Cover Page

LEADING
COMPLEX
PROJECTS

A Data-Driven Approach to Mastering
the Human Side of Project Management





Edward W. Merrow and

Neeraj S. Nandurdikar







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This book is dedicated to families.

First, the families of the authors who put up with the constant stress of our travel and yet happily encouraged us to write this book.

Second, our IPA family – everyone at IPA who made our work possible by doing the difficult and exacting work of collecting data on thousands of projects and turning those data into useable information.

And third, to the family of project directors – the project management family – that we have come to know and embrace over the last several decades and from whom we continue to learn every day.

FOREWORD

All companies, governments, and even individuals desire to have their projects completed with success. In the industrial world, this elusive success has always been measured in terms of performance against project goals, normally quantified in terms of safety, quality, cost, and schedule. To be successful in today's regulatory and commercial environment requires that we deliver exceptional performance on all four of these measures. Many methods are available to track the goals and achievements of the desired performance. Yet, even with numerous methods, processes, and procedures, major projects continue to have significant failure rates (discussed in significant detail in Industrial Megaprojects by Ed Merrow). This new book provides additional insight into major project execution that looks beyond the usual processes and recognizes the critical factor: project success is all about people. Therefore, the true differentiator for project performance is the leadership of the people developing and executing the project.

With all the literature available on leadership, why should you spend your time with this specific book? I believe that the authors have captured the essence of creating successful projects with their analysis of leadership as it applies specifically to large industrial projects. This analysis builds upon the library of recognized experts such as Bennis, Goleman, and others. Using the proprietary database of Independent Project Analysis, Inc., which includes thousands of projects covering many industries, Ed and Neeraj have studied specific, successful projects. Through surveys and direct interviews, they have determined what each project leader did that helped his or her team to succeed. I think you will find valuable guidance in this book for the selection of the leader for your next major capital project, as well as keys to building an excellent project management organization. This can provide a basis for future success through investment in the people in your organization.

In the interview section of the book, the authors share insights from several successful project leaders. The varied backgrounds, industries, experiences, ways of handling teams and significant issues will provide valuable comparisons for your consideration. A consistent thread is the focus on teams and relationships to enable project success. These relationships include the supply chain for projects, including vendors and contractors, assuring an integrated process. In this book you will see the importance of values in driving project success. You will see how the personal values of the leaders create a shared culture in the project that governs how people communicate and trust each other to assure best-for-project decisions and keep projects moving toward success. Where the company culture aligns with the project culture, significant empowerment of the team provides an additional enabler of success. And where the right company culture doesn't exist, these leaders still often find ingenious ways to work around that and create inspiration and followership and still deliver success. That's what leadership is about!

I encourage you to read on and enjoy this fresh approach to understanding this driver of major capital project success.

Don Vardeman

Vice President of Worldwide

Project Management (Retired)

Anadarko Petroleum Corporation

ACKNOWLEDGMENTS

Just like any other project, the making of this book was a collaboration among a great many people, many of whom donated their time because of their belief in the importance of effective project leadership. First, we thank the 56 leaders of complex projects who completed our detailed survey as well as the complex projects that went with them. Without their help this would have been quite impossible. Second, we thank the seven extraordinary project leaders who were willing to sit for long interviews with us to deepen our understanding of how successful project leaders approach their important work. These seven are the real authors of Part II of this book.

We also owe a deep debt to those researchers whose life's work was essential to our analysis, particularly Lewis Goldberg, developer of the Five-Factor Model version that we employed, and Daniel Goleman, a central developer of the connections between emotional intelligence and effective leadership.

We also thank our external reviewers: Joseph C. Brewer, Jr., Paul Harris, Robert Don Vardeman, Murray Covello, and William Hederman. These gentlemen provided a practitioner's reading that enriched the effort. We would like to thank Jon Walker of IPA's research organization, who both pioneered some of the methodology we employ and was also kind enough to review some of the key chapters of the book. We also thank Lucas Milrod, deputy director of IPA Projects Research Division/Organization and Teams, who both reviewed chapters and provided answers to many questions about psychological research as we proceeded. Our thanks to Elizabeth Sanborn and Loretta Merrow, who reviewed some of the early chapters. We also thank Katya Petrochenkov, a senior research analyst in our UK office, who read and commented on the draft. We were helped throughout by Kelli Ratliff's eye for graphics, which she combines with knowing the substance, an unbeatable combination. Thanks also to our Wiley editor, Richard Narramore, and our Wiley team.

Finally, and most especially, we would like to thank our spouses, Loretta and Christine, who put up with our additional stress as we wrote this book while trying to do our day jobs.

ABOUT THE AUTHORS

Edward W. Merrow is the founder and CEO of Independent Project Analysis, Inc. After starting his career as a professor at the University of California, Los Angeles, Ed spent 15 years at the RAND Corporation, eventually directing RAND's Energy Research Program. In 1987 he founded IPA to be a unique benchmarking and research provider to the capital-intensive industries and infrastructure builders around the world. Ed has authored a number of studies and books, most recently Industrial Megaprojects (Wiley, 2011). Ed's contributions to the industry have been recognized by a number of organizations and he is a member of the National Academy of Construction.

Neeraj S. Nandurdikar is Director of IPA's global Exploration and Production (E&P) practice. In this capacity he acts as a partner and adviser to Fortune 100 Oil and Gas executives around the world in helping to find savings and efficiencies across the entire oil and gas value chain and lift capital productivity. He has delivered several keynotes and conference presentations and is a key thought leader in the industry, working to enhance the oil and gas industry's capital projects performance and make the industry stronger and more resilient. He has an MBA from the Wharton Business School of University of Pennsylvania and an MS in Petroleum Engineering from the University of Tulsa.

INTRODUCTION
EXECUTIVE SUMMARY

There is general agreement throughout the industrial world that large complex projects have had a very rough go. There have been a number of books and articles published seeking to diagnose why the track record has been so bleak and even (somewhat naïve) calls to stop doing megaprojects altogether in the future.1 The problems are not new and have been documented by academics, the trade press, and occasionally even the daily news for at least 30 years.2 Nor are the problems confined to any particular sector. Flyvbjerg et al. document the problems in public infrastructure projects.3 Merrow (2011) has reported the record of the petroleum, chemicals, and minerals industries.4 It's not a pretty picture. Megaprojects fail more than twice as often as their under-$1 billion counterparts using the same criteria for failure.

Amidst all this discussion of failure it is easy to overlook the fact that about one complex project in three is highly successful. The successes are too numerous to be dismissed as flukes. In Industrial Megaprojects (2011) we showed that when large complex projects followed a particular set of practices, they were quite likely to generate not just good but genuinely excellent outcomes. This indicated that success and failure were not in any sense random. What we could not satisfactorily explain is why relatively so few megaprojects actually employed sound practices. The failure to do so could not be explained by ignorance because the practices are known throughout the modern projects world, especially over the past 15 years. We rationalized some of the failure away by noting how difficult getting the right work done is for complex projects. But that still failed to explain why the successes were able to accomplish in practices what the failures could not.

The missing piece of the puzzle is to be found in the nature of project leadership, how leaders are selected for complex projects, and how they must behave to achieve success. Although we noted in Industrial Megaprojects that leaders have a disproportionate effect on project results in complex projects, we did not deeply investigate why. That is the subject of this book.

We considered titling this book The Leadership of Megaprojects. But that title would have obscured an essential point: the characteristic that generates so many problems for megaprojects is that most of them are complex, and it is complexity rather than size that triggers the pathway to failure. When smaller projects have the same degree of complexity, they too have an equally high rate of disappointing projects. They are simply much less likely to be complex.

Complexity occurs in three dimensions in projects: scope, organization, and shaping. Scope complexity occurs when a project has a number of distinct elements, drawing on different technical disciplines, all of which must be fully and carefully coordinated to produce a valuable result. Scope complexity is exacerbated by uncertainty in the basic technical data underpinning designs in many large projects. Petroleum development projects, for example, always have a major basic data development challenge in trying to understand the reservoir being developed. Scope complexity is the most common source of organizational complexity. The project organization is complex when a number of separate teams are required to execute the scope. These teams are often required because the technical disciplines needed to develop the area of work are distinct. Organizational complexity is also created in project systems that organize by function rather than by project teams led by an authoritative director. Finally, shaping is the process by which the benefits of a project are allocated among the various stakeholders along with the allocation of costs and management of risks. Shaping complexity is high when the stakeholder set that must be aligned around the project is diverse and potentially quarrelsome, usually with both private and public-sector players.

There are all sorts of reasons that complexity makes projects more difficult, but the biggest problem that complexity presents is that complexity transforms the leadership requirements for a project from the arena of project management to the realm of project leadership. In a complex project, the person at the top cannot watch the performance of most of those involved. In a complex project, the leader cannot demand compliance from recalcitrant stakeholders. Leadership is the art of getting full cooperation from those who are not forced to comply. Unfortunately, those responsible for selecting project directors for complex projects are usually not aware of the transformed requirements.

Good project managers are good organizers. They plan out the tasks that need to be accomplished and the order in which those tasks are to be done. They then assign tasks to those with the disciplinary competence to execute them and hold everyone accountable for delivering their part of the work on time and budget. Good project managers can be quite transactional about the whole process and be quite successful.

Complexity requires leaders at the top of the project rather than project managers. Some project managers are by nature and development both leaders and managers, but most are not. When the wrong selection process is used and the wrong person is selected to sit atop a complex project, failure regularly follows. The whole process is illustrated in Figure I.1.

Flow diagram shows project leader performs people and cooperation tasks and supports best practices reach success in right selection process whereas project manager performs technical and control tasks and leads to poor practices reach failure in wrong selection process.

Figure I.1 The Leadership of Complex Projects

PROJECT LEADERS VERSUS PROJECT MANAGERS

In our study of the directors of complex projects, we find that successful leaders display very different personalities and backgrounds from the unsuccessful leaders, but the unsuccessful leaders look very much like the profiles of most project managers of simpler projects. The usual selection process for new complex project leaders is to draw from the pool of successful project managers of simple projects. Sometimes they have the “right stuff,” as Tom Wolfe would say, and sometimes they don't.

To investigate what constitutes the right stuff we administered a battery of psychological tests to 56 complex project leaders along with a survey of their backgrounds and career development. We then linked this information statistically to the tasks that the leaders found valuable and spent their time on and finally to the practices executed on the projects. Successful project leaders have a generalist orientation, although they may have started their careers as effective technical specialists. They are unusually open personalities, and especially so when one considers that all of our sample consisted of engineers by original training. Open personalities are better learners on the whole and deal with uncertainty much more easily than those who measure as more closed. Open personalities are more likely to listen to more points of view as well. Among the seven successful leaders with whom we conducted in-depth interviews, we found that most had very clear and well-articulated approaches to learning.

The successful leaders scored higher on five of the six scales measuring different attributes of emotional intelligence.5 Emotional intelligence is different than standard IQ. Emotional intelligence measures people skills and overall facility with recognizing and using emotions. Such skills might be a plus for the manager of a simple project, but they are a must for project leaders because project leaders are not so much governors of tasks as they are leaders of managers and aligners of stakeholders. Strong people skills are integral to effective leadership.

Successful leaders tended to have had a more varied career, especially early on. They were more likely to have worked for another company in another industry before settling into their career. They were much more likely to have worked as a liaison in a joint venture operated by another company than unsuccessful leaders.

WHAT SUCCESSFUL LEADERS DO

Personality and emotional intelligence don't develop and execute projects. What they do, however, is shape the tasks that project leaders like to do and find important to do. Leaders with open personalities with high emotional intelligence focused their work on communication, people management, stakeholder management, and working with people in the supply chain. Those with more black-and-white personalities found dealing with emotions more difficult and focused their attention on work process, project management tasks, controls, and engineering tasks. In other words, those that had failed complex projects focused on the classical project management tasks. Those who succeeded focused on the classical leadership tasks. Not a very surprising conclusion but one that is rewarding to actually prove.

A successful project leader is able to get the needed practices accomplished at the right time while their failing colleagues cannot. The reader should recognize that getting the right things done at the right time for complex projects is very difficult. It requires that a lot of things are accomplished in a short period of time by people who often have never worked together before. Implementing the right practices at the right time is a manifestation of the ability of the successful complex project leader to generate extraordinary levels of cooperation from all involved.

FROM TASKS TO PRACTICES

Of course, at the end of the day, it is good practices, especially upfront, combined with dedicated people ready to react to the inevitable surprises, that actually get projects done successfully. A seeming paradox in our analysis is that those complex project leaders who focused on work process and practices rather than leadership weren't able to get the practices done correctly. Those who focused on leadership were. The resolution of the paradox is simple – the job of the leader is to facilitate others getting the practices done properly by keeping everyone focused on the goals of the project and keeping at bay all the stakeholders who might be tempted to disrupt the progress of the project. The leader's job is not only to give vision and to guide but also to protect the good work being done by others.

If your goal is to improve the results of the most important projects that you do, you must focus on how you are selecting the people who lead them. This book tells you how to do that.

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