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ENSURING PROJECTS ARE EFFECTIVE AND EFFICIENT
RESEARCHERS FROM THE SCHOOL OF BUSINESS AND LAW AT EDITH COWAN UNIVERSITY LOOK AT WHY INVESTING IN THE RIGHT PROJECTS AND TRACKING THE BENEFITS THAT EACH PROJECT REALISES, IS AN IMPORTANT PART OF HOW PROJECTS CAN CONTRIBUTE POSITIVELY TO THE HEALTH OF THE AUSTRALIAN ECONOMY.
THE RESEARCH PROBLEM
Over the last 18 months and with the support of AIPM we’ve been exploring the peak performance of projects. We wanted to know what contribution projects could make to the health of the Australian economy.
The reason this is important is because the economy is changing. We’re already seeing a shift in Australia from an industrial to a “post-industrial” configuration, and this means many businesses are now using project management processes to support innovation without running formal projects. While we think this will have a positive impact on a firm’s performance, the reality is that this is not really tracked, and we can’t say with certainty how this impacts the economy. All we know is projects should create some sort of value.
OUR APPROACH
In some ways it might seem like a simple research task; projects make things, and these things help the economy to grow, and that’s where the value comes from. But when we investigated it, things weren’t that simple. It is correct that benefits stem from the use of the products created by the project, which in turn creates value. But proving it is a difficult task. There’s no national directory of projects, and project managers aren’t the people who define what benefits the project will bring. That’s the job of the sponsor. Nor are project managers around after the project has ended to see if what was promised was what was realised. That’s the job of the client organisation.
THE VALUE OF VALUE
To set our research up properly we needed to define what we meant by the word “value”? Here we’re treading on old ground. Way back in 2008, the PMI funded some research which partially answered the same question but also concluded that the question was far from simple. Since then academics have researched value beyond the financial angle and have looked at the environmental and social concepts.
For more than a decade there’s been little consistency and the result is a swathe of articles that look at topics as diverse as earned value management, value for money, client value, the value chain, cultural values, the value of diversity and trust, competing values, the value at risk and even the value of values.
In 2019 researchers writing in one of the best academic journals tried again. They produced 10 papers that still left gaps in our understanding. What this meant for us was that we had to agree a definition that we’d use. We also accepted that other academics would disagree with it. So we settled on value as being the worth of the project or the deliverables that arise from the things the project creates.
Furthermore, when we’re looking at what projects contribute to the economy, we need to be aware that the building blocks of a research question are founded on the multiple meanings of value. This can cause problems when we try and link it to economic, environmental, and social perspectives. This problem is not uncommon in research. The way we deal with it is by explaining what we mean when we use terms and when we make arguments.
THE ECONOMIC CONTEXT
In early 2020, the context of our research shifted when the COVID-19 pandemic impacted Australia. We saw that it accelerated an existing decline in the performance of gross and net national product. It meant that the policy decisions of national and state governments to inject large capital sums of money into the economy would put projects, project management, benefits and value under scrutiny. It presents Australia with a new challenge. Can significant government investment in capital projects help to rebuild the national economy? To what extent will the management of projects come under scrutiny?
DOING THINGS RIGHT
It is not new to suggest that organisations running projects need to address two issues - efficiency and effectiveness. Doing a project right is important but doing the right project is arguably vital. At the moment, effective and efficient projects with clearly defined benefits and mechanisms for tracking these against the original investment are crucial to assisting the national economic recovery.
But recovery isn’t just about returning to what existed before. Australia is witnessing a reshaping of the economy. We’re seeing businesses close, merge, morph and new ones being born. Good projects make these things happen. As they do, an economic supply side stimulus is also being created. That’s also how projects support the economy.
Efficiency
Let’s consider efficiency first. In one strand of our research we looked at efficiency using a modelling technique called data envelopment analysis. We ran a national survey for project managers to capture the data we needed. This gave us a lot of information about different projects. Using our modelling technique, we saw that some projects were less efficient than others.
Mining projects seemed to be the most efficient, whereas construction projects were the least efficient. In fairness we also found examples of efficient and less efficient projects in every sector.
Together with other research we think the reasons for this are already known; a lack of skilled labour, poor cash flows, smaller profit margins, and high indirect costs. But what should organisations look at when deciding how to assess efficiency?
Our research suggests that looking at whether the project schedule was achieved is fundamental, but so too is technical performance, client satisfaction, and the amount of rework. Some of these issues may already be familiar to construction project managers. Finding out why mining projects manage these in a better way requires further study. This is not to say that all mining projects were efficient. Far from it. It’s just that the projects we looked at placed the efficiency of mining projects higher than the efficiency of construction projects.
What is useful is that organisations can use the same modelling techniques as we used to see if they can work out how efficient their projects are. We also developed some tools that can complete the data set if any values are missing. We believe this is important because an efficient project could save time and money. This goes some way to maximising the investment that a client makes when funding the project.
Effectiveness
Having considered efficiency, we know that this is only part of the issue. It brings us neatly on to discussing effectiveness. That’s where the business case and some notions of “value” come in. The point of the business case is that it should guide the client towards choosing the right project at the start. One that best delivers the return on the investment they are making.
It is well known that benefits stem from the use of the products created by the project which in turn creates value. If we can’t measure them, we can’t track them. Furthermore benefits aren’t random. They should be linked to the strategic priorities of the organisation.
Benefits identification and management have long been known about in project management but ironically do not feature prominently in all approaches. For example, while PRINCE2 practitioners embed them in their approach, other practitioners following a PMBOK Guide set of processes only enter the project
once it has been chartered. This means it has already been given the green light by the organisation. So not all project management approaches enter the project at the same stage. Perhaps a broader question is what role is played by the organisation? After all, they own and commission the project. Perhaps we should be asking them what their benefits identification and management process looks like?
Organisations such as AIPM are already ahead of this. They recognise that for the organisation, maturity in this area begins with having a good benefits management framework that is applied right across the portfolio. This sets the scene for projects within the organisation to be selected and managed in a way that delivers the strategic objectives. As these objectives need to be measurable, so too must the benefits for individual projects. It’s a cultural thing.
The organisation needs to map planned benefits for all projects against its own strategic objectives. This map is not a benefits register. The benefits register only records information about each benefit which includes its category, and how that benefit contributes to the organisation’s strategic objectives. Mature organisations will therefore have a framework that describes the structure of the benefits register without being a benefits register itself.
A mature framework is also more than just a toolbox. Organisations that understand this are well placed to maximise good project management. They can also be fairly brutal. If projects are not contributing sufficiently to the strategic benefits framework then they should be terminated. What this does is contextualise the role of the organisation at the portfolio level, and the role of the project manager at the project level. They are not the same thing. Collectively however they work together to deliver value.
COVID-19
The final fundamental issue is whether any of this needs to change given the context of a post COVID-19 economy? Arguably yes. The operating environment and therefore the strategic context of organisations is changing. Maybe clients should now be focusing on the specific strategic objectives that underpin economic outcomes such as a financial return on investment or changes in headcount. These are both tangible and measurable. But while this may be beyond the daily remit of project managers, it remains part of the consultancy provided by project management professionals within organisations.
Our research suggests that the wider project management profession should be encouraging client organisations to look at the maturity of their own project management techniques.
Organisations should be looking at the financial and economic case for any future projects so that they only spend money on the most suitable projects to get the investment returns and value they need to maintain corporate health.
Does this apply to government projects as well? Certainly. Doing a government project right is important but doing the right project based on an economic recovery plan is arguably vital.
The conclusion we draw from all this is that investing in the right projects, and running projects in an efficient way, and particularly tracking the benefits that each project realises, is an important part of how projects can contribute positively to the health of the Australian economy.
Authors: Alistair Campbell PhD, Denise Gengatharen PhD MAIPM, Reza Kiani Mavi PhD (Joint Chief Investigator), Richard Hughes MAIPM CPPM (Joint Chief Investigator) and Ross Yates PhD MAIPM CPPD from the School of Business and Law, Edith Cowan University.
