Project management within organisations

Executive Summary

This report is focussing on the critical evaluation of two major aspect of project management process; stakeholder management and risk management. In depth analysis of tools and techniques of both the aspects has been done. Along with power/interest matrix, communication plan for stakeholder management and risk identification, risk analysis, risk mitigation and control and documentation have been illustrated as different steps of risk management, with appropriate frameworks and diagrams. The importance of these aspects has been reflected with the literature support and examples of both successful and unsuccessful case-studies have been used, from both academic source and personal experience.

Introduction

Guide to the Project Management Body of Knowledge (PMBOK Guide) defines project as “A temporary endeavour or undertaken to create a unique product or service, temporary means that every project has a definite beginning and definite end” (Project Management Institute, 1996: cited in Project Management Journal, 2003). In the same context other authors point out that projects are non-routine processes and involve the coordination of interrelated activities (Rad, 2003). PMBOK, 1996 defines project management as “The application of knowledge skills, tools and techniques to provide activities in order to meet or exceed stakeholder needs and expectations from a project”. Projects are now the most popular way to get things done and projects themselves are now often co-ordinate thorough programmes. Maylor, 2005 states that to have a successful project, manager needs to be good at planning and managing projects with sufficient knowledge and experience, especially in the kind projects and about the tools and techniques to project activities. Project management helps companies in attaining targets based on vision and strategy (Thurston, 2009). There are no magical instructions for a successful project however good project planning during the initial phase, can impinge positively on cost, time and quality areas of any project. This report has been written to critically evaluate the two aspects i.e. Stakeholder management and Risk management as an important aspect of overall project management process, with the support of literature and case-studies are provided as an example.

Literature Review

Stakeholder management

Maylor, 2005 states that stakeholder management is 1 of the s’ out of 7’s framework of project management and management related issues were later promoted by Mckinsey & Co., Management consultants. Stakeholder management is one of the major aspect of project management and Freeman (1984) describes the concept of stakeholders as any group or individual who can affect, or is affected by, the achievement of a corporation’s purpose however it has been criticised by Phillips, 2003; Sternberg, 1997; and Mitchell et al., 1997, that if everyone is a stakeholder of everyone else then there is little value-added in the use of the stakeholder concept. The other school of thought identify stakeholders through the potential harms and benefits that they experience or anticipate experiencing as a result of the organization’s actions or inactions (Donaldson and Preston, 1995). Figure 1 shows that projects generally have a range of stakeholders with strategic expectations and operational requirements. Stakeholders can be either internal or external. “Internal stakeholder can be defined as project owners in the sense they have overall managerial responsibility and power usually linked to a financial stake and organisation teams or individuals who have a contractual relationship with the project owner” (Chapman, 2008)-ref. needed for example- Top-management, Accountant, other functional managers, project team members whereas external shareholders are “who may be positive or negative about a project, who may seek to influence the project through political lobbying, regulation, campaigning or direct action” (Ward, 2008)-ref.needed, like clients, competitors, suppliers, consumer. Stakeholders can be internal and external to the project scope or it can be external and internal to the project team, therefore their determination depends on the point of view of the observer.

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Johnson and Scholes (1999) state that it is not enough simply to identify stakeholders however managers need to assess each stakeholder’s interest to express its expectations on project decisions and if there is the power to follow it through. Although there are various perspectives of stakeholder theory (e.g., social science stakeholder theory, instrumental stakeholder theory), one common perspective is their perception that they have stake in an entity or task. As a result, they have certain expectations, and consequently, engage in certain types of behaviour, sometimes constructive, explained later in the case study of green-belt project in Genpact and sometimes destructive, explained later in the case-study of new airport terminal at Jersey airport (Bourne & Walker, 2006).

Because of their perception, stakeholders behave in ways in which they feel, will help them achieve their project objectives, which may be congruent or incongruent with the project manager’s project mission, vision, and objectives. “Frequent conflicts between stakeholders revolve around long term versus short-term objectives, cost efficiency versus jobs, quality versus quantity, and control versus independence” (Newcombe, 2003). Therefore, it is incumbent upon the project manager to understand the objectives of each project stakeholder in order to effectively manage his or her needs and desires. According to Jergeas et al. (2000) and Cleland (1986), important key to project success is an efficient management of the relationship between the project and its stakeholders. “In order to achieve a successful project outcome, the project manager must be expert at managing the interests of multiple stakeholders throughout the entire project management process” (Sutterfield et al, 2006). Jergeas et al (2000) argued that some stakeholders have power because they control information and resources, while other stakeholders are important because they decide whether the project result is a success or not.

Power/interest matrix –

Firstly, it is important to identify the space between the current and future expectation of the shareholder as well as to study the qualitative relationship they share. Secondly, because of difference goals and interests, stakeholders face difiiculty in reaching to an agreement on deliverables as a result it leads to a conflict between them. Antonioni, 2009 suggests that project manager may tend to avoid or accommodate, instead of engaging in collaborative problem solving to attain winning outcomes. The formation of stakeholders is often triggered off with specific events. Therefore, if faced with different possible future events, it is helpful to speculate on the degree of unity or diversity between the various groups. During strategic analysis, the process of uncovering potential alliances or rifts may be significant when thinking about future strategic choices (Miller & Wilson, 1998). Lastly, failure to establish and manage the communication process with stakeholders can lead to a lack of support from stakeholders, disapproval of the deliverables and dissatisfaction working with project manager (Antonioni, 2009) and for this reason communication plan holds importance in project management.

Communication Plan –

Effective communication is very important in any project and every project should include communications management planning. Communication plan is a document which gives guidance to the project team to communicate with the stakeholders, at a right time, and to timely inform them, though it varies according to the needs of the project. Therefore Schwalbe (2006) suggests that Stakeholder communication plan should include Information to be communicated with the format of who will receive the information and who will produce it, Suggested methods or technologies for conveying the information, Frequency of communication, Escalation procedures for resolving issues, Revision procedures for updating the communications management plan. It will help in avoiding wastage of time and money or even from disseminating unnecessary information. Figure 3 is an example of a stakeholder communication analysis:

Case-study comparison as successful and unsuccessful:

There is an example, Fig. 4, which reveals that how an efficient management can leads to an accomplishment of project-targets. In this project the stakeholders identified as controllers, allocations, treasury department, client and Genpact, wherein the key recognized problems were to reduce the delay in hand-off of un-reconciled items to controllers which are impacting the performance of other related departments, reduced frequency of reconciliation preparation leading to un-processed items, affecting the financials of the company. In lieu to carry on the project, the business goal and challenge has been set-out by keeping in mind the interests and objectives of all stakeholder’s mentioned above. The improvement actions suggested providing benefit not to one but to all the departments so that the projects outcome could be successful, without having conflicts.

Due to effective management of stakeholder’s vested interests and objectives, the projects outcome was delightful and figure 5 shows customers feedback to the Genpact and to the related stakeholders.

On the other hand, the case-study of construction of a new airport terminal building at Jersey Airport illustrates as to what can happen when project managers do not adhere to the fundamental principles of stakeholder management, adapted from article in Financial Times (1996, cited in Maylor, 2005). The main concern is the completion of the project in stipulated time-frame, i.e. in spring to cater to the in-flux of tourist in summer, though the target was achieved however suffered a negative publicity when financial times reminded potential visitors to Jersey that “….they can easily go by boat”. Customers, external stakeholders, will need to know that their requirements have been considered carefully and sufficient steps have been taken to fulfil them. Complaints by air-traffic controllers (ATC) that they were being dazzled by sunlight reflected on the roof of the new terminal building and CEO replied that at-least this will not happen in winter, another complaint by the ATC, stakeholder, is that the new building is affecting the accuracy of wind speed indicator and they were advising pilots to use their own judgement regarding the wind-speed and furthermore the new building has obscured the view of parts of the taxiway to the ATC’s clearly reflects that How can the mismanagement of the stakeholder’s interests and objectives can hamper a project.

Risk Management-

“Project risk management, as one of the key disciplines of project management, is defined as the systematic process of identifying, analysing and responding to risk as project-related events, or managerial behaviour, that is not definitely known in advance, but that has potential for adverse consequences on a project objective” (Project Management Institute, 2004 cited in Kutsch and Hall, 2009). Ben-David and Raz, 2001 states that regardless of number and definition of stages, project risk management processes have one element in common: ”an activity that deals with planning actions that will be implemented in order to reduce the exposure to risk”. Reiss, 1995 has created an argument by citing examples as “a survey of IT management consultancies which showed that only 30% applied any form of risk analysis and yet 90% of projects went over budget and 98% had changed specifications, usually to a lower spec” however in December 1992, Computer weekly reveals that as a result of abandoning or replacing projects up-to 50 UK companies recently lost as much as $1 billion between them. “Risk management includes identification of risks, assessment of risks either qualitatively or quantitatively, choosing an appropriate method for handling it and last but not the least is monitoring and documenting the risks. The requirement of an effective risk management is that a manager needs to be proactive and demonstrates a willingness to develop contingency plans, actively monitor the project and be willing to respond in a quicker manner in an event of risk occurrence. Time and money are essentially required for effective risk management to take place” (Kerzner, 2003).

Risk Management has 4 stages as –

1. Risk Identification
2. Analysis of profitability and consequences
3. Risk mitigation strategies
4. Control and documentation

Risk-Identification and techniques-

Uncovering weaknesses in methods used in product development through structured approach so that timely mitigation actions are initiated to avoid risk, transfer risk, reduce risk likelihood or reduce risk impact refers by risk management process (Risk Management Standard AS/NZS 4360, 1999). Figure 6 shows the risk management process proposed by the Australian Standard for Risk Management. It is composed of seven iterative sub-processes of establishing the context of risk, identifying risks, analysing risks, evaluating risks, communication and consultation across stakeholders and monitoring and controlling risk events. Study a situation to identify what could go wrong in the product design and development project at any given point of time during the project is risk identification. Identification of risk and potential consequences sources to be done, before they can be acted upon to mitigate (Ahmed at al, 2007). Risk identification helps managers in identifying different types of risks such as – financial, technical, commercial, execution and legal risks and it can be identified with the help of different tools, such as-

1. Checklists- An insignificant method, where crucial points are examined for symptoms of potential risk situation (Ahmed et al, 2007), usually evolve over time through collective experiences and contributions from various functional experts (Ward, 1999)
2. Influence diagrams – Before the risk situations eventuate, their effects can be described through visual display (Clemen, 1996).
3. Cause-and-effect diagrams – Also known as fish-bone diagram which means the breaking up of the root causes of any problem into detailed sources (Russell and Taylor, 2000). These are easy to use however they do not provide a foundation for further analysis.
4. Failure Mode and Effect analysis (FMEA) and Hazard and Operability study (HAZOP)- In a technical system, FMEA provides a format for determining causes, effects and relationships wherein a scale of 0 to 10 is used to rate the causes (Kumamoto and Henley, 1996). It is calculated by multiplying the severity, occurrence and detection. An extension of FMEA, HAZOP can be applied by considering project parameters such as strategy, budget and schedule to identify risk situations (Ahmed et al, 2007).
5. Fault trees and Event trees- A visual technique used for breaking down failure in the system into source events is performed by fault tree analysis where as “graphical representation is of potential consequences arising from a failure where possible consequences are generated and broken down from an initial event” (Kumamoto and Henley, 1996).

Risk Analysis and techniques-

After the identification of risk events, if their further analysis is required then project manager needs to be determined whether the risk event information can be acquired through quantitative or qualitative means. There are two parameters to measure risk- risk probability and risk consequence (Chapman and Ward, 1997). The function of risk analysis is to determine influence of risk factors on the system as a whole. One or more aspects of the project are cumulatively affected by the risk events and if the risk events are bunched together they can be mitigated easily. The bunched risk events can be dealt at the higher level in the long run rather than handling one particular risk event at a time, where the project is likely to be micro-managed. Because the techniques which have been mentioned earlier, applied for project analysis, can also be applied for risk analysis such as- Fault tree analysis, Event tree analysis and Estimation of system reliability and sensitivity analysis and simulation.

Estimation of system reliability –

It includes the analysis of smooth functioning of a technical system. Hence, cumulative effects on the critical components of the project are determined as the system reliability.

Fault tree and Event tree analysis-

It analysis the flow of risk from top-level to the low-levels as mentioned earlier. Event tree analysis states “The probability of occurrence of a particular outcome is determined as a product of all probabilities of occurrence in the associated branch” (Ahmed et al, 2007).

Sensitivity analysis and simulation –

A baseline for the project metrics is generated as a precursor to a what-if analysis and then project conditions are manipulated to determine their effect on the project metrics. This leads to an understanding of the system response to changing project situations. Simulation is used as an extension to the sensitivity analysis (Berny and Townsend, 1993). In simulation, a system model is constructed to reflect actual processes with project parameters and constraints. Then, the values for the risk parameters and constrains are randomly selected in a predefined range (Ahmed et al, 2007). It’s a flexible technique which requires a statistical analysis of a problem.

Risk Mitigation –

When risk events eventuate, the risk mitigation actions are initiated and which can be seen as initiation of contingency plans, this process is known as a reactive approach or a feedback approach however a proactive approach or a feed forward approach is the process when any occurring risk event results in initiation of actions such as insurance. “A combination of these two approaches is applied to risk management to avoid risk, reduce the likelihood of risk, reduce the impact of risk, transfer risk, or to retain the risk” (Kartam, 2001). A project manager should draw a risk mitigation framework, as shown in figure 7, to establish a risk structure that will facilitate the subsequent functions in the risk management process.

Case-study comparison as successful and unsuccessful:

A project has been carried out at Genpact to carry out a smooth global disbursement process, which is responsible to make payments through electronic wires, within treasury department wherein few risks have been identified by the project manager. Being a mission critical process, because of involvement of payments with figures in millions, considerable attention is required to the pertaining risks as time limit, cost and error free process. The key areas of focus were the correct amount, to the correct banking details, to the correct payee and at the right time. A framework has been prepared, once the risks have been identified and the cost-benefit analysis has been carried out with the estimation of system reliability. Because RPN(risk priority number) of control checks in the FMEA was the maximum therefore all the control checks were aligned to the validation checks stage, as shown in figure-8, like valid requestor and valid approver as per the Genpact approved list, double check of bank-details by approver with the details appearing in the database as well as request, booking must be reflecting outstanding against the beneficiaries name in the sub-system and payment platform is checked for duplicate payment. Because the due consideration has been given to the risk-management aspect of project management process as a whole, in particular, the project came out with magnificent results and is one of the best six-sigma projects of Genpact (Genpact-Finance overview, 2008).

On the contrary, a product of an IT firm, while in the development phase went through the identification phase and came out with 152 possible risk events. Out of which most of the product’s features are not in accordance to the customer specifications/likings as a matter of fact that the steps in risk management process, like analysis of probability and consequences, quantitative measures, risk mitigation framework and control and documentation has not been followed. This would have been highly productive if the risk management tools and techniques would have been followed. Unfortunately the team left the hotel after brainstorming over the same without achieving it and 80% of their risk events actually occurred, during the next 2 years. As the team has only identified the risks however has not followed the risk management process as a whole as a result it was so disastrous that it almost finished the company (Maylor, 2005).

Conclusion

There is no magic wand to achieve success however

References –

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