on the strategic project management process in the uk upstream oil and gas sector

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ARTICLE IN PRESS Omega ( ) www.elsevier.com/locate/omega On the strategic project management process in the UK upstream oil and gas sector Boris Asrilhant a , Robert G. Dyson b , Maureen Meadows b, a Petrobras S.A., Av. República do Chile, 65 sala 1702, Rio de Janeiro, 20031-912, Brazil b Warwick Business School, University of Warwick, Coventry, CV4 7AL, England, UK Received 9 February 2004; accepted 28 April 2005 Abstract This paper reports on an investigation into strategic project management in the UK upstream oil and gas sector. The management process is represented by a set of elements which covers context, content and output and are balanced across financial, internal business, external environment, and learning and innovation perspectives. The paper uncovers elements that appear to explain successful project management and compares these with the elements to which managers pay greatest attention. There appears to be a mismatch between those elements which are associated with success and those receiving significant management attention. 2005 Elsevier Ltd. All rights reserved. Keywords: Managing projects; Success and strategy; Strategic project management; Upstream oil and gas sector 1. Introduction This paper reports on an investigation into the strategic project management process in the UK upstream oil and gas sector, and is concerned with understanding the effective management of the process. The research objectives are as follows; first, to understand the extent to which the strate- gic project management process can be characterised by a set of elements which are both recognised by management and consistent with a wider literature; second, to explore whether the set of elements emerging provides coverage of context, content and output elements, and whether it is balanced across financial, internal business, external envi- ronment, and learning and innovation perspectives; finally, to analyse whether there is a close match between the ele- ments that appear to explain successful project management and the elements to which managers pay greatest attention. Corresponding author. Tel.: +44 24 7652 4491; fax: +44 24 7652 4539. E-mail address: [email protected] (M. Meadows). 0305-0483/$ - see front matter 2005 Elsevier Ltd. All rights reserved. doi:10.1016/j.omega.2005.04.006 Section 2 of the paper discusses the nature of strategic projects and the management process allied thereto. The process is divided into evaluation and control stages, and is characterised by a set of elements, obtained from an ex- ploratory empirical and theoretical investigation. Section 3 outlines the research methodology adopted. The chosen ap- proach involved the collection of both qualitative (an ex- ploratory phase consisting of nine exploratory interviews in a single oil and gas company, and a literature review) and quantitative data (a main phase, consisting of a survey of 54 projects across 15 oil and gas companies) in order to enrich the overall results of the study. Section 4 of this article covers the data gathering for the main research exercise, which was via questionnaire. In the following section, the data analysis and research findings are outlined, and two sets of elements—one asso- ciated with the successful management of strategic projects, and one receiving significant management attention—are identified and compared. Finally, a conclusions section discusses the implications for successful strategic project management.

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Page 1: On the Strategic Project Management Process in the UK Upstream Oil and Gas Sector

ARTICLE IN PRESS

Omega ( ) –www.elsevier.com/locate/omega

On thestrategic projectmanagement process in theUKupstreamoilandgas sector

BorisAsrilhanta, Robert G. Dysonb, Maureen Meadowsb,∗aPetrobras S.A., Av. República do Chile, 65 sala 1702, Rio de Janeiro, 20031-912, BrazilbWarwick Business School, University of Warwick, Coventry, CV4 7AL, England, UK

Received 9 February 2004; accepted 28 April 2005

Abstract

This paper reports on an investigation into strategic project management in the UK upstream oil and gas sector. Themanagement process is represented by a set of elements which covers context, content and output and are balanced acrossfinancial, internal business, external environment, and learning and innovation perspectives. The paper uncovers elementsthat appear to explain successful project management and compares these with the elements to which managers pay greatestattention. There appears to be a mismatch between those elements which are associated with success and those receivingsignificant management attention.� 2005 Elsevier Ltd. All rights reserved.

Keywords:Managing projects; Success and strategy; Strategic project management; Upstream oil and gas sector

1. Introduction

This paper reports on an investigation into the strategicproject management process in the UK upstream oil and gassector, and is concerned with understanding the effectivemanagement of the process. The research objectives are asfollows; first, to understand the extent to which the strate-gic project management process can be characterised by aset of elements which are both recognised by managementand consistent with a wider literature; second, to explorewhether the set of elements emerging provides coverageof context, content and output elements, and whether it isbalanced across financial, internal business, external envi-ronment, and learning and innovation perspectives; finally,to analyse whether there is a close match between the ele-ments that appear to explain successful project managementand the elements to which managers pay greatest attention.

∗ Corresponding author. Tel.: +442476524491;fax: +442476524539.

E-mail address:[email protected](M. Meadows).

0305-0483/$ - see front matter� 2005 Elsevier Ltd. All rights reserved.doi:10.1016/j.omega.2005.04.006

Section 2 of the paper discusses the nature of strategicprojects and the management process allied thereto. Theprocess is divided into evaluation and control stages, andis characterised by a set of elements, obtained from an ex-ploratory empirical and theoretical investigation. Section 3outlines the research methodology adopted. The chosen ap-proach involved the collection of both qualitative (an ex-ploratory phase consisting of nine exploratory interviews ina single oil and gas company, and a literature review) andquantitative data (a main phase, consisting of a survey of 54projects across 15 oil and gas companies) in order to enrichthe overall results of the study.Section 4 of this article covers the data gathering for

the main research exercise, which was via questionnaire.In the following section, the data analysis and researchfindings are outlined, and two sets of elements—one asso-ciated with the successful management of strategic projects,and one receiving significant management attention—areidentified and compared. Finally, a conclusions sectiondiscusses the implications for successful strategic projectmanagement.

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2. Strategic project management

Strategic projects are considered to represent the core ofcorporate growth, change and wealth creation. They are ma-jor investments, often involving a high degree of uncertainty,offering intangible benefits (benefits that come from suchissues as flexibility, learning, synergies, innovative routines,etc.) and promising attractive long-term financial outcomes[1,2]. Strategic projects also motivate the creation, acquisi-tion and development of competencies[3], comprise a col-lection of diverse options[4], and are often conducted in achangeable, uncertain and complex environment[5–8].Here, strategic project management is taken to comprise

two main stages: evaluation and control. This is based onAmram and Kulatilaka’s taxonomy[4] and has a clear align-ment with classifications proposed by a number of authorsin the project management field[9–13]. Evaluation involvesframing (i.e. drawing up a strategic project after its incep-tion), planning and valuing a strategic project, and ends withits authorisation. Control comprises the management, reviewand redesign of a strategic project through to its completion.A precursor stage involves generating possible projects be-fore their effective creation. Although this is an importantand interesting stage which could be the subject of furtherresearch, this paper focuses on the lifecycle of a project, i.e.the period from its creation to its completion.Managers often regard evaluation and control as discrete,

detached stages, and therefore the control stage is consid-ered to be a natural consequence of the evaluation stage[4].Projects are often optimistically planned[14], and rarely goaccording to plan[15]. Managers who assess a project aregenerally different from those who execute it[4]; both par-ties are likely to fear blame if the project fails[16]. How-ever, evaluation and control are not sequential, but intercon-nected processes[17], and control can be carried out froma project’s outset[18].A key concept in the strategic project management pro-

cess is the ‘critical factor’ or ‘critical element’. ‘Critical el-ements’ should receive constant and careful attention frommanagement, because they drive the organisation to focusattention on the success of the project in hand. Accordingto the Pareto Rule, which separates “the important few fromthe trivial many” [15], if attention is paid to sets of ‘criticalelements’ and their interactions, success is more likely. It isconjectured here, therefore, that there is a set of ‘critical el-ements’ that explain a strategic project’s success. This pos-sible set of elements known as ‘success critical elements’ iscentral to the research study that follows.

3. Research methodology

Despite the polarisation of quantitative and qualitativeparadigms at a conceptual level, in recent years the frictionbetween quantitative and qualitative methods within the so-cial sciences has progressively diminished. Combinations

of research methods, both quantitative and qualitative, haveincreasingly been applied by many researchers[19]. An in-tegration of both paradigms has quite often been rejected intheoretical terms. However, a ‘paradigm of choices’ is de-fined as a way of achieving methodological quality insteadof methodological rigidity[20]. The ‘paradigm of choices’allows for the combination of diverse methods in a singleresearch project[21]. The combination of different method-ologies in the management sciences is referred to as a mul-timethodological approach[22]. The following paragraphspresent and discuss the adopted research methodology.This study pursued the notion of success critical ele-

ments associated with strategic project management by firstcarrying out an exploratory investigation in a major com-pany in the upstream oil and gas sector. The exploratory in-vestigation comprised an empirical phase and a theoreticalphase. The empirical phase consisted of nine semi-structuredrecorded interviews with a diverse group of managers hold-ing top and mid-ranking positions. This phase broadly iden-tified and defined a range of relevant elements involved in,respectively, strategic project evaluation and control. Theseelements were then reviewed for their importance—elementswere combined, eliminated or restated, along with the ex-amination of potential interrelationships amongst them, andreduced to those elements shown inTable 1, a mixture ofcontext and project specification elements.The proposed set of elements presented inTable 1

emerged from the business world, following the approachsupported by Grounded Theory. Grounded Theory is a pro-cess for guiding research through collecting and verifyingdata, while allowing the researcher to be conscious of con-tingencies that affect the original hypotheses. The theory isbased on data but it is not strictly bound to it. GroundedTheory is therefore useful for exploratory research[23,24].The ideas borrowed from Grounded Theory fit properly

with the main purposes of the exploratory fieldwork of thisstudy. GroundedTheory plays a role in identifying and defin-ing the meaning of empirical elements that give practicalsupport to a specific framework. In this way, the interviewsundertaken aimed to verify the importance of the proposedelements in a real context, and to include a sufficient set ofelements in the framework, as well as defining and puttingthem into practice.However, it is necessary to check whether the set of ele-

ments proposed by the empirical phase of the exploratory in-vestigation are consistent with theory. The theoretical phaseof the exploratory investigation checked the set of empiri-cal elements against theories about the project managementprocess. This phase of the research validated the proposedset of elements, as all the elements proposed are necessaryin the logical sense. The elements uncovered were consis-tent with an extensive literature on the nature of the strategicproject management process.A further check on the validity, comprehensiveness and

coherence of the set of elements was then made by placingthem within a conceptual framework, based on ideas from

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Table 1Evaluation and control elements

Evaluation element Operational definition

Feasibility Strategic project’s difficulty of realisation and implementationTimescale Strategic project’s time to maturityDurability Strategic project’s economic life, e.g. platform production life spanFlexibility Strategic project’s flexibility to adapt to changes in external circumstancesTime Time value of moneyFinancial capability Firm’s financial situationFinancial leverage Firm’s requirement to raise external funding, e.g. project finance, leasingFinancial market uncertainty Uncertainty related to financial market variables, e.g. oil price, exchange rateCompetition Firm’s rivalry to competitorsEconomic uncertainty Uncertainty related to economic environment, e.g. growth, inflationPolitical uncertainty Uncertainty related to political environment, e.g. taxation, expropriation, government supportEnvironmental uncertainty Uncertainty related to environmental legislation, pressure groupsGeological uncertainty Uncertainty related to geological issues, e.g. oil(gas) reserveTechnological uncertainty Uncertainty related to changes in technologyCorporate alignment Strategic project’s adherence to corporate mission and goalsCompetency alignment Strategic project’s fit with corporate strengthsInterdependency Strategic project’s interaction with other projects and activitiesCash flows Costs and benefits by time periodFinancial summary measures Strategic project’s financial measuresEnvironmental impact Strategic project’s imp

act on environmentSocial impact Strategic project’s impact on societyPolitical impact Strategic project’s impact on key stakeholders, e.g. governmentMarket share Firm’s market position due to the strategic projectOrganisational impact Strategic project’s impact on the organisation

Control element Operational definition

Financial market scanning Monitoring of financial market information, e.g. oil price, exchange rateBudgetary constraints Financial constraints affecting a strategic project’s executionMarket scanning Monitoring of customer and competitor information, e.g. brand image, competitor activityEconomic scanning Monitoring of economic information, e.g. growth, inflationEnvironmental scanning Monitoring of environmental information, e.g. water emission, oil pollutionPolitical scanning Monitoring of political information, e.g. taxation, expropriation, government supportCorporate alignment scanning Monitoring of strategic project’s adherence to corporate mission and goalsProject milestones scanning Monitoring of progress against strategic project’s milestonesProduct monitoring Monitoring of product information, e.g. oil quality, appropriate gas supplyManagerial interaction Ability to promote involvement, commitment andleadershipResources deployment Ability to apply current resources and competenciesLearning Ability to learn form past experience, e.g. interim and post-appraisalInnovative routines Ability to change organisational routinesInnovative technologies Ability to introduce new technologiesFinancial targets Degree to which financial targets (e.g. costs, incomes, financial summary results) are achievedTimescale targets Degree to which strategic project’s deadlines are metCustomer satisfaction Level of customer contentment achieveEnvironmental targets Degree to which environmental targets are achievedMarket position Level of market position achievedCorporate alignment Degree to which corporate mission and goals are supportedEmployee satisfaction Level of internal contentment and morale achievedOrganisational communication Quality of internal communication around the strategic projectEmployee development Degree of development of employee skillsTechnological development Degree of development and diffusion of technologyOrganisational adaptability Degree of organisational adaptability to changes in external circumstances

the Balanced Scorecard[5]. The Balanced Scorecard advo-cates the use of a balanced set of performance measures,whilst here it is advocated that a set of process elements

should be correspondingly balanced in their coverage of thestrategic management process. A balanced process is seenas a prerequisite to a balanced set of performance measures.

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Table 2Framework for evaluation and control elements

Financial External environment Internal business Learning andinnovation

Evaluation elementsContext Time Competition Corporate alignment

Financial capability Economic uncertainty Competency alignmentFinancial leverage Social uncertainty InterdependencyFinancial market uncertainty Political uncertainty

Environmental uncertaintyGeological uncertaintyTechnological uncertainty

Content FeasibilityTimescaleDurabilityFlexibility

Output Cash flows Environmental impact Organisational impactFinancial summary measures Social impact

Political impactMarket share

Control elementsContext Financial market scanning Market scanning Corporate alignment scanning Learning

Budgetary constraints Economic scanning Project milestones scanning Innovative routinesEnvironmental scanning Product monitoring Innovative technologiesPolitical scanning Managerial interaction

Resources deploymentContentOutput Financial targets Customer satisfaction Corporate alignment Employee development

Timescale targets Environmental targets Employee satisfaction Tech. developmentMarket position Organisational communication Org. adaptability

Obs.: In relation to the above framework, some premises are assumed, as follows: (1) the learning and innovation perspective is justconsidered in the control phase because this stage is considerably longer than the evaluation phase, and therefore learning and innovationare crucial at the control phase; and (2) a strategic project’s content is just considered in the evaluation stage because its conception andframing are examined at that stage.

Besides placing the proposed elements within the fourperspectives proposed by the Balanced Scorecard (finan-cial, external environment, internal business, and learningand innovation), the elements were also classified accord-ing to three categories: context elements, content elementsand outputs. Content elements[25] are the essence of thestrategic project management process, while context ele-ments[25] cope with the contexts that bound the strategicproject management processinter alia. In accordance withthe 2000 PMI Guide to the Project Management Body ofKnowledge, content and context elements are the influentialelements that affect the achievement of a strategic project’soutputs. Outputs represent the ultimate results of a specificprocess[26]. The proposed framework is shown inTable 2.It can be seen that the notion of ‘balance’ given by the Bal-anced Scorecard was used as a background for conceivingthe proposed framework in order to assess the comprehen-siveness of the proposed elements, and to ensure coverageof the entirety of the strategic project management process.Having identified the set of elements that covers strategic

project management, the study then concerned itself with the

following questions. Firstly, which elements (known as ‘suc-cess critical elements’) appear to explain successful strate-gic project management? Secondly, which elements actuallyreceive most attention from management? The question toarise then is how close is the match between the two sets?To address these questions, the study moved to the applica-tion of a survey with a cross section of upstream oil and gascompanies; this exercise represents the core of this article. Itis important to note that, when commenting on the successof the strategic projects under consideration, the managersresponding to the survey were discussing their ownpercep-tionsof success, rather than any ‘objective’ measures ofac-tual success. This approach was adopted here due to the dif-ficulty of defining any ‘objective’ measure of the success ofa strategic project, when gathering data across a rich varietyof projects in a cross-organisational context. For example,externally available financial data such as audited accountsare not relevant in the current context, as they do not existat the project level. It is also important to note that opinionsdiffer as to the validity of making clear distinctions betweenperceptual and ‘objective’ data. For instance, are the only

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truly ‘objective’ variables ones that are numerically mea-sured and obtained without the use of a questionnaire? Evenexternally available financial measures can involve a degreeof judgement (e.g. how to allocate overheads); in addition,there is a growing literature in performance measurement[5] on the need to utilise non-financial indicators. Some re-searchers, e.g. West and Schwenk[27] and Starbuck andMezias[28] point to the need to question apparently ‘objec-tive’ data such as financial performance measures, and ar-gue that in practice almost all surveys are perception based.Much research using ‘subjective’ measures has made a con-tribution to diverse literatures such as organisational perfor-mance and corporate productivity (see for instance[29–32]).Given genuine concerns about the proper use of percep-

tion based data, careful consideration was given as to how toproceed with the study. Experts were used at an early stageto inform the work, and reliability in questionnaire designwas sought through careful formulation and testing of thesurvey instrument. In particular, careful consideration wasgiven to the reliability of the data gathered; as mentionedearlier, a Cronbach Alpha of 95% was achieved overall inthis study. This approach of scrutinizing reliability mea-sures when perception-based variables are being analysedis adopted by many authors, e.g., Elsbach and Barr[33],Hambrick [34], Mikkelsen et al.[35], Benbunan-Fich andHiltz [36], Thrikell and Dau[37], Rodan and Gallunic[38],Miller et al. [39].Therefore, as there was no consistent way of defining ob-

jective measures of success across the variety of projectsand organisations concerned, it was judged to be accept-able in this case to useperceivedsuccess as a surrogatemeasure foractualsuccess. The limitations of the approachwere also minimised by asking respondents to comment onsuccess from a number of perspectives (financial success,strategic success, successful completion and successful man-agement). Respondents were also asked to focus on thelaststrategic project that they had undertaken, in order to avoidan overrepresentation of projects that were perceived to beparticularly successful. The research approach adopted inthe main phase (survey exercise) is described in more detailin the next sections of the paper, where data gathering, dataanalysis and results of the quantitative study are described.

4. Data gathering

To address the above research questions, the investiga-tion involved the design and piloting of a ten-page ques-tionnaire. The questionnaire was distributed in November1999. The sample design and framing are based on Shoham’s[40,41] methodologies, and are discussed in the followingparagraphs.Thirty-one leading UK-based upstream oil and gas com-

panies were selected as a target population, based on thecompanies categorised by the 1999 Dun and BradstreetDatabase of Key British Enterprises matched with a list of

companies provided by the Institute of Petroleum. Althougha shorter questionnaire would be more likely to achieve ahigher response rate, the list of companies provided by theInstitute of Petroleum guaranteed a high level of commit-ment on the part of the respondents.The corporate financial performance and size criterion

was based on the numbers shown in the 1999 Dun andBradstreet Database of Key British Enterprises. In this study,companies with turnover exceeding £50 million (sterling)were selected. This cut-off point was chosen based on theresearchers’ practical experience in the upstream oil and gassector. Strategic projects are major long-term investments,and usually involve significant sums of money. Hence, £50million (sterling) seems to be an acceptable cut off point forcorporate turnover. A higher cut-off point would lead to adrastic reduction in the potential population.Companies were categorised into three groups—large,

medium and small. Large companies have turnover greaterthan £1 billion (sterling) and/or more than 2,000 employ-ees. Medium companies have turnover between £200 mil-lion and £1 billion (sterling) and/or between 300 and 2,000employees. Small companies have turnover between £200million and £50 million (sterling) and/or less than 300 em-ployees. Twenty-three companies (74% of the targeted pop-ulation) responded positively to a primary contact letter.Among them, nineteen companies (61% of the targeted pop-ulation) nominated seventy-four participants, and four com-panies indicated staff members who were predisposed todistributing the questionnaires among their peers.Seventy-eight survey packets were posted to named man-

agers holding top, medium and lower positions in a rangeof corporate functions, and to staff who would distributethe questionnaires among their peers, scattered over Eng-land and Scotland. As a result, it would be possible to con-currently mediate divergent viewpoints, and to cover a widerange of strategic project categories. Different actors mayview a project in different ways[42], and look for differ-ent outcomes[43]. Each mail packet enclosed a sample ofthe questionnaire, a covering letter and a pre-paid envelope.None of the packets posted to staff who would distribute thequestionnaires, however, were returned.Twenty respondents answered the questionnaire before

the initial deadline (27% of the original sample). A fewasked the researchers to e-mail the questionnaire, as theypreferred e-mailed to postal questionnaires. The contactingprocess started immediately after the deadline. Reminder let-ters were not sent out to the participants. Instead, participantswere contacted through telephone calls and e-mails. Forty re-spondents responded positively after being contacted.Again,some participants asked for the questionnaire to be e-mailedto them, rather than posted.A total of 60 questionnaires were received back from re-

spondents. Fifty-four questionnaires were considered validobservations (69% of the original sample), from fifteen com-panies (three large, seven medium and five small). Thereasons for the exclusion of six questionnaires were the

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following: (1) one questionnaire was received after the be-ginning of the data analysis; (2) one questionnaire containedmore than 50% of missing values; and (3) four question-naires persistently presented a high number of outliers andextreme values. These observations could impact the over-all analysis, but they were removed from the sample, as itwas not possible to check whether they were representativeof the population. No pattern could be observed among thesix excluded observations.The unit of analysis of the questionnaire was the strategic

project. As a result, it was valid to include multiple question-naires from the same company. This increased the potentialsample size, as there were only 31 leading UK upstream oiland gas companies that complied with the corporate finan-cial performance and size criteria. However, it was necessaryto check whether the questionnaires received from a singlecompany were independent observations. A careful visualanalysis of the questionnaires was carried out. It was possi-ble to confirm that the respondents were commenting upondifferent strategic projects, as they named and describedthe projects concerned. In addition, the questionnaire posedmany general questions about strategic project management,alongside questions specifically concerning the last strate-gic project undertaken. The requirements for independentobservations were therefore fulfilled.Of the 74 questionnaires sent out to nominated individu-

als, the response rate of valid questionnaires was 73%. Thisrate reflected the high commitment of the potential respon-dents to the questionnaire; it also resulted from following avariety of tactics[44]: (1) a covering letter which includedthe primary contact name in each company; and (2) multipleattempts to contact respondents at different instants in dif-ferent ways, such as e-mails and telephone calls. However,most importantly, it resulted essentially from the a priorinomination of participants with the assistance of the Insti-tute of Petroleum.On average, the sample consisted of a group of male, mid-

dle managers from a variety of functions within their firms,with long-term experience in the field, long-term job com-mitment, and short-term international managerial experi-ence, who work for a wide range of large, medium and smallintegrated, international UK-resident oil and gas affiliates.The main strategic project categories included marginal

field development, giant field development, asset disposal,field exploration, company acquisition, company merger,infrastructure, market entry and re-entry, corporate infor-mation systems development, technology research and de-velopment, asset acquisition, organisation restructuring andstrategic alliances.Around 80% of the strategic projects described represent

the core business of the organisations responding, such asfield exploration, marginal field development and giant fielddevelopment. The remaining projects address a range ofhighly confidential and sensitive issues usually associatedwith top management, such as acquisitions, mergers andorganisational restructuring.

5. Data analysis and research findings

The questionnaire was divided into five sections with anoverall reliability (CronbachAlpha) of 95%. The large num-ber of items analysed might have contributed to the ques-tionnaire’s reliability[45]. Each section had individually ac-ceptable reliability indexes; for exploratory questionnaires,a reliability index should exceed 60%[46].The questionnaire was piloted with a diverse group of

practitioners and academics outside the final respondents toallow amendments to be made before distributing the mainsurvey. During the piloting of the questionnaire, the elementsinvolved in the evaluation and control of strategic projectswere thoroughly discussed with managers and experts in theUK upstream oil and gas sector.The first section of the questionnaire referred to the

last strategic project in which the respondent had beeninvolved. The results suggested (1) the prevailing trendsin the UK upstream oil and gas sector, which exhib-ited a lack of new opportunities in the UK petroleumprovince; (2) the search for new markets and opportunitieson an alliance basis; and (3) a focus on cost reduction,reengineering and the introduction of new informationtechnologies.At the time of the survey strategic projects were being

managed in a recessive and competitive climate associatedwith low oil prices, which could have impacted the results ofthis research study. The respondents claimed in general thattheir last strategic projects were successfully completed, andmost had achieved both successful financial and strategicresults. However, 22% of the respondents considered theirlast strategic project to be a financial failure, mainly due tolow oil prices.The questionnaire then sought information on the per-

ceived level of relevance of the elements, and the extent towhich the elements were addressed, in the evaluation andcontrol stages of the process. According to these scales ofmeasurement, the elements can be grouped into those thatwere considered to be (1) relevant and frequently addressed;(2) relevant but only occasionally addressed; and (3) lessimportant and only occasionally addressed. The relevant andfrequently addressed elements were broadly financial ele-ments, environmental elements and elements associated witha project’s content, such as feasibility, timescale and durabil-ity. The relevant but only occasionally addressed elementswere broadly internal business elements, such as corporatealignment and organisational impact; this may be becausemany project managers are highly focused on the project it-self (its content and its success), and less focussed on thewider context of the project in the organisation. Less impor-tant and only occasionally addressed elements were basi-cally external environment elements, including social, polit-ical and economic elements.Table 3presents the evaluationand control elements according to the above taxonomy. Itmay seem surprising that elements such as political and so-cial uncertainty were felt to be less important; however, the

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Table 3Evaluation and control elements

Level of relevance, and extent of use Evaluation Control

Relevant and Feasibility Project milestones scanningfrequently addressed Timescale Product monitoring

Durability Managerial interactionCorporate alignment Resource deploymentCompetency alignment Budgetary constraintsFinancial capability Financial market scanningTime Environmental scanningGeological uncertainty Financial targetsFinancial market uncertainty Timescale targetsEnvironmental uncertainty Environmental targetsTechnological uncertaintyCash flowsFinancial summary measuresEnvironmental impact

Relevant but only Flexibility Learningoccasionally addressed Interdependency Corporate alignment scanning

Economic uncertainty Corporate alignmentOrganisational impact Technological development

Organisational communicationOrganisational adaptabilityEmployee developmentInnovative technologies

Less important and Financial leverage Political scanningoccasionally addressed Competition Economic scanning

Political uncertainty Market scanningSocial uncertainty Innovative routinesPolitical impact Employee satisfactionMarket share Customer satisfactionSocial impact Market position

context of this study refers to projects conducted in the UKoil and gas sector, where political and social uncertaintiesare considered less relevant if compared to other sources ofuncertainty.The final section of the questionnaire was concerned

with the success of the projects. Although the respon-dents claimed in general that their strategic projects weresuccessfully completed and financially successful, theywere less confident that their projects were successfulstrategically.The introduction of the concept of success raises

the question of whether addressing particular elementsnecessarily leads to successful project management. Ifsuch elements can be identified, then they are the suc-cess critical elements which if managed effectivelywill increase the likelihood of project success. A sta-tistical analysis was undertaken, on the link betweensuccess and the extent to which the various elementshad been addressed in project management. Success

was subdivided into (1) successful completion; (2) fi-nancial success; (3) success in broad strategic terms;and (4) successful management, which was calculatedas a linear combination of the first three successdimensions. There were thus four potential depen-dent variables (the measures of success), and 25 ele-ments each in the evaluation and control stages (seeTable 1). However, as there were only 54 valid observa-tions, a standard application of multivariate analysis couldnot be employed[46]. Nevertheless, as multiple regressionanalysis would potentially bring to light some interest-ing insights into the management of strategic projectsand possibly recommend future research directions, itappeared to be important to seek a way of solving thispractical problem.This was achieved by first carrying out a factor anal-

ysis prior to a multiple regression analysis. The factoranalysis resulted in nine factors for the evaluation stage,and seven for the control stage. The factors exhibited

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Table 4Factors for evaluation and control elements

Financial External environment Internal business

Evaluation factorsContext “Micro” financial element Social, political economic and Internal alignment elements

time market elements Corporate alignmentCompetition Competency alignment

“Macro” financial elements Economic uncertaintyFinancial capability Social uncertaintyFinancial leverage Political uncertainty

Environmental and technologicalelementsEnvironmental uncertaintyTechnological uncertainty

Content Isolated and portfolio characteristicsFeasibilityTimescaleDurabilityFlexibilityInterdependency

Output Financial evaluation outputs External environment evaluation Internal business evaluation outputCash flows outputs Organisational impactFinancial summary measures Environmental impact

Social impactPolitical impact

Control factorsContext Financial control element External environment control “Hard” internal elements

Budgetary constraints elements Project milestones scanningMarket scanning Product monitoringEconomic scanning Innovative technologiesPolitical scanning

“Soft” internal elementsManagerial interactionResources deploymentLearningInnovative routines

Content — — —Output Financial control output External environment control Internal business control outputs

Financial targets outputs Organisational communicationCustomer satisfaction Organisational adaptabilityEnvironmental targets Employee developmentTechnological development Employee satisfaction

broad coherence, and could be aligned with the frame-work for the individual elements shown inTable 2. Thisalignment is shown inTable 4. The only divergence fromthe framework was due to the elements of the learningand innovation perspective becoming combined with in-ternal business elements in the ‘hard’ and ‘soft’ internalelements factors.In the multiple regression analysis each success dimen-

sion was linked separately to the evaluation and control fac-

tors, resulting in a total of eight regression models, as shownin Table 5.Ideally, evaluation and control factors could be em-

ployed together, but there is insufficient data to justifythat. Furthermore, having separate models for evalua-tion and control factors ensures that success critical el-ements are identified from both parts of the process,as a successful project needs both effective evaluationand control.

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Table 5Regression models

Model Description

1A Evaluation factors vs. successful completion1B Control factors vs. successful completion2A Evaluation factors vs. financial success2B Control factors vs. financial success3A Evaluation factors vs. success for strategic reasons3B Control factors vs. success for strategic reasons4A Evaluation factors vs. successful management4B Control factors vs. successful management

The analysis of each regression model is presented inTable 6. From the F tests it can be seen that the results arestatistically significant, although theR2 values are modest.It can thus be concluded that the important factors are in-deed explanatory variables in terms of success, but thereare other explanatory variables not captured by the mod-els. A possible explanation may be that explanatory powerwas lost due to the necessity to replace the original el-ements with factors. However, it is perhaps more likelyto be due to the impact of variables outside the controlof management, such as oil prices, as well as the exis-tence of elements that were not identified by the exploratoryinvestigation.Some conclusions can be drawn from these models

by identifying the most significant factors. From Model1A the internal content factor ‘isolated and portfoliocharacteristics’, including feasibility, timescale, durabil-ity, flexibility and interdependency, explains successfulcompletion. From Model 1B the ‘soft internal elements’factor, including managerial interaction, resources deploy-ment, learning and innovative routines, explains successfulcompletion.From Model 2A, ‘isolated and portfolio characteris-

tics’ reappears along with ‘macro financial elements’,which includes financial capability and financial leverage,to explain financial success. Model 2B suggests ‘inter-nal business control outputs’, including organisationalcommunication, organisational adaptability, employeedevelopment, and employee satisfaction, as a key fac-tor to explain financial success. In Models 3A and 3Bstrategic success is explained by ‘isolated and portfo-lio characteristics’, ‘soft internal elements’ and ‘externalenvironment control elements’ (market, economic andpolitical scanning).Models 4A and 4B suggest that successful management

is explained by ‘internal alignment elements’ (corporate andcompetency alignments), isolated and portfolio characteris-tics’, ‘soft internal elements’ and ‘hard internal elements’(project milestones scanning, product monitoring and inno-vative technologies).Overall then, internal business factors dominate the ex-

planation of a strategic project’s success. Secondly, both

financial and non-financial factors appear to explain a strate-gic project’s financial success.Finally, context and content (process) elements ap-

pear to explain a strategic project’s success rather thanthe outputs. This might at first appear to be a controver-sial finding, if we are expecting that outputs will alignwith success. However, the finding becomes less con-troversial when the importance of context, content andprocess is taken into account[25]. This suggests that man-agers should focus their attention on content, context andprocess, as outputs record success rather than drive orexplain it.

6. Success critical elements and management attention

It is now instructive to compare the factors which werefound to be associated with success (Table6) with the ele-ments whichmanagement addressed frequently and to whichthey had paid particular attention (Table3).From Table 7 it can be seen that the factors that ex-

plain success appear mainly in the internal business per-spective, whilst the factors in the financial and externalenvironment perspectives rarely appear to explain success.However, this is not consistent with the elements withwhich managers tend to concern themselves. Only halfof the elements in the internal business success factorsare frequently addressed by management. Managers fre-quently address all except one of the financial elementsdespite the fact that only one financial factor is signif-icant in only one model. This suggests that managersspend a disproportionate amount of time on financial as-pects of the process, a finding consistent with one ofthe motivations for the Balanced Scorecard. Finally, ex-ternal environment factors appear to contribute little tosuccessful project management. Management pay consid-erable attention to geological and environmental (green)elements, but pay little attention to social, political andeconomic elements.Focussing on individual elements, although ‘isolated

and portfolio characteristics’ is perhaps the most sig-nificant factor in terms of success, elements such asflexibility and interdependency are only occasionally ad-dressed by management. The management of ‘soft inter-nal elements’ also seems to be a key to success. Hereit is noticeable that the learning and innovative routineselements are not addressed consistently. This supportsthe view that the learning and innovation perspectiveis equally important from a management process pointof view as from the performance measurement perspec-tive of the Balanced Scorecard, yet it is often neglectedin practice.The learning and innovation perspective is associated with

the ideas brought to light by Tushman and Scanlan’s work onboundary spanning individuals. These individuals are an im-portant linkingmechanism; they help a company to learn and

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Table 6Multiple regressions against strategic project’s success

Item Results of model 1A

Number of valid obs. 45Obs.-to-indep. var. ratio 5.0Method StepwiseGoodness-of-fit R2 = 0.216; adjustedR2 = 0.198a

Overall fit F = 11.839 (sig. 0.001)Standard coefficient(s) Isolated and portfolio characteristics: 0.465 (t = 3.441, sig. 0.003)Multicollinearity No multicollinearity; VIF= 1Assumptionsb

√Influential points No

Item Results of model 1B

Number of valid obs. 39Obs.-to-indep. var. ratio 5.6Method StepwiseGoodness-of-fit R2 = 0.346; adjustedR2 = 0.329Overall fit F = 19.612 (sig. 0.00)Standard coefficient(s) “Soft” internal elements: 0.589 (t = 4.429, sig. 0.00)Multicollinearity No multicollinearity; VIF= 1Assumptions

√Influential points No

Item Results of model 2A

Number of valid obs. 50Obs.-to-indep. var. ratio 5.6Method StepwiseGoodness-of-fit R2 = 0.414; adjustedR2 = 0.389Overall fit F = 16.610 (sig. 0.00)Standard coefficient(s) Isolated and portfolio characteristics: 0.527 (t = 4.668, sig. 0.00),

“Macro” financial elements: 0.300 (t = 2.661, sig. 0.011)Multicollinearity No multicollinearity; VIF: Isolated and portfolio characteristics: 1.022;

“Macro” financial elements: 1.022Assumptions

√Influential points No

Item Results of model 2B

Number of valid obs. 42Obs.-to-indep. var. ratio 6.0Method StepwiseGoodness-of-fit R2 = 0.302; adjustedR2 = 0.285Overall fit F = 17.305 (sig. 0.00)Standardcoefficient(s) Internal business control outputs: 0.550 (t = 4.160, sig. 0.00)Multicollinearity No multicollinearity; VIF= 1Assumptions

√Influential points No

Item Results of model 3A

Number of valid obs. 45Obs.-to-indep. var. ratio 5.0Method StepwiseGoodness-of-fit R2 = 0.283; adjustedR2 = 0.267Overall fit F = 16.990 (sig. 0.00)Standard coefficient(s) Isolated and portfolio characteristics: 0.532 (t = 4.122, sig. 0.00)Multicollinearity No multicollinearity; VIF= 1Assumptions

√Influential points No

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Table 6 (continued)

Item Results of model 3B

Number of valid obs. 38Obs.-to-indep. var. ratio 5.4Method StepwiseGoodness-of-fit R2 = 0.247; adjustedR2 = 0.204c

Overall fit F = 5.755 (sig. 0.007)Standard coefficient(s) “Soft” internal elements: 0.382 (t = 2.580, sig. 0.014); external

environment control elements: 0.377 (t = 2.546, sig. 0.015)Multicollinearity No multicollinearity; VIF: “soft” internal elements: 1.020;

external environment control elements: 1.020Assumptions

√Influential points No

Item Results of model 4A

Number of valid obs. 45Obs.-to-indep. var. ratio 5.0Method StepwiseGoodness-of-fit R2 = 0.528; adjustedR2 = 0.505Overall fit F = 23.465 (sig. 0.00)Standard coefficient(s) Internal alignment elements: 0.475 (t = 4.164, sig. 0.00), isolated

and portfolio characteristics: 0.401 (t = 3.518, sig. 0.001)Multicollinearity No multicollinearity; VIF: internal alignment elements: 1.158;

isolated and portfolio characteristics: 1.158Assumptions

√Influential point Case 35d

Item Results of model 4B

Number of valid obs. 39Obs.-to-indep. var. ratio 5.6Method StepwiseGoodness-of-fit R2 = 0.533; adjustedR2 = 0.507Overall fit F = 20.520 (sig. 0.00)Standard coefficient(s) “Soft” internal elements: 0.459 (t = 3.478, sig. 0.001); “hard”

internal elements: 0.423 (t = 3.450, sig. 0.001)Multicollinearity No multicollinearity; VIF: “soft” internal elements: 1.157; “hard” internal elements: 1.157Assumptions

√Influential points No

aRegression power less than 80%.bAssumptions refer to normality, linearity and homoscedasticity of the independent variables and the error term distribution.cRegression power less than 80%.dIf case 35 is removed, seven more cases are then subsequently removed, which is quite high comparing to the sample size, and does

not imply any change in the results.

innovate by gathering, transferring and communicating in-formation, within a project and across its boundaries. Bound-ary spanning individuals are extremely specialised and com-petent, and their competencies allow them to develop new(incremental or radical) knowledge[47,48]. Recent critics ofthe Balanced Scorecard have identified an overly strong con-nection between the learning and innovation perspective andinformation systems, at the expense of boundary spanningindividuals[2].In summary then there appears to be a gap between

the elements to which managers pay considerable atten-

tion and those elements that are believed to explain astrategic project’s success. The results of the regressionmodels suggest that the internal business elements oftenappear to explain, and differentiate, a strategic project’ssuccess.However, managers pay great attention to many fi-

nancial, environmental (green) and geological elementsdespite the fact that they appear not to be significantdrivers of success. In summary, the elements critical tosuccess and those managers focus on do not constitute agood match.

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Table 7Success factors and management attention

Financial External environment Internal business

Evaluation elementsContext “Micro” financial element (0)a Social, political economic and Internal alignment elements (1)

Time FA market elements (0) Corporate alignment FACompetition OA Competency alignment FA

“Macro” financial elements (1) Economic uncertainty OAFinancial capability FA Social uncertainty OAFinancial leverage OA Political uncertainty OA

Environmental and technologicalelements (0)Environmental uncertainty FATechnological uncertainty FA

Content Isolated and portfolio characteristics (4)Feasibility FATimescale FADurability FAFlexibility OAInterdependency OA

Output Financial evaluation outputs (0) External environment evaluation Internal business evaluation output (0)Cash flows FA outputs (0) Organisational impact OAFinancial summary measures FA Environmental impact FA

Social impact OAPolitical impact OA

Control elementsContext Financial control element (0) External environment control “Hard” internal elements (1)

Budgetary constraints FA elements (1) Project milestones scanning FAMarket scanning OA Product monitoring FAEconomic scanning OA Innovative technologies OAPolitical scanning OA

“Soft” internal elements (3)Managerial interaction FAResources deployment FALearning OAInnovative routines OA

Content — — —Output Financial control output (0) External environment control Internal business control outputs (1)

Financial targets FA outputs (0) Organisational communication OACustomer satisfaction OA Organisational adaptability OAEnvironmental targets FA Employee development OATechnological development OA Employee satisfaction OA

aDenotes number of models in which factor is significant.FA denotes elements frequently addressed by management.OA denotes elements only occasionally addressed by management.

7. Conclusions

This paper proposes that the strategic project managementprocess can be characterised by a set of elements which arerecognised by management and consistent with a wider lit-erature. The elements were initially identified by a numberof interviews held in a single oil and gas company, and werethoroughly validated against theories about strategic projectmanagement. These elements also provide a comprehen-

sive, balanced coverage of context, content and output onthe one hand, and financial, internal business, external en-vironment, and learning and innovation perspectives on theother[49].Amongst the proposed elements, it was instructive to

identify the subset of elements that are associated with astrategic project’s success. A questionnaire was designed forthat purpose, and applied to a wide range of big, mediumand small integrated, international UK-resident oil and gas

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affiliates. As discussed earlier, the concept of success wasmeasured via managerialperceptionsof success, along fourdimensions (financial success, strategic success, successfulcompletion and successful management).The analysis of the data indicates that internal business

elements are key drivers of success, but management payconsiderable attention to only one half of these elements.Some key elements such as flexibility, interdependency,and learning and innovative routines, appear to be broadlyneglected.It appears that managers do not always fully appreciate

the potential for interdependent options embedded in strate-gic projects; such options may represent intangible valueas they offer flexibility[42]. Managers also suffer from an“illusion of control” [14]. They avoid taking flexibility intoaccount while managing their strategic projects. They preferto adopt a single scenario for the future, and tend to computea single value for a project. Additionally, managers tend tooverlook synergies between projects, and between projectsand ongoing activities. The lack of attention to learning andinnovative routines may reflect a short-term managementstyle focusing on current activities at the expense of futureimprovements in management processes.Management also expend considerable effort on financial,

environmental (green) and geological aspects of the pro-cess, although these do not appear to be critical to success.Managers may focus on environmental (green) aspects, forinstance, partly because such a focus is effectively a require-ment for public companies today. A traditional engineeringperspective on project management still seems to dominatethe UK upstream oil and gas sector. This sector appears tobe attached to financially orientated decisions, focuses onfinancial and environmental (green) issues, seeks to controlthe efficiency of tangible assets, resists changing current rou-tines and overemphasises short term interests such as thoseof shareholders, sometimes at the expense of customers andemployees.The concern with financial elements is understandable.

The upstream oil and gas sector is based on financially ori-ented decisions. However, many financial elements are ef-fects rather than the causes, and they record rather than ex-plain success. The concern with environmental (green) andgeological elements is also understandable. These elementsare of prime concern to all organisations operating in theoil and gas sector. On the one hand environmental elementsimpact upon a company’s image and credibility, and on theother hand geological elements represent their core business.Both types of elements directly affect a company’s financialoutcomes.The overall research finding of the current study therefore

is to alert managers that there appears to be a gap betweenthe elements to which managers often pay considerable at-tention in managing strategic projects, namely financial, ge-ological and environmental (green) issues, and the elementsthat appear to explain successful strategic project manage-ment, namely internal business issues. Managers seem to

focus on the symptoms rather than the underlying causes,and on the results instead of on the process itself, althoughresults record rather than explain success. As a strategicplanning manager observed, “I used to work for a companywhere such a gap existed, ultimately leading to the demiseof the company”.This article suggests that the convergence of financial,

environmental (green), geological and internal business is-sues might be a healthy route for the UK upstream oil andgas sector towards successful strategic project management.In the case of specific situations, namely overseas projects,external environment (e.g. social, political and economic)issues might also be taken into account.The next step of this research study addresses the role

of techniques in facilitating successful strategic projectmanagement. Sets of techniques that tackle success criticalelements are proposed in order to help managers evaluateand control their strategic projects in a proper manner. Therespondents to the questionnaire validated the proposedsets of techniques through evaluation sheets. The evaluationsheets proposed comprehensive, theoretically supportedinstruments that help systematise strategic project manage-ment, as well as acting as effective facilitators for such aprocess.The evaluation sheets complete the triangular method-

ology adopted by this research study: (1) exploratoryinterviews, to identify and define the elements that thor-oughly represent the strategic project management process;(2) questionnaires, to highlight success critical elementsinvolved in such a process, and the gap between successcritical elements and those elements that receive consid-erable managerial attention; and (3) evaluation sheets, tovalidate sets of techniques that tackle success critical ele-ments and help managers deal with their strategic projectsin an effective way.

Acknowledgements

The authors are grateful to Dr. Brian Abbott, from the In-stitute of Petroleum who provided them with contact namesin the UK upstream oil and gas sector; to Dr. Charles Cuifrom UMIST, for helping with the multivariate analysis; tothe managers who anonymously co-operated with the mainsurvey; to OMEGA’s referees for their helpful comments;and to OMEGA’s Editor-in-Chief Prof Ben Lev, for his valu-able comments on the paper.

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