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PROJECT MANAGEMENT
Vol. 7, No. 1, 2001

International Project Management Journal

ISSN 1455-4186

OLD TRUTHS AND NEW INSIGHTS

MANAGEMENT OF PROJECTS AS PORTFOLIOS
INTEGRATED SCRIPT FOR RISK MANAGEMENT
THE TRUST FACTOR

Publishers: Project Management Association Finland

Norwegian Project Management Forum

Project Management - Editor-in-Chief

Karlos A. Artto, Helsinki University of Technology, Finland
Co-Editors
Professor Erling S. Andersen, Norway
Doctor Kalle Khknen, Finland
Aki Latvanne, Finland
Professor Asbjrn Rolstads, Norway
Editorial Assistants
Marko Korpi-Filppula, Helsinki University of Technology, Finland
Iiro Salkari, Helsinki University of Technology, Finland
Jan Alexander Langlo, Norwegian Centre of Project Management,
Norway
Executive Board
Karlos A. Artto, Finland
Pekka Mkel, Finland
Kari Gro Johanson, Norway
Inquiries
Address submissions and inquiries to:
Karlos A. Artto, Editor-in-Chief
Helsinki University of Technology
P.O. Box 9500, FIN-02015 HUT, Finland
Telephone +358 9 451 4751
Facsimile +358 9 451 3665
E-mail: [email protected]
More information about the journal can also be found from the
Project Management Association Finland web site at: http://
www.pry.fi/pmaf_mag.htm
Submissions
Manuscripts should be submitted to the Editor-in-Chief in
electronic format by E-mail.
Journal Policy
Project Management, ISSN 1455-4186, is published by two
publishers: 1) Project Management Association Finland (PMAF)
and 2) Norwegian Project Management Forum (NPMF). NPMF is
a joint venture between Norwegian Association of Project Management (NAPM), and Norwegian Centre of Project Management. The mission of Project Management (PM) is to promote
theory and practice in the field of project management and
project-oriented business. It is the policy of PMAF and NPMF to
publish one issue of PM yearly, which will be distributed free of
charge. In addition to the world-wide free distribution, the
Finnish and Norwegian project management associations include
the yearly issues in their publications list, which enables that
individuals and organizations outside the distribution network can
have single copies to be sent to them for a reasonable price. The
main distribution channels comprise circulation arranged by
national project management associations to their members and
distribution to the attendants of international events on project
management in cooperation with the arranging organization. The
circulation of the journal is 5 000 copies. The aim of PM is to
reach extensively interest of project management experts and
professionals worldwide in any sector both in academic world and
industry, and this way to extend communication between all
different sectors of industries including the public sector, universities and research organizations.
The PM seeks articles on any aspects of project management for
publication. In addition to reviewed academic articles, it welcomes papers of more practical nature. Authors are encouraged to
submit the following types of original manuscript: summaries of
research results; surveys on current practices; critical analysis and
developments of concepts, theories, practices, methodologies,
application or procedures; analyses of success or failure in the
business context; and case studies. The division of the journal

content follows subdivision of papers into different paper types.

The paper types recognized are application papers, research
papers, and notions and summaries. In the selection of research
paper manuscripts for publication the primary importance will be
based on the original contribution and novelty value and the
extent to which they advance the knowledge on project management. In selecting application papers, it is required that the paper
discusses recent advancements of project management in any
industrial sector or public sector in terms of empirical applications, applicability, and practical utility. Papers are submitted in
electronic format to the Editor-in-Chief.
Copyright notice
Copyright of the Project Management is fully owned by the
publishers, which reserve all rights to the published material as
defined in the following. No part of this publication may be
reproduced, stored in a retrieval system or transmitted in any
form or by any means, electronic, mechanical, photocopying,
recording or otherwise, without the prior written permission of
the publishers. All articles in PM represent the views of the
authors and are not necessary those of PMAF nor NPMF.
International Board of Advisors and Contributors
Professor Luis Alarcon, Universidad Catolica de Chile, Chile
Professor Erling S. Andersen, The Norwegian School of Management BI, Norway
Professor Karlos A. Artto, Helsinki University of Technology,
Finland
Professor David Ashley, University of California, USA
Professor John Bale, Leeds Metropolitan University, UK
Professor Juan Cano, University de Zaragoza, Spain
Professor Franco Caron, Politecnico di Milano, Italy
Professor Chris Chapman, University of Southampton, UK
Doctor David Cleland, University of Pittsburgh, USA
Doctor Nashwan Dawood, University of Teesside, UK
Professor Mats Engwall, Stockholm School of Economics, Sweden
Professor Pernille Eskerod, Southern Denmark Business School,
Denmark
Professor Roger Flanagan, University of Reading, UK
Professor Carlos Formoso, Federal University of Rio Grande do
Sul, Brazil
Doctor J. Davidson Frame, University of Management & Technology, USA
Professor Roland Gareis, University of Economics and Business
Administration, Austria
Doctor Ari-Pekka Hameri, CERN, Switzerland
Doctor Keith Hampson, Queensland University of Technology,
Australia
Professor Francis Hartman, University of Calgary, Canada
Otto Husby, Control Bridge AS, Norway
Simon Indola, Nokia Networks., Finland
Doctor Kalle Khknen, VTT Building Technology, Finland
Professor Daniel Leroy, Universite des Sciences et Technologies
de Lille, France
Marko Luhtala, Nokia Mobile Phones Ltd., Finland
Professor Rolf A. Lundin, Ume University, Sweden
Professor Jens Riis, Aalborg University, Denmark
Professor Asbjrn Rolstads, Norwegian University of Science
and Technology, Norway
John Russell-Hodge, Synergy International Limited, New Zealand
Professor Rodney Turner, Erasmus University Rotterdam, The
Netherlands
Veikko Vlil, Industrial Insurance Co. Ltd., Finland
Doctor Stephen Ward, University of Southampton, UK
Doctor Kim Wikstrm, bo Academy University, Finland
Doctor Terry Williams, Strathclyde Business School, UK

Table of Contents
Editorial: Management of Projects as Portfolios ......................................................... 4
Karlos A. Artto, Editor-in-Chief, Project Management

Notion on Project Management Education

Project Management Education in Project-oriented Societies .................................... 7
J. Rodney Turner, Erasmus University Rotterdam, The Netherlands
Martina Huemann, University of Economics and Business Administration Vienna, Austria

Notion on Studying Projects in Societies

Assessing and Benchmarking Project-oriented Societies ......................................... 14
Roland Gareis, University of Economics and Business Administration Vienna, Austria
Martina Huemann, University of Economics and Business Administration Vienna, Austria

Notion on Industrial Risk Management Application

Risk Analysis to Assess Completion Time of a Tram-Line ....................................... 26
Enrico Cagno, Politecnico di Milano, Italy
Franco Caron, Politecnico di Milano, Italy
Mauro Mancini, Politecnico di Milano, Italy

Research
Contracting and the Flying Trapeze: The Trust Factor ............................................. 32
Roch DeMaere, University of Calgary, Canada
Greg Skulmoski, University of Calgary, Canada
Ramy Zaghloul Mohamed, University of Calgary, Canada
Francis Hartman, University of Calgary, Canada
Rethinking Project Management: Old Truths and New Insights .............................. 36
Kam Jugdev, University of Calgary, Canada
Janice Thomas, Athabasca University, Canada
Connie L. Delisle, University of Calgary, Canada
The Impact of Performance in Project Management Knowledge Areas on
Earned Value Results in Information Technology Projects ....................................... 44
Ralf Mller, Henley Management College, UK
J. Rodney Turner, Erasmus University, The Netherlands
Towards An Integrated Script for Risk and Value Management ............................... 52
Stuart D. Green, The University of Reading, UK
Project Management Association Finland, Corporate Members, Board ................... 59
Norwegian Centre of Project Management .............................................................. 60
Norwegian Association of Project Management, Board 2001 .................................. 61

Cover: Photograph by Aki Latvanne

KARLOS A. ARTTO

EDITORIAL

Management of Projects
as Portfolios
Karlos A. Artto, Editor-in-Chief, Project Management
Keywords: Project Portfolio Management, Management of Project-oriented
Corporation, Project-oriented Business

Many articles in this issue of the Project Management discuss the role of projects in organizations, and even the
role of projects in whole societies. Furthermore, many articles in this issue discuss promoting project management to develop companies' business operations. Such promoting aspects are included in e.g. articles that
suggest rethinking project management, marketing and selling the project management within the organization, project management support, and project management education.

ecently, the project research

personnel in my school and
personnel in our partner
companies have made a substantial
effort into aligning projects and their
management to management of the
corporation as a whole. Such
development of strategic project
management is contained in the concept
of project portfolio management. Project
portfolio management is applied for
maximizing the value/benefit of the
projects as a whole, balancing portfolios
relative to e.g. risk/reward and resource
allocation, and aligning projects to
business objectives.
According to our definition,
project portfolio management
constitutes the management of a multiproject organization and its projects in
a manner that enables the linking of
projects to business objectives. This
implies development at two levels. First,
there is a need to bring a holistic view
to the process of managing single
projects. A holistic project-oriented
approach basically requires the adoption
and inclusion of all relevant knowledge
on the rich field of project management.

Page 4

However, the project concept must be

redefined to include the activities from
the very early pre-project phases to very
late post-project phases. Such view
suggests that the project must be
managed already before the project is
formally established, and that the project
must be managed after completing the
execution and dissolving the formal
project team. This approach to the
extended project process widens the
scope of project management outside
the traditional planning/execution
centered view. Second, management
processes and approaches must be
developed at the level of business units
or other organizational units above
projects. Such management approaches
and processes relate to questions of how
responsibilities, decision making and
information sharing are arranged and
supported in a multi-project
environment so that they are linked to
the overall business scheme. This widescope management perspective is
needed to enable transparency across
projects, across whole portfolios of
projects, and across different
organizational units.

In a pre-study for ambitious developments of project portfolio management in corporations and public organizations, we raised not only the importance of defining portfolios and their
boundaries with appropriate responsibilities in organizations, but also the importance of managing the interaction across
boundaries between the portfolio and its
projects, between single projects, between different portfolios, and between
different corporations in business networks (Artto et al. 2001). We concluded
that organizational models, management
practices, methods and tools for the strategic management of projects should be
developed, the key areas of development
in our current research schemes
(Dietrich 2001, Ikonen 2001) being:
- Definition of extended project
process, its phases, and major
decision making points (with
objective setting, group decision
making, and commitment
building)
- Definition of major decision
making points at the level of the
organization above projects

- Selection and prioritization

criteria for individual projects
and whole portfolios
- Project portfolio management
process with links to processes in
single projects (including
organizational, methodological
and process practices to link
strategy to projects)
- Organizational models, responsibilities and structures at different levels in the organization
- Setting portfolios and their
boundaries in the organization
- Interacting across multiple
portfolios and their projects cross-portfolio optimizations
- Use of projects and project
portfolios to transform company
towards strategic directions
- Relevant feedback information
from portfolios and their
projects that imply changes in
strategy
- Organizational and methodological constructs that link
portfolios to customers' and
partners' portfolios, and negotiating priorities in business
networks

- Definition of the relevant

information content for decision
making and objective setting,
and communication of the
results of the decision making to
the organization.
- Information sharing and communication for effective crossproject, cross portfolio and
cross-functional views.
- Methodology and tools for
decision support and implementing the criteria
- Learning from other companies
participating in the research
schemes through seminars and
workshops (benchmarking).
Project portfolio management is
about aligning projects with business
performance goals. In today's complex
business networks, this is undoubtedly
more important than ever. Industrial
corporations and public sector organizations have expressed their urgent need
for in-depth portfolio management
knowledge and tools. Successful implementation of project portfolio management requires industry specific understanding and tight cooperation in a time
frame suitable for today's dynamic businesses (Dietrich 2001, Ikonen 2001).

References
Artto K. A., Martinsuo M., Aalto T. (eds.), 2001.
Project Portfolio Management. Strategic
Business Management Through Projects,
Project Management Association Finland,
Helsinki
Dietrich P., 2001.
Plan for Project Portfolio Management
Information System Development, City of
Espoo, Finland, Unpublished Document, in
Finnish
Ikonen T., 2001.
Project Portfolio Management (PPM)
Development, Research Plan, Global
Project Business (GPB) Technology
Program at the National Technology
Agency (TEKES), Finland, Unpublished
Document

Karlos A. Artto
Helsinki University of Technology
(HUT), Finland
Department of Industrial Engineering and
Management
P.O. Box 9500
FIN-02015 HUT, Finland
Tel: +359 9 451 4751
Fax: +358 9 451 3665
E-mail: [email protected]

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Page 6

CATEGORY: NOTION ON PROJECT MANAGEMENT EDUCATION

Project Management Education in

Project-oriented Societies
J. Rodney Turner, Erasmus University Rotterdam, The Netherlands
Martina Huemann, University of Economics and Business Administration Vienna, Austria
Keywords: Project Management Education, Project-oriented Society, Project Management Initiatives, Project
Management Competence
Project management competence is based on knowledge and experience. The provision of formal project management education programmes is essential to the development of the new profession project management. In
this paper we discuss the development of project management education using the United Kingdom as a base
case. We then describe the current state of education in project management in Austria, Germany and Switzerland and investigate new developments in Austria and Switzerland, initiated by project management initiatives
programm I austria and SwissPM. Finally we give an overview of project management education in projectoriented societies around the world. The paper derives from the work of the Global Working Party on Education and the International Project Management Association (IPMA) research initiative into the Project-oriented Society.

Introduction
The state of maturity of project management education in countries around
the world is currently being investigated
by two initiatives. These are:
1. the global working party for
education in Project Management, (Turner and Huemann
2000)
2. the IPMA research initiative
into the Project-oriented
Society, (Gareis and Huemann
2001).
In this article, we report on what
education in project management is provided in United Kingdom, and give an
overview of the project management
education and new developments in
Austria, Germany and Switzerland.. We
then give an overview on the current
status in project management education
in different countries around the world,
drawing on the work of the two initiatives above.

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Based on the definitions in the

Oxford English Dictionary, Turner and
Huemann (2000) define education as:
structured extended programmes
to impart knowledge and develop
competence
and training as:
short courses to develop specific
skills.

Provision of Project Management

Education in the United Kingdom
We start by describing what project management education is provided in the
United Kingdom, one of the more mature project-oriented societies. We use
the developments in the United Kingdom over the last half a century as a base
case to illustrate the developments that
have occurred. We consider:
- tertiary education
- work-based programmes
- primary and secondary education

Tertiary Education in the United

Kingdom
In the United Kingdom, the provision
of education in project management
started at the top and worked down.
People started undertaking doctorates or
masters degrees by research, and then
offering post-experience education at
masters degree level. From there it percolated down through the levels of tertiary education, and into secondary and
primary education. Perhaps this was necessary; it was first necessary to train the
trainers for lower levels. Perhaps also it
was inevitable; interest at the higher levels creates interest at lower levels. In
other countries that came later to
project management education it was
different. Taught masters degrees were
offered first, either programmes
specialising in project management, or
with project management as an essential component on wider programmes.
From there, it spread up and down to
other levels. This was the case in Austria for instance.
Page 7

Doctorates and Masters Degrees by

Research
In the UK, the first doctorates in project
management related subjects were done
in the 1960s by some of the now leaders
of the profession, Peter Morris, Martin
Barnes and John Perry. It is now theoretically possible to do a research degree
in almost any business, engineering, construction, building or information systems faculty. Rodney Turner has supervised or examined people at
Bournemouth, Cranfield, Lancaster,
Leeds Metropolitan, Loughborough and
the Open Universities, and at Henley
Management College. He is also aware
of people doing doctorates at Herriot
Watt, Leeds and Reading Universities,
Imperial College, and UMIST. There are
about 120 universities and university
colleges in the UK, and so there are active doctoral research programmes in
project management in at least 10% of
them.

Table 1. Taught master degrees in Project Management at the UK's Universities

Taught Masters Degrees

In the United Kingdom, the first taught
masters degrees in Project Management
were offered by Cranfield University and
Henley Management College in the late
1970s, sponsored by the Engineering
Construction Industry Training Board,
(ECITB). Because of the sponsor, these
programmes were initially not generic,
but focused on the construction industry. Since then, both programmes have
become generic, and there are now a
growing number of programmes offered,
Table 1.
At some universities, generic
programmes are offered. They cover the
management of all types of projects. At
others they tend to focus on projects of
one type or another. Note that in the
United Kingdom, it is not possible to give
a degree the name of a specialist discipline. Thus the name Master of Project
Management is not used. All the qualifications in the top part of Table 1 are
called MSc (Project Management) or
MBA (Project Management). (The title,
Master of Project Management is used
in other countries, for instance at the
University of Limerick in Ireland and the
University of Technology Sydney in
Australia.)
Then there is a range of specialist
degrees from related disciplines. These
cover things like Construction Project
Management or Risk Management, and
are included in the bottom part of Table
1. Interestingly, to our knowledge there
are no masters programmes in InformaPage 8

Table 2. Bachelors degrees or equivalent in project management in the UK

tion Systems Project Management, (although there are courses in Information

Systems Management incorporating
project management).
Finally there are many other masters degree programmes which incorporate project management as a compulsory or optional module. Most MBA
programmes include a course on operations management which will address
project management, or include a
project management module. Similarly
many courses on engineering, construction or information systems will include
a project management module.
With about 120 universities and
university colleges in the UK, a little
over 10% of them offer taught masters
degrees in project management or
closely related disciplines. A very large
proportion would offer project management modules as part of other degree
programmes. This figure of about 10%
seems to be the level reached by the
more mature countries, (Britain, Australia, New Zealand and Ireland, al-

though with the latter two, 10% is just

one university or university college
each).

Bachelors Degrees
There are three bachelors degree
programmes in project management in
the UK, Table 2. You will see that all of
these are from the building or construction industry. However, project management is also taught as a compulsory or
optional module on many other
programmes in management, engineering, construction or information systems.
For instance, project management is a
compulsory module on the programme
of information systems management at
Bournemouth University.
Rodney Turner is on record as saying the project management cannot be
taught to undergraduates, that it is essentially a subject for post experience
study, (Turner 1995). Clearly that is not
now true, and perhaps it is part of the
developing project management maturity of societies that as project-based

ment department, in the use of its propriety project management methodology, PRINCE 2

National and Scottish Vocational

Qualifications, NVQs and SVQs
National Vocational Qualifications
(NVQs and SVQs) were introduced in
the UK during the 1990s. These are
works-based education programmes that
give maximum credit to works based
experiences, and to keep formal study
to a minimum. NVQs and SVQs in
Project Management are offered by a
number of professional institutions and
other bodies.
Figure 1. Kolb's experiential learning cycle
ways of working become more widespread that people become more receptive to them at an earlier age. Rodney
Turner is himself teaching project management modules on several undergraduate programmes in the Netherlands, and Martina Huemann in universities and Fachhochschulen in Austria.
However, perhaps some of the sentiment
remains true, in that post-experience
and pre-experience people have different learning styles, which needs to be
recognised by the educators. For preexperience people the education
programme must primarily aim to impart explicit knowledge, whereas for
post-experience people it can also aim
to develop implicit knowledge, skills and
behaviours through Kolb's learning
cycle, Figure 1, (Turner et al. 2000).
Educators need to adapt their style to
the audience, and to be aware of the
danger of mixing students at different
stages of development in the same class.
(Students perhaps also need to be aware
that educators have different teaching
styles, some aimed at post-experience
learners and some at pre-experience).
At least three other universities or
colleges also offer postgraduate certificate and diploma programmes, Table 2.
In the UK's university system, a postgraduate diploma is considered as being
equivalent to a bachelors degree, but is
offered to post experience students in a
much narrower and more focused subject. The three institutions offering postgraduate diploma programmes all
specialise in teaching post experience
people. Certificate and diploma qualifications are also offered by several professional or other bodies. These measure
attainment of very specific skills after a
shorter training programme, and are discussed at the start of the next sub-section.
P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Works-based Education and

Qualifications in the United
Kingdom
Available in the UK are several different types of works-based qualification,
including:
- certificate and diploma qualifications
- national and Scottish vocational
qualifications, NVQs/SVQs
- certification by professional
institutes
All these qualifications certificate
the attainment of a specific skill or level
of competence. In these cases, the qualifying bodies merely examine the candidate. It is beholden on the candidate to
determine what education they require
to meet the requirements of the examination, and to compose their own course
of study from courses available on the
open market, (Lane 2000, 2001), leading to an examination by a professional
or other body. Indeed, if someone feels
competent, they can sit the examination
with no study, (risky). According to the
European norm, EN45013, it is required
that the training body and examining
body should be separate, (a requirement
not met by all higher education institutes, except possibly the colleges of
London University).

Certificate and Diploma

Qualifications
Professional Certificate and diploma
qualifications are also offered by several
professional bodies. The best known
certificates and diplomas in this category
are those offered by the Information
Systems Education Board, ISEB. However, the Association for Project Management offers a range of knowledge
certificates as well. There is also a certificate offered by the CCTA, a govern-

Certification by Professional
Institutes
There is growing interest in certification
in the UK. Two competing programmes
are offered:
1. the multi-stage programme of
the International Project
Management Association,
IPMA, operated by the Association for Project Management,
APM
2. the single stage programme of
North American Project
Institute, PMI
The only stage of the PMI
programme (PMP) is equivalent to the
first stage of the APM/IPMA programme
(APMP), and both are aimed at people
at the beginning of their professional or
management career. Both are based on
a test of knowledge, with some measure
of professional experience. The second
stage of the APM/IPMA programme
contains a further test of knowledge and
experience, with some test of appropriate skills and behaviours. The third stage
(Certificated Project Manager, CPM) is
a rounded test of competence for experienced project managers. For more detailed descriptions refer to Turner and
Huemann (2000), or to the literature of
the relevant associations, or their web
pages, (www.ipma.ch, www.apm.org.uk,
www.pmi.org).

Primary and Secondary

Education in the United
Kingdom
At a workshop benchmarking the results
of research into the project oriented society, (Gareis and Huemann 2001),
some of the six countries present (Austria, Denmark, Hungary, Romania, Sweden, UK), claimed that all their primary
and secondary school children received
education in project management, and
Page 9

some said none did. In particular the UK

and Sweden said it depends how you
interpreted the question. In the UK, almost all primary school children are
given termly project to complete. Some
of their learning is through being set this
research exercise to complete each term;
it is part of the National Curriculum.
The question was whether these projects
counted as project management education. Some argued that because the children were given no guidance in project
management systems and process, this
did not count as project management
education. Others argued that it did
count as project management education
because:
1. It gave the children a project
mindset. They learnt from an
early age that project-based ways
of working are an important
alternative to more routine ways
of working. This mindset is
important for the development
of the project-oriented society.
2. The children are probably given
guidance in simple systems and
processes, appropriate to their
age. At six years old, children do
not have the structural skill to
apply a work break down
structure, nor the social skills for
complex team behaviours. But
they can be taught to set
themselves a simple objective,
work out what they have to do
in a limited amount of time, and
set themselves weekly tasks.
They can also learn to share
work amongst themselves,
drawing in their different skills.
That is all part of developing the
mindset.
Thus most of us concluded that
at primary schools in Western European
countries, and particularly the UK, Sweden and Denmark, children are given
education in project working appropriate to their age. The children may not
be given explicit knowledge of project
systems and processes, but they are given
implicit knowledge of project objective
setting, project scheduling and project
team working.
However, at secondary schools,
where perhaps the children are now
ready for more explicit training in project
management, none is yet given in the
UK, Sweden, nor Denmark. They continue to do some of their work through
projects, and so continue to develop the
implicit knowledge of project working.
Page 10

Provision of Project
Management Education in
Austria, Germany and
Switzerland
We now describe project management
education provided in German speaking countries. We also discuss new developments currently being undertaken
in Switzerland and in Austria to further
develop the project-oriented societies.
In Switzerland the project SwissPM,
organised by the Swiss Project Management Association (SPM), concentrates
on the implementation and further development of project management education and training to develop Switzerland into a project management competence centre. The Austrian Project
Management Association (PMA) has
chosen a different approach to further
develop the competences of the projectoriented society Austria. Within
programm I austria, the strategy is to
promote project management in industry, and to provide project management
to families, schools and municipalities,
to raise a wider understanding of the
profession project management.

Tertiary Education in German

Speaking Countries
Universities
In Austria and Germany there is the
possibility to specialise in project management in doctorate programmes at
technical or management universities.
At the master degree level there are several universities that include a project
management courses in their
programmes.
In Austria and in Switzerland
there are no programmes equivalent to
a master degree in project management.
At the University of Economics and
Business Administration Vienna project
management is formally established in a
chair. Project management is offered
formally as an elective within the curricula of business administration, international trade and economics at this
university.
In Germany project management
is formally established as a chair at some
universities like the University of
Bremen and the University of Giessen.
There are also professor of construction
project management at the Universities
of Wuppertal and Dortmund. The
Munich Centre for Management Development (Universitt der Bundeswehr)
offers an MBA in Project Management.

This programme is carried out in cooperation with Henley Management College, (see Table 1). The programme is
designed to prepare general managers for
senior positions in project based
organisations and to enable technical
managers to improve their pm competence and gain a broader perspective on
management.

Fachhochschulen
There are several Fachhochschulen in
all three countries, with project management as an integrated compulsory module on certain degree courses, from engineering, management, export, information systems, telecommunication,
tourism, art and social professions. Further there are Fachhochschulen , which
give project management a much higher
emphasis often in the connection with
a specific industry. In all three countries
there are Fachhochschulen that provide
project management in a generic form
suitable for all industries.
At Fachhochschulen the students
might or might not be post experience.
As in the UK, some universities offer
postgraduate certificate or diploma
programmes. There the students are post
experience and study in a much narrower and more focused subject. One
example for such a programme is the
postgraduate programme International
Project Management organised by the
University of Economics and the Technical University Vienna. The participants come from all different kinds of
industries and have already at least some
experience in project management
Austria
has
three
Fachhochschulen offering project management programmes. Germany has at
least ten offering project management
education in at least some modules.
Programmes in construction and engineering especially include courses in
project management. The University of
Bremen has a post graduate programme
(European Project Manager) in their
offer, Table 3.
In Switzerland, as a part of the
project management initiative,
SwissPM, (mentioned above), project
management was integrated in all
programmes at the Private Hoschschule
Wirtschaft (e.g. Graduate Business
School St.Gallen). Further one postgraduate programme in project management was established. The contents of
the project management education were
based on a survey analysing the requirements of Swiss-German companies re-

garding education (Niederer et al 2000).

Professional Certificates and

Diplomas
Professional certificates and diploma
qualifications are also offered by several
professional or other bodies. For instance
in Germany the German Project Management Association (GPM) together
with RKW offers programme (PMFachmann/-frau) which qualifies for the
IPMA D-level certification. Also other
project management education
programmes are closely linked to the
certification. For instance, the project
management programme at the Graduate Business School St.Gallen prepares
candidates for IPMA certification Level
C.
Vocational qualifications like in
the UK do not exist in Austria, Germany
or Switzerland. However, IPMA project
management certifications exist in all
three countries.

Primary and Secondary

Education in German Speaking
Countries
At secondary school level, project management is part of the curricula in trade
schools in Austria. For instance in all
trade schools the pupils age 19 (last
grade of trade school) have to do a

project work in their specialisation they

have chosen, e.g. marketing or information technology. The projects are based
on real cases and are coached by practitioners. Project management methods
like project work break down structure,
project environment analysis scheduling
methods are applied. In an annual competition these projects are judged for an
award. The criteria against which they
are judged focus mainly on content , but
also include whether they have done the
project management professionally.
Many of these pupils are taught by professionally qualified teachers. Some of
the teachers in trade schools are certified at IPMA D-level.
In High Schools project work is
part of the curriculum, but no project
management is thought to date. Within
programm I austria further attempts to
integrate project management in these
schools have been started. In a pilot
school project management is introduced to selected teachers and pupils.
The project management methods are
applied for instance in event projects
(school theatre, school ball, class journeys, etc.)
In Switzerland the school system
is changing. Project work has been
widely integrated in all kind of school
types The establishment of project man-

Table 3. Fachhochschulen or equivalent programmes in Austria,

Germany and Switzerland
P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

agement in primary and secondary education is described as one of the essential promoters to become a truly projectoriented society and stay competitive in
the long run. Within SwissPM one the
objectives is to integrate project work/
project management according to the
age level. In the age group 16 and up
selected pm methods should be introduced. Even the importance of the age
group was stressed, the initiative gave
priority to the establishment of project
management in Fachhochschulen.

Summary
The UK is probably one of the most
mature societies world-wide for the provision of education in project management, with 10% of higher educational
institutions offering taught masters and
research degrees in project management,
and many professional institutions supporting opportunities for works-based
education. Areas of immediate development would be the widening of provision at undergraduate level, particularly
the offering of first degrees in information systems project management, and
the introduction of teaching on project
management systems and process at secondary school. However, it must be
recognised that, at all levels, education
in project management must be appropriate for the age.
In comparison to the UK, in Austria, Switzerland and Germany there is
less project management education provided. In Austria and Switzerland no
master programme in project management is offered. At which level of education project management is provided
also depends on the university or school
system in that particular country. In
Austria for instance the university system is rather rigid, so no master degree
programmes in project management can
be found. But in the newly established
Fachhochschulen project management
is offered widely. To react to the demand
of educated project managers in the last
view years further to one postgraduate
programme that has been in existence
since the early 80s two programmes have
been established.
In all four countries project work
has already been integrated at primary
and secondary level, but that does not
necessarily mean that project management methods are included. One exception to mention are trade schools in
Austria, were project management is
explicitly taught to pupils age 19.

Page 11

Country Provision
So how does the provision of project
management education in these countries described above compare with
other countries? Table 4.1 and 4.2 show
the status of education in project management in several countries from
around the world. All the countries
listed have been represented in the
meetings of the global working party in
education (Turner and Huemann 2000)
or the benchmarking of the project oriented society (Gareis and Huemann
2001) or both. The schedule of meetings is shown in Table 5.

From Table 4.1 and 4.2, it can be

seen that the UK has the greatest maturity in the provision of project management education. However, several countries are close behind, including Sweden
from Europe, the USA and Canada from
the Americas, Australia, New Zealand
and South Africa for the Commonwealth of Nations. In the more mature
countries, about 10% of universities or
university colleges offer doctorates and
taught masters degrees in project management. This figure is achieved by Britain, Sweden, Australia, New Zealand
and Ireland. The USA, Canada, Ger-

many, Switzerland and Denmark have

about half that figure.
We would expect eventually the
number of universities offering bachelor
degree qualifications to grow to a similar number. Unless, that is, as argued by
Turner (1995), project management is
essentially a post experience qualification, and individuals will learn some
other profession as their first discipline,
and project management second as a
post-experience discipline. We predict
that there will be a growing number of
programmes combining project management with another major, construction

Table 4.1. Country provision of education in project management (Europe)

Table 4.2. Country provision of education in project management (outside Europe)

Page 12

project management, information systems project management, etc.

But as societies become mature in
their use of project management, and it
becomes a more widely used way of
working, project management must be
taught at secondary and primary schools.
Perhaps at primary schools, the level of
teaching will not progress beyond what
is done at the moment. That is all that
is needed to give very young children
an appreciation of the role of projects
and the methods of working. But at secondary schools, older children need to
be given formal instruction in project
management systems and process. This
process will be self propagating, as more
and more people become familiar with
the techniques, they will become more
natural, and will percolate through all
levels of education in the society.

Table 5. Meetings of the global working

party (GWP) on education in project
management and the project-oriented
society (POS) benchmarking research
project.

Conclusion and Future Research

We conclude that project management
education provisions differ in different
societies because of its specific context.
Some reasons for differences in project
management education are:
- the maturity of the projectoriented society
- history of provision of project
management education
- the rigidity of education system
in the society
- government support to establish
project management education
- provision of project management training by project oriented companies
Societies with a high competence
as project-oriented society have a broad
offer in project management education.
Closely linked to that assumption is the
history of provision of project management education. e.g. The UK has not
Pr o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

only a broad offer in project management education, but also a quite long
history in the application of project management in industries.
The rigidity of the education system often makes it rather difficult to
introduce project management in the
education structures existing. When
new study types are established it is
much easier to introduce new ideas e.g.
a lot of project management education
was introduced in Austria, when
Fachhochschulen were established only
a couple of years ago. The university system in Austria still is rather rigid and
not able to react to the demand for
project management personnel.
In some countries like the Ukraine
the government supports the establishment of project management education.
In the Ukraine a lot of project management education at universities (e.g. master programmes in project management)
are provided. Romania has a low competence as project oriented society but
provides quite a lot of project management education at university level
(Gareis and Huemann). The establishment of education was supported by EU
funding. Probably project management
education can serve as a starting point
for (further) developing the project-oriented society.
In other countries a lot of project
management education and training
activity can be observed within projectoriented companies to compensate the
lack of project management education
supported by state.
We will conduct further research
regarding
- the links between project
management education and the
maturity of the project-oriented
society
- and to develop an ideal model
for project management education in the project-oriented
society.

References

XII(3), March.
Lane, K. (ed) 2001.
Project Manager Today, special issue with
Training and Education Focus, XIII(3),
March.
Turner, J.R. 1995.
The Qualification Arena: making informed
choices, in The Project Management Year
Book 1995/96, Association for Project
Management, High Wycombe.
Turner, J.R., Huemann, M. 2000.
Formal education in project Management,
in The Project Management Year Book
2000, Association for Project Management,
High Wycombe.
Turner, J.R., Keegan, A.E., Crawford, L. 2000.
Learning by Experience in the ProjectBased Organization, ERIM Report Series,
ERS-2000-58-ORG, Erasmus Research
Institute of Management, Rotterdam,
(http://www.erim.nl).

Professor J. Rodney
Turner
MA, MSc, DPhil
(Oxon), BE (Auck),
CEng, FIMechE,
FAPM, CMath,
MIMA, MInstD
Department of Marketing and Organization
Faculty of Economics,
Erasmus University Rotterdam
Burgemeester Oudlaan, 50
3062 PA Rotterdam, The Netherlands
Tel: +31-(0)10-408-2723
Fax: +31-(0)10-408-9169
E-mail: [email protected]

Dr Martina
Huemann

Gareis, R., Huemann, M. 2001.

Assessment and Benchmarking of Projectoriented Societies, in Project Management,
Vol. 7, No.1.

PROJEKTMANAGEMENT GROUP

Niederer, R., Greiwe S., Minnig C., Schwarb, T.

Projektmanagement in der Schweiz: Praxis
und Ausbildung (Project Management in
Switzerland: Practice and Education), in
Projektmanagement, 3/2000.

Franz Klein-Gasse 1
A-1190 Vienna, Austria

Lane, K. (ed) 2000.

Gateway guide to qualifications and
training, in: Project Manager Today,

University of Economics and Business

Administration Vienna

Tel: +43-1-4277 29401

Fax: +43-1-368 75 10
E-mail: [email protected]

Page 13

CATEGORY: NOTION ON STUDYING PROJECTS IN SOCIETIES

Assessing and Benchmarking

Project-oriented Societies
Roland Gareis, University of Economics and Business Administration Vienna, Austria
Martina Huemann, University of Economics and Business Administration Vienna, Austria
Keywords: Project-oriented Society, Project-oriented Companies, Benchmarking, Competitive Advantage
A society, which applies projects and programs as temporary organisations to perform unique processes of
medium or high complexity, can be perceived as a project-oriented society (POS). It is the objective of a POS
research initiative, to develop and to apply a model of the POS, which identifies and describes the specific
processes and services of a POS, and provides criteria for the measurement of the competencies of a POS. This
paper reports about the results of this research. It describes the POS model and it shows its application in
assessing and benchmarking a group of six project-oriented societies - namely Austria, Denmark, Hungary,
Romania, Sweden and the United Kingdom. programm I austria - The Austrian Project Management Initiative
is presented as an example for the further development of the competencies of a POS.

The POS Research Initiative

The Structure of the POS Research
Initiative
The IPMA - International Project Management Association conducts a research initiative with the objective to
develop the model of the POS. In a
"POS Conception Project" the model of
the POS was constructed and elements
for the description of a POS were defined. Based on these conceptual results
the project "POS Benchmarking" is performed currently. The objectives of this
project are to assess the competencies
of different POSs, to analyse commonalties and differences between these
POSs and to define strategies for further
developing the competencies of the
POSs. A first group of POSs has been
benchmarked. It is planned to benchmark a further group of POSs in 2002.

The Research Approach

In the POS research initiative a systemic-constructivistic research approach is applied based on the following
three fundamental paradigms:
Page 14

- the radical constructivism (see

Glasersfeld 1992) as the epistemological approach,
- the social systems theory (see
Luhmann 1995) as the
organisational approach, and
- the qualitative social research
(see Lamnek 1995) as the
methodological approach.
The research emphasis lies on the
generation of hypotheses and the development of the POS model. The empirical assessment and benchmarking work
supports the creation of a viable POS
model. The research is carried out in a
cyclic process and consists of several
loops of information gathering, hypotheses generation and reflection. For the
information gathering a multi-method
approach, including questionnaire based
assessments, documentation analyses,
observations, and group discussions, is
applied. The interpretation of the data
gathered and the hypotheses generated
is done in several workshops with representatives of the different POSs. The

quality of the assessment data depends

on the assessment process applied in the
single POSs. The benchmarking results
represent the perception of the POS
Team.
The POS model as well as the assessment and benchmarking results are
social constructs. These constructs are
further developed and examined in different team structures to allow for different perceptions.
The POS is perceived as a social
system. According to Luhmann`s
categorisation of social systems in interactions, organisations and societies, the
society is the most complex social system. Social systems establish and maintain themselves by constructing a difference to their social environment. Therefore, Luhmann (1995) defines a social
system as everything, for which a differentiation in internal and external is possible. Other societies as well as the economic and political systems of a society
under consideration are defined as context of the POS.

The Project-oriented Society: Basic

Hypotheses
More projects and programs (of projects)
are performed in companies, but also in
municipalities, schools and even families. "Management by Projects" becomes
an organisational strategy of "Projectoriented Companies", to cope with increasing complexities and dynamics in
the business environment .The
globalisation of the economy, new technologies with ever shorter product development cycles, and the application
of a new management paradigm,
characterised by virtual organisations,
empowerment, knowledge management, etc. promote the application of
project and program management.
Not only traditional industries but
also the public sector and non-profit
organisations consider projects and programs as appropriate organisations to
perform complex business processes.
New project types, such as marketing-,
product
development-,
and
organisational development projects,
gain in importance. A society, which
applies projects and programs as temporary organisations to perform unique
processes of medium or high complexity, can be perceived as a POS.
The research initiative is based on
the following hypotheses:
- Societies are becoming more
project-oriented. Projects and
programs are applied as temporary organisation forms.
- Project management is not just a
micro-economic but also a
macro-economic concern.
- POSs can be defined by national
or by regional boundaries.
- POSs are characterised by
specific processes applied by
project-oriented companies,
such as project management,
program management, project
portfolio management, personnel management, and
organisational design, and by
specific project management
related services, provided by PM
education, PM research, PM
marketing, and PM
standardisation institutions.
- Different POSs have different
competencies to perform these
specific processes and to provide
these PM related services.
Competencies of POSs can be
benchmarked.

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

- The more competencies a POS

has, the more competitive it is
internationally. There is no ideal
POS. The competencies required by a POS depend on its
context, especially on the
importance of projects and
programs, and the management
culture of the society.
- The competencies of a POS can
be further developed. This can
be done by national project
management initiatives.
- POSs with similar competencies
have a high potential for
efficient co-operations. POSs
with high competencies can
transfer their knowledge to
societies with little competencies.
All but the last hypothesis have
been considered in the empirical work
and interpretations so far.

The Model of the Projectoriented Society

Boundaries of the POS
The perception of a society as a POS is
a construction; it requires the observation of a society with a specific "pair of
glasses", the glasses of project-orientation. The focus is on those communications of the society, which relate to
projects, programs and project portfolios.
Generally, the boundaries of societies can be constructed according to
different criteria. By applying a functional differentiation as primary differentiation criterion for the construction
of societies, subsystems, like economy,
science, education, politics, law, art, religion, etc. can be defined. As far as this
functional differentiation of the society
is concerned, the POS model concentrates on the subsystem economy, but
also considers supporting activities of the
subsystems education, science and law.
As secondary differentiation criterion for the construction of societies
Luhmann (1995) suggests territories and
the extent of the economic development. Examples for application of the
secondary differentiation criterion are:
- National territory: e.g. USA,
Canada, Australia, Sweden,
Austria
- Regional economic associations:
e.g. EU, Nafta
- Regions with the same language:

e.g. English speaking countries

- Extent of economic development: developed , transformation, developing countries.
Here the boundaries of the POS
are defined to include all communications of a nation's economy-system,
which relate to projects, programs, and
project portfolios and those communications of a nations science-, education, and law-system providing services related to project, program and project
portfolio management.

Context of the POS

The competencies of a POS are influenced by the importance projects and
programs have for a POS, by the overall
structure of the society and by its history and expectations about the future.
The importance of projects and programs for the society can be determined
by assessing the number of project-oriented industries and companies. Information about the history and the future
of the society can be described regarding the social sub-systems economy, science, education, politics, law, religion,
arts, etc.

Processes and Services of the POS

The POS model considers on the one
hand the processes of project-oriented
companies (POCs), such as project management, program management, project
portfolio management, personnel management and organisational design, and
on the other hand the services of PM
related institutions, such as PM education, PM research, PM marketing and
PM standardisation institutions, as elements for describing a POS.
The POS model can be visualised
by a spider web. The axes of the spider
web represent the processes and services
of the POS.
Below the elements of the POS
are shortly described:
- Project management: A project is a
temporary organisation for performing a unique, short- or
midterm process of medium or
high complexity. PM is a business
process of the project-oriented
company. The PM process starts
with the project assignment and
ends with the project approval. It
consists of the sub-processes
project start, project co-ordination,
project controlling, project discontinuity management and project
close-down.

Page 15

Project management
100

PM standardization

80

Programme management

60
40
20

PM marketing

Project portfolio management

Personnel management in projectoriented companies

PM research

PM education

Organizational design of projectoriented companies

Figure 1. The spider web model of the project-oriented society

-

Program management: A program

is a temporary organisation for
performing a unique, mid-or longterm process of high complexity. A
program is a set of projects and
tasks which are closely coupled by
common objectives. Programs are
limited as to time and budget.
Program management is a business
process of the project-oriented
company. The program management process consists of the subprocesses program start, program
co-ordination, program controlling, program close-down and
occasional the management of a
program discontinuity.
Project portfolio management: A
project portfolio is a set of projects
(and programs), which are performed by a project-oriented
company at a certain point in time.
A project portfolio is more than
the sum of its projects. A project
portfolio database is the basis for
project portfolio management.
Information of this database can be
used to decide, if new projects
should be started and to establish
priorities among projects. The
objective of project portfolio
management is to optimise the
results of the project portfolio.
Personnel management in projectoriented companies: Personnel
management processes in projectoriented companies are recruitment, disposition and development
of project personnel. In projectoriented companies a PM career
path includes the PM-roles Junior
Project Manager, Project Manager,
Senior Project Manager and PM

Page 16

Executive.
Organisational design of projectoriented companies: Projectoriented companies have specific
integrative organisational structures, such as PM Offices, Project
Portfolio Groups or Expert Pools,
and specific integrative tools such
as PM procedures and standard
project plans.
PM education: Formal PM education programs are provided by
different institutions and might
lead to academic degrees in PM.
The PM approach taught and the
number of courses vary in different
programs.
PM research: PM research projects
and programs, PM related publications and events and PM related
research financing are services
provided by PM research institutions.
PM marketing: The primary PM
marketing institution in a POS is
the national PM association.
Services like membership, certifications of project managers, PM
events, etc. are services provided
by these institutions.
PM standardisation: Services
provided by PM standardisation
institutions, such as a national
norming institute, are PM norms
and formal PM requirements for
public tenders.

The POS Questionnaire

The context of the POS as well as each
element of the POS model is specified
in detail in the POS questionnaire. The
questionnaire consists of

- Part A: Context of the POS and

importance of projects and
programs in the POS,
- Part B: Services of PM-related
institutions in the POS, and
- Part C: Practices of projectoriented companies in the POS.
Part A of the questionnaire asks
for context information regarding the
managerial competitiveness of each society based on international competitiveness reports such as the Global Competitiveness Report (Sachs et al.1998)
and the World Competitiveness Report
(International Institute for Management
Development 1997).
Part B of the questionnaire asks
for the services of PM-related institutions such as PM education, PM research, PM marketing and PM
standardisation institutions. Part C consists of questions regarding the practices
of project-oriented companies in project
management, program management,
project portfolio management, personnel management and in organisational
design. In Figure 2 and Figure 3 examples
of questions of the questionnaire are
shown.
The questionnaire of the POS
model can be applied for assessing and
benchmarking POSs.

Assessing and Benchmarking the

Competencies of POSs
A POS requires competencies, i.e.
knowledge and experience, to perform
its specific processes and to provide the
PM related services. The assessing and
the benchmarking of the competencies
of POSs is performed in the project "POS
Benchmarking".
The first level of the work break
down structure of the project "POS
Benchmarking" is shown in Figure 4.
The conception of the POS model
started in May 1999. The assessments
and the benchmarking of the POSs of
BM Group 1 was performed in the period from October 2000 to March 2001.
It is planned to start the assessments and
the benchmarking for the BM Group 2
at the end of 2001. The project
organisation chart of the project "POS
Benchmarking" is shown in Figure 5.
The members of the project organisation
are listed in Table1.

The Process of Assessing and

Benchmarking the First Group of
POSs
The project "POS Benchmarking" is

Figure 2. An example of a PM education related question (Part B)

Figure 3. An example of a project management related question (Part C)

performed as a co-operation of IPMA

and the PROJEKTMANAGEMENT
GROUP of the University of Economics and Business Administration Vienna
with different national PM Associations
and organisations representing POSs.
The process of assessing and
benchmarking the POSs is the following:
- Each POS nominates a POS
Assessment Team with representatives of the national PM association, of project-oriented companies, PM researchers and PM
students. A National Co-ordinator
represents the POS in the overall
POS Team.
- The PM related services provided
by institutions (PM education, PM
research, PM marketing, PM
standardisation) are assessed by
national PM Institutions Teams.
Internet information and documents, that describe the services of
these PM institutions, are
analysed. This assessment is
questionnaire based. It is supported
by interviews.
- The assessments of the practices of
the project-oriented companies are
performed by national PM Practice
Panels in workshop form, considering the practices in project management, program management,
project portfolio management,
personnel management and in
organisational design. This assessment is also questionnaire based.
- The analyses and the discussions of
the results of the assessments of
the single POSs are performed by
the overall POS Team with
representatives of the different
POS Assessment Teams in workshop form. Commonalties and
differences between the POSs are
interpreted. Overall strategies for
the further development of the
POSs are planned.
- A POS benchmarking report is
prepared, and the benchmarking
results are published and communicated in the single POSs.

Figure 4. Work break down structure of the project "POS Benchmarking"

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Page 17

Results of Assessing and

Benchmarking the Services of
PM Related Institutions
The services provided by PM education,
PM research, PM marketing, and by PM
standardisation institutions in the different POSs are described and compared.

PM Education
In Austria a formal PM degree is provided
by
three
colleges
(Fachhochschulen). Three postgraduate
programs in PM exist, but there is no
master degree program in PM. PM is provided in the form of an elective education program at the University of Economics and Business Administration
Vienna. There students can do their
PhD thesis or master thesis in PM and
by that specialise in PM. In trade schools
PM education is provided.
In Denmark there is no formal
degree "Master in PM", but similar as in
Austria students can do a master or PhD
theses in PM. PM education is provided
at six universities. One bachelor degree
in PM is offered. None formal degree is
granted by continuing education programs. PM is included in secondary education programs.
In Romania at the Academy of
Economic Studies in Bucharest and at
the Ovidiu University Constanta master degree programs in PM were established in 2000. In some other Romanian
universities PM modules have been included. No other formal PM education
exists in Romania so far. Some consulting companies offer PM training.
Sweden has two universities providing formal master degree programs in
PM. In many more universities (at least
10) PM education is offered and it is
possible to do a master or PhD thesis in
PM. No formal degrees in colleges or
continuing education institutes exist,
but at least 13 colleges and 3 continuing education institutes offer PM education.
In Hungary two master degree
programs in PM are running. PM education is provided in form of single modules at at least three universities and at
some continuing education institutions.
Some secondary schools in the field of
environment protection have included
PM in their curricula.
In the UK 13 master degrees in
PM (or closely related disciplines) are
offered. Of about 120 universities and
university colleges in the UK, about 10%
offer masters degrees in PM or closely
related disciplines. Doctorates in PM
Page 18

can be done at at least 13 institutions.

Three bachelor degrees and three diploma programs in PM exist in the UK.
In all assessed POSs PM education can be found in tertiary education
(universities, colleges, continuing education). UK is the most mature society
regarding degrees in PM and formal PM
education. Supported by EU funding
Romania has established PM master
degree programs. No other formal PM
education is provided so far. In Austria
and in Denmark no master degrees in
PM are provided.
PM is provided in secondary
schools in Austria, Denmark, Hungary
and Sweden. In all POSs except Romania project work is often included in primary education. But no PM education
is provided at this education level.

The PM approach taught in PM

education programs is rather planning
oriented in Hungary and Romania, while
in Austria and Denmark the approach
is rather organisational oriented. Sweden states that their PM education is
organisational oriented. In the UK education programs with different PM approaches exist, ranging from traditionally planning oriented to organisational
oriented.
Only Romania states that they
have a national institute co-ordinating
the PM education. Objects of consideration in this co-ordinations are the contents as well as the teaching methods of
the PM education programs. The coordinating institute is also responsible for
the co-ordination between education
institutes.

B M Group 1
P OS B M P a rtn er A
PM Pra ctice
Pa n el

.
.
.

PM
Ins titu tion s
Tea m

P OS B M P a rtn er 7

Na tiona l
Co-ordin a tor

PM Pra ctice
Pa n el
Na tiona l
Co-ordin a tor

P OS B M P a rtn er B
PM Pra ctice
Pa n el
PM
Ins titu tion s
Tea m

PM
Ins titu tion s
Tea m

Na tiona l
Co-ordin a tor

.
.
.

B M Group 2

P OS B M P a rtn er X

Na tiona l
Co-ordin a tor

P OS
M a rketin g

P OS As s is tan ts
P roject
M a na g er
P roject
Org a ni za ti on

P OS Off ice

PM Pra ctice
Pa n el
PM
Ins titu tion s
Tea m

P OS Fin a ncin g
Tea m

P OS Tea m

P roject
Owner

Figure 5. Organisation chart of the project "POS Benchmarking"

Table 1. List of the organisation members of the project "POS Benchmarking"

PM Research
In none of the POSs a national institution co-ordinating PM research exists.
Partly the co-ordination is done by national PM associations, like in the UK,
where the national association APM also
carries out PM research. The assessments show that in Austria, Denmark,
Sweden and the UK quite a number of
PM research projects (and programmes)
have been carried out during the last five
years. In Austria for instance within the
research programme "Best PM Practice"
a process-oriented PM approach has
been developed at the University of Economics and Business Administration
(1996-1999).
PM research initiatives often support the promotion of PM as a profession in the society. For instance in the

UK one of the most important research

projects was the renewal of the APMs
body of knowledge, which was performed in co-operation with UMIST. In
Sweden project sweden - based on a
collaboration between universities and
industries - aims at enhancing PM competence through research (see also PM
marketing table).
In Hungary only some PM research was carried out during the last
five years. In Romania PM research has
not yet been established. In Austria,
Denmark, Sweden and the UK a few PM
related research events took place during the last five years.

PM Marketing
In all assessed POSs national PM associations exist. In Romania a national PM
association was established in 2000 and

Table 2. PM education in POSs

is currently seeking for IPMA membership. The PM associations in some countries (Austria, Denmark, Sweden and
the UK) offer a lot of services like PM
marketing, PM events, PM publications,
PM discussion platforms and developing PM standards. In Austria, Denmark,
Hungary, Sweden and the United Kingdom PM certifications according to
IPMA standards are carried out.
In Hungary and in the UK several PM associations exist. In Austria,
Denmark, Hungary, Romania, Sweden
and the UK also PMI chapters exist. No
doubt that APM the Association for
Project Management in UK with about
9.000 individual members is a very
strong and very active force for promoting PM in the UK. The most important
initiative in the last five years was
APMs development of a revised body
of knowledge. Other national associations are of course smaller because of the
number of inhabitants in the country,
but probably also because of cultural differences. For instance, while in the UK
it is a habit to join clubs or associations,
in Austria people do not like to formally
join in. Nevertheless there also exist very
active small PM associations e.g. in Denmark or in Austria.
The PM approach represented by
the PM associations of Sweden and
Austria is organisationally oriented.
Romania's approach can be
characterised as rather organisationally
oriented. In Hungary the association
follows a rather planning oriented approach. UK stated that within the association all PM approaches ranging from
organisationally oriented to planning
oriented are represented.
None of the societies stated that
the profession project manager has already been formally established. In all
POSs PM initiatives are currently running or have been accomplished. These
PM initiatives are often aiming at further developing the profession.

PM Standardisation

Table 3. Project management initiatives in POSs

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

In Austria and the UK national PM bodies of knowledge according to the ICB International Competence Baseline exist. In Austria there are also some special norms (DIN, NORM) for the
standardisation of PM applied. Denmark
is currently developing a new PM body
of knowledge, which will be issued later
in 2001. In Hungary the PMBok and
Prince are used widely as a PM standard.
In Romania no PM norms or standards
exist. The UK is the only society stating
Page 19

that formal PM requirements are asked

for in public tenders. Namely Prince and
APM competency certificates are asked
for.

Results of Assessing and

Benchmarking the Practices of
Project-oriented Companies
The data resulting from the assessments
of the practices of project-oriented companies are average data relating to all
project types performed by all industries
in the different POSs. Different data
might result from assessments of specific
industries and/or specific project types
in the POSs.

Project Management
The benchmarking results regarding PM
are shown in figure 6 and 7. Figure 6
visualises the competencies in the
project start process. Figure 7 illustrates
the competencies in the other PM subprocesses, namely the project co-ordination, project controlling, project discontinuity management and project
close-down.
In Austria in the project start process PM methods for planning (like
project goals, wbs, bar chart, project cost
plan, project resources plan, business
case analysis, etc.), for project context
(such as the project environment analysis), design of project organisation
(project organisation chart, project role
descriptions, etc.) and project risk management methods (such as the project
risk analysis) are sometimes applied,
while PM methods for designing a
project culture (like project name,
project slogans, project mission statements etc. ) and project discontinuity
management (project scenario analysis,
escalation plans, alternative plans) are
seldom applied.
A similar picture shows Denmark,
where also PM methods to design a
project culture are sometimes applied.
In the project start process in Hungary
PM methods concerning the design of
the project organisation and the project
culture are sometimes applied, while all
PM methods for other objects of consideration are seldom used. In Sweden
PM methods considering project context, the design of project organisations
and project culture are often applied in
the project start process. PM methods
for planning, project risk management
and discontinuity management are
sometimes used. In the UK all PM methods are sometimes used in the project
start process.
Page 20

Figure 6. Benchmarking results: Project management - Part 1

Figure 7. Benchmarking results: Project management - Part 2

Regarding the competencies for

the performance of the project start process the following general interpretations
are possible:
- Two groups of POSs can be
differentiated. Romania and
Hungary show less competencies
in comparison to the other
POSs.
- The scores are seldom or
sometimes, only Sweden claims
to apply certain methods often.
- There is less application of
project risk management and of
project discontinuity management than of the other PM
methods.
Austria, Denmark and Hungary
show similar competencies for the performance of the other PM sub-processes.
In these POSs PM methods are often
used in the project co-ordination process. The project plans (goals, work
breakdown structure, schedules, cost
plan, etc) are sometimes adapted in the
project controlling process.
In Romania less PM methods are
used. For instance PM methods like updating the project organisation chart are

never used. Sweden and the UK show

more competencies for the performance
of these PM sub-processes than all the
other societies. PM methods are always
used in the project co-ordination process. In the UK representatives of relevant environments, such as customers
and suppliers are always invited to participate in project workshops. But these
workshops like project start or project
close-down workshops only sometimes
take place.
Regarding the competencies for
the performance of the other PM subprocesses the following general interpretations are possible:
- The competencies for the
performance of the project coordination process is the highest
in all POSs.
- The competencies for the
project co-ordination and for
the project close-down process
are pretty homogeneous.
- The competencies for the
performance of project controlling and for project discontinuity
management are very heterogeneous.

Programme Management
Austria, Denmark, Hungary and the UK
show a similar picture in their
programme management competencies.
In Austria and the United Kingdom
programme management is seldom applied. Again Romania shows less competence in comparison to the other
POSs. In Sweden the sub-processes
programme start, programme co-ordination,
programme
controlling,
programme discontinuity management
and programme close-down are often
performed. Programme management
methods are often applied and specific
programme organisations are often designed.

Project Portfolio Management

In general the competencies in project
portfolio management are rather low in
the considered societies. Project portfolio processes (like assigning projects and
programmes, managing the project portfolio, etc.) are seldom performed in Austria, Sweden and in the UK, sometimes
performed in Denmark and Hungary. In
Austria and Sweden project portfolio
management methods like project proposals, project portfolio database and
project portfolio reports are sometimes
applied, while they are seldom applied
in Denmark, Hungary and the UK. Sweden states that in project-oriented companies project portfolio groups to manage the portfolio are always established.

Project Personnel Management

Figure 8. Benchmarking results: Programme management

Figure 9. Benchmarking results: Project portfolio management

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Austria and Denmark show a similar

picture again. In both POSs project personnel development processes (like assessing project personnel, PM training,
PM coaching, etc.) are often performed.
In Austria, Denmark and Hungary PM
development methods such as internal/
external PM seminars, PM certification,
coaching of PM personnel and assessment centres for project personnel are
sometimes applied. Personnel development activities are sometimes organised
for the roles project owner, project manager, project team member and project
coach. While in Austria and Denmark
seldom a PM career path exists, projectoriented companies in Hungary sometimes have such a career path. In Denmark, Hungary and the UK PM offices,
internal PM trainers, PM coaches and
networks of project managers sometimes
support project personnel development.
In Austria such supportive structures
seldom exist. Romania shows less competence in comparison with all other
Page 21

POSs. Sweden and UK show high

competences in project personnel management. Project personnel processes are
often performed and project personnel
methods are often applied, often considering all PM roles. In Sweden specific
structures for supporting the project personnel development often exist.

Organisational Design
Austria and Hungary show the same picture regarding their competencies in
organisational design. Integrative structures, like expert pools, project portfolio groups and PM office seldom exist.
Specific tools like PM procedures, standard project plans, PM marketing tools
sometimes exist, while organisational
development processes like auditing, self
assessment and benchmarking of the PM
process are seldom performed. Roles like
PM office manager, (internal) consultants to support the organisational development seldom exist. The UK shows
a similar picture. Again Romania shows
the lowest competencies in
organisational design of project-oriented
companies within the assessed POSs.
Denmark and Sweden have more competencies regarding the organisational
design of project-oriented companies
than the other POSs. In Denmark specific tools and PM roles to support the
organisational development often exist.
In Sweden integrative structures always
exist in project-oriented companies.

approach. The quantitative and qualitative data resulting from the answers
are integrated. The resulting scores are
relative values, relating each national
score to those of the other POSs.

POS Ratios
Table 5 shows the weighted competencies for each process and service, the PM
service ratios and the POC practice ratios, and the overall POS ratios for the
assessed POSs.
Overall one can see that the UK
has the highest POS competence, while
Romania has the lowest one. There are
two pairs of POSs with similar competencies: UK and Sweden on the one
hand and Austria and Denmark on the

other hand. While also the PM service

ratios and the PM practice ratios from
Austria and Denmark are pretty similar,
these ratios show big differences for the
UK and Sweden. UK, with a higher PM
service ratio has a much lower POC
practice ratio than Sweden. This might
mean that the provision of a high
amount of PM related services by e.g.
education and research institutions does
not guarantee high quality POC practice in the project-oriented companies
immediately. From the Eastern European countries Hungary has a much
higher competence than Romania. The
POS ratios of the single POSs have to
be interpreted within the context.

The overall Competencies of the

Assessed POSs
POS Competence Algorithm
On the one hand the competencies of a
POS can be shown in a spider webmodel and on the other hand a POS
ratio can be calculated. The POS ratio
is a weighted sum of the competencies
for performing the specific processes and
for providing PM related services. As
project management is considered as the
most important process in the POS, this
process has the weight of 20%. All other
processes are weighted with 10%. The
weight of each question is proportional
to the number of questions per process.
The competencies are measured according to a scale of 0-100. In table 4 the
relations between the competence scale
and the answering categories in the POS
questionnaire, for questions relating to
the practices of POCs, are defined.
The competence scores for the
services provided by PM related institutions are determined in a qualitative
Page 22

Figure 10. Benchmarking results: Project personnel management

Figure 11. Benchmarking results: Organisational design

Interpretation of the Competencies of

the Single POSs
Austria
Austria has a lot of small and medium
sized industries. Despite this fact the
importance of projects has increased in
the last few years significantly. Traditionally external projects are performed in
the building and construction industry,
in the engineering industry and in the
IT-industry. Internal projects are performed in different industries only since
recently. It is rather difficult to implement internal projects in traditional industries like the engineering industry.
Especially in health services and in the
public administration the importance of
projects continues to rise. There is an
increasing demand for PM procedures
and for formal PM qualifications, such
as certifications for project managers.
Working in project-oriented companies
is seen as being attractive. Students are
interested in studying PM and companies in turn are trying to get in contact
with PM graduates.

Competent staff is available in

Austria, but there is little flexibility of
the people to adapt to new challenges.
Further there exist quite a lot of administrative regulations in Austria, which is
not too favourable for project work
(Sachs et al. 1998, International Institute for Management Development
1997). Austria has a POS ratio of about
400, the PM service ratio of 170 is a bit
lower than the POC practice ratio of
about 240. This shows that the PM related services provided by institutions
are still rather limited, and that the
project-oriented industry takes on responsibility to ensure adequate competencies for themselves.
Denmark
Denmark also has a lot of small and
medium sized industries. In the past PM
was only applied in a few industries, like
in the building and construction industry. Denmark is now in a change process from companies based on hierarchies to project-oriented companies.

Table 4. Relationships between answering categories and the competence scale

Projects are becoming very important in

the IT, public and finance industries and
are more and more common in other
industries and sectors. Projects are common in the areas of change management, internal organisational development and customer oriented product
development.
Considering the World Competitiveness Report Denmark shows a good
ground for PM, for instance the willingness to work in teams is very high (Sachs
et al. 1998, International Institute for
Management Development 1997). For
Denmark a POS ratio of about 420 has
been calculated. Denmark still shows
little competence regarding the PM related services (140 out of 400), but more
competencies regarding the POC practices (277 out of 600).
Hungary
In the past projects and programmes
were of little importance for Hungary.
Nowadays projects are of medium importance but in the future projects and
programmes will gain a lot in importance. The POS ratio calculated is about
320, whereby the POC practice ratio is
quite high (239) for the project-oriented
companies that exist in Hungary. Less
competence is shown regarding the PM
related services, where Hungary only
reaches 80 out of 400 points. Concerning the managerial context an advantage for PM might be that administrative regulations are rather low and foreign investors are relatively free to acquire control in domestic companies
(Sachs et al. 1998, International Institute for Management Development
1997).
Romania
In Romania projects were only used in
some specific industries, like building
construction, energy, chemistry, engineering and IT. Romania now passes
through a rough economic restructuring process, applying projects for
privatising large state-owned enterprises,
modernising and updating strategic economic units, creating new business units.
For all industries and the non-profit sector projects are becoming very important. Companies which offer consulting
services for PM tend to cover a lot of
project types from different areas. Demand for the application of projects and
programmes of the markets is increasing.

Table 5. Weighted competences and POS ratios

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Page 23

It is not surprising that Romania

has the lowest POS ratio with nearly
200. In the last two years emphasis was
given to the development of formal PM
education programmes, but except that
there is not much competence in the
other PM related services like research,
marketing or standardisation. Nevertheless Romanian project-oriented companies show already some PM competence
(63 out of 200), while programme management and portfolio management almost do not exist yet.

potentials and demands, given the dynamics of the overall economic development in these nations. The performed
assessments and the benchmarking give
a view at the beginning of 2001 only. It
can be assumed that due to the dynamics at the beginning of 2001 the competencies of these nations as POSs will be
much higher in a few years.

Sweden
In Sweden projects are commonly used
and important in different industries and
in the non-profit sector. Sweden has
some big players in telecommunication
industry and has a lot of big international
companies. Ericsson for instance does
80% of its business in project or
programme form. Projects have also
grown in importance in the non-profit
sector during the last years, due to an
increased awareness of EC-projects. Increasing importance of projects can be
observed, because of an increase in product development and R&D.
Sweden shows a quite high POS
ratio of 540. Concerning the PM related
services with a ratio of 160 Sweden
shows a similar ratio as Austria. Looking at the POC practice ratio Sweden
shows a value of 380. Sweden seems to
provide an excellent managerial context
for PM (Sachs et al. 1998, International
Institute for Management Development
1997).

The dark area in the POS spider web

for Austria (Figure 12) shows the assessed competences of Austria as a POS.
The assessment results show that
the competencies of Austrian projectoriented companies are most developed
in project management and in personnel management, even these competencies have a score of 87 (out of 200) and
50 (out of 100) only. Programme management, project portfolio management
and the organisational design are even
less developed yet. This shows the traditional focus on the development of
competencies for the management of
the single projects. Within the services
provided by PM related institutions the
PM marketing efforts by Projekt Management Austria result in the score of
50. The other PM service areas are not
too well developed. This analysis portrays the development potentials Austria as a POS has. The dark line in Figure 12 shows the planned competences
of Austria as a POS in 2010.
In Austria the further develop-

UK
In the UK there is wide recognition of
the role of projects and programmes in
the achievement of business objectives.
There is growing recognition of when
projects need to be used and when routine operations should be used. UK
shows a POS ratio of about 560. In providing PM related services a competence
of 290 is reached. So the UK is the most
mature POS regarding the provided PM
services. The POC practice ratio is about
270. An explanation for this imbalance
might be found in the managerial context, where structures and people are
described as not flexible and adapt rather
bad to new challenges (Sachs et al. 1998,
International Institute for Management
Development 1997).
Overall
Overall it can be observed that all assessed nations are still in an early phase
as a POS. There are high development
Page 24

programm | austria - The

Austrian Project Management
Initiative

ment of the POS is organised by

programm I austria, which started in
October 2000 and has a duration of four
years. The promoters of programm I
austria are Projekt Management Austria,
Projektmanagement Group of the University of Economics and Business Administration and Roland Gareis Consulting. The objective of programm | austria
is to contribute to the further development of Austria as a POS. By that the
international competitiveness of Austria
shall be ensured.
The following results shall be
achieved by the end of programm |
austria:
- PM is well known in the public
- The profession "Project Manager" is implemented and
accepted
- Research results on the projectoriented society are published
- Project-oriented companies
have analysed and developed
their competences
- Networking of project managers
and PM Office managers takes
place
- A structural basis for the further
development of Austria as a
POS is provided.
One of the strategies of programm
| austria is "PM for everybody". This
strategy is implemented by performing
projects such as "PM in schools", "PM
in families", "PM in small municipalities",

Project management
100

PM standardization

80

Programme management

60
40
20

PM marketing

Project portfolio management

Personnel management in projectoriented companies

PM research

PM education

Organizational design of projectoriented companies

Figure 12: Actual and planned POS competencies of Austria

etc. Another strategy is the "Further

development of project-oriented companies". This strategy is implemented by
projects such as "PM Auditing", "Network of PM Office Managers" etc.

Conclusion
Projects and programmes as temporary
organisations are becoming a broadly
applied form of organising for the performance of complex and dynamic processes. Therefore project and
programme management is not just a
micro economic but it becomes a macro
economic concern. The objective of the
POS research initiative is to develop a
viable model to describe the POS. The
empirical application of the POS model
in the POS benchmarking project contributes to the development of the POS
model.
Furthermore, the assessing and
the benchmarking of the different POSs
contribute to the promotion and marketing of project management in these
nations. Based on the POS
benchmarking results the societies are
developing strategies to further develop
their society as a POS.

References

Roland Gareis

Gareis R., 2000. Competences of the projectoriented society, in: Proceedings of IPMA
World Conference, London.

Projektmanagement
Group
University of
Economics and
Business Administration, Vienna

Gareis R., 2001. The Project-oriented Society: A

new creation to ensure international
competitiveness, Paper presented at the
IPMA International Symposium and
NORDNET 2001, Stockholm, Sweden.
Gareis R., 2001. Research Report: Assessment and
Benchmarking of Project-oriented Societies:
Results of the POS Benchmarking Group1,
University of Economics and Business
Administration, Vienna.
Gareis R., Huemann M., 2000. PM-Competences
in the Project-oriented Organisation, in:
The Gower Handbook of Project
Management, JR Turner, SJ Simister (ed.),
Gower, Aldershot, pp. 709-721.
von Glasersfeld, E., 1992. Konstruktion der
Wirklichkeit und des Begriffs der
Objektivitt, in: Gumin, H., Meier, H.:
Einfhrung in den Konstruktivismus,
Mnchen.
International Institute for Management Development, 1997. The World Competitiveness
Yearbook 1997, Lausanne.

Franz Klein-Gasse 1
1190 Vienna, Austria
Tel: +43/1/4277-29401
Fax: +43/1/3687510
E-mail: [email protected]
Martina Huemann
Projektmanagement
Group
University of
Economics and
Business Administration, Vienna

Lamnek S., 1995. Qualitative Sozialforschung:

Band 2 Methoden und Technologien, Beltz,
Weinheim.

Franz Klein-Gasse 1
1190 Vienna, Austria

Luhmann N., 1995. Social Systems, Stanford

University Press, Stanford, California.

Tel: +43/1/4277-29405
Fax: +43/1/3687510
E-mail: [email protected]

Sachs J. D., Schwab K., 1998. The Global

Competitiveness Report 1998, World
Economic Forum, Geneva.

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P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Page 25

CATEGORY: NOTION ON INDUSTRIAL RISK MANAGEMENT APPLICATION

Risk Analysis to Assess

Completion Time of a Tram-Line
Enrico Cagno, Politecnico di Milano, Italy
Franco Caron, Politecnico di Milano, Italy
Mauro Mancini, Politecnico di Milano, Italy
Keywords: Schedule Risk Analysis, Simulation, Public Transports
The paper describes the approach to 'schedule' risk analysis in a project involving the construction of new tram
lines to improve the urban public transport system. The risk analysis process includes risk Identification and
quantification phases. Since no data record was available about project risk analysis and management in previous similar projects, both phases were based on the elicitation of experts knowledge. A simulation model has
been implemented in order to evaluate the probability distribution of the overall project duration. The paper
describes the assessment of strengths and weaknesses of the proposed approach and identifies areas of interest
for possible future developments.

Introduction
The paper describes an industrial case
study concerning the schedule risk
analysis developed for a project involving the construction of new tram lines
to improve the urban public transport
system. Due to the project complexity,
many critical elements emerged, both of
a general nature (difficulties in implementing a suitable project management
system in the public sector) and of a specific nature (the involvement of several
public authorities in the decision making process).
The project risk analysis process
was divided into two major phases: risk
identification and risk quantification.
The former aims to identify possible risk
sources, risk events and corresponding
risk responses. The latter aims to evaluate possible risk consequences in terms
of completion delay for single activities;
in this context a simulation approach
was applied, using a network model of
the project and considering also statistical correlation between activity durations, in order to evaluate the probability distribution of the overall project
duration.

Page 26

Since no data record was available

about project risk analysis and management in previous similar projects, both
the risk identification and risk quantification phases were based on the elicitation of experts' knowledge.
In particular, in the risk quantification phase, in order to evaluate the
joint effect of different risks on each
activity duration, a suitable approach
was implemented based on discrete
probability distribution and event trees.
The case considered includes the
following activities (divided into three,
distinct sub-projects):
1. Construction of three new
tramlines;
2. Purchase of new generation
trams for these lines, together
with the respective maintenance
facilities;
3. Construction of a depot for the
garaging and maintenance of the
vehicles.
The major aspects of the project
are:
1. very close inter-connections
between the sub-projects: work
on the depot must be completed

in time to accept delivery of the

new vehicles; delays in completion of the lines with respect to
delivery of the trams would
immobilise substantial capital, as
the vehicles cannot be used on
other lines; lines must be
completed to test vehicles, and,
in particular, one of the three
lines must be completed to
realise connections to the depot;
2. a long and complex financial
and technical approval process
by authorities outside the
project organisation;
3. the large number of actors
involved directly or indirectly in
the various activities.
These aspects mean that the time
required to finalise decisions is difficult
to forecast and extremely variable, so
that a project management system focused on risk, in particular schedule risk,
has to be implemented.
The first step, during project development, was the definition of a WBS
(Lavold, 1988; Raz and Globerson,
1998) in the following terms:
1. a WBS for each sub-project;

2. each WBS was divided into

three or four levels using an
activity based approach; the
WBS for the construction of the
depot is shown below as an
example (Figure 1).
The risk analysis process has been
divided into two major phases: risk identification and risk quantification. In the
first phase risk sources, risk events and
associated risk responses have been identified. In the second phase, assuming
that risks affect activity durations, a duration distribution has been estimated
for each activity allowing , through a
network based simulation model, for the
estimation of the variability of the overall project duration.

DEPOT
DESIGN

SUBCONTRACTING

SUPPLY

PROCUREMENT

Depot design

Tenders for
construction

Fittings and
line equipment

Demolitions and
opening of sites

Approval and
funding

Tenders for
maintenance equipment

Maintenance
equipment

Civil works

Specs maintenace
equipment

TESTING

System testing

Utilities

Equipment installation

Completions
and finishing

Figure 1. Work Breakdown Structure for the construction of the depot

Identification of risks and

responses
The Identification phase can be broken
down into five steps:
1. identification of the sources of
risk (i.e.: an element inside or
outside the project which causes
a significant risk for the project);
2. identification of the project risks
(i.e.: uncertain event which may
cause a variation in the completion date of an activity) stemming from the sources of risk;
3. classification of project risks;
4. identification of risks associated
to each activity;
5. identification of responses.
Since, in the present case, risk
analysis was included for the first time
in the project management system and
the project team was therefore not sufficiently acquainted with risk analysis
techniques, the most suitable approach
for the first step was the use of a checklist. Experts thus identified 20 main
sources of risk which were classified in
the following categories (Wideman,
1992): a) external sources determined
by social, environmental or legislative
factors; b) internal risks concerning
project management system and processes; c) technical risks concerning
design process; and d) legal risks of a
contractual nature.
The next step was the move from
sources of risk to project risks. Experts
were asked to indicate the main risks in
function of the sources of risk given in
the previous step (see for instance Figure 2).
The identified risks were classified
by type and associated to the WBS. Each
P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Figure 2. Extract from the risk identification document.

DEPOT
ENGINEERING

Approvals
and funding

Outstanding tecnical
approval
Outstanding financial
approval
Def. tech. features
maintenance eqpt.

Difficulties in
project development
Re-design

PROCUREMENT

Supplies of
fittings/lines

Change of supplier

Approval of
maintenance eqpt.

CONSTRUCTION

Demolitions and
opening of sites

Outstanding technical
approval

TESTING

Testing of
maintenance eqpt.

Non conformity
to tests

Construction
difficulties
Civil works

Delays in
supply
Disputes with
supplier

Construction difficulties

Conflict with
contractors
Utilities/eqpt.

Construction
difficulties
Conflict with
contractors
Finishing and
completions

Construction
difficulties
Conflict with
contractors
TENDERING

Tenders for the suplly

of maintenance eqpt.

Legal
disputes

Figure 3. Risks involved in the construction of the depot

(activities not shown do not involve uncertainty)
Page 27

project activity may be affected by one

or more risks causing a possible variation in the activity duration. The result
can be presented in a hybrid structure
(see the example in Figure 3) derived
from the cross-tabulation of the risk list
and the WBS for each subproject.
The last step in the Identification
phase concerns specification of the appropriate responses to the risks found
(Diekman et al., 1988). A discussion of
risk management procedures goes beyond the objectives of the present paper. However, the criteria used can be
summarised briefly. Project managers
were asked to indicate the main responses to the identified risks and, where
appropriate, to assess in quantitative
terms the reduction in the probability
of occurrence or in the impact. This information was used in the final phase of
the analysis to highlight the iterative
nature of the process and compare results obtained after implementing various responses with those initially obtained without any corrective measure.
The Identification phase represents the
prerequisite for the following quantification phase which quantifies risks and
aims to provide some quantitative measure of the variability in the duration of
each activity.

Risk quantification
Risks identified in the previous phase
must be quantified in terms of the level
of uncertainty (by assessing the relative
probability of occurrence) and the entity of the consequences (variation induced in the duration of the activity),
so obtaining a range for overall project
duration. This operation was divided
into two parts:
1. determination of the probability
distribution for the duration of
each activity;
2. assessment of possible correlations between activities and
determination of overall project
duration.

Determination of the probability

distribution for the duration of each
activity
The main inputs to the first part of the
quantitative analysis were:
- risks associated to each activity,
i.e. the results of the preceding
identification phase;
- estimated duration of each
activity.

Page 28

Figure 4. Representation of the relations between risks

In the present case, in order to
follow managers customary behaviour,
they were asked to provide a deterministic duration for each activity, assuming this value referred to a target estimate, i.e. execution of the respective
activity under normal conditions and
without manifestation of any risk. The
variability in the duration of activities
can be described in terms of the distribution of the offsets from the target point
estimate. Therefore, it was necessary to
estimate the range of the possible variations in the individual variables (in the
present case the activity duration, with
respect to the target values: the range is
given by the minimum and maximum
that the variables are not expected to
exceed) and the probability distribution
of the values within the range. In general, the starting point for the collection
of data for the analysis is historical data
and/or recourse to the subjective opinion of experts (Bowers, 1994). In the
present case, historical data was not
available, as it was the first case of implementation of a risk analysis in the public transport sector and there had been
no systematic archiving of information.
Consequently, only expert opinion could
be used (refer to Cagno and Caron,
1997, to identify the most suitable type
of questionnaire on the basis of the availability and reliability of the data). The
interviewees rejected the possibility to
assess the impact of each risk, in terms

of delay, and the respective probability

of occurrence by means of a continuous
distribution, as it was less intuitive. Consequently, each risk was given one or
more discrete values for the variation
induced in the expected duration and
for the respective probability of occurrence.
Strictly tied to the question of the
sources of the input data to the risk
analysis process is the problem of how
to represent this data for the analysis
(Williams, 1992). It was felt appropriate to use an empirical discrete distribution and a methodology which uses
event trees to derive the probability distribution of the duration from the joint
effect of the various risks affecting the
activities. To determine the probability
distribution of each activity by appropriately combining the effects of the risks
associated to each activity (Ren, 1994),
the first step was to identify relations
between the associated effects and so
construct a model to define the overall
impact of the risks affecting the activity. When the effects of two events are
additive, the risks are given 'in series',
otherwise they are given 'in parallel', i.e.
the occurrence of both risks causes an
overall delay equal to the greater of the
delays induced by the individual risks.
Figure 4 gives an example of the modelling for one of the activities in the
project, considering also conditional
probabilities.

sessment of project risks involves calculating the probability distribution of the

overall duration of the project. Among
the various probability analysis techniques, simulation based on the Monte
Carlo method (Rubinstein, 1981) was
considered the most appropriate for the
purpose. The simulation approach
(Cagno and Caron, 1997) is substantially
defined by three elements: input variables, output variables, and a project
representation model which highlights
relations between the project elements.
In the present case, the input variables
were given by the probability distributions for the duration of each activity in
the project, while the output variable
was the overall duration of the project.
The durations of the individual subprojects were added to the latter in order to assess performance separately and
with respect to the total duration. The
quantitative output of the simulation
was a cumulative probability curve
which shows the relation between the

ous activities were examined to detect

any statistical dependence. As historical data was not available, expert opinion was again used. The main criterion
in establishing correlations is the presence of common sources of risk. The
underlying idea is that if two activities
have a common source of risk, they must
be considered potentially related. The
Table 1. Calculation of the delay
first step was, therefore, to draw up a
distribution of two elements linked 'in
list of potentially related activities on the
parallel'
basis of the given criterion. The experts
then assessed the list of pairs to identify
In cases where two elements are
effective correlations. The level of corlinked in parallel, e.g. R1 and R2 overrelation then had to be quantified. The
lapping in Figure 4, the overall delay
ideal situation is to derive a direct esti(RP) is equal to the larger of the two
mate of a correlation coefficient which
elements: RP = Max (R1;R2). A simple
can be used as an input to the simularepresentation of the calculation using
tion. Unfortunately, experience shows
a table (cf. Table 1) shows the results
that deriving a number which represents
obtained for delays R1 and R2 (Figure
the correlation between two activities
4).
is neither easy nor intuitive, and there
If the elements are linked 'in seis a risk of defining an insignificant figries', e.g. the RP delay (given by the calure. The easiest approach is thus to deculation of R1 and R2) and R3 in Figfine conditioned distributions for the
ure 4, the overall delay is given by the
correlated pairs. The
sum of the individual
dependencies bedelays: RS = RP +
tween the activities
R3. An example is
were represented as
given in Table 2, in
follows:
which the calcula1.
the entity
tion takes account of
of the induced delay
the fact that the
on the dependent
probability of the valactivity was defined
ues of R3 is depenwith reference to the
dent on the values of
duration of the
RP.
activity identified as
Proceeding in
Table 2. Calculation of the delay distribution of two elements linked 'in series'
independent; as the
the resolution of the
duration of the latter
system, the distribuincreases, the induced delay is
tion of the overall delay induced in the possible project durations and their
greater (Figure 6);
activity is obtained. If this distribution probability of occurrence. To construct
is added to the deterministic duration a representative model of the situation
2. the induced delay is then simply
estimated previously by the experts, the in question, account had to be taken of
added to the values of the
variability in the duration of each activ- two different types of relation between
dependent distribution, taking
ity is obtained, which can be represented the activities:
account, however, of the fact
1. temporal dependence, i.e.
by an empirical discrete distribution (Figthat this delay is progressively
precedence relations between
ure 5). It should be noted that the use
absorbed for higher values in the
activities which identify the
of empirical discrete distributions allows
dependent distribution. In other
sequence of events;
multi-modal distributions to be shown,
words, given a delay induced by
as well as highlighting the contribution
2. statistical dependence, i.e.
the duration of the independent
of each risk to the variability in durapossible correlations between
distribution, for short durations
tion. This information may prove useful
variations in duration of the
in the dependent activity, the
in a subsequent risk management phase.
different activities.
The distributions obtained represent the
The grid was based on the activiU tilitie s co n structio n
principal input to the subsequent Quan- ties in the project WBS, and time detification phase, based on a simulation pendency relations between the activimodel, allowing for the calculation of the ties and the points of convergence beprobability distribution of the overall tween the sub-projects were defined in
project duration.
consultation with project managers.
The other fundamental aspect was
Determination of overall project
Dur a tio n (m onths )
duration
how correlations between activities were
The second part of the quantitative as- managed. In the present case, the variFigure 5. Duration distribution
0 ,2 5

P ro b a b ility

0 ,2 0

0 ,1 5
0 ,1 0

0 ,0 5
0 ,0 0

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

10

Page 29

2. the probability distribution for

the total duration;
3. the sensitivity analysis for the
individual sub-projects and,
consequently for the overall
project.
Tab. 3 summarises the principal
results for the duration distribution of
the overall project and the individual
sub-projects. The figures reveal two critical areas:
1. the duration distribution for the
construction of tramlines Nord,
Sud and Testi has a higher
standard deviation than that for
the other projects;
2. the realisation of the depot
determines final completion of
the overall project.
It should be noted that the variance associate to the tramline projects
is absorbed in the final convergence
point, as the longest path crosses the
depot project. Indeed, the standard deviation for the total duration is very similar to that for the duration of the depot
project. The graph in Figure 9 shows the
distribution for the total duration as a
cumulative curve. It is evident that for
a completion probability of 80% within
a fixed date, an overall duration of 79
months must be expected, i.e. 18 months

Page 30

P ro b a b ility

0 ,2 0

0 ,1 5
0 ,1 0

0 ,0 5

0 ,0 0

Conclusions
Major contracting projects are generally
subject to the risks of exceeding initial
budget and delays in completion time.

10

Figure 6. Independent activity and

induced delay

Simulation of an alternative
scenario
As a demonstration of the iterative nature of the risk analysis and management
process, identification of the main responses to project risks, together with
the respective effects on the probability
of occurrence and/or on the impact of
the risks, led to revised estimates of the
duration of the individual activities
based on new assumptions and assessed
by simulating the consequent impact on
overall duration. The expected results
mainly concern reduced variability in
overall duration as a result of the reduction in overall project uncertainty by
means of the definition of appropriate
responses. Table 4 summarises the main
results of the duration distributions for
the overall project and the individual
sub-projects in the second simulation.
In effect, the values obtained are below
those in the previous case, but the same
observations remain, i.e. the fact that the
depot project is the aspect which most
determines total duration. As a result of
the reduction in the level of project risk,
the output distribution (Figure 10)
shows less dispersion. In the new scenario, a completion probability within a
fixed date of 80%, is given after 75
months, a period which in the previous
scenario guaranteed only a 50% probability of completion. A sensitivity analysis of the new scenario was carried out.
Comparing the results with the previous cases, the criticality of the variables
in terms of the impact on results was the
same, but the level of impact of design
fell after implementation of the responses.

Dur a tio n (m onths )

F i n i sh i n g (1)
0,3
0,2 5

P r o b a b i li ty

The most significant comments refer to

the following results from the simulation:
1. the expected value and the
standard deviation for the total
duration of the project and the
individual sub-projects;

U tilitie s co n structio n
0 ,2 5

0,2
0,1 5
0,1
0,0 5
0
5

10

11

D u r a ti o n M o nth s)

Figure 7. Dependent distribution for an

induced delay of zero
F i n i sh i n g (2 )
0,3
0,2 5

P r o b a b i li ty

Assessment of results

longer than the optimistic estimate for

the completion of the depot. The software used can perform a sensitivity
analysis of the input variables to assess
the effect of each on the final result.
Results can be presented in a bar chart
illustrating the impact of each variable.
The sensitivity analysis was performed
for the overall project and the individual
sub-projects. The activities with the
greatest impact on the final results are
'design', 'technical and financial approval' and some parts of the 'construction' phase.

0,2
0,1 5
0,1
0,0 5
0
6

8,5

9,5

10

11

D u r a ti o n (m o n th s)

Figure 8. Dependent distribution for an

induced delay not equal to zero

Table 3. Parameters of the output

distributions
1

PROBABILITY

delay is added in full, while for

longer durations it is progressively absorbed into the delay of
the dependent activity (Figure
8). If the induced delay is zero,
the dependent activity maintains the delay distribution
derived in the previous Quantification phase (Figure 7). These
correlations were then inserted
into the model to ensure that
the simulation did not underestimate the real variance of the
output distribution. The simulation using the defined model
and the data collected was
carried out with the @Risk
software package. Five thousand
iterations were performed.

0,8
0,6
0,4
0,2
0
60

63,5

67

70,5

74

77,5

81

84,5

88

91,5

DURATION (months)

Figure 9. Probability curve for overall

duration

95

This means that a systematic and

rigorous analysis of the major sources of
project risk is necessary as early as the
first phases of the life cycle.
In the case considered a risk analysis approach has been developed in order to do obtain a distribution probability of the overall project duration.
In fact, the possibility of realising
the initial 'schedule' objectives must be
assessed in the face of uncertainties associated to the duration of activities in
the individual projects. From this point
of view, the aim of the risk analysis and
management process is first the formulation of reliable estimates for project
time planning based on the identification of the principal risks and their effects on the individual activities and on
overall duration. Secondly, it should
develop the foundations for the correct
management of these risks by means of
the definition and implementation of
appropriate responses. Assessment of the
results of this process leads to the identification of critical areas within the
project which are mainly responsible for
the variability in total duration. These
results should therefore not be seen as a
definitive solution to the difficulties
faced in the project, but rather as a starting point in the control process towards
realising the initial objectives.

The process of eliciting the data

necessary to assess uncertainty (Bowers,
1994) is probably the most important
aspect of the analysis, particularly when
data records are scarce or not available,
as in the public transport case considered. The importance of a Risk Management Corporate Memory, which can
correct and progressively improve an
organisation ability to draw up reliable
estimates, suggests the need to invest in
this aspect. This can form the structure
of a system to capitalise experience and
archive information on past projects intelligently, so possibly improving future
estimates.

References

Enrico Cagno,
PhD (Engr)
Politecnico di Milano
Department of Mechanical Engineering
P.zza Leonardo da Vinci 32
20133 Milan - ITALY
Tel: +39 02 23994730
Fax: +39 02 70638377
E-mail: [email protected]

Bowers J.A., 1994.

"Data for Project Risk Analyses",
International Journal of Project Management.
Cagno E. and Caron F, 1997.
"Integration of Subjective Judgements and
Historical Data", in Khknen K., Artto K.
A. (eds.), "Managing Risk in Projects",
E&FN SPON.
Chapman C.B., 1997. "Project Risk Management".
Diekmann J. et al., 1988.
"Risk Management in Capital Projects",
University of Colorado at Boulder.
Lavold G., 1988.
"Developing and using the work breakdown
structure" in Cleland D., King W., "Project
Management Handbook", Van Nostrand
Reinold.
Raz T. and Globerson S., 1998.
"Effective Sizing and Content Definition of
Work Packages", International Journal of
Project Management.

Franco Caron,
Professor,
corresponding author
Politecnico di Milano
Department of Mechanical Engineering
P.zza Leonardo da Vinci 32
20133 Milan - ITALY
Tel: +39 02 23994812
Fax: +39 02 70638377
E-mail: [email protected]

Ren H., 1994.

"Risk Lifecycle and Risk Relationships on
Construction Projects", International
Journal of Project Management.
Rubinstein R.Y., 1981.
"Simulation and the Monte Carlo Method",
J. Wiley Inc., New York.
Touran A., Bolster P.J. and Thayer S.W., 1994.
"Risk Assessment in Fixed Guideway
Transit System Construction".
Ward S.C. and Chapman C.B., 1991.
"Extending the use of risk analysis in project
management", International Journal of
Project Management.

Table 4. Parameters of the output

distributions
1

Wideman M., 1992.

"Project and Program Risk Management, A
Guide to Managing Project Risks and
Opportunities", PMI, Drexel Hill, Pa..

PROBABILITY

0,8
0,6

Mauro Mancini,
PhD (Engr)
Politecnico di Milano
Department of Mechanical Engineering
P.zza Leonardo da Vinci 32
20133 Milan - ITALY
Tel: +39 02 23994980
Fax: +39 02 70638377
E-mail: [email protected]

0,4
0,2
0
60

62,5

65

67,5

70

72,5

75

77,5

80

82,5

85

DURAT ION (months)

Williams T.M., 1992.

"Practical Use of Distributions in Network
Analysis", Journal of Operational Research
Society.

Figure 10. Probability curve for overall

duration
P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Page 31

CATEGORY: RESEARCH

Contracting and the Flying

Trapeze: The Trust Factor
Roch DeMaere, University of Calgary, Canada
Greg Skulmoski, University of Calgary, Canada
Ramy Zaghloul Mohamed, University of Calgary, Canada
Francis Hartman, University of Calgary, Canada
Keywords: Trust, Contracting, Risk Management, Teams, Project Management
In this paper we focus on the important role trust plays in contractual relationships. A conceptual model of
trust is outlined. We present practical suggestions as to how trust can be built-or at least not destroyed-through
contracting activities. The suggestions include identifying and choosing trustworthy partners, "practising" or
gaining experience with potential partners, and effectively allocating risks. Results from research exploring the
relationship between trust and use of exculpatory clauses in the Canadian construction industry are presented.
The results suggest that the use of exculpatory clauses can decrease trust between contracting partners and
increase overall project costs. We present a strategy based on trust to overcome some of the problems associated with risk allocation and the use of exculpatory clauses. To aid in the analysis we compare the relationship
between contracting parties to that of individuals performing on the flying trapeze.
Introduction
Tonight is the night. You have waited
long to see the featured trapeze artists
attempt a never before completed stunt.
This could be historic. The two artists
will co-ordinate their acrobatic movements that require the highest degree
of precision possible; many say this may
even be impossible to complete-at least
without injury. Yet the trapeze artists
have trained all their lives for this amazing feat that will require ultimate teamwork. Now is the time. High above the
crowd, with music for dramatic effect,
the trapeze artists begin to swing. They
are focused on the stunt. They are building their concentration and coordinating their timing so that the conditions for success are optimal... NOW!
One of the artists lets go, with the precise amount of momentum, he flies
through the air, twisting and turning
with the grace of a dancer. He completes
the stunt and is cleanly caught by his
partner. The crowd roars. History is
made. Now imagine that the two individuals do not trust each other. Would
one expect to see such precision, daring
and creativity now that uncertainty exPage 32

ists as to whether the other will precisely

perform?
As with the flying trapeze, trust
between contracting parties can be an
essential foundation for successful contracting. Trust can decrease project costs
(Zaghloul & Hartman 1999), propitiate
open communication, and facilitate innovation. A lack of trust between partners can result in defensive behaviour, a
decrease in problem-solving effectiveness, a reluctance to share or be candid
(Gibb 1961; Gibb 1964; Klimoski and
Karol 1976). Participants in low trust
environments are more likely to conceal,
disguise or distort information (Zand
1972). In an interesting experiment
(Klimoski and Karol 1976), high trust
and low trust groups were created to test
the effect that trust has on the number
of creative solutions each group could
develop in brainstorming sessions. The
result was that the high trust groups
outperformed the low trust groups in
terms of the number of ideas generated
by each group and also regarding the
participants' perceptions of group performance. Trust can have a positive impact on project success by stimulating

creative and innovative solutions.

In this paper we focus on the important role trust plays in contractual
relationships. A conceptual model of
trust is outlined in the first portion of
this paper. Following that, we present
practical suggestions as to how trust can
be built-or at least not destroyedthrough contracting activities. Finally,
research results exploring the relationship between trust and use of exculpatory clauses in the Canadian construction industry are presented. The results
suggest that the use of exculpatory
clauses can decrease trust and increase
overall project costs. Throughout this
paper we compare the relationship between contracting parties to that of individuals performing on the flying trapeze to aid in the analysis

What is trust?
Before moving ahead, it is important to
have a common understanding of trust.
The concept of trust is very complex and
multidimensional and there has been
much debate within academic circles
regarding a definition (Hosmer 1995;
Mayer et al. 1995; Rousseau et al. 1998).

In an attempt to advance the conceptual understanding of the topic,

Hartman (2000) developed a model of
trust that enables a more simplified understanding of the concept. The model
depicts three types of trust: Blue, Yellow, and Red trust.
Blue trust is all about competence
and ability. Blue trust is based on the
perception of the other's capacity to perform what is required. "Can they do the
job?" is the question associated with this
type of trust. Blue trust can be built
through an organization's reputation, on
a recommendation from another party,
through previous experience, through
credentials, etc. Our perception of
another's competence is primarily
founded on a rational or cognitive evaluation of the available evidence about the
other party (McAllister 1995; Hartman
2000). However, just because someone
can do the job does not necessarily mean
that they will do the job, and that brings
us to the other types of trust.
Yellow trust is based on integrity.
Yellow trust is founded upon the perception of the other's aptitude to act ethically, to adhere to values that we hold
important, and to be motivated to not
take advantage of us (Mayer et al. 1995;
Hartman 2000). To evaluate this type
of trust we ask, "will they look out for
my interests?" Yellow trust is fragile and
quickly damaged if violated. Once broken, yellow trust is very difficult if not
impossible to repair (Hartman 2000).
Red trust is based on intuition.
Red trust is the result of a combination
of emotional response and rapid processing of information and may be described
as the instincts or "gut feelings" that one
person has about the other, a situation,
or an artefact. Red trust is not founded
on a cognitive judgement or decision;
rather it is emotional and hard to support with available evidence. Friendship,
liking, or affect often accompanies this
type of trust. Red trust can dominate
over Blue and Yellow trust. For example,
we may judge a particular political candidate to have high levels of competence
and integrity, yet still not feel "good"
about him or her for some reason we may
not be able to identify and therefore not
vote for him or her. To measure this type
of trust we ask the question, "Does this
feel right?"
You may have noticed that the
three primary colours represent the three
different types of trust. Just as the primary colours can be mixed together to
make diverse colours, so too can the different types of trust. Different types of
trust (or combinations of the three) are
P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

important for different relationships and

situations. For example, a marriage
would most likely be some tone of orange, a combination of red and yellow
trust where blue trust may be of lesser
importance. Business relationships
would typically be some shade of blue
or green trust, formed by some combination of blue and yellow trust. The situation or circumstances dictate the
colour and intensity of trust requisite for
the relationship. The colour model and
its applications in different types of relationships are illustrated in Table 1.

The Analogy of the Flying

Trapeze
With a common understanding of trust,
we can now glean some lessons from the
analogy of the flying trapeze. There are
three primary points that we wish to
make with the analogy: (1) choose the
right partner, (2) practice makes perfect,
and finally (3) use a netand share it!

Choose the right partner

Let's go back to a time before the two
trapeze artists have met. One of them,
our protagonist, has an idea that will
bring him fame and fortune. The idea is
to perform a stunt that no one has attempted before, one that most critics
would agree is likely impossible, and one
that could put his very well-being in
jeopardy. This proposed act is dangerously risky, requires an enormous investment in time and resources to construct
the necessary structure and specialized
apparatus, and it requires a partner that
is both creative and can be relied upon.
What if our protagonist graduated from
the traditional school of contracting? To
choose his partner he tenders out the
job to whoever thinks they can do it and
awards it to the lowest bidder
Well, maybe not. Considering the
nature of this specific task, our protagonist will likely use different criteria for
selecting his partner. The point of this
example is that, depending on the situation, there may be other factors that

are equally (if not more) important than

price when choosing a partner. Although
the previous statement may seem obvious, it bears repeating as current practice (at least in Canada) would suggest
that price is a prime consideration when
selecting contracting partners. When
there is high risk and dependence upon
another party, it may be prudent to consider trustworthiness when evaluating
and selecting potential partners.
In most business relationships,
blue trust or competence is certainly a
requirement of any formal or informal
arrangement; most firms would not consider partnering with an organization
that they believe could not do the work
in the first place. Yellow and red trust
tend not to be as important. Contracts
or other forms of bureaucracy are often
substituted for yellow and red trust to
ensure the other party fulfils their obligations. This is often the most appropriate strategy when the objective of a
project is to complete a task that is second nature or business as usual for all
the parties involved. Where uncertainty
and complexity are low a "tight" contract
is often appropriate (Skulmoski et al.
1998). However, if the project is large,
risky, complex, and covers new ground
it becomes an increasingly difficult task
to account for everything that could
possibly happen within the confines of
a contract. Under these circumstances
a "looser" contract may be more appropriate (Skulmoski et al. 1998). Sometimes there is no substitute for a partner
who has integrity and can be relied upon
to look out for your interests when things
do not go as expected.
The question then becomes "how
does one go about identifying and choosing a trustworthy partner?" This can be
a difficult process, as no potential partner would purposely send out signals that
they could not be trusted. In fact, all
potential candidates will be on their best
behaviour with any misdemeanours of
their past hidden neatly away. The first
step to identifying trustworthiness is to

Table 1. Colours of trust in Different Relationships

Page 33

simply make trust a priority and part of

the selection criteria. The process of recognizing clues and pertinent evidence
can be facilitated if the importance of
trust is salient in the contracting phase
of a business relationship. Blue and yellow trust are built from evidence, this
evidence can come from first hand experience or numerous secondary sources
(For a more thorough analysis of identifying and choosing trustworthy partners
see Barney and Hansen 1994). The most
powerful evidence would be from direct
experience, which leads us to the next
point of the analogy.

Practice makes perfect

Imagine that our protagonist on the trapeze has chosen a trustworthy partner
to perform the proposed dangerous and
difficult stunt and they are ready to begin working together. Would you expect
them to start right out with the most
difficult feat? They would most likely
start out easy and work up to the more
difficult stunts. Practice allows the trapeze artists to learn about each other's
motivations, strengths, weaknesses, etc.
This enables the trapeze artists to predict certain responses and anticipate
each other's actions. Firsthand experience furnishes potent evidence regarding the type and level of trust that can
be placed in the other party.
If the analogy were applied to a
business relationship, it would denote
that the parties have some experience
working with each other before implementing innovative solutions or becoming highly vulnerable to each other. It
may not always be possible or practical
for partnering organizations to "practice"
together first; however, such experience
would be invaluable for building trust
and identifying trustworthy partners
(Barney and Hansen 1994).

Use a net
Imagine the difference in the type of
stunts that our friends on the flying trapeze would be engaged in if there was or
was not a net below to catch them if
something went wrong. With a net we
would expect to see more creativity and
daring; without a net we would likely
expect to see the opposite behaviour.
The "net" in a project would consist of
risk mitigation, backup plans, stage
gates, tolerance for human error, and
allowance for unexpected events that
may occur even after a thorough risk
analysis. Additionally, it entails that the
parties recognize and compensate for the
fact that implementing projects of this
nature may require iterative processes
Page 34

and certain activities may have to be

done more than once. There are costs
associated with using a "net" or implementing contingency plans when problems are encountered. Incentives could
be in place to motivate the participants
to do be successful in implementing a
plan the first time without resorting to
plan "B". Whatever the approach, a balance should be sought so that appropriate action is encouraged and inappropriate behaviour is discouraged.
"Using a net" is really risk management and it includes risk identification, quantification, mitigation, and allocation. Ensuring that risks are
recognised and managed is good practice in any project. This activity is an
important step in that risk management
and allocation can significantly influence the behaviour of the project participants and hence impact both project
performance and the final cost. Additionally, the manner in which risks are
shared or allocated can have a significant affect on trust and the relationship
between contracting parties, and this
brings us to the next point.

Share the net

Imagine that our protagonist on the trapeze positions the entire net under himself and leaves his partner with a very
hard and potentially painful landing
spot. How would this type of situation
affect the relationship between the parties or the behaviour of the individual
at risk? Potentially, this scenario could
create an adversarial relationship between the two participants. We would
also probably expect that the individual
at risk would want to be compensated
for the potential danger and would most
likely perform very cautiously.
The above scenario would seem
inappropriate on the flying trapeze, but
it is a prevalent practice in many contractual relationships in Canada. Exculpatory clauses-also known as "weasel
clauses"-are extensively used in many
industries. Exculpatory clauses transfer
risk from one party to another, usually
in favour of the party that writes the
contract while the other party has little
control or no control over these risks.
For example, in the late 1990s when the
year 2000 (Y2K) was a potential threat
to all computer systems, an IT consulting firm placed one computer programmer temporarily with a client organization to be one member of a large project
team to accomplish a project related to
Y2K. The programmer was under the
direct supervision of the client organization and the IT consulting firm was

not involved in the project in any other

way and was not even informed of the
project objectives. As part of the contract the client organization included a
clause that stated that the IT consulting firm would be responsible for the
Y2K compliance of the software to be
developed. Those at the IT consulting
firm felt that this was unreasonable considering they had no control over
project. In this case, the utilization of
the exculpatory clause resulted in much
heated debate between the two organizations.
Three hundred and fifty participants from organizations in the Canadian construction industry responded to
a survey to gain a better understanding
of the relationship between the use of
exculpatory clauses, trust and project
costs. The results show that exculpatory
clauses are used in 75% of the contracts.
A case for using exculpatory clauses can
easily be substantiated because they are
very effective at transferring risk. Another reason exculpatory clauses may be
used could be due to a lack of yellow or
red trust between the parties, resulting
in a general unwillingness to be at risk
to the other party. However, regardless
of the reason they are used, there are
two major disadvantages. First, there is
a cost associated with their use. Contractors compensate by adding an additional 9% to 19% to their bids (Hartman
1998; Zaghloul and Hartman 1999).
The dollar value of these premiums is
between $9 billion and $19 billion CDN
in that industry alone. The ironic thing
about this situation is that 69% of the
owners are unaware that they are paying a premium when such clauses are
used (Zaghloul 2001).
The second problem with using
weasel clauses is that they may destroy
yellow and/or red trust. Although much
less quantifiable, the end result could be
equally detrimental. yellow trust is a
belief that the other party will look out
for your interests and Red trust is an
impression that the relationship feels
right. Exculpatory clauses can send a
clear message about how much one party
values or, maybe more appropriately,
does not value the other party or the
relationship. The effects of low trust may
be a decrease in innovation, an increase
in defensive behaviour and conflict, a
reduced potential for establishing a longterm relationship, and jeopardization of
project success.
In many cases, the current contracting practice of using exculpatory
clauses does encourage a specific type
of creativity-to find more creative ways

to make claims and to maximize the

amount of money that can be drawn
from the project at the other party's expense. And it seems the more adversarial
the relationship, the more "encouragement" there is to be creative in this regard.
Avoiding exculpatory clauses and
adopting more efficient risk allocation
practices by contracting organizations
could potentially be a source for substantial increases in trust, profit and competitive advantage. Efficient risk allocation means that the party most suited
for dealing with the risk takes responsibility for it. For example, in a construction project, if the party most suited to
accept the risk is the owner, a potential
risk allocation strategy may be the following:
- Clearly identify all potential risks.
The party in the best position to
manage a specific risk should
assume responsibility for it.
- Avoid using exculpatory clauses.
- Negotiate a contract that does not
include the expensive risk premiums.
- Set aside the savings as contingency.
- Share the windfall savings if the
risk does not occur.
Implementing a strategy such as
the one described above requires a relationship of trust between the parties
because there may be more exposure to
risk without the use of exculpatory
clauses. However, their may be significant rewards and competitive advantage
for those organizations that can make it
work. Thus the development of trust
could have some very tangible benefits
to partnering organizations.

Conclusion
Contracting is much like performing on
the flying trapeze. Both entail interdependency and risk, both can be enlivening, and both can add value to the
parties involved. In order to realize the
potential benefits of contracting, trust
should be developed between the parties. Trust can be developed between
contracting partners by (1) identifying
and choosing the right partner, (2) by
practising working together on easier
projects before more risky or difficult
projects are attempted, and (3) by using
effective risk allocation practices. If
partnering organizations will make trust
a priority, new opportunities may arise
to adopt contracting strategies that may
lead to increased profits and competitive advantage in the market place.
P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

References
Barney, J. B. and M. H. Hansen, 1994. "Trustworthiness as a Source of Competitive
Advantage." Strategeic Management
Journal 15(Special Issue): 175-190.
Eskilden, J. K., J. J. Dahlgaard, et al., 1999. "The
Impact of Creativity and Learning on
Business Excellence." Total Quality
Management 10(4&5): S523-S530.
Gibb, J. R., 1961. Defence Level and Influence
Potential in Small Groups. Leadership and
Interpersonal Behavior. L. Petrillo and B.
M. Bass. New York, Holt, Rinehart and
Winston: 66-81.
Gibb, J. R., 1964. Climate for Trust Formation. TGroup Theory and Labratory Method. L.
P. Bradford, J. R. Gibb and K. D. Benne.
New York, John Wiley: 279-301.
Hartman, F. T., 1993. Construction Dispute
Resolution Through an Improved
Contracting Process in the Canadian
Context. Faculty of Engineering.
Leughborough, U.K., University of
Technology.

Roch DeMaere
University of Calgary
Department of Civil Engineering
Project Management Specialization
2500 University NW Calgary,
Alberta, Canada, T2N 1N4
Tel +403 2202875
Fax +403 2827026
E-mail [email protected]

Hartman, F. T., 1998. The Real Cost of Weasel

Clauses in Your Contracts. Proceedings of
the Annual Project Management Institute
Seminars & Symposium, Long Beach,
California.
Hartman, F. T., 2000. Don't Park Your Brain
Outside. North Carolina, PMI.
Hartman, F. T. and G. Skulmoski, 1999. "Quest
for Team Competence." Project Management 5(1): 10-15.
Hosmer, L. T., 1995. "Trust: The Connecting Link
Between Organizational Theory and
Philosophical Ethics." Academy of
Management Review 20(2): 1-25.
Jergeas, G. and F. T. Hartman, 1996. A Contract
Clause for Allocating Risk. Proceedings of
the American Association of Cost
Engineers.
Klimoski, R. J. and B. L. Karol, 1976. "The Impact
of Trust on Creative Problem Solving
Groups." Journal of Applied Psychology
61(5): 630-633.

Greg Skulmoski
University of Calgary, Department of
Civil Engineering
Project Management Specialization
2500 University Drive NW
Calgary, Alberta, Canada, T2N 1N4
Tel +403 2202875
Fax +403 2827026
[email protected]

Mayer, R. C., J. H. Davis, et al., 1995. "An

Integrative Model of Organizational Trust."
Academy of Management Review 20(3):
709-734.
McAllister, D. J., 1995. "Affect- and Cognitionbased Trust as Foundations for Interpersonal Cooperation in Organizations."
Academy of Management Journal 38(1):
24-59.
Rousseau, D. M., S. B. Sitkin, et al., 1998. "Not
So Different After All: A Cross-Discipline
View of Trust." Academy of Management
Review 23(3): 393-404.
Skulmoski, G., K. Jugdev, et al., 1998. Remove the
Finger from the Scale: A Balanced
Approach to Outsourcing Contracts.
Proceedings of the Annual Project
Management Institute 1998 Seminars &
Symposium, Long Beach, California.

Francis Hartman
University of Calgary
Department of Civil Engineering
Project Management Specialization
2500 University Drive NW
Calgary, Alberta, Canada, T2N 1N4
Tel +403 2202875
Fax +403 282-7026
[email protected]

Zaghloul, R. M., 2001. Contracts' Hidden Costs:

A Trust/Risk Allocation Approach
(Unpublished PhD dissertation). Faculty of
Engineering. Calgary, University of
Calgary.
Zaghloul, R. M. and F. T. Hartman, 1999. How To
Reduce Your Project Cost. Proceedings of
the American Association for Cost
Engineers Annual Conference, Calgary.
Zand, D. E., 1972. "Trust and Managerial Problem
Solving." Administrative Science Quarterly
17: 229-239.

Ramy Zaghloul
Mohamed
University of Calgary, Canada

Page 35

CATEGORY: RESEARCH

Rethinking Project Management:

Old Truths and New Insights
Kam Jugdev, University of Calgary, Canada
Janice Thomas, Athabasca University, Canada
Connie L. Delisle, University of Calgary, Canada
Keywords: Trends, Project Management, Project Management Maturity Models, Core Competence, Old & New
Economy, Professionalization, Success, Performance, Competitive Advantage
Change, learning and leadership are prevailing concepts of the New Economy. This paper reviews old truths
and explores new insights in project management within the following areas: a) the profession, b) success /
performance measures, and c) competitive convergence vs. competitive advantages in relation to certification
programs and management maturity models. Then we present some new insights on two areas of current
research - developing a firm level core competence in project management and practices to promote project
management to executives. The paper concludes by encouraging those in project management to learn from
the old truths and be receptive to change and learning as they lead the way into the New Economy.
Introduction
Change, learning and leadership are
three key concepts of the New Economy
(Fastcompany, 2000). With the exponential growth of project management,
emerging trends within the discipline
lend themselves to new insights. In the
Old Economy, classical or traditional
project management involves getting
work done on time, on budget and
within scope. In the New Economy,
modern project management involves
leading change in organizations and
learning from the process (Hartman &
Skulmoski, 1998; Morris & Jones, 1998).
Old Economy thinking focused on
project management as a tactical construct; New Economy thinking positions
project management as a strategic construct. These terms enable us to examine our practices for gaps so that we can
challenge axioms (self-evident truths)
and theorems (logical conclusions)
about success (Delisle, 2001). "First,
while the subject of 'project management' is now comparatively mature, and
recognized by thousands if not millions
of managers as vitally important, it is in
many respects still stuck in a 1960s time
warp" (Morris, 2000, p. 2).

Page 36

Although some of the literature

links project management competence
to project management effectiveness,
standards describing project management capabilities and the link to organizational success are still lacking
(Cooke-Davies, 2000). There is a significant gap in our understanding of how
project management can be integral to
strategic management by defining
project management's role in achieving

organizational effectiveness and long

term business success. Though project
management is a relatively young discipline, it has been around long enough
for an exploration of some old truths and
new insights. This paper highlights perspectives necessary to build a New
Economy viewpoint on project management. The main themes discussed in this
paper are summarized as follows:

Table 1: Old Truths and New Insights about Project Management

Trends and Definitions

A number of global trends directly and
indirectly influence the growth of
project management. One such trend is
the increased competitiveness of the global market place and emphasis on efficiency. Other trends include the exponential growth of the computer industry, reliance on Information Technology
to store and analyze information, the
Internet market space, deregulation,
mergers and acquisitions, environmental concerns and growing customer expectations. These trends and others contribute to the corporate adoption of the
following types of practices in the quest
to remain ahead of the status quo: quality improvement, business process
reengineering, outsourcing, restructuring, downsizing and project-based work
to name a few (Stewart, 1995; Wirth,
1992). Over the past 50 years, project
management grew exponentially to meet
the demands of global competition. In
1998 it was an $850 (US) million industry and growing at 20 percent a year
(Bounds, 1998). Membership in the
Project Management Institute (PMI),
one of several standards associations
worldwide, is over 78,000 as of May 2001
(PMBOK, 2001).
Most early descriptions and definitions of project management were
mechanistic and referred to the constructs of time, cost and scope - otherwise known as the iron or priority triangle (Archibald, 2000; Atkinson, 1999;
Meredith & Mantel, 1995; Wallace &
Halverson, 1992; Wirth, 1992)
(Skulmoski & Hartman, 2000). Traditionally, project management referred to
the discipline, methodologies, tools and
techniques to manage projects and
projects were "temporary endeavors undertaken to create a unique product or
service" (PMBOK, 2001, p. 167).
Moving towards a New Economy
perspective, a more holistic description
refers to addressing stakeholder needs
and expectations by balancing the demands between a) time, cost and quality, b) different stakeholders, and c)
identified requirements and unidentified
requirements (expectations) (PMBOK,
2001). The literature also describes
project management as involving a
blend of "hard" and "soft" processes, tools
and techniques (Kress, 1994). The literature sometimes describes project
management as involving cultural, structural, practical and personal aspects
(Cooke-Davies, 1990). A New Economy

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

definition of project management that

captures the essence of the discipline
states that project management is "the
art and science of converting vision into
reality" (Turner, as cited in Atkinson,
1999 p. 338). Project Management researchers and practitioners are only now
beginning to explore the implications
this shift in perspective has on the discipline (Thomas & Tjader, 2000). Along
with the evolving understanding that
project management is a complex undertaking, there is growing awareness
around its professionalization.

The Profession of Project

Management
From the Old Economy perspective,
project management is an applied discipline with value at the tactical and operational level. It is usually considered a
subset or extension of a person's technical domain. In the period following
World War II, project management
evolved as a subset of technical knowledge areas such as defense, aerospace
and civil engineering (Morris et al.,
1998). It is beginning to be more widely
acclaimed as a "profession" in it's own
right (Verzuh, 1999). As a young vocation not yet recognized as an occupation by many census bureaus, project
managers require a balance of skills in
the business, technical and project management domains and are increasingly
viewed as industry independent professionals (Verzuh, 1999). Clearly, practitioners and major associations view
project management as a "profession"
(Zwerman & Thomas, 2001). However,
project management only became an
"academic" discipline in the mid 1980s
(Morris et al., 1998). What is less clear
is what that term means to its proponents and to the discipline as a whole.
For over 75 years, the discipline
of sociology has studied what distinguishes a profession from an occupation.
The list of attributes of a profession typically includes a body of knowledge, a
culture sustained by a professional association, code of ethics, recognized
authority and community sanction
(Greenwood, 1966; Millerson, 1964).
Project management is evolving towards
professional status on some of the criteria as noted by the following trends
(Zwerman et al., 2001):
- Bodies of knowledge exist for the
profession e.g. Project Management Body of Knowledge Guide
and some include codes of ethics;

The culture is sustained through

professional development initiatives, conference and seminar
venues as well as local chapter
activities;
- Professional certification designations support recognized authority;
and,
- Universities offer degrees at the
graduate and doctoral level in
project management (AACE,
2000; AIPM, 2000; APM, 2001;
CCTA, 2000; CIPPM, 2001; ESIInternational, 2001; Hartman et
al., 1998; IPMA, 2000; PMI,
2001).
Based on the traditional definition
of a profession, project management is
missing an esoteric body of knowledge
or theories that are unique to the practice. It is also missing community sanction or government recognition that the
practice has enough impact on the public good to be reserved for "professionals" as is the case in law, medicine, engineering and accounting. The PMI recently recognized the need to examine
the lack of project management theoretical roots as evidenced by its support
for a research study on the topic in May
2001 (PMI, 2001). Many association
bodies including PMI and academic researchers (such as Morris and Thomas)
are endeavoring to develop theories of
project management which will ultimately distinguish it from general management and other process skills and
applications. The trickier question will
be accomplishing the community sanction necessary to make it truly a profession in the traditional sense of the term.
The other issue to consider is whether
or not project management is mature
enough as an occupation for practitioners to be measured against performance
standards and whether an acceptable
level of accountability is in place to regulate the discipline. Are the professional
associations and practitioners in agreement on what this entails? Are they
ready for this challenge? The answer to
whether project management is a profession or not is likely to be debated for
some time.
Adding to this debate is that the
New Economy global playing field is increasingly complex. Project managers
work in diverse organizational structures, manage or work with multiple
teams and have many operational and
project responsibilities. They deal with

Page 37

changing customer demands, multiple

stakeholders, senior management,
teams, staff, and project responsibilities
(Kerzner, 2001). The role involves considerable leadership and flexibility in a
world of uncertainty. In addition to their
technical responsibilities, they are increasingly aware of societal project issues (Hartman, 2000). These trends
both drive towards professionalization
(through the increasing potential impact
on society of project outcomes and related need for community sanction and
policing) and away from it (through increasing project complexity that makes
it more difficult for project managers to
accept responsibility for outcomes).

Performance Metrics of Success

Defining the Elusive Concept of
Success
In the Old Economy, project and project
management performance metrics as indicators of success are of particular importance in determining progress.
Whether time to market, reduced cycle
time or quality products are the goals or
more broadly, returns on investment or
market share, firms compete and seek
the advantages offered by strategies and
techniques such as project management.
Historically, success was efficiency focused, measured in terms of the iron triangle of time, cost and scope (quality)
and emphasized the implementation
phase of the project lifecycle (Pinto &
Slevin, 1987).
Newer insights are slow in being
adopted. They relate to understanding
that success is not a one-time measure,
it can be subjective and it is a multidi-

mensional construct. Success may refer

to indicators (aspects that are paid attention to) or outcomes (aspects that are
judged) (Delisle, 2001). Success metrics
also changes over the project lifecycle
and can extend into the product lifecycle
(Atkinson, 1999; Baccarini, 1999; Might
& Fischer, 1985; Munns & Bjeirmi,
1996; Shenhar, Levy, & Dvir, 1997).
Success involves both objective performance metrics (efficiency measures e.g.
return on investment) and subjective
metrics (effectiveness and innovation
measures) (EIU, 1999). Some examples
of effectiveness metrics involve the customer perspective, improved internal
processes, learning and competencies
(Germain, 2000; Sveiby, 1997). Another
area of contrast between old truths and
new insights is related to success and
involves the constructs of competitive
convergence and competitive advantage.

Competitive Convergence vs.

Competitive Advantage
In the Old Economy, the emphasis is on
efficiency whereas the New Economy
perspective includes effectiveness and
innovation metrics in a balanced manner akin to how the iron triangle warrants negotiations on time, cost and
scope. Effectiveness values emphasize
customer service, collaboration, organizational effectiveness and knowledge
sharing. Innovation values involve market expansion and advantage creation
strategies (EIU, 1999). Being more successful than the competition is key towards achieving a competitive advantage. However, as explained by Porter's
productivity frontier diagram that fol-

lows, companies that compete on project

management competences but rarely on
a core competence in the discipline
achieve operational advantages instead
of competitive advantages. Firms are
constantly pressured by both internal
and external factors to increase productivity, improve performance and improve
quality. Performance is also indicative of
success and at the firm level, being successful means survival in the competitive marketplace, staying ahead of the
pack and increasing profits (Cleland,
1991; Stewart, 1995; Wirth, 1992). To
outperform rivals, firms must deliver
greater or a more full range of value for
customers or create comparable value at
lower costs (Porter, 1996).
Operational effectiveness means
doing similar activities better than rivals.
Operational effectiveness is insufficient
in achieving a competitive advantage
though, because after a while, firms look
alike, do the same things and this leads
to diminishing returns as they reach
competitive convergence (Porter, 1996).
Porter depicts this as follows.
On the productivity frontier
(based on non-price buyer value delivered and relative cost position), the frontier shifts constantly due to the diffusion of innovative practices. Common
strategies such as project management,
project management maturity models,
quality improvement, empowerment
and outsourcing can be used to keep up
with the productivity frontier. However
the frontier continues to shift as rivals
imitate each other and generic solutions
diffuse into the marketplace. Operational effectiveness is a necessary part
of management but it is not the same as

Figure 1: Operational Effectiveness Versus Strategic Positioning

Page 38

innovation. Operational effectiveness

shifts the productivity frontier outward
and continues to raise the standard of
expected firm performance. However, it
does not lead to a relative improvement
position for firms. In contrast, strategic
positioning refers to doing different activities from rivals or similar activities
differently - in other words, being innovative and creative. Innovation involves
revolution, remodeling or introducing
newness (EIU, 1999). As explained in
next section, this is an area where
project management has not moved forward rapidly in the New Economy.
Project management continues to support incremental improvements through
Old Economy practices in relation to
certification and maturity models.

Individual Certification and

Project Management Maturity
Models
Certification programs and project management maturity models both measure
competence. Certification measures
competence at the individual level and
the project management maturity models measure competence at the project,
program or firm level.

Individual Certification
Worldwide, project management associations such as PMI, the Association
of Project Management (APM) and the
Australian Institute of Project Management (AIPM) offer professional designations or certifications. These are based
on combinations of questions that test
individual rote knowledge and resumes
and project summaries that assess reported experience. Most exams do not
specifically test personal competencies
or technical level detail (CCTA, 2000).
Only the AIPM provides detailed evidence guidelines to measure capabilities.
Examples of extant certification programs include: the PMI's Project Management Professional designation; the
IPMA's certification; the APM certification; and, the AIPM certification
(AIPM, 2000; CCTA, 2000; IPMA,
2000; PMI, 2001). The old truth is that
project management is evolving as a discipline to warrant a number of certification programs as a way of establishing
professional credibility. However, global
standards are not in place and certifications remain continent specific for the
most part.
The new insight is that existing
certification programs will be challenged

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

to raise the bar and assess member

competences more rigorously by developing tests that go beyond rote memorization. Otherwise, project management
associations run the risk of diluting the
value of certification and this will detract from the establishment of the profession. Two other pressures to move
from the Old Economy to New
Economy relate to the growing debate
on the professionalization of project
management and industry demands for
better-qualified personnel in light of prevailing project failures (Standish, 1996).
In addition, another frontier where incremental progress is being made relates
to project management maturity models.

Project Management Maturity

Models
Along with measuring individual capabilities, project management has focused
on maturity models to assess project
standards and practices as well as firm
support for the discipline. As of 2001,
there were approximately eight extant
maturity models at various stages of development and use. Many are based on
the Software Engineering Institute's five
stage capability maturity model where
the levels move incrementally from initial, repeatable, defined, quantitative to
optimized performance (SEI, 2001).
Most models are also based on the
project management bodies of knowledge supported by the prevailing association. The models involve step-wise
quality improvements on processes and
practices.
Some of the maturity models involve commercially available software
and others are conceptual or involve
guidelines and templates. The range of
extant project management maturity
models includes: Organizational Project
Management Maturity Model (OPM3);
Projects in Controlled Environments
Methodology (PRINCE2); Project Management Assessment (PMA 2000);
Project Management Maturity Model;
Project Framework; EFQM Excellence;
IBM Progress Maturity Model; SMART
Project Management; Project Management Maturity Model (AACE, 2000;
AIPM, 2000; CCTA, 2000; Hartman et
al., 1998; IPMA, 2000; PRINCE2, 2000;
Schlichter, 1999). Only one model is
described as "open" in contrast to the
others that are linear and incremental the
Leshem-Nituv
Engineers
(Lubianiker & Schwartz, 2001).

The models are useful in advancing project management practices and

standardizing processes. They combine
inputs, processes and outputs as well as
knowledge, experience and competencies. They investigate the premise that
success could be improved by addressing project competence and maturity
(Skulmoski, 2001). The models improve
our understanding of practitioner competence, the working environment and
the business purposes (Hartman et al.,
1998). The maturity models also identify project or organizational strengths
and weaknesses as well as provide
benchmarking information.
However, few have been empirically tested and most are based on anecdotal material, case studies or espoused best practices (Skulmoski, 2001).
Project management maturity models
tend to be hierarchical and the exact
points of transition between the levels
are not always clear. Furthermore, they
often blend individual project management maturity with program or organizational maturity. From a New Economy
perspective, considering the shift in skills
and roles project managers play in new
types of organizations and teams in the
global economy (i.e. virtual teams),
maturity models need re-thinking
(Delisle, 2001). Just as no one certification standard exists in the New
Economy, neither does a generally accepted model for project management
maturity (Schlichter, 2000). This area
is relatively young and lacks empirical
support for determining which competencies contribute most to project success (Skulmoski, 2001). Although the
models have been useful in improving
project related practices, they have also
resulted in competitive convergence
wherein companies are "doing much of
the same", and few companies are strategically positioned as a result of achieving a high project management maturity level (Kujala & Artto, 2000).
The old truths on project management maturity models are that hierarchical, closed models can assess project
management maturity and support
project management as an operational
construct as evidenced by the focus on
the business unit or project level. The
models typically lack a holistic, strategic dimension (Jugdev, 2001). As a consequence, business improvements appear incremental rather than strategic.

Page 39

Project Management as a Core

Competence
The old truth is that project management is an operational construct. The
new insight is that project management
has a role at the strategic planning level
of the organization. There is an economics and strategy based construct called a
core competence that has yet to be explored in terms of what this means to
project management. Achieving a high
project management maturity score is
not enough as it simply contributes to
competitive convergence. However,
companies with high levels of project
management maturity are better positioned to achieve a competitive business
advantage than their rivals, especially if
they integrate the practice with other
strategic initiatives.

"Current research and project

management applications often
have a limited focus on
applications at the operative
level. As a result, they seldom
provide links between operative
and strategic management in a
project-oriented organization
Projects have the potential to
change the purpose and the
future of the organization, and
in that respect, they are part of
the strategy creation process"
(Kujala et al., 2000, p. 47-48).
As presented thus far, the incremental progress in such areas as measuring success, performance, individual
and project competence lends itself to
Old Economy thinking and supports a
theme of competitive convergence. How
can firms then move forward and strive
for New Economy thinking and practice? One approach would be to develop
a core competence in project management. A core competency is what a firm
does (e.g. functional skills and cultural
habits, attitudes and beliefs) in contrast
to tangible assets that a firm has (Nelson,
1994). This area has not been studied
in project management and it stems from
the Resource-Based Perspective of the
firm. This perspective, rooted in economic theory, has produced the strategic management literature supporting
the premise that systematic differences
exist across firms that are relatively
stable, and that intra-firm resources are

Page 40

unique and contribute to a firm's competitive advantage (Foss, 1997; Schulze,

1994).
The Resource-Based perspective
describes core competences in terms of
tangible and intangible resources. Core
competences are rooted in the intra-firm
heterogeneous resources involving human resource practices, asset specialization, learning, culture, team-embodied
skills and routines, hard to manage tasks/
processes, alliances for learning and trust
(Schulze, 1994). Organizational knowledge and collective practice are dimensions of the intangible assets a firm can
capitalize on to achieve a dynamic capability or innovative competitive advantage (Teece, Pisano, & Shuen,
1997). Resources must be synergistic,
unique, inimitable and or unexpected
otherwise efficient markets will ensure
that abnormal returns from any resource
will be competed away (Barney, 1986).
Overall, a core competence is "a messy
accumulation of learning(and) comprises both tacit and explicit knowledge"
(Hamel, 1994, p 12). In addition, core
competencies are dynamic, as they
change over time (Bogner & Thomas,
1994; Hall, 1994; Turner & Crawford,
1994). Thus, their definition and measurement appear difficult.
Research should consider project
management as more than a tactical
construct consisting of tools and techniques, and introduce the softer, cultural
and belief driven nature of project management. This may make it easier to see
a holistic application of project management at the organizational level and
encourage its application to generate a
strategic advantage. One major issue
may relate to addressing change at the
cultural level of the firm. Looked at this
way, we can make an argument that a
project management culture is:
- Inimitable - while there is
abundant reporting of best
practices, organizations find it
extremely difficult to transplant
these practices across organizations;
- Synergistic - higher levels of
project management application
are found in organizations with
base level cultures supportive of
a high achievement, high
accountability process; and,
- Unique - organizations that have
achieved excellence in project
management tend to have their
own unique approach to

applying it internally. A vanilla,

"mature" application of standard
methodologies does not produce
excellence.
DeFillippi and Arthur (1998) suggest that project management contributes to developing stable strategic resources in the following ways:
- Although projects are temporal
in nature, involve cross-functional teams and essentially rent
human capital, they can accumulate core competencies;
- Although projects do not
involve a stable workforce, they
can convey tacit knowledge and
knowledge transfer; and,
- Although projects involve very
mobile staff, they can create
competitive advantage through
possessing inimitable resources
(DeFillippi & Arthur, 1998).
The old truths confirm that when
firms apply project management basics
as measured through the project management maturity models, most achieve
competitive convergence. As such, operational effectiveness is a given. However, Porter (1996) suggests operational
effectiveness "is a required practice for
firm survival but it is not a strategy" (p.
78). Project management maturity models tend to support an operational approach that supports incremental improvements instead of strategic ones.
Stepwise improvements are the norm for
competitive convergence but not for a
competitive advantage (EIU, 1999;
Hartman & Skulmoski, 1999).
The new insights indicate that
little research has been conducted on
project management core competencies.
To date, certification approaches have
not addressed this and the maturity
models emphasize project focused incremental improvements but not tacit
knowledge or dimensions of a core competence that link it to the strategic management level of the firm. Firms investing in project management stand to gain
a competitive advantage in the market
place by capitalizing on their project
management abilities and turning them
into core competencies through the
alignment of operations management
with strategic management. Some firms
could achieve strategic project management wherein the following constructs
are supported:
1. Project management maturity
levels: These firms have a founda-

2.

3.

4.

5.

6.

tional project management

maturity level;
Success Factors: Senior managers
embrace the concepts and provide
leadership based on success criteria
and indicators that are defined and
measured up front (Belassi &
Tukel, 1996);
Strategic Management: Executive
practices are aligned with operations management. Operational
management support alone is
insufficient to develop a core
competence in project management, as it does not result in a
program of projects that are
aligned among themselves or with
the strategic directions. This might
lead to competitive convergence
instead of a competitive advantage;
Developing and Protecting: Project
management core competences are
supported and protected by senior
management in innovative ways as
warranted by the unique resource
bundles. Firms that fail to do so
end up in competitive convergence
because rivals can easily and
readily replicate their practices.
4.1. The project management
program is aligned with quality
management and knowledge
management practices as this
lends itself to explicit and tacit
knowledge sharing and practice
improvements. An effort to
develop a project management
core competence in isolation of
these practices lends itself to
fractured knowledge warehousing and limited sharing. This
constrains the firm's abilities to
holistically address quality
dimensions of project management;
Valuation: Project management is
valued in both tangible and
intangible ways and viewed more
as a rent-generating asset than an
overhead or cost. Firms that view
project management as an expense, are less likely to view it as a
strategic asset or make the investment in it;
Organizational Learning: Double
loop learning (learn-do-assesslearn) and the ability to address
the knowing-doing gap is a joint
requirement for a core competence

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

in project management (Pfeffer &

Sutton, 1999) (Thomas, Delisle,
Jugdev, & Buckle, 2001b); and,
7. Dynamicism: Innovation and
adaptability are the norm over
rigidity and control. There is a
tolerance for paradoxical situations
and the firm is both effective and
ineffective at the same time in
different aspects of function
(Helleloid & Simonin, 1994;
Thomas, 1998) (Anderson, 2000;
Thomas et al., 2000).
The old truth is that a high project
management maturity level means excellence had been achieved. The new
insight is that there are practices to be
achieved beyond a linear maturity level
focused on the project. Such practices
relate are organizational in nature, involve corporate directions and core
competences. This is a New Economy
theory the authors are currently researching so this discussion is a first attempt to build a case for theorists and
practitioners alike to view project management as a potential strategic resource
and core competence (Jugdev, 2001).
Furthermore, developing and sustaining
core competences cannot occur without the commitment and leadership
from executives or the investment in the
learning process. "Without specific
competences related to reshaping the
firms future competences, corporate survival is no more than a chance event"
(Turner et al., 1994, p. 262).

Selling Project Management

Last but not least, the Old Economy
supports the premise that it is enough
to practice project management at the
operational level and promote it in tactical ways by emphasizing tools and techniques. The Old Economy perspective
supports practicing project management
reactively, in response to crises, instead
of proactively. A recent international
research study (n= 1,867) confirms that
this does not contribute to senior management appreciating the greater value
possible with project management (Thomas, Delisle, Jugdev, & Buckle, 2001a).
Instead it results in executives further
viewing project management as a tactical construct lending itself to mid-level
attention instead of senior level attention:
- 71.1% agree that the selling
issue is an important one for
their organizations;

- 45% somewhat or strongly agree

(12.4%) that selling project
management is difficult to do
within their organizations;
- 58.6% somewhat agree that
project management is used in
times of crises and 16.7%
strongly agree;
- The concept of the Accidental
Project Manager is supported.
60.2 % of respondents agree that
the title project manager is
usually not accompanied by
increased pay or recognition
while 57.8% agree that little or
no project management training
is given to those who take on
the role of project manager; and,
- 21.8 % of respondents strongly
agree with the statement that
project management is a valued
discipline in organizations,
ranking with accounting,
finance and engineering and
26.8% somewhat agree. At the
same time 11.8% strongly
disagree and 26.1% somewhat
disagree.
Insights of the New Economy are
that firms support practices of advocating and championing project management by aligning the value of the discipline to the firm's strategic priorities. In
addition, project managers understand
the organization's business priorities and
speak the language of executives as they
extol the virtues of the discipline; project
managers and senior managers strive to
develop an environment conducive to
sustaining a core competence (Thomas
et al., 2001b).

Summary
To summarize, the paper has addressed
old truths and new insights in the following areas:
a) Definitions on project management in either narrow terms or
holistic ways;
b) The debate on describing
project management as a
discipline or profession;
c) Success and performance
measures that are now multidimensional and recognize joint
connection at the operational
and strategic level;
d) Aspects where project management has demonstrated competitive convergence instead of

Page 41

competitive advantages e.g.

certification, maturity models;
e) Competences vs. core
competences; and,
f) Practicing project management
vs. selling project management
in proactive ways and demonstrating its strategic value.
Earlier, we identified change,
learning and leadership as three driving
concepts of the New Economy. Clearly,
those aware of the old truths and their
limitations and willing to take the risks
of venturing into the New Economy
stand increased chances to succeed.
Furthermore, the area of core
competences in project management
will bear watching for the next few years.
In a world of changing organizational
forms where projects are more the norm
than bureaucracies, developing a core
competence in project management may
be the key to survival and growth for
many companies. Developing the "profession" of project management may be
the route to further success or a few dead
ends along the journey.
We encourage you to learn from
the old truths and be receptive to change
and learning as you lead the way into
the New Economy.

Barney, J. B. 1986.
Strategic factor markets: Expectations, luck
and business strategy. Management
Science, 32(10): 1231-1241.

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P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

PhD Student
Project Management Specialization,
University of Calgary
8311-11 Street SW
Calgary Alberta T2V 1N7
Tel: (403) 258-2513
E-mail: [email protected]

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Acknowledgements
The authors would like to thank the
University of Calgary and Athabasca
University for their valued support.

Dr. Janice Thomas,

PhD, MBA, BSc
Associate Professor, Centre for Innovation Management, Athabasca University
Adjunct Professor, Project Management
Specialization, University of Calgary
96 Manyhorses Drive
Redwood Meadows, Alberta T3Z 1A1
Tel: (403) 949-4965
e-mail: [email protected]
Dr. Connie L. Delisle, PhD, MSc, BA,
BA (Ed)
Centre for Innovation Management,
Athabasca University
Project Management Specialization,
University of Calgary
104, 500 Elliot Avenue, Kelowna,
British Columbia V1Y 5S8
e-mail: [email protected]

Page 43

CATEGORY: RESEARCH

The Impact of Performance in

Project Management Knowledge
Areas on Earned Value Results in
Information Technology Projects
Ralf Mller, Henley Management College, UK
J. Rodney Turner, Erasmus University, The Netherlands
Keywords: Project Performance, Project Management Knowledge Areas, Earned Value

Using the Body of Knowledge from the Project Management Institute this study explores the relative impact of
the different project management knowledge areas on the Earned Value (EV) measures of Percent Schedule
Variance (%sv) and Percent Cost Variance (%cv) in Information Technology (IT) projects. The results show
that a planning stage after contract signature has the strongest impact on %sv, whereas Communication Management, Change Management and Human Resource Management have the strongest impact on %cv. Resource management and project planning practices are most influential on a project's risk status. A formula to
calculate Return on Investment (ROI) for project management improvement activities is also developed. It
allows focusing project management improvement activities on those knowledge areas that have strongest
impact on project performance results and therefore the highest ROI.

Introduction
A Project Management Body of Knowledge (PMBoK) provides a framework for
project management execution, i.e. a
broad set of management dimensions to
cover the vast variety of possible projects
in many industries. The Project Management Institute's (PMI) PMBoK (PMI
1996), defines 9 project management
knowledge areas that comprise good
project management execution today:
- Project Integration Management
- Project Scope Management
- Project Time Management
- Project Cost Management
- Project Quality Management

Page 44

- Project Human Resource

Management
- Project Communications
Management
- Project Risk Management
- Project Procurement Management.
These project management
knowledge areas are also used as a reference to review projects and project management execution. Identification of
weakly executed knowledge areas allows
focusing improvement activities, e.g.
through awareness building or training,
for subsequent improvement of the
project's overall performance results.

One of the widely used measures

for performance in project management
is Earned Value (Alexander 2000, Sparrow 2000, Stratton 2000), which is defined in the PMI PMBoK (PMI 1996)
as:
"A method for measuring project performance. It compares the amount of
work that was planned with what was
actually accomplished to determine if
cost and schedule performance is as
planned"
Two of the most important performance result metrics in EV are Percent
Cost Variance (%cv) and Percent
Schedule Variance (%sv), which are
defined by Defense System Management

College (2000) and the company performing this study as:

Cost Variance % = (Budgeted
Cost of Work Performed - Actual
Cost of Work Performed) /
Budgeted Cost of Work Performed
Schedule Variance % = (Budgeted
Cost of Work Performed - Budgeted Cost of Work Scheduled) /
Budgeted Cost of Work Scheduled
where:
Actual Cost of Work Performed
(ACWP) = Total costs incurred
(direct and indirect) in accomplishing work during a given time
period.
Budgeted Cost of Work Performed
(BCWP) = The sum of the
approved cost estimates (including
any overhead allocation) for
activities (or portions of activities)
completed during a given period.
Also known as "earned value".
Budgeted Cost of Work Scheduled
(BCWS) = The sum of the
approved cost estimates (including
any overhead allocation) for
activities (or portions of activities)
scheduled to be performed during a
given period (usually project-todate)
(PMI 1996)
The two measures of %sv and %cv
indicate current project performance in
terms of cost and time management.
They allow for calculations of projected
final performance results or for development of appropriate contingency activities to improve the performance during the remaining part of the project.
These knowledge areas and EV
techniques are widely known in the
Project Management Community,
which is shown by the wide recognition
that the PMI PMBoK has achieved
(Turner 2000). With almost 400,000
copies in circulation by the end of 1999
the PMI PMBoK is the knowledge foundation for the more than 18,000 PMI
certified Project Management Professionals (PMI 2000), who were tested in
the knowledge areas and EV techniques
as part of their certification exam. However, little research is done on how the
knowledge areas defined by PMI influence project results measured by use of
EV techniques.
The objective of this research was

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Table 1: Project Management Areas

to explore the results of 36 IT project
audits to identify project management
knowledge areas that have the largest
influence on project variances, measured in %cv and %sv. Once known by
the IT industry, improvement activities
for cost and schedule variances can be
implemented more economically by focusing on those knowledge areas that
have the strongest impact on the variances, thereby leading to the highest
Return on Investment.

Methodology
The research aim was to determine
whether generalizable laws might exist
in project management execution, provided that reasonably stable relationships can be found among project results
and performance in project management knowledge areas. Given the exploratory nature of the research no hypothesis was developed in advance of the
study.
The methodology used semistructured group interviews (here called
audits) using an a priori developed questionnaire, followed by structured methods of data analysis.

Audit Methodology and Material

The research is based on a series of
project audits that were held worldwide
by NCR Corporation, a US Headquartered, global IT company (further called:
the company) in April and May 1999.
All audits were performed on projects
for IT data warehousing solutions in
Customer Relationship Management.
Contrary to the usual practice of auditing only troubled projects, these audits
were performed on all projects of this
particular solution, independent of the
project's performance status or geographical location. The results reflect the
whole spectrum from good to weak per-

formance and therefore allow for analysis of the underlying structures and relationships among the project management knowledge areas in these projects.
Prior to the audit work a questionnaire was developed by the prospective
auditors and management of the company as a guideline and tool for the auditors. This questionnaire was based on
the PMI defined knowledge areas and
expanded for assessment of project status, selling and contracting practices,
and project specific business & technology management. Through that the
questionnaire was aligned with the
company's Project Management Methodology GlobalPM (NCR 1998). A total of 13 Project Management Areas
(PMA's) were defined. These are shown
in Table 1.
For each of the PMA's a set of
questions was developed (an example for
the PMA 'Selling' is provided in the
Appendix). The responses to the questionnaire have formed the basis for the
auditors to rate the PMA's according to
their maturity in execution. The rating
levels used by the auditors were:
1 = PMA non-existent
2 = inadequate performance
3 = adequate performance
4 = best-in-class performance
In an attempt to ensure consistency in audit execution a training session was held for the audit team leaders. In this training session the leaders
were familiarized with the objectives of
the audit, the project documentation,
audit and data collection method, how
to code the responses and the nature of
the audit report to be fed back to Headquarters.
On a project-by-project basis the
methodology used for the audits was:
- Review of the project documen-

Page 45

tation, including proposal,

contract, project plan, risk and
quality plans, reports from
earlier audits, and other plans as
available, as well as the monthly
project status reports
- Face-to-face meeting of the
audit team with the Project
Manager and Sales Representative of each project. The Project
Manager presented the project
and its status, and discussed
issues and concerns of the
project. The audit team leader
used the questionnaire to ensure
assessment of all dimensions of
each PMA. A final performance
rating for each PMA was jointly
agreed by the 3 auditors based
on the results of the presentation, the verbal assessment of
the PMA's, the response to the
questions from the questionnaire, as well as the quality of
the documentation provided.
- Consolidation of the results into
an audit report, which was
forwarded to the company's
Headquarters for consolidation.
The reports were analyzed on a
worldwide basis and the findings presented to corporate management in order to launch improvement activities
within business and project management
practices.

Data
16 audit teams collected data from 77
projects. For several projects the %cv
and %sv values were not provided. Also
some projects were in the pre-implementation stage and hence no implementation data available. This resulted in full
data being available for only 36 of the

projects. The data were collected within

a time frame of four weeks, from April
to May 1999. Further definitions of the
data can be found in Table 2.

Analysis of the Audit Results

Complementary to the business-related
analysis, which gained insight in the
company's performance level per PMA,
a more general, project management
related analysis of the results was done
and is described in this paper. The goal
of the analysis was:
- Identification of PMA's that
significantly influence %cv, %sv,
and a project's risk status
- Identification of key PMA
groupings
Analysis was done on the level of
PMA rating. Data on %cv and %sv were
taken from the audit reports, as well as
the risk level of the projects, which is
classified within the company in three
categories, namely red, yellow and green,
which are mutually exclusive and completely exhaustive categories. Criteria for
determination of the risk level were
quantitative and qualitative:
- Quantitative - using EV measures:
- green = %cv and/or %sv less
than -5%
- yellow = %cv and/or %sv
between -5% and -15%
- red = %cv and/or %sv more
than -15%
- Qualitative - anticipating problems:
- green = no major issues foreseen
- yellow = issues foreseen and
help required to solve them
- red = major issues foreseen,

Table 2: Data and Research Techniques used

Page 46

threatening successful project

implementation
The analysis was done using SPSS
Rel. 9.0.0 on Windows NT as computer
program. The multivariate data analysis techniques used were mainly applied
as described in Hair et al. "Multivariate
Data Analysis" 1998, with other supporting documentation on quantitative
methods (Remenyi et al. 1998, Targett
1990).
PMA's were classified as independent variables, whereas %cv, %sv and
project risk level were classified as dependent variables. The analysis was
done using Stepwise Regression Analysis to identify the PMA's with the largest impact on %cv and %sv. Factor
Analysis was used to reduce the number of possible factors (PMA's) for a subsequent Stepwise Regression Analysis to
identify the drivers for project risk levels. Discriminant analysis was applied to
develop a model for predicting a project's
risk level, but the resulting group sizes
were too small to validate the findings.
Table 2 shows the areas of exploration,
research technique used, data used and
the expectations underlying the research:
The level of detail in reporting the
results within the sections below follows
the recommendation of Chin (1998).

Analysis of Drivers for %sv, %cv

and Risk
Only 11 of the reported 13 PMA's were
included in this analysis. Subcontractor
Management was excluded because it
was scored sometimes 1 and sometimes
3 in case of projects without subcontractors. The PMA Selling was excluded
because of collinearity with other independent variables.

expected to be 5% positive. It also shows

that adequate performance (score 3)
may not prevent a project from a slight
negative %sv of -1%. Good planning is
necessary to keep the project at zero
schedule variance or above. The figure
below outlines the relationship between
performance in Post-contract Planning
and the %sv of the project, cet. par.

Table 3: Driver for %sv

Drivers for %cv

Table 4: Drivers for %cv

Drivers for %sv

The results of the stepwise regression analysis showed that Post-contract Planning
has the largest impact on %sv results(Table 3). No other PMA proved to have
significant impact at the .1 significance level. This model has a significance of .047
at an R2 of .111 and F value of 4.263.
Post-contract planning, as defined in the company's project management
methodology (NCR 1998), is a planning step that follows contract signature in
order to account for any changes in the project scope or objectives that occurred
between pre-sales planning and contract signature, i.e. during contract negotiations following a proposal.
Questions asked during the assessment of Post-contract Planning focused on
the project manager's empowerment, his possession of all contracts, the development of a Work Breakdown Structure (WBS) to a level where resources can be
assigned and the availability of project management tools.
The formula:
%sv = -18.6 + 5.9(P Post-contract Planning)
derived from the results of the analysis shows a direct relationship between
the performance score in Post-contract Planning (PPost-contract Planning) and the %sv in
subsequent project results (see fig. 1). Considering all other variables as unchanged,
it allows a prediction of %sv increase at increasing performance levels in Post-contract Planning, e.g. in case of performance score 1 (no Post-contract Planning) a
%sv of -13% is expected, while at performance score 4 (best-in-class) the %sv is
6%
4%
2%
0%

Projected %sv

-2%
-4%
-6%
-8%
-10%
-12%
-14%

Performance Level in Post Contract Planning

Figure 1: %sv as a function of Post-contract Planning

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

A stepwise regression analysis, at a significance level of .1, showed that Communication Management has the largest impact on %cv results, followed by
Change Control and Resource
Management(Table4). The model has a
significance of .045, R2 of .22 and F value
of 3.003.
Communication Management, as
assessed during the audits, looked for the
existence of steering committees, executive sponsors, communication plans, status meetings, reports, customer relation
plans, lessons learned documentation,
and the existence of issues and action
item management processes.
Assessment of Resource Management, the second strongest PMA impacting %cv, was done by focusing on
plans and processes for identifying eligible resources and their current organizations. Further assessed were the
resource's qualifications, training and
orientation needs, commitments and
morale, as well as the mix of internal
versus external resources and the project
manager's level of control over the resources assigned to the project.

- Significance is the probability that

marks the borderline between what
happened by chance and what not
happened by chance (Targett 1990).
- R2 measures the proportion of variation explained by regression (Targett
1990).
- F-value tests the hypothesis that the
amount of variation explained by the
regression model is more than the
variation explained by the average
(Hair 1998)
- t-value is a significance test carried
out for each variable in the regression. A t-test on each x variable coefficient will indicate if the variable
has a significant effect on the y variable. (Targett 1990)
- Regression Coefficient (B) is the multiplier of x variables in y = Constant
+ Bx
Page 47

Change Control, as the third

driver for %cv, was assessed by looking
for updated scope and schedule
baselines, as well as quality plans and
resource plans to reflect approved
change requests, and actions on variances in project performance together
with the associated results. The negative value of the B coefficient indicates
more rigorous control practices once a
project is over budget. An effect like this
is described by Drummond (1999) in her
research on the collapse of the Taurus
project, a 500 million IT venture by
the London Stock Exchange, where increased requests for information from
the project's monitoring group led to
more rigorous control practices:
"It was assumed that because important milestones were being missed, the
project must be brought under control.
When control failed the response was
to 'apply more of the same' [control]."
Drummond's research explains
why projects with a negative %cv can
have a strong correlation with good
change management performance.
However, a detailed answer to the question in the context of data warehouse
projects requires a longitudinal study.

Drivers for Project Risk Levels

In the next step the drivers for a project's
risk level, expressed in red, yellow or
green were identified. Factor Analysis
was used to reduce the data and identify the underlying structure and relationships of the PMAs in preparation for
a subsequent Regression Analysis, which
identified the factors driving the risk
level.
A Principal Component Factor
Analysis with Varimax rotation was used
to reduce the data and to explore the
structure of the PMA's assessed. A factor loading of .48 with power 80% for a
sample size of 36 was used (Hair et al.
1998) to identify the component structure. The rotation converged after 4 iterations with a KMO of .746 at a significance level of .000. A scree test
showed that three factors are necessary
to represent the data from the audit reports. Care has to be taken in accepting
the results because of the small sample
size that might lead to an overstating
(overfitting) of the results.
The factors identified represent
groups of project implementation knowledge areas, selling and planning activities, as well as Human Resource Management. So they can be named as:
Factor 1: Project implementation
Page 48

Figure 2: Structure of PMA's

Factor 2: Project selling & planning
Factor 3: Resource management
Figure 2 shows the structure of
these
Project
Management
Areas(PMA's).
This indicates a clear distinction
between a project's selling & planning
activities, management tasks during
implementation, and the management
of resources.

Results for Drivers on Project Risk

Levels
With the three factors identified as independent variables and the project risk
level as dependent variable a Stepwise
Regression Analysis was performed to
identify the factors that determine a
project's risk level as defined in Table 5.
The results show that Factor 3 and
2 (Resource Management and Project
Selling & Planning respectively) are the
main drivers for a project being red, yellow or green. The model has an R2 of
.20, F value of 4.116 with a significance
of .025.
The negative Beta Coefficients for
factor 3 and 2 show that higher performance levels in the factors and its components will result in lower risk levels
(green risk status). The result confirms
the importance of resource management
(factor 3) for project results, as already
outlined in the analysis of %cv, and identify this PMA as being influential on several measures throughout this analysis.
The second important factor for
a project risk level is project selling and
planning. This factor comprises the
PMA's Selling, Contracting, Contract
Management and Post-contract Plan-

ning, showing the importance of good

pre-sales and planning work for the lowering of a project's implementation risk.
It confirms earlier findings from the %sv
analysis, which outlined the importance
of post-contract planning for project results.
- Principal Component Analysis identifies the underlying structure of relationships. Component analysis
summarises most of the original information (variance) in a minimum
number of factors for prediction purposes. Varimax rotation is a method
to achieve simpler and theoretically
more meaningful factor solutions.
The Varimax method has proved very
successful as an analytic approach to
obtaining an orthogonal rotation of
factors (Hair 1998).
- Factor loadings indicate the degree
of correspondence between the variable and the factor, with higher loadings making the variable representative of the factor (Hair 1998).
- Power is the probability that a significant relationship will be found if it
actually exists. Complements the
more widely used significance level
alpha (Hair 1998).
- KMO, the Kaiser-Meyer-Olkin measure of sampling adequacy tests
whether the partial correlation
among variables are small (SPSS
1998).
- Scree test is used to identify the optimum number of factors that can be
extracted before the amount of
unique variance begins to dominate
the common variance structure (Hair
1998, citing Cattel 1966)

Table 5: Factors Driving Risk Levels

Return on Investment
Calculation
The Ibbs and Kwak model for ROI calculations in project management (Ibbs
& Kwak 1997, Ibbs 2000), together with
the results from the study above allow
for a calculation of ROI per individual
PMA identified here as having significant impact on project results. With the
%cv or %sv improvement achieved
through investment in a particular PMA
the overall ROI per project or per organization can be calculated.
Assuming that a spending of x for
improvement in a particular PMA yields
an improvement in %cv leads to the formula

ment, implement improvement

activities and capture spending
for it (x)
3. Calculate %cv(post invest) for the
time after improvement activities are finished and new
practices are implemented
4. Calculate the improvement in
%cv using the formula for %cv
5. Calculate ROI per project using
the formula above.
The same calculation can be applied on an organizational level by substituting the %cv calculation, spending
and costs per project with those per organizational unit.

Example
then the ROI per project can be
calculated as:

where:
- ROI = Return on investment in
improvement of PMA performance
- Project cost = Estimated costs
per project (or estimated cost to
complete, if the improvement
activity took place during the
cause of a project)
- %cv = incremental %cv
improvement after spending x
on training or other improvement activities on a PMA
- %cv(post invest) = %cv for the
period after the implementation
of improvement activities
- %cv(pre invest) = %cv prior to
implementation of improvement
activities
- x = cost of training or other
improvement activities for a
given PMA
The steps for calculating the ROI
per project are:
1. Calculate %cv(pre invest) of a
project using earned value
techniques as described above
2. Determine PMA for improveP r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

An organization's annual project costs

are $ 10,000,000 with an average %cv
of - 1%. Training and process improvement activities in Communication Management were implemented at a cost of
$ 450,000. Average %cv for the three
reporting periods after implementation
is 0.5%. Using the formulas above the
improvement in %cv is:
%cv = 0.5% - (-1%) = 1.5%
That leads to a ROI of:

The return on investment realized

through the improvement activities in
Communication Management is 33%,
equal to annual cost savings of $
150,000.

Conclusions
Findings of general applicability for IT
data warehouse projects are the high
impact that Communication Management, Resource Management and
Change Control have on %cv, as well as
the impact of Post-contract Planning on
%sv. Communication Management and
Post-contract Planning have been found
as the main drivers for %cv and %sv respectively.
In the past researchers repeatedly
identified communication skills as cru-

cial for successful project management

(Pitman 1994). However, its priority in
influencing cost variances in IT data
warehouse projects was not yet investigated. These findings are in line with the
annually issued reports from The
Standish Group (Standish Group 1998b,
Standish Group 1995), which repeat the
importance of executive support and
communication with users for successful IT projects. Improving the management of communication will have the
strongest positive impact of all PMA's
on a project's cost variance.
Post-contracting planning has the
strongest influence on %sv in IT data
warehouse projects. This planning, performed after the contract is signed when the true scope and budgets of the
projects are known - ensures that project
plans are realistic, up-to-date and can
be implemented in a timely manner. It
shows the importance of up-to-date
planning for reliable schedule estimates.
Resource Management has been
found influential on two of the three
measures, i.e. cost variance and project
risk level. It is also a main factor that
determines the structure of the PMA's.
The quality of Resource Management
is thus a major factor determining
project results.
Building on the model of Ibbs and
Kwak (Ibbs & Kwak 1997, Ibbs 2000) a
ROI formula was developed that can be
applied on project level or on organizational level to determine the respective
return on improvement investments in
individual PMA's. This provides the financial measures which may be supplemented by non-financial ones, such as
balanced scorecards, to present project
management value (Crawford et al.
2000).
The sample of 36 audit results of
projects with varying performance levels allowed for the identification of
PMA's driving project results in terms
of cost and schedule variances. The benefit of having a sample comprising the
whole spectrum from good to weak performance was offset by the fact that it
was focused on one specific data warehouse solution only. The applicability of
the results beyond IT data warehouse
projects must be investigated.
The Standish Group reports on
reasons why projects fail define cost
overrun as a major problem in the IT
industry (Standish Group 1998a) and
communication as one of the three main
factors for project success (Standish
Group 1998b). Other research shows the
Page 49

central importance of communication

for successful projects (Cleland 1988 and
1995, Tushman 1979, Couillard 1995,
Clarke 1999, Bajaj 2000, Kuprenas et al.
2000). The analysis done in this study
confirms and complements these findings by identifying Communication
Management as the main driver for cost
variations. In the past many research
studies focused on project team internal communication. Much lesser research was done on the Project
Manager's external communication, especially communication with Steering
Committees and Project Sponsors.
Building on the existing work of (Turner
1993, Remenyi et al. 1999) further research is recommended in external communication for Project Managers to
comprehend the whole scope of Communication Management.

References
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Bureaucratic Decree or Managerial
Choice?," in Proceedings of the Project
Management Institute Annual Seminars &
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Chin, W. W. 1998, "Issues and Opinion on
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September 7-16, 2000, PMI, Houston,
Texas, USA.

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Defense Systems Management College 2000.

Earned Value Management Gold Card.
Internet publication: http://
www.dsmc.dsm.mil/educdept/
ev_hold_card.htm, Defense Systems
Management College, USA.
Drummond, H. 1999, "Are we any closer to the
end? Escalation and the case of Taurus",
International Journal of Project Management, vol. 17, no. 1, pp. 11-16.
Hair, J. F., Anderson, R. E., Tatham, R. L., &
Black, W. C. 1998, Multivariate Data
Analysis, fifth edn, Prentice Hall, USA.
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Management's Value: New Directions for
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PMI, USA, pp. 35-40.
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Standish Group, 1998b. CHAOS '98: A Summary

Review. A Standish Group Research Note
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Corresponding Author

NCR 1998, GlobalPM 4.0, 4 edn, NCR

Corporation, USA.
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www.pmi.org/news/review/
1999%20Review.pdf 1999, pp. 1-15,
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1999, "Language and a post-modern
management approach to information
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E. 1998, Doing Research in Business and
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Management Results in Early Visibility and
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standishgroup.com/visitor/chaos.htm , 1-8.
1995, Standish Group. 6-5-2000.
Standish Group 1998a. CHAOS '97 - The
Changing Tide. Internet publication: http://
www.standishgroup.com/_compass/
chaos97.htm 1998, 1-4. 3-31-1998.

Ralf Mller
MBA, PMP
Director,
Global Program
Management Office
NCR Corporation, Teradata Division
Sjbogatan 10, 212 28 Malm, Sweden
Tel: +46 40 68 91 312
Mobile Phone: +45 40 56 91 88
Fax: +46 40 68 91 512
E-Mail: [email protected]

J Rodney Turner
MA, MSc, DPhil
(Oxon), BE (Auck),
CEng, FIMechE,
FAPM, CMath,
MIMA, MInstD
Professor of Project Management,
Department of Marketing and
Organization
Faculty of Economics,
Erasmus University Rotterdam
Burgemeester Oudlaan, 50
3062 PA Rotterdam, The Netherlands
Tel: +31-(0)10-408-2723
Fax: +31-(0)10-408-9169
E-mail: [email protected]

Appendix: Questionnaire Example

Question
The project team will be asked to present a brief overview of their project. Target 30-40 minutes maximum. The
audit team should capture answers to these introductory questions, and perhaps some from the introductory
section as well.

Question

Yes No

A. Selling
1. Is there a dedicated PS Project Manager on this project?

What is the overall status of the project? (Include EV reports)

Overall forecasted Revenue and Margin at completion:

2. Was a project manager assigned at the appropriate point in the sales process (prior to project
qualification)?

Forecasted Professional Services (PS) Revenue and Margin at Completion:

3. Has the same salesperson been involved in this project since pre-contract planning?
Cost/schedule variance against plan:
What was the original revenue and margin planned at contract (the original baseline)?

4. Is there a pre-contract project plan?

Current percent complete:

5. Was a Work Breakdown Structure (WBS) developed?

Overall status (Red, Yellow, Green):

6. Was the WBS used in cost estimating?

What is current level of customer satisfaction?

High or Low, why, how do you know?

7. Was there a risk assessment conducted prior to bid review?

What was the overall engagement/sales strategy for the project? (phased, fixed price,
etc.)

8. Was a risk management plan developed as part of the precontract project plan?

Have the project team present their project documents, and describe how they are
being used to manage the project.
What are the top three issues facing your project?

9. Was bid approval obtained according to the process?

10. Did the customer have expectations on budget, scope, or performance before proposal?

11. Did the customer provide budget or time constraints?

12. Did we properly adjust project scope to meet customer budget to time constraints?

13. Did the bid change after the initial approval?

14. Were recommendations made at bid review implemented?

15. Was a process by which changes would be managed agreed with the customer?

16. Did the PM sign the proposal indicating concurrence with scope, cost, and terms/conditions?

17. Are the PM and sales organizations working together to identify migration opportunities
on this project?

18. Is there a supplier/subcontractor strategy for this project? ("Yes" if no suppliers needed)

19. Did you use a formal methodology or tool for cost build-up?

20. Did you use a formal methodology or tool for pricing?

21. Was risk included in the project price?

22. Was a P&L plan developed for the project?

www.metso.com

Linking Innovations
Metso Corporation is a global supplier of process industry machinery and systems. Metsos
core businesses are Metso Paper ( fiber and paper technology), Metso Minerals (rock and
mineral processing) and Metso Automation ( automation and control technology).

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Page 51

CATEGORY: RESEARCH

Towards An Integrated Script for

Risk and Value Management
Stuart D. Green, The University of Reading, UK
Keywords: Risk Management, Value Management, Postmodernism, Dramaturgical Metaphor, Rhetoric,
Strategic Choice.
It is contended that the current conceptual distinction between risk management and value management is
unsustainable. The origins of the two traditions are reviewed and critiqued from a postmodernist perspective.
It is concluded that they differ primarily in terms of their rhetoric, rather than their substantive content.
Insights into the current practice of risk and value management are provided by considering their enactment in
terms of 'performance'. The scripts for such performances are seen to be provided by the accepted methodologies which determine the language to be used and the roles to be acted out. A coherent integrated script for risk
and value management can be provided by the methodology known as strategic choice, which replaces the
language of 'risk' and 'value' with that of 'uncertainty'. The benefits of adopting this alternative script are
illustrated through six case studies.
Introduction
Risk management and value management are both widely recognised to be
an essential part of best practice (Construction Industry Board, 1997; HM
Government, 1995). Although significant attention has been directed to the
two topics in isolation, there has as yet
been little progress in the development
of an integrated approach. The separation of the two disciplines is well illustrated by the way in which the Construction Industry Research and Information
Association (CIRIA) and HM Treasury
have both published separate guides to
risk management (Godfrey P.S., 1996;
HM Treasury, 1993) and value management (Connaughton J. N. and Green S.
D., 1996; HM Treasury, 1996).
The main objective of this paper
is to propose an integrated approach for
risk and value management. In developing the argument in support of the
need for an integrated process, it is initially necessary to establish the intellectual origins of the two disciplines. The
case will be made that the two disciplines
only really differ in terms of the rhetoric
in which they are presented. It will then
be suggested that an alternative script
for integrated risk and value management can be provided by the strategic
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choice approach. The benefits of this

approach will be illustrated through a
summary of six case studies. The case
will also be made for a continuous process of intellectual deconstruction of
established concepts as an essentially
requirement for an innovative and reflexive construction industry.

Value Management
Two schools of thought can be identified in the value management literature.
The first follows the tradition of systems
engineering and seeks to achieve given
identified functions at minimum cost
(Dell'Isola A., 1982; Miles L. D., 1972;
SAVE International, 1997). This approach tends to be implemented by an
external team in response to a projected
cost overspend and is usefully labelled
'value engineering' (Green S. D., 1994).
It is essentially a technical activity that
seeks efficient means of achieving
known ends.
The second school of thought focuses on the strategic interface between
client organisations and construction
projects (Barton R. T., 1996; Kelly J. and
Male S., 1993). From this point of view,
the primary purpose of value management is to resolve ambiguity and establish a shared commitment to a common

set of design objectives (Connaughton

J. N. and Green S. D., 1996). The emphasis no longer lies on the technical
evaluation of design alternatives, but on
a process of communication and consensus building with the active participation of the project stakeholders.
Within this school of thought, value
management is primarily perceived as an
aid to the briefing process rather than a
technique of cost reduction. Whereas
value engineering is characterised by an
underlying positivism, the emerging 'second generation' of value management
owes its allegiance to an underlying epistemology of social constructivism
(Green S. D. and Simister S. J., 1996).
Sources such as Barton (1996) are especially notable in emphasising the role
of the facilitator rather than the application of mechanistic techniques.
It is useful to classify the above
two approaches to value management
as 'hard' and 'soft'. Similar distinctions
have been made within the more established fields of operational research
(Rosenhead J., 1989) and systems theory
(Checkland P. B., 1981). The same two
alternative 'hard' and 'soft' approaches
are also evident within the construction
risk management literature.

Risk Management
The Hard Paradigm
The established techniques of risk management are well described in Chapman
and Ward (1997), Flanagan and
Norman (1993) and Raftery (1994).
Such sources directly reflect the 'hard'
paradigm of value engineering in that
they are primarily concerned with quantitative techniques. The emphasis given
by Raftery (1994) to the role of external
'experts' in the risk management process
is especially notable. The intellectual
origins of these approaches can be traced
back to probability theory and the concept of 'risky utility' (von Neumann J.
and Morgenstern O., 1947). It is the
concept of risky utility that underpins
the frequently described techniques of
expected monetary value (EMV) and
expected net present value (ENPV).
The dominant assumption behind these
approaches is that risk relates to the
uncertainty of future outcomes. It is further assumed that the stakeholders can
agree on a common interpretation on
the likelihood of their occurrence. In
many respects, previous critiques of
'hard' value engineering are also directly
relevant to the corresponding paradigm
of risk management. Both approaches
are limited to problem contexts that are
technical, static and well-defined. It is
invariably assumed that the definition
of the 'problem' is in itself
unproblematic. Traditional risk management is too often limited to 'technical'
issues. The definition of 'technical' frequently embraces financial issues and
hazardous operations. Nevertheless, the
'soft' factors relating to the ways in which
stakeholders think, behave and interact
are at best under-emphasised, and at
worst ignored.

An Emerging Alternative Paradigm

The established texts on risk management (Chapman C. and Ward S., 1997;
Flanagan R. and Norman G., 1993;
Raftery J., 1994) are further notable in
the way that they tend to be prescriptive rather than descriptive. The included case studies tend be to highly
idealised and divorced from the
organisational context from which they
were derived. Those few sources which
set out to describe current practice are
notably at odds with the prescriptive literature, e.g. (Akintoye A. S. and
MacLeod M. J., 1997; Stevens D., 1996).
However, there is evidence that a tentative 'soft' paradigm of risk management
P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

is gaining ground. Sources such as

Godfrey (1996) place much less emphasis on the use of quantitative techniques,
stressing the team nature of risk management and the corresponding importance of an independent facilitator. The
risk management process is no longer
conceptualised in terms of 'decisionmaking', but as a means of continuous
learning. In this respect, Godfrey's approach to risk management echoes many
of the characteristics of 'soft' value management. Indeed, it is notable that both
are advocated primarily as a means of
resolving conflict within the project
team.

The Epistemology of Risk

Management
On the basis of the available literature,
it would seem that the emerging soft
paradigm of risk management remains
less conceptually developed than its
equivalent within value management.
Certainly within the domain of construction management, there is a notable
absence of any risk management approaches laying claim to a guiding epistemology of social constructivism. This
is not to say that the hard paradigm is
without its critics. Mak (1995) has challenged the paradigm of quantitative risk
management and the validity of its underlying reliance on normative Bayesian
statistics. Nevertheless, the articulated
alternative falls some way short of social constructivism. Mak emphasises the
use of heuristics in searching out solutions that are 'good enough'. The approach therefore follows Simon's (1981)
concept of satisficing and as such is based
on a post-positivist position. The ontological position of naive realism is seemingly weakened to one of critical realism, see (Guba E. G. and Lincoln Y. S.,
1998). Whilst Mak seems to accept that
optimal solutions cannot be identified
due to the limitations of human perception, he still seems to believe that they
exist at least in theory.

The Need for A Broader Framework

Much of the uncertainty which occurs
during construction cannot be construed as 'technical'. This is especially
true for the earlier stages of the project
life-cycle, where decisions need to span
the boundary between the construction
project and the broader environment.
The context for many construction
projects is provided by multi-faceted client organisations that comprise several
different interest groups whose objec-

tives often differ (Cherns A. B. and

Bryant D. T., 1984). Within this context, risk management can no longer be
considered to be a narrow activity that
is applied to 'technical' issues in isolation of other factors. The process of risk
management therefore only becomes
meaningful through the active participation of the client's project stakeholders. Effective risk management of this
nature depends less upon probabilistic
forecasting and more upon the need to
maintain a viable political consistency
within the client organisation. It is notable that there is as yet no recognised
framework that embraces both the notion of technical risk with the less tangible uncertainties that characterise the
strategic interface between construction
projects and client organisations.

The Case for Integration

The continued acceptance of risk and
value management as two discreet disciplines can be traced back to neo-classical economics and decision theory.
Once stripped of its popularist rhetoric,
the guiding intellectual framework for
value management can be seen to be
provided by the 'theory of riskless
choice', otherwise labelled the 'fundamental theorem of utility' (Fishburn P.
C., 1970). It is the notion of 'riskless
utility' which provides the basis for
multi-attribute utility theory (MAUT)
and the associated weighted preference
methods which are so popular within the
value management literature, e.g.
(Connaughton J. N. and Green S. D.,
1996; HM Treasury, 1996; Institution of
Civil Engineers, 1996).
In contrast, the guiding intellectual framework for risk management
stems from the 'theory of risky choice'.
This was originally developed from von
Neumann and Morgenstern's (1947)
concept of 'risky utility', as defined
within the context of hypothetical
gambles. At the time, the supposed discovery of measurable utility caused considerable furore within the economics
community. Subsequent contributions
by Ellsberg (1954) and Edwards (1954)
served to classify the two types of utility
into entirely different concepts. Hence
the distinction between the 'theory of
risky choice' and the 'theory of riskless
choice' as initially labelled by Edwards
(1954). Modern writers on decision
theory perpetuate this distinction by referring to value functions when utility is
used in the neo-classical sense (i.e. in

Page 53

the absence of uncertainty) and utility

functions when used in the risky sense.
It is their respective allegiance to these
two different traditions that primarily
distinguishes value management from
risk management. However, even within
the context of decision theory, an increasing number of commentators have
questioned the extent to which this distinction is meaningful. Fishburn (1970)
suggests that the phrase 'decision making under certainty' is simply an abbreviation of 'decision making in which
uncertainty, whatever form it may take,
is suppressed and not given explicit recognition'. Von Winterfeldt and Edwards
(1986) have also expressed doubts
whether the distinction between 'utility' and 'value' is valid:
"In our opinion, the distinction between
value and utility is spurious
because....there are no sure things, and
therefore values that are attached to
presumably riskless outcomes are in fact
attached to gambles."
In the light of the above, it is valid
to question whether the continued distinction between value management
and risk management is meaningful. The
CIRIA report on risk management suggests that 'the techniques of risk management are similar to those used in the
management process known as value
management, outputs from each being
closely linked and inter dependent'
(Godfrey P. S., 1996). If the techniques
really are similar, and there is no such
thing as a 'riskless decision', there would
seem to be little logic in defining value
management and risk management as
separate services.

A Postmodernist Interpretation
Reality Construction through
Language
A postmodernist perspective provides an
alternative reading of the current practices of risk and value management. The
advocates of postmodernism contend
that the world is constituted by shared
language and can only be understood
through particular forms of discourse
(Hassard J., 1994; Legge K., 1995). In
other words, humans experience the
world through a given set of words and
concepts (Cooper R. and Burrell G.,
1988). This is in direct opposition to the
modernist view that language describes
something which already exists 'out
there'. From a postmodernist perspective, the expressions 'risk' and 'value' do

Page 54

not relate to any sort of external reality,

but provide the language through which
managers construct their own reality.
The contention is that neither value
management nor risk management possess any substantive content other than
the language within which there are presented. They are only implemented as
discrete activities because there is an
expectation that 'risk' and 'value' should
be managed separately. This expectation
is created by the literature that has fabricated the nonsense that value management and risk management exist independently. Note that neither of these
actually 'exist' at all, they have merely
been constructed as separate entities. A
postmodernist interpretation also serves
to challenge the grandiose claims often
made in favour of 'methodology'. A
methodology becomes a 'script' that uses
particular forms of rhetoric to be persuasive. Such an interpretation would
question the argument that different
methodologies are characterised by different assumptions. The notion that
'soft' and 'hard' approaches are
characterised by different epistemological positions would seem to be somewhat
contrived. A more defendable position
is that different methodologies are
characterised by different forms of rhetoric.

Motivations and Benefits

It is interesting to consider the motivations that drive practitioners to adopt
initiatives such as risk management and
value management. A common motivation will be a desire to demonstrate to
clients and colleagues that they are efficient and up-to-date in the latest management techniques. Apart from issues
of image, an organisation could realistically benefit through a more participative and reflective means of decisionmaking. However, both of these potential benefits are extremely fragile. The
arena for the desired participation is too
often limited to the risk (or value) management workshop. The decision to
implement a 'participatory' approach is
invariably made unilaterally by top management. The outputs of any such exercise are therefore constrained to those
that are acceptable to top management.
Hence the nature of the 'participation'
and the outputs are both highly controlled. This may lead many 'participants'
to suspect that the real agenda is one of
manipulation rather than genuine participation. The second potential benefit
of providing a more reflective means of

decision-making will also rapidly disperse

should the same approach be implemented time over again. Once the structure of the exercise is allowed to become
predictable, it will provide no more benefit than any other mechanistic 'boxticking' exercise.

Unrealistic Expectations
Some of the claims commonly made in
support of risk and value management
serve to create unrealistic expectations.
The following quote from Don Ward,
Chief Executive of the UK Construction
Industry Board, is by no means unusual:
"Techniques such as value management
ensure better definition of needs and
lead to fewer changes during the project.
The result? A better product, typically,
delivered ahead of programme (which
in turn can mean earlier business income, for example, to a retail client),
with improved cost certainty and lower
whole-life costs." (Ward D., 1998)
Unfortunately, the techniques of
value management are not capable of
'ensuring' anything. Techniques do not
have any meaning in isolation of the way
in which they are enacted, and people
enact value management in different
ways. There is no established causal link
between the use of value management
and a resulting better product. So-called
improvement techniques such as value
management can only meaningfully be
evaluated in terms of whether or not the
participants found the process to be useful. Much clearly depends upon the
rhetoric used initially to justify the use
of value management and the subsequent degree of post hoc rationalisation.
Furthermore, there is no consensus on
which techniques constitute value management. It would seem that Ward
(1998), the Construction Industry Board
(1997), and others, have fallen victim
to the propaganda of those who wish to
propagate value management for their
own purposes.
Ward's (1998) naive faith in value
management is perhaps indicative of the
Western world's general weakness for
management panaceas. Managers everywhere feel overwhelmed by uncertainty
and struggle to exert control over their
day-to-day environment. They are
therefore desperate for any promise of a
'quick fix'. The result is that the construction industry becomes ever more
desperate as it lurches from one improvement technique to another. Total
quality management, business process

re-engineering, value management, risk

management and lean thinking are all
held up in turn to be the saviour of the
construction industry. All are notoriously amorphous constructs that are
strong on rhetoric and weak on coherence. Managers seem to have an in-built
weakness for the rhetoric of
reductionalist management improvement recipes. The construction industry would surely be better served by more
thoughtful managers who recognise that
uncertainty cannot be 'managed away'
by a programmed technique.

The Dramaturgical Metaphor

The concept of gaining insights into
managerial practice through the use of
metaphors was popularised by Morgan
(1986). Although the roots of the
dramaturgical metaphor can be traced
back as far as Goffman (1959), the notion that 'management' can usefully be
perceived as a performing art owes much
to Mangham (1990). Clark and Salaman
(1996) have since examined management consultancy from a dramaturgical
perspective, that is, they argue that insights can be gained by thinking in terms
of the consultant's performance in front
of a client. The way in which value management, and increasingly risk management, evolve around participative workshops makes the dramaturgical metaphor especially powerful. The
conceptualisation is that the facilitators
attempt to create a reality for their audience (i.e. the client) which captures
their imagination and commitment. All
participants are assigned roles that are
acted out in accordance with a previously agreed script. The success of the
facilitator is primarily judged in terms of
her performance.
The performance is initially commissioned by the client in accordance
with the accepted scripts on how 'best
practice' clients should behave, e.g.
(1997). The decision to implement risk/
value management is therefore the outcome of a previous 'act' in the drama of
management. The client's representative would be required to act out the
expected role of a project manager. As
an effective project manager, she would
be expected to instigate the latest management ideas, including risk management and value management. Given
that these are conceptualised in the literature entirely separately, the expectation would be that they should be performed separately.

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

The Drama of Value Management

If the client's representative decided initially to act out value management, she
would read some of the readily available
publications before approaching a number of consultants. The consultants
would act out the role of appearing authoritative and would confidently describe the services that they have to offer. Note that the consultant would 'tell
a different story' depending on which
school of thought they subscribed to.
Advocates of Barton (1996) would use
a different language from the advocates
of SAVE International (1997). The language would be different because they
would be talking from different scripts.
Once commissioned, there would be an
expectation that the consultant would
perform in accordance with the agreed
script. If she had emphasised the use of
'function analysis' in her initial interview,
she would be expected to perform 'function analysis' in the workshop. Briefing
notes would be sent to the intended participants emphasising what their roles in
the drama would be. On the day of the
workshop, the drama would be enacted.
The facilitator would arrive with the
necessary 'props': coloured pens, bluetac
and flipcharts. All parties would then act
out roles in accordance with the script,
hopefully leaving some scope for improvisation. The facilitator would be highly
animated, usually waving her arms about
a good deal. She would steer the workshop through the various stages of the
script. The closing act would invariably
be the formulation of an 'action list'.

The Drama of Risk Management

Given the previous contention that
there is no substantive difference between risk management and value management, it would be reasonable to suppose that the enactment of a risk management workshop would be broadly
similar to that described above. The
main difference would lie in the language dictated by the alternative script.
Whereas a value management facilitator would say the words 'value' and 'function' often and loudly, a risk management facilitator would rely on phrases
such as 'risk identification' and 'risk response'. Both would share the same practical reliance on coloured pens, bluetac
and flipcharts. The 'outputs' of each
workshop would be shaped by the language of their respective scripts. These
would in turn shape the expectations for
some subsequent 'act' in the on-going

management drama.
The preceding interpretation is
admittedly more reflective of the 'soft'
approaches to risk management which
are enacted through participative workshops. Nevertheless, the 'hard' quantitative approach can also be conceived
in terms of a performance, albeit to a
different script. For example, a practitioner who followed the script provided
by Chapman and Ward (1997) would be
expected to play the role of 'rational calculator'. Key props would include a
laptop computer and risk analysis software. The initial consultations would
contain their own elements of drama,
before the consultant withdraws to complete the 'analysis' (also a necessary part
of the drama). A further act of drama
would follow when the consultant presents the 'findings' to the client. The
action taken would be primarily dependent on the persuasiveness of the
consultant's rhetoric. Note that no risk
assessment exercise can ever be 'complete'. Constraints are always imposed
by the resources available to conduct the
analysis and the unavoidable limitations
of bounded rationality. The rigour of any
risk assessment exercise is therefore ultimately judged in terms of the currently
accepted standard. In other words, it is
the standard that provides the script for
the justification. Note also that such
standards are themselves socially negotiated and that the requirements of
rigour change over time. For example,
in the nuclear industry there have been
numerous examples of risk assessment
exercises which, whilst persuasive at the
time, have seemed much less than persuasive in retrospect.

Towards An Integrated Script

The Language of Uncertainty
The first step towards an integrated
script for risk and value management is
to reject the language of 'risk' and 'value'
in favour of the language of uncertainty.
Value management is primarily concerned with resolving uncertainty regarding project objectives. In contrast,
risk management addresses uncertainty
regarding outcomes. When expressed in
these terms, the inter-dependence between risk and value management is
readily apparent. The effect of unknown
outcomes cannot be assessed until the
objectives are clear. At the same time,
the project objectives may well depend
upon the identified areas of uncertainty.

Page 55

A feasible script that addresses both

types of uncertainty is provided by the
group decision support methodology
known as 'strategic choice'.

Strategic Choice
Strategic choice is rooted in the sociotechnical approach pioneered by the
Tavistock Institute during the 1970s.
The approach is facilitator-driven with
no specific constraints regarding the
number or length of workshops. The
description that follows is primarily derived from Friend and Hickling (1997)
and Friend (1989).
The basic premise of strategic
choice is that managerial decisions are
made in conditions of uncertainty. It
seeks to aid the decision-making process
by conceptualising three different types
of uncertainty, the first of which relates
to the clarity of 'guiding values'. This
type of uncertainty, labelled UV, is primarily caused by ambiguous objectives.
A decision-making group's response to
UV may be to seek policy guidance from
a higher authority, or to commission a
consensus-building exercise such as a
value management exercise. The second
type of uncertainty pertains to the
broader environment and is labelled UE.
This is the kind of uncertainty which is
normally dealt with through risk management techniques. Responses to UE
are usually of a technical nature, comprising surveys, forecasting exercises or
cost estimations (Friend J. K., 1989).
The third kind of uncertainty concerns
'related decision fields'. This is labelled
UR and relates to the 'interconnectiveness' between decision areas.
In other words, uncertainty concerning
the wider implications of an individual
decision. The response here may be to
re-frame the decision area or to consult
with others beyond the immediate constituency of the problem-owners.
The conceptualisation of three
different kinds of uncertainty is useful
in that it provides a framework that subsumes not only the current practice of
value management, but also that of risk
management. However, neither of these
two existing scripts gives explicit recognition to UR as a distinct area of uncertainty. Strategic choice makes explicit
all three types of uncertainty and deals
with them through an iterative decisionmaking process. Implementation is
framed around four complementary
modes of decision-making activity.
The first mode, described as the
shaping mode, is concerned with probPage 56

lem formulation. Key techniques include

the graphical identification of, and linkage between, decision areas. This enables the decision-makers to identify the
most urgent problems and agree upon
an initial problem shape. The second
mode is labelled the designing mode
during which the facilitator steers the
participants towards the identification
of different options. Of particular importance is the grouping of different combinations of options into discreet decision schemes. It is recognised that whilst
some options would be compatible, others would be mutually exclusive. The
third mode is the comparing mode and
consists of a sequence of techniques that
seek to compare the benefits of alternative decision schemes. These techniques
differ from those of decision analysis in
that they allow for a combination of
quantitative and qualitative comparison.
The final stage of strategic choice is described as the choosing mode and is concerned both with making immediate
decisions and with devising a strategy for
managing those decisions which are best
made in the light of further information.
The outcome of any particular meeting
would therefore always include immediate commitments to action and also
strategies for resolving identified areas
of uncertainty to aid future decisions.
The latter aspect has some commonality with the established practice of maintaining risk registers.
In advocating the 'use' of strategic choice it is important not to repeat
the grandiose claims made in support of
more prescriptive methodologies. Friend
and Hickling (1997) recognise that the
established decision-making norms of
linearity, objectivity, certainty and comprehensiveness inevitably break down
when faced with real-world problems.
The strategic choice approach is
characterised by less simple prescriptions
(Friend J. K. and Hickling A.,1997):
- Don't aim for linearity - learn to
work with cyclicity.
- Don't aim for objectivity - learn
to work with subjectivity.
- Don't aim for certainty - learn to
work with uncertainty.
- Don't aim for comprehensiveness - learn to work with
selectivity.
The prime issue of importance is
the way in which the embedded language of the strategic choice approach
provides a different script for facilitated

interventions. The language of uncertainty can serve to combine the separate story lines of risk and value management. The intervention can be justified in terms of the language of uncertainty. The workshop can be enacted
and the outcomes justified in the same
language. Whilst the strategic choice
approach has appropriated numerous
techniques associated with the four
specified modes of decision making, it
must be recognised that these techniques are inseparable from their embedded language. From a postmodernist
perspective, a new technique is only useful in helping participants think differently because the language and imagery
are unfamiliar. Once the techniques become familiar, they cease to stimulate
different ways of thinking and therefore
too easily regress to mechanistic exercises of dubious value. The metaphor of
a facilitated workshop as an act of drama
remains important. Given that so many
risk (and value) workshops result in few
tangible outcomes, it is important that
the 'drama' engages project stakeholders as active participants rather than
members of a passive audience. The intention must be to ensure that the process is 'on-line'. Too many existing value
management exercises take place 'offline' with little impact on day-to-day
project management. This is probably
even more true in the case of risk management.

Case Studies
The author has to date used the 'uncertainty script' of strategic choice on six
separate occasions in a variety of different project contexts. Within the confines of this paper it is not possible to
describe each occasion in detail. Nevertheless, it is possible to communicate the
essence of what took place. Each project
comprised an action-research intervention that sought to help with real-world
projects. The six projects can be
summarised as follows:
- PFI submission for a Schools
project;
- Master planning exercise for the
re-development of a major
university campus;
- 100M mixed retail and residential development in central
London;
- New supermarket development;
- Major highways scheme;
- A national programme of high

street shop conversions.

Three of the above were billed as
'value management' and three were
billed as 'risk management'. Each intervention consisted of a series of briefing
meetings followed by a one-day facilitated workshop. The same approach was
adopted irrespective of how the workshop was billed. The workshops were
deliberately light on formal methodology whilst being loosely informed by the
strategic choice framework. The sessions
were facilitated in a positive manner
whilst avoiding any tendency to impose
solutions. Indeed, the facilitator avoided
any temptation even to suggest courses
of action. Each workshop involved a
broad cross-section of stakeholders;
numbers varied from twelve to twentyseven. The workshops would typically
begin by asking the participants to state
their four key issues of concern. These
were written onto a post-it note that was
then attached to a display board. The
post-it stickers were then grouped into
'problem areas' that provided the agenda
for the rest of the day. In broad terms,
the groups were then sub-divided into
three smaller groups on a forty-five
minute cycle. Initially the groups were
tasked to diagnose why the identified
'problem area' was problematic. Each
group appointed their own facilitator
who subsequently acted a spokesperson.
The groups were asked to ensure that
everything that they considered important was written down on their flipchart.
After forty-five minutes (or so) the main
workshop reconvened and the three presentations were made in turn. After the
resultant discussion, the agenda for the
next cycle was agreed and the workshop
was again sub-divided into separate
groups. Sometimes the groups were the
same as previously, sometimes they were
re-constituted. More often than not the
focus of the second cycle was directed
towards the production of recommendations. The facilitator endeavoured to
be neutral at all times and deliberately
avoided introducing any unfamiliar language, although he did often build on
the discussion of the group. The three
categories of UV, UE and UR were occasionally used as prompts for different
sub-groups to identify different sources
of uncertainly. On each occasion the last
session of the workshop was devoted to
the derivation of an 'action list' to which
specific responsibilities were assigned.
The staged outcomes of the workshops were recorded on flipcharts and
summarised in a brief written report. On
P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

all six occasions the scripts were accepted by the audience and the resultant 'performance' was well received.
Whilst the enactment of the workshops
was loosely structured around the strategic choice methodology, the adopted
approach was essentially pragmatic.
However, the justification of the events
depended upon the broader theoretical
conceptualisation that underpins strategic choice. This provides a practical
manifestation of the dramaturgical
metaphor described previously. It was
noticeable that the different sub-groups
frequently resorted to the language of
risk management, rarely did the terminology of value management provide the
basis for discussion. It should also be
added that many of the workshops participants were very experienced in the
established approaches to risk management. Without exception, such participants were warmly supportive of the
adopted approach. They were often especially complementary about the highly
participative style of the events and the
way in which the detailed agenda was
formulated on the day. The relative absence of quantitative analysis was seen
to be a strength rather than a weakness.
Effective risk management is of course
dependent upon quantitative assessments, but the view was accepted that
such assessments are best carried once
the overall 'problem frame' has been established.
Future publications will described
the workshops and resultant feedback
in further detail. For the present, suffice
it to say that there is evidence that the
strategic choice approach can provide a
feasible integrated script that embraces
the story lines of both risk management
and value management. The adoption
of the dramaturgical metaphor however
militates against any grandiose claims on
the behalf of 'methodology'. The intention must be to propagate a more
thoughtful approach to the management
of uncertainty, rather than laying claim
to yet another panacea.

Discussion
In accordance with the adopted
postmodernist position, it is necessary to
concede that the insights achieved from
the dramaturgical metaphor are inevitably incomplete. In contrast to
popularist management gurus, academics must always be aware of the limitations of their adopted standpoint. It is
notable that several authors readily concede the limitations of 'mechanistic,

checklist approaches to risk analysis' and

claim no monopoly on the truth. Different insights are gained from different
perspectives. Each way of seeing is also
a way of not seeing. Perhaps the most
important aspect of thinking in terms of
metaphor is the way in which any one
chosen metaphor exposes the limitations
of others. This awareness of the incompleteness of metaphor therefore fosters
a healthy cynicism of all metaphorical
approaches, be they implicit or explicit.
A postmodernist position requires a continual process of reality deconstruction
and reconstruction (Morgan G., 1986).
The benefits of this process have been
demonstrated in the case of risk and
value management. However, there is a
danger that the strategic choice approach might be routinised through
regular use. A continuous process of
deconstruction and reconstruction is
necessary to guard against this possibility. Indeed, it is contended that this cycle
of intellectual activity is vital to continued innovation. It is also possible to
make the argument that a greater understanding of metaphor and
postmodernism amongst managers in
the construction industry would serve
to make them more creative and less
susceptible to the mindless ideology of
management panaceas. To promote a
more thoughtful industry must surely be
the prime responsibility of construction
academics.
It is also necessary to concede that
the author's background and expertise
are in construction management and
value management. Therefore the trials
and relating validation are based of the
practice in construction sector. However, the principles of risk and value
management described are by no means
unique to the construction industry. The
arguments developed can easily be extended to other industrial sectors. The
interpretation of risk and value management methodologies as dramaturgical
scripts presents a new way of thinking
that has wide application. The results
presented in this paper can be of value
to a range of different disciplines and to
the development of a generic understanding of the way in which project
management is enacted.

Conclusion
This paper has presented a new way of
thinking about risk and value management. It has been suggested that the current literature propagates a false distinction between these two activities. An
Page 57

alternative integrated script based on the

strategic choice approach has been suggested. The legitimacy of this approach
has been established through six actionresearch interventions. However, it has
also been suggested that the relationship
between a published 'methodology' and
what happens in practice is much
weaker than is commonly supposed.
From a postmodernist perspective, the
prime contribution of a methodology is
the way in which the adopted discourse
shapes practice. The initial need for a
management-type intervention will be
justified in terms of the rhetoric of the
favoured methodology. The text of the
methodology will then provide the script
for the enactment of the 'drama'. The
rhetoric of the methodology will subsequently be used for the post hoc
rationalisation of what took place. However, the dramaturgical metaphor cannot provide a complete explanation of
the way in which methodologies are
enacted. To make such a claim would
be contrary to the adopted
postmodernist position.

Acknowledgements
The research described was supported
by the UK's Engineering and Physical
Sciences Research Council (GR/
M42657). The fieldwork and empirical
analysis was conducted with the assistance of Ian Compson. An earlier version of this paper was presented at the
1999 CIB W-55 and W-65 Joint Triennial Symposium in Cape Town, South
Africa. The author is grateful for the
subsequent feedback from conference
participants.

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Dr Stuart D. Green
Department of
Construction
Management &
Engineering
The University of
Reading
Whiteknights, PO Box 219, Reading,
RG6 6AW, UK
Tel: +44 (0)118 931 8201
Fax: +44 (0)118 931 3856
E-mail: [email protected]
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