Strategic Planning for Excellence in Project Management

Introduction

Strategic planning for excellence in project management needs to consider all aspects of the company: from the working relationship among employees and manager and between staff and management, to the roles of various players (especially the role of executive sponsors), to the company’s corporate structure and culture. Other aspects of project management must also be planned. Strategic planning is vital for every company’s health. Effective strategic planning can mean the difference between the long-term success and failure. Even career planning for individual project managers ultimately plays a part in a company’s excellence in project management or its mediocrity.

What is General Strategic Planning

Strategic planning is the process of formulating and implementing decisions about an organization’s future direction. This process is vital to every organization’s survival because it is the process by which the organization adapts to its ever-changing environment, and the process is applicable to all management levels and all types of organizations.

Formulation Process

The formulation process is the process of deciding where you want to go, what decisions must be made, and when they must be made in order to get there. It is the process of defining and understanding the business you are in and how to remain competitive within that business.

The formulation process is performed at the top levels of the organization. Here, top management values provide the ultimate decision template for directing the course of the firm.

Formulation

Scans the external environment and industry environment for changing conditions.

Interprets the changing environment in terms of opportunities or threats.

Analyzes the firm’s resource base for asset strengths and weaknesses.

Defines the mission of the business by matching environmental opportunities and threats with resource strengths and weaknesses.

Sets goals for pursuing the mission based on top management values and sense of responsibility.

Translation and Implementation of Formulated Plan

The formulated Plan are translated into policies and procedures for achieving the grand decision. Implementation involves all levels of management in moving the organization toward its mission. Middle and lower-level managers spend most of their time on implementation activities. Effective implementation results in stated objectives, action plans, timetables, policies and procedures, and results in the organization moving efficiently toward fulfillment of its mission.

Strategic Planning for Project Management

Strategic planning for project management is development of a standard methodology for project management, which can be used over and over again, and which produce a high likelihood of achieving the project’s objectives. Although strategic planning and execution of methodology does no guaranties profits or success, it does not improve the chance of success.

Implementation of Methodology

Advantage of developing an implementation methodology is that it provides the organization with a consistency of action. The methodology with a project definition process that is broken down into technical baseline, functional and management baseline, and financial baseline. Figure 3-1: shows the “skeleton” for the development of a simple project management methodology.

Figure 3‑1: Methodology structuring.

The technical baseline includes, at minimum;

Statement of work (SOW)

Specifications

Work breakdown structure (WBS)

Timing (i.e., schedules)

Spending curve (S curve)

The functional and management baselines indicate how you will manage the technical baseline. This includes:

Resumes of the key players.

Project policies and procedures

The organization for the project

Responsibility assignment matrices(RAMs)

The financial baseline identifies how cost will be collected, analyzed, variances explained, and reports prepared. This is simplistic process that can be applied to each and every project.

Identifying Strategic Resources

All businesses have corporate competencies and resources that distinguish them from their competitors. These competencies and resources are usually identified in terms of a company’s strengths and weaknesses. Strengths and weaknesses can be identified at all levels of management.

Senior management may have a clearer picture of the overall company’s position in relation to the external environment, whereas middle management may have a better grasp of the internal strengths and weaknesses. All organizations have strengths and weaknesses as no organization is equally strong in all areas.

Strengths and weaknesses are internal measurements of what a company can do and assessment of them must be based upon the quality of the company’s resources. Methodologies, no matter how good, are executed by use of resources. Project management methodologies do not guarantee success. They simply increase the chances for success provided that

The project objective is realistic

The proper resources are available along with the skills needed to achieve the objective.

Tangible Resources

The strengths and weaknesses of a firm are usually described in the terms of its tangible resources. The most common classification for tangible resources is:

Equipment

Facilities

Manpower

Materials

Money

Information/technology

Pictorial representation of resources is shown in Figure 4-1.

Figure 4‑2: Project resources.

Unfortunately, these crude types of classification do not readily lend themselves to an accurate determination of internal strengths and weaknesses for project management. A More useful classification would be human resources, nonhuman resources, organizational resources, and financial resources.

Human Resources

Human resources are the knowledge, skills, capabilities, and talent of the firm’s employees. This includes the board of directors, managers at all levels, and employees as a whole. The board of directors provides the company with considerable experience, political astuteness, and connections, and possibly sources of borrowing power.

Top management is responsible for developing the strategic mission and making sure that the strategic mission satisfies the shareholders. The biggest asset of senior management is its decision-making ability, especially during project planning and defining clearly its own managerial values and the firm’s social responsibility.

Lower and middle management are responsible for developing and maintaining the “core” technical competencies of the firm. Every organization maintains a distinct collection of human resources. Middle management must develop some type of cohesive organization such that synergistic effects will follow. It is the synergistic effect that produces the core competencies that lead to sustained competitive advantages and a high probability of successful project execution.

Nonhuman Resources

Nonhuman resources are physical resources that distinguish one organization from another. Boeing and IBM both have sustained competitive advantages but have different physical resources. Physical resources include plant and equipment, distribution networks, proximity of supplies, availability of a raw material, land, and labor.

Companies with superior nonhuman resources may not have a sustained competitive advantage without also having superior human resources. Firms that endeavor to develop superior manufacturing are faced with two critical issues. First, how reliable are the suppliers? Do the suppliers maintain quality standards? Are the suppliers cost effective? The second concern, and perhaps the more serious of the two, is the ability to cut costs quickly and efficiently to remain competitive. This usually leads to some form of vertical integration.

Organizational Resources

Organizational resources are the glue that holds all of the other resources together. Organizational resources include the organizational structure, the project office, the formal (and sometimes informal) reporting structure, the planning system, the scheduling system, the control system, and the supporting policies and procedures. Decentralization can create havoc in large firms where each strategic business unit (SBU), functional unit, and operating division can have its own policies, procedures, rules, and guidelines. Multiple project management methodologies can cause serious problems if resources are shared between strategic business units

Financial Resources

Financial resources are the firm’s borrowing capability, credit lines, credit rating, ability to generate cash, and relationship with investment bankers. Companies with quality credit ratings can borrow money at a lower rate than companies with non quality ratings. Companies must maintain a proper balance between equity and credit markets when raising funds. A firm with strong, continuous cash flow may be able to fund growth projects out of cash flow rather than through borrowing. This is the usual financial-growth strategy for a small firm.

Intangible Resources

Human, physical, organizational, and financial resources are regarded as tangible resources. There are also intangible resources that include the organizational culture, reputation, brand name, patents, trademarks, know-how, and relationships with customers and suppliers. Intangible resources do not have the visibility that tangible resources possess, but they can lead to a sustained competitive advantage. When companies develop a “brand name,” it is nurtured through advertising and marketing and is often accompanied by a slogan. Project management methodologies can include paragraphs on how to protect the corporate image or brand name.

Social Responsibility

Social responsibility is also an intangible asset, although some consider it both intangible and tangible. Social responsibility is the expectation that the public perceives

that a firm will make decisions that are in the best interest of the public as a whole. Social responsibility can include a broad range of topics from environmental protection to consumer safeguards to consumer honesty and employing the disadvantaged. An image of social responsibility can convert a potential disaster into an advantage.

For example Johnson & Johnson, earned high marks for social responsibility in the way it handled the two Tylenol tragedies in the 1980s. Nestle, on the other hand, earned low marks for its role in the infant-formula controversy.

Why does Strategic Planning for Project Management Fails?

We have developed a strong case earlier for the benefits of strategic planning for project management. Knowledge about this process is growing, and new information is being disseminated rapidly. Why, then, does this process often fail? Following are some of the problems that can occur during the strategic planning process. Each of these pitfalls must be considered carefully if the process is to be effective.

Lack of CEO Endorsement

Any type of strategic planning process must originate with senior management. They must start the process and signal their own aspirations. A failure by senior management to endorse strategic planning may signal line management that the process is unreal.

Failure to Reexamine

Strategic planning for project management is not a one-shot process. It is a dynamic, continuous process of reexamination, feedback, and updating.

Being blinded by success:

Simply because a few projects are completed successfully does not mean that the methodology is correct, nor does it imply that improvements are not possible. A belief that “you can do no wrong” usually leads to failure.

Over responsiveness to information

Too many changes in too short a time frame may leave employees with the impression that the methodology is flawed or that its use may not be worth the effort. The issue to be decided here is whether changes should be made continuously or at structured

time frames.

Failure of organizational acceptance

Company-wide acceptance of the methodology is essential. This may take time to achieve in large organizations. Strong, visible executive support may be essential for rapid acceptance. People cannot implement successfully and repetitively a methodology they do not understand. Training and education on the use of the methodology is essential.

Failure to keep the methodology simple

Simple methodologies based upon guidelines are ideal. Unfortunately, as more and more improvements are made, there is a tendency to go from informality using guidelines to formality using policies and procedures.

Blaming failures on the methodology

Project failures are not always the result of poor methodology; the problem may be poor implementation. Unrealistic objectives or poorly defined executive expectations are two common causes of poor implementation. Good methodologies do not guarantee success, but they do imply that the project will be managed correctly.

Failure to prioritize

Serious differences can exist in the importance different functional areas, such as marketing and manufacturing, assign to strategic project objectives. A common, across-company prioritization system may be necessary.

Rapid Acquisitions

Sometimes an organization will purchase another company as part of its long-term strategy for vertical integration. Backward integration occurs when a firm purchases suppliers of components or raw materials in order to reduce its dependency on outside sources. Forward integration occurs when an organization purchases the forward channels of distribution for its products. In either case, the company’s projects will now require more work, and this must be accounted for in the methodology. Changes may occur quickly.

Only by watching out for these potential problems can a firm hope to avoid them (or at least to minimize their negative effects). This is the path to success in strategic planning for project management

Critical Success Factor for Project Management

Critical success factors for strategic planning for project management include those activities that must be performed if the organization is to achieve its long term objectives. Most businesses have only a handful of critical success factors. However, if even one of them is not executed successfully, the business’s competitive position may be threatened.

The critical success factors in achieving project management excellence apply equally to all types of organizations, even those that have not fully implemented their project management systems.

Influence of Economical Conditions

Economic conditions can be favorable or unfavorable. Yet in either case, an astute company can convert someone else’s misfortune into its own good fortune. Every place we look we find windows of opportunity. But to take full and prompt advantage of these windows of opportunity, to be truly successful, management must have a repeatable process predicated upon speed and quality of execution.

Historical Basis

During favorable economic times, changes in management style and corporate culture occur very slowly. Executives are reluctant to “rock the boat.” But favorable economic conditions don’t last forever. The period between recognizing the need for change and garnering the ability to manage change is usually measured in years. As economic conditions deteriorate, change occurs more and more quickly in business organizations, but still not fast enough to keep up with the economy. To make matters worse, windows of opportunity are missed because no project management methodology is in place.

Strategic Factors in Achieving Excellence

Let’s look at the three critical success factors in achieving project management excellence: qualitative, organizational, and quantitative factors.

Qualitative factors

For companies to reach excellence in project management, executives must learn to define project success in terms of both what is good for the project and what is good for the organization. success in projects has traditionally been defined as achieving the project’s objectives within the following constraints:

Allocated time

Budget cost

Desired performance at technical or specification level

Quality standards as defined by customers or users

In experienced organizations, the four preceding parameters have been extended to include the following:

With minimal or mutually agreed upon scope changes

Without disturbing the organization’s corporate culture or values

Without disturbing the organization’s usual work flow

Organizations that eventually achieve excellence are committed to quality and up-front planning so that minimal scope changes are required as the project progresses. Those scope changes that are needed must be approved jointly by both the customer and the contractor.

Organizational Factors

Coordination of organizational behavior in project management is a delicate balancing act, something like sitting on a bar stool. Bar stools usually come with three legs to keep them standing. So does project management: one is the project manager, one is the line manager, and one is the project sponsor. If one of the legs is lost or unusable, the stool will be very difficult to balance.

In successful projects, project and line managers are more likely to have shared authority. While in unsuccessful projects, the project manager has often been vested with power (authority) over the line managers involved. In successful project management systems, the following equation always holds true:

Accountability = Responsibility + Authority

When project and line managers view each other as equals, they share equally in the management of the project, and thus they share equally the authority, responsibility, and accountability for the project’s success. A few suggestions for executive project sponsors follow:

Do not increase the authority of the project manager at the expense of the line managers.

Allow line managers to provide technical direction to their people, if at all possible.

Encourage line managers to provide realistic time and resource estimates, and then work with the line managers to make sure they keep their promises.

Above all, keep the line managers fully informed.

Conclusion

Executive project sponsorship must exist and be visible so that the project–line manager interface is in balance. Recommendations for obtaining maturity include:

Educate the executives as to the benefits of project management.

Convince the executives of the necessity for ongoing, visible support in the capacity of a project sponsor.

Convince executives that they need not know all the details. Provide them with the least information that tells the most.

Quantitative Factors

The third factor in achieving excellence in project management is the implementation and acceptance of project management tools to support the methodology. Project management education must precede software education. Also, executives must provide the same encouragement and support for the use of the software as they do for project management.

The following recommendations can help accelerate the maturity process:

Educating people in the use of sophisticated software and having them accept its use is easier if the organization is already committed to project management.

Executives must provide standards and consistency for the information they wish to see in the output.

Executive knowledge (overview) in project management principles is necessary to provide meaningful support.

Not everyone needs to become an expert in the use of the system. One or two individuals can act as support resources for multiple projects.

Project Management Maturity Model

All companies desire to achieve maturity and excellence in project management. Unfortunately, not all companies recognize that the timeframe can be shortened by performing strategic planning for project management. The simple use of project management, even for an extended period of time, does not necessarily lead to excellence. Instead, it can result in repetitive mistakes and, what’s worse, learning from your own mistakes rather than from the mistakes of others.

Strategic planning for project management is unlike other forms of strategic planning in that it is most often performed at the middle-management, rather than executive-management. Executive level management is still involved, mostly in a supporting role, and provides funding together with employee release time for the effort. Executive involvement will be necessary to make sure that whatever is recommended by middle management will not result in unwanted changes to the corporate culture.

The Foundation for Excellence

The foundation for achieving excellence in project management can best be described as the project management maturity model (PMMM), which is comprised of five levels, as shown in Figure 6-1. Each of the five levels represents a different degree of maturity in project management. Each level is discussed in detail in the remaining chapters. The levels are:

Common language

In this level, the organization recognizes the importance of project management and the need for a good understanding of the basic knowledge on project management and the accompanying language/terminology.

Common processes

In this level, the organization recognizes that common processes need to be defined and developed such that successes on one project can be repeated on other projects. Also included in this level is the recognition of the application and support of the project management principles to other methodologies employed by the company.

Singular methodology

In this level, the organization recognizes the synergistic effect of combining all corporate methodologies into a singular methodology, the center of which is project management. The synergistic effects also make process control easier with a single methodology than with multiple methodologies.

Benchmarking

This level contains the recognition that process improvement is necessary to maintain a competitive advantage. Benchmarking must be performed on a continuous basis. The company must decide whom to benchmark and what to benchmark.

Continuous improvement

In this level, the organization evaluates the information obtained through benchmarking and must then decide whether or not this information will enhance the singular methodology.

When we talk about levels of maturity (and even life cycle phases), there exists a common misbelieve that all work must be accomplished sequentially (i.e., in series). This is not necessarily true. Certain levels can and do overlap. The magnitude of the overlap is based upon the amount of risk the organization is willing to tolerate.

Continuous Improvement

All too often complacency directs the decision-making process. This is particularly true of organizations that have reached some degree of excellence in project management and become self-satisfied. They often realize only too late that they have lost their competitive advantage. This occurs when organizations fail to recognize the importance of continuous improvement. Figure 7-1 illustrates the need for continuous improvement.

Figure 7‑3: The need for continuous improvement.

As companies begin to mature in project management and reach some degree of excellence, they achieve a sustained competitive advantage. Achieving this edge might very well be the single most important strategic objective of the firm. Once the firm has this sustained competitive advantage, it will then begin to exploit it.

Capacity Planning

As companies become excellent in project management, the benefits of performing

more work in less time and with fewer resources become readily apparent. Companies are now struggling to develop capacity planning models to see how much new work can be undertaken within the existing human and nonhuman constraints. Using the approach shown in Figure 7-2, projects are selected based upon such factors as strategic fit, profitability, consideration of who the customer is, and corporate benefits.

Figure 7‑4: Capacity Planning.

The next step points up one critical difference between average companies and excellent companies. An excellent company will identify capacity constraints from the summation of the schedules and plans. Project managers will meet with project sponsors to determine the objective of the plan, which is different than the objective of the project. Is the objective of the plan to achieve the project’s objective with the least cost, least time, or least risk? Typically, only one of these applies, whereas immature organizations believe that all three can be achieved on every project. This, of course, is unrealistic.

Strategic Selection of Projects

What a company wants to do is not always what it can do. The critical constraint is normally the availability and quality of the critical resources. Companies usually have an abundance of projects they would like to work on but, because of resource limitations, they have to develop a prioritization system for the selection of projects. One commonly used selection process is the portfolio classification matrix. Each potential project undergoes a situational assessment for strengths, weaknesses, opportunities, and threats. The project is then ranked on the nine-square grid, based upon its potential benefits and the quality of resources needed to achieve those benefits.

Potential benefits of a project

Profitability

Customer Satisfaction/Goodwill

Penetrate New Markets/Future

Business

Develop New Technology

Technology Transfer

Reputation

Stabilize Work Force

Utilize Unused Capacity

Quality of Resources

Knowledge of Business

Manpower

Facilities, Equipment, Machinery

Proprietary Knowledge

Special Expertise

Reputation

Relationship with Key Stakeholders

Project Management Skills

Money

This classification technique allows for proper selection of projects, as well as providing the organization with the foundation for a capacity planning model to see how much work the organization can take on. Companies usually have little trouble figuring out where to assign the highly talented people. The model, however, provides guidance on how to make the most effective utilization of the average and below average individuals as well.

Horizontal Accounting

Recessions and poor economic times have put pressure on the average company to achieve better cost control. Historically, costs were measured on a vertical basis only. This created a problem in that project managers had no knowledge of how many hours were actually being expended in the functional areas to perform the assigned project activities. Standards were very rarely updated and, if they were, it was usually without the project manager’s knowledge. Strategic planning for cost control on projects is a three-phase effort.

Budget-based planning

This is the development of a project’s baseline budget and cash flow based upon reasonably accurate historical data. The historical databases are updated at the end of each project.

Cost/performance determination

This is where the costs are determined for each work package and where the actual costs are compared against the actual performance in order to determine the true project status.

Updating and reporting

This is the preparation of the necessary reports for the project team members, line managers, sponsors, and customer. At a minimum, these reports should address the questions of:

Where are we today (time and cost)?

Where will we end up (time and cost)?

What problems do we have now and will we have in the future, and

what mitigation strategies have we come up with?

Good methodologies provide the framework for gathering the information to answer these questions.

Organizational Restructuring

Effective project management cultures are based on trust, communication, cooperation, and teamwork. When the basis of project management is strong, organizational structure becomes almost irrelevant. Restructuring an organization only to add project management is unnecessary and perhaps even dangerous. Companies may need to be restructured for other reasons, such as making the customer more important. But successful project management can live within any structure, no matter how awful the structure looks on paper, just as long as the culture of the company promotes teamwork, cooperation, trust, and effective communication The organizations of companies excellent in project management can take almost any form. Today, small- to medium-size companies sometimes restructure to pool management resources. Large companies tend to focus on the strategic business unit as the foundation of their structures. Many companies still follow matrix management. Any structure can work with project management as long as it has the following traits:

The company is organized around non dedicated project teams.

It has a flat organizational hierarchy.

It practices informal project management.

It does not consider the reporting level of project managers to be important.

To sum it all up, effective cross-functional communication, cooperation, and trust are bound to generate organizational stability.

Carrier Planning

In organizations that successfully manage their projects, project managers are considered professionals and have distinct job descriptions. Employees traditionally are allowed to climb one of two career ladders: the management ladder or the technical ladder. (They cannot, however, jump back and forth between the two.) This presents a problem to project managers, whose responsibilities bridge the two ladders.