School of Accounting

Research Seminar – Session 1, 2010

The role for management controls at different stages of project management. Some insights

from a qualitative study.

Chang-Yuan Loh

University of Sydney Date: Friday 23 April Time: 3.00-4.30pm Venue: M032 Red Center

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The role for management controls at different stages of

project management. Some insights from a qualitative study.

FIRST DRAFT ONLY

Chang-Yuan Loh

Abstract

Capital investment projects can represent a significant proportion of an organisation’s

budget but are also subject to risks of failure. Causes of project failure have often

been attributed to the lack of effective project management controls. This paper

explores how capital investment projects are controlled within companies and where

these controls are located at different stages of a project. Semi-structured interviews

were held with project managers across various industries. Results from the

interviews suggest that proper implementation of controls at certain stages of a project

is critical to the success of that project, but that not all organisations implement them.

Results also suggest that while some organisations do have project controls, these

controls are unlikely to be effective where some users – particularly top management

– may not comply with them.

1. Introduction

A project is defined as “..a series of activities designed to achieve a specific outcome

within a set budget and timescale. It has clear start and end points, a defined set of

objectives, and a sequence of activities in between.” (Bruce and Langdon, 20011).

According to Rozenes, Vitner and Spraggett (2006), as time passes “there is a need to

update the methods, tools and techniques used in the management of projects” (p. 5).

The implementation of controls for a project is important as the lack of has been cited

as a major reason behind project failures (De Falco and Macchiaroli, 19982).

One of the major concerns in project management is delay or avoidance of

termination of projects even though they have been identified as failing. Delayed

1 As cited in Chartered Institute of Management Accountants (CIMA), Project Management: Topic Gateway Series No. 19, November 2008, www.cimaglobal.com 2 As cited in Rozenes et al, 2006, p. 6

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project terminations can lead to the project being run to completion – however,

completed projects do not necessarily mean they have been successful in delivering

the promised objectives. It is not uncommon to see projects run to completion and

subsequently deliver a product/service that falls short of requirements. For example,

IT organizations report some 50% of total initiated projects are subsequently

terminated only after 10-100% of allocated costs have been consumed (Hormozi,

2000, p. 47). Up to 57% of organizations spent 70% of allocated costs prior to

termination, with most of the costs being unrecoverable.

Avision, Bakerville and Myers, (2001) argued that project performance (e.g. cost,

time and successful delivery) can be improved if more attention is given to the issue

of control. The lack of appropriate controls in a project can lead to a laissez faire

approach to project management where project objectives are not quantified,

performance is not measured and therefore not achieved. For example, weak

budgetary control can lead to increasing investment that may never deliver its

promised returns.

This paper examines this critical issue in project management; whether and how

controls can reduce increasing investment (time and money) in a failing project. More

specifically, this paper seeks to investigate whether the mere presence of controls can

reduce such investment, or if equal care needs to be given to individual adherence to

the controls. For example, it is easy to assert that controls are important and thus

project failures to date must be in some way caused by the absence of appropriate

controls. However, it should also be counterintuitive that modern organisations do not

have some form of management control system implemented. Perhaps it can be

argued that project failures have occurred – not due to a lack of controls necessarily –

but rather that some factor prevented those controls from being effectively used. A

notable example was presented by Free, Macintosh and Stein (2007) in relation to

Enron. Reportedly, Enron had a ‘state-of-the-art’ and award-winning management

control system, and yet its presence had limited effect where certain individuals

subverted that same system.

This exploratory study seeks to increase understanding of the issues surrounding

unsuccessful project management. Specifically, it aims to provide insights into why

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projects fail and what controls are perceived to play a role in reducing project failures.

The rest of the paper is structured as follows. Section 2 provides a literature review

and development of the research questions. Section 3 describes the research method.

Section 4 discusses the results and Section 5 concludes.

2. Literature Review and Development of Research Questions

Capital investment projects play a major role in organisations. They can be

infrastructure investments (such as plants and equipment, hardware and software

installations) to augment the organisation’s ability to operate and/or new

products/services launched to the market. These are core to business operations and

often involve significant cost outlays. However, such projects are also susceptible to

high risks of failure. Ross and Staw (1993) described the Long Island Lighting

Company’s Shoreham nuclear plant project which was delayed for over ten years,

was more than USD$4 billion over budget and ended up decommissioned before

operations. Eden, Ackermann and Williams (2005) noted an abundance of public and

private projects that have suffered massive cost overruns within Europe. Eden et al

(2005) cited public projects including the 800 million Danish kroner (approx

USD$135m) Oresund bridge that was 68% overspent (Flyvberg, Bruzelius, &

Rothengatter, 2003), the UK’s Scottish Parliament, which was expected to cost ten

times the original budget (Scottish Parliament, 2003), and the description of 258

major transportation infrastructure projects where 90% of projects were overspent

(Flyvberg, Holm, and Buhl, 2002).

Morris and Hough (1987) (as cited in Eden et al 2005), also concluded the following

about projects in private industries:

“the track record of projects is fundamentally poor, particularly for the larger

and more difficult ones.… Projects are often completed late or over budget, do

not perform in the way expected, involve severe strain on participating

institutions or are cancelled prior to their completion after the expenditure of

considerable sums of money” (p. 7).

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In many of the above scenarios, one can argue that a lack of appropriate controls or

compliance with existing controls may have enabled management to continue

investment in a project that had indications of failure. Escalation of commitment

(EoC) research, within management accounting, is dedicated to investigating this very

aspect of project management – that is, why do management often continue to commit

scarce resources to failing capital investment projects long after any rational person

would have given up - also known as 'pouring good money after bad' (Drummond

1996). In the case of Denver International Airport in 1992, for example, persistence

with a problematic baggage system resulted in a system that was $2 billion over

budget, several months behind schedule and plagued with operational issues

(Monteleagre and Keil 2000). It is important to note here that the problem illustrated

within the EoC literature is not necessarily that these projects were not needed nor

that persistence in projects generally is necessarily dysfunctional. Rather the problem

is increasing (or escalating) investment in a project that had early and consistent

indications of failure, that any other rational individual would have terminated or

reassessed.

The EoC literature has significant implications for the business world as it

investigates what factors drive managers (to make certain decisions) to continue

unprofitable projects that logically should be discontinued. Understanding such

factors also help design control systems to mitigate actions which would be

detrimental to the organization’s goal of creating value.

EoC has been explained from different theoretical perspectives including agency

theory (Harrell and Harrison 1994), prospect theory (Whyte 1991), and self-

justification theory (Staw 1976), as well as from different contexts: exhibition shows

(Ross and Staw 1986), nuclear plant construction (Ross and Staw 1993), airport

baggage systems (Monteleagre and Keil 2000), software projects (Keil, Mann and Rai

2000), mergers (Bruner 1999) and new product developments (Schimdt and Calantone

2002).

A significant number of such research utilised an experimental approach to investigate

potential variables that may affect EoC. Some of these are outlined below:

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Harrell and Harrison (1994) examined the interaction between four cases (privately

held information [yes/no] with incentive to shirk [yes/no]) and found that, consistent

with agency theory, managers possessing both an incentive to shirk (i.e. self interest)

and privately held information (information asymmetry) were more likely to continue

a project which is identified as failing.

Ghosh (1997) conducted an experiment adapted from an actual project based on a

national fast-food chain and found that providing unambiguous feedback about

previous expenditures and information on benefits of future expenditures significantly

reduced tendency to escalate commitment. This could be attributed to the

informativeness of specific feedback in aiding more effective decision-making

(Sprinkle, 2000). Similarly, Ghosh (1997) found that preparation of a project’s

progress report also greatly moderated the funds committed to it compared to the

absence of such a report.

Schimdt et al (2001) investigated EoC in New Product Developments (NPDs) with

respect to individuals, face-to-face teams and virtual teams. Their results indicate that

teams make more effective project continuation decisions than individuals who were

more likely to escalate their commitment to unprofitable projects. In particular, the

authors found that virtual teams made the best decisions, and that the effectiveness of

decision-making teams at project reviews can be significantly magnified when teams

are dispersed and communicate via asynchronous media.

Schimdt & Calantone (2002) also found that managers who initiate a NPD are less

likely to perceive it as failing, and thus are more committed to it, than managers who

assume leadership of a project after it has started. The authors also find that there is a

tendency for greater commitment to innovative products rather than less innovative

ones. Their results suggest that simply giving managers better information may not

lead to better decisions, and that the escalation commitment is a more serious problem

during NPD than after the product is commercialised. McNamara et al (2002)

suggested two methods to aid in de-escalation of commitment. Their results showed

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that increased monitoring and subsequent rotation of project responsibility had the

desired effect of reducing escalation.

Heng et al (2003) investigated how social and psychological factors could help reduce

EoC in software projects. The results show that under conditions of low sunk cost,

superiors can adopt the shelter strategy (by shouldering blame for botched projects) or

the support strategy (by providing assurance) to reduce EoC by individuals. However,

their results show that under conditions of high sunk costs, all these strategies do not

appear to reduce EoC. This is consistent with prior research findings that high sunk

cost triggers escalation. The results from Heng et al (2003) provide a contrast to those

of Sabherwal et al (2003). Whereas the latter showed that the tough standing taken by

top management on botched projects help in early reduction of escalation, Heng et al

(2003) suggest that a more accommodating environment can reduce EoC as well.

Booth and Schulz (2005) found that a strong ethical environment was instrumental in

reducing EoC problems both in the presence and absence of agency problems. Booth

and Schulz (2005) also found that project managers under a weak ethical environment

and no agency problems made similar project termination decisions to managers who

experienced a strong ethical environment and agency problems. This builds upon the

findings of Rutledge and Karim (1999) who found that the level of moral reasoning

contributed to decisions of commitment. Their results illustrate the importance of

establishing a strong ethical culture within organizations in order to mitigate potential

losses from EoC dilemmas.

Although there is extant research on EoC, several gaps can be argued to exist:

First, the literature tends to portray EoC as undesirable managerial behaviour

extending the life of costly projects which will inevitably fail (often caused by

individual motivations or cognition issues [Keil, Depledge and Rai 2007; and Cueller,

Keil and Johnson 2006]). This is not unfounded since research has attributed the high

number of project failures to the EoC to failing projects (Schimdt and Calantone

2002). However, this paper argues that extant literature often takes the failure of the

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project as a given - that is, there has been little explanation of why projects fail in the

first instance, and whether the factors which have allowed the failure of these projects

are related to those which encourage subsequent EoC. This is argued to be important

since literature has noted the establishment of an effective management control

system to be important for project success (de Falco and Macchiaroli 1998; Avision,

Bakerville and Myers 2001). Yet, few studies in EoC – to date – have examined (from

a qualitative perspective) what management controls are perceived to reduce the

likelihood of project failures.

Second, much of extant EoC research is dominated by studies using experimental

settings. Such studies typically include a capital budgeting scenario where subjects are

often presented with a project continuance decision asking them to evaluate whether

they would invest more or less into a specific project. An assumption is often made

that the decision to continue/terminate a project is fixed at an arbitrary point in time

and there is often no justification for the chosen timeframe. However, this paper

argues that project continuance decisions are not static; managers are often faced with

the decision to continue or abandon a project at different stages of a project. Staw and

Ross (1987) noted that the abundance of EoC literature to date had been examining

occurrences of escalation prompted by a single isolated event. It was suggested that

future studies move away from this approach to a consideration of the effect of a

range of variables in a variety of contexts: “greater efforts are needed to capture

experimentally the life-span of escalation episodes so that the relative influence of

contributing variables can be tracked over time” (Staw and Ross 1987, p. 246).

However, relatively few studies to date have considered the role of project stages

(Mahring and Keil, 2008) nor which controls are important at different project stages

(Hyvari, 2006).

To explore these gaps, the aims of this paper can be formulated into two research

questions:

RQ1. What management controls are perceived to be important in reducing project

failure?

RQ2. At which stages of a project are these controls perceived to be important?

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The purpose of this paper is thus exploratory - to study organisational project

management practices and explore which controls are perceived to be important at

different project stages in preventing project failures. To explore the perceived role of

project stages, this paper will be using the temporal framework by Staw and Ross

(1987) which proposed that the EoC to a project can occur over different project

stages and each stage is influenced by different factors (project, psychological, social

and organisational). An adapted illustration of this framework is shown in Figure 1

(please see Appendix A).

According to Staw and Ross (1987), the typical escalation episode beginning with the

conception of the project, spurred on by predictions of favourable outcomes. As the

project progresses through its middle and late stages, it gradually becomes more and

more of a losing prospect before culminating in the final stage where there is

substantially high negative feedback. Project variables are argued to be influential in

the early stages of the project as uncertainty is high in this period, and project

information is needed to test the viability of the project as well and build up the

necessary support for initial commitment. As the project continues with increasing

negative feedback, it is suggested that project variables take less precedence as the

desire to collect additional negative feedback diminishes. During the middle stages,

psychological and social variables become more influential. As the outcome of the

project becomes increasingly bleak, managers may continue to escalate commitment

to a losing course of action due to: responsibility to the project (Whyte 1991); threats

of self-justification (Staw 1976); job insecurity (Sabherwal, Sein and Marakas 2002);

sunk costs (Heng, Tan and Wei 2003); and fear of ‘loss of face’ (Chow, Harrison,

Lindquist and Wu 1997). Finally, in the late stages of the project, organizational

variables begin to influence escalation. At this stage, factors including the need for

completion (Garland and Conlon 1998; Moon 2001), and organizational inertia (Ross

and Staw 1993) become most influential.

There have been few studies to date which have tested Staw and Ross' (1987)

temporal model. For example, Ross and Staw (1993) applied the model against a case

study of the Shoreham Nuclear Plant and found that organisational factors are also

important in the early stages of a project. Subsequent studies by Sabherwal, Sein and

Marakas (2003) and He and Mittal (2007) that used Staw and Ross’ (1987) model

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found some support for the sequencing of factors during different project stages but

relied on experimental approaches. It is the aim of this paper to explore the relevance

of this temporal model to practitioners using a qualitative approach.

3. Research Method

For the aims of this paper, semi-structured interviews were conducted with twelve

managers with experience in managing capital investment projects. This paper argues

that the use of interviews is helpful in understanding the key issues of project

management as perceived by practitioners across a range of industries. By using a

qualitative approach, this paper seeks to offer additional insights into practical project

management to those offered by previous escalation studies which have mostly used

experimental approaches. The semi-structured nature of the interviews also allows the

interviewees the freedom to develop issues not scripted by the interviewer and thus

reduces the potential for any bias. Before the actual interviews, a pilot study was

taken to trial the interview with collaboration from academic researchers and project

managers.

Key issues raised in the interviews included how projects are initiated, controlled and

concluded. Questions were asked on issues of quantifying project objectives,

performance measures and incentives. Also important were the outstanding issues

project managers have faced with regards to successful project performance.

Interviewees were also given a copy of Figure 1 (Appendix A) to comment on the

perceived relevance of Staw and Ross’ (1987) proposition. A copy of the interview

instrument is included in the Appendix B.

Interviewees had experience in a variety of industries, including construction,

engineering, information technology, retail and finance. On average, managerial

experience ranged from 5 to over 10 years. Approximately half of the interviews are

current project managers, while the other half are now currently employed as

consultants and partners at a U.S. based project consultancy firm. The data collected

contain information pertaining to the types and nature of projects within

organizations, controls used in project management, the relevance of project stages,

and the main reasons perceived to lead to project failure.

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Each interview took between 60 to 90 minutes and were audio-taped and summarised

with the permission of the interviewees. In an attempt to address potential bias and

clarification of issues, the following steps were taken to triangulate the data: 1. A

summary of each interview was written and sent to the interviewees for confirmation;

2. Interviews were supplemented with a short survey requiring interviewees to

complete a checklist of some key issues highlighted in the interviews; 3. Discussion

between the researchers on the interpretation of issues raised from the interviews. A

summary of the interviewee demographic is provided in Table 1 below:

Designation Industry Years of experience

1 IT, Manufacturing 10+

2 Engineering 20+

3 IT 17

4 IT 15

5 Project consultancy 10+

6 Retail, accounting, manufacturing 20+

7 Retail, manufacturer 10+

8 Retail 10+

9 Retail, manufacturing, mechanical 20+

10 Project consultancy 10+

11 Project consultancy 10+

12 Project consultancy 20+ Table 1

4. Results and Discussion

Consistent with the suggestions by Guest, Bunce and Johnson (2006) that themes in

interviews recur after six interviews and data saturation occurs after twelve

interviews, this paper found that key themes regarding project management began to

recur with the third and subsequent interviews. On the whole, the majority of

interviewees expressed support for, and an interest in, this type of research into

project management.

Do I believe [project management] to be important? Yes – I’m not aware of

much research being done on this.

Interviewee 11

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Results suggest that practitioners perceive project management to be an under-

researched field, and that theoretical approaches should not serve as a substitute for

field experience:

Project management is a discipline – not something learnt from a textbook.

Experience in the field is very important.

Interviewee 5

When interviewees were asked to comment on the likelihood of projects that were

terminated too early, most interviewees disagreed that it was a common occurrence, if

at all. Rather the main problem identified stemmed from failing projects where

termination happened too late (due to EoC). An interesting note from the interviews

was that there was little perceived difference between factors that cause a project to be

unsuccessful and those that cause subsequent EoC. Impressions from the interviews

were that factors that are related to a project’s failure can often be the same as those

that encourage escalation to that project later on. For example, one interviewee

mentioned that it is often easy in hindsight to identify poor projects, but escalation

may not have been visible at that decision moment. A project that lacks certain

controls but was nevertheless initiated with the promise to deliver, can result in EoC

where the individual who made the promise simply found it too difficult to save ‘face’

in termination.

There is trust placed in [that person’s] technical ability to deliver. Sometimes

the hardest thing is to admit defeat.

Interviewee 3

This paper argues that the aforementioned results are important as this highlights that

the problem of project failure and escalation of commitment is a contemporary one,

and that practitioners believe there to be benefits from additional research into this

area.

Given its contemporary relevance, this paper argues it is important to gain additional

insights into practical nature of project management, since results suggest

practitioners perceive the factors which affect project failure can be related to EoC.

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Although there is extant research into EoC, this paper argues that prior studies often

rely on experimental approaches where project failure is taken as a given and project

stages are often not considered. This paper seeks to offer additional insights into these

gaps by using a qualitative perspective.

The following section presents and discusses the data collected in relation to the

research questions:

RQ1. What management controls are perceived to be important in reducing project

failure?

RQ2. At which stages of a project are these controls perceived to be important?

To better present the results relating to the research questions, the management

controls highlighted during the interviews will be grouped in chronological order by

project stages.

Not surprisingly, the importance of a formal project management control system had

the overwhelming support from all interviewees. Indeed, this is consistent with

literature assertions that project control - which includes the proper planning,

measurement, monitoring and corrective actions - of the different stages of a project

was considered to be instrumental to a project's success (Rozenes, Vitner and Spragett

2006):

Without a defined methodology, a project is not only open to criticism or

blowout, but importantly, exposed to failure.

Interviewee 3

Essential as there are very specific actions and skills required for each stage.

Interviewee 5

It was also reassuring to see that most interviewees were comfortable with Ross and

Staw’s (1993) discussion of the three main stages of project development. While not

using the same Stage 1, 2, 3 approach per se, most interviewees described three to

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four stages of a project along similar lines: project pre-feasiblity analysis > project

initiation (early) > project implementation (middle) > project delivery (late).

Important controls at the early stages of a project:

Early project definition and subsequent performance

Results suggest that poor project definition is among major reasons as to why projects

fail.

Projects stem from a decision – the best projects are those that are defined

clearly at the start, or run the risk of being 'dead in the water' later on.

Interviewee 12

Interviewees stated that projects that are ill-defined simply cannot be planned well

and the resulting lack of direction has been argued to be one reason why managers

may choose to “just ‘wing it’” and continue the project even if there exists sufficient

negative feedback on its performance to justify discontinuance.

Many organisations have a culture where project management was a doing (roll

out) process rather than a thinking process. [We] attempt to move towards a

‘think first, then act’ philosophy. Projects must be properly defined or there will

be no way to reliably measure performance or determine ‘what should be done’

Interviewee 9

Interviewees commented that many organisations seem content to borne changes late

in the project where costs have mounted and it becomes increasingly difficult to

terminate or redirect a failing project rather than take the time early in the project

lifecycle to properly define and plan.

Some organisations seem content to suffer execution pain rather than upfront

pain - often citing a lack of time to define early, but willing to then revise and

repeat the project later on where costs and time investment is higher. It’s like

that habit of 'digging out of a hole to climb a mountain'.

Interviewee 12

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Project ‘creep’, where ad-hoc modifications are added to the project (often a by-

product of poor project definition), was also a recurring issue of concern as one of the

reasons why projects continue to drag on past its budgeted timeframe.

I think we need to manage project creep – people like to tack on more objectives

for a project, potentially overloading it. [Oraganisations] need to be careful in

properly defining scope of project and keeping it on track.

Interviewee 11

Implementing consistent performance criteria

All interviewees made the recommendation that all projects should be measured

against set criteria.

Sometimes I see a lack of commitment to goals, of engagement to the project.

People don’t really know what is required, desired or how to get there.

Interviewee 7

However, the consensus was also that these criteria – where existent – are often not

standardised in organisations, which can allow for the occasional ‘topical’ project

(aka CEO’s pet) to receive attention and resources. Interviewees also argued that the

question should not be simply whether financial hurdles (such as ROI, NPV) are met,

but also “why is the project being done in the first place?” Projects that are not chosen

according to the organisation’s strategic criteria are often those which are most likely

to fail.

Ideally projects should follow the Strategy > Business plan > Project approach,

with the ability to assess the project back to how it relates to the strategy at

regular reviews.

Interviewee 12

Incentives

The idea of rewards for project completion is an interesting issue. For the

interviewees, recommendations on the implementation of an incentive system were

divided. Some interviewees noted that project completion is not the same as project

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success, and incentives could perhaps be implemented to reward success as opposed

to mere completion (to avoid fast-tracking troubled projects, and to ensure all projects

deliver value). Not all organisations implemented incentives - several have a 'bleed-

down' effect, where the department gets a bonus, and it trickles down to project

members. Some recommended an incentive system to motivate, while some

mentioned that bonuses are often based on total project performance, which makes it

difficult to attribute incentives based on individual performance. Interviewees who

noted the existence of an incentive system specifically for project completion often

commented such incentives to be tied to the project manager rather than project

members. On projects that occur as a result of a tendering process (e.g.

engineering/build projects), the issue of incentives become even more complicated.

Here, the marketing team responsible for getting the tender receives incentives for

securing the bid, but the project team who gets 'passed the baton' often may not

received incentives tied to project completion (interviewees here commented project

management to be 'part of the salary'). This bred concerns where ambitious tendering

can adversely affect the project team where there is an inability to deliver that project.

Important controls during the middle stages of a project

Dedicated project management

Top management support, as well as clear segregations of duties between what is

know as ‘day-to-day’ operational activities and project management duties, have been

argued to be vital for project success.

Organisations need to differentiate individual roles and strike a balance between

day-to-day operational activities and project 'future oriented' activities. It is not

uncommon to see organisations consider [project] management as secondary,

and assume a project to turn out 'okay on the day'.

Interviewee 12

Interviewees also stated that this segregation is often “not done well”, with project

management being treated as a ‘secondary’ activity and reducing the amount of

attention a manager is willing to spend on monitoring the performance of a project.

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The lack of a resident project manager career path means that the reins of

project management may be given to inexperienced or overworked staff. I can

give you examples of staff ‘burn-outs’ due to lean staffing, and a lack of defined

roles and workloads. This lack of project management expertise may not be due

to a lack of the ‘right’ staff, but rather a problem of misallocation of that staff.

Execution of projects – and in an optimal manner – is still an issue, and may not

be resolved until the establishment of a career path dedicated to project

managers.

Interviewee 9

Interviewees suggested that this lack of dedicated project managers may be due to the

low visibility of employee skills within the organisation – a problem potentially

worsened by what was called a lack of ‘cross-state project management fertilisation’

or choosing staff with management expertise from different parts of the organisation.

Another reason may also be related to the difficulty some organisations face

identifying the ‘right’ project manager for the job.

How do we identify which skills are preferred for a project manager, and how

do we identify that individual in the organisation?

Interviewee 9

Competence

Interviewees recommended that the individual with the best skills should undertake

the responsibility of project management.

Good project management requires a need for good processes and good people.

Past experience sees good people – rather than good processes – managing to

execute projects and ‘getting stuff done’. There is still however, the need for a

process which allows for a common language – as in communication,

procedures, means to an end – to bring people together.

Interviewee 9

However, some managers are chosen on the basis of their having championed the

project and/or having the technical competency. Interviewees argue that the best

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project managers are those who possess both technical as well as project management

skills (e.g. people skills – “it is the people who manage a project not the software”).

Project management is a professional skill and technical competence is not

always enough. For example, some may pick a senior engineer to be a project

manager due to his/her technical skills, but it may not be a good choice if the

individual has little experience or knowledge in project management.

Interviewee 5

Project management is a discipline and is not a role that can be filled by

someone with technical competence alone. Not all functional heads, engineers

make for good project managers. They need not be content experts, but should

have exceptional people skills.

Interviewee 9

Furthermore, the project manager should have the “responsibility, accountability and

authority” for the project’s day-to-day operation, but be distinct from the project

champion to avoid conflicts of interest.

Project reviews

Consensus from the interviewees recommended the need for a formal and consistent

reporting system on the status of projects.

I think it is important…to conduct [project] reviews. Key issue in project

management is the discipline – humans resist discipline but can be critical to

success. It is important to clearly set out what needs to be measured, how to

measure these and then compare actuals. This allows for the optimisation of

resources.

Interviewee 10

The critical problem identified by the interviewees, however, was that some

organisations either lack this process, or conduct status reports by 'word-of-mouth'.

For example, one of the interviewed managers stated that it is not uncommon for

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project managers to simply respond “we’re good” or “everything’s fine” and have the

project continued without formal assessment.

[Nowadays] we test against strict criteria. It’s a contrast to the informal

collegial approach we had but we need to balance generosity versus timeliness

and budget realism. No one wants to be seen [anymore] to be wasting money.

Interviewee 4

There is only a limited pool from which projects can draw resources from,

however, some organisations lack adequate control blocks. Some implement

'protocols' which some projects try to meet, but there is often no effort made to

back review the project to the original protocols.

Interviewee 12

Results from the interviews suggest that the timing of reviews was dependent on

several factors: the nature of the project, project size/length, and/or managerial

preference. Earlier stages such as project designs and feasibility can conduct weekly

reviews and implementation or construction stages may involve fortnightly or

monthly reviews. Interviewees also suggest that the longer a project is forecasted to

run, the longer the difference between timing of reviews (e.g. quarterly). As with the

criteria, however, interviewees note that not all projects have frequent and consistent

timing of project reviews.

[Timing of reviews is] dependent…some are not reviewed at all. It is

recommended that reviews are conducted as frequently as possible – for

example weekly. The rationale for this is that if delays occur, then you will only

be delayed by a week. The shorter a project is kept off-track, the better. But this

kind of control usually drops upon the [project consultant’s] withdrawal.

Interviewee 11

Several managers recommended a ‘red, amber, green’ approach where projects area

assessed on a routine basis on whether it has met critical hurdles. Projects that

successfully meet hurdles on cost, and time delivery are awarded the 'green' light;

projects falling short of some hurdles are held at the 'yellow' light for reassessment;

19

and finally the 'red' light is highlighted on projects falling critically short on

performance measures.

Interestingly, the results also suggest it is during these review stages where the

management accountant becomes most visible during project management. It has been

argued from the literature that proper accounting and budgeting of projects are critical

parts of a project control process (Wooldrige, Garvin and Miller 2001). Results from

the interviews support this; management accountants are often considered the ‘right-

hand’ of project managers, playing a critical role in ensuring projects stay on track,

and deliver the promised returns.

Is there a role for management accountants? Yes. Especially in large-scale

projects, they can be regarded as the right hand man of the project manager.

The accountant can focus on the numbers, allowing the project manager to

specialise in other key areas requiring his/her attention. Having a dedicated

accountant also allows for more control, with greater visibility/accountability. I

have a rule of thumb: projects involving more than $1m we hire a part-time

accountant, greater than $50m, a full-time position. They are like the three legs

of the tripod. Time/Cost/Performance of projects can optimally be managed via

the Project Manager/Management Accountant/Project Team.

Interviewee 9

Their roles, however, go beyond that of cost accounting and budget preparation to

more of a business advisor:

We would like to hire one [accountant] who is not just a beancounter...but also

one with business acumen, who understands the business.

Interviewee 8

I do see a role – the most useful MAs are those who are not mere beancounters,

but active in day-to-day assistance with the project manager. They can be

regarded as the major people to audit and sign-off on expenditure and confirm

that a project is indeed delivery its benefits (e.g. through assessing potential

savings in fixed/variable costs). They are often closer to the marketing/sales

20

staff, assisting them with the forecast of future benefits and preparing the reports

for the project manager.

Interviewee 11

Important controls during later stages of a project

Post-project audits

The majority of interviewees agreed to a common problem in many organisations -

that of a lack of proper audits of performance post-project.

A glaring problem perhaps lies in the lack of post-project reviews. There is no

audit into what made certain projects successful and others not. The ‘why’ of

success is not critically done.

Interviewee 3

Most interviewees also suggested the need to evaluate projects on not just “what has

been done”, but also ‘how it was done” and “what has not been done, and what can be

done about it?”

Often project managers are measured on ‘getting the job done’ rather than

‘how’ the job was done. For example, a job could be done by yelling incessantly

at the involved parties, but what effect does this have on staff within the

company? What else was not done and have not been measured? From

experience, companies often fail due to a lack of measurement of the critical

indicators.

Interviewee 10

However, interviewees mentioned that many organisations found such audits to be

time-consuming and unnecessary, especially following a project's successful delivery.

Projects that were non-successful (or completed, but over budget etc), were treated

like a 'hot potato' - it was commented on that many project members were simply

unwilling to spend more time on such projects and preferred to sign off and close

down as soon as possible.

21

People often don’t learn from their mistakes. Projects perform badly, and issues

are recognised, but few talk about how they can be addressed. This can be

attributed to frustration, and some can get too emotive about it.

Interviewee 5

However, interviewees raised the argument that audits are equally important for both

successful and non-successful projects. For unsuccessful projects - audits fulfil the

function of analysing what went wrong and how future mistakes can be corrected. In

the case of successful projects, audits are also a learning tool - "learning what went

well, and how it was done" for the sakes of accomplishing the same with future

projects.

There is a need for organisations to get better at capturing learnings, and not

make the same mistakes.

Interviewee 8

Other recurring issues

Another recurring theme throughout the interviews was that not all organisations have

formal controls for their projects, or if they have, the effectiveness of that system

depends heavily on top management's own willingness to follow through on it in all

project. Clear rules and guidelines on how projects should be introduced, approved

and reviewed is something that interviewees have commented as missing in project

control, or if available, not always followed. It has been commented by some that

such loopholes can lead to the birth of pet projects by powerful stakeholders:

Theoretically, there is a set of standardised procedures...but it can be

‘forgotten’, and not all projects follow the rules. Rules are important, but it is

critical that top management champions and advocates the ideas or no one will

follow them

Interviewee 1

Interestingly, one common issue also arose from the interviewees - that of a need to

develop a formal framework for training the 'rational manager' on project

management across all organisations. Several of the interviewees mentioned their

22

organisations were beginning to implement a consistent framework for rational

project management which seemed to be developed by an international project

consultancy firm based in North America. This suggests that several organisations are

increasingly moving towards a dedicated project management team and a consistent

framework for managing their capital projects.

Results from the interviews also suggest that while interviewees were familiar with

the project stages proposed by Staw and Ross (1987), they were divided on the

influence of non-project factors (e.g. psychological and social factors) in project

continuance decisions.

All interviewees strongly supported the importance of project (e.g. financial

performance) and organisational (e.g. political) factors in deciding whether to

continue a project.

Money for the project’s existence is fundamental. Without it, the project can’t

get started.

Interviewee 2

Politics can drive the speed to complete.

Interviewee 1

On the other hand, most interviewees (particularly those in a current managerial

position) were less likely to attribute project continuance decisions to psychological or

social factors.

Generally top managers are paid to make decisions based on $ not

emotions...Businesses rarely have the luxury or cash to compete on such things.

Interviewee 7

Complacency can detract from the exercise of achieving a complete data

collection by constructing imaginary barriers.

Interviewee 3

23

Also interesting was the mixed support on the relative importance of the different

factors (project, psychological, social and organisational) at different stages of a

project. Findings from the interviews give little support on whether these different

variables are weighted differently in different stages of a project. A few interviewees

did weight project factors as being more important in the earlier stages followed by

psychological and organisational factors in the later stages when assessing their

impact on EoC. Others, however, either weighted the four factors as of similar

influence throughout different stages or disagreed on the value of considering factors

other than project related. In addition, results also found a distinct difference in the

admission of the importance of non-project factors in escalation decisions between the

interviewees who are current project managers, and those who are current project

consultants (but with prior management experience). The latter group was more likely

to recognise the impact of non-project related factors on escalation decisions.

Interviewees were also more likely to mention the impact of non-project related

factors during the interviews than to rate them on the supplementing surveys.

5. Conclusion

This exploratory study seeks to increase understanding of project management in

organisations, specifically with regards to the role of management controls in

preventing project failure in relation to different stages of a project. Using a

qualitative approach to explore some practitioner perceptions of project management

in capital budgeting, this paper also aims to address gaps in extant research in EoC

which largely relies on experimental approaches. Using semi-structured interviews

with practitioners in project management across a range of organisations and

industries, results from this paper suggest that the issue of a dedicated project

management function and philosophy is of great interest to organisations, but is also

perceived to be underutilised in practice and somewhat under-researched.

Results from this study suggest that certain controls are perceived to be important in

reducing project failures and that the absence of these controls are also perceived to

influence EoC to failing projects. This paper argues that the identification of these

controls is important since studies in EoC - to date - have taken project failure as a

24

given and few have examined the underlying reasons behind project failure and how

these may be related to subsequent escalation to these failing projects.

This paper also argues few studies in EoC have integrated project stages as part of

their experimental designs. By exploring the role of project stages and which controls

should be present at certain stages of a project to reduce project failure, this study

aims to provide additional contexts to the EoC literature and help inform experimental

designs in future studies in EoC. Future studies may also shed additional insights into

how the controls identified in this paper may reduce project failure and/or escalation

of commitment, and whether other controls may also be of importance.

This study also investigates the impact of different factors (project, psychological,

social and organisational) and their weighting on project escalation at different stages

of a project. Results indicate project factors taking precedence throughout the

project’s lifecycle, and other factors (psychological, social and organizational) were

either secondary considerations or were not considered at all. This is an important

finding as it is inconsistent with the findings from Ross and Staw's (1993) case study

and the later experiments of Saherwal et al (2003) and He and Mittal (2007).

Lastly, results from the interviews suggest that having a consistent control system for

project management is critical to its success. Results also suggest however, that not all

organisations have a formal consistent project control system. In addition, the ‘people’

element was highlighted by several interviewees – that technology and processes are

by themselves insufficient if the people involved do not follow them. This is

considered to be an important finding as it raises two key issues that need to be

addressed in project management and EoC. First, while there is the general

recognition that management controls are important, the recurring concern from the

practitioners is that not all organisations implement a formal consistent system of

controls to manage projects. The second issue is the concern that even in

organisations where controls are implemented, a problem may stem from management

override of those controls which limits their effectiveness.

This study has a number of limitations. First, although the interviewees in this paper

came from a range of industries and experience (national and international), the aim

25

of the paper is not to generalise its findings across the international context.

Additional research – perhaps in the form of case studies into industries – can offer

additional insights into how project management practices are perceived. Second, the

majority of interviewees related their experiences to for-profit projects. This may have

introduced a bias towards project-related factors as opposed to non-project factors.

While several interviewees advocated a similar project management framework across

both for and not-for-profit projects, future research into the latter can reveal whether

non-project factors may also affect project decisions. Third, a limitation lies in the

potential sensitivity project managers may have in acknowledging that factors other

than project performance can influence their decision. Interviewees (particularly those

associated with project consultancy) were more comfortable with providing relevant

details by referring to the third person than on the supplementing surveys. This

sensitivity may be a potential explanation for the mixed support for the model

proposed by Staw and Ross (1987). Future research may be helpful in further

illuminating the mixed results between experimental-driven and interview-driven

research on this topic.

26

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Appendix A

Figure 1: Decision points during a project’s lifecycle (model adapted from Ross and Staw 1993) An illustration of how certain factors are proposed to affect project continuance decisions at different stages of a project’s lifecycle.

Early Stage

Design/Approval

Mid Stage

Build

Late Stage

Deliver

Decision to continue project can be influenced by the above factors:

Project: Factors to do with the project itself, including financials

and time

Psychological: Individual factors that influence the way information is

gathered, interpreted and

acted on

Social factors: Cultural or

workplace factors that influence the way information is

gathered, interpreted and

acted on

Organizational

factors: Organizational-wide factors that influence the way information is gathered, interpreted and acted on

More emphasis Less emphasis

Projects

Stages

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Appendix B

Issues of Interest

1. Background � Title of position � Years of experience � Role within organisation � Types of projects

� for-profit or not-for-profit

� Size of projects � physical � investment � time to complete and/or duration of end product/service

� External environment considerations � Economical, political, environmental, technological

� Is the organisation highly centralised or de-centralised (degree of bureaucracy) � Are projects initiated on an organisational level or business-unit level?

2. Project Initiation Stages

� Who introduces a project and how? � What process is involved to assess the feasibility of a project?

� Is this a standardised process for all projects?

� Who are involved in the feasibility process? � Who makes the decision to approve the project?

� Time taken between project introduction and approval?

� How important is top management support for a project? � Do all projects have to be approved by top management?

� Beliefs system – How important is staff commitment to projects (at different levels)? � Are efforts made to promote staff awareness and engage support for projects (missions)?

� Are projects funded solely by the organisation? � Who are other sponsors?

� How important is sponsorship to the successful launch and completion of projects?

3. Project Management Stages

� Does the person introducing the project also manage it?

� If not, is someone chosen to manage a project (and on what criteria)? � Individual or team management � Change in management during project? Why and how?

� How frequently are projects reviewed? � Is the lifecycle of the project considered, and if so, how is it represented?

� time to completion, or lifespan of end product/service?

� Who are involved in evaluating a project (individual or committee)? � How is project performance assessed?

� Financial, non-financial

� What possible actions are available if progress is not desirable? � Termination, re-direction?

� Are the remunerations of project managers linked to project completion (besides salary) � for other staff? � Financial, non-financial incentives?

� Have there been occurrences where projects have been continued despite information suggesting otherwise? � Perceived reasons for such persistence? � Possible for politics to be controlled?

� What types of controls are in place to prevent such occurrences and to ensure the successful progress and completion of a project?

31

� Examples of a good project vs. a bad project?

4. Project Completion Stages

� Is there a perceived difference between project completion and project success? � How is project success and/or project completion defined?

� Physical completeness � Within budget � On-time � Meets operational requirements

� How common are project terminations, once commenced? � When are these likely to occur (early, late or in between)? � What are the reasons for such terminations?

� What are the impacts of such terminations? � Purely financial? � Reputation effects? � Staff security?

5. Interviewee Perceptions: outstanding issues in project management?