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The Versatile Project-Based Organisation: Governance and Operational Control

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Throughout the latter half of the 20th century, there has been a shift in the management paradigm, from the functional, bureaucratic approach, almost universally adopted in the first half of the century, to project and process-based approaches. This shift has been in response to the changing nature of work from mass production, with essentially stable customer requirements and slowly changing technology, to the current situation where every product supplied may be against a bespoke design, and technology changes continuously and rapidly. Whereas the functional, bureaucratic approaches to management are underpinned by a strong theoretical basis, the classical theory of management developed during the late 19th and early 20th centuries, the process and project-based approaches do not have a strong theoretical basis. Furthermore, in adopting project- and process-based approaches to overcome the weaknesses of the functional approach, managers have also lost its strengths; they have not replaced some of the essential roles it fulfils. With the eventual aim of developing a theoretical basis for the project and process-based approach, which recovers the strengths of classical management, we at Erasmus University Rotterdam are conducting a research project to determine how project-based organizations are managed. In this paper we present initial findings, especially as they relate to the management of the process of product delivery, that is in the areas of operational control and governance. We also briefly review the issues identified in the management of human resources.
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European Management Journal Vol. 17, No. 3, pp. 296–309, 1999
1999 Elsevier Science Ltd. All rights reserved
Pergamon
Printed in Great Britain
0263-2373/99 $20.00 0.00
PII: S0263-2373(99)00009-2
The Versatile Project-
based Organization:
Governance and
Operational Control
J. RODNEY TURNER, Erasmus University, Rotterdam
ANNE KEEGAN, Erasmus University, Rotterdam
Throughout the latter half of the 20th century, there
has been a shift in the management paradigm, from
the functional, bureaucratic approach, almost uni-
versally adopted in the first half of the century, to
project and process-based approaches. This shift
has been in response to the changing nature of
work from mass production, with essentially stable
customer requirements and slowly changing tech-
nology, to the current situation where every product
supplied may be against a bespoke design, and
technology changes continuously and rapidly.
Whereas the functional, bureaucratic approaches to
management are underpinned by a strong theoreti-
cal basis, the classical theory of management
developed during the late 19th and early 20th cen-
turies, the process and project-based approaches do
not have a strong theoretical basis. Furthermore, in
adopting project- and process-based approaches to
overcome the weaknesses of the functional
approach, managers have also lost its strengths;
they have not replaced some of the essential roles
it fulfils. With the eventual aim of developing a
theoretical basis for the project and process-based
approach, which recovers the strengths of classical
management, we at Erasmus University Rotterdam
are conducting a research project to determine how
project-based organizations are managed. In this
paper we present initial findings, especially as they
relate to the management of the process of product
delivery, that is in the areas of operational control
and governance. We also briefly review the issues
identified in the management of human resources.
1999 Elsevier Science Ltd. All rights reserved
European Management Journal
Vol 17 No 3 June 1999
296
Introduction
Functional hierarchical line management was the
main paradigm of management for nearly two hun-
dred years from the late 18th century until the mid-
20th century. However, since the 1950s it has been
necessary to adopt project- and process-based
approaches to management to respond to the almost
constantly changing nature of work and manage-
ment. A consistent, classical management theory was
developed to underpin functional hierarchical line
management, and some of it basic premises were
adopted almost as axioms of management. As people
have adopted project- and process-based approaches,
either they have tended to assume that these axioms,
or orthodoxies, have still applied, or they have not
developed a consistent theory to replace them. The
result is that while managers have adopted a new
approach to management that addresses the weak-
nesses of classical management within the modern,
changing environment, they have at the same time
lost its strengths; they have not created mechanisms
to replace some of the essential roles fulfilled by the
functional organization. Thus, project- and process-
based approaches to management have not been the
unbridled successes that they were hoped to be.
At Erasmus University Rotterdam, we are con-
ducting an international research project into how
project-based organizations are managed, with the
eventual aim of developing a consistent theory for
project- and process-based management, to replace
the classical management theory in project-based
organizations where it does not apply. We aim to
show how managers can recapture the strengths of
THE VERSATILE PROJECT-BASED ORGANIZATION: GOVERNANCE AND OPERATIONAL CONTROL
the bureaucratic organization within the versatile,
project-based organization.
In this paper we describe our initial findings, parti-
cularly as they relate to the management of the pro-
cess of product delivery in project-based organiza-
tions, that is in the areas of operational control and
governance. We trace the development of manage-
ment, from the classical approaches through to the
modern project- and process-based approaches, to
understand why each was adopted, and how the axi-
oms of the former do not apply to the latter. We then
introduce our research project and the companies
interviewed. We describe how the organizations
interviewed implement process management
through the operational control and governance
models adopted. We identify the strengths and weak-
nesses of the approaches, and the challenges and con-
tradictions encountered. This will begin to enable us
to identify what elements of classical management
theory can be applied to project-based organizations
and where new concepts are required. We also briefly
introduce consequences for human resource manage-
ment policy, particularly careers, skills development
and organizational learning. The full description of
those are left for another paper.
European Management Journal
Vol 17 No 3 June 1999
297
The Historical Development of
Management Models
Turner (1998) traced the development of manage-
ment from the classical, bureaucratic approaches
through to the modern project- and process-based
approaches, to understand why the shift in paradigm
was required, and why the strengths of the functional
approach that made it so successful for 200 years,
became weaknesses in the modern era.
Functional Hierarchical Line Management
Functional hierarchical line management achieved its
ascendancy during the 19th century and reflected
social, technical and managerial innovations of the
day. Victorian engineers were building great
machines to harness the forces of nature:
steam engines to harness the force of steam
hydroelectric dams to harness the force of water
so why not organizations to harness the force of
people?
As a model for the
governance of nations,
centralized planning has been
an unmitigated disaster
THE VERSATILE PROJECT-BASED ORGANIZATION: GOVERNANCE AND OPERATIONAL CONTROL
Functional, hierarchical line management was under-
pinned by classical management theory, (Morgan,
1986, 1990), which pulled together three threads:
the economic theory of Adam Smith (1776) and
the striving for greater economic efficiency
the scientific management theory of Frederic W.
Taylor (1911) and the idea that the work of people
could be made as predictable as the work of
machines
the scientific administration theory of Henri Fayol
(1949) and the idea that organizations could be
designed with military or engineering precision.
Smith (1776) laid the foundation for classical manage-
ment theory, with his proposals for the specialization
of work and the striving for
greater economic efficiency. So
great has been his influence
that his basic premise that ever
greater economic efficiency is
better goes virtually unques-
tioned, driving many organiza-
tions into corporate anorexia.
The efforts of 19th century
managers to mimic the harnessing power in
machines relied on making work as routine and pre-
dictable as possible. This orientation towards the
design of jobs was encapsulated in the writings of
F.W. Taylor (1911). He argued that there are five
basic principles that lead to the efficient organization
of tasks:
shift responsibility for designing work to man-
agers; leaving workers solely with the task of
doing
use scientific methods to determine the most
efficient way of working, design the task accord-
ingly, and specify the task precisely
select the best person to perform the job thus
designed
train the person to carry out the job as efficiently
as possible
monitor the performance of the person to ensure
work processes are followed and results are achi-
eved as planned
Scientific administration, proposed by Fayol (1949);
Mooney and Reiley (1931); Urwick (1943), mirrored
at a macro-level the scientific management of work
at a micro-level. Fayol and his followers suggested
management is a process of planning, organizing,
commanding, coordinating, and controlling. They
advocated principles of management based on mili-
tary and engineering ideals, drawn from experience
of successful organizations, which they sought to
codify as a universal theory of management. These
principles included scalar command, division of line
and staff functions, and a hierarchy of tasks with
European Management Journal
Vol 17 No 3 June 1999
298
increasing responsibility for those further up the hier-
archy. Weber (1956) described an ideal model of
bureaucracy encompassing basic elements of man-
agement through enforcement of rules and pro-
cedures based on hierarchical authority. These rules
and procedures provided clear guidelines for mana-
gerial action, promotion of workers, discipline and
the control of the workplace.
A metaphor used to describe organizations designed
according to this paradigm is the pyramid, [inappro-
priately according to Turner (1997)]. In reality they
are two dimensional, comprising hierarchies and
functions. Management within this framework is
mechanistic. Its role is to oversee clearly defined and
limited tasks of members lower down the hierarchy
and to combine their efforts
using a centralized planning
and control. Management is
assumed to be omniscient in its
ability to foresee and respond
to changes in the environment,
(Burns and Stalker, 1961;
Mintzberg, 1979). Weber (1956)
and Orwell (1949) saw this
model as basically dehumaniz-
ing for everybody, and Turner (1997, 1998) has
pointed out that as a model for the governance of
nations centralized planning has been an unmiti-
gated disaster.
A core feature of functional hierarchical line manage-
ment is the assumption that the work of an organiza-
tion, its inputs, (human and material resources), and
outputs, (products), are by and large unchanging.
This enables the work of the organization to be div-
ided into discrete, highly specialized functions, each
of which undertakes a parcel of the work to process
inputs into outputs. A necessary pre-condition for
this model to be effective is that technology and cus-
tomer requirements are slow to change, (Burns and
Stalker, 1961; Lawrence and Lorsch, 1967). In a time
when large manufacturing bureaucracies dominated,
customer requirements were slow to change because
customers had to take what they were given. Henry
Ford said your Model T Ford could be:
Any colour — so long as it’s black. (quoted in Nevins, 1957)
Advantages, Orthodoxies and Disadvantages
The classically managed and organized bureaucracy
was so successful because it has compelling advan-
tages, which can be stated in terms of the way the
organization operates:
1. Central planning provides a mechanism through
which senior management can govern the organi-
zation. This governance can be elaborated accord-
ing to the level of control management desires by
THE VERSATILE PROJECT-BASED ORGANIZATION: GOVERNANCE AND OPERATIONAL CONTROL
insisting on more feedback and communication
from managers up and down the chain of com-
mand.
2. The functional hierarchy also undertakes oper-
ational control. Through the functions the organi-
zation transforms inputs into outputs step after
predictable step. By controlling the functions
through an ordered hierarchy, management also
control the processes. In this way governance and
operational control are aligned, and at times indis-
tinguishable.
3. The line management structure is both a com-
munication and co-ordination mechanism.
4. Functions provide careers. People progress in their
careers by moving up the hierarchy within their
function, by climbing the career ladder up the silo
or smoke stack.
5. Individual learning is developed by functions that
train people to do carefully prescribed work. As
people’s careers progress, organization members
are trained to undertake various parts of the func-
tion’s work. Furthermore the skills required are
exactly predictable, because the work of the
organization is unchanging.
6. The individual functions act as repositories for the
organization’s knowledge, which is easily access-
ible.
So compelling are the advantages that the three
elements of classical management theory have
become consolidated as three orthodoxies of manage-
ment. So deeply ingrained have these three ortho-
doxies become that they are often treated as axioms
of management, whereas they are in fact aims of the
bureaucratic organization. As we shall see, in a pro-
ject environment these orthodoxies are at best wrong,
and at worst damaging. The orthodoxies are:
An Organizational Structure Orthodoxy: that
there is only one model for the organization,
called the structure, which fulfils the six functions
1 to 6 above.
A Human Resource Management Orthodoxy:
that you grade the job and not the person.
An Economic Orthodoxy: that greater efficiency
is better.
Functional hierarchies that adopt bureaucratic rule-
like behaviour and a mechanistic approach to man-
agement can be highly successful under conditions
where machines work well:
there is a straightforward, repetitive task to be
done
the environment is stable enough to ensure the
products are appropriate
precision is highly valued.
This requires the human part of the organization, to
behave like parts of a machine and comply with what
European Management Journal
Vol 17 No 3 June 1999
299
the organization demands from them. However,
these conditions do not always hold true, and where
they do not the mechanistic approach to management
inherent in functional hierarchies, centralized plan-
ning and rule-based authority has severe limitations:
(a) Bureaucratically organized firms have great dif-
ficulty adapting to changes in the environment.
They are precisely designed to achieve certain
goals as efficiently as possible. The endless striv-
ing for efficiency creates a ‘corporate anorexia’:
stripping away organizational fat and with it the
redundancy of functions and time which can be
the source of new ideas, new products and new
businesses. When the environment changes, the
organization dies. Organizations can be too thin
as well as too fat.
(b) The drive for stability leads to a loss of customer
focus. Customers take what they are given, what
the organization wants to produce for them.
Coupled with this, the organization becomes
very introspective. The structure exists because
‘that is the way we do things’, not for the sake
of delivering desired benefits to customers.
(c) The more certain the environment (markets,
inputs and labour) the more efficiently the firm
can transform inputs into (predefined) outputs.
The desire for a stable environment leads
bureaucracies to become highly risk averse. With
risk aversion comes suppressed creativity, low
innovation and inflexibility of thought and
action.
(d) The interests of those working in and having
careers in the organization can take precedence
over the goals for which the organization was
established. The people can become introspec-
tive, and unable to respond to changes in the
environment.
(e) The only route to promotion is up the functional
career ladder. This results in the Peter Principle,
(Peter and Hull, 1969), as good managers become
poor administrators.
(f) The functional hierarchy can be dehumanizing,
especially for those lower down, (Weber, 1956;
Orwell, 1949). Creativity is squeezed out as work
is defined in minute detail, rules are written for
almost all contingencies and supervision over
tasks is constant.
Project Management
The classical approach was first seriously challenged
in the 1950s, and the need for new approaches has
gathered pace ever since, (Morris, 1997). There were
several causes:
rapid development by governments of infrastruc-
ture and weapons systems in the immediate post-
THE VERSATILE PROJECT-BASED ORGANIZATION: GOVERNANCE AND OPERATIONAL CONTROL
war period, as a result of the Marshall Plan and
Cold War respectively
the space race
the needs of the infant computer industry to
embrace rapid technological developments
the explosive development of products and tech-
nologies during the 1980s and 1990s
the rise of consumer choice and the fragmentation
of mass markets
These developments required the creation of project
teams to undertake research, construction or devel-
opment projects that were essentially unique, novel
and transient, (Morris, 1997). Project teams could
meld the skills of those working in different func-
tions. In the beginning however, project management
suffered from continued adherence to segmentalist
thinking, (Kanter, 1983; Turner, 1998). Project teams
may have had members from different functions but
projects became isolated entities, looking inward to
their own task and failing to integrate their efforts
with other project teams and other organizational
units. The old (technical) and the new (task) functions
found it difficult to work together, and the old
inflexibilities remained (Figure 1). Turner and Pey-
mai (1995) identified several reasons, including:
the new functions threatened the power base of
the old functions.
the paradox that projects exist short-term to achi-
eve long-term objectives, while operations exist
long term to achieve short-term objectives. Oper-
ations managers may agree the project is a good
idea in the medium-term, but have to achieve
today’s production target.
Projects are about upsetting the status quo and
doing things in new ways, whereas operations
managers try to preserve the status quo because
that is how, as we saw above, they achieve ever
increasing efficiency.
Projects are unique novel and transient, and hence a
project is unable to benefit from any of the advan-
tages 1 to 6 above, which promote the use of func-
tional, hierarchical and mechanistic approaches to
management. That is, (using the same numbers):
1. Every project is different requiring a different
Figure 1 The Management of the Routine Versus the Bespoke, using a Discrete Approach
European Management Journal
Vol 17 No 3 June 1999
300
approach to its operational control. Hence project
management breaks the link between governance
and operational control which prevails in the func-
tional hierarchy.
2. That also breaks the use of the functional hier-
archy for communication and coordination.
3. Because projects are transient, they cannot offer
people careers.
4. As every project is different, it can be difficult to
predict the future skill requirements of the organi-
zation.
5. Because projects are transient they cannot become
repositories for knowledge.
The stability and order underpinning successful func-
tional bureaucracies is threatened by the project-
based orientation of recent organizational forms.
Flexibility must be built into project-based firms to
allow them to meet unique novel and transient cus-
tomer requirements. The three orthodoxies are at best
irrelevant and at worst damaging in the project-
based environment:
1. There is not one structure for the organization, but
different models of operation for every project.
People tried to overcome this by the invention of
matrix management, (Morris, 1997). However, it
has proved difficult to eliminate the conflict
between projects and operations identified in Fig-
ure 1, and people find it difficult to work for two
masters, (Turner and Peymai, 1995; Turner et al.,
1990).
2. It is not possible to grade the job; in the unique,
novel and transient environment it is not even
possible to define the job with any certainty. (In
6 years with ICI, Rodney Turner did six jobs. Only
two of those jobs had been graded, and for one of
those he did not receive the grade associated with
the job because the project had not been
sanctioned).
3. In the unique, novel and transient environment it
is also not possible to be efficient. Indeed
efficiency can be damaging, because, with projects
being uncertain, it is necessary to build flexibility
(fat) into the plans.
THE VERSATILE PROJECT-BASED ORGANIZATION: GOVERNANCE AND OPERATIONAL CONTROL
The Process Approach
So deeply ingrained in managers’ thinking were the
classical theories and three orthodoxies, when project
management was first adopted between the 1950s
and 1970s it was implemented according to classical
principles. However, with the adoption of Total
Quality Management in the late 1980s, the essential
contradiction between the introspective nature of the
classical approaches and the need for customer focus
could no longer be ignored. Turner and Peymai
(1995) document some of the dangers of rigidity of
classical project management by describing what
happened when a medium-sized construction com-
pany attempted to adopt ISO 9000. Working to
internal procedures became more important than
delivering customer requirements or desired benefits.
They recommended a process-based, customer
focused approach (Figure 2), and many of their rec-
ommendations have become adopted in industry
standard approaches such as ISO 10,006 (1997) and
Prince 2, (CCTA, 1996), in which:
procedures are written to describe projects as pro-
cesses which convert inputs into desired cus-
tomer outputs
project specific procedures are written for every
project, based on the organization’s global pro-
cedures, but tailored to the needs of this specific
project
throughout the process, and in particular at the
hand-over from one function to the next, the pro-
duct is checked against the needs of internal and
external customers
at the end of every project the global procedures
are revised to reflect new learning
However, in overcoming the rigidity built into classi-
cal project management, organizations have made
classical management theory totally irrelevant:
A. In trying to overcome the disadvantages, (a)
to (f) on page 299, associated with classical
Figure 2 Four Types of Management
European Management Journal
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301
management theory, all of the benefits, 1 to
6, have been lost.
B. The three orthodoxies are at best irrelevant
and at worst damaging as described above.
C. And hence the process approach, at the
moment, lacks a firm theoretical basis.
Our Research Project
At Erasmus University Rotterdam we are undertak-
ing a research project to determine how versatile pro-
ject-based organizations deal with issues of:
1. governance
2. operational control
3. leadership, communication and coordination
4. careers
5. individual learning and skills development
6. organizational learning
Table 1 contains a list of the organizations we have
interviewed and a brief description of their main
work. In the following sections we describe some of
our initial findings, especially as they relate to oper-
ational control and the maintenance of customer
focused processes. In summary, our initial findings
are that the versatile project-based organizations
need to:
I. Retain specialist functions. (In functional hier-
archical line management it is the hierarchical line
management that causes loss of customer focus
and lack of versatility, not the functions.) The
functions are responsible for maintaining:
4. careers
5. individual learning and skills development
6. organizational learning
II. Group the functions into versatile networks,
with different networks for different customer
THE VERSATILE PROJECT-BASED ORGANIZATION: GOVERNANCE AND OPERATIONAL CONTROL
Table 1 Companies Interviewed
Company name Country Company type
Ericsson Netherlands Supplier of bespoke intelligent networks to the telecommunications
industry
ABN-AMRO Netherlands Development division of a bank
Pink Elephant Netherlands Information systems consultants
Raytheon Engineers and Constructors Netherlands Engineering procurement and construction contractor in the oil, gas
and petrochemical industry
ABB Lummus Global Netherlands Engineering procurement and construction contractor in the oil, gas
and petrochemical industry
ABB Austria Engineering procurement and construction contractor in the power
generation industry
Unisys Austria Supplier of computer equipment and bespoke information systems
solutions
Unisys UK Supplier of computer equipment and bespoke information systems
solutions
British Aerospace Defence Systems UK Supplier of bespoke electronic systems to the defence and other
industries
GEC Dunchurch UK Training college of a group of companies in the electronic and
electrical engineering industries
Reuters UK Supplier of business and financial data products
British Telecom UK Communications and data network operator
Posten State Data Centre Norway Supplier of bespoke information systems solutions to the public
sector
University of St Galen Switzerland Established the virtual factory, comprising 30 companies from
Germany, Austria and Switzerland around Lake Constance
requirements. Within the networks, there need to
be new functions to:
2. coordinate and control the operation of the net-
work
3. communicate customer requirements and strat-
egy
III. Provide strategic direction and leadership to
the functions, set empowering performance cri-
teria, monitor performance against those criteria,
and provide finance. This provides:
1. empowering governance which sets parameters
for performance, but allows flexibility to be
innovative to meet customer requirements, old
and new
Diverse Models of Governance and Operational
Control
In the classical management and administration
model, the functional hierarchy serves both to control
operations and to act as a communication and co-
ordination mechanism for top management. This
means that the day-to-day management of a classi-
cally managed firm is tightly coupled with the
decisions of top management on overall governance
of the firm. Furthermore, in the classically managed
firm, operations are defined and controlled very
tightly, and so governance tends to be involved at a
very low level of detail. Under the principles of scien-
tific management, individuals in the firm have very
European Management Journal
Vol 17 No 3 June 1999
302
closely prescribed jobs. Their room for manoeuvr-
ability is low. Governance becomes almost Soviet
style central planning and micro-management.
(Almost the only country in the world that retains
this as a form of national government is North Korea,
and even that is now changing).
Our research suggests that in the versatile, project-
based organization, there will be a different model
for operational control for each project, and that this
will necessarily result in a decoupling of operational
control and governance. This should then lead to a
decentralization of decision-making on operational
issues, with empowering governance. Governance
should set high-level strategic direction and perform-
ance parameters, but, under a principle of subsidiar-
ity, delegate day-to-day decision-making on oper-
ational issues to local management, management at
a level where the decision has an effect. We saw this
in some organizations, but in others, especially those
with a background in the US or UK defence elec-
tronic industry, we saw the continued use of intrus-
ive governance, Soviet style micro-management.
In most organizations we studied, operational control
is outward looking, attending not simply to internal
management of the task, but to the whole chain of
activities through which inputs are transformed into
desired customer outputs. The management of the
interface with the client, and the delivery of desired
customer outputs, infuses the work of versatile pro-
ject-based firms. The delivery of superior perform-
ance for the customer, compared to what they could
THE VERSATILE PROJECT-BASED ORGANIZATION: GOVERNANCE AND OPERATIONAL CONTROL
Figure 3 Four Elements of Operational Control
obtain from the competition, becomes a core value
adding activity. Within the firms we have studied,
there are four elements (or functions) of operational
control (Figure 3):
Table 2 Four Functions of Operational Control and One of Governance, and the Roles They Fulfil
Function Roles
Client management Identify and attract new clients
Bid for and win work
Liaise with the client during the work and delivery of the product
Ensure the client is satisfied
Win follow-on business
Input management Ensure resources of the right number and skill are available
Manage their development
Manage their careers
Care for their needs as personnel
Ensure people are used efficiently
Process management Manage the contribution of resources to the process
Manage the delivery of components of the end product
Ensure they meet the functional requirements of the end product
Manage interfaces with other process managers
Ensure people are used effectively
Output management Manage design of the end product
Manage its configuration during delivery
Ensure the components and final assembly are delivered in accordance with the customers’
requirements
Manage hand-over to the client
Governance Set strategic direction
Set and monitor levels of performance, especially profitability
Provide finance, and control financial returns
Provide technical expertise through centres of excellence
Provide an audit function
Control risk exposure
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303
1. client management
2. input management
3. process management
4. output management
The roles of these four functions of operational con-
trol are listed in Table 2. In the classically managed
organization, they are treated as functions in a string,
or value chain, (Porter, 1985). In project-based organi-
zations, they operate in parallel, (shown as a loop in
Figure 3). Turner (1997) suggests that in the versatile,
network organization they can operate as nodes in a
changing network of value added activities. Different
products can be made for different customers by link-
ing the functions of operational control together into
different networks, and if this can be done quickly
and responsively, the organization becomes truly
versatile.
Operational Control in Practice
Our research has shown that different organizations
implement operational control in different ways,
according to the nature of the business, (products and
THE VERSATILE PROJECT-BASED ORGANIZATION: GOVERNANCE AND OPERATIONAL CONTROL
Table 3 The Roles of Operational Control in Four Organizations
Company Client management Input management Process management Output management
EPC contractor — oil, Commercial director, bid Resource managers Lead engineers and Project directors
gas and petrochem managers project engineers
EPC contractor — Account managers Competence managers Project managers Solutions managers
telecommunications
Computer systems Domain managers Line managers Technical managers Project managers
supplier — Head Office
Computer systems Domain managers All of these roles are undertaken by project managers
supplier — satellite
Telecommunications Customer account Back office Customer account Operating divisions
network operator management management
customers), its historical background and the philo-
sophical approach of management. In this section we
describe how four firms in our sample approached
operational control (Table 3 Figure 4). The firms
assigned various titles and descriptions to their per-
sonnel, because of the differing nature of their busi-
nesses.
Illustration One: EPC Contractor, Oil, Gas and
Petrochemicals
The first company deals in large to major projects. A
project may cost upward of £100 million, and involve
1 million hours of design. Given the scale of business,
this company has only a few potential clients, with
whom the company seeks to maintain close relation-
ships. Illustrating this, one respondent said of their
main client:
[The company] are our past and our future.
The market in which this company operates is well
Figure 4 Operational Control in an EPC Contractor
from the Oil Industry
European Management Journal
Vol 17 No 3 June 1999
304
established. Because it is one of the few major players
with the capacity to meet the needs of clients, the
necessity to find and attract new clients is low. The
key to future contracts lies in satisfying clients, pro-
viding them with superior performance. Client man-
agement is therefore the first key function of oper-
ational control. At the front end of a project, there is
a strong emphasis on bid management, to win the
work in the first place. Once won, projects are man-
aged through to completion by a project director,
who maintains a close working relationship with
equivalent people from the client organization, and
ensures eventual delivery of an operating facility to
the client, which provides them with superior per-
formance. This continuity is necessary as projects can
be very complex and involve a wide range of people
from within and outside the firm.
The second function of operational control, through
which firms add value is input (or resource) manage-
ment. Resource management refers to both human
and non-human resources. Resource managers are
responsible for ensuring the organization has the
right number of people of the right skills, managing
their careers, and ensuring they are used efficiently.
This organization sells the knowledge of how to carry
out a project from beginning to end. It is a knowl-
edge-based organization and employees are a key
resource. They are highly educated and trained tech-
nical experts. With this kind of human resource,
keeping people busy on projects is essential. A pro-
ject director we interviewed said:
If our people are idle we are dead.
The third function of operational control is the trans-
formation process, and this is the responsibility of
lead and project engineers. Lead engineers manage
the technical input to the project, the delivery of the
components of the product, and ensure that stan-
dards of safety and quality are adhered to. Project
engineers manage the delivery and configuration of
those components into elements of the product.
Finally, the project director manages the assembly of
those elements into the final product of the project to
produce the desired customer outputs. It is the pro-
ject director’s responsibility to produce a product
THE VERSATILE PROJECT-BASED ORGANIZATION: GOVERNANCE AND OPERATIONAL CONTROL
that meets the customer’s functional requirements at
the best time and cost. They therefore have responsi-
bility for both output management and the last steps
of client management to complete the loop.
A strong message to emerge from this company is
that project professionals, (engineers, managers and
directors), are the most highly regarded people.
There is much investment in their training and they
have the longest length of tenure. Many of the people
we interviewed stressed the ability of the project
managers to add value both for their own organiza-
tion and for the client by the effective delivery of the
projects’ outputs to time, cost and functionality.
Because the technology with which this organization
works is widely available, the only way for this
organization to provide their client with competitive
advantage is by being more effective in the delivery
of the projects’ outputs. The way project managers
make a profit for their company as well as the client
is by being better at managing risk than the next sup-
plier.
Illustration Two: EPC Contractor,
Telecommunications Industry
This company makes networks for land-based and
mobile telephone operators, based on their expertise
in intelligent switches. In contrast to the company in
illustration one above, their projects tend to be much
smaller and in reality are sub-projects of longer-term
programmes of development. Their clients are very
dominant and have agreed single supplier relation-
ships with the suppliers in certain geographical
regions.
The close links between this company and the net-
work operators means it is essential they maintain
excellent working relationships with their clients. To
achieve this the company appoints account man-
agers. Following our schema of core activities,
account managers manage the client relationship and
control all of the main client interface activities. Sol-
utions managers work with the account managers to
deliver facilities that meet client needs and thus man-
age the process. Account managers and solutions
managers are based within the companies Sales and
Marketing Department. They are supported by pro-
ject managers from the Operations Department who
manage the individual projects to deliver parts of the
overall network, the output. They call this triumvir-
ate ‘3-core’ (Figure 5). The Competence Management
department nominally controls the organization’s
human resources. They are provided to each project
on a project-by-project basis. However, in reality
movement from project to project is limited to pro-
jects for the same client. There are two reasons for
this:
1. People in the organization have very high work-
loads. It takes two years to train somebody in the
European Management Journal
Vol 17 No 3 June 1999
305
Figure 5 Operational Control in an EPC Contractor
from the Telecommunications Industry
use of the company’s technology, and hence using
contractors to balance the work is not an option.
Work is balanced by people working between 7
and 14 hours a day, and as one project comes to
an end, they go straight on to another.
2. The client’s solutions are highly specialized, mak-
ing it necessary to maintain strict Chinese walls
within the organization, to stop one client learning
of another’s expertise. This is different from the
previous example, where the technology was
widely available. Competitive advantage came
from by being able to deliver the projects’ outputs
more effectively. Here the technology is pro-
prietary and provides competitive advantage in
itself. Hence the need to maintain client confi-
dence, even within the organization. Strangely this
high customer focus leads to a loss of versatility
and organizational and individual learning as
people remain working for one client from one
project to the next.
Illustration Three: Computer Systems Supplier
The third illustration is a computer systems supplier.
This company used to be just a supplier of hardware,
particularly mainframes. Recently, all this has
changed. With the shrinking margins in the computer
hardware industry, they have moved their business
into computer systems solutions, providing the com-
plete IS/IT solution for their clients. The culture
within the organization is dominated by a functional,
hierarchical, line management mindset where there
is an emphasis on tangible products and efficiency
in operations. The new emphasis on solutions is a
dramatic change for the organization and requires
greater project orientation on the part of the whole
THE VERSATILE PROJECT-BASED ORGANIZATION: GOVERNANCE AND OPERATIONAL CONTROL
company to cope with the demands for customized
client-led solutions. According to one respondent, the
new environment is characterized by:
Chaos, temporary networks, co-ordination and co-oper-
ation
The management of the company in terms of clients,
inputs, processes and outputs is shifting to meet the
new needs of the solutions-driven environment
although the change process is slow and the chal-
lenges still emerging. One way the company seeks
to effect this change is to concentrate on people and
institute changes to careers and to attitudes to facili-
tate the change. At the European headquarters in
London, we found the implementation of four poss-
ible career tracks for managers reflecting the core
activities of operational control in our schema:
domain (or client) management
line management (input)
technical management (process)
project management (outputs)
Employees join the organization as consultants. As
their careers progress, they decide which of the four
tracks they wish to join. The training paths tend to
diverge reflecting different needs in each path.
Although the decision is not irreversible, the head of
competence management did note the narrowing of
opportunities as employees advance further and
further in their chosen direction. The company recog-
nizes that there is a need for the four separate ‘tracks’
within its operations to allow those best suited to tra-
vel the path most fruitful for them and the organiza-
tion. By training people within the diverse tracks, the
company ensures it can meet the different needs of
input, process and output management, as well as
client management.
We also interviewed people from their Austrian sub-
sidiary and found a different pattern of operational
control of the key activities. The Austrian division
has implemented a totally project-based way of
working in their main group. Project managers fulfil
the roles of input, process and output managers.
They have retained client managers to find and win
new clients. By fulfilling so many roles, it is possible
that project managers will face conflicts of interest.
For instance, they may be forced to make choices
between:
learning experiences for individuals in their role
as human resource manager
the efficient utilization of human and other
resources
finding the best person for the project
sharing people between projects to find the best
solution for the organization
achieving the most effective delivery of their pro-
ject
European Management Journal
Vol 17 No 3 June 1999
306
doing what is best for their client
doing what is best for the firm
doing what is best for other clients
Needless to say, these demands may not always be
reconcilable. According to respondents, a core prac-
tice for managing these tensions is the holding of
weekly meetings of all the project managers to dis-
cuss the management of resources. Project managers
meet face to face and they have to argue their case
against the other project managers. As one project
manager adopts one role, the others play devil’s
advocate by adopting other roles and emphasizing
other priorities and resource demands. Even with
this practice, resource conflict remains and is a core
part of the management of projects in this firm.
Finally, the recent appointment of a new chief execu-
tive in the American parent may change the nature
of operational control. He has implemented a single
measure of performance: the utilization of resources
with the emphasis on rate realization and efficiency.
Although it is too early to tell, this move may under-
mine all other efforts (in career management and pro-
ject practices) if the company shifts its attention away
from meeting clients needs and inwards towards
resource efficiency. Small amounts of fat and redun-
dancy are necessary for innovation to thrive and
ideas borne of chance encounters to emerge (Foxall,
1984). People working in their spare time often gener-
ate the most spectacular results. In an environment
where every minute must be accounted for, spare
time is a thing of the past. Unless the company insti-
tutes effective practices for ensuring people have
time and space to engage in innovative and creative
problem-solving, the effort to increase client satisfac-
tion through solutions which are meaningful and add
value will surely be undermined. It might be argued
here that governance is setting performance para-
meters, and delegating to responsibility to managers
to implement them. However, the parameter relates
to the use of inputs, and not the delivery of outputs,
and so its effect is at an intrusive level. It suffers from
the problems of scientific management. A respondent
from another organization said of this approach:
People are paid to do work, not produce results.
That was of course one of the main contributing fac-
tors to poor economic performance in Eastern Euro-
pean countries under the communist system.
Illustration 4: Telecommunications Network
Operator and Service Provider
Our final illustration is one of the UK’s largest com-
panies. When it was privatized in 1984, all operations
were conducted by geographically-based divisions.
During the late 1980s, the adoption of Total Quality
Management led to customer focus, and a realization
THE VERSATILE PROJECT-BASED ORGANIZATION: GOVERNANCE AND OPERATIONAL CONTROL
that the organizational structure was internally, not
customer, focused. It was therefore changed in the
early 1990s, through a project called Project Sover-
eign. In the new organization, there are divisions pro-
viding technical services to internal and external cus-
tomers; the back office providing information
systems and maintenance and support services.
There are also the operating divisions operating the
network, and supplying telecommunications services
to customers. In the early days, there were just three
customer service divisions, supplying corporate cus-
tomers, domestic customers and international cus-
tomers. There are now 16 and growing, with corpor-
ate customers divided into small to medium, large
and major organizations, domestic customers div-
ided into nuclear families, people living alone and
other market segments, and new customer groupings
such as mobile customers, specialist numbers, etc.
Through all of this, it has been necessary to maintain
a stable back office. In order to stop the back office
having to change every time the operating divisions
reorganize and introduce new customer groupings,
an interface has been created, called Customer
Account Management. This interface procures ser-
vices from the back office to deliver them to external
customers and operating divisions. In this way one
of the UK’s largest companies, and one with a former
history of hierarchical management, achieves versa-
tility. It shields that part of the organization which
can be organized into stable functions, (the back
office undertaking input management), from those
that must be versatile to respond to changing cus-
tomer needs, (the operating divisions undertaking
process and output management), by providing an
interface, (undertaking client management).
Governance
In this section we report preliminary findings on
aspects of the governance of an organization. The
role of governance is outlined in Table 2. During our
interviews we also found that different organizations
adopted different approaches to governance for very
similar reasons as in the case of operational control.
In the firms interviewed, approaches to governance
ranged from light, remote and empowering to almost
Soviet-style central planning and monitoring. In the
manufacturing and defence industries the latter
approach was evident and in the engineering con-
struction industry the former approach was found.
There may be many reasons why this difference
exists. For example, manufacturing firms have tra-
ditionally applied very tight governance, because:
the nature of the product lends itself to close scru-
tiny and production engineering
companies have traditionally operated according
to classical management doctrine
production is carried out under the close super-
vision of management
European Management Journal
Vol 17 No 3 June 1999
307
In contrast, the engineering construction industry is
characterized by:
production on a larger scale and production which
is less predictable
companies which have traditionally not applied
classical management doctrine
work carried out in remote geographical areas
demanding decentralization of decision-making to
managers on site
ABB was unusual as a manufacturing company that
applied an empowering stance to the governance of
its local companies. We attribute this to the philo-
sophical approach of the chief executive, which our
respondents argue is a key influence on the culture
of the company as a whole. Furthermore, the ABB
organization reflects an empowering governance
style. Operating companies are required to report
profits to the head office in Zurich and their stra-
tegies for future business to the relevant business
head office. A system of expenditure approval exists
whereby managers have to justify the risk exposure
but when the project is approved, they operate inde-
pendently and without interference. A similar system
of expenditure approval exists in most organizations
we have spoken to. Unisys in Vienna said they found
the risk reviews helpful. ABB in Vienna told us that
the way of reporting strategy to the business head
office varied from business to business depending on
the nature of the business. In the versatile project-
based environment such empowerment is necessary
to allow firms to respond rapidly to rapidly changing
market opportunities and threats.
In contrast to ABB, those companies with American
parents, especially from the manufacturing and
defence industries, reveal a more traditional and cen-
tralized governance structure where diversity in local
company behaviour is less tolerated and central plan-
ning more pervasive.
While the ABB system of reporting illustrates govern-
ance with a high degree of trust, the reporting pro-
cedure is designed to minimize surprises. For
example, input management, process management
and output management make separate reports on
project performance and the three have to tally. If a
manager tries to distort his reports to disguise poor
performance, he will be found out, and if he is found
out he will be punished. This is similar to the appar-
ent contradiction that parents who set the strongest
guidelines on behaviour for their children are often
the parents who can grant their children most free-
dom on a day-to-day basis.
Human Resource Management Policy
In our study, we have also investigated areas of
human resource management policy, including:
THE VERSATILE PROJECT-BASED ORGANIZATION: GOVERNANCE AND OPERATIONAL CONTROL
careers
individual learning and development
organizational learning
leadership
This area is to be the subject of a separate paper
(Keegan et al., 1999). However, we would like to sum-
marize some key points, especially as they relate to
operational control and governance.
Careers and Individual Learning
In the days of hierarchical, line management,
people’s careers progressed up the hierarchy and into
line management. They climbed the ladder, up the
chimney stack or silo that was the function. As they
climbed the ladder of line management, they were
rewarded according to the size of the budget they
managed, or their number of subordinates, or both.
Unfortunately, this often resulted in the Peter Prin-
ciple, where good technical managers were promoted
into bad administrators (Peter and Hull, 1969). In
many of the project-oriented organizations we spoke
to careers do not follow this model. Careers follow a
spiral staircase, in which:
1. People can progress in all of the four main activi-
ties we identify as core activities including input,
process, output and client managers, as well as
in governance
2. As people progress, they can move between differ-
ent areas of operational control, and between
operational control and governance, to gain wide
experience of how the organization operates
3. People are rewarded according to the amount of
risk they manage, their ability to add value, and
their contribution to profits
The line manager of the department may well man-
age someone who is a higher grade due to the latter’s
level of technical expertise and risk management. For
example, we spoke to line managers in both Ericsson
and ABB Lummus Global who had people in their
departments who were two grades higher.
As an individual progresses up the spiral staircase,
they gain experience of how the organization oper-
ates. In many organizations this process was care-
fully managed, to ensure individuals got the right
learning experiences. In ABB Lummus Global, an
individual’s learning needs could take precedence
over the needs of a project, with them being moved
as the right learning opportunity became available.
All the organizations view mentoring and coaching
as an essential part of the development of managers.
This can be achieved through ‘sitting next to Nellie’
a ‘master – apprentice’ relationship. However, one of
our organizations is so young and in such a fast mov-
ing environment that there are no Nellies. To cope
with this and to ensure knowledge developed is cap-
European Management Journal
Vol 17 No 3 June 1999
308
tured, even in the absence of Nellies, the firm deliber-
ately pairs people on jobs in order that they may
learn from each other. One can see this as the creation
of Nellies.
Organizational Learning
All the companies we interviewed recognized learn-
ing as a key issue. However, it is an area of manage-
ment that is not well addressed. It remains an open
question and an ongoing struggle for all of our firms.
Practices found to facilitate the development of
organizational learning include post completion aud-
its, the use of INTRANETS, start-up workshops, and
job rotation. However, at the end of the day, all the
techniques used were ad hoc.
Leadership
Our data contains some insights on the issue of lead-
ership in project based firms. At ABB Lummus Glo-
bal we got a clear view of what it means to be a
leader. According to one respondent, leaders must:
Communicate the goal, communicate the process.
The leader in ABB must develop and communicate
a clear vision for the project and combine the talents
and skills needed to deliver the project. The data also
reveals national differences in perception as to what
constitutes effective leadership. This was overtly
mentioned in our interviews in The Netherlands. In
Holland, and to an extent in England, a good leader
is one who earns the right to lead by earning the
respect of those being led. Hence the agreement of
those being led is a key to effective leadership. Our
data also suggests that in the US, Germany and
Switzerland there is much more of an expectation
that once a manager has achieved a level of status
and position in the hierarchy, this is sufficient for
them to lead. Subordinates will be much more com-
pliant in respecting that status of position.
Salute the uniform, not the person.
This requires further exploration as others, including
Covey (1992), argue that even in the US managers
have to earn the right to lead by clearly communicat-
ing their vision and values, and not expect to earn
the automatic right from their status and position.
Conclusions
Process-based management has been adopted as an
alternative to functional hierarchical line manage-
ment and traditional project management, because
the former is not seen as being able to respond to the
modern changing environment, and the latter repeats
many of the mistakes of the former. Our research has
THE VERSATILE PROJECT-BASED ORGANIZATION: GOVERNANCE AND OPERATIONAL CONTROL
shown that rather than adopting linear process
chains, managers need to recognize that organiza-
tions are essentially multi-dimensional, with:
the hierarchy linked to governance
different models for operational control and
governance
four elements of operational control, managing cli-
ents, inputs, processes and outputs
People’s career development ideally will give them
exposure to all four elements of operational control,
and perhaps also governance. As a result they will
progress up a spiral staircase. People should also be
rewarded according to how much risk they manage,
which means a technical manager may earn more
than the head of his or her department.
And so, from our research we see organizations are
able to pursue different models of operational control
and governance, which enable them to achieve some
of the benefits of classical management while giving
them customer focus and flexibility.
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Objective: This article presents a project focused on the stabilization of employment in a multi-generational organization in the scope of human resources –specifically, employee relationship management. Methodology: The type of project was evaluated by taking into account different typological criteria. The employee generations were defined by providing time ranges based on dates of birth. All important project stages were presented according to the newest PMI 2017 methodology, with particular attention to the selection of the model of the project team and the division of tasks within the team. The critical path method was used in the description of the course of project activities. Findings: The method of determination of project success factors was specified. Value Added: In accordance with the title of the article, it was, however, shown how one can combine the identification of the level of project risk (using failure mode and effects analysis – FMEA) and the costs of quality to increase the project effectiveness. Recommendations: Projects of this type are important in these organizations where the risk of loyalty is high, which leads to negative economic implications. The advantages from such projects can, however, affect more than the employer.
Thesis
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El objetivo de esta Tesis Doctoral es proponer un modelo basado en ecuaciones de interrelación dinámica, para pronósticos de resultados de planificación-inversión y ejecución de proyectos industriales. Dentro de este contexto, la Tesis Doctoral que se presenta está enmarcada en la temática de modelo basado en ecuaciones para transferir los resultados de la investigación universitaria al sector productivo, dado que el modelo que aquí se plantea corresponde a un aporte que mejorará el proceso de toma de decisiones a nivel gerencial en las industrias. En dicho modelo se incorporan conocimientos de la Dinámica de Sistemas basada en ecuaciones, para que quienes estén encargados de tomar decisiones en el área de la planificación estratégica y de proyectos puedan usarlo idóneamente. Todo lo anterior permitirá crear laboratorios de aprendizaje organizacional en donde los gerentes puedan crear escenarios en un ambiente virtual. Cabe destacar que el simular un ambiente virtual en este caso permite, en primer lugar, disminuir el grado de incertidumbre en la toma de decisiones, lo cual también disminuirá el riesgo, y en segundo lugar, será menos costoso que una prueba de ensayo y error en la realidad. Como forma de validar el modelo se corrieron escenarios en las industrias del aluminio primario de Venezuela y el Sector avícola colombiano, a fin de observar el comportamiento de los sistemas.
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In today's business, projects are considered as an important part of business operations. Thus, the success of projects has a direct impact on the success of the firm. Researchers and practitioners have been attempting to improve project performance by suggesting and implementing several project management methods and methodologies. The present research is written to answer the question of how to improve Project performance through the consideration of information technology governance and project governance. The research was conducted using a descriptive-survey research method with a sample of 183 employees of Mellat Bank, using a questionnaire, and using structural equation modeling method, using Smart PLS and SPSS software for analyzing data. The research results indicate that both information technology governance and project governance have a positive impact on project performance. These findings provide evidence for project management professionals that information technology governance and project governance are part of an operational strategy to facilitate project success. This research also highlights the importance of strategic alignment between governance and project governance in enhancing project performance.
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This article assessed the relationship between psychological empowerment and project success through direct and indirect effects of knowledge sharing. The assumptions outlined in this article were built on the self-determination theory (SDT). In this article, two surveys were conducted to test the proposed hypotheses. Data for study 1 were collected from employees (N = 168) working in the Pakistani telecommunication sector, while data for study 2 were gathered from (N = 160) employees working on development sector projects. Time-lagged design was employed to minimize common method bias. As a result, psychological em-powerment emerged as a critical factor for the project success both directly and indirectly via knowledge sharing. Hence, this article recommends several theoretical and practical implications for practitioners and academicians. Index Terms-Project-based organisations, project success, psychological empowerment, knowledge sharing.
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This paper provides a comprehensive model of the issues that require managing if a project is to successfully initiated and accomplished. The model is illustrated extensively with examples drawn from a wide range of project experiences over the last 40 years. The paper shows the broad range of factors which need to be managed if projects are to be successful; it shows how such a range has so far tended to elude the project management community, which has concentrated rather more on computer systems and organizational techniques than on the strategic factors which are so essential to project success. The paper implicitly makes the point that the Macro-Engineering and Major Project Societies have a central role to play in developing a strategic view of the management of projects as here outlined.