LEADERSHIP FACTORS THAT AFFECT THE SUCCESS OF PROJECTS IN SOUTH AFRICAN PRIVATE SECTOR COMPANIES TABLE OF CONTENTS

Chapt er 1 1.1 1.2 1.3 1.4 1.5 1.6 Sectio Description of chapter n Introduction and background of study Introduction to study Background to study Literature review Problem statement Objectives of study Research questions Page 2 2 3 4 7 7 8

2 2.1 2.2 2.3 2.4 2.5 2.6 3

Methods and materials of study Study design Sample size of study Sampling technique Data collection instrument and measurement of variables Statistical methods of data analysis Limitation of study Outline of chapters in dissertation Time table of activities Cost of study List of references

9 9 9 9 9 10 10 11 12 13 14

CHAPTER 1: INTRODUCTION AND BACKGROUND TO STUDY

1.1: Introduction to study The purpose of the study is to identify and quantify factors that affect the successful completion of projects undertaken by South African private sector companies. The study is based on a random sample of size n=120 private sector companies that have undertaken projects since April, 1994 in South Africa. Data will be gathered from each of the 120 companies on a large number of socioeconomic variables that are well known indicators of the successful implementation of projects (Gareis, 2004: 101-103; Turner & Muller, 2005: 49-61; Clemens, 2006: 492-500). The association between the successful implementation of projects and requirements such as resources, skills and leadership has been outlined by researchers such as Chetty & Stangl (2010: 1725-1743). Coelho and Matias (2010: 324-329) and Chromie (2000: 7-24) have argued that innovative leadership is a requirement for the successful implementation of mega projects in the private sector. The view expressed by the authors has been reinforced by Dasanayaka and Sardana (2010: 50-70) and Doom, Milis, Poelmans and Bloemen (2010: 378-381). According to Chen, Papazafeiropoulou and Dwivedi (2010: 325-347) the ability of project managers to complete projects within time and budget without compromising quality is a key indicator of success in global assessments. Carrol and Wagar (2010: 218-229) have found that the ability of the project manager to utilize project resources according to plan depends on the level of leadership, technical, entrepreneurial and managerial skills. The study is one of very few studies that have been conducted in South Africa since April 1994 for identifying key predictors of success in the implementation of projects undertaken by private sector enterprises operating in South Africa. The study is designed to test the veracity and relevance of well known 2

theories in project management based on data sets that will be gathered as part of the study. Findings of the study have the potential for highlighting the need for fostering sound leadership qualities such as financial and administrative accountability, transparency, good governance and sound business ethics in private enterprises that undertake strategically important projects in South Africa based on best practice project management models that have been proposed by researchers such as Edwards, Sengupta and Tsai (2010: 543-565) and Dougherty (2009: 357-380). The research utilizes quantitative techniques of data collection and analysis. Quantitative data shall be gathered from each of the 120 respondents in the study by using a pre-tested, validated and standardized questionnaire of study. In approaching the research study, examination will be made of the available literature on theory and practice of Leadership in Project Management, Human Aspects in Project Management and Project Management Maturity Models. The focus will also be on the Management of projects (project execution and team management) and the evaluation of Project Management Maturity levels of Project Oriented Organizations such as project teams.

1.2: Background to study The study is being conducted against the background of an increasing number of failing projects undertaken by private sector enterprises in South Africa (South African Department of Trade and Industry, 2013: 2-4). According to Estebanez, Grande and Colomina (2010: 39-57), enterprises that undertake large projects are increasingly focusing on effective leadership as important success criteria, assessing the capabilities of executive sponsors, and project leaders in resolving extraordinary situations 3

and challenges with todays complex change. To manage sponsor interest, project managers must have superior leadership skills. According to Gareis (2004: 48-49) the project-oriented company is characterized by an explicit project management culture. The project-oriented company advocates a culture based on management concepts, such as Lean Management, Total Quality Management, the Learning Organization, and Business Process ReEngineering. Dowla (2005: 23-38) argues that the management culture of the project-oriented company is characterized by customer-orientation, process-orientation, and interdisciplinary Gareis (2004: 42) and Bosworth cross functional 660-677) team argue work. that (2009:

leadership qualities such as networking with potential clients and suppliers are essential for long term viability and success. When projects stall or fail, new product and service offerings, process improvements, and other intangibles such as innovation and creativity may be delayed or fail to come to fruition. The inability of an organization to successfully manage and complete projects results in short and long-term consequences (Bass, Bruce, Dong & Berso, 2003: 207-218). Examples of the repercussions that stem from delayed and failed projects include dissatisfied customers and stakeholders and poor financial performance (Carmignani, 2009: 345-349). 1.3: Literature review Gareis (2004: 48-49) argues that a project-oriented company is different from most companies, and that emphasis is placed on the need to have projects completed successfully at any cost. This shows that a projectoriented company is driven by the requirements of project portfolios of different internal and external factors. The project-oriented company is a social construct and has specific organizational strategy, structures and culture. The task of running project-oriented organizations requires a complete understanding of a global structural approach as a means of ensuring effective project delivery. 4 This question goes beyond the

examination of the project structure and the position of a given project in the organization as it addresses the structural problem at organizational level. This leads to research agendas that reflect different schools of thought. Steers, Lyman and Gregory (1996: 101) explore the relationship between projects and the corporate environment by using the construct of project orientation. Their initial findings conclude that this interface is a locus of tension. The lack of understanding of the causes and dynamics of tension between projects and organizations leads to friction and failure. This insight confirms the necessity to shed light on the global organization where projects are realized in a dynamic environment alongside operations. Bass, Bruce, Dong and Berso (2003: 207-218) argue that most organizations have implemented Project Management Offices (PMOs) and portfolio management structures that have evolved from the traditional pyramidal organizational structure. In this perspective, project-based structures simply mimic traditional organizational structures, replacing management rhetoric with project rhetoric and may therefore be losing some of the dynamism and flexibility attributes that characterize project and programme management. A well-integrated Project Based Organization (PBO) is expected to display strong interrelationships between its projects and both its business and corporate strategies; in such an organization project managers are expected to be appointed in senior management roles, or senior managers are expected to view project management as an integrative process. According to Bosworth (2009: 660-677), project based organizations must fulfill the following three requirements at organizational level: (a) A horizontal integration process of projects across the product lifecycle, from formulation of the business strategy to delivery of business benefits.

(b) A vertical integration approach of projects across the project portfolio, to link it to the corporate strategy. (c) Integrative project governance structures that close the gap between corporate goals and product delivery.

Carroll and Wagar (2010: 218-229) have found that the majority of companies with global interest in the world are becoming more projectoriented as a means of ensuring long-term viability. Projects and programs are applied in all industries and in the non-profit sector. To perceive a company as a Project Orientated Company (POC) in a social construct, any company (or parts of a company, such as a division or a profit center), which frequently applies projects and programs to perform relatively unique business processes of large scope, can be perceived as being projectoriented. In general, a Project Orientated Company is characterized by following attributes:

Defines Management by Projects as an organizational strategy; Applies temporary organizations for the performance of business processes of medium and large scope; Manages a project portfolio of different project types; Has specific permanent organization units, such as a Project Management (PM) Office and a Project Portfolio Group; Applies a New Management Paradigm; and Perceives itself as being project-orientated.

The study aims to test the veracity of the Leader-Member-Exchange (LMX) theory proposed by George Graen (Steers, Lyman and Bigley, 1996: 45-46) by gathering empirical data based on a scientific survey. The Leader-member exchange (LMX) theory states that one-on-one relationships 6

between leaders and individual subordinates in enterprises determine the overall success of projects in private enterprises. Those in the in-group enjoy a relationship with the leader, which is marked by trust and mutual respect, whereas those in the out-group are excluded from important activities and decisions. The theory suggests that high-quality relationships between a leader and subordinate will lead to positive outcomes such as better performance, lower turnover, job satisfaction, and organizational commitment. What is most interesting about the evolution of leadership theory is what might be called parallel theoretical developments. LMX theory and implicit leadership theory both bring in the need to attend to followers. Graen (a major proponent of LMX theory) argues that leaders develop different exchange relationships with followers over time and that he/she may not use the same style of leadership with each follower nor have the same relationship with each follower. On the other hand implicit leadership If a leader is perceived to be theories argue that subordinates hold certain beliefs and assumptions about the characteristics of effective leaders. effective based on an implicit belief about what an effective leader looks like and behaves like, then that leader will be rated more highly by subordinates even on objective measures of leader performance.

1.4: Problem statement

According to the South African Department of Trade and Industry (2013: 24), an increasing number of private sector enterprises are failing to complete projects due to lack of skills in the management of projects. There are very few studies that have been undertaken so far in this area of research. This study aims to fill the gap by gathering empirical data from 7

120

private

sector

enterprises

that

have

been

tasked

with

the

implementation of projects since April, 1994 in South Africa.

1.5: Objectives of study The overall objective of this study is to identify and quantify factors that affect the ability of private sector enterprises in South Africa to successfully implement projects. The study has the following three specific objectives: To identify factors that are responsible for failure in private sector companies involved in the implementation of projects; To evaluate the quality of leadership in private sector enterprises that have succeeded in implementing projects; and To establish whether the Leader-Member-Exchange (LMX) theory proposed by George Graen (Steers, Lyman and Bigley, 1996: 45-46) explains the reason why companies fail to implement projects in South Africa.

1.6: Research questions The study aims to provide adequate answers to the following research questions:

1. What specific leadership factors affect the success of projects in South African private sector companies? 2. Is there a statistically significant association between leadership style and the success of projects in the South African private sector? 3. Do human aspects of leadership determine the success of projects in the South African private sector?

CHAPTER 2: METHODS AND MATERIALS OF STUDY

2.1: Study design The design of the study is descriptive and cross-sectional (Creswell, 2003: 49-50).

2.2: Sample size of study A random sample of size n=120 shall be drawn for the study from the private sector small and medium enterprises, operating in the Gauteng Province of South Africa. The Business Register of Statistics SA will be used for drawing private enterprises that are required for conducting the study.

2.3: Sampling technique Stratified random sampling will be used as a sampling technique for selecting eligible enterprises. The five geographical zones in Johannesburg Metropolitan Municipality (Central, East, West, North and South) will be used as strata. Sampling frames will be obtained from Statistics South Africa.

2.4: Data collection instrument and measurement of variables

Data collection will be conducted by using a structured, pre-tested, validated and standardized questionnaire. Data will be collected from each eligible respondent on socioeconomic and demographic variables that are relevant to leadership and management in private enterprises. Face validity will be used for ensuring validity. The Cronbach Alpha test (Dawson and Trapp, 2004: 102-103) will be used for ensuring reliability and internal consistency.

2.5: Statistical methods of data analysis At each of the 120 enterprises, the success or failure of the current project will be used as a dependent variable of study. At each of the 120 enterprises that will be selected for the study, the value of the dependent variable of study (Y) is dichotomous. This means that variable Y can only have 2 possible values. That is, the project has failed (Y=1), or else the project has succeeded (Y=0). Y is a yes or no variable. At each of the 120 10

enterprises, data will be gathered on the variable Y and a total of k socioeconomic, demographic and leadership factors that affect the success or failure of the most recent project attempted at the enterprise (X1, ..., Xk). The regression of Y on X1, ...., Xk constitutes a binary logistic regression model. The econometric measure of effect will be the odds ratio (Hosmer and Lemeshow, 2002: 49-52). The success or failure of projects will be assessed based on a well-defined, standardized and validated index (Turner & Muller, 2005: 29-32). Quantitative (statistical) methods of data analysis will be used as a principal method of data analysis in this study. Frequency tables, Pearsons chi-square tests of associations (Dawson and Trapp, 2004: 56-58) and binary logistic regression analysis (Hosmer and Lemeshow, 2002) will be used for statistical data analysis. Odds ratios estimated from binary logistic regression analysis will be used as a measure of effect in this study.

2.6: Limitation of study The study will have the following minor limitation: While the study determines the success or failure of projects at each of the 120 private companies in the study based on a well-defined and referenced set of criteria, it will not have the necessary resources for conducting a forensic investigation with a view to identify the underlying causes of success or failure of projects at the 120 companies that will be taking part in the study. This failure constitutes a minor limitation of study.

CHAPTER 3: OUTLINE OF CHAPTERS IN DISSERTATION The dissertation of study will consist of 6 chapters, list of references, and a list of appendices as described below.

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Chapter 1 : Introduction and background of study This chapter will present an introduction to the study along with the relevant background of study. The chapter will state the research questions of study and problem statements. The potential benefits and expected outputs of study will also be presented.

Chapter 2: Literature review

This chapter will present a review of the relevant literature along with the theoretical framework of study. Key theories of interest are the theory and practice of leadership in project management, Project Management Success, and the benefits of using maturity models. The common project management maturity models will be discussed, highlighting the advantages and limitations of using these models in analyzing organizational Project Management leadership and project management success.

Chapter3: Methods and materials

This chapter will discuss the study design, the sample size of study, the list of variables of study, and the quantitative methods of data collection and analysis.

Chapter 4: Results of study This chapter will present results that will be obtained from data analysis.

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Chapter 5: Discussion of results This chapter will present a detailed discussion of key results and findings. A thorough and critical analysis of the results obtained from analysis will be conducted with a view to identify gaps that should be addressed by researchers. The discussion of results will be guided by the key research questions of study.

Chapter 6: Conclusions and recommendations This chapter will provides all the conclusions from the study, as informed by the analysis of the results in the previous chapters. Relevant recommendations as informed by the study results and their analysis thereof will also be proposed in this chapter.

Time table of activities (2013) Research activity Jun e Jul y X X X X X X X Aug Sep Oct Nov Dec

Review of proposal Approval of proposal X Data collection Data analysis Write-up of thesis Submission of draft thesis Review of draft thesis Submission of hard copies

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Cost of study

Research activity Design of questionnaire of study Data collection Data entry, editing and validation Data analysis and interpretation of results Binding and editing of thesis Total

Cost in Rand 2, 000 30, 000 10, 000 10, 000 10, 000 62, 000 Rand

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LIST OF REFERENCES BASS, B. M., BRUCE, J. A., DONG, I. J. & BERSO, Y. 2003. Predicting unit performance by assessing transformational and transactional leadership. Journal of Applied Psychology, 88(1): 207218.

BOSWORTH, G. 2009. Education, mobility and rural business development. Journal of Small Business and Enterprise Development , 16(4): 660-677.

CARMIGNANI, G. 2009. The definition of a standard to implement a process management system Business Process Management Journal , 15 (3): 345 349.

CARROLL, W. R. & WAGAR, T. H. 2010. Is there a relationship between information technology adoption and human resource management? Journal of Small Business and Enterprise Development, 17(2): 218-229.

CHEN, H., PAPAZAFEIROPOULOU, A. & DWIVEDI, Y. K. 2010. Maturity of supply chain integration within small- and medium-sized enterprises: lessons from the Taiwan IT manufacturing sector. International Journal of Management and Enterprise Development, 9(4): 325-347.

CHETTY, S. K. & STANGL, L. M. 2010. Internationalization and innovation in a network relationship context. European Journal of Marketing, 44(11/12): 1725-1743.

CHROMIE, S. 2000. Assessing entrepreneurial inclinations: Some approaches and empirical evidence. European Journal of Work & Organizational Psychology, 9(1): 724.

CLEMENS, B. 2006. Economic incentives and small firms: does it pay to be green? Journal of Business Research, 59(4): 492-500.

COELHO, D. A. & MATIAS, J. C. O. 2010. Innovation in the organization of management systems in Portuguese SMEs. International Journal of Entrepreneurship and Innovation Management, 11(3): 324-329.

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CRESWELL, J. W. 2003. Research design: qualitative, quantitative, and mixed methods approaches, 2nd ed. Thousand Oaks: Sage Publications.
DASANAYAKA, S. & SARDANA, G. D. 2010. Development of SMEs through clusters: a comparative study Entrepreneurship, of India, Pakistan and Sri Lanka. World Review of

Management and Sustainable Development, 6(1/2): 50-70.

DAWSON, B. K. & TRAPP, R. G. 2004. Basic Clinical Biostatistics. 2nd ed. New York: McGraw-Hill.

DOOM C., MILIS, K., POELMANS, S. & BLOEMEN, E. 2010. Critical success factors for ERP implementations in Belgian SMEs. Journal of Enterprise Information Management, 23(3): 378-406.

DOUGHERTY, L. 2009. Putting poverty in museums: Strategies to encourage the creation of the for-profit social business. Boston Third World Law Journal, 29(2): 357380.

DOWLA, A. 2005. In credit we trust: building social capital by Grameen Bank in Bangladesh. Journal of Socio Economics, 1(2): 23-38.

EDWARDS, P., SENGUPTA, S. & TSAI, C. J. 2010. The context-dependent nature of small firms' relations with support agencies: a three-sector study in the UK. International Small Business Journal, 28(6): 543-565.

ESTEBANEZ, R. P., GRANDE, E. U. & COLOMINA, C. M. 2010. Information technology implementation: evidence in Spanish SMEs. International Journal of Accounting and Information Management, 18(1): 39-57.

GAREIS, R. 2004. Management of the project-oriented company. New York: John Wiley & Sons. HOSMER, D. W. & LEMESHOW, S. 2002. Applied logistic regression analysis, 2nd edition. New York: John Wiley & Sons. 16

SOUTH AFRICAN DEPARTMENT OF TRADE AND INDUSTRY. 2013. Publication of names of bidders in respect of advertised competitive bids 2013 . [Online]. Available from: http://www.thedti.gov.za/bidders.jsp [Accessed: 08 October 2013]. STEERS, R. M., LYMAN, W. P. & GREGORY, A. B. 1996. Motivation and leadership at work. New York: McGraw-Hill. TURNER, J. & MULLER, R. 2005. The project manager leadership style as a success factor on projects: a literature review. Project Management Journal, 36(2), 49-61.

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