The three ironies of crisis management in construction projects

The three ironies of crisis management in construction projects

Pergamon International Journal of Project Management Vol. 16, No. 3, pp. 139-144, 1998 © 1998 Elsevier Science Ltd and IPMA. All rights reserved Prin...

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Pergamon

International Journal of Project Management Vol. 16, No. 3, pp. 139-144, 1998 © 1998 Elsevier Science Ltd and IPMA. All rights reserved Printed in Great Britain 0263-7863/98 $19.00 + 0.00

PII: S0263-7863(97)00041-0

The three ironies of crisis management in construction projects M Loosemore The School of Building, The University of New South Wales, Sydney, 2052, Australia

The three ironies of construction crisis management are; at a time when effective communication is important it is less likely; at a time when mutual sensitivity between project members is important it is less likely; at a time when collective responsibility and teamwork are important they are less likely. This paper reports research which identified these ironies and concludes with practical advice to project managers who operate within hostile environments or crisis-prone organisations. © 1998 Elsevier Science Ltd and IPMA. All rights reserved. Keywords: crisis, ironies, communication,behaviour

Introduction A crisis is "a situation faced by an individual, group or organisation which they are unable to cope with by the use of normal routine procedures and in which stress is created by sudden change", l More specifically, a crisis is an unexpected event in an organisation's life, for which there are no contingency plans in place, which threatens high priority goals and demands a time-pressured response. 2-5 The field of crisis management has evolved over the last three decades from the relatively long tradition of research into disaster management) Impetus for the evolution of crisis management research in its own right was first provided by international political instability, then by rapid technological advances and more recently, by an increasingly hostile business environment. Although crisis management research is in its infancy, its value in other contexts is already becoming evident. 6"7 This is because crises are unique laboratories of human life, forcing to the surface, processes which lie at the very core of management. During a crisis, power-configurations, interests, values, perceptions, bargaining and decision-making processes are highlighted by being sharply focused upon a single well-defined issue. Moreover, because a multitude of forces interact during a crisis, it provides an excellent context for the integration of theory. Despite the apparent value of crisis management research, caution is needed in transferring its theories, ideas and principles to other contexts. For example, in construction there are important differences between the project based 'temporary multi-organisations' used to procure buildings and the relatively permanent organisations within which the majority of crisis management research has occurred. 8'9 In particular, project organisations are typically more dynamic and characterised by higher differentiation and conflict, qualities

which make the management of change more difficult. 1° A further reason for caution in transferring general crisis management principles to the construction context is related to the industry's unique professional roles, employment practices, expectations, norms and traditions. While it is important not to treat construction as a special case as warned against by Hillebrandt t~ and Bryant, 12 it is important to recognise the possible influence of these unique characteristics on the crisis management process. Within this context, the aim of this paper is to investigate the crisis management process in a construction context and thereby to identify any special problems which may face construction project managers. While this paper is presented within this restricted context, it will be of interest to any manager who operates within a crisis-prone organisation.

Crisis management in construction projects There has been a scarcity of crisis management research in construction, particularly from a reactive perspective. Although studies of construction project disasters seem relevant, they pay most attention to identifying the causes of disaster in order to prevent them in the future) 3 15 Despite a growing understanding of how to prevent and predict construction crises, little attention has been paid to the manner in which construction project organisations deal with crises. In particular, little is known about the pattern of events which evolve in response to them and about any relationship between these patterns and crisis management efficiency. 16'17 This is also true in the literature relating to mainstream project management and indeed, crisis management, where it has been acknowledged that research has progressed further in under139

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standing how crises occur than in studying responses to them. 18' 19 It is possible that the historical dominance of proactive managerial research has been fired by the traditional association of reactive strategies with poor management practice] ° It may also have something to do with the methodological difficulties associated with researching crises from a reactive perspective. Crises are often associated with sensitive issues and under such conditions, information is closely guarded. Furthermore, psychological factors ensure that people prefer to put such events behind them rather than recalling them. Collectively, these conditions make reliable data collection notoriously difficult. What ever the reasons, the current imbalance towards proactive crisis management research needs to be redressed. While prevention is better than cure, managers imperfectly control the forces which induce crises, which means that a crisis-free environment is unlikely to be achieved within or outside a construction context. 21 26 Indeed, if the predictions of Toffler27 and Dror 28 are correct then the future will be increasingly saturated with uncertainty and punctuated by sudden, potent and cryptic events which require a time-pressured response. To prosper in this hostile environment, organisations need reactive capabilities so that the impact of such events can be mitigated. However, at present, the danger is that continual advances in proactive management techniques will produce an over-reliance upon strategies of anticipation and deflect attention from the need to build resilience into organisations to deal with the unexpected. Paradoxically, this trend will result in organisations becoming increasingly vulnerable to crises. To abate this trend, it is essential that project managers give equal attention to both proactive and reactive managerial strategies. 29"7

The challenge of crisis research To redress the proactive imbalance that exists within project management literature, research was undertaken to investigate the crisis management process from a reactive perspective. The research took place within the construction stage of traditionally procured building projects. That is, in those projects where design is complete before construction commences, where those who contribute to these distinct stages are separated, where the architect is the lead consultant in both a design and management capacity. The research was particularly concerned with the patterns of behaviour and communication which emerge in response to a construction crisis and their relationship with crisis management efficiency. In accordance with the recommendations of ESRC, 3° a pilot study was carried out to test the reliability of preliminary methodologies and to gather feedback from practising managers about the overall research design. The pilot study adopted a case study approach where data about people's communication patterns was collected longitudinally by diary. Behavioural data was collected cross-sectionally by semi-structured interviews as the crisis progressed. The pilot study feedback highlighted a number of problems which had to be overcome in developing a suitable methodology to research crisis episodes. In particular, the highly emotional, sensitive, and contentious nature 140

of a crisis made information a major source of power and caused people to be secretive with it. This problem was exacerbated by the pressures and stresses which people often suffered and by the use of qualitative research methods which were particularly searching in the depth of data required. Problems were also experienced in collecting data retrospectively, the main obstacle being that the emotional impact of a crisis often persisted and restricted a respondent's ability to give an unbiased and rational perspective of it. Furthermore, widely conflicting accounts of the same crisis were often received and it became clear that to obtain a balanced and unbiased account, a full range of perceptions was essential. Finally, an air of trust, impartiality, integrity and confidentiality was important because some of the issues discussed were still sensitive. In addition to these general problems, a number of construction-specific problems were also encountered. For example, there was a pronounced learning effect at the start of each project which made the timing of research an important consideration. Consequently, in contrast to the pilot study where the timing of data collection was not controlled, the final research strategy was restricted to the first crisis that arose in any case study. The effect of this was to freeze the learning variable which could have interfered with the research results. A further problem related to the 'leanness' of the industry at the time of research. It was evident that potential respondents were working at maximum capacity and that consequently, the research strategy would have to reconcile the conflicting demands for indepth data and minimal inconvenience. The need to minimise inconvenience was made more important by the discovery that any inconvenience would repeatedly fall upon the same shoulders whenever a crisis arose. A further problem related to the logistics of collecting data from the typically large number of people drawn into a reaction process, many of whom played a very peripheral role. While it was important to collect data from a range of perspectives, it was clear that respondent limits had to be set to make the research manageable and the data meaningful. Finally, one of the greatest problems that emerged was connected to the inherent uncertainty of crisis research. It was impossible to predict when a crisis would arise, who would be drawn into the process and how long the crisis and data collection would last. This meant that a responsive rather than a pre-planned approach to data collection was essential.

The final research methodology In response to the pilot study feedback the research methodology was adapted. Data collection

A longitudinal case study approach was maintained, with four case studies being undertaken. Data about people's communication patterns were collected by diaries distributed during the pre-contract meeting. Diaries were valuable because they were unobtrusive, enabled both formal and informal communications to be recorded and gave respondents ownership of sensitive information until they were happy to release it.

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Furthermore, Bernard et al 3~ found them to be the most accurate method for collecting interactional data. When a crisis arose, project members were asked to use their diaries to record their formal and informal communications in relation to that crisis. The collection of data from a wide range of respondents enabled cross-referencing which helped to resolve dairy discrepancies. This process resulted in a chronological communication network of the crisis management process which was used as a framework to collect further data via retrospective interviews with each person cited on it. While the retrospective interviews were useful for resolving outstanding diary discrepancies, their main purpose was to gather qualitative data about people's behaviour and their differing perceptions of the crisis management process. Each interview was semi-structured and guided by the communication network which was able to highlight each respondent's contribution to the crisis management process. Further behavioural data was collected during the crisis by nonparticipant observations of meetings where the crisis was discussed. Analysis

The above data collection strategy produced a variety of qualitative and quantitative data from a wide range o f perceptions. The communication network associated with each crisis was used a framework upon which to hang this data and the process of analysis in each case study involved three stages which became progressively more quantitative. The first stage of analysis was largely intuitive and based upon the reconciliation of often conflicting accounts of the crisis which emerged from diary, observational and interview data. This time-consuming process resulted in a longitudinal descriptive account of the crisis management process which incorporated the whole range of perceptions of those involved. However, while the impressions and intuitions which arose from such accounts were helpful in providing insights, their contribution was limited by their inherent subjectivity. In this sense, they were only used to provide leads which were then followed up by a more rigorous content analysis of the dairy and interview data relating to each network interaction. The technique of content analysis was particularly suitable to the unstructured nature of the data and involved categorising the communication content of each network interaction into its component parts and quantifying them. 32 The result was a longitudinal account of a crisis which revealed the dynamics of people's behaviour. The final element of the analytical strategy was purely quantitative and involved analysing the patterns of communication in the crisis management networks using a technique known as social network analysis. 33-35 In essence, this resulted in structural indices which were able to identify an individual's role within the crisis management process.

Discussion of results Three managerial ironies emerged from the research described above.

A t a time when collective responsibility and teamwork are important they are less likely

Each crisis demanded an injection of extra resources into its host project, the responsibility for supplying them, being determined by contractual agreements. These tended to allocate responsibility distinctly to one party rather than to share it, a pattern of risk distribution which had three problematical effects. 1. There was little collective responsibility shown in crisis management, those who were not responsible, becoming selfish in their attitude towards a crisis which they considered to be another party's risk. 2. Distinct winners and losers emerged, resulting in resource redistributions between project members. Problems arose as people sought to ensure that the resource redistributions went in their favour. 3. Contractual documents became more important as a formal guide to responsibility patterns and as people turned to them, differences in interpretation and understanding often emerged. If not for the crisis, such misunderstandings would have remained hidden and irrelevant. However, their effect was to create uncertainty and detract attention from crisis management. In essence, the serious financial implications of a crisis, produced fundamental changes in the nature of interpersonal relationships and created an environment highly conducive to conflict. Any disagreements which emerged during a crisis were made more contentious by the low margins under which parties were employed. This magnified natural conflicts of interest between project participants by making them more sensitive to money-making opportunities and conversely, more resistant to potentially threatening situations. In essence, it made insensitive, irrational and extreme behaviour more likely. The important irony to emerge from the above findings was that at a time when cooperation, consensus and rapidity in response was more crucial, it was less likely to occur. Rather, the crisis management process became characterised by tactical combat, the aim of each stakeholder being, to secure the most favourable redistribution of resources. One of the initial tactics employed before full combat commenced was for those of similar interests to collect into temporary coalitions, the aim being to increase their power-base in negotiations. Unfortunately, the effect of this, while creating the appearance of temporary tranquillity, was to further polarise a situation by allowing parties to more clearly define their position and thereby their differences with others. In this sense, the early stage of a crisis was characterised by increased levels of communication, teamwork and participation. However, the problem was that this activity was focused into distinct pockets and aimed at identifying, rather than eroding differences. The challenge for project managers in preventing their formulation was that many coalitions were informal and covert in nature. Indeed, there was repeated evidence of project managers being susceptible to the deliberate attempts of coalition members, to filter information away from them in order to disguise their identity. The formation of coalitions was typically followed by a range of tactics which were more specifically aimed at manipulating resource 141

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movements than building a power-base. For example, a popular tactic was to take advantage of the ambiguity of the crisis itself and of the contractual documents by attempting to redefine them in their favour. Typically, this was an early tactic and popular because of its low risk of escalation. Other tactics which emerged as a crisis progressed included the use of silence, bluffing, threats, warnings and eventually deliberate acts of escalation. The range of tactics observed represented the essence of the bargaining process through which project participants resolved responsibility patterns surrounding a crisis. Typically, as time went by, the combination of tactics used during bargaining, had an escalating effect because more energy was invested in negotiations and the costs of compromise, in emotional and monetary terms, increased. Since there was no evidence of parties wishing to deliberately precipitate an escalation, it is clear that the process of crisis management is fraught with the danger of accidental escalation as a result of the misguided tactics of differing interest groups. Despite the gloomy portrait of crisis behaviour portrayed above, difficulties over resource redistributions are not an inevitable aspect of all crises. For example, one case study illustrated that in addition to presenting opportunities for increased division and failure, crises also present opportunities for increased cohesion and efficiency. Here, financial responsibility was immediately accepted by the client meaning that there was little uncertainty relating to risk distribution patterns. Furthermore, the parties had a constructive attitude towards the project and did not exhibit any exploitative behaviour. Rather, they used the crisis as an opportunity to demonstrate their commitment to the project's success and their sensitivity to each other's interests. This in turn meant that project members saw each other in a more positive light, that there were no prolonged and acrimonious discussions about financial issues and that managerial energies were focused upon more progressive tasks. Indeed, as time went by the positive influence of the crisis gathered a momentum which became increasingly difficult to break.

A t a time when effective communication is important it is less likely

Effective communication was found to be essential in efficiently bringing about the significant social, monetary and technical change demanded by a crisis. Communication was the mechanism by which the potentially damaging uncertainty associated with such levels of change was reduced and an equilibrium reestablished. However, the case analyses highlighted the disturbing irony, that at a time when effective communication was of particular importance, a crisis created conditions which made it less likely. Two explanations emerged for this irony, the first relating to information being a source of power in resolving conflicting interests and the second relating to the volume of information generated during a crisis. Information as a source of power. Where there were uncertainties over responsibility patterns, information became an increasingly important source of power and was therefore more closely guarded. In some cases, the inclination to 142

withhold information was magnified by the tendency of people with similar interests to collect together in groups. This magnified communication problems because the groups imposed strong norms which produced an inward orientation. The volume of information generated. In contrast the above, when financial responsibility patterns were resolved, there was a danger of the organisation becoming flooded with information. This was a result of a shorter period within which to resolve the technical aspects of a crisis. It was a problem, exacerbated by the tendency for information supply and demand to focus around a few key people. This resulted in bottlenecks where information overload occurred. If unable to cope, the people occupying those positions were forced into a reactive style of management as information demand ran ahead of its supply. In two cases, this led to coping behaviour which made the situation worse. For example, in one case, the project manager responded by adhering to formal, standardised, programmed procedures. In contrast, in another case, a project manager attempted to cope by becoming increasingly informal. Ironically, both coping strategies damaged the crisis management process by deepening the problems they were designed to resolve. The effect of the formal coping strategy was to slow down information supply and cause a significant amount of frustration on the part of the contractor. The effect of the strategy of informality was to create a disjointed organisation by restricting communications outside the immediate vicinity of the crisis. Thus, paradoxically, it appears inappropriate to deal with a crisis in a routine, formalised manner but equally inappropriate to respond in a completely informal manner. Rather, the emphasis in coping with a crisis should be upon a balanced, flexible approach supported by open communication which at the same time, maintains an element of control. Unfortunately during the extremes of a crisis it appears that this type of finely balanced response is less likely. Instead, there is a tendency for project participants to exhibit extremes of formal or informal behaviour which lead the project into a downward spiral of poor communication, tension, anxiety and stress which becomes increasingly difficult to break. These conditions create and fuel inefficiency in the crisis management process.

A t a time when mutual sensitivity between project members is important it is less likely

The selfish tendencies which emerged because of the separated manner in which project risks were distributed, were discussed earlier in this paper. While this selfishness was attributable to contractual conditions, collective responsibility was also discouraged in other ways. In particular, a crisis tended to generate conflicts of interests between project participants with responsibility for the protection of different project goals. The most common conflict to emerge was between those responsible for the protection of costs and time and as a consequence they would often exclude each other from

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the crisis management process in order to fulfil their own responsibilities. Since a crisis threatened a whole range of project goals, the consequence was that some endangered goals went unprotected. For example, in one case study, the initial need to maintain site progress in the face of a crisis, meant that a direct conflict of interests emerged between an architect and a cost surveyor. This crisis resulted from the collapse of a basement excavation, a critical-path activity which demanded intense efforts from the architect and engineer to maintain information supply on a new basement design, to the contractor. To satisfy the contractor's urgent information needs, the architect and engineer resorted to a strategy of informality by repeatedly issuing verbal instructions on site, without notifying the cost surveyor. The reason was that the surveyor, in seeking to control costs, would have imposed a formality which would have restricted their ability to cope with an increasingly out-of-control situation. The result of the cost surveyor's exclusion from the crisis management process was a complete loss of cost control and later in the project, conflict with the contractor in attempting to re-establish it. This prolonged the crisis management process and resulted in a significant waste of managerial energy and resources. Thus, by threatening a whole range of competing goals a crisis created conflicts of interests between different goal protectors and thereby generated and fuelled inefficiency in the crisis management process. The important irony to emerge, was that at a time when collective mutual sensitivity to the needs and responsibilities of others was needed, it was less likely to occur.

Conclusion The aim of this paper was to investigate the reactive aspects of crisis management with a view to providing practical advice to project managers who operate in hostile environments and crisis-prone organisations. By doing so the paper would redress an important deficiency in project management knowledge. That is, how best to cope with crises when they have occurred. The investigation has identified three important ironies which project managers face when dealing with a crisis. These are; at a time when effective communication is important, it is less likely; at a time when mutual sensitivity is important, it is less likely; at a time when collective responsibility and teamwork are important, they are less likely. In this sense, crises appear to have in-built defence mechanisms in creating conditions which make their management more difficult. More disturbing for construction managers is the tendency for the problematical effects of crises to be self-perpetuating, once initiated. The managerial implications of these findings are that project managers should: • Pay particular attention to the financial aspects of a crisis because they are likely to be problematical and contentious. This is particularly important when project risks are not shared and where margins are low. • Pay attention to the emergence of coalitions and to the maintenance of information flow between them.

• Identify potential information bottlenecks in advance and provide the necessary support so that people are not tempted into extreme coping behaviour which initiates a damaging and self-perpetuating spiral of pressure, stress and damaged communication. • Balance control with flexibility in their managerial strategies. • Closely monitor tactical behaviour during crisis bargaining and be alert to tactical combinations which create the potential for escalation. • Be sensitive to the needs of all interest groups and to changes in interpersonal relationships during crisis bargaining. • Maintain an air of independence and trust so that they can effectively; 1. Propose solutions which reflect no vested interests and thereby allow opposing parties an escape route from an escalating situation with no loss of face. 2. Clarify issues that become clouded by the heat of argument. 3. Dissipate tensions by mediating between opposing interest groups. Despite the portrait of a crisis being a potential stimulant to self-perpetuating division and conflict, construction crises also created opportunities for increased cohesion, h a r m o n y and efficiency. They did so by providing an arena within which parties could demonstrate commitment to project success and sensitivity to each other's needs and thereby improve interpersonal relationships. Indeed, as improvements in interpersonal relationships strengthened, mutual trust and cohesion within the project team grew in a selfperpetuating fashion. In this sense, it became clear that construction crises have both threatening and opportunistic aspects and that project managers should: See a construction crisis as an opportunity as well as a threat and seek to exploit the potential for increased cohesion which it provides. They can do this by encouraging a sense of mutual sensitivity and collective responsibility within the project team. Success breads success. Finally, project managers should also use crises as an opportunity to demonstrate their own leadership qualities and thereby nurture the trust and confidence of others in themselves.

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Dr Martin Loosemore received his PhD from the University of Reading in the UK and is a Senior Lecturer in Project Management at the University of New South Wales in Sydney. He is active in both research and consultaney in the construction industry and has developed a particular interest in the interface between construction law and management.