Independent Project Analysis · databases that now number over 23,000 projects with a total capital...
Transcript of Independent Project Analysis · databases that now number over 23,000 projects with a total capital...
1IPA CONFIDENTIAL
Independent Project Analysis
Leading Complex ProjectsEd Merrow
2IPA CONFIDENTIAL
IPA Viewpoint on Capital Projects
• IPA evaluates projects—large and small—for owners around the world
• In a typical year, we evaluate about 800 major projects and add them to our projects databases that now number over 23,000 projects with a total capital value of over US$5 trillion
• For each project we capture the record of the project from business case development through early years of operation
• 10 to 15 percent of those projects are what we call large and complex projects
• As a project management community about 80 percent of the projects that we do are deemed by their business sponsors to successes; when we follow best practice the percent rises to about 95 percent
• But when we look only at large complex projects our success rate plummets to about one third of projects
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Track Record of MegaprojectsMegaprojects Are Either Quite Good or Horrid
SuccessFailure
65% of Megaprojects Are Failures
We deem a project to be a failureif one or more of the following occurred:
Costs Grew 25%+Cost Competitiveness 25%+Execution Schedule Slipped 25%+Severe and Continuing Production Problems—2 years Yes
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• They were successes because they followed a particular set of good practices; success was not at all random
• So why do so few megaprojects follow these good practices?
• It can’t be ignorance; best practices are not new and have been well known for the last 15 years
• We rationalized some of the results to the complexity of these projects, which makes getting work done difficult, but the successful projects were as difficult and complex as the failed projects
• But, through this research, we now believe it actually has to do with the nature of leadership of these complex projects
• Most megaproject directors are selected from the ranks of successful middle-sized project managers
• Is that selection process effective…..?
But 1 in 3 Megaprojects Are Stunning Success!
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Complexity Occurs in 3 Dimensions
Most megaprojects are complex in all three dimensions
Scope Complexity1
Shaping Complexity2
Organizational Complexity3
When a project has three or more distinct sub-projects, the scope is too complex for the project director to supervise all
When a project has a significant number (4 or more) of external and/or internal stakeholder organizations, e.g., partners, government agencies, NGOs, local communities
When a project’s organization requires a central hub that supports work but does not directly manage the work
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Leadership Is Difficult in a Complex Project
Mac
roEx
tern
al
Stak
ehol
ders
Partners Regulators NGOs Governments Etc.
Mid
dle
Commercial Operations ProductionWellsReservoir
Mic
roFa
ciliti
es
Exam
ple Engineering
Environment, Health, & Safety
Procurement
Construction
Legal
Contracts
Project Controls
Etc.
Facilities
Project Leader’s Common Situation: Responsibility without Authority
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• E&P projects are usually large and complex—technically, organizationally, and politically
• Project leader position (project manager, project director) is more important in large complex projects than in small, simpler ones
• Large E&P projects are harder to manage than their counterparts in other industries because most:
‒ Are joint ventures
‒ Entail complex relationships with governments and regulators
‒ Are organized internally with 5 somewhat autonomous functions that must work together intimately to succeed
The Effect of Complexity
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Management v. Leadership
Project Management Project Leadership
• Good planning of deliverables
• Proper allocation of work
• Sequencing all work correctly
• Holding everyone accountable through good controls
• Articulating a clear vision for the project
• Getting all stakeholders to agree and cooperate
• Generating strong followership from the team
• Being a leader of leaders
vs.
When a project becomes sufficiently complex, leadership is necessary rather than management alone
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• As projects become more complex, the project manager role shifts from that of a manager to that of a leader
• Unfortunately, the manager and leader skillsets and personality requirements are not the same
• Yet complex project leaders are mostly selected based on their success with middle-size projects
• We believe that the mismatch of requirements contributes very substantially to the poor track record we have accumulated in large complex projects everywhere
Our Basic Thesis
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Motivation and Goals of This Study
• The decline in oil prices is accelerating the demographic shift that was already occurring in the ranks of project leadership
• To put the right people in place for the right project we need a better understanding of what generates leadership success in projects
Tom Wolfe
• What distinguishes the successful leaders from the also-ran leaders of major projects?
‒ The right experience
‒ The right temperament
‒ The right stuff!
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Databases and Methods
Role of Experience
Personality and Emotional Intelligence
Leadership Content and Style
Conclusions and Implications
Outline
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• 422 projects for the 262 PLs that answered surveys
• Average Authorization Year: 2009
• Average Project Cost (2016 US$): 200 million
Non-Megas• 56 current and past projects
for the PLs that answered surveys
• Average Authorization Year: 2011
• Average Project Cost (2016 US$): 1.55 billion
Databases and Method
Megaprojects
• Online survey of PLs in the Field Development Database• 56 PLs responded out of ~100 surveys sent• Includes PLs from 17 companies• 160+ questions around background personality
(Big 5 Attributes), and leadership• About 30-40 minutes to complete
Project Leadership Survey
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• The individuals surveyed were selected by the companies, so there is no expectation of randomness
‒ Better-than-average projects were selected on the whole
• Over half of the surveys were returned but with big differences by company
‒ In some companies all PLs asked returned the surveys
‒ In others, very few did
• This result was not random; it reflects the degree of control or impotence of the projects organization
Surveyed Project Leaders
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The PL Personality BIG 5 Scale AttributesA Well-Established and Validated Instrument
1 2 3 4 5 6 7
SpontaneousNot Process-boundNot Many Rules
ConscientiousOrganized
Self DirectedControlling
AgreeableSuspiciousConfrontationalUn-sacrificing
TrustingCompliant
Affectionate
OpenSkepticalRationalConventional
CuriousCreative
Open to Changes
ExtrovertedQuietCautiousSolitary
OutgoingAdventurous
Novelty Seeking
NeuroticInattentiveTake RisksEven Tempered
Hyper-vigilantRisk-averse
Tend to Worry
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Ironic Validation: Conscientious People Responded to Our Survey Earlier!
Big
5 C
onsc
ient
ious
ness
Sca
leLe
ssM
ore
Earlier LaterTiming of Response
Pr < 0.06
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The Emotional Intelligence ScalesAnother Well-Established and Validated Instrument
Schutte, N.S, Malouff, J.M., Hall, L.E., Haggerty, D.J., Cooper, J.T., Golden, C.J. and Dornheim, L. (1998) “Development and validation of a measure of emotional intelligence”, Personality and Individual Differences 25, 167-177.
Scale Name Description
Recognize Own Emotions
How quickly and easily does a person recognize their own emotional situation?
Recognize Others’ Emotions
How easily does one grasp how others are responding emotionally to a situation?
Regulating Emotions How good is one at controlling one’s own emotions?
Social Skills How well does one get along with others and make them feel at ease?
Use Emotions Does a person know how to use emotions to motivateothers?
Optimism Is that glass half full?
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Fox and Hedgehog Measure
• This distinction, popularized by Isaiah Berlin, is useful for understanding characteristic ways of thinking
• We used a standard battery of questions to understand whether our project leaders displayed any patterns in this regard:
“A Fox knows many things, but a Hedgehog knows one important thing” -Archilochus c.680-645BC
Foxes are generalists, eyes-to-the-horizon types that do not like to spend too much time on a single issue
Hedgehogs focus on a particular subject and know it extremely well; they specialize and are truly expertsAs a group, engineers tend toward being Hedgehogs
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Databases and Methods
Role of Experience
Personality and Emotional Intelligence
Leadership Content and Style
Conclusions and Implications
Outline
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• More than getting old
• Career path and progression
• Experience in other industries
• We expect some backgrounds are more helpful to leaders of complex project than others
• But remember, experience is only valuable if one has the capacity to learn
Experience
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• We believe this is an example of learning
• When teams are missing one or more key functions, projects fail
• Experienced project leaders know this and push for the right team members from the moment they join the project
• Experienced leaders review the team makeup as one of their first activities on a new project
Experienced Leaders Fill All Roles
1
4
7
10
13
16
19
22
Integrated Team Non-IntegratedTeam
Year
s of
Exp
erie
nce Pr < 0.01
+1 Std. Dev.
-1 Std. Dev.Mean
Sample
Average
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• We hypothesized that more diverse experiences for our project leaders would generate better ability to diagnose and fix problems
• We examined work in other industries and different jobs within their company as indicators of more diverse backgrounds
The Effects of Varied Backgrounds
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Utilities & Infrastructure, 43%
Industrial21% Chemicals,
22%
Any Experience Outside Oil & Gas Relates to Improved Performance (Even if it was early in career)
0.3
0.8
1.3
1.8
2.3
2.8
3.3
3.8
4.3
4.8Yes No
Pr < 0.09
+1 Std. Dev.
-1 Std. Dev.Mean
Asset $/BOE Index
Bet
ter
Wor
sePL Has Experience Outside Oil & Gas
27% of PLs Have Had Experience In Other Industries
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Experience in Roles Other Than Project Manager
Perc
enta
ge o
f Res
pond
ents
0%
10%
20%
30%
40%
50%
60%
NOV* HUC** Business Operations ProjectControls
ConstructionManagement
**Hookup & Commissioning*Non-operated venture
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0%
20%
40%
60%
80%
100%
Yes No
• 59% of respondents worked as NOV reps but they make up nearly 80% of successful leaders
• We speculate that time on NOVs is a period of intense learning for (prospective) project leaders
• Time to watch others make mistakes
• Time to reflect on what works and what doesn’t
Better Leaders Often Spent Time on NOVs*
Pr < 0.01
Perc
enta
ge o
f Suc
cess
ful P
Ls
PL Previously Spent Time on an NOV
*Non-Operated Venture
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Perc
enta
ge o
f Res
pond
ents
0%
10%
20%
30%
40%
50%
60%
NOV* HUC Business Operations ProjectControls
ConstructionManagement
*Non-operated venture
Experience in Roles Other Than Project Manager
Does Business Experience Help?
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Databases and Methods
Role of Experience
Personality and Emotional Intelligence
Leadership Content and Style
Conclusions and Implications
Outline
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Personality and Emotional Intelligence
• Personality is believed to be largely fixed before adulthood
• The literature is not clear about whether emotional intelligence can be taught or developed later in life
Temperament
• The personality characteristics that make certain things easier, or more difficult, for different individuals
• We expect some temperaments are more suited to complex project leadership than others
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Complex Project Leaders are Mostly Foxes
Foxes78%
Hedgehogs22%
Are generalists, eyes-to-the-horizon types that do not like to spend too
much time on a single issue
Focus on a particular subject and know it extremely well; they specialize and are truly experts
Almost all of our respondents are engineers and engineers tend to be hedgehogs…
But our respondents are overwhelmingly foxes
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Megaproject Leaders Must be Foxes to Cope With Project Complexity
Megaproject leaders are more likely to be foxes than non-mega project leaders
FoxHedgehog
Freq
uenc
y
1 2 3 4 5 6 7 8FoxHedgehog
Non-Mega PLs Mega PLs
1 2 3 4 5 6 7 8
Freq
uenc
y
failures successes
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• We find this result unsurprising; in our study of non-E&P project leaders we found that “foxiness” increased with project size and complexity
• The projects being executed by our respondents are large and complex and require the ability to look over and juggle a wide variety of tasks successfully
• The basic profile of the megaproject leader is a generalist
• “Foxiness” clearly relates to better projects in our sample
Why Foxes?
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0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00Fox Hedgehog
Fox vs. HedgehogCost Index and Asset Cost Growth
+1 Std. Dev.
-1 Std. Dev.Mean
Cost Index-20%
0%
20%
40%
60%
80%Fox Hedgehog
Cost Growth
+1 Std. Dev.
-1 Std. Dev.Mean
Pr < 0.04 Pr < 0.02
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The Role of Personality
• Our average project leader was close to the middle on most attributes of personality measured by the Big 5
• The averageness of the sample hides the importance of personality
• Some traits are associated with success and others with failure
• Let’s look at the best of our projects and the worst…
WorseBetter
‒ Achieved cost or schedule target‒ Cost Index: <= 1.00 OR
Execution Schedule Index: <= 1.00
‒ Did not meet cost and schedule targets
‒ Cost Index: > 1.00 ANDExecution Schedule Index > 1.00
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Better and Worse
B = Better W = Worse
BWLess Agreeable
MoreAgreeable
BWLess Conscientious
More Conscientious
B WIntrovert Extrovert
B WRelaxed Neurotic
BWClosed OpenPr < 0.05
Pr < 0.02
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• A little more agreeable
• Much more open‒ As a group engineers tend strongly toward the closed end of this scale Preference for black and white
Not prone to “creative” solutions
‒ Openness is the dimension most associated with the ability to gather more information for decision-making
Successful Project Leaders
The generalist learner is prototypical successful project leader
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Emotional Intelligence and Success
Scale Sign Z-score withSuccess
Statistical Significance Comment
Recognize Own Emotions + 1.96 .05 Successful leaders have good
self-awareness
Recognize Others’ Emotions + 1.68 .09 Relationship to project success is
obvious
Regulating Emotions + 0.18 .86 This is the only EI scale that
shows no relationship
Social Skills + 1.78 .08 Key to effective teamwork
Use Emotions + 1.12 .26 Directionally correct; some components are significant
Optimism + 2.0 .05 This is a measure of emotional strength in face of difficulties
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• The personality profile of the successful large complex project leader doesn’t resemble a cross-section of engineers
• The profile also doesn’t look a lot like that of project leaders of smaller, simpler projects
• Successful complex project leaders are open—as open as psychologists and lawyers
• Successful leaders are systematically high on all emotional intelligence scales
Summarizing Experience & Temperament
The successful project leader is the experienced, neurotic, generalist who is open to others’ views
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Databases and Methods
Role of Experience
Personality and Emotional Intelligence
Leadership Content and Style
Conclusions and Implications
Outline
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• Personality characteristics and emotional intelligence do not magically change project outcomes
• Rather, they shape the tasks that leaders actually do‒ Personality and emotional intelligence affect the things one is good at doing
‒ Everyone tends to do more of the things we are good at and less of what we are not
• Personality and EI shape the extent to which the right practices are actually followed
The Causal Links
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Generalist Orientation
Open Personality
High Emotional Intelligence
Varied Experience
Project Outcomes
Causal mechanisms to trace how PL characteristics shape project results
Project Leader Traits
Project Leader Tasks
Project Practices
From Traits to Tasks and Practices
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Personality and E-Intelligence Shape TasksTasks Project Leaders Spend Time On During Projects
Significantly Less Time Significantly More TimeBig 5 Personality Scales
Openness Work Process and Engineering Communication and People Management
Conscientious People Management Communication and Contracting
Extrovert People Management and Contracting
Neurotic Contracting Project Management
Emotional Intelligence ScalesRecognize Own Emotions Project Management People Management
Recognize Others’ Emotions Project Management People Management
Regulate Emotions Project Management Contracting
Social Skills Work Process, Project Controls, and Project Management People Management
Use Emotions Work Process People Management and Contracting
Optimism Project Controls People Management and Contracting
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• Those with more open personalities and high emotional intelligence tended to focus on:‒ Communication
‒ People management
‒ Contracting
• Those lower on these scales tended to focus on:‒ Project management tasks
‒ Controls and engineering
‒ Work process
• The first group understood their job to be leadership; the second felt their job was project management
PMs and Leaders
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-40%
-30%
-20%
-10%
0%
10%
20%Yes No
Those That See Stakeholder Management as Value-Adding Get Better Results
Pr < 0.04
+1 Std. Dev.
-1 Std. Dev.Mean
Cost Growth
Bet
ter
Wor
se
0.70
0.80
0.90
1.00
1.10
1.20
1.30Yes No
Pr < 0.06
+1 Std. Dev.
-1 Std. Dev.Mean
Execution Schedule Index
Stakeholder Management Perceived as Value-Adding PL Task
Stakeholder Management Perceived as Value-Adding PL Task
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Project Leaders Should Not Do Others’ Work
Goo
dFa
irIn
adeq
uate
Poor
Bes
t
FEL Index
Pr < 0.06
No
Yes
Engineering/Technical Tasks Important for PL
0.90
1.00
1.10
1.20
1.30
1.40
1.50Cost Index
Pr < 0.05
No
Yes
Engineering/Technical Tasks Important for PL
0.90
1.00
1.10
1.20
1.30
1.40
1.50Execution Schedule Index
Pr < 0.02
No
Yes
Project Controls Is a Common PL Task
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Communication and People Do FEL
Goo
dFa
irIn
adeq
uate
Poor
Bes
t
FEL Index Project Controls Index
Fair
Poor
Def
icie
ntG
ood
Spends Time on People Management
Does NOTSpend Time on People Management
Values Communication
Does NOT Value Communication
Pr < 0.001Pr < 0.05
Spends Time on People Management
Does NOTSpend Time on People Management
Values Communication
Does NOT Value Communication
Pr < 0.001Pr < 0.04
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• Successful leaders manage to balance a paradox:‒ Good project leaders listen to everyone, but
‒ Jealously guard their decision-making prerogatives
• The key is that they are genuine listeners:‒ They will change their mind if the evidence is good
‒ They never do “fake listening”
• But they and they alone will make the final decisions‒ No need for consensus
‒ No group-think
‒ No going along to be a good sport
Listening and Decision-Making
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Databases and Methods
Role of Experience
Personality and Emotional Intelligence
Leadership Content and Style
Conclusions and Implications
Outline
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• Good leadership is very important to the performance of major projects—perhaps too important
• The leaders of successful megaprojects have a very different profile than project managers generally or engineers generally
• Only a small subset of technical employees are good candidates for these positions‒ They need to be identified early in their careers
‒ Given assignments that provide broader backgrounds
• Most companies do not appear to have screening criteria and development paths that lead to a coherent cadre of major project leaders
• Assignment appears based on characteristics of last project (or favoritism) rather than the needed leadership qualities
Conclusions and Implications
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What Is the “Right Stuff”?
Profile of a Successful Leader for Complex Projects:
Savvy, generalist fox
Very open to others’ input
Strong focus on people issues
Experience as a non-operating partner rep on joint ventures
No experience working in the business (unless predictable but high cost is desired result)
Desired personality characteristics are easy to measure, but that is hardly ever actually done Very high emotional intelligence
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Concluding Thought
“The hard stuff is easy.
It’s the soft stuff that is really hard.”—Leader of the most complex successful
gigaproject ever done
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THANK YOU!