Industry Insight No. 11: The future of portfolio, project and programme management—part 2

August 30, 2016

This article was first published on Lexis®PSL Construction on 24 August 2016.

 

Construction analysis: Sarah Schütte of Schutte Consulting Limited completes her review of key trends in portfolio, project and programme management (also known as P3M). In part 2 she considers how to manage large projects, the importance of people and culture, the roles and responsibilities of P3M professionals, building the optimal team, and the involvement of investors.

 

Last month, I explained the rise of the portfolio management office (PMO) and the enterprise project management office (EMPO), and described how they are implementing new P3M techniques across the construction and engineering industry—see News Analysis: Industry insight: the future of portfolio, project and programme management—part 1. This month, I continue picking out trends focussed on the 'people' side of projects, and looking at what the future might hold for project stakeholders.

 

How to manage projects of ever-­increasing size?

It is true that, whether the project is 'small' or 'mega', the core skill­set required is the same—technical prowess. But in some sectors (construction and engineering is leading the way) projects are getting bigger, and client expectations are increasing exponentially so suppliers or contractors must be ready to respond to, and meet (or exceed) customer satisfaction. Projects are also becoming more complicated and may be interwoven into a larger project programme, perhaps to take advantage of disruption which is being caused anyway, or to take account of, or ensure interface with, third parties who are working on the same overall programme (such as HS2 and TfL). This brings complications and sensitivities which must be managed appropriately, as well as requirements for risk identification and mitigation. The PMO is well­-placed to manage this, given its coordination and oversight function.

 

In order to effect this at delivery level, project managers and programme managers must be set up for success and this requires training, accreditation and regular review to ensure that the individual develops expertise and accreditation (eg with PMInstitute (PMI) and/or the Association of Project Managers (APM)), and the organisation’s strategic needs and, therefore, its projects’ needs, are properly met. This, done thoroughly and consistently, will contribute to raising the currently quite poor success rate of projects (see the statistics in part 1).

 

People and culture vs process

The rise of the PMO (a trend I explored in part 1) will require more emphasis on people and culture and less emphasis on process. Processes serve project professionals well, because their brains tend to work comfortably with process. Processes are also, of course, important for legal compliance, governance and ethics reasons, as discussed in my previous pair of articles— News Analysis: Industry Insight—ethics in the construction industry part 1 and Industry Insight—ethics in the construction industry part 2.

 

However, evidence shows that processes do not work optimally if people cannot (or won’t) follow them due to the working environment. Contracts such as NEC3, which set up simple processes to follow, cannot succeed if the people administering the contract do not follow them—a theme explored in this year’s NEC3 People Conference. In the workshop I co-­chaired on compensation events, it was striking to hear from delegates how little the contractual process was used, either properly or at all. This, coupled with a stimulating session on culture and environment, gave delegates much food for thought.

 

A key way to set the right environment is to ensure a transparent flow of information from the executive team, in the form of decision-­making and accountability, which is then put into practice by the project delivery team. A successful PMO manager will be someone who can build synergies, communicate well and effect true collaboration between the executive and the project delivery function, and be ready to test the true viability of certain projects, and push the executive to end a project when the planned­for benefits cannot be realised or the budget is exhausted (for more in the rationale of projects, see part 1). When I asked at the recent PMI PowerTalk why we persist with projects which are patently failing, there seemed to be two main reasons—self­ preservation and/or not wanting to admit failure and lack of direction/leadership. These neatly illustrate the need for, and value in, a PMO.

 

Contracts—the roles and responsibilities of P3M professionals

At the recent two­-day #eVa21 conference organised by the APM Chairman, I presented a paper on P3M professionals and law. The conference theme, 'Bringing Projects to Life', was the perfect backdrop for my talk. Project professionals, like organisations, must act within the scope of the law, and their contractual role and responsibility. They must not stray outside them. If they do not understand their role, or their organisation’s contractual position in a project, then the project starts off from the wrong place and problems are bound to occur. At the least, project issues are more likely to arise and relationships be strained in trying to resolve them. In the worst case scenario, an organisation could face a claim for professional negligence based on an allegation of breach of duty or a failure to comply with the professional appointment. Allegations, proven or not, increase the risk of impact on corporate and individual reputations, raise ethical or compliance issues, increase the professional indemnity insurance (PII) cover premium and bring enormous stress and cost.

 

Therefore, and as PMI’s statistics show (see part 1), technical excellence is no longer sufficient, and an excellent project manager needs also to have honed leadership and business skills. I work with organisations to put the legal framework at the core of business strategy. This is usually seen to fall within both the leadership and business skills part of the PMI Talent Triangle. There could be one or more legal frameworks, depending on the organisation’s global reach. Ensuring projects are undertaken with the legal framework at the forefront is where an organisation's legal officers, assisted by risk managers, compliance managers and insurance professionals, play an important part. Without them (or the others), the business lacks a quasi-­independent, naturally inquisitive, governance function. Forward­thinking organisations are realising this and structuring reporting lines accordingly. If one or more of these officers is able to sit on the executive board, then the function will be further strengthened.

 

In my experience, this approach also leads to a reduction in disputes and claims which are incapable of amicable resolution. A P3M professional, who exhibits leadership and commercial skills, as well as technical excellence, and who acts within the boundaries of the legal framework, definitely contributes to this outcome in my experience. By contrast, project problems which are determined through formal proceedings end up pitting teams and individuals against each other, and goodwill vanishes in an instant as differing accounts of the problem are exchanged, and then fought over. The stress and time involved are not to be underestimated, and nor is the cost.

 

Aligning people to projects and being ready to adjust the team

I am a passionate believer in the value of putting the right people in the right place for a project, creating a team which is dynamic, complementary and exhibits a broad skill­set. Little thought seems to be paid to building the team and I would advocate that the PMO is in a good position to do this given its oversight function. The PMO can see all the projects, and quickly assess which are placing demands on the organisation’s people, and when. The PMO can analyse the data vertically or horizontally eg by industry, client etc, and work out the optimal team arrangement for each project. This is a fledgeling trend but I believe it is one which helps to set up projects for success and I think it will be used more as the PMO function becomes more established.

 

Behavioural science tells us that in creating the right environment, the right values and behaviours are more readily exhibited by individuals. It is very interesting to watch how the dynamic of project delivery alters when one of the team members is changed. Organisations should not be afraid to change the team if it is not performing optimally, but should be ready to answer the question 'why?' and to take steps accordingly.

 

Striving for 'success'—the investors’ perspective

Public sector infrastructure projects are no longer being delivered solely by the public sector owner. For example, if the project is procured on a design­build­finance­operate (DBFO) or design-­build-operate-­maintain (DBOM) basis, then there is a medium­ to long­term interest in the asset.

 

Thus, major and mega projects are being driven by investors and investors are taking a closer look than ever at viability and benefits realisation (see the trend observed in part 1). If investors do not anticipate a return, then they will not invest or they will pull funding, and the project is put at risk of failing. The current market in infrastructure and development (including sustainability) projects is buoyant, but investors are careful. For them, the rate on investment is the key to 'success'. To measure 'success', they want to see reports on project progress and delivery milestones, call project board meetings, and may well appoint their own project monitor to assess project progress with the aim of protecting their investment.

 

Another way in which investors can measure success is by the use of contractual notices such as corrective action requests (CARs), which are common in the US, but are not often used in the UK currently. A CAR is triggered and sent to a contractor or supplier where an item or process does not conform to specified contractual requirements, and a remedy is required. A CAR requires the contractor/supplier to identify the root cause of the problem and effect change in order to correct the nonconformity and to prevent a recurrence. The contract may incorporate a CAR as part of quality assurance activities (a template form is useful), or simply as a contractual right. There may be differing levels of CARs depending on the complexity of the project, severity of the nonconformity, and how quickly the remedy must be provided. The key measure of success would be a nil return i.e. the supplier receives no CARs during a project. When I worked at London Underground, the concept of Corrective Action Notices (CANs) was used in the PPP contracts with similar aims and objectives. There was mixed success, including challenges to the issue of a CAN, but overall I believe that the inclusion of this process was a positive one.

 

Conclusion

For the past year, I have been working on bringing together law and contract strategy with project and programme management. I have observed and participated in debates on strategy and the PMO and am developing workshops on the impact of law on P3M to go live from 2017. I will continue to work closely with APM and PMI, both in the UK and globally, and the remainder of 2016 is jam­packed with events on this stimulating and topical debate. The trends described in this and my previous articles (News Analysis: Industry insight: the future of portfolio, project and programme management—part 1 and Industry Insight—making project managers ‘great’) indicate that P3M is going to be central to the future success of business.

 

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