Impact of Project Governance on Benefits Realization

Impact of Project Governance on Benefits Realization Management and Project Success: Towards a Framework for Supporting Organizational Strategy

By

Ata ul Musawir CIIT/FA13-RPM-001/LHR MS Thesis In Master of Science in Project Management

COMSATS Institute of Information Technology Lahore – Pakistan Spring 2015

COMSATS Institute of Information Technology

Impact of Project Governance on Benefits Realization Management and Project Success: Towards a Framework for Supporting Organizational Strategy

A Thesis Presented to

COMSATS Institute of Information Technology, Lahore

In partial fulfilment of the requirements for the degree of

Master of Science in Project Management By

Ata ul Musawir CIIT/FA13-RPM-001/LHR

Spring 2015

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Impact of Project Governance on Benefits Realization Management and Project Success: Towards a Framework for Supporting Organizational Strategy

A Post Graduate Thesis submitted to the Department of Management Sciences as partial fulfilment of the requirement for the award of Degree of Master of Science in Project Management.

Name

Registration Number

Ata ul Musawir

CIIT/FA13-RPM-001/LHR

Supervisor Dr. Imran Ali Assistant Professor Department of Management Sciences COMSATS Institute of Information Technology (CIIT) Lahore Campus July 2015

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DEDICATION

To my family – With whom my success begins and ends

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ACKNOWLEDGEMENTS

I am grateful to my mentor and supervisor, Dr. Imran Ali, for his patience and unconditional support, for his dedication to professionalism, and for his expert guidance, without which this thesis would not have been possible.

I would like to thank the members of the thesis review committee, especially Dr. Ahmad Nawaz amd Mr. Basharat Naeem, for their guidance and for their dedication to elevate the level of research conducted at CIIT Lahore. I would also like to thank Dr. Faisal Tehseen Shah for his insightful suggestions that helped to improve this thesis.

I am also grateful for the support and guidance of Carlos Serra, whose original research inspired me to embark on this journey to bring the emerging, critical concept of Benefits Realization Management to Pakistan.

A special thanks to the highly supportive academicians and practitioners in the Project Management community who were gracious enough to contribute their views to this research, especially Dr. Ralf Müller, Dr. Ofer Zwikael, Dr. Tuomas Ahola, Martin Samphire, Ross Garland, Mark Swan, Jed Simms, Bruce Bozza, Sue Bivins, and Emma-Ruth Arnaz-Pemberton.

Ata ul Musawir CIIT/FA13-MSPM-001/LHR

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ABSTRACT Impact of Project Governance on Benefits Realization Management and Project Success: Towards a Framework for Supporting Organizational Strategy This thesis aims to shed light on two streams of project management research that are rapidly gaining importance: the first is project governance and the second is the emerging concept of Benefits Realization Management (BRM). Both concepts are at the forefront of the fairly recent drive to revisit and re-conceptualize the theory and practice of project management, as evidenced by comprehensive initiatives such as Rethinking Project Management, which was a two-year research program (2004-2006) funded by the UK Government that involved a research network of academicians and practitioners working to extend and enrich project management theory in accordance with the developing practice. A key recommendation of said initiative is to shift focus from product creation to value creation. This is fueled by the increasingly large body of evidence that the majority of projects fail to meet success criteria. Adding to the urgency is the increasing pressure from business managers for projects to justify their value contribution to the organization. In this context, project governance and BRM are vital for ensuring that projects deliver expected business benefits and value. In doing so, these concepts help align project outcomes with organizational strategy.

This study aims to address an important gap in the literature: the relationships between project governance and BRM, and their effects on project success. These relationships were studied based on 326 responses from Pakistan’s burgeoning IT & Software sector, which is increasingly becoming vital for the country’s future economic growth as Pakistan transitions from an industrial to service-based economy. The findings of this study indicate that the aspects of project governance included in this study have a positive significant effect on both BRM and Project Success. Also, it is found that BRM mediates the relationship between two aspects of project governance, namely Relational

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Governance and Governance of Project Management (GoPM), and Project Success. The results supports the overall proposition of this study that strong project governance creates the context in which effective BRM can occur.

For the theory of project management, specifically project governance and BRM, this study hopes to contribute much needed empirical evidence to the literature and responds to recent calls for research on BRM. Additionally, this study attempts to adapt a scale for the GoPM concept, which fills an important gap in the existing operationalizations of different aspects of project governance and may prove useful for future academic studies.

For the practice of project management, this study hopes to initiate a discussion on how project governance and BRM may be integrated to support the achievement of organizational strategic objectives through projects and programs. Furthermore, this research aims to assess the current levels of, and create awareness of the developments in, project governance and BRM in Pakistan. This should help organizations to not only improve the success rates of their projects but also to extract business value from projects.

Keywords: Project Governance, Contractual Governance, Relational Governance, Benefits Realization Management, Project Success, Organizational Strategy, Business Value

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TABLE OF CONTENTS

ABSTRACT ....................................................................................................................... ix 1. Introduction ..................................................................................................................... 2 1.1. Background .............................................................................................................. 2 1.2. The Importance of Benefits and Benefits Realization Management (BRM) ........... 4 1.3. Importance of the Study in for Pakistan’s IT & Software Industry ......................... 7 1.3.1. Key Issues in Pakistan’s IT & Software Industry.............................................. 7 1.3.2. A Note on Corporate Governance ..................................................................... 8 1.4. Gap Analysis & Problem Statement......................................................................... 9 1.5. Research Questions ................................................................................................ 10 1.6. Significance of the Study ....................................................................................... 11 1.6.1. Theoretical Significance .................................................................................. 11 1.6.2. Practical Significance ...................................................................................... 14 1.7. Delimitations of the Research Area ....................................................................... 15 1.8. Organization of the Study ...................................................................................... 17 2. Literature Review.......................................................................................................... 19 2.1. Definition and Characteristics of Project Governance ........................................... 19 2.2. Contractual and Relational Governance ................................................................. 21 2.2.2. Contractual Governance .................................................................................. 21 2.2.3. Relational Governance .................................................................................... 22 2.3. Governance of Project Management (GoPM) ........................................................ 23 2.4. Governance of Projects (GoP) Orientation ............................................................ 25 2.5. Benefits Realization Management (BRM) ............................................................. 27 2.5.1. Definition and Benefits of BRM ..................................................................... 27 2.5.2. Conceptualizing the BRM Process .................................................................. 28 2.5.3. BRM Adoption and Approaches ..................................................................... 31 2.6. Project Success ....................................................................................................... 35 2.6.1. The Inadequacy of Existing Project Success Measures ................................... 35 2.6.2. Conceptualizing a Multi-Dimensional Approach to Project Success .............. 37 2.7. Hypothesized Model .............................................................................................. 38 xi

2.7.1. Contractual and Relational Governance and BRM ......................................... 38 2.7.2. Contractual and Relational Governance and Project Success ......................... 40 2.7.3. GoP Orientation and BRM .............................................................................. 41 2.7.4. GoPM and BRM .............................................................................................. 42 2.7.5. GoPM and Project Success .............................................................................. 44 2.7.6. BRM and Project Success................................................................................ 45 2.7.7. Mediating Role of BRM between Aspects of Project Governance and Project Success....................................................................................................................... 46 2.7.8. Hypothesized Model ........................................................................................ 47 3. Research Methodology ................................................................................................. 49 3.1. Target Population ................................................................................................... 49 3.2. Sample and Sampling ............................................................................................. 50 3.2.1. Sampling Frame ............................................................................................... 50 3.2.2. Sampling Methodology ................................................................................... 50 3.3. Research Instrument ............................................................................................... 52 3.3.1. Instruments used in the Survey Questionnaire ................................................ 52 3.3.2. Measurement Scale .......................................................................................... 54 3.3.3. Scale Adaptation and Pilot Testing (GoPM) ................................................... 55 3.3.4. Control and Demographic Variables ............................................................... 56 3.4. Data Collection and Analysis ................................................................................. 56 3.4.1. Data Collection ................................................................................................ 56 3.4.2. Data Screening ................................................................................................. 58 3.4.3. Data Analysis ................................................................................................... 58 4. Results and Discussion ................................................................................................. 61 4.1. Validity and Reliability Analysis ........................................................................... 61 4.1.1. Exploratory Factor Analysis (EFA) of GoPM Scale ....................................... 61 4.1.2. Confirmatory Factor Analysis (CFA) .............................................................. 63 4.1.3. Reliability Analysis ......................................................................................... 70 4.2. Descriptive Analysis .............................................................................................. 70 4.2.1. Project Type ..................................................................................................... 71 4.2.2. Project Size ...................................................................................................... 72

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4.2.3. Respondent’s Role in the Project..................................................................... 73 4.2.4. Length of Service in the Current Organization ............................................... 75 4.2.5. Total Experience being involved in Projects & Programs .............................. 76 4.2.6. Age Group ....................................................................................................... 77 4.2.7. Gender ............................................................................................................. 79 4.2.8. Highest Level of Education ............................................................................. 80 4.3. Correlation Analysis ............................................................................................... 81 4.4. Hypothesis Testing ................................................................................................. 83 4.4.1. Collinearity Analysis ....................................................................................... 83 4.4.2. Initial Structural Equation Model .................................................................... 84 4.4.3. Improvements to the Structural Equation Model ............................................ 86 4.4.4. Final Structural Equation Model ..................................................................... 88 4.4.5. Mediation Analysis .......................................................................................... 88 4.5. Discussion of Findings ........................................................................................... 93 4.5.1. Hypothesis 1: Contractual Governance and BRM .......................................... 93 4.5.2. Hypothesis 2: Relational Governance and BRM ............................................. 93 4.5.3. Hypothesis 3: Contractual Governance and Project Success .......................... 94 4.5.4. Hypothesis 4: Relational Governance and Project Success ............................. 94 4.5.5. Hypotheses 5a & 5b: GoP Orientation and BRM............................................ 95 4.5.6. Hypothesis 6: GoPM and BRM ....................................................................... 96 4.5.7. Hypothesis 7: GoPM and Project Success ....................................................... 96 4.5.8. Hypothesis 8: BRM and Project Success ........................................................ 97 4.5.9. Hypothesis 9a, 9b & 9c: Mediating Role of BRM .......................................... 98 4.5.10. Significant Effects of Control Variables ..................................................... 100 5. Conclusion .................................................................................................................. 103 5.1. Conclusion and Implications of the Research ...................................................... 103 5.2. Limitations and Directions for Future Research .................................................. 106 6. References ................................................................................................................... 109 Annexure A ..................................................................................................................... 116

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LIST OF FIGURES Figure 1 - The Aspects of Project Governance Analyzed in this Study ........................... 20 Figure 2 - Governance of Project Management (GoPM) in context (adapted from APM, 2011) ................................................................................................................................. 23 Figure 3 - Bridging the Value Gap (adapted from Serra and Kunc (2014), reprinted with permission)........................................................................................................................ 29 Figure 4 - Confirmatory Factor Analysis (CFA) (Standardized Estimates) ..................... 65 Figure 5 – Initial Structural Equation Model (Standardized Estimates) ........................... 85 Figure 6 - Final Structural Equation Model (Standardized Estimates) ............................. 89 Figure 7 - Mediation Analysis Step 1 ............................................................................... 90 Figure 8 - Mediation Analysis Steps 2, 3 & 4................................................................... 90

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LIST OF TABLES Table 1 - Benefit Types (adapted from Sapountzis et al., 2009) ........................................ 5 Table 2 - The Governance of Project Management Principles (adapted from APM, 2011) ........................................................................................................................................... 24 Table 3 - The Four GoP Paradigms (adapted from Müller & Lecoeuvre, 2014).............. 26 Table 4 - Outputs vs. Outcomes (adapted from Zwikael & Smyrk, 2012) ....................... 30 Table 5 - Overview of BRM Approaches (adapted from Sapountzis et al., 2009) ........... 32 Table 6 - The triple-test performance measurement framework for project success (adapted from Zwikael & Smyrk, 2012) ........................................................................... 37 Table 7 - Target Population & Sampling Frame ............................................................... 50 Table 8 – Scales’ Cronbach's α values as reported by their respective authors ................ 52 Table 9 - EFA of the GoPM Scale .................................................................................... 63 Table 10 - CFA Model Fit Indices .................................................................................... 63 Table 11 - Recommended Factor Loadings based on Sample Size (adapted from Hair et al., 2010) ........................................................................................................................... 64 Table 12 – CFA Factor Loadings and Reliability Testing ................................................ 67 Table 13 - ANOVA Results: Project Type ....................................................................... 71 Table 14 - ANOVA Results: Project Size......................................................................... 72 Table 15 - ANOVA Results: Respondent’s Role in the Project ....................................... 74 Table 16 - ANOVA Results: Length of Service ............................................................... 75 Table 17 - ANOVA Results: Total Experience ................................................................ 76 Table 18 - ANOVA Results: Age Group .......................................................................... 77 Table 19 - Independent Sample T-Test Results: Gender .................................................. 79 Table 20 - ANOVA Results: Level of Education ............................................................. 80 Table 21 - Mean, Standard Deviation, and Pearson’s Correlation Matrix ........................ 82 Table 22 - VIF Test Results .............................................................................................. 84 Table 23 - Tolerance Index Values ................................................................................... 84 Table 24 - Initial Structural Equation Model Fit Indices .................................................. 86 Table 25 - Final Structural Equation Model Fit Indices ................................................... 88 Table 26 - Mediation Analysis Results ............................................................................. 91 Table 27 - Hypothesis Decisions ...................................................................................... 92 Table 28 - Significant Control Variable Effects ............................................................. 101

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LIST OF ABBREVIATIONS α

Alpha

β

Beta

ABR

Active Benefits Realisation

ADB

Asian Development Bank

ANOVA

Analysis of Variance

APM

Association for Project Management

BDN

Benefits Dependency Network

BIS

Department for Business, Innovation & Skills (UK)

BRM

Benefits Realization Management

CFA

Confirmatory Factor Analysis

CFI

Comparative Fit Index

CG

Contractual Governance

CMIN

Chi-Square

DF

Degrees of Freedom

EFA

Exploratory Factor Analysis

GFI

Goodness of Fit Index

GOCG

GoP Dimension: Corporate Governance orientation

GOOC

GoP Dimension: Organizational Control orientation

GoP

Governance of Projects (orientation)

GoPM

Governance of Project Management

IJPM

International Journal of Project Management

IS

Information Systems

IT

Information Technology

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ITES

Information Technology Enabled Services

MSP

Managing Successful Programmes

N

Number

NFI

Normative Fit Index

ISO

International Organization for Standardization

OGC

Office of Government Commerce (UK)

P@SHA

Pakistan Software Housing Association

PM

Project Management

PMI

Project Management Institute

PMO

Project Management Office

PPM

Project Portfolio Management

PRINCE2

PRojects IN Controlled Environments, version 2

PSBV

Project Success dimension: Creation of Business Value

PSMP

Project Success dimension: Project Management Performance

PSOS

Project Success dimension: Project Success (overall)

RG

Relational Governance

RMSEA

Root Mean Square Error of Approximation

ROI

Return on Investment

SD

Standard Deviation

SEM

Structural Equation Modeling

SIG

Specific Interest Group

SPSS

Statistical Package for Social Sciences

SRO

Senior Responsible Owner

TCE

Transaction Cost Economies

UNESCO

United Nations Educational, Scientific and Cultural Organization

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Chapter 1 Introduction

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1. Introduction Chapter 1 begins with an overview of the project management field’s rise to prominence. It explores the reported success rates for both international and local projects and brings to light the ‘investment-in-failure’ paradox. In parts two and three, the increasingly important concept of Benefits Realization Management (BRM) and the need to examine its relationship with project governance in Pakistan are discussed. Subsequently, the gap analysis and problem statement are presented in part four, based on which the research questions for this study are derived in part five. Furthermore, the theoretical and practical significance of this study is discussed in part six. Finally, the delimitations of the research scope are explained in part seven and an outline of the remainder of the study is provided in part eight.

1.1. Background Project management and the organization of work using projects has steadily gained prominence over the past few years and represents a paradigm shift in management: from the functional, bureaucratic approaches that dominated the first half of the 20th century to more flexible project- and process-based approaches that have increasingly become essential in the latter half and beyond (Turner & Keegan, 1999). This shift may be attributed to various reasons discussed in detail in the project management literature but the underlying cause may be the inability of classical management approaches to effectively address the complexity and rapid pace of change (Turner & Keegan, 1999) that has become characteristic of modern organizations.

The rapid proliferation of projects and programs means that project performance and success rates have far-reaching implications for the health of the domestic as well as global economy. According to the Project Management Institute’s Fact Book, expenditure on projects amounted to approximately 25% of the world’s US$40.7 trillion gross product in 2001 (PMI, 2001). Similarly, Turner (2009) reports that approximately 30% of the global economy is project-based.

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Despite their significance, a large number of projects fail or at least are reported to fail. The widely cited CHAOS Report by the Standish Group indicated that in 2014, 83.8% of software projects in the U.S. failed to complete on time while 52.7% exceeded budget estimates and 31.1% were outright cancelled (Standish Group, 2014). The IT sector in Pakistan faces a similar situation. According to Jalil and Hanif (2009), most of the software projects outsourced to Pakistan fail to meet budget and schedule goals, while some even fail to reach completion. This is particularly worrying considering that Pakistan’s IT & ITES industry ranks second overall in South Asia and currently earns over USD 2 billion in revenues a year, which is expected to increase to USD 11 billion in the next 5 years (P@SHA, 2015). There is a dire need to address the challenges faced by the IT & Software industry since it represents an important source of future economic growth as Pakistan transitions from an industrial to a service-based economy (Ghauri, 2013).

Furthermore, statistics published by large international organizations on the success rates on their own projects conducted in Pakistan indicates a similarly dismal situation. For example, the Asian Development Bank (ADB) reported an average success rate of only 48.8% based on 168 projects undertaken in a wide range of sectors in Pakistan including education, energy, finance, and transport and ICT (Asian Development Bank, 2014). Similarly, the World Bank reported that almost one-third of its multi-billion dollar projects in Pakistan have failed to achieve the desired results (Haider, 2013).

Given this bleak situation, it is surprising that organizations still continue to increase their investments in projects (Shenhar & Dvir, 2007) which leads to an apparent ‘investmentin-failure’ paradox (Zwikael & Smyrk, 2012). Indeed, one may question that if most projects fail, why do organizations still continue to commit large amounts of resources to fund such initiatives? One possible explanation that has been gaining support in the literature is that current measures of project performance and success are inadequate or at least incomplete (Atkinson, 1999) and therefore it is difficult to reliably estimate the scale or success or failure (Jenner, 2015). It is possible the ‘true’ project failure rates may be

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lower than currently reported (Zwikael & Smyrk, 2012). A number of famous examples of projects that were initially considered failures according to existing project success criteria but went on to become highly successful include the Sydney Opera House, the Hubble Space Telescope, and the Ford Taurus (Shenhar & Dvir, 2007; Zwikael & Smyrk, 2012).

1.2. The Importance of Benefits and Benefits Realization Management (BRM) As evidenced by the above examples, the traditional ‘Iron Triangle’ of cost, time, and scope/quality that is widely used to gauge project performance and success may represent a short-term view that excludes the consideration of longer-term benefits of projects, which can often only be adequately gauged well after project delivery (Atkinson, 1999). A ‘benefit’ in this context may simply be understood as “an outcome of change which is perceived as positive by a stakeholder” (Bradley, 2010). This definition is often extended to include strategic connotations, in terms of contributions to organizational strategic objectives. Benefits can be classified into different types based on their characteristics and need to be measured accordingly. Some of the major benefit types are shown in Table 1. Similarly, the New South Wales Government’s BRM framework identifies the following benefits types (NSW Office of Finance & Services, 2015): 

Direct financial – those benefits that can be quantified and valued in financial terms e.g. cost savings, revenue generation.

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Direct non-financial – those benefits that can be quantified, but are difficult to value in financial terms e.g. improved resilience.

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Indirect benefits – those benefits that can be identified, but cannot be easily quantified, e.g. end user satisfaction, better access to information, improved customer service.

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Others – classified by stakeholder; operational/strategic; emergent

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The delivery of benefits should be of paramount importance for projects and programs. Indeed, a successful project may be defined as one that delivers the expected benefits (Thorp, 2001). Consideration of project benefits may be vital even at the project appraisal stage to ensure that only those projects that have the potential of creating the most business value are selected.

Table 1 - Benefit Types (adapted from Sapountzis et al., 2009) Benefit Types Tangible (hard/direct)

Intangible (soft/indirect)

Description Judged objectively, uses quantitative measures which are often but not always financial Judged subjectively and tend to employ qualitative measures, often difficult to measure and almost always difficult to convert to monetary values

By organizational or

These come in five different business streams: strategic;

business impact

management; operational; functional; support Classification of benefits and disbenefits according to the

By stakeholder or actor-oriented

stakeholder (groups) who will feel or experience their impact. In an investment, project or program the actors/stakeholders can be classified in four main categories: providers; acceptors; supporters; controllers, both human or organizational These are often a consequence of a change implemented or

Unplanned/emergent

another benefit gained. They are documented in business cases as a result of a change or an investment

However, existing project management approaches may not be adequate for supporting the identification and realization of benefits. As pointed out by Coombs (2015), common project appraisal techniques such as net present value, internal rate of return, and return on investment assume that the cost of project investments are directly related to benefits, whereas in reality there is often a significant gap between the costs incurred and the benefits realized. According to the UK Office of Government Commerce (OGC),

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“deficiencies in benefits capture bedevils nearly 50% of government projects” and “3040% of systems to support business change deliver no benefits whatsoever” (OGC, 2003 in Jenner, 2012). Similarly, based on data of large-scale projects over a 70-year period, Flyvbjerg (2014) concludes that overruns have remained high and constant and “benefit shortfalls of up to 50% are also common and above 50% not uncommon” with no signs of improvements over time and geography. Organizations investing in projects need to understand that benefits do not happen on their own and rarely happen according to plan (Thorp, 2001). Therefore, the need for a new project management approach that supports the identification and realization of benefits arises. Benefits Realization Management (BRM) is defined as “the process of organizing and managing, so that potential benefits arising from investment in change, are actually achieved” (Bradley, 2010). Through tools such as the Benefits Dependency Network (BDN), BRM is about ‘starting with the end in mind’, where this end usually represents the investment objectives for undertaking projects, and working backwards to determine what is required to achieve that end goal.

While there is increasing interest in literature, BRM lacks widespread adoption in practice (Coombs, 2015; Doherty, 2014). Even in projects where BRM is being implemented, it may not be systematically or rigorously practiced (Pellegrinelli et al., 2007). Similarly, Ashurst et al. (2008) find that while benefits are often considered during the early stages of the project, they tend to be forgotten and are not actively managed during the later stages of projects. One of the major reasons for this lack of adoption is that the field is still in its relative infancy (Doherty, 2014) and a significant amount of work is required to develop the underlying theory as well as models and tools to guide practice.

The central aim of this research is to contribute to the development of the benefits management literature by empirically examining the extent of its application in Pakistan and the relationship between Benefit Realization Management (BRM) practices and project success, where the latter is divided into three distinct categories, namely Project

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Success (overall), Project Management Performance, and Creation of Business Value (Serra & Kunc, 2014). Additionally, the role of selected project governance aspects, specifically Contractual Governance and Relational Governance (Lu et al., 2015), and Governance of Projects (GoP) orientation (Müller & Lecoeuvre, 2014), and the Governance of Project Management (GoPM) (APM, 2011) in facilitating BRM practices and Project Success are explored.

1.3. Importance of the Study in for Pakistan’s IT & Software Industry 1.3.1. Key Issues in Pakistan’s IT & Software Industry IT Projects is Pakistan tend to adopt a ‘by hook or by crook’ approach to business acquisition, which often results in false commitments to the project customer (Ahsan, 2009). Inevitably, these lead to confusion and frustration for all parties involved and, in a number of cases, the project organization lacks the capabilities to deliver on these commitments (Ahsan, 2009). A comprehensive BRM approach can help overcome these challenges by ensuring that a realistic business case, which is aligned with the IT organization’s strategy, is established (Zwikael & Smyrk, 2012). Additionally, by creating an explicit accountability structure, effective project governance can prevent inflated or outright false promises being made to project customers, ensure an adequate level of project sponsorship, and improve project success rates by ensuring that the business case is realized (APM, 2015).

Lack of stakeholder engagement is also identified as one of the core reasons for IT project failure in Pakistan (Ahsan, 2009). This tends to result in information asymmetries and a lack of commitment from key stakeholder groups (Ahsan, 2009). The reported lack of ownership by project team members (Majeed et al., 2013) is perhaps the most serious case of poor commitment. A study of software projects outsourced to Pakistan found that 46% of projects analyzed indicated low to average stakeholder satisfaction (Jalil & Hanif, 2009). Similarly, conflicts between stakeholders has been identified as one of the major issues facing Pakistan’s IT projects (Majeed et al., 2013). The management of

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stakeholder requirements and expectations is an important aspect BRM, whereas project governance provides an effective counterbalance through independent scrutiny to ensure that the project is not derailed due to excessive stakeholder involvement.

Furthermore, while the top management of IT & Software organizations exert excessive pressure on project teams, there is often a lack of necessary project sponsorship for successful project execution (Ahsan, 2009). This is due in part to lack of IT literacy on part of project customers, which inhibits their ability to understand the limitations of such projects and may lead them to impose somewhat unrealistic expectations (Majeed et al., 2013). To exacerbate the situation, IT & Software organizations tend to lack an infrastructure that is supportive of project activities and project management (Ahsan, 2009). In this context, a meticulous definition of the business case and intended project benefits, along with effective requirements management, is essential to prevent disputes. Also, intra-organizational support for projects and project management may be achieved through clear governance procedures and accountability structures. However, the state of project governance in Pakistan’s IT & Software industry may not be up to the task. In a study of public and private sector IT organizations in Pakistan, respondents were asked to rate their organization’s project governance function on a scale of 1 to 10, with 1 being the lowest and 10 being the highest. Effectiveness of the steering committee received a mean score of 5 whereas project sponsor involvement received a mean score of only 3 (Majeed et al., 2013). Similarly, another research based on a case study of three major public sector projects indicated a mean score of 3.7 for how well the project was controlled against the plan, 2.7 for how well issues were handled during the project, and 5.5 for effectiveness of change management (Ashraf et al., 2010).

1.3.2. A Note on Corporate Governance Although a discussion on corporate governance is beyond the scope of this research, it is important to note that Pakistan’s lax regulatory climate and widespread corruption necessitates an emphasis on corporate governance, especially since project governance is

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simply a sub-set of corporate governance (Too & Weaver, 2014). This implies that a strong corporate governance orientation is invariably necessary for strong project governance. Large-scale scandals in Pakistan’s IT & Software industry are a testament to this. Even at the time of writing, an international multi-million dollar fake degrees scandal involving a Pakistani software company is under investigation (Walsh, 2015). This is not the first governance failure in Pakistan’s IT & Software industry and, unless the importance of strong corporate governance is promoted, it may not be the last.

1.4. Gap Analysis & Problem Statement Firstly, despite several advancements in the PM field over the past few years, significant improvements in project success rates have not been realized (Mir & Pinnington, 2014). As a result, managers are increasingly questioning the effectiveness and value contribution of Project Management and Project Management systems (Mir & Pinnington, 2014). This indicates a need to expand existing project success criteria beyond time, cost, and scope considerations to include the contribution of project outcomes to business value, which has also been identified in the context of Pakistan by Qureshi et al. (2009).

Secondly, while the literature recognizes the importance of benefits and active benefits management, a number of studies indicate that the adoption of BRM concepts and methodologies in practice has been low (APM, 2009; Sargeant et al., 2010; Ward et al., 2007). While this may indicate a lack of awareness regarding BRM methodologies, it does raise the question of whether BRM provides any tangible benefits to the project organization in terms of the expanded project success criteria mentioned above.

Thirdly, the relationship between BRM practices and project governance is unclear and lacks empirical evidence. Although benefits realization is recognized to be a key aspect of the governance process and governance functions should be accountable for the integration of project outcomes into the business (Serra, 2013), few organizations are able to effectively integrate their benefits realization strategy with their governance strategy

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(Serra, 2012). In Pakistan, this problem is made worse by weak project governance practices of IT & Software sector organizations (Ashraf et al., 2010; Majeed et al., 2013).

Based on the above discussion, the following problem statement may be derived: The primary goal of projects should be to deliver the expected benefits (investment objectives) that lead to the creation of business value (Thorp, 2001). However, despite strong support in the literature, Benefits Realization Management (BRM) practices are not being widely adopted (Ward et al., 2007) and projects continue to be judged according to the incomplete ‘Iron Triangle’ criteria of cost, time, and scope/quality (Atkinson, 1999). Additionally, while the literature implies that effective project governance may be vital for supporting BRM practices (Jenner, 2014), the relationship between the various aspects of project governance and BRM is unclear and lacks empirical evidence. Therefore, the purpose of this research is to: (a) Examine the relationship between selected aspects of project governance and BRM (b) Examine the relationship between BRM and Project Success, where the latter is expanded to include both Project Management Performance and Creation of Business Value in line with Serra and Kunc (2014) (c) Examine the mediating role of BRM in the relationship between selected aspects of project governance on Project Success

1.5. Research Questions This research aims to answer the following core questions: RQ1. What is the relationship between the selected aspects of project governance and Benefits Realization Management? RQ2. What is the relationship between the selected aspects of project governance and Project Success? RQ3. What is the relationship between Benefits Realization Management and Project Success?

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RQ4. Does Benefits Realization Management mediate the relationship between (a) Contractual and Relational Governance and (b) Governance of Project Management and Project Success?

Additionally, this study aims to shed light on the following: RQ5. What is the extent to which various Contractual and Relational Governance practices are being implemented in the organizations studied? RQ6. What is the Governance of Projects paradigm of the organizations studied? RQ7. What is the extent to which Governance of Project Management practices are implemented in the organizations studied? RQ8. What is the extent to which various Benefits Realization Management practices are being implemented in the organizations studied? By answering RQ1 – RQ4, this study empirically examines and models the direct and mediated impact of selected aspects of project governance on Project Success as well as the direct impact of BRM on Project Success in organizations operating in Pakistan. By answering RQ5 – RQ8, this study investigates the implementation of project governance practices and orientation as well as BRM practices in project organizations operating in Pakistan. This would be compared with the findings of existing studies (Lu et al., 2015; Müller & Lecoeuvre, 2014; Ward et al., 2007) to determine the relative awareness and orientation of these concepts in Pakistan.

1.6. Significance of the Study 1.6.1. Theoretical Significance i. Significance for the Field of Project Management In their extensive study of the progress project management as a research-based academic discipline, Kwak and Anbari (2009) found that project management faces difficulties in validating and justifying its existence within the business and management fields.

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Accordingly, there is a need to make project management more relevant to other management disciplines and to explore how it can contribute to organizational strategy and bottom-line business value. Indeed, one of the main directions for future research proposed by the Rethinking Project Management research network is to shift the prime focus of projects from product creation to value creation (Winter & Smith, 2006). This entails a shifting emphasis from managing capital assets involved in projects to linking projects to business strategy and managing the delivery of benefits to different stakeholder groups (Winter et al., 2006).

Furthermore, Strategy/PPM (which includes Strategy, Integration, Portfolio Management, Value of Project Management, and Marketing) was found to be the most important research subject in project management, in terms of popularity amongst top management and business journals, and shows a strong upward trend that is predicted to continue in the future (Kwak & Anbari, 2009). Similarly, the Editorial Board of the leading project management journal – the International Journal of Project Management – aim to shift the focus of the journal towards strategic aspects and away from tactical and operational aspects of project management (Turner & Huemann, 2014), which indicates that the priorities of the field are shifting towards making projects a meaningful tool for achieving strategic organizational objectives.

This thesis addresses the need to relate project management to organizational strategy by (a) building on the emerging concept of BRM, which helps organizations plan, monitor, and achieve required business value from projects, (b) expanding the project success criteria to include creation of business value, and (c) exploring the role of project governance in supporting the achievement of strategic objectives through BRM. In doing so, this study contributes towards increasing the significance and relevance of the project management discipline to the academic business and management fields, which is vital for the recognition and long-term growth of discipline.

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ii. Significance for the Theory of Project Governance & BRM One of the major reasons why project management struggles to gain legitimacy as an academic discipline is that unlike classical management theories that have developed considerably during the late 19th and 20th centuries, project-based approaches have had relatively less time to develop and lack a strong theoretical basis (Turner & Keegan, 1999). It is therefore not surprising that the existing literature on BRM is lacking in a number of areas including target benefit formulation, monitoring tools, and evaluation of benefits (Zwikael, 2014). Also, the lack of adoption of BRM methodologies prompts the need to look more deeply into the underlying concepts of BRM (Breese, 2012). Accordingly, a call for papers on project benefits management was issued in the May 2014 issue of IJPM (Zwikael, 2014). Similarly, the Association for Project Management’s (APM) Benefits Management Specific Interest Group (SIG) encourages research on management disciplines and organizational characteristics that present the greatest potential to either support or compromise BRM (White, 2014).

This thesis contributes to the development of theory on BRM. Specifically, it aims to respond to two research questions posed in the call for papers on BRM in IJPM: 1. “How can project benefit management enhance the achievement of organizational strategic objectives?” 2. “What are the implications of benefit management research on project governance, the concept of project success, and the project management tool kit?”

The first question is addressed by analyzing the impact of BRM on the creation of business value. The second and third are addressed by investigating the role of project governance in facilitating BRM, which also responds to the need for research on management disciplines and organizational characteristics that support BRM, as highlighted by APM’s Benefits Management SIG. To this end, this study adapts a scale for measuring the strength of an organization’s Governance of Project Management (GoPM) function, which is based on the 13 principles of GoPM proposed by APM (2011). To the best of the author’s knowledge, this is the first study that aims to adapt

13

such a scale and to empirically examine the relationship between the selected aspects of project governance and BRM.

1.6.2. Practical Significance i. Significance for Organizations Engaging in Projects & Programs The prominence and pervasiveness of project management and the velocity at which it is gaining importance in both private and public sectors (Turner & Keegan, 1999) greatly emphasizes the need for further research on how greater business value can be derived from projects and how their success rates can be improved. A major practical contribution of this research is towards bridging the gap between organizational strategy/change management and project/program management, which is one of the key contributions of BRM (Breese, 2012). In this regard, the findings of this study could help organizations understand how projects can be employed towards achieving strategic objectives and elucidate the steps that need to be taken towards creating the organizational context to support strategic project management. Specifically, it aims to highlight those BRM practices that may have the greatest potential for improving project success and the achievement of business value. Additionally, this study aims to identify the governance context in which business value may be derived from projects through BRM. Most importantly, this study represents the first attempt to integrate project governance and BRM structures and processes into a system that leverages projects and programs to achieve organizational strategic objectives.

ii. Significance in the Context of Pakistan BRM, when studied together with aspects of project governance, has tremendous potential for project management in developing countries such as Pakistan. One of the most pressing issues in Pakistan is ‘strategic misrepresentation’, which may be defined as the “the planned, systematic, deliberate misstatement of costs and benefits to get projects approved” (Flyvbjerg et al., 2007). It is widely known that private sector IT & Software projects in Pakistan often commit strategic misrepresentation of project benefits just to acquire the business with little regard for the fit between the project customer’s

14

requirements and the organization’s capabilities (Ahsan, 2009). Similarly, public sector IT & Software projects suffer from poor management and governance (Ashraf et al., 2010; Majeed et al., 2013), as a result of which the benefits rarely reach the intended beneficiaries. Even development projects in Pakistan have a poor track record (Dawn, 2010; Schneider, 2006; Talpur et al., 2013). This study aims to create awareness of BRM practice which, supported by a strong project governance context, can potentially help ensure that the benefits envisioned at the beginning of projects are actually realized and the interests of stakeholders are safeguarded. Although the study focuses specifically on IT & Software organizations, the concepts of BRM and project governance are also relevant to other project-based sectors in Pakistan, such as Engineering & Construction and Public Administration & Development. Thus, the recommendations of this research may prove useful to other sectors as well. Over time, this can contribute towards the improving the ROI and success rates of both private- and public-sector projects, which in turn would contribute to the high-end goals of greater economic welfare and growth.

1.7. Delimitations of the Research Area This research is subject to the following key delimitations:

D1: Only selected aspects of project governance are analyzed Reasons: Project governance is a vast and evolving field. To the best of the author’s knowledge, there is no existing operationalization of project governance that adequately covers the wide range of project governance roles, structures, and processes. This is partly due to the varying interpretations and perspectives on project governance and the lack of a unanimously accepted conceptualization. Therefore, this study does not attempt nor claim to capture in its entirety the concept of project governance and its interaction with BRM and Project Success.

D2: Moderating variables relating to Contractual Governance and Relational Governance are not included

15

Reasons: While the literature indicates that certain contextual factors such as the institutional environment may affect the strength and type of relationship between Contractual Governance and Relational Governance (Cao & Lumineau, 2015), these variables have been excluded in this study in line with the principle of parsimony. Also, the in-depth discussion of these variables is beyond the scope of this research.

D3: The relationship between GoP Orientation and Project Success is not studied Reasons: Results from the original study highlight that GoP, in terms of both governance orientation and outcome control dimensions, varies according to country, project size, and project type (Müller & Lecoeuvre, 2014). This indicates that there may be various contextual factors at play and proposing that a certain orientation is more effective in improving Project Success may be an oversimplification. Therefore, this relationship is not investigated in this study, although the importance in-depth research to analyze this relationship is recognized.

D4: The interrelationship between different aspects of project governance is not analyzed Reasons: The primary focus of this research is to study the relationship between different aspects of project governance and BRM as well as Project Success. The interrelationship between different aspects of project governance is therefore beyond the scope of this study but represents an important avenue for future research.

D5: The actual realization of benefits is not measured Reasons: The realization of project benefits can take up to several months or years (Andersen, 2014) depending on the characteristics of the project, which makes it very difficult to collect accurate data. Additionally, it is unlikely that organizations in Pakistan would possess benefits tracking and monitoring processes that are mature enough to provide accurate and quantifiable data relating to the realization of benefits.

D6: Only completed projects are analyzed Reasons: To acquire reliable perceptions of project management performance and creation of business value, only data pertaining to projects completed in the past one year

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will be requested from respondents, which is similar to the approach used by Serra and Kunc (2014). D7: Project customer’s perspective of Project Success is not (directly) analyzed Reasons: Due to the difficulty in reaching project customers and the expected unwillingness of respondents to reveal the identity of their clients, Project Success from the perspective of the project customer will not be directly measured. Instead, respondents will be asked to indicate their perceptions of project success from three perspectives, which includes the project customer’s perspective. This is in line with the approach used by Serra and Kunc (2014), where respondents holding project management, project sponsorship, and project governance roles were asked to evaluate the project’s success from three perspectives: project team, project sponsor, and project customer.

1.8. Organization of the Study The remainder of the thesis is organized as follows: 

Chapter 2 reviews the literature on the key variables of interest in the study and presents the theoretical and, where appropriate, empirical evidence on how they relate with each other, based on which the hypothesized model for this study is derived.



Chapter 3 overviews the research methodology to be used for this study, including the sample and sampling method, the survey questionnaire instruments used and their respective sources, and the data analysis techniques. The complete survey questionnaire is appended as Annexure A.



Chapter 4 presents the results of the data analysis, which involves validity and reliability analyses, descriptive analyses, correlation analysis, hypothesis testing, and mediation analysis. The results are also discussed in light of findings from previous studies.



Chapter 5 provides concluding remarks and identifies directions for future research.

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Chapter 2 Literature Review

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2. Literature Review This chapter explores the extensive literature on project governance and the four main aspects that are the focus of this research, namely Contractual Governance, Relational Governance, Governance of Projects (GoP) Orientation, and Governance of Project Management (GoPM). These are discussed in parts one through four. Additionally, the concept of Benefits Realization Management (BRM) and its role in business value creation and hence supporting organizational strategic objectives is explained in part five. Furthermore, the shortcoming of the existing definition of Project Success are explored and an extended, multi-dimensional definition of Project Success is proposed in part six. Finally, in part seven, the theoretical and empirical evidence (where applicable) on the relationship between these key variables is discussed and this study’s hypotheses are proposed accordingly. These are then summarized in the form of a hypothesized model.

2.1. Definition and Characteristics of Project Governance The concept of project governance is often misunderstood owing partly to its misleading verbiage and the different variations and connotations being used by various industries, institutions, and organizations to suit their specific needs (Bekker & Steyn, 2009). As a result, there is no generally accepted definition of project governance (Bekker & Steyn, 2009). Also, the literature on the definition and interpretation of project governance is somewhat inconsistent (Roe, 2015). The more commonly used definition of project governance uses it as a blanket term for Project, Program, and Portfolio governance (Figure 1), which may be considered a subset of corporate governance (Too & Weaver, 2014). This is encapsulated in the definition provided by (Müller, 2009, p.4): “Governance, as it applies to portfolios, programs, projects, and project management, coexists within the corporate governance framework. It comprises the value system, responsibilities, processes and policies that allow projects to achieve organizational objectives and foster implementation that is in the best interest of all stakeholders, internal and external, and the corporation itself.” Although this conceptualization is convenient, it presents difficulties when attempting to operationalize and observe the impacts of specific governance structures on other aspects 19

of project management, such as project success. Therefore, for the purpose of this research, the concept of project governance is ‘broken down’ into sub-components based on the level at which they are most applicable, in accordance with the first school of thought on governance which postulates that different types of governance are needed in different sub-units of the organization (Too & Weaver, 2014). These different types of governance possess different characteristics and objectives. At the project level, governance functions to set project objectives and outline the means to obtain these objectives, which are then used as a basis for monitoring and controlling project performance (Turner & Keegan, 2001). In contrast, at the program and portfolio levels,

Selected PG Aspects

Levels of Project Management

GoPM & GoP Orientation

Portfolio Management

Contractual & Relational Governance

Project Governance

governance functions mainly to align the portfolio of projects to its organization strategy.

Program Management

Project Management

Figure 1 - The Aspects of Project Governance Analyzed in this Study

For the purpose of this study, Contractual Governance and Relational Governance are used to represent a portion of the project governance practices that occur at the project

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level, whereas GoPM and GoP orientation are used to represent project governance that typically occurs at the program and portfolio levels. This is illustrated in Figure 1.

2.2. Contractual and Relational Governance 2.2.2. Contractual Governance The concept of Contractual Governance is derived from the Transaction Cost Economics (TCE) theory which posits that firms respond to exchange hazards by drawing up complex contracts (Lu et al., 2015). These contracts represent the formal promise or obligations by either party to perform specific actions and serve to govern the relationships between distinct firms involved in projects (Lu et al., 2015).

Project contracts usually consist of three distinct sections (Lu et al., 2015): 1. Fundamental elements – specifies the key principles and agreements between the parties pertaining mainly to time, cost, and scope/quality requirements 2. Provisions/Change elements – terms specifying how unforeseen events would be settled and the principles, tactics, and organizational structures and process that would take effect in such situations 3. Governance elements – terms specifying how the contractual relationship will be maintained, including performance measurement methods, penalties, and incentives as well as dispute resolution and termination conditions and procedures

Formal contracts serve to reduce risk and mitigate uncertainty (Ferguson et al., 2005) and represent the mechanism through which Contractual Governance occurs. However, the underlying assumption behind this approach is that accurate and complete planning can be accomplished when contracts are drawn up (Ferguson et al., 2005), which is unrealistic. Another drawback of governance based solely on contracts is that flexibility is inhibited (Ferguson et al., 2005). This is a particularly detrimental for complex and under-defined or quasi-projects. Furthermore, over-reliance on contracting signifies a highly transactional approach that may hinder the development of long-term business

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relationships and may even lead to an adversarial relationship between contracting parties (Ferguson et al., 2005). Therefore, there is a need to address the relational aspects of governance.

2.2.3. Relational Governance The concept of Relational Governance aims to overcome the limitations of Contractual Governance such as bounded rationality, which makes it impossible for planners to accurately predict all possible future states (Lu et al., 2015). Instead of legallyenforceable written contracts, Relational Governance relies on social ties and relational norms to define the limits of acceptable behavior in order to prevent abnormal behavior or breach of obligations by either party (Lu et al., 2015). These norms are typically developed through the socialization process as different parties engage with each other and develop an understanding of each other’s expectations (Ferguson et al., 2005). Essentially, Relational Governance is a form of ‘informal self-enforcing governance’ (Dyer & Singh, 1998).

Relational Governance relies on various mechanisms to establish relational norms and prevent disputes. Four of the major mechanisms are listed as follows (Lu et al., 2015): 1. Information-sharing – used to reduce information asymmetry between parties to enable conflict prevention and resolution 2. Flexibility – unlike Contractual Governance, flexibility in adapting the project to unforeseen circumstances is supported by Relational Governance 3. Solidarity – discourages self-centered behavior and fosters unity amongst parties allowing them to recognize and focus on common interests 4. Trust – one of the most critical factors in any form of relationship, trust creates the context in which long-term business relationships can flourish

Through the aforementioned social processes, Relational Governance serves to mitigate exchange hazards involved in projects (Lu et al., 2015). Additionally, by fostering collaborative practice, Relational Governance can potentially reduce transaction costs as

22

compared to formal contracts (Dyer & Singh, 1998). However, governing a project through relational norms alone would not be a practical. Ultimately, project governance requires and should include both contractual and relational aspects.

2.3. Governance of Project Management (GoPM) Governance of Project Management (GoPM) is defined by the Association for Project Management (APM, 2011) as “those areas of corporate governance that are specifically related to project activities” with the aim of ensuring that the project portfolio is aligned with the organization’s objectives, is delivered efficiently, and is sustainable. Additionally, the GoPM framework supports timely and relevant information exchange between the board and other major stakeholders (APM, 2011). The position of GoPM in the organizational context is illustrated in Figure 2.

Figure 2 - Governance of Project Management (GoPM) in context (adapted from APM, 2011)

Unlike Contractual Governance which regulates matters at the project level, GoPM involves the collective governance of a program or portfolio of projects, or all projects in an organization (Müller & Lecoeuvre, 2014). As such, GoPM is mainly concerned with

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how project portfolios are authorized and directed, and establishes the boundaries within which portfolio management is to be undertaken (British Standards Institution, 2014). To that end, GoPM provides the policies, authorities, processes, standards, and accountability necessary to manage portfolios (British Standards Institution, 2014). The crux of the GoPM approach can be summarized through a set of 13 governance principles developed by APM (2011) that address the requirements of project management. These are listed in Table 2.

Table 2 - The Governance of Project Management Principles (adapted from APM, 2011) No. Governance of Project Management Principle 1

The board has overall responsibility for the governance of project management.

2

The organisation differentiates between projects and non project-based activities.

3

Roles and responsibilities for the governance of project management are defined clearly. Disciplined governance arrangements, supported by appropriate methods, resources

4

and controls are applied throughout the project life cycle. Every project has a sponsor.

5

There is a demonstrably coherent and supporting relationship between the overall business strategy and the project portfolio. All projects have an approved plan containing authorisation points at which the

6

business case, inclusive of cost, benefits and risk is reviewed. Decisions made at authorization points are recorded and communicated.

7

8

Members of delegated authorisation bodies have sufficient representation, competence, authority and resources to enable them to make appropriate decisions. Project business cases are supported by relevant and realistic information that provides a reliable basis for making authorisation decisions. The board or its delegated agents decide when independent scrutiny of projects or

9

project management systems is required and implement such assurance accordingly.

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10

11

12

13

There are clearly defined criteria for reporting project status and for the escalation of risks and issues to the levels required by the organisation. The organisation fosters a culture of improvement and of frank internal disclosure of project management information. Project stakeholders are engaged at a level that is commensurate with their importance to the organisation and in a manner that fosters trust. Projects are closed when they are no longer justified as part of the organisation’s portfolio.

According to the draft ISO 21503 concerning the governance of projects, programs, and portfolios, GoPM may be executed and maintained through various structures, including the Portfolio Management Office and the Project Portfolio Board of Review (British Standards Institution, 2014).

However, each structure should include a defined membership of executive and senior management that are involved in both decision-making and advisory capacity within the organization (British Standards Institution, 2014). GoPM structures acquire their authority from, and are answerable to, the owners of the organization or the executives that have the overall responsibility for the organization (British Standards Institution, 2014).

2.4. Governance of Projects (GoP) Orientation Although GoP has been analyzed from a number of perspectives, there has limited effort towards integrating corporate governance factors such as stakeholder orientation and shareholder orientation within GoP (Müller & Lecoeuvre, 2014). To address this gap, the authors conceptualize four governance paradigms based on an organization’s governance orientation and control focus, namely Flexible Economist, Versatile Artist, Conformist, and Agile Pragmatist. These paradigms are shown in Table 3. It is important to note that the four paradigms are not mutually exclusive, i.e. a single organization may utilize different paradigms for different projects (Müller & Lecoeuvre, 2014).

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Table 3 - The Four GoP Paradigms (adapted from Müller & Lecoeuvre, 2014) Governance Orientation

Control Focus

Outcome Behavior

Shareholder Orientation Flexible Economist Conformist

Stakeholder Orientation Versatile Artist Agile Pragmatist

Flexible Economist. These organizations are characterized by a shareholder orientation and an outcome control focus. Their aim is to achieve the highest possible return on investment through flexible application of the most effective project management methods, tools, and techniques (Müller & Lecoeuvre, 2014). This paradigm may be effective for relatively straightforward projects with limited and predictable stakeholder requirements.

Conformist. These organizations are characterized by a shareholder orientation and a behavior control focus. Working under the assumption that efficiency is acquired by following structured processes, these organizations aim to conform with existing methodologies (Müller & Lecoeuvre, 2014). This paradigm may be effective for noncomplex and homogenous project types.

Versatile Artist. These organizations are characterized by a stakeholder orientation and an outcome control focus. They aim for versatility by balancing diverse and often conflicting stakeholder requirements (Müller & Lecoeuvre, 2014). This paradigm may be suitable for more complex project types and under-defined project types.

Agile Pragmatist. These organizations are characterized by a stakeholder orientation and a behavior control focus. They are highly process focused and compatible with agile project management methods, which allows them to be flexible and accommodate frequently changing stakeholder requirements (Müller & Lecoeuvre, 2014). This paradigm may be most effective for complicated project types.

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These discrete governance paradigms allow for the operationalization and subsequent categorization of GoP structures, based on which the relationship between GoP and other project variables may be assessed (Müller & Lecoeuvre, 2014). Additionally, it allows practitioners to identify their existing GoP orientation and adjust their GoP paradigm to potentially improve the likelihood of project success (Müller & Lecoeuvre, 2014). While it is difficult to prescribe a single paradigm as the ‘best’, the rising complexity of projects seems to indicate that paradigms involving a strong stakeholder perspective may be more appropriate for improving project success (Kolltveit et al., 2007).

2.5. Benefits Realization Management (BRM) 2.5.1. Definition and Benefits of BRM Project management has traditionally been viewed as an execution discipline with the explicit aim of delivering projects within the bounds of the ‘Iron Triangle’, i.e. time, budget, and scope. This narrow viewpoint does not take into account the potential contributions of projects on organizational strategy and business value (Morris, 2004) and erroneously emphasizes efficiency of process, rather than effectiveness of investment, as the dominating performance metric (Zwikael & Smyrk, 2012). As a result, classical project management has often been criticized for being insufficient for praxis and often inadequate for managing projects successfully (Svejvig & Andersen, 2015).

In contrast, a broader view that considers the management of projects as a whole and within an organizational context allows for the optimization of the entire organizational ‘system’. In this context, the role of projects and project management is extended as vehicles for delivering business benefits and contributing to organizational strategic objectives. As Bradley (2010) eloquently puts it, benefits are the ultimate deliverable. This viewpoint is encapsulated in the concept of BRM.

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Reiss et al. (2006) define benefits management as “the process for the optimisation or maximisation of benefits from organisation change programmes”. The concept has been steadily gaining importance in recent years amongst management at all levels and has been particularly emphasized by the UK Government (Bradley, 2010). This increased interest may be attributed to two major trends, namely increasing competition, which has led organizations to closely scrutinize the rationale of their investments, and an increasingly complex and rapidly changing business environment, which makes the realization of benefits more difficult and thus creates the need to actively manage benefits (Bradley, 2010). Although BRM was initially conceived for deriving investment objectives from change projects and initiatives, it has also been widely implemented in other project types such as IS/IT projects (Ward et al., 1996).

According to Bradley (2010), the Return on Investment (ROI) generated by BRM consists of two key components: an improved return from each investment (doing things right) and an improved investment portfolio overall (doing the right things). Specifically, the ROI of BRM arises from the elimination, or reduction in the number, of wasted investments; earlier realization of benefits; increased realization of benefits; and sustained realization of benefits (Bradley, 2010). Organizations that possess a strong benefits orientation in terms of identifying, planning for, and reviewing benefits, are more likely to be successful in achieving expected benefits from projects (Ward et al., 2007).

2.5.2. Conceptualizing the BRM Process The BRM process serves to align an organization’s projects and programs with its strategies. According to Serra and Kunc (2014), strategies set targets for future stakeholder value to be achieved by the business. These strategies are broken down into measurable strategic objectives that aim to bridge the difference between current value and desired value i.e. the value gap (Serra & Kunc, 2014), as depicted in Figure 3.

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Benefits are increments in business value from the perspective of various stakeholders, including shareholders, customers, suppliers, and even society (Zwikael & Smyrk, 2011). Hence, successful value creation strongly depends on projects and programs delivering their intended benefits (Chih & Zwikael, 2015; Serra & Kunc, 2014). Therefore, BRM may be understood as a set of processes that bridge the gap between strategy planning and execution (Serra & Kunc, 2014), and hence between current value and desired value.

Figure 3 - Bridging the Value Gap (adapted from Serra and Kunc (2014), reprinted with permission)

Zwikael and Smyrk (2012) define an outcome as a “desired, measurable end-effect that arises when the outputs from a project are utilized by certain stakeholders”. Unlike project outputs, an outcome essentially represents a change for the organization such as ‘reduced production times’ or ‘increased service levels’ (Zwikael & Smyrk, 2012). The differences between project outputs and project outcomes are discussed in Table 4.

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Table 4 - Outputs vs. Outcomes (adapted from Zwikael & Smyrk, 2012) Characteristic

Output

Outcome

Intention

What is to be delivered?

What effect is being sought?

Form

Artefact

Measurable end effect

Specified by a …

Set of values for all critical

Set of specific attributes

fitness-for-purpose features

(characteristics)

Labeled with a …

Noun

Participial adjective

Creation

Production or delivery

Generation or realization

Certainty

Production can be guaranteed

Generation cannot be guaranteed

Manageability

Production can be controlled

Generation can only be influenced

Measurement

Through fitness-for-purpose

Through one or more measures

features measured in quality

(with defined units and

tests

dimensions)

Tangibility

Tangible

Intangible (but measurable)

Appearance

Impossible without execution

In certain cases possible – even if

of process

process is not executed

Available immediately after

Delayed until some time after

process is executed

execution of the process

A suite of re-engineered

Reduced waiting time for elective

hospital processes

surgery

mechanism

Lead time

Example

These outcomes, in turn, serve to support business benefits. To elaborate this point, let us consider the example in Table 4. The project output of re-engineered processes leads to the outcome of reduced waiting time for elective surgery. While this is a positive change for the hospital, it does not, in itself, create value for the business. Therefore, this outcome needs to be converted into a business benefit, which is a measurable improvement resulting from or enabled by the outcome(s) (BIS, 2010). The benefit in this case may be an increase in the number of surgeries performed per month. Ultimately, the

30

purpose of this benefit may be to support one or more organizational strategic objectives, such as improving productivity and customer satisfaction.

It is important to note that the conversion of outcomes to benefits requires relevant enabling and business changes. For example, a reduced waiting time would not necessarily mean an increase in the number of surgeries performed if the available surgeons, support staff, rooms, and equipment are not enough or they are not available at the right time. Ultimately, benefits realization is a process and, like any other business process, it needs to be actively managed to ensure that the desired project outcomes are achieved and translated into business results (Thorp, 2001).

2.5.3. BRM Adoption and Approaches Despite the significance of actively managing benefits, the literature indicates that BRM methodologies are not widely adopted. A study by APM (2009) revealed that, based on a sample of 650 respondents, only 38% of the surveyed organizations indicated having a formal/structured benefits management approach while the remaining 62% described their approach as informal/ad-hoc or incidental. Perhaps not surprisingly, almost 70% of respondents in the same study indicated that their approach to benefits management provides value ‘some of the time’ or ‘never’. In a survey of IS/IT projects in the Benelux and the UK, Ward (2006) found that 70% of respondents believed they were failing to identify and quantify the benefits adequately. Also, Ward et al. (2007) found that only 25% of organizations surveyed had implemented a benefits management methodology, compared to 12% in 1996. However, 56% of organizations surveyed indicated that benefits delivery planning is important to essential while 66% indicate that business benefits evaluation and review are critical for delivering value from IS/IT investments (Ward et al., 2007).

While there is increasing interest in and adoption of benefits management methodologies, most organizations tend to emphasize benefits only during early stages of projects and fail to follow through by creating enabling business changes during implementation

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(Ashurst et al., 2008; Ward et al., 2007). As succinctly summarized by Bradley (2010), “Benefit realisation management is common sense but not common practice.” The various BRM methodologies developed over the past few years are reviewed in Table 5.

Table 5 - Overview of BRM Approaches (adapted from Sapountzis et al., 2009) Approach/Model

Details

Active benefits

Sets the benefits management activity in the context of

management (Leyton,

business change. Identifies continuous flow between change

1995)

and benefits Key feature of this model is benefits monitoring. This

The Cranfield process model of benefits management (Ward et al., 1996)

compares project results with the benefits realization plan during the project and assesses whether any internal or external changes have occurred that will affect the delivery of planned benefits. Potential benefits are identified, a plan is devised for their realization, the plan is executed, the results reviewed and evaluated and feedback occurs Is based on two corner-stones: (1) The shift from standalone project management to: business program management, disciplined portfolio management, full

The Benefits Realisation

cycle governance

Approach (Thorp, 1998)

(2) The three necessary conditions for the successful implementation of the BRA are: (a) accountability of activists; (b) relevant measure; and (c) proactive management of change to give people ownership stakes in programs

Active Benefit

A process for managing information systems’ development

Realisation (ABR)

through a continuous evaluation approach. ABR requires a

(Remenyi & Sherwood-

direct and continuous focus on business benefits realization

Smith, 1998)

and is based on a contingency philosophy

Towards best practice to

In this approach benefits realization is a continuous process

benefits management

through an evolving organizational context. But it does not

32

(Ashurst & Doherty,

take

2003)

into account influences that external factors may have on a project MSP represents the UK Government’s view on the program management principles and techniques. MSP identifies benefits management as “a core activity and a continuous

Managing Successful Programmes (MSP) (Office of Government Commerce, 2007)

‘thread’ throughout the program” (Office of Government Commerce, 2007), and fundamental to the realization of benefits from new capabilities delivered by projects within the program. Emphasis is placed on identification, quantification, assignment of owners and tracking, it has been heavily influenced by Cranfield’s benefits management model (Ward et al., 1996) and Bradley’s benefits realization management (Bradley, 2006) The Gateway Review Process indicates, at a high level, dependencies between a typical Benefits Management process and the steps for managing a major delivery program. It also maps the main benefits management steps on to the standard

The GatewayTM Process

delivery stages described in both MSP and OGC Gateway Reviews, but the approach can be used for any type of more specialized change initiative. This process contains identification of potential benefits, their planning, modeling and tracking, the assignment of responsibilities and authorities and their actual realization This approach focuses the benefits management model in the

Benefits management in

delivery of benefits by projects (Nogeste & Walker, 2005).

the Handbook of

Reiss et al. (2006) define the scope of benefits management as

Programme

“the management and monitoring of benefits during and after

Management (Reiss et

execution phase” and depicts the “value path” relationship

al., 2006)

between benefits and projects as a hierarchical benefits structure (Nogeste & Walker, 2005)

33

Most successful project management methodologies involve benefits management to some extent. For example, the PRojects IN Controlled Environments, version 2 (PRINCE2) methodology, which is widely used in the UK and internationally for managing projects, emphasizes delivery in accordance with the Business Case (and the benefits specified therein) (Murray, 2010). It is also interesting to note that greater focus on benefits tracking and benefits management are amongst the highest ranked suggestions for future improvements in PRINCE2 (Sargeant et al., 2010). Similarly, the Managing Successful Projects (MSP) methodology, which is also widely used internationally for managing programs, explicitly defines programs as vehicles for delivering outcomes and benefits relating to an organization’s strategic objectives (Murray, 2010).

Regardless of the chosen approach, effective BRM requires a shift, or rather an expansion, in organizational mindset from the traditional ‘Iron Triangle’ measures of project performance to include bottom-line business value considerations (Serra & Kunc, 2014). Additionally, BRM practices should be embedded in the foundations of project management rather than being an afterthought (Bradley, 2010).

Also fundamental to any BRM approach is the understanding that project delivery is not the end as the realization of project benefits often occurs well after the project has been delivered (Breese, 2012; Thorp, 2001), which may be considered as an additional ‘utilization’ stage after delivery of outputs (Zwikael & Smyrk, 2012). As a result, BRM is often viewed as a program management process or portfolio management. For example, the MSP approach recommends that benefits management should be conducted at the program level as project managers are not in the best position to evaluate the validity of their projects (Coombs, 2015). Also, the principal-agent theory suggests that accountabilities should be split amongst different stakeholders (Zwikael & Smyrk, 2012).

However, the responsibility of achieving the necessary outcomes to support business benefits often lies with project teams and therefore project teams should be made aware

34

of the organization’s needs and actively involved in BRM practices (Serra, 2013). Unfortunately, in practice project managers tend not to be involved in project selection and prioritization and, as a result, may not fully understand the link between project outputs and expected business benefits (Serra & Kunc, 2014). Additionally, for external projects, the benefits to be delivered to both the external customer and the organization undertaking the project need to be taken into account (Serra, 2013).

It is therefore evident that for any BRM approach to be successful, it needs to be integrated into the project organization’s practices from the initiation stage and followed through until well past delivery until all expected benefits have been realized. Doing so is not an easy task however and requires concerted effort and commitment from all levels of project management – the project level, the program level, and the portfolio level.

2.6. Project Success 2.6.1. The Inadequacy of Existing Project Success Measures The conventional definition of project success, encapsulated in triple constraint of cost, time, and quality/scope – the ‘Iron Triangle’ – is being questioned by project management academics and practitioners. The overwhelming evidence of high rates of project failure (Asian Development Bank, 2014; Standish Group, 2014) and the simultaneously rising investments in projects (Shenhar & Dvir, 2007) leads to the critical question: Why do organizations seem to be throwing good money after bad? This notion in eloquently termed the ‘investment-in-failure paradox’ (Zwikael & Smyrk, 2012), which may indicate that existing estimates of project success may not be reliable (Jenner, 2015), may be overstated (Zwikael & Smyrk, 2012), or may simply be based on incomplete criteria (Atkinson, 1999).

A number of high-profile examples reveal the inadequacy and short-termism of existing project success criteria:

35



The Sydney Opera House was delayed by several years and, upon completion, was approximately 1,500% over budget. However, today it represents a symbol of national pride, has been classified a UNESCO World Heritage Site, and serves as a global tourist destination for Australia, indicating that long-term customer satisfaction may be a more important criterion for project success (Shenhar & Dvir, 2007).



The Hubble Space Telescope also experienced cost and schedule overruns and was infamously launched into space with a faulty mirror (Zwikael & Smyrk, 2012). However, it went on to achieve and enable several scientific discoveries and is generally considered an investment success by the astronomy community (Zwikael & Smyrk, 2012).



The Ford Taurus project was delayed by six months, resulting in the demotion of the project manager (Shenhar & Dvir, 2007). However, the project was successful in realizing the intended business case and produced a satisfactory return on investment (Shenhar & Dvir, 2007). As a result, the project is generally regarded as a commercial success (Shenhar & Dvir, 2007).

From the above cases, it is evident that while the existing conceptualization of project success provides adequate measures of efficiency of output delivery, they are unable to address the project ownership and project investment performance which concern the congruence of project outcomes with the intended business case and the effectiveness of the investment of business resources into projects (Zwikael & Smyrk, 2012). Essentially, this leads to the development of different dimensions of project success, where a project may be a success in one dimension (output efficiency) but a failure in another (investment effectiveness). Also, as Jenner (2015) highlights, the notions of ‘success’ and ‘failure’ of projects may be contestable depending on the context, for example cancellation of a project due to changing business conditions may not necessarily indicate a failure. Hence, there is a need to re-examine and re-conceptualize Project Success.

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2.6.2. Conceptualizing a Multi-Dimensional Approach to Project Success One of the most piercing criticisms of existing project success criteria is provided by Andersen (2014), where the author also goes on to review the differentiation between project management success and project product success. The former represents the traditional cost, time, and quality factors of success while the latter encompasses the satisfaction of the strategic objectives of the project owner and the needs of other stakeholder groups, including the project user/customer (Baccarini, 1999). Similarly, Zwikael and Smyrk (2012) draw upon the ‘principal-agent’, ‘regret’, and ‘contingency’ theories to propose three dimensions of project success – the ‘triple-test performance framework’ – which consists of project management success, project ownership success, and project investment success. The characteristics of this framework are reviewed in Table 6. According to the authors, the proposed framework aligns with both the benefits management literature and project-strategic fit models.

Table 6 - The triple-test performance measurement framework for project success (adapted from Zwikael & Smyrk, 2012) Level of Test Project Management

Project Ownership

Project Investment

Success

Success

Success

Who judges?

Project owner

Project funder

Project funder

Who is being

Project manager

Project owner

The investment

What is

Achievement of the

Realization of the

The effective ‘return’

judged?

project plan

business case

on the investment in

evaluated?

the project (in the form of desirable outcomes) Relevant

1. Time

Achievement of the

Acceptability of the

criteria

2. Cost

approved business

realized business case

3. Scope/quality

case

4. Detrimental outcomes

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Although this conceptualization provides a more detailed analysis of project success, the conceptualization used by Serra and Kunc (2014), which includes Project Success (overall), Project Management Performance, and Creation of Business Value, is more relevant for the purpose of this research. The main reason is that the role of ‘project owner’, as proposed by Zwikael and Smyrk (2012), is rarely, if at all, recognized and assigned in projects in Pakistan. In this context, project ownership success and project investment success may be combined under a single dimension, namely business value.

The inclusion of the business value dimension is vital for providing a more complete view of project success (Coombs, 2015). Additionally, it would hopefully help address a critical question that is increasingly being asked by the senior management of organizations: What demonstrable economic benefit does project management provide? (Lappe & Spang, 2014)

2.7. Hypothesized Model 2.7.1. Contractual and Relational Governance and BRM There are several ways in which Contractual Governance supports a project organization’s BRM functions. At the initiation stage, Contractual Governance helps define clear specifications of what is expected of either contracting party (Cao & Lumineau, 2015) allowing for the clear definition of project outputs and outcomes which would, in turn, serve as critical inputs for a well-defined business case. An effective BRM approach also includes activities to integrate project outputs and outcomes into regular business routine (Serra & Kunc, 2014). These activities can be included within the contract and their execution may be ensured through Contractual Governance. Furthermore, Contractual Governance defines guidelines for handling unanticipated contingencies and procedures for managing changing requirements (Lu et al., 2015), which helps accommodate changing stakeholder needs in the benefits realization plan. A critical function of Contractual Governance is to specify dispute resolution procedures

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and define conditions under which project termination may occur (Lu et al., 2015). This allows project boards to terminate projects that are no longer capable of delivering on the intended benefits.

Another important function of Contractual Governance is to inhibit opportunistic behavior (Zheng et al., 2008) and therefore ensure that project resources are directed towards the realization of intended business outcomes and benefits. Additionally, the integration of benefits considerations in contracts may serve to create accountability for benefits realization during and, more importantly, after project delivery. This is vital for effective BRM as most project benefits are typically realized well after project delivery (Breese, 2012). Thus, the first hypothesis is proposed:

H1: Contractual Governance positively affects the level of Benefits Realization Management

Relational Governance mechanisms also support BRM practices. Perhaps the most critical of these mechanisms is trust, which inspires mutual confidence between parties (Cao & Lumineau, 2015). Given the multidisciplinary nature of project teams and the wide range of stakeholders involved in projects, trust is essential for rallying intra- and inter-organizational support towards the management of benefits. This is further supported through solidarity between parties, which helps curb opportunistic behavior and thus allows stakeholders to focus on common interests (Lu et al., 2015). Also, by facilitating information exchange, relational governance helps reduce information asymmetry between parties (Lu et al., 2015). This helps create congruence in the understanding of all parties of required project outcomes and how they relate to expected benefits.

One of the major benefits of Relational Governance is flexibility (Zheng et al., 2008). Unlike formal contracts, governance based on relational norms and principles allow for much greater adaptability of the project organization. In the face of the rapidly pace of change in technology and stakeholder requirements that characterizes the projects of

39

today, Relational Governance can help ensure that changes to the benefits realization plan are handled smoothly and reflect the needs of stakeholders. Thus, the second hypothesis is proposed:

H2: Relational Governance positively affects the level of Benefits Realization Management

2.7.2. Contractual and Relational Governance and Project Success Governance serves to reduce uncertainty in projects through clear definition of what is permissible and what is not (Lu et al., 2015). The legal enforceability of contracts can inhibit opportunistic behavior in exchanges and thus lead to improved performance (Lu et al., 2015). Similarly, Relational Governance can help mitigate exchange hazards and avoid transaction costs that are typically involved in formal contracts (Lu et al., 2015). Also, relational norms serve as mechanisms to curb opportunistic behavior in projects (Lu et al., 2015). Relational Governance is especially critical for success in Pakistan’s context. According to (Hofstede, 2007), Pakistan has a collectivist culture which is relatively more collectivist India, Japan, Iran, and the Arab countries. As a result, interpersonal relationships and commitment to the ‘group’ tend to be important factors in Pakistani organizations. This cultural aspect can potentially increases the value and effectiveness of relational norms in governing intra-party and inter-party exchanges in project organizations. Consequently, Relational Governance can lead to improved project performance and success.

Furthermore, empirical evidence indicates that both Contractual Governance and Relational Governance have a positive effect on exchange performance (Poppo & Zenger, 2002). Also, based on 225 responses from construction projects in China, Lu et al. (2015) found the relationship between Contractual Governance and project performance to be significant at the 0.1% level, whereas the relationship between Relational Governance and project performance was found to be significant at the 5% level. However, the performance criteria used by the aforementioned study corresponds

40

to the Project Management Performance dimension of Project Success only. This study aims to extend these finding by further testing the relationship of Contractual and Relational Governance with Project Success (Overall) and the Creation of Business Value dimensions of Project Success. Accordingly, the third and fourth hypotheses are proposed:

H3: Contractual Governance positively affects the level of Project Success H4: Relational Governance positively affects the level of Project Success

2.7.3. GoP Orientation and BRM Müller and Lecoeuvre (2014) measure an organization’s GoP orientation along two continuums: (i) corporate governance, which ranges from shareholder orientation at one end to stakeholder orientation at the other, and (ii) organization control, which ranges from behavioral control orientation to outcome control orientation.

Corporate governance continuum. While a shareholder orientation represents a more traditional, profit-centered view of projects, stakeholder orientation involves actively identifying and managing communications, negotiations, and relationships with project stakeholders (Kolltveit et al., 2007). The latter approach is increasingly being considered more appropriate for contemporary project management (Müller & Lecoeuvre, 2014). Indeed, a key aspect of BRM is closely assessing stakeholder needs and, in accordance with these needs, delivering project benefits to the organization as well as other stakeholder groups (Atkinson, 1999; Serra & Kunc, 2014). Effective BRM also requires that stakeholders be kept informed of changes in expected project benefits through frequent reviews (Serra & Kunc, 2014), so as to realign their expectations and to focus the efforts of stakeholders actively involved in project processes. Therefore, the first part of the fifth hypothesis is proposed:

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H5a: Stakeholder oriented governance structures have a stronger positive effect on the level of Benefits Realization Management than Shareholder oriented governance structures

Organizational control continuum. A behavioral control orientation represents the traditional view of compliance with specified processes and job descriptions (Müller & Lecoeuvre, 2014). However, in the increasingly complex environment of projects characterized by a fast pace of change, this approach may not be suitable for supporting an effective BRM approach. In contrast, an outcome control orientation is characterized by loose, informal control mechanisms and an emphasis on intended outcomes even at the expense of formal procedures (Müller & Lecoeuvre, 2014). Additionally, an outcome control orientation prioritizes experience to determine the best course of action based on situational factors and leverages support institutions such as the Project Management Office (PMO) to address skill and knowledge gaps (Müller & Lecoeuvre, 2014). Therefore, an outcome control orientation may be more conducive to the achievement of project outcomes and the subsequent conversion of outcomes into benefits. Hence, the second part of the fifth hypothesis is proposed:

H5b: Outcome Control oriented governance structures have a stronger positive effect on the level of Benefits Realization Management than Behavior Control oriented governance structures

2.7.4. GoPM and BRM Various sources indicate that effective GoPM supports BRM. According to APM (2011), one of the key objectives of the principles of GoPM is to help board of directors maximize benefits realized from projects. To this end, GoPM principle no.6 explicitly requires all projects to have an approved plan for reviewing benefits at predetermined authorization points (APM, 2011). Turner et al. (2010) describe the role of project governance at the individual project level as ensuring that “projects are undertaken in the right way to deliver the right products, and to ensure the products will deliver the desired

42

benefits”. Similarly, Bradley (2010) emphasizes that establishment of the most appropriate governance structures is one of the required enablers for BRM. The application of effective governance is also highlighted as a ‘pillar’ in the Benefits Management Model proposed by Jenner (2014).

Additionally, Sapountzis et al. (2009) advocate the need for clear roles and responsibilities and robust methods of governance to enable successful BRM. In a similar vein, Thorp (2001) recommends implementing a comprehensive governance approach, termed ‘full cycle governance’ to help organizations cope with constantly changing potential benefits and ensuring that expected benefits are realized. Furthermore, the findings of Serra and Kunc (2014) suggest that a BRM strategy integrated into governance processes can improve an organization’s ability to define and manage success criteria.

BRM is also recognized as an important function of governance under leading project management methodologies such as MSP and, to a lesser extent, PRINCE2 (Murray, 2010). In PRINCE2, lack of focus on benefits and lack of BRM beyond project close are recognized as two of the highest ranking project governance issues (Sargeant et al., 2010).

The conceptualization of GoPM in this research attempts to integrate an additional key governance mechanism – the existence of the project owner – in line with the recommendations of Zwikael and Smyrk (2012). The project owner plays a vital role in not only drawing up the business case for approval by the project funder but also holds accountability for its realization (Zwikael & Smyrk, 2012). Hence, the sixth hypothesis is proposed:

H6: Governance of Project Management positively affects the level of Benefits Realization Management

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2.7.5. GoPM and Project Success Through effective GoPM practices and policies, organizations can improve the success rates of projects. Governance failures are amongst the most prominent underlying causes of project failure (Jenner, 2015). According to APM (2011), one of the key functions of GoPM is to help boards avoid common failures that result in poor project and program performance. Also, effective GoPM helps organizations minimize risks arising from projects and optimize their portfolio of projects (APM, 2011), which are instrumental for realizing and safeguarding expected business value from projects.

A recent study conducted by APM (2015) found that, based on responses from 862 project practitioners, 88% of respondents indicated that effective governance is important for project success. Effective governance was found to be amongst the factors with the strongest and most consistent relationship with all six measures of success, being the most important factor for on time project delivery and consistently amongst the highest three factors for all other measures (APM, 2015). Accordingly, the study identified effective governance amongst the five key factors that constitute its proposed ‘formula for success’ (APM, 2015).

Furthermore, the existence of a project owner role, a point which has been added to the conceptualization of GoPM in this study, creates the accountability structure to support project success by (a) by holding the project manager accountable to the project owner for project management performance, and (b) by holding the project owner accountable to the project funder for the realization of the business case, which leads to the expected project outcomes and the creation of business value (Zwikael & Smyrk, 2012). Based on these findings, the seventh hypothesis is proposed:

H7: Governance of Project Management positively affects the level of Project Success

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2.7.6. BRM and Project Success According to Serra (2013), BRM practices serve to reduce project failure rates and ensure that projects deliver the expected business value. Cooke-Davies (2002) identifies the existence of an effective benefits delivery and management process as vital as a critical success factor for project success. Similarly, effective BRM was identified as one of the key factors supporting the success of the Hoover Dam project, which was completed under budget and two years ahead of schedule despite facing several economical, technical, political, and organizational challenges (Kwak et al., 2014). Furthermore, Ward et al. (2007) find empirical evidence that more successful organizations, in terms of their ability to realize expected benefits from their IS/IT projects, are more likely to have a comprehensive benefits orientation.

In a study of the influence of BRM on project success based on responses from 331 project management practitioners in Brazil, UK, and US, Serra and Kunc (2014) found that BRM practices predict 9% to 26% of the variance in project management performance and 15% to 49% of the variance in creation of business value, but were not significantly associated with perception of overall project success. However, BRM practices managed to predict 41.5% to 46.7% of the variance in consolidated dimensions of Project Success across the three countries (Serra & Kunc, 2014).

One possible explanation for these results may the long-term nature of BRM due to which it is more strongly associated with the creation of business value rather than the comparatively short-term project management performance. Also, BRM helps align the objectives of project teams, sponsors, and clients towards delivering successful and valuable organizational changes (Serra & Kunc, 2014), which serves as an important strategic resource for facilitating future projects.

However, it is important to note that success rates may vary between countries due to cultural and psychological factors that affect the perception of project success (Serra &

45

Kunc, 2014). Therefore, in order to test the relationship in the context of Pakistan, the eighth hypothesis is proposed:

H8: Benefits Realization Management positively affects the level of Project Success

2.7.7. Mediating Role of BRM between Aspects of Project Governance and Project Success While the role of project governance in supporting Project Success is fairly welldocumented (APM, 2015; Lu et al., 2015), there is little empirical evidence on how it actually supports success. Some sources posit that effective governance actually mitigates the common causes of project failure (APM, 2011; Jenner, 2015), and thus leads to improved success rates. Some other sources posit that project governance enables the realization of benefits (Bradley, 2010; Thorp, 2001) and, since the realization of benefits is an important criteria for project success (Atkinson, 1999), improves the rate of success.

At this point, it bears mentioning that this research does not attempt to measure the actual realization of benefits. Since benefits realization can take several months to years after project delivery (Atkinson, 1999), it cannot be adequately measured using a crosssectional study. Instead, this research measures the level of BRM practices and its relationship with the perception of expected business value creation, which is the ultimate goal of project benefits.

In either case, it is evident that project governance does not directly improve the probability of Project Success but rather creates a framework that enables factors that improve Project Success. For example, BRM can help make the strategic relevance of each project clear and thereby increase the effectiveness of project governance (Serra & Kunc, 2014). It is based on this rationale that this paper posits that project governance enables effective BRM and creates the accountability structure to support BRM practices during as well as after project delivery which, in turn, improves Project Success.

46

Given the complex and multi-dimensional nature of the two concepts, project governance can be expected to influence Project Success through various processes, of which BRM may be one of the most important. Hence, the ninth three-part hypothesis is proposed:

H9a: Benefits Realization Management mediates the relationship between Contractual Governance and Project Success H9b: Benefits Realization Management mediates the relationship between Relational Governance and Project Success H9c: Benefits Realization Management mediates the relationship between Governance of Project Management and Project Success

2.7.8. Hypothesized Model

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Chapter 3 Research Methodology

48

3. Research Methodology This chapter begins with a description of the target population, which is Pakistan’s IT & Software industry, and explains why this particular industry was chosen. In part two, the sampling frame as well as the sampling methodology used this study, which is systematic random sampling, is discussed. In part three, the research instruments used in this study and their respective sources are explained. Also, the process of adapting the GoPM scale from APM’s Directing Change principles is discussed. The complete survey questionnaire is appended as Annexure A. Finally, in part four, data collection and analysis procedures are described.

3.1. Target Population The target population for this study is the IT & Software sector of Pakistan. IT & Software is traditionally considered one of the main ‘project-based’ industries and is frequently targeted by similar studies (Müller & Lecoeuvre, 2014; Zwikael & Smyrk, 2012). Other such industries include engineering & construction, aerospace, pharmaceuticals, biotechnology, and defense (Taylor & Levitt, 2004). However, while they bear some similarities in terms of how their work is organized, their practices and governance systems can vary greatly. For example, different industries tend to define the concept of project governance differently to suit their specific needs (Bekker & Steyn, 2009). Also, Müller and Lecoeuvre (2014) found that the governance of organizational change differs based on the type of project. Therefore, this study focused on a single sector to ensure that results are sufficiently generalizable. Also, while each of the ‘project-based’ industries is important in its own right, IT & Software is perhaps the most critical in the context of Pakistan. This is due, in part, to its phenomenal growth over the past few years, which is forecasted to increase even further (P@SHA, 2015). Also, for a developing country such as Pakistan, the IT & Software sector represents an important source of future economic growth as the country shifts away from agriculture-based industries (Ghauri, 2013). Despite its impressive growth, 49

Pakistan’s IT & Software industry faces some ‘chronic’ issues that include false commitments with clients (Ahsan, 2009), and poor project governance structures and practices (Ashraf et al., 2010; Majeed et al., 2013). Therefore, while the topics discussed in this thesis are relevant to all ‘project-based’ industries, this study may offer the greatest potential to benefit to Pakistan’s IT & Software industry.

3.2. Sample and Sampling 3.2.1. Sampling Frame The sampling frame chosen to represent Pakistan’s IT & Software sector was the Pakistan Software Housing Association’s (P@SHA) members’ directory. P@SHA was selected because it is a reputable and internationally recognized organization that describes itself as the ‘voice of the industry’ (P@SHA, 2015).

The total number of organizations in the sampling frames is 218. The unit of analysis is the organization and respondents consist of project practitioners, including, but not limited to, project governance and PMO roles, project sponsorship roles, project management roles, and project team roles.

Table 7 - Target Population & Sampling Frame Sector

Target Population

Size Source of Sampling Frame

IT &

IT and Software firms operating

Software

in Pakistan

218

P@SHA database (www.pasha.org.pk)

3.2.2. Sampling Methodology For the purpose of this research, a simple random sampling without replacement approach was used, where the name of each element in the sampling frame (alphabetically arranged) was input into SPSS and assigned a number between 1 to 218. Subsequently, 140 elements were randomly selected using SPSS. According to Kotrlik 50

and Higgins (2001), a sample size of 132 is recommended for a population size close to 200 and categorical data is being sought in an organizational research context. This corresponds with a margin of error of 0.05 and alpha value of 0.05, where the latter indicates the probability of the true margin of error exceeding the acceptable margin of error Kotrlik and Higgins (2001). Similarly, Krejcie and Morgan (1970) recommend a sample size of 140 is when the population size is 220 which is the closest threshold in this case. This also corresponds with a margin of error of 0.05. In order to satisfy both recommendations, the higher of the two was used in this study.

Simple random sampling was chosen because it has the least bias and offers the most generalizability amongst all sampling methods (Sekaran, 2006). Although stratified random sampling provides greater efficiency and information (Sekaran, 2006), it was not appropriate in this case as no clear strata could be identified within the sampling frame.

Due to the unavailability of the list of employees in each organization, a random sampling methodology could not be applied at the respondent level. Therefore, to ensure adequate representation of the population, it was arbitrarily decided that a maximum of 4 respondents would be targeted from each organization. Hence, the sample of 140 organizations meant a maximum of 560 respondents.

In order to acquire reliable perceptions of project management performance and creation of business value, only data pertaining to projects completed in the past one year were requested from respondents, which is similar to the approach used by Serra and Kunc (2014). This is used primarily to avoid loss of details and accuracy (Serra & Kunc, 2014). As highlighted by Iarossi (2006), some experiments indicate that, when recounting a single event one year ago, only up to 20% of the event’s critical details are irretrievable whereas for an event two years ago, up to 30% of information is irretrievable and for an event three years ago, close to 50% is irretrievable.

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3.3. Research Instrument 3.3.1. Instruments used in the Survey Questionnaire The structured survey questionnaire is appended as Annexure A. For each of the scales used in this study, permission was acquired from their respective authors by e-mail. The following list describes the scales used in this research and their respective sources (total 66 items). The Cronbach’s α values reported by the authors are specified in Table 8. Table 8 – Scales’ Cronbach's α values as reported by their respective authors Sub-Components

α

Fundamental Elements (4 items)

0.880

Change Elements (3 items)

0.746

Governance Elements (3 items)

0.881

Trust (6 items)

0.882

Relational Governance

Information Exchange (3 items)

0.822

(14 items)

Solidarity (3 items)

0.825

Flexibility (2 items)

0.731

Governance of Projects (GoP)

Corporate Governance Orientation (5 items)

0.824

Orientation (10 items)

Organizational Control Orientation (5 items)

0.822

Scale Contractual Governance (10 items)

Governance of Project Management (GoPM)

α not available

(15 items) Benefits Realization Management (12 items)

Project Success (8 items)

α not specified Project Success (overall) (1 item)

0.818

Project Management Performance (3 items)

0.940

Creation of Value for the Business (4 items)

0.940

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Contractual Governance (10 items) – (Lu et al., 2015) This scale was pilot tested with three specialists from China’s construction industry and subsequently tested based on 225 responses from over 20 firms (Lu et al., 2015). Relational Governance (14 items) – (Lu et al., 2015) As above. Governance of Projects (GoP) Orientation (10 items) – (Müller & Lecoeuvre, 2014) The scale was pilot tested based with the help of 14 participants from the Project Management Institute’s (PMI) Chapter meeting (Müller & Lecoeuvre, 2014). Subsequently, it was tested based on 478 responses from various project practitioners in over 20 countries, including Pakistan (Müller & Lecoeuvre, 2014). Governance of Project Management (GoPM) (15 items) – adapted from APM (2011) 13 of the 15 items were adapted directly from APM’s 13 principles on the Governance of Project Management (APM, 2011). Two additional items, items no. 4 and 5, were added based on recommendations of Garland (2013) and Zwikael and Smyrk (2012). The final wording of the two items was provided by Martin Samphire, Chairman of the APM Governance Specific Interest Group (e-mail communication). The process of adapting this scale is discussed further in Section 3.3.3. Benefits Realization Management (12 items) – (Serra & Kunc, 2014) The authors derived the items from numerous studies in the literature (Serra & Kunc, 2014). The scale was then submitted to both APM and PMI for review and was subsequently tested using a sample of 331 project practitioners from US, UK, and Brazil (Serra & Kunc, 2014). Project Success (8 items) – (Serra & Kunc, 2014) As above.

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3.3.2. Measurement Scale This research employs two types of Likert scales. According to Iarossi (2006), ratings scales, such as Likert scales, are effective for subjective questions that aim to measure subjective states, such as opinions, knowledge, feelings, and perceptions. Therefore, Likert scales are suitable for this study since all of the variables in this study involve respondents’ perceptions. Also, a similar study by Serra and Kunc (2014) employed a 5point Likert scales as well.

Additionally, a 5-point Likert Semantic Differential Scale is used for GoP orientation. Although a 7-point scale was used in the source paper by Müller and Lecoeuvre (2014), a 5-point scale is used to achieve congruence with the other variables.

Furthermore, for the Project Success variable, respondents were requested to record their perceptions from three different perspectives: project team, project sponsor, and project customer. The purpose is to take into account different perspectives that may vary in their perception of Project Success, even when evaluating the project using the same criteria (Serra & Kunc, 2014). This is in line with the approach used in a similar study conducted by Serra and Kunc (2014).

5-point Likert Scale points description (for all variables except GoP Orientation): 

SA – Strongly Agree



A - Agree



N – Neutral



D – Disagree



SD – Strongly Disagree

5-point Likert Semantic Differential Scale points description (for GoP Orientation only): 

1 – Strongly Agree with Statement 1



2 – Agree with Statement 1



3 – Neutral

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

4 – Agree with Statement 2



5 – Strongly Agree with Statement 2

3.3.3. Scale Adaptation and Pilot Testing (GoPM) Due to the lack of an existing scale that addresses the GoPM variable (to the best of the author’s knowledge) and the reported inconsistency in the literature regarding the interpretation of governance in the context of project organizations (Roe, 2015), this study attempted to adapt a relevant and credible measurement instrument. For this purpose, 13 items have been adapted directly from the Principles of the Governance of Project Management published by the Association of Project Management (APM, 2011). These principles are clearly worded and structured as statements which respondents can easily evaluate using a 5-point Likert scale.

Two additional items were proposed (items 5 & 6) relating to existence of the project owner role. These were based on the (a) recommendations by Zwikael and Smyrk (2012) and (b) suggestions by Ross Garland based on the “Project Executive” role as defined by PRINCE2 and the “Senior Responsible Owner (SRO)” role as defined by MSP (Garland, 2013; online communication). Additionally, wording of the two items is in accordance with the recommendations by Martin Samphire, Chairman of the APM Governance Specific Interest Group (e-mail communication). All of the items are listed in Part III of Annexure A.

To ensure content validity, feedback was requested from APM, which published the 13 principles upon which this scale is based, as well as various experts in the field of project governance, which includes both academics and practitioners. Positive feedback has been received from six experts in the field of project governance, which includes four reputed academics with publications in the International Journal of Project Management and two reputed practitioners.

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In order to test the validity of the proposed scale, Exploratory Factor Analysis (EFA), was conducted through SPSS and the factors were be rationalized based on recommended thresholds and best practices. The results are discussed in Section 4.1.1.

3.3.4. Control and Demographic Variables The following three control variables were used in this study in line with those used by Serra and Kunc (2014) and Müller and Lecoeuvre (2014): 1. Project type – IT & Software; organizational & business; other 2. Project size – In PKR: 5M 3. Respondent’s role in the project – project governance/PMO; project owner/sponsor; project management; other

Additionally, six demographics variables related to the respondent were used: 1. Length of service in the current organization – 5 years 2. Total years of experience being involved in projects & programs – 10 years 3. Age group – 55 years 4. Gender – Male; Female 5. Highest level of education – Bachelor’s; Master’s, PhD, Professional (PMP, PgMP, PfMP etc.)

3.4. Data Collection and Analysis 3.4.1. Data Collection Data was collected through self-administered structured survey questionnaires using a combination of personal visits, for respondents from organizations with an office in the city of Lahore, and online methods for respondents from organizations based in other parts of Pakistan.

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Both the hardcopy version and the online version of the survey questionnaire were identical with exactly the same questions. The latter was developed using Google Docs. E-mails of the respondents, for the purpose of the online survey questionnaires, were acquired from the publicly available information in the P@SHA Members’ Directory (P@SHA, 2015) and from the respective websites of the organizations. Additionally, employees of listed organizations were searched and approached through LinkedIn. The objectives of the research, its implications for Pakistan’s IT & Software industry, and the conditions of anonymity and confidentiality were conveyed through a covering letter for respondents in Lahore and through an e-mail for respondents outside Lahore. The email also provided recipients with the researcher’s contact details in case further clarification was required. Furthermore, three e-mail reminders were sent. The first reminder was sent one week after the original e-mail and the second and third reminders were each sent one week after the previous one.

Out of the total 560 respondents targeted, 349 responses were received. Out of these, 10 were found to be unengaged responses and 13 contained excessive missing values (discussed further in the next section). Therefore, a total of 326 responses were valid and usable which is a response rate of 58.2%. This is close to the 54% response rate achieved in a similar study (Reich et al., 2014). Also, various other studies have reported an average response rate of 56% (Nulty, 2008). Furthermore, Nulty (2008) recommends a response rate of 58% for a sample size consisting of approximately 300 respondents.

Although there were no major issues in data collection, it bears mentioning that a number of respondents indicated that the GoP orientation items were somewhat confusing, mainly due to the measurement scale used.

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3.4.2. Data Screening The responses were coded and initially input into SPSS. All of the key variables were measured on a 5-point Likert scale and hence responses were coded 1 – 5. Demographic variables were also classified into categories ranging from 1 – 2 to 1 – 5 depending on the variable in question. These categories are provided in Section 3.3.4. Unengaged Responses – Responses were analyzed on a case-by-case basis and cases with very low standard deviation (0.4) were retained whereas items with insignificant (