The relationship between project governance and project success

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Highlights

  • Stakeholder orientated project governance is a project success factor.

  • Control oriented structures are not generally correlated to project success.

  • Stewardship theory was shown to be an appropriate lens for successful project governance.

  • All dimensions of project success used in this study are correlated to the governance orientation.

  • The success dimension “future potential” is most strongly correlated to the governance orientation.

Abstract

This study looks at the relationship between project governance and project success from an agency theory and stewardship theory perspective. For that project governance was operationalized respectively as a) the extent of shareholder versus stakeholder orientation and b) the extent of behavior versus outcome control, both exercised by the parent organization over its project. A cross-sectional, worldwide online survey yielded 254 usable responses. Factor and regression analyses indicate that project success correlates with increasing stakeholder orientation of the parent organization, while the types of control mechanisms do not correlate with project success. Results support the importance of stewardship approaches in the context of successful projects.

Introduction

Forty years of research have brought up a variety of new success factors (i.e. those elements that, when applied during a project's life cycle, increase the project's chances to be successful) and extended the number of success criteria (i.e. those measures applied at the end of the project to judge on the project's success). Project success is hereby seen as the achievement of a particular combination of objective and subjective measures, manifested in the success criteria and measured at the end of a project (Müller and Judgev, 2012). But success rates still do not meet expectations (Judgev and Müller, 2005, Lehtonen and Martinsuo, 2006). Because of that, researchers have started to widen the scope of possible success factors and focus more on the structural characteristics of the project context and its impact on success. One of these factors is project governance, which has grown exponentially in popularity since 2005 (Biesenthal and Wilden, 2014). This stream of literature identifies the structural characteristics needed for successful project execution (Müller and Lecoeuvre, 2014). Project governance is “the use of systems, structures of authority, and processes to allocate resources and coordinate or control activity in a project” (Pinto, 2014), it coexists within the corporate governance framework with the objective to support projects in achieving their organizational objectives (Müller, 2009). The majority of published research on project governance is conceptual, supplemented by some qualitative studies and very little quantitative evidence on the relationship between project governance and project success. Among the few quantitative studies are Wang and Chen's (2006) assessment of governance impact on success in ERP projects, and Müller and Martinsuo's (2015) investigation of the role of project governance in the relationship between relational norms between project buyers and suppliers and their joint project's success. However, both studies showed an important role of governance, but were confined to the IT industry. This is in contrast to general management studies, where the link between corporate governance, management performance, and shareholder value is well researched (Amzaleg et al., 2014, Core et al., 1999, Lazonick and O'Sullivan, 2000, Maher and Andersson, 2000). As project governance is aligned with corporate governance and good corporate governance is associated with management performance, a link between project governance and project success may be assumed. This will be addressed in the present paper.

The purpose of this study is to investigate the relationship between project governance and project success. The aim is to understand which forms of project governance relate with project success. To achieve this, the following research question is posed:

What is the relationship between project governance and project success?

To answer this question, we first empirically test the correlation between project governance and project success. After that we discuss some of the underlying assumptions, which, when met, may provide indicators for a limited causality. The unit of analysis is the relationship between project governance and project success. The study uses the governance paradigms framework from Müller and Lecoeuvre (2014), which identifies two governance dimensions: a) a continuum of the extent of shareholder versus stakeholder orientation (following Clarke, 2004), and b) a continuum on the level of behavior versus outcome control (following Ouchi, 1980), as exercised by the project's parent organization. This allows for the contrasting views of agency and stewardship theory. Agency theory is hereby seen as a proxy in explaining behavior in more shareholder-oriented governance structures, where contracts and process control structures are used to manage the self-serving behavior of managers for the maximization of shareholder wealth (Berle and Means, 1968, Friedman, 1962). Contrarily, stewardship theory is taken as a lens explaining behavior in more stakeholder-oriented governance structures, where trust and controlling by outcomes/results serve as a mechanism to govern towards the achievement of organizational goals by balancing the requirements of a diverse set of stakeholders (Davis et al., 1997c, Müller, 2011).

The study is relevant for practitioners developing success related governance structures by pointing out the success related governance approaches, and for academics in developing contingency theories of project performance and results.

The next section reviews literature on governance, project success, and agency and stewardship theories from which the hypotheses are derived, followed by the research methodology, results and discussion sections. The paper finishes with the study's conclusions and its implications.

Section snippets

Governance as a success factor on projects

Building on the early success factor models by Pinto, Slevin and Prescott (Pinto and Prescott, 1988, Pinto and Slevin, 1988), which covered organizational effectiveness and technical validity, the development of success factors diversified significantly over the years. Researchers soon realized that success factors without structure, grouping, and context would result in increased project risks; therefore, success factor frameworks were introduced such as those fostering multi-dimensionality

Research methodology

We followed Saunders et al. (2011) process for research design, which comprises of seven steps: post-positivism was used as epistemological stance, because it aims for objectivity as an ideal, but is aware of the subjectivity stemming from the subjects targeted for data collection. Post-positivism identifies trends instead of generalizations (Biedenbach and Müller, 2011). A deductive approach was chosen for a robust design that includes both existing theory and new empirical evidence. A survey

Data analysis and results

Varimax rotated factor analysis was used to establish the three constructs. Here a KMO of 0.8 (p < 0.001) indicated the data's appropriateness for this analysis (Hair et al., 2010). All questionnaire items loaded on their respective factor and were of acceptable reliability (Cronbach alpha), see Table 3.

Discussion

The two independent constructs GOV orientation (shareholder–stakeholder) and GOV control (behavior–outcome) were tested on their relationship with project success. Only GOV orientation (shareholder–stakeholder) is significantly correlated to project success, where 6.3% of the variation in project success can be explained by the governance position along the shareholder–stakeholder continuum. With a beta of 0.25 (p < 0.001) an increase in stakeholder orientation correlates with an increase in

Conclusions

This study empirically investigated the relationship of project governance and project success. A deductive approach tested a theoretically derived research model. Two theoretical lenses were used in the study: agency theory and stewardship theory. The data were collected through a web-based questionnaire with 246 respondents from 11 industries evenly distributed across North America, Europe, and Australasia. The research question can now be answered: project governance has a small, but

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