Project Management Cultures Case Study
Project management methodologies, regardless how good, are simply pieces of paper. What converts these pieces of paper into a world-class methodology is the culture of the organization and how quickly project management is accepted and used. Superior project management is attained when the organization has a culture based upon effective trust, communication, cooperation, and teamwork.
Creating a good culture cannot be done overnight. It may take years and strong executive leadership. Good project management cultures are leadership by example. Senior management must provide effective leadership in the same manner that they wish to see implemented by the corporate culture. If roadblocks exist, then senior management must take the initiative in overcoming these barriers.
Como Tool and Die (A)
Como Tool and Die was a second-tier component supplier to the auto industry. Their largest customer was Ford Motor Company. Como had a reputation for delivering a quality product. During the 1980s and the early 1990s, Como’s business grew because of its commitment to quality. Emphasis was on manufacturing operations, and few attempts were made to use project management. All work was controlled by line managers who, more often than not, were overburdened with work.
The culture at Como underwent a rude awakening in 1996. In the summer of 1996, Ford Motor Company established four product development objectives for both tier one and tier two suppliers:
- Lead time: 25–35 percent reduction
- Internal resources: 30–40 percent reduction
- Prototypes: 30–35 percent reduction (time and cost)
- Continuous process improvement and cost reductions
The objectives were aimed at consolidation of the supply base with larger commitments to tier one suppliers, who would now have greater responsibility in vehicle development, launch, process improvement, and cost reduction. Ford had established a time frame of twenty-four months for achievement of the objectives. The ultimate goal for Ford would be the creation of one global, decentralized vehicle development system that would benefit from the efficiency and technical capabilities of the original equipment manufacturers (OEMs) and the subsupplier infrastructure.
STRATEGIC REDIRECTION: 1996
Como realized that it could no longer compete on quality alone. The marketplace had changed. The strategic plan for Como was now based upon maintaining an industry leadership position well into the twenty-first century. The four basic elements of the strategic plan included:
- First to market (faster development and tooling of the right products)
- Flexible processes (quickly adaptable to model changes)
- Flexible products (multiple niche products from shared platforms and a quick-to-change methodology)
- Lean manufacturing (low cost, high quality, speed, and global economies of scale)
The implementation of the strategy mandated superior project management performance, but changing a sixty-year culture to support project management would not be an easy task.
The president of the company established a task force to identify the cultural issues of converting over to an informal project management system. The president believed that project management would eventually become the culture and, therefore, that the cultural issues must be addressed first. The following list of cultural issues was identified by the task force:
- Existing technical, functional departments currently do not adequately support the systemic nature of projects as departmental and individual objectives are not consistent with those of the project and the customer.
- Senior management must acknowledge the movement away from traditional, “over the fence,” management and openly endorse the significance of project management, teamwork, and delegation of authority as the future.
- The company must establish a system of project sponsorship to support project managers by trusting them with the responsibility and then empowering them to be successful.
- The company must educate managers in project and risk management and the cultural changes of cross-functional project support; it is in the manager’s self interest to support the project manager by providing necessary resources and negotiating for adequate time to complete the work.
- The company must enhance information systems to provide cost and schedule performance information for decision-making and problem resolution.
- Existing informal culture can be maintained while utilizing project management to monitor progress and review costs. Bureaucracy, red tape, and lost time must be eliminated through project management’s enhanced communications, standard practices, and goal congruence.
The task force, as a whole, supported the idea of informal project management and believed that all of the cultural issues could be overcome. The task force identified four critical risks and the method of resolution:
- Trusting others and the system.
- Resolution: Training in the process of project management and understanding of the benefits. Interpersonal training to learn to trust in each other and in keeping commitments will begin the cultural change.
- Transforming sixty years of tradition in vertical reporting into horizontalproject management.
- Resolution: Senior management sponsor the implementation program, participate in training, and fully support efforts to implement project management across functional lines with encouragement and patience as new organizational relationships are forged.
- Capacity constraints and competition for resources.
- Resolution: Work with managers to understand constraints and to develop alternative plans for success. Develop alternative external capacity to support projects.
- Inconsistency in application after introduction.
- Resolution: Set the clear expectation that project management is the operational culture and the responsibility of each manager. Set the implementation of project management as a key measurable for management incentive plans. Establish a model project and recognize the efforts and successes as they occur.
The president realized that project management and strategic planning were related. The president wondered what would happen if the business base would grow as anticipated. Could project management excellence enhance the business base even further? To answer this question, the president prepared a list of competitive advantages that could be achieved through superior project management performance:
- Project management techniques and skills must be enhanced, especially for the larger, complex projects.
- Development of broader component and tooling supply bases would provide for additional capacity.
- Enhanced profitability would be possible through economies of scale to utilize project managers and skilled trades resources more efficiently through balanced workloads and level production.
- Greater purchasing leverage would be possible through larger purchasing volume and sourcing opportunities.
- Disciplined coordination, reporting of project status and proactive project management problem-solving must exist to meet timing schedules, budgets, and customer expectations.
- Effective project management of multitiered supply base will support sales growth beyond existing, capital intensive, internal tooling, and production capacities.
The wheels were set in motion. The president and his senior staff met with all of the employees of Como Tool and Die to discuss the implementation of project management. The president made it clear that he wanted a mature project management system in place within thirty-six months.
- Does Como have a choice in whether to accept project management as a culture?
- How much influence should a customer be able to exert on how the contractors manage projects?
- Was Como correct in attacking the cultural issues first?
- Does the time frame of thirty-six months seem practical?
- What chance of success do you give Como?
- What dangers exist when your customers are more knowledgeable than youare concerning project management?
- Is it possible for your customers’ knowledge of project management to influence the way that your organization performs strategic planning for project management?
- Should your customer, especially if a powerful customer, have an input in theway that your organization performs strategic planning for project management? If so, what type of input should the customer have and on what subject matter?
Como Tool and 1 Die (B)
By 1997, Como had achieved partial success in implementing project management. Lead times were reduced by 10 percent rather than the target of 25–35 percent. Internal resources were reduced by only 5 percent. The reduction in prototype time and cost was 15 percent rather than the expected 30–35 percent.
Como’s automotive customers were not pleased with the slow progress and relatively immature performance of Como’s project management system. Change was taking place, but not fast enough to placate the customers. Como was on target according to its thirty-six month schedule to achieve some degree of excellence in project management, but would its customers be willing to wait another two years for completion, or should Como try to accelerate the schedule?
FORD INTRODUCES “CHUNK” MANAGEMENT
In the summer of 1997, Ford announced to its suppliers that it was establishing a “chunk” management system. All new vehicle metal structures would be divided into three or four major portions with each chosen supplier (i.e., chunk manager)
COMO TOOL AND DIE (B)
responsible for all components within that portion of the vehicle. To reduce lead time at Ford and to gain supplier commitment, Ford announced that advanced placement of new work (i.e., chunk managers) would take place without competitive bidding. Target agreements on piece price, tooling cost, and lead time would be established and equitably negotiated later with value engineering work acknowledged.
Chunk managers would be selected based on superior project management capability, including program management skills, coordination responsibility, design feasibility, prototypes, tooling, testing, process sampling, and start of production for components and subassemblies. Chunk managers would function as the second-tier component suppliers and coordinate vehicle build for multiple, different vehicle projects at varied stages in the development–tool–launch process.
STRATEGIC REDIRECTION: 1997
Ford Motor Company stated that the selection of the chunk managers would not take place for another year. Unfortunately, Como’s plan to achieve excellence would not have been completed by then, and its chances to be awarded a chunk management slot were slim.
The automotive division of Como was now at a critical junction. Como’s management believed that the company could survive as a low-level supplier of parts, but its growth potential would be questionable. Chunk managers might find it cost-effective to become vertically integrated and produce for themselves the same components that Como manufactured. This could have devastating results for Como. This alternative was unacceptable.
The second alternative required that Como make it clear to Ford Motor Company that Como wished to be considered for a chunk manager contract. If Como were to be selected, then Como’s project management systems would have to:
- Provide greater coordination activities than previously anticipated
- Integrate concurrent engineering practices into the company’s existing methodology for project management
- Decentralize the organization so as to enhance the working relationship with the customers
- Plan for better resource allocation so as to achieve a higher level of efficiency
- Force proactive planning and decision-making
- Drive out waste and lower cost while improving on-time delivery
There were also serious risks if Como were to become a chunk manager. The company would be under substantially more pressure to meet cost and delivery targets. Most of its resources would have to be committed to complex coordination activities rather than new product development. Therefore, value-added activities for its customers would be diminished. Finally, if Como failed to live up to its customers’ expectations as a chunk manager, it might end up losing all automotive work.
The decision was made to inform Ford of Como’s interest in chunk management. Now Como realized that its original three-year plan for excellence in project management would have to be completed in eighteen months. The question on everyone’s mind was: “How?”
- What was the driving force for excellence before the announcement of chunk management, and what is it now?
- How can Como accelerate the learning process to achieve excellence in project management? What steps should management take based on its learning so far?
- What are their chances for success? Justify your answer.
- Should Como compete to become a chunk manager?
- Can the decision to become a chunk supplier change the way Como performs strategic planning for project management?
- Can the decision to become a chunk supplier cause an immediate change in Como’s singular methodology for project management?
- If a singular methodology for project management already exists, then how difficult will it be to make major changes to the methodology and what type of resistance, if any, should management expect?
Apache Metals, Inc.
Apache Metals is an original equipment manufacturer of metal working equipment. The majority of Apache’s business is as a supplier to the automotive, appliance, and building products industries. Each production line is custom designed according to application, industry, and customer requirements.
Project managers are assigned to each purchase order only after the sales department has a signed contract. The project managers can come from anywhere within the company. Basically, anyone can be assigned as a project leader. The assigned project leaders can be responsible for as many as ten purchase orders at one time.
In the past, there has not been enough emphasis on project management. At one time, Apache even assigned trainees to perform project coordination. All failed miserably. At one point, sales dropped to an all-time low, and cost overruns averaged 20–25 percent per production line.
In January 2007, the board of directors appointed a new senior management team that would drive the organization to excellence in project management. Project managers were added through recruitment efforts and a close examination of existing personnel. Emphasis was on individuals with good people and communication skills.
The following steps were implemented to improve the quality and effectiveness of the project management system:
- Outside formal training for project managers
- Development of an apprenticeship program for future project managers
- Modification of the current methodology to put the project manager at the focal point
- Involvement of project managers to a greater extent with the customer
- What problems can you see in the way project managers were assigned in thepast?
- Will the new approach taken in 2007 put the company on a path to excellencein project management?
- What skill set would be ideal for the future project managers at ApacheMetals?
- What overall cultural issues must be considered in striving for excellence inproject management?
- What time frame would be appropriate to achieve excellence in project management? What assumptions must be made?
Haller Specialty Manufacturing
For the past several years, Haller has been marginally successful as a specialty manufacturer of metal components. Sales would quote a price to the customer. Upon contract award, engineering would design the product. Manufacturing had the responsibility to produce the product as well as shipping the product to the customer. Manufacturing often changed the engineering design package to fit manufacturing capabilities.
The vice president of manufacturing was perhaps the most powerful position in the company next to the president. Manufacturing was considered to be the main contributor to corporate profits. Strategic planning was dominated by manufacturing.
To get closer to the customer, Haller implemented project management. Unfortunately, the vice president for manufacturing would not support project management for fear of a loss of power and authority.
- If the vice president for manufacturing is a hindrance to excellence, howshould this situation be handled?
- Would your answer to the above question be different if the resistance camefrom middle or lower level management?
Coronado Communications, Inc. (CCI) was a midsized consulting company with corporate headquarters in New York City and satellite divisions in more than twenty-five of the largest cities in the United States. CCI was primarily a consulting company for large and small firms that wished to improve their communication systems, including computer hardware and networking systems. Each of the twenty-five divisions serviced its own geographical areas. Whenever a request for proposal was sent to CCI, corporate decided which satellite office would bid on the job.
In 2009, Fred Morse took over as president and CEO of CCI. Although CCI was successful and won a good portion of its contracts through competitive bidding, Morse felt that CCI could win more contracts if he created a climate of internal competition. Prior to Morse coming on board as the CEO, CCI corporate would decide which satellite office would bid on the job. Morse decided that any and all CCI branches could bid on each and every contract. This process meant that each satellite office would be competing with other satellite offices.
©2010 by Harold Kerzner. Reproduced by permission. All rights reserved.
In the past, CCI encouraged the satellite office that would be bidding on the job to use internal resources whenever possible. If the office in Chicago were bidding on a contract and were awarded the contract, then the Chicago office could use resources from the Boston office to fulfill the contract. The workers in the Boston office would then bill the Chicago office a fully loaded or fully burdened hourly rate, but excluding profits. All profits would be shown on the financial statement of the office that won the contract. This technique fostered cooperation between the satellite offices because the Chicago office would get credit for all profits and the Boston office would be able to keep some of its employees on direct charges against contracts rather than on overhead account if they were between jobs.
With the new competitive system, Boston would have the right to charge Chicago a profit for each hour worked, and the profit on these hours would be credited to Boston’s financial statement. In effect, Chicago would be treating Boston as though it were a contractor hired by Chicago. If Chicago felt that it could get resources at a cheaper rate by hiring resources from outside CCI, then it was allowed to do so.
The bonus system also changed. In the past, bonuses were paid out equally to each satellite office based upon the total profitability to CCI. Now, the bonuses paid to each satellite office would be based entirely upon the profitability of each satellite office. Salary increases would also be heavily biased toward individual satellite office profitability.
Over the years, the company had developed an outstanding enterprise project management methodology with a proven record of success. Now, each satellite office was still asked to use the methodology but could make its own modifications to satisfy its customer base.
TWO YEARS LATER
The following facts appeared after using the new competitive system for two years:
- The gross revenue to the corporation had increased by 40 percent but the profit margin was only 9 percent, down from the 15 percent prior to the implementation of the new competitive system.
- Satellite offices were lowering their profit margins in order to win new business.
- Most satellite offices were outsourcing some of their work to low-cost suppliers rather than using available resources from other satellite offices.
- Some of the satellite offices had to lay off some of their talented people because of lack of work.
- Employees were asking for transfers to those satellite offices where greater opportunities existed.
- The cooperative working relationships that once existed between satellite offices was now a competitive relationship with hoarding of information and lack of communications.
- There was no longer a uniform process in place for promotions and awards; everything was based upon yearly satellite office profitability.
- Each satellite office created its own project management methodology. The modifications were designed to reduce paperwork and lower the overall cost of using the methodology.
- Clients that had become accustomed to seeing the old methodology were somewhat unhappy with the changes because less information was being presented to the clients during status review meetings. The clients were also unhappy that updates and changes to the methodology were not being made as fast as necessary, and CCI appeared to be getting further behind in project management capability.
- Could you have anticipated that these results would have occurred?
- What happened to the corporate culture?
- Can project management practices be improved with a major repair to the corporate culture?
- Is it realistic to expect each satellite office to have its own project management methodology? What happens when two or more satellite offices must work together?
- Can CCI be fixed? If so, what would you do and how long do you estimate it would take to make the repairs?
Radiance 1 International
Radiance International (RI) had spent more than half a decade becoming a global leader in managing pollution, hazard, and environmental protection projects for its worldwide clients. It maintained ten offices across the world with approximately 150 people in each office. Its projects ranged from a few hundred thousand dollars to a few million dollars and lasted from six months to two years.
When the downturn in corporate spending began in 2008, RI saw its growth stagnate. Line managers that previously spent most of their time interfacing with various project teams were now spending the preponderance of their time writing reports and memos trying to justify their position in case downsizing occurred. Project teams were asked to generate additional information that the line managers needed to justify their existence. This took a toll on the project teams and forced team members to do “busy work” that was sometimes unrelated to their project responsibilities.
Management decided to reorganize the company primarily because of the maturity level of project management. Over the years, project management had matured to the point where senior management explicitly trusted the project managers to make both project-based and business-based decisions without continuous guidance from senior management or line management. The role of line management was simply to staff projects and then “get out of the way.” Someline managers remained involved in some of the projects but actually did more harm than good with their interference. Executive sponsorship was also very weak because the project managers were trusted to make the right decisions.
The decision was made to eliminate all line management and go to the concept of pool management. One of the line managers was designated as the pool manager and administratively responsible for the 150 employees that were now assigned to the pool. Some of the previous line managers were let go while others became project managers or subject matter experts within the pool. Line managers that remained with the company were not asked to take a cut in pay.
In the center of the pool were the project managers. Whenever a new project came into the company, senior management and the pool manager would decide which project manager would be assigned to head up the new project. The project manager would then have the authority to talk to anyone in the pool that had the expertise needed on the project. If the person stated that he or she was available to work on the project, the project manager would provide that person with a charge number authorizing budgets and schedules for his or her work packages. If the person overran the budget or elongated the schedule unnecessarily, the project managers would not ask this person to work on his or her project again. Pool workers that ran out of charge numbers or were not being used by the project managers were then terminated from the company. Project managers would fill out a performance review form on each worker at the end of the project and forward it to the pool manager. The pool manager would make the final decision concerning wage and salary administration but relied heavily upon the inputs from the project managers.
The culture fostered effective teamwork, communication, cooperation, and trust. Whenever a problem occurred on a project, the project manager would stand up in the middle of the pool and state his or her crisis, and 150 people would rush to the aid of the project manager asking what they could do to help. The organization prided itself on effective group thinking and group solutions to complex projects. The system worked so well that sponsorship was virtually eliminated. Once a week or even longer, a sponsor would walk into the office of a project manager and ask, “Are there any issues I need to know about?” If the project manager responds “No,” then the sponsor would say, “I’ll talk to you in a week or two again” and then leave.
TWO YEARS LATER. . . .
After two years, the concept of pool management was working better than expected. Projects were coming in ahead of schedule and under budget. Teamwork abounded throughout the organization and morale was at an all-time high in every RI location. Everyone embraced the new culture and nobody was terminated from the company after the first year of the reorganization. Business was booming even though the economy was weak. There was no question that RI’s approach to pool management had worked, and worked well!
By the middle of the third year, RI’s success story appeared in business journals around the world. While all of the notoriety was favorable and brought in more business, RI became a takeover target by large construction companies that saw the acquisition of RI as an opportunity. By the end of the third year, RI was acquired by a large construction firm. The construction company believed in strong line management with a span of control of approximately ten employees per supervisor. The pool management concept at RI was eliminated; several line management positions were created in each RI location and staffed with employees from the construction company. Within a year, several employees left the company.
- Is it a good idea to remove all of the line management slots?
- If pool management does not work, can line management slots then be reinstated?
- How important is the corporate culture to the pool management concept?
- Are there project sponsors at RI?