Project Management Tools and Techniques in High-Technology

SMEs

by Alan Murphy and Ann Ledwith

Autobiographical Note:

Alan Murphy is a research student with the Enterprise Research Centre at the University

of Limerick. He is investigating the use of project management tools and techniques in

small high-technology firms.

Email: [email protected]

Address: Alan Murphy,

Enterprise Research Centre,

University of Limerick,

Limerick, Ireland.

Ann Ledwith is a lecturer in the Department of Manufacturing and Operations

Engineering and a member of the Enterprise Research Centre at the University of

Limerick. Her research interests include project management, the management of

innovation and new product development in small firms. Ann is a member of the PDMA

UK & Ireland Steering Group.

Email: [email protected]

Address: Dr Ann Ledwith,

Enterprise Research Centre,

University of Limerick,

Limerick, Ireland.

1
Research Paper

Purpose

To examine the use of project management practices in small high-technology firms and

to identify what contributes to project success.

Design/methodology/approach

The results presented in this paper are based on a survey of Irish high-technology Small-

to-Medium Enterprises (SMEs). A questionnaire was distributed to over 200

organisations via email and a response rate of 20% was achieved.

Findings

Results suggest that the existence of a project manager and the use of project planning

significantly contribute to project success. Control for projects resides primarily with

owner-managers and achieving quality standards is a significant success criterion.

Additionally, having clear goals/objectives and top management support are identified as

the most important success factors in the firms surveyed.

Research limitations/implications

This paper presents the findings of an initial investigation into the management of

projects within SMEs. The study has been limited by the number of respondents and also

by the use of a survey as a research instrument. Further research to develop a deeper

understanding of how projects are managed in SMEs and how project success can be

improved would require a more varied research methodology.

Practical implications

Findings suggest that project management tools and techniques are being used to a

limited extent by high-technology SMEs. Analysis suggests that the employment of a

2
project manager and the implementation of project planning techniques are likely to

contribute to the overall success of projects. SMEs also strongly believe that past

experiences is a vital factor in implementing effective management procedures and

determining future success.

Originality

While most research into the use of project management has concentrated on practices

within large firm there has been a lack of investigation into project management in small

firms as addressed by this paper.

Key Words: Project Management, High-Technology Small Firms, SMEs

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Introduction

Project management is a well-established discipline that defines in detail the tools and

techniques that are required to define, plan and implement any project. However, while

many researchers have addressed the issues surrounding the management of projects

within large firms (White and Fortune 2002; Bryde 2003) there has not been a lot

published to date about the management of projects in SMEs.

This paper examines previous empirical studies on project management implementation

in various industry sectors and the success criteria and factors most frequently adopted.

The paper also examines the results of a survey distributed to 200 owner/managers of

high-technology SMEs in Ireland that attempts to recognise the general characteristics of

projects undertaken by SMEs, the issues they encounter and their opinions on how SMEs

can use project management to achieve greater efficiency and competitiveness.

SMEs, ranging from the dynamic, innovative and growth-oriented to the traditional

enterprises satisfied to remain static, are critical to the economy as an engine of economic

and social development, (Hallberg 1999). (Floyd and McManus 2005) examining the

increasing significance of small firms in the European Union (EU), point out that

increased importance has been given to SMEs within EU industrial policy. According to

the European Competitiveness report of 2003, SMEs account for 99 per cent of activity in

the EU. The focus on high-technology SMEs derives from their importance to the Irish

economy with their capacity for generating employment and promoting innovation

(Warren and Hutchinson 2000).

Project management is well established with (White and Fortune 2002) describing it as a

well developed and well accepted area of professional expertise and an area for academic

4
research aimed at encouraging improvement in a system. Project management offers a

systematic approach to all stages of a project by ensuring that every step is carefully

planned, monitored and measured. Although initially intended for application in large

organisations with complex systems that require such a process, (Baccarini 1999),

modern methods of project management can be adapted and altered to suit the needs of

the smaller organisations.

This paper aims to develop an understanding of project characteristics and how they are

managed within SMEs, what factors enhance project success and the perception of the

potential of project management as a process. These findings will contribute to the

development of a simplified approach to managing projects in SMEs.

Characteristics of SMEs

The definition of an SME has varied over time and there has been a lack of consensus

about what constitutes a small or medium firm (McAdam, Reid et al. 2005). For the

purpose of this research, the definition set out by the European on January 1 st 2005 will

be adopted. According to this definition an SME must have fewer than 250 employees, a

turnover of less than €250 million and/or an annual balance sheet less than €43 million.

The above definition also considers the potential relationships that exist between SMEs

and other enterprises defining three categories of SMEs – autonomous, partner and

linked. Most SMEs are autonomous meaning that they are completely independent or

have only minority partnerships (less than 25%). For practical reasons within this study

SMEs were defined by their staff count and annual turnover. This approach has been

5
adopted in many previous empirical studies (Johnson and Turner 2000; Hudson, Smart et

al. 2001; Gray and Mabey 2005; McAdam, Reid et al. 2005).

SMEs exhibit both advantages and disadvantages when compared to larger organisations.

(Audretsch, Prince et al. 1998) in their comparative paper examining small and large

firms found that small firms have a greater potential flexibility and closeness to the

customer and an edge towards customisation and innovation. They seek out markets

where their advantages count and they are not in direct competition with their larger

counterparts. However, despite these key advantages, SMEs lack economies of scale,

scope and learning.

(Edwards, Delbridge et al. 2001), suggest that SMEs exhibit behavioural features that

give them an innovative advantage over large firms these include the ability to respond

rapidly to external threats or opportunities, more efficient internal communications and

interactive management cycles. However, (Rothwell 1992) found that SMEs were limited

in their ability to innovate as they, ‘lack the material and technological resources that

enable large firms to ‘spread risk over a portfolio of new products’ and ‘fund longer-term

R&D’.

An examination of the skills of project managers in small and large electronics firms

(Ledwith 2004), showed that project managers in small firms were weak in the areas of

motivation, marketing and management. Small firms demonstrated limited use of project

management techniques and were not benefiting from project management in terms of

increased new product success. Despite this it was observed that by improving project

planning, establishing clear priorities and setting clear objectives, small electronics firms

6
could improve New Product Development (NPD) performance by reducing project

delivery times.

High technology firms are predominantly founded by technical entrepreneurs who form a

business based on the discovery and belief in a new product, (Oakey and Mukhtar 1999).

High technology SMEs are characterised by long lead times from basic research to

industrial application and short lead times in commercialisation. They suffer accelerated

obsolescence under global competitive pressures from new product and process

innovations, (Litvak 1992). High technology SMEs tend to have entrepreneurial

management styles with organic structures and their success is often based upon sound

knowledge of the business, highly skilled employees and the ability to spot a gap in the

marketplace, (Warren and Hutchinson 2000).

Projects

The Project Management Institute, PMI (2000), define a project as ‘a temporary

(definitive beginning and definitive end) endeavour undertaken to create a unique

(projects involve doing something that has not been done before) product or service.’

Projects can be considered as the achievement of a specific objective and involve the

utilisation of resources on a series of activities or tasks. (Munns and Bjeirmi 1996) in

their paper on how to achieve project success, differentiate between project success and

project management success. Their definition of a project suggests an orientation

towards longer-term goals such as return on investment, profitability and competition,

while project management focuses on short-term goals and a more specific context for

7
success. (Cooke-Davies 2002) proposes the following distinction between project success

and project management success:

 Project Success is measured against the overall objectives of the project,

 Project Management Success is measured against the widespread and traditional

measures of time, cost and quality.

(Munns and Bjeirmi 1996) conclude that despite the differences between project success

and project management success they compliment each other. A project can succeed

despite the failure of project management but successful project management

implementation can increase the potential for success on an overall project scale.

Project Management

Project Management has existed, in theory, for centuries with its informal application by

the Chinese and Egyptians in such feats as the Great Wall of China and the Pyramids.

However, modern Project Management is a recent phenomenon gaining initial acceptance

in the rapid development of the Information Technology industry, (Fox 2004).

The Project Management Institute (Institute 2000) provides a simplified definition of

project management as ‘the application of knowledge, skills, tools and techniques to

project requirements.’

The emergence of modern project management owes to three core stimuli, (Baccarini

1999):

1. Complexity – Growing complexity of tasks and a need for a greater degree of

specialisation.

8
 2. Change – Increasingly dynamic environments with constant pressure within

organisations to implement change due to global competition.

3. Time – Demand for tasks to be completed as quickly as possible.

Over time modern project management has emerged as a discipline that has constantly

remoulded itself to allow for expansion in its practice. A valuable conclusion was made

by (Crawford, Pollack et al. 2005) who carried out an analysis of the International Journal

of Project Management and the Project Management Journal over the last ten years to try

to uncover the trends in project management:

‘As a field, project management is regularly facing new challenges, as the tools, methods

and approaches to management that comprise the discipline are applied to different areas,

for different ends, in different cultures.’

Success Criteria and Success Factors

When studying projects and their management a clear distinction should be made

between critical success criteria and critical success factors. (Cooke-Davies 2002)

defined the difference as follows:

Success Criteria are the measures by which success or failure of a project will be judged.

Success Factors are the inputs to the management system that lead directly or indirectly

to the success of the project.

This is supported by (Belassi and Tukel 1996) who recommend that sound research on

critical success factors has to:

1. Distinguish between success factors and success criteria.

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 2. Distinguish success factors within the control of the project manager and factors

outside his/her control.

Determination of a project’s success criteria has become far more complex in recent times

(Belassi and Tukel 1996) with the traditional criteria of time, cost and performance no

longer sufficient. On any project, there can be numerous parties each with their own

perception of success. (Pinto and Slevin 1989) recognised this ambiguity in determining

project success by concluding that it is still not clear how to measure success because the

parties who are involved in projects perceive project success or failure differently. For

the purpose of this study, senior management’s perception of success was considered

based on their overwhelming influence in SME procedures.

Research has contributed to a significant quantity of factors that could be described as

critical to a projects outcome. But projects are individual and unique and each project can

have a different set of success factors. (Belassi and Tukel 1996) proposed that, ‘a

combination of many factors, at different stages of the project life cycle, result in project

success or failure’. Table 1 outlines the key success criteria and success factors seen to

be most significant from previous empirical studies.

<< Take in Table 1 >>

The three basic criteria of time, cost and quality appear regularly in Table 1. Additionally,

client satisfaction is seen as a significant factor in achieving overall project success.

(Westerveld 2003) also considered the appreciation of the various parties involved both

directly and indirectly in the project.

10
The success factors listed in Table 1 include many items that could be implemented

within SMEs. But in considering the application of different success factors in SMEs it is

important to remember that SMEs are generally characterised as having basic

organisational structures with simple planning and control systems. This would suggest

that SMEs should adopt a simplified approach to managing projects. Having reviewed the

success factors in Table 1, six were considered to have the greatest potential benefit to

SMEs:

 Clear Goals / Objectives

 Senior Management Support

 Resource Allocation

 Planning, Monitoring & Control

 Client Consultation

 Risk Management

These six factors are investigated through a survey that measures the opinions of SME

owner/managers about the use project management within their organisations.

Methodology

A questionnaire was developed and distributed via email to the owner-managers of over

200 firms operating across many sectors that included medical devices,

telecommunications, electronics and general engineering. A commercial business

directory, Kompass, provides general information on organisations across Ireland and was

used as the source for the collection of organisations for the distribution list. Selection of

SMEs from the database was dependant on two factors; number of employees and

11
industry sector. In line with the SME definition provided earlier, employment levels had

to be less than 250 people. The study concentrated on high-technology SMEs because of

their importance to the Irish economy in terms of employment and wealth creation.

Additionally, Oakey and Mukhtar (1999) highlight that poor business skills among

technical entrepreneurs often cause their firms to be badly managed, both during

formation and through expansion.

The questionnaire was piloted in three SMEs, with two academic personnel working in

related disciplines, and two project management professionals with extensive SME

experience. These pilot studies led to the addition and removal of questions and general

improvements in wording. The questionnaire was designed using the Survey Monkey

survey tool and data were analysed using SPSS.

The main objectives in developing the questionnaire were to explore the following:

1. The basic characteristics of projects and perceived success of projects to date.

2. The level of recognition of project management as a process within SMEs.

3. Success criteria and success factors for projects.

4. Project management tools and/or techniques in use and their contribution to project

success.

Forty responses, yielding a response rate of 20% were returned. The data collected is

presented and analysed below.

Results & Discussion

12
Descriptive Analysis

Responses to the questionnaire came from the following sectors: Medical Devices (25%),

Electronics (22.5%), Manufacturing (32.5%), Telecommunications (5%), Engineering &

Construction (15%).

On average the firms employed 65 staff, the largest firm employing 210 and the smallest

having 22 employees. Questions were asked about current organisational structures and

general project characteristics. Table 2 reports the percentage responses from these

questions. Most firms described themselves as having either a traditional functional

structure or a matrix structure (i.e. a mix of functional and pure project structures). Only

two firms were described as being organised around projects. Most of the projects

undertaken by SMEs who responded to this survey were small; 63% of the firms reported

that project expenditure was between 0-20% of turnover, and 85% had only 1-10 staff

working on projects. Project durations varied considerably from under 3 months to over

12 months. However, there was agreement that projects undertaken were complex in

nature.

<< Take in Table 2 >>

Over half the respondents, 60%, reported that project management was an identifiable

process within their firms with 88% of them (or 53% of the complete sample) employing

full time project managers. The remaining sixteen firms (40%) were not using project

management.

13
Respondents were asked to rate success criteria and success factors on a scale of 1 to 5 in

terms of their importance to the firm (where 1 = not important and 5 = very important).

Table 2 shows the average values reported for each success criteria and success factor.

<< Take in Table 3 >>

It is interesting to note that quality is rated as the most important success criterion; the

literature would suggest that this is not the case in larger firms with more mature quality

management systems in place. The results also suggest that project success is based more

on internal than external factors. This is supported by the level of agreement with the

statement ‘Success of projects within my organisation is mainly determined by internal

factors’ in Table 5. ‘Clear Goals/Objectives’ and ‘Senior Management Support’ were both

considered the most important success factors, this supports existing literature. ‘Resource

Allocation’ was also identified as an important success factor. This is not surprising as

resources are frequently an issue for SMEs.

Respondents were also asked to identify the most influential decision makers on project

in their firms, average results are shown in Table 4. Not surprisingly, owner-managers

were found to have the most influence in decisions relating to projects, followed by

project and functional managers. This supports the belief (Ghobadian and Gallear 1997)

that owner-managers are closely involved in all aspects of operations with few layers of

management in most SMEs.

<< Take in Table 4 >>

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Respondents indicated their support for a range of statements, presented in Table 5.

These results suggest that SME owner-managers understand the importance of a well-

defined project management process and also feel that there is a difference between how

large and small firms approach projects. This supports the findings of Ghobadian and

Gallear (1997) who found that in managing projects large organisations possess greater

capital and resources and a greater degree of specialisation than their small counterparts.

The firms surveyed also appear to work closely with customers and suppliers.

<< Take in Table 5 >>

Respondents were asked how they could improve project performance; some of their

comments are listed below:

‘Prioritisation of project tasks over other work’

‘Reviewing EVMS (Earned Value Management System) methods and honing CPI
(Cost Performance Index) and SPI (Schedule Performance Index) introduction of a
strong matrix management structure’
‘By people being trained to understand the principles and benefits of same’
‘Training of Project Managers. Clearer Goals being set and communicated to all
staff involved. Better client or fact finding on site at conception stage’
‘More control of project team’
When asked if they thought that project management was too complex a process to

implement in SMEs the responses were as follows:

‘No, it can actually be easier to implement in a smaller organisation.’

‘No. I have worked in industries of various sizes – the approach is different but the
tools are the same’
‘You would want to be clearly identifying the benefits of it and then it may not be
that complex to achieving the implementation of same.’
‘No, I do not agree, it is as easy to implement. It is just that in SMEs it is very
difficult to afford the time and the resources…..it is a growing issue for a company
and a mindset.’

15
 ‘No, if adequate time and resources are given then there should not be any
problems’
Finally, the level of usage of a variety of project management tools and techniques was

measured. These results are shown in Figure 1. They show that while many of the firms

use project teams and actually plan projects few SMEs are using the more complex

project management tools such as Earned Value or CPM (Critical Path Method). The data

also raises a question about how SMEs use Microsoft Project if they are not using it to

implement the various project management techniques listed in Figure 1.

<< Take in Figure 1 >>

Statistical Analysis

Statistical analyses in the form of independent sample T-tests and the Pearson correlations

were performed to further explore the responses and the potential relationships between

them. One of the aims of the survey was to try to understand how high-technology SMEs

manage projects and to identify management practices that may be linked with success.

In order to determine if there was a relationship between a firm’s organisational structure,

size and project expenditure, and the decision to employ a full-time project manager a

series of t-tests was performed, see Table 6. The results show that there is a relationship

between the organisational structure in place and the existence of a project manager.

Firms that employ a project manager were more likely to have a matrix-like structure.

Firms without a project manager were more likely to have a more functional structure.

The results also show that there is no relationship between the number of employees and

16
the employment of a project manager. In other words the very small firms in the sample

are as likely to have full time project managers as the larger firms surveyed. However, it

was found that the firms with a project manager employed were more likely to spend a

greater percentage of turnover on projects.

<< Take in Table 6 >>

Table 7 examines the relationships between the existence of an identifiable project

management process and the same factors examined in Table 6 above. Again a

relationship between organisation structure and the presence of an identifiable project

management process was identified. This suggests that firms who employ full time

project managers or have project management as an identifiable process are more likely

to be organised as ‘project organisations’ where the work undertaken by the organisation

is in the form of projects.

<< Take in Table 7 >>

For the purpose of this research three components of project success were measured:

 Budget – completion within the proposed or allocated budget.

 Schedule – completion within the estimated duration.

 Performance – completion to specification and meeting client’s requirements.

Overall project success was calculated as the average of these three components. The

data were tested for any significant relationships between key project management

variables and project success; results are presented in Table 8. Success was considered

both in terms of the three components described above, budget, schedule and

17
performance, and in terms of overall success. One of the most interesting findings from

the analysis was that there was a significant positive relationship between the

employment of a Project Manager and overall and performance success. While neither

the application of project management nor the use of Microsoft Project were found to

significantly enhance project success organisations that use project planning techniques

were more likely to achieve success in project budget and schedule. This is supported by

the level of agreement to the statement - ‘A well defined Project Management process is a

necessity for successful implementation of projects’ as was seen in Table 5.

<< Take in Table 8 >>

The data were analysed to identify any relationships between the rating by firms of

difference success criteria and project success, see Table 9. The only success criterion that

was linked with overall project success was ‘completion within schedule’. In other words

firms who consider completing a project within schedule as an important success

criterion are more likely to achieve project success. This is interesting in the light of the

results reported in Table 3 where ‘completion within schedule’ was not reported as one of

the most significant success criteria. However, previous research (White and Fortune,

2002) has identified ‘completion within schedule’ as an important success criterion. It is

also worth noting that the relationship between two success criteria, ‘appreciation by user,

and ‘appreciation by project personnel’, and project success is negative. This implies that

firms who are concerned about the extent to which users and project personnel approve of

(or appreciate) a project’s progress are less likely to achieve project success.

<< Take in Table 9 >>

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Finally, the data were tested to identify any significant relationships between the success

factors that firms considered important and project success, no significant relationships

were identified.

Conclusion

The findings presented in this paper are an attempt to understand the current project

management practices in high-technology SMEs. The paper also reviews the major

contributors to project success in SMEs. Results suggest that a majority of SMEs have

identifiable project management processes and also full time project managers, but that

owner/managers are still the most influential when it comes to making decisions about

projects. Also, these SMEs are more likely to be organized along projects rather than

functional lines.

Meeting quality standards and specification are considered to be the most important

success criteria by the SMEs surveyed while clear goals/objectives and senior

management support were judged to be the most important success factors. Additionally,

the results show that having a full time project manager and applying project planning

techniques are most likely to increase the chances of success. Despite the presence of a

project management process being considered by the respondents as a necessity to

success it is not found to contribute to project success. Finally, SMEs that consider

meeting completion schedules to be a success criterion are more likely to have successful

projects than those who do not.

19
These findings can be summarised in terms of implications for projects management

within SMEs as follows:

 Project success is more likely in firms that have full time identifiable

project managers and that apply project planning techniques.

 Project success is more likely in firms that consider completion schedules

to be important.

This study begins to identify the manner in which SMEs manage projects and also some

project management practices that are linked with success. However it also raises several

questions about the use of project management tools and techniques within SMEs and

how these tools and techniques can be used to increase project success.

Further investigation is required to answer these questions, to deepen the understanding

of project management in SMEs and to develop an approach to project management that

can increase the likelihood of project success within SMEs.

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