Summary of the Master Thesis Masters Degree International Project Management in the Building Process Chain Stakeholder Contribution to the Strategic Direction of a Construction Project Submitted by: Dipl.-Ing. (FH) Sarah McNeill Matriculation Number 810115 Tutor: Professor Christoph Ehrhardt University of Applied Sciences Stuttgart Dipl.-Ing. (FH) Jürgen Marc Volm, M.Eng., MBA Drees & Sommer GmbH, Stuttgart
- 1-1 Introduction The construction industry is project based and characterised by an interdependence of many different organisations and individuals, providing services and products for planning and building. A project has a definite beginning and end, and involves unique activities, services, and results (PMI, 2004). This research seeks to answer the question of how project stakeholders influence and contribute to the overall strategic direction and success of a construction project. In a project environment, the strategic outcome can be understood as the direction and scope of the project over its lifetime. Resources and competences are directed with the aim of achieving the strategic intent. While a project functions as an alliance, the stakeholders pursue their own business goals apart from project goals, and interests may be conflicting. In a highly fragmented environment, the overall performance depends on all stakeholders. Motivation and additional effort, better performance, can be mobilised by good relationships. Effective communication strategies maximise positive stakeholder input. The main objective developed for this study is to critically evaluate how stakeholders develop communication strategies. Project performance is measured using success criteria. The individuals perception plays influences the measurement of project success. The project management success criteria of time, cost, and quality ( iron triangle ) are long established and tangible. The soft factors of project success, however, are hard to quantify and not well understood. The supporting objective of this study is to clarify how project success is currently defined among project participants. 2 Literature Review Managing construction projects involves many tasks and a variety of stakeholders (Schieg, 2009) having different requirements and expectations, which are often incompatible and not all of them can be fulfilled (Olander, 2007). Stakeholder theory, as opposed to the traditional shareholder view, acknowledges the interdependence of organisations for continued economic success (Freeman and Reed, 1983). Stakeholders are individuals, groups, even the natural environment. Opinion differs on the nature of the stake (Mitchell et al., 1997). It is associated with something of value invested in an organisation accepting a risk of loss, and a potential benefit vested in the stakeholder. Therefore, a project stakeholder can be defined as an individual or group, having an interest in the project and its successful completion. The interest is characterised by the power of the stakeholder as well as the legitimacy, and urgency of the claim (Mitchell et al., 1997). Stakeholder management is described in the Project Management Body of Knowledge as managing communications to satisfy the needs of, and resolve issues with, project stakeholders (PMI, 2004:235). Active stakeholder management increases the probability of the project staying on track, to build up synergies in the team, and to restrict disruptions during the project. Donaldson and Preston (1995) describe the stakeholder management function as the responsibility of managers ( ) to select activities and direct resources to obtain benefits for legitimate stakeholders. Hence, it is the project manager s responsibility to identify the stakeholders needs, and to direct activities and resources to resolve issues.
- 2 - Among the most common tools in stakeholder management is stakeholder mapping. Its key elements are the identification of stakeholders, their position, and the development of measures and communication strategies in order to influence key stakeholders expectations and perceptions (Bourne and Walker, 2008). The defining characteristic for success criteria is the measurement of project success or failure (Cooke-Davies, 2002). In measuring success a commonly acknowledged important distinction lies in overall project success and project management success, measured using the traditional iron triangle criteria (Atkinson, 1999; Cooke-Davies, 2002; dewit, 1988; Nguyen, 2004; Ojiako et al., 2008). Project success is achieved ( ) if there is a high level of satisfaction concerning the project outcome among key people ( ) of the project effort (dewit, 1988). Studies generally concede that different project stakeholders perceive project success differently (Belassi and Tukel, 1996; de Wit, 1988; Pinto and Slevin, 1998). Cooke- Davies (2002) concludes that most success factors listed do not directly relate to human factors, while those are quickly becoming accepted as important for project success. 3 Methodology The focus of this study is on communication strategies and the perceived quality of relationships between project stakeholders. Because people define project success differently, the research adopts an interpretivist and subjective research philosophy. Following out of this the research approach mainly obeys an inductive line of reasoning. However, hypotheses are developed using a deductive approach. An integrated approach can underpin the theory and provide more valid and reliable results. The main data collection method is semistructured interviews, following an interview outline. A dynamic sampling method was employed. In snowball sampling the interviewee directs the researcher to the next suitable interviewee. A case study approach was chosen as research strategy, because the study attempts to understand contemporary circumstances in context. The study focuses on the stakeholders influence on the construction project and communication between them. The case defined for this study is the individual stakeholder. Two comparable commercial developments were chosen as the context for the study. Both are part of a larger development project, show similar characteristics (type, size, complexity), performed well with regards to schedule and budget, but differed in the occurrence of claims. Data external to the case was collected in order to increase validity and reliability. A case study aims at analytical rather than statistical generalisability; a template theory is compared with the empirical findings of the study (Yin, 2009:38). Generalisability from the cases to theory is determined by whether data analysis shows repeated support in favour of a theory. The analytic strategy relied on theoretical propositions against which the findings were matched. 4 Findings and Interpretation The powerful stakeholders as identified in the context of Project A were the project developer / manager, the investor, architect, and M&E engineers. Respectively, in Project B the investor, developer, and project manager were identified as powerful. On the other hand, the general contractor had a high degree of power since he acted as the connection between the client and the general planner during implementation. Concerning whom a stakeholder pays
- 3 - attention to, the two main points raised were the contractual relationship and issues arising with routine business. Stakeholder Management :: Main Research Objective The legal framework, as an instrument to ensure security of resources featured prominently in the findings, and is an established critical success factor (Sanvido et al., 1992). It serves as a foundation to secure the appropriate resources to achieve the desired results. Nonetheless, unforeseen issues tend to occur in the course of a project, which require renegotiation. Ethical behaviour, fair payment for services, was identified to ensure the willingness to provide positive input. Financial incentives were not used to enhance the stakeholders motivation in the context of this study. Objectives should be clearly defined, and explicitly stated in the contract with a measurable frame. Formalised processes were not in place for the development of communication strategies in the projects under examination. The assessment of stakeholder requirements was intuitive and engagement practices viewed as insignificant and replaced by regular processes. Participants expressed the opinion that a clearly communicated strategic intent may have the potential to facilitate uninterrupted project implementation. The findings revealed that communication strategies were more subjective and intuitive in character, and reactive to the particularities of the individual relationships. Fairness and respect, paired with the willingness to deal reasonably with the economic interests of the parties, led to cooperative relationships. When the professional relationships were perceived to be positive, the impact on the stakeholders work was positive. Respectively, a negative atmosphere led to less motivation. A practical implication could be the use of instruments (such as reporting with provided templates) to document the achievement of milestones, and objectify decisions. When made available to all stakeholders, such methods can bridge gaps in the project network. The findings revealed that an effective network compensates for the absence of communication strategies. An ineffective network led to open issues and claims. The dimensions (out of the four dimensions knowledge, accessibility, engagement, safety) found to be most relevant were accessibility and engagement in problem solving. Project Success :: Supporting Research Objective The findings demonstrated that the perception of project success does not depend on profitability alone. A key finding was that the fulfilment of the individual s expected benefits, and the evaluation of project success correlated in all but one instance. Most definitions for project success involved satisfaction, expected benefits centred on professional achievement and job satisfaction. The participants evaluated Project A generally positively and Project B ambiguously, but slightly more negative. Therefore, the expected benefit plays a major role in judging project success. Project management success criteria were included in almost all the definitions of project success. All but one definition included one, two, or all three aspects of the iron triangle goals. The majority of definitions for project success recognized the importance of satisfaction, also among other stakeholders. Thus, a distinction between project success and project management success is not made in practice. This seems justified within the context of the study, because project progress is a key concern in the development and implementation phase.
- 4 - A deficit appeared in determining measurable success criteria for satisfaction. Generating repeat business was suggested as a criterion, the disadvantage of which is that it can only be evaluated after completion. A criterion for evaluating user satisfaction suggested was marketability. Expressed as quantifiable data in percent, the criterion could be justified as an expression of the demand for the product by investors or tenants. It may be of value to introduce processes for evaluating stakeholder satisfaction during a project, because what is measurable is manageable. The interviews showed, that opinion leaders concerning project performance tend to be colleagues. Discourse on project performance was reported to happen less across management levels. Few interviewees mentioned people external to their own company: the employer, members of the planning team, friends and family. 5 Conclusion Engagement practices, and specifically how communication strategies are developed was the focus of the main research objective. Regarding the issues discussed concerning engagement practices, there possibly is the greatest room for improvement in securing resources by developing communication strategies. Scheduling project activities, a common procedure in the construction industry, is not unlike developing a communications plan. It details when to involve which stakeholder, and clearly defines objectives for the communication. The basis for such a plan should be the assessment of all relevant stakeholders and their position. For the assessment tools, e.g. a power/interest matrix (Johnson et al., 2008:156), could be used with a focus on steering information to influence key stakeholders expectations and perceptions (Bourne and Walker, 2008). The supporting research objective is concerned with the expectations of the stakeholders. Specifically, the study aimed to clarify how project success is currently defined among professionals. The suggested definition of project success, formulated and based on the interpretation of the findings, should be: A project is perceived as successful, when the individual s expectations are met, there is satisfaction among key stakeholders of the client organisation and the project team, and when performance against time, cost and quality is well managed. The research question this study aimed to answer is how stakeholders contribute to the overall strategic direction of a project. It was established, that contracts serve as the legal framework stakeholders operate in. A core interest of all stakeholders is the economic benefit derived. Engagement practices other than adhering to the services owed are not prevalent. Communication strategies are developed intuitively. They are reactive to circumstances. Thus, fairness as a foundation for relationships serves to ensure positive stakeholder input in addition to obligations resulting from contracts. Establishing an effective network can compensate for the absence of other engagement practices. Building trust in relationships assists in retaining a level of intrinsic motivation and commitment to the project. Project success is continually and informally assessed according to subjective perception. There is an intrinsic risk management element built into the assessment of the current status of the project, because corrective measures may be taken. Communication strategies will react to the perceived opportunities and threats, and thus aim to ensure the desired strategic outcome of the project.