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The Australian construction industry’s record of improved project performance indicates that it may hold lessons for the IT industry. We suggest that these lessons are more likely to be at the enterprise-level rather than the project-level. An exploratory study confirmed this, finding differences in a number of areas of management practice affecting organizational and individual capabilities and their relationship to project performance. The design of a two-level survey comparing the two industries is described. This is the first such study of its kind. Initial findings from questionnaires completed by managers of project managers in both industries are described. They suggest that the performance difference across industries is real, that the degree of task certainty is different, and that some of the performance differences may be attributable to organization and management. 1. RESEARCH OBJECTIVES Information systems (IS) projects are notorious for poor performance against objective targets such as budget and schedule as well as the more subjective targets of quality and customer satisfaction. Worse, despite IS professionals’ continuing efforts there is little sign of consistent improvement throughout the industry (Johnson 1995; Sauer 1999). In Australia, this contrasts with the construction industry, which 20 years ago had a poor reputation for project performance but where today the best companies are widely perceived to consistently meet most project targets. Not only have prestige projects such as the Sydney Harbour Tunnel been successfully delivered, the leading companies also appear to deliver smaller, bread-and-butter projects equally successfully. Enterprise-Level Project Management Capabilities 441 The IT industry has been aware of the construction example and has borrowed, and then extended and developed, its project management tools and techniques. Some leading scholars of project management consider the IT industry as among the most advanced in the use of project management techniques (Morris 1996). Therefore, the fact that IS project performance has not shown consistent improvement suggests that either construction’s advantage lies in more than its application of technique or that the IS project task is substantially harder to manage than that of construction. We do not challenge the claim that IS projects are harder to manage because of factors such as continually changing technology, difficulty of fixing user requirements, high staff turnover, and the intangibility of the software product. Rather we argue that because construction’s performance has improved and become more consistent where IT’s has apparently not, and since few industry observers would suggest that IS project performance is as good as it could be, the construction example may offer useful lessons. One possible source of lessons lies in the fact that building contractors conduct their business solely through projects. By contrast, many IS projects are carried out either by in-house IS functions in businesses where project activity is not the principal source of revenue or by IT service firms whose main business often includes non-project activities such as facilities management and product sales. We surmise that construction firms’ exclusive focus on projects may have resulted in their introducing organizational innovations to support project management to a greater degree than firms that conduct IS projects. In short, this insight constitutes the motivation for this study. Our initial objective, therefore, is to study how building contractors organize and manage so as to achieve consistently high project performance and to compare this with the IT industry. Our ultimate objective is to identify organizational and management changes that a company can make at the enterprise-level so as to improve its performance on IS projects. 2. THEORETICAL FOUNDATIONS While numerous fields of study bear on IS project performance, there is a paucity of directly relevant theory at the enterprise-level. Most research on IS implementation has been conducted at the individual-project-level aimed at identifying success and failure factors. Although some project management factors such as goal-setting, planning and control, team behaviors and team management are commonly identified as influencing performance (e.g., Barki , Rivard and Talbot 1993; Keider 1984; Schmidt et al. 1999), the target of such research is the project manager rather than enterprise-level management. Both the generic project management literature (Cleland and King 1983; Frame 1994; Kerzner 1995) and the IS project management literature (Hallows 1998; Kirsch 1997; McLeod and Smith 1996) are likewise almost exclusively focused on project-level variables. Recent exceptions include work on corporate project offices (Frame and Block 1998) and on the management of project managers (Graham and Englund 1997). Such work is based on informal case studies and experiences, but while these provide useful insights into enterprise-level management practice they do not constitute rigorous empirical support. Research on organizational design might have been expected to be more helpful. However, it has largely been directed toward volume production and continuous process industries. Where researchers have recognized the importance of projects in industries such as heavy engineering, they have typically studied matrix management largely from a structural perspective (Galbraith 1973, 1977). Today matrix management is an unfashionable area of research because in practice it has been distinguished more by the problem it creates for project managers—insufficient control of necessary resources and the resultant conflict—than by any solution it provides to the problem of integrating differentiated functions. A particular weakness of this literature has been that its focus on individual projects has resulted in the exclusion of longer-term organizational-wide improvement in project performance. In the absence of a mature theoretical foundation as a platform for our research, we have been obliged to undertake exploratory research to formulate appropriate research questions. Sauer, Liu and Johnston 442 Organizational capability Individual capability Conduct of project Figure 1. Building Project Management Capability Around Project Performance in Construction 3. RESEARCH QUESTIONS Our research objectives were refined into specific questions through an initial qualitative investigation using case study methods. In view of the limited theoretical foundation for the study, this approach is widely viewed as appropriate (Benbasat, Goldstein and Mead 1987; Eisenhardt 1989; Yin 1994). This phase of the research draws on qualitative data gained from 28 unstructured interviews with members of four of Australia’s largest and most successful construction companies. The research explored their organizational and management practices in relation to project management. Personnel interviewed included board directors, project managers, functional managers, and members of corporate-level project audit and process improvement teams. We used our existing understanding of IT project management, which is based on more than 20 years practical and research experience, as a benchmark against which to identify what was interesting and distinctive about construction industry practice. In addition, as a validity check, we conducted 10 interviews with senior IT managers in Australia and the United States. From our initial research we derived a number of factors that appeared to influence project performance in construction but which when present in IT have a less active and important role. These factors included: • Proportion of business conducted through projects • Flat, project-centered structure • Strong project performance focus • Client focus • Strong project director role • Project manager responsibility and accountability matched to authority • Frequent and effective formal and informal reporting • Active involvement by senior managers • Values support development and retention of project management knowledge • Human resource systems and processes support recruitment and development of project managers and retention of project management knowledge • Career structure to lead from project managers to senior executives • High level of project management experience among senior executives Our initial research also suggested that some other factors were not as important as might have been expected. These included: • Formal project management methodologies, tools and techniques • Performance-related pay Importantly, we found that the companies’ organization and management practices were linked by a common organizing logic which we expanded into a description of a distinctive project-management-centered organizational form (Sauer, Johnston and Liu 1998). Figure 1 illustrates two important elements: the focusing of the bulk of the organization’s resources in the form of individual and organizational project management capabilities on individual projects; and the continual improvement of these capabilities through learning from individual projects. The initial phase, therefore, led us to the following research questions: • What are the constituents of organizational and individual project management capability? • How do these relate to project performance? • What lessons does the construction industry’s approach to organizational and individual project management capability offer for the IT industry? Enterprise-Level Project Management Capabilities 443 4. RESEARCH METHOD In order to address these questions, and to validate our initial findings, we chose to collect quantitative data through surveys designed to permit us to analyze organizational level determinants of project performance within the construction and IT industries separately, and to compare them. In the absence of many directly relevant prior studies, we anticipated that

Enterprise-level project management capabilities: a comparison of the construction and IT services industries