Organizations interact with other, external subsystems such as customers, suppliers, unions, stockholders, and governments. They rely upon the subsystems for inputs of energy, information, and material, and they export to them outputs of goods and ser- vices (represented in Figure 3-4).
In establishing goals and methods of operation, organizations are influenced by and must deal with these subsystems. Any organization which challenges others for the same scarce resources—customers, raw materials, budget allocations, and so forth—is a competitive subsystem. All organizations compete. Projects organizations rely on technology—equipment, tools, facilities, techniques, and knowledge—that is given or loaned to them by other organizations such as suppliers, consultants, and functional departments. They must compete economically and politically to acquire the resources and technology they need to obtain contracts and accomplish goals, in- deed, to survive.
Many organizations try to operate as if they were isolated; they collect too little in- formation about their environment or fail to utilize the information they have. As open systems, organizations must choose goals and conduct their operations in ways that respect the opportunities and limitations afforded by the environment. Cleland and King call this the manager’s “environmental problem,” meaning that managers must6
1. Appreciate the need to assess forces in the environment;
2. Understand the forces that significantly affect their organization; and
3. Integrate these forces into the organization’s goals, objectives, and operations. Although every project is influenced by outside forces, these forces alone should not be allowed to dictate the conduct of the project; that is the role of project management. A project manager must appreciate and understand forces influencing the project, but having done that, must then be able to control the project and guide it to completion. A project that is predominantly influenced or managed by divergent outside forces will go out of control and likely fail, illustrated in the following example.
Example 1: Life and Death of an Aircraft Development Project
Some of the systems concepts described thus far can be related by way of an ex-
ample based on a study by Law and Callon of a large British aerospace project.7
The study traces the evolution of the project in terms of two systems: the global system and the project system. The global system represents parties and orga- nizations in the environment that influence or initiate a project and provide the necessary resources. This system includes environmental subsystems that have a stake in the project. The project system represents the creation and conduct of
the project itself. These two systems and their relationships to project manage- ment are explained later.
The Global System
The project was initiated by the Royal Air Force (RAF) as a “requirement” for a new military supersonic aircraft with short take-off capability. In addition to the RAF, the principle parties in the global system and their interests include
1. The Ministry of Defence (MOD), which mandated that the aircraft could not be a bomber. Because the RAF wanted some kind of aircraft, albeit not a bomber, the aircraft was specified to be a tactical strike and reconnaissance fighter, called TSR.
2. The Treasury, which wanted the aircraft to be inexpensive and have market appeal for sale to other nations.
3. The Royal Navy, which wanted to purchase another aircraft, but which the RAF hoped would ultimately buy the TSR instead.
4. The Ministry of Supply (MOS), which wanted a project that would consoli- date the efforts of several airframe and engine manufacturers into one large consortium.
As typical of most projects, each party in the global system conceptualized the project differently: To the RAF and MOD it would yield an aircraft for a spe- cific mission; To the Treasury it would fit the defence budget and generate reve- nue; To the Navy it was a competitive threat; and to the MOS it was an instrument of industrial policy. The parties had different interests for contributing resources and support: Some were economic (in return for funds, an aircraft would be built); some political (in return for a demonstrated need, objections of the Navy would be overruled); some technical (in return for engineering and technical effort, the aircraft would meet RAF performance requirements); and some industrial (in ex- change for contracts, the aircraft industry would be consolidated).
The Project System
No funding would be approved until features of the project were better defined, including the aircraft’s basic design and its likely manufacturer, cost, and delivery date. The RAF and MOD had to begin creating a project system comprised of con- tractors, tasks, schedules, and so on. They sent requests to the aircraft industry for design ideas, and selected those from two manufacturers; Vickers Corp. and English Electric (EE). RAF and MOD favored Vickers for its integrated “weapons systems” design (aircraft, engine, armaments, and support equipment in a single package) and capability in tackling complex projects, but they also liked EE’s de- sign and experience with supersonic aircraft. They decided to contract with both companies and utilize a design that combined features from both designs. The idea was presented to the rest of the global network, which approved it and re- leased funding. The major elements of the project system—major organizations involved, initial designs and costs, and management structure—were now in place, and resources began to flow to it from the global system.
The project system continued to grow as Vickers and EE organized and ex- panded their design teams, production teams, management teams, subcontrac- tors, and so on. Under the encouragement from MOS, Vickers, EE, and several other contractors merged to form a single new organization called British Aircraft Corporation (BAC).
Designers initially faced two problems: Some wanted to locate the engines in the fuselage to minimize aerodynamic problems, but others worried about fire risks and wanted them on the wings. Also, they could not design a wing that would meet the requirement for both supersonic speed and short take-off capa- bility. Compromises were made, requirements relaxed, and eventually the designs were completed and sent to the factory.
Relationships between the Global System and the Project System
As the project system expanded, so did the problems between it and the global system. MOS wanted centralized control over all aspects of the project and all transactions between the project system and the global system. Although BAC was, in principle, the prime contractor and responsible for managing the entire project, MOS did not vest BAC with much management responsibility. Rather, it formed a series of committees to represent government agencies in the global system and gave the committees much of management responsibility for the pro- ject. This led to serious problems:
1. The committees could make or veto any decision related to the project. For example, most important contracts were awarded by MOS, and BAC con- trolled only 30 percent of project expenditures; often the RAF made deci- sions and changed requirements without consulting with BAC.
2. With so many interests involved, decisions were hard to reach. Committee members lacked information or knowledge, thus technical committees made decisions without regard to costs, and cost committees made deci- sions without regard to technical realities. Decisions did not reflect “sys- tems thinking.”
Eventually distrust grew between BAC and MOS, and neither could act effec- tively to integrate the flow of requirements, information, and decisions between parties in the global system and the project system. The project ran into major problems with development of the TSR engine. MOS had specified the engine re- quirements in general terms and expected the development to be routine, but the new engine needed much greater thrust than anticipated. One of the test engines exploded and it would be 2 years before the cause was understood. Subcontrac- tors were difficult to control. Many ignored BAC and appealed directly to MOS for favorable treatment; some colluded directly with the RAF; and many doubted that the plane would ever fly, overcharged to project, or gave it low priority.
Global System Reshaped
Everyone connected with the project knew it was in trouble. The RAF and MOD rec- ognized that the engine would likely remain unproven for some time, and the trea- sury, which hoped for an inexpensive aircraft, saw its costs double. The Australian Air Force then announced that instead of the TSR, it was ordering the U.S.-built F- 111. Still, RAF and MOD remained strong supporters, and as long as the funding continued, so would the project. However, project opponents were also aware of the project’s troubles, and they decided to take them to a broader arena, the Labour Party. A general election was coming, and the Labour Party promised to review the project if it was elected. The emergence of these two new elements in the global system—the F-111 and the Labour Party—clinched the fate of the project. The Labour Party won the election and immediately began assessing the TSR project, which included comparing it with the F-111, considered by now an alternative to the TSR. As cost overruns and schedule delays continued, MOS slowly withdrew support. The RAF also withdrew support when it discovered that the F-111, which was already in production, met all of its requirements. TSR was canceled.
Conclusions
The lesson suggested by this case is that the shape and fate of large techno- logical projects depends on the global system, the project system, and the inter- face between them as handled by project management. The conclusions of Law
and Callon, the study authors, are that8
1. The global system provides resources in expectation of some return from the project system. For the project system to perform well, however, the global system must afford it freedom to proceed and make mistakes
without interference. The global system must allow project management the autonomy to make project decisions and control project work.
2. The project system must provide the material, economic, symbolic, and cul- tural returns expected by parties in the global system. It must be able to ex- periment, assemble, control, and deliver the benefits or returns that will satisfy parties in the global system.
3. Project management must be the center of transactions (flow of informa- tion, resources, decisions) between the two systems. Unless it is, it will not be able to control the resources provided by the global system, which, as a result, will be misused or withdrawn, and it will not be able to claim credit to the global system for any successes the project system achieves.
In the TSR project, project management was not able to exercise control over the project or serve as the agent between the project system and the global sys- tem. Project management should have served as the control valve for informa- tion and resources flowing between the two systems; in fact, much of the flow completely circumvented project management. Parties in the global system were able to interfere with the structure and management of the project system, and parties in the project system were able to deal directly with parties in the global system, each to maximize its own interests, although usually to the detriment of the project.