The Strategic Context of Projects

Source: PROJECT MANAGER’S PORTABLE HANDBOOK
SECTION 4
THE STRATEGIC CONTEXT
OF PROJECTS
4.1 SELLING PROJECT MANAGEMENT TO

SENIOR MANAGERS
4.1.1 Introduction
Selling project management to senior leaders requires that they recognize

a problem and the need for project management as the best solution. The
problem that senior leaders have is managing from a strategic point of
view and getting the tactical work to align with those high-level goals.
Project management, although mature with more than 40 years of devel-
opment as a process and discipline, is still not well understood.
Bridging the problem from a high-level view to the execution of work
may be difficult with the need to have a strategic focus by senior leaders.
Implementation of the goals in detail is often not understood by the senior
leaders and left to the mid- to lower-level leaders. There is not the ability
to cascade the thinking from top to bottom.
4.1.2 Background on Strategic Planning
Senior leaders have the nondelegatable responsibility to establish the prin-

ciples of work and practices for the organization to follow to achieve
success for their business. It is important for senior leaders to establish a
system to measure the effectiveness of the strategic planning, through the
business process, to the operating level. Through measurement, senior
leaders know what is working and what is not, where successes are most
needed and where lower priorities may exist.
4.1
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THE STRATEGIC CONTEXT OF PROJECTS
4.2 SECTION FOUR
Senior leaders are concerned with and conduct strategic planning that
is far removed from the operating level. Strategic planning, however, uses
the historical, tactical information from these operating level systems. In-
formation flow is piecemeal and inadequate for setting the strategic direc-
tion and future of the organizations.
Currently, senior leaders seek solutions through improved communi-
cation of information and tools to measure performance. What is needed
is a management strategy that uses operating units to perform the work
and measure performance, analyze the effectiveness of the work being
performed, and generate information for senior leaders. Project manage-
ment does all this and is the choice of many senior leaders today for
intensively managing critical aspects of the business.
4.1.3 Recognizing the Problem

Before senior leaders accept any solution, they must recognize the problem
and be willing to act on that problem. The problem is clearly identified:
‘‘more than 90 percent of organizations fail to effectively communicate
and execute their strategic plans because the necessary management and
communications systems are not in place.’’ Organization success is hinged
on three requirements:
• Having a management system that emphasizes accountability and con-

trol
• Taking advantage of available resources
• Promoting cultural values dedicated to continual improvement that is
supported by an appropriate management system
Current management systems are not delivering the desired results and
the communication of strategic goals from senior leaders to operating lev-
els is weak. The layers of management between the senior leaders and
operating levels preclude effective information flow down and the required
performance flow back to the top.
One perceived solution to the communication breakdown is to buy new
tools. Better information systems are seen as the need while the efficiency
and effectiveness of the operating unit has not changed. More timely and
accurate reporting of the performance data is only one part of the chal-
lenge to senior leaders.
The management system and operating units retain the same structure
and there is little or no improvement in productivity or meeting customer
needs.

THE STRATEGIC CONTEXT OF PROJECTS 4.3
4.1.4 The Solution
Senior management is responsible for its management systems locally and

globally. The management systems locally and globally should be mutu-
ally supportive of the strategic goals as well as taking advantages of im-
provements across the enterprise. The management system of choice must
be supportive of both local and global environments.
Many organizations have adopted project management as the system
of choice and made significant gains in productivity and performance.
Other organizations have accepted project management as one of its op-
tions without giving full support. These organizations have ‘‘hired’’ ex-
pertise through bringing in several successful project managers from other
organizations. The hired experts bring a variety of methodologies and
practices that create conflicts.
Developing project management as a core competency of an organi-
zation is a dedicated effort. Typically, organizations buy the tools rather
than knowledge and experience. Many organizations do not receive full
value because they buy tools. Figure 4.1 compares the most frequent and
the most effective sequence of project management implementation.
Typical Implementation vs. Preferred Implementation

• Tools • Methodology
• Skills Training • Standards
• Methodology • PM Knowledge Training
• PM Knowledge Training • Skills Training
• Techniques • Techniques
• Standards • Tools
FIGURE 4.1 Project management implementation sequence.
4.1.5 Benefits of Project Management
Project management, as a process to meet an organization’s needs for

performing a variety of work, has provided significant benefits. The gen-
eral list of benefits for all organizations are as follows:
• Balance competing demands and prioritize the work that provides the
most advantage to the organization

4.4 SECTION FOUR
• Positive control over work progress through a tracking and control func-
tion
• Positive communication of needs to project team and frequent feedback
to the customer on progress
• Estimates of future resource needs through the life cycle of the project
• Early identification of problems, issues, and risks to project work
• Early understanding of scope of work
• Goals and measures of success for each project
• An integral performance measurement capability to compare planned to
actual progress
4.1.6 Comparison of Operations to Project

Management
A comparison of operations to project management capabilities, as de-
picted in Fig. 4.2 is helpful to identify the advantages of project manage-
ment under different conditions. Operations typically focuses on main-
taining the status quo and producing a given set of products. Project
management, however, serves as a process for change and delivering
unique products.
Project
Operations
Management
Uses existing systems Tailors system to fit requirements
Repetitive work functions One-time work functions
Relies on stable standard procedures Uses standards and processes to deliver
customer’s unique needs
Quota by numbers Driven by the need for the end product
Focus on maintaining repetitive functions Focus on taking opportunities for change
Line management with span of control on Flexible work force with temporary help,
“owned” resources only as needed
FIGURE 4.2 Operations versus project management.

4.1.7 Selling Project Management
Selling project management as the management system of choice requires

that the seller provide facts and figures to demonstrate the advantages. The
advantages must give a better solution than the current system and dem-
onstrate significant benefits to senior leaders. There must be a perceived
problem to be solved and all elements of that problem must be solved.
The simple model for selling project management is:
• Identify senior leaders’ problem with the organization.

• Low productivity
• Uncontrolled work being done
• Insufficient accurate information on progress
• Work doesn’t follow strategic direction
• Work doesn’t take advantage of product changes
• Identify causes of senior leaders’ complaint
• Work force not keeping pace with technological advances
• Poor definition of work and poor control over work
• Weak or no communication system
• Work driven by perceived requirements based on historical information
rather than the strategic direction
• System too rigid to accommodate product changes except on a planned
change over
Develop a comparison of current operations, feasible fixes to current

operations, and a project management driven approach. See the following
illustration and example in Fig. 4.3.
The differences can be documented using a similar model that captures
the current problems with the operations, identifies the changes within the
current management system to correct weaknesses, and identifies the ben-
efits of transitioning to a project management system. While senior leaders
can be influenced by cost figures, there are few data collected that truly
represent the situation.
Soft data are often required to justify a transition to project manage-
ment. Some of these soft data areas are:
• Reduced time to market for products

• Improved information reporting
• Better visibility into the product build process

4.6 SECTION FOUR
Current Feasible Changes to Feasible Project

Operations
perat o Current Operations Management
Low productivity. Train personnel to per- Tailor workforce to meet

form faster and better. the productivity needs of
Just returning to old the organization. Some
state. training may be required.
Inflexible in meeting Change system to halt System anticipates

changes to product. work while changes change and has a con-
are made. trolling mechanism to
accommodate changes.
Strategic goals not Change the process for Link all projects to
being met. directing and approving strategic goals and en-
work to ensure goals are sure linkage during plan
identified and followed. approval process.
Performance information Establish a communica- Distill/consolidate pro-

accurate and timely tion system that will ject reports for senior
for senior leaders. collect the required in- leaders. No change from
formation and provide usual management
same to senior leaders. process.
FIGURE 4.3 Comparison of operations to project management.
• Reduced human resource stress

• Rapid response to product changes
• Continuous improvement opportunities
• Improved productivity (qualitative)
• Improved return on investment (qualitative)
• Alignment of tactical work with strategic goals
Other areas may be applicable within different industries. Reduced risk
through improved risk management procedures, for example, may be an
area that is important. Improve product image through improved customer
communications could be another area.

4.1.8 Key User Questions
1. When existing systems do not meet the needs of senior leaders, how
can project management be sold as the solution?
2. If strategic goals are not being met by existing systems, how can project
management fill the gap especially in the area of communication of
information upward?
3. How can projects be linked to strategic goals and what is that process?
4. What are some of the inherent benefits of project management when
an organization has rapidly changing products, both in features and in
different products?
5. How can senior management take immediate advantage of project man-
agement to fill the need for continuous improvement?
4.1.9 Summary
A project management system will consistently outperform standard op-

erations functions and provide better results. The dynamic business envi-
ronment where ‘‘more than 90 percent of the organizations fail to effec-
tively communicate and execute their strategic plans’’ provides many
opportunities to sell project management as the management system of
choice. Organizations need the discipline of project management while
receiving the benefits of a flexible, tailored work force to complete work.
Selling project management to senior leaders requires a comparison of
the benefits and risks to be developed for each organization. These benefits
over current operations will provide the reason for change. Project man-
agement must be sold as the solution to existing weaknesses and it must
be demonstrated as to how these will be overcome.
4.1.10 Annotated Bibliography
1. Caldwell, Chip, ‘‘The roles of senior leaders in driving rapid change,’’

Frontiers of Health Services Management, Ann Arbor, MI, Fall, 1998,
pp. 35–39. This article discusses the role of senior management in
establishing and cascading down the principles of work for the organ-
ization. Measurement tracking is proposed as bottom-up, top-down
method to ensure focus on what is working and what is not working.
2. Caruso, David, ‘‘Command performance,’’ Intelligent Enterprise, San
Mateo, CA, Jan. 5, 1999, p. 1. This article highlights the strategies that
drive performance and the problem with a ‘‘tools for all’’ orientation.

4.8 SECTION FOUR
3. Connors, Jack, ‘‘Maximizing effectiveness through enterprise perform-

ance management solutions,’’ Business Credit, New York, Jan. 1999,
pp. 64–65. This article addresses the issues of different performance
measures at different levels within an organization and suggests using
a single Enterprise Measurement. It discusses a single integrated strat-
egy to ensure rapid delivery to the market.
4. Gaiss, Michael, ‘‘Enterprise performance management,’’ Management
Accounting, New York, Dec. 1998, pp. 44–46. This article emphasizes
the shortfall in communicating requirements from the top to the project
level. It touches on three success criteria: (1) a project management
process, (2) using available assets, and (3) promoting a continuous
improvement culture.
4.2 PROJECT PARTNERING
4.2.1 Introduction
Partnering in projects has emerged in recent years as a means of sharing

equally in managing large projects by two or more organizations. One
organization may initiate partnering to gain additional capability for a
project as well as share in the risks of large, complex projects. Partnering
is also a means of combining information, such as in research and devel-
opment projects, to improve the chance of success.
Partnering may be accomplished between public, private, and for-profit
and not-for-profit organizations. A government agency may, for example,
partner with a private organization to conduct research. Another example
is for a private, for-profit professional association to partner with a not-
for-profit company to develop a commercial product from intellectual
property.
There is no limit to project partnering by organizations. A common
goal and complementing capabilities are the basis for a project partnership.
Finding the talent needed to perform specific project work and developing
cooperative arrangements for the partnering are needed for a working part-
nership.
4.2.2 Types of Project Partnering Arrangements

Project partnerships may take many forms of cooperative agreements. The
formality and contractual relationship is determined by the needs of all
partners. Some examples of these relationships are depicted in Table 4.1.
The number of arrangements is left to the organizations desiring to
partner and work together. One important aspect is the visibility that the

TABLE 4.1 Types of Project Partnering Arrangements
Relationship
& binding Description of possible
documentation working arrangements Remarks
Formal and Contract Two companies obligate One or both companies

themselves to perform must commit to the
parts of a project. The customer for delivery.
allocation of work is One or both may sign
based on expertise in the contract with the
the type of work to be customer.
performed.
Formal and Two or more companies The consortium
Consortium obligate themselves to represents itself to
perform project work the customer as the
through a single contracting entity.
contract that joins The individual
them in a separate identities of the
legal entity. companies may not
be visible to the
customer.
Formal and Contract One company may bid The arrangement is
on a project and use invisible to the
another company’s customer. The
resources. The ‘‘loaning’’ company
resources are excess has an obligation to
to the ‘‘loaning’’ provide qualified
company, but become resources to the
a part of the project project and may or
under the direction of may not provide
the host company. supervision.
Informal and One company bids and Second tier companies
Agreement wins work on a are invisible to the
project. One or more customer. Work
other companies agree performed by second
that they will tier companies is
contribute to the accomplished as
success of the project needed, but the
through selected work. customer does not
know other
companies are
involved.

4.10 SECTION FOUR
customer has of the accomplishment of different work packages. In some

partnering, the customer wants to be aware of who is doing the work and
in other situations, the customer is only concerned with quality of the
work.
4.2.3 Examples of Project Partnering
There are many examples of project partnering that demonstrate the con-
cept and the future of this type of business relationship. Figure 4.4 shows
several examples of project partnering.
Examples of Project Partnering
E&C firms mix

capabilities
Aerospace use best

capabilities to build
airplanes
Small companies partner

to expand capability
Licensing to obtain
technology
----
FIGURE 4.4 Examples of project partnering.
• Engineering and construction firms partner to obtain the best mix of

talent and capability for projects. Partnering to obtain excellence in proj-
ect control for major projects is often found in major projects such as
the Super Collider Project in Dallas, Texas.
• Aerospace companies partnered to build a stealth bomber on a $4 billion
project. Several companies worked together to develop the best in stealth

technology. Technology was the driving force for partnering. The com-
bination of companies could not solve the technical problems and the
project was cancelled when the cost was estimated to exceed nearly $7
billion.
• Three small companies combined their capabilities to bid and win a
project requiring expertise in computer technology, computer network
operations, and procurement knowledge. The project, although relatively
small, combined the talents from all three companies to perform the
required tasks.
• Licensing of intellectual property of a professional association to a com-
pany to build software products is a current project. The association’s
standards were licensed to a company for the specific purpose of ex-
panding the distribution of knowledge in the standards and to generate
a modest profit for the association. This is partnering in that the profes-
sional association retains review over the products developed by the
company.
4.2.4 Managing Partnered Projects
Customers are concerned with the management of the project work and
who will be responsible for such items as reports, corrective actions,
changes to the project, and overall project direction. Strong management
capability builds confidence with the customer, while a weak or vague
project management structure erodes confidence.
Figure 4.5 shows typical types of arrangements for managing partnered
projects. A detailed discussion follows.
Some management structures for partnered projects are:
• Steering Committee—senior managers from all partnering organizations.

This committee reviews progress and sets direction. A project manager
or co-project managers are designated for all partnered work and report
to the Steering Committee.
• Project Manager and Deputy Project Manager (or Co-Project Man-
ager)—two individuals are designated from the partnering companies to
lead the project. These individuals may report to their respective com-
pany executives or to a steering committee.
• Project Manager—a single individual is appointed as the project man-
ager for all the project work. Project team members report to the project
manager for performance issues.
These three management structures can be modified to meet any situ-

ation. Large projects need senior guidance from a group such as a steering

4.12 SECTION FOUR
Managing Partnered Projects
Steering Committee
Co-Project Managers
Project Manager
----
FIGURE 4.5 Managing partnered projects.
committee while small projects would only require a single project man-
ager. The management structure must meet the needs of both the project
and the customer.
4.2.5 Technical Aspects of Partnered Projects

One of the primary reasons for partnering is to gain additional technical
capability. A customer wants assurances that the project will be technically
successful and that the performing organization has the capability to ac-
complish the work. Partnering gives that assurance by bringing the best
talent from more than one company.
Principles of partnering will guide companies to better work solutions
and better products for the customers. The following is a list of principles:
• Work allocation—divide work so the work packages are performed with
an integral team where possible. Attempting to develop teams on a short-
term basis may not be the most efficient use of talent and expertise. So,
a team from one of the partnering companies should be assigned work
packages commensurate with its skill.
• Project control—a team should be assigned responsibility for controlling
the project work. This team may be individuals from different compa-
nies, but should have discrete work responsibilities. The project control
team must report to the project manager.

• Project management—there needs to be a single person responsible for

managing the work. Some work may be performed under the supervision
of a manager, but that manager is responsible to the project manager for
delivering a product component. All elements of the project must be
managed from a single person with the authority to direct and accept
work.
• Company participation—company managers must not, as individuals,
become involved in the direction of the project. Direction must be
through a consolidate body, such as a steering committee or senior man-
agement representative group. Individuals may bring the wrong solutions
to the partnered project.
• Customer interface—like any project, partnered projects must have a
single interface with the customer. This may be the project manager, the
chair of the steering committee, or the elected representative from the
management group. In some situations, there are two levels of customer
interface. The strategic direction and liaison is from the senior steering
committee and the daily interface is between the project manager and
the customer’s representative.
4.2.6 Benefits in Partnered Projects

Partnering has benefits that exceed those that a single organization may
derive from a project. The benefits can be short-term or long-term, with
a major impact on future business. Some of the benefits for the partnering
organizations are:
• Technology—partnering with a high-technology exposes personnel to
state of the art technology and processes. These technologies may be
used in future projects or they may serve as information when seeking
future partnering relationships.
• Small to large companies—small companies partnering with large com-
panies learn improved methods of managing and bidding on projects.
The transfer of knowledge is valuable to small companies in future work.
• Managing projects—all partnering organizations gain skills and knowl-
edge on how to better manage projects. The cross-pollination of skill,
knowledge and abilities helps organizations improve the project man-
agement capabilities.
• Efficiency—availability of a large resource pool should give the right
skills for the work and lead to a more efficient level of work. This
efficiency should yield benefits in that rework and other waste could be
significantly reduced.

4.14 SECTION FOUR
• Monetary rewards—improvements in management and work processes

from a wide base of several companies should result in improved profits.
The efficiency and effectiveness of the work will cost less to perform
and yield a better margin.
• Corporate image—if companies in partnered projects are visible, the
efficiency and effectiveness may improve the image as quality perform-
ing organizations. This image and reputation can be used in future bid-
ding and project work, whether partnering or alone on a project.
1. What are some of the reasons that an organization would want to par-
ticipate in a partnered project?
2. Why would an organization loan people to another organization for a
cooperative effort in partnering a project?
3. What are the major management structures for guiding a partnered
project at the top level?
4. When would it be appropriate to have someone other than the project
manager be the customer liaison in a partnered project?
5. In a major project, who would the project manager report to and why?
4.2.8 Summary
Project partnering takes on many forms based on the desires and creativity
of the partners. The arrangements will vary according to the project and
the visibility of organizations may be more or less, depending upon the
needs for the partnered project. Organizations, public and private, for-
profit and not-for-profit, can create partnerships to meet the needs of a
small, medium, or large project.
Managing a partnered project is typically driven by the desires of the
customer. Customer confidence and visibility into the project dictate the
management structure as well as the size of the project. It is not uncom-
mon to have a two tier management structure, a project manager and a
steering committee to which the project manager reports.
Many benefits are derived from partnered projects. These include learn-
ing from other organizations’ management and technical processes, ob-
taining technical knowledge about project management methodologies and
processes, acquiring improved work methods from others, and large profit
shares through improved productivity. The benefits may have immediate
use or they may contribute to the long-term growth of an organization.

1. Department of Energy, Super Collider Project, Dallas, TX (c. 1988–

1993). This project is an excellent example of many different compa-
nies being involved in cooperative work. It is not an example of part-
nering per se, but how many companies share the responsibility for
different elements.
2. Department of Defense, Stealth Bomber Project, Washington, DC (c.
1986–1994). This project used four major companies in partnership and
hundreds in subcontracting roles. This example shows a complex ar-
rangement that failed to achieve the desired results and had to be ter-
minated.
4.3 PROJECT STRATEGIC ISSUE MANAGEMENT
In a project, a strategic issue is a condition or pressure, either internal or

external, that has the potential for a significant influence on one or more
factors of a project during its life cycle, such as its cost, schedule, and
technical performance objectives as well as financing, design, engineering,
construction, and operation. Strategic issues can arise from many different
stakeholder groups: customers, suppliers, the public, government, inter-
venors, and so forth. Some examples of strategic issues include:
1. The need to reduce time required to design, develop, and produce an
automobile—resolved through the practice of Concurrent Engineering
2. The failure to recognize the environmental-related and political issues
in product development, which, in the case of the US Supersonic Trans-
port Program led to the cancellation of that program by the US Con-
gress
3. The need to develop strategies for a ‘‘turn-around’’ project underway
at Eastman Kodak—remedial action was required to reduce and elim-
inate resistance to change from the employees
4. The emergence of a key environmental-related factor which held po-
tential to delay or cancel a project, as in the case of the discovery of
an earthquake fault offshore from the construction site of a nuclear
generating plant
4.3.1 Managing Project Strategic Issues
There are four key phases involved in the management of strategic issues
for a project. These phases are portrayed in Fig. 4.6, (David I. Cleland,

4.16 SECTION FOUR
Identification Phase
(of the issues involved)
(1)
Implementation Phase Assessment Phase

(of action to be implemented) (of the strategic relevance)
(4) (2)
Analysis Phase
(of the action required)
(3)
FIGURE 4.6 Key phases for managing strategic issues for a project.
Project Management: Strategic Design and Implementation, 3rd ed. (New

York, NY: McGraw-Hill, 1999), p. 195), and discussed below.
4.3.1.1 Identification Phase. Chances for the identification of potential

issues facing the project can be enhanced if in the project planning a
‘‘work package’’ is established for the identification and management of
the strategic issues. At each review of project progress, consideration
should be given to whether or not any strategic issues have arisen that
could impact the project. By reviewing the project stakeholder interests in
the project, the likelihood of strategic issues coming forth is enhanced.
4.3.1.2 Assessment Phase. In this phase, judging an issue’s importance

is essential. Several criteria can be used to assess the importance of an
issue, such as:
1. Strategic relevance, or magnitude and duration of the issue
2. Actionability—considers whether or not the project team has the
knowledge and resources to deal with the issue. A project may face an
issue over which it has little control. In such issues, keeping track of
the issue and considering its potential impact may be the only realistic

strategy that can be pursued. For example, in government defense work,

contracts can be cancelled at the convenience of the government
3. Criticality of an issue relates to the importance of the potential impact
of the issue on the project. If an issue appears to be non-critical, then
continued monitoring of the issue may be all that is needed
4. Urgency of the issue regarding the time period in which something
needs to be done
4.3.1.3 Analysis of Action. In the analysis of strategies and actions

required to deal with the project, seeking answers to the following types
of questions can be useful:
1. What will be the probable effect of the issue in terms of impacting the
project’s cost, schedule, and technical performance objectives?
2. What might be the impact on the project of the key stakeholders in-
volved in the issue?
3. What specific strategies have to be developed by the project team to
deal with the issue(s)?
4. What resources will need to be committed to deal with the issue?
4.3.1.4 Implementation of Action. In this phase, a plan of action is

implemented. The action plan and its implementation can be dealt with
as a sub-project and involves all of the elements in the management of a
project, such as planning, organizing, direction, control, and so forth. An
important part of the implementation phase is a review of the strategic
issues during the regular review of the project’s progress.
1. Do the members of the project team and senior managers understand

the concept of project strategic issues, and the need for the active
awareness and management of such issues?
2. Are the potential strategic issues involving the project(s) in the organ-
ization identified and brought into the management processes of the
project and the organization?
3. Has a work package been established on the project(s) that is dedicated
to the management of strategic issues as outlined in this section?
4. Are post-project appraisals used to identify historical strategic issues
and help foster an understanding of the role of strategic issues in the
management of the organization’s future project?

4.18 SECTION FOUR
5. Have any strategic issues in the portfolio of projects in the organization

been identified and reported to senior management for their awareness,
and suggestions on how the issues might be resolved?
4.3.3 Summary
A strategic issue in a project is a condition or pressure that has the po-
tential to have a significant impact on the project. Strategic issues can
arise from within the organization, and from outside, such as major con-
cerns or forces that the project stakeholders consider of importance to the
project. In this section a few ideas were presented on how a project team
could better manage the strategic issues that their project faces. Strategic
issues can arise at any stage in the life cycle of the project. The project
manager should be aware of the concept of project strategic issues, and
provide proactive leadership in dealing with the strategic issues that are
likely to impact the project.

Cleland, David I., Project Management: Strategic Design and Implemen-
tation, 3rd ed. (New York, NY: McGraw-Hill 1999), chap. 7, ‘‘Strategic
Issues in Project Management’’. This chapter provides a description of the
concept of strategic issues, and suggests a management process on how
such issues can be identified and managed.
4.4 PROJECT STAKEHOLDER MANAGEMENT
Project stakeholders are those individuals, organizations, institutions,

agencies, and other organizations that have, or believe that they have a
claim or stake in the project and its outcome. Stakeholders in the political,
economic, social, legal, technological, and competitive environments have
the potential to impact a project. Project managers need to identify and
manage those stakeholders likely to have an influence on the project’s
outcome.
4.4.1 Examples of Stakeholder Influence

1. Actions by environmental groups that delayed progress on the design
and construction of nuclear power generating plants in the US.

2. On the James Bay Project in Canada, special effort was made to stay
sensitive to social, economic, and ecological issues coming from vested
stakeholder interests on that project.
3. Proactive action by environmentalists, tourists, and government agen-
cies motivated the project team to take special care to protect and
preserve the scenic well-being of an area during the construction of a
highway through Glenwood Canyon in Colorado.
4. Stakeholder action caused the rerouting of a major highway in Pitts-
burgh, PA to preclude the razing of an old church that had historical
value to the community.
5. Failure on the part of the project team to manage the political interests
of key US congressmen and environmental groups who developed such
organized opposition to the US Supersonic Transport Program that it
was cancelled by lawmakers, even though the technological feasibility
of the aircraft had been demonstrated.
4.4.2 Evaluating Potential Stakeholder Influence
Developing a strategy to consider the potential impact of project stake-

holders can start with seeking the answers to a few key questions such as:
1. Who are the project stakeholders, both primary and secondary?

2. What stake, right, or claim do they have in the project?
3. What opportunities and challenges do the stakeholders pose for the
project team?
4. What obligations or responsibilities does the project team have toward
its stakeholders?
5. What are the strengths, weaknesses, and probable strategies that the
stakeholders might use to realize their objectives?
6. What resources are available to the stakeholders to implement their
strategies?
7. Do any of these factors give the stakeholders a distinctly favorable
position in affecting the project outcome?
8. What strategies should the project team develop and use to deal with
the opportunities and challenges presented by the stakeholders?
9. How will the project team know if it is successfully ‘‘managing’’ the
project stakeholders?

4.20 SECTION FOUR
4.4.3 A Model of the Project Stakeholder

Management Process
The process of dealing with stakeholders focuses around the application
of the management functions (planning, organizing, motivating, directing,
and control) to potential stakeholder issues. Figure 4.7 shows a model of
such process.
4.4.3.1 Identification of Stakeholders. A project usually faces two

kinds of stakeholders: (1) Primary stakeholders who have a contractual or
legal obligation to the project team; and (2) Secondary stakeholders who
usually have no formal contractual relationship to the project team but
FIGURE 4.7 Project stakeholder management process. (Source: David I. Cleland,

Project Management: Strategic Design and Implementation, 3rd ed. (New York, NY:
McGraw Hill, 1999), p. 164)

have, or believe that they have, a stake in the project or its outcome. Figure
4.8 is a model of these stakeholders.
The key authority and responsibility of the primary stakeholders in-
clude:
• Providing leadership to the project team
• Allocating resources for use in the design, development and construction
(production) of the project results
• Building and maintaining relationships with all stakeholders
FIGURE 4.8 The project stakeholders. (Source: Cleland, David I., ‘‘Stakeholder
Management,’’ Chapter 4 in Jeffrey K. Pinto, Editor, Project Management Handbook,
Project Management Institute and Jossey-Bass, Inc., Publishers, 1998, p. 61)

4.22 SECTION FOUR
• Managing the decision context in the design and execution of strategies

to commit project resources
• By example, set the project’s cultural ambience, which emphasizes the
best of people in providing high-quality professional resources to the
good of the project
• Maintain ongoing and effective oversight of the project’s progress in
meeting the schedule, cost and technical performance objectives, and
where necessary reallocating and reprogramming resources as needed to
keep the project on track
• Periodically checking the efficiency and effectiveness of the project team
in doing the job for which they were hired
Secondary stakeholders can be difficult to manage. Some of the more
obvious characteristics of these stakeholders include:
• There are no limits to where they can go and with whom they can talk
to influence the project;
• Their interests may be real, or perceived to be real as the project and
its results may infringe on their ‘‘territory’’;
• Their ‘‘membership’’ on the project team is ad hoc—they stay so long
as it makes sense to them in gaining some advantage or objectives in-
volving the project;
• They may team up with other stakeholders temporarily to pursue their
common interest for or against the project’s purposes;
• The power they exercise takes many forms such as political influence,
legal actions, such as court injunctions, emotional appeal, media support,
social pressure, local community action, and even scare tactics;
• They have a choice of whether or not to accept responsibility for their
strategies and actions.
4.4.3.2 Gathering Information of Stakeholders. Information about

project stakeholders can come from a wide variety of sources to include:
• Project team members
• Key managers
• Business periodicals including The Wall Street Journal, Fortune, Busi-
ness Week, and Forbes
• Business reference services, including Moody’s Industrial Manual, Value
Line Investment and Security
• Professional associations
• Customers and users

• Suppliers
• Trade associations
• Local and trade press
• Annual corporate reports
• Articles and papers presented at professional meetings
• Public meetings
• Government sources
• Internet
4.4.3.3 Identifying Stakeholder Mission. This involves a determina-

tion of the mission of the stakeholders that support their vested interests
in the project. For example, the mission of a stakeholder group on a high-
way project in Pittsburgh, PA was to ‘‘Change the route of the freeway
highway to avoid razing of the historical church.’’
Stakeholders can be supportive or adversarial—with degrees of influ-
ence in between. Both types require managing— to strengthen the project
by gaining continued support—or to reduce as much as possible the likely
adversarial impact of the stakeholders on the project.
4.4.3.4 Determining Stakeholder Strengths and Weaknesses. The de-

termination of the stakeholders’ strengths and weaknesses is essential to
ascertaining how successful they might be in influencing either the project
or its outcome. A stakeholder’s strengths might include those listed in
Table 4.2.
Conversely, the weaknesses of a particular stakeholder group might
include those listed in Table 4.3.
4.4.3.5 Identification of Stakeholder Strategy. A stakeholder strategy

is a prescription of the collective means by which resources are dedicated
for the purpose of accomplishing the stakeholder’s mission, objectives,
and goals. These prescriptions stipulate what resources are available, and
how such resources will be used in an organized fashion to accomplish
the stakeholder’s purposes. The use of legal means to stop construction
TABLE 4.2 Stakeholders Strengths
• Availability and use of resources

• Political and public support
• Quality of their strategies
• Dedication of the stakeholder members.

4.24 SECTION FOUR
TABLE 4.3 Stakeholders’ Weaknesses
• Lack of public and political support

• Lack of organizational effectiveness
• Inadequate strategies
• Uncommitted, scattered members
• Poor use of resources
• General incompetence.
on a project because of claims of adverse impact on the ecology is one

principal strategy used by stakeholders. Another means is to seek support
from political bodies to influence the project. Picketing construction sites,
letter writing campaigns, paid radio or TV advertisements are other means
that stakeholders can use. Once an understanding of the stakeholder’s strat-
egy is gained, then the chances are increased to predict what the stake-
holders’ behavior will be.
4.4.3.6 Predicting Stakeholder Behavior. How will the stakeholders

use their resources to affect the project? This is the key question to be
answered. There are many alternatives available to the stakeholders to
attain their end purposes. These can include:
• Influencing the economic outcome of the project—as a construction un-

ion might do when a new manufacturing plant is being built
• Attaining specific objectives of the stakeholder—such as the protection
of the environment, which is part of the mission of the Sierra Club
• Legal actions to influence the outcome of the project—such as work
stoppage orders until stakeholder claims of safety are resolved
• Political actions through gaining the support of legislators—such as hav-
ing governmental projects funded for construction in their political dis-
tricts
• Health and Safety—often brought up when new drugs or medical pro-
tocols are being developed
4.4.3.7 Implementing Stakeholder Management Strategy. The final

step depicted in Fig. 4.7 in managing the project stakeholders is to develop
protocol for the implementation of the resources dedicated to managing
the stakeholders. Once the implementation phase has been embarked on,
the project team needs to:

• Be sure that the key managers and professionals appreciate the impact
that both supportive and non-supportive stakeholders may have on the
project outcome.
• Manage the project review meetings so that the stakeholder assessment
is an essential part of deciding the project status.
• Keep in touch with key external stakeholders to improve the chances of
determining stakeholders’ understanding of the project and its strategies.
• Ensure a clear evaluation of possible stakeholder response to major proj-
ect decisions.
• Provide ongoing, current reports on stakeholder status to key managers
and professionals for use in developing and implementing project strat-
egy.
• Provide a proper security system to protect sensitive project information
that might be used by adverse stakeholders to impact the project’s suc-
cess.
1. Project stakeholders must be managed—taking the form of a specific

‘‘work package’’ in the management of the project. Is this being done
on your projects?
2. Both primary and secondary project stakeholders exist. The project
team must know who these stakeholders are, and what their likely strat-
egies will be in order to manage them. Is this being done on your
projects?
3. Who are the stakeholders with which this project must deal, and what
is their perception of the nature of their stake in the project?
4. There are specific sources for the collection of information on the proj-
ect stakeholders, which can be used in the development of counter-
vailing strategies for dealing with the stakeholders. Have the sources
been developed on your projects?
5. Every review of the project should include an assessment of who the
project stakeholders are, and how well they are being managed. Is this
being done on your projects?
4.4.5 Summary
The management of project stakeholders is a vital ‘‘work package’’ in
planning for and implementing the use of resources on the project. An

4.26 SECTION FOUR
individual should be assigned a specific ‘‘work package’’ responsibility on

the project team to identify, track, and manage the project during its life
cycle.
1. Cleland, David I., ‘‘Stakeholder Management,’’ in Jeffrey Pinto, Project

Management Handbook, Project Management Institute and Jossey-
Bass, Inc., 1998. This chapter deals with the concept of project stake-
holders to include identification and management of such stakeholders.
The chapter provides basic information concerning how project stake-
holders should be considered by the project team during the life cycle
of the project.
2. Padgham, Henry F., ‘‘The Milwaukee Water Pollution Abatement Pro-
gram: Its Stakeholder Management,’’ PM Network, April 1991, pp. 6–
18. This article describes how project stakeholders were managed on
a major construction project.
4.5 THE STRATEGIC MANAGEMENT OF TEAMS
4.5.1 The Team Context of Strategic Management
The essence of managing an organization from a strategic perspective is

to maintain a balance in using resources to accomplish organizational mis-
sion, objectives, and goals. The key is to balance operational competence,
strategic effectiveness, and functional excellence. Figure 4.9 shows the
linkage between strategic effectiveness, operational competence, and func-
tional excellence for teams. These terms are defined below:
Operational Competence is the ability to use resources to provide cus-

tomers with high quality products and services so that sufficient profit
is realized to advance the state-of-the-art in such products and services,
and have sufficient funds left over to develop new strategic initiatives
for the organization.
Strategic Effectiveness is the ability to assess the need for, and develop
future products, services, and organizational processes. Alternative
project teams, as described in Section 3 can be used to assess the
possibilities and probabilities in the use of resources to ensure the or-
ganization’s future.

Strategic
Effectiveness
Operational Functional
Competence Competence
FIGURE 4.9 Balance between strategic
management challenges. (Source: David I.
Cleland, Strategic Management of Teams
(New York, NY: John Wiley and Sons, 1996),
p. 5)
Functional Competence is the ability to maintain state-of-the-art ability

in the use of resources to support the organization’s current and future
needs.
A balance must be maintained among the organization’s Operational
Competence, its strategic effectiveness, and its functional excellence, as
depicted in Fig. 4.9. This balance can be facilitated by providing appro-
priate project team linkages within the organization.
4.5.2 The Team Linkages

There are many team-driven organizational initiatives that are endemic to
the strategic management of the organization. Some of these initiatives
are discussed below.
• Reengineering teams used to bring about a fundamental rethinking and

radical redesign of business processes. The output of these teams is
improved business and processed changes in the organization

4.28 SECTION FOUR
• Crisis management teams that serve as a focus for any crises that might
arise in the organization’s activities.
• Product / process development teams which provide for the concurrent
design and development of products, services, and organizational pro-
cesses. Effective use of such teams result in higher quality products,
services, and organizational processes, developed at a lower cost and
leading to earlier commercialization and greater profitability
• Self-directed production teams which manage themselves and when
team members are adequately prepared and used can result in greater
efficiency and effectiveness in the manufacturing or production activity
of the organization
• Task forces which are ad hoc groups to solve short-term organizational
problems or exploit opportunities to support the operational and strategic
well-being of the organization
• Benchmarking teams used to measure the organization against the most
formidable competitors and industry leaders. When properly used the
results of the work of these teams can be improved operational and
strategic performance
• Facilities construction teams which design, develop, and construct cap-
ital improvements for the organization. This is the ‘‘traditional’’ use of
project teams which have reached considerable maturity in industries
such as construction, defense, engineering, research, and in government,
educational, health systems, and economic development agencies
The use of alternative project teams has been necessary in part because
of the way that jobs and strategies are changing in contemporary times.
4.5.3 Jobs Are Changing
Jobs are changing from fixed specific areas of responsibility to a team

effort. The use of part-time and temporary workers is increasing; the or-
ganizational design today is undergoing major changes. Some of the more
important other job changes include:
• An organizational design is used that is more flexible than the traditional

structure based on specialization of work.
• There is increased reliance on alternative teams to deal with the change
affecting the organization, particularly in the development of new and
improved products and organizational processes.
• There is increasing acceptance of the belief that traditionally structured
organizations are inherently designed to maintain the status quo rather
than respond to the changing demands of the market and competition.

• There is less reliance on job descriptions or supervisor directions; rather

the team members take their direction from the changing demands of
the team objectives.
• Workers develop the knowledge, skills, and attitudes to deal with indi-
vidual effort and the collective responsibility of the team.
• Team members report to each other, look for facilitation and coaching
from the team leader, and focus their effort on the resources needed to
meet team objectives.
• A single job is important only insofar as it contributes to the bundle of
capabilities needed to get the team’s work done.
Along with job changes, the traditional roles of managers and super-
visors are changing. In fact, such traditional roles are becoming an en-
dangered species. Team leader members are performing many of the tra-
ditional duties of these previous ‘‘in-charge’’ people. Contemporary
managers are becoming mentors, facilitators, teachers, coaches, and other
roles which are different from the ‘‘in-charge’’ nature of earlier periods.
Team leaders and members are performing many of these traditional man-
ager roles such as:
• Planning the work and assignment of the tasks by members of the team
• Evaluating individual and team performance in doing the work
• Moving toward both individual and team rewards
• Counseling poor team performers
• Participating in key decisions involving the work the team is doing
• Organizing the team members regarding their individual and collective
roles
• Taking responsibility for the quality of the work, team productivity, and
efficiency in the use of resources
• Developing initiatives to improve the quality and quantity of the output
• Seeking better ways of doing the work and, in so doing, discovering
creative and innovative means of preparing for the team and the organ-
ization’s future
• A form of team building is required to prepare the organization for the
use of teams.
4.5.4 Preparing the Enterprise for the Use of Teams

There are some important fundamentals that managers need to recognize
when preparing the enterprise for the use of teams in the organization.
These include:

4.30 SECTION FOUR
• An ability of the different teams to work with each other and to respect
each other’s territory
• Recognition of the high degree of interdependence among the members
of the team, and how that interdependence can be used as a strength for
integrated team results
• A willingness of the team members to share their information and work
with each other, leading to a high degree of collaboration among team
members
• Recognition of the deliberate conflict usually found in team work—a
conflict, often stemming from different backgrounds, which exists be-
cause of substantive issues and not interpersonal strife
• A more efficient way for team members to proactively seek ways to
work out problems and opportunities through team members to reach a
result in which each member sees part of his or her work in the solution
• A better understanding of the culture of the team, its thought and work
processes, and greater willingness to give unselfish support to the team’s
objectives and goals
• Enhanced communication among the team members about their individ-
ual and collective work on the team
• Better understanding of the purpose of the team, its relationship with
the work of other teams, and how everything comes together to support
the mission, objectives, and goals of the enterprise
• Greater opportunity for a higher degree of esprit de corps, a sense of
belonging on the part of the members, and pride in working together to
accomplish desired ends
The responsibilities with which the members of the design and imple-
mentation team are charged for the design and implementation of a team-
driven strategy in the organization include the following:
• Providing for the transfer of the organization’s vision and values to the
teams
• Developing documentation for the teams, including a supporting charter,
authority-accountability-responsibility relations, work redesign, and gen-
eral cultural support
• Providing both conceptual and work linkages between the teams and
the other organizational elements
• Evaluating existing reward systems for compatibility with the team or-
ganizational design
• Becoming the champion for the transformation of the organization from
its traditional configuration to one characterized by team modes, values,
and processes

• Providing general support, including allocation of resources

• Evaluating how the teams will interface with the functional expertise,
strategic management, and cultural characteristics of the organization
• Recommending training initiatives to support the transition to a team-
driven organization
• Assessing the existing supporting technologies, such as computer and
information systems, to support the team architecture
1. What are the likely advantages to the organization from the use of
alternative teams described in this section?
2. Do the members of the organization understand and accept what alter-
native teams can do for the organization?
3. Has a specific strategy been developed to prepare the members of the
organization for the use of teams and their likely individual and col-
lective roles while serving on such teams?
4. Do the members of the organization understand the things in the or-
ganization that need to be changed to use teams effectively?
5. Do the members in the organization understand the meaning and prob-
able use of teams to contribute to the organization’s operational effi-
ciency, strategic effectiveness, and functional excellence.
4.5.6 Summary
Teams working in cross-functional and cross-organizational environments

are making major contributions to the operational and strategic well-being
of contemporary organizations. The decision to use teams in the organi-
zation’s strategy should be carefully assessed, to include the potential
value of such teams, how the enterprise has to be prepared for using teams,
and how the oversight of teams will be carried out. Changes in the culture
of the organization will be profound when teams are introduced and used
as elements of organization strategy.
1. Cleland, David I., Strategic Management of Teams (New York, NY:

John Wiley and Sons, 1996), chap. 1, ‘‘The Concept and Process of
Strategic Management’’, and chap. 2, ‘‘Getting the Organization
Ready’’. In these chapters, the concept and process of strategic man-

4.32 SECTION FOUR
agement is described along with guidance on how to prepare the or-

ganization to use teams. A substantial portion of the material in this
section has been paraphrased from this reference.
4.6 SENIOR MANAGEMENT AND PROJECTS
Senior managers, including general managers, have the residual authority

and responsibility for the management of the organization, and are re-
sponsible to the Board of Directors. Since projects are building blocks in
the design and execution of strategic management initiatives, these man-
agers should pay particular attention to why projects are used in the or-
ganization and how well they are managed.
4.6.1 Senior Management Responsibility for Projects
• Ensuring the adequate organizational design has been established

• Ensuring that the cultural ambience of the organization is evaluated to
determine how well such culture will support the use of projects
• Providing resources to update the knowledge, skills, and attitudes of
people associated directly with the projects
• Maintaining oversight over the development and acceptance of a plan
of action for each project
• Seeing that an adequate information system exists that contributes to the
planning and execution of projects
• Ensuring a system for monitoring, evaluating, and controlling the use
of resources on projects to include an assessment of how well projects
are meeting their cost, schedule, and technical performance goals and
objectives
• Maintaining an ongoing consideration of where projects have, and will
continue to have, a strategic fit in the organization’s mission
The authority and responsibility of the senior managers of the organi-

zation and its directors are similar. If the directors of the enterprise are
going to do their job in maintaining oversight over the planning and ex-
ecution of projects, then the senior managers must ensure that the adequate
management systems are in place in the organization, and that the directors
are kept informed on the status of major projects underway.

4.6.2 Which Projects?
In an ongoing organization there can be hundreds of projects, of all sizes,

and for different purposes in the product, service, and processes of the
enterprise. General guidelines for which projects senior managers should
be directly concerned will include:
• New product, service, and organizational process projects which have
the promise of providing a competitive advantage in the marketplace
• Product / service projects which contain the potential for breakthroughs
in technology, significant reduction of development costs, or the promise
of bringing the product to earlier commercialization
• Projects that require the commitment and obligation of substantial en-
terprise resources, which if inappropriately applied can reduce the fi-
nancial or competitive well-being of the organization
• Projects that are linked to strategic alliances with other organizations
such as those designed to share development risks, or penetrate local
markets in the global marketplace
• Projects which are closely linked to such strategies as downsizing, re-
structuring, cost reduction, productivity improvement, investment op-
portunities, or acquisitions, mergers, and alliances with other organiza-
tions
Senior management must develop a means for surveying the major
projects underway, and determine which are sufficiently important that
their personal involvement in planning for and execution of project strat-
egies is required.
If adequate oversight of the firm’s projects is not carried out, there is
a risk of failure of one or more projects. Such failures could impact the
competitive advantage that the organization holds in the market place.
Some of the more common failures on the part of the oversight of senior
managers is shown in what follows.
4.6.3 An Inventory of the Causes of Failures
• A lack of appreciation of how projects are inexorably tied to the oper-

ational and strategic trajectories of the organization
• Unwillingness to become involved in assessing how well the projects
are being planned and carried out
• Ignorance of how projects should be managed in the spirit of a ‘‘systems
approach’’ as outlined in Section 1 of this Handbook

4.34 SECTION FOUR
• Not providing resources that are needed to support the projects, as well
as failing to understand and articulate how the organization’s projects
are linked to functional and other organizational units in the organization
• Not requiring that all projects in the organization should be reviewed
on a regular basis following the model for monitoring, evaluation, and
control suggested in Section 7 of this Handbook
• Not providing suitable recognition of project efforts
• Not understanding, and thus likely not appreciating, the impact that proj-
ect stakeholders can have on in-house projects
• Neglecting the commitment of resources to train project teams in the
management of projects
• Not being a role model for how prudent and effective management can
be carried out in the organization
4.6.4 Senior Management Review by Life Cycle

Phases
Conceptual Phase is the period when a conceptual framework for the
project is being determined to include probable cost, schedule, technical
performance objective, and potential strategic fit. Major responsibilities of
senior managers include:
• Evaluating potential ‘‘deliverables’’ of the project to include probable
strategic fit in the organization’s businesses
• Determining the ability of the organization to provide the resources to
support the project during its life cycle
• Determining the capability of the organization to provide trained people
to serve on the project team as well as provide human resource support
from the functional entities of the organization
• Selecting of the ‘‘right’’ project manager who is clothed with the au-
thority and responsibility to manage the project
• Ascertaining if adequate planning has been established for the project
• Finally, seeing that the project and its deliverables are appropriately
linked to the operational and strategic purposes of the organization. Re-
quire contingency planning for the early termination of the project.
Execution Phase is the phase when resources are committed to the project
and its design, development, and execution is underway. Major responsi-
bilities include:
• Provisioning of resources to support the project

• Giving the project manager and the project team the freedom to manage
the project without interference from other managers
• Providing oversight of the project’s cost, schedule, and technical per-
formance progress followed by appropriate feedback to the project man-
ager and project team
• Maintaining contact with key stakeholders such as project customers,
suppliers, and regulatory agencies
• Ensuring that other managers in the organization are committed to sup-
porting the project through the allocation of needed resources
• Allowing the project manager and team members enough freedom to
follow their muse in finding innovative and creative solutions to prob-
lems and opportunities
• Providing a buffer to guard the project against the inevitable politics that
come up in any organization and its stakeholders
• Providing suitable rewards and inducements to bring out the best per-
formance in the people supporting the project
• Determining if a project audit review would make sense
Post-Project Phase is the phase when the project’s results are being inte-
grated into the operational and strategic business of the organization. Ma-
jor responsibilities during this phase include:
• Ensuring the successful strategic fit of the project into the affairs of the
organization
• Ensuring that appropriate measures have been taken for the after-sales
support of the project results
• Doing a post-project review to gather information on how well the proj-
ect was managed to include a collection of ‘‘lessons learned’’ that can
be passed on to other project management initiatives
• Examining the rationale for the project to support organizational pur-
poses
1. Do the senior managers understand the key role that they have in the
management of projects in the organization?
2. Do the senior managers recognize that projects are building blocks in
dealing with product, service, and organizational process change.
3. Given such recognition, have these managers developed a philosophy
and protocol for the ongoing regular review of projects?

4.36 SECTION FOUR
4. Senior managers are vital links between the enterprise projects and the
organization’s board of directors. Have these managers provided infor-
mation and a protocol on how the board should carry out its respon-
sibility in maintaining oversight of the planning and execution of proj-
ects.
5. Have provisions been provided for the post-project reviews to help the
organization do a better job of managing projects in its future?
4.6.6 Summary
In this section, the role of senior managers in maintaining oversight of the
planning for and execution of projects was presented. Such managers have
key responsibilities in the planning for projects to include an assessment
of what the likely strategic fit of the project will be. The role of these
managers was described in the three key phases of a project, with appro-
priate oversight responsibilities that senior managers should carry out dur-
ing these phases.
1. Hartley, Kenneth O., ‘‘The Role of Senior Management,’’ chap. 17 in

David I. Cleland, ed., Field Guide to Project Management (New York,
NY: Van Nostrand Reinhold: 1998. This chapter provides basic philos-
ophies and protocol on how senior managers can best execute their
fiduciary responsibilities in the management of projects in the organi-
zation.
4.7 THE BOARD OF DIRECTORS (BOD) AND

CAPITAL PROJECTS
Once a project is funded and organization resources are being used to

design, develop, and construct (manufacture) the project, the BOD has an
important responsibility to maintain surveillance over the progress that is
being made on the project. By maintaining such surveillance, the BOD
gains valuable insight into how well the organization is being prepared
for its future. The projects over which the BOD and senior management
of the oganization should maintain approval and oversight include:

• New product, service, and organizational process projects, which hold

the promise of giving the organization significant competitive advantage
in the marketplace
• Projects which require the commitment of substantial resources such as
new facilities, restructuring, reengineering, or downsizing initiatives
• Projects that lead to strategic alliances, research consortia, partnering,
and major cooperative efforts with other organizations
• Major initiatives that promise to provide initial or expanded presence in
the global marketplace
• Projects, such as concurrent engineering initiatives, which promise to
provide earlier commercialization of products and services
• Projects that lead to potential major changes in the organization’s mis-
sion, objectives, goals, or strategies
By maintaining oversight over these kinds of projects the BOD mem-
bers gain valuable insight into how well the organization is preparing itself
for the future.
4.7.1 Some BOD Inadequacies Regarding Projects
• On the Trans-Alaska Pipeline System (TAPS) an ‘‘Owner’s Committee,’’

similar to a BOD, did not maintain oversight of the TAPS project, par-
ticularly with respect to strategic decisions on the project to include:
1. The development of a master plan for the project
2. Early integrated life-cycle project planning
3. Design and implementation of a project management information
system
4. Development of an effective control system for the project
5. Design of a suitable organization
• In the design and construction of nuclear power generating plants all
too many utilities had BODs that neglected to exercise ‘‘reasonable and
prudent’’ oversight over the planning and execution of nuclear power
plant projects to support corporate purposes.
• The Washington Public Power Supply System (WPPSS) defaulted on
interest payments due on $2.5 billion in outstanding bonds in part be-
cause of the failure of its directors. Communication at the senior levels
of the company, to include the BOD, tended to be ‘‘informal, disorga-
nized, and infrequent.’’
However, on some nuclear power plant projects, BOD served in an
exemplary fashion, such as in the case of the Pennsylvania Power and

4.38 SECTION FOUR
Light Company where ongoing surveillance was conducted over the plan-
ning and construction of the Susquehanna nuclear plant project.
4.7.2 Key Responsibilities of BOD Regarding Projects
• Set an example for the ongoing review of projects that support organ-
izational purposes.
• Provide senior managers guidance in the strategic management of the
organization as if its future mattered.
• Assure the strategic fit of ongoing projects with the strategic direction
of the organization.
• Ensure that projects are recognized as building blocks in the design and
execution of strategies, and that the linkages of projects with other ini-
tiatives in the organization are carried to help ensure the organization’s
future.
• Maintain ongoing and regular review of major projects, and through
doing this, help to motivate the general managers and project managers
to do the same with respect to their projects.
• Be available to meet with key project stakeholders, such as project cus-
tomers, should the need arise during the life of the projects.
• Review the key elements of the plan for major projects.
• Require formal BOD briefings or the status of the project at key points
in the project’s life cycle.
• Visit the construction site on major projects. By so doing, an important
message will be sent to the project team, and to other stakeholders on
the project.
• Direct that the necessary independent audits are carried out for the proj-
ects that need such audits to determine their status and progress.
4.7.3 Project Information for the BOD
To carry out their responsibilities, the BOD members need certain infor-
mation that is provided in an orderly and regular fashion. Examples of
this information follows:
• Presenting information and issues on the project progress and status

prior to BOD meetings so that the members have time to study the
material prior to the meeting

• Providing for clear reporting on project information to the BOD mem-

bers, avoiding burying the information in other corporate records to be
reviewed at the BOD meeting
• Allowing time at the BOD meeting for a full discussion of the relevant
project-related issues and decision matters
• Ensuring that the BOD members take the time and care to determine
the ‘‘strategic fit’’ of major projects underway in the organization

1. On what basis are the major projects in the organization reviewed by
the BOD members?
2. Have the review of the major projects in the organization by the BOD
resulted in any cancellation, redirection, or acceleration of the use of
resources on the project?
3. Do the members of the BOD receive timely and relevant information
about the status of the projects in the organization, which enables them
to make informed judgment about the progress and status of such proj-
ects?
4. Are any of the major projects in the organization likely candidates for
a BOD directed audit?
5. Have any of the major projects in the organization been the target, or
might become the target, of litigation proceedings?
4.7.5 Summary
In this section, the role of the BOD with respect to major projects in the
organization was presented. A case was made that an ongoing surveillance
over the planning and execution of projects would provide the BOD mem-
bers insight into the effectiveness with which the organization is preparing
for its future. Suggestions were made concerning how the role of the BOD
regarding projects could be strengthened.

Cleland, David I., Project Management: Strategic Design And Implemen-
tation, 3rd ed. (New York, NY: McGraw-Hill, 1999), chap. 5, ‘‘The Board
of Directors and Capital Projects.’’ This chapter provides a prescription on
how major projects should be reviewed by the BOD. Information, strate-
gies, and policies are suggested to improve the review of projects by the
BOD.



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Source: PROJECT MANAGER’S PORTABLE HANDBOOK

4.1 SELLING PROJECT MANAGEMENT TO

Selling project management to senior leaders requires that they recognize

4.1.2 Background on Strategic Planning

Senior leaders have the nondelegatable responsibility to establish the prin-

4.2 SECTION FOUR

4.1.3 Recognizing the Problem

• Having a management system that emphasizes accountability and con-

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