Read an Excerpt
CHAPTER 1
Introduction
What form of organizing work is a megaproject? Why do performance targets in megaprojects regularly slip over time? Can we trace regular slippages in the megaproject performance targets (cost, schedule, scope) back to their organizational structure? These are the central questions that motivate this study. Here, we claim that megaprojects are "meta-organizations" — networks of multiple actors, including individuals, communities, public bodies, and firms collaborating under an identifiable system-level goal (Gulati, Puranam, & Tushman, 2012). The defining attribute of meta-organizations is the absence of employment relationships, or ownership stakes, as sources of authority between its members. Meta-organizations are not, however, self-organizing systems. Rather they are guided by a central "systems architect" — a designated leader who leads the organization in pursuit of the higher-order goal. In the case of megaprojects, the leader is the project promoter. Here, we argue that megaprojects are a special class of meta-organization because of the fundamental structural differences between the two constituent organizational parts: the core and periphery.
The core of a megaproject is the organizational structure that controls strategic choice. In megaprojects, the core structure is porous and pluralistic. We trace the porosity of the megaproject core to the system-level goal. A megaproject promoter rarely has direct control over all the critical resources necessary to forge ahead, including finance, land, political support, regulatory consent, and knowledge of needs. Some resources may also not be up for sale. More likely, direct control of these resources will be distributed across multiple legally independent actors. These resource-rich actors will be directly impacted by the megaproject outcome and thus have a "stake" in the megaproject organization. Hence, resource-rich stakeholders want to be "development partners," and propose to volunteer their resources in exchange for rights to access the strategic decision-making process. As a result, in a megaproject, multiple actors will share direct influence over the strategic design choices that define both the outcome and the development process. The sharing of decision-making power across autonomous actors with conflicting goals creates a pluralistic structure. Under pluralism, strategizing is inherently political and the outcome of negotiated processes.
In marked contrast, the periphery of a megaproject organization is a close, hierarchical structure. At the periphery, a vast supply chain of suppliers provides expert knowledge and labor for the organization, and carries out the engineering and implementation works in exchange for monetary rewards. Unlike the development partners, the supply chain has much less direct influence over the strategic design choices. Furthermore, suppliers can only enter into the megaproject organization if they are selected by the promoter or by the promoter's agent. Hence, the periphery is a closed organizational structure. The vertical relationship between the promoter and suppliers is governed by buyer-supplier contracts. Formal contracts enable the promoter to simulate an authority hierarchy in the relationship with the suppliers.
Armed with this conceptualization of a megaproject as a form of organizing work, we set off to shed light on why megaprojects perform the way they do. Various studies suggest, with statistical significance, that megaprojects struggle to keep the scope stable (Flyvbjerg, Bruzelius, & Rothengatter, 2003; Merrow, McDonwell, & Arguden, 1988). As a result, megaprojects grapple to achieve the system-level goal — the delivery of a functional, designed artifact — within the cost and schedule targets announced at the onset of the planning. And yet, megaprojects cannot do without premature commitments to performance targets. These commitments attenuate ambiguity in the value proposition and build the legitimacy necessary to convince other resource-rich actors to commit critical resources to the goal. But commitments to a performance baseline create normative expectations. Enterprises that fail to conform to norms established in the context lose their legitimacy to operate. Hence, a megaproject organization that fails to meet the initial pledges "fails" in the eyes of third parties and loses legitimacy for allocating the resources that the pledges allowed it to acquire.
Extraordinarily, the debate on megaproject performance has been stuck for almost 20 years between two views. One claims that the promoter frequently underestimates the performance targets. The reasons offered are varied, and include (1) optimism bias and deliberate strategic misrepresentation (Flyvbjerg et al., 2003; Wachs, 1989); (2) underinvestment in planning, leading to vague or poorly specified goals (Merrow et al., 1988; Morris, 1994); and (3) use of rigid buyer-supplier contracts that preclude the suppliers' know-how to feed into planning and lead to late suppliers' claims for compensation (Stinchcombe & Heimer, 1985). The second and more benign view is common, too — that megaprojects cannot be planned reliably because of external events and institutional self-interests that lay outside the promoter's control. Promoters are thus hostage to project pathologies, including scope creep or scope "shaping" (Miller & Lessard, 2000), inflationary consensus (Denis, Dompiere, Langley, & Rouleau, 2011), and escalation of commitment (Ross & Staw, 1986).
Reconciling less benign arguments that trace megaproject underperformance to agency problems with the more benign argument that traces megaproject underperformance to the environment has been a conundrum. Both views draw the boundaries separating the megaproject organization from the environment around the promoter organization. Hence, in both views, resource-rich actors are "external" stakeholders, not "development partners." However, the two views are undergirded on different behavioral assumptions of the promoter. In the first view, slippages in the performance targets are traced to the promoter's private decisions to set overly optimistic targets. These decisions are rooted in the promoter's opportunism and incompetence. In contrast, in the second view, the megaproject promoter is well-intended and competent, but it is also hostage of the interests of powerful actors in the environment, the main cause of slippages in the performance targets.
In this study, we propose to reconcile these two research traditions by redrawing the megaproject organization boundary. We do so by bringing resource-rich stakeholders in the environment, the so-called "development partners," into the megaproject organization. Hence, in our conceptualization, the environment around the megaproject organization is delineated to, first, the resource-poor stakeholders, that is, actors who may need to be consulted by regulation but lack the power to influence strategic choice directly, and two, to regulations and laws in the institutional environment. By delineating the organizational boundaries of a megaproject in this way, we reveal the pluralism at the megaproject's organizational core.
Under pluralism, collective strategizing involves negotiation processes, and these processes invariably lead to slippages in the project performance targets. In addition, the political nature of many strategic choices leads to two other major performance risks. One risk is that of impasse, if the promoter and the resource-rich actors who mistrust one another keep disputing the evidence that the other party uses to back up his or her arguments — lack of cooperation leads to defections and the collapse of the pluralistic arena (Langley, 1995). This risk explains why megaprojects can take so many decades to get off the ground during the planning stage. A second risk is that the megaproject promoter makes concessions disproportional to what is at stake to carry the development partners along, undermining the collective value of the enterprise. This risk can explain why some megaproject organizations produce "white elephants"— sources of private value, but not collective value creation.
The premise that strategic design choice in megaprojects is rooted in a pluralistic structure is also important for understanding discrepancies between the rhetoric used by promoters to describe performance and public perceptions. Under pluralism, strategic ambiguity and reification practices are critical devices to keep the pluralistic setting afloat (Denis et al., 2011; Jarzabkowski & Fenton, 2006). Strategic ambiguity creates space for incompatible goals and translates into vague goals, equivocal language, procrastination on difficult decisions, inflationary consensus, and the safeguarding of rights to reverse decisions. Reification practices add symbolic value to continued involvement and make it hard for participants in a pluralistic setting to withdraw without losing face; reification practices translate into: (1) enthusiastic language in public discourse implying prestige, process, and technological leadership; (2) signatures of nonbinding protocols and memorandums of understanding; and (3) ratification of documents. Both sets of practices are necessary to carry the participants in a pluralistic setting along, but they have a double edge in that they sow the seeds of discord. In a megaproject organization, the use of these rhetorical practices leads to a gap between what project promoters say about performance, and the cost overruns, delays, and scope creep observable to third parties. Here, we argue that insofar as prevailing norms establish that "successful" megaprojects must freeze the scope early on to meet initial targets, it is hard to see how megaprojects cannot fail in the eyes of third parties. This is troubling, as many megaprojects are a source of value creation. It is also unfair to the megaproject leaders who deserve our sympathy and not blame. By revealing the organizational structure of a megaproject, we hope to move forward the debate on megaproject performance.
The database underpinning this study includes contemporaneous megaprojects unfolding in different parts of the world. It is, however, wholly focused on large, capital-intensive infrastructure development projects. Specifically, our insights are grounded in four multibillion-pound megaprojects in the United Kingdom: Crossrail and High Speed 2 (HS2) railways, the London Olympic Park, and Heathrow Airport Terminal 2 (T2). Crossrail is a high-capacity train connecting the east and west ends of London, scheduled to fully open by September 2018. HS2 is a national high-speed railway network that aims to increase railway transportation capacity between London and the northern regions; it is planned to be delivered in two stages, and is not expected to be fully completed before 2033. The London 2012 Olympic Park was a project to develop the infrastructure to host the 2012 Olympics and to catalyze urban regeneration in East London. And the Heathrow T2 was a project to develop a new terminal campus at Heathrow Airport to accommodate Star Alliance (Star), a global alliance of airlines.
In addition, we explore the validity of our claims to infrastructure projects in developing economies. Specifically, we studied the Dedicated Freight Railway Corridor, a megaproject that aims to connect first-tier cities in India with a railroad line dedicated to freight. This megaproject is promoted by a coalition that includes the Japan International Cooperation Agency (JICA), the government of India, and the World Bank. We have also studied three schemes in Africa: (1) the modernization of the transport network of Lagos, Nigeria (soon to be Africa's largest city by population); (2) the modernization of the road network of Kampala, Uganda's capital; and (3) and the Kampala-Entebbe Expressway, Uganda's first toll highway. All projects aim to deliver infrastructure critical to meet urgent societal needs.
Our study, informed by megaprojects in developing economies, reveals that the pluralism at the organization core is central to an understanding of megaproject performance in developing economies. It also shows that, in a developing economy, the propensity for slippage in megaproject performance is exacerbated by the lack of structures to resolve disputes and the scarcity of slack resources. In developing economies, our analysis focuses on two different ways to structure the megaproject development process: One approach overlaps the project planning and implementation stages in an effort to shorten the development life cycle. Another approach specifies that implementation should only start after planning is substantially done in order to attenuate uncertainty during execution. We find that the overlapped approach is attractive for the pledge of quick developments. This approach relies on opaque negotiations between the promoter and the suppliers, which are permissible because the institutions in the environment are weak. However, we show that the overlapped approach carries a high risk of the development derailing if improvization, ingenuity, and flexibility fail to resolve late planning problems or suppliers engage in opportunistic behavior ex-post contract award. In contrast, a sequential approach relies on substantive investment in planning to acquire all the critical resources before letting the contracts to suppliers. This approach attenuates the risk of supplier opportunism ex-post contract award and the risk of overruns in implementation. But it pledges timescales that fail to respond to the urgency of the problems.
In sum, we believe that studying the phenomena of megaprojects from an organizational design lens brings a complementary perspective to megaproject literature. This perspective enables us to reconcile conflicting explanations for the regularity with which megaprojects miss performance targets. Guided by this perspective, we have assembled a vast database and sought to make sense of why megaproject organizations perform the way they perform.
We organized this monograph as follows. In the second chapter, we introduce our main cognitive lens — organization design theory. The second and third chapters are coauthored with Dr. Colm Lundrigan, and part of his doctoral research at the Manchester Business School. The second chapter asks the question: What form of organizing work is a megaproject? In seeking to address this question, this chapter explores the processes through which the structure of participation in a megaproject organization is created and grows.
In the third chapter, we trace the regular slippages in performance targets to the megaproject organizational structure. This chapter is coauthored with Dr. Colm Lundrigan and Phanish Puranam. We show that as megaproject promoters seek to gain support for their system goal, powerful stakeholders in the environment enter the megaproject organization. But these so-called "development partners" are not altruistic: They contribute their resources in exchange for a stake in strategic choices. As the megaproject organizational structure changes, changes to performance targets ensue. We develop this argument by examining the conflict and the consequences to performance at the megaproject organization core. We show that the participants in the megaproject core are drawn from differing ideological and epistemic backgrounds, and thus have differing preferences for the final design. These differences spur the formation of coalitions between like-minded actors, which wage political battles over the strategic design choices — the losers can feel disenfranchised and see the megaproject as a poorly performing organization, while the winners will think that they did a great job. As a result, the megaproject performance is politically charged, with members crafting narratives that either support or attack the megaproject's strategy.
The fourth chapter investigates the implications of pluralism at the megaproject's core. This chapter was coauthored with Professor Jeff Pinto. We start by tracing pluralism back to the system-level goal. We use design structure matrices (DSM), a tool from design theory, to shed light on the diffusion of power. We show how the development partners directly influence the strategic design choices in exchange for committing to supply their resources. We thus argue that strategic design choices qualify as an Ostrom's "common-pool resource"— a resource shared by many nonexcludable claimants with rivalrous goals. We then show how pluralism affects governance, this is, the allocation of decision-making authority and resources. We show that megaproject governance is polycentric, consisting of a nested structure of decision-making centers with capacity for mutual adaptation and local variation. We also show that the context may presuppose that governance will fail to encourage sufficient cooperation to resolve emerging interorganizational disputes. Hence, the context can create a powerful external umpire to referee disputes. In some cases, promoters also have more slack resources (money, time) than in others to reconcile incompatible goals. We build upon these findings to offer a contingency model of megaproject performance that contains a relationship between slack availability and the presence of an umpiring structure.
(Continues…)
Excerpted from "Megaproject Organization and Performance"
by .
Copyright © 2017 Project Management Institute, Inc..
Excerpted by permission of Project Management Institute, Inc..
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
