The client role in project management

The client role in project management P Thompson

A ~~~ent’s role during project deveLopment and implementation is crucial to the success of the project. Project managers, however, often lack support from the The paper client organization’s top management. discusses briefly those aspects of a project that most affect its outcome in relation to the involvement of corporate management: the establishment of the project team, project appraisal and reappraisal, and the management of risk. Keywords: project client involvement

management,

client organizations,

the establishment of the project team, and the team’s relationship with corporate management, project appraisal and continual reappraisal of the investment as an essential requirement of project management, the management of risk. PROJECT SCENARIO The relationship between the ongoing parent, or corporate, organization and the temporary project team is illustrated in Figure 1.

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Corporate

Ongoing ond stratified

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Project contributes to corporate wealth

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A client invests in a project to generate benefit to the client organization or to the community that it serves. The client initiates the project, and later assumes responsibility, as the owner, for the operation and maintenance of the enterprise. The client’s role the intervening stages of project throughout development and implementation is crucial to its success, but it is widely held that the project manager frequently lacks top-level support’. The aspects of a project considered briefly in this paper are:

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Figure 1. Corporate

and project management

[New projects are essential corporate organization.]

to the

continuing

prosperity

of the

The temporary nature of the project team, and the need to define and achieve specific project objectives against a demanding timescale, together with the high level of risk and expenditure encountered on many ,projects, will demand a style of project management that is likely to be more dynamic than that of corporate management. The general requirement is for the corporate organization has a rigid hierarchical management decision and drive, and to liaise continually and review regularly both objectives and performance. This may prove difficult where the corporate organization has a rigid hierarchical management structure linked to slowly changing long-term objectives. The increasing uncertainty arising from the acceterating pace of change2 and the rapid transition to global activity and societies” will demand closer client involvement in project development during the 1990s. Consequently, project-oriented corporake organiza-

0 1991 Butterworth-Heinemann

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Project Management

tions are now advocated4, 5. These are likely to be more flexible and supportive of project needs, but they must avoid competition between project teams, which could blur corporate policy.

CONTROL OF CLIENT’S INVESTMENT The setting of realistic objectives for the project, and the achievement of the desired cost/benefit, demands concentrated effort from dedicated and motivated people. The establishment and training of an adequate project-management team is therefore the client’s initial task. Experience suggests that selecting project staff with a positive, forward-looking attitude, coupled with commercial awareness and experience of similar projects, is more important than for them to have detailed technical knowledge. It must also be accepted that different skills may be required in the appraisal and implementation phases of the projec6. Sanction is the most important aspect of project control in the key areas of control of the client’s investment listed below: Sanction: o o o o

the

investment

decision,

supported

by:

clear objectives, extensive market intelligence, realistic estimates and predictions, assessment and appreciation of risk.

Contract strategy: the selection of the appropriate organizational structure for project implementation. Contract award: the competence and collaborative attitude of the contractor are more significant than a minimum price. Design: aim for ‘fitness for purpose’, not perfection’. Minimize change: variation only accepted when essential for the functioning or safety of the enterprise. Project audit and review: regular reappraisal - review is particularly important for conceptual design. Handover: scheduled commissioning and early training of operations staff.

technical environment of the 199Os, regular reappraisal of all aspects of project development is strongly advocated by the author as part of the audit and review process. The implications for project management of changes in the market are likely to be particularly significant. It is essential that the project manager should contribute to the initial appraisal and to subsequent regular reappraisals during project implementation. If he or she is to fulfil his or her task of managing the client’s investment, he must relate his decisions to current market forecasts. The author has observed that the appropriate market intelligence has sometimes been withheld in hierarchical corporate organizations. A project-oriented corporate structure is likely to offer the advantage of improved liaison between the parties, and the ready exchange of such data.

RISK MANAGEMENT Investment in a project involves risk; the success or failure of the enterprise depends crucially on the identification, understanding and management of uncertainty’. Risk may be reduced by additional research, investigation and/or expenditure, but it cannot be avoided. It is therefore appropriate to build risk analysis into the cost/benefit appraisal model”. Single-figure predictions of the outcome of a project are not realistic, and the estimates are best presented in terms of the probability of achieving a certain return. When risk is analysed for the project reported in Reference 7 and shown in Figure 2, the deterministic 100 -

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PROJECT APPRAISAL Project appraisal is a process of investigation, review and evaluation undertaken as the project, or alternative concepts of the project, are defined. This study is designed to help the client to make informed and rational choices about the nature and scale of investment in the project. The core of the process is an economic evaluation, based on a cash-flow analysis of all costs and benefits that can be valued in monetary terms, that is also, therefore, called a cost/benefit analysis. Appraisal is likely to be a cyclic process repeated as new ideas are developed, additional information is received, and uncertainty is reduced, until the client is able to make the critical decision to sanction implementation of the project and commit the investment in expectation of the predicted return’. The greatest degree of uncertainty about the future and the outcome of the project is encountered at this stage, and the appraisal is essentially a process of risk reduction’. In the rapidly changing economic, social and

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Figure 2. of return

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prediction of an internal rate of return (IRR) of 27.6% is seen to be optimistic. The analysis indicates a 75% probability that the IRR will be less than this. The major project risks are summarized below: Political/environmental risks: must be addressed by the client or project champion prior to sanction; cannot be delegated to collaborators. Market risks: the demand for the produce or service is frequently the greatest uncertainty. See factors 1, 2 and 3 in Figure 3. Risks of delay in completion: require massive additional investment; they may also result in losses of market and benefit.

In most cases, uncertainty about the market will dominate the analysis, and this uncertainty may be reduced by phasing project development. Delay in completion is frequently the most significant risk within the control of the project manager. 50

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The corporateproject team should represent both the implementation and operational phases of the project.

REFERENCES 1 Fahlen, L ‘The role of the managing director in a customer orienting project’ Proc. Internet 90 - VoZ2 Vienna, Austria (1990) 2 Semolic, B ‘Strategic management and projects’ Proc. Znternet 90 - Vol 2 Vienna, Austria (1990) 3 Laszlo, E ‘Responsible (project) management in an unstable world’ in Handbook of management by Projects Manz, Austria (1990) pp 16-21 4 Cooke Davies, T ‘changing corporate culture to improve project performance’ Proc. Znternet 90 Vol I Vienna, Austria (1990) Gareis, R ‘Management by projects’ Proc. Internet 90 - VoZ I Vienna, Austria (1990) Morton, G H A ‘Become a project champion’ Znt. J. Project Manage. Vol 1 No 4 (1983) pp 197-203 Thompson, P A ‘Project appraisal and management’ Proc. Nordnet Conf. Spectrum of Project Management Reykjavik, Iceland (1987) pp 361-366 8 Gaisford, R Wet al. ‘Project Management in North Sea construction’ ht. J. Project Manage. Vo14 No 1

4c

c 5^

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(1986) pp 5-12 9 Hayes, R et al. Risk management in engineering Construction Thomas Telford, UK (1986) 10 Thompson, P A and Willmer, G ‘Caspar - a program for engineering project appraisal and management’ Proc. Civil-Comp 85 - Vol I London, UK (1985) pp 83-90

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Project managers are invited to send comments on any aspect of the role of the client in project development to the author at the address below. The research team arc particularly interested in the response of the client to the rapid-change scenario. and to the fast-track approach that is likely to be encountered in the 1990s. (Project management Group, ~n~vers~ty of ~anc~~st~r Instituteof Science and Technology, PO Rox 88, Sackville Street. Manchester M60 IQD, UK. Tet: 061-200 4591 or 061-200 4614. Fax: 061-200 4628.)

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Figure 3. Sensitivity diagram Peter

CONCLUSIONS The owner of a project must provide clear direction and must assist the and timely decisions, project-management team to drive the project to a successful conclusion. He or she must accept the risk associated with the enterprise, and assume particular responsibility for: o the selection of the project team, o thorough appraisal and realism over risk, o championing the project in the political and public arenas. Corporate organizations are ongoing, and are therefore rarely suitable for management by projects. A strong temporary corporate project team within the parent organization is recommended to support project management.

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Thompson

has

exfensive

industrial experience guined on power stations, oil installations, and mujor wter-supply projects. He was appointed Professnr of Civil ~ngj~eering at the Un~~er.~ity of ~~~~~l~e.~ter Institute of Science md Technology. UK, in 1984, and recently to the A MEC Chair of Engineering Project Management. Professor Thompson has specialized in the financial uspects of contracts und project.s, und in contruct strutegy. He has lectured extensively in the UK und &road, and acted as rt consultant on wzany ovrrsen.~ projects. Assignments have included project appraisals, risk unul_wev. cost estirmtes and contract-strategy reports. Recent work includes the preparation of un estimating manual

for u UK Government Department, and further research on risk management. He is currently studying the changing role of thr ciient in relation to difjerent project organizatiom and ~~ntru~tliui nrrangements.

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Project Management