This chapter describes how project management has evolved, project management team functions and goals, and the concept of project risk management. The chapter also describes risks specific to projects.

Taylor’s associate, Henry Gantt (1861-1919), studied in great detail the order of operations in work. His studies of management focused on naval ship construction during the First World War (1914 — 1918). His charts, complete with task bars and milestone markers, outline the sequence and duration of all tasks in a process. Gantt chart diagrams proved to be such a powerful analytical tool for managers that the charts remained virtually unchanged for nearly a hundred years. It was not until the early 1970s that link lines were added to these task bars, depicting more precise dependencies between tasks.

Taylor, Gantt and others helped evolve management into a distinct business function that requires study and discipline. In the decades leading up to the Second World War (1939-1945), marketing approaches, industrial psychology and human relations began to take hold as integral parts of business management.

Soon these techniques spread to all types of industries as business leaders sought new management strategies, tools and techniques to handle their businesses’ growth in a quickly changing and competitive world. In the early 1960s, general system theories of science began to be applied to business interactions.

Modern project management is a strategic, company-wide approach to the management of all change. Although it is underpinned by the traditional discipline of project management, it is broader in its application, concepts and methods. Central to the modern project management paradigm is the definition of a project according to Lane (1993) as:

Project management includes creating the right conditions by organising and controlling resources to achieve specific objectives (Elbing 2000). Every project has fundamental characteristics that make it unique in some way. These characteristics include objectives, value, timing, scope, size, function, performance criteria, resources, materials, products, processes and other physical parameters that define the project.

Project management is a central point in the organisation’s structure of a project where all information should be channelled. Clients of large projects often have no or less experience in project management than those involved in smaller repetitive projects. The main task is to lead the client through the life cycle and to realise the project on behalf of the client.

The project manager’s responsibilities are broad and fall into three categories: responsibility to the parent organisation, responsibility to the project and the client, and responsibility to members of the project team. Responsibility to the SBU itself includes proper conservation of resources, timely and accurate communication and careful, competent management of the project. It is very important to keep senior management of the parent organisation fully informed about the project’s status, cost, timing and prospects. The project manager should note the chances of being over budget or being late, as well as methods available to reduce the likelihood of these dreaded events. Reports must be accurate and timely if the project manager is to maintain credibility, protect both the corporate body and the SBU from high risk, and allow senior management to intercede where needed.

Communication is a key element for any project manager. Running a project requires constant selling, reselling and explaining the project to corporate and SBU levels, top management, functional departments, clients and all other parties with an interest in the project, as well as to members of the project team itself. The project manager is the project’s liaison with the outside world, but the manager must also be available for problem solving, and for reducing interpersonal conflict between project team members. In effect the project manager is responsible to all stakeholders regarding the project to be managed.

The control of projects is always exercised through people. Senior managers in the organisation are governed by the CEO, who is directed by such groups as the executive committee and/or the board of directors. Senior managers in turn try to exercise control over project managers, and the project managers try to exert control over the project team. Because this is the case, there is a certain amount of ambiguity, and from time to time humans make mistakes. It is therefore important that there are effective communication controls and standards and procedures to follow.

According to Turner and Simister (2000), the roles and responsibilities for the project manager are as follows:

Figure 9.2 depicts the vertical hierarchy of a construction organisation’s site project management team. All team members report through different routes to the project manager who in turn reports to the SBU.

The relationships between the project manger and the line managers are important. Often heads of organisational units who are higher than the project manager in the existing hierarchical organisation do not want to co-operate as they should. They want the power to decide independently on things which are not within their competence. If they do not get what they want they hamper the project through passive or covert opposition. Members of the project team who are higher up the hierarchical ladder sometimes will not permit ‘some project managers’ to report on their work and report on it to an executive (Field and Keller 1999).

Below is a list of typical members of a project team with their usual duties:

The question of project success can be answered on different levels or at different points of view. If one project participant, for example a contractor, architect or consultant, achieves a reasonable profit, the project is a success for this party. From a project management point of view, success is realising a project on time, within budget and to specifications. The project must satisfy the client (Fachtagung Projektmanagement 1998).

For investors their success can be measured in terms of return on their investment. However, there are other measures for success. If the project is a great service for the community it is also a success up to a certain level independent of the costs and completion date. Examples include the Thames Barrier and the Sydney Opera House (Morris and Hough 1987).

In fact, a great majority of all decisions made in the course of managing a project are actually made under conditions of uncertainty. In general, many project managers adopt the view that is usually best to act as if decisions are made under conditions of risk. This will often result in estimates being made about the probability of various outcomes. If project managers use appropriate methods to do this, they can apply the knowledge and skills they have to solving project decision problems.

Project risk management is a process which enables the analysis and management of risks associated with a project. Properly undertaken it will increase the likelihood of successful completion of a project to cost, time and performance objectives. However, it must be noted that no two projects are the same, causing difficulties with analysis and troubleshooting. In most cases things go wrong that are unique to a particular project, industry or working environment. Dealing with project risks is therefore different from situations where there is sufficient data to adopt an actuarial approach (Gareis 1998).

The first step at project level is to recognise that risk exists as a consequence of uncertainty. In all projects there will be risks of various types:

Turner and Simister (2000) believe benefits gained from using project risk management techniques serve not only the project but also other parties such as the organisation as a whole and its customers. Below is a list of the main benefits of project risk management:

Norris et al. (2000) believe that there are five points in a project where particular benefits can be achieved by using project risk management:

Uncertainty decreases as the project moves towards completion. From the project start time, the band of uncertainty grows until it is quite wide by the estimated end of the project. As the project develops the degree of uncertainty about the final outcome is reduced. In any event, the more progress made on the project, the less uncertainty there is about achieving the final goal.

The project manager must have a good knowledge of the stakeholders in the project and their power. A consensus must be found with the majority of participants in the project. This is often not easy because stakeholders have conflicting interests. It is important that project managers continuously analyse the positions of the stakeholders, their expectations, their needs and foreseeable reactions. If the stakeholders think that they will only be collaborating once, then it is difficult to achieve creative co-operation (Simon et al. 1997).

The technology of a culture includes such things as tools used by people, the material things they produce and use, the way they prepare food, their skills and their attitude towards work. It embraces all aspects of their material life (Haynes 1990).

The institutions of a culture make up the structure of society (The Economist 2001). This category contains the organisation of the government, the nature of the family, the way in which religion is organised as well as the content of religious doctrine, the division of labour, the kind of economic system adopted, the system of education, and the way in which voluntary associations are formed and maintained.

Language is another ingredient of all cultures. The language of a culture is always unique because it is developed in ways that meet the express needs of the culture of which it is part. The translation of one language into another is rarely precise. Words carry connotative meanings as well as denotative meanings. The word ‘apple’ may denote a fruit, bribery, ‘for the teacher’, New York City, a colour, a computer, favouritism, ‘of my eye’, as well as several other things (Johnson and Scholes 1999).

Finally, the arts or aesthetic values of a culture are as important to communication as the culture’s language. If communication is the glue that binds culture together, art is the most important way of communicating. Aesthetic values dictate what is found beautiful and satisfying. If a society can be said to have style, it is from the culture’s aesthetic values that style has its source (Jaafari 2001).

The present authors also believe that decommissioning risks play a fundamental part in risk management at project level. These are the risks associated with plant or machinery at the end of the project’s life cycle. For example, what will be done to a nuclear power station when it is decommissioned? What are the costs of decommissioning? What are the environmental effects? And which stakeholders are affected and how?

Cooper and Chapman (1987) suggest that the need for emphasising risk assessment is particularly apparent when projects involve:

Figure 9.3 shows the level of risk plotted against the stage of the project. As the diagram indicates greater risk at the earlier stages of the project cycle, it can be concluded that this is where the majority of risk management efforts should be concentrated as it offers greater yields (Merna and Owen 1998).

Precise quantitative data are unlikely to be available. Techniques such as Delphi, benchmarking and interviews can be used to get qualitative rankings and quantitative range estimates of both impact and probability. These tools are particularly useful, as the parties involved can be geographically disparate.

The greatest change comes at project level. The project strategy plan focuses on how all the macro-environmental factors and the micro-effect project success will be managed in order to meet the goals set by the business unit strategy.

During the feasibility stage of the project qualitative risk analysis and quantitative sensitivity analysis are appropriate. As the project progresses and a project network is defined, computer modelling such as Monte Carlo simulation can be performed. The major advantage is that it considers the effects of variables in combination, resulting in cumulative frequency predictions for the major strategic goals. This technique is particularly useful for selecting mitigating actions as their effect can be predicted by rerunning the modified model.

Khan (2006) suggests that identified risks such as bad weather, supplier unreliability and technical delays can be mitigated in a cost-effective way. Khan states that one solution has its roots in that most fundamental of project planning processes, the project schedule and the associated knowledge network. By incorporating risk and uncertainty parameters in respect of the individual activities within the schedule, and then applying simulation techniques to extrapolate potential outcomes, project managers can build up a precise picture of where mitigation will be most effective. Resources can be intelligently allocated to mitigate against risks where the probability of occurrence and consequence are clearly understood.

Issues of risk that relate to people are often reclassified as management of ‘human resources’ and so are ignored as risk factors; consequently a large element of risk assessment is excluded from project risk management. The nature of the uncertainty which people contribute to the project can be divided into two principal areas: human resource management issues, concerned with effective management competencies and practices, and the perspectives of stakeholders concerning the project and its attendant risks (Oldfield and Ocock 1999).

The importance of effective management practices has often been highlighted, the main concerns being centred around poor leadership, lack of communication, lack of provision of necessary resources, insufficient use of resources, work overload, lack of knowledge, lack of decision-making authority, and inability to estimate accurately tasks and processes. Identification of these dimensions would aid the project manager’s decision making and improve the quality and efficiency of the management process (Oldfield and Ocock 1999).

In many cases of project failure, the necessary information concerning risks and problems is available within project teams but often not sought out by management (Oldfield and Ocock 1999). A common problem in project risk management processes is the need to determine the relative significance of different sources of risk so as to guide subsequent risk management effort and ensure it remains cost effective. Chapman and Ward (1997) consider the use of probability impact grids to identify sources of risk which will receive most attention. In particular it is important to distinguish between the size of impacts and the probability of impacts occurring, the range of feasible responses and the time available to respond.

The risk management plan is the process of identifying and controlling the business, technical, financial and commercial risks throughout the project’s life cycle by eliminating or reducing the likelihood of occurrence and the potential impact caused by any threat. For commercial undertakings, any impact on the project outcome is to be expressed in the terms of cost. Financial impact is therefore a baseline to measure risk. Risk that has a timescale is to be converted into cost. This will enable accounts to raise provisions early in the project if they are needed. It is important to remember that strategic project planning is the synergy between a best practice culture of project management and the effective implementation of corporate strategy, goals and objectives (Blanden 2002).

In discussing future issues in project management, Turner (1994) cited the study of risk management as an emerging area for academic study based on journal submissions. Whilst it may be said that the further development of technically specialist areas will certainly take place, the project manager’s role will almost certainly move from that of a technical specialist, who has taken on the role of co-ordinator of a project, to that of a change agent. The function that these managers perform will be recognised as increasingly important for the survival of the organisation in all sectors, by management of all the stakeholders in projects. In addition there is the search for new management structures (Maylor 1996).

Barnes (2007) suggests that the way to make risk management work is to make it integrated, by taking steps to ensure that key players want to come and take part in the process because it benefits them all. Barnes suggests that there are two ways of moving in this direction:

This chapter outlined the history of project management and its functions. It also highlighted the importance of project management and its teams. Project risk, project managers as risks, and project risk strategy were also considered within this chapter.