understanding the value of project management: first steps on an international investigation in...

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74 September 2007 � Project Management Journal � DOI: 10.1002/pmj

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INTRODUCTION �

A lthough the holy grail of demonstrable project management value isoften discussed and even proclaimed in consulting and practitionerliterature, the actual value resulting from investments in projectmanagement has been hard to define, let alone measure. Few rigor-

ous studies have been undertaken and those that exist struggle to provideindisputable and strong evidence. The works of Kwak, Ibbs, and Reginato(Ibbs & Kwak, 2000; Ibbs, Reginato, & Kwak, 2004; Kwak & Ibbs, 2000, 2002;Reginato & Ibbs, 2002) over the last decade represent some of the more rig-orous and quantitative efforts but suffer from failing to enroll enough organ-izations to be broadly relevant and statistically credible. These investigationsalso focus on only a limited definition of both value and project manage-ment. Paradoxically, the more the concept of value is pinned down to a def-inition, the easier it becomes to identify why it is insufficient: in his work onreturn on investment (ROI), Phillips (1998) recognized that in addition toROI there are intangible non-monetary benefits whose conversion to “harddata” is subjective, undermining the credibility of the ROI process. He rec-ommended that even though they may be as important to the organizationas hard data they “are listed . . . with appropriate explanation” and in effectexcluded from the calculations of ROI. Studies such as that of Thomas,Delisle, Jugdev, and Buckle (2002) provide insights into the multiplicity ofpotential benefits that executives, practitioners, and consultants associatewith implementing project management but make no effort to quantify thesevalues. Where empirical evidence does exist (see, for example, Bryde, 2003;Cooke-Davies, 2002a; Ibbs et al., 2004; Kwak & Ibbs, 2000; Mullaly, 2004;Reginato & Ibbs, 2002), it is tantalizing but fragmented and incomplete.

This paper outlines a rigorous, coordinated, multidisciplinary, multi-method project designed to provide evidence of the value organizationsrecognize when project management is appropriately implemented. It con-cretely addresses common dimensions of concern; for example: the devel-opment of practical guidelines for practitioners, consultants, and executivesto measure the value of project management initiatives; and the value, rigor,and appropriateness of the value statements and practice guidelines toacademic, executive, and practitioner communities. Lessons learned fromprevious value research in both project management and other disciplinesare discussed. A model of enquiry is presented and the paper concludes with

Understanding the Value of ProjectManagement: First Steps on anInternational Investigation in Search of ValueJanice Thomas, Centre for Innovative Management, Athabasca University, Athabasca, Canada andUniversity of Technology, Sydney, AustraliaMark Mullaly, Interthink Consulting, Edmonton, Alberta, Canada and University of Technology, Sydney, Australia

ABSTRACT �

Organizations investing in project managementneed to be assured of a concrete return.Without the ability to clearly define its value,project management joins the long line of ini-tiatives (i.e., TQM, information systems, train-ing, human resources) struggling to prove theirworth to organizations. However, demonstrat-ing a concrete value in organizations has beenillusive and even paradoxical. This paperdescribes the conceptual model underlying amajor international research project designedto yield a broad perspective on the value ofproject management. This model and researchdesign will be of interest to researchers, proj-ect managers, professional organizations, andsenior executives.

KEYWORDS: project management; valueof project management; ROI; organizationalvalue

Project Management Journal, Vol. 38, No. 3, 74–89

©2007 by the Project Management Institute

Published online in Wiley InterScience

(www.interscience. wiley.com)

DOI: 10.1002/pmj.20007

September 2007 � Project Management Journal � DOI: 10.1002/pmj 75

a discussion of the strengths and bene-fits of this research design. The authorsbelieve this approach presents a holis-tic and appropriate way to leverage theinsights and expertise of the researchcommunity to first understand andthen quantify the value of project man-agement in today’s organizations.

Lessons and Limitations ofMeasuring Organizational ValueEfforts to determine the value of organi-zational activities have been a longstand-ing pursuit in a number of disciplines(Lepak, Smith, & Taylor, 2007). The con-ceptual approaches to the value ques-tion can be roughly categorized asfollows:• Return on investment (ROI) approach-

es• Balanced scorecard metrics• Organizational competency approach-

es.

Measuring ROI stems from a timewhen it was easy to base the value of anenterprise on the value of its financialassets (like revenue, real property, orequipment). The assumption is that forevery dollar invested, there is a directlycorrelated financial return attributableto that investment.

Under this heading are includedmeasures that deal specifically withfinancial value, such as the following:• Cost Benefit Ratio

B/C Ratio � $Benefits/$CostsBoth Knutson (1999) and Smith and

Barker (1999) discussed the use of thisapproach in a project managementcontext.• Return on InvestmentROI � ($Benefits � $Costs)/$Costs � 100

Proponents (Phillips & Philips,2004) state that the biggest challengesof conducting ROI evaluations relate to:ensuring credible, valid results in a rea-sonable time frame; demonstratingthat the results exhibited are appropri-ately apportioned and attributable tothe program or initiative being investi-gated; and isolating the impacts of the

program or initiative from other con-text-specific and situational factors.The underlying message is that this isnot a terribly difficult thing to do.• Maturity Based ROI MetricsPM/ROI � [(Predicted Profit Margin –Current Profit Margin) � AnnualProject Revenues]/Annualized ProjectManagement Expenditures

The work of Ibbs, Kwak, andReginato (Ibbs, 2000; Ibbs & Kwak,1997, 2000; Ibbs & Reginato, 2002; Kwak& Ibbs, 2000; Kwak & Ibbs, 2002;Reginato & Ibbs, 2002; Ibbs et al., 2004)over the last decade focused on recog-nizing the benefits of investment inproject management competencythrough measures of maturity in anorganization’s practice of project man-agement. In this way their work usesboth ROI and benchmarking to valuethe investment in project management.Higher maturity scores are hypothe-sized to correlate with higher levels ofpredicted project performance. Thetheory was that investment in projectmanagement increases an organiza-tion’s project management maturitystanding and this improvement resultsin enhanced project performance thatshould translate into cost saving andother benefits.

Others have contributed to thisstream of research (Crawford &Pennypacker, 2001; Pennypacker &Grant, 2003), through survey-basedresearch attempting to associate firmself-report data on maturity measuresand project performance. Althoughflawed, many of these approaches pro-vide some interesting insights thatdeserve further exploration.

Valuation from this industrial per-spective is not as useful in informationand service-based industries, or theso-called knowledge economy, where itis commonplace for a company to bevalued as much for its intangibles—itsbusiness processes, customer lists,trademarks and patents, knowledge,skills, and business relationships. Asone executive put it recently,“Calculating an ROI of project manage-

ment wouldn’t be very useful to me.Project management is too manythings. Even if I had an ROI, I stillwouldn’t know what specifically toinvest in.” As Githens (1998) pointedout, in the project management con-text, these metrics are criticized fortheir role in preserving the status quo.ROI measures emphasize capitalinvestment and the yield of predictablereturns over increases in intellectualcapabilities. Cabanis-Brewin (2000)echoed these criticisms in stating thatthese methods do not recognize thevalue of the cultural change and “soft”human factor benefits. Jugdev andThomas (2002) made a clear case thateasily copied competencies do notyield the long-term strategic advan-tages that today’s organizations arelooking for from their investments.

There is no question that bottom-line results are important for all types oforganizations regardless of their profitorientation. All organizations need topay attention to revenue and coststo remain financially viable. However,not everything that an organizationdoes can be translated into monetaryterms. For instance, the link betweenemployee satisfaction and corporateperformance is difficult if not impossi-ble to establish. However, many organi-zations believe that keeping employeessatisfied is an important corporategoal. In not-for-profit or governmentorganizations, measuring objectives infinancial terms is even more problem-atic. Translating employee or customersatisfaction into a dollar value or evalu-ating outcomes in financial terms isvery difficult to calculate in any valid orcredible way. Thus, in spite of the per-ceived desire for an ROI calculation forsuch organizational interventions, mostexecutives are often wary to acceptthose calculations that are presented.

Given the difficulties and constraintsof using ROI to measure value in anorganizational setting, many researchershave sought to develop more sophisti-cated measures. By far, the most used ofthese expanded approaches is the


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balanced scorecard approach developedby Kaplan and Norton (1996a, 1996b).Both Githens (1998) and Cabanis-Berwin(2000) advocated a balanced scorecardapproach as a response to the challengespreviously discussed.

Balanced scorecard (BSC) metricstry to evaluate organizational perform-ance using a variety of financial andnonfinancial measures including thefollowing:• Learning and growth• Internal measures• Customer perspectives• Financial perspectives (such as ROI).

In particular, this approachattempts to measure the knowledge-based and intangible benefits associat-ed with organizational effectivenesstoday. Webber and Torti (2004) gave athorough review of the application ofthis approach. BSC metrics have thetheoretical advantage of attempting toevaluate all the benefits and costs ofeach organizational action in the con-text of the specific organization’s strate-gy. The selection of appropriate metricsis therefore key to the success of thisapproach.

In Europe, a similar model has beendeveloped based on this approach incombination with quality perspectives.This model, developed by the EuropeanFoundation for Quality Management(EFQM), seeks also to evaluate organi-zational performance based on a widervariety of potential measures.

Building from the EFQM model,Westerveld (2003) defined a ProjectExcellence Model and Bryde (2003)derived a Project ManagementPerformance Assessment model to beused to evaluate the performance andcontribution of project managementwithin the organization. Bryde pub-lished the results of his survey as aneffort to explore the value of projectmanagement in a way that built on thestructure of the EFQM model. The studyintent and constructs are interesting,but the small sample size and weaknessof construct validity limits its usefulness.

The criticisms of these approachesare also many. Ittner and Larcker(2003) pointed out that many peopleattempting to apply the BSC approachfail to tie the metrics back to corpo-rate strategy—often because com-monly available or easy to acquiremeasures substitute for the more dif-ficult but appropriate strategic meas-ures. For example, although Crawfordand Pennypacker (2001) advocateduse of a “balanced family” of metricsassociated with shareholders,employees, and communities, theydid not discuss how to select andquantify these metrics or link them tocorporate strategy. They appear to befalling into the trap that Ittner andLarcker discussed of failing to linkmeasures to strategy, setting faultyperformance targets, and measuringthe targets ineffectively. In addition,attempts to quantify intangible bene-fits fall prey to criticisms of howthey are estimated. Crawford andPennypacker’s empirical work usingthis approach also falls prey to thecommon issue that organizations donot often collect or maintain the kindsof information necessary to do thiskind of evaluation on a comprehen-sive or consistent basis.

In addition, although many authorsshow how the BSC approach focuses anorganization on improving measurableperformance in order to optimize oper-ational efficiency (Bontis, Dragonetti,Jacobsen, & Roos 1999; Roos, Roos,Dragonetti, & Edvinsson, 1998; Russ,2001), Voepel, Leibold, Eckhoff, andDavenport (2006) argued that this single-minded focus on a small number ofrelatively rigid measures results in atyranny of measurement that conflictswith creativity, innovation, and adapta-tion. Likewise, they argued that theinternal focus of the BSC approachencourages organizations to ignoreexternal circumstances, often to theirown detriment.

Finally, it is the authors’ professionalopinion arising from consulting andresearch conversations with hundreds

of executives that executive manage-ment often views estimates of the BSCmetrics as speculative and debatablerather than representing the concretedefinition of value that they are lookingfor. In addition, some of the financialmeasures that are recommended here—like earnings per share (Crawford &Pennypacker, 2001)—are notoriouslydifficult to associate with individualorganizational initiatives as there aretypically too many other activities andinitiatives in organizations at the sametime to be able to tie share prices toimprovements in one specific area.

Emerging at roughly the same timeas the balanced scorecard approach,the Competency Based Perspective ofstrategic thought emphasizes theimpact that internal organizationalcompetencies have in determining thelong-term, sustainable competitiveadvantage of firms. According to thisperspective, each firm develops aunique combination of corporateassets and capabilities that allow it togenerate income based on the exploita-tion of these competencies (Barney,1991; Grant, 1991; Peteraf, 1993;Wernerfelt, 1984). Strategic competen-cies are those that contribute to sus-tainable competitive advantage forfirms. Competencies can reflect theabilities and specific skills that a firmpossesses or the cognitive characteris-tics that allow the organization todeploy these skills in a specific way. Thecommon understanding is that thesefirm-specific assets and competenciesare knowledge-related, tacit, difficult totrade, and typically shared among theagents of the firm. Thus, the questionemerges as to whether or not projectmanagement as a universal disciplineof practice could be capable of generat-ing long-term competitive advantageto a firm.

Jugdev ( Jugdev, 2002; Jugdev &Thomas, 2002) has made the mostrigorous attempt to evaluate projectmanagement’s capacity to generatelong-term competitive advantage.This research looks at the formation

and enhancement of project manage-ment capabilities through the use ofmaturity models as a framework forcompetency development. Her con-ceptual arguments assert that maturi-ty models do not in themselves generateadvantage as they are easily copied. Herempirical findings from a small sampleexploratory study suggest that projectmanagement may be an enabler ratherthan a strategic asset. However, this res-earch remains to be tested with larger-scale samples. One of the problems with all competency-based empiricalresearch has been in operationalizingthe attributes of interest and synthesiz-ing appropriate measures.

Literature in the TQM field mayprovide some insights into how to dothis. Similar to project management,the TQM literature suggests that qualitymanagement initiatives can contributeto sustainable competitive advantage“by encouraging the development ofcompetencies that are specific, pro-duce socially complex relationships,are imbued in the history and culture ofthe organization, and generate tacitknowledge” (Escrig-Tena & Bou-Llusar,2005). Building from previous litera-ture classifying four main types ofcompetencies: managerial, input-based, transformation-based, and out-put-based (Lado Boyd, & Wright, 1992;Lado & Wilson, 1994), Escrig-Tena andBou-Llusar (2005) developed a methodof operationalizing these types of com-petencies in the context of a TQM ini-tiative that may prove very useful forevaluating the contributions of projectmanagement initiatives.

However, project management isnot the only organizational initiativethat has struggled with equivocalresults in ROI research. Efforts to deter-mine the value of organizational activi-ties have been a longstanding pursuitin a number of disciplines. Researchersfrom as disparate disciplines as informa-tion systems (Barua, Lee, & Whinston,1996; Barua & Mukhopadhyay, 2000;Powell & Dent-Micallef, 1997), humanresources (Hesketh & Fleetwood, 2006),

hotel quality management (Erikkson & Hansson, 2003; Guler, Guillen, &Macpherson, 2002; Montes, Jover, &Molina Fernandez, 2003, Powell, 1995,Westphal, Gulati, & Shortell, 1996, 1997),and expert systems (Mottiwalla &Fairfield-Sonn, 1998) blame these unsat-isfactory results on the absence of effec-tive means of taking into account con-textual factors and adequately measuringall impacts. In addition, Marcus and Soh(1993) suggested that all componentparts of the IT investment process mustbe taken into account to get a moreeffective evaluation of IT benefits. Likethe TQM researchers previously cited,these researchers all point to the needfor a comprehensive measurementframework considering all dimensionsof “white-collar” performance (Tuttle &Romankowski, 1985) including efficien-cy, effectiveness, productivity, quality,quality of work life, innovation, and pro-ductivity. Additional benefits such asautonomy, control, and satisfactioncould be added to this list.

Ultimately, although it may betempting to focus directly on the rela-tionship between the entire projectmanagement intervention package andglobal organizational outcomes, cau-tions applied to TQM research applyequally here.

It is maddeningly difficult to do suchresearch well, for several reasons:• First, there are serious measure-

ment problems associated witheven standard indices of firmperformance such as marketshare, profitability or stock price(Brief, 1984; Kaplan & Norton,1992; Penning, 1984) . . .

• Second . . . Exogenous distur-bances can significantly obscurethe link between work processesand organizational outcomes . . .

• Third, temporal issues canobscure intervention-outcomerelationships (Whitten &Cameron, 1994) . . .

Taken together, these three diffi-culties can make it nearly impossi-ble to detect statistically the directeffects of TQM on global measures of

organizational outcomes. (Hackman& Wageman, 1995)

Another temptation is to identifythe value of different independentactivities or initiatives associated withimplementing project management(such as training or project manage-ment maturity or the value of any oneproject) and extrapolate from there.Several recent studies addressed proj-ect success factors. These studiesinclude success factors on projects,project management, and the organi-zation (Cooke-Davies, 2002b), theinfluence of project managementoffices (PMOs) on reported project per-formance (Dai, 2002; Dai & Wells, 2004),the impact of project managementsoftware acceptance on project success(Bani-Ali & Anbari, 2004), and the asso-ciation of project risk managementpractices with reported project success(Voetsch, Cioffi, & Anbari, 2004).Despite their importance, these studiesdo not result in the measure of theoverall value of project managementimplementation as the approaches donot hold constant the impact of allother project management or organiza-tional initiatives taking place in theorganization at the same time.

The pursuit of value remains anongoing quest. Recent organizationaltheory reviews of value creation (Lepaket al., 2007) recognize that valuecreation is important and “. . . equallydifficult to find agreement amongscholars regarding (1) what value cre-ation is, (2) the process by which valueis created, and (3) the mechanisms thatallow the creator of value to capture thevalue.” However, the complexity andimportance of the question of valuecannot be escaped “. . . the subject ofvalue creation is made complex by itssubjective nature, multiple levels ofanalysis, and the theoretical disciplinescholars use to study it.”

Therefore, it is unlikely that self-report survey data, limited case studies,or studies of the value of independentelements of project management will




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result in rigorous and generalizableinsights. To successfully conduct aresearch project of this magnitude andcomplexity requires a carefully con-structed and rigorously implementeddata collection strategy guided by anintegrated and coordinated cross-functional, cross-national team(Easterby & Danusia, 1999). Until nowthere were no sources of funding will-ing to sponsor such an undertaking.The remainder of this paper describesthe authors’ initial strategy to broadlyand definitively demonstrate in anintegrated fashion the value that canaccrue to organizations that effectivelyimplement project management.

Model of EnquiryValuing organizational initiatives is adifficult activity fraught with challenges(see Thomas & Mullaly, 2005 for areview). Voepel et al. (2006) furtherasserted that “All of the traditional busi-ness performance measures suffer tosome degree because of the underlyingand increasingly invalid assumptionsrooted in the industrial economy.” Theysuggested that what is missing in thesemeasures is a contextual understand-ing of the complex web of interrelatedfactors, relationships, and activitiesthat need to be taken into account in aholistic manner in order to assess anorganization’s performance in theknowledge economy.

In reviewing the ROI research in IT,TQM, expert systems, and humanresources, it becomes clear that theconceptual model underlying thisresearch must incorporate appropriatemeasures of what has been implement-ed in each organization, the processand outcome impacts of thisimplementation, the fit between whatwas implemented and the business ori-entation and environment withinwhich the organization functions andappropriate measures of the benefitsand costs of the project managementimplementation (extrapolated fromHackman & Wageman, 1995). In prelim-inary work (Thomas & Mullaly, 2005)

the authors identified the relationshipsthat can occur between the compo-nents of project management and theaccrued benefit to the stakeholder(s).Different attributes can provide a startingpoint for the identification and elabora-tion of the relationships and variablesthat need to be measured and statisticallyexplored in this research.

Distinguishing between the rheto-ric and the actuality of what has beenimplemented is also essential, as is theassessment of the fit between these ini-tiatives and the organizational andbusiness environment. The choice ofwhat will have been implemented (theproject management implementationin the context of any one organization)will be influenced by the business ori-entation of the organization—its focus,strategic direction and vision of itselfas an entity—and the environmentwithin which the organization oper-ates—which will be influenced by itsindustry, customers, economic context,and the types of projects the organiza-tion typically manages.

In understanding the impact ofproject management to a specificorganization, there are three directinfluences that will govern whethervalue is actually being realized:• First, the fit of what has actually been

implemented needs to be understoodin the context of the business orienta-tion and the environment; in otherwords, to what degree did the organi-zation “get it right” in establishing acontext of project management that isappropriate for them and the types ofprojects they manage?

• Second, the process impacts of whathas been implemented must beassessed and measured—in otherwords, to what degree does this frame-work better influence the delivery ofprojects? Are the processes more effi-cient, more effective, or more capableof delivering projects more reliably?Has the project management processimprovement allowed the organiza-tion to improve market focus or dif-ferentiate its market services?

• Third, the tangible business out-comes resulting from using what has been implemented must be evaluated—in other words, to whatdegree do these project managementcapabilities actually deliver a bot-tom-line impact in terms of reducedcosts, optimized efficiency, or increa-sed revenue? What is the return to theorganization for investing in the proj-ect management capabilities it hasestablished?

Figure 1 reflects an initial conceptu-al model designed to help us under-stand how project management createsvalue in today’s organizations to serveas a basis for data collection. This dia-gram suggests how different attributescan provide a starting point for theelaboration and identification of therelationship and variables that need tobe measured and statistically exploredin this program of work.

Organizational ContextBruner (1990) asserted that it is impos-sible to understand the metrics and ref-erence system of a company withoutfirst understanding the situated, contextual interpretations embeddedwithin the management practices of thecompany. The conceptual modeldefined first recognizes that there is anexternal context that influences themanagerial practices within eachorganization and ultimately determinesthe success of any organizational initia-tive. This is the context within which theinitiative is being launched and takesinto account the organizational, strate-gic, and economic contexts. Althoughnot always readily apparent, these vari-ables are likely to influence the resultsof the project management initiative inat least three ways. First, if the projectmanagement initiative does not “fit”with the organization or its strategic orcompetitive environment, it is unlikelyto deliver desired results (Kimberly &Evanisko, 1981). Second, somethingelse going on in the organization mayweaken, jeopardize, or overstate the

Figure 1: Conceptual model developed by Thomas & Mullaly (2005).

Project ManagementConstructs

PMImplementation

OrganizationalContext Environment

Fit

ProcessCriteria

OutcomeCriteria

Value Constructs

Valueof

ProjectManagement

BusinessOrientation

potential benefits from the projectmanagement initiative (Damanapour,1987, 1996). Finally, we need to accountfor the lag between the time the projectmanagement initiatives are undertakenand the time the benefits occur(Damanpour & Evan, 1984). Withoutunderstanding the context, it is impos-sible to know what other organizationalor environmental activities may beinfluencing resulting value.

In order to understand the organi-zational context, each of the followingareas need to be explored in somedetail:• Strategic context—customers, suppli-

ers, strategy• Economic/political context—loca-

tion, politics, strength of economy

• Organizational attributes—people,projects, culture, infrastructure.

The choice of what will have beenimplemented (the project managementimplementation in the context of anyone organization) will be influenced bythe business orientation of the organiza-tion—its focus, strategic direction andvision of itself as an entity—and theenvironment within which the organi-zation operates. This in turn will beinfluenced by its industry, customers,economic context, and the types of proj-ects the organization typically manages.Clearly, careful study of these contextualvariables goes a long way to addressingVoepel et al.’s (2006) criticism of metricslike the BSC that focus solely on the

internal performance impacts of organi-zational initiatives.

Project Management ConstructsMany project management or organi-zational project management maturity,models are available on the market andreaders may be asking at this point whyone of them was not chosen for use inevaluating this aspect of the model—especially as at least two of the projectteam members own proprietary matu-rity models and PMI—a major sponsorof the study—has recently launched theOPM3 model.

Each of these models (where wehad access to them) were evaluated aspotential instruments for use in thisstudy. What we found was that none of




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them had the depth and breadthof variables we felt were important toinclude in order to evaluate all aspectsof the project management implemen-tation within an organization. Each ofthese instruments were created for aspecific purpose and to shed light onsome aspects of project managementor performance but in doing so alsooften left others in shadow or at timescomplete darkness. As per Callon’s(1990) insights, each set of predomi-nant metrics serves to identify certainactivities and initiatives as essential ordetrimental to the advancement anddevelopment of an organization or func-tion. In particular, most of the existinginstruments focused on the tangibleelements of project management,ignoring or under-considering the intan-gible and innovative capabilities thatare necessary to manage in a high-uncertainty, high-ambiguity knowledge-based economy.

In addition, each of the instru-ments underlying these models ontheir own ran into a large number ofquestions or items. Given the scopeand of the data we needed to collectfrom each organization we had to tradeoff the use of an established instrumentalongside our other data collectionrequirements against the willingness oforganizational participants to com-plete the instrument.

Instruments were developed that,as much as possible, are based on pub-lished research. The instruments useitems that have been, where possible,tested in previous studies and specifi-cally focus on data collection. Ratherthan pursue specific evidence of proj-ect management knowledge and prac-tice as defined within any specificinstrument, we chose to develop a moredetailed understanding of the processesthrough which practice and knowledgeclaims are identified and created inthe process of becoming self-evident“best practices” in light of Latour’s(1987, 1999) work rather than look forany particular set of externally identi-fied “best practices.”

We also recognized that we neededto do two things in collecting informa-tion on the project management imple-mentation. First, we needed to collectinformation that would allow us toidentify what they have implemented inthe name of project management. To dothis we would need to understand thefollowing:• The history of the project management

implementation—who did what, when,why, and how?

• What organizational infrastructurehave they created to support projectmanagement in the organization:What level of infrastructure supportdo they have? Is there a PMO? Whatlevel does it report to? How manyproject managers are there? What isthe budget for project management?What are their HR policies? etc.

• What project management practiceshave they implemented with respectto organizational integration, portfoliomanagement, program management,project management, value realiza-tion, and resource management?

• What tools do they use: software, guide-lines, databases, reference sources?

• What are their project managementhuman resources like?

• What training and development dothey offer their project managementpersonnel and what is the quality andintensity of this training?

Second, we needed to distinguishbetween the rhetoric and the actu-ality of what has been implemented(Abrahamson, 1991; Zbaracki, 1998).That is, we needed to discern whetherthe policies that have been created areimplemented or just sit in binders andare not used. To do this we needed toask similar questions of different levelsin the organization. We needed to askpeople to tell us what the policy is andwhat they actually do to manage proj-ects. We needed to compare this to theformal documentation of the policiesand procedures that we can see in doc-uments. In this way, we elicit both thetheories in use and espoused theories

(Argyris & Schön, 1978) of project man-agement for each organization.

Finally, we needed some way to beable to assess the fit between these ini-tiatives and the organizational andbusiness environment. This informa-tion is likely to be reflected in analyticalresults derived by reviewing the statisti-cal relationships between these vari-ables. However, asking for a perceptualresponse to this question may also pro-vide valuable insights.

Organizational ValueIn most organizations, expenditures onproject management do not have directimpacts on revenue or profits.Although project management is often“sold” on an efficiency agenda(Thomas et al., 2002), improvements inproject management do not alwaysreduce costs and may increase them inthe short run (Bridges, 1986). Mostproject management improvements donot yield tangible revenue and costimpacts but more usually are associat-ed with improving less tangible aspectsof the project often related to meetingstakeholder expectations around cost,timing, quality, and process. Thisresults in a number of different kinds ofbenefits for organizations includingpossibly preparing the organization forfuture activities (Shenhar, Dvir, Levy, &Maltz, 2001).

Borrowing a long-standing evalua-tion framework from human resourcesdevelopment evaluation literature(Phillips, 1998), five types of organiza-tional value were chosen for study.• Level 1—Satisfaction

This can be the simplest measure ofvalue. Do the key stakeholders per-ceive that the project management initiatives provided value? This is meas-ured through perceptions/self-reportsatisfaction levels as well as through theuse of objective measures (such asrepeat customers) wherever possible.

• Level 2—Aligned Use of PracticesMeasures the fit between espousedtheories and theories in use. Did theproject management implementation

result in the desired processes? Doyou do what you say you do? Do proj-ect people know what they are sup-posed to do? This is assessed througha comparison of practices, policies,and procedures with what actuallyhappens on projects.

• Level 3—Process OutcomesWhat project process improvementshave you reaped from your projectmanagement implementation? Howeffective is the project managementprocess? This is evidenced by changesover time in things like numbers ofchange requests, budget perform-ance, learning from past projects, andreliability of delivery.

• Level 4—Business OutcomesWhat business outcomes are related tothese process improvements? Impro-ving project management can result ina number of different business out-comes depending on the nature of theorganization. For organizations thatdo projects for clients, for instance,improving project management prac-tices may improve customer satisfac-tion and their organization’s ability toattract new customers through repu-tation effects, word of mouth, andpotential advertising opportunities.Research suggests that repeat busi-ness arises out of customer satisfac-tion and that even small increases incustomer retention can have a dra-matic impact on profits (Reichheld &Sasser, 1990). For organizations thatdo manufacturing or research proj-ects for product development,improving project delivery speed andreliability can improve an organiza-tion’s time to market performance,which has been shown to significantlyimprove organization and product per-formance. Organizations that do proj-ects primarily for internal purposessuch as organizational change andinformation technology projects canbenefit from increased ability toachieve strategic goals.

• Level 5—Return on InvestmentFor every dollar invested in the projectmanagement initiative, what return in

terms of cost savings, revenue, etc., canbe attributed to it? This measure is cal-culated based on the quantification ofthe direct business impacts identifiedin Level 4 benefits analysis as com-pared with the reported expenditureson project management. The readermight at this point ask why we botherwith this calculation if ROI has the lim-itations noted earlier. One of the pri-mary limitations of ROI is that manybenefits have to be estimated and it ishard to see where the numbers arecoming from. This study takes theapproach that all the measures usedwill be rigorously documented, and sothe ROI in this case is at least based onsolid organizational understandingand measures that can be used for theinsights it provides, while still recog-nizing its inherent limitations and rec-ognizing that this measure will be themost difficult and time-consuming toarrive at.

Once each organization is analyzedbased on the described approach,information from each organizationwill be coded for statistical analysis.Using statistical tools, including factoranalysis, we will look at this data withthe view to deriving relationshipsbetween categories of investment inproject management and categories ofbenefits. Where we can identify thesepatterns, we are likely to identify specif-ic benefits associated with developingspecific project management capabili-ties. This will provide an analysis that isfar more than a simple assessment ofthe average ROI that results frominvesting in project management. Weshould be able to show that investing ina particular form of project manage-ment provides a specific type of benefitin a specific context. This type of resultwill not simply provide value state-ments for project management. It willalso provide guidance for those makingthe decision to invest in project man-agement as to where best to spend theirmoney to get the type of result theymost desire and require.

Research AgendaExploring this question in detailrequires careful planning and assess-ment at multiple levels. Building fromextensive review of the literature onmultiple case research, survey, andorganizational assessment designand construction, and on large-scalecoordinated research projects similarto this one the project is designed to bearried out in two main phases. Theresearch was structured as per Figure 2.Each of the two main phases and itskey activities are described in moredetail next.

A multidisciplinary research team isneeded to ensure that suitable perspec-tives are covered and the volume of workcan successfully be achieved. The teamis organized as described in Figure 3.Main contributors to this project andtheir affiliations are given in theAppendix.

Phase 1—In Search of ValueFour pilot studies have been carried outto elaborate and test the conceptualmodel previously described. The geographic distribution includes two inCanada and one each in China and theU.K., using a wide ranging team ofbusiness and project managementexperts. One additional pilot case studyis also being completed in the U.S. aspart of the main data collection effort.Each case study was designed to identifywhich capabilities and attributes existwithin the organization from a normal-ized but evolutionary framework ofcapabilities (developed with inputsfrom the initial literature search, theresearch teams—subject matterexperts, academics, and executives)that define the full set of practices andattributes seen in organizations. Datafor each case study was collectedthrough personal interviews, docu-ment reviews, project file reviews, orga-nizational surveys, library research, andfinancial analysis. This multipleresponse methodology is used to pro-vide triangulation across methods andstudy participants, and to includenumerous perspectives on how the




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organization is perceived or rated oneach measure. It is an approach recom-mended by a wide number of recentarticles (Dawes, 2000; Gray, Matear,Boshoff, & Matheson, 1998; Tsai, 2002)to ensure that an organizational ratherthan individual picture is developed.

As well as collecting cases that aregeographically diverse and span abroad range of industry sectors, it isimportant to distinguish between thedifferent types of projects each organi-zation carries out. Rather than do thisat a fine grain level, we use a three-leveltaxonomy of: business projects (doneby one company for another), develop-ment projects (like innovation, newproduct development (NPD) or R&D)and change projects (IT, organizationalchange, and TQM) (Soderlund, 2004).Of the five pilot cases outlined, threewere organizations primarily involvedin business projects, one a develop-ment project, and the other a changeproject. This segmentation can be usedto differentiate between project informa-tion collected between as well as withinorganizations. The projects within eachcase study have been classified by

project type, and the relative value ofthe projects and project managementfor each of these project types, allowingthe overall value of project manage-ment within that organization to beestablished.

The capabilities of each case studywill be associated with the values thatare being demonstrated within that casestudy, and correlated with the results ofeach other case study conducted.Results are yet to be analyzed in thisway, but it is expected to be able todemonstrate the holistic delivery of valuethrough discrete project managementcapabilities. Further, it is expected thatthis holistic value will be realized throughspecific and identifiable clusters of prac-tice that are consistent and verifiable—and therefore generalizable—throughthe other cases and practitioner inputs.

This research requires the designand assessment of a large number ofdata collection and analysis instru-ments. Phase 1 of this research wasdesigned to assess the validity of theseinstruments as well as the avail-ability of the data in organizations.The pilot case studies suggest that the

overall constructs and instruments areappropriate and that the core data thatwill be required is available to us inmost organizations. The frameworkhas been revisited in light of the pilotsto incorporate additional feedback andinput from the pilot case studies andaddress some terminological inconsis-tencies and ensure they are appropri-ate for the broad cultural base acrosswhich case studies will be conducted.

Phase 2—Calculating ValueThe second phase of the project entailsengaging as many as 20 grant-fundedresearch teams around the world(North America, South America, Europe,Eastern Europe, Northern Africa, andAsia) to continue data collection. Eachteam will collect data on between twoand six organizations. Prior to data col-lection, familiarization of each teamwith the standard instruments thatare derived from the pilot studies wascarried out.

The data collected will provide astandardized basis of qualitative andquantitative input across as many as 80organizational case studies. In addition,

Phase 2Phase 1

Conceptual Doable? Exploratory

Knowledge

Uncertainty

Theory Testing

Valueof PM

Figure 2: Value project structure.

each team will add a new dimension tothe study by collecting additional datathat is theoretically inspired by theirindividual research interests and expert-ise. A statistics team has been formed toprovide a central point of analysis for thequantified global data set. As each studyis completed, specific data will be codedand entered into the statistical databasefor analysis by the statistics team.Findings from the statistics team willgenerate further analysis of cases. Itwill also inform whether any furtherrefinement of the survey instruments ispossible in order to enable the collectionof self-report data from a larger numberof organizations. The exploratory exam-

ination of all data (quantitative andqualitative, as well as the underlyingcontextual and demographic informa-tion) will lead to the formation of theo-ries that correlate the different types ofvalue with their contributing contextualand practical drivers. The final stages ofthe project will involve testing the syn-thesized theories and developing ageneralized model for enabling organi-zations to be able to model their desiredvalue outcomes.

A complex, integrated project ofthis nature must be considered a high-risk undertaking and so is beingdesigned as such. In this section wereview the key risks and barriers to

success of undertaking this researchstudy and our mitigation strategies foreach.

Ensuring Credible, Reliable, Valid ResultsAs we have seen in the literature, initia-tives to measure ROI often fail becausethey focus only on measuring thequantifiable costs and benefits andignore the holistic evaluation of whatwas implemented, how well it wasimplemented, and any intangible ben-efits that result. They also try to avoidestimating values and so stick with onlythe easily quantified cost and benefits.On the other extreme, ROI studiessometimes fail because of using overly

ProjectCo-Investigators

ProjectManagement/Administration

SteeringCommittee

StatisticsTeam Core Team Subject Matter

Experts

Research Teams Workshop/Advisory Teams

Executive/PractitionerAcademic

Figure 3: Value project organization.




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optimistic estimates of benefits orunderestimates of costs, resulting inlow credibility of the results.

Because organizations do not nec-essarily account for expenditures ormeasure outcomes in the same way,any study seeking to be able to com-pare findings across organizationsmust be prepared to deal with this issueand normalize both the measuresused and the results being reported.The results that must emerge must beboth credible and valid.

Credible means believable, con-vincing, probable, and trustworthy.Valid means that another researchercould recover (Checkland & Holwell,1998) (if not replicate, as this is diffi-cult, and potentially meaningless, inthese types of studies) the study andachieve comparable results. To ensurethe credibility and validity of ourresults we will:• Continually check both our process

and our results with academic andpractitioner advisory groups and theparticipant organizations to ensurethat there is a common and docu-mented understanding of the processof collection and analysis.

• Devise data collection instrumentsand procedures that allow all theresearch teams to collect consistentdata across organizations.

• Use only credible sources for collect-ing and analyzing data and use trian-gulation (more than one data sourcewherever possible).

• Where there is a choice among alterna-tive valuations, always use the mostconservative and document the choice.

• Ignore extreme data items and unsup-ported claims.

• Confirm all calculations with allstakeholders in each organization.

These measures combined with theefforts of a highly credible group ofresearchers consciously engaging inrigorous research activities from a vari-ety of perspectives should result inhighly credible and valid measures ofvalue.

Agreement and Validity of VariableMeasurementMeasurement of the key variables willbe an important challenge to this study.Selecting any one approach to measur-ing value risks criticisms from variousdisciplines as to both the definition andmeasurements of key variables, not tomention the validity of the analysistechniques. We have designed theresearch to include a wide array of per-spectives in order to in each instancebe able to triangulate results throughmore than one instrument or assess-ment technique. In this manner, notonly should we be able to ensure thatstatistically valid correlations and qual-itatively rigorous relationships areidentified, but also that the correlationsand relationships exist across multipleperspectives and inputs.

Isolating the Project Management ImpactsThe question of isolation refers toefforts to identify the impacts of theproject management initiative separatefrom all the other initiatives takingplace in the organization at the sametime, as well as other environmentaland situational factors. The risk is thatthe research will not be able tounequivocally state which benefits areattributable to the project managementimplementation.

We will use the following methods(as suggested by Phillips, 1998, 2002)wherever possible to isolate the projectmanagement benefits from other ini-tiatives:

• Trend lines projecting the value ofspecific output variables if the projectmanagement initiative had not beenimplemented will be compared toactual data after the implementation.

• Organizational estimates of the totalamount of improvement on key variables, and the apportionment or“adjustment” necessary to reflect theportion of the improvement attri-butable to the project managementinitiative.

• All extraneous factors will be iden-tified and their impact estimated.What remains will be attributable tothe project management initiative.Dummy variables will be used toaccount for their level of input oncross-organizations analysis.

• An understanding of the organiza-tional environment and context (bothinternally and externally) will bemonitored throughout the periods ofstudy to understand and triangulatethe impacts that internal initiatives aswell as external market, economic,and competitive factors have in influ-encing the observed results.

Sufficient Data to Make ValidGeneralizable InferencesAlthough we strongly believe that in-depth analysis of a controlled subset oforganizations is essential in order toarrive at holistic and justifiable results,we also recognize that this potentiallyopens up the research to criticism as tothe applicability and generalizability ofthe findings beyond the scope of theindustries and types of projects evalu-ated. Conducting as many as 75detailed case studies should provide forsufficiently generalizable results andallow for statistical analysis of relation-ships. Further, a more comprehensiveweb-based data collection effortaimed at gathering data from 200�

organizations could be carried out ifdeemed appropriate to supportsophisticated factor and other statisti-cal analysis as discussed earlier. Thiseffort would allow verification and val-idation of the local findings of the casestudies and confirm their applicabilityin a more general context.

The Road Ahead for the Value ofProject ManagementThis paper provides insight into thecomplexity of the value question. Byproviding an authoritative review of theliterature on performance measurement,the nature of value, and competitiveadvantage, we not only lay the foundation

for this specific project, but also pro-vide a useful reference for otherresearchers interested in this question.No longer can we resort to simplisticmeasures to examine the value of proj-ect management without taking intoaccount the many and varied levels andtypes of value project managementprovides to organizations.

There is a breadth of data required tounderstand the value that project man-agement brings to organizations beforemore precise questions or measures canbe understood. This means that anyvalid and meaningful conclusionsregarding value can only be drawn afterextensive investigation and analysis.Good research takes time to do well, andthis study is no exception. Given thewidespread interest and enthusiasm forthis project, one of the most significantchallenges may well be the manage-ment of expectations of the extremelybroad range of interested stakeholderswhile the research is conducted.

The breadth of understanding ofwhat value can mean and how it can beinterpreted is an equally critical consid-eration. The interdependence betweendifferent interpretations of value andthe types of data that represent themare illustrated within the very simplisticfive-level model described in this paper.Isolating the many meanings of value isclearly the key to understanding value.The interpretations that can be quanti-fied in monetary terms, as described inthe earlier sections of this paper, areclearly only part of the quest for under-standing the value of project manage-ment. To be useful, all aspects that aremeaningful to an organization must bebrought into the organization’s ownconcept of what value project manage-ment brings.

Pilot work shows that this data isavailable in many organizations and the instruments designed to capture the data are appropriate and suitable.The scale of research being conductedhere and the efforts associated withmanaging it as a cohesive, integratedstrategy has to our knowledge never

been attempted within the projectmanagement or organizational devel-opment field. The multidisciplinary andtruly international nature of the projectwill yield comparative data and per-spectives that have previously not beenconsidered together, and the results willhave broad interest for those involved inthe oversight, delivery, and realizationof value from projects. The resultsshould be of particular meaning forthose contemplating initiating or con-tinuing investment in their projectmanagement capabilities. If ultimatelysuccessful, this research will pro-vide executives with the rigorous andrelevant decision support necessary to ensure the effective delivery of value from their investments in projectmanagement.

AcknowledgmentsAn earlier version of this paper was pre-sented at the PMI Research Conferencein Montreal in July of 2006 and at prac-titioner conferences around the world.Audiences at all of these presentationshave aided us greatly in defining thisresearch agenda. We wish to particular-ly acknowledge the contributions ofour team members (identified in theAppendix) to the conceptual and proj-ect development documented here. Allof these individuals improved the qual-ity and rigor of this study in manyuntold ways. �

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Janice Thomas is program director for theExecutive MBA in Project Management at theCentre for Innovative Management at AthabascaUniversity. She has almost 25 years experience

in the project management field. Prior to becom-ing an academic, she spent 10 years as aninformation technology and organizationalchange project manager. She has been studyingproject management since 1992. She presentsand publishes research for academic and practi-tioner audiences around the world and supervis-es master’s and PhD students. In 2006 she wasrecognized as one of the 50 most influentialwomen in project management by PM Network.Her research is aimed at improving the practiceof project management, and she currently co-leads a major research initiative aimed at defin-ing and measuring the value project manage-ment contributes to organizations.

Mark Mullaly has more than 20 years of projectmanagement experience, working in a variety

of industries, including information technolo-gy, communications, utilities, insurance,finance, engineering, construction, high tech,and the arts. As president of InterthinkConsulting Inc., a company based inEdmonton, Alberta, he has been a pioneer inthe development of organizational projectmanagement capabilities. He has been invitedto address conferences across North America.His column, “Project Management in Practice,”appears monthly on gantthead.com, and he isan instructor in project management with theSchool of Business at the University ofAlberta. He is also currently pursuing a doc-toral degree at University of Technology,Sydney. He is a past president of the NorthernAlberta Chapter of the Project ManagementInstitute.

Dr. Frank Anbari The George Washington University United StatesDr. Erling Andersen BI Norwegian School of Management Norway Dr. Ben Arbaugh University of Wisconsin Oshkosh United StatesDr. Walid Belassi Athabasca University CanadaDr. Tim Brady CENTRIM, University of Brighton. United Kingdom Dr. Christophe Bredillet ESC Lille Graduate School of Management France Dr. Peter Checkland Emeritus, Lancaster University United Kingdom Dr Svetlana Cicmil University of the West of England United Kingdom Dr. Terry Cooke-Davies Human Systems Limited United Kingdom Dr. Lynn Crawford University of Technology Australia Dr. Fathi Eloumi Athabasca University Canada Dr. Pernille Eskarod University of Denmark DenmarkDr. Patrick Fong Hong Kong Polytechnic University Hong Kong Dr. Merlyn Foo Athabasca University CanadaDr. Damian Hodgson University of Manchester United Kingdom Dr. Khim Teck Yeo Nanyang Technological University Singapore Dr. Thomas Lechler Stevens Institute of Technology United States Dr. Harvey Maylor University of Bath/Cranfield United Kingdom Dr. Thomas Mengel Integral Consulting/ University of New Brunswick Canada Mark Mullaly Interthink Consulting Inc. Canada Dr. Ping Chen Tsinghua University China Dr. Qiang Maoshan Tsinghua University ChinaDr. Maria Romanova State University of Management Russia Dr. Shi Qian Tongji University ChinaDr. Jonas Soderlund University of Linkoping SwedenDr. Janice Thomas Athabasca University CanadaDr Rodney Turner ESC Lille Graduate School of Management United Kingdom Dr. Vaidotas Viliunas Vytautas Magnus University Lithuania Dr. Terry Williams Southampton University United KingdomDr. Mark Winter Manchester Institute of Technology United Kingdom Dr. Xue Yan Beijing University China Dr. Young Hoon Kwak The George Washington University United StatesDr. Zhai Li Fudan University China

Researcher Organization Country

Appendix: Research Contributors


understanding the value of project management: first steps on an international investigation in...

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