Project Advisory: How To Increase Project Success?

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Project Advisory:

How To Increase Project Success?

Master thesis, MScBA, specialisation Change Management University of Groningen, Faculty of Economics and Business

FINAL THESIS – PUBLIC VERSION

April 20, 2009 R.M. Menkveld Studentnumber: 1177400 Gerbrand Bakkerstraat 20 9713 HJ Groningen tel.: +31 (0)6 4875 2530 e-mail: michielmenkveld@gmail.com Supervisors/university 1st Supervisor: Dr. C. Reezigt 2nd Supervisor: Drs. K.F.C. de Bakker Supervisor/field of study COMPANY X, Amsterdam

Acknowledgement: I received numerous helpful comments during the research and the development of this thesis on earlier drafts from both dr. C. Reezigt and drs. K.F.C. de Bakker. Special thanks for their patience. I thank my temporary colleagues at COMPANY X for their support, interest, and openness.

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Project Advisory: How To Increase Project Success?

A b s t r a c t

This master thesis addresses the question on how COMPANY X can contribute to the success rate of projects within client organizations. For this service COMPANY X wants to take the role of an external advisor. The research consists of three parts that together form the answer to the research question. The first part focuses on the elements of project management that can be used to align a project management advisory service. The literature study in this parts shows that COMPANY X should concentrate on the fields of risk management, quality management, and scope management. These elements are closely connected to the expertise of COMPANY X. The second part consists of the case studies by interviewing external parties. The findings in this section provide concrete guidance to specific topics in risk management, quality management, and scope management. These specific topics are used in the interviews to determine what the possibilities and needs by client organizations are. Client organizations encounter difficulties in all of the three topics. The challenge in thee topics are however scattered among client organizations. Therefore the project advisory service must deal with all topics. The final part is a more internally oriented research. In this part the competences of COMPANY X in according to delivering a project management advisory services are determined. It is found that there are possibilities for COMPANY X to contribute to the success of projects and therefore value for the client organization can be added. But before the advisory service can be delivered, development in experiences, knowledge en skills is required for COMPANY X. The conclusions are based on all of these findings and provide a set of advises to the management in order to develop a suitable service in the market of project management.

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0 . I n d e x

1 . I n t r o d u c t i o n_______________________________________________________________________________________________________________________ 5 2 . F r a m e w o r k _____________________________________________________________________________________________________________________________ 9 2.1 Practical framework____________________________________________________ 9 2.2 Theoretical framework ________________________________________________ 11 2.2.1 Project____________________________________________________________ 12 2.2.2 Project Management ______________________________________________ 14 2.2.3 Project Success___________________________________________________ 20

2.2.4 Project Management Consultancy__________________________________ 24

3 . P r o b l e m S t a t e m e n t___________________________________________________________________________________________________ 27 4 . T h e o r e t i c a l f i n d i n g s______________________________________________________________________________________________ 32 4.1 Project Control _______________________________________________________ 32 4.2 Risk Management ____________________________________________________ 33 4.3 Quality Management__________________________________________________ 39 4.4 Scope management ___________________________________________________ 44 4.5 Theoretical implications_______________________________________________ 47 5 . E m p i r i c a l F i n d i n g s_________________________________________________________________________________________________ 48

5.1 External case study___________________________________________________ 48

5.1.1 External Case 1___________________________________________________ 48 5.1.2 External Case 2___________________________________________________ 50 5.1.3 External Case 3___________________________________________________ 52 5.1.4 External Case 4___________________________________________________ 54 5.1.5 External Case 5___________________________________________________ 56 5.1.6 External Case 6___________________________________________________ 57

5.1.7 Summary external cases __________________________________________ 59

5.2 Internal case study ___________________________________________________ 61

5.2.1 COMPANY X Case 1_______________________________________________ 62

5.2.2 COMPANY X Case 2_______________________________________________ 62

5.2.3 COMPANY X Case 3_______________________________________________ 63

5.2.4 Summary COMPANY X cases______________________________________ 64

6 . C o n c l u s i o n s________________________________________________________________________________________________________________________ 66

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Tables

Table 1.1 – Overview of Constraints _____________________________________________ 7 Table 3.1 – Criteria External Interviewees ______________________________________ 30 Table 4.4 – Risk Management Processes ________________________________________ 37 Table 4.5 – Audits and Reviews ________________________________________________ 41 Table 4.7 – Overview of theoretical findings _____________________________________ 47 Table 5.1 – Case 1 _____________________________________________________________ 48 Table 5.2 – Case 2 _____________________________________________________________ 51 Table 5.3 – Case 3 _____________________________________________________________ 52 Table 5.4 – Case 4 _____________________________________________________________ 54 Table 5.5 – Case 5 _____________________________________________________________ 56 Table 5.6 – Case 6 _____________________________________________________________ 58 Table 5.7 – Case 1: Public Sector Advisor _______________________________________ 62 Table 5.8 – Case 2: Health Science Advisor _____________________________________ 63 Table 5.9 – Case 3: Project Management Specialist______________________________ 64

Figures

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1 . I n t r o d u c t i o n

′′National government wasting money on projects′′ [free translation, trouw 2007]. This is the header of an article on the high percentage of failing projects in the public sector in The Netherlands, published by daily newspaper Trouw on June 4th 2007. The article continues with the conclusions of a scientific research conducted by J.F. Groote. This researcher found that an American study on IT-projects shows a rate of 30 percent of all projects never getting off the ground, 50 percent is subject to major problems, and only 20 percent can actually be called a successful project. Groote uses these percentages to calculate the yearly waste of money due to failed projects run be the government and found the total amount of loss on IT-projects is approximately €15.000.000.000 per year. This is only the amount of money wasted on IT-projects, and Groote claims the failure percentages of the IT-projects can also be applied for other projects carried out be the government. This makes the total waste of money even larger.

This article is just an indication of the current state of project management and the high percentages of failure that accompany projects. Studies by VU [2007], Berenschot [2006], KPMG [2004], and Twynstra [2003] show similar figures for failure of other types of projects and other businesses in the private as well as the public sector in The Netherlands. These figures are alarming. Even more serious are the findings in the KPMG global survey on project management [2005] which shows a considerable increase of the failure percentages of projects over the last five years. These are serious figures due to the fact that projects and project management have grown into competitive advantages recognized by organizations. More and more project management is applied as a strategic tool to guide change and achieve business objectives [pricewaterhousecoopers 2007]. This implicates that the essence of project success for the continuity of organizations is increasing where the failure rate of projects is not reducing, quite the contrary!

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project? When is a project successful? Is project success the opposite of failure? How can it be measured? Interesting questions, but not easy to come up with appropriate answers.

The tendency of increasing importance of managing projects in a successful manner and the difficult questions accompanying this subject have not gone by unnoticed. Over the past decade the scientific research in project management has significantly increased [morris & pinto 2004]. This indicates the field of project management has matured into a scientific field of expertise. Furthermore, more and more consultancy firms are focusing on projects and project management as an object of their advising services [thamhain 2004] and aim at helping the client to achieve a higher project success rate.

Besides the trend of the maturing of the field of project management another trend has been detected. A study in the UK has proven that the effectiveness to execute projects is becoming an area for increasing stakeholder attention [mori 2004]. Due to the importance projects have on the continuity of the organization stakeholders are seeking more for confidence in the project management within organizations. Following to this a mounting regulatory pressure for disclosure and transparency on projects exists.

This quest for transparency and disclosure, combined with the high failure rates, has led to the attention of accounting firms. Transparency and disclosure are two major components of the services provided by such organizations. Furthermore, most of the accounting firms have advisory services related to their accounting activities or even as an extension of the services they provide. One of these accounting firms is COMPANY X, which is the central organization in this research.

Management question – COMPANY X has decided to investigate if they can add

value to the management of projects for clients by developing a project advisory service. The management objective is to design an advisory service which COMPANY X can deploy to help client organization in the problems they occur in project management. The management question is defined as:

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COMPANY X has named several constraints for this project management advisory service, Table 1.1 provides the overview over the constraints named by the management:

Table 1.1 – Overview of Constraints

No. Description Constraint

1

The new project management advisory service must fit into the field of expertise COMPANY X Advisory has developed throughout time

Field of expertise

2 The service must be interesting to the existing

group of clients and potential clients Existing clients

3

The project management advisory service is an extension of the service package and therefore it must be related to the other services

Expansion of the services

4

There is no need to focus on all types of

projects, it is regarded as better to have a focus on specific conditions of a project

Specific type of project

5 The must be applicable to the most common

project management methods Fit with project management

6 The advisory service must add value to the

client’s project Lead to project success

7

Due to the jeopardy of a conflict of interest between the accountancy services and the advisory services, COMPANY X must preserve independency from the client

Independent role

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Outline – This chapter is focused on introducing the reader to the context of this

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2 . F r a m e w o r k

2.1 Practical framework

Ernst & Young The Netherlands (COMPANY X) is a commercial service provider with approximately 4,500 employees in 29 offices. Globally, COMPANY X has more than 106,000 employees in 140 countries. COMPANY X′s clients include multinationals, major national companies, small and medium-sized enterprises, government bodies and non-profit institutions. COMPANY X recorded income of €642.5 million in the 2005 – 2006 financial year, making the firm the market leader in its field in The Netherlands. In the same period, COMPANY X′s worldwide income was 17 billion US dollars.

Advisory services – Because of the scandals in the accountancy profession of the

late nineties, the independency of accounting firms became a key issue. To prevent any form of conflicts of interest, COMPANY X had decided to hive off all of its advisory services to CapGemini. With the upcoming of new acts and codes of conduct, restrictions regarding conflicts of interest are determined and therefore can be anticipated to. This evolution has driven COMPANY X to start orienting on the field of advisory to extend the activities related to accounting; the core business. Therefore a global vision on advisory services was formulated: ′′Growing demand

from the clients has created an opportunity for COMPANY X to build a world-class performance advisory business focused on the finance agenda and business improvement in large organizations, especially around the finance, supply chain and customer management aspects of their business′′ [COMPANY X 2007]. This vision

has led to the start-up of an advisory department and recently COMPANY X Advisory is launched. COMPANY X Advisory has a formulated mission statement including its key values (Figure 2.1).

We want to be recognized and acknowledged as a leading consultancy firm, with an outstanding reputation in specific markets and sectors, where inspiring and fun

colleagues work on realizing sustainable results for our clients. Ernst & Young Advisory fun to work with

Powered by the best professionals

Connected by leading (inter)nationalnetworks

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Field of expertise – The core business of COMPANY X Advisory can be separated

into two services; Risk Advisory Services (RAS) and Business Advisory Services (BAS). RAS is driven by client requests based on eliminating trouble and keeping them safe. BAS include the consulting activities focused at improving business processes of clients. BAS and RAS together, must allow COMPANY X to be a valuable advising party dealing with all questions of clients. Figure 2.2 provides the overview of the core business of COMPANY X Advisory.

Figure 2.2 – COMPANY X Advisory Core Business

[source: COMPANY X 2007]

Existing clients – The service line COMPANY X Advisory is divided into six sub

service lines with each a focus on a specific field of excellence; Business Risk Services (BRS), Financial Services Risk Management (FSRM), Fraud Investigation Dispute Services (FIDS), Technology Security Risk Services (TSRS), Actuarial Services (AS), and Business Advisory Services (BAS). Furthermore, three key sectors for the advisory services are defined; the health science sector, public sector, and local practice. Below the sub service lines are the solutions that can be used as a tool in solving client′s problems (Figure 2.3).

Constraint: Existing clients

Direction: Aim at health science sector, public sector, and local practice Constraint: Field of expertise

Direction: Focus on risk management and performance management Make our business better …

… and also help us to improve Keep us out of trouble …

… but also keep us safe

R Riisskk ( (RRAASS)) - Expanding regulation - Growing number of restatements - Catastrophic reputational consequences - Stiffer sanctions - Criminal indictments - Refocus Strategy

- Improve coordination and decision making

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Expansion of the services – The services provided by COMPANY X Advisory are

subdivided into solutions. A solution focuses on a specific task or problem and consists of a specific methodology to approach the task or problem and enablers to help the employers to efficiently deal with the topic. Figure 2.3 shows the core solutions international framework that is currently been used by COMPANY X Advisory. The solutions in this framework are being used all over the world and are often centrally developed in the United States. Next to these international solutions, there are several additional nationally developed solutions which focus on country-specific needs.

Figure 2.3 – Organizational Structure

Constraint: Expension of the services Direction: Focus on management services

2.2 Theoretical framework

The theoretical framework firstly focuses on the phenomenon ‘project’. After that, Risk Advisory Services

FIDS Fraud Investigation Dispute Services FSRM Financial Services Risk Management TSRS Technology Security Risk Services BRS Business Risk Services Anti Fraud Programs Investigations & Dispute

Risk & Regulatory Market Risk, Credit Risk & Operational

Risk Insurance Risk Management Economic Capital Quantitative Advisory Services/Derivatives Valuation Center Treasury Services Energy Risk Services ERP Advisory Application Controls & Security

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theoretical framework for project success will be drawn. The theoretical framework ends with dealing with the topic of project management consultancy.

2.2.1 Project

There is an innumerable amount of different definitions for the term ′project′. In 1988, House defines a project as a group of related tasks which together satisfy one or more objectives. This definition became common use. Turner [1992] expanded the definition of a project into: ′′an endeavor in which human, material and financial

resources are organized in a novel way, to undertake a unique scope of work of given specification, with constraints of cost and time, so as to achieve unitary, beneficial change, through the delivery of quantified and qualitative objectives′′. In The

Netherlands the most cited definition for a project is drawn up by Wijnen [2001] who state that projects are temporary, result-oriented cooperation between humans, and use limited resources. The definition by the Project Management Body of Knowledge (PMBOK) of the Project Management Institute (PMI) is more focused on the organizational aspects of projects [pmbok 2004]. The PMBOK definition includes the description of a project as a temporary endeavor in an organization. The English Office of Government Commerce (OGC) defines a project as a management approach with the aim on the delivery of one or more products based on a specified business case [ogc 2005]. Pinto [2007] examines the various elements that can be found in a set of definitions. He found four overlapping elements in the various definitions, projects are:

• complex, one-time processes;

• limited by budget, schedule, and resources; • developed to resolve a clear goal or set of goals; • customer-focused.

These aspects are mentioned in this thesis when the term ′project′ is used. This is somewhat an extension to the common definition used by COMPANY X, this definition is closely related to the PMBOK definition and runs as follows: ′′a project

is a temporary endeavor undertaken to create a unique product, service, or result′′

[COMPANY X 2006].

Specific type of project – The previous paragraph stated definitions of projects all

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axiom that a project is a project. More recently, research has been conducted with the assumption that the organizational structural contingency theory [lawrence & lorsch 1967; thompson 1967; perrow 1967] must also be applied as a basic point of departure for studies on projects. This approach is firstly elaborated by Shenhar & Dvir [1996] and during time proved to be both theoretically grounded and practically applicable [shenhar & dvir 2005]. This one-size-does-not-fit-all approach to projects is a more defined way for organizations to categorize their projects based on specific situational contingencies.

Diamond Model – Shenhar & Dvir [2004] acknowledge there is the myth about

projects that assumes that all projects are essentially the same. To take this myth away, they studied contingencies influencing the classification of projects. This research proved four dimensions on which projects differ and can be typified; novelty, complexity, uncertainty, and pace. The categorizations that can be made based on these four dimensions prove that not all projects are the same and therefore that one-size-does-not-fit-all [shenhar 2001a]. The dimensions are expounded into a coordinate system called the Diamond Model [shenhar & dvir 2004] (Figure 2.4).

Figure 2.4 – Diamond Model

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The four axes in the Diamond Model are:

1. Novelty The novelty ax describes how new the product is to its potential

users [wheelwright & clark 1992].

2. Complexity The level of complexity of a project is determined by its size, and

the number, variety, and interconnectedness of the elements [dvir ea 1998]. For projects the complexity can be made operational by regarding the system scope [shenhar 2001] which can be seen as the level of subsystems involved in the project.

3. Uncertainty Uncertainty is defined as the inability to predict future

outcomes. A more tangible definition of uncertainty is provided by Galbraith [1977]; who says uncertainty is the gap between the information needed to complete a task and the information that is already possessed at the beginning of the task. Shenhar [2001a] determines the level of project uncertainty by using the degree of new versus mature technology within the project.

4. Urgency This ax involves the urgency of the project to the organization

and the available timeframe for the execution of the project [shenhar ea 2005].

Constraint: Specific type of project

Direction: Focus on ‘large’ projects in terms of time and budget. The projects should not be to uncertain or complex.

2.2.2 Project Management

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the project. The pre-project phase is focused on the selection of the projects [pinto 2007]. The maintenance phase after the completion of the project is used to stabilize the project result and to intervene if necessary [wijnen 2001].

According to Waddell [2005] the modern approach to project management has led to a confusing state in the field. This makes it necessary to grasp the content of project management for this thesis. The definition as applied by COMPANY X is closely connected to the definition by the Project Management Institute (PMI) in their Project Management Body of Knowledge (PMBOK) [2000], which is:

′′Project management is the application of knowledge, skills, tools, and techniques to

project activities in order to meet or exceed stakeholder needs and expectations from a project. Meeting or exceeding stakeholder needs and expectations invariably involves balancing competing demands among:

• Scope, time, cost, and quality;

• Stakeholders with differing needs and expectations; • Identified requirements and unidentified requirements.′′

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Figure 2.5 – Project Management

[source: morris & pinto 2003]

Project management methodologies – Since the late eighties a number of

different standardized methodologies for managing project have been developed [boddy 2003]. These methodologies were developed because more and more organizations tried to gain higher success rate in executing projects. At the time the standardized methodologies were developed it was believed that applying one of these methodologies in an organization would lead to guaranteed project success. Nowadays this believe is somewhat weakened, but it is still accepted that project methodologies contribute to higher success rates [berenschot 2006]. In the following paragraphs the most common project management methodologies will be examined and compared.

In literature a lot of different terms are confused; method, framework, approach, and best practice are all used to define the same phenomenon. In this thesis the term ′methodology′ will be used. A clear definition of methodology is provided by Berenschot [2006]: ″a systematic, well-thought-out way of acting in order to achieve a result that contributes to an objective″. A methodology is based on the use of certain techniques and tools. Techniques are a way of acting and a tool is a mean that allows a technique to be applied. Often the flaw in a methodology is that it is supposed to fit all related organizational problems; a one size fits all solution [pellegrinelli 2007].

Recently, the VU University Amsterdam [2007] has undertaken a large scale market research in the usage of project management methodologies in The Netherlands. This market research shows that PRINCE2 is by far the most used methodology,

Time Quality

Cost Communications

Scope Human Resources

Risk Procurement

Integration Time Budget

Scope ′′given′′ ′′delivered′′

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followed by the PMBOK and the TG Method. The research further indicated that the use of a project management methodology is more common when the size of the budget for the project is high. The study showed that in all projects with a budget of more than €3M a standardized methodology is used. Figure 2.6 shows the relation between the project budget and the use of a standardized methodology.

Figure 2.6 – Use of Methodologies

0 25 50 75 100 <75K 75K-1.5M 1.5M-3M >3M Budget P er ce n ta ge [source: vu 2007]

Use of methodologies – Berenschot [2006], KPMG [2004], and Twynstra [2003]

also performed market research to the current state of project management methodologies. The researches show a comparable trend in the use of standardized methodologies; PRINCE2 is the most common methodology, followed by home-grown methodologies. Figure 2.19 provides insight into the market share per methodology. The Berenschot and Twynstra researches found that the home-grown methodologies are often based on either the TG Methodology of the PMBOK. There are however organizations that have developed their own methodology, for example Philips, KPN, CapGemini, and Siemens. Other methodologies that are used for project management are the Rational Unified Process (RUP) with 4% and the Dynamic Systems Development Method (DSDM) with 1%.

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PRINCE2. Only 10% of the respondents use a specific standardized program management methodology and furthermore a small number was orienting on implementing a program management methodology. This research concludes that in practice mostly project management methodologies are used for programs and that there is no significant relation between project success or failure rates and the use of specialized methodologies for large projects.

Figure 2.7 – Dominant Project Management Methodologies

Comparison – For this thesis the technical aspect is most relevant to rank. Risk

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Figure 2.8 – Comparison Standard Methodologies

[source: Berenschot 2006]

PRINCE2 – PRINCE2, short for Projects IN Controlled Environment 2, is the

successor of the PRINCE methodology. PRINCE2 is developed in 1996 by the OGC as a generic standard for all types of projects. The focus in this standardized approach is on the processes in a project and is a result of best practices. PRINCE2 can be used for managing the project as well as for managing the deployment of people and resources in a project. The strength of PRINCE2 is that it is not focused on covering all aspects of project management [wideman 2005]. Explicitly excluded in the PRINCE2 methodology are the social and communicative skills, techniques, and software supporting systems [berenschot 2006]. With the upcoming of the concept ′program′ the OGC created a management methodology for programs, called Managing Successful Program[me]s (MSP) [ogc 2003]. This methodology shows resemblance to PRINCE2 in many aspects [hof & van bommel 2002]. Many authors, therefore, regard the MSP methodology as an extension and update of the PRINCE2 methodology [van der tak 2006; hof & van bommel 2002; berenschot 2006; kpmg 2004].

PRINCE2 has five basic assumptions on which the methodology is based: • Projects are executed in controlled environments;

• A project is successful when all stakeholders are satisfied with the result; • Successful projects are business driven;

• Cooperation between stakeholders leads to more success; • Practice decides what is effective.

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The PRINCE2 methodology consists of a framework of interrelated processes, components, and techniques. Figure 2.9 shows the process model of PRINCE2, with centrally the eight key processes and on the outside the eight components. The components are the elements on which the project manager must have knowledge [berenschot 2006].

Figure 2.9 – Basic Processes in PRINCE 2

[source: ogc 1996] Constraint: Fit with project management

Direction: Connection to the PRINCE2 methodology

2.2.3 Project Success

It is difficult to determine project success because of the ambiguous definitions that are used [liu & walker 1998]. In order to be able to determine the success of a project De Wit [1988] makes a distinction between two concepts of project success; product success and project management success. The product success deals with the overall objectives and outcomes of the project [cooke-davies 2002], where the project management success deals with the project process and the accomplishment of objectives quantified in cost, time, and quality [baccarini 1999]. Another distinction that needs to be made when dealing with achieving project success is the difference between success criteria and success factors. Criteria can be used to measure the success of the project whilst factors lead to the achievement of success [collins & baccarini 2004]. The following paragraphs will handle the two concepts of project success by dealing with the success criteria.

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LFM – Baccarini [1999] uses the Logical Framework Method (LFM) to explain the

difference between the two project success criteria; product success and project management success. The LFM provides a top-down hierarchical order of project objectives to which the success criteria can be measured. The four levels of project objectives are:

• Project goal – the overall strategic organizational orientation to which the project should contribute [pmi 1996];

• Project purpose – the intended short-term effects of the project′s output on the end-users;

• Project outputs – the immediate, specific, and tangible results of the project [baccarini 1999];

• Project inputs – the resources and activities needed to achieve a project output.

Based on the LFM hierarchical order of project objectives Collins & Baccarini [2004] determine the separation between product success and project management success (Figure 2.3).

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Figure 2.10 – Link LFM – Project Success

[based on: baccarini 1999 and shenhar ea 2001]

Time – The dimensions [shenhar ea 1997] and objectives [baccarini 1999] of project

success all include a certain time element. This timescale for the measurement of each success criterion is firstly described by Turner [1993]. This implicates that project success includes both short-term and long-term consequences of a project [shenhar ea 1997]. There are four different levels of time to measure success; short-term, medium-short-term, long-short-term, and the future. Each of these four time levels is linked to a project objective or success dimension. The time frame provide insight intoto the relative importance of each success criteria, where product success is most important on the shorter-term and project management success most important on the longer-term [shenhar ea 2001]. The time frame is added in Figure 2.10 to show the linkage between time and the two success criteria.

The attendance of a timescale for the measurement of project success is also recognized by Cooke-Davies [2004]. This author describes a more significant role time has in the success criteria. To be able to determine project success over time, a third level of success next to product success and project management success. This most recently developed level of project success is the consistent project success criterion [cooke-davies 2002]. The distinction between the three levels can be clarified by stating the question by which each level is driven. For product success the question is whether the right project was done. Project management success deals with the question whether the project was done right and finally, the consistent project success answers the question whether the right projects were

Future Long-Term Medium-Term Short-Term

Time (after project completion)

Product Success Project Management Success

Project Success Criteria

Objectives

Dimensions

Goal Purpose Outputs Inputs

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done right, time after time. Besides the link between the three levels of success and time elapsed, the link can be made with the level of organizational hierarchy needed to give requirement in order to achieve success. The assumption is that consistent project success requires the highest level of hierarchical commitment.

Connectedness – Now the two project success concepts have been clarified, there

are some things that need to be added to explain the (inter)connectedness of product success and project management success. First, the success or failure in terms of one of the criteria does not necessarily mean the same outcome for the measurements based on the other criterion. To cite De Wit [1988] on this matter: ′′One frequently observes that a project team gets credit for a successful project which

it does not deserve and, conversely, the team may be incorrectly blamed for project failure. A project can be a success despite poor project management performance, and vice versa′′.

Secondly, project management success is subordinate to product success [baccarini 1999]. This implicates that the success criteria that are combined in the iron

triangle are inferior to the success criteria associated with the goal and the purpose of the project. This indicates that the long-term success of a project is superior to the short-term success [shenhar ea 2005]. Thirdly, although project management success is subordinate, it does influence the level of product success [munns & bjeirmi 1996]. Adequate project management can contribute to the project goal and purpose, but is unlikely to prevent projects from product failure [baccarini 1999]. Managing the project as stated in the objective will result in meeting deadlines and budgets, and therefore will add to the competitiveness of new products [shenhar ea 1997]. The final notion on project success criteria is the viewpoint of internal versus external measurements of success [shenhar ea 1997]. The internal success of a project is seen as the satisfying of interest groups internal to the project

organization, while external success is seen as the effectiveness of the project result. Therefore the link can be made between internal and project management success, and external and product success.

Constraint: Lead to project success

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2.2.4 Project Management Consultancy

Management consultancy is the practice of external or internal advisory aimed at helping organizations to improve performance through the use of analysis of existing and possible problems and providing solutions to deal with these problems. In practice, the external advisor provides the client organization with an objective view across functions and departments [brown 2000]. An advisor can stimulate the brainstorming to come up with new ideas, bring in ideas based on its own knowledge and experience form other fields, or break the rules to come up with a more creative solution to the problem [walker 1997; van oech 1994]. Important restriction to the advisor is its independency of the client organization; both an external as well as an internal advisor must have no gain in the project. Thamhain [2004] defines an effective consultant as: ′′a social architect who fosters a climate of

active participation by involving people at all organizational levels in the assessment of the existing system, and in the planning and implementation of the desired change′′.

Consultant – A project or project management consultant is a specialist in advising

on projects and/or project management, or one or more of the project management components [brown 2000]. Walker [1997] listed four reasons why a consultant might be hired for a project;

• Expertise unavailable otherwise – a specialist in a certain area of project management is hired in to manage that area or advise on how to manage it by the organization itself;

• Impartibility of perspectives and recommendations – an external consultant can offer an independent additional view on issues and can come up with recommendations without having any stake in the solution;

• Cost-effective improvements – a consultant can be cost-effective by adding value to the project or reducing costs mainly on personnel costs for project members from within the organization;

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For COMPANY X the reasons of expertise and impartibility of perspectives and recommendations are useful. These two reasons can be combined with the independent advisory role COMPANY X has listed as a requirement. These reasons give direction to the role COMPANY X can fulfill in a project organization. As stated earlier the PRINCE2 methodology gives guidance to the advisory service.

PRNCE2 organization – The organization structure in PRINCE2 consists of roles

and responsibilities for the actors in the project. The ultimately responsibility for the project results is the principal. The principal can be defined as the one that owns the business case for the specific project. The project principal is member of the project board. The project board represents the business, user, and supplier interests of the project at managerial level. This indicates that in the PRINCE2 methodology the interests of all stakeholders are combined into one project board. The project board must have authority because they are the decision-makers and responsible for commitment of resources. The project team is responsible for the day-to-day management of the project. The project team consists of the project manager, the team manager, and the team members. Figure 2.11 provides the project organization based on the PRINCE2 methodology of organizing a project.

Figure 2.11 – Project Organization

Business or Program Management

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All of these roles are part of the project organization. There is, however, a role defined by the PRINCE2 methodology that is external to the project organization; the project assurance. This role will be examined further because it can be interesting for the role of COMPANY X.

Project assurance – The project assurance is mainly responsible for making sure

the work in the project is done according to the agreements [ogc 2007]. Because this role can take a lot of time and requires specific qualities, it is often delegated to one or more persons outside of the Project Board. The activities of the project assurance are directly related to the principals of the project assurance; the senior user, senior supplier, and principal. These are also the ones responsible for appointing the project assurance.

The principal needs assurance on:

• Costs and progress are in the light of the Business Case; • Risks are managed adequately;

• The project organized performs correctly.

The senior user needs assurance on:

• Quality expectations and acceptance criteria; • Quality reviews and/or audits are done; • The realization of the products.

The senior supplier needs assurance on: • The project scope is guaranteed;

• The right approach is chosen for designing and realization.

In PRINCE2, the project assurance role is described as being in charge of project control and all of the activities needed to be carried out to assure the project control [ogc 2005].

Constraint: Independent role

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3 . P r o b l e m S t a t e m e n t

Research objective – The objective of this research is providing recommendations

to the management of COMPANY X on what the opportunities for introducing project advisory services are. To achieve this objective it must be clear how project control is organized in The Netherlands and what the flaws in general project management are. This analysis will provide the needs by potential client organizations. The second research object are the possible services COMPANY X can offer. To determine these possibilities the knowledge and skills of COMPANY X will be analyzed.

Research question – The research question that will be answered is:

How can COMPANY X, as independent advisor, contribute to the success rate of projects within organizations in The Netherlands?

To be able to formulate the answer to this question, three sub questions will need to be answered:

1. What elements of project control can COMPANY X focus on?

First, project control must be studied further to come up with specific elements that can be used for an advisory service. The answering of this question will lead to a set of project management activities on which COMPANY X can focus their advisory service. This question will be examined by conducting a literature study.

2. Are project organizations interested in advisory services on these elements?

The set of activities from the literature study will be discussed with interviewees. In these interviews the way these elements are imbedded in the project management will be examined, as is the possible contributing of an external advisor. Goal of these interviews is to find the empirical needs in project management.

3. Is COMPANY X capable to deliver these advisory services?

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A more detailed description of the used methodology can be found in the following paragraphs.

Research methodology – In this methodology paragraph the four steps taken in

order to answer the research question will be described. This starts with the research strategy that was the backbone for the research. The following step is to explain the data collection method. Next the responsibility for the selection of the cases used to gather data will be outlined. And the final step is the data analysis method used to analyze the data and draw up the conclusions.

Research strategy – Yin [2003] has distinguished three conditions that influence

the appropriate research strategy; the type op research question, the extent of control the researcher had over the behavioral events of the research object, and the focus on either contemporary events as opposed to historical events. For this study the three condition can be applied as follows:

Form of research question Explanatory (how?)

Requires control of behavioral events? No

Focuses on contemporary events? Yes

This set of conditions points out that the case study strategy has an advantage above other well-known research strategies. A case study helps to create understanding of a problem and contributes to the exploration of a problem [cooper & schindler 2003]. The exploration of the problem is done by creating a framework which includes constraints and direction to the project management advisory service. The case study will be used to test the framework and find out whether the framework needs to be altered.

Data collection – In this research two different case study techniques are used; a

literature study and in-depth interviewing [yin 2003].

1. Literature study – The literature study is carried out to build the theoretical

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interpreting the empirical findings. The second literature study is a deepening of the theoretical framework. This deepening leads to an outline for the in-depth interviewing.

2. In-depth interviewing – The other data collection method is in-depth

interviewing. In-depth iinterviews are typified by the collection of data through the use of communication with the interviewees based on formulated questions in advance [emans 2002]. There are two groups of interviewees; respondents and informants. Respondents are interviewed to obtain information about the person or situation itself, while informants provide data on a specific situation without involving themselves [baarda & de goede 2002]. The difference between respondents and informants is mainly based on the subjectivity of the data versus more objective information respectively [emans 2002]. For this research informants are needed, because the data that needs to be collected is on projects and project management inside the organization and less on their on subjectivity.

The interviews were open conversations. A selection of topics was made in advance to be able to start and sometimes steer the conversations. This approach often led to in-depth interviews where a certain topic was central and was discussed by the interviewee and the interviewer. Because of the complexity of the subject and the in-depth interviews, the data collection is done in face-to-face individual conversations. Advantages of the face-to-face interviews are the flexibility to anticipate on the informants′ answers and the security of gaining enough data because of the fixed date and time of the interviews.

During the interviews minutes are taken down to capture the most important statements of the informant on the relevant topics. After the interview, the minutes are remolded into research data based on the findings in the theoretical framework. These research data are used for analysis of the theoretical concepts.

Case selection – The informants for this research are divided into two main

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[baarda & de goede 2005]. The reason for this type of selection is that the chance of appropriate informants is higher, then when selecting the informants randomly. The three COMPANY X informants are used as experts to decide whether COMPANY X is capable of delivering the advisory services. These respondents have been selected based on their experience in the field of project management and project management consultancy.An overview of the selection criteria is presented in Table 3.1 and Table 3.2.

Table 3.1 – Criteria External Interviewees

Topic Criterion

Project budget > 1 Million Euro

Expertise Familiar with projects and PRINCE2 Responsibility Appointing Project Assurance

Sector Health care, public, or local practice Experience Project management

Knowledge Principles of PRINCE2

Table 3.2 – Criteria Internal Interviewees

Topic Criterion

Expertise Familiar with projects and PRINCE2 Sector Health care, public, or local practice Experience Advisory and project management Knowledge Principles of PRINCE2

Data analysis – The data analysis consisted of three flows of activity as suggested

by Miles & Huberman [1994]; data reduction, data display, and the drawing of conclusions. The data reduction focuses on the selection and transformation of the gathered data [miles & huberman 1994]. In this research the main part of the data reduction is carried out during the literature study and the definition of the theoretical framework. Also the case selection criteria and the topics that were addressed during the interviews lead to data reduction.

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empirical data. This activity made it possible to compare the findings on the different elements of the theoretical framework.

The last data analysis activity was the drawing up of conclusions. These conclusions must enable the answer to the research question and must be helpful to the management of COMPANY X in their quest to deliver a project management advisory service.

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4 . T h e o r e t i c a l f i n d i n g s

The theoretical framework provides direction to the advisory services in the way that these services should focus on project control. But project control is still an extensive term and offers too few starting points for an advisory service. Therefore the first research question is defined as: What elements of project control can

COMPANY X focus on?

To answer this question the concept of project control must be deepened. After that, the next step is to define a set of elements and gain insight in the possibility these element offer.

4.1 Project Control

Project control is about ensuring that the project delivers what the project should deliver [harpum 2003]. Control is a fundamental part to all management, in the way that managing implies that control must be exercised. The concepts of management and control can be connected as follows:

′′The management process … is concerned with deciding to do or not to do something, with planning, with alternatives, with monitoring performance, with collaborating with other people or achieving end through others; it is the process of taking decisions in social systems in the face of problems which may not be self generated′′ [checkland 1981 cited in harpum 2003].

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Figure 4.1 – The Project Control Process

[source: harpum 2003]

Central in the project control process are the phases of a project; conceptualizing, planning, and executing. This indicates project control is a necessary process throughout the entire project life cycle. Next to these phases is the feedback loop that typifies project control. This feedback loop measures where the project is loosing the project plan and therefore seems to be off route in reaching the objectives. The measurement provides inputs to the system to correct the deviation [harpum 2003]; so the implementation of appropriate actions to bring the project back on route.

The control cycle in project management includes several key elements. Among these elements are risk management, quality management, scope management, and the project organization [morris & pinto 2003]. Because these elements fit the constraints of the advisory service, each of these elements will be elaborated in the following paragraphs.

4.2 Risk Management

Risk management in projects is a cyclic process that must be run-through several times during a project [van well-stam 2003]. The main purpose of project risk management is to direct the project organization towards the effective management

Defined project objectives Plan project: • Deliverables to achieve project objectives • Forecast time to

carry out work • Forecast cost to carry out work

Carry out work

Deliverables Scope of work Budget Schedule Monitor work against plan

Revise and update plan

Measure performance of project Implement control

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[2001] summarizes the main objective of project risk management is taking deliberate action to increase the odds of positive outcomes and reducing the odds of negative outcomes. After conducting studies in the field of risk management Martinelli and Waddell [2004] conclude that there are three key characteristics to risk management. First, risk management is not an exact science that can develop and apply models to mitigate risks. Secondly, risk management is an iterative process and should not be considered a one time event. Finally, the concept of organizational risk tolerance must be understood and managed. This risk tolerance includes the level of acceptance of risks driven by organizational culture and values.

Project risk management is fundamentally different form general risk management methodologies as applied to operational or strategic risks [loch 2006]. Project risk management is more focused than general risk management because its view is on the project only. On the other hand, project risk management is more general because it considers all possible risks that may occur during the execution of the project. Project risk management can also include to ″upside″ of project risks, while general risk management looks at the downside only. The upside of risks is the opportunity or positive effect of an event. The execution of risk management in projects is more operational than general risk management. Project risk management states exactly what is needed to be done and how flexible the project organization must be in order to cope with occurring risks.

Risk – The largest influence that threatens the project success is the risk involved

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Risk = (Probability of Event) x (Consequences of Event) [pinto 2007] (Formula 1)

Risk Sources – Now the origin and influence of risk on the project performance is

clarified a closer look at the main sources of risk can be taken. Datta and Mukherjee [2001] found four different sources of risks in projects. These sources are located at different levels; in the project itself, the organization, the immediate environment, and the external environment (Figure 4.2). The significant sources this study concludes are at the immediate environment level at highest. Although Datta and Mukherjee recognized the influence of risks form the external environment, they claim that efforts in managing these types of risks are not worthwhile.

The risks that are directly connected with executing a project are the so-called internally generated risks [barber 2005]. These risks arise from the rules, policies, processes, structures, actions, decisions, behavior, or cultures in the project organization. The immediate risks have the largest impact on the successful completion of the project in terms of schedule, cost, and quality [datta & mukherjee 2001]. The most common immediate project risks can be linked to the complexity of a project, including conceptual difficulties, external agencies, mode of contracts, and contractor failure. The immediate risks are especially influencing large projects, because these projects are normally more complex due to the call for multiple contractors, suppliers, outside agencies, coordination, and procedures [kerzner 1987].

Figure 4.2 – Sources of Risk in Levels of Environment

Project Organization Immediate Environment

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Pinto [2007] listed five primary causes of project risk; financial risk, technical risk, commercial risk, execution risk, and contractual or legal risk. Cooper [2005] adds the risks associated with estimates that are necessary for the planning of the project. Van Well-Stam [2003] found seven areas where risks in large projects can stem form: • Political/governmental; • Financial/economic; • Legal; • Technical; • Organizational; • Geographical; • Societal.

Views – Kaliprasad [2006] determined three views on risk management in projects.

The traditional view (Figure 4.3a) is that risk management is part of the general project management and the responsibility for performing risk managing is at the project manager. The traditional view is fundamentally flawed due to its disjointed approach to project decisions, its not a proactive approach as it follows a stepwise linear approach [jaafari 1999], and its focus on the implementation process of the project whereas most project risks are associated with the project outcome and its viability as a business entity [hobbs & miller 1998].

Another view (Figure 4.3b) on project risk management is that risks are the fundament for project management. If there would be no risks, there is no need for project management [kaliprasad 2006]. Based on this view, the primary purpose of project management is the management of project risks. The third view (Figure 4.3c) on project management is that risk management should be included into all aspects of project management [wijnen 2001]. A project manager often outsources the task of managing risks to external specialists.

Figure 4.3 – Views on Risk Management

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Processes – Project risk management is more and more being viewed as an integral

part of project management [kaliprasad 2006]. Despite this, risk management fails to receive the due consideration within project management fundamentals [chapman 2006]. There are three much used risk management models based on a risk management process. These three models are the 4-step, 5-step, and 9-step risk management processes [chapman 2006]. Most specific risk management processes involve a description in terms of phases which are divided into either tasks and activities, or deliverables [chapman 1997]. The main differences in the three most used risk management processes is based on the level of detail that is applied. The overlapping risk management process between the 5- and the 9-step process is the 4-step risk management process [pinto 2007]. Table 4.4 provides an overview of the steps in each of the risk management processes.

Table 4.4 – Risk Management Processes

4-step 5-step 9-step

Define Focus Identification Identify Identify Analyze Structure Ownership Estimate Analysis

Prioritize and Map

Evaluate Mitigation

Strategies Resolve Plan

Control and

Documentation Monitor Manage

Risk Identification – The risk identification is focusing on the realistic set of risk

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provide a source for risk identification and planning, and furthermore provide knowledge about assumptions that have proven to be right within an organization and types of project [royer 2000]. The second technique for risk identification is the brainstorming-based risk identification. When applying this technique facilitated brainstorming sessions with all involved stakeholders of the project are organized. Besides brainstorming on possible risks, the applicable mitigation strategies and potential contingency plans can be determined. Pinto [2007] agrees on these two identification techniques and added two more. First experts can be used to identify possible project risks. When applying this technique either the wisdom of a set of experts is used or just the experience of a single expert. The second technique is the multiple assessments. In this technique the project team together tries to identify sources of risk, with the assumption that the different experiences, knowledge, and perspectives allow the project team to identify the potential risks.

Risk Analysis – The risk analysis is performed to determine the probability and

consequences of each identified risk. The consequences are related to the performance criteria schedule, cost, and quality and are quantified based on estimations. See formulas 1 and 2 for the calculation methods of the severity of risks. Figure 3.3 shows the PI-matrix that provides a visual ranking of the risks and can be used as input for the mitigation strategy phase.

Risk Mitigation – Strategies for mitigating project risks include [turner 2005; ogc

2002; turner 1999]:

• Reducing the uncertainty associated with the estimates of key performance indicators on project; schedule, cost, and quality;

• Avoiding the risk by finding a different way of doing the project; • Abandoning the project;

• Reducing the likelihood of the risk occurring or the impact on the project if it does occur;

• Transferring the risk to other parties such as contractors or insurance companies;

• Accepting the risk;

• Creating a contingency plan to deal with the risk if it does occur.

Control and Documentation – Pinto [2007] adds to this mitigation strategies list

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partnership with another project organization or through the use of legal means like a contract. The partnership or legal relationship must ensure the mitigation of the risk or compensation when the risk does occur.

The documentation and control of risks starts when the risks are analyzed. Control documentation methods enable project managers to classify and codify the various risks that are faced, the responses to these risks, and the outcome of these responses. The documentation of a risk must contain an analysis of the problem, its mitigation strategy, a target date, and the expected outcomes to be effective.

Pinto [2007] derived five main questions that coherently identify the key information:

• What – the source of the risk;

• Who – the assigned responsible project team member, risk ownership;

• When – the time frame and milestones that determine when the mitigation is to occur;

• Why – the reasons for the risk;

• How – a detailed plan for how the risk is to be mitigated.

Implications – Risk management in projects offers opportunities to the project

advisory service of COMPANY X. Besides the knowledge and methodology of project risk management, risk management can be used for the empirical study. The five main question as stated by Pinto can be used as a starting point for the empirical study. Based on the theoretical findings on risk management the main topics for this empirical study are:

• The main risks in projects; • The main sources of these risks;

• The responsibility for dealing with risks; • The risk mitigation strategies used.

4.3 Quality Management

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success criteria, and therefore there is a need to be able to manage quality throughout the project. Within projects, quality has to do with [turner 2000]:

• Meeting customer requirement; • Meeting the specifications; • Solving the problem; • Fitting the purpose;

• Satisfying or delighting the customer.

Management of quality – The objects for which quality is an important feature in

project management are the material results, the content process, and the management process [huemann 2003]. The material results are the actual product or service that is the objective for the project. The content processes are the processes within the project that need to be executed to create the project results, often related with the different phases of a project. And the management processes in the project include all the project management activities needed to be able to run the project.

Quality management according to the PMI [2002] includes the processes aimed at ensuring the project will satisfy the needs that lead to the initiation of it. There are three main aspects in project quality management [PMI 2002]:

• Quality planning – the identification of all the quality standards that are relevant for the project and the project plan on how to satisfy these standards; • Quality assurance – the evaluation of the project to ensure that the relevant

quality standards are met;

• Quality control – the monitoring, comparing with the relevant quality standards, and the correction of the project product and the processes.

Measuring Quality – Two well-known tools for measuring project quality are

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Table 4.5 – Audits and Reviews

Management Audit Management Review

Initiator Project owner

Customer

Project manager

Owner Project owner Project owner

Client Project Project

Purpose Learning Feedback Controlling Problem identification Quality assurance Learning Feedback Quality assurance

Obligation High Medium

Formalization High Medium

Methods To be agreed on All possible To be agreed on All possible Object of consideration

Management processes and results

Organizational, team, and individual project

competence

Management processes and results

Organizational, team, and individual project competence Homebase of auditors/reviewers Company external Company internal

Company internal (peer review)

Number of

auditors/reviewers

1-3 1-3

Duration 1-2 weeks 2 days – 1 week

Resources Depending on scope of the

project and methods agreed on: 8-12 days

Depending on scope of the project and methods agreed on: 2-8 days

[source: huemann 2003]

Audit – The criteria that are used for an audit are a set of policies, procedures, or