Close the Gap between Projects and Strategy
In the previous article, “A Theoretical Framework for Aligning Project Management with Business Strategy”, Milosevic and Srivannaboon implicate a framework for alignment to achieve a competitive advantage. The next review by Breakthrough Performance Management is an article about tying performance metrics to business strategy. Now we explore the gap between the organizational components and the project level components.
Johnson points to the research of Cathleen Benko and F. Warren McFarlan which established that $2.3 trillion are spent annually on projects by U.S. companies. A majority of companies are performing these projects without having a strategy that ties the project to the organizational needs. Benko and Mcfarlan conclude that companies must optimize their projects by using portfolio management that focuses on both the relationship of synergic projects and the alignment to corporate strategy.
The primary question that Johnson presents is, “How can companies surmount these obstacles so their projects collectively support the corporate strategy, achieve efficiencies, and position the company to adapt to the future?” The first approach is to view your projects through a “strategy lens” and the second approach is to build a project-portfolio “brain”. By keeping it simple and involving the right people, portfolio management systems allow executive management to look across their enterprise for duplicate efforts that chip away at the bottom line. The key for success is to have constant communication on multiple levels.
Consider the application of tying the project level structure and strategy of the resource loaded network (RLN) development activities to that of a contract procurement structure and strategy at the business unit level. The project lifecycle is 1) pre-award, 2) contract execution, and 3) contract close. During the pre-award phase, a request for proposal (RFP) follows a procurement timeline consisting of four sequential phases,1) receive draft RFP, 2) receive final RFP, 3) submit proposal, and 4) contract award. At the organizational level, procurement specialists are primarily concerned with capturing the contract and handing it off to the project. Project level stakeholders are also concerned with capturing the contract, but more focused on the implementation of the proposal strategy. The alignment of the organizational components to that of the project level components often determines the success of the project.
The business unit has a strategy to capture contracts that continue to grow the business in terms of revenue recognition and customer relations. Therefore, projects implement the contract proposal in a way that satisfies the customer requirements on schedule and on budget. Strategic managers can group projects into portfolios by taking into account some of these similarities relating to the customer such as, risk in terms of contract type, Integrated Master Plan/Integrated Master Schedule RLN development, Earned Value Management, and so on. Processes, procedures, methodologies, and other continuous improvement activities are captured at the portfolio tier with a direct relationship to the customer requirements. Portfolio management assists in closing the gap between projects and strategy by utilizing an enterprise project structure and strategy that links the hierarchy of the organization to that of the project. Strategic managers can use portfolio management to achieve their projects collectively as they support the corporate strategy, achieve efficiencies, and position the company to adapt to the future.
References
Johnson, L. (2004, June). Close the gap between projects and strategy. Harvard Management
9(6), 3-5. Retrieved October 12, 2008, from EBSCO MegaFILE database.
Dec 22nd, 2008 at 11:19 am
Hi Travis,
It never ceases to amaze me to see all the agonizing and articles linking or attempting to link projects to strategy. Maybe it is an IT or telecommunications issue, because in oil, gas, mining, general construction, and international development project management projects ARE the manifestation of some strategy. Now, whether that strategy is a good one or not, remains to be seen, and is well beyond the pay grade of most project managers, but a project arises out of some strategic decision by an asset or operations manager to develop a new field or expand an existing one; to open a new area for mining; to build a new hotel or school or whatever…..
At last year’s Global Project Management Forum in Singapore, three of us (coincidently) presented papers basically debunking the myth that project managers are “strategic”. Applying a military model, we are the Lieutenants, Captains and Majors (field grade officers) who EXECUTE strategy conjured up by the Generals and Colonels…. Thus, we (project managers) are TACTICAL only. The General tells the Colonel the battle plan and the Colonel breaks that down into grand tactics. As the field grade officers, our jobs are to take the hill or whatever tactical objective has been established for us by the Colonel. Now, we may have input into the strategic decisions, but to infer or pretend that it is the project manager’s responsibility to establish strategy is, IMPO, unrealistic.
Happy Holidays to one and all……
Dr. PDG, shoveled out in Boston
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Dec 22nd, 2008 at 2:46 pm
Travis –
The $2.3 trillion number is NOT from research done by Benko and McFarlan. It is an estimate developed by PMI: and a highly self-interested estimate at that. In addition, both PMI and other project management associations are fond of estimating how much money is spent on projects, but none of them have ever offered any evidence that the percent of GDP spent on projects today is actually any greater than the percent spent at any previous point in history.
I would actually venture a guess that in the USA it is somewhat lower today than in past years, and certainly lower than in the period from 1940-1960.
In counterpoint to Johnson, let me mention an idea which I have adapted/adopted from a NewGrange contributor named Vic Rosenberg. Vic notes that an organization’s strategy is implicit in the projects that it funds and in the other decisions that it makes. What Johnson is actually arguing for is the idea that projects should be supportive of the “official” strategy rather than the “de facto” strategy without offering any evidence that the former is actually superior to the latter.
Duncan
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Dec 22nd, 2008 at 6:04 pm
Travis,
To learn more about the relationships between strategy and projects, I would urge you to Google on “Logical Framework”. To get you started, check out these two excellent sites. http://www.lgausa.com/top_page.htm or http://www.pitt.edu/~super1/lecture/lec16211/index.htm or http://amg.um.dk/NR/rdonlyres/A5C92A15-6E14-4F06-80B1-96971D31CD04/0/LogicalFrameworkApproach.pdf.
Like Earned Value, the Logical Framework evolved from the US Navy/Air Force and other Dept of Defense funded projects during the 1960’s. However, unlike EVM, Logical Framework pretty much died out, except for use by the World Bank, Asian Development Bank, AUSAID, USAID and similar bi- or unilateral lending agencies.
Essentially, the Logical Framework Approach (LFA) is “Organized” or “FACILITATED” by the aid agencies as the method to involve stakeholders in deciding what is the BEST project(s) to fund.
Consistent with my earlier posting, the project manager is RARELY if ever, involved in this process. As a matter of process, there technically IS no project until after the Logical Framework Approach has been completed.
FWIW, this same process is emulated in part by the oil, gas and mining sectors using the “Value Assurance Process” http://www.zadco.com/CMS/AboutZADCO/CorporateOverviewMissionVisionValues/AssetManagement/tabid/255/Default.aspx.
To learn more about this, pick up any decent book on Engineering Economics and you can see the process outlined in terms of the mathematical processes appropriate.
BR,
Dr. PDG, shoveled out in Boston
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Dec 22nd, 2008 at 10:59 pm
In my experience, the dark, strange area between strategy and projects is a difficult one. I do not think anyone can say how many projects are “tied to strategy”. A small percentage are certainly fraudulent, and have nothing to do with company objectives at all. Another percentage of projects are clearly supporting strategic goals of the company. The vast majority are somewhere in between.
Making this measurement even more difficult, you will find that different people in the same company have a different definition of “THE” strategy. Even Business School academics cannot agree on what the word “strategy” really means, too.
I agree with the general idea that project portfolio management can help align projects to strategy for some companies, but I am not convinced that it helps every company. Some companies do not have a clearly articulated strategy. Others have a strategy but it is secret and cannot be shared. Issues like these can completely undermine any project portfolio management effort.
I also think projects and strategy can come together without having an official portfolio process to do so. A good project charter can establish the business case and tie a project to strategy. I have worked with auditors to ensure that all projects are tied to business goals, and we did it successfully one project at a time. We did not talk about “project portfolios”, yet we made the links clear.
Interestingly, according to Michael Porter’s definition of “strategy”, there should be many projects in a company that are not aligned to strategy. “Strategy” are those things that a company does differently from its competitors. Any company must do a lot of non-strategic things to keep in operation. Projects that improve or maintain the basic functions of the organization would not align to strategy, according to this definition, but they are clearly aligned to business needs. The word “strategy” is used loosely in the project management world, but its definition is really debated in the business world.
Finally, I have to add that I think project managers can be strategic. There is a wonderful, poorly-defined space between strategic planning and project management. I call it “strategic project management”, and I think it is a legitimate and important topic. Hopefully we can nurture a set of project managers with strong business and strategic skills, alongside a set of strategic planners who understand how to implement projects and project controls. Right now I see few people who fall into either of these categories, but I hope their ranks will grow over time. I am not convinced that project portfolio management is necessary to get us there, and I am not sure it will help in all cases.
I think a good education in strategic planning will help any project manager grow. I love the fact that the article above is citing Harvard Business School. I recommend jumping in deeper, to enjoy the wealth of articles about strategic planning. There is much, much more to learn. Most of these articles and books do not mention projects at all, but when I read about strategic planning, I see the project-level implications on every page.
–Alex
http://www.alexsbrown.com
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Dec 31st, 2008 at 12:58 pm
Hi Travis,
I just stumbled on an article published by McKinsey that addresses many of the issues or concerns I have with the perceived attempts trying to link project managers to strategy.
http://www.mckinseyquarterly.com/Strategy/Growth/Just-in-time_strategy_for_a_turbulent_world_1195
In this article, you can see very clearly that STRATEGY is not the responsibility of the Project Manager. It is the CEO and other C level actors to establish strategy. As project managers, we have two primary responsibilities-
1) To develop the TACTICS to deliver the projects on time/within budget/in substantial conformance to the specifications
2) To keep the “project sponsor” (CEO, Asset Manager, Portfolio Manager)apprised of the status of the project in terms of those items over internal or external threats/opportunities that may impact the achievement of those very fundamental objectives.
Whether the strategy was “good” or “bad” is not the responsibility of the project manager.
BR,
Dr. PDG, shoveling snow in Boston again!!!
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Dec 31st, 2008 at 2:56 pm
Paul, your comments are always thought provoking, but I would not limit the project manager’s role in strategy to just two items.
The McKinsey article is interesting, and it reflects what I consider a “top down” view of strategy. Strategy is a vision, set by the top management, articulated by top management, and implemented by the workers.
I read people like Michael Porter and get a richer sense of what it means to create strategy. Strategy depends on the market, the industry, the internal capabilities of the firm (including capital investment, knowledge, people, and intellectual assets), the capabilities of competitors, buyers, sellers, and the market signals being exchanged in the marketplace. Porter writes to senior executives and strategic planners, but to say that strategy is their “responsibility” is a bit misleading, I think.
Strategy is the responsibility of everyone in the firm. Communicating events and capabilities up to senior management, watching trends, comparing the stated organizational strategy to actual events in the market place, and just being aware of strategic issues is everyone’s responsibility to some extent.
For a project management job, there is not only the responsibility to develop tactics to achieve stated objectives and the responsibility to keep sponsors informed. There is also:
* Collect data about what the organization is capable of
* Collect ideas for future strategic initiatives
* Conduct lessons learned to improve the capabilities of the organization
* Identify and improve capabilities during projects through training, improved procedures, improved process, and capital investment
* Collect competitive intelligence from the market, customers, suppliers, and others
* Create technical innovations and ideas that will set the company apart from others
Of course, the project manager must communicate all these new ideas, data, and improvement up the chain of command to be an effective contributor to strategy.
Keep in mind that NONE of these items include “setting the organization’s strategy”. The project manager does not have authority over the whole organization, so he or she should not try to set strategy for it. I do believe that the project manager can be an important influence on organizational strategy. I also think that many companies fail to use the competitive intelligence and other information that the project managers gather in their normal work.
I do believe that if the company strategy is truly awful, it is the responsibility of any and all employees to question it. There is a chain of command, and the project manager should do his or her job. The chain of command also exists to communicate messages from the front lines back to senior management, though. It is worthwhile for the employees to give their honest opinion about the quality of the strategic plan, the vision, and the mission, and for that message to go up the chain of command. Senior managers setting strategy often do consider whether the strategy is motivating and believable to the organization’s employees. If it is not believable, that is important strategic information.
I know you hate the term, but that is why I am focusing on “strategic project management”. I think there is a wealth of ways that project managers should interact with strategic planners and senior executives.
–Alex
http://www.alexsbrown.com
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Dec 31st, 2008 at 3:35 pm
Hi Alex,
As with so many other “issues” related to project management, we are talking about semantics.
I am in total agreement that project managers have the moral, ethical and (under SoX) the legal obligation to provide INPUT to management on how well the project is progressing.
If you look at the definition of “Tactics” or “Tactical”, http://www.thefreedictionary.com/tactics or http://management.about.com/cs/generalmanagement/g/tactics.htm or http://www.businessdictionary.com/definition/tactics.html, I think you can agree that the items you identified more appropriately fall under the category of TACTICS rather than stragegy.
I know you and I have had this discourse in other venues, but I believe we really have an obligation (as professionals) to consult with reputable standard English language dictionaries before we go running off creating or attempting to create our own definitions.
So yes, I do disagree that project managers are anything more than the implementers of strategies, designed by, funded and authorized by others. (Which is more or less consistent with PMI’s definition of “Project Sponsor”) and I think it is irresponsible for us to try to “bend” or “spin” definitions to fit what we would like to believe.
Happy New Year!!!!
Dr. PDG, shoveling snow again west of Boston (only 4 more days till I am back in the tropics!!!)
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Jan 2nd, 2009 at 2:38 pm
Paul, the semantic disagreement goes on! Unfortunately there is no good, solid, generally accepted definition of “strategy” in the business world. Michael Porter and others have disagreed about what is within and outside the scope of “strategy” and “strategic planning” for years. There is not even a “standard” or “body of knowledge” guide to provide an authoritative decision.
If you go to m-w.com or any of the on-line dictionaries you mentioned, the definition of “strategy” typically includes something about planning to meet an objectives, and marshalling resources to achieve a goal. Project management activities, including the ones I describe, can be brought under that goal. There is a tremendous amount of blurry, gray area between “strategy” and “tactics”. It has always been that way — even military experts (where the terms originally came from) do not have an absolutely sharp line between the two.
As you point out, we have an obligation to consult a good dictionary or resource. I recommend taking a look at Mintzberg et al, “Strategy Safari” for a good overview of the wide and varied ways that the words “strategic planning” have been used over the years. Michael Porter also has some great articles around his view of strategy — essentially doing things differently from the competition. Neither of these books match the dictionary definition so well.
I know the importance of consulting dictionaries and experts, but honestly I do not think that they help us very much here. None of them give us a clear boundary between tactics and strategy — nor should they. The words are not mutually exclusive. One action or one goal can be both tactical and strategic.
This area is a great and fluid place. Few signposts and markers have been set. I know you enjoy the exploration as much as I do. I do see appropriate paths where the project manager does far more than just “implement” strategy. Probably we share a different vision of how strategy is built, too. As a PM I have helped shape mission statements, organizational strategy, and marketing plans. I think that is appropriate and an avenue open to others, too. PMs lack authority to set strategy, and they should not act outside their authority. Their influence can be broad and deep, though. I encourage all project managers to expand and deepen their influence, especially with the people who set their organization’s strategy.
–Alex
http://www.alexsbrown.com
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Jan 2nd, 2009 at 9:41 pm
Hi Alex,
Unfortunately there is no good, solid, generally accepted definition of “strategy” in the business world.
We need to ask the question WHY there is no definition in the business world. If we look at the military defintions, the difference between Grand Strategy, Strategy, Grand Tactics and Tactics is clearly spelled out and it is clear which levels are responsible for each.
Could the problem be our old friend, “the not invented here” or “we do things differently” syndrome?
I for one am perfectly comfortable with the military definitions and am equally comfortable making the connection or parallel’s in the business world.
As you know, I have been “doing” project management for 45+ years on a wide variety of projects and the only times I have been involved in setting strategy as a project manager was during the bidding phase, preparing for an RFP. And as a project manager, I only had INPUT, but never actually established strategy.
After I became a General Contractor (GC), I set strategy as an owner, who had my own money riding on the line, and I expected my project managers to develop tactics to support the strategy we were building our proposal around, OR to change the strategy based on a better set of tactics. But in each case, the strategy was not established by the PM, but by the person whose money was riding on the line.
I am not in my office yet, but I seem to recall that Mintzberg was no fan of strategic thinking in most organizations, and I can assure you, as a successful small to medium size enterprise working in a highly competetive market during once in a lifetime financial turmoil, our “strategy” remains extremely fluid and flexible……. To the point we are functioning more at the tactical level with only the most broad and vague strategies in place.
1) Take no project unless it has a high potential to be profitable;
2) Keep overhead costs to the bare minimum;
3) Seek out opportunity whereever one presents itself;
4) Conserve cash whenever possible…..
And these strategies are communicated to our project people, with the expectations they will develop tactics specific to each project in line with those broad strategies…….
BR,
Dr. PDG, packing for Jakarta
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Jan 8th, 2009 at 12:36 pm
[...] Travis Anderson, PMStuden Tying Performance Metrics to Business Strategy In the previous article, “Close the Gap between Projects and Strategy”, Johnson discusses drawing the gap closer between projects and strategy. Now we explore an article [...]