to explain self-organization. They tried to address the question: “What distinguishes the living from the non-living?” They suggested that living systems are autopoietic systems that could reproduce their elements recursively (Seidl, 2005, p. 25). Autopoiesis, from the Greek for “self-making” is based on “looking at a living organism in the totality of its mutual interactions” (Capra & Luisi, 2019, p. 130). It posits that while an organism interacts with its environment it also creates its own environment, which allows it to continue to exist. While Maturana and Varela’s concepts are complex, they can enhance our understanding by prompting us to think of a project as an organism that undergoes structural and behavioral changes by interacting with its environment to adapt and survive. Pemsel and Widén (2010) illustrate the application of autopoietic principles in understanding end users’ requirements in a project. Projects are often expected to respond to rapid changes and demands. This would require actively sensing the environment and interpreting and understanding these demands. Pemsel and Widén’s (2010) study of two organizations (public and private) found that while the external facing units of the organization gathered rich knowledge about current and future stakeholders it was not widely communicated to other parts of the organization to learn, innovate and create knowledge to change the organization or reproduce (reinvent) itself to meet the challenges of a “dynamic and ever-changing environment” (p. 128). Social Systems Fred Emery and Eric Trist from the Tavistock Institute (Emery & Trist, 1972) developed sociotechnical system theories building on the work of Kurt Lewin’s group dynamics and cybernetics (Ramage & Shipp, 2009). Their theories were developed while studying the introduction of new technology in organizations and its impact on people. They were specifically interested in understanding how multiskilled people can work together as a self-organizing

Systems theories and systems praxis  53

group to optimize social and technical systems. Their work is significant as they suggested that in turbulent environments work should be designed to be performed in cooperative ways and structured around networks. Agile project management does use self-organizing principles to cope with a fast-paced environment. Sociotechnical systems have had a resurgence due to rapid advances in technology that are also affecting how projects are managed. This has necessitated the need to take into account sociotechnical aspects of introducing technology in projects. Examples are the spread of building information modeling and robotics in construction, and the influence of artificial intelligence on projects and how they could impact project management and governance (Sackey et al., 2015; Kozarkiewicz, 2020). Niklas Luhmann (1995) developed social systems theories building upon the work of second-order cyberneticists and autopoiesis. Luhmann classified social systems into three subtypes – societies, organizations, and interactions. He postulated that meanings, the outcome of some communications, apply to the interaction of both social systems and individuals to distinguish between machines, organisms, social systems, and psychic systems (Ramage & Shipp, 2009, p. 197). Psychic systems, according to Luhmann, are systems that reproduce as autopoietic systems based on consciousness (Seidl, 2016, p. 26). Luhmann regarded communication as the basis of autopoiesis in social systems and emergence as helping to maintain its existence. He defined communication as understanding from an utterance that only included intended meaning (Seidl, 2016, p. 27). If the understanding involves anything other than intended meaning, proper communication is not achieved. Luhmann also viewed organizations as social systems that can reproduce themselves based on decisions, which he interpreted as choices among alternatives. The importance of Luhmann’s work to projects and their governance structures lies in the need for good communication that promotes understanding so that decisions can be made between options to steer the project in the right direction. Often, such communication gets distorted when parties in a project (for example, the project consultant, project owner, and contractor) operate using different institutional logics, have different perspectives on issues, and interpret spoken communication differently. In a project managed by an Australian project manager in the Soviet Union and East Timor even interpreters could not help to improve communication and it was felt a cultural translator was necessary (Gibbs & Sankaran, 2007). Organizational cultures can also be different. Therefore, attempts must be made to close this gap. Mohe and Seidl (2011), who have explored client–consultant relationships and the contact systems organizations tasked to maintain this relationship, have studied these issues based on Luhmann’s work. Let us now look at how systems theories have been applied in practice.

SYSTEMS PRAXIS This section will discuss examples of systems methodologies that have translated systems theories into useful practices and their relevance to project governance. They can be classified into hard systems, soft systems, and emancipatory systems as each of these categories is useful in specific problem contexts (Jackson, 2003). Jackson’s classification proposed that some systems practices are more useful in specific contexts as a way of navigating through system of systems methodologies (Table 5.1).

54  Research handbook on the governance of projects

Table 5.1  Matching systems to contexts and stakeholders Stakeholders Unitary

Pluralist

Coercive

Problem contexts

Similar values/beliefs/interests sharing common purpose

Interests compatible/ do not share common values/beliefs debate required

Few interests in common expressed freely/conflicting values and beliefs

Simple

Hard systems thinking: Systems analysis Systems engineering Operations research

Soft systems approaches

Emancipatory systems thinking: Critical systems heuristics Team syntegrity

Complex

System dynamics Cybernetics Complexity theories

Postmodern systems thinking

Source:   adapted from Jackson, 2003, p. 24; Jackson, 2019, p. 159

Hard systems thinking, developed during World War II, used mathematical and engineering approaches to projects or systems development to build weapons. They were used to optimize the performance of systems to achieve defined objectives. These systems were useful when the stakeholders had common views on what needed to be done and shared common interests, beliefs, and values. As systems became more complex, new approaches had to be developed to address the number of variables required during the development of systems and the number of interactions between subsystems. This led to the development of system dynamics by a group set up by Jay Forrester at the Massachusetts Institute of Technology to look at issues like urban growth. Stafford Beer then applied cybernetics to address organizational problems. In the 1960s, Peter Checkland observed that systems engineering approaches were inadequate to address management issues that were often ill-structured and ambiguous. These issues needed to be discussed to arrive at a position everyone could live with. This led to the strand of soft systems thinking, distinct from hard systems thinking, which abandoned “the notion that it was possible to assume easily identifiable, agreed-on goals that could provide an objective account of the system and its purposes” (Jackson, 2003, p. 22). Therefore, a debate was required to achieve accommodation on a problematical situation (a term used by Checkland) that needed better understanding before its goals were clear. Later versions of soft systems methodology advocated considering culture, power, and politics as well. A soft systems approach is useful to deal with situations where the stakeholders have different perspectives, and this needs to be recognized and discussed. This can improve management of projects to deliver expected benefits to stakeholders. As systems approaches spread it was noticed that systems were being developed to ensure fairness and to consider the consequences of action. This led to the emancipatory systems thinking strand, which relates to situations where coercion or a lack of fairness ignores the values of certain stakeholder groups or discriminates against them. Such situations are often found in international development projects that neglect the needs of vulnerable populations or the consequences of projects on them. Examples are infrastructure projects built under development programs that displace people from their lands, creating more poverty for them.

Systems theories and systems praxis  55

For example, the Agua Zarca Hydro Dam being built in Honduras has resulted in indigenous people rising in opposition and subsequent violence against community leaders (Bird, 2013). We will now look at some examples of how the different ways of thinking are useful in improving the governance of projects. Hard Systems Thinking Locatelli et  al. (2014, p. 1395) suggest that in projects delivered in complex environments, systems engineering (SE) can transform “project governance to systems governance and improve performance.” While the “hard systems” approach of SE was born when developing missile systems in Bell Labs in the 1940s, it has evolved over the years to address complex problems. The International Council on Systems Engineering (INCOSE, 2015) defines SE as: An interdisciplinary approach and means to enable the realization of successful systems. It focuses on defining customer needs and required functionality early in the development cycle documenting requirements and then proceeding with design synthesis and systems validation while considering the complete problem. SE considers both business and technical needs of all customers with the goal of providing a quality product that meets the user needs.

Locatelli et al. (2014, p. 1397) point to the case of the West Coast Route Modernisation project in the UK, which faced serious upgrade issues as unanticipated problems arose during implementation and in particular a lack of understanding of the new signaling technology. The Strategic Rail Authority then initiated SE practices by using the following steps to recover the project to deliver the expected outcomes: 1. Setting a direction for the project and its desired goals and outcomes; 2. Specifying well-defined measurable program outputs, more detailed infrastructure requirements, and a systematic change control procedure. Contractors could then proceed to deliver designs with a fixed price; 3. Installing a clear governance structure; 4. Consulting stakeholders widely and keeping them informed. Although project governance can also work in complex environments that can be delivered successfully, Locatelli et al. (2014, p. 1398) argue that SE provides a better “system perspective” compared with the “management perspective” advocated by project management (PM) as shown in Table 5.2. Table 5.2  Comparison of life cycle between PM and SE Method

Phases/stages

PM

Feasibility study

SE

Development Concept

Initiation

Planning

Execution monitoring and control

Production

Support Source:   adapted from INCOSE, 2015 and PMBOK, 2016

Benefit realization Utilization Support

Retirement

56  Research handbook on the governance of projects

Table 5.3  Elements of SE that contribute to project governance of complex systems SE approaches

SE tools and techniques

Systems thinking (hard and soft)

Integrated product team (that includes all stakeholders – external and internal)

Open systems approach and modular design

Systems integration processes (to translate needs of the customer into performance specifications to meet systems requirements)

Multidisciplinary approach (covering technical and social aspects)

Modeling and simulation (using a systems modeling language to clearly communicate with stakeholders)

Top-down and bottom-up approach (V Trade-off analysis (to analyze alternatives based on cost model) vs performance using processes such as quality function deployment and analytical hierarchy processing) SE management plan (manages interfaces between contractors and appropriate monitoring of contracted work) Requirements management tools (capture, analyze, and track requirements) Source:   based on Locatelli et al., 2014, pp. 1401–1405

In general, the role of project governance starts with initiation and finishes with execution. Most of the project governance work is related to monitoring and control. The SE cycle is much wider from concept development and extends up to the retirement of the system once its life is over. In megaprojects, concept development would also be a major task where governance roles are required. Governance could therefore extend to feasibility studies. The reason SE has a much longer life cycle is because it deals with a larger and more diverse set of stakeholders. Take a nuclear power plant as an example, where politics and societal concerns become very complex. SE is superior as a governance mechanism when technologically complex issues are predominant while project governance works better when managerial issues are predominant. For instance, in a project like the International Space Station, SE governance helped to have a clear definition of the project at the start due to the involvement of multiple agencies and collaboration required across many countries. SE processes reflect several aspects of the systems theories discussed as shown in Table 5.3. They also use welldeveloped tools. Of the several models used in SE, the V model is interesting as there is a constant interaction between development and execution through a process called validation which can help ensure that benefits are realized (Figure 5.1). The V model combines the top-down approach on the left to decompose and define the systems to their lowest level and the bottom-up approach on the right, validating the system from the lowest level until it is ready for testing. The process is iterative in practice. Soft Systems Thinking Checkland and Poulter (2006, p. 15) explain that soft systems methodology (SSM) can be used for “learning your way through problematical situations to ‘action to improve.’” It is also

Systems theories and systems praxis  57

Source:  adapted from Walden et al., 2015, p. 34 & Locatelli et al., 2014, p. 1403

Figure 5.1   V model a structured process to ask questions of real issues and model purposeful activities to address the situation. The common tools used in an SSM intervention are: 1. Drawing “rich pictures” to “capture informally, the main entities, structures and viewpoints in the [problematical] situation, the processes going on, the current recognized issues and any potential ones” (p. 25); 2. Analysis 1, to clarify the various roles in the situation such as the issue owner (who owns the issue), client (who is interested in what needs to happen), and practitioner (who carries out the SSM intervention; this could be internal within a project or an external consultant); 3. Analysis 2, to understand the social reality of the situation by looking at roles, norms, and values in play in the situation; 4. Analysis 3, to investigate the political forces and power in play. After the three analyses, purposeful activity models are developed after performing a CATWOE analysis. CATWOE stands for: customers, actors, transformation process, worldview, owners, and environmental constraints. As an example, an SSM analysis could resolve disputes with stakeholders whose lands are being acquired for a large infrastructure project. The CATWOE for such a situation could be represented as follows. C – Stakeholders in dispute with or affected by the project A – The project team and sponsor responsible to resolve the dispute T – Change from the current situation to a new situation, for example, “a project held up by disputes” transformed to “a project continuing to be implemented” W – Worldview that holds that all “disputes in the project should be settled fairly”

58  Research handbook on the governance of projects

O – Organization that is financing the project (say, the government) and could stop the project or reroute it, paying additional costs E – Environmental constraints could be economic (costs), political (impact on elections), or social (issues of justice) Once a CATWOE analysis is completed, a root definition or mission statement for the transformation is discussed between stakeholders. It could be a simple formula called PQR, that is, “Do P by Q to contribute to R.” For example, arrive at a fair compensation through a fair negotiation to settle the dispute. Often a root definition is a much longer worded statement involving all the elements of the CATWOE. For example: A fair compensation mechanism to landowner considering costs and social justice developed in collaboration by the project sponsor and project manager, which meets with the overall public strategy of the government to help the stalled project to be restarted and completed.

Based on the root definition, a conceptual model of the transformation is developed, which acts as the high-level scope statement of the project (as a human activity system), with 7 +/− 2 (as advocated by Miller, 1956) activities in sequence or parallel, to carry out the transformation with provision for monitoring and control. Once the human activity system is developed, it is tested for feasibility and desirability. Often three E’s are used to ask questions of: 1. Efficacy 2. Efficiency 3. Effectiveness Recently, two more E’s have been added: 4. Elegance 5. Ethicality Examples of rich pictures, CATWOE, root definition, human activity systems, and root definitions can be found in Checkland and Poulter (2006). Venter (2020) reports on the use of SSM to resolve governance issues in a decision support software. SSM was used to facilitate a discussion between affected stakeholders and implementers of a governance process for a project along with the representative of a project portfolio management office. The workshop yielded a rich picture leading to a root definition that also tried to answer the questions: who, why, what, and so what? The existing governance process proved to be too complex and ineffective in “categorising the portfolio of capital projects in terms of risk profiles and levels of development during the project planning and execution phases” (p. 147). At the workshop, a rich picture was drawn with the stakeholders affected by the project to paint an as-is status of the governance process. Using the picture, a root definition was developed to transform the as-is situation to an ideal situation. This then created a need to revisit the rich picture with an increased understanding of the situation. Following this, a second root definition was developed to set up a transformation to improve the governance system.

Systems theories and systems praxis  59

During the rich picture session, the following questions were used for clarification (p. 147): ● ● ● ● ● ●

What do you do to assess projects now? How do you do that? Why do you do that in this way? What is the goal of governance? How do you view project success? How about your own personal success in your roles?

After developing the root definition, the “what” questions pinpointed the source of major conflicts (p. 15): ● ●

What will happen if the project was not classified as high risk and well developed? What will happen if the decision support system (DSS) is inaccurate?

The main issue revealed through the process was not the accuracy of correct measurement and classification but how the outcomes of the assessments affected the reward systems, the performance appraisals and incentives, and future advancement of people working on the project. This then led to recommending and developing steps to ensure that: 1. Truthful project data is captured as prescribed in the governance process so that the real status of projects is known to enable decision-making. 2. The performance management system applied to project personnel is revised to decouple the outcomes of the risk profiling/project status through a consultation between the human resources department, top management, and line management. 3. Top management then uses output from the DSS to decide on resource allocation and further investments. The systems would enable making informed decisions related to projects to continue as is, be redesigned, or be terminated to ensure profitability and reduce wastage. These deliberations led to a re-engineering of the governance process and redesign of the DSS to simplify it while adhering to strict quality and integrity standards to prevent data from being manipulated. While SSM was the main methodology used, aspects of critical systems heuristics or CSH (Ulrich, 1983) were used in developing the questions. The application of CSH is discussed next. Application of Emancipatory Systems Thinking CSH advocates making judgments on the boundaries of a system and their implications. It proposes deciding on the boundary categories when you are considering establishing a system or a project, with a more holistic awareness of the situation where it is being applied (Ulrich, 1983). This could help in avoiding the exclusion of important stakeholders whose interests may be affected by our judgments. An example of this could be a project to deal with poverty in a developing country. In many developing countries there are informal settlements that are not included by the electoral system of the country, which only recognizes people with a permanent address. If we only

60  Research handbook on the governance of projects

include people in our project who are covered by the electoral system of the national government, we will be excluding those living in informal settlements who are among the poorer sections of society. Ulrich (2000) provides a framework to carry out a boundary critique by categorizing the issues based on who is involved in making these judgments and who is likely to be affected. He recommends asking 12 questions based on this framework as shown in Table 5.4. An example of how CSH can apply in information technology systems development can provide a view on its impact on governance. Johnstone and Tate (2017) used CSH to reflect on the governance of an IT project that did not go well by interviewing the key participants involved to explore “what the project would have looked like” (p. 5). The case was a new enterprise resource planning (ERP) system developed to support national emergency services. The asset management information system (AMIS) as part of the ERP system faced many issues. The governance of this system was established based on a previous module developed for the ERP. The project steering committee (PSC) was set up by the head office, which initiated the project, and included the chief information officer and a strong representation from the finance department, who were seen as the client. The users of the system at local stations were not represented in the steering committee. When issues started to emerge as the project was being implemented, the regional manager, who was familiar with the processes at the local level where the system would be used, was added to the PSC. An external firm was asked by finance to improve the existing asset classification system they had in the organization to fit in with the requirements of the new AMIS. This turned out to be a time-consuming exercise. At the local levels, where support was required to collect data for the new system, this was not seen as a priority as they had their own daily operations to look after. There was lack of cooperation between the head office and local offices. Subsequently, the PSC decided to use a revised asset classification system in consultation with the regional office and the frontline people involved. A lot of debate ensued, and a third round of data collection was initiated, blowing the budget and delaying the project. The 12 CSH questions recommended by Ulrich (2000) were used by Johnston and Tate (2017) to examine what went wrong and resulted in the following findings. Sources of motivation: The project was set up by finance to be able to manage asset information. The local staff had their own manual system and were happy with it. They were asked to do extra work to collect information for the new system but could not see the benefit nor did they get any appreciation for taking on extra work. The AMIS would have helped the finance department to integrate with other parts of the ERP system and help them with better monitoring and strategic planning. The people at the local stations saw this as a cost-cutting exercise and a way of rationalizing assets. The success of the project was based on the budget, time, and functionality of the AMIS. The local station managers signed off on their own measure of success based on getting a better reconciliation between local and national data on assets. But this proved to be difficult to achieve and resulted in considerable debate between the head office and local stations. The local stations asked head office to separate the two projects (AMIS and local data collection) with resources allocated to the stations, but the request was not heeded. Sources of control: The authority structure and measures of success were set by the head office. The project required cooperation with local stations. However, they resisted being controlled and the audit processes used during the project created more conflict and the issues were then escalated to the chief executive officer. While the PSC had full financial control of the project, adequate resources were not allocated to local stations to carry out the audit even

Systems theories and systems praxis  61

Table 5.4  Boundary categorization and questions Boundary issues

Categories

Questions

Stakeholders

Sources of motivation

Client

Who is (ought to be) the client? Whose interests are being served?

Those involved

Purpose

What is (ought to be) the purpose? What are the consequences of deciding on this purpose?

Measure of improvement

What is (ought to be) the measure of improvement? How do we know the consequences are an improvement?

Decision-maker

Who is (ought to be) the decisionmaker? Who can then decide on the measure of improvement?

Resources

What resources are (ought to be) controlled by the decision-maker? By doing this, how can those involved control the success?

Decision environment

What conditions are (ought to be) part of the decision environment? Or those that the decision-maker does not control?

Professional

Who is (ought to be) considered a professional? Who is regarded as the expert in this situation?

Expertise

What expertise is (ought to be) consulted? What counts as relevant knowledge in the situation?

Guarantor of success

Who is (ought to be) the guarantor of success? How will people involved know that improvement will be achieved – would this be the experts/or stakeholders?

Witness

Who is (ought to be) witness to the interests of those affected but not involved? Who is a legitimate stakeholder and who argues for them?

Emancipation

What secures (ought to secure) the emancipation of those affected from the premises or promises of those involved? Where does legitimacy lie?

Worldview

What worldview is (ought to be) determining? What versions of improvement are considered and how are they reconciled?

Sources of power

Sources of knowledge

Sources of legitimation

Source:   adapted from Ulrich, 2000, pp. 251–258

Those affected

62  Research handbook on the governance of projects

though it required specialist knowledge and skills of experts. While the organization owned the assets and the finance department had control over their management, the assets were managed by local stations who had knowledge about them. It would have been better not to let the physical control of assets be managed by the head office. Sources of knowledge/expertise: Skills and knowledge were to be provided by the PSC and the project team consisting of the IT department and vendors. The IT department did not have much experience in managing complex IT projects such as the new ERP system being installed. The requirement of local expertise at the stations was overlooked and hence relevant knowledge was unavailable to the project team. Although knowledge of completing an IT project existed, the domain knowledge of assets and asset handling was lacking at the head office as these rested with the local station staff. While the PSC was responsible for budget and scheduling of the project, it was unclear who was responsible for physical asset and management functionality. In addition, the regional manager’s experience was underused even though he was co-opted into the steering committee. Sources of legitimization: Frontline staff who had to put in extra effort were affected negatively by having to spend more time and losing control over assets. They were not represented in the governance system and were not involved in making decisions that affected them. Head office held the legitimacy, and emancipation of frontline staff was neglected. It was seen that the frontline staff were resistant to change and several of them did not possess IT skills. The command-and-control environment expected people to do what they were told. The worldview ignored the fact that the frontline staff’s professional expertise and cooperation was required. The value conflicts over asset management in this project were ignored and exacerbated by not asking the right questions at the start to establish a governance process that would have worked. The project resulted in further entrenching a structural conflict (that existed even before the project started in the organization due to previous issues) without paying sufficient attention to boundary judgments. “The project started with an atmosphere of mistrust, suspicion, and entrenched structural conflict between two major stakeholder groups which was not recognized or addressed” (p.12). The case demonstrates how using a CSH lens to develop and implement governance arrangements could help in anticipating and reducing conflict to improve the chances of succeeding in such projects. We looked at three ways in which systems practices can be applied in project management and governance. Hard systems approaches are useful in both simple and complex situations when the stakeholders have a common view of what is to be achieved whereas soft systems approaches are better when stakeholders have different perspectives but their views can be accommodated using participatory processes to move toward accommodation. Emancipatory processes help when goals can be conflicting and stakeholders have unequal power to influence goals to critically view boundaries and ensure that less powerful stakeholders’ interests can be taken into account.

CONCLUSIONS This chapter provides an overview of relevant systems theories and practices to improve project governance by using more holistic approaches to recognize the interrelationships and emergent properties of projects that could result in unintended consequences. Holistic or systemic approaches let us see both the forest and the trees to help us adapt governance structures,

Systems theories and systems praxis  63

processes, and relationships based on the needs of the projects. They are especially useful in complex projects and projects in which vulnerable stakeholders are involved where outcomes need to be fair and equitable. As expectations toward creating social value from projects and contributing to sustainable development increase, systems theories and praxis will grow in importance. As a result of this, new competencies will be required to enact governance in projects by taking a much broader worldview to become more responsible citizens and leave the world a better place for future generations.

REFERENCES Bateson, G. (1972). Steps to an ecology of mind. Ballantine. Beer, S. (1984). The viable system model: Its provenance, development, methodology and pathology. Journal of the Operational Research Society, 35(1), 7–26. Bird, A. (2013). The Agua Zarca Dam and Lenca communities in Honduras: Transnational investment leads to violence against and criminalization of indigenous communities. Washington: Rights Action, October 3. Boulding, K. E. (1956). General systems theory—The skeleton of science. Management Science, 2(3), 197–208. Capra, F., & Luisi, P. L. (2019). The systems view of life: A unifying vision. Cambridge University Press. Checkland, P., & Poulter, J. (2006). Learning for action: A short definitive account of soft systems methodology and its use for practitioners, teachers and students. John Wiley. Emery, F., & Trist, E. (1972). Towards a social ecology: Contextual appreciation of the future in the present. Plenum. Gibbs, A., & Sankaran, S. (2007). Strategies to manage cultural risks in international engineering projects, Paper presented at 21st International Project Management Association World Congress, June 18–20, Cracow, Poland, pp. 167–172. Hammond, D. (2003). The science of synthesis: Exploring the social implications of general systems theory. University Press of Colorado. INCOSE. (2015). Systems engineering handbook, Version 4, INCOSE. https://www​.sebokwiki​.org​/ wiki​/incose​_systems​_engineering​_ handbook Jackson, M. (2003). Systems thinking: Creative holism for managers. John Wiley & Sons, Ltd. Jackson, M. (2019). Critical systems thinking and the management of complexity: Responsible leadership for a complex world (1st ed.). Wiley. Johnstone, D., & Tate, M. (2017). Improving IT project governance: A reflective analysis based on critical systems heuristics. AJIS. Australasian Journal of Information Systems, 21, 1–18. Kast, F. E., & Rosenzweig, J. E. (1972). General systems theory: Applications for organization and management. Academy of Management Journal, 15(4), 447–465. Katz, D., & Kahn, R. L. (1966). The social psychology of organization. Wiley. Kozarkiewicz, A. (2020). General and specific: The impact of digital transformation on project processes and management methods. Foundations of Management, 12(1), 237–248. Leifer, R. (1989). Understanding organizational transformation using a dissipative structure model. Human Relations, 42(10), 899–916. Locatelli, G., Mancini, M., & Romano, E. (2014). Systems engineering to improve the governance in complex project environments. International Journal of Project Management, 32(8), 1395–1410. Luhmann, N. (1995). Social systems. Stanford University Press. Maturana, H. R., & Varela, F. J. (1980). Autopoiesis and cognition: The realization of the living. Dordrecht. Mead, M. (1968). Cybernetics of cybernetics. In H. von Foerster et  al. (Eds.), Purposive systems; proceedings of the first annual symposium of the American society for cybernetics (pp. 1–11). Spartan Books. Meadows, D. H. (2008). Thinking in systems: A primer. Chelsea Green Publishing.

64  Research handbook on the governance of projects

Miller, G. A. (1956). The magical number of seven, plus, minus two; Some limits on our capacity for processing information. Psychological Review, 63(2), 81–97. Miller, R., & Lessard, D. (2001). The strategic management of large engineering projects: Shaping risks, institutions and governance. International Journal of Project Management, 19, 437–443. Mohe, M., & Seidl, D. (2011). Theorizing the client—Consultant relationship from the perspective of social-systems theory. Organization, 18(1), 3–22. Odum, H. T. (1983). Systems ecology: An introduction. John Wiley. Pemsel, S., & Widén, K. (2010). Creating knowledge of end users’ requirements: The interface between firm and project. Project Management Journal, 41(4), 122–130. PMBOK. (2016). A guide to the project management body of knowledge (6th ed.). Project Management Institute. Prigogine, I. (1955). Introduction to thermodynamics of irreversible processes. Charles C. Thomas Publisher. Ramage, M., & Shipp, K. (2009). Systems thinkers (2nd ed.). Springer. Reeve, C. D. C. (2002). Substantial knowledge: Aristotle’s metaphysics. Hackett Publishing. Sackey, E., Tuuli, M., & Dainty, A. (2015). Sociotechnical systems approach to BIM implementation in a multidisciplinary construction context. Journal of Management in Engineering, 31(1), A4014005. Sankaran, S. (2014). Implementing organizational change using action learning and action research in an Asian setting. In J. W. Willis & C. L. Edwards (Eds.), Action research: Models, methods, and examples (pp. 131–152). Information Age Publishing. Seidl, D. (2005). The basic concepts of Luhmann’s theory of social systems. In D. Seidl & K. H. Becker (Eds.), Niklas Luhmann and organization studies (pp. 21–53). CBS Press. Seidl, D. (2016). Organisational identity and self-transformation: An autopoietic perspective. Routledge. Ulrich, W. (1983). Critical heuristics in social planning: A new approach to practical philosophy. John Wiley. Ulrich, W. (2000). Reflective practice in the civil society: The contribution of critically systemic thinking. Reflective Practice, 1(2), 247–268. Venter, C. (2020). A reflection on SSM as a critical social action research method: Towards improvement in project governance. The Electronic Journal of Business Research Methods, 18(2), 142–152. Von Bertalanffy, L. (1950). The theory of open systems in physics and biology. Science, 111(2872), 23–29. Von Bertalanffy, L. (1968). General system theory: Foundations, development, applications. George Braziller. Von Foerster, H. (1979). Cybernetics of cybernetics. In K. Krippendorf (Ed.), Communication and control (pp. 5–8). Gordon and Breach. Walden, D. D., Roedler, G. J., & Forsberg, K. J. (2015). Generic life cycle stages in INCOSE systems engineering handbook: A guide for system life cycle processes and activities. John Wiley. Weiner, N. (1948). Cybernetics. MIT Press.

6. Multi-level governance Alfredas Chmieliauskas, Ralf Müller, Raimonda Alonderienė, Margarita Pilkienė, and Saulius Šimkonis

INTRODUCTION Governance of complex inter-organizational settings, such as in large infrastructure or megaprojects, is challenging due to the idiosyncratic nature of its set up and its constant co-evolution with the project’s circumstances and the sponsoring coalition (Miller & Hobbs, 2005). This applies especially to large infrastructure projects or megaprojects with many different contributing subcontractors and their relationships. Examples include the EXPO 2010 in Shanghai (Li, 2018; Zhai, 2017) and the Sydney Olympics (Clegg, 2002), with complex organizational structures, involving a blend of hierarchical, non-hierarchical, and network structures in need of governance. This complexity poses a challenge to governance theory in explaining “what goes on” in the governance of these projects because most of the existing governance theories build on one particular perspective, such as hierarchy in principal–agent theory (Jensen & Meckling, 1976), or networks in shared governance theory (Provan & Kenis, 2008). Governance – the framework within which management executes and is held accountable for its task (Müller, 2019) – is supposed to govern the project in its entirety, similar to a board of directors governing the entire firm (Turner & Müller, 2003). Governance theory is supposed to describe and explain observed regularities (Whetten, 1989) in governance. However, existing governance theories for projects struggles to explain inter-organizational settings characterized by complexity – the heterogeneity of organizational entities and the variety of their relationships (Ashby, 1957; Simon, 1962) – because of their typically one-dimensional perspective. Multi-level governance theory (MLG) (Bache & Flinders, 2015) addresses governance theories’ heterogeneity and provides a theoretical perspective to integrate hierarchical, nonhierarchical, and network governance under one theoretical framework. MLG simultaneously applies two distinct governance perspectives: ●

●

Type I governance, a vertical perspective, encompassing the hierarchical part of the project governance structure, Type II governance, a horizontal perspective, encompassing the task-level governance.

Type I and II governance are the main building blocks of MLG. They are complementary by nature. However, little is known about the interface between them. This chapter will demonstrate how MLG provides a promising framework to integrate the different governance perspectives and theories in complex inter-organizational project governance settings and specifically look at how Type I and Type II governance interface in

65

66  Research handbook on the governance of projects

projects. We do this by building on the empirical findings from four case studies in the construction industry in Scandinavia and the Baltics (Šimkonis et al., 2021).

GOVERNANCE IN COMPLEX ORGANIZATIONAL PROJECT SETTINGS Governance as a phenomenon is analyzed in multiple disciplines addressing different problems, leading to the multi-perspectival nature of governance theory as described in the introduction. However, project management researchers use only a small fraction of the potential theoretical perspectives to explain governance of and in projects. Despite this relatively small number, this approach allowed explaining many phenomena found in projects. For example, agency and stewardship theory explain the effect of top management governance on project team identity (Toivonen & Toivonen, 2014). Stakeholder and shareholder theory explain the dominating paradigms for the governance of projects in organizations (Müller & Lecoeuvre, 2014). Resource dependence theory explains how projects, programs, and portfolios steer the business, implement change, support innovation, and develop a competitive advantage (Drouin & Besner, 2012). Transaction costs economics explains how governance structures, production functions, and transactions align in project-based organizations (Turner & Keegan, 2001). The majority of studies in project governance apply a one-dimensional theoretical perspective not applicable to more democratic or network-like relationships. Examples include principal–agent theory and stewardship theory, which theorize the dyadic (hierarchical) relationship between a principal and an agent. These theories are outlined in Chapter 3. Due to these limitations, governance in complex organizational settings is typically not described in reference to theories but as a configuration of governance variables and processes. This approach provides good insight into specific cases. However, it prevents generalizability to other populations and the development of theory because it can only explain the What and How and not the Why and When of a theory’s functioning. Hence, the contribution to governance theory becomes questionable (Whetten, 1989). Examples include studies on the governance of organizational change projects in hospital modernizations (Aubry et  al., 2018) or processes for megaproject governance (Brunet, 2019), or the governance framework’s dimensions in major public projects (Brunet & Aubry, 2016; Roehrich & Lewis, 2010; Lewis & Roehrich, 2009). One reason for the rare use of governance theory in complex project settings might be the difficulty of explaining complex phenomena with just one theory or theoretical perspective. Along this line, Biesenthal and Wilden (2014) concluded in their content-driven, systematic review of the governance literature that governance in the realm of projects is a multi-level phenomenon at the intersection of organizational and project objectives purposefully contributing to a firm’s (or other types of organizations’) performance. Several studies claim to contribute to the understanding of multi-level governance, for example, in megaproject settings (e.g., Li et al., 2018; Zhai et al., 2017). However, surprisingly few studies address project governance directly from a multi-level theory perspective. These few studies tend to take a systems theory perspective and are predominantly conceptual (e.g., Müller et al., 2020; Sankaran et al., 2020; Weyer et al., 2015). They are subject to the criticism of systems theory in terms of its self-centeredness, the emergence of morals and codes from

Multi-level governance 

67

individuals’ communication (Kihlström, 2012), and its underlying assumption of linearity and equal weight of variables. The above disadvantages are overcome with MLG (Hooghe & Marks, 2003), explained in the following sections of this chapter.

MULTI-LEVEL GOVERNANCE THEORY MLG was initially developed in political science to explain the complex governance setting in the European Union. It aims to theorize the governance of states’ highly complex interdependence, emerging from the transcendence of autonomous states to semi-autonomous ones, and the simultaneous increase in private sectors’ importance. In this case MLG integrates several different governance approaches simultaneously, which makes it especially suitable to theorize complex organizational settings. MLG is typically used to understand and explain hierarchical, non-hierarchical, and network types of settings. For example, in large infrastructure projects MLG demonstrates a vertical and a horizontal governance perspective at the same time. The vertical governance is referred to as Type I governance and the horizontal as Type II governance. The two types complement each other (Bache et al., 2016; Hooghe & Marks, 2003). Type I governance allows MLG to theorize the governance at the upper, typically hierarchical, parts of a large project organization. Examples include prime contractors that contract several firms, which, in turn, subcontract for services, suppliers, and vendors at one or more layers down the hierarchy (Denicol et al., 2021). Type II governance allows MLG to theorize governance at the task level, where individual actors from different organizations interact to accomplish shared goals, such as project objectives. For example, Type I and Type II governance perspectives in complex organizational project settings are shown in Figure 6.1. The hierarchical part (Type I governance) consists of the sponsor, temporary client

Figure 6.1  Type I and Type II governance perspectives

68  Research handbook on the governance of projects

organizations (special purpose entity – SPE), and Tier 1 and 2 suppliers. The lower end of this hierarchy connects to a network of Tier 3 suppliers with a variety of different relationships. Type I Governance Type I governance takes a vertical and system-wide perspective by steering the different autonomous and non-overlapping units, such as the hierarchy of organizations contracted by the prime contractor and its subcontractors. These units should be non-overlapping in their competencies to avoid clashes between them. These firms collectively represent the project’s shared competencies and resources and provide a decision board that can act and decide on behalf of the constituting members. The objective of this governance perspective is to achieve system effectiveness (Hooghe & Marks, 2003). The Type I perspective supports the application of existing governance theories for hierarchies; for example, principal–agent theory, implemented through an ex ante definition of agents, which are the decision-making entities at the situation-contingent level in the hierarchy, and an ex post control mechanism of monitoring and potential sanctioning in case of drifts (Blom-Hansen, 2015). A study by Šimkonis et al. (2021) investigated four case studies in the construction industry in Scandinavia and the Baltics. The findings explain how Type I governance materializes in hierarchical relationships. The prime contractor is perceived as the most crucial entity, with heavily dependent subcontractors. The relationships between prime contractors and subcontractors vary in terms of trust and control. Principal–agent types of relationships are dominated by control (Turner, 2022), as outlined in Chapter 3. This tends to increase under time pressure, typically in the second half of the project or when unexpected issues emerge. A principal–agent type of governance was found in cases where the spending of taxpayers’ money is of concern. Often contracts are incomplete, and governance institutions must balance the client and subcontractor views. For that, formal governance boards are employed (e.g., for user, financial, and technical issues). Stewardship types of relationships are trust-based (Turner, 2022). The prime contractor’s characteristics influence the level of trust from the subcontractors, for example, the prime contractor’s benevolence and willingness to collaborate instead of exploiting subcontractors. New partners are credited with trust by relying on their competence and success in previous collaborations. With increasing collaboration experience, control tends to shift toward trust. In one of Šimkonis et al.’s (2021) cases, the project manager was asked to develop a “fingertip feeling” on how much the contract could be formally enforced without risking the good relationship with the subcontractors. Hence, stewardship approaches to governance remain the ideal. However, this may be compromised when circumstances demand it, such as in projects subject to public scrutiny, where more principal–agent approaches prevail. Type II Governance Type II governance takes a task perspective and governs individuals’ endeavors in fulfilling tasks or solving issues. Thus, Type II governs individual problems’ disaggregation and their solution through technical proficiency and knowledge application. While the firms employing the resources are sovereign, autonomous, and non-overlapping entities, the resources working in projects move across tasks (and sometimes projects) to apply their skills when needed. Hence, the resources cross the boundaries between the tasks, requiring different governance

Multi-level governance 

69

theories than Type I hierarchies. Type II governance aims for Pareto optimality, an economic state where the particular use of resources achieves the maximum benefit for all parties together. Type II governance is often embedded in Type I governance. Here Type I governance supports effectiveness, while Type II governance supports efficiency (Hooghe & Marks, 2003). Examples include project team members from different subcontractors jointly working on a task or solving an issue. They are governed by the shared desire to fulfill their task or solve an issue at hand. They apply their collective professional knowledge and sometimes innovation within the constraints set by Type I governance. Šimkonis et al. (2021) demonstrated that Type II governance focuses on project tasks and is characterized by more democratic relationships between all project members. These relationships build on communication and coordination among all project parties when transferring from one project task to another. Although prime contractors are typically responsible for communication with the client, subcontractors do not avoid contacting the client to keep communication and workflow more efficient. Contractors use Type II governance to achieve individual and joint objectives. For example: “if I need a crane or something temporarily, I will spend like 450 €. And here stands an unused crane that belongs to the other subcontractor. We agree on a favor or smaller sum of money. Everyone is happy.” Other examples include informal collaborations to align schedules or monitoring each other since they jointly get paid for the final outcome. At times, mutual objectives take priority over individual ones. Subcontractors may help each other due to personal relationships, even knowing the project costs will exceed the revenue. This indicates trust-based relationships, underpinning an overall stewardship approach to governance, which allows for ad hoc problem-solving through informally led club-like teams of problem-solvers. Table 6.1 sums up the main characteristics of Type I and Type II governance settings. Type I governance is project-oriented, while Type II governance focuses on the task level. Type I governance provides hierarchical structure and clear accountabilities. Contrarily, Type II governance has more fluid structures and less clear lines of accountability.

Table 6.1  Comparison of Type I and Type II governance Characteristic

Type I governance

Type II governance

Orientation

Project-orientation and project-wide governance

Task-orientation and task-level governance for technical proficiency and knowledge application, embedded in Type I governance

Structure

Clearly structured, typically hierarchical, with non-overlapping responsibilities across organizations

Fluid, sector-specific structures, often as networks with members intersecting across levels

Accountability

Clear lines of accountabilities, e.g., to prime contractor

Less clear lines of accountability, as dynamics of task fulfillment and issue solving take precedence

Source:   based on Hooghe & Marks, 2003; Smith, 2007

70  Research handbook on the governance of projects

THE INTERFACE BETWEEN TYPE I AND TYPE II GOVERNANCE Skelcher’s (2005) studies show that Type II governance emerges within Type I governance, whereby the former is grounded in highly institutionalized rules and norms. The latter can emerge ad hoc, on a case-by-case basis, and out of particular needs, but can also be established at the project’s outset. In these studies, Skelcher (2005) identified three distinct forms of governance bodies, which coordinate Type II governance activities and provide the interface with Type I governance: ●

●

●

Clubs are informal collaborations, typically formed ad hoc voluntarily to solve a particular problem in the project. The participants of the clubs have a trust-based relationship and rely on stewardship governance. Agencies are formal semi-permanent units, typically organized and led by prime contractor representatives and staffed with subcontractor employees. There may be several agencies in one project as they are used to tackle a specific area of a project, such as technical feasibility or quality. Boards are formal semi-permanent entities focused on internal and external governance issues, including compliance. Local municipalities or other project owners may set them up. Their formal setup and typically high level of authority imply a principal–agent governance approach, which positions them opposite to clubs in the trust-to-control continuum of governance mechanisms.

Network governance theories explain much of the nature of the temporary but often repetitive relationships of Type II governance actors in clubs, agencies, or boards. Examples include the use of shared governance in clubs, network internal lead organization–driven governance and network external administrative organization–driven governance in agencies (Provan & Kenis, 2008), or self-regulating governance networks in boards (Sørensen, 2016). Hooghe and Marks (2003) addressed the economics of MLG using transaction costs economics theory (Williamson, 1985). Transaction costs in the coordination of Type I and II governance occur through spillovers from the different policies of the different organizations involved. This effect represents a second-order coordination problem, which constitutes a governance task in itself. Hooghe and Marks (2003) identify the following issues and suggest the following mitigation strategies: 1. Coordination costs increase exponentially when the number of organizations in a network increase, thus following Scharpf’s law (Hooghe & Marks, 2003). Limiting the number of Type I governance organizations counteracts this effect, for example, by bundling intersecting organizations and their related competencies together, such as in SPEs (Sainati et al., 2017). Another mitigation approach is limiting the cascading levels of hierarchies of subcontractors of Type I organizations, for example, to a maximum of four layers (Hooghe & Marks, 2003). 2. Mitigation strategies in Type II governance include constraining the interaction across players. Grouping related resources and distinct structures minimize interaction to the necessary level, reducing coordination and transaction costs (Hooghe & Marks, 2003). The above discussion shows that Type I and II governance are distinct yet interwoven, interrelated, and exist simultaneously. Hence, they constitute a polycentric governance system,

Multi-level governance 

71

which simultaneously addresses Type I governance issues of general nature for the project and Type II issues related to tasks and technical problem-solving. Clubs, agencies, and boards were identified as interface and coordinating entities between Type I and II governance. The discussion also shows a dearth of project-related governance studies applying MLG in general and Type I and II governance and their interface specifically. MLG would allow the integration and contextualization of these discussions. Šimkonis et al. (2021) confirmed that Type I and Type II governance are inter-related. At the outset, the prime contractors define Type I governance in terms of management structure, owners, hierarchical relations, and permissions to contact. They also approve informal relationships between the subcontractors in Type II governance. Despite its wide coverage of the extensive network of subcontractors, Type II governance has its apparent limits, such as when legal, financial, or other key project-related criteria from Type I organizations are impacted. In these cases, and when unexpected flaws emerge or subcontractors cannot solve their disagreements, governance authority may shift back from Type II to Type I. Type I and II governance is linked through organizational entities, namely clubs, agencies, and boards. The following describes some examples of their implementation. Clubs often emerge as a group of volunteers from different disciplines. Different project subcontractors volunteer to jointly solve ad hoc a shared issue, such as being behind schedule, machinery not working, installing unplanned equipment, etc. These ad hoc collaborations are characterized by mutual trust in the contributing parties’ capabilities and skills, as well as voluntary collaborations. Hence, clubs tend to occur in stewardship types of governance contexts. An example of a club is a highway construction project where some organizations cooperated over time in more than 20 projects (see Figure 6.2). When an issue arises, one of the participants asks for help. Then others assist in resolving the situation, often without extra charge, in expectation to receive help from others with their own issues in the future “as we have also a personal relationship with the people of this supplier, when they shout for help, then we go to help them; maybe they will help us at some point.” Usually, the prime contractor

Figure 6.2  Club in infrastructure project

72  Research handbook on the governance of projects

is not involved and may not know about these issues or the cooperation between the members to resolve the situation. Agencies are formed by prime contractors as a formal interface between Type I and II governance. They improve communication and decision-making in projects. Agencies are typically led by prime contractor representatives and staffed with people from subcontractor companies. At times they may involve client representatives. One of the cases investigated uses ten different agencies, each led by a formally appointed representative from the different beneficiary groups, such as city government or users. Each of these agencies is staffed with subcontractor resources, which may work across several agencies. Simultaneously, the agencies’ leaders are members of the project management group. This combination of roles provides mutual transparency between Type I and II governance. Agencies are more formal entities than clubs, as shown through the formal appointments and roles and frequent and regular meetings. Therefore, they are “in the middle” between trust and control as their governance mechanism. That implies a more formal relationship between Type I and II representatives and is indicative of a governance context that balances both principal–agent and stewardship approaches. An example of the way agencies are formed is a railway project in Scandinavia (Šimkonis et  al., 2021) (see Figure 6.3). The owner and client is the national government agency for traffic infrastructure. The project’s steering group consists of representatives from the beneficiaries of the project and four government units. The main contractor manages the project, reporting to the steering group and subcontracting 11 other firms, which, in turn, subcontract other organizations over several hierarchical levels. About 120 resources are working on the project. Ten working groups (i.e., agencies) reporting to the project management organization are set up to handle various requests and issues and determine working and safety standards. Each working group is led by a representative of a beneficiary group, while group members come from different subcontractor organizations. This way, the working groups – in the role of agencies – ensure the link between the upper level of the hierarchical structure (Type I

Figure 6.3  Working groups in the role of agencies in a railway project

Multi-level governance 

73

governance) and networked organizations with their team members at the task level (Type II governance). Boards are formed for formal handling of project internal and external governance-related issues, such as in a school project in Northern Europe. Here the local municipality officially set up the boards and appointed members, such as for users, financing, and technical issues. The boards address Type I and Type II governance issues simultaneously. Type I governance includes scoping of the project, as when the users of the school wanted big facilities with all good and modern equipment, whereas on the financial side did not want to pay too much for this. Type II governance addressed by a board includes accepting formal changes to the project, which often had to be also accepted by other or all boards of the project. Overall, the boards align more closely with the project owner than the agencies or clubs discussed above. Being set up and staffed by an owner like a municipality, they are concerned with process compliance and correctness, which implies a more control-driven principal–agent context for boards. Figure 6.4 provides an example of the boards in constructing a public building (a school) in a mid-size city (Šimkonis et al., 2021). The project owner and client is the city government, consulted by several advisory firms in terms of legal, financial, and technical aspects of the project. The project structure has a temporary project organization (an SPE) on top, which reports to the city government. Project management is done by the prime contractor, which reports to the SPE, with several contractors reporting to it. The contractors subcontract other firms for specific services or deliverables. Altogether the project employs about 100 resources from ten different companies. Three advisory boards for handling legal, technical, and financial requests from subcontractors and other stakeholders in a formal manner are established and meet regularly. The client and the project management organization appoint the members of these boards. Being more external to the project, the boards establish a link between the upper level of the hierarchical structure

Figure 6.4  Boards in a school project

74  Research handbook on the governance of projects

– city government and SPE (Type I governance) – and organizations in the networked part on a task level (Type II governance) through formal procedures of overseeing the project and its implementation correctness.

CONCLUSIONS This chapter set out to identify a theoretical framework to explain the simultaneous governance of hierarchical, non-hierarchical, and networked structures in inter-organizational networks for projects. MLG, in the sense of Bache and Flinders (2015), was proposed to provide this framework with its distinction between Type I and Type II governance. The former provides a space for existing hierarchy-related governance theories to be applied, such as agency theory or transaction costs economics. The latter provides a space for existing network theories, such as shared network governance, leading organization network governance, or governance by network administration organizations. Case studies by Šimkonis et al. (2021) validated MLG as a theoretical framework and confirmed its applicability. Hence, the distinction into Type I and Type II governance allows for a multiple theory approach in explaining complex organizational governance settings in inter-organizational networks for projects. The link between the Type I and II governance was proposed to be explained through Skelcher’s (2005) theory of organizational interface units, namely clubs, agencies, and boards. The selection of a particular choice of interface unit for a given governance setting was empirically investigated by Šimkonis et al. (2021). Their results show that clubs are typical for Type I governance settings that are predominantly trust-based and stewardship-like, in combination with informal and ad hoc Type II governance contexts. Boards are typical for control-based and agency-like Type I governance settings when combined with formally led

Source:  after Müller et al., 2022

Figure 6.5  Clubs, Agencies and Boards as interfaces between Type I and Type II Governance

Multi-level governance 

75

and semi-permanent Type II governance settings. Agencies are typically used in dynamic settings, which balance trust and control in situational contingency, together with temporary but stable Type II governance settings. Figure 6.5 depicts the three interface units in the Type I and II governance space. The framework described in this chapter is the first to provide an end-to-end governance perspective, from the top of the hierarchy of large project settings, such as from the investor, all the way to the individual, networked supplier in a large inter-organizational network. It does that by providing the space to use existing theories and combine them to explain the idiosyncrasies of individual inter-organizational networks. Hence, this provides for maximum flexibility in choosing and combining theoretical perspectives, their onto-epistemological stances, and particularities of theories’ explanatory power.

REFERENCES Ashby, W. R. (1957). An introduction to cybernetics (2nd ed.). Chapman & Hall Ltd. Aubry, M., Boulay-Bolduc, M., Richer, M. C., & Lavoie-Tremblay, M. (2018). Dealing with uncertainty and ambiguity in a complex project: The case of intravenous (IV) pumps in a healthcare center. Project Management Journal, 49(1), 110–121. https://doi​.org​/10​.1177​/875697281804900108 Bache, I., Bartle, I., & Flinders, M. (2016). Multi-level governance. In C. Ansell & J. Torfing (Eds.), Handbook on theories of governance (pp. 486–498). Edward Elgar Publishing. Bache, I., & Flinders, M. (2015). Multi-level governance: Essential readings I. Edward Elgar Publishing. Biesenthal, C., & Wilden, R. (2014). Multi-level project governance: Trends and opportunities. International Journal of Project Management, 32(8), 1291–1308. https://doi​.org​/10​.1016​/j​.ijproman​ .2014​.06​.005 Blom-Hansen, J. (2015). Principals, agents, and the implementation of EU cohesion policy. In I. Bache & M. Flinders (Eds.), Multi-level governance: Essential readings II (pp. 203–227). Edward Elgar Publishing. Brunet, M. (2019). Governance-as-practice for major public infrastructure projects: A case of multilevel project governing. International Journal of Project Management, 37(2), 283–297. https://doi​.org​/10​ .1016​/j​.ijproman​.2018​.02​.007 Brunet, M., & Aubry, M. (2016). The three dimensions of a governance framework for major public projects. International Journal of Project Management, 34(8), 1596–1607. https://doi​.org​/10​.1016​/j​ .ijproman​.2016​.09​.004 Clegg, S. R., Pitsis, T. S., Rura-Polley, T., & Marosszeky, M. (2002). Governmentality matters: Designing an alliance culture of inter-organizational collaboration for managing projects. Organization Studies, 23(3), 317–337. Denicol, J., Davies, A., & Pryke, S. (2021, February). The organisational architecture of megaprojects. International Journal of Project Management. https://doi​.org​/10​.1016​/j​.ijproman​.2021​.02​.002 Drouin, N., & Besner, C. (2012). Projects and organisations: Adding rungs to the ladder of understanding project management and its relationship with the organization. International Journal of Managing Projects in Business, Special Issue on Project and Organization, 5(2), 175–179. Hooghe, L., & Marks, G. (2003). Unraveling the central state, but how? Types of multi-level governance. The American Political Science Review, 97(2), 233–243. https://www​.jstor​.org​/stable​/3118206 Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 3(4), 305–360. Kihlström, A. (2012). Luhmann’s system theory in social work: Criticism and reflections. Journal of Social Work, 12(3), 287–299. https://doi​.org​/10​.1177​/1468017310386425 Lewis, M. A., & Roehrich, J. K. (2009). Contracts, relationships and integration: Towards a model of the procurement of complex performance. International Journal of Procurement Management, 2(2), 125–142.

76  Research handbook on the governance of projects

Li, Y., Lu, Y., Ma, L., & Kwak, Y. H. (2018). Evolutionary governance for mega-event projects (Meps): A case study of the World Expo 2010 in China. Project Management Journal, 49(1), 57–78. https:// doi​.org​/10​.1177​/875697281804900105 Miller, R., & Hobbs, B. (2005). Governance regimes for large projects. Project Management Journal, 36(3), 42–51. Müller, R. (2019). Governance, governmentality and project performance: The role of sovereignty. International Journal of Information Systems and Project Management, 7(2). https://doi​.org​/10​ .12821​/ijispm070201 Müller, R., Alonderienė, R., Chmieliauskas, A., Drouin, N., Ke, Y., Minelgaite, I., Mongeon, M., Pilkiene., Šimkonis, S. Unterhitzenberger, C., Vaagaasar, A. L., Wang, L., & Zhu, F. (2022). Governance of interorganizational project networks. PMI Sponsored Research White Paper Series. Project Management Institute, Newtown Square, PA, USA. Müller, R., Drouin, N., & Sankaran, S. (2020). Governance of organizational project management and megaprojects using the viable systems model. In G. Metcalf, K. Kichima, & H. Deguchi (Eds.), Handbook of systems sciences. Springer Nature. https://doi​.org​/10​.1007​/978​-981​-13​- 0370​-8​_14-1 Müller, R., & Lecoeuvre, L. (2014). Operationalizing governance categories of projects. International Journal of Project Management, 32(8), 1346–1357. https://doi​.org​/10​.1016​/j​.ijproman​.2014​.04​.005 Provan, K. G., & Kenis, P. (2008). Modes of network governance: Structure, management, and effectiveness. Journal of Public Administration Research and Theory, 18(2), 229–252. Roehrich, J. K., & Lewis, M. A. (2010). Towards a model of governance in complex (product–service) inter‐organizational systems. Construction Management and Economics, 28(11), 1155–1164. Sainati, T., Brookes, N., & Locatelli, G. (2017). Special purpose entities in megaprojects: Empty boxes or real companies? Project Management Journal, 48(2), 55–73. https://search​.ebscohost​.com​/ login​ .aspx​?direct​=true​&db​=bth​&AN​=122103748​&site​=ehost​-live Sankaran, S., Müller, R., & Drouin, N. (2020). Creating a “sustainability sublime” to enable megaprojects to meet the United Nations sustainable development goals. Systems Research and Behavioral Science, 37(5), 813–826. https://doi​.org​/10​.1002​/sres​.2744 Šimkonis, S., Müller, R., Alonderienė, R., Chmieliauskas, A., & Pilkienė, M. (2021). Multi-level governance in inter-organizational project settings. The Proceedings of the British Academy of Management (BAM), Conference in the Cloud, Lancaster University, UK. Simon, H. (1962). The architecture of complexity. Proceedings of the American Philosophical Society, 106(6), 467–482. Skelcher, C. (2005). Jurisdictional integrity, polycentrism and the design of democratic governance. Governance, 18(1), 89–111. http://scholar​.google​.com​/scholar​?q​=related​:mVjV0OlkLvIJ​:scholar​ .google​.com/​&hl​= en​&num​=30​& as​_ sd​​t​= 0​, 5​​%5Cnp​​apers​​2:/​/p​​ublic​​ation​​/uuid​​/6675​​F BEC-​​91B7-​​ 4415-​​AD78-​​6A7B0​​D8D42​​46 Smith, A. (2007). Emerging in between: The multi-level governance of renewable energy in the English regions. Energy Policy, 35(12), 6266–6280. https://doi​.org​/10​.1016​/j​.enpol​.2007​.07​.023 Sørensen, E. (2016). Democratic network governance. In C. Ansell & J. Torfing (Eds.), Theories of governance (pp. 419–427). Edward Elgar Publishing. Toivonen, A., & Toivonen, P. U. (2014). The transformative effect of top management governance choices on project team identity and relationship with the organization – An agency and stewardship approach. International Journal of Project Management, 32(8), 1358–1370. https://doi​.org​/10​.1016​/j​ .ijproman​.2014​.07​.001 Turner, J. R. (2022). Using principal–Steward contracting and scenario planning to manage megaprojects. Project Management Journal, 53(1), 8–16. https://doi​.org​/10​.1177​/87569728211061836 Turner, J. R., & Keegan, A. (2001). Mechanisms of governance in the project-based organization: Roles of the broker and steward. European Management Journal, 19(3), 254–267. https://doi​.org​/10​.1016​/ S0263​-2373(01)00022-6 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. Weyer, J., Adelt, F., & Hoffmann, S. (2015). Governance of complex systems: A multi-level model (Soziologische Arbeitspapiere No. 42). Dortmund, Germany. https://doi​.org​/10​.17877​ /DE290R​- 401

Multi-level governance 

77

Whetten, D. (1989). What constitutes a theoretical contribution? Academy of Management Review, 14(4), 490–495. Williamson, O. E. (1985). The economic institutions of capitalism. The Free Press. Zhai, Z., Ahola, T., Le, Y., & Xie, J. (2017). Governmental governance of megaprojects: The case of EXPO 2010 Shanghai. Project Management Journal, 48(1), 37–50. https://doi​.org​/10​.1177​/ 875697281704800103

7. Governmentality for positive project management Stewart Clegg and Johan Ninan

INTRODUCTION An increasing number of organizations use projects to bring about change and achieve their strategic and operational objectives through a process of “projectification of everything,” it has been claimed (Jensen et al., 2016). Project governance of the formal aspects of project management is essential for the efficient delivery of these projects but not sufficient. Considering the protests from project communities, who ideally stand to gain from infrastructure and related projects, current methods of project governance are inadequate. It is not only external stakeholders that are likely to be dissatisfied as there are low levels of affinity and loyalty for those employed in temporary project settings (Velasco & Wald, 2022). By contrast, in a positive organization, employees find work meaningful, feel proud of their association with the organization, and show greater commitment to the organization and its activities (Cunha et  al., 2020). When people feel that something is meaningful, they experience a sense of stability, energy, and direction, even in challenging circumstances. Thus, an environment for employees to flourish and thrive is created in such an organization. We define positive project management as a project management governance philosophy meant to bring diverse stakeholders together with a sense of ownership and commitment. Broadly, governance concerns the sum of the many ways projects manage their different internal and external stakeholders. To govern is to wield power, the central concept in the social sciences (Clegg et al., 2006), even when practiced democratically (Lawrence, 2020). Manifestations of power in organizations range from episodic coercion to systemic subjectification (Fleming & Spicer, 2014). The general perception of power is that it is negative, where power is understood as a coercive and repressive act constraining human agency. In theory and practice, however, power can be used for either negative or positive purposes. Negative power is manipulative, coercive, violent, dominating, constraining, antagonistic, destructive, and inhibitive. In contrast, positive power is generative, empowering, collaborative, inclusive, and facilitative (Cunha et al., 2020). Negative power generally relies on coercive force to make another act in a manner they would not ordinarily do, while positive power achieves its effects by shaping and framing what others want to do. Thus, positive power relations are socially constructed and voluntarily entered, as opposed to those that are externally imposed against a person’s will (Nye, 2011). A particular way of achieving positive power has been much discussed in recent social science, especially that of dealing with organizations and management – the concept of governmentality developed by Michel Foucault (see McKinlay et al., 2012). Foucault’s concept of governmentality focuses on how specific forms of knowledge and power emerge that enable individuals to govern themselves. Governmentality entails consideration of those administrative powers and knowledges that we accept as shaping our everyday lives, and is a concept 78

Governmentality for positive project management  79

involving the subtle exercise of a power aimed at creating self-governing subjects of power. It enables an understanding of the processes including the multiple ways in which it is enacted and the resulting mentalities which underpin governance in project settings. It concerns the ability to structure the actions of others through subtle strategies rather than recourse to coercive control or constraint (Foucault, 2003a). The practice of governmentality aspires to create a common sensemaking frame (Weick, 1995) whereby project participants will voluntarily and willingly agree to be normatively governed in choices forming the subjectivity of their project selves (Barnett et  al., 2014). The aspiration is that the personal ambitions of those governed will become enmeshed with those of the overall project management team through their subjectification to these norms. Governmentality can be considered as a productive network that runs through the whole administrative apparatus (Foucault, 2003b). From such a positive power perspective, governmentality has the potential to create an indispensable force for effective governing of both internal and external stakeholders in project settings. Our focus on governmentality includes the broader definition of governing in consideration of the productive nature of power. In this chapter, we argue that governmentality can be a method to achieve more positive project management. We proceed by providing an overview of the concept of governmentality and its application to positive project management. The following section introduces the notion of governmentality, describing the historical origins of the approach and its most important conceptual terms and features. It then discusses some applications of governmentality in project settings, along with the case of the Juukan Gorge. The final sections of the chapter record the governmentality implications of the digital world, of considerable significance for the management of projects in the 21st century.

GOVERNMENTALITY Governmentality is the study of the complex relationship between the subject and power along with their political rationalities, motivations, and technologies through which governance occurs (Lawrence, 2020). The term was coined by Michel Foucault in a lecture series, “The Birth of Biopolitics,” presented at the College de France in the 1970s, which was concerned with tracing the historical shift in ways of thinking about and exercising power in certain societies (Marks, 2000). In the lecture, Foucault talks about how the activity of government became separated from the self-preservation of the sovereign and is redirected toward optimizing the wellbeing of the population (Foucault, 2003c). In the modern era the focus of the activity of government is to make its population potentially more “docile” and “productive,” thereby shifting from the management of a territory to the management of the population (Jessop, 2007). Thus, for Foucault, governmentality is the “art of government” and the “conduct of conduct” and involves the multiple ways through which social order induces individuals and groups to think and behave in certain ways (Foucault, 2007). Governmentality that is concerned with making a body of people productive can be considered as a form of positive power; it creates positive effects not by limiting what people can do but by enabling an increased scope for their agency and actions, within limits. It focuses on positively shaping the imaginaries and character orientations of a specific body of people. Power is exercised indirectly via modes of subjectification, self-management, and proactive compliance (Clegg, 2019), which is why it can be considered a form of positive power; it

80  Research handbook on the governance of projects

enables rather than constrains. Multiple scholars suggest governmentality has proved to be perhaps Foucault’s most productive concept as it concerns managing a body politic as a collective mass (McKinlay & Taylor, 2014; Miller & Rose, 2008). Governmentality techniques strive to create and reinforce the type of subjects they seek to govern. Rather than seeing power relations as a matter of different forces’ positions and resources, Foucault saw it in terms of strategies, discourses, and processes (Clegg, 2023). The focus was on “the totality of practices, by which one can constitute, define, organize, instrumentalize the strategies which individuals in their liberty can have in regard to each other” (Foucault, 1988, p. 20). Governmental technologies can vary from mundane documents, calculations, techniques, apparatuses, to specific programs and procedures through which authorities seek to embody and give effect to governmental ambitions (Rose & Miller, 1992). There are multiple techniques and sites in which governmentality works. Unlike government in the traditional sense, governmentality goes beyond the traditional boundaries of the state apparatus to be government ubiquitous in social relationships, in the most ordinary of activities, the finest of empirical minutiae (McKee, 2009). Governmentality concerns the nature and practice of government (Burchell, 1993) through the mentalities of those that are its subjects, those that identify with and practice its freedoms and know its pleasures and practice its discourse of self-surveillance and subjectification (Sewell, 1998). The governed become subjects of power that achieve outcomes through attraction to their purpose rather than through coercion or payment in their pursuit (Nye, 2008). With governmentality, people voluntarily and willingly position their subjectivity in relation to an external normativity (Jackson & Carter, 1998); hence, organizations must be normatively designed for the successful delivery of governmentality (Simard et al., 2018) as the local “art of governing.” Calculated attempts to direct human behavior normatively toward aims make up the background rationality of governmentality (Dean, 1999). Projects, as instruments that bring about transitions and change, that make futures unfold in socio-materiality, seek to shape conduct by working through the desires, aspirations, interests, and beliefs of various actors both internal to the project and outside of its formal remit. The earliest work on governmentality for positive project management was the study of designing an alliance culture between a public-sector body and three private-sector contractors for the construction of a large infrastructure project meant to prevent storm water detritus and sewage ending up in the harbor in Sydney, Australia (Clegg et al., 2002; Pitsis et al., 2003). The project offices were festooned with banners declaring the ideals of a “no-blame” culture and promoting “whatever is best for the project,” along with glossy photography and clearly visible mission and vision statements. The walls of the staff kitchen were decorated with stories about the project that had been cut out of the local and metropolitan press. The progress of the project was displayed in charts throughout the office space. Notices were posted about forthcoming social and training events. All parties to the alliance contract were partners in a risk/reward scheme which was based on successful achievement of key performance indicators of schedule, budget, occupational health and safety, community, and ecology. Normativity was instituted through training, through inclusive practices involving the workforce and subcontractors, and through the visual cues of the space in which project staff worked. A visible commitment to the key performance indicators was evident from observation of the project office where all the alliance partners were collocated. Through these strategies a culture of trust became widely shared both internally between project teams and externally between stakeholders formally and informally implicated in the project. Trust reduced transaction

Governmentality for positive project management  81

costs in terms of control and increased the opportunity for positive interaction. Thus, the study highlighted how different governmentality instruments in project settings were used for positive project management. After the work of Clegg et al. (2002), other scholars considered governmentality aspects in project settings. Müller et al. (2016) showed a significant correlation between governmentality as an enabler for project governance and organizational success. Renou (2017) emphasized the importance of governmentality for performance measurement and regulation in the case of water utilities in France. Ninan et al. (2019) studied a metro rail project in which the role of governmentality in branding the project and managing the project community on social media was vital. As we shall see in the next section with the case of Juukan Gorge, the projection of governmentality can occur not only through face-to-face contact but also through use of digital tools. We have stressed the positive aspects of governmentality but have said little about how it emerges. One important consideration is through striving to create a definitive break with past practices, premised on more conventional power relations. In the case of the project that Clegg et  al. (2002) and Pitsis et  al. (2003) researched, the project had to be accomplished within a tight temporality. The project would have failed if it had not been ready for the Sydney Olympic Games. The immediacy and immovability of this event created a positive breach with past practices of competitive tendering and the adversarial micropolitics that often accompanied accomplishing the winning tender, given tight margins in the projectbased construction industry (for examples, look at the empirics in Clegg, 1975). Sometimes the breaching is less positive, however, events can create significant breaches between pasts and futures, such as happened in the case to which we turn next, when a naturally occurring “breaching experiment” (Garfinkel, 1967) occurred on a macro-scale.

JUUKAN GORGE CASE Sometimes, in corporate circles, it takes a public relations disaster to make clear the importance of governmentality in terms of corporate actors’ responsibility, autonomy, and choice. A case in point occurred in the corporate behemoth, Rio Tinto, the minerals and resources project company. In May 2020 Rio Tinto blasted a cliff face near its Brockman iron ore mine in the Pilbara, Western Australia, to access iron ore. The blasting destroyed a site of spiritual significance to the traditional owners of the land. Much adverse media coverage followed the event. Interpretations of the event were very largely agreed that the blasting was illegitimate even if not illegal because in destroying a place of indigenous value it demonstrated corporate values that were out of tune with contemporary accounting of the significance of respecting indigenous places, practices, and peoples. Under West Australian law, Rio Tinto had the legal right to mine the area but in light of the media and indigenous reaction to so doing, they breached legitimacy. After the event, the following appeared on the Rio Tinto website: This was a breach of the trust placed in us by the Puutu Kunti Kurrama and Pinikura people and other Traditional Owners of the lands on which our business operates. We apologise unreservedly to the Puutu Kunti Kurrama and Pinikura (PKKP) people, and to people across Australia and beyond, for the destruction of Juukan Gorge … In allowing the destruction of Juukan Gorge to occur, we fell far short of our values as a company and breached the trust placed in us by the Traditional Owners of the lands on which we operate. It is our collective responsibility to ensure that the destruction of

82  Research handbook on the governance of projects

a site of such exceptional cultural significance never happens again, to earn back the trust that has been lost and to re-establish our leadership in communities and social performance. (https://www​.riotinto​.com ​/en ​/news​/inquiry​-into​-juukan​-gorge)

Rio Tinto has a segmented organizational structure with product divisions, such as iron ore, operating as autonomous strategic business units, in which responsibility, autonomy, and choice to make decisions reside. Choice in this case led to decision-making with disastrous environmental and stakeholder consequences that threatened the legitimacy of the entire corporation, as Rio Tinto recognized in its changes to governance published on its website. For the future, strategic business units, such as the iron division, were assigned responsibility for communities and social  performance, partnerships, and engagement. A central communities and social  performance area of expertise was being established to build line management capability and provide support as well as deliver assurance. An Integrated Heritage Management Process established reviews of all sites and ranks each for cultural significance, informed through consultation with the traditional owners of the land, and confirms that these traditional owners have been consulted prior to any material impact of Rio Tinto activity, the nature of which will be explicitly advised. Instead of blasting and extracting to take advantage of market opportunities, the new forms of mining subjectivity were to embrace indigenous peoples and their knowledge. The subjectivities of miners, fused in engineering and economics, were to be reframed by acknowledging the subjectivity of those whose lands had previously been taken for granted. In addition, a new approvals process for projects of “high” or “very high” significance under the new Integrated Heritage Management Process was established that meant that the heritage subcommittee of the executive committee or the board must approve projects referred to it and provide commitments to greater transparency and material benefit to traditional owners. On Rio Tinto’s website, an interview with indigenous man Brad Welsh, chief adviser to the chief executive officer on indigenous affairs, is given prominence on the website (https://www​.riotinto​.com​/news​/stories​/ how​-we​-are​-listening), stressing “truth telling” and treating traditional owners as partners. What these reforms signal is a realization in Rio Tinto that governance must be more than a formal instrument; it must extend to governmentality shaping the choices and dispositions of its executives in areas much broader than their technical and managerial expertise. These subjects must now extend their knowledge to an appreciation of anthropology and a respect for cultural traditions among those who are residents and traditional custodians of the lands on which Rio Tinto operates; moreover, the voice of these custodians will now be heard in agreements that have to be negotiated in advance of any project work. Rio Tinto learned through a failure of governmentality how significant and costly such shortcomings can be, both internally and externally (Verrender, 2020). Destroying trust can occur rapidly (Kramer, 2009), as Juukan Gorge demonstrates. It is not just traditional owners of the land and places on it that are external stakeholders in projects, as the next section elaborates.

GOVERNMENTALITY IN THE DIGITAL ERA In the modern digital era, more and more digital technologies and information and communication technology tools are used in project settings, such as the Rio Tinto website. With the advent of these technologies, there is a need to rethink the taken-for-granted concepts and

Governmentality for positive project management  83

consider the different instruments and sites where governmentality acts. Discourses, emojis, photos, videos, and diverse other forms of engagement prevalent in the modern digital era’s socio-materiality can have governmentality implications (Ninan et al., 2020). The use of social media in an infrastructure project in India is recorded in Ninan et al. (2019). The project had a social media strategy for communicating effectively with stakeholders outside the project’s formal bounds. The objective was to build alliances with key constituencies of interest, forged through building a common sense of pride and purpose that incorporated those upon whom project work had effects. Progress updates of the project such as work completed, progress photos, and service information were regularly shared on the official social media platform of the project. Glossy images depicted the inside of trains and outside of stations and did not cover any negative events such as accidents, safety issues, or delays. There was an explicit focus on promoting the project using positive rhetoric, such as the project “transforming the city” and how awards bestowed on the project were a source of pride for the city. Promotional events and awareness programs to educate the community about the benefits of the project were conducted in parks, malls, and colleges. Reports of other events such as hoisting flags for national days and celebration of regional festivals were shared on the social media platforms. Painting competitions on the theme “go green metro” were conducted for school children. The use of these strategies resulted in some visible changes in the behavior of the project community. Traffic diversions during construction did not create problems due to the support gained from the community through the social media strategy. The project’s celebration of regional festivals became an icon of the city’s identity, complementing similar discourses found in the social media interactions of the project organization. In addition, there were community brand advocates for the project, encouraging community members in supporting and defending the decisions of the project on social media. This transformation of identity occurred in part because the project targeted sections of the population, such as school children, specifically to enroll and translate their unformed interest into being loyal supporters of the project. A positive brand image for the project was developed; community members claimed that they were proud of the project rather than being inconvenienced. The implications of the governmentality effect were extended from the external stakeholders to the project team in a subsequent work (Ninan et  al., 2021). Project teams were also exposed to the same social media. All the project participants were also members of the community, they read the discourse on social media posts and news articles and were also subjects of power through governmentality. They took pride in the asset and understood the importance of what they were building, resulting in them being individually motivated and taking responsibility on their own. Project team rationalities also involved an acceptability of public inconvenience in the process of the construction, often stating that the public has accepted the project. The practice of governmentality does not mean that resistance does not exist. Because power, in the Foucauldian view, flows everywhere, it is also subject to tactical reversals, resistance, and change (Foucault, 1978). The subjects of power can react and resist governmental actions as governmentality is exercised over free subjects with a capacity for action, rather than those oppressed (McKee, 2009). Hence, such resistance should be treated as an inventory of alternatives to current governing practices or political strategies and not as a liberation from an oppressor that has to be overthrown, destroyed, or abandoned (Cooper, 1994). Protesters of projects create their own social media pages and other public discourses in the process of resisting the governmental actions of the promoters of projects prevalent on social media.

84  Research handbook on the governance of projects

For instance, the protesters of the Westconnex project in Sydney, Australia, created a Twitter page titled “WestCONnex Action” highlighting how the project is a large “con” project by the government, in the process trying to sway governmentality in their favor. Labels are one of the ways through which resistance to governmentality acts. Labels in project settings exist as a labyrinth tangling up peoples and practices, from different agencies, in and around projects which are then contested and maintained through more labels (Ninan & Sergeeva, 2021). In studying governmentality practices in projects, research should focus on micro-level analysis of inscriptions, practices, and discourses to trace how positive processes of power act upon and shape individual and group behavior (Lawrence, 2020). Observations of practices, open-ended and semi-structured interviews with respondents, study of data sets related to project settings, such as social media, news articles, corporate emails, LinkedIn profiles, etc., can help understand these practices in the 21st century.

CONCLUSION In this chapter, we describe governmentality for positive project management and consider the potential of positive power as social relational processes that are generative, empowering, and facilitative of individual and collective flourishing. In the case of Rio Tinto repairing the breach meant empowering both indigenous voices and corporate voices, the former through having to engage positively rather than adversely with actors that were usually marginalized and resisted. In the Juukan Gorge case a website posting was used as an instrument of governmentality. Project organizations can adopt governmentality processes to generate positive project management such as enabling dialogue, spreading positive news of the project, and creating an inclusive culture around the project, through digital and social media apps for the modern era. Diverse tools such as social media, videos, and online news articles can be employed. Digital media can play a pivotal role in positive project management through governmentality as it can have marketing and branding implications in projects not only for “cooling out” (Goffman, 1952) potential opposition but also for constituting project participants as subjects aware of their role in creating civic virtue.

REFERENCES Barnett, C., Clarke, N., Cloke, P., & Malpass, A. (2014). The elusive subjects of neo-liberalism: Beyond the analytics of governmentality. In S. Binkley & J. Littler (Eds.), Cultural studies and anticonsumerism (pp. 116–145). Routledge. Burchell, G. (1993). Liberal government and techniques of the self. Economy and Society, 22(3), 267–282. Clegg, S. (1975). Power, rule and domination: A critical and empirical understanding of power in sociological theory and organizational life. Routledge. Clegg, S. R. (2019). Governmentality. Project Management Journal, 50(3), 266–270. Clegg, S. R. (2023). Frameworks of power (2nd edition). Sage. Clegg, S. R., Courpasson, D., & Phillips, N. (2006). Power and organizations. Sage. Clegg, S. R., Pitsis, T. S., Rura-Polley, T., & Marosszeky, M. (2002). Governmentality matters: Designing an alliance culture of inter-organizational collaboration for managing projects. Organization Studies, 23(3), 317–337.

Governmentality for positive project management  85

Cooper, D. (1994). Productive, relational and everywhere? Conceptualising power and resistance within Foucauldian feminism. Sociology, 28(2), 435–454. Cunha, M. P., Rego, A., Simpson, A., & Clegg, S. (2020). Positive organizational behaviour: A reflective approach. Routledge. Dean, M. (1999). Governmentality: Power and rule in modern society. Sage. Fleming, P., & Spicer, A. (2014). Power in management and organization science. Academy of Management Annals, 8(1), 237–298. Foucault, M. (1978). The history of sexuality. Pantheon Books. Foucault, M. (1988). The care of the self as a practice of freedom. In J. Berbauer & D. Rasmussen (Eds.), The final Foucault (pp. 1–20). MIT Press. Foucault, M. (2003a). The subject and power. In P. Rabinow & N. Rose (Eds.), The essential Foucault: Selections from essential works of Foucault 1954–1984 (pp. 126–144). The New Press. Foucault, M. (2003b). Truth and power. In P. Rabinow & N. Rose (Eds.), The essential Foucault: Selections from essential works of Foucault 1954–1984 (pp. 300–318). The New Press. Foucault, M. (2003c). Governmentality. In P. Rabinow & N. Rose (Eds.), The essential Foucault: Selections from essential works of Foucault 1954–1984 (pp. 229–245). The New Press. Foucault, M. (2007). Security, territory, population: Lectures at the Collège de France, 1977–78. Springer. Garfinkel, H. (1967). Studies in ethnomethodology. Prentice Hall. Goffman, E. (1952). On cooling the mark out: Some aspects of adaptation to failure. Psychiatry, 15(4), 451–463. Jackson, N., & Carter, P. (1998). Labour as dressage. In A. McKinlay & K. Starkey (Eds.), Foucault, management and organization theory (pp. 51–64). Sage. Jensen, A., Thuesen, C., & Geraldi, J. (2016). The projectification of everything: Projects as a human condition. Project Management Journal, 47(3), 21–34. Jessop, B. (2007). From micro-powers to governmentality: Foucault’s work on statehood, state formation, statecraft and state power. Political Geography, 26(1), 34–40. Kramer, R. M. (2009). Rethinking trust. Harvard Business Review, 87(6), 68–77. Lawrence, J. (2020). Governmentality approaches. In D. Bigo, T. Diez, E. Fanoulis, B. Rosamond, & Y. A. Stivachtis (Eds.), The Routledge handbook of critical European studies (pp. 60–71). Routledge. Marks, J. (2000). Foucault, Franks, Gauls: Il faut defendre la société: The 1976 lectures at the Collège de France. Theory, Culture & Society, 17(5), 127–147. McKee, K. (2009). Post-Foucauldian governmentality: What does it offer critical social policy analysis? Critical Social Policy, 29(3), 465–486. McKinlay, A., Carter, C., & Pezet, E. (2012). Governmentality, power and organization. Management & Organizational History, 7(1), 3–15. McKinlay, A., & Taylor, P. (2014). Foucault, governmentality, and organization: Inside the factory of the future. Routledge. Miller, P., & Rose, N. (2008). Governing the present: Administering economic, social and personal life. Polity Press. Müller, R., Shao, J., & Pemsel, S. (2016). Organizational enablers for project governance. Project Management Institute. Ninan, J., Clegg, S., & Mahalingam, A. (2019). Branding and governmentality for infrastructure megaprojects: The role of social media. International Journal of Project Management, 37(1), 59–72. Ninan, J., Mahalingam, A., & Clegg, S. (2021). Asset creation team rationalities and strategic discourses: Evidence from India. Infrastructure Asset Management, 8(2), 1–10. Ninan, J., Mahalingam, A., Clegg, S., & Sankaran, S. (2020). ICT for external stakeholder management: Sociomateriality from a power perspective. Construction Management and Economics, 38(9), 840–855. Ninan, J., & Sergeeva, N. (2021). Labyrinth of labels: Narrative constructions of promoters and protesters in megaprojects. International Journal of Project Management, 39(5), 496–506. Nye, J. S. (2008). Public diplomacy and soft power. The Annals of the American Academy of Political and Social Science, 616(1), 94–109. Nye, J. S. (2011). The future of power. Public Affairs.

86  Research handbook on the governance of projects

Pitsis, T., Clegg, S. R., Marosszeky, M., & Rura-Polley, T. (2003). Constructing the Olympic dream: Managing innovation through the future perfect. Organization Science, 14(5), 574–590. Renou, Y. (2017). Performance indicators and the new governmentality of water utilities in France. International Review of Administrative Sciences, 83(2), 378–396. Rose, N., & Miller, P. (1992). Political power beyond the state: Problematics of government. British Journal of Sociology, 43(2), 173–205. Sewell, G. (1998). The discipline of teams: The control of team-based industrial work through electronic and peer surveillance. Administrative Science Quarterly, 43(2), 397–428. Simard, M., Aubry, M., & Laberge, D. (2018). The Utopia or order versus chaos: A conceptual framework for governance, organizational design and governmentality in projects. International Journal of Project Management, 36(3), 460–473. Velasco, M. M. A., & Wald, A. (2022). The dark side of projectification: A systematic literature review and research agenda on the negative aspects of project work and their consequences for individual project workers. International Journal of Managing Projects in Business, 15(2), 272–298. Verrender, I. (2020, September 14). Consequences for Rio Tinto over Juukan Gorge catastrophe are the new norm. ABC News. Retrieved June 7, 2021, from https://www​.abc​.net​.au​/news​/2020​- 09​-14​/ superannuation​-forcing​-change​-rio​-tinto​-juukan​-gorge​/12659824 Weick, K. E. (1995). Sensemaking in organizations. Sage.

PART II PROJECT GOVERNANCE Part II of this book addresses project governance, which is intricately related to corporate governance since it is the application of the principles of governance to projects. The aim of project governance is to ensure consistent and predictable delivery of projects within the limitations set by corporate governance or its agreed upon subset in contracts with external partners. Hence, this part of the book covers a variety of topics of project governance throughout three main lenses raised in Chapters 8 to 24. First, its focuses on project governance for strategy implementation, value creation, entities such as steering committees, and project management offices. Then, it is oriented toward project governance implementation and it discusses: the governance of commercial interface, private–public partnerships, methodologies, issues related to normalization of deviation, governance implication, and ethics and cultural implications. Finally, project governance is considered in the context of megaprojects and it looks at public acceptance of infrastructure projects, governance of not-for-profit projects, quality in megaprojects, and risks and coping strategies in megaprojects. Each chapter is described as follows.

FIRST LENS: PROJECT GOVERNANCE Chapter 8 by Ata Ul Musawir discusses the key guidelines in the literature for enabling strategy implementation through projects at each of the hierarchical interfaces between corporate governance, governance of projects, project governance, and project management. Subsequently, some directions for future research are identified. Chapter 9 by Karyne C.S. Ang, Shankar Sankaran, and Nathalie Drouin draws upon recent governance, stakeholder value, and megaproject literature to discuss how stakeholders make sense of value, beyond mere economic and financial value. The authors look into how megaproject governance might support the creation of social value. These multi-stakeholder value perspectives are important in supporting approaches to governance and decisionmaking in megaprojects with the intention of creating, negotiating, and delivering value fairly to their various stakeholders. Chapter 10 by Lynn Crawford provides insight into the common features and challenges of sponsorship, steering groups, and equivalent governance arrangements. Such roles and entities are central to governance of temporary endeavors, as they take accountability for direction and oversight of a project, program, or portfolio on behalf of the owner for whom the endeavor

88  Research handbook on the governance of projects

is being undertaken. They have an important role in ensuring that the temporary endeavor has the resources, capability, guidance, and timely decision-making required to enable it to deliver value. The specific roles and responsibilities, membership, and operation of these governance entities must be carefully tailored to suit the widely varying characteristics and needs of temporary endeavors from single owner projects, to complex internal change programs and multi-owner megaprojects delivered in alliance, partnership, and network arrangements into volatile and uncertain environments. Chapter 11 by Monique Aubry and Magali Simard proposes some answers to guide reflections on the integration of project management offices (PMOs) within the broader organizational governance. The chapter emphasizes the position of the PMO at the interface of the temporary and the permanent organizations. It provides definitions and differentiates between governance, governmentality, and organizational design. These three components are essential and complementary for a PMO to take its place within organizational governance. PMO fundamentals are also introduced to give decision-makers the opportunity to build a PMO that responds to their specific situation. The mapping of governance, governmentality, and organizational design with the fundamentals allows for a rich analysis that can help shape PMO governance. Finally, the chapter discusses the implications of the agile approach for PMO governance.

SECOND LENS: PROJECT GOVERNANCE IMPLEMENTATION Chapter 12 by Graham M. Winch looks at the paradoxical challenge of governance across the commercial interface between project owners and their suppliers of the resources required to execute the project. It charts the evolution of governance from neo-classical contracting to relational contracting over the last 250 years or so as projects have become more complex and uncertain. It examines some recent attempts to develop relational contracting: the CRINE initiative in the UK North Sea; UK defense acquisition; Heathrow’s T5 project; and the contemporary Project 13 initiative, which proposes the enterprise governance of the commercial interface on complex engineering projects. Chapter 13 by Nicola Thounaojam, Ganesh Devkar, and Boeing Laishram aims to understand the role of contractual and relational governance in institutionalizing sustainability in private–public partnerships (PPPs) and megaprojects. In this chapter, the authors conduct a single case study of a PPP airport project in India. The results suggest that contractual and relational governance is instrumental in improving the sustainability of PPPs. Contractual governance lays the groundwork for moving the partnership toward sustainability, while relational governance, through the impact of normative and cognitive institutions, enables one to go above and beyond in achieving sustainability in PPP megaprojects. Chapter 14 by Miia Martinsuo outlines the basic features and components of project management methodologies as mechanisms of governance, differentiates the alternative methodology types (adopted, adapted, designed) in terms of their contextualization and use, and reviews current-state knowledge on the benefits and challenges of using project management methodologies. While formalization of project management through these methodologies may promote capability development and learning from one project to another, it also may cause rigidity, which may become quite destructive in dynamic project contexts. The chapter, therefore, discusses the necessity of flexibility, interpretation, adaptation, and continuous learning in using project management methodologies.

Part II  89

Chapter 15 by Jeff Pinto and Kate Davis examines the behaviors and motivations of project team members in situations where deviant behaviors have been accepted and normalized as part of project operations. It discusses how normalization of deviance (NoD) manifests in terms of (1) project proposals and strategic misrepresentation, (2) client/contractor relationships, (3) planning and scheduling dynamics, and (4) workplace safety, and provides examples of NoD in practice. The chapter concludes with implications of NoD for organizational performance improvement and offers advice for how to avoid NoD situations. Chapter 16 by Ralf Müller introduces morals and ethics and a tool to help decision-making when facing ethical issues in projects. A variety of ethical issues in projects and their relation to different project governance approaches are discussed. These approaches are distinguished along the lines of the four different project governance paradigms presented in an earlier chapter. Different paradigms give rise to different types and frequencies of ethical issues occurring in projects and different levels of trust among the participating parties. The role of trust, the costs of mistrust, and their relation to governance are discussed from an ethics perspective. Types of ethical issues are presented with an assessment tool for organizations to identify the most likely ethical issues in their particular setting. The chapter finishes with a discussion of the role of corporate governance and the interaction between corporate governance and project governance in the emergence of ethical issues in projects. Chapter 17 by Rodney Turner identifies four behavioral constructs and conducts a literature review to explore how these constructs link governance and decision-making to improved project performance. Twelve project management professionals were interviewed about 24 decisions they had made on projects, and six case studies were investigated. Thus, this chapter shows that good governance empowers competent people to make decisions, so good governance leads to better decision-making and thence to improved project performance. Chapter 18 by Alfons van Marrewijk discusses a cultural perspective of megaproject governance. The characteristics of megaprojects bring along specific needs for complex governance arrangements to ensure their smooth execution. Such ex ante arrangements have proven to be too limited to anticipate the uncertain, ambiguous, or invisible issues that emerge during execution. A cultural perspective of megaproject governance contributes to the debate on project governance with a focus on the, sometimes hidden, cultural practices of megaproject governance. Insights into these practices help to understand the impact of governance arrangements on the daily work of megaproject actors.

THIRD LENS: MEGAPROJECT GOVERNANCE Chapter 19 by Maude Brunet and Sofiane Baba elucidates the links between governance frameworks for public infrastructure projects and their social acceptability. Building on recent literature on project studies, sustainability, and public policy, it uncovers the relationships and blind spots between governance and social acceptability. More specifically, integrated impact assessments are explored as essential decision-making tools covering key factors of projects, i.e., environmental, societal, and governance. This chapter’s discussion brings forward the benefits of governance frameworks aiming proactively at social acceptability with a win–win approach for the main stakeholders, such as the government (project owner), the local community, and civil society. Chapter 20 by Ole Jonny Klakegg and Gro Holst Volden illustrates the importance of project evaluations in harvesting the benefits of having a working project governance framework.

90  Research handbook on the governance of projects

It presents necessary principles and qualities required to achieve desired learning effects. The chapter looks into literature on learning organizations, learning from projects, and how evaluations may be a source of lessons learned. Results show that most projects are successful in some perspectives and less so in others. There is vast potential for learning within and across sectors and types of projects, but for learning to happen the evaluations need to be of good quality, with clear recommendations for the intended target groups, be available, and ultimately be used to make improvements. Chapter 21 by Nathalie Drouin and Yves Genest highlights that major infrastructure projects (MIPs) are common goods that are too often unsuited to the needs of populations. They are complex to manage and their implementation requires high capital, the involvement of multiple stakeholders, and the consideration of environmental, social, and governance challenges. Conventional governance practices of MIPs are no longer sufficient to ensure their success. The performance and success of MIPs are more based on the creation of social value, non-financial benefits that promote the economic development of societies and the wellbeing of their populations. Thus, the chapter looks at environmental, social, and governance criteria to highlight where these principles come from and the relationship with the governance of MIPs. Chapter 22 by Patrick Renz introduces the findings on governance, middle management, and operations from the assessments of 67 not-for-profit organizations and 700 persons. The chapter suggests a new governance model understanding comprising themes such as system, mission, integrity, stakeholders, risks, and audit and reporting. This new governance of nonprofit organizations (NPOs) model requires to be implemented all through the organization in a leveladjusted bidirectional discourse. The research summarized in this chapter reveals that nearly all organizations have so-called governance gaps but they are mostly ignorant about them. This yields a substantial upward potential to improve the impact and sustainability of NPOs. Chapter 23 by Florence Yean Yng Ling and Wujuan Zhai develops a predictive model to forecast the project quality of megaprojects based on governance-related constructs in social responsibility (such as subjective norms, group norms, social identity, organizational support, and obligation). As there are many types of megaprojects, the scope of research is limited to mega water transfer projects in China. A structured questionnaire was designed to measure the extent to which different governance measures were adopted or observed in megaprojects. The results from multivariate linear regression analysis indicate that group norms, social identity, organizational support, and obligation explain 21 percent of the variance in the quality of megaprojects. The findings suggest that when project participants feel that they are influential stakeholders who can impact the decisions made by the project organization (social identity variable) and have an internal obligation to take collective action, their megaprojects are likely to exhibit higher quality. An additional discovery is that at the organizational level, when companies have resolute goals to take socially responsible collective action (group norm variable) and have established a relatively complete social responsibility management system (organizational support variable), the quality of megaprojects is further boosted. Finally, Chapter 24 by Rehab Iftikhar highlights that crisis in a megaproject has a considerable impact which could jeopardize the project and its organizations. In a worst-case scenario, it can cause reputational damage to participating organizations, which can take a long time to recover from the crisis. Some might never enjoy the same reputation as before. Thus, the chapter uncovers different types of crises and coping strategies to manage crises in megaprojects. It also presents a crisis management model that represents all possible crises and coping strategies for each type of crisis, which enhances theoretical and empirical insights.

8. Governance of projects and project governance: enabling strategy implementation through projects Ata Ul Musawir

INTRODUCTION Governance arrangements in the context of projects can broadly be grouped into two main concepts (Müller et al., 2014, 2015, 2016). The first is governance of projects (GoP), which builds upon the concept of the management of projects developed by Morris (1997) and is used to refer to the governance of groups of projects that takes place at the program, portfolio, and board levels (Müller et  al., 2014). Governance at this level adopts a broader perspective and focuses on selecting the appropriate projects in line with the strategic priorities of the funding organization and subsequently ensuring benefits realization and long-term value creation through projects. The second is project governance (PG), which refers to the governance of individual projects (Müller et al., 2014). Governance at this level adopts a narrower perspective and focuses on providing direction, oversight, and support to ensure successful project delivery and realization of the project’s business case. These two concepts represent the two main dimensions of governance in the context of projects, which appear as a recurrent dichotomy in the literature (Musawir, 2022); for example, in the two streams of literature identified by Ahola et al. (2014), in the portfolio management vs. assurance aspects of governance defined by Winch (2014), and the governance of complex change across the enterprise vs. governance of individual change initiatives defined by APM (2018). Both GoP and PG are embedded within, and a subset of, the corporate governance system (Müller, 2009; Too & Weaver, 2014). Corporate governance refers to the formal system through which organizations are directed and controlled (Cadbury, 1992). Since corporate governance is concerned with the direction and control of the entire organization and its activities, GoP also falls under the scope of corporate governance (APM, 2011, 2018; Levie et al., 2017; Müller et al., 2013). However, the involvement of the corporate governance framework in the oversight of projects is lacking as evidenced by, for example, the high rate of failure of large capital projects (Bekker & Steyn, 2009a; Flyvbjerg et al., 2007). This is likely due to the fact that project work differs significantly from standard operations, or “businessas-usual,” in that it typically involves the use of temporary organizational arrangements that may involve multiple stakeholders, sometimes from multiple organizations. Therefore, projects require their own unique governance mechanisms (Garland, 2009) based on specialist project management skills and knowledge (Too & Weaver, 2014). Accordingly, GoP and PG are specialized subsets of corporate governance that focus specifically on the governance of project-related decisions and activities within an organization (Bekker & Steyn, 2009b; Klakegg et al., 2008) and collectively serve to fill the “governance gap” between corporate governance and project management (Levie et al., 2017; Renz, 2007). 91

92  Research handbook on the governance of projects

The importance of projects for realizing business value and strategic objectives is widely documented (Serra & Kunc, 2015; Shenhar & Dvir, 2007; Zwikael & Smyrk, 2012). Increasingly, projects are being recognized as being critical to strategy implementation hence greater consideration is being given to projects during strategy development (APM, 2020). However, two separate industry research surveys indicate that only 40 percent of projects are actually aligned with business strategy (KPMG, 2010; PMI, 2014). While the ultimate accountability for successful strategy implementation, including through projects, lies with the corporate governance system, GoP and PG collectively assume delegated responsibility for ensuring that projects are aligned with strategic objectives (Bekker & Steyn, 2009a; Too & Weaver, 2014). For example, Müller (2009, p. 16) described the overriding aim of governance in the context of projects as “a consistent and predictable delivery of projects and programs in accordance with their planned contribution to corporate strategy and stakeholder expectations.” Due to the generally poor track record of strategy implementation through projects (Young et  al., 2012), this function of governance in the context of projects is increasingly being stressed more explicitly (APM, 2018; Musawir et al., 2020; PMI, 2016). To understand how GoP and PG can effectively facilitate the realization of strategic objectives through projects, it is imperative to understand how these objectives are translated and progressively linked down to the project level, as well as the mechanisms through which the alignment of projects with strategy is ensured (Morris & Jamieson, 2005). Accordingly, this chapter discusses the role of GoP and PG as a two-tiered interface between corporate governance and project management, i.e., between strategy and projects, as depicted in Figure 8.1. Relevant guidelines from the literature are discussed in three main sections representing the

Source:  adapted from Levie et al. (2017)

Figure 8.1  Governance of projects and project governance as the two-tiered interface between strategy and projects

Governance of projects and project governance  93

interfaces between corporate governance and GoP, between GoP and PG, and between PG and project management, respectively. Furthermore, an agenda for future research is presented.

INTERFACE BETWEEN CORPORATE GOVERNANCE AND GOVERNANCE OF PROJECTS Strategy Translation Organizational strategy is typically developed by the CEO or equivalent, often in collaboration with the other members of the top management team. The involvement of the board of directors in the strategy development process varies considerably based on various factors such as the board’s structure and management style, as well as organizational and national cultures (Tricker, 1994). Typically, the board provides oversight of the strategy development process, provides recommendations to the management team, and sanctions the resulting strategy in light of the relevant corporate governance guidelines (Townsend, 2007). Subsequently, the strategic objectives are translated progressively downwards into lower-order objectives both in the hierarchy of the permanent organization and at the portfolio, program, and project levels (Morris & Jamieson, 2005; Müller, 2009). In the latter case, GoP and PG facilitate this process of strategy translation and also assume responsibility for the lower-order objectives at their respective levels. The implication is that the effectiveness of GoP and PG is directly dependent upon the effectiveness of the strategy and the clarity with which it is defined and communicated (Ritson et al., 2012). Specifically, at the interface between corporate governance and GoP, the strategy development team need to, first and foremost, set clear strategic objectives that lend themselves to being translated into lower-order objectives at the portfolio management level, which, in turn, should lend themselves to being translated into programs and projects to achieve those objectives. However, Rumelt (2011) argues that much of contemporary strategy is ultimately ineffective in that it does not begin with an honest discussion of underlying problems, is too vague and afflicted with buzzwords rather than focusing on a specific direction, and ends up becoming just a wish list of goals that the organization should achieve with no clearly defined guiding policies and coherent actions that will enable the organization to achieve them. The GoP system may engage in discussions with the strategy team to clarify the strategic direction (Morris & Jamieson, 2005), discuss how programs and projects can contribute to this, and perhaps educate them about the importance of projects in implementing organizational strategy, if needed. Prospective programs and projects would then be required to demonstrate their linkage to strategic objectives. Alternatively, the strategy team may, either directly or in consultation with the portfolio management team, adopt a road-mapping process to proactively determine the appropriate programs and projects required in order to deliver the defined strategy (Oliveira & Rozenfeld, 2010). One of the key advantages of this approach is that it helps prevent the selection of programs and projects that are not closely aligned with the organizational strategy. Furthermore, an enterprise project management office (EPMO) may be enacted to enable this process. EPMOs are typically permanent governance structures that operate at the strategic level and provide high-level oversight and support to the portfolio, program, and project levels (PMI, 2018). In this capacity, EPMOs provide support to the senior management in the evaluation,

94  Research handbook on the governance of projects

selection, and implementation of programs and projects in line with organizational strategic objectives (PMI, 2018). In some cases, the EPMO may even assume full responsibility for managing the organization’s portfolio (APM, 2012). Capturing Emergent Strategies Once the required programs and projects have been selected, there remains a need for close coordination between corporate governance and GoP to manage changes in the strategic objectives. To be effective, strategy needs to be dynamic and agile so that it is able to adapt to the evolving internal and external organizational factors. Morris and Jamieson (2005) explained that strategy implementation through projects is not an entirely top-down process but rather a two-way process where emergent strategies also feed upwards to the strategic level. Mintzberg and Waters (1985) described emergent strategies simply as the “patterns or consistencies realized despite, or in the absence of, intentions” (p. 257). Emergent strategies may arise naturally in programs and projects as they adapt to their environments (Young et al., 2012). Such insights do not always find their way upwards to those involved in strategy formulation and hence may remain invisible or might be recognized only in hindsight, at which point it might be too late to leverage them effectively (Neugebauer et al., 2016). The findings of Kopmann et al. (2017) suggest that strategic control at the portfolio level improves project portfolio performance by enabling both deliberate and emergent forms of strategy, and that the two forms of strategy are complementary in that they enhance each other’s impact on performance. This view is supported by the literature on organizational ambidexterity (March, 1991) and the related concept of strategic ambidexterity (Han, 2007), which indicates that organizations that simultaneously exploit existing capabilities and explore new opportunities achieve better results in the long term. Therefore, in addition to the implementation of planned strategies, the strategy team at the top should proactively identify, capture, and assimilate emergent strategies from programs and projects on an ongoing basis (Morris & Jamieson, 2005). GoP serves as the conduit between the strategy team and projects by facilitating the flow of information to and from the decision-makers on both sides.

INTERFACE BETWEEN GOVERNANCE OF PROJECTS AND PROJECT GOVERNANCE Using Benefits to Maintain Linkage with Strategic Objectives At the interface between GoP and PG, one of the core priorities is to break down portfoliolevel objectives, which are based on strategic objectives, into program-level objectives and then project-level objectives. As the scope of activities at these levels becomes progressively narrower, a key challenge during this process is maintaining the link with the strategic objectives. Serra and Kunc (2015) define organizational strategy in terms of value, suggesting that strategic objectives represent a “value gap” between current and desired value. They suggest that benefits fill this gap by contributing business value, which ultimately leads to the achievement of strategic objectives. Therefore, to facilitate the process of progressively breaking down strategic objectives, benefits can serve as the “missing link” between strategy and projects and serve as a bridge to help link the two worlds (Thorp, 2007). This may be achieved

Governance of projects and project governance  95

by, for example, defining high-level benefits categories at the portfolio level and then defining target benefits (Chih & Zwikael, 2015) which will be realized through programs and projects. The ongoing performance and expected strategic contributions of programs and projects can then be evaluated through concrete metrics and key performance indicators that are linked to the target benefits. Similarly, another approach might be to define objectives at the project, program, and portfolio level in the form of outcomes, intermediate benefits, and end benefits, which are ultimately linked to strategic objectives (Serra & Kunc, 2015). In practice, this linking process does not take the form of a single linear flow but rather a complicated and intertwined network of “value chains” (Too & Weaver, 2014), where the outcomes and intermediate benefits arising from various projects and programs may feed into one another, hence forming an interdependent network of benefits dependencies (Serra & Kunc, 2015). Decision-makers may employ tools such as the benefits dependency network, which involves working backward from the end goal (i.e., the desired investment objectives) and identifying the business benefits necessary to achieve these objectives (Coombs, 2015). Subsequently, the business changes required to achieve these benefits are identified, along with the facilitators and inhibitors of said changes (Coombs, 2015). Hence, the benefits dependency network provides a highlevel overview of the link between project and program outcomes and organizational strategic objectives, while also making explicit the chain of causality between the former and latter. However, organizations generally struggle with the process of linking benefits with organizational strategy (Marnewick, 2016) due to issues pertaining to inadequate benefits formulation procedures (Chih & Zwikael, 2015), the lack of a process to link benefits with strategy, the oversimplification of benefits management as a linear process rather than a closed-loop system, and the difficulty in measuring and reporting benefits. Here, GoP and PG can help to overcome these challenges by facilitating a robust benefits management process and assuming responsibility for benefits realization through programs and projects (Musawir et al., 2017). The realization of benefits would ultimately serve to generate the required value that would lead the organization toward the desired state envisioned in the strategic objectives (Serra & Kunc, 2015). Intermediary Role of Program Management Program management plays a crucial role at the interface between GoP and PG, specifically between portfolio management and PG. Project portfolio management is a governance structure that is concerned with the horizontal integration of all programs and stand-alone projects within a single business unit or the entire organization (Thiry & Deguire, 2007). It is considered a high-level business function that is typically positioned close to the strategic level (Koh & Crawford, 2012). On the other hand, PG has a much narrower focus and is positioned close to the project level. Program management, which involves the collective management of a group of interrelated and interdependent projects that are typically undertaken to achieve some common end benefits, is widely recognized as an important intermediary structure that serves as the bridge between these two levels (Pellegrinelli, 2002; Ritson et al., 2012; Thiry & Deguire, 2007). Program management relies on portfolio management for strategic direction, which is translated and communicated down to the PG level for each constituent project. At the same time, program management relies on PG for ensuring the successful delivery of the outputs and outcomes of each constituent project, which lead to the realization of the expected

96  Research handbook on the governance of projects

benefits. The performance evaluation and expected benefits tracking reports for these projects are communicated upwards to the portfolio management level. Due to its broader scope, ability to deal with complexity and ambiguity, and longevity beyond the traditional project life cycle, program management is often considered to be the more appropriate level for realizing benefits and strategic objectives (Thiry & Deguire, 2007). The governance functions served by program management include defining PG roles and structures, monitoring the expected value contributions of constituent projects, managing their competing resource needs, ensuring that project outputs and outcomes are aligned with required benefits both before and during the project life cycle (Thiry & Deguire, 2007), and ensuring that these benefits are finally realized after project delivery (Garland, 2009).

INTERFACE BETWEEN PROJECT GOVERNANCE AND PROJECT MANAGEMENT Strategic Alignment at the Project Level The final step of the process of translating and linking strategy down to the project level occurs at the interface between PG and project management. Although benefits realization is typically attributed to the program level, this should not be construed as the project level being irrelevant from a strategy implementation standpoint (Midler, 2013). Indeed, the value chain begins with project outputs and outcomes, which subsequently enable the realization of benefits and strategic objectives (Too & Weaver, 2014). Additionally, Musawir et al. (2017) highlight that for stand-alone projects that are not part of a program, there is a need to monitor and control their strategic contributions, and that for projects that are part of a program, the alignment of their individual outputs and outcomes to strategic objectives is a necessary prerequisite for ensuring that the program as a whole is aligned with organizational strategy. Furthermore, in the absence of a portfolio management structure in an organization, or in the case of projects that receive direct oversight from the top management team, PG becomes the sole intermediary between the strategic level and the project level and, hence, strategic alignment occurs primarily at the interface between PG and project management. In any case, PG plays a vital role at this interface by facilitating the communication of the value proposition (i.e., what value the project is required to create) from the program, portfolio, or top management level to the project management level, as well as the effective communication of the customer value proposition (i.e., how the required value will be achieved) from the project management level to the relevant higher levels (Hjelmbrekke et al., 2014, 2017). By facilitating this two-way exchange, PG enables the development of a project strategy that is appropriate for the particular circumstances of the project (Artto et al., 2008) and is consistent with the organizational strategy (Morris & Jamieson, 2005). Crucial Role of the Business Case in Establishing and Maintaining Strategic Linkage The business case serves as the focal document through which the strategic linkage of projects is established, tracked, and maintained. While benefits are the missing link between strategy and projects, business cases serve as artifacts that enshrine this link and document the reason for which a particular project was approved in the first place (Morris & Jamieson, 2005;

Governance of projects and project governance  97

Zwikael & Smyrk, 2015). Due to this, business cases are uniquely suited to serve as a point of reference against which the strategic value and viability of projects can be evaluated on an ongoing basis (Ward et al., 2007). Business cases are also a central component of the benefits management process and are used to document and track expected benefits from projects (Serra & Kunc, 2015). It is important to note that the business case is not a static document but rather it is subject to constant re-evaluation in light of changes in the project’s environment, changes in the funding organization’s strategic priorities, and shifts in other stakeholders’ priorities (Einhorn et al., 2019) that might consequently result in shifts in their value expectations. Additionally, the impact of major project changes that may potentially affect the business justification and expected benefits of a project need to be verified against, and reflected in, the business case (Einhorn et al., 2019). Accordingly, in order to maintain strategic linkage at this interface, the PG system must ensure that the business case is up to date, and the project management system must ensure that project execution and delivery are conducted in a manner that ultimately leads to the realization of the business case and the target benefits stated therein. Ensuring the Link between Projects and Strategy In order to ensure that project decisions and activities are conducted in a manner that is consistent with the business case and the overall strategic objectives of the organization, it is imperative to define a single point of accountability in order to ensure clarity of decisionmaking, empowerment of the central decision-making authority, and consistency of direction in the project assuming that the accountability is constantly maintained throughout the project (Garland, 2011, 2013). The project sponsor serves as the apex governance authority for a project (APM, 2018) and is typically considered the primary point of accountability for project success (Kloppenborg et al., 2014). However, this may lead to ambiguity as the definition of project success can vary considerably from one project to another as well as from one stakeholder to another. Therefore, a distinction is made between project management success and project success, as proposed by Ika (2009), where the former refers to the adherence to project constraints while the latter refers to the realization of expected benefits and broader strategic objectives. Accordingly, since the primary mandate of the sponsor is to secure the interests of the funding organization (Zwikael & Smyrk, 2012), it therefore follows that the project sponsor should be held accountable for project success, i.e., realizing the business case as it is this document that describes the justification and strategic intent for undertaking a particular project (Garland, 2011, 2013). Furthermore, periodic, formal checkpoints may be used for appraising a project’s continued alignment with strategy. Typically referred to as stage gates or phase gates, these checkpoints allow for a formal re-evaluation of projects in light of their ongoing tactical and strategic performance, as well as evolving strategic priorities of the organization. The business case, once again, serves as a key point of reference at each checkpoint against which project progress and expected strategic outcomes can be evaluated (Volden & Samset, 2017). The dynamic nature of strategy may lead to changes in strategic objectives causing the priorities of the organization at a particular checkpoint to be different from those at the time of project selection. Likewise, other stakeholders’ values and expectations may also change over time. These factors might, in turn, prompt a need to revise the project’s business case or to terminate the project if it no longer represents the best use of resources (Williams et al., 2010). Hence,

98  Research handbook on the governance of projects

stage gates provide opportunities to ensure that organizational resources are being mobilized toward those projects that are expected to provide the greatest strategic value.

CONCLUSION AND FUTURE RESEARCH DIRECTIONS This chapter covered the guidelines in the literature on the roles of GoP and PG in enabling strategy implementation. It proposed that GoP and PG act as a two-tiered interface between corporate governance and project management. Subsequently, specific guidelines for establishing strategic linkage at the interfaces between corporate governance and GoP, between GoP and PG, and between PG and project management, respectively, were discussed. Overall, most publications on governance in the context of projects indicate that GoP and PG should serve to constantly align and deliver projects in accordance with an organization’s strategic objectives (Levie et al., 2017; Pitsis et al., 2014; PMI, 2016). However, there is a lack of research on how this might be achieved in practice. Therefore, further research is required to develop specific guidelines to help organizations configure their GoP and PG systems to optimize the strategic contributions of projects. A fundamental question that needs to be explored is: how is strategic value actually created through projects? A thorough examination of this question would shed light on the specific factors that enhance the strategic contribution of projects, which in turn may reveal governance best practices for enabling strategy implementation through projects. There is also a need to examine how strategic objectives can be effectively formulated and translated down to the portfolio, program, and project levels, as well as the practices, tools, and techniques that enable this translation process. Additionally, researchers may study the involvement of those in charge of formulating organizational strategy, typically the board of directors and top management, in the project ideation and selection process, as well as their interactions with GoP in this regard. Furthermore, researchers may investigate how accountability for project selection decisions is assigned and subsequently enforced once the actual benefits and strategic contributions of projects have become apparent. Further research is also needed on the role of benefits in bridging the gap between strategy and projects by serving as a “common language” that facilitates communication and coordination between decision-makers at the strategic, portfolio, program, and project levels. Benefits serve as a useful medium for expressing high-level strategic objectives, which are often too abstract, in more concrete terms that can be more readily linked down to the project level. Additionally, the roles of GoP and PG as stewards of the benefits management and realization process need to be explored further (Musawir et al., 2017). Another line of investigation that might be worth pursuing is how strategic linkage is established and maintained in highly dynamic environments. Researchers might examine how the concept of agility relates to governance in the context of projects. This not only pertains to the governance of agile projects but also an exploration of how agile principles may be applied to GoP and PG in order to make these governance systems more responsive and adaptive to changes in the internal and external environments, as well as the broader strategic landscape. The identification and capture of emergent strategies is one mechanism through which this may be achieved (Morris & Jamieson, 2005). In addition to high-level risk management, researchers may explore the role of high-level change management as an important function of PG, wherein the business case is continuously re-evaluated and revised in response

Governance of projects and project governance  99

to emergent strategies and changes in the project’s environment. Researchers may further examine how GoP and PG may, in addition to enabling the implementation of deliberate strategies, facilitate the “planned emergence” of emergent strategies that synergize with deliberate strategies (Kopmann et  al., 2017). To this end, researchers may draw on insights from the organizational ambidexterity literature, in particular the concept of strategic ambidexterity (Han, 2007) that may potentially be an organizational-level predictor of planned emergence. Furthermore, in examining the interfaces between the different levels of governance, it becomes evident that effective coordination between these different layers is essential for ensuring that the entire process from project ideation to benefits realization is streamlined (Thorp, 2007; Winch et al., 2022). Therefore, a holistic approach to governance is needed that integrates these different governance layers and oversees the entire investment cycle of projects, with the explicit aim of maximizing the strategic value created through projects. Hence, such a holistic governance system would be the steward of an organization’s investments in projects and would assume the delegated responsibility for implementing strategy through projects. Finally, it should be noted that the proposed two-tiered interface in Figure 8.1 applies primarily to projects owned and funded by a single organization. For large and megaprojects that involve complex inter-organizational relationships and, in many cases, are co-owned by multiple organizations (APM, 2007), there is a need for additional research on how the complex interactions between the participating organizations can be governed to satisfy the individual strategic objectives of each organization, for example, through approaches such as alliance governance. Furthermore, in the context of large and megaprojects, Müller et al. (2022) conceptualized additional governance layers at the network and regulatory levels. This represents a promising avenue for further research on guidelines for effective governance at each of these layers as well as the interfaces between them, in order to maximize benefits and value creation through projects for all participating organizations.

REFERENCES Ahola, T., Ruuska, I., Artto, K., & Kujala, J. (2014). What is project governance and what are its origins? International Journal of Project Management, 32(8), 1321–1332. APM. (2007). Co‑directing change: A guide to the governance of multi‑owned projects. Association for Project Management. APM. (2011). Directing change: A guide to governance of project management (2nd ed.). Association for Project Management. APM. (2012). APM body of knowledge (6th ed.). Association for Project Management. APM. (2018). Directing change: A guide to governance of project management (3rd ed.). Association for Project Management. APM. (2020). Projecting the future: The adaptive project professional. Association for Project Management. Artto, K., Martinsuo, M., Dietrich, P., & Kujala, J. (2008). Project strategy: Strategy types and their contents in innovation projects. International Journal of Managing Projects in Business, 1(1), 49–70. Bekker, M. C., & Steyn, H. (2009a). Defining “project governance” for large capital projects. South African Journal of Industrial Engineering, 20(2), 81–92. Bekker, M. C., & Steyn, H. (2009b). Project governance: Definition and framework. Journal of Contemporary Management, 6, 214–228. Cadbury, A. (1992). Cadbury report: The financial aspects of corporate governance. Technical report, HMG, London.

100  Research handbook on the governance of projects

Chih, Y. Y., & Zwikael, O. (2015). Project benefit management: A conceptual framework of target benefit formulation. International Journal of Project Management, 33(2), 352–362. Coombs, C. R. (2015). When planned IS/IT project benefits are not realized: A study of inhibitors and facilitators to benefits realization. International Journal of Project Management, 33(2), 363–379. Einhorn, F., Marnewick, C., & Meredith, J. (2019). Achieving strategic benefits from business IT projects: The critical importance of using the business case across the entire project lifetime. International Journal of Project Management, 37(8), 989–1002. Flyvbjerg, B., Holm, M. K. S., & Buhl, S. L. (2007). How (In)Accurate are demand forecasts in public works projects?: The case of transportation. Journal of the American Planning Association, 71(2), 131–146. Garland, R. (2009). Project governance: A practical guide to effective project decision making. Kogan Page. Garland, R. (2011). Capital investment governance: The integrated governance of projects, programmes and portfolios. The Stationery Office (TSO). Garland, R. (2013). Programme and project accountability: The governance of capital investments. The Stationery Office (TSO). Han, M. (2007). Achieving superior internationalization through strategic ambidexterity. Journal of Enterprising Culture, 15(1), 43–77. Hjelmbrekke, H., Klakegg, O. J., & Lohne, J. (2017). Governing value creation in construction project: A new model. International Journal of Managing Projects in Business, 10(1), 60–83. Hjelmbrekke, H., Lædre, O., & Lohne, J. (2014). The need for a project governance body. International Journal of Managing Projects in Business, 7(4), 661–677. Ika, L. A. (2009). Project success as a topic in project management journals. Project Management Journal, 40(4), 6–19. Klakegg, O. J., Williams, T., Magnussen, O. M., & Glasspool, H. (2008). Governance frameworks for public project development and estimation. Project Management Journal, 39(S1), S27–S42. Kloppenborg, T. J., Tesch, D., & Manolis, C. (2014). Project success and executive sponsor behaviors: Empirical life cycle stage investigations. Project Management Journal, 45(1), 9–20. Koh, A., & Crawford, L. (2012). Portfolio management: The Australian experience. Project Management Journal, 43(6), 33–42. Kopmann, J., Kock, A., Killen, C. P., & Gemünden, H. G. (2017). The role of project portfolio management in fostering both deliberate and emergent strategy. International Journal of Project Management, 35(4), 557–570. KPMG. (2010). KPMG New Zealand project management survey 2010. http://p3m​.com​.au​/Reference​/ KPMG​_2010​.pdf Levie, F., Burke, C. M., & Lannon, J. (2017). Filling the gaps: An investigation of project governance in a non-governmental organisation’s response to the Haiti earthquake disaster. International Journal of Project Management, 35(5), 875–888. March, J. G. (1991). Exploration and exploitation in organizational learning. Organization Science, 2(1), 71–87. Marnewick, C. (2016). Benefits of information system projects: The tale of two countries. International Journal of Project Management, 34(4), 748–760. Midler, C. (2013). Implementing a low-end disruption strategy through multiproject lineage management: The Logan case. Project Management Journal, 44(5), 24–35. Mintzberg, H., & Waters, J. A. (1985). Of strategies, deliberate and emergent. Strategic Management Journal, 6(3), 257–272. Morris, P. (1997). The management of projects. Thomas Telford. Morris, P., & Jamieson, A. (2005). Moving from corporate strategy to project strategy. Project Management Journal, 36(4), 5–18. Müller, R. (2009). Project governance. Gower Publishing. Müller, R., Alix-Séguin, C., Alonderienė, R., Bourgault, M., Chmieliauskas, A., Drouin, N., Ke, Y., Minelgaite, I., Pilkienė, M., Šimkonis, S., Unterhitzenberger, C., Vaagaasar, A. L., Wang, L., & Zhu, F. (2022). A (meta) governance framework for multi-level governance of inter-organizational project networks. Production Planning & Control, 1–20. https://doi​.org​/10​.1080​/09537287​.2022​.2146018

Governance of projects and project governance  101

Müller, R., Andersen, E. S., Kvalnes, Ø., Shao, J., Sankaran, S., Turner, J. R., Biesenthal, D., Walker, D. H. T., & Gudergan, S. (2013). The interrelationship of governance, trust and ethics in temporary organizations. Project Management Journal, 44(4), 26–44. Müller, R., Pemsel, S., & Shao, J. (2014). Organizational enablers for governance and governmentality of projects: A literature review. International Journal of Project Management, 32(8), 1309–1320. Müller, R., Pemsel, S., & Shao, J. (2015). Organizational enablers for project governance and governmentality in project-based organizations. International Journal of Project Management, 33(4), 839–851. Müller, R., Zhai, L., Wang, A., & Shao, J. (2016). A framework for governance of projects: Governmentality, governance structure and projectification. International Journal of Project Management, 34(6), 957–969. Musawir, A. U. (2022). Project governance: Conceptual and practical challenges in complex project organizing. Chapter 18. In G. Winch, M. Brunet, & D. Cao (Eds.), Research handbook on complex project organizing (pp. 183–202). Edward Elgar Publishing. Musawir, A. U., Abd-Karim, S. B., & Mohd-Danuri, M. S. (2020). Project governance and its role in enabling organizational strategy implementation: A systematic literature review. International Journal of Project Management, 38(1), 1–16. Musawir, A. U., Serra, C. E. M., Zwikael, O., & Ali, I. (2017). Project governance, benefit management, and project success: Towards a framework for supporting organizational strategy implementation. International Journal of Project Management, 35(8), 1658–1672. Neugebauer, F., Figge, F., & Hahn, T. (2016). Planned or emergent strategy making? Exploring the formation of corporate sustainability strategies. Business Strategy and the Environment, 25(5), 323–336. Oliveira, M. G., & Rozenfeld, H. (2010). Integrating technology roadmapping and portfolio management at the front-end of new product development. Technological Forecasting and Social Change, 77(8), 1339–1354. Pellegrinelli, S. (2002). Shaping context: The role and challenge for programmes. International Journal of Project Management, 20(3), 229–233. Pitsis, T. S., Sankaran, S., Gudergan, S., & Clegg, S. R. (2014). Governing projects under complexity: Theory and practice in project management. International Journal of Project Management, 32(8), 1285–1290. PMI. (2014). Pulse of the profession 2014 – The high cost of low performance. Project Management Institute. PMI. (2016). Governance of portfolios, programs, and projects: A practice guide. Project Management Institute. PMI. (2018). Pulse of the profession 2018: Success in disruptive times - expanding the value delivery landscape to address the high cost of low performance. Project Management Institute. Renz, P. S. (2007). Project governance: Implementing corporate governance and business ethics in nonprofit organizations (Vol. 1431). Springer Science & Business Media. Ritson, G., Johansen, E., & Osborne, A. (2012). Successful programs wanted: Exploring the impact of alignment. Project Management Journal, 43(1), 21–36. Rumelt, R. P. (2011). Good strategy/bad strategy: The difference and why it matters. Crown Business. Serra, C. E. M., & Kunc, M. (2015). Benefits realisation management and its influence on project success and on the execution of business strategies. International Journal of Project Management, 33(1), 53–66. Shenhar, A. J., & Dvir, D. (2007). Reinventing project management: The diamond approach to successful growth and innovation. Harvard Business School Press. Thiry, M., & Deguire, M. (2007). Recent developments in project-based organisations. International Journal of Project Management, 25(7), 649–658. Thorp, J. (2007). The information paradox: Realizing the business benefits of information technology. Fujitsu Consulting (Canada) Inc. Too, E. G., & Weaver, P. (2014). The management of project management: A conceptual framework for project governance. International Journal of Project Management, 32(8), 1382–1394. Townsend, D. (2007). Engaging the board of directors on strategy. Strategy & Leadership, 35(5), 24–28.

102  Research handbook on the governance of projects

Tricker, R. I. (1994). The board’s role in strategy formulation: Some cross-cultural comparisons. Futures, 26(4), 403–415. Volden, G. H., & Samset, K. (2017). Governance of major public investment projects: Principles and practices in six countries. Project Management Journal, 48(3), 90–108. Ward, J., Daniel, E., & Peppard, J. (2007). Building better business cases for IT investments. MIS Quarterly Executive, 7(1). Williams, T., Klakegg, O. J., Magnussen, O. M., & Glasspool, H. (2010). An investigation of governance frameworks for public projects in Norway and the UK. International Journal of Project Management, 28(1), 40–50. Winch, G., Maytorena, E., & Sergeeva, N. (2022). Strategic project organizing. Oxford University Press. Winch, G. M. (2014). Three domains of project organising. International Journal of Project Management, 32(5), 721–731. Young, R., Young, M., Jordan, E., & O’Connor, P. (2012). Is strategy being implemented through projects? Contrary evidence from a leader in new public management. International Journal of Project Management, 30(8), 887–900. Zwikael, O., & Smyrk, J. (2012). A general framework for gauging the performance of initiatives to enhance organizational value. British Journal of Management, 23(S1), S6–S22. Zwikael, O., & Smyrk, J. (2015). Project governance: Balancing control and trust in dealing with risk. International Journal of Project Management, 33(4), 852–862.

9. Social value from megaprojects and their governance Karyne C.S. Ang, Shankar Sankaran, and Nathalie Drouin

INTRODUCTION Megaprojects are identified as large-scale, transformational complex ventures involving multiple internal and external stakeholders spanning across multiple organizational contexts where decisions made and resulting outcomes have significant impacts on people and society. They are often justified through societal promises of access to health, education, energy, urban regeneration, transportation, and many other major pursuits that contribute to economic and social value. Typically, megaprojects are found in large-scale infrastructure ventures like transport systems and bridges or social assets like Olympic parks and buildings. Some megaproject examples include Heathrow Airport Terminal 2 (Gil & Fu, 2022), the Astoria– Megler Bridge (Eskerod & Ang, 2017), London 2012 Olympic Park (Gil & Fu, 2022), and the hydroelectric generating stations in Québec, Canada (Drouin & Turner, 2022). Every project, regardless of size, is expected to bring value to its constituents (Martinsuo & Killen, 2014). To initiate a project, decision-makers need to determine that the business case being presented includes sufficient details about its promise of delivering value (often defined as expected benefits minus expected costs due to the project), and by the initiators themselves or a funding body investing in the project. This is only logical for good business practice and is viewed as a fundamental wisdom in managing projects. However, megaprojects cannot be managed as larger versions of small projects (Drouin & Turner, 2022). Beyond the scale and magnitude that characterize megaprojects, megaprojects have different aspirations, lead times, complexity, and approaches for stakeholder management and performance. Megaprojects reside in an ecology or large system that is complex, pluralistic, and inter-organizational – with each stakeholder in the system holding different aspirations, objectives, and expectations of the value to be created across time, often beyond the lifecycle of the project. They are also often wrought with complex stakeholder negotiations. Scholars and practitioners in the field of megaprojects typically lament and debate about the long-standing issues that include cost overruns, expansive resources, lengthy and extended timeframes, high stakes, cost and benefit misrepresentations, scope changes over time, misinformation, and conflicting stakeholder interests, to name just a few (Flyvbjerg, 2014; Gil, 2022). This does not mean that all megaprojects “fail” in their endeavors. However, beyond being efficient, legitimate, and accountable in their endeavors (Brunet & Aubry, 2016), there are multiple governance approaches that could potentially enable megaprojects to create and realize value for their various constituents more successfully (Denicol et al., 2020). With the perspective of stakeholder value in mind, the motivation for this chapter is to explore these different concepts of stakeholder value and how these might fit with how megaprojects could be governed. We appreciate that the long-standing endeavors that characterize megaprojects mean that it often takes years before value is realized. This could have 103

104  Research handbook on the governance of projects

an impact on how megaprojects are governed beyond the project lifecycle. It is therefore important for megaprojects to mobilize and engage the right stakeholder groups upfront and throughout a megaproject so that value is realized. Value derived from megaprojects can be viewed as both planned (deliberate) and emergent (unanticipated) (Eskerod & Ang, 2017), contributing critical economic, social, and environmental value over a long time horizon for different stakeholders. With the added complexity of misaligned stakeholder interests and goals, and which stakeholders to pay attention to (Mulholland et al., 2020), certain aspects of value associated with social issues can risk being sidelined (Martens & Carvalho, 2017). To create and derive holistic value from megaprojects across the longer term including social value, a flexible, adaptable, and polycentric governance approach that address the complexity of ecological and social systems (Voß & Schroth, 2018) could support equitable value creation and distribution across various governance-related activities and decisions for its various stakeholders could be considered. This chapter adds to the megaproject governance with a discussion about how different stakeholders make sense of value. Value dimensions discussed in this chapter go beyond financial and economic value to include social value. This chapter starts with an introduction to what megaprojects are. Next, it explores the recent literature and prevailing themes about multi-stakeholder value perspectives across different organizational contexts pertaining to megaprojects. We discuss “value for whom” and link this to how dynamic value perspectives need to be considered within megaproject governance models incorporating complex tensions between the various objectives, levels, and the shifting perceptions of multiple stakeholders across time and space. The conclusion highlights the chapter’s main contributions and suggests areas for further research.

WHAT ARE MEGAPROJECTS “Megaproject” is a term typically associated with large-scale, temporary inter-organizational forms set up to develop capital-intensive, long-lived, shareable-in-use infrastructure that has an appreciable range of demand (Gil & Fu, 2022). Such large-scale projects are often found in other sectors besides infrastructures as well. These types of projects have extended initiation and delivery phases, with capital assets delivered that span decades or centuries, and involve many different organizations and stakeholders (Brookes et al., 2017). Stakeholders are typically identified as individuals or groups who could impact on or be impacted by the objectives of the organization (Freeman, 1984). In sum, a megaproject consumes numerous resources and has an impact on a wide range of people (stakeholders), across generations (Eskerod et al., 2018). Megaprojects have the purpose of creating and delivering long-term value for multiple actors including society as a whole (Zhai et al., 2009). Government and political stakeholders view megaprojects as a means to create urban areas that are economically viable (Clegg et al., 2017; Orueta & Fainstein, 2008). In line with Flyvbjerg’s (2014) political sublimes that drive megaprojects described as “the rapture that politicians get to build monuments to themselves and their causes,” Pitsis et al. (2018) agree that politicians are deemed to have an underlying agenda of gaining public favor and votes. These types of megaprojects encouraged by political stakeholders contain vast investments into technological innovation coupled with high (financial) risks, which are often not adequately accounted for (Flyvbjerg et al., 2003; Clegg et al., 2002).

Social value from megaprojects and their governance  105

Despite having high stakes, escalating costs, multiple uncertainties, ongoing stakeholder tensions, and extensive resources invested into megaprojects, the value generated from megaprojects is often recognized to be transformational and builds sustainable long-term value that is socially and economically impactful. To achieve this, it is important to govern and steer the megaproject to balance and fulfill the various stakeholder expectations.

GOVERNANCE FOR MEGAPROJECTS Governance is defined as the value system, structures, processes, and policies that allow projects to achieve organizational objectives, and incorporates mechanisms of control and trust in its execution (Müller et al., 2017). Governance frameworks can be described as authoritative structures organized and established within the institution, and comprise of processes and rules to ensure projects meet their purpose (Klakegg et al., 2008). In major public projects, these governance frameworks have three key objectives: to increase government efficiency, legitimacy, and accountability (Brunet & Aubry, 2016). Governance is necessary for steering and controlling organizations, and balancing their economic and social intentions, including the fulfillment of individual and stakeholder objectives. It is critical to establish the foundations for governance early. Principles of good governance defined by the Organisation for Economic Co-operation and Development (OECD) (2015) are transparency, accountability, responsibility, and fairness. Governance defines the roles, responsibilities, rights, and relationships across the organization’s stakeholder groups. This implies that governance involves a set of inter-related relationships among various project stakeholders. Stakeholders in a megaproject could include the organization’s management, owners, employees and suppliers, contractors, subcontractors, customers, local community, lobby groups, and media. Each of these groups could have its own governance structures and there are also multiple levels of governance in the organization. Turner (2020) suggests policy (governmentality), strategic (business objectives and social benefits), tactical (work approach of principal-agent or principalsteward) and operational (contractual work to deliver outputs) as the four levels of governance. In megaprojects, the ability to implement a shared, flexible, integrated, and adaptable governance system is important, but not without its own challenges. Stakeholders increasingly expect organizations to manage their investments into megaprojects proactively and effectively. The governance system should reflect and address the needs of each smaller project within the megaproject as systems within systems, and the governance system should consider differing needs of all participating organizations and their stakeholders – whether they are internal or external stakeholders. Turner (2014) suggests that when all parties act in the interest of the project rather than for individual self-interests, a project will perform better. Others (Derakhshan et al., 2019) identify the importance of ethics, transparency, and trust as governance mechanisms could potentially improve transparency and accountability toward society. Any effective governance model should aim to establish a process that directs its project to deliver value for its key stakeholders.

WHAT IS VALUE? The megaproject literature generally discusses value in terms of economic benefits minus cost. However, value concepts in project management have long evolved from a singular dimension

106  Research handbook on the governance of projects

to a multidimensional view. For decades, scholars have acknowledged that stakeholders value different things in different ways (Oliomogbe & Smith, 2013; Ang & Killen, 2016; Eskerod & Ang, 2017; Laursen & Svejvig, 2016; Mulholland et al., 2020; Zhai et al., 2009). For instance, value can be defined as: ●

●

●

●

●

The benefits generated for project stakeholders as a result of project management deployment (Oliomogbe & Smith, 2013); The sum of the economic benefits and social gains to be accrued from a new infrastructure development minus the capital costs to be incurred (Gil & Fu, 2022); The difference between benefits received and sacrifices made by the customer (Ahola et al., 2008); Positive consequences of the megaproject perceived and appreciated by stakeholders (Eskerod & Ang, 2017); Synergetic project processes, solutions, and outcomes both tangible and intangible that participating actors find beneficial (Lehtinen et al., 2019).

While value is regarded from multiple dimensions (Ahola et al., 2008; Eskerod & Ang, 2017; Ang & Killen, 2016), it is assumed that much of value delivery can be planned, assessed, measured, and managed. Researchers acknowledge that value can also emerge and evolve over and beyond the life cycle of a megaproject (Eskerod & Ang, 2017; Gil & Fu, 2022). Others position the value of megaprojects into two streams (Zhai et al., 2009; Flyvbjerg et al., 2003; Oliomogbe & Smith, 2013): 1. Value from project outcomes (expected by external stakeholders including the public, authorities, public organizations, NGOs, industrial organizations, technical experts, media); and 2. Value from project management deployment (expected by internal stakeholders, owner/ clients, contractors). In attempts to make sense of value concepts, we acknowledge that scholars have used a plethora of classifications to identify different dimensions of value. We have selected but a few examples of how value is viewed and expressed by different stakeholders. This is summarized in Table 9.1. For Ang and Killen (2016), value is often expressed by stakeholders in a spectrum that ranges between one end – as a well-articulated, tangible, and quantifiable element – and the other end – as emergent, unanticipated, unknown, and unmeasurable. An example at this tangible end of the spectrum would be clearly quantified and measured financial and economic metrics as value variables, for example, increases in market shares, profits, savings, and productivity. On the other extreme end of the spectrum, value that exists is not well expressed by stakeholders, intangible, and often not known upfront (unanticipated/emergent). Examples at this ambiguous end of the value spectrum include retrospective value, that is, value that is only identified upon hindsight and reflection or through lessons learned. These types of retrospective value can have an immense impact on the future value of new projects down the line. Meanwhile there are also types of stakeholder value that are clear but often expressed qualitatively, for instance, relationship and networks value (e.g., building trustworthy supplier–client networks). Others express self-interests or gratification in the form of personal rewards (e.g., personal satisfaction in a project, career promotions, profile and visibility

Social value from megaprojects and their governance  107

Table 9.1  Summary of value perspectives

Value positioned as a spectrum or range based on tangibility, time, and space (Ang & Killen, 2016; Ang & Biesenthal, 2017)

Value perspectives

Authors

Financial

Flyvbjerg, 2014; Barlow & Köberle-Gaiser, 2008; Zwikael & Smyrk, 2012

Economic

Flyvbjerg, 2014; Gil, 2021; Eskerod & Ang, 2017

Social/Societal

Mulholland et al., 2020; Ma et al., 2017; Pitsis et al., 2018; Quélin et al., 2017; Oliomogbe & Smith, 2013; El-Gohary et al., 2006; Drouin & Turner, 2022; Eskerod & Ang, 2017

Environmental

Ma et al., 2017; Mota & Moreira, 2015

Political

Flyvbjerg, 2014

Transactional/Singular

Ang & Killen, 2016

Generative

Ang & Killen, 2016

Transformational

Ang & Killen, 2016; Eskerod & Ang, 2017; Vickerman, 2017

Personal rewards

Ang & Killen, 2016

Preventative

Ang & Killen, 2016

Networks and relationships

Ang et al., 2016; Eskerod & Ang, 2017

Reflective-retrospective-future orientated

Ang & Killen, 2016

Symbolic/Iconic/Aesthetic

Flyvbjerg, 2014; Eskerod & Ang, 2017

Organizational value and values

Martinsuo, 2020; Ang & Biesenthal, 2017

Technological

Flyvbjerg, 2014

Sustainability

Sankaran et al., 2020

from involvements in a project), preventative value (e.g., safety through maintenance projects, firewalls), transformational value (e.g., transforming the life of a child and/or village through health intervention projects, transforming the lifestyle of the citizens through new infrastructure). This transformation also contributes to social value. The study by Eskerod and Ang (2017) suggests social value and symbolic value as emergent values whereby the Astoria–Megler Bridge megaproject went beyond utility and economic value to improve the quality of life for its users and citizens, and became an iconic symbol of pride for the local community. Other facets of the value spectrum describe value in terms of time horizons (e.g., short-tolong term, past–present–future). The value created delivered in megaprojects can differ across time as stakeholders shift in their priorities, change positions, be added to, or exit the project at different times. With dimensions of space, the distance of stakeholders from the project could impact on the type and magnitude of value they expect. Stakeholders at different levels in an organization would also be able to influence the value to be created and delivered (Ang & Biesenthal, 2017).

108  Research handbook on the governance of projects

While researchers are extending the understanding of value for different project environments that include large-scale, multi-organizational contexts, megaproject research into the complex and multi-faceted aspects of governing for stakeholder value is still scant. In megaprojects, value would be influenced by the complex relationships and networks of the various stakeholders across multiple organizations. These stakeholders’ interests and expectations of value need to be regarded in the governance and decision-making mechanisms to ensure long-term success. To better understand multi-stakeholder value and therefore effective megaproject governance that optimizes value for all its stakeholders, the involvement of a wide range of stakeholders is important as value is perceived in different ways and in different circumstances by different stakeholders (Eskerod & Ang, 2017; Ang et  al., 2016; Mota & Moreira, 2015; Oliomogbe & Smith, 2013; Laursen & Svejvig, 2016).

MEGAPROJECT STAKEHOLDERS AND VALUE CREATION One of the key functions in megaproject governance is about making decisions that focus on maximizing the value for the project’s internal and external stakeholders, including value for society. Research by Mulholland et al. (2020) calls for stakeholder management in projects to be an ongoing process in order to deliver on social value. What we further observe from the literature is that many key stakeholder groups have power to control essential resources necessary for a wide range of value to be created. Meanwhile other stakeholder groups like the community, activists, and retailers tend to be excluded from initial governance structures. Focusing on economic benefits in megaproject performance may result in missing out on creating broader social welfare or social value. Considering these comments, it is pertinent to know who the megaproject stakeholders are – who has the power to influence and who is impacted by the decisions made and outcomes of megaprojects? Stakeholder theory considers which groups of stakeholders deserve or require management’s attention (Freeman, 2004). It also pushes managers to consider the types of stakeholder relationships and inter-dependencies required in order to deliver on their purpose (Freeman, 2004). How widely or narrowly stakeholders are defined will have an impact on megaproject decisions and value to be created and distributed. Freeman (2004) identifies stakeholders as those who are able to impact on or are impacted by the project. Mitchell et al. (1997) position stakeholders as those with the ability to influence by way of power, legitimacy, and urgency. In the context of megaprojects, El-Gohary et al. (2006) identify stakeholders as those with responsibility, impacted by or interested in the project. Stakeholders can impact project success up to the extent that they have power to influence the project activities (e.g., the client, contractor, etc.), legitimacy of the stakeholders’ relationship with the project (e.g., community the project is located in) and the urgency of the stakeholders’ claims on the project (e.g., a fatality due to a health and safety breach within the project location). Stakeholders could also be impacted by the megaproject, for instance, the public and local business owners closing due to prolonged road closures, extended roadblocks, or other delayed transport inconveniences. The media is a unique type of stakeholder although they are not a direct contributor to the project. As with lobby groups and public representatives, the media can wield tremendous power to influence and therefore impact on the project outcomes (Oliomogbe & Smith, 2013).

Social value from megaprojects and their governance  109

Effectively managing both internal and external stakeholders’ expectations and concerns would impact on the value generated by megaprojects (Oliomogbe & Smith, 2013). For instance, in the early phases of project planning and design, value can either be created or destroyed depending on how the process of consulting and engaging with stakeholders and addressing their concerns is managed. Understanding the desired performance characteristics and attributes stemming from the project from the viewpoints of multiple stakeholders is important to ensure its demand and viability. Other stakeholders (e.g., NGOs, environmentalists) would have concerns around impacts on the environment and ecological balance. Meanwhile, construction safety and operation safety are concerns of stakeholders like the government, construction firms, and trades/industry representatives to ensure worker and public safety. This in turn contributes to the reputation of the profession and industry. Cartigny and Lord (2017) highlight that social value in construction is provided community-wide and through individuals. Others discuss projects as mechanisms for long-term societal impact regardless of magnitude from the local and regional to the international scale (Vuorinen & Martinsuo, 2019). The next section discusses how stakeholder concerns and expectations of value including that of social value have a certain degree of volatility, variability, and multiplicity associated with them. Stakeholder Value Creation as a Dynamic Process and Balancing Act Value varies in the ways it is perceived by different stakeholders, and these value perceptions might shift when translated into practice (Ang & Killen, 2016; Ang et al., 2016). Studies have shown that governance approaches in megaproject contexts are likely to adapt and evolve with the project, and the value to be created for the various stakeholders is negotiated and renegotiated (Gil & Fu, 2022). It is crucial to track value over time as it unfolds and changes over and beyond the project life cycle to ensure that it can sustain community and political support for the long haul. One example is the London Olympics project that evolved from building a park to wider infrastructure that triggered further urban regeneration (Lundrigan & Gil, 2018). To realize both planned and emergent value for its stakeholders, megaproject governance structures and processes need to take into careful consideration the complexities surrounding the multiple streams of value it creates and delivers to all its stakeholders throughout and beyond the project lifecycle, all this time ensuring the ability to accommodate emergent stakeholder needs and future changes in the environment, or risk potential future obsolescence and loss of stakeholder support for future works. Value in megaprojects transcends the boundaries of the various organizations, and their stakeholders. It is argued that the innovative conceptualization of value creation and delivery processes for megaprojects require governance and decision-making that span the private and public sectors (Barlow & Köberle-Gaiser, 2008). This indicates that shifts in megaproject governance models to deal with the dynamic stakeholder contexts are needed and suggests the importance of adaptability and interconnections across projects and their stakeholders in an evolving value ecosystem. Barlow and Köberle-Gaiser (2008) (in the context of modernizing healthcare infrastructure) regard adaptability as an innovation to ensure that projects and programs are “future-proof.” On the other hand, adaptability and adaptations occurring in governance structures to ensure a fair creation and delivery of value to all its various stakeholders have been observed to lead to higher costs and delayed timeframes in

110  Research handbook on the governance of projects

megaprojects (Gil & Fu, 2022). In addition to economic value, pressures for projects to be more sustainable – environmentally and socially responsible – have been on the rise recently (Aaltonen, 2011; Flyvbjerg et al., 2003; Mulholland et al., 2020; Wang et al., 2020), particularly megaprojects as transformational mechanisms resulting in positive societal impacts and social value. Given the impacts that megaprojects have on society, the following section discusses the concept of social value in greater detail. Social Value in Megaprojects Social value can mean different things to different people. How social value is defined is influenced by the key stakeholders at hand in a megaproject. Mulholland’s review of social value critiqued how social value was viewed as a monolithic, objective “truth”; and how measures were limited in their focus at a moment in time, and thus missing out the changing dynamics with stakeholders and what matters over time (Mulholland et al., 2020). Social value is also synonymous with the social wellbeing of the people, for example, beauty and comfort (Vuorinen & Martinsuo, 2019). Social value in the UK, under the Public Services (Social Value) Act 2012, mandates that public-sector projects need to consider how the works “might improve the economic, social and environmental well-being of the relevant area” (Public Services (Social Value) Act, 2012, p. 2). In the public service sector, value is often determined by the citizens and commonly identified as improved services, enhanced trust or social capital, or diminishing or eradicating social problems (Horner & Hazel, 2005). Social concerns, social welfare, and social value generated by megaprojects include quality of life, public health effects, public access to various facilities, housing effects, cultural heritage and national pride, community cohesion and connections, promotion of active transportation, and recreational uses such as ice fishing, snowmobiling, or races and marathons (Eskerod & Ang, 2017; Drouin & Turner, 2022). Infrastructure projects can impact on businesses positively and the value of land (Flyvbjerg et  al., 2003). On the other hand, communities are concerned about job creation, investor attractiveness, real estate prices, and the environment, to name a few. In the case of the Astoria–Megler Bridge, infrastructure located close to people enhanced the economy in the local region, connected different geographical areas, and contributed to regional and national growth (Eskerod & Ang, 2017). For Kelly et al. (2002), services and outcomes, and trust, legitimacy, and confidence in government provide the basis for guiding decision-makers in considering the value they create. O’Flynn (2007) highlights the multiplicity of goals and objectives, multiple accountability systems including citizens as overseers of government, customers as users, and taxpayers as funders, and implies that the dominant focus of public and social value creation requires managing stakeholder relationships and engaging in negotiation. This in turn requires adaptable and flexible governance mechanisms in place to steer the project and engage stakeholders at different levels and stages across the project lifecycle and beyond. Governing for Social Value in Megaprojects There is an opportunity for megaproject governance mechanisms to anticipate and maximize the value created and distributed equitably across the stakeholder groups. Stakeholder concerns could be viewed as collaborative opportunities to develop shared, flexible, and open governance mechanisms to ensure that investments into the project are able to drive long-term and sustainable value to its stakeholders. For example, Davies et al. (2019) discuss flexible

Social value from megaprojects and their governance  111

and innovative delivery models based on a case of the London Heathrow T5 megaproject. The studies highlighted that stakeholders (clients) want more flexible and collaborative delivery models – risk sharing, collaborative learning from other industries (networks and relationships), and flexibility to deal with risk and innovative opportunities. Heathrow T5 had a collaborative model, deployed client-based dynamic capabilities that resulted in external learning and internal learning. Flexibility and adaptability were built into the objectives for the T5 project. The project embraced an “integrated systems view” in its approach. While governance structures focused on systems integration for London Heathrow Terminal 5, the London 2012 Olympics embraced a “meta-systems integrator” (Whyte & Davies, 2021) approach where stakeholders were engaged in the integration of a “system of systems.” Megaproject value creation and delivery can be deduced to revolve around collaborative models that focus on the effective management of interfaces and inter-dependencies, building integrative project teams and engagement with multiple stakeholders. Negotiating a shared and equitable sense of value among different stakeholders in an integrated governance structure can be challenging as each could have different approaches to assessing value (e.g., user willingness to pay or productivity increases and social gains such as new jobs). Therefore, involving stakeholders early on in megaproject planning and design is important (Flyvbjerg et al., 2003). Subsequently, engaging external stakeholders like the public in the early phases of planning and design is a two-way process aimed at informing stakeholders and acquiring their feedback to ensure that the design of a project is appropriate (El-Gohary et al., 2006) and social value is considered (Drouin & Turner, 2022). Megaproject governance is likely to embrace an alliance, an integrated or shared governance structure between legally independent actors, where the members negotiate a unifying proposition for joint value creation and distribution. Several governance adaptations across the lifecycle of the megaproject would be necessary while costly, as observed by Gil and Fu (2022). An adaptation saw non-supplier key stakeholder groups engaged in local governancerelated decisions that resulted in a polycentric governance structure to ensure that local value is created, and pressure is placed to ensure that the value distribution among the stakeholders is fair. The governance modus operandi was next adapted to include independent, bilateral agreements with stakeholders who were initially identified as those not able to influence governance matters directly. The final adaptation to the governance process and structure saw the addition of a vast supply chain steered by market transactions. From our understanding of value so far, we observe that stakeholder perspectives are pluralistic and dynamic. These pluralistic views of stakeholders emphasize the ongoing need to flexibly attend to, integrate, and align the often fragmented and varying interests of multiple stakeholders as they shift across time. This implies that megaproject governance to achieve stakeholder value is related to the ongoing practices of collaboration, negotiation, re-negotiation, adaptation, and co-creation. In this light, social value is context-dependent (that is, it is based on the type of infrastructures), time sensitive (for example, infrastructure is a white elephant at the beginning and later is appreciated as an iconic symbol for a community), and stakeholderdependent (in which stakeholders are given attention to define it) (Drouin & Turner, 2022).

CONCLUSIONS Megaprojects are characterized by their complex and dynamic nature including heterogeneous stakeholders, an extended lifecycle, changes in scope, ambition and value expectations,

112  Research handbook on the governance of projects

and interactivity of diverse social concerns. These complexities make the governance of megaprojects challenging from both theoretical and practical perspectives. Megaproject success of the future involves planning and delivery of megaprojects that provide social value to as many stakeholders as possible while empowering the people that deliver it (Whitmore et al., 2020). This chapter contributes to a greater understanding of the breadth of value expressed by different stakeholders, including those who influence and/or deliver these megaprojects, to those who are directly or indirectly impacted by the megaproject, from the project investors, governments, and policy-makers to the end-user who uses it, and society at large. Gaining value from megaproject management and its deployment is therefore a dynamic process and balancing act that needs to be incorporated into the governance framework of a megaproject. It needs to consider the megaproject context, and the internal and external stakeholders’ perspectives of value, and that these value perspectives are not static in time and space. In practice, organizations can use the range of values previously highlighted to identify and negotiate what value needs to be generated for both internal and external stakeholders, to ensure that governance mechanisms including the decision-making process take into consideration the different and evolving stakeholder needs at different points in time. To achieve shared and sustainable value for all stakeholders throughout the megaproject lifecycle, an efficient and effective governance in the form of an integrative and flexible governance approach that appreciates the complexities of stakeholder value dynamics and engages with stakeholders across time is deemed important. Stakeholder perceptions of value are complex, situated in time and space, and tend to be dynamic and evolving. By integrating stakeholder and value theories in the governance models, megaproject frameworks in action could better anticipate and consider a wider range of shifting stakeholder perspectives in their governmentality. As a result, they could potentially improve the quality of negotiations and decision-making by encouraging organizations involved in megaprojects to derive relevant and accurate value lenses and embrace multiple perspectives and languages at different project levels and in different stakeholder contexts. Social value created by megaprojects is gaining attention due to increased importance being placed on attention to environmental, social, and governance indicators by organizations to demonstrate that they are socially and ecologically responsible (see Chapter 21). However, further research is required to incorporate adequate mechanisms to ensure that social value will be planned for and created. Recent literature appearing in project management journals (Ma et al., 2017) points out that governance of megaproject social responsibility (MSR) needs additional considerations beyond adhering to public governance and adopting corporate social responsibility (CSR). This is because societal governance of MSR is more complex and requires business and politics to work together. As pointed out in this chapter, stakeholders of megaprojects often evolve throughout the project’s long life cycle and the variety of actors involved in delivering megaprojects may result in socially irresponsible behavior. Both business and government must work together to prevent this as they are in contact with all stakeholders. Social responsibilities are also distributed along the social network of stakeholders who have complex relationships through competing interests. While CSR involves only two parties (a corporation and its stakeholders), MSR requires coordination between multiple actors involved in delivering a megaproject. While construction projects often focus on health and safety of workers, megaprojects could face a wider range of social issues such as settlement of displaced people due to the project

Social value from megaprojects and their governance  113

acquiring land, pollution control, ecological impact, issues arising out of corruption, and prevention of disasters and their mitigation if they do occur. This requires the knowledge of diverse disciplines to govern MSR. Megaprojects often start with a great deal of uncertainty of risk, which also impacts MSR as risks to MSR are high at initial stages and may cause irreparable damage to society if not considered from the start. Hence “a governance framework for megaprojects [to address MSR] must take into account the variability and non-linearity of processes that shape the progress of the project” (Ma et al., 2017, p. 1369). Therefore, governing megaprojects from a social value perspective requires further investigation. We hope that this chapter has provided some guidance on exploring governance of social value creation and preservation in megaprojects.

REFERENCES Aaltonen, K. (2011). Project stakeholder analysis as an environmental interpretation process. International Journal of Project Management, 29, 165–183. Ahola, T., Laitinen, E., Kujala, J., & Wikström, K. (2008). Purchasing strategies and value creation in industrial turnkey projects. International Journal of Project Management, 26, 87–94. Ang, K., & Biesenthal, C. (2017). Multilevel value creation in projects, programs, and portfolios: Results from two case studies. In N. Drouin, R. Müller, & S. Sankaran (Eds.), Cambridge handbook of organizational project management (pp. 295–310). Cambridge University Press. Ang, K., & Killen, C. (2016). Multi-stakeholder perspectives of value in project portfolios. 16th Annual Conference of the European Academy of Management (Euram) Conference 2016. European Research and Management Conference 2016. Ang, K., Sankaran, S., & Killen, C. (2016). Value for whom, by whom: Investigating value constructs in nonprofit project portfolios. Project Management Research and Practice, 3, 1–21. Barlow, J., & Köberle-Gaiser, M. (2008). The private finance initiative, project form and design innovation: The UK’s hospitals programme. Research Policy, 37, 1392–1402. Brookes, N., Sage, D., Dainty, A., Locatelli, G., & Whyte, J. (2017). An island of constancy in a sea of change: Rethinking project temporalities with long-term megaprojects. International Journal of Project Management, 35, 1213–1224. Brunet, M., & Aubry, M. (2016). The three dimensions of a governance framework for major public projects. International Journal of Project Management, 34, 1596–1607. Cartigny, T., & Lord, W. (2017). Defining social value in the UK construction industry. Proceedings of the Institution of Civil Engineers-Management, Procurement and Law, 170(3), 107–114. Clegg, S. R., Pitsis, T. S., Rura-Polley, T., & Marosszeky, M. (2002). Governmentality matters: Designing an alliance culture of inter-organizational collaboration for managing projects. Organization Studies, 23, 317–337. Clegg, S. R., Sankaran, S., Biesenthal, C., & Pollack, J. (2017). Power and sensemaking in megaprojects. In B. Flyvbjerg (Ed.), The Oxford handbook of megaproject management (pp. 238–258). Oxford University Press. Davies, A., MacAulay, S. C., & Brady, T. (2019). Delivery model innovation: Insights from infrastructure projects. SAGE Publications. Denicol, J., Davies, A., & Krystallis, I. (2020). What are the causes and cures of poor megaproject performance? A systematic literature review and research agenda. Project Management Journal, 51, 328–345. Derakhshan, R., Turner, R., & Mancini, M. (2019). Project governance and stakeholders: A literature review. International Journal of Project Management, 37, 98–116. Drouin, N., & Turner, J. R. (2022). The Elgar advanced introduction to megaprojects. Edward Elgar. El-Gohary, N. M., Osman, H., & El-Diraby, T. E. (2006). Stakeholder management for public private partnerships. International Journal of Project Management, 24, 595–604. Eskerod, P., & Ang, K. (2017). Stakeholder value constructs in megaprojects: A long-term assessment case study. Project Management Journal, 48, 60–75.

114  Research handbook on the governance of projects

Eskerod, P., Ang, K., & Andersen, E. S. (2018). Increasing project benefits by project opportunity exploitation. International Journal of Managing Projects in Business, 11(1), 35–50. Flyvbjerg, B. (2014). What you should know about megaprojects and why: An overview. Project Management Journal, 45, 6–19. Flyvbjerg, B., Bruzelius, N., & Rothengatter, W. (2003). Megaprojects and risk: An anatomy of ambition. Cambridge University Press. Freeman, R. E. (1984). Strategic management: A stakeholder approach. Pitman. Freeman, R. E. (2004). The stakeholder approach revisited. Zeitschrift fuer Wirtschafts- und Unternehmensethik, 5, 228–241. Gil, N. (2022). Megaprojects: A meandering journey towards a theory of purpose, value creation and value distribution. Construction Management and Economics, 40(7.8), 562–584. Gil, N. A., & Fu, Y. (2022). Megaproject performance, value creation and value distribution: An organizational governance perspective. Academy of Management Discoveries, 8(2), 224–251. Horner, L., & Hazel, L. (2005). Adding public value. Work Foundation. Retrieved June 22, 2006, from http://www​.theworkfoundation​.com​/pdf​/twf3​_value​.pdf Kelly, G., Mulgan, G., & Muers, S. (2002). Creating public value: An analytical framework for public service reform. Strategy Unit, Cabinet Office. Klakegg, O. J., Williams, T., Magnussen, O. M., & Glasspool, H. (2008). Governance frameworks for public project development and estimation. Project Management Journal, 39, S27–S42. Laursen, M., & Svejvig, P. (2016). Taking stock of project value creation: A structured literature review with future directions for research and practice. International Journal of Project Management, 34, 736–747. Lehtinen, J., Peltokorpi, A., & Artto, K. (2019). Megaprojects as organizational platforms and technology platforms for value creation. International Journal of Project Management, 37, 43–58. Lundrigan, C., & Gil, N. (2018). Megaprojects: An evolving hybrid meta-organization. Megaprojects: A Design and Strategy Perspective, 24. Unpublished PhD thesis, University of Manchester, UK. Ma, H., Zeng, S., Lin, H., Chen, H., & Shi, J. J. (2017). The societal governance of megaproject social responsibility. International Journal of Project Management, 35, 1365–1377. Martens, M. L., & Carvalho, M. M. (2017). Key factors of sustainability in project management context: A survey exploring the project managers’ perspective. International Journal of Project Management, 35(6), 1084–1102. Martinsuo, M. (2020). The management of values in project business: Adjusting beliefs to transform project practices and outcomes. Project Management Journal, 51, 389–399. Martinsuo, M., & Killen, C. P. (2014). Value management in project portfolios: Identifying and assessing strategic value. Project Management Journal, 45, 56–70. Mitchell, R. K., Agle, B. R., & Wood, D. J. (1997). Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts. Academy of Management Review, 22, 853–886. Mota, J., & Moreira, A. C. (2015). The importance of non-financial determinants on public–private partnerships in Europe. International Journal of Project Management, 33, 1563–1575. Mulholland, C., Chan, P. W., Canning, K., & Ejohwomu, O. A. (2020). Social value for whom, by whom and when? Managing stakeholder dynamics in a UK megaproject. Proceedings of the Institution of Civil Engineers-Management, Procurement and Law, 173, 75–86. Müller, R., Zhai, L., & Wang, A. (2017). Governance and governmentality in projects: Profiles and relationships with success. International Journal of Project Management, 35, 378–392. O’Flynn, J. (2007). From new public management to public value: Paradigmatic change and managerial implications. Australian Journal of Public Administration, 66, 353–366. Oliomogbe, G. O., & Smith, N. J. (2013). Value in megaprojects. Organization, Technology & Management in Construction: An International Journal, 4, 617–624. Organisation for Economic Co-operation and Development. (2015). G20/OECD principles of corporate governance. OECD. Orueta, F. D., & Fainstein, S. S. (2008). The new mega‑projects: Genesis and impacts. International Journal of Urban and Regional Research, 32, 759–767.

Social value from megaprojects and their governance  115

Pitsis, A., Clegg, S., Freeder, D., Sankaran, S., & Burdon, S. (2018). Megaprojects redefined – complexity vs cost and social imperatives. International Journal of Managing Projects in Business, 11(1), 7–34. Quélin, B. V., Kivleniece, I., & Lazzarini, S. (2017). Public‑private collaboration, hybridity and social value: Towards new theoretical perspectives. Journal of Management Studies, 54, 763–792. Sankaran, S., Müller, R., & Drouin, N. (2020). Creating a ‘sustainability sublime’ to enable megaprojects to meet the United Nations sustainable development goals. Systems Research and Behavioral Science, 37, 813–826. Turner, J. R. (2014). Handbook of project-based management: Leading strategic change in organizations. McGraw-Hill Education. Turner, R. (2020). How does governance influence decision making on projects and in project-based organizations? Project Management Journal, 51, 670–684. Vickerman, R. (2017). Wider impacts of megaprojects. In B. Flyvbjerg (Ed.), The Oxford handbook of megaproject management (p. 389). Oxford Unviersity Press. Voß, J. P., & Schroth, F. (2018). Experimentation: The politics of innoation and learning in polycentric governance. In A. Jordan, H. Van Asselt, & J. Forster (Ed.), Governing climate change: Polycentricity in action? (pp. 99–116). Cambridge University Press. Vuorinen, L., & Martinsuo, M. (2019). Value-oriented stakeholder influence on infrastructure projects. International Journal of Project Management, 37, 750–766. Wang, G., Wu, P., Wu, X., Zhang, H., Guo, Q., & Cai, Y. (2020). Mapping global research on sustainability of megaproject management: A scientometric review. Journal of Cleaner Production, 259, 120831. Whitmore, D., Papadonikolaki, E., Krystallis, I., & Locatelli, G. (2020). Are megaprojects ready for the fourth industrial revolution? Proceedings of the Institution of Civil Engineers-Management, Procurement and Law, 174, 49–58. Whyte, J., & Davies, A. (2021). Reframing systems integration: A process perspective on projects. Project Management Journal, 52, 237–249. Zhai, L., Xin, Y., & Cheng, C. (2009). Understanding the value of project management from a stakeholder’s perspective: Case study of mega‑project management. Project Management Journal, 40, 99–109. Zwikael, O., & Smyrk, J. (2012). A general framework for gauging the performance of initiatives to enhance organizational value. British Journal of Management, 23, S6–S22.

10. Steering committees as governance entities Lynn Crawford

INTRODUCTION The central role in project governance is held by the governing body which is accountable for authorizing, directing, empowering, providing oversight, and setting constraints for management of the project, program, or portfolio (ISO, 2017) on behalf of the owner. The governor may be an individual, usually referred to as the sponsor, or a group such as a steering committee or project board. As an extension of or representative of the project owner (Loch et al., 2017), the sponsor or steering committee, most often in combination, are the principal institutions for project governance and governance of projects (Müller, 2009). The forms, accountabilities, responsibilities, and decision-making powers of these principal governance entities will vary according to context ranging from internal projects to complex partnerships involving multiple organizations and project owners. The aim of this chapter is to provide insight, from research and practice, into the role, composition, and operation of steering groups as the principal institutions for governance of projects (Müller, 2009). Discussion will focus on the steering group, often referred to as a steering committee, but will also address the role of the individual sponsor who may act alone or with a steering group, representing the interests of the project owner.

THE SPONSOR AND THE STEERING COMMITTEE The owner is the individual, organizational unit, organization, or group of organizations on behalf of whom the project or program is undertaken. They have ultimate accountability for and harvest the benefits of the endeavor. The owner may also be the sponsor, particularly where the owner is an individual and the project is relatively straightforward. In more complex endeavors, there will be both an owner and a sponsor, the latter in most cases appointed by the owner. The sponsor represents the owner and is expected to play a key role in promoting, advocating, shaping, and overseeing the endeavor and taking accountability for realization of value and specified benefits over time (APM, 2019; GAPPS, 2015). A sponsor is generally a senior member of the executive providing a vital point of connection between the permanent and temporary organizations (Crawford, Cooke-Davies, Hobbs, Labuschagne, Remington, & Project Management Institute, 2008). It is important to distinguish between an executive sponsor and a project sponsor. On behalf of the owner, the executive sponsor retains ultimate accountability for the project and responsibility for the business case (AXELOS, 2017) but may delegate responsibilities to a less senior project sponsor. Where ownership and operation of a project or program are limited to a single organization or organizational unit, a sponsor may be all that is required and there may be no need for a steering committee. A steering committee is most effective where multiple organizational 116

Steering committees as governance entities  117

units or organizations are involved in ownership, provision of resources, operation, and realization of benefits over time. The steering committee may be appointed, convened, and chaired by the sponsor but this is not always the case. A steering committee may act as a sponsoring group. This is most common in programs where the sponsoring group is a governance board comprising senior representatives of organizations or organizational units that are providing resources or otherwise investing in and benefiting from the program. This sponsoring group may appoint a senior responsible owner (AXELOS, 2020), who has ongoing accountability for successful delivery of the outcomes of the program and may also be referred to as a sponsor. Although the roles of the sponsor and of the steering committee have been researched and reported separately, the relationship between the two and their governance role have received little or no attention in the academic research community. One study that looks at both sponsors and steering committees was conducted by a special interest group of the German-speaking member organizations of the International Project Management Association. Their survey of governance structures in projects and programs (Rudischer, 2020)1 provides insight into the realities of practice. In this study, over 80 percent of projects and programs had some form of sponsorship and of these 30 percent of projects had only a sponsor, 13 percent had only a steering committee, and 52 percent had both a sponsor and a steering committee. Programs are more likely to have a steering committee with (71 percent) or without (29 percent) a sponsor. No programs reported having only a sponsor. Results of this study are consistent with those of Müller et al. (2016), indicating that the majority of projects and programs are likely to have a steering committee and of these the majority will have both a sponsor and a steering committee. This is supported by the Association for Project Management (2019), which states that the “sponsor has a critical role as part of the governance board of any project, programme or portfolio.”2 Having established that steering committees are important governance entities in the majority of projects and programs, primarily but not exclusively in association with an executive or project sponsor, the next steps will be to outline the governance roles of steering committees, and guidelines for most-effective membership and operation with reference to different contexts, and particular reference to their role and challenges in megaprojects.

ROLES AND RESPONSIBILITIES The governance roles and responsibilities of steering committees will vary according to context but there is general agreement that as project governance entities, they are “a temporary group of senior executives charged with a joint project ownership role” (Loch et  al., 2017, p. 46) and have governance accountability and responsibility for realization of the business case (Zwikael & Meredith, 2018). There are several useful and credible resources that provide guidance as to the detailed roles and responsibilities of steering committees including the International Organization for Standardization’s ISO 21505:2017 Project, programme 1 From a sample of 144 responses, 74 percent described projects, 25 percent related to programs and 1 percent to portfolios. Of these, 66 percent were primarily business and technology projects or programs for internal clients and 30 percent were technology, innovation, and construction projects for external clients (Rudischer, 2020). 2 https://www​.apm​.org​.uk​/resources​/what​-is​-project​-management​/what​-is​-sponsorship/

118  Research handbook on the governance of projects

and portfolio management: guidance on governance (ISO, 2017); The Project Management Institute’s (PMI) Practice guide for governance of portfolios, programs and projects (PMI, 2016), which lists typical responsibilities specifically for program and project governing bodies; and Managing successful projects with PRINCE2 (AXELOS, 2017). Notably, both the ISO and PMI documents provide different lists of responsibilities for projects and programs. The Global Alliance for the Project Professions has developed generic terms of reference for governance of temporary endeavors such as projects and programs (GAPPS, 2022), which list responsibilities under headings of approving, facilitating, guiding, supporting, and constructively challenging. It also notes particular responsibilities of steering committee members and the chair. These resources provide useful guidance for deciding on roles and responsibilities to suit the specific conditions for each project or program. It is most important that this is carefully considered and that the roles and responsibilities are clear, understood, and agreed to by the steering committee members (Karlsen, 2020). McGrath and Whitty (2018, p. 787) offer guidance for deciding whether a steering committee is a decision-making body or an advisory committee. If it only has powers to advise, and not to make decisions, it may be argued that it is not a steering or governance entity. Steering committees may be used in governance of a single project or program, or for governance of a portfolio of projects. The specific circumstances and the context should be taken into account in determining the role and responsibilities and other characteristics of the steering committee and its sponsorship role. For instance, steering committees for project portfolio governance are most likely to be standing committees, concerned with selection and prioritization of projects, resource allocation, and organizational capability (Karlsen, 2020; Mosavi, 2014). Research into the sponsorship role (Crawford, Cooke-Davies, Hobbs, Labuschagne, Remington, & Chen, 2008) confirms its importance both in terms of ensuring that governance requirements are met and in providing support to projects and programs. The role is positioned at the interface between the permanent, parent, or owning organization and the temporary endeavor. It must therefore look after the interests of the owning organization and at the same time provide support to the temporary endeavor to ensure that it has the resources, capability, guidance, and timely decision-making required to enable it to deliver value to the owner. This is, in effect, the top management support that is regularly cited in research as a critical factor in the success of projects (Ayat et al., 2020; Young & Poon, 2013). In balancing the emphasis on governance and support, the sponsorship role should be tailored to fit the nature of the owner or owning organization of the particular endeavor and its management, and the environment in which it unfolds. For instance, a strong emphasis on governance oversight and control may be required where there is high risk exposure, regulatory compliance requirements, high visibility, stakeholder sensitivity, or changing and uncertain market conditions. Support may be needed if the owner or parent organization is failing to provide sufficient resources, if there is resistance or competing or conflicting demands from stakeholders, and if there are organizational and other constraints being imposed on the endeavor. Membership of a steering committee can be an important factor in supporting supply of resources from different suppliers, in negotiating with different stakeholder groups, in maintaining awareness of political and cultural realities, and in ensuring expertise and guidance where the owning or managing team lack experience or expertise in aspects of the endeavor.

Steering committees as governance entities  119

RATIONALE FOR A STEERING COMMITTEE Steering committees should only be used where they will add value. If the governance roles can be carried out by an individual such as a sponsor, then there is no need for a steering committee. As McGrath and Whitty (2018) discovered in their research, this is most likely the case for smaller projects with a relatively small number of stakeholders. Steering committees may be established where the project owner has insufficient time, project management knowledge, or expertise to fill the role (Karlsen, 2020). They become necessary when more than one organization is involved in ownership but may also be required in internal projects where multiple organizational units are providing resources or are responsible for realization of benefits as is the case in the majority of information and communications technology and organizational change projects and programs. Importance, novelty, and uncertainty of the project or program are indicators for use of a steering committee (Loch et al., 2017) as it provides a vehicle for diversity of input, specialized knowledge and expertise, and a balance of viewpoints to improve oversight and decision-making. Musawir et al. (2020) provide a categorization of project types that could be used to guide decisions when establishing steering committees especially where the term “organization” is taken to include organizational units. They identify Type I projects, led by a single organization, Type II, led by a dyad or triad of organizations, and Type III, led by a network of organizations. The latter would apply to megaprojects as it includes joint venture, public–private partnerships, private finance initiatives, and projects and programs in the public sector that involve multiple government agencies. The number of organizations or organizational units involved in an endeavor, and the relationships and roles of the organizations, will influence the membership, roles and responsibilities, and operation of a steering committee as a governance entity.

STEERING COMMITTEE MEMBERSHIP The rationale for use of a steering committee, the nature of the project or program and the role that the committee is expected to perform will drive membership considerations. The number of members should be limited to six to eight people (GAPPS, 2022; Karlsen, 2020). They should be senior executives with a sufficient level of authority to make decisions and resolve issues, sufficient knowledge of the work of the project and the operational environment to have an informed view and access to networks, and connections and resources that will be useful in progressing the endeavor (GAPPS, 2022; Karlsen, 2020). Members may include senior executives representing funding or resource providers, the product owner, user, or operator(s) of the outcomes of the endeavor, and those who will be responsible for realizing the longerterm benefits. Major membership considerations are availability and continuity (Karlsen, 2020). Committee members with the required seniority will be taking on this responsibility in addition to significant regular roles and responsibilities (Loch et al., 2017). It is important that they make a commitment to provide sufficient time to discharge their role and they should be discouraged or prohibited from sending delegates to steering committee meetings in their place. Motivation and willingness to personally participate in meetings are important. External members who bring specific expertise have been shown to build trust in the committee in the

120  Research handbook on the governance of projects

eyes of stakeholders (Karlsen, 2020). For complex projects of long duration, some change in the composition of the steering committee may be made to meet the needs of different stages in the life cycle. Research indicates that there is value in providing training for steering committee members to ensure that they have shared understanding of their roles and responsibilities and principles of good governance (Karlsen, 2020). As individuals, effective steering committee members will be expected to prepare for and participate actively in meetings, speak openly and contribute to healthy debate, encourage others to voice their views, constructively challenge information provided, and declare and manage any conflict of interest. The chair of the steering committee is typically the sponsor or project owner (Zwikael & Meredith, 2018; Zwikael & Smyrk, 2015) but this is not always the case. Where the steering committee represents multiple project owners, funders, resource suppliers, or beneficiaries, the chair may be elected by the members or the position held in rotation. As the steering committee “directs and controls the project manager” (Müller, 2016, p. 18), the project or program director or manager will not normally be a member of the steering committee but may be considered a permanent attendee without voting or decision-making rights but with responsibility for reporting to the committee on project progress, answering any questions that may arise, informing the committee of key risks, issues, and areas of concern and escalating any matters requiring action from the committee to support resolution. Subject matter experts or members of the project management team may be invited to attend steering committee meetings as observers from time to time.

OPERATION Unless the rules of operation of steering committees are decided by the authorizing body, the steering committee will agree on their own meeting rules and procedures for negotiation and decision-making (Loch et al., 2017). Meetings of the steering committee should be scheduled at the start of the endeavor and held regularly to enable members, who will have many other responsibilities, to plan and commit to attendance and contribution. Meetings are usually held monthly or on a quarterly basis or in line with important decision-making points or milestones (Karlsen, 2020). The timing may be varied throughout the project cycle depending on requirements. At a minimum, meetings should be scheduled in line with key milestones for the endeavor. Ad hoc meetings may be held as required to accommodate the dynamics of complex projects and programs. The terms of reference for the steering committee, set by the authorizing body, should specify the basis upon which decisions will be made. As a general principle, the aim would be to make decisions on the basis of agreement achieved after discussion; however, processes should be in place to address and expedite decisions if there is conflict and disagreement. There should be clarity as to the decisions that can and should be made by the steering committee. Technical decisions should as far as possible be handled within the project or program although decisions made by the steering committee can assist the project or program manager by providing resolution and enabling work to proceed or providing support where unpopular decisions need to be made (Karlsen, 2020). Prompt, clear, and informed decision-making is critical to effective performance of the steering committee and the endeavor.

Steering committees as governance entities  121

Steering committees should establish policies and processes that support principles of good governance, namely transparency, accountability, responsibility, and fairness (Müller, 2016). For transparency and effective operation, the steering committee should establish reporting lines and processes for authentic communication with the authorizing body, the project or program director and team, and between committee members, providing support and encouraging honesty in reporting from the endeavor. Accountabilities and responsibilities of all parties should be clearly agreed and documented. The steering committee should demonstrate fairness in carrying out its governance roles. An effective steering committee will understand the difference between governance and management, focus on providing governance and support, and avoid unnecessary interference with management of the endeavor as this is the responsibility of the project or program manager. They will articulate and communicate a clear vision for the endeavor, act to remove obstacles faced by the manager and team, foster a collaborative, psychologically safe environment that encourages diverse and dissenting views, communicate positively and build support for the endeavor, remain focused on the intended purpose and outcomes, monitor changes in the external environment that may positively or negatively impact the business case, and be alert for opportunities to add value.

MEGAPROJECTS Although there has been a considerable amount of research focused on the governance of megaprojects (Denicol et al., 2021; Gann et al., 2017; Miller & Hobbs, 2005; Qiu et al., 2019), the focus tends to be on the client and contracting organization with some discussion of the role of the project owner and the sponsor but little examination or discussion of the governance role of steering committees. This appears to be a research gap and opportunity. Meanwhile, there are some observations that can be made. Megaprojects are particularly complex endeavors that clearly fall into Musawir et al.’s (2020) Type III network of organizations, presenting particular challenges for the establishment, membership, operation, and behaviors of steering committees. As there are many organizations involved in megaprojects, selection of steering committee members and limiting membership to a manageable number becomes particularly difficult as does the definition of the role and responsibilities. As Ahola (2018, p. 1015) points out, project governance frameworks assume a project owner that ultimately controls the project, but in networks of inter-organizational projects there “is no single actor in total control of the whole network.” Drawing on Miller and Hobbs (2005) there is potential for changes in steering committee membership in what they refer to as the strategic structuring or concept phase, design and execution and, finally, commissioning and ramp-up phases of large complex projects. Governance regimes, and therefore steering committees as governance entities for large complex projects, need to be dynamic and able “to change themselves to adapt to emerging contexts” (Miller & Hobbs, 2005, p. 48). Project owners and therefore steering committees of such endeavors are challenged to deal with uncertainty, allow sufficient flexibility for innovation and incentivize collaborative behaviors to enable swift action in response to rapidly changing conditions (Gann et al., 2017). There is clearly scope for empirical research into the effective operation of steering committees as governance entities in the context of megaprojects.

122  Research handbook on the governance of projects

CONCLUSION The sponsorship role, whether taken by a sponsor, a steering committee, or both, is central to the governance of projects and other temporary endeavors. It is positioned at the interface between the permanent and temporary organizations and the roles and responsibilities, membership, and operation should be tailored to suit the characteristics of the specific context both internal and external to the endeavor. The sponsor and steering committee are the principal governance institution for temporary endeavors and provide a major part of the top management support which research has shown is critical to the successful delivery of value.

REFERENCES Ahola, T. (2018). So alike yet so different: A typology of interorganisational projects. International Journal of Project Management, 36(8), 1007–1018. https://doi​.org​/10​.1016​/j​.ijproman​.2018​.07​.005 Association for Project Management. (2019). APM body of knowledge (7th ed.). Association for Project Management. https://ebookcentral​.proquest​.com​/ lib​/westminster​/detail​.action​?docID​= 6348558 AXELOS. (2017). Managing successful projects with PRINCE2 (6th ed.). TSO. https://learning​.oreilly​ .com ​/ library​/view​/managing​-successful​-projects​/9780113315352/ AXELOS. (2020). Managing successful programmes (5th ed.). TSO. https://learning​ .oreilly​ .com​ / library​/view​/managing​-successful​-programmes​/9780113316786/ Ayat, M., Imran, M., Ullah, A., & Kang, C. W. (2020). Current trends analysis and prioritization of success factors: A systematic literature review of ICT projects. International Journal of Managing Projects in Business, 14(3), 652–679. https://doi​.org​/10​.1108​/ IJMPB​- 02​-2020​- 0075 Crawford, L., Cooke-Davies, T., Hobbs, B., Labuschagne, L., Remington, K., & Chen, P. (2008). Governance and support in the sponsoring of projects and programs. Project Management Journal, 39(Suppl. 1), S43–S55. https://doi​.org​/10​.1002​/pmj​.20059 Crawford, L., Cooke-Davies, T., Hobbs, B., Labuschagne, L., Remington, K., & Project Management Institute. (2008). Situational sponsorship of projects and programs: An empirical review. Project Management Institute. Denicol, J., Davies, A., & Pryke, S. (2021). The organisational architecture of megaprojects. International Journal of Project Management, 39(4), 339–350. https://doi​.org​/10​.1016​/j​.ijproman​.2021​.02​.002 Gann, D. M., Davies, A., & Dodgson, M. (2017). Innovation and flexibility in megaprojects (B. Flyvbjerg, Ed.; Vol. 1). Oxford University Press. https://doi​.org​/10​.1093​/oxfordhb​/9780198732242​.013​.15 GAPPS. (2015). A guiding framework for project sponsors. Global Alliance for the Project Professions. http://www​.globalPMstandards​.org GAPPS. (2022). A guiding framework for terms of reference for governance of temporary endeavours (Draft). Global Alliance for the Project Professions. ISO. (2017). ISO 21505:2017 project, programme and portfolio management – Guidance on governance. International Organization for Standardization. https://www​.iso​.org​/standard​/63578​.html Karlsen, J. T. (2020). The project steering committee, project governance and trust: Insights from a practical case study. Management Research Review, 44(6), 926–947. https://doi​.org​/10​.1108​/ MRR​12​-2019​- 0540 Loch, C., Mähring, M., & Sommer, S. (2017). Supervising projects you don’t (fully) understand: Lessons for effective project governance by steering committees. California Management Review, 59(2), 45–67. https://doi​.org​/10​.1177​/0008125617697944 McGrath, S. K., & Whitty, S. J. (2018). Do steering committees really steer? International Journal of Managing Projects in Business. https://doi​.org​/10​.1108​/ IJMPB​- 04​-2018​- 0064 Miller, R., & Hobbs, B. (2005). Governance regimes for large complex projects. Project Management Journal, 36(3), 42–50. https://doi​.org​/10​.1177​/875697280503600305 Mosavi, A. (2014). Exploring the roles of portfolio steering committees in project portfolio governance. International Journal of Project Management, 32(3), 388–399. https://doi​.org​/10​.1016​/j​.ijproman​ .2013​.07​.004

Steering committees as governance entities  123

Müller, R. (2009). Project governance. Gower. Müller, R. (2016). Organizational project governance. In R. Müller (Ed.), Governance and governmentality for projects: Enablers, practices, and consequences (Vol. 2). Routledge. https://doi​.org​/10​.4324​/ 9781315683294 Müller, R., Shao, J., & Pemsel, S. (2016). Organizational enablers for project governance (1st ed.). Project Management Institute, Inc. PMI. (2016). Governance of portfolios, programs and projects: A practice guide. Project Management Institute, Inc. Qiu, Y., Chen, H., Sheng, Z., & Cheng, S. (2019). Governance of institutional complexity in megaproject organizations. International Journal of Project Management, 37(3), 425–443. https://doi​.org​/10​.1016​/ j​.ijproman​.2019​.02​.001 Rudischer, C. (2020). Governance structures in projects and programmes, PM goes boardroom. GPM/ pma/spm special interest group/Rudischer Management Consulting e.U. https://www.rudischer. consulting/ext/pmgb/Final_Report_Governance_Structures.pdf ul Musawir, A., Abd-Karim, S. B., & Mohd-Danuri, M. S. (2020). Project governance and its role in enabling organizational strategy implementation: A systematic literature review. International Journal of Project Management, 38(1), 1–16. https://doi​.org​/10​.1016​/j​.ijproman​.2019​.09​.007 Young, R., & Poon, S. (2013). Top management support – Almost always necessary and sometimes sufficient for success: Findings from a fuzzy set analysis. International Journal of Project Management, 31, 943–957. https://doi​.org​/10​.1016​/j​.ijproman​.2012​.11​.013 Zwikael, O., & Meredith, J. R. (2018). Who’s who in the project zoo? The ten core project roles. International Journal of Operations & Production Management, 38(2), 474–492. https://doi​.org​/10​. 1108​/ IJOPM​- 05​-2017​- 0274 Zwikael, O., & Smyrk, J. (2015). Project governance: Balancing control and trust in dealing with risk. International Journal of Project Management, 33(4), 852–862. https://doi​.org​/10​.1016​/j​.ijproman​. 2014​.10​.012

11. The project management office: governing at the interface of temporary and permanent Monique Aubry and Magali Simard

INTRODUCTION Project management offices (PMOs) are often encountered in a variety of sectors and organizations today. Their legitimacy seems to have been accepted over the last decade and is no longer a matter for debate. However, questions related to the integration of such an entity within organizational governance are still open to discussion (Braun, 2018). Indeed, current knowledge of PMOs and governance suggests that there is no one way of approaching PMO governance mechanisms to integrate a PMO within an organization’s overall governance structure (e.g. Chapter 32). Following the emergence of numerous novel governance approaches in diverse academic disciplines such as politics, economy, technology, etc., the Introduction chapter of this book points to the need for a diversification of theoretical lenses to study governance in the context of projects. The aim of this chapter is to answer this call by suggesting an integrative framework for PMOs in the governance of organizational project management. Governance in the project context has attracted the attention of several researchers, many of whom focused primarily on transaction cost economics. Exploring governance beyond this purely economic perspective offers great potential for new theorization (Ahola et al., 2014). PMOs often face two power system logics: hierarchy and projects. In other words, a traditional vertical power system intersects a horizontal power system. This gives rise to complex organizational governance systems, where the PMO is positioned at the intersection of the two power systems. An illustration of this reality can be found in Aubry (2011). Applying a sociological perspective, she showed the coexistence of multiple loci to report on project status within the vertical governance system and within the horizontal project governance system. Interestingly, vertical governance is well known, unlike horizontal governance, which is often invisible and temporary. While vertical governance is essential to maintain coherence within the overall organizational governance, the invisible portion of governance dedicated to projects calls for an alternative approach to the inclusion of governance mechanisms specific to projects. Aubry (2011) recognizes that governance alone does not suffice to account for the complex power relations and decision-making found in projects. The PMO is a good place to study governance mechanisms since, as we saw, it usually sits at the intersection of the vertical and horizontal power systems. We define a PMO as an organizational entity representing “a management structure that standardizes projectrelated governance processes and facilitates the sharing of resources, tools, methodologies, and techniques” (Project Management Institute, 2021, p. 245). “However, the character and function of a PMO may vary between organizations, and even within the same organization” (Project Management Institute, 2021, p. 211). To define governance, in this chapter we have adopted the definition quoted in the Introduction, which is as follows: “The governance of 124

The project management office  125

an organization provides the structure, processes, policies, and value system through which the objectives of the organization are set, and the means of attaining those objectives and of monitoring performance are determined in the best interest of all stakeholders and the corporation itself” (Turner, 2022, p. 9). One interesting avenue to advance knowledge on PMO governance can be found in recent research on the concept of governmentality in the context of projects, which addresses the human side of governing (Müller et al., 2014; Simard et al., 2018). Governmentality is associated with the art and task of governance (Foucault, 1971) through the general and dispersed practices of governance, which are identified as the “conduct of conducts.” For Foucault, governmentality meant both strategies of organizational governance, in a broad sense, as well as self-governance by those who are made subjects of organizational governance (Clegg et al., 2002). In this context, governmentality concerns how to apply governance, either through strict rules or through values that individuals share and respect. Governmentality is seen as an alternative to policing, litigation, and arbitration (Clegg et al., 2002). According to Barnett et al. (2014) (see also Chapter 7), it is a concept: involving the subtle exercise of a power aimed at creating self-governing subjects of power. … The practice of governmentality aspires to create a common sensemaking frame (Weick, 1995) whereby project participants will voluntarily and willingly agree to be normatively governed in choices forming the subjectivity of their project selves.

Another concept that should also be applied in this perspective is organizational design, which represents a way to give life to both governance and governmentality. Organizational design can be defined as the structures of accountability and responsibility used to develop and implement strategies and human resource practices, and the information and business processes that activate those structures (Miller & Friesen, 1984). Organizational design drives the way strategies are formulated or formed and determines whether and how they can be implemented. It is the vehicle whereby organizations recognize the need for adaptation, determine its course, and put change into effect; it is the framework that enables and allows collective behavior to occur (Greenwood & Miller, 2010). According to Simard et  al. (2018), together these three elements form a complementary whole that helps us understand the extent to which informal interactions are influenced by formally designed and imposed organizational elements. Governmentality takes into account informal interactions and self-governance throughout and between levels and refers to a social structure that is frequently modeled as a network that influences and is influenced by the various levels of formal governance and organizational design. The result is a more comprehensive view, one that considers the formal and informal aspects of the challenges encountered by projects in the context of organizational project management. This view is useful for the study of the dynamic role of governance in the emergence of the informal social structure (i.e., emergent models of individual behavior and interactions between individuals). Simard et al. (2018) proposed a multilevel conceptual framework that can capture the different mentalities involved in governing and their evolution. Their framework corresponds well to the changing, pluralistic context of today’s projects and the organizations within which PMOs are located at the intersection of temporary and more permanent governing/organizing. Consequently, the dyad governing/organizing symbolizes the need for continual adaptation of governance and organizational design resulting from the changing environment, where organizations are understood as operating in a world on the move (Hernes, 2014).

126  Research handbook on the governance of projects

In this chapter, we aim to provide some answers (or at least some insights) to guide reflections on the integration of PMOs within broader organizational governance. First, we localize the PMO in the governance of organizational project management, then it is analyzed as an integrative locus of governance, governmentality, and organizational design. Finally, we present an overview of the challenges facing PMO governance in an “agile” world, followed by the conclusion.

THE PMO IN THE GOVERNANCE OF ORGANIZATIONAL PROJECT MANAGEMENT The PMO, defined as an organizational entity, refers to a wide variety of situations, given the different activities or functions it is involved in, and firms’ different organizational and structural characteristics (Hobbs & Aubry, 2010). Consequently, there are many variations in governance systems. The research by Aubry et al. (2012) specifically explored PMO governance in different organizational settings. The researchers found variations based on four paradigms previously identified by Müller (2011) for project governance: flexible economist, versatile artist, conformist, and agile pragmatist. Not only were the four paradigms present in their four cases in different PMO settings, but more than one paradigm might be found in the same organization. In fact, organizations sometimes move from one paradigm to another depending on the project. In the same study, the authors undertook a social network analysis of the same four organizations. Using this method, they also found a wide range of approaches based on three governance roles for PMOs: controlling, partnering, and serving. The detailed results showed that most PMOs adopted a controlling role, whereas PMOs adopting partnering and serving roles were few. These results have important consequences for governance. For instance, a controlling role in PMO governance would favor an exploitation approach and a search for efficiency, rather than exploration and a search for innovation (Aubry et al., 2012; Unger et al., 2011). A good illustration of a controller role was found with a PMO that existed at the organizational level and established relations with other PMOs at the departmental level mainly based on project control. In that situation, there was no possibility of learning and sharing experiences. In some cases, the PMO was deliberately left outside the decision-making process and was established strictly to serve and support other PMOs or departments. In other situations, a PMO adopted a partnership role with other PMOs or departments. For example, one PMO established a partnership with the human resources department to ensure change management in projects. Overall, the findings of the social network analysis showed that a variety of governance roles existed simultaneously in the same organization and sometimes even in the same PMO; furthermore, different PMOs in a single organization exhibit complex mixtures of PMO roles. Summing up this research on PMO governance, we can conclude that knowing about a PMO’s activities, structural characteristics, governance paradigms, and roles might not suffice to account for and understand the PMO’s full reality in the governance of organizational project management. Recent research on PMOs has shed light on more complex organizational arrangements where governance might need to adopt a different mindset. Some scholars have investigated inspiring perspectives on PMOs. For example, Braun (2018) explored how PMOs and network administrative organizations relate to each other in the case of inter-organizational projects. He pointed out, accurately, “Thus, obviously the research on PMOs has moved

The project management office  127

toward relational issues within and across the organization and touches on domains that are typically addressed in the research stream on NAOs [network administrative organizations]” (Braun, 2018, p. 55). He suggested that PMOs and NAOs will eventually work together more often in more complex organizational arrangements. That means that PMO governance may well involve both internal and external network members. Artto et al. (2011) argued in favor of a dynamic role for PMOs to ensure better integration with a diversity of mechanisms, including coaching, facilitators, coordinators, and innovation strategies. Finally, we should mention the research on the role of PMOs in innovation and knowledge. Sergeeva and Ali (2020) argued that PMOs should play a dynamic role to activate creativity and innovation within organizations. The study on PMOs as knowledge brokers by Pemsel and Wiewiora (2013) provided similar results. Overall, the research on PMOs suggests that they must navigate between the formal relations established by the hierarchical governance of a permanent organization, on one side, and the less formal relations crossing over hierarchical boundaries in temporary project organizing, on the other side. The examination of PMO governance at the interface of permanent and temporary organizing and of formal and informal social structures can contribute new insights and enhance our understanding of PMOs in the governance of organizational project management.

THE PMO AS AN INTEGRATIVE LOCUS OF GOVERNANCE, GOVERNMENTALITY, AND ORGANIZATIONAL DESIGN In this section, we build on the work of Simard et  al. (2018), who proposed a conceptual framework to establish the necessary complementarity among governance, governmentality, and organizational design in the governance of organizational project management. Taking parsimony into consideration, they argued that each of the three components is essential for understanding the different facets of governance that work together in dynamic organizational processes. The argument set out in their paper is based on three major problems in the current literature on governance in the context of projects. The first problem is the absence or quasiabsence of the informal in the understanding of governance and organizational design. Thus, there is a lack of recognition of the lateral governance mechanisms associated with projects, which often refer to informal relations. Moreover, these relations take on more importance in complex forms of organizing – such as networks (Braun, 2018) – and complex social interactions (Clegg et al., 2006). The second problem concerns the difficulty of integrating different timeframes, particularly when processes are located at the interface of temporary and permanent organizations. Moreover, we know very little about how governance mechanisms interact in a multi-project context (Miterev et al., 2017) and when these projects are embedded in inter-organizational arrangements (Burke & Morley, 2016). The third and last problem is the widespread confusion between governance and organizational design. The framework proposed by Simard et al. (2018) applies an integrative approach that considers formal and informal relations in organizational project management and provides wide coverage, from the micro to the macro level. In this chapter, we examine the PMO as a specific case where this approach can shed light on complex and sometimes invisible aspects of the PMO’s role in the governance of organizational project management. In this respect, it is

128  Research handbook on the governance of projects

important to note that a PMO is not considered to be an independent entity external to the overall governance context. Rather, a PMO is embedded in that context. Figure 11.1 illustrates the case of a project-based organization with multiple PMOs, each one of which is at the interface of temporary and permanent governing/organizing, given that it is included in the permanent organizational hierarchy but takes part in the governance of organizational project management with its own temporality. In some cases, PMOs are more likely to be permanent entities, such as an enterprise portfolio office or HUB portfolio program offices, while in other cases PMOs are more likely to be temporary entities such as program offices or project offices (GOC, 2013). The same framework can also apply to different and more complex forms of project organizations, such as project networks, temporary alliances, etc. Figure 11.2 illustrates the framework in more detail, where each PMO participates in the governance of organizational project management with its own temporality and an evolving context in terms of governance and organizational design, including the associated governmentality. Governmentality is composed of four axes inspired by Dean’s (2010) perspective on this concept. (1) Visibility: ways of seeing and perceiving what is made visible, which represent the objects to be governed, for instance organizational charts. The emphasis is on the visual and spatial dimensions and on diagrams of power. For example, this axis can refer to what is made visible in an organizational chart versus what is made less evident. (2) Techne: ways of acting based on technical aspects such as the means, processes, mechanisms, instruments, tactics, technologies, and vocabularies whereby authority is constituted, and rules are applied. For example, this axis can refer to what is recognized as a standard to be followed. (3) Episteme: ways of thinking and knowing, referring to the ideals of governance, of the

Figure 11.1  PMOs at the interface of temporary and permanent

The project management office  129

Source:  adapted from Simard et al., 2018

Figure 11.2  PMOs in the governance of organizational project management “normal” mode of functioning. It concerns the forms of knowledge, reason, and expertise that justify and inform the techne of governing. For example, this axis refers to how an individual considers things should work, such as how a PMO should be managed. (4) Identification: ways of forming identities and identifying with, for example, a PMO or a project, referring to the forms of identity presupposed by different government practices and the kinds of conduct expected and enacted. This last axis concerns how someone who is assigned in, for example, a PMO or a project can be encouraged to identify himself or herself as an active participant of the PMO or the project. Ultimately, this perspective on governmentality considers how we govern and are governed while also incorporating how the people who are governed perceive being governed. It considers different mentalities and their evolution. Each axis constitutes a line of continuous transformation and variation; and each presupposes the others without being reducible to them (Simard et al., 2018). In this chapter, we seek to understand how PMOs put governance, organizational design, and governmentality into action together through their interactions based on Simard et al.’s (2018) framework. For this purpose, we will examine the fundamentals of PMOs under these three components. We refer to Aubry (in press) for the five fundamentals of PMOs: PMO toolbox, think globally, frequent changes, chaos versus order, and performance as a dialogue. These fundamentals were identified by means of a long-standing research program on PMOs and direct interventions in several organizations. In the following paragraphs, we will examine each of these fundamentals with reference to the three components of the framework presented above (see Table 11.1). The mapping does not reflect a strict, fixed classification: Table 11.1 should be understood with some nuances.

130  Research handbook on the governance of projects

Table 11.1  PMO fundamentals through the lens of governance, governmentality, and organizational design PMO fundamentals

Governance

PMO toolbox



Think globally



Frequent changes



Chaos versus order



Performance as a dialogue

Governmentality

Organizational design 



 







The PMO Toolbox The toolbox is an approach to overcome the extreme variability of organizations’ realities: the results of research confirm that there is no such thing as a type of PMO specific to any industrial sector or region. Constructing its own solution seems to fit the organization’s specific context better than copying from another organization. In this situation, the PMO toolbox provides four categories of basic elements where a decision should be made to define a PMO’s mandate or at least to be the subject of discussion. The four categories of basic elements are: ● ● ● ●

Organizational context characteristics Project characteristics PMO structural characteristics PMO domains of activity.

The PMO toolbox relates mainly to governance and organizational design, which are strictly associated with the formal ways of governing/organizing in reference to the conceptual framework defined by Simard et al. (2018). The toolbox’s objective is to define as precisely as possible the PMO’s position in the overall organization considering the context and to identify its mandate in terms of the activities that will be entrusted to it – a governance issue. In this regard, the PMO will be given a certain level of authority over its activities. Regarding organizational design, the PMO toolbox will also help to position the PMO in the organizational governance structure and identify activities that will require lateral interactions with projects, programs, or portfolios. It will also consider the case of PMOs specifically created for a program (or a large strategic project). These PMOs may only be included in the governance structure of their program without being included in the organizational governance structure. It is important to specify that, even though the toolbox is mainly linked to formal governance and organizational design, the four axes of governmentality can also be considered in the analysis of this PMO fundamental. For example, the episteme axis (ways of knowing) presupposes a vision of a better way of doing or organizing things. Thus, it implies that “governors” have a vision (or ideal) of how things should work (e.g., what a PMO’s role should be); and how they work in a specific case; what the appropriate standards and processes are (referring to the techne axis); and therefore what should be made visible (e.g., process documentation and the associated positive communication practices) in order to influence people to participate actively in the PMO’s activities and thus engage in positive project management.

The project management office  131

Think Globally PMOs are embedded in their organizational context, which may be a large, complex projectbased organization, a project network, or a megaproject. PMOs are far from being isolated: they are part of organizational project management, and as such they are integrated with other project-related activities in a cohesive network (Müller et al., 2019). So, when the time comes to think of the governance aspects of PMOs, relationships with other PMOs in the same organization or other external entities must be taken into consideration. Not only internal interactions must be considered, but external ones also. Thinking globally is also about acting globally. Thinking and acting globally is a good way to avoid eventual tensions or conflicts related to PMOs. Indeed, PMOs are often positioned at the interface of vertical governance, provided by the hierarchy, and horizontal governance, provided by projects, programs, portfolios, and other PMOs. Mapping the different domains of activity among entities is a good way to think globally. Collaboration with other entities is key to succeeding at thinking and acting globally. Based on Simard et al.’s (2018) work, thinking and acting globally refer to governance, governmentality, and organizational design. Indeed, governmentality encapsulates governance and organizational design to bring coherence into the governance system for various actors, both internal to the project and outside of its formal mandate, as emphasized by Clegg and Ninan in Chapter 7. Governance provides for the essential normativity that takes shape in organizational design. A major challenge for the integration of the three facets relates to temporality. PMOs’ domain is projects, and projects are temporary vehicles to create change and transformation within a permanent organization. Since PMOs are at the interface of temporary and permanent entities, the overall governance system should provide mechanisms to respond to the requirements for normative governance and be open to relational governance for projects. Thinking and acting globally call for a governance system capable of adapting to different temporalities  – permanent and temporary  – and contexts. It also calls for a governance system that can draw on the four axes of governmentality to develop some understanding and reflexivity about what is made visible versus invisible (e.g., rules, roles, values and/or processes that are communicated and/or published, and thus made visible or not), what is or is not recognized as rules (techne), and what are the various visions (epistemes) of how things should be, for example, how a rule or method should be defined and applied. Together, these three axes can be used in interaction with the fourth axis, identification, to understand, adapt, and encourage the identification of individuals who may become active participants in the PMO. By mastering these axes, a PMO can facilitate the interface between temporary and permanent organizing by facilitating positive project management. Another aspect to consider is that horizontal power is often a locus where coordination through informal social structures can occur, which can make room for informal governing/organizing mechanisms. These mechanisms may complement the formal way of governing/organizing by facilitating, for example, the emergence of informal roles or informal committees that are aligned with a PMO’s objectives, which may be associated with positive project management impacts. However, these mechanisms can also be considered as competition, for example, if they are not aligned with a PMO’s objectives, and this can have negative impacts on the PMO, and ultimately on its parent organization.

132  Research handbook on the governance of projects

Frequent Changes PMOs are no exception to general principles: the world changes and so do they. In fact, not changing might be a symptom of inertia. A good approach to change is to understand the PMO as being in transition from one state to the next. This entails being prepared for change. One major issue when considering change is the loss of knowledge and learning from earlier situations. This fundamental principle of frequent changes is mainly associated with governance and organizational design, and thus the formal side. It refers to a dynamic process of change affecting both the organization and the PMO. It is closely connected with the development of the PMO toolbox. Yet a major challenge for PMOs is to maintain good coherence in the integration of governance and organizational design over time while existing in multiple temporalities and contexts. The four axes of governmentality can be considered in the analysis of this PMO fundamental. The quest for coherence should also consider the intersections at which the PMO is located, its evolution, and the plurality of visions or ways of seeing how things should work (episteme) of vertical and horizontal power. Within governmentality, this axis concerns the vision of an ideal way of working and seeks to transform practices, which may be associated with certain ideals of governing (i.e., how we shape or direct our own and other people’s conduct). Consequently, internal PMO reforms or radical challenges to the PMO’s operations may emerge, for example, by assigning new goals to a PMO or acting upon the desires or aspirations of individuals within the PMO. Most strategic changes in a PMO are undoubtedly the result of certain ideals of governing (episteme), which influence the technical aspects, such as methods (techne) and what is visible or not concerning these changes. Therefore, they have an impact on how individuals may identify themselves as active participants in a PMO. Chaos versus Order This fundamental aspect brings in some critical points concerning the current stream of standardization in the project management community. There is a need for standardization, as it is admitted that more standardization leads to better performance. However, it is also as important to remember that project management has its roots in innovation. Project management and particularly its organic structure of matrix-type organization is seen as flexible and free of the rigidity associated with hierarchy. A balance must be found between flexibility and rigidity, or between chaos and order (Geraldi et al., 2021). This balance can be described as managing at the edge of chaos (Geraldi, 2009). The agile movement is very welcome in this regard, as discussed further on in this chapter. The chaos versus order points to governance, organizational design, and governmentality. For PMOs, in a way, this concept could translate as governance and organizational design, which are associated with the formal way of governing/organizing, and as governmentality, which takes into account informal interactions throughout and between levels and their impacts on governing/organizing. However, these two approaches are not at all opposed; they can be considered as standing in a paradoxical relationship of “one or/and the other” (Smith & Lewis, 2011). Governance brings in the normative aspects of a permanent organization where formal order is usually imposed, along with the associated organizational design. For example, a PMO may have to report at fixed periods on project performance or project portfolio risks to

The project management office  133

specific units. Governmentality opens the structure up to informal social relations, including both internal actors and people who are external to the core project team. Its consideration may help take into account the expectations or impacts of a project on indirect stakeholders or enable informal governing/organizing mechanisms in the governance of organizational project management, which may be complementary to a PMO. Consequently, informal roles and/ or informal coordination committees that are aligned with a PMO’s objectives may emerge. However, these informal social structures, which can facilitate project governing/organizing by creating “positive” mechanisms that complement the formal way of governing/organizing, can also provide “negative” mechanisms that compete with it. Therefore, it appears important to highlight the importance of providing a governance framework in which promulgated values are visible and enforced through norms and reinforced by positive project management. Performance as a Dialogue This builds on paradox theory and admits that different individuals do have different values and, consequently, how they assess PMO performance may vary. In this dialogue, there is a need for negotiation among the different performance expectations of a PMO. For example, organizational executives usually push for the PMO to achieve better financial results in its projects under management, while PMO personnel focus instead on quality human relations. Dialogue and negotiations take time. Various activities may take place to encourage the reconciliation of different viewpoints: committees, round tables, visits to other organizations, case studies, workshops, collaborative research with academics, etc. Performance as a dialogue is mainly associated with governmentality as shown in Table 11.1. This is not surprising as governmentality is concerned with bringing actors together within a common sensemaking framework. As Clegg and Ninan mention in Chapter 7, “Governmentality that is concerned with making a body of people productive can be considered as a form of positive power.” It is about the individual vision of how a PMO should operate in a specific context (episteme); the process, methods, and structures that should be used (techne); and what should be made visible and how, in terms of, for example, information and/ or processes. It is also about what can be communicated to encourage different individuals to participate actively in PMO activities, thereby providing a common sensemaking framework. In this section, the consideration of the PMO fundamentals through the interaction of governance, organizational design, and governmentality provides an analysis framework that can deepen our understanding of the PMO’s special location at the interface of power systems. However, the popularity of the “agile” concept and what it means in the context of these power systems may create some additional challenges for PMOs, which we introduce in the following section.

PMO GOVERNANCE IN AN AGILE WORLD “Agile” has become a sort of motto in managers’ discourse; many consider agile as a way to increase competitiveness and improve innovativeness (Conforto et al., 2016), and it is increasingly gaining a hold over mainstream management thinking (Birkinshaw, 2018). For organizations, agile project management represents a way to face current challenges in environments characterized by uncertainties and constant change (Azanha et  al., 2017). This situation is

134  Research handbook on the governance of projects

especially applicable to the digital transformation affecting almost all industries (Conforto et al., 2016; Lappi et al., 2018). The agile emerging approach is gaining ground in high-tech companies and software development projects, as well as in other industries and communities (Conforto et al., 2016; Lappi et al., 2018). The main impacts of this approach are on customer involvement, project delivery frequency, acceptance of changes, frequency of organizational change management activities, and the changes in project team design, within which the use of self-organizing teams is considered a key aspect of this approach (Beck et al., 2001; Hoda et al., 2013; Krancher et al., 2018). However, the use of such teams raises questions not only about the project manager’s role, which is currently described as ambiguous by some professional project management associations (e.g., Project Management Institute, 2017), but also about the impacts on governance processes at the various levels of the governance of organizational project management, including the project’s relationship with the permanent organization. An example of impact on agile project governance is the emerging concept of “minimal viable governance” described in Chapter 35 of this book, which seems inspired by the agile concept “minimal viable product.” Therefore, the agile approach should have consequences for how projects are governed and organized and, correspondingly, for PMOs. Issues on PMO adaptation to agile are often reported in agile project management literature (e.g., Dikert et al., 2016); PMOs are showing some signs of adaptation to the “agile mentality,” as also indicated by professional project management associations (e.g., Project Management Institute, 2021). Some PMOs have acquired a new enabling role that focuses on coaching rather than management and oversight functions (e.g., controlling role). Thus, some PMOs provide coaching about agility in projects. Considering the agile context, the position of the PMO at the interface of temporary and permanent within the overall organization should lead organizations to pay special attention in a PMO’s mandate to how formal control is exercised. In agile projects, change is omnipresent, which demands adapted control processes. The omnipresence of change may require a closer relationship between temporary and permanent governing/organizing. Consequently, controlling may also require an adaptation of the governance of organizational project management especially concerning the horizontal governance between the permanent and the temporary, which is often invisible and temporary, to be both more formal and “subtle.” In addition, self-organizing both within teams and between teams, in projects and programs, requires governance adaptations not only at the project/program level but also at the organizational level, which should allow the PMO to serve as a boundary spanner to facilitate the understanding of governing/organizing issues and the identification of the associated adaptations. Past research on self-organizing teams (Hackman, 1986; Hackman & Katz, 2010; Pasmore & Khalsa, 1993; Trist, 1981) has shown that permanent teams need support from organizational governance (e.g., creation of team-related objectives in the annual performance evaluation). The same applies to temporary organizing in the context of agile projects. For example, the PMO could facilitate the relationship between agile project governance and human resources governance by fostering the addition of team-related objectives to annual performance evaluations or the recognition of agile project roles (Simard & Lapalme, 2018). Indeed, the remuneration and recognition practices established by human resources governance are often seen as problematic, since rewards are frequently tied to personal performance, which acts against team-centric thinking and the agile approach in general (Dikert et  al., 2016; Sun & Schmidt, 2018). Thus, self-organizing in an agile context implies that temporary

The project management office  135

and permanent governing/organizing, including their relationships, should be better understood, and PMOs could serve as facilitators.

CONCLUSION The challenges faced by organizations today call for solutions that enforce adaptation and innovation capabilities, including in governance. PMOs can play a role in implementing such solutions. In this chapter, we have emphasized the position of PMOs in the governance of organizational project management, standing as they do at the interface of the temporary and the permanent in organizations. The conceptual framework developed by Simard et al. (2018) served as a foundation to provide some guidance in shaping PMO governance. This framework brings together governance, governmentality, and organizational design. The mapping of these three concepts with PMO fundamentals (Aubry, in press) provides practical perspectives for governance based on academic research. The previous section in this chapter discussed developments for PMOs engaging in an agile world. This avenue seems to be key to facing today’s challenges by increasing adaptation and innovation in the project world and, consequently, in permanent organizations. With the development of technological capabilities, digitalization and artificial intelligence (AI) are affecting the project management world more and more. They will surely change the field, including its governance mechanisms. Interestingly, a Gartner (2017) study on the impacts of digitalization on PMOs forecast that PMOs will morph, developing a more strategic change function, since much of the “work” of today’s PMO will be eliminated as AI takes over traditional project management functions, and reporting PMOs will disappear. This means that PMOs, and the project management community as a whole, will continue to change, along with the rest of the world. However, some questions can already be raised about these changes on governance and on PMOs. On the one hand, project managers will increasingly be called upon to implement projects focused on AI, while on the other AI will take over administrative tasks for project managers and PMOs. As a result, AI should increasingly be used to analyze trends related to projects progress and to suggest decisions to be made. The data used can be very varied. For example, emails from project workers and other messages could be used to perform sentiment analysis in projects. Therefore, how AI solutions will be implemented through projects/programs which usually use agile approaches, and how data related to projects/programs and their management will be used, managed, and accessed, are important governance issues in which PMOs will have to play a role, and also for which they will have to develop their competencies.

REFERENCES Ahola, T., Ruuska, I., Artto, K., & Kujala, J. (2014). What is project governance and what are its origins? International Journal of Project Management, 32(8), 1321–1332. Artto, K. A., Kulvik, I., Poskela, J., & Turkulainen, V. (2011). The integrative role of the project management office in the front end of innovation. International Journal of Project Management, 29(4), 408–421. Aubry, M. (2011). The social reality of organisational project management at the interface between networks and hierarchy. International Journal of Managing Projects in Business, 4(3), 436–457.

136  Research handbook on the governance of projects

Aubry, M. (in press). PMO toolbox: Fundamentals and implementation of a project management office (PMO). In J. R. Turner & M. Huemann (Eds.), Gower handbook of project management. Gower. Aubry, M., Müller, R., & Glückler, J. (2012). Governance and communities of PMOs. Project Management Institute. Azanha, A., Argoud, A. R. T. T., de Camargo, J. B., Junior, & Antoniolli, P. D. (2017). Agile project management with Scrum: A case study of a Brazilian pharmaceutical company IT project. International Journal of Managing Projects in Business, 10(1), 121–142. Barnett, C., Clarke, N., Cloke, P., & Malpass, A. (2014). The elusive subjects of neo-liberalism: Beyond the analytics of governmentality. In S. Binkley & J. Littler (Eds.), Cultural studies and anticonsumerism (pp. 116–145). Routledge. Beck, K., Beedle, M., van Bennekum, A., Cockburn, A., Cunningham, W., Fowler, M., Grenning, J., Hunt, A., Jeffries, R., Kern, J., Marick, B., Martin, R. C., Mellor, S., Schwaber, K., Sutherland, J., & Thomas, D. (2001). Agile manifesto. https://agilemanifesto​.org/ Birkinshaw, J. (2018). What to expect from agile. MIT Sloan Management Review, Winter, 39–42. Braun, T. (2018). Configurations for interorganizational project networks: The interplay of the PMO and network administrative organization. Project Management Journal, 49(4), 53–61. Burke, C. M., & Morley, M. J. (2016). On temporary organizations: A review, synthesis and research agenda. Human Relations, 69(6), 1235–1258. Clegg, S., Courpasson, D., & Phillips, N. (2006). Power and organizations. Sage. Clegg, S. R., Pitsis, T. S., Rura-Polley, T., & Marosszeky, M. (2002). Governmentality matters: Designing an alliance culture of inter-organizational collaboration for managing projects. Organization Studies, 23(3), 317–337. Conforto, E. C., Amaral, D. C., da Silva, S. L., Di Felippo, A., & Kamikawachi, D. S. L. (2016). The agility construct on project management theory. International Journal of Project Management, 34, 660–674. Dean, M. (2010). Governmentality: Power and rule in modern society. Sage. Dikert, K., Paasivaara, M., & Lassenius, C. (2016). Challenges and success factors for large-scale agile transformations: A systematic literature review. Journal of Systems and Software, 119, 87–108. Foucault, M. (1971). Surveiller et punir: Naissance de la prison. Gallimard. Gartner. (2017). Digitalization’s impact on PPM practices and the PMO by 2030. Gartner, Inc. Geraldi, J. G. (2009). Reconciling order and chaos in multi‑project firms. International Journal of Managing Projects in Business, 2(1), 149–158. Geraldi, J., Söderlund, J., & van Marrewijk, A. (2021). Bright and dark spots in project studies: Continuing efforts to advance theory development and debate. Project Management Journal, 52(3), 227–236. Greenwood, R., & Miller, D. (2010). Tackling design anew: Getting back to the heart of organizational theory. Academy of Management Perspectives, 24(4), 78–88. Hackman, J. R. (1986). The psychology of self-management in organizations. In M. S. Pallak & R. Perloff (Eds.), Psychology and work: Productivity, change, and employment (pp. 89–136). American Psychological Association. Hackman, J. R., & Katz, N. (2010). Group behavior and performance. In S. T. Fiske, D. T. Gilbert, & G. Lindzey (Eds.), Handbook of social psychology (Vol. 2, pp. 1208–1251). John Wiley & Sons. Hernes, T. (2014). A process theory of organization. Oxford University Press. Hobbs, B., & Aubry, M. (2010). The project management office: A quest for understanding. Project Management Institute. Hoda, R., Noble, J., & Marshall, S. (2013). Self-organizing roles on agile software development teams. IEEE Transactions on Software Engineering, 39, 422–444. Krancher, O., Luther, P., & Jost, M. (2018). Key affordances of platform-as-a-service: Self-organization and continuous feedback. Journal of Management Information Systems, 35, 776–812. Lappi, T., Karvonen, T., Lwakatare, L. E., Aaltonen, K., & Kuvaja, P. (2018). Toward an improved understanding of Agile project governance: A systematic literature review. Project Management Journal, 49(6), 39–63. Miller, D., & Friesen, P. H. (1984). Organizations: A quantum view. Prentice-Hall. Miterev, M., Engwall, M., & Jerbrant, A. (2017). Mechanisms of isomorphism in project-based organizations. Project Management Journal, 48(5), 9–24.

The project management office  137

Müller, R. (2011). Project governance. In P. W. G. Morris, J. K. Pinto, & J. Söderlund (Eds.), The Oxford handbook of project management (pp. 297–320). Oxford University Press. Müller, R., Drouin, N., & Sankaran, S. (2019). Organizational project management: Theory and implementation. Edward Edgar. Müller, R., Pemsel, S., & Shao, J. (2014). Organizational enablers for governance and governmentality of projects: A literature review. International Journal of Project Management, 32(8), 1309–1320. Office of Government Commerce [OGC]. (2013). Portfolio, programme and project offices: Axelos Ltd. Pasmore, W., & Khalsa, G. (1993). The contributions of Eric Trist to the social engagement of social science. Academy of Management Review, 18(3), 546–569. Pemsel, S., & Wiewiora, A. (2013). Project management office a knowledge broker in project-based organisations. International Journal of Project Management, 31(1), 31–42. Project Management Institute. (2017). The agile practice guide. Project Management Institute. Project Management Institute. (2021). A guide to the project management body of knowledge (PMBOK® guide) – Seventh edition. Project Management Institute. Sergeeva, N., & Ali, S. (2020). The role of the project management office (PMO) in stimulating innovation in projects initiated by owner and operator organizations. Project Management Journal, 51(4), 440–451. Simard, M., Aubry, M., & Laberge, D. (2018). The Utopia of order versus chaos: A conceptual framework for governance, organizational design and governmentality in projects. International Journal of Project Management, 36(3), 460–473. Simard, M., & Lapalme, J. (2019). Self-organizing is not self-managing: A case study about governance challenges in an Agile IT unit and its scrum projects. In T. Bui (Ed.), Proceedings of the 52nd Hawaii international conference on system sciences (pp. 6539–6548). HICSS. Smith, W. K., & Lewis, M. W. (2011). Toward a theory of paradox: A dynamic equilibrium of organizing. Academy of Management Review, 36(2), 381–403. Sun, W., & Schmidt, C. (2018). Control mechanisms and agile methodology use: Data from the industry. Journal of Computer Information Systems, 58(3), 234–243. Trist, E. (1981). The evolution of socio-technical systems as a conceptual framework and as an action research program. In A. H. Van de Ven & W. F. Joyce (Eds.), Perspectives on organization design and behavior (pp. 19–75). John Wiley & Sons. Turner, R. J. (2022). Using principal–steward contracting and scenario planning to manage megaprojects. Project Management Journal, 53(1), 8–16. Unger, B., Gemünden, H. G., & Aubry, M. (2011, 2011/06/19-22). The three roles of a project portfolio management office: The impact on portfolio management execution and success [Paper presentation]. IRNOP 2011, Montreal, Canada. Weick, K. E. (1995). Sensemaking in organizations. Sage.

12. Governance across the commercial interface on complex engineering projects Graham M. Winch

As there is a certain degree of depravity in mankind which requires a degree of circumspection and distrust, so there are other qualities in human nature which justify a certain proportion of esteem and confidence. (Hamilton et al., 1961, p. 346) When people seldom deal with each other, we find that they are somewhat disposed to cheat, because they can gain more by a smart trick than they can lose by the injury which it does to their character. (cited in Milgrom & Roberts, 1992, p. 257)

INTRODUCTION Writing in the last quarter of the 18th century, James Madison and Adam Smith, respectively, captured the inherent challenges of relationships of trust and exchange in emerging capitalist society that also underpin the governance of the commercial interface in complex engineering projects. All commercial relationships between organizations face the challenge Madison identified while drafting the US constitution – in contemporary commercial terms, how buyers can incentivize consummate performance from their suppliers, while protecting themselves from the potential “depravity” of those suppliers. Smith, as he theorized the capitalist society emerging around him and the nature of merchant honor, identifies why the most important methods of suppressing depravity are much more difficult to apply when parties to the commercial exchange are not familiar with each other. In the context of projects, this is due to their temporary nature and the inherent lack of frequent dealings in complex project organizing. This chapter explores how the economic and societal challenges posed more generally by Madison and Smith have been addressed and resolved over the last 250 years in the context of engineering projects. We do this by focusing on the commercial interface between project owner and project-based firms in complex project organizing. The commercial interface is the interface between the owner organization that is financing the project as an investment in its future operational capabilities and the coalition of project-based firms in the supplier domain that are the solution providers meeting the owner’s investment needs (Winch et al., 2022). In providing solutions for owners, suppliers mobilize human and material resources into the delivery domain of the temporary project organization. Both the owner and suppliers are permanent organizations that collaborate in the temporary project organization to deliver project outputs and outcomes. The research literature on this interface has evolved over many years and has drawn principally on the transaction governance literature associated with Williamson on the boundary of the firm and the make/buy problem (Lowe, 2023). So, the chapter first reviews this literature 138

Governance across the commercial interface  139

by asking why project owners outsource the delivery of their investment projects to suppliers before moving to discuss the contribution of Macneil that underpins Williamson’s contribution. We then review developments in practice that have attempted to address the Madison/ Smith problem in complex engineering projects across the defense material, construction, and the oil and gas sectors – the domain of complex engineering projects. We then suggest some implications for theory and conclusions follow.

WHY DO PROJECT OWNERS OUTSOURCE DELIVERY OF THEIR INVESTMENT PROJECTS? The make/buy problem is one of the most important questions in the theory of the firm because the answers determine the efficient boundary of the firm (Williamson, 1975). This boundary marks out what the firm itself produces, and what it buys from external suppliers in order to enable that internal production. Although the theory applies to profit-seeking firms, for our purposes here it can be taken to apply, mutatis mutandis, to public sector organizations such as government agencies when acting as project owners seeking to define the efficient boundary of their projects. Williamson argues that there are three contingent factors that shape this efficient boundary: asset specificity (how idiosyncratic the asset being acquired is), uncertainty (the degree of difficulty in specifying in advance all characteristics of the asset and how it will be delivered), and frequency (how often the owner purchases that particular type of asset). Associated with each contingency are behavioral characteristics. The problem with asset specificity is opportunism by either party – Madison’s depravity – and the problem with uncertainty is bounded rationality (Simon, 1955) in designing the efficient boundary. Pre-contract, asset specificity usually takes the form of monopoly pricing but post-contract, one of the principal issues is the hold-up problem (Masten et al., 1991), defined as a situation where a supplier knows that they are on the critical path of the project and can use this to lever their advantage. Williamson did not assign a behavior to frequency, but it can be suggested that it is learning (Winch, 2001). Complex engineering projects typically fall into the category of high asset specificity, high uncertainty, and low frequency (Williamson, 1985; 3.1) for which Williamson recommends either a hybrid form of transaction governance – trilateral governance – or unified governance, which means bringing the delivery of the asset in-house to the owner. Trilateral governance is where a third party is appointed by the owner to act as an independent arbitrator with regard to the administration of the contract; the role of the architect under traditional construction contracts is an example of this. Empirically, very few – if any – project owners bring the delivery of their complex investment projects in-house in a unified governance. The most common empirical case of in-house production is the arsenal, defined as a government-owned production facility for military equipment. Even here, as military equipment became more and more complex – particularly with the development of aircraft and missiles – arsenals became incapable of meeting military requirements (Sapolsky, 2003). Why then this preference for outsourcing project delivery? The high uncertainty and asset specificity of complex engineered assets would predict in-house delivery. What confounds this prediction is frequency. Owners invest in new capital assets relatively infrequently; most of the time their focus is on operating those assets to produce goods and services, thereby generating income streams from which profits can be taken. Take the example of National Highways, which has the corporate mission to “operate, maintain, and improve” England’s strategic road network. In the financial year 2020–2021,

140  Research handbook on the governance of projects

this involved the expenditure of £4.5bn, less than half of which (£2.0bn) went on “capital improvements.” The balance was on maintenance and renewals (e.g., resurfacing) and operational expenditures. The forward plan for Roads Period 2 (2021–2025) includes an enhanced capital expenditure on major projects of £14.2bn on an asset base of £132bn – and enhancement rate of just over 2.1 percent each year of the planning period.1 These major projects are diverse, involving major tunnels, complex bridges, and smart motorways (electronically controlled motorway sections) as well as more traditional highway construction across widely geographically spread sites. National Highways’ principal purpose is to provide transportation services to English road users, not to build new roads. When it does build new roads, the technologies required display significant diversity. It therefore outsources the delivery of these capital investments to various types of project-based firm. We suggest that National Highways is a typical project owner in these respects, which therefore explains why Williamson’s unified governance option for the acquisition of idiosyncratic capital assets is so rarely taken. We turn, therefore, to examining the trilateral governance option more closely.

THE EMERGENCE OF THE CONTRACTOR AND TRILATERAL GOVERNANCE Building projects from time immemorial were based on a project promotor – be it the Church, the state, or a private entity – hiring the workers required to deliver the project directly and then paying them based on the work done. The workers might be coordinated by a master mason and the promotor might be helped in this task by a surveyor or architect but the essentially cost-plus nature of contracting for resources was pervasive. This approach had two principal disadvantages for project promotors: (1) they had little sense of what the outturn cost of their project might be and (2) they could not be sure that the rates they were paying were to their advantage. As the industrial revolution generated demand for more complex factory buildings and infrastructure, the UK government introduced “contracting in gross” in which a single supplier undertook to complete the main works for an agreed price which was determined though competitive contracting. A government commission formally approved this evolving approach in 1828, and by the 1860s it had become the norm in the UK (Winch, 2010). Succinctly described as “the system” (Bowley, 1966), a distinctive form of neoclassical contracting (Macneil, 1974, 1978) evolved. Classical contracting has no temporality. It is defined as a discrete transaction in which the time taken to complete the transaction is immaterial to contract design, in which transaction execution is “sharp in by clear agreement; sharp out by clear performance” (Macneil, 1974, p. 738). Transaction specific governance is not required and reliance can be based on the external institutions of the rule of law for redress should things go wrong (North, 1990). However, many commercial transactions have a temporal dimension – this is of course the case for transacting on projects – which requires adjustment mechanisms during transaction execution. Neoclassical contracting (Macneil, 1978) introduces temporal adjustment mechanisms that start to govern transaction execution in a number of ways while retaining the discrete nature of the transaction. However, “sharp in” required that the potential range of these adjustments be fully specifiable at the time of contract performance through what Macneil calls “presentiation” (embodying future conditions in the present contract) and that sharp out performance can be fully measured against those specifications. 1 Figures from Highways England’s Annual Report and Accounts 2021.

Governance across the commercial interface  141

There are many examples of neoclassical contracting in modern economies that attempt to combine temporality in transaction execution while retaining the discrete features of classical contracts. Construction contracts are a prime example (Macneil, 1978). Under Bowley’s “system,” the inherent uncertainty in the front end of projects is handled by retaining cost-plus reimbursement for the early phases of the project where conceptual and detail design was undertaken. Thus, all liabilities for change remained with the owner but with two protections against depravity in place. The first was the use of standardized fee scales, which meant that suppliers could not overcharge. One example of this is the German Honorarordnung für Architekten und Ingenieure, which is laid down by statute. The quality of the execution of the work by the supplier for these fees is governed by the membership of designers of professional organizations, such as the American Institute of Architects, which accredits architectural training and enforces professional codes of conduct. Once the design is complete, contractors are then invited to compete to execute that design on a fixed-price basis. Once the price for execution is agreed, contractors and the owner then sign a standardized complex contract full of procedures for resolving disputes that might arise as the contract is executed. The first line of dispute resolution in such contracts is the provision for arbitration by the professional architect or engineer who carried out the design work; if that is unsuccessful, litigation typically follows. Although originating within the specific context of the British building industry during the industrial revolution, “the system” presents many aspects of the broader neoclassical solution to the Madison/Smith problem posed above. We can see a number of solutions to particular aspects of the problem: ●

●

●

●

The use of reimbursable contracts where uncertainty is relatively high during the design phases of the project. “Depravity” is then managed through the code of conduct of the professional organization that accredits the architect or engineer. The owner, in effect, trusts the internal governance capabilities of the professional body concerned, as well as the wider reputation of the professional practice as a project services provider (Winch & Schneider, 1993). These professional services are reimbursed on the basis of publicly available fee scales rather than through formal competitive tendering. The use of competitive tendering to select the contractor in order to ensure that the price paid for the execution of the works is the lowest feasible, thereby reducing the opportunities to “cheat” on the cost of the works for the owner. Remember that designers’ fees typically account for less than 10 percent of the overall investment value, while contractors’ costs make up much of the rest. The use of a complex contract that effectively turns market into hierarchy (Stinchcombe, 1985). The “depravity” of the contractor is thereby managed bureaucratically by specifying who should be doing what and when, in considerable detail. Arbitration of disputes through the role of the professional designer (reimbursed on a cost-plus basis) as the first line of dispute resolution through trilateral governance (Williamson, 1985).

THE LIMITATIONS OF NEOCLASSICAL GOVERNANCE Neoclassical governance served well in many circumstances but as projects became more complex, due both to the increasing capital intensity and complexity (Macneil, 1978) of the asset being delivered by projects and the increasing desired pace of that delivery, “the system”

142  Research handbook on the governance of projects

begin to break down. Some of the challenges were well illustrated as the US moved into the dynamic systems development period of the Cold War. “Imagine, for example, trying to draft in 1962 a master contract with all the performance terms required for a prime contractor to agree with the government to put a man on the moon by 1970” (Macneil, 1974, p. 765). While the acquisition of weapons during World War II was largely a production problem of providing adequate amounts of materiel rather than technological advance as such,2 the Cold War arms race emphasized weapons capability with a fast-changing technological base incorporating new electronic guidance systems and missile technologies (Sapolsky, 2003). This dynamic was reinforced by a perception that the Russians took half the time to develop their systems compared to the Americans. Under these circumstances market failure occurred (Peck & Scherer, 1962) and neoclassical contracting reached its limits. In particular, the inherent uncertainty of weapons system development meant that neither adequate presentiation to enable “sharp in” agreement nor adequate performance measurement of contract execution to enable “sharp out” by performance were possible (Williamson, 1967). The period saw a marked shift to relational contracting (Macneil, 1978) relying on administrative, rather than market, procedures with largely internal dispute resolution to achieve desired levels of flexibility and change in transaction execution. In effect, relational contracting moves away from trilateral governance to a temporary form of bilateral governance defined as specialized governance arrangements between two contracting parties (Williamson, 1985). The fundamental premise of relational contracting is that any particular transaction is set within a socio-economic context in which the parties have a history both severally and jointly. In order to govern any particular transaction, considerable joint efforts are required to plan and execute the transaction. Within the project context, the specific transaction may formally be discrete, but it is executed by parties that both know each other and typically have a prior history of transacting on other projects. Under high levels of uncertainty and complexity, change from the original presentiation is inevitable and so adjustment mechanisms within the transaction need to be both smooth and efficient if transaction execution – and hence project delivery – is not to be delayed and additional costs are to be minimized. Although Macneil formulated the problem clearly, he provides little guidance as to what the most appropriate administrative arrangements might be for governing the commercial interface on complex projects. Williamson provides little additional insight because in his framework (1985: Figure 3.2) unified governance (i.e., vertical integration) is the only option left when neoclassical contracting fails for occasional and idiosyncratic acquisitions, i.e., complex projects. The US Cold War experience (Peck & Scherer, 1962) provides a number of insights as to what the administrative aspects of relational contracts might be: ●

●

The retention of reimbursable contracting, where liabilities for change during project delivery were retained by the owner (i.e., the US military services), often complemented by an agreed management fee. Heavy investment in research and development funded by grants to government laboratories and universities, often working in collaboration with contractors. This did much for front-end uncertainty reduction but did not approach the levels of certainty required for competitive tendering.

2 Clearly technologies such as the atom bomb and radar are exceptions to this generalization.

Governance across the commercial interface  143 ●

●

●

●

The development of an ecosystem of contractors largely reliant on military contracts for their survival and the desire of owners to maintain that ecosystem by allocating contracts in such a way as to keep multiple firms afloat rather than rewarding project performance directly. This became known as the US industrial military complex (Eisenhower, 1961). “Projectizing” (Peck & Scherer, 1962, p. 81) project administration by the establishment of owner-side project offices within the military such as the US Navy’s Special Projects Office (Morris, 2013), and associated matrix forms of organization (Ford & Randolph, 1992). The development of new managerial tools for project planning and control such as the program evaluation review technique, described as “the first management tool of the computer and nuclear age” (cited in Morris, 2013, p. 34) and the planning program-budgeting system (Cleland & King, 1968). While project-specific managerial tools had been under development for some 50 years prior to this period, the innovation was that the new tools were specifically for use by the owner in order to manage project delivery and, hence, the suppliers delivering the project. The development of systems concepts to address the engineering challenges of complex systems which were soon applied to organizational aspects as well (Johnson et al., 1964).

This list begs the question of which administrative aspects of the governance of the commercial interface are specific to (US) weapons acquisition and which are more widely applicable to other types of complex engineering projects? We will attempt to answer this question by reviewing a number of more recent applications on complex projects, while noting that the broader systems approach to complex project organizing developed in the US during the Cold War tended to founder when it was applied in more complex stakeholder environments (Horwitch, 1987). We will answer this question by examining (1) the experience of the UK oil and gas sector; (2) recent attempts to reform weapons acquisition in the UK; (3) the experience of constructing Heathrow’s Terminal 5; and (4) the contemporary Project 13 initiative in the UK.

COST REDUCTION IN THE NEW ERA: THE UK OIL AND GAS SECTOR By the early 1990s the oil price had dropped to very low levels, making most investment projects in the relatively expensive North Sea fields unviable. The Cost Reduction Initiative for the New Era (CRINE) was a UK government sponsored initiative that attempted to address the issues by improving the budget and schedule performance of development projects without compromising on safety considerations. One major element of this initiative was the introduction of “alliancing,” which proposed significant changes to the governance of the commercial interface between the oil and gas company owners and their specialist providers of project services (Scott, 2001). The principles developed through CRINE were then widely influential in the UK construction sector. Alliancing moved beyond neoclassical contracting in a number of significant ways: ●

Contracts were not fixed price but incentive contracts. These worked on the basis of an agreed target for the outturn cost of the project. If savings were made against that target,

144  Research handbook on the governance of projects

●

●

then the “gain” was shared between the owner and suppliers; inversely, if there were overruns against that target, then the “pain” was also shared. However, pain was usually capped for the suppliers to remove the risk of their facing catastrophic losses. An integrated project team (IPT) was formed which brought the owner and the principal suppliers into a collaborative environment of co-working and often co-locating. Incentive shares were agreed as the IPT was formed. Suppliers worked on an “open book” basis in which their costs were visible to the owner so that pain and gain could be verified with the owner.

The early successes of this approach were spectacular, with BP’s Andrew project becoming a model of collaborative working (Knott, 1996), achieving significant budget and schedule improvements and also significant technical innovation. However, disillusion quickly arose, with rigorous project performance benchmarking (Merrow, 2023) suggesting that alliance projects typically performed worse than neoclassically governed projects. The problem was that the oil and gas owners ignored the lessons of projectization in weapons acquisition. Rather than retaining strong owner capabilities (Morris & Hough, 1987; Winch & Leiringer, 2016), owners ran down these capabilities in order to reduce costs even further, which reduced their ability to effectively engage with and manage their suppliers. The oil and gas majors spent much of the noughties rebuilding these capabilities.3

THE REFORM OF UK DEFENSE ACQUISITION UK defense acquisition strategically switched from internal supply from state-owned enterprises and arsenals to external supply from profit-seeking firms through privatization of those firms during the 1980s. Since that privatization, the UK sector has swung between collaboration and competition as it tried to grapple with the inherent limitations of neoclassical contracting for defense acquisition projects (Winch & Maytorena-Sanchez, 2020). Privatization changed the sector from one dominated by nationalized organizations to an oligopolistic structure with three dominant supplier corporations. Symbiotic commercial relationships were thereby created with suppliers having a monopoly in their specialist areas and the Ministry of Defence (MoD) as a monopsonistic buyer. As a consequence, the relationships and behaviors that developed between privatized suppliers and the MoD at the inception of this process were characterized as adversarial, with a lack of shared trust. This situation prompted the introduction of the Levene Reforms (Levene, 1987), which focused more strongly on a policy of competition. The aim was to change the role of the MoD from one of monitoring and auditing to a more rigorous owner role where the risk of defense acquisition was transferred to the suppliers by replacing cost-plus contracts with fixed-price contracts under competitive tendering. The dominant logic was one of competition as a way of achieving efficiencies (cost reductions, risk transfer), improving effectiveness in procurement and promoting innovation. At the same time a collaborative logic seeking closer alignment with industry was present but latent. In practice the means of pursuing the valuefor-money goal involved seeking keen prices from suppliers and sourcing greater input from industry in establishing the best way to meet the MoD’s requirements. The supply side further 3 This analysis is based on discussions with industry senior leaders over the period.

Governance across the commercial interface  145

consolidated as a result of this competition policy, with dominant defense materiel suppliers buying smaller ones or deciding to exit the field. The competition policy created friction in the MoD’s relations with suppliers, resulting in an even more adversarial relationship and arm’s length relationships. The MoD used its position as a monopsonist to push for reduced profit rates but created increased transaction costs in competitive tendering. By the late 1990s intensified competition contributed to the worsening adversarial relationship between suppliers and the MoD. The dominant competition logic led to a range of behaviors such as fragmented contractor involvement; limited information sharing between the MoD and suppliers; and ineffective joint problem solving. With costs increasing, there were clear inefficiencies that needed addressing and the MoD recognized the need to restructure and change its acquisition practices. This led to “Smart Acquisition” (MoD, 2002) being introduced in 1998 to engage with industry in a more collaborative manner with the aim of changing the culture of the commercial interface by moving the characteristically adversarial relationship to one of partnership. The initiative was a joint development exercise between the MoD and its principal suppliers undertaken through consultation aiming to establish new acquisition processes. Perhaps the most important was the introduction of IPT as the vehicle for MoD–supplier collaboration to ensure the aim of value for money was achieved. Overall, IPTs were introduced to reduce acquisition costs, establish more open relationships between the MoD and suppliers, encourage innovation, and monitor operations within a shared working environment. Smart Acquisition signaled the shift to a collaborative logic being dominant and the competition logic present and latent as the need grew to reconcile partnership with competition. However, performance continued to disappoint. In 2009, an independent report found “on average, mature Smart projects outperform non-Smart projects in terms of cost and schedule overrun between initial gate and in-service delivery” (Gray, 2009, p. 131), and that in general the initiatives have “improved processes and accountability,” but it also noted that much more remained to be done. In 2013, the MoD decided to move back to using open competition as its primary procurement principle thus moving away from the Smart Acquisition principles of collaboration but it did not explain how it would address the problems which were experienced during the 1980s and 1990s which motivated the implementation of Smart Acquisition.

THE T5 AGREEMENT The new Terminal 5 at London’s Heathrow airport was a major infrastructure investment by BAA. It cost £4.3bn and opened on schedule and budget in March 2008 having started on site in 2002. The initial days of operation were marred by lack of readiness on the part of the airline using the facility, BA, which took a “calculated risk” on staff training and lost. However, T5’s effective realization by BAA remains a considerable achievement and the few systems failures on opening day were trivial. The project mission – honed through a regulatory process that took from February 1993 to November 2001 – set high standards in term of specification and conception and aspired “to deliver the world’s most successful airport development.” Challenging civil engineering problems in a very tight site melded with the ambition to achieve an architectural statement for the principal international gateway to the UK. The BAA program team consciously set out to improve on the performance benchmarks of major projects and the context for achieving this vision was the cultural change facilitated by

146  Research handbook on the governance of projects

the T5 agreement. Born from the traumatic experience of the Heathrow Express project, BAA decided that as it effectively held the risk on the project in any case, it might as well formally take that risk through the contract, thereby motivating cooperative rather than adversarial behavior from suppliers when the going inevitably got tough. The T5 agreement was founded on a number of principles (Winch, 2010): ●

●

●

●

●

●

All suppliers would receive a guaranteed margin of between 5 percent and 15 percent depending on the trade on incentive contracts for each package. Bonuses of up to onethird were available for exceeding package targets. Single project insurance of up to £2.4bn with a maximum pay-out of £500m for any one incident was negotiated, which took suppliers’ professional indemnity and insurance costs out of the equation and paid on a “no-fault basis.” Supply chain segmentation, differentiating between those firms ready for a long-term relationship with BAA and those which were not. The first BAA framework agreement had been negotiated in 1993; the second was negotiated in 2000 and identified 750 firsttier suppliers. The T5 supply chain had 60 first-tier suppliers, 500 at the second tier, and over 20,000 in lower tiers. Strong performance management of suppliers through quarterly supply chain reviews which mobilized peer pressure between suppliers to meet agreed targets. Rework was paid for the first time, and redone without profit payment if still unsatisfactory. Two firsttier suppliers and 12 at other tiers were removed from the project at various times. Collegial dispute resolution at team level. If this failed a “star chamber” of senior management was convened. The T5 agreement then provided for an external third-party mediator before adjudication processes could start. By early 2008, no issue had gone as far as mediation. Progressive account settlement with the 60 first-tier suppliers with the aim of settling most accounts prior to opening.

PROJECT 13 Over the last 30 years, the UK infrastructure sector has been consistently innovative in developing the relational governance of the commercial interface, and the key recognition is the importance of Smith’s insight regarding the frequency of interaction between the parties. Repeat transactions lead to superior project delivery (Merrow, 2023). The most recent initiative gained momentum around 2015, dubbed (randomly) as Project 13 (P13), and has learned from CRINE and the T5 agreement and proposes “enterprise” governance of the commercial interface (www​.project13​.info ). The P13 model (ICE, 2017) of the project enterprise deploys three principal pillars of collaborative working: organization, integration, and governance. The organization pillar stresses the importance of a coalition of suppliers with aligned commercial interests which are effectively supported by the owner organization. The integration pillar focuses on effective teamwork between the members of the enterprise enabling effective management of the project production process while safeguarding health, safety, and wellbeing. The governance pillar is where the owner defines the value that the project will deliver for their customers while establishing long-term relationships with suppliers supported by appropriate performance measurement.

Governance across the commercial interface  147

These three pillars are underpinned by two further pillars, which are crucial: the capable owner and digital transformation. A strong, capable owner (Merrow, 2023) is vital to effective governance of the commercial interface – without that capability none of the other pillars can work effectively, including digital transformation. Further research under P13 auspices (Maytorena-Sanchez & Winch, 2022) has identified the six capabilities required: articulating the voice of the customer; a value-driven mindset, articulating the voice of operations; creating complex systems; and recruiting, building and retaining talent. These are particularly important for the commercial interface, relating to the supply chain.

POTENTIAL LINES OF RESEARCH We now have considerable evidence on what works in governing the commercial interface (Merrow et al., 2023; Pryke, 2020). We therefore suggest (Winch et al., 2022) that research should broaden its focus from the transaction itself to the broader set of issues around the capabilities of the available suppliers, the economic cycle, and the institutional context of governance. For owners, this means a deeper attention to the overall contracting strategy at both the project/program and portfolio levels. For suppliers, this means moving beyond bidding strategy to the broader issues of capture management through the life cycle from initial business development to signing the contract and mobilizing the project. In broadening this focus, the question of where the efficient boundary between owner and supplier lies remains to be worked through in an enterprise governance context.

CONCLUSIONS: RELATIONAL GOVERNANCE OF THE COMMERCIAL INTERFACE We started this chapter by posing the perennial dilemmas of commercial relationships in capitalist society – how project owners can mobilize the esteem and confidence of suppliers and minimize their depravity, and how owners can increase the frequency of their transactions with their suppliers in the inherently temporary context of complex projects. One solution to this problem is unilateral governance, more colloquially bringing suppliers in-house, but the problem of frequency mitigates this on complex projects. We then showed how classical contracting is inherently a-temporal and so not appropriate for complex projects, which have an inherent temporal dimension. The neoclassical solution that emerged during the early industrial revolution in the UK was trilateral governance in which professionally governed third parties had an arbitrating role within the contract between the two principal parties (owner and supplier). This worked well for over a century, but the increasing pace and complexity of projects led to a breakdown in this approach, weaknesses that became manifest in the US defense acquisition programs of the 1950s. Over the past half century, increasingly confident moves have been made toward relational contracts with the specific aim of moving beyond “transactional” relationships toward ones based on collaborative approaches. The challenges have been most acute in defense acquisition where the UK approach to governance has swung from collaborative to transactional and back again; similar trends are apparent in the US. Steadier progress has been made in UK construction, where Project 13 now offers the prospect of repeated transactions leading to

148  Research handbook on the governance of projects

learning that deepens collaborative relations, thereby generating trust and releasing innovative potential. However, it should be noted that this collaborative working is still underpinned by formal contracts, in particular contracts designed to facilitate such working, such as the New Engineering Contract (now NEC4), which has been used on all continents, including Antarctica (www​.neccontract​.com). However, the governance of the commercial interface remains a challenging dilemma requiring tough-minded decision-making. The dilemmas described in the epigraphs of this chapter pose a true paradox in which owners attempt to gain both the performance incentives of collaboration with suppliers and the price incentives of competition between suppliers. In turn, suppliers attempt to be appointed onto projects on which they can make an acceptable profit while also maintaining and, perhaps, stretching their own distinctive capabilities. For both sides of the commercial interface, this is a difficult balancing act in which success is a highly contingent phenomenon. There are no lasting solutions to these dilemmas, only better ways of coping with them!

REFERENCES Bowley, M. (1966). The British building industry: Four studies in response and resistance to change. Cambridge University Press. Cleland, D. I., & King, W. R. (1968). Systems analysis and project management. McGraw-Hill. Eisenhower, D. D. (1961). Farewell address. http://www​.eisenhower​.archives​.gov​/research​/online​_ documents​/farewell​_address​.html Ford, R. C., & Randolph, W. A. (1992). Cross-functional structures: A review and integration of matrix organization and project management. Journal of Management, 18(2), 267–294. Gray, B. (2009). Review of acquisition for the secretary of state for defence. HMSO. Hamilton, A., Madison, J., & Jay, J. (1961). The federalist papers. New American Library. Horwitch, M. (1987). Grands programmes: l’Expérience Américaine. Révue Française de Gestion 60 (Mars-Avril-Mai), 54–69. ICE. (2017). From transactions to enterprises. Institution of Civil Engineers. Johnson, R. A., Kast, F. E., & Rosenzweig, J. E. (1964). Systems theory and management. Management Science, 10(2), 367–384. Knott, T. (1996). No business as usual: An extraordinary North Sea result. BP. Levene, P. (1987). Competition and collaboration: UK defence procurement policy. The RUSI Journal, 132(2), 3–6. Lowe, D. J. (2023). Transaction cost economics: Governing the commercial interface. In G. M. Winch, M. Brunet, & C. Dongping (Eds.), Research handbook on complex project organizing (pp. 78–88). Edward Elgar. Macneil, I. R. (1974). The many futures of contracts. Southern California Law Review, 47, 691–816. Macneil, I. R. (1978). Contracts: Adjustment of long-term economic relations under classical, neoclassical, and relational contract law. Northwestern University Law Review, 72, 854–905. Masten, S. E., Meehan, J. W., & Snyder, E. A. (1991). The costs of organization. Journal of Law Economics and Organization, 7, 1–25. Maytorena-Sanchez, E., & Winch, G. M. (2022). Engaged scholarship in project organizing research: The case of UK infrastructure. Project Leadership and Society, 3, 100049. Merrow, E. W. (2023). Contract strategies for major projects: Mastering the most difficult element of project management. Wiley. Milgrom, P., & Roberts, J. (1992). Economics organization and management. Prentice-Hall. Ministry of Defence. (2002). Defence acquisition handbook. MoD. Morris, P. W. G. (2013). Reconstructing project management. Wiley-Blackwell. Morris, P. W. G., & Hough, G. H. (1987). The anatomy of major projects: A study of the reality of project management. Wiley.

Governance across the commercial interface  149

North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge University Press. Peck, M. J., & Scherer, F. M. (1962). The weapons acquisition process; an economic analysis. Harvard University Press. Pryke, S. (2020). Successful construction supply chain management: Concepts and cases (2nd ed.). Wiley Blackwell. Sapolsky, H. M. (2003). Inventing systems integration. In A. Prencipe, A. Davies, & M. Hobday (Eds.), The business of systems integration (pp. 15–34). Oxford University Press. Scott, B. (2001). Partnering in Europe: Incentive based alliancing for projects. Thomas Telford. Simon, H. A. (1955). A behavioral model of rational choice. The Quarterly Journal of Economics, 69(1), 99–118. Stinchcombe, A. L. (1985). Contracts as hierarchical documents. In A. L. Stinchcombe & C. A. Heimer (Eds.), Organization theory and project management: Administering uncertainty in Norwegian offshore oil (pp. 121–171). Oslo University Press. Williamson, O. E. (1967). The economics of defence contracting: Incentives and performance. In R.  M.  McKean (Ed.), Issues in defense economics (pp. 217–256). National Bureau of Economic Research. Williamson, O. E. (1975). Markets and hierarchies: Analysis and anti-trust implications. Free Press. Williamson, O. E. (1985). The economic institutions of capitalism. Free Press. Winch, G. M. (2001). Governing the project process: A conceptual framework. Construction Management & Economics, 19(8), 799–808. Winch, G. M. (2010). Managing construction projects: An information processing approach (2nd ed.). Wiley-Blackwell. Winch, G. M., & Leiringer, R. (2016). Owner project capabilities for infrastructure development: A review and development of the “strong owner” concept. International Journal of Project Management, 34(2), 271–281. Winch, G. M., & Maytorena-Sanchez, E. (2020). Institutional projects and contradictory logics: Responding to complexity in institutional field change. International Journal of Project Management, 38(6), 368–378. Winch, G. M., Maytorena-Sanchez, E., & Sergeeva, N. (2022). Strategic project organizing. Oxford University Press. Winch, G. M., & Schneider, E. (1993). Managing the knowledge‑based organization: The case of architectural practice. Journal of Management Studies, 30(6), 923–937.

13. Contractual and relational governance for sustainability: case study of a PPP megaproject in India Nicola Thounaojam, Ganesh Devkar, and Boeing Laishram

INTRODUCTION Given the increasing urbanization growth rate, particularly in developing nations, infrastructure megaprojects have increased dramatically in recent years. Especially after the Covid-19 pandemic, economic recovery is at the center of governments’ long-term agendas. Therefore, infrastructure investment has become a crucial component of the strategy for a swift economic recovery while ensuring a more sustainable and resilient future. To do this, the appropriate procurement process must be chosen carefully because infrastructure megaprojects involve many stakeholders, are expensive, and have a sensitive context. Public–private partnerships (PPPs) have been increasingly popular among governments worldwide as a “very powerful arrangement” for the funding of these large-scale infrastructure projects (Chan et al., 2018; Xue et al., 2017). Infrastructure megaprojects exhibit suitable projects for PPP procurement because of their large scale. Specifically, megaprojects involve huge investment costs and require international expertise, unique technological innovation, and sophisticated management skills. However, PPPs have drawn criticism from several international and national scholars despite their rising popularity. In recent years, considerable attention has been given to sustainability in PPP research (Hueskes et al., 2017). Siemiatycki (2013) argued that market-driven private sector participation exacerbates socio-economic marginalization and unequal progress worldwide. Apart from the public and private dimensions of value creation, PPPs often face significant issues related to social benefit enhancing and pending social concerns (Castelblanco et al., 2022). The management of PPPs is quite complicated, especially in megaprojects. They are frequently criticized for having exceptionally long-term commitments and the possibility that they may not deliver expected outcomes to governments if underlying circumstances or assumptions change considerably over time. The debate regards the extent to which PPPs involve political, economic, and managerial dimensions of a phenomenon is not reducible to a simple project delivery agreement (Benítez-Ávila et al., 2019). Different logics of public and private operations confront individuals in PPPs with competing demands. Furthermore, megaprojects differ from traditional construction projects, not just in scale and size – they can also significantly impact society and the environment. These projects are more complicated in terms of organization, technology, and the environment, which makes sustainability management more difficult (Ma et al., 2020). Additionally, several coexisting logics in megaprojects may serve as motives for engaging in sustainable performance and outcomes. They have a variety of short- and long-term implications on the environment, such as effects on groundwater, noise and vibration, pollution, erosion, and geological impacts (Gharehbaghi et al., 2022). These megaprojects frequently result in significant population displacement and 150

Contractual and relational governance for sustainability  151

conflicts among the many project partners, which pose serious social sustainability challenges and ultimately obstruct their proper completion (Klakegg, 2009). Additionally, serious shortcomings in government, public, and private sector activities jeopardize the attainment of the targets set for the United Nations Sustainable Development Goals (Sankaran et al., 2020). In light of this dyad, complexity arising from the PPP mode of procurement and megaproject characteristics, resilient and sustainable considerations in PPP megaprojects are imperative. However, as a tailoring process, institutionalization of sustainability is influenced by various actors in the megaproject field and is exposed to multiple field actors’ logics; therefore, a proper governance mechanism is important. Contractual and relational governance may enhance sustainability in PPP megaprojects (Tian et al., 2021). And since sustainability in the PPP-megaproject field is rooted in the frame of institutional environments, the governance for sustainability is greatly influenced by the institutions. Against this backdrop, this chapter addresses the contractual and relational governance in institutionalizing sustainability in PPP megaprojects using the lens of institutional theory.

LITERATURE REVIEW PPP Megaprojects Large complexity (e.g., many stakeholders), high risk, long-term effects on the economy, environment, and society, and costs of US$1 billion and higher are what distinguish megaprojects from traditional projects (Flyvbjerg et al., 2003). They have significantly increased recently in both developed and developing nations. In general, infrastructure megaprojects are more often preferred to be procured using the PPP method than the conventional bid-build system because they require large investment funds, better management skills, well-qualified and experienced international experts, and technology innovation (Chan et al., 2018). In addition, the preferences for technology transfer and more local content in infrastructure megaprojects make PPP the ideal method for their procurement. PPPs enable governments to finance infrastructure projects and deliver public services with the aid of the private sector. In return, governments permit private parties to manage projects and make a fair profit. PPPs are intricate projects, from both technical and financial standpoints. They involve a spectrum of cooperation between organizations, from straightforward agreements involving just two parties to more complex ones, including a sizable number of organizations. According to Klijn and Teisman (2003), the presence of a large number of actors complicates the management of different parties in PPPs and makes decision-making more difficult. PPP Megaprojects and Sustainability Despite the advantages of megaprojects, policy-makers and experts have given them a great deal of attention due to their significant adverse effects on society and the environment (Li et  al., 2019a), including widespread relocation, the destruction of archaeological sites, and changes to the local ecology. Incomplete environmental impact assessments, inadequate social impact assessments, a lack of local and stakeholder participation, high bid and transaction costs, high user fees, incorrect risk allocation, a lack of transparency and accountability,

152  Research handbook on the governance of projects

conflicts of interest between the public and private parties, and a lack of sustainability expertise and knowledge are the main issues that hinder progress toward sustainable development (Patil et al., 2021; Thounaojam & Laishram, 2021). Based on a study of 25 PPP-funded infrastructure projects in Belgium, Hueskes et al. (2017) highlighted that sustainability factors have a minimal role in these projects, particularly the social dimension, which is largely overlooked. The “measurability” and “enforceability” of the social sustainability criteria are the key challenges the public actors face. Additionally, the procurement and evaluation team frequently overlooks cutting-edge technology from private organizations considering environmental sustainability in exchange for a high investment cost. Long-term agreements in the PPP format may be challenging to modify (Patil et  al., 2021). In such a contract, flexibility is decreased regarding output specification, contract conditions, and technology. These emphasize the requirement to increase the usefulness of PPP megaproject adoption in the development of infrastructure projects and in fostering sustainable development goals. Previous research on the financial structure of PPPs has also shown that the project parties primarily focused on the short-term investment requirements while mostly ignoring the long-term investment goals that should deliver the sustainable development requirements (Du et al., 2018). Contractual and Relational Governance in Achieving Sustainability “Governance refers to the formal and informal rules of exchange between partners” (Lu et al., 2015, p. 214). To ameliorate the functioning of PPP projects, contractual and relational governance, as governance methods for controlling inter-organizational connections, are essential (Tian et al., 2021). Contractual governance refers to procedures that control interparty transactions and eliminate uncertainty by highlighting the significance of agreements between parties (Zheng et al., 2019). Relational governance stresses inborn and moral control mechanisms that regulate interactions by establishing clear objectives and a friendly environment. Contractual mechanisms depend on ownership and authority to enforce control, whereas relational mechanisms depend on trust and constructive expectations of cooperation or social punishments. Designing an effective mechanism is essential for sustainability initiatives since adopting governance mechanisms substantially impacts megaproject sustainability performance. Public agencies may include sustainability conditions in PPP contracts to encourage sustainable development (Tian et  al., 2021). The duties and rules explicitly regulated in contracts indicate how partners should behave legally and leave little room to explain the agreed-on terms outlined in formal contracts (Xue et al., 2017). As a result, the contractual governance mechanism aids in reducing risks and environmental uncertainties in exchange interactions, fostering partner commitment, and enforces penalties for contract violations. Although contracts are crucial in governance for sustainability, the parties that draft them cannot anticipate every scenario because of the “Bound Rationality of human beings,” especially in the case of unique and one-off projects, such as PPP megaprojects (Lu et al., 2015, p. 214). Therefore, relational governance, which considers relational norms in the form of informal governance, is also crucial in achieving sustainability in PPP megaprojects. Organizations must effectively govern their relationships with suppliers to encourage those parties’ commitment to sustainability (Awan et  al., 2018). According to recent studies, relational governance is a crucial

Contractual and relational governance for sustainability  153

informal tool to manage opportunistic behaviors, and it can be even more helpful than contractual governance during project execution (Liu et al., 2022). Contractual and Relational Governance and Institutional Theory Institutions are composed of formal regulations and informal norms, rules, and culture and have a long-lasting effect on social behaviors (Scott, 1995). The central tenet of institutional theory is that to exist in a society, actors must either submit to the institutions predominating in the environment or respond proactively with appropriate strategies (DiMaggio & Powell, 1983; Oliver, 1991). Previous literature on sustainability has offered valuable findings on the link between the influence of institutional factors and sustainability practices. For instance, Misopoulos et al. (2018) proposed regulative, normative, and cultural-cognitive aspects as the key sustainability constructs in the industrial manufacturing industry and discovered that normative forces outweigh the other two elements. Using the lens of institutional theory, Glover et  al. (2014) investigated how players in the supply chain for diaries may improve energy efficiency. By examining the institutional forces on the integration of sustainable development goals in construction project management, Ullah et al. (2020) highlighted that big construction firms may be primarily influenced by mimetic pressure from professional associations and rival companies. Because sustainability in the PPP-megaproject field is rooted in the setting of institutional environments, the governance for sustainability is much affected by the institutions (regulative, normative, and cultural-cognitive). Regulatory aspects use stated laws and surveillance operations from state agencies, the judiciary, or government departments. Normative elements focus on “prescriptive and obligatory dimensions,” coming from professional associations, industry partners and standards bodies, consulting firms, and suppliers, while cultural-cognitive aspects are reliant on “shared beliefs (culture) and individual cognition” (Biesenthal et al., 2018, p. 46). Contractual governance controls project operations through formal institutions (regulative), while relational governance aims to assure project objectives through relational norms and shared cognitive practices (Tian et al., 2021).

RESEARCH DESIGN Single Case Study Case studies have been widely used in many megaprojects and PPP studies (Cantarelli, 2022; Zidane et  al., 2015). This study used a single case study approach to acquire insights into the governance mechanisms around sustainability in a PPP megaproject. Even though results from multiple study analyses are often more powerful and persuasive, single case studies can make a comprehensive and in-depth contribution to theory building and knowledge advancement and produce fresh insights for future studies, even if results from multiple cases are frequently more robust and persuasive (Yin, 2003). Primary evidence was gathered through semi-structured interviews with two key senior-level experts with an average of 30 years of experience. The interviews were conducted in the English language and were recorded and transcribed. This study also used document analysis to validate the findings of the interviews. Project documents and archives (including media reports, court orders, detailed project

154  Research handbook on the governance of projects

reports, environmental impact assessments, social impact assessments, and environmental impact assessment reports) and newspaper articles were analyzed. The data were coded utilizing QSR NVivo’s coding guidelines. Description of the Case Study An international airport project (hereafter Garden) in India was selected as an ideal research setting for this study. This project is a greenfield airport project in India, established on a PPP model. Private promoters hold a 74 percent stake, while the government holds the remaining 26 percent. The consortium is granted the exclusive right to manage the airport for 30 years, later extended to 60 years. The airport expanded in three phases. The project’s initial phase was finished in March 2008, and on May 23, 2008, the airport opened for business. Phase II started in June 2011 and included the full expansion of Terminal 1 and was completed in December 2013, with the opening of the new terminal (Terminal 1A). The airport served 10 million passengers in 2008, witnessed phenomenal growth during the subsequent years, and concluded with 33.65 million passengers (between April 2019 and March 2020). Phase III includes the construction of a new terminal (Terminal 2), a second runway, and an express terminal building to tackle 25 million passengers per annum in stage 1 and 45 million passengers per annum in stage 2. Construction of Terminal 2 started in October 2018. Stage 1 of the airport’s Terminal 2 was inaugurated on November 11, 2022, and plans are to open for operations in January 2023. The project received many awards, including Environmental Best Practices in 2021 and Airport Carbon Accreditation by the Airports Council International in 2019. One hundred percent of the wastewater generated from the project is recycled and reused. The project also has made tremendous progress in achieving energy neutrality. Nearly 100 percent of the energy needs in the project are covered using renewable sources through onsite and offsite power purchase agreements. Contractual Governance – Regulative Institutions PPP megaprojects are not closed systems; different organizations act together to implement sustainable practices (Li et  al., 2019b). It becomes clear that interactions and interventions between field actors and internal organizational forces have a role in institutionalizing sustainability. These field actors come together under the influence of regulative forces such as rules, regulations, and contracts. On this note, Expert 1 added: This is a large infrastructure; we are mandated certain activities by the Ministry of Environment, Forest, and Climate Change. And under this ministry, any large infrastructure has to have environmental clearance. So, we carry out environmental clearance. We carry out environmental impact assessment related to what is our development activities with the master plan, … basic needs like water, power, … waste generated, how to treat them, reuse them, what is my mitigation plan for each of these things … the impact assessment even considers into flora and fauna of the area.

This contractual mechanism governs the roles and responsibilities of field actors in promoting sustainability. For instance, the contract provisions that consider environmentally friendly practices, such as the contractors’ preservation of green cover, containment of noise, air and water pollution, and waste and energy management, are forms of contractual governance.

Contractual and relational governance for sustainability  155

Some of the other contractual contents relate to obtaining approval for cutting or felling trees and encouraging integration of local workers in the project. And this mechanism creates a foundation or a fertile ground for nurturing partnerships toward sustainability. As Expert 1 commented: When contracting document for such a megaproject goes, a lot of effort is given to many sustainability factors. One is safety. The second one is the environmental and social safeguards. These are fundamental aspects; then we come into material usage, quality control, cost, and time management.

Therefore, project organizations and governments must create policies and regulations that are effective and efficient and then implement the necessary follow-up measures to increase the sustainability of megaprojects. Brauch (2017) presented eight strategies to encourage investment in sustainable infrastructure, highlighting the significance of including sustainability in infrastructure contracts. According to Ma and Fu (2022), the successful execution of contracts is a key factor in the sustainability of megaprojects. In this context, Expert 1 commented: We have got one team that always focuses only on energy management. While [Head of Sustainability, Garden] is getting the sustainability as overall, an individual team from their perspective, somebody will be working on the water management, some team will be working on the energy management, and something will be working on the waste management. And it will be well orchestrated at my level.

RELATIONAL GOVERNANCE – NORMATIVE AND COGNITIVE INSTITUTIONS With the incompleteness characteristic of PPP contracts, it is not enough to depend on contractual governance. Relational governance, as opposed to contractual governance, relies on an informal structure and self-enforcement by each partner (Cao & Lumineau, 2015). The cooperative planning and problem-solving components of relational governance, according to Awan et al. (2018), may signal better recognition of hazards in interactions between PPPmegaproject field actors demanding adaptation, flexibility, and credibility. For instance, the application of a governance mechanism by asking the suppliers and contractors to sign their sustainability commitment may increase social sustainability and make PPP megaprojects more sustainable. Therefore, normative institutions are also crucial in institutionalizing sustainability in PPP megaprojects. Often, organizations self-regulate by earning recognized accreditations, standards, and certifications. On this note, Expert 2 added: And we have also taken up the tough task of driving sustainable procurement in the supply chain with green procurement policy and [International Organization for Standardization] ISO 20400: 2017 sustainable procurement principles and guidelines. We want to take our supply chain partners into this sustainability journey. The collaborative approach always helped us.

One party cannot accomplish the challenging goals of megaprojects alone. Therefore, several stakeholders engage in intense relationship activity to ensure project success. These actions have been demonstrated to be essential for fostering and upholding an organizational relationship that improves sustainability performance and adds value. In this context, Expert 2 commented:

156  Research handbook on the governance of projects

Airports are generally called the business of businesses. It is not that one army can successfully run an airport. I need partners; I need airlines who have to bring the aircraft. I need some ground handlers. I need cargo people; I need a caterer. But now, they are some of my agenda, but at the same time, it requires investment from others. For example, I would have an agenda that in the next three years, I would like to convert all vehicles to electric mobility. But the problem is, as Garden International Airport Limited, as airport owner, I have some control over certain vehicle pools. But the passengers’ coaches, the dollies which are carrying the packages, the equipment which is pulling the aircraft, etc. are being operated by the ground handlers. So, what we have is, we have a collaborative mechanism. And in that mechanism, we also agree with them that if you need an investment, how much you can do in the next three to five years?

The desired behaviors in the interactions that support the emergence of a cooperative relationship are referred to as relational behavior. The three relational behaviors that are most frequently seen under relational governance are solidarity, knowledge sharing, and flexibility (Lu et al., 2015; Zheng et al., 2019). Regarding knowledge sharing, Expert 1 added: We have every step going through the mandatory thing: learning on sustainability, etc. There is a course developed by [Head of Sustainability, Garden] that everybody will go through it, which is an interactive session. Similarly, from the contractor side, they’ve got – I mean, related to safety, dust control, etc. – they’ve got a daily toolbox meeting, they will be doing it, and we submit monitoring reports to the pollution control board once a month.

Regarding flexibility and solidarity, Expert 2 commented on ISO certifications for contractors: The major companies, EPC [Engineering, Procurement and Construction] contractors, etc. will mostly have the certification. But then, as I said earlier, we also have to run with multiple smallerlevel contractors. While we will be advocating them about these things, not 100 percent will be able to do that immediately. Some of them will be looking at the scale and how to do that kind of thing. It is a continuous dynamic process of hand-holding.

Additionally, Expert 1 added: So, fundamentally, it is a collaborative approach. Some airlines might feel that we are already bleeding, we may not be able to invest anything, and then we will have to work out the way around how this is possible. Not that everybody will have money etc. So, then, we will have to work out with their management what can be done mutually on both sides. So, it is not only one hand; you need multiple hands to come together, join, and then perform to achieve sustainability.

In response to mounting concerns over the aviation industry’s environmental impact, several airports worldwide have incorporated greener features into their designs and operating principles and enrolled in eco-friendly programs. Airport sustainability is a growing topic, and the aviation and airport communities are aware of the crucial role that airport infrastructure plays in fostering positive results for human and environmental health. In this context, relational governance at large serves as a “robust” accompaniment to contractual governance, regardless of the levels of institutional forces (Lin et al., 2021). In this regard, Expert 2 commented: We have not stopped with the Ministry of Environment rules, norms, and clearances. We went ahead, especially this new building concerning our voluntary commitment with respect to the green building concept, where we have adopted all the international principles of a green building, an ultimate requirement of how a green building should be. This new terminal aligns with the USGBC United States global green building council.

Contractual and relational governance for sustainability  157

Relational governance also aims to assure project objectives through shared cognitive practices (Tian et  al., 2021) and restrain the parties’ opportunistic action (Lu et  al., 2015). To behave responsibly, cultural-cognitive factors are used in “taken for granted” ways. In this context, Expert 1 commented: We want to take our sustainability to the next level. So, if you ask me, as [Head of Sustainability, Garden] rightly mentioned, it is voluntary. But, more than voluntary, it is our responsibility to society. To start with, ours is purely voluntary. It’s based on the management’s commitment and the vision … while the major intent is not to get a benefit out of every sustainability initiative economically, we also structure in such a way that these projects contribute to Mother Earth as well as it contributes to the economy.

Regulatory and normative entities serve as direct pressures on organizations to promote sustainability initiatives. However, to be effective, influence from cultural-cognitive institutions may require a longer duration to build sustainability attributes within the field actors or individuals. In addition, experts believe that a cognitive culture in governance for sustainability is important, as Expert 1 noted: Sustainability is not a short-term or a medium-term project for us, it’s a journey, it’s a culture, it’s a DNA, which we want to drive as a whole existence with the organization as a culture of the organization.

Cultural-cognitive institutions guide the behavior of the field actors (Wooten & Hoffman, 2008); therefore, megaproject research needs attention from this angle. In this regard, Expert 2 added: From a community initiative, if the government does everything and the community is not doing anything, your sustainability will never work. There are many attributes, like knowledge sharing, making people understand, be responsible, etc.

CONCLUSIONS Resilient and sustainable considerations must be considered in PPP megaprojects because of the dyad complexity resulting from the procurement mode and megaproject characteristics. However, because the institutionalization of sustainability is a tailored process, it is impacted by different players in the megaproject field and having an effective governance system is crucial. Additionally, because institutional contexts take an important role in the context of PPP-megaproject sustainability, institutions have a significant impact on sustainability governance. This chapter aims to address the role of contractual and relational governance in institutionalizing sustainability in PPP megaprojects through the lens of institutional theory. The findings of this study provide several insights. Contractual governance creates a foundation for sustaining the partnership toward sustainability and plays an important role in improving the sustainability of PPP megaprojects under the influence of regulative forces such as rules, regulations, and contracts. However, relational governance makes it possible for PPP megaprojects to go an extra mile in achieving sustainability. Beyond contractual governance, the sustainability agenda depends on the interplay between normative and cognitive institutions in the megaproject field. Relational governance, including relational norms, solidarity,

158  Research handbook on the governance of projects

flexibility, and knowledge sharing, is vital for sustainability in PPP megaprojects. The findings demonstrate how relational governance mechanisms encourage mutual understanding, assist in amicably resolving issues arising from cultural and social differences, and increase commitment to sustainability. This study informs field actors on how to strike the correct balance among the three institutions and revamp contractual and relational governance for sustainability in PPP megaprojects. Field actors in the PPP-megaproject field should create a more robust contractual governance mechanism in case of the presence of a weak relational mechanism in the field. However, normative and cognitive institutions will pave the way for advancing a sustainable culture in the field. Therefore, relational governance mechanisms will contribute to self-enforcing social and environmental safeguards and commitment-level relationships. Nevertheless, some limitations are present in this study. First, the study is a single case study approach. Future studies can consider exploring contractual and relational governance using multiple case studies. Second, megaproject sustainability depends immensely on field actors and their interdependence. In addition, factors such as project type, contract mode, regulations, norms, and culture affect sustainability in PPP megaprojects. Therefore, future studies should consider exploring the impact of contextual components on institutionalization of sustainability in PPP megaprojects.

REFERENCES Awan, U., Kraslawski, A., & Huiskonen, J. (2018). Buyer-supplier relationship on social sustainability: Moderation analysis of cultural intelligence. Cogent Business & Management, 5(1), 1429346. Benítez-Ávila, C., Hartmann, A., & Dewulf, G. (2019). Contractual and relational governance as positioned-practices in ongoing public–private partnership projects. Project Management Journal, 50(6), 716–733. Biesenthal, C., Clegg, S., Mahalingam, A., & Sankaran, S. (2018). Applying institutional theories to managing megaprojects. International Journal of Project Management, 36(1), 43–54. Brauch, M. D. (2017). Contracts for sustainable infrastructure: Ensuring the economic, social and environmental co-benefits of infrastructure investment projects. Retrieved April 30, 2020, from https://www​.iisd​.org ​/publications​/report ​/contracts​-sustainable​-infrastructure​- ensuring​- economic​ -social​-and​-environmental Cantarelli, C. C. (2022). Innovation in megaprojects and the role of project complexity. Production Planning & Control, 33(9–10), 943–956. Cao, Z., & Lumineau, F. (2015). Revisiting the interplay between contractual and relational governance: A qualitative and meta-analytic investigation. Journal of Operations Management, 33–34(1), 15–42. Castelblanco, G., Guevara, J., Mesa, H., & Hartmann, A. (2022). Social legitimacy challenges in toll road PPP programs: Analysis of the Colombian and Chilean cases. Journal of Management in Engineering, 38(3), 05022002. Chan, A. P. C., Osei-Kyei, R., Hu, Y., & Le, Y. (2018). A fuzzy model for assessing the risk exposure of procuring infrastructure mega-projects through public-private partnership: The case of Hong KongZhuhai-Macao Bridge. Frontiers of Engineering Management, 5(1), 64–77. DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160. Du, J., Wu, H., & Zhao, X. (2018). Critical factors on the capital structure of public–private partnership projects: A sustainability perspective. Sustainability, 10(6), 2066. Flyvbjerg, B., Bruzelius, N., & Rothengatter, W. (2003). MegaProjects and risk: An anatomy of ambition. Cambridge University Press. Gharehbaghi, K., McManus, K., & Myers, M. (2022). Utilization of adaptive methodology to underpin rail transportation systems: Sydney metro’s methodical formulation. Journal of Engineering, Design and Technology, 20(5), 1132–1153.

Contractual and relational governance for sustainability  159

Glover, J. L., Champion, D., Daniels, K. J., & Dainty, A. J. D. (2014). An institutional theory perspective on sustainable practices across the dairy supply chain. International Journal of Production Economics, 152, 102–111. Hueskes, M., Verhoest, K., & Block, T. (2017). Governing public–private partnerships for sustainability: An analysis of procurement and governance practices of PPP infrastructure projects. International Journal of Project Management, 35(6), 1184–1195. Jonny Klakegg, O. (2009). Pursuing relevance and sustainability: Improvement strategies for major public projects. International Journal of Managing Projects in Business, 2(4), 499–518. Klijn, E. H., & Teisman, G. R. (2003). Institutional and strategic barriers to public-private partnership: An analysis of Dutch cases. Public Money and Management, 23(3), 137–146. Li, H., Xia, Q., Wen, S., Wang, L., & Lv, L. (2019a). Identifying factors affecting the sustainability of water environment treatment public-private partnership projects. Advances in Civil Engineering, 2019, 1–15. Li, Y., Lu, Y., Cui, Q., & Han, Y. (2019b). Organizational behavior in megaprojects: Integrative review and directions for future research. Journal of Management in Engineering, 35(4), 04019009. Lin, Y.-H., Zhu, T., Kim, C. J., & Ho, S. P. (2021). How do institutional pressures moderate the impacts of relational governance on the performance of international projects? An empirical assessment. International Journal of Project Management, 39(7), 726–737. Liu, T., Chong, H.-Y., Zhang, W., Lee, C.-Y., & Tang, X. (2022). Effects of contractual and relational governances on BIM collaboration and implementation for project performance improvement. Journal of Construction Engineering and Management, 148(6), 04022029. Lu, P., Guo, S., Qian, L., He, P., & Xu, X. (2015). The effectiveness of contractual and relational governances in construction projects in China. International Journal of Project Management, 33(1), 212–222. Ma, H., Liu, Z., Zeng, S., Lin, H., & Tam, V. W. Y. (2020). Does megaproject social responsibility improve the sustainability of the construction industry? Engineering, Construction and Architectural Management, 27(4), 975–996. Ma, L., & Fu, H. (2022). A governance framework for the sustainable delivery of megaprojects: The interaction of megaproject citizenship behavior and contracts. Journal of Construction Engineering and Management, 148(4), 04022004. Misopoulos, F., Michaelides, R., Salehuddin, M. A., Manthou, V., & Michaelides, Z. (2018). Addressing organisational pressures as drivers towards sustainability in manufacturing projects and project management methodologies. Sustainability, 10(6), 2098. Oliver, C. (1991). Strategic responses to institutional processes. The Academy of Management Review, 16(1), 145–179. Patil, N. A., Thounaojam, N., & Laishram, B. (2021). Enhancing sustainability of Indian PPP procurement process using system dynamics model. Journal of Public Procurement, 21(4), 345–369. Sankaran, S., Müller, R., & Drouin, N. (2020). Creating a ‘sustainability sublime’ to enable megaprojects to meet the United Nations Sustainable Development Goals. Systems Research and Behavioral Science, 37(5), 813–826. Scott, W. R. (1995). Institutions and organizations. SAGE Publications. Siemiatycki, M. (2013). The global production of transportation public-private partnerships. International Journal of Urban and Regional Research, 37(4), 1254–1272. Thounaojam, N., & Laishram, B. (2021). Issues in promoting sustainability in mega infrastructure projects: A systematic review. Journal of Environmental Planning and Management, 65(8), 1349–1372. Tian, B., Wang, Z., Li, C., & Fu, J. (2021). Can relational governance improve sustainability in public-private partnership infrastructure projects? An empirical study based on structural equation modeling. Engineering, Construction and Architectural Management, 30(1), 19–40. Ullah, M., Khan, M. W. A., Kuang, L. C., Hussain, A., Rana, F., Khan, A., & Sajid, M. R. (2020). A structural model for the antecedents of sustainable project management in Pakistan. Sustainability, 12(19), 8013. Wooten, M., & Hoffman, A. (2008). Organizational fields: Past, present and future. In R. Greenwood, C. Oliver, K. Sahlin, & R. Suddaby (Eds.), The SAGE handbook of organizational institutionalism (pp. 130–148). SAGE Publications.

160  Research handbook on the governance of projects

Xue, J., Yuan, H., & Shi, B. (2017). Impact of contextual variables on effectiveness of partnership governance mechanisms in megaprojects: Case of Guanxi. Journal of Management in Engineering, 33(1), 04016034. Yin, R. K. (2003). Case study research: Design and methods. SAGE Publications. Zheng, X., Lu, Y., & Chang, R. (2019). Governing behavioral relationships in megaprojects: Examining effect of three governance mechanisms under project uncertainties. Journal of Management in Engineering, 35(5), 04019016. Zidane, Y. J. T., Johansen, A., Ekambaram, A., & Hald, L. C. (2015). When stakeholders shape successes or bring failures – A case study of an Algerian megaproject. Procedia Computer Science, 64, 844–851.

14. Governance through project management methodologies Miia Martinsuo

INTRODUCTION Organizations that implement projects repeatedly benefit from an overarching approach to how they decide upon, steer, control, manage, and conduct their projects, and this is covered in the concept of governance of projects. A distinction has been made between an internal view and external view on project governance (Ahola et al., 2014), and this chapter concentrates on the external view, i.e., how the organization governs its projects. Putting governance into practice requires a well-functioning mechanism, that is, such structures and processes of productive activities that contribute toward reaching the goals that the organization has set for the projects (following Pajunen, 2008). The choices at the organizational level are naturally reflected in the internal view of project governance and how individual project managers and project teams implement project governance. In the governance of projects, organizations often define norms and develop formalized tools and routines that specify how projects should be managed. In this chapter, the focus is on project management methodologies as mechanisms of governance. They comprise the norms, tools, and established routines used for managing projects and reflect some key assumptions about what kinds of processes and activities are expected to lead to success. To some extent standardized practices may be needed, to align the different interests of the organization and the projects (Ahola et  al., 2014). The organizations create such norms, tools, and routines and develop them over time, through experiences of what has driven success and what has delivered planned benefits through projects. Sometimes, organizations may adopt such norms, tools, and routines from models and frameworks of professional associations and certification bodies (Project Management Institute, PMI; Association for Project Management, APM; International Project Management Association, IPMA; and Axelos), standardization organizations (International Organization for Standardization, ISO), commercial consultants, or partner firms, based on learning from the successes of other organizations. Project management methodology (PMM) is here defined broadly as “an organization’s way to control and make decisions on a project during project management” (Lehtonen & Martinsuo, 2006, p. 7). It is sometimes referred to as a project management system (CookeDavies et al., 2009), framework (Badewi, 2022), or method (Jugdev et al., 2013). With PMMs, organizations often seek consistency in the way in which projects are managed and improvement in project success rates (McHugh & Hogan, 2011). On one hand, PMMs become more established when the organization’s project management maturity evolves. On the other hand, the use of PMMs is seen to advance or reflect the organization’s project management capability (Crawford, 2006). Here, I use the general term PMM to emphasize its overarching nature as the organization’s approach to managing its projects and to acknowledge that it 161

162  Research handbook on the governance of projects

may include many different methods, techniques, and tools used for the different purposes in project management. Control and decision-making on projects may take different forms in organizations. PMMs may specify project management processes, tasks, and tools (including information systems for project management) that can be considered as explicit, formalized aspects of project management. However, some aspects of PMMs may be implicit and even informal, since PMMs also include the core principles and norms that guide project management, and actors’ roles and responsibilities that have become established in the organization through the learnings in the past and are anticipated to lead to successful project outcomes. This chapter focuses on three main questions: 1. What are PMMs like, as mechanisms of governance? 2. How do PMMs differ from each other? and 3. What kinds of outcomes can PMMs offer as mechanisms of governance? PMMs are here considered especially from the viewpoint of organizations whose main business is projects (i.e., project-based firms) or that carry out projects for the purposes of developing their offerings, operations, or business more generally (i.e., any organizations). Either of them might develop and use PMMs in their pursuit of project goals. Naturally, many types of organizations in the private, public, and non-profit sectors procure, implement, and deliver projects, participate in joint projects with other organizations, and have their specific PMMs. Inter-organizational projects with organizations from different industries add complexity through the possibility of multiple different PMMs, requiring negotiation concerning which PMM is used in the specific project. This complexity is purposely excluded from this chapter, but it is a relevant issue for research. The chapter shows that there is no one single best PMM, but all organizations need selectivity, flexibility, interpretation, and adaptation when using a PMM. The paradox between formalization and flexibility is discussed, and the necessity for organizational learning is revealed, when organizations use a PMM and continuously develop their project management capabilities.

BASIC FEATURES AND COMPONENTS OF PROJECT MANAGEMENT METHODOLOGIES When PMMs are considered and used as mechanisms of governance, there is a need to acknowledge both the normative (rules and procedures) and behavioral (people and what they do) perspectives. Table 14.1 illustrates four key components of PMMs, each discussed below. The general discussion on PMMs tends to concentrate on formal rules and procedures, but I emphasize that also the deeply rooted and often invisible social structures and cultures are equally important in the governance of projects. A core aspect of PMMs deals with the knowledge areas, processes, and tasks that are expected to be central to achieving project success. When they are specified clearly, organizations appreciate the possibility to keep the project processes well structured, controlled, and known, projects are treated in a consistent manner, and personnel share the same project vocabulary and understand each other (Wells, 2012). Wells (2012) also reports that PMMs may

Governance through project management methodologies  163

Table 14.1  Overview of the key components of PMMs

Foundation (what, why)

Normative components (rules and procedures)

Behavioral components (people)

Knowledge areas, processes, and tasks

Values, principles, and culture

Implementation (how, who) Tools, techniques, methods, and technologies

Actors, committees, and their roles and responsibilities

act as “hygiene factors”: without PMMs the organization would become inefficient. PMMs might be necessary when working with customers and communicating to other stakeholders, since such organizations may require official accreditations for the assurance of project management quality. However, PMMs might also become constraints, especially if people do not rely on them or cannot act flexibly in the context of the PMM (Wells, 2012). It is important for personnel to remain sensitive to the requirements of specific contexts and circumstances, when using the standardized processes and tools. Tools, techniques or methods, and technologies may deal with any of the processes or tasks in projects and are often focused on handling some specific tasks in the projects. PMMs may include many kinds of tools and methods, for example, for project planning and monitoring, and the information they offer is relevant for governance, too. The critical path method, work breakdown structure, Gantt chart, various analysis techniques, and project management software are such tools that are actively used in projects (White & Fortune, 2002; Fortune et al., 2011) and offer information input to decision-makers. These kinds of tools often represent good-practice knowledge accumulated over the past decades, and they are intended for very specific tasks and purposes. Organizations might also develop their own tools for their own purposes. The study by White and Fortune (2002) identified some limitations with general tools and techniques in that they are not always suitable for the organization or could be somehow inadequate. Therefore, it is quite important to select the right tools and techniques for the right purposes in the organization and not merely copy them from others. Each organization may have its own, unique PMM, which is not just formalized, documented, and officially shared, but may also be resting upon implicit values, principles, and culture, learned over the years as “good” and “right” ways of operating in the specific context. Value drivers underlying the development of PMMs may, for example, deal with the need for process efficiency and the need for differentiation (Cooke-Davies et al., 2009). Such values and principles may reflect the national culture of the organization’s historical homebase, or the culture typical to the organization’s industry. Organizations and their PMMs might differ, for instance, in the degree of formality, centralization, control, participation, communication, and openness. The values, principles, and culture are reflected in the general character of the PMM. For example, Joslin and Müller (2015) analyzed the comprehensiveness, supplementation, and selective application of PMM as overarching approaches of PMM use. CookeDavies et  al. (2009) differentiated between ad hoc, classic, innovative, and entrepreneurial PMMs. Lehtonen and Martinsuo (2006) examined the appropriateness of project management by drawing attention to respondents’ own views of “our way” of managing projects. Even if the cultural aspect of PMMs is often invisible, the project-based learning occurring over the

164  Research handbook on the governance of projects

years and accumulating to the project routines and practices in the organization is a powerful aspect of PMMs. PMMs may additionally specify actors’ roles and responsibilities in project management and define competence requirements for project decision-makers and project managers. This might imply specifying the requirements for project managers and upper-level decision-makers, and also defining the various groups and committees involved in projects and related decision-making. While official standards and textbooks may define project and decision-making structures and competence requirements generally and reveal alternative models for different project types, such structures and the division of responsibilities always have to be defined organization-specifically, acknowledging the available resources and culture of the organization. Thereby, it is important to consider how the PMM empowers decision-makers and project actors to drive projects toward success. Especially senior management support, effective leadership, team building, and training provision have been identified as actor-related critical success factors (White & Fortune, 2002; Fortune et  al., 2011). Project managers may also pursue professional qualifications and maintain memberships in professional organizations, to demonstrate their project management competences, as reported in some countries (Fortune et al., 2011).

ALTERNATIVE METHODOLOGY TYPES Organizations have various options, when they choose and implement a PMM for their own purposes. It is important to acknowledge the differences between different types of PMMs and use them selectively for the organization’s own needs. I here differentiate between adopted, adapted, and designed PMMs. Previous research acknowledges that different PMMs are needed for different purposes (Cooke-Davies et al., 2009), environments (Joslin & Müller, 2015, 2016), and cultures (Piwowar-Sulej, 2021). The study by Cooke-Davies et  al. (2009) indicates that especially when the organization seeks high process efficiency and does not need to differentiate itself from competition, a very traditional PMM with focus on efficient implementation is needed, whereas a firm with a high differentiation strategy would require PMMs that will enable much more flexibility and creativity. Adopted PMMs Over time, standards, bodies of knowledge, and knowledge bases have been developed, suggesting and documenting processes, tools, and competences useful in project management. Some PMMs may rely upon an international standard and guidance (ISO 21502) and some focus on the organization and its capability or maturity in project management (e.g., PMI OPM3, APM Body of Knowledge). Complementing the organizational approach, some models rest on individual capabilities and related certifications (e.g., PMI Body of Knowledge, APM Chartered Project Professional, IPMA Competence Baseline ICB4, Axelos: PRINCE2, P3O). Organizations might learn from and adopt the processes, guidelines, and toolboxes based on such established standards and related support materials, potentially through the support of accreditation and certification systems and consultants. However, as the readymade models do not acknowledge the organization’s special circumstances or differentiate between project types, organizations need to be careful in interpreting such methodologies for

Governance through project management methodologies  165

their specific needs. Organizations might customize the international standards generally, or specifically for different project types (Joslin & Müller, 2016). When adopting PMMs based on standards developed for general use, it is important to select carefully which parts of the existing frameworks are useful and helpful for the specific organization’s needs, tailor them (McHugh & Hogan, 2011), and also take into account needs specific to the project types. Adopted PMMs have the strength of international availability and potential sharing within and among firms (e.g., customers and partners), enabling the use of a commonly understood project terminology (McHugh & Hogan, 2011; Wells, 2012). Their weakness might be a similarity with competitors: adopting a similar PMM as competitors does not really enable differentiation or, thereby, achieve competitive advantage. Adapted PMMs Research literatures, textbooks, practitioner literatures, and commercial consulting and training firms offer process models and tools for specific project types, such as product and service development, organization change, software development, construction, investment, and infrastructure development. Organizations may procure consulting services to introduce such a model or learn a conceptual model from existing literature. While such models may acknowledge the special nature of a certain project type (e.g., Wells, 2012), they may be thereby quite limited and they require additional work, to take the organization’s unique context into account. There is a need for adjusting and adapting the models to the organization’s specific circumstances and needs. It is important to also consider the unique organizational culture and develop such norms, routines, and tools that fit with the specific organization. Adapted PMMs have the strength of accumulated project type-specific knowledge into good practices, and potentially also the terminological consistency internationally. Their weakness might be the limited application domain and operational nature, requiring the combination of multiple separate PMMs for different project types. Designed PMMs Particularly large project-based organizations may have multiple project types and a strong, unique identity and culture with learnings from past projects. Then, instead of adopting or adapting an existing PMM, it might be more useful to design an organization-specific PMM, based on the knowledge and learnings accumulated in the past. For example, Fortune et al. (2011) reported quite a high proportion of in-house developed PMMs in their study of firms in Australia, Canada, and the UK. Especially for large organizations, the investment into a tailored, designed PMM might prove to be good, as the PMM then reflects the capabilities, commitment, and learnings of the involved employees. Designed PMMs also enable the different treatment of varied project types and sizes, for example, through advising which practices and tools are used for which types of projects (Joslin & Müller, 2016). Challenges with tailored PMMs deal with a too-strong foundation in the past, reliance on internal learning (instead of learning also from others), mismatch with the customer’s supplier selection criteria, and mismatch with models that international customers and partner firms might use. On the other hand, a unique PMM might reflect capabilities that could enable differentiating from competitors and developing competitive advantage (Cooke-Davies et al., 2009). Table 14.2 summarizes some key features of different types of PMMs.

166  Research handbook on the governance of projects

Table 14.2  Summary of features typical to different types of PMMs Adopted PMM

Adapted PMM

Designed PMM

Offers a common language and terminology

+

+

+

Promotes a consistent way of working and use of good practices

+

+

+

Promotes easy learning of practices and capability development

+

+

+

Is widely available and possible to share internationally

+

+

–

May be used as a formal supplier or partner selection criterion

+

(+/–)

(+/–)

Takes into account the needs of a specific project type and size

–

+

(+)

Takes into account the requirements of different project types and sizes

–

(–)

+

Takes into account the requirements in a specific industry

–

(+)

+

Capabilities and support for implementation broadly available

+

+

(+)

Coverage of history, learning, and good practices across different types of organizations

+

+

–

Coverage of history, learning, and good practices within the organization

–

–

+

Possibility for differentiation from competitors

–

(+/–)

+

OUTCOMES OF USING PROJECT MANAGEMENT METHODOLOGIES A crucial aspect of benefiting from PMMs relates to whether and how they are used. Even if a PMM exists officially, it does not always mean that it is used in the right way and in all possible projects. Getting a PMM into use will require extensive effort from the organization, first to create the PMM and/or modify it to the organization’s specific circumstances and then to educate the personnel on its use. Accreditations, audits, and certifications of PMM use are available to assure proper governance through PMMs. It is up to project managers, decision-makers, and personnel to implement PMMs in practice, and there are some benefits to using PMMs for single projects. Some studies associate the use of PMMs and their elements with success at the single project level (Joslin & Müller, 2015, 2016), suggesting that the use of PMMs explains the achievement of goals in a certain project. Some examples indicate that using and referring to PMMs may help in preparing and negotiating successful project proposals and bids, since the customers appreciate a transparent approach to project management, and in making the project plans realistic and feasible (Wells, 2012). The use of a PMM can make project managers’ and decision-makers’ work easier, since

Governance through project management methodologies  167

they offer guidance on agreed-upon ways of working in the organization and help new managers in their work (Wells, 2012). The study by Badewi (2022) reported that the institutionalization of PMMs was associated with the managers’ power in transformation projects and to some extent also project success. The benefits of PMMs, however, are much more significant for the organization as a whole, as multiple projects may take place simultaneously and sequentially. PMMs represent an important component of project management capability that is maintained and improved over time (Crawford, 2006). PMMs promote consistency, sharing of a common language, systematic control for projects, guidance and support, and continuity over time (Wells, 2012). The study by Cooke-Davies et al. (2009) showed examples where the efficiency pursuits of projects increased over time, when the organizations developed and established PMMs and took effort to continuously improve the project efficiencies. If the organization uses a PMM, employees experience the project management approach of the organization as more appropriate than without a PMM, and the PMM use could increase the proportion of projects that reach their goals (Lehtonen & Martinsuo, 2006). PMM alone, however, is not a guarantee for repeatedly high-performing projects. All PMMs have their limitations, in terms of suiting certain project types, matching with real-life needs, required time and resource consumption, availability of training, and employees’ capabilities and readiness to use the methodology (White & Fortune, 2002, Fortune et al., 2011). The added workload, rigidity of the system, and documentation and capability requirements might even become barriers to using the PMM (Terlizzi et al., 2016). Some examples in the study by Wells (2012) also indicate that individuals might be reluctant to use PMMs, as they do not believe in the effectiveness of the methodologies, they may feel too old to learn new ways, they want to rely on common sense, and they have not heard of others’ experiences or good practices of using such PMMs.

CONCLUSIONS In this chapter, I have portrayed PMMs as mechanisms of governance that enable organizations to use their projects for goal-oriented endeavors successfully, to continuously learn from managing the projects, and, thereby, to build their project management capability. PMMs, as mechanisms of governance, focus on the general approach of deciding upon, steering, controlling, managing, and carrying out projects, but they are not sufficient alone. Organizations need strategies and future visions that give direction to the projects, too. Concerning the nature of PMMs as mechanisms of governance, this chapter emphasized the complementarity of normative and behavioral perspectives to governance. While PMMs are often represented as official rules, tools, and processes, the need for flexibility and agility must be acknowledged (Lappi et al., 2018) along with the powerful influence of people, implicit values, and organizational culture in the governance of projects. All organizations can and should consider the established foundations of both aspects of PMMs (i.e., what is being governed as part of projects and why), and also support the efficient and flexible implementation of PMMs in projects (i.e., how the learned practices are used and by whom). This chapter has offered a holistic overview of the components of the governance of projects, which may help organizations in acknowledging all the necessary perspectives in their own governance approach.

168  Research handbook on the governance of projects

Various PMMs are available publicly and commercially, and I proposed differentiating between PMMs adopted from standards and bodies of knowledge, PMMs adapted from commercial and practitioner process models, and PMMs designed specifically for the organization’s own needs and context. These alternatives are not necessarily mutually exclusive, but organizations could combine parts of pre-existing PMMs with their own designed components. The analysis of the strengths and weaknesses of different PMM types enables organizations to consider which approach is suitable for their own needs. It also encourages organizations to allow flexibility, interpretation, and adaptation, when choosing and using their own PMM. None of the PMMs can perfectly anticipate the circumstances faced in projects, so the use of PMMs needs to be complemented with personnel’s awareness and active anticipation of uncertainties. Since PMMs as mechanisms of governance pursue efficiency and learning in and among projects, research tends to emphasize that PMMs produce beneficial outcomes both at the level of single projects and at the level of the organization. The conceptions of success and outcomes tend to be limited through how they are assessed. If reaching of project goals and efficiency are pursued, they are measured. However, in inter-organizational contexts, successes and outcomes may be perceived differently by the different organizations and some aspects of project and business value may be more difficult to assess than efficiency. The benefits of PMMs, therefore, are highly sensitive to the strategies with which projects are steered and the contexts and circumstances in which projects take place. Some PMMs might become extremely rigid and hinder personnel from seeing events occurring in the context, or they might be biased to one organization’s expectations and neglect the other stakeholders’ interests. Therefore, benefiting from PMMs will require constant attention and responsiveness to the stakeholders, events, and strategies and related dynamics. When implementing and using PMMs, the personnel in organizations may face a dilemma between the official formality of the PMM and the flexibility necessary in implementing projects in their specific context. The chapter indicated that personnel may be reluctant to use a PMM due to lack of confidence in the PMM and reliance on their own common sense and capabilities. However, projects and project business are always team efforts, which will require effective communication and interaction between personnel and even between different organizations. To resolve the dilemma between formality and flexibility, organizations should educate their personnel in the selective and, yet, sufficient use of PMMs. Employees’ own agency, responsibility, and capacity to adjust operations upon need are crucial in all projects due to their inherent uncertainty. A key aspect of PMMs relates to their evolution over time. Organizations develop their project management capabilities through learning from previous projects and at the same time they become more mature in project-based operations. PMMs are always results of some learning, either broadly in the world or in a certain industry or specifically in an organization. In any type of PMM, it is necessary to accumulate the organization’s learning into good practices and share them actively, which means that PMMs are not intended as static and fixed entities; they are supposed to be developed continuously. It is important that organizations have procedures in place also for changing and improving the existing PMM, for example, as part of the tasks of a project management office or project support office. At its best, PMMs as mechanisms of governance promote the organization’s success through a double-loop learning process where learning takes place not just between projects, but from projects to the organization, in the form of a continuously evolving PMM.

Governance through project management methodologies  169

This chapter has considered PMMs as a mechanism promoting both project success and organizational governance. Future research possibilities exist broadly, concerning both adopted PMMs and their implementation and use internationally, and adapted and designed PMMs in their unique local contexts. With the diverse cultural and industrial contexts of project business, research could consider the local implementations of PMMs and experiences of their inter-organizational use. Particularly the conflicts between multiple different PMMs in inter-organizational projects deserve attention and guidelines for resolution. Research could delve more into the process of adapting or designing PMMs, focusing empirically on the mechanisms that enable agility and flexibility in governance (following Lappi et al., 2018). Furthermore, there is a need to understand behavioral aspects of PMMs in governance, in terms of the values, norms, and distribution of tasks between governing actors in the development, implementation, use, and revising of PMMs. Research could explore the competing values and task division between top managers, project portfolio managers, project management offices, and project managers in PMM use. Also, there is a need to take a more critical view of the outcomes of using PMMs, at the level of both single projects and the organization. For example, the accrued costs and sacrifices made need attention alongside the achieved benefits, when assessing the real value and outcomes of PMMs.

REFERENCES Ahola, T., Ruuska, I., Artto, K., & Kujala, J. (2014). What is project governance and what are its origins? International Journal of Project Management, 32(8), 1321–1332. Badewi, A. (2022). When frameworks empower their agents: The effect of organizational project management frameworks on the performance of project managers and benefits managers in delivering transformation projects successfully. International Journal of Project Management, 40(2), 132–141. Cooke-Davies, T. J., Crawford, L. H., & Lechler, T. G. (2009). Project management systems: Moving project management from an operational to a strategic discipline. Project Management Journal, 40(1), 110–123. Crawford, L. (2006). Developing organizational project management capability: Theory and practice. Project Management Journal, 36(3), 64–97. Fortune, J., White, D., Jugdev, K., & Walker, D. (2011). Looking again at current practice in project management. International Journal of Managing Projects in Business, 4(4), 553–572. Joslin, R., & Müller, R. (2015). Relationships between a project management methodology and project success in different project governance contexts. International Journal of Project Management, 33(6), 1377–1392. Joslin, R., & Müller, R. (2016). The impact of project methodologies on project success in different project environments. International Journal of Managing Projects in Business, 9(2), 364–388. Jugdev, K., Perkins, D., Fortune, J., White, D., & Walker, D. (2013). An exploratory study of project success with tools, software and methods. International Journal of Managing Projects in Business, 6(3), 534–551. Lappi, T., Karvonen, T., Lwakatare, L. E., Aaltonen, K., & Kuvaja, P. (2018). Toward an improved understanding of agile project governance: A systematic literature review. Project Management Journal, 49(6), 39–63. Lehtonen, P., & Martinsuo, M. (2006). Three ways to fail in project management and the role of project management methodology. Project Perspectives, XXVIII(1), 6–11. McHugh, O., & Hogan, M. (2011). Investigating the rationale for adopting an internationally-recognised project management methodology in Ireland: The view of the project manager. International Journal of Project Management, 29(5), 637–646. Pajunen, K. (2008). The nature of organizational mechanisms. Organization Studies, 29(11), 1449–1468.

170  Research handbook on the governance of projects

Piwowar-Sulej, K. (2021). Organizational culture and project management methodology: Research in the financial industry. International Journal of Managing Projects in Business, 14(6), 1270–1289. Terlizzi, M. A., de Souza Meirelles, F., & de Moraes, H. R. O. C. (2016). Barriers to the use of an IT project management methodology in a large financial institution. International Journal of Project Management, 34(3), 467–479. Wells, H. (2012). How effective are project management methodologies? An explorative evaluation of their benefits in practice. Project Management Journal, 43(6), 43–58. White, D., & Fortune, J. (2002). Current practice in project management – An empirical study. International Journal of Project Management, 20(1), 1–11.

15. Normalization of deviance in projects: its causes and implications for effective governance Jeffrey K. Pinto and Kate Davis*

INTRODUCTION Recently,1 an electrical worker employed by the sub-contractor of a major utility was fatally electrocuted while working on a project in a “hot zone.” This was a dangerous work environment due to the proximity of a number of high-voltage electrical lines and adjacent towers. Because this environment is considered very high risk, continuous employee safety training and rigorous enforcement are mandated by state law. Following the subsequent investigation and from depositions of key members of the contractor and utility organizations, it was determined that the utility was fully aware of the dangers of working in this area, and had a number of codified safety policies and best practices in place, but routinely failed to enforce them – either for their own employees or for those of contractors, in spite of legal obligations to do so. When questioned, members of the organization acknowledged the lack of enforcement efforts and painted the picture of an organizational culture that encouraged and rewarded its project managers for the quick completion of projects, even if safety steps had to be cut along the way. In early 2018, the large UK construction firm Carillion was forced to enter liquidation proceedings, with a debt of £7.1 billion and a string of some 30,000 creditors, suppliers, employees, shareholders, and customers left with significant financial losses. In the aftermath of this financial disaster, a report by two parliamentary select committees criticized the regular actions of directors, auditors, and the regulatory bodies as the main reason behind the collapse (House of Commons, 2018). A system-wide lack of control systems led to three specific types of normalized deviance: “late payments to suppliers, aggressive accounting and payment of high dividends to shareholders despite the troubled financial status of the firm” (Hajikazemi et al., 2020, p. 1122). A similar circumstance occurred some years prior to the Carillion case, when a detailed analysis of the Dutch construction industry was undertaken (Sminia, 2011). The study exposed an embedded system of deviant behaviors. Specifically, “pre-consultation,” which is similar to bid-rigging, had been declared illegal by EU regulators. Still, because the practice was common and entrenched in their construction sector, Dutch firms continued these pre-consultation, collusive practices for nearly a decade after they were proscribed. * Portions of this chapter were derived from: Pinto, J. K., 2014, Project management, governance, and the normalization of deviance, International Journal of Project Management, 32, 376–387; Davis, K. & Pinto, J. K., 2022, The corruption of project governance through normalization of deviance,  IEEE Transactions on Engineering Management, DOI: 10.1109/TEM.2022.3184871, available online July 11, 2022. 1 Some key details have been deliberately obscured for legal reasons. 171

172  Research handbook on the governance of projects

What these three stories have in common is a fundamental willingness of organizations to create cultures that reward behaviors, which are ultimately deviant in pursuit of some other acceptable goals (for example, profitability). That is, the challenge here is not that employees are ignorant of required standards of behavior or accepted practices; quite the opposite, in fact. The problem, from a governance perspective, is that unsafe or unethical practices are fully recognized, as well as potential problems resulting from their disregard, but it does not matter. Individuals and entire groups (even up to the corporate level) routinely and willingly transgress accepted standards of behavior. What may have once begun as a “this one-time only” deviation from standard operating rules become, with enough repetitions, “normalized” practice patterns (Stebbins, 2012). Normalization of deviance (NoD) in projects and project management is a concept that has become increasingly important in recent years, as we better understand the expanded nature of project managers and their teams in pursuing organizational goals through the use of project-based work. As we will see in this chapter, in many ways NoD is a natural consequence of failed governance, toxic or benign operating cultures, and skewed reward systems. Our goal is to introduce the idea of NoD, identify its causes and their consequences, and offer a model for identifying the warning signs of NoD and active steps organizations can take to quickly address and minimize the role NoD plays in both the failure of projects of immediate concern, and the manner in which these behaviors can continuously poison the ground for future project efforts. It is generally recognized that the term “normalization of deviance” was first coined by Diane Vaughan, a Columbia University professor who studied the original space shuttle Challenger disaster in 1986 and found its cause resulted from a series of missteps, flawed assumptions, and a NASA culture of risk-taking. “Social normalization of deviance means that people within the organization become so much accustomed to a deviant behavior that they don’t consider it as deviant, despite the fact that they far exceed their own rules for the elementary safety” (from Villeret (2008) interview with Vaughan). Equally importantly, Vaughan’s work has found that people grow more accustomed to the deviant behavior the more it occurs; that is, NoD is the progressive state of loss of effective control. Put simply, NoD suggests that the unexpected becomes the expected, which becomes the accepted (Pinto, 2006). If we consider this dictum, it implies that toxic or inappropriate behaviors may occur once, result in no organizational sanctions or loss of operational effectiveness, and so are continuously repeated, often without negative consequences until the inevitable catastrophe occurs. Thus, one phenomenon of this NoD is that while a series of behaviors may appear deviant to people outside the organization, for personnel within the firm, the deviance often goes unrecognized; that is, it is simply assumed to be a normal occurrence. It is usually only with hindsight that people within an organization can realize that their seemingly “normal” behavior was, in fact, deviant (Vaughan, 1996, 1999, 2004; Vaughan et al., 2005). Part of the challenge in recognizing and addressing NoD is the role that the “gradualism” phenomenon plays in promoting these concerns. As Starbuck and Milliken (1988) have noted, acclimatization within an organization to “deviance” behavior occurs as a process of steps, often over an extended period. The unacceptable behavior does not occur all at once, but rather may serve as the summation of multiple decisions made or avoided, with no visible or discernible negative effects. Thus, the potential for catastrophe is never envisioned as an option until it occurs. In a project setting, we see gradualism occur in scope adjustment, safety standards modification, or incremental changes to plans and other control documentation

Normalization of deviance in projects  173

(Eden et al., 2005; Winch, 2013); and often experience the effects that gradualism plays in ballooning project costs and schedules. Or, more tragically, gradualism may affect the adherence to safety standards in which lengthy or seemingly obstructive safety checks are, over time, ignored with increasing frequency until a catastrophic event occurs. As Winch (2013) noted, a constructivist perspective yields a number of causes of project escalation – many involving elements of gradualism – including strategic misrepresentation, “endgaming,” “governmentality,” culture, and escalation of commitment on major projects (Clegg et al., 2002, 2006). There is an important difference between the ideas of “deviation” and “deviance” as they relate to project development (Bourrier, 2005). It is commonly understood that projects are prone to deviation during the development process, as specific technical, commercial, or environmental issues can lead to nonconformity with the expected standards (see Geraldi et al., 2010; Hällgren & Söderholm, 2010; Morris & Hough, 1987). Deviation from plan, for example, may be a “normal” element in the development of most projects and our response to these deviations – efforts to “stabilize the situation” (Hällgren & Söderholm, 2010) – can be viewed as an important but relatively commonly applied component of the project development process (Jin & Levitt, 1996; Orr & Scott, 2008). Indeed, the practice of configuration management is often predicated on the expectation that deviations will naturally (and necessarily) occur in the project between its original plan and final delivery. The challenge of dealing with deviations in this sense lies in determining how effectively an organization reacts to unexpected events; i.e., how quickly they are able to get a project back on track with minimal lost time or expense. Deviance, on the other hand, becomes an attitude that members of an organization adopt as cultural norms both prior to and during the project development cycle. This behavior does not deny errors or misuse of organizational actions, but it attempts to “normalize” these errors as simply part of the project’s (or firm’s) normal operating procedures. When “the unexpected” fully migrates to “the accepted,” the danger for organizations is that they have rationalized away destructive behaviors or created an environment where deviance is permitted to thrive. Thus, “deviation” is normal in projects; “deviance” is represented as normal, but actually results only through a willingness to accept toxic behaviors and look the other way. There are reported examples of the NoD phenomenon in multiple industries and professions including engineering (Gerstein, 2008), medical care (Banja, 2010; Green, 2004; Prielipp et al., 2010), and industrial and financial organizations (Ashforth & Anand, 2003). Although widely observed, normalized deviance differs from the more commonplace nature of organizational accidents due to engineering overreach (Petroski, 1992) or other design or development failures. Errors, particularly due to unexpected risk factors (e.g., “unknown-unknowns”) will continue to remain a part of organizational life despite firms’ attempts to identify and therefore minimize their effects as much as possible, leading to the “normal accidents” which are the price paid for the failure to jointly design technology and organization (Perrow, 1999). Further, some risks are accepted as a process of rational cost–benefit analysis, as has been argued to have occurred with NASA’s decision to launch Challenger in the face of technical concerns. In this case, technical risk was outweighed by political risk, where NASA faced tremendous pressure to carry out missions to support the image they had created, that space flights had become both routine and a profitable enterprise through contracting for satellite launches (McConnell, 1986). A more recent example of a similar phenomenon occurred with Boeing’s 2018 introduction of their widely used 737, upgraded as the 737 Max. In the aftermath of two fatal accidents and the deaths of over 300 people, the company has been charged with negligence through pushing these design and software upgrades too rapidly, even though

174  Research handbook on the governance of projects

they fundamentally changed the flight characteristics of the aircraft. In this case, commercial pressures were assumed to trump technical concerns, as the changes were rationalized as simple “upgrades” to a proven airframe. NoD represents a cultural attitude that consciously creates conditions in which mistakes are made; in effect, it provides a perfect petri dish environment for corporate (or project) misbehavior. As Vaughan (1996, 2005) notes, with NoD, individuals, teams, and organizations repeatedly drift away from what are acceptable standards of practice until the drift has become the norm.

WHAT CONTRIBUTES TO NORMALIZATION OF DEVIANCE? We see the roots of NoD behavior emerge from the same backdrop of other forms of unethical or misguided organizational behaviors. That is, just as the phenomena of (1) socialization, (2) institutionalization, and (3) rationalization enable corrupt practices to flourish in otherwise competently led organizations (Ashforth & Anand, 2003), we can find these same occurrences are similarly at work in the evolution of deviant behavior among project organizations and members of project teams. Underlying this process is a contributing culture within the organization that is either accustomed to such practices and actively looks the other way, or may actually reward such behavior. Early research on the formation of corporate cultural norms, for example, traced the development of a firm’s values and assumptions often to a series of critical incidents, or defining behaviors, which demonstrate – despite formal professions of corporate values – what it really takes to succeed (Hatch, 1993; Kilmann, 1985). While culture is presented as a concept in this chapter, it is not discussed in detail. Development of the concept of culture has deep roots, since the earlier formulations of corporate culture (Ouchi & Wilkens, 1985; Schein, 1986) to more recent theory, and linkages to project organizations can be found in Alvesson (2002) and Cicmil and Gaggiottia (2014). For the purposes of this chapter, culture is defined as a system of collective assumptions, values, and beliefs which drive how people behave in organizations. As we consider each element in turn, we can reflect on how these not only help develop a culture of NoD, but also contribute to a project governance system that fails to provide the necessary process control of people and organizational systems (Banja, 2010). 1. Socialization, which is often mediated by a system of rewards and punishments, aims at determining whether the newcomer will or will not join the group by adopting the group’s deviant behaviors. This step is where governance and operating culture most directly collide, as new members are exposed, through experiencing critical incidents and subsequent rewards or sanctions, to expected behaviors and are at this point presented with the implicit choice of joining in to get along, or risking isolation and social ostracism by not submitting to the cultural norms of the project team. 2. Institutionalization exposes newcomers to deviant behaviors, often performed by authority figures, and explains those behaviors as organizationally normative. When new members of project teams are first assigned, they are quickly immersed in the rules (written and unwritten) that govern project activities. Because new members may be aware of the “right way” to perform tasks, institutionalization processes are intended to show them “how we do it here” in order to quickly forestall their objections should these behaviors seem unethical or unsafe.

Normalization of deviance in projects  175

3. Rationalization enables organizational members to convince themselves that their deviances are not only legitimate, but acceptable and perhaps even necessary. The gradualism at work in NoD is most often demonstrated as part of the rationalization step. Repeated missteps or deviations from accepted operating norms and principles are ignored to the point where they become institutionalized and accepted – even expected – on the part of project team members. It is important to note that socialization, institutionalization, and rationalization work in a mutually reinforcing manner to dissolve anxiety among the uninitiated by representing deviant behaviors as thoroughly rational and not immoral responses to work performance challenges (Ashforth & Anand, 2003). For a project team or for a project-based organization, these moves away from standard operating procedures require a series of deliberate actions taken, or not taken, which, when no harm appears to have occurred, can be safely assumed to represent the true wishes of the firm’s executives. In this way, NoD is not so different from other forms of unethical behaviors, as they share the same root causes; namely, a process of inculcating less-than-satisfactory decisions and/or actions throughout the organization to the point where this behavior is simply accepted and ignored. Let us consider, then, some of the more common NoD behaviors and how they are demonstrated within project-based firms.

NORMALIZATION OF DEVIANCE PRACTICES IN ORGANIZATIONS Research on NoD in projects has led to some useful understanding of how these behaviors can arise, as well as the way in which NoD affects project outcomes. Perhaps the best-known study of projects and NoD comes from Pinto (2014), who used a questionnaire and semistructured interviews with project managers in three large project-based corporations in the US. More recent work by Davis and Pinto (2022) employed narratives from respondents across multiple industries and project responsibilities. Their findings suggest that there are primarily four consequences of NoD behaviors within firms that can adversely affect project activities. Specifically, the consequences identified included: 1. Project proposals and strategic misrepresentation: A common theme was found of strategic misrepresentation occurring as firms sought to win project business, particularly in competitive bidding processes or as part of final scope negotiations with a customer. The term “strategic misrepresentation” comes from the work of Flyvbjerg and colleagues as they studied the phenomenon of gaining approval for large public works projects (Flyvbjerg, 2005; Flyvbjerg et al., 2002) and refers to the deliberate use of misleading or false information for political purposes or agency issues. Thus, one avenue for NoD lies in the tactics employed by firms to win these competitive bids, often through falsifying pertinent information, minimizing risks, making unrealistic project delivery promises, and so forth. Knowing full well that in many cases these initial promises, though perceived as crucial for winning the business, are based on well-understood falsehoods, project organizations tacitly (and sometimes overtly) encourage these behaviors. As a recent example, an investigation of widespread corrupt practices in the Canadian construction industry in 2011 resulted in the Charbonneau Commission identifying

176  Research handbook on the governance of projects

bid-rigging and price-fixing in the awarding and management of public contracts. The commission announced that the corruption and collusion were “far more widespread than originally believed” in the construction sector (Saint-Martin, 2015). According to Courtois and Gendron (2017), the situation had worsened to the point where collusion had become the “usual” way of managing public contracts in the construction sector. 2. Client/contractor relationships: A fascinating feature of many client/contractor relationships is that they often follow a common “rival camps” dynamic. Rather than explore opportunities to create partnerships and open communications, critical project information is often hoarded and either misused or doled out selectively. Left to their own devices, as a result, the emergent pattern (to follow Bresnen’s (2010) argument) among clients and contractors is often one of indirect conflict and opportunism. Put another way, many firms believe it is more advantageous in the short term to support opportunistic behavior that trumps a more client-centered approach emphasizing partnering and relationship development. 3. Planning and scheduling dynamics: To create accurate schedules, it is necessary for project managers to have full information and constructive, trusting relationships with senior managers. When a project manager is asked to develop a schedule, there is an implicit assumption that estimates will be in good faith and the resulting project plan reflects a reasonable path to completion. However, it may not be this way at all. By scheduling dynamics, we are referring to the myriad pathologies that often occur during the project planning and scheduling cycle. These issues coalesce around problems in perception, false manipulation, or hijacking the planning process outright, and pressures that senior executives often bring to bear to artificially adjust the schedules. These issues routinely pit top management against the project manager, functional department heads against each other, the project manager against the team, the project team against the customer, and so forth. A relationship between the project manager and senior executives that enforces deliberate manipulation of information, data, and project schedules encourages the maintenance of a combative culture in which normal governance cannot function. 4. Workplace safety – another critical example of NoD behaviors occurs when organizations gradually allow safety standards to relax while pursuing project outcomes. That is, as the original example in this chapter typifies, there are any number of projects in the construction industry, for example, that fail to enforce safety standards (see Andersen et  al., 2018; Hajikazemi et al., 2020; Smith, 2019). In effect, although everyone – site workers and management – is aware of unsafe practices and fully recognizes that such behaviors should be eschewed, there is often an unspoken sub-text accompanying these prohibiting rules in which it is not only possible but often expected that safety rules can be relaxed or ignored. Examples of NoD in workplace safety requirements are numerous and involve a variety of justifications for cutting corners, including pressures for on-time project delivery associated with financial penalties. Moreover, beyond the construction industry, we can see many examples of the consequences of NoD on workplace safety in healthcare systems (Holden et al., 2011), offshore oil operations (Ingersoll et al., 2012; Rundmo et al., 1998), and even agricultural activities (Seo, 2005). The project management literature is rich with research on the causes of project failure. It is helpful, therefore, to contrast the pathologies that can lead to cost or schedule overruns, technical failures, cancellations, and other negative results and the more insidious dynamic

Normalization of deviance in projects  177

of NoD, as it applies to project management (Keating & Katina, 2012). Researchers have examined numerous issues that can derail projects, including identifying behavioral biases (Flyvbjerg, 2021; Pinto, 2022), “decision traps” in project development (Van Oorschot et al., 2013), political issues (Gil & Pinto, 2018; Levine & Rossmoore, 1995), bureaucratic red tape (DeHart-Davis & Pandey, 2005), team dynamic problems (Thamhain, 1990), and leadership challenges (Müller & Turner, 2010) among the more common forces acting upon project development. However, it is critical to define a conceptual difference between this myriad of project “pathogens” (Love et al., 2009), including errors of commission or omission, and NoD in project management. For example, conflict is seen as a natural phenomenon both in organizations in general and in project management processes in particular, occurring for a variety of reasons, including differences in goals, functional roles, personality issues, differences in perceptions of behavior and threat, and so forth. That is not to suggest that organizational conflict behavior necessarily equates to NoD. Problems do arise, however, when behaviors such as these become culturally embedded and destructive but remain viewed as a normal part of organizational processes without questioning the assumptions driving them. For example, intra-organizational conflict involving deliberate attempts to discredit or sabotage the work of another functional department because they are perceived as “the enemy” may be a form of conflict, but its origin lies in destructive cultural processes allowed to run unchecked. In this manner, NoD is typically the result of a series of deliberative choices that have become institutionalized over time. As noted above, the nature of normalized deviance is one of gradualism and the accumulation of (and organizational acclimatization to) a series of decisions that individually may not signal disasters but taken collectively, and applied continuously to a project setting, will eventually lead to serious repercussions (Starbuck & Farjoun, 2005).

BATTLING NORMALIZATION OF DEVIANCE BEHAVIORS – WHAT CAN BE DONE? The Project Management Institute’s Body of Knowledge (2021, p. 240) defines project governance as “the framework for directing and enabling an organization through its established policies, practices, and other relevant documentation.” Perhaps a better and simpler definition guiding our fundamental understanding of governance is offered by Müller (2009) as “the conduct of conduct”; that is, it is a form of self-regulation “where the regulator is part of the system under regulation” (Müller, 2009, p. 2). Müller further suggests that “governance provides a framework for ethical decision making and managerial action within an organization that is based on transparency, accountability and defined roles” (Müller, 2009, p. 2). Such governance systems offer organizations the most effective means to counter a toxic culture and resulting practices associated with NoD. This latter point is particularly relevant because NoD practices arise and are informally reinforced through cultural lapses that often point to ethical concerns as well. Consider, for example, the “project” developed by Volkswagen engineers to develop a system that would allow their diesel engines to cheat emission detection equipment. No one within the Volkswagen engineering staff questioned this dubious undertaking because NoD attitudes were so deeply ingrained (Gaim et al., 2021). “Management, at all levels, in many organizations, creates, by their own choice, a world that is contrary to what they say they prefer and contrary to the managerial stewardship they espouse” (Argyris, 1990; p. 10). With this observation, Chris Argyris lays out the conundrum

178  Research handbook on the governance of projects

of addressing normalization of deviance behaviors in modern organizations due to the disparity between espoused theory – what we say we do – and theory-in-use – what we actually do (Argyris, 1990, Argyris & Schon, 1974). Putting this issue another way, we can reflect that the nature of deviant behavior, as applied to project management activities, requires organizations to first openly identify such behaviors and the consequences (intended or unintended) they produce. … many of these acts are self-promoting, even at the expense of the projects that teams and key organizational stakeholders are purporting to support. However, they are also visible; once prompted, respondents had little trouble identifying examples of normalized deviance in their operations. Nevertheless, because of the progressive nature of the phenomenon, moving from the first deviant actions with their unexpected consequences to their finally achieving acceptable status, it remains difficult but critically important to recognize these actions in a project-based setting. Thus is organizational learning so fundamental to allowing organizations to identify and reflect upon the normalization of deviance phenomenon (Pinto, 2014, p. 382). As the above quotes recognize, organizational learning is critical to addressing embedded NoD, both attitudes and manifested behaviors. We need to consider some ways in which organizations and their members can begin to: (1) recognize the degree to which NoD operates within their own organizations and, having done so, (2) develop methods for exposing, addressing, and remediating these behaviors. Using the organizational governance perspective, there are several ways that project organizations can begin resolving the potential (or actuality) of NoD (See Table 15.1). These remedial steps (Pinto, 2014) are described below. Analyze Standard Operating Processes Standard operating processes should be analyzed for examples or overt symptoms of deviant behaviors. Before they can begin to address the manner in which NoD is affecting their operations, organizations must first establish a monitoring and oversight mechanism to identify Table 15.1  Countering normalization of deviance: steps in the governance process Step 1: Process analysis

Critical to first establish a mechanism to identify instances of willful or benign behaviors that may be characterized as normalization of deviance

Step 2: Educate/Train organizational members

Organizational actors must be trained to identify and reflect on instances of normalization of deviance as part of their own operating processes and the motives behind these actions to change daily practice

Step 3: Clarify standards of appropriate behavior

Organization-wide standards for acceptable interactions with stakeholders, planning, and scheduling activities must be established and uniformly enforced

Step 4: Ensure transparency throughout the organization

Oversight mechanisms can offset many opportunities to fall back into deviant behaviors

Step 5: Reward compliance with the new standards

Recognizing and rewarding instances that support new standards is a critical final component of the change process

Source:   adapted from Pinto, 2014

Normalization of deviance in projects  179

instances of willful or benign behaviors that may be characterized as NoD. Initially, these mechanisms may require the use of external consultants or other members of unaffected (non-project-based) components of the organization to provide the outside view that Flyvbjerg (2011, 2013) and others argue is essential for recognizing decision biases. The key deliverable from this remedial stage should be a process diagram that shows examples of deviant behavior and identifies some of the principal actors involved and motives that are likely incentivizing this behavior. Educate/Train Organizational Members Organizational members should be educated/trained in how to identify decision traps that can encourage NoD as part of their own operating processes. Training will include opportunities to reflect upon their (deviant) work practices. Reflection has been noted to be a strong means for changing practices of practitioners (Yanow & Tsoukas, 2009). During deliberations, understanding will “constantly be negotiated, for all practicing is at the same time a performance of a particular practice, reinforcing or breaching expectations, negotiating what it is to be practicing something specific” (Bjørkeng et al., 2009, p. 150). Yanow and Tsoukas (2009) add that improvisations as part of daily practice in organizations can result in new institutionalized practices. This step is necessarily difficult because the normalization model specifies that all too often, organizational members adopt dysfunctional practices gradually, without realizing they are doing so. Thus, the actions may be historically based or so ingrained in the prevailing culture or operating or reward systems that this behavior is not simply “allowed” to occur, but may be actively promoted. If we apply Argyris’s model of single-loop versus double-loop learning (Argyris, 1976; Argyris & Schon, 1978), we can gain some insight into how this educational process can best be addressed. Single-loop learning is defined as organizational members making repeated attempts at resolving the same goal, without ever adjusting the methods or modifying the goals sought. Argyris (1976) argues that double-loop learning, on the other hand, recognizes the criticality of feedback loops in which an individual or organization, having attempted to reach a goal on other occasions, modifies their approach or the goal in light of previous experience and learning. Governance mechanisms permit the firm to modify behavior, working from the perspective of a double-loop model, whereby past goals must now be modified to support non-deviant behaviors. Clarify Standards of Acceptable Behavior Many project governance models suggest that it is critical to highlight the expected behavior as a standard for future behavior. The standards clarification step often consists of reconnecting to an ethical model of behavior because, absent standards, it is not surprising that self-promoting behaviors will occur. An important corollary of this step must be to ensure that members of the organization are comfortable recognizing and calling out NoD practices without fear of sanction or retribution. As Banja (2010, p. 146) noted, “[s]ystem operators need to feel safe in speaking up.” Once standards are established and clear demonstrations are made that identifying and naming NoD behaviors are riskless, organizational members are more inclined to willingly adopt these behaviors, particularly if reward systems support them, as we will discuss (Van Marrewijk, et al., 2014).

180  Research handbook on the governance of projects

Ensure Transparency throughout the Organization Normalized deviance either occurs because organizational actors are unaware that what they are doing is inappropriate, or, as with many models of ethical behavior in organizations, is allowed to occur without proper oversight and necessary exposure. Müller (2009) and others have identified the critical importance of developing a culture of openness and transparency as part of the governance model so that all actors understand the standards, their behaviors are judged against them, and they can perceive the ways in which these standards are working to the advantage of the organizational whole. Exposing the use of techniques that can only be seen as normalized deviance is a critical step in correcting this behavior on an organizationwide basis. Reward Compliance with the New Standards Just as an organization begins to create and enforce standards for appropriate behavior, care must be taken to tie reward systems to these new standards of behavior. Put another way, it is possible to sanction deviant behavior as an element in a new reward structure, but it is often more useful, powerful, and long-lasting to establish positive expectations for future performance, including concrete ways to measure compliance. We need to not only reward compliant behavior but also ensure that organizational members see it directly tied to the introduction of new methods, or as a result of the elimination of older, deviant behaviors.

CONCLUSION NoD represents a set of cultural norms whereby willful deception, manipulation of information, poisoned customer relationships, and dangerous or passive responses to unsafe workplace conditions are allowed to develop and thrive. They are, essentially, a demonstrated result of skewed or absent governance. As this chapter has noted, these behaviors do not suddenly occur, but are the byproduct of a gradualism that steadily erodes expected standards of conduct. Unfortunately, because of institutionalization, socialization, and subsequent rationalization, project-based firms often find themselves caught in a vicious cycle of bad consequences and uncertainty about how to remediate these conditions. This chapter offers some perspective, based on previous research, on some of the dynamics of NoD practices, the manner in which it is most commonly found to affect organizational activities, and some remedial steps to begin recognizing and ultimately correcting NoD before it reaches its inevitable and potentially tragic results.

REFERENCES Alvesson, M. (2002). Understanding organization culture. Sage. Andersen, L. P., Nørdam, L., Joensson, T., Kines, P., & Nielsen, K. J. (2018). Social identity, safety climate and self-reported accidents among construction workers. Construction Management and Economics, 36(1), 22–31. Argyris, C. (1976). Single-loop and double-loop learning in research and decision-making. Administrative Science Quarterly, 21(3), 366–367.

Normalization of deviance in projects  181

Argyris, C. (1990). Overcoming organizational defense: Facilitating organizational learning. Allyn and Bacon. Argyris, C., & Schon, D. (1974). Theory in practice: Increasing professional effectiveness. Jossey Bass. Argyris, C., & Schon, D. A. (1978). Organizational learning: A theory of action perspective. Addison-Wesley. Ashforth, D. E., & Anand, V. (2003). The normalization of corruption in organizations. Research in Organizational Behavior, 25(1), 1–52. Banja, J. (2010). The normalization of deviance in healthcare delivery. Business Horizons, 53(2), 139–148. Bjørkeng, K., Clegg, S., & Pitsis, T. (2009). Becoming (a) practice. Management Learning, 40(2), 145–159. Bourrier, M. (2005). The contribution of organizational design to safety. European Management Journal, 23(1), 98–104. Bresnen, M. (2010). Keeping it real? Constituting partnering through boundary objects. Construction Management and Economics, 28(6), 615–628. Cicmil, S., & Gaggiottia, H. (2014). The ‘slippery’ concept of ‘culture’ in projects: Towards alternative theoretical possibilities embedded in project practice. Engineering Project Organization Journal, 4(2), 134–146. Clegg, S. R., Pitsis, T. S., Marosszeky, M., & Rura-Polley, T. (2006). Making the future perfect: Constructing the Olympic dream. In D. Hodgson & S. Cicmil (Eds.), Making projects critical (pp. 265–293). Palgrave Macmillan. Clegg, S. R., Pitsis, T. S., Rura-Polley, T., & Marosszeky, M. (2002). Governmentality matters: Designing an alliance culture of inter-organizational collaboration for managing projects. Organization Studies, 23(3), 317–337. Courtois, C., & Gendron, Y. (2017). The normalization of deviance: A case study on the process underlying the adoption of deviant behavior. Auditing: A Journal of Practice and Theory, 36(3), 15–43. Davis, K., & Pinto, J. K. (2022). The corruption of project governance through normalization of deviance. IEEE Transactions on Engineering Management. Retrieved July 11, 2022, from https://doi​ .org​/10​.1109​/ TEM​.2022​.3184871 DeHart-Davis, L., & Pandey, S. K. (2005). Red tape and public employees: Does perceived rule dysfunction alienate managers? Journal of Public Administration Research and Theory, 15(2), 133–148. Eden, C., Ackermann, F., & Williams, T. M. (2005). The amoebic growth of project costs. Project Management Journal, 36(1), 15–27. Flyvbjerg, B. (2005). Design by deception: The politics of megaproject approval. Harvard Design Magazine, 22, 50–59. Flyvbjerg, B. (2011). Over budget, over time, over and over again. In P. W. G. Morris, J. K. Pinto, & J. Soderlund (Eds.), The Oxford handbook of project management (pp. 321–344). Oxford University Press. Flyvbjerg, B. (2013). Quality control and due diligence in project management: Getting decisions right by taking the outside view. International Journal of Project Management, 31(5), 760–774. Flyvbjerg, B. (2021). Top ten behavioral biases in project management: An overview. Project Management Journal, 52(6), 531–546. Flyvbjerg, B., Holm, M. S., & Buhl, S. (2002). Underestimating costs in public works projects: Error or lie? Journal of the American Planning Association, 68(3), 279–295. Gaim, M., Clegg, S., & Cunha, M. P. E. (2021). Managing impressions rather than emissions: Volkswagen and the false mastery of paradox. Organization Studies, 42(6), 949–970. Geraldi, J. G., Lee-Kelley, L., & Kutsch, E. (2010). The Titanic sank, so what? Project manager response to unexpected events. International Journal of Project Management, 28(6), 547–558. Gerstein, M. (2008). Flirting with disaster: Why accidents are rarely accidental. Union Square Press. Gil, N., & Pinto, J. K. (2018). Polycentric organizing and performance: A contingency model and evidence from megaproject planning in the UK. Research Policy, 47(4), 717–734. Green, M. (2004). Nursing error and human nature. Journal of Nursing Law, 9(4), 37–44.

182  Research handbook on the governance of projects

Hajikazemi, S., Aaltonen, K., Ahola, T., Aarseth, W., & Andersen, B. (2020). Normalising deviance in construction project organizations: A case study on the collapse of Carillion. Construction Management and Economics, 38(12), 1122–1138. Hällgren, M., & Söderholm, A. (2010). Orchestrating deviations in global projects: Projects-as-practice observations. Scandinavian Journal of Management, 26(4), 352–367. Hatch, M. J. (1993). The dynamics of culture. Academy of Management Review, 18(4), 657–693. Holden, R. J., Scanlon, M. C., Patel, N. R., Kaushal, R., Escoto, K. H., Brown, R. L., Alper, S. J., Arnold, J. M., Shalaby, T. M., Murkowski, K., & Karch, B. (2011). A human factors framework and study of the effect of nursing workload on patient safety and employee quality of working life. BMJ Quality and Safety, 20(1), 15–24. House of Commons, Business, Energy and Industrial Strategy and Work and Pensions Committees. (2018). Carillion, HC 769. Published on May 16, 2018 by authority of the House of Commons. Ingersoll, C., Locke, R. M., & Reavis, C. (2012). BP and the deepwater horizon disaster of 2010. MIT Sloan School Management, Case Study, 10–110. Jin, Y., & Levitt, R. E. (1996). The virtual design team: A computational model of project organizations. Computational and Mathematical Organization Theory, 2(3), 171–196. Keating, C. B., & Katina, P. F. (2012). Prevalence of pathologies in systems of systems. International Journal of System of Systems Engineering, 3(3–4), 243–267. Kilmann, R. H. (1985). Corporate culture. Psychology Today, 19(4), 62–68. Levine, H. G., & Rossmoore, D. (1995). Politics and the function of power in a case study of IT implementation. Journal of Management Information Systems, 11(2), 115–133. Love, P. E. D., Edwards, D. J., Irani, Z., & Walker, D. H. T. (2009). Project pathogens: The anatomy of omission errors in construction and resource engineering projects. IEEE Transactions on Engineering Management, 56(3), 425–435. McConnell, M. (1986). Challenger: A major malfunction: A true story of politics, greed, and the wrong stuff. Doubleday. Morris, P. W. G., & Hough, G. H. (1987). The anatomy of major projects: A study in the reality of project management. John Wiley and Sons. Müller, R. (2009). Project governance. Gower Publishing. Müller, J., & Turner, J. R. (2010). Attitudes and leadership competences for project success. Baltic Journal of Management, 5(3), 307–329. Orr, R. J., & Scott, W. R. (2008). Institutional exceptions on global projects: A process model. Journal of International Business Studies, 39, 562–588. Ouchi, W. E., & Wilkens, A. C. (1985). Organizational culture. Annual Review of Sociology, 11, 457–483. Perrow, C. (1999). Normal accidents: Living with high-risk technologies. Princeton University Press. Petroski, H. (1992). To engineer is human: The role of failure in successful design. First Vintage Books. Pinto, J. K. (2006). Organizational governance and project success: Lessons from Boston’s big dig. Presentation at concept symposium – Principles of governance of major investment projects, Trondheim, Norway. Pinto, J. K. (2014). Project management, governance, and the normalization of deviance. International Journal of Project Management, 32(3), 376–387. Pinto, J. K. (2022). No project should ever finish late (and why yours probably will, anyway). IEEE Engineering Management Review, 40(3), 181–192. Prielipp, R. C., Magro, M., Morell, R. C., & Brull, S. J. (2010). The normalization of deviance: Do we (un)knowingly accept doing the wrong things? Anesthesia and Analgesia, 110(5), 1499–1502. Project Management Institute. (2021). Project management institute body of knowledge (7th ed.). Project Management Institute. Rundmo, T., Hestad, H., & Ulleberg, P. (1998). Organisational factors, safety attitudes and workload among offshore oil personnel. Safety Science, 29(2), 75–87. Saint-Martin, D. (2015). Systemic corruption in an advanced welfare state: Lessons from the Quebec charbonneau inquiry. Osgoode Hall Law Journal, 53(1), 66–106. Schein, E. H. (1986). What you need to know about your organizational culture. Training & Development Journal, 40(1), 30–33. Seo, D. C. (2005). An explicative model of unsafe work behavior. Safety Science, 43(3), 187–211.

Normalization of deviance in projects  183

Sminia, H. (2011). Institutional continuity and the Dutch construction industry fiddle. Organization Studies, 32(11), 1559–1585. Smith, S. D. (2019). Safety first? Production pressures and the implications on safety and health. Construction Management and Economics, 37(4), 238–242. Starbuck, W. H., & Farjoun, M. (2005). Disaster management: Organizations at the limit. Blackwell. Starbuck, W. H., & Milliken, F. J. (1988). Challenger: Fine-tuning the odds until something breaks. Journal of Management Studies, 25(4), 319–340. Stebbins, R. A. (2012). Tolerable, acceptable, and positive deviance. In C. D. Bryant (Ed.), The Routledge handbook of deviant behavior (pp. 24–30). Taylor & Francis. Thamhain, H. J. (1990). Managing technologically innovative team efforts toward new product success. Journal of Product Innovation Management, 7(1), 5–18. Van Marrewijk, A. H., Veenswijk, M., & Clegg, S. R. (2014). Changing collaborative practices through cultural interventions. Building Research and Information, 42(3), 330–342. Van Oorschot, K. E., Akkermans, H., Sengupta, K., & Van Wassenhove, L. N. (2013). Anatomy of a decision trap in complex new product development projects. Academy of Management Journal, 56(1), 285–307. Vaughan, D. S. (1999). The dark side of organizations: Mistakes, misconduct, and disaster. Annual Review of Sociology, 25, 271–305. Vaughan, D. S. (1996). The Challenger launch decision: Risky technology, culture, and deviance at NASA. University of Chicago Press. Vaughan, D. S. (2004). Organizational rituals of risk and error. In B. Hunter & M. Power (Eds.), Organizational encounters with risk (pp. 33–66). Cambridge University Press. Vaughan, D. S. (2005). The normalization of deviance: Signals of danger, situated action, and risk. In H. Montgomery, R. Lipschitz, & B. Brehmer (Eds.), How professionals make decisions (pp. 255–276). Lawrence Erlbaum Associates. Vaughan, D. S., Gleave, E. P., & Welser, H. T. (2005). Controlling the evolution of corruption: Emulation, sanction, and prestige. Paper presented at the annual meeting of the American Sociological Association, Philadelphia, PA. Villeret, B. (2008). Interview: Diane Vaughan. Consulting News Line, May. http://www​ .consultingnewsline​.com​/ Info​/ Vie​%20du​%20Conseil​/ Le​%20Consultant​%20du​%20mois​/ Diane​ %20Vaughan​%20(English).html Winch, G. M. (2013). Escalation in major projects: Lessons from the channel fixed link. International Journal of Project Management, 31(5), 724–734. Yanow, D., & Tsoukas, H. (2009). What is reflection-in-action? A phenomenological account. Journal of Management Studies, 46(8), 1339–1364.

16. Ethics and trust implications of governance Ralf Müller

INTRODUCTION Ethics is one of the least addressed topics in the project management literature, even though neither academics nor practitioners deny its importance (Turner, 2022). Moreover, the well-known scandals involving Enron, WorldCom, and Volkswagen have sensitized the public to ethical business conduct and its implications. So what is ethics? In order to understand ethics, it is advisable to take a step back and first define the underlying concept of morals. Morals is a Greek and Latin concept describing acceptable human behavior. Morals consist of personal and shared beliefs, or principles, about what is right and what is wrong, typically acquired during upbringing and social interaction (Buchholz & Rosenthal, 1996). They are our personal compass indicating what is generally appropriate in terms of socially acceptable behavior and decisions. Ethics is the systematic application of these moral principles to everyday situations. Ethics provides the concepts and language to analyze situations and identify the circumstances needing ethical decisions. While most of the time the existing moral principles will be applied to everyday situations, there might be situations that justify not doing so, such as in the case of self-defense, where the moral principle of nonviolence might be overridden by the need to survive. In other words, ethics is the reflection of morals on the particularities of a given situation (Müller & Kvalnes, 2017, p. 181). As a discipline, ethics is characterized by several schools of thought. Among the most popular, especially in project management, is the normative school, which links traditional moral philosophy, theology, and other related disciplines with management. It does that by addressing the principles and norms to be considered for acting in different situations and their related decision-making. Here conduct and decision-making fall into three main categories. The first is process-oriented ethics, also known as deontology, where rules, maxims, norms, and principles govern people’s conduct. This category spans from absolute moral duties and principles, such as those established by Immanuel Kant (1785), to never absolute prima facie duties and principles, whose importance and relevance vary in situational contingency, as described by Ross (1930). The second category is outcome-oriented ethics, also known as teleological ethics, consequentialism, or utilitarianism. This school builds on the philosophies of Jeremy Bentham (1970) and John Stuart Mill (2002). It aims to maximize the common good by finding a solution likely to produce the best overall outcome for the stakeholders. The third category, character orientation, or virtue ethics, addresses the development, nurturing, and maintenance of moral virtues like honesty, courage, and integrity of a person. Building on the philosophies of Aristotle (1984) and Plato (2000), this school indirectly addresses ethical questions and conduct by asking what a person with moral virtue would do in a given situation. This establishes a guideline for the conduct and decision-making of the actor. Recent decades of research in moral and social psychology have questioned the viability of this school, arguing that contextual factors have a higher predictability of conduct than the characteristics of the decision-maker’s character. 184

Ethics and trust implications of governance  185

Ethical issues arise when conduct or decisions conflict with a society’s moral principles, such as in the above example of self-defense. The three categories indicate the different perspectives for addressing ethical issues. These are (a) following an ethical process, (b) aiming for the highest benefit for all participants, or (c) applying moral virtues. This choice of perspective is supported by training and tools that help managers resolve their ethical dilemmas. A popular tool for business managers to overcome their ethical muteness is that by Kvalnes and Øverenget (2012). They define a series of questions in six dimensions to foster ethical decision-making. The decision-makers decide the order and weight of the questions. The dimensions and their questions are: ●

●

●

●

●

●

Law dimension: Is it legal? While illegal action is often detectable in a country’s particular jurisdiction and can be rejected, it can become challenging to identify and judge in international settings. An action that is legal in one of the business partners’ countries might be illegal in the other business partner’s country. However, the legal status of an action does not necessitate its execution. The question “Why did you do this?” is typically not answered by stating, “Because it was legal.” Identity dimension: Does it conform to our values? Values are often related to the identities of individuals, organizations, or professions and can vary substantially. Different value systems and their expression through identities shall be considered when deciding on a course of action. Examples include the accounting profession’s value of integrity and objectivity, which contrasts with the healthcare profession’s value of patient interest and rights. Morality dimension: Is it right? This question addresses the convictions and beliefs about what is right and what is wrong. People with a similar cultural background often share the same moral framework. However, morals can also change over time, for example, when living abroad. Reputation dimension: Does it affect our goodwill? Organizations, professions, and individuals perceive reputation as essential in achieving desired objectives. Building a reputation takes a long time but can be lost quickly. Hence, the impact on reputation should be carefully considered when deciding on a course of action. Economy dimension: Is it in accordance with the business objectives? Circumstances may demand a decision to either go bankrupt or damage one of the other dimensions, such as reputation. These situations require an assessment of the economic value of the potential course of action and subsequent prioritization of the options by the decision-maker. Ethics dimension: Can it be justified? A reflection of the possible courses of action from the perspectives of the different categories mentioned above. Most often, this requires a decision to either prioritize the process (which may compromise the ethics of the outcome) or the outcome (which may compromise the ethics of the process). No simple rules exist for prioritizing process or outcome focus. However, organizations have developed aids like the “newspaper test,” which asks the decision-maker how comfortable he or she would feel if the decision was printed on the front page of the local newspaper.

Applying this six-dimensional model and its questions should follow a three-step process: (i) identify the options available, (ii) take each option through the relevant questions shown above, and (iii) make a decision.

186  Research handbook on the governance of projects

A particular type of ethical issue is dilemmas. They require a decision between two or more equally undesirable options (Kvalnes, 2015). In other words, the decision-maker must prioritize one moral value over one or several others. A series of studies showed that at least four main dilemmas could emerge in the realm of projects (Müller et al., 2013): ●

●

●

●

The undesirable choices dilemma, where none of the valid choices is desirable. Examples include projects with cost overruns. Reporting them early in the project identifies the project manager as a poor planner; reporting them later identifies the same person as a poor cost manager. The ethics versus policy dilemma, where the preferred choice is ethical but against the company policy. Such cases emerge with inappropriate close buyer–seller relationships, leading to frequent invitations, which may blur the borderline between gift and bribe. The ethics versus law dilemma, where the ethics of one country might conflict with the law in another country. Examples include relationships between expatriates with local citizens in some countries. The legal versus policy dilemma, where the company’s policies and practices do not comply with the law. Examples include companies that set their employees’ objectives to 100 percent billable work to customers. They do this even though they know that training and administrative work must be done in the employee’s leisure time. The total time the employee spends may exceed the maximum hours of work permitted in a particular country.

Avoiding these dilemmas requires careful design of the governance system, for example, in internationally operating organizations, by taking into account the laws and ethical standards of the countries they work in.

ETHICAL CATEGORIES AND GOVERNANCE PARADIGMS The above choices of process and outcome orientation underpin the project governance paradigms described in Chapter 27. They are derived from an overlay of stakeholder versus shareholder orientation at the governance level, with the choice of controlling project managers either through their behavior by imposing process compliance, or through controlling them by the outcome of their work. This overlay leads to four different governance paradigms (Müller, 2009): Conformist paradigm: shareholder orientation with behavior control. Here process compliance is emphasized to maximize shareholders’ return on investment. This paradigm reflects agency theoretical approaches to governance, with strict control due to a lack of trust in the project manager but trust in the process to deliver highly efficient results. Flexible economist paradigm: shareholder orientation with outcome control. Here the maximization of shareholder return on investment is pursued by allowing the project manager to choose the most efficient methodology for the project, often supported by project management offices to stay up to date on methods and techniques. This paradigm reflects a combination of agency approaches to governance, as indicated by the shareholder orientation, and stewardship approaches to governance, as indicated by outcome control. Hence, the project manager is trusted by the governance system, which aims for the highest levels of efficiency.

Ethics and trust implications of governance  187

Versatile artist paradigm: stakeholder orientation with outcome control. Here the project manager is trusted to find the balance between the diverse stakeholder groups’ many different and often conflicting requirements. This balance typically requires senior experts in project management who can tailor their methods in line with changing requirements. The versatile artist paradigm reflects stewardship approaches to governance, with high levels of trust in the project manager’s work and tolerance for tailoring processes, methods, and techniques. Agile pragmatist paradigm: stakeholder orientation with behavior control. Here process compliance is emphasized, along with a balance of conflicting stakeholder requirements, which are balanced by the project owner, as in the case of agile/scrum projects. Hence, the governance system trusts the process and the owner, not the project manager. This resembles a dominance of agency thinking in governance, albeit in a stakeholder-oriented context, which requires some level of stewardship approaches to governance (e.g., by keeping the big picture across all stakeholder groups). The above identifies trust as a key concept in governance. It is defined as the willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party (Schoorman et al., 2007, p. 712). Numerous publications have underscored the importance of trust in management and its role as the underlying mechanism of any governance system. It is factually serving with control as invisible devices that steer the development of visible devices, such as governance documents, processes, and tools, reflecting the governance system designers’ preference for more trust or more control-based governance (Müller, 2017). Agency theoretical approaches to governance follow Jensen and Meckling (1976) by emphasizing the need to divide ownership and control of a task through appointing principles as owners governing the appointed manager as agents in executing a task. Agency theory assumes that agents are self-interested, utility-maximizing individuals and suggests close control to ensure agent actions stay in line with the principals’ goals. Hence agency theory emphasizes mistrust and control between principal and agent. Contrary to this view is stewardship theory, which assumes that managers are agents serving higher-order needs, aiming for the organization’s good. The underlying assumption of stewardship theory is that stewards are pro-organizational agents, showing collectivistic rather than self-serving behaviors (Turner, 2022). A detailed discussion of agency and stewardship theory can be found in Chapter 3.

TYPES OF ETHICAL ISSUES IN DIFFERENT GOVERNANCE PARADIGMS The natural differences between process and outcome orientation in ethics and in governance paradigms indicate that the quality and frequency of ethical issues vary by governance paradigm. A series of conceptual, qualitative, and quantitative studies on ethical issues in projects identified seven categories of ethical issues. A worldwide survey indicated that at least one of the top three (transparency, optimization, and relationship issues) are found in 97 percent of all projects. In contrast, the other categories are found in less than five percent of all projects. The seven categories are (Müller et al., 2014):

188  Research handbook on the governance of projects

1. Transparency issues: the project managers hesitate to report the project’s true status. This stems from a fear of losing face, getting punished, being made redundant, or facing project termination due to reporting the actual situation of the project. Excuses for being non-transparent include hopes to balance costs through reduced functionality or otherwise being able to recover the project. 2. Optimization issues: the project manager must decide on the balance between risk and benefit. That is, shall the project be optimized for meeting the objectives of the sponsor, the client, the project manager, or other stakeholders? This typically emerges through questions such as shall we deliver as planned or with the best value for the client, or shall the safety standards of the team members’ home countries be applied or the local standards used, or shall the senior consultant described in the proposal do the work or shall we send junior consultants to the project, etc.? 3. Relationship issues: the project manager engages in inappropriate interpersonal relationships. These include too-close buyer–supplier relationships with frequent invitations, gifts, and private ties, where the border between gift and bribe becomes increasingly blurred. Other examples include expatriates’ inappropriate contact with locals in some countries or the project manager having to replace personal friends in a project team because of low performance. 4. Power and politics: the project manager is forced by powerful stakeholders or through political actions to make changes in projects against his or her own will. This includes steering group members enforcing replacement of uneasy team members or replacing team members with relatives of the steering group member, as well as clients enforcing costly changes to the project without paying for it. 5. Illegal actions: the project manager, team members, or other project stakeholders engage in fraud, corruption, blackmailing, bribery, or other illegal actions. This includes digressing funds for off-project purposes, demanding payments for signing off specifications, corruption, and bribery among stakeholder groups. 6. Role conflicts: the project manager or team members are forced into actions contrary to their cultural, religious, legal, or career values. This includes applying working practices not in line with peoples’ religion, enforcing handshakes and other interactions between, for example, males and females in some countries, or forcing people to work in roles contrary to their career ambitions. 7. Underperforming governance structure: the project manager is left without guidance or with the wrong guidance by the governance system. This includes steering committees not fulfilling their role, customer management not engaging when decisions are due, or instruction from authoritative but incompetent members of the project management office. An analysis by governance paradigm showed the relative distribution of ethical issue types across the four governance paradigms (Figure 16.1). In agency-driven governance paradigms (i.e., behavior-controlled project managers), transparency issues dominate. Fifty percent of all reported ethical issues in projects governed by a conformist paradigm are transparencyrelated (numbers in the stacks in Figure 16.1 are percentages of all ethical issues in a paradigm), followed by optimization issues with about 18 percent. This balance almost inverses when moving toward stewardship-driven governance paradigms (i.e., outcome-controlled project managers). Only 11 percent of the ethical issues in

Ethics and trust implications of governance  189

Figure 16.1  Distribution of ethical issues by paradigm the versatile artist paradigm are transparency-related. However, 39 percent are optimization-related. The distribution of the remaining issue types varies by type of control. While outcome-controlled projects (under flexible economist and versatile artist paradigms) show significantly reduced transparency issues, they increase in relationship and power and politics issues in shareholder-oriented settings and illegal actions in versatile artist settings. Thus, higher levels of freedom in outcome-controlled paradigms are associated with more optimization, relationship, and legal issues, while the number of transparency issues is drastically reduced. The role of transparency issues is interesting because these issues dominate in the most control-driven governance structures. That raises the question of causality, which is not easy to answer (for a detailed discussion of this, see Müller & Kvalnes, 2017). Suppose the project governance structure is established at the start and only slightly adapted to the project’s circumstances over time. In that case, the governance structure exists before the project starts, and it can be assumed that the governance structure “causes” the high percentage of transparency issues. In other words, the more control imposed by governance on the project manager, the more the project manager circumvents the governance system by delivering incomplete reports. When the governance structure discovers this, control is increased, leading to even more reduction in transparency by the project manager. Hence, the project enters a vicious circle of mistrust and control, which increases transaction costs exorbitantly and hinders collaborative project delivery (Müller et al., 2013). Suppose the project governance structure is flexible and steadily adapted to the project’s circumstances. In that case, intense control is imposed when the governance system has detected the lack of transparency and wants to understand the project, its situation, and management. This leads to the same vicious circle as described above. Hence, mistrust is building up. In his PhD studies, Robert Joslin investigated the relationship between project success and the project’s governance orientation, measured on a continuum from stakeholder (i.e., controlbased) to shareholder (i.e., trust-based) orientation. He found a strong correlation between

190  Research handbook on the governance of projects

stakeholder orientation and project success. Hence, successful projects are in the versatile artist and agile pragmatist paradigm (Joslin & Müller, 2016). Starting projects using such a paradigm establishes trust between the parties early on. Possible deviations from the plan will be discussed openly. If project performance does not meet expectations, the paradigm might temporarily change to more control-based approaches but is likely to return to the trustful paradigms, where successful projects typically prevail. Mistrust at the outset of a project is often a recipe for failure.

THE COST OF MISTRUST The examples discussed in the last section are empirically supported by numerous projects, especially megaprojects or public infrastructure projects. Here public scrutiny of spending taxpayers’ money demands strict process compliance, thus behavior control of the project manager. Moreover, with the public as the single dominating project stakeholder, these projects fall under the conformist paradigm. Such a project is under strict control from the outset, intending to create the highest possible benefit for the main stakeholder, the public. If the project develops well and aligns with its plan, it will still not leave the conformist (low-trust) paradigm because of the threat of public scrutiny. Intense control through process compliance prevails, giving room for compromising transparency when performance issues arise. Once the governance system detects this, the vicious circle sets in, and the project will likely enter into a steady escalation of control and opaque reporting. The German sociologist Max Weber described this effect as the iron cage of bureaucracy, a teleological approach to achieving efficiency through increasing rational calculation and control (Guzman & Hill, 2017). The iron cage consists of enforced rules and laws (Ashworth et al., 2009), whose rigidity leads to the dehumanization of individuals (Elwell, 2022). The underlying mechanism for the vicious circle is the presence of mistrust. This applies to all levels of governance. A related example is Berlin Brandenburg Airport in Germany. Among the many shortcomings in the governance of this project is the governing body’s mistrust in the construction firms during the tendering stage. The offers by the construction firms were not significantly different, each around €1 billion fixed price for turnkey delivery of the airport. The governing body suspected collusion among the bidders and decided not to accept any offer. Instead, the politicians decided to govern the project themselves and broke it into five lots, which later became 50. These lots were subject to countless issues and delays, eventually shifting the opening date from 2012 to 2020. Instead of paying a one-time sum of €1 billion to a construction firm, the governance system ended up paying a loss of €1 billion per year between 2012 and 2020 (Fiedler & Wendler, 2016; Teworte & Albeniz, 2015). The cost of mistrust: €7 billion taxpayers’ money. A popular way to deal with mistrust and its associated costs is through the contracting strategy. Research in the construction industry showed that the risks the parties assumed in a contract reflect the type of their relationship and the associated level of trust. Various techniques are used to increase control as a function of mistrust, including contract type, disclaimers, and premiums (Zaghloul & Hartman, 2003). Hence the subjective mistrust between people and organizations is attempted to be rationalized through formal agreements. This shifts the emphasis from people trust, that is, the trust between individuals and groups, to system trust, that is, the trust in the governance system and its components, like contracts

Ethics and trust implications of governance  191

(Wong & Cheung, 2004). However, contracts are always incomplete and cannot cover all possible developments (Turner, 2004). Thus, they can, at best, reduce but not eliminate the risks associated with the mistrust between people. A complementary approach is trust-building through integrated project delivery approaches with joined teams. While these approaches promote trust, they do not warrant trustful relationships (Pishdad-Bozorgi & Beliveau, 2016). In concluding the above discussion on trust, it can be said that mistrust on the side of the governance system is potentially a factor leading to failing projects. Its opposite, trust, is not only associated with successful projects; it is also a critical factor in governing the start of projects to ensure collaboration between project management and the governance system. Most recent studies in the construction industry indicate a long-term change toward more trust in large and megaprojects, raising hope for better relationships, more trust-based governance, and better project results (Müller et al., 2022).

THE ROLE OF CORPORATE GOVERNANCE In the Introduction chapter, we presented the definition of governance as providing “the structure, processes, policies, and value system through which the objectives of the organization are set, and the means of attaining those objectives and of monitoring performance are determined in the best interest of all stakeholders and the corporation itself” (Turner, 2022, p. 9). Within this corporate-wide governance structure, organizations carry out their projects, and their particular project governance becomes necessarily a subset of the corporate-wide governance. If the latter is not the case, the organization is not controlled or governed, and anarchy prevails. This is not a good argument to convince investors to buy shares of the organization, because corporate governance is their way to control what goes on in the organization. With project governance being a subset of corporate governance, the question arises of how both levels of governance, independently and collaboratively, influence the occurrence of ethical issues in projects. A global study, executed as part of a program of studies on the relationship between governance and ethics in projects, showed that project governance directly affects the emergence of ethical issues. However, this effect is mediated by corporate governance. Analyzing the relationship between project governance and the frequency of ethical issues showed that clear control structures lower the number of ethical issues. If that is done in the context of “good corporate governance” structures, then this effect almost doubles. Hence, in good corporate governance structures, corporate governance absorbs about a third of project governance’s impact on ethical issues and replaces it with the impact stemming from corporate governance. Individually, project governance accounts for approximately four percent, and together both governance layers account for about seven percent of the number of ethical issues in projects. Hence, corporate governance, if present, has a stronger impact on ethical issues than project governance (Müller et al., 2016). This raises the question: what is good corporate governance? The literature review done as part of that study revealed 12 practices of good corporate governance (see Larcker & Tayan, 2011; Monks & Minow, 1995; Nordberg, 2011), of which seven practices are influential for ethical issues. These issues can be categorized into four catefories of: ● ●

A mission statement that puts a priority on good corporate governance Policies for strict ethical behavior, sustainability, and corporate responsibility

192  Research handbook on the governance of projects ● ●

Procedures for risk management and monitoring of people’s ethical behavior Access to information on the business model and its operations, as well as company results.

Increasing expressions of these corporate-level governance practices reduce the number of ethical issues. Within project governance, it is behavior control through process compliance that reduces the number of ethical issues. This resembles an agency type of governance, applied in the conformist and agile pragmatist paradigms. This reduction in the quantity of issues is accompanied by a relative dominance of transparency issues (Figure 16.1). Projects governed through outcome control, which resembles stewardship approaches to governance, are those within a versatile artist and flexible economist paradigm. They show, on average, a higher quantity of ethical issues than behavior-controlled projects. Optimization issues dominate in these settings. In other words, the type of control structure determines both quantities and types of ethical issues to be expected in a project. This is summarized and depicted in Figure 16.2. The study results support the notion that careful ethical governance at the corporate level pervades the organization, including the project level (Schaubroeck et  al., 2012). The corporate level sets the climate with mission statements, policies, procedures, and information access. Associated control structures complement this at the project level to regulate the number and the mix of ethical issues (Müller et al., 2016).

CONCLUSION Ethical issues prevail in almost all projects. This chapter has provided an introduction to morals, ethics, and ethical issues and how they manifest themselves in different governance structures. The link between governance paradigms and types of ethical issues was discussed. Readers can now use the free survey-based tool at http://manapra​.com​/paradigms​/questions to assess their organization for their potential types of ethical issues. This allows organizations

Figure 16.2  The interaction of corporate and project governance on quantity and type of ethical issues in projects

Ethics and trust implications of governance  193

to prepare for possible countermeasures. Moreover, with Figure 16.2, organizations can steer the quantity and quality of their ethical issues by adjusting their governance structures in line with the types and quantities of ethical issues they feel most eligible to deal with successfully. The chapter has discussed the important role of mistrust in project failure and the mediating role of corporate governance in setting the context for regulating the number and types of ethical issues in projects. It is now on the organizations to use these findings for their own benefit.

REFERENCES Aristotle. (1984). Nicomachean ethics. The Peripatetic Press. Ashworth, R., Boyne, G., & Delbridge, R. (2009). Escape from the iron cage? Organizational change and isomorphic pressures in the public sector. Journal of Public Administration Research and Theory, 19(1), 165–187. https://doi​.org​/10​.1093​/jopart​/mum038 Bentham, J. (1970). An introduction to the principles of morals and legislation. Clarendon Press. Buchholz, R. A., & Rosenthal, S. B. (1996). Towards a new understanding of moral pluralism. Business Ethics Quarterly, 6(3), 263–275. Elwell, F. (2022). The sociology of Max Weber. Retrieved June 3, 2022, from https://academic​.udayton​ .edu​/ RichardGhere​/ POL 307/weber​.h​tm Fiedler, J., & Wendler, A. (2016). Berlin Brandenburg Airport. In G. Kostka & J. Fiedler (Eds.), Large infrastructure projects in Germany: Between ambition and realities (pp. 1–206). Springer International Publishing. https://doi​.org​/10​.1007​/978​-3​-319​-29233-5 Guzman, S., & Hill, J. (2017). An analysis of Max Weber’s The Protestant Ethics and the Spirit of Capitalism. Macat International Ltd. https://doi​.org​/10​.4324​/9781912282708 Jensen, M., & Meckling, W. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 3(4), 305–360. Joslin, R., & Müller, R. (2016). The relationship between project governance and project success. International Journal of Project Management, 34(4). https://doi​.org​/10​.1016​/j​.ijproman​.2016​.01​.008 Kant, I. (1785). Groundwork of the metaphysics of morals. Cambridge University Press. Kvalnes, Ø. (2015). Moral reasoning at work: Rethinking ethics in organizations. Palgrave Macmillan. Kvalnes, Ø., & Øverenget, E. (2012). Ethical navigation in leadership training. Nordic Journal of Applied Ethics, 6, 58–72. Larcker, D., & Tayan, B. (2011). Corporate governance matters. Pearson Education Inc. Mill, J. S. (2002). Utilitarianism and on liberty. Blackwell Publishing. Monks, A. A. G., & Minow, N. (1995). Corporate governance (4th ed.). Wiley & Sons Ltd. Müller, R. (2009). Project governance. Gower Publishing Ltd. Müller, R. (2017). Governance mechanisms in projects. In R Müller (Ed.), Governance and governmentality for projects: Enablers, practices and consequences (pp. 173–180). Routledge. Müller, R., Alix-Séguin, C., Alonderiene, R., Bourgault, M., Chmielauskas, A., Drouin, N., Ke, Y., Wang, L., Pilkienė, M., Minelgaite, I., Šimkonis, S., Unterhitzenberger, C., Vaagaasar, A. L., & Zhu, F. (2022). A (meta)governance framework for multi-level governance of inter-organizational project networks. Advance. Preprint, 1–30. https://doi​.org​/10​.31124​/advance​.19474733​.v1 Müller, R., Andersen, E. S., Kvalnes, O., Shao, J., Sankaran, S., Rodney Turner, J., Biesenthal, C., Walker, D. H. T., & Gudergan, S. (2013). The interrelationship of governance, trust, and ethics in temporary organizations. Project Management Journal, 44(4). https://doi​.org​/10​.1002​/pmj​.21350 Müller, R., & Kvalnes, Ø. (2017). Project governance and project ethics. In R. Müller (Ed.), Governance and governmentality for projects: Enablers, practices and consequences (pp. 181–194). Routledge. Müller, R., Turner, R., Andersen, E. S., Shao, J., & Kvalnes, O. (2014). Ethics, trust, and governance in temporary organizations. Project Management Journal, 45(4). https://doi​.org​/10​.1002​/pmj​.21432 Müller, R., Turner, J. R., Andersen, E. S., Shao, J., & Kvalnes, Ø. (2016). Governance and ethics in temporary organizations: The mediating role of corporate governance. Project Management Journal, 47(6), 7–23.

194  Research handbook on the governance of projects

Nordberg, D. (2011). Corporate governance. SAGE Publication Ltd. Pishdad-Bozorgi, P., & Beliveau, Y. J. (2016). A schema of trust building attributes and their corresponding integrated project delivery traits. International Journal of Construction Education and Research, 12(2), 142–160. https://doi​.org​/10​.1080​/15578771​.2015​.1118171 Plato. (2000). The Republic (G. R. F. Ferrari, Ed.). Cambridge University Press. Rodney Turner, J. (2022). Using principal–Steward contracting and scenario planning to manage megaprojects. Project Management Journal, 53(1), 8–16. https://doi​.org​/10​.1177​/87569728211061836 Ross, W. D. (1930). The right and the good. Oxford University Press. Schaubroeck, J. M., Hannah, S. T., Avolio, B. J., Kozlowski, S. W., Lord, R. G., Trevinño, L. K., Dimotakis, N., & Peng, A. C. (2012). Embedding ethical leadership within and across organization levels. Academy of Management Journal, 55(5), 1053–1078. https://doi​.org​/10​.5465​/amj​.2011​.0064 Schoorman, F. D., Mayer, R. C., & Davis, J. H. (2007). An integrative model of organizational trust: Past, present, and future. Academy of Management Review, 32(2), 344–354. Teworte, V., & Albeniz, V. M. (2015). Berlin Brandenburg International Airport, IES617, P-1142-E, IESE Publishing. Turner, J. R. (2004). Farsighted project contract management: incomplete in its entirety. Construction Management and Economics, 22(1), 75–83. Turner, R. (2022). Forty years of organizational behaviour research in project management. International Journal of Project Management, 40(1), 9–14. https://doi​.org​/10​.1016​/j​.ijproman​.2021​.10​.002 Wong, P. S. P., & Cheung, S. O. (2004). Trust in construction partnering: Views from parties of the partnering dance. International Journal of Project Management, 22(6), 437–446. https://doi​.org​/10​ .1016​/j​.ijproman​.2004​.01​.001 Zaghloul, R., & Hartman, F. (2003). Construction contracts: The cost of mistrust. International Journal of Project Management, 21(6), 419–424. https://doi​.org​/10​.1016​/S0263​-7863(02)00082-0

17. The link between governance, decisionmaking, and project performance Rodney Turner

INTRODUCTION Many authors have suggested good governance and governmentality are associated with improved project performance (see for instance Müller, 2019). Previously the mechanism was unknown (Haq et al., 2019), but Turner (2020a, 2020b, 2020c) suggests it may be via decisionmaking. Good governance leads to good decisions which in turn leads to improved project performance. We need to be cautious because correlation does not prove causation. Turner (2020a) gives an example of one project, Computer Aided Despatch in the London Ambulance Service, LASCAD, where a poor organizational culture led to poor decision-making which in turn led to project failure. Poor organizational culture also led to poor governance, so poor governance was associated with poor performance but did not cause it. However, in the other five cases he considered, good governance appointed competent people to make decisions which led to good project performance. Similarly, Turner (2020b) interviewed 12 people making 24 decisions across 14 projects, and in all 24 decisions, good governance had appointed competent people to make decisions, which led to good decisions and improved project performance. In one case the decision was to cancel the project, but that avoided poor project performance. Turner (2020b) allowed the interviewees to choose the decisions they wanted to talk about, and they all selected good decisions which led to good project performance. So in Turner (2020a, 2020b), on 19 projects good governance led to good decision-making which led to good project performance. On one project, poor culture led to poor decision-making and poor project performance, but also led to poor governance. Turner (2020c) conducted a literature review where he surveyed the relationship between governance and four behavioral constructs and their impact on decision-making on projects, Table 17.1. The four constructs are identity, social representation, choice architecture, and culture. In only two of the papers reviewed did the authors identify a direct relationship between governance and decision-making (Müller et al., 2016; Sergeeva, 2020). Müller et al. (2016) studied how the governance paradigm (Müller, 2009) influences the way project managers respond to ethical issues. Unsurprisingly project managers game the system: ●

●

●

●

in organizations with a shareholder orientation, project managers make decisions which benefit the shareholders; in organizations with a stakeholder orientation, they make decisions that benefit a wider set of stakeholders; if they are controlled by behaviors, they try to show they are following the required process; if they are controlled by results, they try to show they are achieving the desired outcomes. 195

196  Research handbook on the governance of projects

Table 17.1  The four organizational behavior constructs Behavioral construct

Description

References

Identity

Our sense of belonging leading to cognitive and behavioral responses

Haslam (2004)

How identity influences decision-making

Through roles

Responsibilities Authorities Relationships

DeFillippi and Sydow (2016) Lappi et al. (2018) Sergeeva (2019)

How governance influences identity

OECD principles

Transparency Accountability Responsibility Fairness

Millstein et al. (1998) Müller (2017)

How identity influences governance

Enablers for governmentality Institutional theory

Stewardship Responsibility Awareness Norms Social behavior

Müller et al. (2014, 2015)

Social representation

A system of values, ideas, and practices which enables individuals to orientate themselves within the organization and to communicate

Norms How social representation influences Identity Language decision-making Anchoring Objectification How governance influences social representation?

Governance Governmentality

Bringing knowledge to people How social representation influences governance?

Moscovici (1973) Rateau et al. (2011)

Interaction Group dynamics Social position Communication Discursive abilities Process facilitators

Moscovici (1973, 2000) Rateau et al. (2011)

Social exchange Social cohesion

Müller et al. (2014, 2015)

Set goals Provide means Control progress Gain knowledge

Müller et al. (2014, 2015)

Choice architecture

An environment created so people make decisions in the best interests of the organization.

Dolan et al. (2010)

How choice architecture influences decision-making?

EAST Nudge

Easy Attractive Social Timely

Dolan et al. (2010)

How governance influences choice architecture

Governance paradigm Governance structure

Müller et al. (2016) Stakeholder vs McGrath and shareholder school Outcome vs behavior Whitty (2015) control Structure Position Rules Delegation Reporting (Continued)

Governance, decision-making, and project performance  197

Table 17.1  (Continued) Behavioral construct

Description

References

How choice architecture influences governance

Keeping people happy and meeting needs

Culture

Observed behavioral regularities when people interact Schein and Schein (2017)

How culture influences decision-making

Through identity, social representation, and choice architecture Through organizational behavior

Interactions Language Group norms Mental models Shared meaning Behavioral norms Judgment norms Perception of risk Risk choices

Schein and Schein (2017) Weber and Hsee (2000) Stingl and Geraldi (2017)

How governance influences culture

Governmentality Governance

Authoritarian Liberal Neoliberal Behaviors Decision-making

Müller (2019) MacCormick (2019)

How culture influences governance?

Defines artifacts Defines espoused beliefs and values Defines understandings and assumptions

Processes Paradigms Goals Values Ideologies and rationalizations (Governmentality) Social representation

Müller (2009) Müller et al. (2016) Millstein et al. (1998) Müller (2017) Schein and Schein (2017)

Sergeeva (2020) showed governance delegates’ decision-making to groups and individuals. She also showed that organizations with a balanced, flexible approach to governance achieve better outcomes, and how governance can create narratives, which Drouin and Turner (2022) show is important for decision-making under complexity. In this chapter, I consider the relationship between governance, the four behavioral constructs, and decision-making (Table 17.1). I consider how the construct impacts decision-making, how governance impacts the construct, and so may influence decision-making, and how the construct may influence governance, to give a correlation between governance and project performance without causation. I give examples from the six projects considered by Turner (2020a) and some of the projects considered by Drouin and Turner (2022) (Table 17.2). I also give examples from some of the interviews conducted by Turner (2020a) and Drouin and Turner (2022) (Table 17.3).

IDENTITY Identity is a sense of belonging to a group that leads to cognitive and emotional responses (Haslam, 2004). Identification is where the choice is made to belong to the group.

198  Research handbook on the governance of projects

Table 17.2  Case study projects Organization

Project

Reference

London Ambulance Service

Computer-aided despatch First three attempts

Beynon-Davies (1995) Dalcher (2010)

London Ambulance Service

Computer-aided despatch Fourth successful attempt

Dalcher (2010) McGrath (2002)

Amsterdam City Council

North–south metro line, NZL

Staal-Ong and Westerweld (2010)

Swedish Rail

Rail tunnel

Eriksson and Kadefors (2017)

European Union

Antibiotic sustainability

Gareis and Frank (2010)

French telecommunications company

Customer relationship management system

Beldi et al. (2010)

From Turner (2020a)

From Drouin and Turner (2022) Swedish and Danish governments Øresund Link, between Copenhagen and Malmö

Hertogh et al. (2008) Russel (2000)

Sydney Water

Storm-water tunnels

Clegg et al. (2002) Pitsis et al. (2003)

Dutch Rail

Betuweroute freight line from Rotterdam to Germany

Hertogh et al. (2008)

Table 17.3  Interviews Code

Organization

Program/Project

Decision

Alison

Financial services company

Reduce cost base

Make internal person program director

Charles

National government Conversion of a government Make line managers respond department to a government-owned to the project manager for PLC ahead of privatization resources Project manager steps down as CEO of his consultancy Balance sheet balanced to achieve timely completion

Daniella Consultant working with an energy company

Customer service center

Creating offices for the service center

Edward

Hardware supplier

Development of a new product

What governance paradigm should be used

Xander

Airfield servicing an oil field

Replace the long-distance radar

Changing flight patterns Keeping flight controllers happy

Source:   Turner, 2020a

Governance, decision-making, and project performance  199

Identity and Decisions Sergeeva (2020) identifies that governance appoints groups and individuals to make decisions. DeFillippi and Sydow (2016) identify four governance mechanisms which they call the four Rs: roles, relationships, responsibilities, and routines. Roles refer to authority assignments, including hierarchical authority and lines of communication. Relationships are how people interact while doing project work. Qualities include trust and reciprocity. Responsibilities are the requirements or deliverables expected of participants, and the consequences of failing. They encompass four Ts: task, team, time, and transition. Routines are related to social representation and culture. They are shared artifacts which reflect established ways of working. Lappi et al. (2018) also identify that governance assigns roles and authorities for decision-making. In all of Turner’s (2020a) interviews, the interviewee was given the role to make the decision by governance. They elected the decision they wanted to describe, and all chose decisions leading to good outcomes, though one decision was to cancel the project. In all cases good governance gave competent people the role and authority to make good decisions. The same was the case with all of Turner’s (2020b) case studies, except the first three attempts at LASCAD. With the fourth attempt at LASCAD, antibiotic sustainability, and the customer relationship management system, governance worked at making people identify with the project. It was believed that would lead to decisions more closely matching the project’s needs. In Turner (2020a), Alison described a program to reduce the cost base in a financial services company. The program manager was originally an external consultant, but he did not understand the routines of the company, which was an issue of social representation and culture. The decision was made to appoint Alison as program manager, as that would lead to decisions that more closely matched the company’s needs. Governance and Identity The Organisation for Economic Co-operation and Development (OECD) suggests four principles of governance: transparency; accountability; responsibility; and fairness (Millstein et al., 1998; Müller, 2017). These are related to the four Rs of DeFillippi and Sydow (2016). On the Amsterdam north–south metro line, they changed the governance structure and made themselves more accountable to the people of Amsterdam, increasing transparency and fairness. In antibiotic sustainability, they were implementing new medical procedures designed to improve antibiotic sustainability in nine European countries. The project was accountable to the medical authorities in the countries, and it was important that what was done was transparent and fair. On the Øresund Link, the bidders were told that bids would be assessed on the basis of which were economically most advantageous, and for procedural fairness. Distributional fairness was key to sharing of risks. The relationship with the contractors was a partnership with trust, openness, and cooperation (Russel, 2000). Identity and Governance Müller et al. (2014, 2015) show identity is an organizational enabler for governmentality. In the first paper they consider people’s sense of self-responsibility and self-awareness, and their willingness to take responsibility for results and associated tasks. In Turner (2020a), Charles

200  Research handbook on the governance of projects

described a project to convert a government department to a government-owned public limited company (PLC) ahead of privatization. He asked the chief executive officer (CEO) to make line managers respond to him as project manager to ensure the project obtained priority for resources. There were people from several consulting companies working on the project. He felt that being CEO of one of the companies could create bias, so he stepped down as CEO for the duration of the project. Müller et  al. (2015) invoke institutional theory to investigate regulative, normative, and cultural-cognitive elements to investigate stability and meaning of social life in organizations. Institutions comprise actors (both individuals and organizations) that become real through social behavior. Informal norms, values, standards, and formal and informal roles make up the normative elements of governmentality. Shared conceptions about the nature of social reality make up cultural-cognitive elements, and create frameworks of meaning, shared beliefs, symbols, identities, and mental models. Eriksson and Kadefors (2017) describe the selection of a project organization for the construction of a rail tunnel in Sweden. They suggest biases and heuristics played a part in the creation of the project organization (Kahneman, 2012). Heuristics are shortcut rules or rules of thumb that people apply to help them make decisions. Applying heuristics reduces cognitive effort but can lead to effective solutions. Eriksson and Kadefors invoke anchoring, availability, and familiarity heuristics, meaning people select alternatives familiar to them. They also invoke satisficing, meaning that once people have found a solution that works, they do not seek a more optimal one. We can also suggest that the choice of the project organizations was based on mental models. Using previous experience, the project members, including the project director, had mental models of project organization structures that would work.

SOCIAL REPRESENTATION Social representation is a system of values, ideas, and practices which enables individuals to work together within an organization by developing common, acceptable behaviors and a common way of communicating (Moscovici, 1973, 2000; Rateau et al., 2011). Social Representation and Decisions Many of our beliefs have social origins (Moscovici, 2000; Rateau et al., 2011), and so people’s knowledge of the project will be influenced by their identity within the organization and project. Organizations and organizational culture can shape and change knowledge. Often people’s understanding of issues is not shaped by the knowledge they have, but by their identity, social position, and group dynamics. Social representation will include social-cognitive facilitators to make the unfamiliar familiar, including: ●

●

Anchoring – discursive abilities: classifying the new using familiar systems of meaning and integrating new knowledge, values, and objects into existing frameworks Objectification – process facilitators: the transformation of abstract representations into routines, stories, institutions, and concrete objects

The fourth successful attempt at LASCAD was managed as a program (Dalcher, 2010). McGrath (2002) describes the delivery of the call-taking system, CTAK. She describes how a “Golden Circle” was created, and the team isolated within it, to protect them from vested interests which

Governance, decision-making, and project performance  201

were felt to have contributed to the failure of the earlier attempts. The call-taking system was developed by the Golden Circle. They took an iterative approach, identifying four possible solutions and prototyping two. The final solution was negotiated with 300 users within the Golden Circle. The 300 call-taking staff working on prototypes had a strong sense of identity. They wanted to be part of the process and valued working within the shared space. Staff members supported each other, enabling communication. People were tied to their identities, which stopped other alliances forming. This also seduced people into an alliance and defined rules of engagement. The Golden Circle became an example of what Latour (1999) labeled a factish, which combines real knowledge (facts) and powerful beliefs (fetishes). A factish provides a mixture of artifacts, beliefs, and values, which holds people together. When the Golden Circle was conceived as a factish, rules of engagement were neither wholly mysterious nor entirely rational. The rules were worked out as prototyping progressed and the solution adopted was a form of satisficing. Governance and Social Representation Müller et al. (2014) quote Stoker (1998, p. 155): governance is ultimately concerned with creating the conditions for ordered rule and collective action, which is accomplished through a framework for ethical decision-making and managerial actions based on transparency, accountability, and defined roles.

They suggest governance builds social exchange and governmentality builds social cohesion. Müller et al. (2015) use institutional theory to show ways in which social structures, including normative and behavioral systems, are established, become stable, and undergo change. Organizational enablers for governmentality seek the development of individuals mindful of the organization, self-responsible and self-aware, and are mindful in accepting decisionmaking, and making decisions in the best interests of the organization. Sergeeva (2020) suggest senior managers construct the meaning of governance through narratives. Biesenthal and Wilden (2014) show that relational governance can strongly influence community, behavioral, and social themes through active participation. On the Amsterdam north–south metro line (Staal-Ong & Westerweld, 2010) the governance structure was changed from principal-agent to principal-steward. The project, which had been working as a contractor to the city council, became a department within the city council. That improved the working relationship between the project and the city council. The project also took responsibility for managing the relationship with the people of Amsterdam. They took a particular interest in the health, safety, and welfare of the population under a program called BLVC, Bereikbaarheid, Leefbaarheid, Veiligheid, en Communiatie (in English: accessibility, livability, safety, and communication). The people of Amsterdam felt ethics, transparency, accountability, and trust had improved, and responded more positively. Social Representation and Governance Müller et al. (2014) investigate how in bringing knowledge to people, social representation influences governance. They suggest four steps: 1. Setting the goals – macro antecedents: project and organizational culture, dynamic learning boundaries, and job characteristics

202  Research handbook on the governance of projects

2. Providing the means – micro conditions: beliefs, attitudes, values, and knowledge expectations 3. Controlling progress – micro behaviors: knowledge behavior, communication, and shared decisions 4. Achieving knowledge-based goals – macro constructs: dynamic capabilities, competencies, and communities of practice Clegg et al. (2002) and Pitsis et al. (2003) describe a project to construct storm-water tunnels in Sydney to clean up Sydney harbor ahead of the 2000 Olympics. The project entailed considerable uncertainty. The geotechnics were poorly known, so it was not possible to do a front-end design in advance of inviting contractors to join the project. When contractors were invited to join, the specification was just 28 pages. The contractors were told the end objectives but had to design how they would be achieved. The project was done as an alliance contract. The alliance was based on a designer culture (Casey, 1996): ●

● ● ●

Individual enthusiasm with values of dedication, loyalty, and self-sacrifice and passion for the project Strong customer focus Discourse characterized by familial language of team and family Public display of designer culture

It was also based on ten cultural commitments: 1. Build and maintain a champion team with champion leadership, integrated across all disciplines and organizations 2. Commit corporately and individually to openness, integrity, trust, cooperation, mutual support and respect, flexibility, honesty, and loyalty to the project 3. Honor commitments to one another 4. Commit to a no-blame culture 5. Use breakthroughs and free flow of ideas to achieve exceptional results 6. Outstanding results provide outstanding rewards 7. Deal with and resolve all issues from within the alliance 8. Act in a way that is best for the project 9. Challenge business-as-usual behaviors 10. Spread the alliance culture to all stakeholders The strap line for the project was to do what is best for the project. Turner (2014) says projects are more successful if the participants do what is best for the project and not themselves individually, and that was the requirement to work on this project.

CHOICE ARCHITECTURE Governance should aim to create an environment in which people make decisions in the best interest of the organization.

Governance, decision-making, and project performance  203

Choice Architecture and Decisions Two ways in which choice architecture influences decision-making is to make decisions easy, attractive, social, and timely (EAST) (Dolan et al., 2010), and to nudge people to make decisions you want them to make. Making EAST decisions is important in organizational change projects. The antibiotic sustainability project had the objective of implementing working practices in nine European countries to improve antibiotic sustainability. The objective was not to achieve antibiotic sustainability in the nine countries – that was impossible – but just to implement the working practices. EAST decisions helped achieve commitment in the nine countries. Similarly, the customer relationship management system was to be rolled out to several departments, and to gain their commitment EAST decisions helped. Charles needed to recommend transfer of the government department to a government-owned PLC by a certain date or it would be delayed by at least six months, and then might not happen. The night before he was due to make the recommendation, he and his co-worker found the balance sheet did not balance. The balance sheet was a complete mess, so they added a very small bit of extra mess to make it balance, and so made a timely decision. Daniella was a consultant working with an energy company to create a customer services center. They were designing new offices for the center. The architect drew a fancy and expensive solution. The client decided to implement a much cheaper solution, rearranging existing offices. Daniella did not think that would send the right messages to customers and would not work for other reasons. But instead of coming in hard at the client to try to get them to change their mind, she arranged a workshop where they identified the requirements the offices had to meet, and the pros and cons of different solutions. They ended up with a solution simpler than the architect’s proposal, but closer to it than the client’s previously preferred solution. Daniella nudged the client toward what she thought was the preferable solution. Governance and Choice Architecture Müller et al. (2016) identified that the governance paradigm influences the way project managers and project teams make decisions. Müller (2009) identified four paradigms based on whether the organization maximizes returns for shareholders or for a wider set of stakeholders, and whether the organization controls by behaviors or by results, Figure 17.1 (see also Chapter 27). Project managers and project teams tend to game the system, as suggested by Figure 17.1. Edward was a program manager in the early 1990s with Digital, a well-known hardware supplier, now part of Hewlett Packard. Schein and Schein (2017) devote a chapter to Digital, a company where the paradigm was versatile artist. Edward was managing a program to develop a new product in conjunction with a well-known consulting company. One Thursday he had a meeting in New York with the program team to plan the program. He flew back to Ireland, where he lived, that evening. On Monday he found people were varying the plans. That was the culture in Digital. People questioned decisions, and varied things to suit their region. If this continued, the program would never finish. Edward had to change the paradigm for this program to agile pragmatist. He told people democracy was suspended.

204  Research handbook on the governance of projects

Source:  after Sankaran’s Figure 27.2 in this volume

Figure 17.1  Four governance paradigms McGrath and Whitty (2015) identify five elements of governance which influence decisions architecture: ● ● ● ● ●

Structure: how people interrelate Positions: definitions of roles and responsibilities Rules: definitions of policies and procedures Decisions: delegation and approval processes Reporting: involvement of stakeholders

The Betuweroute was a megaproject to build a freight railway line from the Port of Rotterdam to the German border (Hertogh et al., 2008). Often with megaprojects there is one contract for the whole project, as with the Sydney storm-water tunnels (Pitsis et  al., 2003), or the megaproject is broken into a small number of large projects with a contract for each project, as with the Øresund Link (Russel, 2000). The Betuweroute was broken down into a large number of small projects, and an appropriate form of contract chosen for each project. The foundations were built using remeasurement contracts; stations, bridges, and tunnels were built using fixed-price design and build contracts; and the track and signaling used a design, build, finance, maintain contract. At one point where the new line crossed an existing line, the foundation was built using an alliance contract because risk belonged to both the client and the contractors. Choice Architecture and Governance Keeping people happy and meeting their needs can change the objectives of the project or organization, the way of achieving the objectives, and the method of controlling progress.

Governance, decision-making, and project performance  205

Xander recounted a project to renovate the long-distance radar at an airfield which was the main landing ground for helicopters ferrying staff to and from oilfields in the local gulf. There are two radars at the airfield: an approach radar, which can look about 10 miles and manage aircraft (mainly helicopters coming from the oil fields) on their final approach; and an area radar, which can look about 100 miles and manage the helicopters as they cross the gulf toward the airfield. Pilots can be informed of other aircraft in their vicinity and lined up as they approach the airfield. The area radar needed replacing. The work was going to take six months, and so the airport would be without the area radar for that time. The solution was to change the route of helicopters approaching the airport. Instead of coming over a hill, where they could not be seen by the approach radar until they were quite close, the helicopters were asked to come around the headland and approach over the harbor, where they could be seen 10 miles out. This was an adequate solution but not ideal. The air traffic controllers could no longer inform aircraft more than 10 miles out of other aircraft in their vicinity. As well as changing the approach route, it required a change in company procedures in terms of take-off, landing, and approach. And it required pilots to use their on-board radar much more to be aware of other aircraft in their vicinity. The revised system was potentially less safe than the normal system, because it required pilots to be much more aware of their surroundings. But it was acceptably safe to allow the work of changing the radar to progress for six months. Xander said that the air traffic controllers were very conservative and needed some persuading. He said: I think by understanding a little bit about how they make decisions and their behaviours, I was able to help them as arrive at a decision that got a good outcome for the project whilst maintaining what they need to do.

CULTURE Culture is observed behavioral regularities when people interact (Schein & Schein, 2017). Culture and Decision-Making Schein and Schein (2017) suggest culture influences decision-making through identity, social representation, and choice architecture. Culture can influence decision-making through roles and responsibilities, interactions, language, group norms, mental models, and shared meaning. Weber and Hsee (2000) say that culture can influence decisions through behavioral norms, judgment norms, perception of risk, and risk choices. We have seen that with the second and third attempt at LASCAD, the governance paradigm was conformist. People did as they were told. But the paradigm was so strong that junior managers did not question the instructions they were given; they suspended judgment. Mistakes were made. Stingl and Geraldi (2017) studied behavioral decision-making and identified three schools: reductionist, pluralist, and conceptualist. In the reductionist and pluralist schools, people take rational decisions. In the reductionist school people make honest errors, based on optimism bias, whereas in the pluralist school people tell lies, which Stingl & Geraldi politely suggest is better phrased as strategic misrepresentation. In the reductionist school people are also subject to group biases. In the contextual school people take naturalistic decisions. People focus on

206  Research handbook on the governance of projects

process and context. The decision made by Xander at the airfield relied heavily on process and context. On the Amsterdam north–south metro line, before the governance structure was changed to principal-steward, the project was late and overspent, suggesting optimism bias, but the project was being delayed by the wrong governance structure. After the governance structure was changed, the project was completed to the revised time and cost estimates. Governance and Culture Table 17.4 shows how the three levels of governmentality determine the culture of the project; often though the culture of the parent organization determines the level of governmentality. With the first three attempts at LASCAD, the culture of the parent organization was authoritarian, which led to authoritarian governmentality on the project. As a result of the report into the failure (Page et al., 1993), the organizational culture switched to liberal, but the governmentality on the CTAK project was neoliberal. With the antibiotic sustainability project, the culture within the consultancy leading the project, Roland Gareis Consulting, was liberal, and that was reflected in the project. With the customer relationship management system, the project team adopted neoliberal governmentality. As they rolled the project out, perhaps authoritarian governmentality was suggested, but they adopted liberal governmentality to win the support of the people rolling out the project. With the Swedish rail tunnel, neoliberal governmentality was adopted at the level of the project board, but was changed to liberal at lower levels. MacCormick (2019) says within a company the board of directors should be responsible for setting the culture of the company. This should apply at the project level as well. The board should set expectations around behaviors and decision-making. MacCormick suggests the board should set formal and informal systems of culture. The formal system sets expectations about the goals, how the goals will be achieved, and how progress will be managed. The informal system sets expectations about social representation. On the Øresund Link, the project board defined clearly how they wanted to work with the main contractors, and on the Amsterdam north–south metro line, the governance structure was changed from Table 17.4  Three levels of governmentality and project culture Governmentality

Authoritarian

Liberal

Neoliberal

Actors

Economic

Marketing

Socializing

Behavior

Self-serving Utilitarian

Selling Persuasive

Collective Altruistic

Aim

Individual reward

Individual reward and societal wellbeing

Organizational success

Control

Behavior

Output

Values and trust

Contract

Principal-agent

Principal-steward

Alliance

Motivation

Extrinsic reward

Leadership

Commanding Tell

Intrinsic Achievement Supportive Sell

Participative Participate

Governance, decision-making, and project performance  207

principal-agent to principal-steward to get a better working relationship between the project team and the city council, and with the people of Amsterdam. Culture and Governance According to the model of Schein and Schein (2017), there are three levels of organizational culture: 1. Artifacts: ● visible and feelable structures and processes ● observed behavior 2. Espoused beliefs and values ● ideals, goals, values, aspirations ● ideologies ● rationalizations 3. Basic understandings and assumptions ● unconscious, taken-for-granted beliefs and values, which influence behavior, perception, thought, and feeling Through artifacts, culture influences the chosen method of achieving the project’s objectives. With the fourth, successful, attempt at LASCAD (McGrath, 2002), the new culture of the organization influenced the operation of the Golden Circle, the interrelationships of the project team’s members with themselves and the context, and the operation of the factish. Artifacts also influence the choice of governance paradigm (Müller, 2009). We have seen with the second and third attempt at LASCAD that the authoritarian governmentality led to a conformist paradigm, which led people to obey rules and not question decisions by more senior managers. Espoused beliefs influence the goals of the organization and project. In Daniella’s project, the culture of the client organization was influencing their choice of office design. By holding the workshop to select the office space, Daniella was able to nudge their beliefs. Espoused beliefs also influence ideologies and rationalizations, and thereby influence governmentality. The culture of LASCAD led to the use of authoritarian governmentality at the second and third attempts (Dalcher, 2010). The culture of Roland Gareis Consulting led to liberal governmentality on the antibiotic sustainability project (Gareis & Frank, 2010). On the Sydney water tunnels, they purposefully chose a neoliberal governmentality (Clegg et al., 2002). Basic understandings and assumptions define social representation. They also influence identity and choice architecture. All are linked.

CONCLUSION Good governance is associated with good project performance. Turner (2020a, 2020b, 2020c) suggests that good decision-making may provide the link. Sometimes good governance leads to good decision-making which leads to improved project performance. Sometimes good decision-making leads to good governance. In this chapter we explored the links from governance to decision-making and decision-making to governance via identity, social representation, choice architecture, and culture.

208  Research handbook on the governance of projects

REFERENCES Beldi, A., Cheffii, W., & Dey, P. K. (2010). Managing customer relationship management projects: The case of a large French telecommunications company. International Journal of Project Management, 28, 339–351. Beynon-Davies, P. (1995). Information systems “failure”: The case of the London ambulance service’s computer-aided despatch project. European Journal of Information Systems, 4, 171–184. Biesenthal, C., & Wilden, R. (2014). Multi-level project governance: Trends and opportunities. International Journal of Project Management, 32(8), 1291–1308. Casey, C. (1996). Corporate transformation: Designer culture, designer employees and post-occupational solidarity. Organization, 3(3), 317–340. Clegg, S. R., Pitsis, T. S., Rura-Polley, T., & Marosszeky, M. (2002). Governmentality matters: Designing an alliance culture of inter-organizational collaboration for project management. Organization Studies, 23, 317–336. Dalcher, D. (2010). Chapter 13: Learning from failure: The LAS story. In J. R. Turner, M. Huemann, F. T. Anbari, & C. Bredillet (Eds.), Perspectives on projects (pp. 296–322). Routledge. DeFillippi, R., & Sydow, J. (2016). Project networks: Governance choices and paradoxical tensions. Project Management Journal, 47(5), 6–17. Dolan, P., Hallsworth, M., Halpern, D., King, D., & Visev, I. (2010). The MINDSPACE: Influencing behaviour through public policy. The Institute for Government and the Cabinet Office. Drouin, N., & Turner, J. R. (2022). The Elgar advanced introduction to megaprojects. Edward Elgar. Eriksson, T., & Kadefors, A. (2017). Organisational design and development in a large rail tunnel project – Influence of heuristics and mantras. International Journal of Project Management, 35, 492–503. Gareis, R., & Frank, A. (2010). ABS international: Sustainable project management. In J. R. Turner, M. Huemann, F. T. Anbari, & C. Bredillet (Eds.), Perspectives on projects (pp. 323–339). Routledge. Haq, S. U., Gu, D., Liang, C., & Abdullah, I. (2019). Project governance mechanisms and the performance of software development projects: Moderating role of requirements risk. International Journal of Project Management, 37(4), 533–548 Haslam, S. A. (2004). Psychology in organizations: The social identity approach. Sage. Hertogh, M., Baker, S., Staal-Ong, P. L., & Westerweld, E. (2008). Managing large infrastructure projects: Research on best practices and lessons learnt in large infrastructure projects in Europe. AT Osborne BV. Kahneman, D. (2012). Thinking fast and slow. Penguin. Lappi, T., Karvonen, T., Lwakatare, L. E., Aaltonen, K., & Kuvaja, P. (2018). Toward an improved understanding of agile project governance: A systematic literature review. Project Management Journal, 49(6), 39–63. Latour, B. (1999). Pandora’s hope. Harvard University Press. MacCormick, J. S. (2019). Governing organisational culture. Paper prepared as part of the Director Tools Series. Australian Institute of Company Directors. McGrath, K. (2002). The golden circle: A way of arguing and acting about technology in the London ambulance service. European Journal of Information Systems, 11, 251–266. McGrath, S. K., & Whitty, S. J. (2015). Redefining governance: From confusion to certainty and clarity. International Journal of Managing Projects in Business, 8(4), 755–787. Millstein, I. M., Albert, M., Cadbury, A., Feddersen, D., & Tateisi, N. (1998). Improving competitiveness and access to capital in global markets. OECD Publications. Moscovici, S. (1973). Introduction. In C. Herzlich (ed.), Health and illness: A social psychological analysis. Academic Press. Moscovici, S. (2000). The history and actuality of social representations. In S. Moscovici & G. Duveen (Eds.), Social representations: Explorations in social psychology. Polity Press. Müller, R. (2009). Project governance. Gower Publishing. Müller, R. (2017). Governance and governmentality for projects: Enablers, practices and consequences. Routledge. Müller, R. (2019). Governance, governmentality and project performance: The role of sovereignty. International Journal of Information Systems and Project Management, 7(2), 5–17.

Governance, decision-making, and project performance  209

Müller, R., Pemsel, S., & Shao, J. (2014). Organizational enablers for governance and governmentality of projects: A literature review. International Journal of Project Management, 32(8), 1309–1320. Müller, R., Pemsel, S., & Shao, J. (2015). Organizational enablers for project governance and governmentality in project-based organizations. International Journal of Project Management, 33(4), 839–851. Müller, R., Turner, J. R., Shao, J., Andersen, E. S., & Kvalnes, O. (2016). Governance and ethics in temporary organizations: The mediating role of corporate governance. Project Management Journal, 47(6), 7–23. Page, D., Williams, P., & Boyd, D. (1993). Report of the public enquiry into the London ambulance service. South West Thames Regional Health Authority. Pitsis, T. S., Clegg, S. R., Marosszeky, M., & Rura-Polley, T. (2003). Constructing the Olympic dream: A future perfect strategy of project management. Organizational Science, 14(5), 574–590. Rateau, P., Moliner, P., Guimeli, C., & Abric, J.-C. (2011). Social representation theory. In P. A. M. van Lange, A. W. Kruglanski, & E. T. Higgins (Eds.), The handbook of social psychology (Vol 2). Sage. Russel, H. (2000). Partnership pays: Project management the Øresund way. Route One Publishing. Schein, E. H., & Schein, P. (2017). Organizational culture and leadership. Wiley. Sergeeva, N. (2020). Towards more flexible approach to governance to allow innovation: The case of UK infrastructure. International Journal of Managing Projects in Business, 13(1), 1–19. Staal-Ong, P. L., & Westerweld, E. (2010). Chapter 12: The North-South metro line, Amsterdam. In J. R. Turner, M. Huemann, F. T. Anbari, & C. E. Bredillet (Eds.), Perspectives on projects. Routledge. Stingl, V., & Geraldi, J. (2017). Errors, lies and misunderstandings: Systematic review on behavioural decision making on projects. International Journal of Project Management, 35, 121–135. Stoker, G. (1998). Governance as theory: Five propositions. International Social Science Journal, 50(155), 17–28. Turner, J. R. (2014). The handbook of project-based management: Leading strategic change in organizations (4th ed.). McGraw-Hill. Turner, J. R. (2020a). Investigating how governmentality and governance influence decision making on projects. Project Leadership and Society, 1, article 100003. Turner, J. R. (2020b). The relationship between governance and decision making on projects. Masters Thesis, London School of Economics. Turner, J. R. (2020c). How does governance influence decision-making on projects and in project-based organizations? Project Management Journal, 51(6), 670–684. Weber, E., & Hsee, C. (2000). Culture and individual judgment and decision making. Applied Psychology, 49(1), 32–61.

18. Cultural practices of governing megaprojects Alfons van Marrewijk

INTRODUCTION The debate on governance has recently gained momentum in megaproject studies (Ahola et al., 2014; Benitez-Avila et al., 2018; Brunet, 2019; Müller, 2012; Pitsis et al., 2014; Qiu et al., 2019). Megaprojects are characterized by their size, budget, structural complexity, uncertainty, environmental impact, and the involvement of a large number of public and private partners with diverse interests and sometimes conflicting goals. These characteristics require specific project governance arrangements (Brunet & Aubry, 2016; Clegg et al., 2002; Miller & Hobbs, 2005). Project governance is here defined as the set of arrangements that regulate the interaction between project participants at the various project levels to realize a certain project performance (Artto & Kujala, 2008; Biesenthal & Wilden, 2014). These strict governance arrangements have to ensure smooth execution of megaprojects (Miller & Hobbs, 2005). Notwithstanding these strict governance regimes, the performance of megaprojects is frequently disappointing (Denicol et al., 2021). This problematic performance is, according to Sanderson (2012), an almost inevitable result of the organizational complexity, ambiguity, and conflict faced by project actors with diverse and competing organization cultures and rationalities (e.g., Clegg et al., 2002; Van Marrewijk et al., 2008). For example, Van Marrewijk et al. (2016) show principal and agent in the Panama Canal Expansion Program re-negotiating their roles, responsibilities, and relations, which they had agreed upon in prior governance arrangements. However, little is known about how governance arrangements provide contextual frameworks for shaping, but not necessarily determining, the actions of project employees (e.g. Müller, 2012). In this chapter the cultural perspective on governing megaprojects is explored by first focusing upon the characteristics of megaprojects. This focus helps to better understand the complex governing arrangement they need. Then the cultural perspective on megaproject governance is discussed. Applying such a perspective on the governance of megaprojects, three practices are presented: (1) trust building to enact a public–private partnership in an infrastructure megaproject; (2) governing phase transitions through rituals; (3) governing cross-cultural collaboration in global megaprojects. Finally, the contribution of a cultural perspective to megaproject studies and future research questions are being discussed.

CHARACTERISTICS OF MEGAPROJECTS Megaprojects can be simply defined as projects whose capital for the complete construction exceeds a one billion euro, or dollar, budget (Altshuler & Luberoff, 2003). A more extended definition is that megaprojects are large-scale infrastructural developments with, frequently, iconic design components, usually aimed at transforming urban areas (Del Cerro 210

Cultural practices of governing megaprojects  211

Santamaria, 2013). Megaprojects distinguish themselves from other types of projects in their structural complexity, which is the interaction and interdependency of elements in a project, and uncertainty, resulting from a lack of clearness and agreement over project goals and the way these goals have to be reached (Van Marrewijk et al., 2008; Williams, 2002). Moreover, they are politically sensitive and involve large numbers of partners, interest groups, citizen opposition, and other stakeholders, with conflicting interests (Bresnen et al., 2005; Hodgson & Cicmil, 2006). Therefore, decision-making processes are complex and lengthy, frequently causing delays in the planning of megaprojects. A further exploration of megaproject literature shows that these projects are generally perceived as non-routine, requiring special authorizing, funding, revenues, land acquisition, and regulatory actions by two or more levels of government; they are initially controversial, proceeding slowly and passing different electoral and business cycles for which public–private cooperation is needed (Altshuler & Luberoff, 2003). Apart from these, Van Marrewijk (2015) names a few more characteristics: complex and critical front-end processes with risks of overcommitment; sensitive and dynamic relations with national political context; mixture of joint organization and sub-contracting to legally separate partners. These characteristics distinguish megaprojects from “regular” projects, making the governance of these projects extremely difficult. The debate on project governance has been dominated by literature on governance systems, based upon behavioral and outcome control in terms of budget, time, and scope; on project partner roles (Turner & Keegan, 2001); and on contracting (Müller, 2012). In their study, Ahola et  al. (2014) distinguish two streams of literature in this debate. In the first stream, project governance is understood as organizationally imposed definition and monitoring of standards for the project. Scholars in this stream prescribe strict contractual arrangements, governance structures, and governance regimes to prevent megaprojects from running into problems (Miller & Hobbs, 2005). This is what Latusk and Vlaar (2018) call the calculative approach, which understands rational actors undertaking actions to reduce risks. For example, Greiman (2013) states that megaprojects require complex construction integration along with technical, resource, and materials management. In this stream, governance is defined in contractual terms of collaboration between public and private partners to ensure a consistent and predictable delivery by contractors within contractual limitations (Müller, 2012). Project partners are expected to provide a blueprint for collaborative behavior, and to ask each partner in advance to specify their obligations in order to adapt for possible future events (BenitezAvila et  al., 2018). These contractual pre-arrangements seek to address the many interests that are at stake (Müller, 2012). However, such contracts are robust to unpredictability of contextual changes but not to uncertainty and ambiguity in perceptions of the context (Carson et al., 2006). In the second stream, project governance is tailored through arrangements that define shared sets of coordination, procedures, and rules which are expected to be followed. This is called the relational approach (Latusk & Vlaar, 2018), which assumes that actors cannot mitigate or anticipate all risks, but nonetheless maintain collaborative relationships (Ruijter et al., 2021). Contracts can provide a blueprint for collaborative behavior, but when project partners work together relations can become tense, conflicting, and challenging (Van Marrewijk et al., 2016). As the relationship unfolds, and conflicting events emerge over time, assumptions about shared project goals, responsibilities, and tasks become increasingly annoying (Sanderson, 2012; Van Marrewijk et al., 2016). Therefore, a focus on the relational aspects in

212  Research handbook on the governance of projects

the collaboration between partners in megaprojects can help to overcome tensions and conflicts (Ruijter et al., 2021). Sanderson (2012) criticizes the strict governance regimes that both above-discussed streams prescribe, as they create an illusion of foresightedness, in which the client tries to build capacity into governance arrangements to deal with future events. However, not only the future is difficult to predict, but also historical events and relations between project partners, the so-called “shadows of the past” (Poppo et al., 2008), have their influence on governance arrangements. Sanderson (2012) identifies governance practices as causes for the problematic execution of megaprojects. Frequently, actors are inflexible in their response to inevitable events of inter-organizational complexity, ambiguity, uncertainty, and conflicts in megaprojects (Van Marrewijk et al., 2016). Therefore, a focus upon cultural practices can help to better understand how governance arrangements shape the actions of project employees and vice versa. Cultural Perspective on Governing Megaprojects Over the last decades the cultural perspective has grown in importance in project studies (Clegg et al., 2023; Van Marrewijk et al., 2016). This perspective, originating from sociology and anthropology, is well developed in organization studies. Organization is there understood as a cultural phenomenon with norms, values, narratives, rituals, informal practices, power relations, conflicts, and abnormalities (Martin, 2002). Culture can thus be represented by the metaphor of a “root system,” signifying that the manifestations and representations of an organizational culture can be found everywhere; for example, in its formal structure, rewarding systems, informal practices, and physical office spaces. The manifestations and representations of an organizational culture can be understood by interpretating their meaning and significance. In the interpretative perspective there is recognition of ambiguity over formal goals, power clashes on structures, and informal practices of managers, working within limited boundaries of rational behavior (Alvesson, 2002). Deviations from scope, failures to fulfill goals, and high risks in many megaprojects pushed attention in project studies away from instrumental and technical issues toward issues of social interaction and organizational culture (Brookes et al., 2014; Cicmil & Gaggiottia, 2014). For example, Willems et al. (2020) emphasized the risk of megaprojects developing a dysfunctional culture, which is when they are caught in a vicious circle of increasing isolation, overidentifying with project goals, and decreasing ability to adapt to the wider environment. Much in the same way as anthropologists studied primitive cultures, project scholars started to study the manifestations and representations of megaprojects (Cicmil & Gaggiottia, 2014; Fellows & Liu, 2013; Smits, 2014). Culture can be learned by studying cultural practices (Geertz, 1973), here understood as the manifestations and representations of a project: dynamic, organization, everyday actions that produce social reality (Feldman & Orlikowski, 2011). The cultural perspective is helpful for understanding the cultural practices of governance, which shape the actions of megaproject actors and vice versa. Brunet (2019, p. 294) suggests concern over “what people do in relation to project governance and how this is influenced by and influences their organization and institution context.” In their one-year ethnographic study, Van Marrewijk and Smits (2016) found five cultural practices after the tendering of a megaproject: (1) ritualizing the public announcement of the bid winner, (2) changing teams during phase transition, (3) struggling over governance structure in the management team, (4)

Cultural practices of governing megaprojects  213

labeling national cultures, and (5) labeling organizational cultures. These five cultural practices hindered the successful execution of the governance arrangements and finally resulted in the project coming to an abrupt and dramatic temporary halt (Van Marrewijk & Smits, 2016). In the cultural perspective context is important, as humans manifest an immense flexibility in their response to the environmental forces they encounter, enact, and transform. Context concerns the specific aspects and circumstances such as history, ideology, fields of action, and technical infrastructures, within which cultural patterns are developed and reproduced, which drive or legitimize an assignation of meaning (Alvesson, 2002). When applying this cultural perspective to the topic of governance, what kinds of cultural practices can be found during a megaproject’s execution? In this chapter three relevant cultural practices are discussed: 1. Trust building to govern a partnership between public and private partners in an infrastructure megaproject (Ruijter et al., 2021) 2. Governing phase transitions through rituals (Van den Ende & Van Marrewijk, 2014) 3. Governing cross-cultural collaboration in global megaprojects (Van Marrewijk, 2010). Cultural Practice of Trust Building to Govern a Partnership The first cultural practice in the governance of megaprojects is trust development. Trust is perceived to be a precondition for collaboration between partners in inter-organizational projects (Swärd, 2016). Zwikael and Smyrk (2015) suggest that trust of project owner in project manager is effective in a turbulent environment. Therefore, trust is generally understood to be relational and to reduce social complexity (Poppo et al., 2008). Frequently, trust is developed in a reciprocal interaction between partners (Swärd, 2016). In her study, Swärd (2016) shows that trust development in an inter-organizational context is an ongoing process in which different types of actions and different types of reciprocity play a part. Trust and collaboration are connected through a process of reciprocal obligations in which actors must trust each other that they share expectations and interpretations of the mutual benefit of the collaboration (Munns, 1995). Scandals created by fraudulent behavior, for example, can cause infrastructure megaprojects to start with little institutional trust (Sminia, 2011). In reaction to the low trust, such projects start with calculative trust based upon contractual specifications and detailed monitoring to prevent opportunistic behavior (Müller et  al., 2013; Van Marrewijk et  al., 2016). Trust development is thus a self-reinforcing cycle of cooperation anticipated due to trust among project employees, which is then reciprocated with further cooperation validating that trust (Munns, 1995; Swärd, 2016). Reciprocity thus deepens the collaboration between partners in megaprojects over time as “we owe others certain things because of what they have previously done for us, because of history of previous interaction we have had with them” (Gouldner, 1960, p. 172). The process of trust development is important for megaproject governance, but not well understood (Maurer, 2010; Swärd, 2016). Swärd (2016) focuses on events of trust building in inter-organizational projects, but does not make clear how this process of trust development can be managed. What do clients do to ensure high levels of trust in the collaboration of partners in a megaproject? To answer this question, Ruijter et al. (2021) studied trust development in an infrastructure megaproject and found that pre-arranged contractual agreements were insufficient in providing blueprints for collaboration. Although contractual governance shapes

214  Research handbook on the governance of projects

relational norms oriented to encourage mutual reliable attitudes based on trust (Benitez-Avila et al., 2018), they show that an enormous effort of organizing 28 workshops had to be done by both the client and the contractors. Therefore, given these efforts and given the temporal, dynamic, and complex character of infrastructure megaprojects, it is no surprise that the enactment of partnership philosophy frequently fails (e.g. Van Marrewijk et al., 2016). Governance arrangements with high ambitions on partnerships run the risk of being hyperreal (Alvesson & Sveningsson, 2016), which is a well-drafted discourse on values disconnected from practice. For many project employees, cultural values and norms are detached from their daily work experiences (Alvesson & Sveningsson, 2016). Therefore, the organizing of workshops to translate a partnership model into daily practices of project employees is necessary. Furthermore, workshops can discuss practical dilemmas related to the governance arrangement and come to a shared understanding of these dilemmas. This is in line with Carson et al. (2006), who stated that relational contracts are not robust to ambiguity in perceptions of the environmental context. In order to enact relational governance arrangements, project managers need to develop new capabilities; by openly discussing dilemmas, by joint reflection, by practicing vulnerability, and by practicing role-playing (Ruijter et  al., 2021). This is much more detailed than the tailored arrangements in which shared sets of coordination, procedures, and rules are defined (Ahola et al., 2014). These cultural practices meet Sanderson’s (2012) criticism of clients’ illusion of foresightedness to deal with future unexpected events. Contractual agreements, even those with a partnership philosophy, cannot ensure smooth collaboration in megaprojects. Cultural practices of megaproject governance do not emerge spontaneously (Sanderson, 2012), but are managed carefully through workshops. Managers and employees of the client and contractors learned to reflect, to enlarge empathetic capabilities, and to prevent diverse interpretations. Cultural Practices of Transition Rituals in Megaprojects The second cultural practice of governing megaprojects is rituals. A ritual is understood as “a strategic mode of action effective within certain social orders” (Bell, 1992, p. 170). Rituals possess both symbolic and pragmatic aspects simultaneously, having on the one side a symbolic character through which meanings and values are expressed, and on the other a tangible character where they can be used strategically to achieve or establish something (Alvesson, 2002; Trice & Beyer, 1993). Rituals can be distinguished from more easily taken-for-granted, ordinary practices, owing to their rapid standardization and intrinsic enactment. Ritual practice is made special by ascribing symbolic meaning to mundane activities and materials (Martin, 2002). Rituals are organized with pre-determined actors and audiences, performed at a pre-destined time and place, with symbolic words, gestures, and artifacts that serve to signal and express meaning (Trice & Beyer, 1993; Turner, 1977). To study rituals, Van den Ende and Van Marrewijk (2014) focused on transitional rituals in the governance of phase transition in infrastructure megaprojects. Transition ritual was first coined and theorized as “rite de passage” by French anthropologist Van Gennep (1960), marking the passage through a threshold from one status to another. This passage resembles the transitional period between two separate project phases. Transition rituals mark and establish important stages and milestones in the project life cycle. For example, Löfgren (2015) studied the construction of the Øresund bridge and tunnel megaproject connecting the cities of Copenhagen in Denmark and Malmö in Sweden and showed how inaugural ceremonies by

Cultural practices of governing megaprojects  215

the royal families of both countries contributed to the emergence of a Danish–Swedish transnational territory. In another example, Eskerod and Blichfeldt (2005) discovered that entry and withdrawal rituals ease transitions in the composition of project teams and help increase performance. Van den Ende and Van Marrewijk (2014) claim that transition rituals do something in the governing of megaprojects. They establish beginning and ending points, exhibit progress, mark and enable transitions, celebrate milestones and accomplishments, help legitimize a project, and communicate important messages to outsiders. Transition rituals signify what needs to be governed, changed, decided, established, or communicated at a particular time and place. Van den Ende and Van Marrewijk (2014) distinguish internal and external transition rituals. Internal transition rituals bring project actors together and allow a project to proceed. These rituals are about commemorating and enhancing solidarity and commitment for those employees who are directly involved in the project. Examples are a kick-off meeting, a first shovel in the ground, the breaking of a coconut, the spilling of alcohol over the soil, or the symbolic closure and handing over of a project. Internal rituals can be transformed into external rituals when this is needed for strategic reasons. An external ritual also facilitates the project process, but is more focused upon the legitimation of a project, to ensure that outsiders, being all the stakeholders such as state officials and civilians, support the project. External rituals are chiefly about gaining support, involvement, and exposure for the project and are directed at a wider audience. Examples are the baptism of a tunnel boring machine by a priest at the start of a metro tunnel megaproject (Van den Ende et al., 2015) or the royal opening ceremony of Øresund bridge and tunnel megaproject (Löfgren, 2015). Cultural Practice of Managing Cross-Cultural Collaboration The third cultural practice of governing megaprojects is managing cultural differences. Cultural differences are understood as differences in national, organizational, and professional cultures which are socially constructed (Van den Ende & Van Marrewijk, 2015). Employees from diverse cultural backgrounds work together in megaprojects, all retaining their own work practices composed by their country of residence, sector, and profession, which can deeply affect collaboration. Sackmann and Friesl (2007, p. 145) argue that “individual identities are still rooted in the various home organizations, their profession and other groupings that they take part of in their life.” For example, the leader of the Incheon Bridge megaproject explained, “it was very difficult for me as a conductor because there were cultural differences between the United Kingdom and Korea, even in the project management plan” (Brunet, 2021, p. 174). Therefore, it is now widely recognized in project studies that differences in national, organizational, and professional cultures influence the execution of megaprojects (Chevrier, 2003; Smits, 2014). The management of cross-cultural differences is an important theme for megaproject studies (Ochieng & Price, 2010). Cultural differences are held responsible for cost overruns, time delays and the failure of many megaprojects. If project partners are unable to cope with diverse management styles and cultures, decision-making processes may slow down and tensions may emerge. Zwikael et  al. (2005) studied differences in project management styles between Japanese and Israeli cultures. Israeli project managers were more focused on a performing scope and temporal processes, while communication and cost management were frequently used by Japanese project managers. The researchers found that Japanese project

216  Research handbook on the governance of projects

managers used clear and measurable success measures for each project, while the Israeli project objectives were quite vague (Zwikael et al., 2005). However, cultural differences are not entirely fixed and determined but can be negotiated by project partners (Brannen & Salk, 2000). In everyday collaboration, groups of project partners distinguish themselves from others by using symbols, language, rituals, signs, and other outward appearances that signal their “uniqueness” (Van den Ende & Van Marrewijk, 2015). In this way, groups construct cultural differences with others. For example, Van Marrewijk (2010) found that the asymmetric power context of Dutch front and Indian back offices in global IT projects stimulated employees to construct salient cultural differences to influence the collaboration.

DISCUSSION AND CONCLUSION In this chapter I focused on the cultural perspective on megaproject governance. Such a perspective sheds light on hidden themes in megaprojects, such as rituals, which are novel in the debate on megaprojects. This perspective helps to understand how governance frameworks shape actions and practices of project employees during the execution of megaprojects and vice versa. The basic agency structure of megaprojects is a contract between client and contractor which encourages actors to focus on governance arrangements ex ante (Sanderson, 2012). The cultural perspective understands megaprojects as heterogeneous living worlds with subcultures, myths, rituals, project narratives, symbols, and collaborative practices. Discussion of three cultural practices of trust development, rituals, and managing cultural differences helps to better understand governance in megaprojects. Future directions of research on governance in megaprojects from a cultural perspective could focus on topics of project cultures, project narratives, myths and symbols of megaprojects, practices and materiality, rituals, and spatial settings. The attention for culture is frequently labeled the “soft” or “people” side of management, but culture manifests itself in both “soft” and “hard” megaproject issues. For example, a study on how a local cultural context influences the governance of a megaproject would be welcomed. Also, studies on how project narratives are entangled with the governance arrangements in megaprojects are interesting. Finally, to practitioners, a cultural perspective might be helpful to notice themes that otherwise would have remained obscure. Therefore, attention should be given to selecting managers with sensitivity to cultural and political processes, people with a “cultural antenna.” In the selection of qualified managers of megaprojects much attention has now been given to technical and professional qualifications. However, leaders of megaprojects need reflexive skills and critical thinking to successfully manage their projects (Crawford et al., 2006; Drouin et al., 2021).

REFERENCES Ahola, T., Russka, I., Artto, K., & Kujala, J. (2014). What is project governance and what are its origins? International Journal of Project Management, 32(8), 1321–1332. Altshuler, A., & Luberoff, D. (2003). Megaprojects: The changing politics of urban public investments. Brookings Institution. Alvesson, M. (2002). Understanding organization culture. Sage.

Cultural practices of governing megaprojects  217

Alvesson, M., & Sveningsson, S. (2016). Changing organizational culture: Cultural change work in progress. Routledge. Artto, K., & Kujala, J. (2008). Project business as a research field. International Journal of Managing Projects in Business, 1(4), 469–497. Bell, C. (1992). Ritual theory, ritual practice. Oxford University Press. Benitez-Avila, C., Hartmann, A., Dewulf, G., & Henseler, J. (2018). Interplay of relational and contractual governance in public-private partnerships: The mediating role of relational norms, trust and partners’ contribution. International Journal of Project Management, 36(3), 429–443. Biesenthal, C., & Wilden, R. (2014). Multi-level project governance: Trends and opportunities. International Journal of Project Management, 32(8), 1291–1308. Brannen, J. V., & Salk, J. E. (2000). Partnering across borders: Negotiating organizational culture in a German-Japan joint venture. Human Relations, 53(4), 451–487. Bresnen, M., Goussevskaia, A., & Swan, J. (2005). Managing projects as complex social settings. Building Research and Information, 33(6), 487–493. Brookes, N., Dainty, A., & Fellows, R. (2014). ESRC seminar series. Cultural issues for project organizations: Developing theory and practice. Engineering Project Organization Journal, 4(2), 59–64. Brunet, M. (2019). Governance-as-practice for major public infrastructure projects: A case of multilevel project governing. International Journal of Project Management, 37(2), 283–297. Brunet, M. (2021). Incheon Bridge, South Korea: The actualization of a landmark envisioned a century ago. In N. Drouin, S. Shankaran, A. H. Van Marrewijk et al. (Eds.), Megaproject leaders: Reflections on personal life stories (pp. 166–180). Edward Elgar. Brunet, M., & Aubry, M. (2016). The three dimensions of a governance framework for major public projects. International Journal of Project Management, 34(8), 1596–1607. Carson, S. J., Madhok, A., & Wu, T. (2006). Uncertainty, opportunism, and governance: The effects of volatility and ambiguity on formal and relational contracting. Academy of Management Journal, 49(5), 1058–1077. Chevrier, S. (2003). Cross-cultural management in multinational project groups. Journal of World Business, 38(2), 141–149. Cicmil, S., & Gaggiottia, H. (2014). The ‘slippery’ concept of ‘culture’ in projects: Towards alternative theoretical possibilities embedded in project practice. Engineering Project Organization Journal, 4(2), 134–146. Clegg, S., Loosemore, M., Walker, D., van Marrewijk, A., & Sankaran, S. (2023). Construction cultures: Sources, signs, and solutions of toxicity. Construction Project Organising, 3–16. Clegg, S. R., Pitsis, T. S., Rura-Polley, T., & Marosszeky, M. (2002). Governmentality matters: Designing an alliance culture of interorganizational collaboration for managing projects. Organization Studies, 23(3), 317–337. Crawford, L., Morris, P., Thomas, J., & Winter, M. (2006). Practitioner development: From trained technicians to reflective practitioners. International Journal of Project Management, 24(8), 722–733. Del Cerro Santamaria, G. (2013) Introduction. In G. Del Cerro Santamaria (Ed.), Urban megaprojects: A worldwide view (pp. xix–xlix). Emerald. Denicol, J., Davies, A., & Krystallis, I. (2021). What are the causes and cures of poor megaproject performance? A systematic literature review and research agenda. Project Management Journal, 51(3), 328–345. Drouin, N., van Marrewijk, A., & Müller, R. (Eds.). (2021).  Megaproject leaders: Reflections on personal life stories. Edward Elgar. Eskerod, P., & Blichfeldt, B. S. (2005). Managing team entrees and withdrawals during the project life cycle. International Journal of Project Management, 23(7), 495–503. Feldman, M. S., & Orlikowski, W. (2011). Theorizing practice and practicing theory. Organization Science, 32(5), 789–808. Fellows, R., & Liu, A. (2013). Use and misuse of the concept of culture. Construction Management and Economics, 31(5), 401–422. Geertz, C. (1973). The interpretation of cultures. Fontana Press. Gouldner, A. W. (1960). The norm of reciprocity: A preliminary statement author. American Sociological Review, 25(2), 161–178.

218  Research handbook on the governance of projects

Greiman, V. A. (2013). Mega project management: Lessons on risk and project management from the big dig. Wiley/PMI. Hodgson, D. E., & Cicmil, S. (2006). Making projects critical. Palgrave Macmillan. Latusk, D., & Vlaar, P. (2018). Uncertainty in interorganizational collaboration and the dynamics of trust: A qualitative study. European Management Journal, 36(1), 12–27. Löfgren, O. (2015). Catwalking a bridge: A longitudinal study of a transnational project and its ritual life. In A. H. Van Marrewijk (Ed.), Inside mega-projects: Understanding cultural practices in project management (pp. 33–68). Liber/Copenhagen Business School. Martin, J. (2002). Organizational culture: Mapping the terrain. Sage Publications. Maurer, I. (2010). How to build trust in inter-organizational projects: The impact of project staffing and project rewards on the formation of trust, knowledge acquisition and product innovation. International Journal of Project Management, 28(7), 629–637. Miller, R., & Hobbs, B. (2005). Governance regimes for large complex projects. Project Management Journal, 36(3), 42–50. Müller, R. (2012). Project governance. In P. W. G. Morris, J. K. Pinto, & J. Söderlund (Eds.), The Oxford handbook of project management (pp. 297–320). Oxford University Press. Müller, R., Andersen, E. S., Kvalnes, O., 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. Munns, A. K. (1995). Potential influence of trust on successful completion of a project. International Journal of Project Management, 13(1), 19–24. Ochieng, E. G., & Price, A. D. (2010). Managing cross-cultural communication in multicultural construction project teams: The case of Kenya and UK. International Journal of Project Management, 28(5), 449–460. Pitsis, T., Sankaran, S., Gudergan, A., & Clegg, S. R. (2014). Governing projects under complexity: Theory and practice in project management. International Journal of Project Management, 32(8), 1285–1290. Poppo, L., Zheng Zhou, K., & Ryu, S. (2008). Alternative origins to interorganizational trust: An interdependence perspective on the shadow of the past and the shadow of the future. Organization Science, 19(1), 39–55. Qiu, Y., Chen, H., Sheng, Z., & Cheng, S. (2019). Governance of institutional complexity in megaproject organizations. International Journal of Project Management, 37(4), 425–443. Ruijter, H., van Marrewijk, A., Veenswijk, M., & Merkus, S. (2021). ‘Filling the mattress’: Trust development in the governance of infrastructure megaprojects.  International Journal of Project Management, 39(4), 351–364. Sackmann, S. A., & Friesl, M. (2007). Exploring cultural impacts on knowledge sharing behaviour in project teams – Results from a simulation study. Journal of Knowledge Management, 11(6), 142–156. Sanderson, J. (2012). Risk, uncertainty and governance in megaprojects: A critical discussion of alternative explanations. International Journal of Project Management, 30(4), 432–443. Sminia, H. (2011). Institutional continuity and the Dutch construction industry fiddle. Organization Studies, 32(11), 1559–1585. Smits, K. (2014). Cross culture work: Practices of collaboration in the Panama canal expansion program. Gildeprint Drukkerijen. Swärd, A. (2016). Trust, reciprocity, and actions: The development of trust in temporary interorganizational relations. Organisation Studies, 37(12), 1841–1860. Trice, M. T., & Beyer, J. M. (1993). The cultures of work organizations. Prentice-Hall, Inc. Turner, R., & Keegan, A. (2001). Mechanisms of governance in the project-based organization: Roles of the broker and steward. European Management Journal, 19(3), 254–267. Turner, V. (1977). Process, system, and symbol: A new anthropological synthesis. Dædalus, 106(3), 61–80. Van den Ende, L., & Van Marrewijk, A. H. (2014). The ritualization of transitions in the project life cycle: A study of transition rituals in construction projects. International Journal of Project Management, 32(7), 1134–1145. Van den Ende, L., & Van Marrewijk, A. H. (2015). The social construction of cultural differences in a Siberian joint-venture megaproject. Journal of Strategic Contracting and Negotiation, 1(2), 168–185.

Cultural practices of governing megaprojects  219

Van den Ende, L., Van Marrewijk, A. H., & Boersma, K. (2015). Machine baptisms and heroes of the underground: Performing sociomateriality in an Amsterdam metro project. Journal of Organizational Ethnography, 4(3), 260–280. Van Gennep, A. (1960). The rites of passage. University of Chicago Press. Van Marrewijk, A. H. (2010). Situational construction of Dutch–Indian cultural differences in global IT projects. Scandinavian Journal of Management, 26(4), 368–381. Van Marrewijk, A. H. (2015). Inside megaprojects. Understanding cultural practices in project management. In S. R. Clegg (Ed.), Advances in organization studies (p. 209). Copenhagen Business School Press. Van Marrewijk, A. H., Clegg, S., Pitsis, T., & Veenswijk, M. (2008). Managing public-private megaprojects: Paradoxes, complexity and project design. International Journal of Project Management, 26(6), 591–600. Van Marrewijk, A. H., & Smits, K. (2016). Understanding cultural practices of governing in the Panama Canal expansion megaproject. International Journal of Project Management, 34(3), 533–544. Van Marrewijk, A. H., Ybema, S., Smits, K., Clegg, S., & Pitsis, T. (2016). Clash of the Titans: Temporal organizing and collaborative dynamics in the Panama Canal Megaproject. Organization Studies, 37(12), 1745–1769. Willems, T., van Marrewijk, A. H., Kuitert, L., Volker, L., & Hermans, M. (2020). Practices of isolation: The shaping of project autonomy in innovation projects. International Journal of Project Management, 38(4), 215–228. Williams, T. (2002). Modelling complex projects. Blackwell. Zwikael, O., Shimuzu, K., & Globerson, S. (2005). Cultural differences in project management capabilities: A field study. International Journal of Project Management, 23(6), 454–462. Zwikael, O., & Smyrk, J. (2015). Project governance: Balancing control and trust in dealing with risk. International Journal of Project Management, 33(4), 852–862.

19. Social acceptability and governance for public infrastructure projects Maude Brunet and Sofiane Baba

INTRODUCTION Public project governance is a topic that has been increasingly studied and considered as relevant in the project management literature (Sanderson & Winch, 2017; Volden & Samset, 2017). Yet, there has been sparse consideration of this topic in relation to sustainability, a crucial connection, given current environmental and social challenges (Huemann & Silvius, 2017). This chapter aims to bridge public project governance and sustainability, highlighting their relationship and some areas for future research. This exploratory study starts with a literature review of governance frameworks for public projects, of integrated impact assessments as a sustainability decision-making tool, and on research at the intersection of governance and project sustainability. Then, an empirical section presents institutional infrastructures in Quebec (Canada) that conduct assessments of public projects: the Bureau of Public Hearings on the Environment, the Environmental and Social Impact Review Committee, the Green Paper on Social Acceptability, and the Impact Assessment Agency of Canada. Based on this, a conceptual framework presents four approaches to integrating impact assessment processes into project governance: the proactive approach, the avoidance approach, the responsive approach, and the dynamic approach. A discussion relates the potential benefits of using the proactive and dynamic approaches to increase project sustainability and formalize the use of impact assessments in the governance frameworks. Improving governance is possible using proactivity, learning, and reflexivity, as experience has shown. Above all, the social acceptability of projects should be a precondition for moving forward. The conclusion highlights the contributions and limitations of this research and offers several avenues for further inquiry.

LITERATURE REVIEW Governance Frameworks While the literature on project governance and institutional and regulatory frameworks has been expanding in recent years, it still does not connect with the emerging literature on project sustainability (Huemann & Silvius, 2017). Researchers have worked on specific regulatory frames that dictate how a government (country, region, or locality) should proceed with major projects. Miller and Lessard (2000) referred to these as institutional frameworks and institutional arrangements. Building on this work, Klakegg et al. (2008) compared how Norway and the UK govern and manage their public projects. They proposed the following definition of a governance framework: “an organized structure established as authoritative within the institution, comprising processes and rules established to ensure projects meet their purpose” 220

Social acceptability and governance  221

(Klakegg et al., 2008, p. S30). As their work became essential and published by other outlets such as the Project Management Institute (Klakegg et al., 2009), other researchers have continued contributing to this critical yet still underrepresented stream of research in project management and governance. Necessary international comparative research is presented by Volden and Samset (2017), as they highlight the main differences and similarities in six countries regarding their governance schemes (Norway, the UK, Denmark, the Netherlands, Canada (Quebec), and Sweden). Interestingly, most current governance schemes have evolved toward a broader perspective on benefits whereas, previously, they were focused on a restricted perspective on efficiency (Volden & Samset, 2017). Volden and Samset’s (2017) study does not specifically target social and environmental impact appraisals but focuses on cost–benefit (economic) analysis of major projects. Based on the public administration literature, Brunet and Aubry (2016) have suggested that governance frameworks for public infrastructure projects serve three distinct purposes: for enhanced legitimacy, greater accountability, and increased efficiency. Brunet (2021) has shown that the institutional/governmental level is more concerned with legitimacy issues, as major infrastructure projects ultimately aim to increase public goods and value (Bozeman, 2007). Thus, public infrastructure projects need to garner legitimacy in their social context. This brings to the fore the necessity for consultation and representativeness. Yet, existing social impact assessment tools and sustainability criteria do not deal with constant scrutiny of multiple stakeholders with often incompatible expectations. Moreover, they are not embedded systematically in various existing governance frameworks, as we will develop later with the case of Quebec (Canada). They remain essential decision-making tools, which politicians and analysts can use (or not) to make fundamental and enlightening decisions aimed at the public good. Integrated Impact Assessments Program evaluation in the public administration literature is a specific research stream that is mature and abundant. However, ironically, not much can be found regarding public project evaluation, perhaps because projects are still sparsely acknowledged as an important vector in public administration (Hodgson et al., 2019). The evaluation literature has paid relatively little attention to large and high-impact public projects. As a result, there is a need to broaden the previous mechanistic way of doing cost and benefits analysis based on a rational and technocratic view (Lehtonen, 2014). Lehtonen et  al. (2017) propose enriching classical economic analysis with more encompassing social tools, such as network mapping and dynamic learning-oriented approaches. Impact assessments are widely used tools for evaluations, which can be sectoral and restricted to specific components such as economic, social, and environmental issues, or deal with fundamental rights. There has been a tendency in the past decade to turn toward integrated impact assessments (IIAs) in some public administrations, mainly in Europe and countries of the Organisation for Economic Co-operation and Development (Achtnicht et al., 2009). IIA can be defined as: “An ex ante impact assessment that aims to integrate in a coherent way the multiple impacts of government intervention. It aims to inform decision-making, enable arbitration between options and provide evidence of the anticipated effects of possible decisions” (Marchand & Brunet, 2019, p. 321). In their comparative study of four public administrations using IIA (France, the UK, Switzerland, and the European Commission), Marchand and Brunet (2019) found that all assessed the three

222  Research handbook on the governance of projects

pillars of sustainability (economic, social, and environmental). The four IIA schemes stated as recommended later become required and institutionalized at the national/supranational level. However, the objects assessed vary according to the jurisdictions (e.g., policies, programs, bills, proposals, and acts), and at the time of the study, only the UK included “projects” as an object that was required to be assessed. Thus, there is still plenty of room and a crucial need to consider a better entanglement between public project governance and the use of IIA for better decision-making. Having reviewed the use of this specific tool for enhanced decisionmaking aiming at greater public value, we turn now to the larger topic of project sustainability and social acceptability. Governance and Project Sustainability: Toward Social Acceptability The literature in project studies offers recent papers on the intersection of governance and sustainability, which this chapter argues is crucial to address. Shiferaw and Klakegg (2012) argued that policies should help decide which projects to choose that offer sustainability, doing so via sustainable impact assessments and other systems analysis procedures. Conducting a systematic literature review on project sustainability strategies, Aarseth et  al. (2017) have found that a small portion of the papers in leading journals combined project sustainability with governance, stakeholder management, or value management. They found eight project sustainability strategies, some at the project level (1. setting strategic and tactical sustainability goals; 2. developing sustainable supplier practices; 3. emphasizing sustainability in project design), some at the institutional level (4. setting sustainability policies; 5. influencing sustainability of project practices), and some at both levels (6. inclusion of sustainabilitypromoting actors in project organization; 7. developing sustainability competencies; and 8. sustainability emphasis in project portfolio management). The development of sustainability and project competencies is especially important for public administrations, as they are the project owners of most (if not all) megaprojects. Public administrations should have the required capabilities to be “strong owners” and lead by example for increased legitimacy (Winch & Leiringer, 2016). Other researchers have worked more explicitly on the link between project governance and sustainability. Zeng et al. (2017) addressed the topic of megaproject social responsibility as a means of governing economic, social, and environmental issues. They proposed a framework to integrate governance mechanisms in relations among corporations, the government, and the public for megaprojects’ societal governance. Klakegg and Haavaldsen (2011) conducted a study in which participants in the Norwegian public project governance framework were asked whether the chosen projects were relevant and sustainable. Respondents answered that their reasons for appraising projects as lacking sustainability were lack of commitment to the project from key stakeholders; conflict over objectives and/or strategies concerning the project; low economic and financial benefits compared to operational costs; and business or other conditions changing between concept stage and final delivery (Klakegg & Haavaldsen, 2011, p. 163). However, the authors acknowledged that the complex nature of sustainability might have been difficult for respondents to consider as their responses did not embrace the totality of the concept (Klakegg & Haavaldsen, 2011). In a recent special issue of the International Journal of Project Management titled Managing Projects to Meet Sustainable Development (Huemann & Silvius, 2017), two papers explicitly focused on governance mechanisms to enhance project sustainability. Hueskes et al. (2017)

Social acceptability and governance  223

investigated the incorporation of sustainability in a sample of 25 Flemish private–public partnerships (PPP) projects. They concluded that sustainability considerations currently play only a limited role in the projects studied and that the social dimensions of sustainability were largely neglected. Based on their findings, they suggested governance instruments to enhance sustainability in PPP projects: setting sustainability norms in output specifications; using sustainability instruments; devoting attention to stakeholder participation; weighting sustainability award criteria; competition on quality rather than on price; and having rewards for aspects such as energy efficiency (Hueskes et al., 2017). The study by Kivilä et al. (2017) identified control practices used by a project organization for sustainable project management. They suggest that project deliverables, along with the project management processes through delivery, should include sustainability indicators and monitoring of all three facets of economic, social, and environmental impact. Baba et al. (2021c) developed a reciprocity framework for community engagement to address the failure of the extractive industries to address societal expectations. When project governance is well thought out and stakeholders are strategically integrated into projects, it favors the social acceptability of projects (Baba & Raufflet, 2015; Nyembo & Lees, 2020; Saenz, 2021). This entails taking into consideration the needs of stakeholders from the initial phases of the life cycle and for the entire life of the projects, which may involve a certain paradigm shift in project governance (Baba et al., 2016). We broadly defined social acceptability as the stakeholders’ approval of a project which they consider legitimate because of the perceived balance between its positive impacts and its negative externalities (Baba et al., 2021a; Melé & Armengou, 2016). The inability of firms to achieve or maintain social acceptability has been documented across various extractive industries and contexts (Campero & Barton, 2015; Martinez & Franks, 2014; Wilson, 2016). Not being able to cultivate social acceptability is tantamount to jeopardizing the existence of the project, which can have important repercussions in the long term on future projects that the promoters might want to develop (e.g., Baba et al., 2021b). In what follows, we focus on Quebec’s experience with institutional infrastructures governing impact assessment processes, a mechanism at the very heart of the dynamics of social acceptability of projects.

INSTITUTIONAL INFRASTRUCTURE FOR CONDUCTING IMPACT ASSESSMENTS Quebec has a long experience with social acceptability and impact assessment of major development projects (Maillé et al., forthcoming). This experience has been developing over the past six decades or so, in parallel with the promotion of major projects, notably hydroelectric, which have begun to shape the role of citizen participation in the development of the Quebec territory. As of today, a whole institutional infrastructure has developed in the province, but also more broadly in Canada, to guide impact assessment processes and debate on the social acceptability of projects. In what follows, we will mainly focus on four key aspects of this infrastructure: the Bureau d’audiences publiques sur l’environnement (BAPE, Bureau of Public Hearings on the Environment), the Environmental and Social Impact Review Committee (COMEX), the Green Paper on Social Acceptability, and the Impact Assessment Agency of Canada. In particular, we delve into their fundamental objectives and the context in which they emerged, as well as how they operate.

224  Research handbook on the governance of projects

Bureau of Public Hearings on the Environment The BAPE originated in 1978. Considered today as one of the specific features of the Quebec participatory model in terms of social acceptability of development projects, the BAPE emerged in a social, historical, and institutional context in which environmental issues were becoming increasingly important in society. In particular, one should note the emergence of the concept of environmental assessment in the United States in 1969, the United Nations Conference on the Environment in 1972, the Environmental Quality Act in 1972, and the establishment of the environmental assessment process at the federal level in 1973. The BAPE’s mission is to inform and consult the public, investigate the projects entrusted to it and, finally, to enlighten government decision-making by conducting analyses and opinions that consider the 16 principles of sustainable development according to the provincial framework. The roles of the BAPE are listed in Table 19.1. The BAPE reports to the Minister of the Environment and Climate Change, despite being independent and impartial in the work it conducts. The BAPE analyzes projects related to various sectors and activities, whether they are roads, energy, mining, or waste related. As of March 2022, the BAPE has analyzed and formulated recommendations on 417 projects. Environmental and Social Impact Review Committee (COMEX) The COMEX was established due to the adoption of Section 22 of the James Bay and Northern Quebec Agreement (JBNQA) which was signed in 1975 by the government of Quebec, HydroQuébec, and the Grand Council of the Crees of Quebec. The COMEX is an independent body in charge of assessing and reviewing the environmental and social impacts of projects located south of the 55th parallel in the territory regulated by the JBNQA of 1975. It is a committee recognized for its work specific to the indigenous context. Five members constitute COMEX: three are appointed by the government of Quebec, including the president, and two are appointed by the Cree Nation government. To carry out the review of the projects, the members appointed by the government of Quebec benefit from Table 19.1  The four roles of the BAPE Role

Details

Inform

Through its public sessions and various means of dissemination, the BAPE provides citizens with the information they need to understand the issues related to development projects and to participate in the debate.

Consult

To fully understand the issues and concerns of citizens, the BAPE holds several public sessions with the objective of granting everyone the opportunity to raise questions and share their opinions and worries.

Investigate

The BAPE commissions have the power to investigate specific matters by questioning individuals who can shed light on the matter. In this vein, the BAPE can request specific documents to analyze the ins and outs of a project.

Advise

The BAPE reports, generally very well documented and based on extensive consultation work, support the Ministry of the Environment’s public decisions.

Source:   based on the official BAPE presentation

Social acceptability and governance  225

the analysis of one or more project managers of the Direction de l’évaluation environnementale des projets nordiques et miniers of the Ministère de l’Environnement et de la Lutte contre les changements climatiques. Other opinions resulting from internal consultations with other ministerial organizations targeted by the project leader are used as material for the analysis. On each of the identified issues, these consultations call upon the scientific expertise of specific stakeholders. On their side, the Cree members of the COMEX benefit from the expertise of the Cree Nation government analysts. During the COMEX meetings, the various analyses are discussed, debated, and combined. At the end of the discussions, the final recommendations of the members are adopted by the COMEX. The members of the COMEX then communicate their recommendations to the Quebec government regarding the project. When necessary, they also determine the conditions under which a project can be carried out by identifying the proper preventive or corrective measures. The active participation of the communities involved is also an important component of how COMEX operates. In particular, the traditional knowledge of indigenous communities is valued in these impact assessments. Within the framework of its mandate, COMEX pays specific attention to a variety of elements important to social acceptability within indigenous contexts such as: (1) protection of the hunting, fishing, and trapping rights of the indigenous people, (2) protection of the environment and the social sphere, (3) protection of aboriginal people, their societies, communities, and economies, (4) protection of wildlife, the physical and biological environment, and ecosystems, (5) the Cree First Nation’s participation in the application of the environmental and social protection regime. Green Paper on Social Acceptability Confronted with the increasing issues of social acceptability of development projects, particularly in the natural resources and energy sectors, the Natural Resources Ministry of Quebec (Ministère des Ressources Naturelles) initiated in November 2014 a process of assessment and major consultations to develop appropriate decision-making tools and guidelines for the reconciliation of land uses in Quebec. The Ministry was considering how to make the process of issuing legal authorizations for natural resource projects coherent with the likelihood that a project will be socially acceptable in its environment. At the time, proponents were obtaining legal authorizations before recognizing that their projects lacked a social license. Several controversial projects were at the heart of this dynamic, with some proponents even turning against the government to seek financial compensation after the cancellation of their projects. The minister in charge of the Green Paper on Social Acceptability justified this assessment project as follows: “In a context where the territory is increasingly solicited for various development activities, it is essential to act to promote dialogue and reduce the risk of conflict by harmonizing activities and ensuring that users live together” (Arcand, 2016). After having established an initial diagnosis of the good practices to be promoted at the level of the Ministry in order to favor the social acceptability of projects, “the Ministry then invited citizens, organizations and local elected officials to share their vision of the social acceptability of resource development projects and to suggest avenues for improvement” (Arcand, 2016). Overall, 25 meetings were held in 2015, with over 200 participants and 40 briefs submitted. The Green Paper was submitted to the parliament in 2016 for consultations and public hearings and is now considered as one of the most important normative frameworks developed in Quebec on the issue of social acceptability. Although criticized for being biased in favor of

226  Research handbook on the governance of projects

project developers when the Ministry of Natural Resources should be in favor of defending the common good (Batellier & Maillé, 2017), the Green Paper is now an important policy tool in the natural resources and energy sector for both the Ministry and project proponents. Five specific guidelines are outlined in the Green Paper: (1) increase awareness of the Ministry’s roles and responsibilities in land use planning and management; (2) make the planning more transparent and participatory and regularly update plans and use reconciliation mechanisms in public land use plans; (3) ensure the implementation of predictable information and consultation processes at all stages of a project; (4) promote the sharing of benefits of energy and mining development projects with host communities; (5) strengthen the Ministry’s capacity to analyze the impacts, economic spin-offs, and repercussions of projects by ensuring that social acceptability factors are taken into account. Impact Assessment Agency of Canada The Impact Assessment Agency of Canada (IAAC), formerly known as the Canadian Environmental Assessment Agency, was created in 1994 to manage all project impact assessment processes, except those administered by the Canadian Nuclear Safety Commission or the Canada Energy Regulator. The Agency was set up in anticipation of implementing the Canadian Environmental Act of 1992 which came into effect in 1995. In 2019, the new Impact Assessment Act came into effect and abolished the Canadian Environmental Act of 2012. Three key evolutions between these two acts are worth mentioning: the shift from a narrow focus on environmental impacts to broader impacts (social, health, environmental); greater publication participation mechanisms; and greater involvement of indigenous peoples in the consultations. The IAAC strives to deliver “high-quality impact assessments that contribute to informed decision-making on major projects in support of sustainable development” (Government of Canada, 2020). Since the environment is a shared responsibility in Canada between the federal and provincial levels of government, the IAAC works on projects that also involve the projects that have been evaluated in the provinces. Furthermore, beyond environmental impact assessments, the IAAC also looks at economic, social, and health impacts of potential projects.

FOUR APPROACHES TO INTEGRATING IMPACT ASSESSMENT PROCESSES INTO PROJECT GOVERNANCE By taking a close look at the many development projects that are in the news and that have made contemporary headlines, we understand that not all projects are the same in terms of project governance. First, there is the level of effort and involvement of the proponent in the impact assessment process, and thus in the integration of stakeholder concerns (i.e., Delannon et al., 2016). Second, depending on the level of effort and involvement in the impact assessment process, project proponents can themselves learn from the process at the organizational level. Such learning serves to improve project governance practices and moves them closer to economically, socially, and environmentally sustainable projects. Interestingly, when the proponent’s effort and involvement are significant and project governance prioritizes the impact assessment process as a strategic practice, learning is important. In contrast, when the impact evaluation process is perceived as a burden and receives minimal attention from the

Social acceptability and governance  227

Figure 19.1  Four approaches to integrating impact assessment processes into project governance sponsor, learning will be low. These dynamics give rise to four approaches that are illustrated in Figure 19.1: avoidance, responsive, proactive, and dynamic. The Avoidance Approach Avoidance is the first approach to (not) integrating social and environmental impact assessments into project governance. This approach depicts a situation where project proponents are not interested in valuing impact evaluation, which is seen as a burden and a waste of resources. Given this somewhat pejorative mindset about the ability of assessment processes to improve projects from a sustainable development perspective, project proponents do not allow themselves to learn about how their projects can be more sustainable. A good illustration of the avoidance approach is the case of Strateco. In 2006, Strateco began uranium exploration in the Otish Mountains, north of Chibougamau and about 200 kilometers from the Cree community of Mistissini, Quebec. It was the largest uranium exploration project in the province. A major regional mobilization in the James Bay region strongly criticized the Matoush project and pointed out the significant environmental risks. Several attempts by Strateco, including the creation of a permanent community relations position, failed to resolve the controversy. The consultation process itself was severely criticized by the Crees, the main indigenous community affected by the project. Faced with the formal opposition of the Crees to the Matoush project, Strateco argued that the environmental authorizations it had obtained from the government took precedence over the community’s consent. The company attempted to override the free and informed consent of the community, which speaks to its reluctant governance to incorporate the voice of stakeholders. Strateco thus attempted through this legal recourse to the Superior Court of Quebec to “invalidate a recommendation of the Provincial Review Committee (COMEX) … [which] recommended that the government accept Strateco’s project, but with certain conditions, the first of which was to obtain the written consent of the Crees” (Radio-Canada, 2013). Cree leaders viewed this judicialization of the controversy negatively and interpreted it as an attempt to reduce the scope of their aboriginal rights. By initiating these legal proceedings, Strateco is seeking to circumvent the treaty rights of the Cree Nation, including the environmental and

228  Research handbook on the governance of projects

social impact assessment process under the JBNQA, and to force a decision in its favor (Grand Chef Matthew Coon Come, Grand Conseil des Cris, 2013). The project was finally halted in March 2013 when the Minister of the Environment announced a moratorium on uranium exploration and mining in Quebec. Strateco’s legal actions to overrule this decision were rejected in 2017 by the Superior Court of Quebec and then in 2020 by the Supreme Court of Canada. The Responsive Approach The second approach is demanding in terms of involvement and effort in social and environmental impact assessment. That said, its spirit is strictly reactive in that this work is not seen as strategic; rather, the project proponent is reacting to its external environment. Here, proponents are often obliged to do so, either because of controversies tainting their project or legal obligations. This process of stakeholder involvement is almost perceived as a constraint, which implies that the learning potential is rather limited. Stakeholder engagement practices are often limited to the minimum required, similar to the transactional engagement strategy conceptualized by Bowen et al. (2010). For example, the recent project of Montreal’s Réseau Express Métropolitain (REM) illustrates the reactive approach (Brunet et al., 2021). The REM is a major fully automated lightrail system project that is planned to enter service progressively between 2021 and 2023. A specific legislative framework has been agreed between the Government of Quebec and the Caisse de dépôt et placement du dépôt du Québec, making this partnership one of a kind, labeled as “public–public.” This innovative framework allowed the project to be launched in record time but raises questions about the inclusion of the public and stakeholders. The gain in speed related to the implementation of the project is undeniable, but this approach seems to have certain consequences in terms of governance, transparency, and the participation of local populations. A public consultation process took place yet it was criticized as superficial and not seriously taking into consideration the points raised. The lack of learning from this process is such that the second phase of the project was removed from the promoters for a lack of social acceptability. The Proactive Approach The third approach we conceptualize is proactive insofar as project proponents give strategic importance to integrating social and environmental impact assessments into project governance. In this approach, proponents deploy the necessary financial, human, and expert resources to conduct these impact evaluations. Because of the great effort allocated to this strategic task, we argue that this proactive approach’s potential for organizational learning is very high. An illustration is the case of Hydro-Québec with the Eastmain-1-A-Sarcelle-Rupert (ESR) hydroelectric project in Quebec, Canada (see Baba et al., 2021a). Following more than a quarter of a century of disputes and mistrust, Hydro-Québec and the Crees (the First Nation which would host this project on its ancestral territory) worked in the early 2000s to ensure that the new ESR project would be socially acceptable. Both actors engaged in a partnership that was two-fold, i.e., related to the impact assessment process and the project’s economic benefits. This partnership was based on four pillars: the involvement of stakeholders upstream in the impact studies, the establishment of coordination mechanisms

Social acceptability and governance  229

and structures, the strengthening of local capacities and contribution to local development, and, finally, the establishment of financial channels and means throughout the life cycle of the project. Through a joint committee called Boumhounan, the Crees were involved in all the impact studies of the project on the biophysical and human environments. Hydro-Québec’s approach focused on the impact assessment before formally initiating the regulatory environmental assessment process. This allowed stakeholders to work upstream and ensure that all potential issues were addressed in a spirit of trust and collaboration. The ESR hydroelectric project was authorized in 2007, nine years after the project’s preliminary phase, and following five years of accelerated work on the impact assessments. Through this partnership, the local communities were involved at all stages of the project with a commitment to involve local stakeholders in identifying the issues that arise from the project and the solutions to resolve them. The governance of this project was one of the most inclusive in the history of Hydro-Québec: stakeholders were involved at every stage of the life cycle, with real power, as evidenced by the various technical changes made to the project following the Cree recommendations. The Dynamic Approach Lastly, the dynamic approach refers to the situation where project proponents take a strategic approach to integrate social and environmental impact assessment issues into project governance but where the learning and experience are such that the level of effort required is significantly reduced. This approach is called dynamic because it is a natural outcome of the previous proactive approach. The distinction here is related to continuous improvement, which, along with experience and the establishment of clear routines, procedures, and strategies for managing stakeholder relations, makes social and environmental assessment much more natural for stakeholders. It is to some extent similar to the forms of stakeholder engagement described by Bowen et al. (2008) as transformational (also see Delannon et al., 2016), representing “a radical departure from community engagement efforts of the past by involving symmetrical, two-way communication between firms and community stakeholders; learning and sense-making that is jointly generated” (Baba et al., 2021c, p. 890). The example of Hydro-Québec is a good illustration of the proactive approach slowly shifting toward a dynamic approach through a quarter-century of experience related to the engagement of local aboriginal communities (Baba et al., 2021a). In the mid-1990s, Hydro-Québec had great difficulty managing its social and environmental assessment processes in collaboration with local communities. Its James Bay projects were controversial and constantly challenged, especially the Great Whale project in James Bay, which was finally postponed sine die (not to say canceled). The arrival of a new chief executive officer brought a new policy: every project promoted by the company had to be economically, environmentally, and socially acceptable. This new direction, anchored in the philosophy of sustainable development, would change Hydro-Québec’s project governance forever: social acceptability took on an inescapable dimension and a major learning process began (Baba et al., 2016). The efforts deployed at the time were significant: the organizational culture had to be truly transformed. There was a need to shift from a culture focused on carrying out projects at all costs to one focused on co-construction of projects with local communities. Today, Hydro-Québec has considerably stabilized its approach to managing relations with local indigenous communities and has become an internationally recognized leader in this area in the hydroelectric sector. The effort

230  Research handbook on the governance of projects

required has naturally been reduced since these governance practices are now embedded in the organizational culture and shared by most of its members.

DISCUSSION We have presented four approaches to integrating social acceptability within projects as early as possible in the process (see also Baba et al., 2022). The various examples illustrate how it can be conducted, and possible outcomes. The legal battle of Strateco, which used avoidance, resulted in the project being terminated. The promoters of the REM, using a responsive approach, failed to learn from this experience. The use of this approach led them to lose the second expansion phase as the Quebec government took it over, claiming its low social acceptability to justify this governance shift. On the contrary, the cases where a proactive approach was undertaken show more positive outcomes for the main stakeholders. With time and learning, the project promoters can also substantially reduce their efforts to comply with the requirements of social acceptability with the dynamic approach while keeping high-quality projects that reflect the stakeholders and local communities’ concerns. While this remains a conceptual frame to be empirically tested, it articulates some important points regarding governance frameworks and social acceptability. First, we point to some blind spots, and then turn to the ways forward. Blind Spots Our conceptual frame is built on the premise that it is not mandatory but desirable for a project to be socially acceptable. It requires resources and efforts, although it might be beneficial for all in the end. First, there is a need for more integration of the impact assessments within the governance frameworks for major public projects. As we have presented four institutional infrastructures of Quebec for conducting impact assessments, we underlined that their main role was to make a recommendation, which can be considered or not by the decision-makers. For the BAPE, the projects to be studied are mandated on a single-case basis, it is not the case by default that all important projects be scrutinized for impact assessments. For COMEX, all projects that fall under the criteria of Section 22 of the James Bay Agreement must go through. It is not decisional because the committee recommends to the government. The Green Paper is a general framework to guide promoters and, above all, to provide the Ministry of Natural Resources with a coherent overall framework for managing the social acceptability of projects submitted to it. The IAAC is not decisional. Its role is to inform public decisions through quality environmental and social assessments. All projects that fall within the criteria set out in the environmental law go through this process, while the government can also require that projects that fall outside these criteria are also subject to the assessment process. We do not claim that these bodies should become decisional but the conditions under which impact assessments are conducted should be clarified; they should be the norm rather than the exception. Second, the timing for conducting impact assessments is also crucial and understudied from our perspective. So many public resources have been lost in long project front-ends. Whereas some decades ago, a promoter could just do their thing and inform the stakeholders afterward, this is no longer possible. The stakeholders must be consulted beforehand, which

Social acceptability and governance  231

can be more intensive but possibly yield a better understanding of the needs and thus better projects. We suggest that social acceptability should be a precondition for moving forward. In other words, project promoters should get their social license before their legal license. Also, good coordination should be deployed when multiple jurisdictions are involved, such as at the provincial and the federal levels. For example, the project GNL Saguenay was already stopped at the provincial level but the federal government pursued its environmental evaluation, although the decision was made to stop it. Third, the role of the governments must be clearly stated, as promoters of the public good (Bozeman, 2007). When a government is also a promoter for a project, this dual role might lead to ambiguity, having incentives to take avoidance or responsive approaches to go faster or cut costs (Sabini & Alderman, 2021). Experience tells that those are often short-term gains bringing important shortfalls afterward. Ways Forward There is a need to improve the current governance of major public projects with more proactive approaches regarding their social acceptability. It could become institutionalized, as is now the case with IIAs in several countries (Marchand & Brunet, 2019). Yet, whereas these impact assessments are mandatory for bills, policies, laws, decrees, or decisions, only one jurisdiction (the UK) makes those mandatory for projects. The idea is not to add more bureaucracy to already demanding requirements for projects, but to make sure that the public resources are invested in good projects in the most efficient way, to bring satisfaction to the main stakeholders, citizens, and civil society. Corporate social responsibility is a hot topic in management (Scherer & Voegtlin, 2020), and we suggest that future research could investigate the public side of this concept. As Winch and Leiringer (2016) suggested, some critical project owner capabilities in the public sector could also develop sensitivity toward social acceptability and capabilities to integrate impact assessments early in the projects’ life cycles. We should not fall into the trap of creating a “sustainability sublime” (Sankaran et al., 2020), yet there are several success stories available from which we can learn and develop capabilities. Considering the fact that major development projects often involve several governmental jurisdictions (for example in Canada: municipal, provincial, and federal), it would be important to clarify the duties and responsibilities of the different jurisdictions, especially in the area of social and environmental impact assessment. The confusion, even the irritants, surrounding the Great Whale project in the early 1990s in Canada is interesting in this respect (Mulvihill, 1997).

CONCLUSION In this chapter, we have argued that the governance frameworks for major public projects and their social acceptability remain to be better integrated. We have provided several examples of institutional infrastructures in Quebec for conducting impact assessments. We proposed four approaches to deal with social acceptability: avoidance, responsive, proactive, and dynamic. We discussed the current blind spots and possible ways forward. Although this chapter has inherent limitations, given its conceptual frame, which remains to be empirically tested, we invite researchers and practitioners to consider more closely the interactions between project

232  Research handbook on the governance of projects

governance and social acceptability. We believe that this topic is highly relevant and worthy of investigation in the years to come. We also invite public project owners to develop their capabilities in social acceptability.

REFERENCES Aarseth, W., Ahola, T., Aaltonen, K., Økland, A., & Andersen, B. (2017). Project sustainability strategies: A systematic literature review. International Journal of Project Management, 35(6), 1071–1083. https://doi​.org​/10​.1016​/j​.ijproman​.2016​.11​.006 Achtnicht, M., Rennings, K., & Hertin, J. (2009). Experiences with integrated impact assessment: Empirical evidence from a survey in three European member states. Environmental Policy and Governance, 19(5), 321–335. Arcand, P. (2016). Le chantier sur l’acceptabilité sociale: Une démarche innovante tournée vers l’avenir. Éthique Publique, 18(1). https://doi​.org​/10​.4000​/ethiquepublique​.2428 Baba, S., Courcelles, R., & Dunn, M. (2021a). Développement de partenariats avec les Premières Nations dans un grand projet hydroélectrique : Le cas du projet Eastmain-1-A–Sarcelle–Rupert à la Baie-James. In M. Brunet & A. Romero-Torres (Eds.), La gestion de projets au Québec: Des cas pour illustrer une expertise en croissance (pp. 83–99). JFD Éditions. Baba, S., Courcelles, R., & Dunn, M. (2022). Acceptabilité sociale : Cinq bonnes pratiques à promouvoir. Gestion, 47(3), 39–42. Baba, S., Hemissi, O., Berrahou, Z., & Traiki, C. (2021b). The spatiotemporal dimension of the social license to operate: The case of a landfill facility in Algeria. Management International, 25(4), 247– 266. https://doi​.org​/10​.7202​/1083853ar Baba, S., Mohammad, S., & Young, C. (2021c). Managing project sustainability in the extractive industries: Towards a reciprocity framework for community engagement. International Journal of Project Management, 39(8), 887–901. https://doi​.org​/10​.1016​/j​.ijproman​.2021​.09​.002 Baba, S., & Raufflet, E. (2015). L’acceptabilité sociale: Une notion en consolidation. Management International, 19(3), 98–114. https://doi​.org​/10​.7202​/1043005ar Baba, S., Raufflet, E., Murdoch, J. P., & Courcelles, R. (2016). Reconstruire des relations: Hydro-Québec et la Nation crie (1994–2015). Éthique Publique, 18(1). https://doi​.org​/10​.4000​/ethiquepublique​.2375 Batellier, P., & Maillé, M.-È. (2017). Acceptabilité sociale: Sans oui, c’est non. Écosociété. Bowen, F., Newenham-Kahindi, A. M., & Herremans, I. (2008). Engaging the community: A systematic review. http://nbs​.net​/wp​-content​/uploads​/ NBS​-Systematic​-Review​-Community​-Engagement​.pdf Bowen, F., Newenham-Kahindi, A. M., & Herremans, I. (2010). When suits meet roots: The antecedents and consequences of community engagement strategy. Journal of Business Ethics, 95(2), 297–318. Bozeman, B. (2007). Public values and public interest: Counterbalancing economic individualism. Georgetown University Press. Brunet, M. (2021). Making sense of a governance framework for megaprojects: The challenge of finding equilibrium. International Journal of Project Management, 39(4), 406–416. https://doi​.org​/10​.1016​ /j​.ijproman​.2020​.09​.001 Brunet, M., & Aubry, M. (2016). The three dimensions of a governance framework for major public projects. International Journal of Project Management, 34(8), 1596–1607. http://doi​.org​/10​.1016​/j​ .ijproman​.2016​.09​.004 Brunet, M., Drouin, N., & Gauthier, P. (2021). Le processus de consultation publique du REM, un projet à la gouvernance inédite. In M. Brunet & A. Romero-Torres (Eds.), La gestion de projets au Québec: Des cas pour illustrer une expertise en croissance. Les Éditions JFD. Campero, C., & Barton, J. R. (2015). “You have to be with god and the devil”: Linking Bolivia’s extractive industries and local development through social licences. Bulletin of Latin American Research, 34(2), 167–183. https://doi​.org​/10​.1111​/ blar​.12260 Delannon, N., Raufflet, E., & Baba, S. (2016). Corporate community engagement strategies and organizational arrangements: A multiple case study in Canada. Journal of Cleaner Production, 129, 714–723.

Social acceptability and governance  233

Government of Canada. (2020). Impact assessment agency of Canada - Mandate. https://www​.canada​ .ca ​/en ​/impact​-assessment​-agency​/corporate​/mandate​.html Grand Conseil des Cris. (2013). Les Cris contestent le geste de Strateco visant à contourner le processus relatif aux traités English [Press release]. Retrieved from. https://www.newswire.ca/ news-releases/les-cris-contestent-le-geste-de-strateco-visant-a-contourner-le-processus-relatif-auxtraites-511859281.html Hodgson, D., Fred, M., Bailey, S., & Hall, P. (2019). The projectification of the public sector. Taylor & Francis. Huemann, M., & Silvius, G. (2017). Projects to create the future: Managing projects meets sustainable development. International Journal of Project Management, 35(6), 1066–1070. https://doi​.org​/10​ .1016​/j​.ijproman​.2017​.04​.014 Hueskes, M., Verhoest, K., & Block, T. (2017). Governing public–private partnerships for sustainability: An analysis of procurement and governance practices of PPP infrastructure projects. International Journal of Project Management, 35(6), 1184–1195. http://doi​.org​/10​.1016​/j​.ijproman​.2017​.02​.020 Kivilä, J., Martinsuo, M., & Vuorinen, L. (2017). Sustainable project management through project control in infrastructure projects. International Journal of Project Management, 35(6), 1167–1183. https://doi​.org​/10​.1016​/j​.ijproman​.2017​.02​.009 Klakegg, O. J., & Haavaldsen, T. (2011). Governance of major public investment projects: In pursuit of relevance and sustainability. International Journal of Managing Projects in Business, 4(1), 157–167. http://doi​.org​/10​.1108​/17538371111096953 Klakegg, O. J., Williams, T., & Magnussen, O. M. (2009). Governance frameworks for public project development and estimation. Project Management Institute, Inc. Klakegg, O. J., Williams, T., Magnussen, O. M., & Glasspool, H. (2008). Governance frameworks for public project development and estimation. Project Management Journal, 39, S27–S42. Lehtonen, M. (2014). Evaluating megaprojects: From the ‘iron triangle’ to network mapping. Evaluation, 20(3), 278–295. https://doi​.org​/10​.1177​/1356389014539868 Lehtonen, M., Joly, P.-B., & Aparacio, L. E. (2017). Socioeconomic evaluation of megaprojects: Dealing with uncertainties. Routledge. Maillé, M.-È., Baba, S., & Marcotte, G. (forthcoming). Social license to operate: Social acceptance in the Quebec context. The Extractive Industries and Society Marchand, J.-S., & Brunet, M. (2019). The emergence of post-NPM initiatives: Integrated impact assessment as a hybrid decision-making tool. International Review of Administrative Sciences, 85(2), 319–336. https://doi​.org​/10​.1177​/0020852317694947 Martinez, C., & Franks, D. M. (2014). Does mining company-sponsored community development influence social licence to operate? Evidence from private and state-owned companies in Chile. Impact Assessment and Project Appraisal, 32(4), 294–303. https://doi​.org​/10​.1080​/14615517​.2014​ .929783 Melé, D., & Armengou, J. (2016). Moral legitimacy in controversial projects and its relationship with social license to operate: A case study. Journal of Business Ethics, 136(4), 729–742. http://doi​.org​/10​ .1007​/s10551​- 015​-2866-z Miller, R., & Lessard, D. (2000). The strategic management of large engineering projects: Shaping institutions, risks, and governance. Massachusetts Institute of Technology. Mulvihill, P. R. (1997). Environmental assessment and viable interdependence: The great whale river case in Northern Quebec (Ph.D.). Université de Montréal, Canada. https://www​.collectionscanada​.gc​ .ca​/obj​/s4​/f2​/dsk3​/ftp04​/nq26705​.pdf Nyembo, N., & Lees, Z. (2020). Barriers to implementing a social license to operate in mining communities: A case study of peri-urban South Africa. Extractive Industries and Society, 7(1), 153– 160. https://doi​.org​/10​.1016​/j​.exis​.2020​.01​.007 Radio-Canada. (2013). Uranium: les Cris contestent les procédures judiciaires entamées par Ressources Strateco. Radio-Canada. Retrieved from https://ici.radio-canada.ca/nouvelle/596581/ uranium-cris-strateco Sabini, L., & Alderman, N. (2021). The paradoxical profession: Project management and the contradictory nature of sustainable project objectives. Project Management Journal, 52(4), 379–393. https://doi​.org​/10​.1177​/87569728211007660

234  Research handbook on the governance of projects

Saenz, C. (2021). Creating shared value to get social license to operate in the extractive industry: A framework for managing and achieving the social license to operate. Emerald Publishing Limited. Sanderson, J., & Winch, G. (2017). Public policy and projects: Making connections and starting conversations – Joe Sanderson and Graham Winch. International Journal of Project Management, 35(3), 221–223. http://doi​.org​/10​.1016​/j​.ijproman​.2016​.12​.001 Sankaran, S., Müller, R., & Drouin, N. (2020). Creating a ‘sustainability sublime’ to enable megaprojects to meet the United Nations sustainable development goals. Systems Research and Behavioral Science, 37(5), 813–826. https://doi​.org​/10​.1002​/sres​.2744 Scherer, A. G., & Voegtlin, C. (2020). Corporate governance for responsible innovation: Approaches to corporate governance and their implications for sustainable development. Academy of Management Perspectives, 34(2), 182–208. https://doi​.org​/10​.5465​/amp​.2017​.0175 Shiferaw, A. T., & Klakegg, O. J. (2012). Linking policies to projects: The key to identifying the right public investment projects. Project Management Journal, 43(4), 14–26. https://doi​.org​/10​.1002​/pmj​ .21279 Volden, G. H., & Samset, K. (2017). Governance of major public investment projects: Principles and practices in six countries. Project Management Journal, 48(3), 90–108. Wilson, E. (2016). What is the social licence to operate? Local perceptions of oil and gas projects in Russia’s Komi Republic and Sakhalin Island. Extractive Industries and Society-an International Journal, 3(1), 73–81. https://doi​.org​/10​.1016​/j​.exis​.2015​.09​.001 Winch, G., & Leiringer, R. (2016). Owner project capabilities for infrastructure development: A review and development of the “strong owner” concept. International Journal of Project Management, 34(2), 271–281. http://doi​.org​/10​.1016​/j​.ijproman​.2015​.02​.002 Zeng, S., Ma, H., Lin, H., Chen, H., & Shi, J. J. (2017). The societal governance of megaproject social responsibility. International Journal of Project Management, 35(7), 1365–1377. http://doi​.org​/10​. 1016​/j​.ijproman​.2017​.01​.012

20. Learning through evaluation: the missing link in governance of projects Ole Jonny Klakegg and Gro Holst Volden

INTRODUCTION Governance frameworks have existed from the beginning of project management, although the term was not used until much later. The current generation of governance frameworks for public sector investment projects have been developed over the last 20 years and have now become mature in several aspects. In particular, this yields the stage-gate structures with their control functions and decision-making. One aspect, though, has not matured to the same degree: the learning loop, based on ex post evaluation of completed projects, which is still not an integrated aspect of most governance frameworks. Argyris and Schön (1978) developed the theory of action, in which they explained how agents are designers of action to achieve certain goals. By only focusing on the shortsighted degree of achievement, the theory explains how the agents are restricted to correcting their course to improve efficiency. This is called single loop learning. When the agents mature enough to consider the context in which the action is performed and its long-term effects, the theory explains how the agents also can consider what actions are effective and, thus, what actions are best fitted to given situations. This is called double loop learning. Reflection is another important aspect of learning. As Greenwood (2003, p. 1049) pointed out, the purpose of reflective practice is to create more desirable outcomes. She refers to Schön (1983), who defined two components: reflection-in-action and reflection-on-action, where the latter corresponds to double loop learning. Double loop learning is necessary because the improvement may depend on structural as well as action redesign. Building on 20 years of experience from the Norwegian quality assurance regime, this chapter illustrates the importance of ex ante appraisal, and ex post evaluations alike, in harvesting the benefits of having a working governance framework for public investment projects. Governing through all stages of development through front end and execution of projects is important but can only fix minor issues once a decision to finance is made. It is restricted to single loop learning (“doing things right,” cf. Argyris & Schön, 1996) and adjusting the course. In the long-term perspective, improvements resulting from double loop learning (“doing the right thing”) are far more important. Did the projects achieve their goals for major user groups? Were they good value for money? Were they sustainable? If not, what needs to be changed? It is vital to pick up on changes in the project environment as well as shifts in policy and priorities, and even needs for structural changes in the governance framework itself. This chapter suggests necessary principles and qualities required in governance frameworks to achieve the desired learning effects. 235

236  Research handbook on the governance of projects

THE LEARNING ORGANIZATION Intuitively we accept that every organization has an ambition to improve and develop its capability pursuing some measure of success. What organizations aim to achieve is individual to each organization and situational, and it changes and develops over time. What remains constant is the need for further development. This implies the need for learning. Learning in organizations has been a topic for authors and researchers over many decades. Örtenblad (2018, p. 151) points out that the focus on learning in organizations comes from two directions. One can be described as “organized learning,” building on pedagogy and educational studies, putting this into the context of management in an organizational setting. This puts the focus on management’s ability to stimulate learning in the organization. The other direction can be described as “organizational learning,” focusing on the organization where the learning takes place. This puts focus on the organization’s need for development and learning, as well as organizational success factors to make learning possible. Furthermore, Örtenblad (2018, pp. 151–152) discusses the definitions of the concepts of “learning organization” and “organizational learning.” He claims that some kind of organizational aspect must be related to the learning. The organizational aspect may take the form of: ●

● ●

the organization being a facilitator, supporter, and/or arranger of the learning going on in the organization, performed by individuals (“organization as facilitator”) the organization being an additional, actual learning unit (“organization as learning unit”) the organization being the end process (in contrast to the end product) that is dependent on learning and rests upon continuous learning to exist (“organization as end process”).

Organization as facilitator may be identified through the arrangement of in-house courses, support of individual employees to take continuing education, the spreading of information and guidelines, the propensity to conduct evaluations, and the arrangement of other types of exchange of experiences. It may also be described through the climate for learning – how strongly and explicitly the organization opens for experimenting and spending time on learning activities. Organization as learning unit may be identified through the distinction between the individual’s learning as an agent and the organization’s ability to gather, store, spread, and re-use that knowledge outside the individual. Argyris and Schön’s (1978) work is generally considered important to understand this distinction. According to Robinson (2001) they belong to the normative strand on learning organizations using empirical studies to form theories on how organizations may improve by interventions. Robinson contrasts their approach to the descriptive strand. Argyris and Schön use manipulation of symbolic representations of organizational life, which is different from the non-symbolic, feedback-driven account of learning offered by other researchers. This points to, on one hand, the organization’s effort to formalize and systemize knowledge and learning in systems, (symbolic) and on the other hand the organization’s ability to facilitate direct transportation of knowledge from one individual to the next through direct dialogue (non-symbolic). Organizations as end process is a more complex concept and understanding of organizational learning. It relates to teams and team development. The team is supposed to be able to solve problems and deal with emerging issues where team members can cover for each other. It requires strong focus on developing new skills and communication abilities. This

Learning through evaluation 

237

dynamic situation is a version of learning organizations that has a lot in common with organic structure – informal, decentralized, and non-hierarchical (Örtenblad, 2018, p. 153). New perspectives on learning organizations consider learning as associated with the collective, more than the individual. New perspectives consider learning a social and cultural process, rather than a cognitive process. In addition, newer perspectives look at learning as context dependent, in contrast to the context independent learning dominating the traditional perspectives (Örtenblad, 2018, p. 153). The focus on learning organizations is strongly associated with Peter Senge’s seminal book The fifth discipline: the art and practice of learning organizations (Senge, 1990). Here he defines five disciplines (“component technologies”) of learning organizations:

1. building a shared vision (common ideas that support selecting purposeful actions) 2. systems thinking (understanding how parts of the system work together) 3. mental models (how the individuals think about the world and how to take actions) 4. team learning (sharing experiences and learning together) 5. personal mastery (personal learning capacity and ability to act as a catalyst).

The shared vision is the organization’s key tool to make sure individuals and units of the organization work to take the organization in the desired direction toward common goals and contribute to developing a culture of learning and sharing. Systems thinking represents the need for a holistic view of the entire system. This underpins managers’ and employees’ ability to see that individual actions are correlated and dependent on others. This enables the understanding of patterns and improvement of systems. Mental models concern individuals’ understanding of who they are in the organizational context, what the business is about, and where they are collectively going in the future. The strongest organization is the one that is flexible and can adapt to changes by quickly developing new shared models. Team learning is the key to accomplish excellent performance and a functioning organization. This is the discipline where personal mastery and shared vision come together. A safe and honest work environment where team members are colleagues and not rivals is essential for learning. Personal mastery is not only about the individual competence but also the individual’s clear vision of goals and perception of reality. The gap between vision and reality drives behavior in the direction of the vision if the truth about reality is shared. Empowering individuals to reach personal mastery is another key tool for the learning organization. Senge’s (1990) message is that these five disciplines cannot stand independently – they are interrelated. The learning organization needs to understand and apply them all to achieve a continuous learning process. Nonaka (1991, p. 97) characterized knowledge-creating companies as places where “inventing new knowledge is not a specialized activity … it is a way of behaving, indeed, a way of being, in which everyone is a knowledge worker.” Nonaka suggested that companies use metaphors and organizational redundancy to focus thinking, encourage dialogue, and make tacit, instinctively understood ideas explicit. In the governance context this highlights the importance of the development of an organizational culture that supports sharing of experiences and makes knowledge available for learning.

238  Research handbook on the governance of projects

Returning to Argyris and Schön, in their book Organizational learning II: theory, method and practice (1996), they identify the two types of learning that might happen when there is a discrepancy between the intended result and the actual outcome of a task: ●

●

single loop learning where you find a solution within the given frame of values, preconditions, standards, etc., to achieve the intended outcome double loop learning where assumptions and beliefs are questioned, and new thinking and methods can be found.

Single loop learning can be associated with “doing things right,” and double loop learning may be associated with “doing the right thing” (Cartwright, 2002). Where doing things right concerns the operational short-term requirement to meet set standards, doing the right thing concerns the long-term improvement and organizational success. Here we may associate strategic perspectives. Both may be associated with governance, the setting of standards, and the defining of goals and strategies. Garvin (1993) suggested that “learning organizations are skilled at five main activities: systematic problem-solving, experimentation with new approaches, learning from their own experience and history, learning from the experiences and best practices of others, and transferring knowledge quickly and efficiently throughout the organization. Each is accompanied by a distinctive mind-set, tool kit, and pattern of behavior.” Systematic problem-solving relies on scientific methods and facts, not guesswork. This requires access to data, systematic analysis, and effective ways of communicating knowledge. Experimentation involves systematic searching for and testing of new ideas and knowledge. It may be in the form of ongoing programs or one-of-a-kind demonstration projects. It is driven by opportunity, rather than problems, and requires incentives for risk-taking. Learning from past experiences requires systematic assessment of successes and failures. Records of lessons learned must be open and accessible. Several definitions of lessons learned have been proposed – but a main point many authors have made is that the lesson (registered experience) is not learned until there is a change as a consequence (Rhodes & Dawson, 2013, p. 155). The lessons-learned literature thus focuses on systems for collecting (documenting) and connecting (sharing) experiences. The success factors of utilizing lessons learned are leadership, culture, roles, and responsibilities – and thus key issues in governance. Lessons may come from successes and failures, but the failures more explicitly question why this outcome came to be. Knowledge from failures is often instrumental in achieving subsequent successes. A productive failure is one that leads to insight, whereas an unproductive success does not. Learning from others includes getting new perspectives from outside one’s own immediate environment. Benchmarking is an example of systematic learning from others with a positive view. These studies should focus on practice – the way things are done – not the results. Transferring knowledge is important to make learning effective. It is far more helpful when shared among many than held in a few hands. There are many mechanisms by which knowledge can be transported including oral, written, and visual reports, visits, rotation programs, education, etc. They all have strengths and weaknesses (Garvin, 1993). In summary, the knowledge we have about learning organizations is that they need to master the craft of collecting, analyzing, and responding to facts about performance and how problems are solved. The learning organization also needs to be able to learn from its failures and successes

Learning through evaluation 

239

in a manner that helps the collective improve to a better version of itself, on the way toward a future vision that is shared in the organization. This involves actions on an organizational, team, and individual level. Projects as Learning Organizations Lessons learned is a recurring theme in project management (Rhodes & Dawson, 2013). This is due to the problems organizations face when trying to learn from experience made in fragmented project contexts and across organizations (Keegan & Turner, 2001). Divine and Zachry (2018) point out that project work is episodic, project professionals rarely have opportunity to reflect across projects to identify potential organizational, social, or tool-based contradictions affecting their work. Projects and project-based organizations do therefore have specific challenges. Kerzner (2000) places continuous learning and improvement as the highest level of project management maturity. He says that “without ‘discounted’ lessons learned, a company can quickly revert from maturity to immaturity in project management. Knowledge is lost and past mistakes are repeated.” Unlike the permanent organization, projects are action- and taskoriented and do not have the organizational mechanisms built in for learning. The outcome from learning processes is difficult to feed back to the permanent organization. Brady et al. (2002) hold that the uniqueness of projects is a challenge; their non-routine features hinder learning. Cooper et al. (2002) point out that the misguided belief that projects are too different to compare is a reason for a lack of learning in itself. Williams (2008) demonstrated that there is a vital need to learn from one project to the next. He also shows that there are fundamental reasons why projects cannot easily create such learning. The temporary nature of projects is one aspect. The project exists only in a limited time and then the organization is dissolved. The consequence tends to be that the individuals take the new knowledge with them. The complexity of projects is another reason for lack of systematic learning. The complexity makes it hard to extract knowledge, typically from fragmented value chains and supply chains that span many different organizations. Going back a few years earlier, Williams et  al. (2001) observed that “even when postproject reviews are performed, there are no standard, structured, routine ways of analyzing projects to ensure that the organization can draw lessons and learn for future projects.” That was then. Later, several methods were suggested; for example, Williams (2004) stated, “what are needed are simple, practical analysis methods that can be used routinely in post-project reviews to explicate how the project out-turn resulted and to identify the lessons which need to be learned,” and demonstrated the practice in a case study. There are also critical perspectives, like McAvoy and Butler (2009) calling projects reviews and post-mortems exercises in sense-making (p. 55), and mere feel-good exercises where the actors do not want to draw attention to failures (p. 57). They call for mindful use of postmortem outcomes in project reviews and decision-making. Further, Pan et al. (2007) hold that the attribution theory literature serves as one of the few promising theoretical bases to explain why project post-mortems fail. They report a case study of a project post-mortem undertaken for an abandoned electronic procurement system project. They identify five antecedent conditions of attribution error: the presence of self-appointed mindsets, the general persistence of negative beliefs, memory decay, selective recall of project events, and the influence of power dynamics within the organization. All of these can reasonably explain the failure to learn the

240  Research handbook on the governance of projects

right lessons from projects. Using attribution theory as a lens, they draw some conclusions as to how these challenges can be overcome. Duffield and Whitty (2015) suggested a more specific model for organizational learning through projects. It is an adaptation of the so-called Swiss cheese model, which explains how project know-how can be distributed across an organizational network of elements such as individual learning, culture, social, technology, process, and infrastructure. The purpose is to conceptualize how to learn from past project experiences and successfully distribute project know-how across the organization. In the continuing chapter we will use the term ex ante evaluations as similar to project appraisal, and ex post evaluations as similar to post-mortems.

EVALUATION AS A SOURCE OF LEARNING Evaluation is the systematic investigation of the feasibility of projects or other interventions. Unlike regular monitoring and control activities that follow the development continuously, it is an in-depth assessment which is done at defined points in the project’s life cycle (ex ante, during implementation, or ex post). Evaluation requires certain expertise and application of scientific methods, while at the same time focusing on solving practical problems and being useful to project participants, decision-makers, and other stakeholders (Rossi et al., 2004). Ex ante evaluation, in the form of project appraisal, is common in public as well as private projects, and is used to ensure that the right projects are selected and implemented efficiently. Ex post evaluation, on the other hand, is much rarer, especially in a strategic perspective. Many project owners do not know whether the intended effects were achieved, and whether assessments and forecasts were realistic or not. Worsley (2014) referred to ex post evaluations as “the weak link” in the assessment process for transport projects in Organisation for Economic Co-operation and Development (OECD) countries. The purpose of evaluation is threefold, accountability, management, and learning. In this chapter, we discuss the learning aspect. Evaluations with a learning purpose should not just provide a “yes” or “no” answer to whether a project succeeded. Instead, they require an openended mandate to focus on and get a deeper understanding of causes and effects. Further, in a learning perspective, it is often more useful to study groups of several projects than only one project (Samset, 2003). Evaluation can be an important source of learning. Samset (2015) refers to a study from the field of development aid, the sector that first started with project evaluations several decades ago. The study demonstrated that in a list comprising 19 learning sources, evaluation reports came in fifteenth. This indicated that the learning potential from evaluation is not realized. People learn first and foremost through their own experiences (they need to “make the mistakes themselves”). Secondly, they learn through direct communication, for example with colleagues talking about their own experiences. Reading evaluation reports may also provide useful input, but these tend to be forgotten more easily. Therefore, it is important to plan for how to integrate evaluations in the organization’s learning cycles, together with other sources of learning. Even if the evaluation is carried out by an independent party, there should be a plan for the involvement of affected parties, and a plan for how the results should be disseminated.

Learning through evaluation 

241

THE CASE: SYSTEMATIC EX POST EVALUATION OF PUBLIC PROJECTS IN NORWAY On the backdrop of major cost overruns, delays, and benefit shortfalls in public projects in the 1990s, the Norwegian Ministry of Finance introduced a scheme in 2000 for ex ante evaluation of the country’s largest public investment projects, the so-called quality assurance (QA) scheme (Volden & Samset, 2017). The intention was to ensure that projects were well planned with more realistic estimates of cost and benefits, before being presented to decision-makers for approval and funding. Twenty years later, about 300 projects have been exposed to this QA scheme. The scheme has provided researchers with longitudinal data on the country’s largest public projects, many of which are now completed and have entered their operational phase. Since 2012, systematic ex post evaluations have been made of projects in their operational phase, under the auspices of the Concept Research Programme at the Norwegian University of Science and Technology. The evaluation framework and some results are presented below. The Evaluation Scheme A key question in an evaluation of a public investment project is whether the project was successful. Evaluation is thus a matter of determining the degree of success. Samset (2003) suggested a three-level framework, including the operational, tactical, and strategic level of project success. The three levels respectively concern (1) project delivery, (2) achievement of agreed goals, normally related to user benefits, and (3) societal effects. We applied a broad, goal-oriented evaluation framework which covers all these three levels of success. It is based on a standardized set of five evaluation criteria, used by the UN and other institutions and development aid organizations, which has been endorsed by the OECD/Development Assistance Committee (OECD, 1991, 2002). We added cost–benefit efficiency as a sixth criterion – since cost–benefit analysis is mandatory in the front end of large Norwegian projects and has an important role in the QA scheme. The six criteria are: ●

●

●

●

●

●

Efficiency (operational level): This concerns project implementation and outputs in terms of cost, time, and quality, and how economically the project organization has converted inputs into outputs. Effectiveness (tactical level): This concerns whether the agreed outcome has been obtained and to what extent the project has contributed to this outcome. Other impacts (strategic level): This includes all consequences beyond the agreed outcome (side-effects), positive and negative, in the short and long term, for different stakeholders. Relevance (strategic level): A project is relevant if there is a need for what the project delivers. Need is seen in relation to national political priorities, measures of demand, and stakeholders’ preferences. Conflicts of interest should be brought to light. Sustainability (strategic level): A project is sustainable if its benefits are likely to persist throughout the lifetime of the resulting infrastructure. This usually requires that the total impacts (financial, environmental, and social) are acceptable in the long run. Benefit–cost efficiency (strategic level): This should be measured in terms of total willingness to pay in relation to cost, or secondarily in terms of outcome in relation to cost.

242  Research handbook on the governance of projects

More details on the evaluation framework and methodology are presented in Volden (2018). The evaluation model is broad to provide an overall picture of the degree of public project success. The purpose is to learn and improve in terms of “doing the project right” as well as “doing the right project”: single loop learning as well as double loop learning. At the same time, it is a fairly simple scheme that only includes six generic evaluation criteria, which should be possible to assess for all types of projects. With budget limitations, we cannot be too ambitious regarding the methodological rigor when responding to each criterion. We see it as more important that evaluations are carried out for a significant number of projects. A main feature is that all evaluations should apply the same format. This is to facilitate learning, since it allows us to draw lessons from aggregates of evaluations. Not only did we apply the same six criteria in all project evaluations, but we also aggregated the results by setting a score between 1 and 6 for each criterion in all projects using a predefined scale. This was to facilitate comparison of achieved success across projects. It should be noted that all the evaluations were done several years after the projects were completed (i.e., post-mortem). Thus, these are summative evaluations, not formative ones. There was no active project team in place at the time of evaluation, and the purpose was not to improve performance of an ongoing project. Instead, the purpose was for all those involved to learn in order to improve future project practices. Evaluation Results Between 2012 and 2021, 29 projects have been evaluated according to this scheme: 10 road projects, seven buildings, four railway projects, six information and communication technology (ICT) projects, and two defense projects. They constitute about half of all the projects that have undergone QA and have been in operation for at least five years. The Concept Research Programme has been responsible for the evaluations, but a different evaluation team was established in each case. The evaluation team could not have any conflict of interest in relation to the project. In all, 19 research and development organizations and consultancies have been involved. The evaluation team reviewed and, if necessary, adjusted the project’s internal logic or goal hierarchy. The team then operationalized each of the six criteria, and then carried out the evaluation by collecting and analyzing data, combining different data sources and methods. They interviewed participants from the original project team, the public agency being responsible for the projects, its parent ministry, and other stakeholders. Finally, the team summarized its assessment for each criterion by setting a score between 1 and 6. The final report was made public and distributed. The findings in terms of evaluation scores are presented in Table 20.1. Score 1–2 are shown as numbers in italics, score 3–4 as plain text, and score 5–6 in bold fonts. Reservations should be made concerning the accuracy of the scores. Unavoidably, a certain degree of subjective assessment must be accepted from the evaluator’s side. The overall picture of performance is quite positive, with average scores between 4 and 5 for all criteria. Only eight out of 29 projects had cost overruns, and the scores concerning efficiency were generally high. The weakest result concerns cost–benefit efficiency. Evaluators noted that this was the most challenging criterion to assess. A general problem for evaluators was the lack of data on key variables related to effects (for example, traffic volumes,

243

 

Sector

Road

Railway

Defense

Building

Road

Road

Road

ICT

Building

Railway

ICT

Road

Defense

Building

Road

Building

Building

Road

Road

Railway

 

Project

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

4

5 3

3

5

4

5 6 6 6 4

4

5

5

5

6

4

4 5 5 4 5 5

5

5

5

5

4

5 3

5

5

5

4

3

5

4

4

4

6

5

3

5

5

5

5

4

4

4

5

4

5

5

4

4

6

4

4

4

4

Other impacts (STRATEGIC)

Effectiveness (TACTICAL)

Efficiency (OPERATIONAL)

Evaluation criterion (level of success)

4

5

5

4

5

5

4

6

5

4

4

4

5

4

5

5

5

4

6

5

5 5

5

5

5

5

4

5

2

5

5

Sustainability (STRATEGIC)

5

3

4

5

3

5

3

5

5

Relevance (STRATEGIC)

Table 20.1  Results from 29 ex post evaluations in the operational phase of public projects in Norway

2

6

6

4

4

6

4

5

4

5

3

3

3

5

6

3

4

2

3

6

(Continued)

Benefit–cost eff. (STRATEGIC)

244

4 4

4

5

4.3

Railway

Building

Road

Road

ICT

ICT

ICT

ICT

Building

score

21

22

23

24

25

26

27

28

29   Average

Note:   Good results 5–6; acceptable results 3–4; bad results 1–2

4.4

2

4

1

5

4.3

4.5

4

5

5 5

3

4.5

6

5

2

4

5

5

5

5

3

3

4

Sustainability (STRATEGIC)

5

3

5

3

Relevance (STRATEGIC)

2

3

4

5

5 4

3

5

5 4

3

Other impacts (STRATEGIC)

3

4

3

4

2

4

Effectiveness (TACTICAL)

Sector

Project

Efficiency (OPERATIONAL)

 

 

Evaluation criterion (level of success)

Table 20.1  (Continued)

5   4.1

3

1

4

6

6

3

4

2

Benefit–cost eff. (STRATEGIC)

Learning through evaluation 

245

punctuality, and accident levels in the case of transport projects). Project appraisals and ex ante data of better quality would have made ex post evaluation easier. Generally, there were few projects which could be considered outright successes or failures (except four projects that received a high score (5 or 6) across the board). The majority showed more ambiguous results, being successful according to some perspectives and less successful in others. There is some correlation between scores on the three levels of success, which indicates that a project that is well planned and governed in one perspective has a greater chance of succeeding in other perspectives as well. The results indicate some interesting sectoral differences, although care should be taken when comparing scores across sectors since different project types may have very different goals and levels of ambition. Building projects scored very well on operational success, but slightly lower tactically and strategically. Railway projects were closely aligned with government strategies for a “green shift” in transport, and thus were considered relevant and sustainable. However, they scored very low on benefit–cost efficiency and on effectiveness. Road projects scored high on most criteria, but somewhat lower on efficiency, and on other impacts due to negative (environmental) side-effects that had not been properly dealt with. The promising results indicate that many project managers, owners, and funders do a good job in ensuring public project success, but also that there is potential for improvement in almost all projects, and that there is much to learn across projects and sectors. Some learning points from the evaluation reports include examples, which could often be explained by a tight construction market – recommendations for agencies are to ensure good timing of tenders, adjust the contract scope to maximize competition, and communicate actively with the marked in advance; geology – the ground conditions need to be properly investigated before one starts to build; and the need to involve user groups and operating personnel in the early stages of projects. Many projects did this, but some that did not had to make costly changes and adjustments after the project was completed, in order to ensure good operation and functionality. A fourth factor to highlight is that humans are of crucial importance, and that disputes in projects can be devastating. This should be taken more seriously in projects. In many projects there is a need to replace personnel. Evaluators also find that the work done on benefits management is often unsatisfactory, resulting in lower scores than necessary on effectiveness and benefit–cost efficiency. Some of the projects had very ambitious goals that required more than the physical infrastructure to be achieved. Still, few organizations had benefit-realization plans with assigned responsibility to benefit owners or project owners. Evaluators generally recommend that more projects take benefits seriously – “they do not occur by themselves.” Some projects had positive side-effects, resulting in high scores on other impacts and sustainability. Generally, the building projects did best in terms of maximizing positive sideeffects, typically depending on the location of the building. Others had negative side-effects (on the environment or the local community) which could have been avoided, and still others missed the opportunity of positive side-effects (for example, road projects in rural areas which could have been exploited in a local/regional growth strategy). Both positive and negative side-effects could have been avoided with earlier stakeholder involvement, and in many cases with use of compensatory and supplementary measures. Overall, most projects scored high on relevance, indicating that there was a need for the service that the project generated. However, the relevance criterion is multidimensional, and

246  Research handbook on the governance of projects

some projects involved conflicts of interest. Further, in some cases, evaluators noted that other, more relevant solutions to the problem existed (at least more cost-efficient ones). This should be seen in relation to the often-low scores on benefit–cost efficiency. For example, some of the ICT projects studied involved the development of new, complex solutions, although simpler, off-the-shelf systems were available. Not all public projects can or should be “profitable,” but one should at least consider whether a simpler solution, still with acceptable goal achievement, would substantially improve value for money. Use of the Evaluations The purpose of doing ex post evaluations is, ultimately, to improve the success of future projects. The organizations involved should compare all the evaluations of their own projects, compare with experiences from projects in other sectors, and look for useful lessons. For learning to happen, several conditions must be met. The evaluations ought to be of good quality, and the results and recommendations must also be perceived, understood, and used. Several steps were taken by the researchers to ensure this. Admittedly, these evaluations are somewhat “rapid,” and the scores sometimes uncertain, as is not uncommon in evaluations. Acceptable quality was ensured in various ways, most importantly by using triangulation (i.e., a wide range of sources and methods) as a key strategy for data collection and analysis. Further, we made guidelines for score-setting available to the evaluators, to promote calibration of assessments. We also made efforts to involve the affected parties (ministries and agencies) during evaluations, and we presented and discussed the findings with them afterwards. All the reports had executive summaries in which results and key lessons were summarized. Evaluations are not always used as intended (Dahler-Larsen, 2012; Samset, 2015). Wrong use of evaluations can be a problem. For example, instrumental use of evaluation results to reward or punish those involved may create barriers to truth-speaking and real learning. Even more common than wrong use is non-use of evaluations, which has been a topic within the evaluation literature since the 1970s. It is well documented that many evaluations are more ritual and symbolic than truth-seeking. Possible explanations can be related to the quality of evaluations, low perceived relevance to the target group, lack of standardization (making it difficult to compare results across projects), and explanations related to power and politics (unwillingness to use the results). As noted by Scriven (2015), the use or non-use of an evaluation’s results cannot be regarded as a quality criterion of the evaluation itself. Even evaluations of high quality, with clear communication, right timing, and user involvement, may be disregarded due to bad management (Scriven, 2015). This is the case not least in the public sector, where horse trading and other political considerations may be emphasized more than facts and knowledge in decision processes. On the other hand, there is no doubt that a good evaluation will have a higher probability of being used than a poor evaluation, all else being equal. A separate survey was conducted by the Concept Research Programme to investigate the perceived benefits and use of evaluations (Bukkestein et  al., 2020). Interviews were conducted with senior project owners and employees involved in project planning and appraisal in affected ministries and agencies. A key finding was that the target group had varying knowledge of the evaluations concerning their own sector. Those who had been involved and were aware of the evaluations often showed considerable interest in them. Their colleagues were sometimes not even aware of the

Learning through evaluation 

247

evaluations. Thus, evaluations did contribute to individual learning, but to a lesser extent to organizational learning. This is a well-known challenge in project-based organizations, and applies to all sources of learning, not only evaluations. It is often explained by the temporality as well as the uniqueness of projects. A complicating factor in this case was that the evaluations were initiated and carried out by an external party (a research programme). The findings of external evaluations normally have higher credibility than those of internal ones, especially for stakeholders and other parties outside the organization. On the other hand, external evaluations may generate less interest in the organization itself. Interestingly, the same survey found that very few (hardly any) evaluations were initiated by the ministries and agencies. Project appraisal and planning was thorough and systematic, and involved external QA according to the Ministry of Finance’s scheme, but only a few evaluations had been carried out ex post. These evaluations were directed on operational success and had essentially a control function, rather than learning as their focus. Bukkestein et al. (2020) provided a set of recommendations on how to improve the use and benefits of evaluations, the most important being: ●

●

●

●

●

involve the relevant ministry and agency earlier and more systematically in the evaluation process sort the findings and recommendations more clearly by target group; normally, operational project success concerns the agency most, tactical success concerns both agency and ministry, and strategic success concerns the ministry most focus less on the scores themselves and more on the learning points, when the report is written focus more on dissemination of the results; this should be a task for both the Concept Research Programme and the organizations involved organizations should take responsibility for some evaluation activities themselves, to supplement the work done by external parties.

CONCLUDING REMARKS The implemented governance framework evaluated in this case shows signs of focusing quality at entry over quality at exit. The focus on learning and long-term improvement of the governance could benefit from more attention. Project evaluations for learning purposes should be conducted routinely and according to a common evaluation framework, rather than as an ad hoc activity. In that way, it will be easier to draw lessons from successes as well as failures. Evaluating more projects with a simple and standardized evaluation method is more influential than deep analysis of a few single projects. Looking for patterns and improvement potential at system level can make a real difference if they result in learning across projects and organizations. Unfortunately, evaluations are often initiated only after something has gone wrong, and tend to focus more on the control aspect than learning. Going back to Örtenblad’s (2018) distinction between “organized learning” and “organizational learning” mentioned in the introduction, we believe that ex post evaluation can contribute to both. First, by making evaluation part of the organization’s formalized governance framework, one may ensure that evaluations are actually conducted, and the results collected

248  Research handbook on the governance of projects

and disseminated throughout the organization (i.e., organized learning). Secondly, the organization should strive to build a climate for learning, from one’s own projects as well as others’, including willingness to use the evaluation results to question old practice in light of new knowledge (i.e., organizational learning). The active use of ex post evaluations opens up double loop learning (Argyris & Schön, 1996), which supplements the single loop learning that might follow from control and measurement activities in project management. This also equips the organization for mature project management according to Kerzner (2000). As the evaluation models reported here show, the challenges reported by Brady et al. (2002) can be overcome. The uniqueness of projects is not an excuse to refrain from trying. The experience reported here also rejects theories that claim ex post evaluations should fail, like “feel good exercises unwilling to draw attention to failure” (McAvoy & Butler, 2009). However, the challenges represented by fragmentation and the effect of time on memory and attribution remain. One potential remedy to help against these challenges is making sure facts are measured and documented in a format that makes them available for later evaluation and support for planning and decision-making. Having entered the digital era, this should not be an unrealistic expectation. Experience so far does not give promises of a quick fix. Digitization has promised a lot more than it has delivered so far in this area. Still, we have not given up on such future perspectives. Digital systems do hold the potential for supporting broad learning and general improvement. The building of a database with actual results from completed projects may contribute to more realistic cost figures, as well as more realistic estimates of benefits. This will support more precise predictions, realistic decisions, and robust project planning. It may even facilitate futuristic systems that may include artificial intelligence and machine learning, estimation methods like reference class forecasting and case based reasoning, i.e., ways of predicting the future by looking at similar past situations and their outcomes. The value of such a database will increase over time with an increasing number of projects. Society should expect that decision-makers become equipped with better and more empirically based analyses supporting better use of public finances and sustainable development. Organizations at all levels of the project environment should welcome the effect of learning across projects and over time that would improve performance toward increased competitive strength and improved reputation. One motor that makes this development possible is the systematic use of effective evaluations in the front end, but also ex post after the project’s resulting infrastructure has been in operation for a few years. Embedding this good practice in the governance frameworks helps spread the effect across the public sector.

REFERENCES Argyris, C., & Schön, D. A. (1978). Organizational learning: A theory of action perspective. Addison-Wesley. Argyris, C., & Schön, D. A. (1996). Organizational learning II: Theory, method and practice. Addison-Wesley. Brady, T., Marshall, N., Prencipe, A., & Tell, F. (2002). Making sense of learning landscapes in project-based organisations. 3rd European Conference on Organizational Learning, Knowledge and Capabilities hosted by ALBA, Athens, Greece, 5–6 April. Bukkestein, I., Welde, M., & Volden, G. H. (2020). Bruk og nytte av etterevalueringer av prosjekter. Concept working paper (pp. 2020–2023). https://www​.researchgate​.net​/profile​/ Morten​-Welde​/

Learning through evaluation 

249

publication ​/348416220​_Bruk ​_og​_nytte​_ av​_etterevalueringer​_ av​_prosjekter​/ links​/5ff​db83​6299​bf14​ 0888cf1d6​/ Bruk​-og​-nytte​-av​-etterevalueringer​-av​-prosjekter​.pdf Cartwright, S. (2002). Double-loop learning: A concept and process for leadership educators. Journal of Leadership Education, 1(1), 68–71. Cooper, K. G., Lyneis, J. M., & Bryant, B. J. (2002). Learning to learn from past to future. International Journal of Project Management, 20(3), 213–219. Dahler-Larsen, P. (2012). The evaluation society. Stanford Business Books. Divine, D., & Zachry, M. (2018). Project management, contradictions, and textualized activity: Supporting reflection in project based organizations. Technical Communication, 65(2), 194–209. Duffield, S., & Whitty, S. J. (2015). Developing a systemic lessons learned knowledge model for organisational learning through projects. International Journal of Project Management, 33(2), 311–324. Garvin, D. (1993, July–August). Building a learning organization. Harvard Business Review, 78–91. Greenwood, J. (2003). The role of reflection in single and double loop learning. Journal of Advanced Nursing, 27(5), 1048–1053. Keegan, A., & Turner, J. (2001). Quantity versus quality in project based learning and continuous improvement. Management Learning, 32(1), 77–98. Kerzner, H. (2000). Applied project management: Best practices on implementation. New York: Wiley. McAvoy, J., & Butler, T. (2009). Project post-mortems: Mindless mismanagement of agreement. Journal of Decision Systems, 18(1), 53–73. https://doi​.org​/10​.3166​/jds​.18​.53​-73 Nonaka, I. (1991, November–December). The knowledge-creating company. Harvard Business Review, 85(7/8), 162. OECD. (1991). DAC principles for evaluation of development assistance. OECD, Development Assistance Committee. OECD. (2002). Glossary of key terms in evaluation and results based management. OECD, Development Assistance Committee. Örtenblad, A. (2018). What does “learning organization” mean? Editorial. Learning Organization, 25(3), 150–158. Pan, G., Pan, S. L., & Newman, M. (2007, December). Information systems project post-mortems: Insights from an attribution perspective. Journal of the American Society for Information Science and Technology, 58(14), 2255–2268. Rhodes, L., & Dawson, R. (2013). Lessons learned from lessons learned. Knowledge and Process Management, 20(3), 154–160. Robinson, V. M. J. (2001). Descriptive and normative research on organizational learning: Locating the contribution of Argyris and Schön. International Journal of Educational Management, 15(2), 58–67. https://doi​.org​/10​.1108​/ EUM0000000005395 Rossi, P. H., Lipsey, M. W., & Freeman, H. E. (2004). Evaluation: A systematic approach (7th ed.). SAGE. Samset, K. (2015). Reell eller rituell evaluering. Stat og Styring, 3, 6–9. Samset, K. F. (2003). Project evaluation: Making projects succeed. Tapir Academic Press. Schön, D. A. (1983). The reflective practitioner: How professionals think in action. Basic Books. Scriven, M. (2015). Key evaluation checklist (KEC). http://michaelscriven​.info​/pap​ersa​ndpu​blic​ations​ .html. Senge, P. M. (1990). The fifth discipline: The art and practice of the learning organization. Doubleday. Volden, G. H. (2018). Public project success as seen in a broad perspective: Lessons from a metaevaluation of 20 infrastructure projects in Norway. Evaluation and Program Planning, 69, 109–117. Volden, G. H., & Samset, K. (2017). Quality assurance in megaproject management: The Norwegian way. In B. Flyvbjerg (Ed.), The Oxford handbook of megaproject management (pp. 406–427). Oxford University Press. Williams, T. M. (2004). Identifying the hard lessons from projects – Easily. International Journal of Project Management, 22(4), 273–279. Williams, T. M. (2008, May). How do organizations learn lessons from projects – And do they? IEEE Transactions on Engineering Management, 55(2), 248–266.

250  Research handbook on the governance of projects

Williams, T. M., Ackermann, F., Eden, C., & Howick, S. (2001, November). The use of project postmortems. Presented at the Project Management Institute Annual Symposium. Worsley, T. (2014). Ex post assessment of transport investments and policy interventions: Prerequisites for ex-post assessments and methodological challenges. ITS roundtable summary and conclusions. International transport foundation discussion paper 2014–19. https://www​ .econstor​ .eu​ / bitstream​ /10419​/109153​/1​/818314141​.pdf

21. Environmental, social, and governance criteria and their relationship with governance of major infrastructure projects Nathalie Drouin and Yves Genest

INTRODUCTION Everywhere infrastructures are crumbling. It has been estimated that $94 trillion will be needed globally in infrastructure investment by 2040 (Reuters, 2017).1 Governments acting alone do not have the resources to meet these needs so private investments are required. In addition, the context in which these infrastructures are delivered has changed. The ill effects of climate change disrupting economic and social activities have drawn governmental and private sector attention toward considerations about how infrastructure may be more sustainable, inclusive, and value maximizing to end users and communities. In recent past years, sustainable requirements culminated in the conceptualization of environmental, social, and governance concerns, called ESG. According to the British Business Bank, ESG is defined as “a collective term for a business’s impact on the environment and society as well as how robust and transparent its governance is in terms of company leadership, executive pay, audits, internal controls, and shareholder rights” (British Business Bank, 2022). Environmental aspects consider environmental issues such as waste, energy use, natural resource conservation, and developing greener products and services; social aspects look at the organization’s relationship of both internal and external stakeholders to ensure that firms are socially responsible and promote ethical and socially conscious behaviors such as equality and fairness; and governance ensures that leadership and shareholders are being held accountable in terms of transparent accounting methods, accurate reporting to stakeholders on financial performance, and preventing corruption, bribery, and conflicts of interests with other organizations (FINSMES, 2022). ESG measures “how business integrates environmental, social, and governance practices into operations, as well as business model, its impact, and its sustainability” (British Business Bank, 2022). A great variety of benchmarking mechanisms is available for assessing the compliance of organizations’ activities in terms of ESG (Economist, 2022; Boffo & Patalano, 2020). These ESG activities are, for instance, board diversity, firms’ reduced material and energy consumption, and investing in local community projects, to name a few. Sources of investment capital are increasingly committing to ESG and being ethically responsible in ensuring compliance and adherence to ESG principles while financing business proposals

1 Please note that infrastructure in this report covers seven sectors: roads, railways, airports, sea ports, electricity, water, and telecommunications. It does not include waste management, hazardous waste management, or public constructions. For more details follow this link: https://outlook​ .gihub​.org/. 251

252  Research handbook on the governance of projects

(Broadstock et al., 2021). ESG is important for three reasons: (1) to bring awareness of the different issues due to climate change that are occurring and encourage businesses to adopt practices and policies that are better for the environment; (2) to create equal, healthy, and safe working environments that are more attractive to employees; and (3) to secure investments (FINSMES, 2022). However, if ESG is so important, how can we ensure that public and private investments directed to infrastructure projects meet high environmental, social, and governance standards (Hebb, 2019)? To answer this question, this chapter looks at ESG criteria through an overview of the literature in order to highlight where these principles come from and what their relationship is to the governance of major infrastructure projects. The research methodologies adopted involve a literature review covering ESG and an examination of some practical cases to finally conclude with challenges to address. All sources for the literature review were drawn from the JSTOR and SCOPUS databases using the keywords “ESG,” “ESG criteria,” “Governance,” “Infrastructure,” “Infrastructure project*,” and “large infrastructure project*.” Those found on SCOPUS and JSTOR were selected according to their citation frequency and their relevance for the understanding of the topic. But before exploring these principles in more detail, let us emphasize the following to highlight why it is important for major infrastructure projects (MIPs) to meet ESG challenges. MIPs are common goods that are too often unsuited to the needs of populations. They are complex to manage (Flyvbjerg, 2017) and it is well recognized that their implementation requires high capital, the involvement of multiple stakeholders, and the consideration of environmental, social, and governance challenges (PRI, 2022). Thus, the conventional governance practices of MIPs, which essentially consider costs, schedules, control, and the realization of short-term profits, are no longer sufficient to ensure their success (Flyvbjerg, 2017). The performance and success of MIPs are based more on the creation of social value, non-financial benefits that promote the economic development of societies and the wellbeing of their populations at the local, national, or international level (Sankaran et al., 2020a, 2020b; Drouin & Turner, 2022). It becomes urgent to equip key stakeholders (governments, managers, investors, and populations) and to enlighten them on the ways to meet ESG challenges while meeting the objectives of sustainable development (Drouin & Caron, 2020; Caron & Drouin, 2019; Sankaran et al., 2020a, 2020b). This echoes the 2030 Agenda for Sustainable Development adopted by the United Nations (UN, 2021) which, via its objective 9, promotes through a partnership approach the sustainable development of infrastructures for the improvement of the quality of life in the world. INTOSAI (2020), the audit arm of the United Nations, has also issued a detailed methodology to assess implementation of sustainable development goals. This underlines the importance of engaging communities in the implementation of MIPs and to study in depth MIPs’ positive and negative impacts on populations throughout their life cycle. Several researchers (Drouin et al., 2013, 2021; Müller et al., 2019, 2021; Brunet et al., 2021; Drouin & Turner, 2022) confirm the importance of reviewing the models of traditional governance by looking at new ways to generate value attached to these MIPs. Researchers also show that firms must actively participate in this new effort in order to rethink the value creation of MIPs to avoid being entrenched by the interests of particular customers (SalvatierraGarrido & Pasquire, 2011; Angelstam et al., 2013). However, MIPs are managed by leaders who are under increasing pressure to perform, to conduct themselves for more financial gain, and to “do good” at the same time. These economic actors transform inputs into outputs, which need to be governed and managed (decisions and resource allocation) and have owner(s) and investors with an interest in the

Environmental, social, and governance criteria  253

successful operation and performance of the firms who are managing these projects (Gibbons & Robert, 2013; Huang, 2021). The total benefits of these firms are no more captured entirely in observed market prices. There is an increased interest regarding the role of these firms (as individual, as organization, and collectively as institution) in the communities in which they operate and build infrastructures responding to economic conditions as well as social, cultural, and environmental considerations (Huang, 2021). However, the rationale for ESG activity is still not that apparent in firms’ financial disclosure or during the management of their infrastructure projects per se. The motivation by profit-seeking firms to undertake voluntary ESG activities and to systematically integrate them in their practices to create value is still unclear (Huang, 2021). A significant gap remains in our knowledge about ESG criteria, their value, and the relationship between ESG criteria and the governance of MIPs. The next sections try to address these questions to better understand the ESG criteria/ MIP governance relationship. Some cases are also discussed later in this chapter to illustrate and support our understanding of this ESG criteria/MIP governance relationship.

WHERE DO ESG CRITERIA COME FROM? With the global spread of Covid-19, the war in Ukraine, and the meltdowns in the stock market, ESG issues have aroused global concerns (Li et al., 2021). Increasing severe sustainable development problems in the environment, society, and the financial market have put forward sustainable development action plans such as ESG as a response to these concerns. Growing public awareness concerning the tangible repercussions of commercial activities on people and ecosystems (such as exploitation, abuse, pollution, or the deterioration of habitat) has also brought about a number of measures and practices to assess and limit them. The exponential growth of literature concerning ESG criteria highlights this trend (Li et al., 2021). ESG calls for responsible investment. Principles for responsible investment are defined as “a strategy and practice to incorporate environmental, social and governance factors in investment decisions and active ownership” (PRI, 2022). ESG is a standard used by investors to evaluate corporate behavior and financial performance (Li et al., 2021). Thus, literature on the topic predominantly stems from the financial and business sectors, with respect to the impact of ESG on corporate financial performance (CFP), and the evaluation and disclosure of ESG practices within firms. The first point highlights the role of ESG on mitigating risk, the effect of ESG evaluation on firm value, and the central role played by governance in raising ESG scores. The second point discusses how ESG practices are tracked, evaluated, and disclosed.

THE QUESTION OF ESG PROFITABILITY According to Friede et al. (2015), there has been an outpouring of academic writing since the 1990s attempting to decipher whether applied ESG criteria produce positive or negative returns for firms. The results, however, are generally “ambiguous, inconclusive, or contradictory” (Friede et al., 2015, p. 211). Their own study reviews more than 2200 empirical studies on the subject of ESG–CFP correlation conducted since the 1970s, concluding that long-term ESG investing generally results in positive financial results. The far-reaching scope of their research asserts it as an authoritative source for gaining insight into the subject. Nonetheless,

254  Research handbook on the governance of projects

the profoundly heterogeneous nature of this field calls for nuanced and pointed positioning. For instance, Nollet et al. (2016) find that corporate social responsibility (CSR) only pays off once a certain threshold is crossed, only after which firm value will increase. Others like Li et al. (2021), looking at the impact of ESG on economic consequences, identified some studies that found positive, negative, and non-linear correlations. For instance, Jayachandran et al. (2013) using the classification measures of the social dimension (product social performance) and environmental dimension (environmental and social performance) show that compared with the environmental dimension, the social dimension has a stronger, positive impact on corporate performance. Negative correlation was also observed. For example, Chen et al. (2018) found that the mandatory disclosure of CSR reduces performance and increases social responsibility costs, which generates positive externalities at the expense of shareholders’ interests. Barnett and Salomon (2006) show that the relationship between corporate sustainable development behavior and financial performance is not linear. These authors analyzed the relationship between social performance and financial performance based on environmental and social dimensions, and found that financial returns began to decline as the number of social dimensional screening projects used by socially responsible investment increased. However, the financial returns rebounded again as the number of screenings continued to increase. Huang (2021) in reviewing alternative accounts for the relationship between ESG and CFP found that the weight of empirical evidence shows a positive, statistically significant, but economically modest ESG–CFP link. Despite these inconsistencies and disagreements, the perceived profitability of ESG norms is actively being applied in the corporate finance field. Indeed, the application of ESG criteria by investors, fund managers, or firms is carried out not as an ethical decision, but first and foremost as a financial one driven by investment performance, client demand, and product strategy (Amel-Zadeh, 2018). From the available studies that present the financial advantages of ESG standards, we find three emerging subjects: (1) ESG practices as risk mitigators, (2) the effect of ESG evaluation on firm value, and (3) the weight of the governance factor in raising ESG scores. These are discussed below. Risk Mitigators The interplay between the soundness of firms and the trust invested by investors and fund managers is highlighted by the notion of risk. Institutional investors face tensions embedded in the fiduciary duty they owe to their beneficiaries. This duty was interpreted in the past by maximizing profits (Hebb, 2019). Thus, institutional investors, like pension funds, tend to be risk averse and shy away from risky investment and uncertain assets (Hebb, 2019). Shareholders and investors base their decisions on the reliability of their assets in relation to their potential returns, which is affected by the firms’ responsibility (Garcia et al., 2017). Integrating higher ESG standards that reduce risk in investment is recognized as a key component of fiduciary duty and allows investors to take into account short-term higher costs of investments with higher ESG that should pay off over time (Hebb, 2019). While the literature is also divided on whether the operation costs associated with the application of ESG criteria outweigh their financial benefits, it is becoming clearer that firms managing more harmful ESG practices are liable to more acute financial risks, occurring through legal prosecutions, fines, and unstable relationships with communities, governments, and regulators (Nofsinger & Varma, 2014). Brooks et al. (2018) find that socially responsible behavior correlates to

Environmental, social, and governance criteria  255

weak systematic risk levels and that irresponsible social practices bring the opposite. As for investment firms, applying ESG criteria helps flag these riskier firms and better manage the reliability of a fund by heightening transparency and investors’ trust (van Duuren, 2016; Li et al., 2018). Moreover, as environmental, economic, and political shocks disrupt financial markets, it is found that socially responsible investment funds fare better in times of crisis than conventional funds (Nofsinger & Varma, 2014). Responsible investment has been a growing phenomenon since the early 2000s and has grown from a niche investment approach to a mainstream understanding (Hebb, 2019). Responsible investment signatories to the PRI now account for two-thirds of all investable assets in the world (PWC, 2017). Thus, ESG factors used to be considered as extra-financial with no influence on the financial valuation of the investment (Hebb, 2019). But, Clark et al. (2014) have shown that these factors can play a role in reducing investment risk and enhance financial performance over time. This brings us on to discuss ESG evaluation in the next section. ESG Evaluation ESG criteria serve as a platform through which to better evaluate the non-financial happenings that define the health and stability of a firm. The weight of these non-financial metrics has been given an increasing amount of attention since the early 2000s and the mandate of a company is shifting from the maximization of shareholder wealth to include a broader responsibility toward a network of stakeholders (Li et al., 2018). As stated by Li et al., “other parties are also involved in the nexus, employees, suppliers, customers, communities, banks, regulatory agents, etc.” (2018, p. 2), and this responsibility can be accounted for and communicated through ESG disclosure. By explicitly considering and acting on the non-financial impacts of their activities, firms give their shareholders, stakeholders, and other parties a better understanding of their business. In other words, strong managerial relationship-building forges reliability, trust, and stability. In the long term, this effort pays off. Brooks and Oikonomou (2018) outline the following trends: ESG disclosure is correlated to better ESG performance and firm performance, and corporate social responsibility decreases financial risk. However, they also highlight the financial cost of screening out so-called “sin industries” (like tobacco and firearms). The literature also presents divergent views on the effect of ESG controversies (whereby a firm has been publicly held accountable for ESG harms) on firm value. Some studies, such as that by Groening and Kanuri (2013), show negative correlations, while others, such as Aouadi and Marsat’s (2018) present data backing a neutral or positive correlation for high-attention firms. In addition, the shortage of data on the performance of infrastructure projects regarding ESG is still a barrier to demonstrating the value of ESG standards or to truly evaluate the ESG effects of firms. It could be explained by the fact that: financial data, ESG standards, and performance metrics are still under development (Environmental Defense Fund, 2017; Hebb, 2019); non-transparent ESG disclosure is still a risk since firms are exposed to corruption and mismanagement (Elger & Frazao, 2016); and MIPs are subject to political pressure or social acceptability by communities in which they reside that can derail infrastructure projects (Drouin & Turner, 2022). An emerging approach to keep track of ESG performance is the establishment of audit standards providing a comprehensive baseline of sustainability disclosure practices. The recently formed International Sustainability Standard Board has been created for this purpose

256  Research handbook on the governance of projects

and has stated its objective of contributing to the provision of high-quality, transparent, reliable, and comparable reporting on ESG matters (IFRS, 2021). A study on the benefits of audits of sustainability reporting by third parties (Giudice & Rigamonti, 2020) suggests that it can improve the reliability of ESG scores. Governance Factor A repeating motif of interest is the predominant role played by governance practices (such as company leadership, executive pay, audits, internal controls, and shareholder rights) to raise ESG scores and attract investors, compared to the environmental and social impacts of a firm. A survey conducted with 126 investment funds (encompassing fund managers as well as their teams) by van Duuren et al. (2016) found that asset managers gave significantly more attention to governance considerations than environmental and social ones. This position is backed up by Nollet et al. (2016), who find governance to be the only ESG subcomponent with a significant relationship to CFP while the social and environmental subcomponents presented none. This may be because of lingering perceptions by shareholders that social and environmental care weakens the profitability of a firm and might be guided by reputation-building instead of fiduciary responsibility (Nollet et al., 2016). Additionally, governance disclosure is already mandated and regulated by the Securities and Exchange Commission, while environmental and social disclosures are less standardized and more difficult to verify (Fatemi et al., 2018). Finally, Nofsinger and Varma state that “strong corporate governance practices are perceived to be associated with lower corporate agency costs” (2014, p. 181). Nonetheless, it is worth noting a departure from this trend highlighted by van Duuren et al.: “retail investors, who manage their own money, are more likely to prioritize the environmental (or sustainable) qualities of their investments over the other two ESG sub-components” (2016, p. 532).

HOW ARE ESG CRITERIA USED BY INVESTORS? The second theme emerging from the literature concerns methods used by investment firms to track, evaluate, and disclose ESG practices. It is important to mention that this proportion of literature is deeply intertwined with the previous one, as ESG disclosure is simply necessary for any study on the correlation between ESG practices and firm value. First and foremost, ESG practices are evaluated and rated by individual researchers and, in more recent years, specialized information providers such as Bloomberg, who base their evaluations on “company filings, such as CSR reports, annual reports, and corporate websites” (Fatemi, 2018, p. 47). Internally, however, investment firms can make use of the ESG ratings in several different ways: (1) through direct corporate engagement (active ownership/shareholder power), (2) by explicitly adopting ESG factors into the analysis of stocks (full integration), (3) by excluding certain sectors (negative screening), (4) by including new sectors (positive screening), (5) by investing in themes directly related to ESG factors (such as renewable energy), (6) by adopting investment strategies to change the overall ESG impact of a specific fund (portfolio tilt), (7) by directly investing in companies with high ESG performance compared to others in the same sector (relative/best-in-class screening), and (8) factoring in ESG considerations in systematic risk analysis (risk factor investing) (Amel-Zadeh & Serafeim, 2018). However, investors are more likely to engage with the first five methods than the rest (Amel-Zadeh & Serafeim, 2018).

Environmental, social, and governance criteria  257

ESG practices can also be followed through the adoption of the United Nations Principles for Responsible Investment (n.d.), which requires its 3,800 signatories to: • … incorporate ESG issues into investment analysis and decision-making processes; • … be active owners and incorporate ESG issues into the signatories’ ownership policies and practices; • … seek appropriate disclosure on ESG issues by the entities in which the signatories invest; • … promote acceptance and implementation of the principles within the investment industry; • … work together to enhance the signatories’ effectiveness in implementing the principles; and • … report on the signatories’ activities and progress towards implementing the principles.

For example, the construction firm Pomerleau in Quebec, Canada, developed an ESG strategy that has six main priorities (culture of innovation; climate change; circular economy; community relations; indigenous relations; diversity, equality, and inclusion) within four overarching themes (best people; green value chain; innovation; collective prosperity). The main target with objectives and timeframe are defined, and ESG performance reports are disclosed. The information is found on a dedicated website.2

ESG PRACTICES AND MIPS By their nature, MIPs drastically change the landscapes into which they are built. Because of this, they can have profoundly disruptive effects on local ecosystems and communities, especially in contexts where regulation and accountable democratic institutions are weak. Indeed, MIPs can often be tied to ESG controversies, where respect for ecosystems, impacted communities, and responsible governance are seriously called into question. ESG guidelines could serve as important tools to evaluate the potential harm of these projects, limit negative effects, and reinforce their positive ones. We find, however, a striking absence of literature on the correlation and application of ESG criteria in the governance of major infrastructure projects. While there exists a body of literature on infrastructure and sustainability goals, best practices, and consequences, the South African Institute of International Affairs is one of the publishing bodies that has explicitly addressed the subject in regard to ESG practices. Three policy briefing studies in particular stand out, providing insight into the ESG consequences of various port infrastructure communications and mining projects in Africa and Asia. Thus, in a case study of two major Chinese-funded and Chinese-built port projects in Kenya and Malaysia, Alden et al. (2021) highlight the profound ESG concerns that emerged in the implementation of the Lamu Port (Kenya) and Kuantan Port (Malaysia) projects. The authors identify drastic consequences for local ecosystems and populations. In the Lamu Port case, they recount the loss of local fishing grounds, concerns over limited job opportunities for locals, forced or non-compensated relocations and land seizures, police harassment and crackdowns on a local environmental NGO, and faulty economic incentives that put into question the rigor of its governance. In the Kuantan Port case, similar devastating consequences on marine life were reported, followed by regional consequences of chemical pollution, the

2 ​https:/​/pomerleau​.ca​/en​/persp​ective retrieved 20 July 2022.

258  Research handbook on the governance of projects

favoring of foreign workers over local ones, and governance concerns related to patterns of corruption and political incentives, and a general lack of transparency. Similarly, Agbedi et al. (2021) address the ESG aspects of Chinese-powered information and communications technology (ICT) networks in Tanzania and Cambodia. This study concerns the implementation of Chinese-led ICT infrastructure projects within the “Digital Silk Road,” an expansive project that seeks to “[promote] the construction and interconnection of ICT globally” (Agbedi et al., 2021, p. 2). In Tanzania, the National ICT Broadband Backbone, a fiber optic cable network, was launched in 2009, funded by the Chinese Bank and implemented by the Chinese International Telecommunications Construction Corporation, to help spread and provide affordable ICT services in the country. The project had wide positive impacts for education and government, and had minimal impacts on the environment. However, local job creation was restricted and Chinese-led governance posed problems of stringent regulations and inadequate construction capacity. In Cambodia, the Chinese telecom infrastructure provider Hyalroute partnered with the Ministry of Posts and Telecommunications in 2016 to install a 380km submarine fiber optic cable route. Local integration was well conducted with the integration of local labor, elites, and legal frameworks, and environmental consequences were minimal. However, concerns over transparency did arise as details on financing, procurement, and employment were absent from its Environmental Socioeconomic Impact Assessment report. Limpitlaw and Johnson (2021) draw correlations between the need to favor shared infrastructure surrounding extractive industries such as mining in so-called developing countries. The creation of societal asset classes (like transportation systems, communication networks, or water systems) has indeed been shown to limit the pervasive negative relationship between growth and inequality in these countries. The authors highlight the correlation between the exploitation of resources and corruption, authoritarian regimes, and violent conflicts. Thus, the governance of these resource extraction infrastructure projects must be guided towards the care for the local contexts in which they impose themselves. Although it is not directly linked to ESG principles, a more positive example is the New Champlain Bridge Corridor Project in Montreal, Canada (Drouin & Brunet, in press), which reached the Envision Platinum status. The Institute for Sustainable Infrastructure’s Envision Framework provides a tool to assess a project’s impact on economic viability, environmental protection, and social equity, and objectively measure the success of its sustainability measures (Vicchio, 2021). In fact, the new Champlain Bridge project measured sustainability because the government of Canada, the project owner, included sustainability measurement as a requirement in its infrastructure guidelines and contract documents. In 2015 (before the start of construction), the governmental proposal stated that Envision status needed to be obtained prior to the end of the project. To reach Envision Platinum status, a project must demonstrate that it delivers a range of environmental, social, and economic benefits: “The Envision system examines the impact of sustainable infrastructure projects as a whole, through five distinct categories: Quality of Life, Leadership, Resource Allocation, Natural World, and Climate and Risk. These key areas contribute to the positive social, economic, and environmental impacts on a community” (Institute for Sustainable Infrastructure, 2018). Key factors contributing to the New Champlain Bridge Corridor project earning Envision Platinum include the following (Institute for Sustainable Infrastructure, 2018): sustainable growth and development that improved mobility of people and goods and benefitted the local and provincial economies; community quality of life, increasing safety and improved traffic flows that benefit

Environmental, social, and governance criteria  259

the surrounding communities; and leadership in sustainability, which was a crucial part of the project from the outset. Many policies and tools were developed by the contractor to ensure and improve sustainable performance. Stakeholders from all affected communities and organizations were engaged in dialogue with the government and the contractor to address the communities’ concerns. According to the Institute for Sustainable Infrastructure (2018), “the project exceeded the highest levels of achievement within the Envision system for several credits in the Quality of Life category, earning the project bonus points for exceptional performance.” The project applied an innovative construction approach to avoid interfering with traffic on the St. Lawrence Seaway. In addition, it made use of a new kind of de-icing system to avoid the problem of ice falling from the cable-stays onto the bridge deck.

CONCLUSION This chapter aims to establish a broad understanding of ESG practices at large and ESG practices with respect to the governance of major infrastructure projects. We find that studies on the matter predominantly relate to finance and business concerns, more specifically to the impact of ESG practices on financial performance. In this stream, we observe that the roles of risk and disclosure are also widely discussed, as well as the disproportionate impact of governance (compared to environmental and social aspects) on raising ESG scores. Another stream of literature is dedicated to the processes by which ESG principles are applied by investors, which can manifest in eight reported ways, as well as through the six Principles for Responsible Investment. Finally, we discuss the few studies available on the relationship between ESG factors and major infrastructure projects, namely in Africa and Asia, and present a Canadian example that uses the Envision framework to illustrate some integration of environmental, social, and economic concerns. This has allowed us to establish that ESG practices are on the rise among firms and investors, but only to the extent that they integrate conventional financial practices (van Duuren et al., 2016). In other words, good ESG practices are mostly applied if there is a perceived financial benefit to their application (through investment performance, client demand, or product strategy (Amel-Zadeh, 2018). This raises concerns for MIPs and their potential for largescale, destructive environmental and social consequences such as reported in the case studies above, where financial incentives for basic ecological and human respect are absent. It also raised the issue that more research is needed to assess the profitability of integrating ESG principles for MIP leaders and their stakeholders. Despite the pressure from the 2030 Agenda for Sustainable Development adopted by the United Nations (UN, 2021), which promotes the sustainable development of infrastructures for the improvement of the quality of life in the world, MIP leaders and firms will govern themselves accordingly if they see a financial value in doing so, a value to attract investors to finance their MIPs, to meet contractual requirements by governmental authorities, or that will positively impact their project and financial performance. More data are needed to demonstrate the ESG value and the need to rethink value creation, governance practices, and performance to build sustainable infrastructures that are common goods. As we raised at the beginning of this chapter, it has become urgent to equip key stakeholders (governments, managers, investors, and populations) and to enlighten them on the ways to meet ESG challenges and meet the objectives of sustainable development (Drouin & Caron, 2020; Caron & Drouin, 2019; Sankaran et al., 2020a, 2020b). It is

260  Research handbook on the governance of projects

urgent to provide data that will convince these stakeholders of the need to change how they evaluate the performance of their infrastructures and how they need to align the governance practices accordingly. Although there are disclosure efforts of ESG principles for some firms, we unfortunately did not reach a level of confidence and trust in the information provided by these firms.

REFERENCES Agbedi, M., Xue, G., & Yu, Z. (2021). China-powered ICT infrastructure: Lessons from Tanzania and Cambodia. South African Institute of International Affairs. http://www​.jstor​.org​/stable​/resrep38689 Alden, C., Chicava, S., Jiang, L., Murg, B., & Lim, G. (2021). China-driven port development: Lessons from Kenya and Malaysia. South African Institute of International Affairs. http://www​.jstor​.org​/ stable​/resrep38690 Amel-Zadeh, A., & Serafeim, G. (2018). Why and how investors use ESG information: Evidence from a global survey. Financial Analysts Journal, 74(3), 87–103. https://doi​.org​/10​.2469​/faj​.v74​.n3.2 Angelstam, P., Grodzynskyi, M., Andersson, K., Axelsson, R., Elbakidze, M., Khoroshev, A., Kruhlov I., & Naumov, V. (2013). Measurement, collaborative learning and research for sustainable use of ecosystem services: Landscape concepts and Europe as laboratory. Ambio, 42(2), 129–145. Aouadi, A., & Marsat, S. (2018). Do ESG controversies matter for firm value? Evidence from international data. Journal of Business Ethics, 151(4), 1027–1047. http://www​.jstor​.org​/stable​/45022714 Barnett, M. L., & Salomon, R. M. (2006). Beyond dichotomy: The curvilinear relationship between social responsibility and financial performance. Strategic Management Journal, 27, 1101–1122. Boffo, R., & Patalano, R. (2020). ESG investing: Practices, progress and challenges. OECD. British Business Bank. (2022). What is ESG – A guide for businesses [Online]. British Business Bank. https://www​.british​-business​-bank​.co​.uk ​/finance​-hub​/ business​-guidance​/sustainability​/what​-is​-esg​ -a​-guide​-for​-smaller​-businesses/ Broadstock, D. C., Chan, K., Cheng, L. T. W., & Wang, X. (2021). The role of ESG performance during times of financial crisis: Evidence from COVID-19 in China. Finance Research Letters, 38, 101716. Brooks, C., & Oikonomou, I. (2018). The effects of environmental, social and governance disclosures and performance on firm value: A review of the literature in accounting and finance. British Accounting Review, 50(1), 1–15. https://doi​.org​/10​.1016​/j​.bar​.2017​.11​.005 Brunet, M., Drouin, N., & Gauthier, P. (2021). Le processus de consultation publique du REM, un projet à la gouvernance inédite Chapitre 2, dans Brunet, M., & Romero-Torres, A. (2021). La gestion de projets au Québec: Des cas pour illustrer une expertise en croissance. Editions JFD. Caron, M. A., & Drouin, N. (2019). Compte rendu de l’atelier sur l’intégration des bénéfices nonfinanciers tout au long du cycle de vie des grands projets d’infrastructure Phase II du projet/Atelier de travail avec des praticiens en gestion de projet. Rapport interne KHEOPS. Chen, Y.-C., Hung, M., & Wang, Y. (2018). The effect of mandatory CSR disclosure on firm profitability and social externalities: Evidence from China. Journal of Accounting and Economics, 65, 169–190. Clark, G. L., & Viehs, M. (2014). The implications of corporate social responsibility for investors: An overview and evaluation of the existing CSR literature. SSRN Electronic Journal. https://doi​.org​/10​ .2139​/ssrn​.2481877 Del Giudice A., & Rigamonti, S. (2020). Does audit improve the quality of ESG scores? Evidence from corporate misconduct. Sustainability, 12(14), 5670. https://doi​.org​/10​.3390​/su12145670 Drouin, N., & Brunet, M. (in press). The Samuel De Champlain bridge corridor project: Sustainability and innovation as key success factors. In S. Clegg, S. Sankaran, Y. Ke, V. Mangioni, & G. Devkar (Eds.), Infrastructure development: A critical international perspective on value in public-private partnerships. Edward Elgar Publishing. Drouin, N., & Caron, M.-C. (2020, septembre 29). Il faudra penser autrement les infrastructures dans l’après-Covid. The Conversation. https://theconversation​.com​/il​-faudra​-penser​-autrement​-les​ -infrastructures​-dans​-lapres​-covid​-140108 Drouin, N., Müller, R., & Sankaran, S. (Eds.). (2013). Novel approaches to organizational project management research: Translational and transformational (Vol. 29). Copenhagen Business School Press.

Environmental, social, and governance criteria  261

Drouin, N., Sankaran, S., Marrewijk, A. H., & Müller, R. (2021). Megaproject leaders: Reflections on personal life stories. Edward Elgar Publishing. Drouin, N., & Turner, J. R. (2022). The Elgar advanced introduction to megaprojects. Edward Elgar Publishing. Egler, H. P., & Frazao, R. (2016, June). Sustainable infrastructure and finance. Report for designing of a sustainable financial system (Inquiry Working Paper 16/09). Environmental Defense Fund. (2017). Unlocking private capital to finance sustainable infrastructure. Report. New York. Fatemi, A., Glaum, M., & Kaiser, S. (2018). ESG performance and firm value: The moderating role of disclosure. Global Finance Journal, 38, 45–64. https://doi​.org​/10​.1016​/j​.gfj​.2017​.03​.001 FINSMES. (2022, October 3). Why is ESG so important. Business Tips. Retrieved December 1, 2022, from https://www​.finsmes​.com ​/2022​/10​/why​-is​-esg​-so​-important​.html#:~​:text​=Importance​%20of​ %20ESG​&text=​​It​%20​​bring​​s​%20a​​waren​​ess​%2​​0to​%2​​0the,​​healt​​h​%20a​​nd​%20​​safet​​y​%20a​​re​%20​​consi​​ dered​ Flyvbjerg, B. (Ed.). (2017). The Oxford handbook of megaproject management. Oxford University Press. Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210–233. Garcia, A. S., Mendes-Da-Silva, W., & Orsato, R. (2017). Sensitive industries produce better ESG performance: Evidence from emerging markets. Journal of Cleaner Production, 150, 135–147. https://doi​.org​/10​.1016​/j​.jclepro​.2017​.02​.180 Gibbons, R., & Roberts, J. (2013). The handbook of organizational economics (p. 1233). Princeton University Press. Groening, C., & Kanuri, V. K. (2013). Investor reaction to positive and negative corporate social events. Journal of Business Research, 66(10), 1852–1860. https://doi​.org​/10​.1016​/j​.jbusres​.2013​.02​.006 Hebb, T. (2019). Investing in sustainable infrastructure. In Challenges in managing sustainable business (pp. 251–273). Palgrave Macmillan. Huang, D. Z. (2021). Environmental, social and governance (ESG) activity and firm performance: A review and consolidation. Accounting & Finance, 61(1), 335–360. IFRS Foundation. (2021). Exposure draft – Proposed targeted amendments to the IFRS foundation constitution to accommodate an international sustainability standards board to set IFRS sustainability standards. https://www​.ifrs​.org​/content​/dam​/ifrs​/project​/sustainability​-reporting​/ed​ -2021​-5​-proposed​-constitution​-amendments​-to​-accommodate​-sustainability​-board​.pdf Institute for Sustainable Infrastructure. (2018). Samuel De Champlain Bridge Corridor: Montréal’s Iconic Samuel De Champlain Bridge Corridor Earns Envision Platinum Award. Retrieved April 14, 2022, from https://sus​tain​able​infr​astr ​ucture​.org​/project​-awards​/projet​-de​-corridor​-du​-nouveau​-pont​ -champlain​-new​-champlain​-bridge​-corridor​-project/ INTOSAI. (2020). IDI’s SDGs audit model. Pilot Project March. https://www​.idi​.no​/elibrary​/relevant​ -sais​/auditing​-sustainable​- development​-goals​-programme​/isam ​/1089​-isam​-idi​-s​-sdg​-audit​-model ​/ file Jayachandran, S., Kalaignanam, K., & Eilert, M. (2013). Product and environmental social performance: Varying effect on firm performance. Strategic Management Journal, 34, 1255–1264. Li, T. T., Wang, K., Sueyoshi, T., & Wang, D. D. (2021). ESG: Research progress and future prospects. Sustainability, 13(21), 11663. Li, Y., Gong, M., Zhang, X., & Koh, L. (2018). The impact of environmental, social, and governance disclosure on firm value: The role of CEO power. The British Accounting Review, 50(1), 60–75. Limpitlaw, D., & Johnson, H. (2021). No mine is an Island: Shared infrastructure for social benefit in the African extractives industry. South African Institute of International Affairs. http://www​.jstor​ .org​/stable​/resrep35983 Müller, R., Drouin, N., & Sankaran, S. (2019). Introduction to organizational project management: Theory and implementation. In Organizational project management: Theory and implementation. Edward Elgar Publishing. Müller, R., Drouin, N., & Sankaran, S. (2021). Balanced leadership: Making the best use of personnel & team leadership in projects. Oxford University Press. Nofsinger, J., & Varma, A. (2014). Socially responsible funds and market crises. Journal of Banking and Finance, 48, 180–193. https://doi​.org​/10​.1016​/j​.jbankfin​.2013​.12​.016

262  Research handbook on the governance of projects

PWC. (2017, June). Asset management 2020: Taking stock, asset & wealth management insights. Report. London, UK. Nollet, J., Filis, G., & Mitrokostas, E. (2016). Corporate social responsibility and financial performance: A non-linear and disaggregated approach. Economic Modelling, 52, 400–407. https://doi​.org​/10​.1016​ /j​.econmod​.2015​.09​.019 PRI. (2022). What is responsible investment? https://www​.unpri​.org​/an​-introduction​-to​-responsible​ -investment​/what​-is​-responsible​-investment​/4780​.article Reuters. (2017, July 25). World will need $94 trillion spent on infrastructure by 2040. Business News. https://www​.reuters​.com ​/article​/idUSKBN1AA1A3 Salvatierra‐Garrido, J., & Pasquire, C. (2011). Value theory in lean construction. Journal of Financial Management of Property and Construction, 16(1), 8–18. https://doi​.org​/10​.1108​/13664381111116043 Sankaran, S., Freeder, D., Pitsis, A., Clegg, S., Drouin, N., & Caron, M.-A. (2020b). Megaprojects. In R. Dilworth (Ed.), Oxford bibliographies in urban studies. Oxford University Press. https://doi​.org​ /10​.1093​/OBO​/9780190922481​- 0032 Sankaran, S., Müller, R., & Drouin, N. (2020a). Creating a “sustainability sublime” to enable megaprojects to meet the United Nations sustainable development goals. Systems Research and Behavioral Science, 1–14. https://doi​.org​/10​.1002​/sres​.2744 UN. (2021). “Les objectifs de développement durable.” https://www​.un​.org​/sus​tain​able​deve​lopment​/fr​/ development​-agenda/ [consulté le 10 décembre 2021] UNPRI. (n.d.). What are the principles for responsible investment? Principles for responsible investment. https://www​.unpri​.org​/about​-us​/what​-are​-the​-principles​-for​-responsible​-investment van Duuren, E., Plantinga, A., & Scholtens, B. (2016). ESG integration and the investment management process: Fundamental investing reinvented. Journal of Business Ethics, 138(3), 525–533. http://www​. jstor​.org​/stable​/44164180 Vicchio, N. (2021). Measuring sustainability: Why and how public-private partnerships achieve Envision’s platinum verification [doctoral dissertation, Virginia Tech].

22. New nonprofit organization governance: driving impact by adopting a holistic governance view Patrick Renz

INTRODUCTION1 The operation of many nonprofit organizations (NPO) consists of running projects. An NPO of the international development cooperation or the aid sector for instance may run dozens if not hundreds of projects. Hence the governance of projects is particularly important. Additionally, many NPOs play a societal role and are financed by public money or professional fundraising. Therefore, accountability and proof of achieved and sustained impact are existential for the organization. Consequently the (corporate) governance of the NPO needs to be well engrained in the governance of projects. Otherwise, there is a disconnect or a governance gap between operations and management (Renz, 2007). This chapter therefore suggests a new NPO governance defined “as a system through which NPOs are strategically guided, integratively managed and holistically monitored according to their specific context, in an ethically reflective manner and with entrepreneurial use of resources” (Hilb & Renz, 2018). Popularly, (corporate) governance is still (mis-)understood as a concern exclusively at the top organizational level. Research has contributed to that in that it focused extensively on gremial aspects of respective governance boards, their recruiting, internal structure, and functioning in exercising their role of direction and control (Hilb, 2019). Nevertheless, despite increased respective legislation, there are still many prominent governance failures or even scandals in all sectors. There is little research that investigates the interplay between governance and operational processes or executional questions. Nevertheless, there is and must be a nexus between the concerns dealt with at governance level and the topics relevant at organizational levels. If for instance we ask a governance member whether the organization has good risk management in place the answer might possibly be yes, while we might get differing answers when we ask operations employees whether they know where to place issues (risks!) encountered in their daily work, or whether they find open ears for such issues. Both questions are a leveldependent contribution toward a working or a suboptimal risk management. The more the answers between the two levels differ, the bigger the so-called governance gap.

1 Research referenced in this chapter was enabled through generous funding by several institutions and the contributions of numerous organizations and individual volunteers, both researchers and students. Funding institutions comprised the Swiss Innovation Agency (also its predecessor agency, the Commission for Technology and Innovation) under contracts 9693.2 PFES-ES and 15231.1 PFES-ES, the AVINA Foundation, and the Aid Governance Foundation. 263

264  Research handbook on the governance of projects

Another example of a possible governance gap is how codes of conduct are managed: the mere existence of an ethical code of conduct does not signify that people at the front can identify and manage ethical questions popping up in their daily work. A final example is related to the impact of an organization: particularly NPOs praise their mission for sustainability and real impact. At the same time there is an absence of widespread systemic understanding as the research presented here will show. In other words, an organization pretends to improve the local society, yet employees may not understand the influencing factors, the dependencies, and the influencing stakeholders in a holistic, systemic way. Governance understood as directing and controlling an organization should deal with the ultimate organizational concerns such as its mission, the intended and real values, the impact, risks, etc. If those concerns are dealt with exclusively at the top level and not “conjugated” through the organization in a bidirectional sense-giving and sense-making way (Gioia & Chittipeddi, 1991; Kraft et al., 2018), the organization runs below its full potential; there are misalignments and energy-absorbing interferences. I framed this phenomenon in my earlier research as “governance gaps” as illustrated in Figure 22.1: there is a substantial risk of a disconnect or a bottleneck between several organizational layers. Organizations tend to have governance gaps, yet most of them are ignorant about it. It is therefore not surprising that many academics started to look beyond the board level governance, down the hierarchy. Particularly project governance, or the relationship between strategy implementation, projects, and governance, has been increasingly investigated (Müller, 2017; Garland, 2009; Turner, 2009; for a systematic literature review see Musawir et al., 2020). In other words, the scientific discourse frames governance increasingly as an

Figure 22.1   Governance gaps

New nonprofit organization governance  265

integral part throughout the entire organization (Cornforth & Brown, 2013; Müller, 2016). This chapter tries to contribute to this debate.

RESEARCH PROGRAMS AND METHODOLOGIES A Map of Governance-Related Organizational Theories Many governance scholars have drawn on the foundations of one or several organizational theories from which they have developed their research and suggested respective findings. Consecutively, several scholars have inventoried and categorized mainstream research along the organizational theories. One of the still most-cited scholars is Hung (1998), who defined roles of governance boards depending on the selected theoretical lens (see Table 22.1). A decade later, Huse (2007) presented a different categorization complementing how these theories shape value creation (see Table 22.2). A more recent work creates an overview of organizational theories and governance based on a systematic literature review of project governance literature (Musawir et al., 2020). The authors namely identified that the following theories were applied in the project governance literature: agency theory, stewardship theory, transactional cost economics theory, stakeholder theory, institutional theory, contingency theory, and network theory. This brief overview leads us to conclude that the theoretical fundaments remain relatively stable while – in line with societal developments – singular aspects shed complementary light. Network theory (Barabási, 2016) for instance can not only help explain increased horizontal interactions between stakeholders but also pinpoint governance dysfunctions caused among others by “top-down dirigisme” (Moro Visconti, 2019) in an increasingly connected world. At the same time, society has lived through the dramatic changes of so-called postmodern times (Welsch, 2008), which is about plurality, heterogeneity, and individualization on one hand, and increased networking on the other hand, enabled through digitalization and social media, resulting in many divergent ways of life (Loiero, 2021). Epistemologically, this results Table 22.1  A typology of theories Influence perspective

Basic function

Role

Organizational theory

Extrinsic

(External) networking, interlocking directorates

Linking role

Resource dependency theory

(External) pluralistic organization

Coordination role

Stakeholder theory

(Internal) conformance function

Control role

Agency theory

Performance function

Strategic role

Stewardship theory

Identifying with societal expectations (and pressure)

Maintenance role

Institutional theory

Institutionalized by internal pressure, instrumental directorate

Support role

Managerial hegemony

Intrinsic

Source:   own table based on Hung, 1998, p. 105

266  Research handbook on the governance of projects

Table 22.2  Board task theories and value creations Barbarian theories

Value creation theories

Agency theory

Resource dependency theory, resource-/competence-based view of the firm

Stakeholder theory, stewardship theory, paternalistic theory, game theory Value creation for external stakeholders

Value creation in the firm

Aunt theories (passive)

Clan theories

Property rights, law, managerial hegemony

Institutional theories: social network and social movements, interlocking directorates, class hegemony

Value protection, but no value creation

Value creation for internal actors and business elites

Source:   own table based on Huse, 2007

in insecure knowledge. Social construction of knowledge and co-existence of diverging views becomes normal. All these factors constitute fundamental challenges to traditional governance and leadership. Relationships become foundational, and participating and sharing become key (Renz & Imhof, 2022). Leadership must change with changing times (French, 2016). It is about unbossing (Veeriah, 2020), de-hierarchization, and balanced leadership (Müller et al., 2021). Also, digitalization needs digital leadership (Imhof & Gatziu Grivas, 2022). In this chapter I argue that it is through a multi-perspective view that governance and leadership have a fair chance to cope with the manifold challenges of our times. Combining the various organizational theories related to governance creates a holistic, all-encompassing governance lens which addresses all fundamental governance concerns including their downsides. Building on previous research and the further advancements as shown above, I suggest the following multi-theory fundament for a new NPO governance model (see Table 22.3). From Governance Roles to Holistic Governance Responsibilities Holistic governance should not rely on one theory exclusively. On the contrary it should draw, in an inclusive way, on the contributions of each theory as well as possible. Additionally, it should cope with the respective downsides. With this a new NPO governance model can be defined by identifying concrete governance responsibilities in a multi-theory approach. These governance key responsibilities draw on the positive and negative aspects of all theories. Graphically speaking, we can overlay the above multi-theory fundament with concrete governance responsibilities, as shown in Figure 22.2. The figure shows six themes or governance key responsibilities: system, mission, integrity, stakeholder, risk, and audit & reporting. The detailed contents of these six key responsibilities will be discussed later. In fact, it does not matter whether the result consists of six or ten or any other number of key responsibilities. What matters is that they cover all governance roles and all downsides in the figure. For a proof-of-concept, 400 case examples from an in-depth participant observation within a large development project were used to verify the appropriateness of the six key responsibilities and their completeness (Renz, 2007). The research

New nonprofit organization governance  267

Table 22.3  Multi-theory fundament for new NPO governance Organizational theory

Relevant governance roles

Downsides

Resource dependency

Linking role (i.e., in digital ecosystems)

Interlocks, collusion, class coalitions, deadlocks from dependency

Stakeholder theory

Coordination role

Strategic vs. normative orientation

Network theory

Role of mediating in horizontal dynamics

Disrupting hierarchical structures and traditional business models, complexity

Agency theory

Control role (Conformance)

Stakeholders not considered Ignores group interactions and power Lack of managerial accountability Not trust building, legalistic focus No institutional embeddedness

Stewardship theory

Strategic direction and support role (performance), entre/intrapreneurship

(Too) optimistic idea of people Blind to interplay of power, conflicts, and ideology Passive governance

Institutional theory

Societal embedding role

Strategic passivity

Managerial hegemony

Management support role

Rubber stamping Board as legal fiction

Source:   own table based on Renz, 2007

concluded that the suggested six key responsibilities are appropriate and have a high internal validity for the governance context of such projects and respective governance gaps. Validation of the Governance Model across Various Sectors Further research was necessary to assess the external validity in terms of generalizability. In subsequent research projects generously funded by foundations and the Swiss Innovation Agency,2 several3 teams explored the six governance key responsibilities with their multitheory fundament (Renz & Böhrer, 2012; Renz et al., 2015; Stricker et al., 2015; and numerous student research projects). The research targeted organizations of three different yet complementary sectors: (1) organizations (mostly NPOs) of national and international development cooperation, (2) subsidiary organizations of business corporations, and (3) social organizations (NPOs) for national social welfare. The six key responsibilities were operationalized, and indicators and respective scales were developed. Table 22.4 gives an overview of the developed indicators and scales. For each of the indicators the teams developed scales for three differing organizational levels: the governance or senior management level, the middle management, and the collaborators 2 Also its predecessor organization, the Commission for Technology and Innovation. 3 Comprising researchers from the University of St. Gallen, the Lucerne University of Applied Sciences and Arts, University of Hamburg, and practitioners from businesses and local and international NPOs.

268  Research handbook on the governance of projects

Figure 22.2  Multi-theory view sets the foundation for governance key responsibilities Table 22.4  Number of indicators developed for NPOs and business corporations Sector and organizational type

Total # of System Mission Integrity Stakeholder Risk Audit & indicators mgt. mgt. mgt. mgt. mgt. rep. mgt.

NPOs from development cooperation

89

14

16

18

19

13

8

Subsidiary organizations (business corporations)

35

6

7

6

8

5

3

NPOs from social sector organizations

55

7

10

8

10

12

8

level. A level-sensitive wording or differing questions had to be chosen. Matching the answers from the three levels would reveal whether the organization was consistent or whether there were differences in the answers, unveiling existing governance gaps. The scales were not just evaluated with numeric levels but using the meaningful maturity levels 0 to 5 of EFQM (European Foundation for Quality Management). The projects furthermore developed a

New nonprofit organization governance  269

Table 22.5  Indication about the research samples Sector and organizational type

# Organizations in surveys

# Persons in survey

# Focus group discussions

# Subsequent consulting project

NPOs from development cooperation (aid governance)

42

158

43

5

5

49

5

–

NPOs from social sector organizations (Fitness Radar)

20

492

10

–

TOTAL

67

699

58

5

Subsidiary organizations (business corporations)

software-based assessment methodology to measure and yield holistic governance and respective governance gaps. The sample comprised 67 organizations with a total of 699 persons. With most of the organizations (87 percent), one or several focus group discussions were conducted to validate the specific findings and the organization-specific positioning in an overall benchmark (see Table 22.5). It turned out that in all sectors the six outlined governance responsibilities are relevant and can serve well to embrace all fundamental management concerns. The underlying indicators varied in number and wording, yet the essence remained the same. For instance, systemic thinking is as fundamental for an NPO to grasp the complexity of its activity field as it is for a corporation to understand market dynamics. Additionally, five organizations demanded subsequent consulting services. One organization trained all staff extensively attaining a university-level Certificate of Advanced Studies in Governance. In general, the respective contents were introduced in programs at several university levels (bachelor, master, Executive Education MBA). After this view on the theoretical foundation and the research methods, we turn to the content of the new NPO governance model.

NEW NPO GOVERNANCE – A HOLISTIC MODEL IN DETAIL This section looks at the content of holistic governance, its structural implementation, and the impact of such governance in terms of intended outcomes. The Content of New NPO Governance – the Lucerne Governance Model From important organizational theories and their proposition to governance, the previous section outlined six complementary key responsibilities. They represent the content that holistic governance in NPOs must deal with. I subsequently call them content modules (see Figure 22.3). This has also been described by Renz et al. (2015) in the so-called Lucerne governance model geared for social organizations. The authors also suggested a Fitness Radar, a self-assessment methodology based on 55 indicators to measure the six modules (Stricker et al., 2015, p. 183ff.). The six modules will be presented subsequently including the respective indicators per module.

270  Research handbook on the governance of projects

Figure 22.3  New NPO governance – the content modules The first module is called system management. It is based on systems theory in management, which emerged over 40 years ago (for instance Ulrich, 1984, pp. 49–84). Similar ideas are taken up, for instance, by circular economy models (Larsson & Lindfred, 2020; Cui, 2021), or by the new cross-disciplinary discourse on society 5.0 (Deguchi et al., 2020). Nevertheless, it is still a major challenge for today’s leaders. System management develops an understanding of the context, the environment, the (postmodern) society, or system the NPO belongs to: How can the context, the environment, the society in which we are as an organization be described? What do the dramatic societal developments like climate change, digitalization, individualization, increased polarization, and the VUCA (volatility, uncertainty, complexity and ambiguity) tendencies in the current world signify for us? What dependencies on external factors exist? Which ones can be influenced, and do we want to do so? What stakeholders exist, what networks are we part of, and what resources can we count on? An NPO needs to continuously update its holistic and systemic understanding of the context and of the organization itself in such a context. This requires an elevated level of systemic thinking, systemic processes, and a respective systemic culture, as it is not only a management task but applies also to the employees at the grassroots level. The organization needs to have a model of how it fits into the whole bigger system. This way success drivers and core competencies become more understandable. Then and only then can NPOs concretely demonstrate how they create impact, through which sustainable changes in the bigger system. Demanding a systems approach and promoting systemic thinking is in my eyes the most important governance task. And all levels contribute in an integrated way. Based on a sound system understanding, an NPO can develop a sense-making mission. Mission management asks: What is our mission and what is needed for its implementation? What strategy, structure, and organizational culture do we have? What do we need to achieve such a mission? How does each part of the organization contribute coherently toward such

New nonprofit organization governance  271

a mission? How about our finances and what are the indicators of success? Impact-oriented NPOs have a vision and a strategy that is understood and lived through the entire organization. Such NPOs are aware of their own culture; management consciously fosters a mission-conducive culture in subtle, systemic ways. Such organizations also have a clear organizational structure and principles (even if self-organized). Obviously, mission management includes sound financial management and key figures being controlled and monitored. Integrity management is about values and how an organization deals with situations that challenge values: Does the organization (self-)reflect whether daily processes work in line with the intended values? How are respect and responsibility defined and lived? How does the organization ensure its own integrity and credibility? The focus is on consciously addressing and reflecting on ethical issues. This must take place at all levels of the organization. The question is not about a generic value declaration but how professionally the organization deals with daily ethical challenges. An organization with integrity has clarified values and guidelines for collaboration and implemented processes that encourage ethically reflective behavior. Integrity should not only be an implicit matter of course, it should be an actively and perceivably addressed concern by the leadership, regularly discussed and exemplified. Along with the Lucerne governance model, I suggest adopting an ethical fundament based on the discourse ethic and the ethic of recognition (Ulrich, 2008; Pless & Maak, 2004; Renz et al., 2022). This should result in a solution-oriented culture where problems are brought to the table. It is a culture of mutual respect and of active acceptance of responsibility. For the employees it becomes normal to behave in an ethically reflective way in concrete situations because the organization lives ethical reflection. Also, there are periodically reviewed processes for compliance with ethical rules of conduct. And the NPO has institutionalized how ethical misconduct can be reported. An all-encompassing governance also deals explicitly with stakeholders. NPOs usually have a big variety of stakeholders, who are often at the core of the organizational mission, for instance as beneficiaries or as co-producers of goods or services. There are two complementary roads to grasp stakeholders: they can be identified as (1) those individuals or groups of people who have the potential to strategically influence our cause (Freeman, 1984), or (2) individuals or groups that have ethically legitimate interests vis-à-vis the organization (Ulrich, 2008). Stakeholder management includes both and asks: Which persons and groups of persons are involved? Do we have strategically powerful as well as legitimately relevant stakeholders on the radar? How do we interact with them? Does that fulfill our expectations? Who is responsible for whom? How does this play into fulfilling our mission? For many NPOs stakeholder management develops into a networked type of collaboration among involved actors: it is about dealing with clients, donors, members, the public, business, media, politics, the professional community, co-actors, employees, and volunteers. That fosters a joint responsibility and results in broader impact. Risk management is a traditional governance task. It deals with identifying risks and vulnerabilities as early as possible and taking steps to prevent or mitigate them (Renz et al., 2015). The NPO should record all potential risks in a risk catalog and keep it up to date. It is essential that all hierarchical levels of the organization are aware of the risks relevant to their specific mission and that people recognize such risks in their everyday work. Also essential is a bottom-up philosophy: people at the bottom of the hierarchy often know best where risks might strike. NPOs must pay particular attention to risks relating to the integrity of service recipients ensuring their psychological and physical integrity. Also, integrity of volunteer workers is often not considered enough, along with employee safety. Finally, many NPOs have made

272  Research handbook on the governance of projects

great use of digitalization. Hence data security and a secure IT infrastructure require particular attention within risk management. Finally, audit & reporting management addresses both regulatory requirements and internal and external reviews or audits (Stricker et al., 2015, p. 25). This supports an organization to comply with legal requirements; moreover mandatory or voluntary reviews, audits, and reports can drive valuable internal improvements. In this way, audits and reports are not just a necessary control tool, but are also used for continuous internal improvement. After this brief introduction of what the six content modules are about, we now look at who is responsible for such new NPO governance and how this ultimately drives the impact of the NPO. Responsibilities for and Implementation of New NPO Governance From the topics of the six governance modules it becomes obvious that not only top-level hierarchy but all organizational levels need to be involved. Only then all staff contribute in one or another way to achieving the mission in a complex system, with its numerous stakeholders, and based on conscious values. Figure 22.4 illustrates the interplay between the organizational levels. In my consulting experience, I noticed that NPOs are remarkably successful in defining how each level can contribute to a good system management. Yet this defining process must be an open and participative process so that a sustained understanding and sound organizational development is achieved. Consequently, and obviously, such new governance understanding must be implemented all through the organization in a level-adjusted bidirectional discourse. The Impact of New NPO Governance Good governance is important, but it cannot be an end in itself. Governance needs to create the necessary conditions so that the organization is best equipped to create superior results. And the results of an NPO are mostly assessed by the impact that is created or at least fostered by the NPO. Impact is defined as the final result of a supposed causal chain starting from the organizational activities, resulting in output, materializing under certain assumptions

Figure 22.4  Shared governance implementation across levels

New nonprofit organization governance  273

Source:  own figure based on Stricker, 2015, p. 162

Figure 22.5  Governance indicators fostering impact in outcome, which again contributes to impact if certain conditions are also given. Hence, impact measurement is a science per se, due to systemic complexity and the so-called attribution issue: attributing what has been the contribution or the complementarity of the NPO is exceedingly difficult. Hence, the task of governance is to ensure that the entire organization is maximally oriented toward impact, even if at the end other factors (such as unforeseen economic developments, a sudden war, etc.) influence negatively and lower the possible impact. If an organization has achieved a superior and organization-wide maturity level in system management, mission management, integrity management, stakeholder management, risk management, and audit & reporting management as suggested by the new NPO governance model, then the organization is best geared toward impact. Figure 22.5 illustrates specific indicators that positively influence an organization toward impact. Good governance can orientate the organization toward impact. In other words, the impact orientation is a result of the suggested new NPO governance. Such governance also holds other results: it drives professionality, the credibility of the organization, its force of innovation, and the respective leadership. In our research projects we have identified these five concepts as key for NPOs. Holistic governance as suggested by new NPO governance is conducive to these concepts.

NEW NPO GOVERNANCE IN PRACTICE: EXPERIENCES AND TRENDS Promoting a Systemic Governance Model in a Systemic Way The suggested model for new NPO governance constitutes a paradigm shift as it “unbosses” governance and makes it an organizationally overarching theme. Additionally, it relies on

274  Research handbook on the governance of projects

systemic thinking and – along with postmodern societies – on social constructivism as epistemology. Consequently, organizations best profit from this model not by prescribing it from the top, but by co-constructing its value, by creating awareness while strengthening empowerment all through the organization in a carefully managed participative process. With the goal to empower organizations, to make best practices available, and to trigger self-reflection, we created a startup organization, Aid Governance, and designed a selfassessment methodology using maturity levels according to the EFQM methodology. It was a conscious decision against launching a new rating which would put an organization in a compliance mode rather than motivating the organization to genuinely want to improve itself. With digital technology we developed self-assessment tools that were applied by NPOs across the world, from Peru to Switzerland and Myanmar. The generous financial support of several foundations and a network of innumerable volunteers made such a venture possible. Results of Assessments and Trends The assessments with 67 organizations as described earlier have yielded several interesting findings. The EFQM maturity levels range from 0 (practice is non-existent) to 5 (practice is subject to continuous self-reflection and improvements). The average across all modules shows maturity values between 1.5 in risk management for projects in the aid sector to 3.3 in mission and audit & reporting (see Figure 22.6). This tendency could also be confirmed in the focus group discussions. Organizations are doing well on mission and audit & reporting. This is not surprising as audit & reporting is one of the key demands including some legal requirements for organizations. From the results on mission, organizations are relatively good on strategies, structures, and financial management. This seems to be the fruit of a certain professionalization in the sector over the last decades. The low score on risk management in

Note:  As the sample of assessed subsidiaries is not sufficiently big, their score is not yielded separately but included in the overall average

Figure 22.6  Research results: governance maturity values

New nonprofit organization governance  275

development projects may reflect a reality of high prevalent risks in development contexts, but at the same time organizations seem not to be well prepared for risk situations. System management (average 2.5) and stakeholder management (average 2.4) have medium values. The strict EFQM scale still shows substantial upward potential. In EFQM a value of 2 means that processes exist but that they are not well established and smoothly running. In other words, organizations could dramatically profit by using systemic thinking and holistic stakeholder involvement to manage today’s complexity and dynamics. Also, integrity management (average 2.2), despite an increased awareness and public debate, should still be a major concern of organizational leaders. On the positive side we could observe several organizations in all sectors practicing outstanding integrity management with values between 3 and 4. In general, the assessments allowed us to identify excellent practices in specific organizations. The assessments were followed in 87 percent of the organizations by focus group discussions. They all concluded that the organizations could validate the assessment results and saw themselves represented appropriately. One of the justified critiques mentioned was that the assessment methodology is rigorous, yielding strict scores. At the same time, the logic of the EFQM maturity levels helped to classify and interiorize the results. In terms of impact, the result shows an average of 2.5 and 3.1 for aid projects and NPOs, respectively (see Figure 22.7). Also here, this holistic governance view reveals that there are many indicators pointing to substantial potential for impact improvements. The assessments not only measured the absolute score of the respective indicators but also identified governance gaps in terms of different hierarchy levels having a differing perspective. The conclusion was that all organizations do have governance gaps. From the focus group

Figure 22.7  Research results – average value on impact (orientation)

276  Research handbook on the governance of projects

discussions, it became clear that most of them were surprised by the fact that they do have governance gaps or by the magnitude of them. Figure 22.8 shows all organizations (n=37) sorted by their maximum gap. There is only one organization with a gap of 1, which could be neglected. All other organizations have gaps between 1.5 and 5 on a scale of 5. Already a gap of 2 is substantial. The following example with respect to a code of conduct shall illustrate this concretely: one organizational level says “yes, we have a code of conduct, and we are trained in it,” while another organizational level says, “I am not aware that there is a code of conduct; we do it intuitively.” Governance gaps were identified in all modules. Not surprisingly, risk management with the overall lowest absolute scores also yields the biggest governance gaps (see Figure 22.9). There are many detailed findings, for instance when comparing specific practices of one organization with the benchmark. Many best practices could be identified on the level of each indicator and through the focus group discussions. Some of them were described in the respective research reports.

THE WAY FORWARD: CONCLUSION AND DISCUSSION This chapter has summarized close to twenty years of research in various projects on governance and its implementation. I suggest a holistic governance model comprising six content modules: system, mission, integrity, stakeholders, risk, and audit & reporting. The novelty of this model lies in a twofold paradigmatic change: First, governance goes beyond risk and compliance; it embraces all the content with which top level must deal (horizontal paradigm shift). Second, it suggests operationalizing governance down the hierarchy to avoid governance gaps (vertical paradigm shift).

Note:  From 67 organizations 37 were assessed with an improved software technology which allowed to yield governance gaps automatically and comparably

Figure 22.8  All assessed organizations show governance gaps

New nonprofit organization governance  277

Figure 22.9  Governance gaps by module (averaged values) The presented research allows the following conclusions: (1) A holistic governance comprising the topics of system, mission, integrity, stakeholder, risk, and audit & reporting can help organizations to understand their full potential and to reveal hidden governance gaps. (2) The systemic and all-encompassing character makes the presented new NPO governance model constitutional for sustainable organizations where impact is at the core of their mission. (3) Governance gaps lower the organizational capability to deliver results and impact. A broad majority of organizations are unaware of governance gaps. One of the limitations of the research lies in the sampling of the organizations. The 67 organizations are impressive in number. But they are not a representative sample of their sector: most of them volunteered to participate because they were eager to learn and excel. It can be assumed that in a representative sample the results would be lower. There were several organizations that could not be convinced to participate. One of the key issues was in the commitment of senior leadership to open themselves to self-reflection and to identifying governance gaps. Further research should focus on conducive factors, such as leadership parameters, that make an organization adopt the ideas comprised by a holistic governance approach. It would be interesting to develop a better understanding of the interplay between holistic governance and leadership, in principle between the institutional governance concept and individual leadership approaches.

REFERENCES Barabási, A. (2016). Network science. Cambridge University Press. Cornforth, C., & Brown, W. A. (2013). Nonprofit governance: Innovative perspectives and approaches. Routledge.

278  Research handbook on the governance of projects

Cui, M. (2021). Key concepts and terminology. In L. Liu, & S. Ramakrishna (Eds.), An introduction to circular economy (pp. 17–34). Springer. Deguchi, A., Hirai, C., Matsuoka, H., Nakano, T., Oshima, K., Tai, M., & Tani, S. (2020). What is society 5.0? In Hitachi-UTokyo Laboratory (Ed.), Society 5.0 – A people-centric super-smart society (pp. 1–24). Springer. Freeman, E. R. (1984). Strategic management: A stakeholder approach. Cambridge University Press. French, R. P. (2016). Deconstructing the end of leadership: Postmodernity, epistemology, and worldviews. Sage Open, 6(1), 2158244016628588. Garland, R. (2009). Project governance: A practical guide to effective project decision making. Kogan Page Publishers. Gioia, D. A., & Chittipeddi, K. (1991). Sensemaking and sensegiving in strategic change initiation. Southern Medical Journal, 12, 433–448. Hilb, M. (2019). Integrierte corporate governance: Ein neues Konzept zur wirksamen Führung und Aufsicht von Unternehmen. Springer. Hilb, M., & Renz, P. (2018). Wirksame Führung und Aufsicht von Not-for-Profit Organisationen (New NPO Governance). 3.Auflage. Haupt. Hung, H. (1998). A typology of the theories of the roles of governing boards. Corporate Governance: An International Review, 6, 101–111. Huse, M. (2007). Boards, governance and value creation: The human side of corporate governance. Cambridge University Press. Imhof, D., & Gatziu Grivas, S. (2022). Towards the definition of digital leadership with drawing the big picture and identifying 20 factors relevant for the understanding and implementation of digital leadership. Paper to be presented at the 16th WASET international conference on leadership and management ICLM. Barcelona, Spain. Kraft, A., Sparr, J. L., & Peus, C. (2018). Giving and making sense about change: The back and forth between leaders and employees. Journal of Business and Psychology, 33(2), 71–87. Larsson, A., & Lindfred, L. (2020). Digitalization, circular economy, and the future of labor. In A. Larsson & R. Teigland (Eds.), The digital transformation of labor (pp. 280–315). Routledge. Loiero, S. (2021, October). Pastoraltheologie: Kirche-Werdung (Ekklesiogenese) in den Spannungsfeldern von pastoralen Grundhaltungen und strategischem Management. Lecture, Pastoraltheologie Hauptvorlesung Masterstudiengang, Universität Fribourg, Fribourg, Switzerland. Moro Visconti, R. (2019). Combining network theory with corporate governance: Converging models for connected stakeholders. Corporate Ownership and Control, 17(1), 125–139. Müller, R. (2016). Organizational enablers for project governance. Project Management Institute. Müller, R. (2017). Project governance. Routledge. Müller, R., Drouin, N., & Sankaran, S. (2021). Balanced leadership: Making the best use of personal and team leadership in projects. Oxford University Press. Musawir, A., Abd-Karim, S. B., & Mohd-Danuri, M. S. (2020). Project governance and its role in enabling organizational strategy implementation: A systematic literature review. International Journal of Project Management, 38, 1–16. Pless, N., & Maak, T. (2004). Building an inclusive diversity culture: Principles, processes and practice. Journal of Business Ethics, 54(2), 129–147. Renz, P. S. (2007). Project governance: Implementing corporate governance and business ethics in nonprofit organizations. Physica Verlag. Renz, P. S., & Böhrer, N. (2012).  Niederlassungen führen: Mit Subsidiary Governance zum Erfolg. Springer-Verlag. Renz, P. S., Frischherz, B., & Wettstein, I. (2022). Integrität im Managementalltag - Ethische Dilemmas im Managementalltag erfassen und lösen. Springer Gabler. Renz, P. S., & Imhof, D. (2022). New leadership – Rethinking business leadership in postmodern societies paper submitted to the international conference society 5.0 at the FHNW school of business. Brugg, Switzerland. Renz, P. S., Lötscher, A., Riedweg, W., & Stricker, S. (2015). Das “Luzerner Governance-Modell.” Soziale Organisationen systematisch führen und Schwachstellen erkennen. Springer.

New nonprofit organization governance  279

Stricker, S., Renz, P., Knecht, D., Lötscher, A., & Riedweg, W. (2015). Soziale Organisationen wirkungsvoll führen: Entwicklung dank ganzheitlicher Governance – ein Fitnessradar. Nomos. Turner, J. R. (2009). Handbook of project-based management: Leading strategic change in organizations. McGraw-Hill Education. Ulrich, H. (1984). Management. Haupt. Ulrich, P. (2008). Integrative economic ethics: Foundations of a civilized market economy. Veeriah, P. (2020, December 21). Winning secrets: How Novartis’ unbossed culture has been a pillar of strength and catalyst for innovation. Human Resources Online. Retrieved November 28, 2021, from https:// www​.hum ​a nre​sour ​c esonline​.net ​/winning​-secrets​-how​-novartis​-unbossed​- culture ​-has​-been​-a​pillar​-of​-strength​-and​-catalyst​-for​-innovation. Welsch, W. (2008). Unsere postmoderne Moderne. Akademie Verlag.

280  Research handbook on the governance of projects

APPENDIX Table A22.1  Checklist of indicators for new NPO governance Board demand and foster

Management plan and lead

Employees contribute, execute, loop-back

System Management Systemic organizational culture Understanding and importance of society and politics for the organization Understanding about supply system and actors Model of the organization in the system environment Systemic processes Success drivers and core competencies Leadership and continuity in system management Mission Management Competent and assertive internal supervisory body Existence of a (normative) mission/ vision statement Existence of a strategy and periodic review of its validity Targeted, long-term design of infrastructure and IT Awareness of own culture and perception of culture as a management task Existence and implementation of an organizational structure and process organization Substitution and active succession planning Key figures that are controlled and monitored Financial management Reflective understanding of success and impact Integrity Management Leadership in integrity issues (Continued)

New nonprofit organization governance  281

Table A22.1  (Continued) Board demand and foster

Management plan and lead

Employees contribute, execute, loop-back

Continuity and example in integrity management Existence of a solution-oriented culture Existence of a culture of mutual respect Culture of active acceptance of responsibility Understanding of ethically reflected behavior in concrete situations Review process for compliance with ethical rules of conduct Reporting office for ethical misconduct Stakeholder Management Systematic overview of stakeholder groups Leadership and continuity in relation to stakeholders Dealing with clients/customers Dealing with clients/donors Dealing with donors, members, and sponsors Dealing with the public, business, media, and politics Dealing with the professional community Dealing with co-actors Dealing with employees Dealing with volunteers Risk Management Leadership and continuity in risk management Holistic understanding of risk Awareness of how to deal with risks Process and accountability for managing risks Risk prevention in critical service processes (Continued)

282  Research handbook on the governance of projects

Table A22.1  (Continued) Board demand and foster Ensuring the psychological and physical integrity of clients/customers Mutual dependency between clients/ donors and service providers about finances and services Protection of employees Risk prevention in volunteer work Legal regulations and professional ethical standards/norms Maintaining the credibility of the organization Data security and IT infrastructure Audit and Reporting Management Leadership and continuity in audit management Audit and report design Ensuring compliance with legal requirements Audit of annual financial statements by external auditors Internal audits (incl. internal control system) Reporting to clients/donors Quality audits, certificates, and guidelines Strategic controlling and management information Source:   own table based on Stricker et al., 2015

​

Management plan and lead

Employees contribute, execute, loop-back

23. Boosting quality of megaprojects through governance mechanisms: perspectives of mega water transfer projects in China Florence Yean Yng Ling and Wujuan Zhai

INTRODUCTION Megaprojects are high-risk projects which require major financial investment, demand long timeframes from planning to completion, and have major socio-economic and environmental ramifications (Flyvbjerg, 2014; Sternberg, 2016). A specific category of megaprojects is mega water transfer (MWT) projects. A MWT project is one with construction costs of more than US$1 billion, water transfer distance of more than 190km, and volume of water transferred exceeding 0.23km3 per year (Shumilova et al., 2018). MWT projects promote development, social stability, and economic growth (Flyvbjerg, 2014; Zhai et al., 2022). They also play an important role in sustaining the water–food–energy nexus, as they can provide water for irrigation, domestic supply, energy production, navigation, and industrial development (Sternberg, 2016). Due to the roles that they serve, it is important that MWT projects are developed to a high level of quality. Yet this is not always possible because MWT projects adopt complex techniques and innovative and advanced technologies (Flyvbjerg, 2014). MWT projects are often of questionable renewability, sustainability, and quality effectiveness (Zeng et al., 2015). As the performance of megaprojects, especially their quality, is typically unsatisfactory (Ansar et al., 2016), it is vital to find ways to improve their quality. Studies have been conducted on different factors affecting this quality. The aim of this study is to find ways to boost the quality of megaprojects through governance-related practices to fulfill social responsibility. The main governance-related constructs in social responsibility are subjective norms (SN), group norms (GN), social identity (SI), organizational support (OS), and obligation. The specific objectives in the context of MWT projects in China are to: (1) examine the quality of megaprojects; (2) examine the extent to which governance-related practices to fulfill social responsibility are adopted in megaprojects; (3) develop a predictive model to forecast the quality of megaprojects based on governancerelated constructs in social responsibility; and (4) provide recommendations on how to boost the quality of megaprojects. In the second section of the chapter, literature on project quality and governance mechanisms is reviewed. Research design, data collection instruments, and data analysis methodology are

283

284  Research handbook on the governance of projects

presented in the third section. The fourth section contains details on respondents’ characteristics while the fifth section focuses on data analysis. The sixth section presents the discussion and recommendations, as well as limitations and some implications for future studies. The conclusion and contributions are in the final section.

LITERATURE REVIEW Project Quality There are several methods used for the measurement of quality performance. These include subjective assessment of quality on a Likert scale (Chan & Chan, 2004; Yang et al., 2011; Xia et al., 2016), the extent of rework (Fayek et al., 2003; Heravi & Ilbeigi, 2012), and winning construction quality awards (Le et al., 2020). Among these, the Likert scale is most frequently used, and therefore also adopted in this study. General Factors Affecting Quality Studies on factors affecting quality have adopted different constructs. For example, Ning and Ling (2014) investigated relational practices on project quality and found that relationship quality and relational transactions have a positive impact on the quality outcomes of public projects. The degree of national importance and the level of public attention to a megaproject can positively promote its quality performance (Le et al., 2020). Project delivery method has also been found to affect the quality of construction projects (Yu et al., 2017; Zhang et al., 2019). Ning and Gao (2021) developed a resilience framework to explore quality management in innovative building projects, by combining four interconnected strategies: planning, monitoring, responding, and learning. Governance Mechanism The presence of social responsibility behavior in construction enterprises has been found to increase the quality of projects (Xie et al., 2022). This study explores this further by investigating whether governance mechanisms that engender social responsibility behavior of stakeholders could improve the quality of megaprojects. Governance mechanisms are safeguards that are put in place to regulate interfirm exchange, minimize exposure to opportunism, protect investments in transaction cost, and promote the continuance of relationships (Jap & Ganesan, 2000). The concept incorporates the rules of exchange between stakeholders, such as incentive structures, monitoring mechanisms, and norms (Jap & Anderson, 2003). Governance mechanism is investigated via SN, GN, SI, OS, and obligation. Subjective norms Norms are considered to be capable of guiding action in direct and meaningful ways, becoming particularly influential on behavior when they are relevant at the time a behavioral judgment is made (McDonald & Crandall, 2015). Two main norms are SN and GN.

Boosting quality of megaprojects through governance mechanisms  285

According to the theory of planned behavior (Ajzen, 1991), SN refer to the belief that peers and people of importance to the person think he or she should engage in a particular behavior (Chen et al., 2020). Variations in others’ opinion of one’s social responsibility behavior explain, to some extent, disparities in the level of social responsibility behavior intentions (Vu et al., 2021). Overall, SN shape how individuals see themselves, impact self-efficacy beliefs, shape outcome expectations, and, in turn, influence the likelihood of forming domain-specific intentions (Santos & Liguori, 2020). Group norms According to the theory of planned behavior, GN primarily affect behavior if the specified norms originate from a group that is a relevant source of SI for an individual (Terry et al., 1999). In-group norms are strong when people identify with the reference group (Terry et al., 1999), when people’s group membership is salient (Wellen et al., 1998), or when the information comes from a close group (Smith et al., 2021). Social identity Drouin and Turner (2022) found that social value is context-dependent, time-sensitive, and stakeholder-dependent. Social value is created by stakeholders who determine the inputs and outputs (Drouin & Turner, 2022). SI theory states that group membership helps people to instill meaning in social situations, define who they are, and to determine how they relate to others (Tajfel, 1978). In megaprojects, stakeholders who sense the importance of social responsibility behavior increase identification with their organization, which increases their commitment, job satisfaction, and organizational citizenship behavior (Farooq et al., 2017). Identification transforms stakeholders’ relationship to their organization and results in increased work performance, health, and wellbeing (Paruzel et al., 2020). Organizational support The OS theory holds that in order to meet socio-emotional needs and to assess the benefits of increased work effort, employees form a general perception concerning the extent to which the organization values their contributions and cares about their wellbeing (Eisenberger et al., 1986). OS is defined as assurance that aid will be available from the organization when it is needed to carry out one’s job effectively and to deal with stressful situations (Matusik et al., 2022). Empirical evidence shows that OS is associated with improved subjective employee wellbeing, positive employee attitudes toward the organization and work, and favorable employee behavior (Caesens & Stinglhamber, 2020). Obligation Social obligation and inner obligation are typically reasons for action, arising from social facts such as commitments, contracts, and shared decision-making (Adra et al., 2020). The sense of obligation as a distinct source of motivation has two key features. First, it has a peremptory, demanding force, with a kind of coercive quality. Second, it is often tied to agreement-like social interactions (e.g., promises) in which breaches prompt normative protest on the one side, and apologies, excuses, justifications, and guilt on the other (Tomasello, 2020). SI has been found to motivate individuals to have a sense of social obligation (Thomas et al., 2020) because of the emotional and value significance of group membership (Cornelissen et al., 2007). When individuals have the obligation to participate in megaprojects in a responsible manner, there is then real value to society of undertaking megaprojects (Drouin & Turner, 2022).

286  Research handbook on the governance of projects

Research Gap Social responsibility in megaprojects has been explored in areas such as the types of social responsibilities adopted (Zeng et al., 2015), the governance of social responsibility (Ma et al., 2017), and social responsibility behavior (Xie et al., 2022). The gap in knowledge is that the impact of adopting social responsibility behavior on performance of megaprojects has not been researched in depth. This study aims to fill this gap and develop a predictive model to forecast the project quality of megaprojects based on governance-related mechanisms to fulfill social responsibility. The research question is: do stakeholders’ governance-related practices to fulfill social responsibility lead to megaprojects achieving higher quality?

RESEARCH METHOD Research Design A large research program that investigated socially responsible collective action of MWT project stakeholders in China has been conducted. The study reports on a part of the findings concerning governance-related constructs to fulfill social responsibility viz. SN, GN, SI, OS, obligation, and quality of the MWT project. The research design is an online survey conducted on MWT projects in China. Data Collection Instrument A questionnaire survey was used as the primary method of data collection. Respondents were asked to complete a questionnaire based on an MWT project they had recently worked on. The first section asked each respondent to provide basic information on the MWT project. They were asked to rate the quality of the MWT project (Y variable) on a five-point Likert scale where 1 = significantly below expectations, 2 = a little below expectations, 3 = meets expectations, 4 = a little above expectations, and 5 = significantly exceeds expectations. The second section comprised questions (X variables) relating to SN, GN, SI, OS, and obligation. Respondents were asked to indicate the extent to which the statements on social responsibility were in line with the actual situation in the MWT project identified in section one. The five-point Likert scale was 1 = strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, and 5 = strongly agree. A pilot test of the questionnaire was conducted with 20 respondents. Based on the feedback, minor amendments were made to the wordings to increase clarity. (The details of the Y and X variables can be found in Table 23.2.) Sampling and Data Collection The population comprised stakeholders of MWT projects. The sampling frame was stakeholders of MWT projects in China. Samples were identified in three ways: searching through related water publications, contacting the participants in MWT projects with which our team had prior collaboration, and requesting the assistance of MWT projects owners. To increase

Boosting quality of megaprojects through governance mechanisms  287

the number of responses, convenience sampling and snowball sampling were adopted. Data were collected through an online survey, with the questionnaire hosted on a professional survey website (https://www​.wjx​.cn/) and the link sent to the target respondents. The online survey was conducted over an eight-week period from April 2022 to May 2022. Data Analysis Methodology A Shapiro–Wilk test was conducted and the data were found to have a normal distribution. The data were tested for reliability. Cronbach’s alpha for the measurement items exceeded the threshold level of 0.7 (Nunnally, 1978), indicating a high degree of internal consistency. One sample t-test was conducted using SPSS software to analyze the quality of MWT projects, and governance-related practices in social responsibility adopted in MWT projects. The hypothesized population mean (μ) was set at 3, which is the neutral point of the five-point Likert scale. For each question, the null and alternative hypotheses were as follows: Null hypothesis (H0): μ≤3. The decision was to accept H1 when p≥0.05. Alternative hypothesis (H1): μ>3. The decision was to reject H0 and accept H1 when the t-value was positive at p20 years

14

4.0

PhD

8

2.3

Master’s

62

17.9

Undergraduate

227

65.6

High school and below

49

14.2

Owner/Government

88

25.4

Designer

35

10.1

Consultant

89

25.7

Contractor

111

32.1

Supplier

23

6.6

Multiple Linear Regression Results The third research objective is to investigate how project quality can be predicted based on governance-related practices. This was done using MLR analysis, with Y being the quality of MWT projects, and X the measurement items in Table 23.2. The regression results in Table 23.3 and Figure 23.1 show that four governance-related practices (GN1, SI4, OS1, and OB1) explain 21 percent of the quality of MWT projects. The equation to predict quality of megaprojects is extracted from Table 23.3 and shown in Equation 23.1.

Y = 1.282 + 0.126×(SI4) + 0.189×(OB1) + 0.141×(GN1) + 0.106×(OS1)

(23.1)

Where: Y is the quality of the megaproject, SI4 is the extent to which one can influence the decisions made by the project organization, OB1 is the extent to which one feels a sense of inner obligation to take collective action,

Boosting quality of megaprojects through governance mechanisms  289

GN1 is the extent to which the organization is determined to take socially responsible collective action, and OS1 is the extent to which the organization has established a social responsibility management system. Application of Predictive Model Quality of megaprojects (Y) may be predicted using Equation 23.1. The X variables should be rated on a five-point scale where 1 = very weak, 3 = moderate, and 5 = very strong. An example of using this equation to predict quality of a megaproject is now given. In a megaproject, decisions are made by one or two persons (SI4 rated 1), members have a moderate sense of inner obligation to be socially responsible (OB1 rated 3), the owner is very determined to take socially responsible actions (GN1 rated 5), but has only established a rudimentary social responsibility management system (OS1 rated 2). Using Equation 23.1, the predicted quality score for the megaproject is 2.892 [being 1.282 + (0.126×1) + (0.189×3) + (0.141×5) + (0.106×2)]. To increase the quality of the megaproject further, the owner could improve its social responsibility management system (OS1 rating increased to 4), and the predicted quality score will increase to 3.104. With Equation 23.1, owners may take specific actions to improve the quality of megaprojects via the governance-related practices identified in Table 23.3.

DISCUSSION AND RECOMMENDATIONS The final research objective is to provide recommendations to owners on how the quality of their megaprojects can be boosted. The recommendations are based on the MLR results, which show that two corporate level practices (GN1 and OS1), and another two individual level practices (SI4 and OB1), to fulfill social responsibility may boost the quality of megaprojects. Project Owners’ Role in Fulfilling Social Responsibility According to the MLR results in Table 23.3, the quality of megaprojects can be improved if companies strengthen their determination to take socially responsible collective action (GN1) and establish a relatively complete social responsibility management system (OS1). To strengthen their determination (GN1), owners need to first accept the group norm that their megaprojects must be developed and operated in a socially responsible manner. This acceptance is via a process of internalization when they accept influence because the content of the ideas and actions is intrinsically rewarding (Kelman, 1958). It is recommended that owners lead in setting the correct value system and setting a clear policy statement to adopt socially responsible behavior. OS in the form of establishing a relatively complete social responsibility management system (OS1) is found to improve the quality of megaprojects (Table 23.3). OS stems from its willingness to recognize and integrate social responsibility concerns into business strategy (Farooq et al., 2017). It is recommended that owners set up a comprehensive social responsibility management system which assesses the extent to which stakeholders have fulfilled their social responsibilities in areas such as economics, law, ethics, and politics. Stakeholders who

290  Research handbook on the governance of projects

Table 23.2  Project quality and governance-related practices to fulfill social responsibility Code

Description

Mean

t-value

Significance (one-tailed)

Y

Project quality

3.33

10.296

0.000**

Subjective norms SN1

My family and friends think that I should take socially responsible collective action.

4.15

36.853

0.000**

SN2

My family and friends support me to take socially responsible collective action.

4.03

26.972

0.000**

SN3

My superior and colleagues think that I should take socially responsible collective action.

3.97

25.913

0.000**

SN4

My superior and colleagues support me to take socially responsible collective action.

3.96

25.615

0.000**

Group norms GN1

My company has strong determination to take socially responsible collective action.

3.90

28.363

0.000**

GN2

The group members in the project organization have strong determination to take socially responsible collective action.

3.72

18.047

0.000**

Social identity SI1

My personal value overlaps with the identity of the project organization.

4.08

37.026

0.000**

SI2

I feel a strong sense of belonging to the project organization.

4.01

29.370

0.000**

SI3

My views and suggestions are taken seriously by the project organization.

3.17

3.920

0.000**

SI4

I can influence the decisions made by the project organization.

2.53

−8.232

0.000**

Organizational support OS1

My company/superior has established a relatively complete social responsibility management system.

3.67

19.015

0.000**

OS2

My company/superior encourages socially responsible collective action.

3.82

23.399

0.000**

OS3

My company/superior values input on socially responsible collective action.

3.86

22.725

0.000**

OS4

My company/superior provides many opportunities to develop socially responsible collective action.

3.39

9.495

0.000**

OS5

My company/superior gives complete and accurate information regarding socially responsible collective action.

3.46

10.891

0.000**

Obligation OB1

I feel a sense of inner obligation to take collective action (internal obligation).

4.17

38.072

0.000**

OB2

I feel a sense of social obligation to take collective action (external obligation).

4.20

38.952

0.000**

Note:   Mean is based on a five-point scale where 1 = far below expectations/strongly disagree and 5 = far exceeded expectations/strongly agree. Test against H0 = 3. *p