Project Management: A Powerful
Strategic Tool for Senior Teams

GMT recently worked with five divisions of a highly successful company, with a seemingly straightforward goal: To ensure that all five businesses continued to grow faster than their respective markets, achieving a 12% annual growth rate.

Each business was already a strong performer—three were dominant share leaders in their targeted markets, one was tied for the number one position in share, and the other enjoyed a number two position—which initially made it appear difficult to identify areas for performance improvement. In addition, the five divisions had a variety of growth initiatives in place that, on the surface, seemed to be adding value—including employee involvement, JIT training, self-directed work teams, activity-based management, total quality, and incentive programs.

But the five businesses weren't achieving close to the kind of growth needed to reach their targets. Working with the senior management of each business, GMT set out to find the key obstacles to growth—and help the businesses achieve their targets by seizing additional share.

GMT and the senior teams found these obstacles in an unexpected place: Project management practices within four divisions were not channeling resources toward the most important strategic growth opportunities. Short-term profit pressures often diverted resources, many projects weren't effectively linked to strategic plans, and strategic insight into key success factors was often missing.

What followed was an in-depth study of project management practices across the five divisions—as well as a benchmarking study of "best practices" nationwide. The aim was to reengineer the businesses' practices, so that project investments would be aimed at the best strategic growth targets and resources would be more efficiently used.

While each division had its own unique project management practices and challenges, it became apparent that a comparison of two of the businesses—Let's call them Division A and Division B—spanned the full spectrum of project management effectiveness and would yield important insights applicable to all.

Division A's problems included:

	Most projects didn't achieve original performance targets for growth or profit margins.
	Many projects weren't solidly linked to the division's strategic goals—they were "wrestling short-term alligators."
	Missed deadlines were seen as normal and okay—"standard operating procedure."
	Project management was viewed as a mechanical, lower management function, with little support from senior executives, except at periodic "review rituals."
	The senior team's project review process required frequent progress reports, but was counterproductive—because it was viewed by project managers as an intrusion, rather than a helpful aid to progress.

Division A's project management process was also undisciplined. While senior managers had the best intentions—encouraging "democracy" to empower employees—the result was a system with poor direction and few controls. By encouraging broad ownership of projects and a high level of team empowerment, senior management had created a situation in which no one assumed responsibility for results.

When project goals are not aligned with organizational goals, the
results are conflict—and widely scattered resources.

Employees in Division A believed that they had control of individual projects, but the effect on market share was a mystery to most. As shown in the above chart, the goals of the organization and the goals of individual project teams were in conflict—and, as a result, resources were fragmented, minimizing their impact on customer satisfaction, market share, and profitability.

The result of Division A's project management process was a mindset that can best be characterized as "accepted frustration." Projects failed to meet objectives because of misdirection, changing priorities, unforeseen obstacles, etc., and this situation was accepted—yet the causes were always the same. They didn't need to be a "mystery."

Division B, in contrast, seemed to be doing most of the "right things" in managing projects—from which Division A (and many other businesses) could learn a lot. Its process shared many characteristics with the practices of the "best" in our study—including 3M, General Electric, Motorola, and Hewlett-Packard:

	Projects were carefully selected—based on a shared understanding of strategic goals.
	There was an urgency associated with completing projects on time and within budget—driven by marketplace demands and performance requirements.
	A high return was expected for projects. Deadlines were respected as performance imperatives.
	Project managers were "champions" for their projects—and felt accountable for results, regardless of obstacles.
	Top executives regarded project management as an important, high-value activity—they became personally involved to help project teams overcome obstacles, but didn't hinder with "progress review bureaucracy."
	The status and results of projects were widely communicated—both successes and shortfalls—and linked to the employee incentive program.

The chart below demonstrates the balance between bottom-up
empowerment and top-down discipline needed for successful project management.

Division B and the "benchmark" companies had installed a disciplined, seemingly autocratic project management process; but the result was employees who had a far greater sense of empowerment than those in Division A. Project team members could see that their work had a direct effect on the performance of the company—and were energized to "get the job done." Employees understood the rules and were highly empowered to work within them. In Division B and the "best" companies in our benchmarking study, we found that senior management played a key role in leading crossfunctional project teams by defining the "what," "why," and "when" for projects—then empowering teams to discover the "how" on their own. In addition, teams were encouraged to refine the "why" and "when" as their work proceeded.

The chart on the left shows the balance of disciplined leadership from the top and high empowerment from the project teams found in the benchmark companies—and in Division B.

In addition, Division B and the "best" companies all had their own versions of a three-part process for directing, implementing, and evaluating all projects. As shown in the chart above, each of these three "stages" in a disciplined project management process also has individual "steps," with different areas of focus for each stage.

Following this disciplined approach ensures that process steps are addressed at the appropriate time and by the appropriate functions. For example, a team's resources won't be distracted by needlessly redefining project specs in mid-implementation—senior management would have already done so at an earlier stage.

Based on this process—and other observations about Division B and the "best" companies—GMT and the senior teams defined a "closed-loop" process that ensures project management effectively utilizes resources and is aimed at the issues most critical to growth in market share. The chart below outlines the process template that resulted. It reflects the best principles seen in benchmarked companies:

Step 1: Key division managers from three levels convene for an annual "agenda meeting." Business priorities are set, driven by growth targets.

Step 2: Critical issues are analyzed at a second workshop, where the strategic plan is merged with these priorities and an overall vision is created for the year, including a list of specific projects which support this vision.

Step 3: After this workshop, senior management compares the list of candidate projects to the resources available—and "edits" the list of projects to match the organization's project capacity. (Having performed Step #3 in prior years, they have a good feel for this capacity.)

Step 4: Projects are integrated into the yearly business plan; strategic and financial results are targeted for each project.

Step 5: Team members and roles are defined for each project; team accountabilities are established.

Step 6: The reward system is refined to fit the projects—with personal incentives that support teams' project success.

Step 7: Each team's mission and its expected impact are written and communicated division-wide.

Step 8: Under the guidance of management "champions," project teams establish their own tasks, deadlines, and milestones. The teams then manage the implementation of "their" projects.

Throughout the process, the entire organization "learns" from its successes and shortfalls, redesigns work processes, applies technology tools like computer-aided design (CAD), and thereby continuously improves its "project capacity."

This process template is a very disciplined "closed loop" which makes the rules for managing projects very clear throughout the business. The template applies the same management discipline normally reserved for directing complex manufacturing projects to the entire enterprise-wide process shown on page 7.

Using this template, project management becomes an ongoing process of continuous improvement—with results directly linked to strategy, quality, and performance. The ongoing learning from successes and mistakes is an important key to improving the performance of future projects.

Many executives believe their organizations are using a similar process—but, in fact, it is rare to find a company that truly follows this "closed loop." Too often, organizations start out with the best of intentions, but the process is violated because the rigid rules of the system are not adhered to—in the name of empowerment.

Executives are too "busy" to become involved up-front, project reviews are seen as intrusions, rewards don't "fit," communications are overlooked—and the result is the same: the "closed loop" is broken, resources are wasted, and projects fail to reach goals.

We've seen this same recurring pattern in many businesses: project resources are "wasted" because companies work on the wrong things and manage resources inefficiently. The result is that it's not unusual for businesses to "waste" 30% to 50% of their project resources.

The senior teams of these businesses can significantly increase their organizations' "project capacity" by implementing a project management system which is truly a "closed loop."

In fact, any business can benefit from this process template. Combining the discipline of a truly "closed-loop" process and the agility of a "learning enterprise" is the key.