Successful Management Of Strategic Intentions Through Multiple Projects

INTERNATIONAL JOURNAL OF

PROJECT MANAGEMENT International Journal of Project Management 23 (2005) 386–391 www.elsevier.com/locate/ijproman

Successful management of strategic intentions through multiple projects – Reflections from empirical study Perttu Dietrich *, Pa¨ivi Lehtonen

1

Helsinki University of Technology P.O.B. 9555, 02015 Helsinki, Finland

Abstract This article focuses on how to implement strategies successfully through projects. Based on the literature we propose measures for successful management of strategic intentions in a multi-project context. Empirical survey of 288 organizations is used to analyze practices that organizations use in managing development projects. Correlations between management practices and success measures are examined and the success factors determined. Several success factors are found related to both single and multiple project management. In addition, the linkage between strategy process and project management, as well as the availability of high-quality information are identified as success factors. Ó 2005 Elsevier Ltd and IPMA. All rights reserved. Keywords: Managing projects; Success and strategy; Multi-project environment

1. Introduction Projects and project management serve as primary capabilities of an organization to respond to change and thereby maintain a competitive edge [1]. Projects may be considered as building blocks in the design and execution of future strategies of the organization [2]. Conventional efforts towards the effectiveness in managing single projects, however, do not suffice in todayÕs organizations. Therefore, the managerial focus of firms has shifted towards the simultaneous management of the whole collection of projects as one large entity, and towards the effective linking of this set of projects to the ultimate business purpose [3]. Variety of models and frameworks issuing different managerial approaches with multiple projects are presented in the literature under the terms of multi-project *

Corresponding author. Tel.: +358 50 385 3490. E-mail addresses: perttu.dietrich@hut.fi (P. Dietrich), paivi. lehtonen@hut.fi (P. Lehtonen). 1 Tel.: +358 50 386 2763. 0263-7863/$30.00 Ó 2005 Elsevier Ltd and IPMA. All rights reserved. doi:10.1016/j.ijproman.2005.03.002

management, multiple project management and project portfolio management [4–12]. The models and frameworks vary depending on the purpose and focus of the model. However, the common characteristic or objective for all of the approaches is to deliver additional benefit for the organization by introducing increased manageability and coordination over the entity formed by multiple projects and by ensuring better linkage between the current efforts conducted by projects and the intended strategic aims of the organization. Most of the models and frameworks presented in the literature are theoretical constructions to solve or describe managerial problems with multiple projects. Excluding only a few studies [13,14], current literature lacks empirical evidence on the functionality of different management approaches, formal or informal. In addition, testing and verification of suggested approaches are too often neglected or based on the results of single case studies. Consequently, described models are often context-related, present often relatively local solutions to related problems and thus the generalizability of the results can seldom be confirmed.

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The objective of this study is to identify the factors correlating with success in managing strategic intentions through multiple projects. In comparison to previous research, we approach the phenomenon with a quantitative approach and thus aim to provide more generalizable results on how organizations can implement strategies successfully through projects.

2. Successful management from the strategy perspective The use of concepts related to success is relatively ambiguous in the literature. Success is a broad concept that in a most straightforward sense simply means meeting or exceeding expectations and goals. In the project context, success is often conceptualized through success criteria and success factors. Success criteria refer shortly to the measures by which success or failure of a project or business will be judged. Consequently, success factors are defined as ‘‘those inputs to the management system that lead directly or indirectly to the success of the project or business’’ [15]. Various approaches and factors affecting project success and project business success have been presented in the literature [16–19]. Success is often evaluated through criteria that emphasize the effectiveness in the management of single projects and thus the fact that projects do have connections to organizationÕs strategy and other projects as well is neglected. We argue that in these studies projects are conceived as closed systems and success factors, respectively, refer to the enablers needed to realize a closed systemÕs (or projectÕs) strategy. However, in many cases effective management of single projects does not suffice to guarantee success in organizational level. Project success should be understood as a multifaceted strategic concept that goes far beyond meeting the time and budget constrains [20,21]. Thus, in addition to criteria indicating effectiveness in the management of single projects, the success of projects should be evaluated through their contribution to the organizationÕs strategy. From the strategy perspective success is ultimately judged through the achievement of sustainable competitive advantage [24]. Different theories and perspectives, such as resource-based view of the organization [23,26], organizational capabilities [25,27,28] and competencies and learning in organization [29,30], are proposed to explain the sources of competitive advantage in organizations. These different perspectives argue that strategic success is, in addition to environmental factors, also dependent on intra-organizational variables [32], such as organizational culture [22], organizational learning [31] and knowledge [30]. In this respect success from strategic perspective is dependent on the organizationÕs ability to implement the desired courses of action. In this study, we aim to examine how to enhance the effective

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realization of strategic intention, and adopt the view that organizational success in managing strategic intentions refers to the organizationÕs ability to manage its compliance to intended strategies. However, the exact measurement of the organizationÕs ability to comply with the intended strategy is rather complex as strategies are dynamic in nature and change over time, and the concept of strategy itself is ambiguous and rather abstract in nature. Thus, we adopt the idea that strategy can be broken down or seen to consist of specific goals or objectives, which again can be reduced to sub-goals [35], and that the goals and sub-goals rather precede the actions than are formed as a result of those actions. Based on these assumptions we conceptualize the successfulness in managing strategic intentions to refer to how well the objectives of the efforts placed to achieve changes are in line with the guidelines of the intended strategy. For many organizations, various forms of development projects are central vehicles to implement the intended strategies [34]. Based on the discussion above we choose to measure the successfulness in managing strategic intentions in a multi-project context through examining how well: (1) the objectives of the projects are aligned with the strategy of the organization; (2) the resource allocation to different projects is aligned with the strategy of the organization; (3) the current portfolio of projects implements the strategy of the organization.

3. Managing successfully in a multi-project context A variety of managerial approaches are identified to have an effect on how well an organization operating in a multi-project environment succeeds. Single project characteristics and management activities are closely related to the overall success of the organization [36]. Single projects need to be managed well in order to get the most out of the group of projects [37]. Among others, characteristics related to the decision-making activities of single projects, and flexibility and formality of the project management approach have been proposed as variables partly explaining the differences in projectsÕ outcomes [14,13,38]. The management approaches in a multi-project environment generally distinguish between management efforts directed to single projects and management activities that focus on group of projects [13,39]. Systematic and purposeful evaluation and selection of projects has been observed to lead to better results [13]. Moreover, literature proposes flexible management processes with explicitly defined rules and procedures as a source of success with multiple projects. Some studies report that utilization of specific methods and tools correlate with superior performance in multi-project management [10].

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The role of projects has developed from a pure device of delivery to an important vehicle in strategy realization. Several authors have emphasized the importance of linking projects and their management to strategy and proposed different models describing how the management processes at project and multi-project levels can be integrated with the organizational strategy management process [4,9,11,12]. Finally, some authors have noticed the importance of meaningful and reliable information as a prerequisite of successful management and high-quality decision-making [40]. Management in multi-project environments involves many decisions, and the quality of decisions is largely based on the quality of information the decision maker have. Based on the discussion above we propose that success in managing strategic intentions through multiple projects is dependent on: (1) single project level characteristics and activities; (2) multi-project level characteristics and activities; (3) the linkage between projects and strategy process; (4) the availability and quality of project information.

4. Data collection and analysis In the empirical study, we used the four above mentioned issues as a framework, in which each issue is operationalized to include several individual variables that potentially correlate with the successfulness of the organization in managing its strategic intentions. These present potential success factors and are presented in the left-most column of Appendix A. The data that was used to test the framework was gathered with the help of a vast questionnaire survey targeted to large and medium-sized Finnish organizations. The sample consists of organizations implementing multiple simultaneous project-like development activities, including product development and organizationsÕ internal development projects. The questionnaire was sent to altogether 1102 private and public organizations employing more than 100 people. In organizations, the respondents were persons responsible for development activities. A total of 288 organizations returned the questionnaire, thus making the response rate 26.1%. The responses were analyzed statistically with the help of SPSS 11.5 (Statistical Package for the Social Sciences) program. OrganizationÕs successfulness in managing strategic intentions in a multi-project context was measured through the following three statement-type indicators:  The objectives of the projects are aligned with the strategy of the organization  Resource allocation to different projects is aligned with the strategy of the organization

 The current portfolio of projects implements the strategy of the organization Each of the three variables was measured with a standard five-point Likert scale, value 5 referring to ‘‘strongly agree’’ and value 1 being ‘‘totally disagree’’. In order to validate the use of the three variables as a common sum variable factor analysis was conducted. The analysis revealed that all three variables above correlate with the single sum variable that was found. Factor scores were calculated to indicate the ability of organizations to manage strategic intentions successfully in multi-project contexts, and organizations were categorized to five hierarchical groups according to the factor scores. Analysis of variance was used to detect the variables that correlate with the success of managing strategic initiatives in a multi-project environment. The categories calculated based on the factor scores were used as a dependent variable and each variable on Appendix A was individually tested as an independent variable with a one-way analysis of variance to determine, whether the variables correlate with the organizationsÕ success in managing strategic initiatives in a multi-project environment.

5. Results of the empirical analysis: success factors The results of the statistical tests are presented in Appendix A. In the table, F values as well as the significance levels are presented along with the results of whether or not a correlation was found between each variable and success. 5.1. Single project level characteristics and activities The organizations that succeed best in managing strategic initiatives in a multi-project environment have a common project management process or project model and they also use it in as many projects as possible. These organizations also employ formal decisionmaking practices related to the initiation of the projectÕs execution phase, projectÕs proceeding during the execution phase, and projectÕs close up. However, the formality of decision-making related to conducting a feasibility study on a project idea and initiating the planning phase of the project did not seem to correlate with success. These findings suggest that successful management approaches are characterized by formal decision making practices in project execution phase. However, in some organizations, more informal and unstructured decision-making activities may be more suitable during the fuzzy front end phase of the project, i.e., project idea emergence and project initiation. In addition, the most successful organizations report that their management

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style is flexible enough to accommodate different types of projects and also commonly understood and accepted throughout the organization. 5.2. Multi-project level characteristics and activities The most successful organizations tend to organize at least most of their development projects into programs or other fixed entities. They also evaluate and compare their project ideas consistently when selecting new projects to be implemented. Statistically significant correlations were also found in examining the methods used in the evaluation of projects and project ideas. Regular use of discounting-based financial methods, structured discussion and group work methods correlates positively with success. However, the correlations detected could simply mean that some more formal methods than just unstructured discussion is needed. Our interpretation is supported by the notion that structured discussion, e.g., with the help of a check list, correlates positively with success. The use of more sophisticated tools and methods, such as scoring models and option or scenario thinking, was very rare among respondent organizations, and it did not correlate with success. Reviewing the set of projects as an entity correlates strongly with success. In reviewing a group of projects, formality of the process in terms of whether the review is based on predetermined rules and procedures seems to have no correlation with success. Results of the study suggest that the level of formality required is organization-specific; some organizations succeed with formal practices and some with more informal ones. Instead of formality, the flexibility of multi-project management practices seems related to success. Also the regularity of reviews correlates positively with success, so apparently some order is needed in the process. 5.3. The linkage between projects and strategy process The results reveal that organizations which are the most successful in managing their strategic intentions in a multi-project environment tend to review the objectives of their ongoing projects in linkage with strategy formulation. In addition, the most successful organizations review their project portfolio in linkage with the strategy follow-up process. The results clearly indicate that the management of projects and group of projects such as portfolios and programs should be included as a part of the strategy process for the organization to be able to implement its strategies successfully. 5.4. The availability and quality of project information The quality of information the decision makers have on projects is strongly related to the successfulness of

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management. The strong statistical correlations in all dimensions of information included in the framework, the availability, topicality and validity of information, indicate the importance of high-quality information in decision making as an enabler or even a prerequisite for the organizations to successfully implement its strategies through projects.

6. Discussion The objective of this article was to identify factors related to success in managing strategic intentions through multiple projects. The framework consisting of potential success factors was tested empirically. The success factors found include management activities both at single project and multi-project level, as well as issues related to the availability and quality of project information and managing the linkage between strategy process and projects. Most of the findings of this study are in line with prior studies representing existing body of knowledge in managing multi-project contexts. However, some differences were found. The literature has emphasized the importance of formality in multi-project management processes [41]. Still, the empirical study displayed neither positive nor negative correlation between having established rules and procedures for management in multi-project environment and success. This indicates that formal procedures are appropriate for some organizations, while the others may yield better results with an informal approach. Thus, the need for formal procedures is an organization-specific issue. The results of this study provide novel insights into project management knowledge and serve as grounds for further academic research on implementing strategies in a multi-project context. In addition, from a pragmatic point of view the results of the study can be applied to benchmarking and developing activities for organizations operating in multi-project environments. Several implications for further research can be recognized. This study focused mainly on formal management processes. However, decision making usually includes informal and invisible processes, and there can be a variety of different and even complementary processes for managing multiple projects in an organization. Thus, extending our framework to include these informal practices can be considered as an interesting future research agenda. In addition, in this study we have made the daring assumption that the strategies are properly defined and lead to successful outcomes if implemented as planned. Strategies also often include an emergent component [33], which we have left out of consideration. Further research could complete our study by examining the role of projects as a source of strategy renewal.

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Appendix A Success factors Factors and determinants within main categories

Observed correlation with success (+/ /no correlation)

Multi-project level characteristics and activities 1. Number of projects 2. Structural linkages between project 3. Comparison and evaluation of project ideas 4. Methods in project and project idea evaluation 4.1 Use of discounting-based financial methods 4.2 Use of scoring model 4.3 Use of structured discussion 4.4 Use of informal discussion 4.5 Use of group work method(s) 4.6 Use of option or scenario thinking 5. Reviewing set of projects 5.1 The set of projects is reviewed as a whole 5.2 The review of the set of projects is based on predefined methods and rules 5.4 The management approach is flexible with different types of projects 5.5 The set of projects is reviewed on a regular basis The linkage between projects and strategy process 1. Ongoing projects and strategy process 1.1 The objectives of ongoing projects are revised in linkage with strategy formulation 1.2 The objectives of ongoing projects are revised in linkage with strategy follow-up 2. Multiple projects and strategy process 2.1 The set of projects is reviewed in linkage with strategy formulation 2.2 The set of projects is reviewed in linkage with strategy follow-up The availability and quality of project information 1. Information sufficiency and validity 2. Information reliability 3. Information topicality *

Indicates that the result is significant at 0.05 probability level.

+

Significance level

4.916

.008

**

No correlation No correlation + + + +

2.471 .939 9.636 12.874 6.655 20.427

.117 .333 .002 .000 .010 .000

** *** * ***

No correlation + +

1.865 3.763 19.169

.101 .003 .000

* ***

+ No correlation + No correlation + No correlation

4.764 2.081 6.097 .000 7.543 0.685

.030 .151 .014 1.000 .006 .409

+ No correlation + +

17.583 .057 7.646 4.275

.000 .812 .000 .040

+ No correlation

4.894 1.363

.028 .244

No correlation +

1.364 7.868

.244 .006

**

23.132 8.092 10.888

.000 .000 .000

*** *** ***

+ + + **

Significance (F-test)

Indicates that the result is significant at 0.01 probability level.

***

* * **

*** *** *

*

Indicates that the result is significant at 0.001 probability level.

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Single project level characteristics and activities 1. Use of project process/project model 2. Decision-making practices 2.1 Formal decision making related to conducting a feasibility study on a project idea 2.2 Formal decision making related to project planning phase initiation 2.3 Formal decision making related to project execution phase initiation 2.4 Formal decision making related to projectÕs proceeding during project execution 2.5 Formal decision making related to project close up 3. Management style commonly understood and accepted

F-value

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