Implementing Project Management as a Business Development Strategy in Medium Sized Companies Simona Bonghez1, Loredana Radu1, Adina Grigoroiu1 1 National School of Political Studies and Public Administration, College of Communication and Public Relations, MSc in Project Management, 6 Povernei st., 10643 Bucharest, Romania,
[email protected]
Abstract. Under the pressure of the economic crisis, organizations are anxiously searching for competitive advantage. Project management has long been advocated as a feasible way to achieve sustainable business results. Corporations are implementing project management throughout their processes, reporting lower risks, better results, and higher achievements. Is project management also fit to medium-sized companies? How could the medium-sized companies benefit from using project management as a business strategy? This paper aims at providing pertinent and well-documented answers to these questions. Our goal is two-fold: on the one hand, we propose a model for assessing the project management maturity (PMM) of medium-sized companies, and, on the other hand, we use this model as a means to formulate recommendations for effectively implementing project management within these organizations. Our research consists in a quantitative analysis performed on a nationally representative sample of 368 medium-sized enterprises. Keywords: project management maturity, medium-sized companies
1 Project Management: from a Simple Planning Method to an Organizational Strategy Project management has rapidly evolved over the past 20 years. On the one hand, organizations specialized in providing project management services have continued to develop their processes, methods and specific applications by adopting new and specialized information and communication technologies. On the other hand, there is a process of increasing recognition of project management as profession, supported by the widening recognition of professional associations, and also by the global application of project management and project portfolio management at organizational level [1]. Since 1970, “project management has undergone various qualitative developments, its conceptualization moving from a simple planning method, that ensures the strictly implementation of what was planned, to a complex organizational strategy, enabling organizations to adapt to change, to respond to the imperative to innovate, to survive in an increasingly competitive environment."[2] In some areas, where changes occur with great velocity, “project management is no longer an option but a necessity.”[3] This necessity is particularly striking where the
entire industry is dominated by projects and does not allow players to ignore this important approach. Nowadays, project management experiences a qualitative development, becoming an “economic and social innovation.” [4] Studies that assess PMM of various organizations have extended this concept to the society as a whole, thus “the more mature in project management a society is, the more able is to cope with dynamism and complexity of the current business environment.”[5] In this context, project management evolved into "a macroeconomic strategy, a way in which contemporary societies respond to the increasing complexity of the overall external environment.”[6]
2 Small and Medium Sized Companies: the DNA of the European Economy Small and medium enterprises (SMEs) are the most active sector of a modern economy, with many implications in the innovation, technological development and job creation. The 23 million SMEs in the European Union (EU) are the “DNA of the European economy” [7], representing over 98% of the companies. These companies provide two-thirds of the private sector jobs and have provided about 80% of the new jobs created over the past five years [7]. This is why the EU has concentrated its efforts on SMEs in the Lisbon Strategy for Growth and Jobs [8]. With a high degree of flexibility and adaptability, SMEs should be able to react quickly to a dynamic environment. However, in the actual context, the SMEs were seriously hit by the crisis. In general, SMEs in the EU have lower productivity and slower economic growth than those in the US [9]. In the U.S., surviving firms increase their employment by an average of 60% during the first seven years of existence, whereas in EU, the increase is around 15%. SMEs still have to deal with market failures undermining the conditions of their operation and competition with others, in areas like finance, research, innovation and the environment. Thus, about 21% of European SMEs report that they face problems in accessing financial resources. [9] Also, European SMEs that innovate successfully are fewer when compared to large enterprises. The situation is worsened by structural difficulties, such as the lack of management and technical skills, and rigidities in labor markets at national level. The development of feasible SMEs is considered a viable way to exit the financial crisis. José Manuel Barroso, EC’s President, said in his introduction to the European strategy Horizon 2020 that "to continue to do business in a traditional way would lead gradually to decline"[10]. The new world after the crisis needs to rethink the role played by SMEs, including their way to work, to adapt to new market regulations, to internalize new macroeconomic principles. In Romania, the share of SMEs in the total number of enterprises (99.6%) is above the EU’s average [10]. Although the SME sector in Romania is still lagging behind the European average, it notably improved from 2002 until 2008. Thus, during this period, the number of SMEs increased by 46%, an impressive growth rate, compared
to the EU average of 13%. This spectacular growth, that has transformed the SMEs sector into an engine of competitiveness in Romania, provided sufficient arguments for the Romanian Government to intensify efforts to support SMEs. However, the governmental support is mostly financial; initiatives to review business development strategies used by the SMEs are not on the public agenda in Romania. This situation applies to other European countries as well.
3 PMM Model for Medium-Sized Companies Our basic assumption is that project management is not among the strategic priorities of medium-sized enterprises in Romania; there is no constant concern in this area, therefore the level of maturity in project management of medium-sized enterprises is low. The goal is to use this research findings to bring forward relevant directions and suggestions for the long-term development of medium-sized enterprises. After an extensive study of several project management maturity models (the CMMI, Harold Kerzner’s PMM Model, the Portfolio, Program and PMM Model developed by the Office of Government Commerce United Kingdom, the PMI’s OPM3), we propose a simplified maturity model based on the Maturity Model of the Project-Oriented Company developed by Gareis. The Gareis’ model was chosen as a starting point primarily due to its systemic perspective. Also, the model presented in this paper builds on our vast experience in implementing project management. In designing the model, we took into account several conditionalities that are built within the very structure of the medium-sized companies: the scarcity of the company’s resources and the flexibility that needs to be maintained. The resulting model consists in six dimensions (Fig 1).
Fig 1. Model for assessing the maturity in project management of the medium sized companies
Dimension A – Maturity concerning project management is meant to evaluate the extent to which several tools related to project planning, coordination, control, and closing are used. Elements considered in the assessment of maturity in project planning were: defining objectives, defining requirements, developing work breakdown structure, defining stakeholders, using schedule baseline or milestone plan, developing cost plan, allocating roles and responsibilities for project team members, identifying risks and defining measures to address them, applying other relevant planning methods. Elements taken into account to assess project maturity in project coordination were: using project plans as instruments of coordination, using meetings, minutes of meetings and lists of tasks, using acceptance certificates, implementating and monitoring measures to address risks. Elements considered in the assessment of maturity in project control were: updating project plans and implementating progress reports. Elements considered in the assessment of the project closing were: formal assessment of projects, making the final report, including lessons learned in the final report. Dimension B – Maturity concerning the dimension of project management process is designed to assess whether there are differentiations in applying project management methods in small projects vs. projects, in external vs. internal projects, whether companies use specialized software tools, define communication structures, and the extent to which project team members contribute to the adaptation of project plans. Dimension C – Maturity concerning project portfolio management focuses on project assignment and project coordination. While the project assignment focuses on the decision on whether or not to launch various projects, the continuing correlation between projects and the organization’s strategy and optimization of the portfolio results are achieved by a process called project portfolio coordination. Dimension D – Maturity concerning organizational design includes the existence of a project management office, the use of a methodology and specific forms, project audits, processes description, and project optimization. Dimension E – Maturity concerning project personnel considers the existence of the formal position of project manager, professional development plans for project managers, organizing training sessions in project management, and certifying project managers. Dimension F - Program Management: participating in programs was intended to highlight the involvement of medium-sized companies in programs. The result at this level therefore quantifies companies’ participation to programs rather than their competence in program management.
4
Key Findings
In order to assess the project management maturity level of medium sized companies in Romania, a relevant questionnaire was developed and applied on a relevant sample of 368 medium-sized companies from all industries. The results of the research validated the proposed project management maturity model and confirmed the hypothesis of a low maturity in project management of medium-sized enterprises in
Romania (Figure 2). The research hypothesis was confirmed: the average value stood at 2.61 on a scale with values from 1 to 5 (1 = lowest and 5 = highest).
Fig 2. Maturity level in project management of medium-sized enterprises in Romania The results by sector highlight the "Financial, banking and insurance, real estate" as the sector with the highest level of maturity (2.98). Immediately below this level, but very close is "Information and Communications" (2.91), a sector where activity by projects is predominant. The lowest level of maturity belongs to the "Hotels and restaurants" sector (2.25), followed closely by "Production and supply of electricity and heat, gas, steam and air conditioning, water supply, sanitation, waste management activities, decontamination" sector (2.29). The sector "Constructions", characterized by large projects with significant investment, is close to the average maturity level, which shows that the sector still needs to develop its project management potential. Specific project management practices and methods are applied in a coherent and consistent manner especially in organizations where there is a specialized project management department. We identified a correlation between the companies which scored over 3.50 in Dimension A (project management maturity), on the one hand, and the companies that obtained the highest maturity in Dimension D (design, project management process). Out of the 386 medium-sized companies in the sample, 85 belong to groups of companies or corporations, though they have their own legal identity. The results confirm the hypothesis that the level of maturity is influenced by the membership in a group of companies, the level of maturity of the 85 companies being much higher than that of independent firms: 3.35 to 2.38.
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Conclusions
„It is not the strongest of the species that survive, or the most intelligent, but the one most responsive to change.”(Charles Darwin). The quote applies to the business environment as well, and the current economic crisis has undoubtedly demonstrated it for the medium-sized enterprises in Romania and elsewhere. What are those capabilities that a medium-sized enterprise should have in order to ensure its survival in a turmoil business environment? By designing and validating a model for assessing the project management maturity of medium-sized companies, we provided a comprehensive framework for analyzing the current business situation of these companies. Furthermore, by actually applying this adapted model to over 350 medium-sized companies, we were able to identify several correlations that point out to the importance of project management in making development happen. Economic conditions can be more or less favorable. In both circumstances, an intelligent organization can transform a hostile situation into an opportunity. Immediate identification of such opportunities, and their prompt exploitation, call for repeatable, reliable and predictable management processes to ensure a fast and high quality implementation. However, the deadlock the organizations frequently face is generated by the fact that, in spite of their ability to quickly adapt strategies and define ambitious development plans, the process of their implementation and execution are slow and cumbersome. This is where the power of project management can be seen, which, adopted at the organizational level, can provide the expected competitive advantage.
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