Economic Forces

The basis of global economics involves the creation of economic interrelations across geographical boundaries as defined by national borders through the production, exchange, and consumption of goods and services. Global free-market economics is stimulated by the flow of money and capital between nations by large and small transnational corporations, international economic institutions, and trading systems that create interdependencies between national economies.⁶

World economics of the past several centuries has been dominated by two philosophies: free-market economics and Keynesian economics. Free-market economics is rooted in the view of Adam Smith (1723–1790), who defined markets as self-regulating mechanisms that drive toward a balance between supply and demand of goods and services.⁷ Within a free-market system, trade in goods and services between nations is unhindered by government-imposed restrictions such as taxes, tariffs, and quotas. Free-market economics is characterized by free access to markets, free movement of labor between nations, and free movement of capital between nations.

Keynesian economics, conversely, advocates nation-state influence of world economic policy. John Maynard Keynes (1883–1946) believed that economic systems would not automatically balance by themselves; therefore, macroeconomic control by government institutions is needed to ensure balance and equity within an economy. Macroeconomic control includes control of money supply, control of interest rates, and control of market access. Keynesian theory recognizes that economic systems will realize points of downturn and even depression and that these systems are not self-correcting; rather, they need support and influence from government interventions to boost the system in recovery.⁸

Whether dominated by free-market policy, Keynesian policy, or a combination of the two—today's most common method—economics is the primary driver that motivates corporate leaders to explore beyond their traditional strategic boundaries. It is economics that drives the world's entrepreneurs and business leaders to seek new markets for their goods and services, to find new suppliers for their raw materials, to develop worldwide sources for production and distribution, and generally to evaluate the world's resources for potential competitive advantage and product optimization. Economics therefore is the driving force that creates our virtual organizations and virtual project work.⁹

Political Forces

World politics is the second primary force that affects globalization. Rarely have economic globalization forces been able to operate independently from political forces. Most often, global economic expansion and contraction is set in motion by a series of political actions. The basis of world politics is the generation, distribution, and control of power and influence.¹⁰ For many centuries, control of power has been achieved by creating territorial lines that defined national borders. In doing so, artificial boundaries have been created that allow us to view the world as a series of “domestic” and “foreign” relationships.

The political force pressuring globalization involves the partial permeation of these national boundaries in order to expand the trade of goods and services. Fledgling entrepreneurs have not been able to achieve expansion of their businesses on a global basis without the support of their governments and of the governments of their trading partners.¹¹

Although recently we have seen the world influenced by the decisions of the Global20 nations, over the past 50 years, governments have funded the early development of technologies that were later commercialized and are now common in our personal and work lives today. Many of these advancements came out of the competition and conflict between the U.S. and Russian governments in trying to win the race to the moon and the Cold War. Today we are witnessing competitive business wars beyond Russia and the United States. Businesses from around the world are competing to be first to market with a sustainable product base and growing customer demand. Those with the most compelling offerings and most effective globalization strategy/execution combination will win, and the followers will be forced to resort to reactive strategies for survival. Because of these competitive conditions, political forces directly affect globalization and virtual project work.¹²

Technology Forces

Technology is the third primary globalization force. Although economics is the true driving force for globalization and politics is mainly a guiding force that either stimulates or contracts globalization, technology is the force that makes globalization both more effective and efficient. Said another way, the speed of globalization is dependent on the conditions for technological use and advancement of technology development.

The basis of technology as a globalization force is in the development and dissemination of new ways to expand our global reach, to facilitate the interaction and interdependencies of humans across the globe, and to enable the flow of monetary exchange across national borders.¹³

Early technology development focused on more effective forms of transportation to help explorers overcome geographical barriers that prevented them from opening new trade routes to expand their markets. Later, new power technologies, such as coal, steam, and petroleum, helped to make transportation of goods and services much more efficient.¹⁴ This led to the invention of mechanized shipping, railway systems, and automotive and air transportation. Additionally, the introduction of electricity spawned new communication technologies, such as the telegraph, radio, television, telephone, and electronic money exchange.

Today, much technological development has been focused on the introduction of collaborative technologies that have resulted in such deep permeation of national boundaries that those boundaries no longer prevent people from collaborating and participating in the exchange of goods and services. These technologies include internet technologies, business-to-business technologies, and work-flow technologies that enable knowledge work to be disaggregated, distributed, and reintegrated across the globe. Collectively recognized as “technology,” this force speeds the rate at which globalization can expand, and it also accelerates the potential of virtual project teams.¹⁵

Interaction among the Globalization Forces

It helps to look at each of the three primary forces of globalization separately to better understand their influence on globalization. However, the forces themselves do not operate independently. It is the interaction among economic, political, and technology forces that has historically had the most dramatic influence on globalization.

We use the tricircle model shown in Figure 1.1 to graphically demonstrate the interactions among the globalization forces and the resulting impacts on the world economies. We provide this analysis to help virtual project managers become more aware of the dynamic forces in play within the environment in which their projects operate.¹⁶

Globalization can be characterized by drivers, enablers, and accelerators. Economics is the globalization driver, meaning the quest for greater economic gain has fueled the human desire to connect with others across the globe to expand the production and sales of goods and services primarily for prosperity, but also for human connection.

Politics is the globalization enabler. Political policy is driven by the agendas of the world's nation-state leaders, which in turn either positively or negatively affect global economic interconnection between nations.

The third force, technology, is the globalization accelerator. Historically, significant advances in various technologies have increased the pace in which people and economies have become interconnected.

These three forces are not static. Rather, each is very dynamic and always in flux. When the globalization forces are independent in nature, as demonstrated in Figure 1.1, it represents a period of slow globalization expansion or, more likely, globalization contraction. When the globalization forces become highly integrated, as demonstrated in Figure 1.2, a state of globalization exists where all three forces are at work to facilitate the wide and rapid expansion of globalization. Such is the state of globalization today, where most world economies and monetary exchanges are driving globalization, political stability, and alignment are enabling continued globalization into new and larger markets, and the advent of new work-flow technologies has accelerated knowledge work activities, allowing work to be distributed digitally to workers across the globe.¹⁷

The integration of the globalization forces is causing changes that will continue for the foreseeable future despite continual resistance to the trend as well as constant challenges associated with executing in a global environment. For those of us caught in the changing tide, it is time to adjust our perspectives and sharpen our skills to ensure our personal success—and the success of our companies—in this wave of globalization that is fueling the virtualization of our companies and our projects.

Virtual Project Teams Are Distributed

The most obvious difference between virtual projects and traditional projects is the fact that team members are geographically distributed on virtual projects. Our first attempts at leading virtual projects normally involve trying to replicate the team and resource management practices used for traditional teams in the virtual team environment with little consideration for the effectiveness of the fit.²⁰ This approach usually faces challenges because different approaches are required in the virtual project environment for team building, communication, collaboration, and integration of distributed work. This is not to say that all traditional practices and processes for managing a project have to be modified for virtual projects. As we explain in chapters to follow, the key is knowing which can carry over, which need to be modified, and which need to be replaced with new practices.

The overwhelming amount of literature and training over the past 15 years on the subject of virtual projects has focused on the people side of project management. This is probably due to the fact that historical approaches to training and certifying project managers has left a vast gap in knowledge required for managing the people side of projects. As project managers transition from managing traditional projects to managing virtual projects, people issues become amplified because they affect team cohesiveness and trust between team members. The people issues then in turn affect how well traditional project management methods and processes work on a virtual project.

In the chapters that follow, we focus on the necessary practices for building a virtual team with a sense of common community and purpose, making changes necessary for increased team monitoring and feedback, managing across multiple time zones, dealing with virtual conflict and differences in language and culture, communicating asynchronously via technology, and changing reward systems that are necessary for geographically distributed project teams.

Virtual Projects Are More Complex

Virtual projects are built on interconnectivity of organizational, human, and electronic networks. This high level of interconnectivity makes virtual projects more complex by nature than traditional projects.

After years of working with complexity, Richard Cook, the deputy project manager of the Mars Science Laboratory at NASA, concludes that the word complexity “is frequently thrown around as a sort of synonym for difficult.”²¹ Cook notes, however, that “complexity is the quality of being intricately combined.” He distinguishes complexity from difficult based on “the number of interconnected elements that are tied together technically, programmatically, and organizationally.”

This gives us great perspective on why virtual projects are so complex. Virtual project teams perform much of their communication and collaboration through a highly interconnected technology platform. Further, the various outcomes and project deliverables generated by the distributed team are highly interdependent and need to be integrated programmatically to create a holistic solution. Finally, the ability to distribute project work across the globe opens the opportunity for interconnected collaboration between partner organizations. The more distributed the virtual project, the more complex it becomes, as illustrated in Figure 1.3.²²

When project teams are co-located in a single location—Palo Alto, California, in our example—the workplace is physical. Even though some elements of the project have virtual characteristics (such as electronic communication), complexity is strictly related to the project structure itself.

If we look at the next logical step in creating a virtual organization, expanding nationally, complexity associated with working in a virtual environment becomes additive to the base complexity of the project. Now interconnectedness becomes separated by time and distance and must be held together by human, organizational, and technological networks.

Since international boundaries are no longer a constraint to business expansion and partner alliances, when organizations expand their virtual organization internationally, project complexity once again increases, as depicted in Figure 1.4.

In globally distributed virtual projects, additional cultural, language, and time zone challenges emerge. These factors create an environment of maximum project complexity that has to be comprehended and managed.

The criticality of performing a project complexity assessment is a distinguishing difference between virtual and traditional projects. A complexity assessment (Chapter 2) should be performed early in the life cycle of a virtual project. The information gained from the assessment will assist project managers in determining the level of complexity of their projects. The information also aids project managers in determining the skills and experience levels required of project team members and in guiding the implementation of key project processes, such as change management and risk management, evaluating the amount of contingency reserve to incorporate into the project schedule and budget, and adapting their management style to the complexity level of the project.²³

Greater Focus on Integration Required

As complexity increases, the need for more work interdependencies between virtual project team members also increases. Managing a virtual project means designing and managing a network of interdependencies among distributed team members.

As project work becomes more distributed, it becomes more decentralized. This is illustrated in Figure 1.5, which shows a simplistic view of the distribution of work packages for a globally distributed project team chartered with designing and developing a mobile device, such as a smartphone.

Not only does the product have to be designed from a systems perspective, so does the distribution of work to create the product. The illustration indicates that the project work is accomplished in a very fragmented manner on a virtual project, and it will remain fragmented unless the integration of the work outcomes of the various project specialists is purposefully managed and integrated.

Of the nine knowledge areas associated with the Project Management Institute's project management methodology, the integration knowledge area often receives the least attention and focus from project managers. This is understandable for traditional projects because much of the integration of project work is accomplished through the centralized management of tasks and interdependencies. When tasks become highly distributed, which is the case on virtual projects, it becomes challenging to maintain centralized management at the task level. Most of this responsibility is in fact decentralized and distributed to the various locations where the work is being performed. Project managers now must focus on establishing centralized management of the project outcomes or deliverables. An important element of centralized management at this higher level is the integration of the various project outcomes to create a synthesized and holistic solution.

This integration of work is a difficult process for many reasons, one of which has to do with testing base assumptions made by project team members as they conduct their work. Like members of traditional projects, virtual project team members have to perform much of their work, and create their project deliverables, on a series of assumptions. When incorrect assumptions are made, they are normally discovered and corrected through direct communication and collaboration with other team members. On virtual projects, however, there is a decrease in direct communication among team members, a lack of informal meetings, and limited synchronous collaboration as compared to co-located teams. It is rare, therefore, that incorrect assumptions are discovered through normal means of communication and collaboration. Rather, they usually are found when work outcomes and deliverables are created and then integrated with other elements of the project. Incorrect assumptions emerge in the form of inconsistencies that are discovered between what was created and what was expected by other team members. These inconsistencies then have to be reconciled through the integration process.

Decision Making Is Decentralized

There are hundreds, some say thousands, of decisions that have to be made during the course of a project. Some are small and relatively insignificant, some are big and critical to the success of the project, some are incremental and follow a pattern or trend, while some are ambiguous and have never been encountered before. Whether big or small, nearly all decisions need to involve discussion, debate, and input from various project players. Traditional projects benefit from co-located team members and stakeholders who can assemble and engage in a rich discussion concerning a particular decision. Virtual teams do not have this luxury, and the separation of team members by time and distance can become an inhibitor to timely decision making. Therefore, a common ailment affecting virtual teams is slow decision making.²⁴ To combat this ailment, modifications to project management decision processes have to be made.

The team charter (Chapter 2) is an ideal project artifact for documenting team decision-making processes.²⁵ In particular, project decision processes are likely to be different in the virtual project environment as compared with the more traditional project environment that most team members have experienced.

On a traditional project, the project manager is the primary person providing leadership for the project. On a virtual project, however, leadership typically is shared among team members based on location and task at hand. This includes decision-making leadership.²⁶ A more complex centralized/decentralized decision framework has to be established for virtual projects. (See Chapter 6.) Decisions that directly affect the success of the project, such as those that can change the project schedule, need to remain centralized with the project manager. Other decisions need to be decentralized and moved to where the decision outcome will be implemented. These decisions, such as the hiring of a particular project team member, become the responsibility of the project personnel within the location who can make the decision in a more timely manner.

In order to make distributed decision making possible, two key factors must be present. First, the project manager must assign and document specific decision responsibility to the distributed project team members. Second, distributed decision making can quickly become ineffective if those given decision responsibility are not also given the authority to make and own the decisions. Project managers must empower the virtual team members who have been delegated decision responsibility by clearly communicating and documenting their decision authority to all project stakeholders.

Greater Hesitance to Share Information

Because virtual project team members share most of their information electronically, often they hesitate to share information at all. This is especially true early in team formation and engagement. The problem has much to do with trust, particularly trust that the information will be used properly. Unfortunately, project decisions, like all decisions, rely on information. Decision makers on virtual projects have to be more deliberate in requesting, extracting, and brokering the exchange of information that supports their decisions than their counterparts on traditional projects, where the flow of information is more forthcoming, fluid, and facilitated by verbal conversation.

Virtual project managers also have to be more systematic about the collection of information and repeatedly ask team members if they have anything else to share that hasn't already been supplied. Hoarding information as a source of power is a common phenomenon, and it can be a barrier to success for a virtual project. It is vital for virtual project success that project managers be proactive in searching for information and not passively waiting for it to arrive; it may never be supplied.

Maintaining Strategic Alignment Is Difficult

For any project, success is ultimately measured in some form of return on investment (ROI).There are many ways to measure ROI, but they all boil down to a common formula:²⁷

It is important to note that maintaining alignment to the strategic goals for which the project was intended to achieve is in many ways a much more difficult task for virtual projects. Team members on a virtual project are more geographically, physically, and sometimes culturally isolated not only from other team members but from their organization as a whole.²⁸

It is the responsibility of the managers of virtual projects to ensure that all team members share a clear sense of how their work fits in with the overall project vision and that they are committed to the strategic success of the organization. Maintaining strategic alignment begins and ends with clear communication on the part of project managers on two primary pieces of information:

1. Where we are going (strategic goals to achieve)
2. How we are going to get there (collaborative planning and execution)

This information is essential for ensuring that the distributed work outcomes and actions taken do not violate a strategic principle or interfere with the strategic direction of the organization. If a violation occurs, there is an increased likelihood that execution outcomes will become misaligned with the strategic goals of the business.

Like traditional projects, virtual projects work within the functional paradigm where team members report to a functional department, or silo, and are “loaned” to the project on a temporary basis. This arrangement can interfere with team members' commitment to project goals as they now have two alliances: one to the functional organization to which they belong and one to the project. Functional work obligations often assume a higher priority, causing team members to lose sight of the project's strategic objectives and how their piece of the project contributes to the overall desired outcome.²⁹ This is a cultural issue more than a project issue, but it is left to project managers to help team members navigate these dual priorities by establishing a clear and common purpose. The project charter, team charter, project vision, and success measures take on a more critical role on virtual projects and become the most valuable tools for virtual project managers in establishing and maintaining alignment to the strategic goals driving the need for the project.

Cross-Team Connections Are Slow to Develop

We have already explained that virtual projects are primarily established on a series of networks (organizational, technological, and human) and not physical locations. This additional complexity, of course, creates challenges because very few network connections between team members exist on a virtual project, especially in the early stages of team formation. The human network especially takes time to establish because connections are built on trust, personal relationships, and direct communication between team members.

Until network connections between virtual team members are fully in place, it falls on project managers to personally establish many of the cross-team connections. Project managers find themselves having to directly and purposefully facilitate the communication and collaboration among team members until a point where the networks are sustainable. (See Figure 1.6, where PM stands for project manager.)

The need to facilitate connections is the case on traditional projects as well. The difference is that once a network connection is established by project managers of traditional projects, the ability to hold face-to-face interaction quickly takes over and solidifies the connection. On virtual projects, team member interaction is occurring through the use of technology without the benefit of face-to-face interaction. As a result, project managers have to stay involved in the interaction through a larger number of communication exchanges and, therefore, for a longer period of time. Sewa Bhatt, an experienced virtual project manager, explains her personal experience with establishing team connections:

One thing that has helped me with my virtual teams is making special effort to establish the connections—which also includes social connections and networking. This seems to happen naturally with co-located team members, but not with virtual teams.

Having to act as conduits for cross-team communication and collaboration puts additional pressure on project managers—pressure that demands significantly greater commitment of their time. Project managers new to managing virtual projects often are unprepared for the amount of time and effort required to establish the cross-team network. However, it is a critical role that has to be filled, even though it is outside of traditional project management duties.

Team Interaction through Technology

It is fundamental to project work that all project teams exchange ideas and project data. This exchange requires information sharing across the project team. By nature, virtual project teams have to depend heavily on information technology to share information through communication and collaboration and to assist them in their day-to-day work activities.³⁰ Core project management and team leadership skills are of course a greater factor in success or failure of virtual projects, but if we didn't have the information technology tools we have today, virtual projects would not be possible.

The heavy reliance on technology is a key differentiator between traditional and virtual projects, even though technology use on traditional projects has increased. The difference is that the separation of time, distance, and sometimes culture requires technological tools that allow for effective asynchronous interaction and collaboration. Additionally, synchronous tools, such as audio conferencing technologies, must be chosen properly to improve, not inhibit, effective distributed team interaction. (See the box titled “Technology Must be Useful to Be Used.”)

On a day-to-day basis, technological tools enable the generation of work outcomes, online collaboration and review of deliverables, review of tasks completed and tasks to be performed, collection and monitoring of team progress, tracking progress against team metrics, and storing of project information, to name just a few. The primary role of technology in distributed teamwork is one of overcoming the challenges created by time, distance, complexity, and the diversity of participants on a virtual project.¹⁴ Successful use of technology on a virtual project hinges on understanding how the team will communicate and collaborate, understanding how technology can be leveraged to improve team communication and collaboration, matching technology selection to communication and collaboration methods and practices, and then using the technology efficiently to improve the team's performance.

Senior leaders and project managers should select electronic technologies that best meet the needs and usage of the virtual project teams and that integrate with the current suite of tools used within the organization. Note that there is no ideal set of technologies for all teams. A clear plan for matching technology options to the communication and collaboration needs of their project teams must therefore be developed for a virtual project by the management of the organization and the identified virtual project manager. (See Chapter 8.)

Diligent Monitoring Required

As in all projects, monitoring of tasks and project progress in a virtual project is an essential element of managing to a successful outcome. It should be recognized, however, that managers of traditional projects have a distinct advantage when it comes to monitoring progress on their projects because their teams are co-located. The advantage comes in being able to manage by walking around to gain a sense of the project progress on a daily basis, if desired. This management method gives project managers the ability to verify that what the team is doing is similar to what is being reported. For virtual projects, this verification process is more difficult.

Two things are required to adequately monitor progress on a virtual project: a more formal project reporting system and additional effort on the part of project managers to collect work and project status information.

On a traditional project, project managers can easily call a meeting with little advance notice and preparation to discuss project status on a particular issue facing the team.¹⁴ This, of course, takes advantage of the physical proximity of team members. Managers of virtual projects, however, must be much more organized and proactive because spontaneous or near-spontaneous meetings are rare due to the difficulty in getting the right participants in a meeting on short notice because of the physical and time distribution of the team.

Virtual projects require the institution of a more formal project monitoring and reporting system to keep team members informed of progress of individual tasks and the project as a whole. A formal system defines a specific sequence of reporting, format, and frequency of data input to the system, meeting requirements, and the type, quality, and frequency of progress reports generated.

A formal reporting system does not free virtual project managers from staying in communication contact with team members. On the contrary, virtual project managers must be diligent about continually pulsing team members, albeit by electronic means, to ensure work is progressing as planned and that no issues are blocking team member efforts. See the box titled “When Managing Virtual Teams” to read one project manager's description of how she changes her practices when managing virtual projects.

Virtual Project Manager Assessment

Date of Assessment: __________

Virtual Project Manager Name: __________________________________

Assessment Completed by: _____________________________________

Confidential Assessment: ______ Yes, confidential

                                              ______ No, not confidential