Systems approach to

strategic project
management
Dragan Z MiloSevi6
Enhancing project results is the challenge facing project
managers. I n response, they assess various ways in
which project results can be improved. One of these
ways is related to strategic project management. This
paper addresses a systems model of strategic project
management which can help the project manager improve
the project results. The model has been tailored to
provide a framework for controlling the environmental
elements usually referred to as the external project
stakeholders, and the interactions between the elements
of the project management.
Keywords: strategicproject management, systems model,
project stakeholders, environment
Professional project managers are faced with the
challenge of project handling and achieving better
results. Project management plays a major role here.
While numerous models have been developed providing
operational project management support (WBS, CPM,
Earned Value Concept, LRA, etc.), there is a strong
need for a model that addresses a systems view on
strategic project management.
This paper is aimed at suggesting a conceptual
systems model for strategic project management. It
begins with a brief look at the systems view on strategic
project management.
WHAT IS A SYSTEMS VIEW ON STRATEGIC
PROJECT MANAGEMENT?
A dictionary definition of a system as an organ-
ization or complex whole; an assemblage or com-
Svetog Save 34A, 11000 Belgrade, Yugoslavia
bination of things or parts forming a complex or
unitary whole, provides a good point of departure
to relate the meaning of a system to project
management2.
Should one view project management in its
systems framework, one could speak of a project
management system (PMS) that consists of a set of
elements which make up a larger system. Effective-
ness of the PMS depends on the effectiveness of
these constituent elements individually, as well as
on how these elements are synergized into the
PMS, since it operates as an entity. It is the way in
which PMS works in its environment that ultimately
determines its success or failure2.
WHY TAKE THE SYSTEMS VIEW ON
STRATEGIC PROJECT MANAGEMENT?
There are at least two reasons for taking the systems
approach.
First, all too often, the approach in solving project
management problems is through solving partial pro-
blems within the individual stages that make up the
project. At first sight, such an approach seems to
contribute to effective problem solving.
However, this is only the case provided that the
cause of the problem lies within the individual stages.
Otherwise, the solution to the problem will not
eliminate the cause, but simply temporarily diminish its
effects. Therefore, if one adopts the notion of a
system as a basis for consideration of the project
management, it could be viewed as a set of elements.
These elements are interrelated in such complex ways
that actions taking place in any of the elements may
produce a change of any other element within the
project management system. This means that a systems
framework implies considering a myriad of inter-
Vol7 No 3 August 1989 0263-7863/89/0301734)7 $03.00 @ 1989 Butterworth & Co (Publishers) Ltd 173
Figure 1. Systems model of project management
relationships and their feedback loops*, thus precluding
the use of the aforementioned partial approach.
Second, a comprehensive view of project manage-
ment requires that the project manager extend his or
her attention beyond those factors that are immediately
controllable within the bounds of the environment. The
reason for taking such a view is that the boundaries and
structure of project management affect the achieve-
ment of its objectives. In addition, investigation of the
project management boundaries can pinpoint sources
of constraints in its actions. Therefore, project manage-
ment should include all elements which vitally affect
project results. A systems view - one defining project
management as a subsystem of a larger system - is a
necessity in performing a comprehensive managing of
the project. However, now the question arises of how
to comprise the elements of the environment?
CONTROLLING THE ENVIRONMENTAL
ELEMENTS
Inputs and outputs are results of an exchange of
materials, energy and information between the PMS
and other systems. As mentioned previously, the PMS
is only a subsystem of a larger system. That larger
system is a set of elements. Figure 1 depicts in a
simplified way some of the elements. These are not
included in the PMS form of the environment, and are
called project stakeholders (e.g. other organizational
projects and functional departments, external stake-
holders, etc.).
Inputs into project management include scope defi-
nition, WBS, manpower, equipment, money, resources
cost, performance criteria, etc., while the PMS outputs
comprise scope definition achieved, schedules, resource
allocations, reports, project acceptance, etc.
It is the project management process that transforms
inputs into outputs. This process encompasses the
* The feedback loop is a closed path of various flows in which inter-
related elements are arranged in sequence5.
management of scope, time, cost, quality, human re-
sources, communications and contract. In addition
to this, there is a reverse interdependency between
inputs and outputs. Accordingly, the outputs are
processed into new inputs by the project stakeholders
from the environment. An engineering department
managers decision to assign inexperienced design
engineers to the project team may serve as an example.
Since, in this way, these stakeholders affect the
achievement of the project objectives, the PMS must
endeavour to control them3. This implies an extension
of the PMS boundaries by including some of the project
stakeholders into the PMS structure so that the PMS
work results depend, as much as possible, on the
quality of the PMS actions and, as little as possible, on
the stakeholders not controlled by the PMS. In so
doing, the extent to which the PMS controls transform-
ation of its outputs into new inputs will increase. To
attain this, in the case of the abovementioned engineer-
ing department manager, a project manager should
make him or her a formal team member, since
involvement enhances commitment, and getting him
or her involved is the best way to obtain his/her
wholehearted support. If this does not work, the
effective project manager should make very large
waves in an effort to get exactly the right design
engineers (as well as other people) for the project
team6. Controlling the project stakeholders from the
environment is a part of what some authors call the
project stakeholders management.
The project manager should deal with controlling the
environmental project stakeholders in developing a
project strategy.
In addition to the inputs and the outputs, this paper
considers the elements that make up the PMS.
ELEMENTS OF THE PROJECT
MANAGEMENT SYSTEM
The PMS is made up of seven elements defined below4.
Organizational mission. Includes overall purpose of
the organization as well as organizational objectives,
goals and strategies to support the purpose.
Project objectives. The desired future positions of
the project regarding scope, cost, schedule, and
technical quality.
Project goals. Specific targets to be met within time-
based restrictions in pursuit of the project objectives.
Project strategy. Set of rules on how to use project
resources to attain the project goals and objectives.
Managing unit. Undertakes the task and functions of
managing the PMS.
l Project style. Project manager and project team
members manners, knowledge, skills, and attitudes4.
l Project resources. Quality and quantity of human and
nonhuman factors needed to complete the project.
STRUCTURE OF THE PROJECT
MANAGEMENT SYSTEM
The PMS structure consisting of feedback loops formed
by interdependencies between the PMS elements is
shown in Figure 2.
There are two types of interdependencies: direct and
indirect. Direct interdependency between two elements
174 Project Management
means that one element directly affects another ele-
ment. On the other hand, indirect interdependency
between two elements means that one element affects
another but through a third element.
Interdependencies between individual elements based
upon the nature of the project management process
build natural feedback loops consisting of a definite
number of PMS elements. For instance, the feed-
back loop marked C in Figure 2 consists of project
goals, project strategy and managing unit. How does a
feedback loop function?
Influence exerted on any element in a feedback loop,
will change its level of state that affects project scope,
time, cost and technical quality. This will, due to direct
interdependency between the elements in the loop,
affect the level of state of all other elements in the
feedback loop and project scope, time, cost and
technical quality. For instance, a change of the project
goals (for any reason) will change the project strategy
for accomplishing the goals. Therefore, changed pro-
ject strategy will make the managing unit take new
decisions, the results of which in terms of scope, cost,
time and technical quality will affect accomplishment of
the goals. As in this example, it is always a managerial
action, either direct or indirect, that brings about
changes in the level of state of the elements which, in
turn, has an impact on project scope, time, cost and
technical quality. The action is based upon a deviation
of actual state from the desired level of the elements
state. Essentially, influence exerted on one or several
elements of the feedback loop will, due to existence of
the cause-and-effect relationship in the PMS, be con-
veyed to all the PMS elements (this is why the actions,
taking place in any element, can lead to a change in any
other PMS element) and generate growth of the level of
state of the entire loop. This growth will have an impact
on the project scope, cost, time and technical quality.
Key features of a feedback loop are its elements,
growth rate* and time lag. Influence exerted on an
element is transferred through a feedback loop in a
definite period of time. For instance, the project
managers order to reset any project goal will call for
some time lag to be carried out. This time lag
determines how fast the influence exerted on an
element will bring about growth (change) of other
elements and the entire feedback loop. In addition, this
indicates that the PMS results depend on growth rates
which have an impact on project scope, time, cost and
technical quality, and time lag. Therefore, a major task of
the PMS is just to control the growth rates and time lags.
An element may appear in several feedback loops.
For example, as shown in Figure 2, the managing unit is
an element of feedback loops marked B, C and D. Let
us consider two coupled feedback loops (e.g. those
designated by C and D in Figure 2). These two loops
may have different growth rates and time lag. Then, the
feedback loop which has a lower growth rate in the
joint element(s) limits the growth rate of the other
feedback loop.
For instance, if the project manager handles matrix
project organization as if it were a military organization,
* Each change of the input brings about a change in the output. The
growth generated in this way depicts the relation between the input
and the output. The growth is defined as the ratio of the output value
over the input value.
Vol7 No 3 August 1989
the feedback loop D may, through the joint element
(managing unit) limit the growth of the feedback loop
C, i.e. accomplishment of the project goals. In that
way, the feedback loop with the lower growth rate will
control two feedback loops which are coupled. In other
words, the feedback loop C shall be the predominant
one.
The PMS structure is built by coupling all feedback
loops. Therefore, the PMS results in terms of project
scope, time, cost, and technical quality are dependent
on the structure, i.e. upon the predominant feedback
loop. This predominant feedback loop need not always
be the same one. Which feedback loop will be the
predominant one will depend on the relations estab-
lished in the PMS during the time period which is under
consideration. It is not possible to determine in
advance which feedback loop will be the predominant
one in the PMS. Therefore, it is of crucial importance
that the PMS have such feedback loop(s) built-in.
The aforesaid shows that change of the level of state
of any of the PMS elements can be controlled twofold,
i.e. either by forming coupled natural feedback loops
or by building a control loop inside that element. Such
an example is the control loop of developing and
implementing the project strategy. This loop may
control growth rates of all natural feedback loop(s)
elements in which the element is, same as other
elements, coupled with the natural feedback loop(s).
The PMS structure is formed by all feedback loops
coupled. The structure varies in different projects. A
structure which is common for all project management
systems is shown in Figure 2 and discussed below. The
structure is built by coupled natural feedback loops
designated by A (the project management feedback
loop), B (the managing unit feedback loop), C (the
project goals feedback loop), and D (the project
resources feedback loop).
PROJECT MANAGEMENT FEEDBACK
LOOP (PMFL)
When considering the PMS, one should take into
account its relationship with the environment. The
\/
Figure 2. Model of a project management
structure
system
175
PMS quality of work also depends on the degree to
which it can control environmental project stakeholders
that can crucially affect its results. Assuming that these
project stakeholders affect the PMS through organ-
izational mission, the mission is considered an element
of the PMS.
By defining the project objectives in terms of scope,
time, cost and technical quality, the organization
determines the purpose of the PMS. In contrast, the
PMS affects the achievements of the organizational
mission to the extent of accomplishing these project
objectives. Thus, the feedback loop marked A in
Figure 2 is established.
Achievement of the organizational mission is partly
dependent on the PMS and partly on the environmental
project stakeholders. If project management delivers
results which lead to permanent enhancing of project
objectives, it also enhances the organizational missions
degree of accomplishment. Then, permanent growth in
feedback loop A is realized.
Through the organizational mission, the PMFL is
coupled with feedback loops which environmental
project stakeholders (e.g. other organizational projects)
build with the organizational mission. This means the
effect of these feedback loops may, through the
organizational mission, control growth, and project
scope, cost, time and technical quality in the PMFL and
entire PMS. An example is when some other organ-
izational project is given priority in using scarce
organizational resources.
Growth rate in the PMFL may also be controlled by
the managing unit feedback loop (MUFL) designated
by B in Figure 2. Then, the total growth rate is equal to
growth rate in MUFL. This will happen when the
degree of accomplishment of the project objectives
decreases.
Time lag of the B feedback loop is less than that of
the A feedback loop. Soon after the moment when the
degree of achievement of the project objectives is
known, the PMS contribution to the organizational
mission should be known. Whether this will happen or
not, depends on how top management supervises the
PMS.
MANAGING UNIT FEEDBACK LOOP (MUFL)
A vital problem concerning the PMS is how to control
the MUFL in order not to limit growth in the PMFL.
The managing unit is an element present in all
feedback loops of the PMS except in the A feedback
loop. Growth rates and time lag of these feedback
loops differ, and it is the task of the managing unit to
bring them closer. The managing unit inputs include
the project strategy and resources. Among other
things, the strategy defines major policies as to the
project management process, information system,
organizational system and cultural ambience which are
constructional blocks of the managing unit. Thus,
development and implementation of the project strategy
directly affect quality of the managing unit work, i.e.
scope, time, cost and quality of the project. Human
resources determine the effectiveness of the managing
unit and the whole PMS, i.e. the project scope, time,
cost, and technical quality. Their importance is perhaps
best described by saying that the system consists of
three factors - people, people and people7. Outputs of
the managing unit are management actions which
determine the achievement of the project objectives,
goals, strategy, style and resources. From the viewpoint
of the PMS dynamics, the managing unit is to coordinate
the requirements and capabilities of the project man-
agement system so that the growth rate in any one of
the PMS feedback loops cannot become a limitation
factor for the whole system. Otherwise, this unit can
produce various limitation factors such as:
0 cost overrun,
l schedule slippage,
l technical quality shortcomings,
l lack of change control,
for some work packages within the project WBS.
These factors affect the PMS through the C feedback
loop coupled with the B feedback loop, which is itself
coupled with the A feedback loop. Then, a drop in
growth rate in the C feedback loop (degree of accom-
plishment of the project goals decreases due to the
above limitation factors concerning work packages)
limits growth rate in the B feedback loop, i.e. it reduces
the achievement of the project objectives. Limitation
of growth in the B feedback loop is transferred to the A
feedback loop which means that the PMS contribution
to implementing the organization mission decreases.
PROJECT GOALS FEEDBACK LOOP (PGFL)
This feedback loop, designated by C in Figure 2, is
formed by the following elements: the project goals,
strategy and managing unit. It is coupled with the B and
D feedback loops. As mentioned, the growth rate
decrease in the C feedback loop limits growth in the B
feedback loop. This means that the degree of accomp-
lishment of the project goals determines the degree of
accomplishment of the project objectives. In practical
parlance, good control of work packages within the
project WBS leads to good control of the entire
project. Ideally, the time lag of the C and B feedback
loops can be equal. This can be reached by using a
performance measurement system which simultaneously
measures the achievement of the project goals and
objectives. In real projects, the time lag of the C
feedback loop is more or less shorter than that of the B
feedback loop. This is a result of those performance
measurement systems which measure achievement of
the project goals more frequently than achievement of
the project objectives. In such cases, the difference of
the time lag is a time period in which the actual
achievement of the project objectives is unknown.
PROJECT RESOURCES FEEDBACK
LOOP (PRFL)
The PRFL, which is designated by D in Figure 2,
consists of the managing unit, style and resources. The
managing unit develops the style which affects the
project resources efficiency, and this efficiency deter-
mines the performance of the managing unit. This
implies that the influence of the managing unit upon
the style, the style upon the resources, and the
176
Project Management
resources upon the managing unit also have an impact
on the project scope, time, cost, and technical quality.
The D feedback loop is coupled with the C and B
feedback loops. Drop of growth in the PRFL limits
growth in the C and B feedback loops through joint
elements - the managing unit. In addition, through the
B feedback loop it also limits growth of the A feedback
loop. In other words, a drop in the level of state of the
style and resources efficiency (D feedback loop) brings
about reduction of the accomplishment of the project
goals (C feedback loop) and objectives (B feedback
loop). In this way, the D feedback loop can control all
feedback loops of the PMS, i.e. the project results. The
time lag of the D feedback loop is usually longer than
those of the C and B feedback loops. It largely depends
on the project style, because the style development can
be time-consuming. This shows that the effectiveness of
the managing unit regarding its ability to develop the
desired style as soon as possible determines the time lag
of the D feedback loop. Project managers often do not
pay due attention to this feedback loop. Therefore, a
project style can be developed which is not in con-
sonance with requirements of the project abounding
with horizontal and diagonal communications. Then, as
mentioned, the style can control the project results.
HOW TO IMPLEMENT A PROJECT
MANAGEMENT SYSTEM
The probability of the PMS being successfully im-
plemented can be greatly improved by an overall
project approach to this implementation, as summarized
in Figure 3. The approach provides a tool to analyse the
project and define actions for implementing the PMS.
RECOGNIZE THE PAOJECT
WANAGEUEtlT SYSTE,,
ProJect features
PrOJ eCt obJectIves
Project stakeholders
BUILD THE PROJECT TEA"
PLAN FOR APPROACHING
THE PROJECT ,4AYAGEHENT
Determine options
Choose the r-lght
UAKE THE PROJECT AllAGE
MENT SYSTEM A TOP ISSUE
SuFportle project
Blt.XtlO
System comm,tment
WAKE THE PROJECT ANAGE
MENT SYSTEM HAPPEN
Figure 3. Project approach for implementation of
project management system
Vol7 No 3 August 1989
First, significant features of a project are considered
which determine the project management opportunities.
Next, four major actions to implement the PMS are
analysed.
Recognize the PMS context. Each project presents a
differing combination of project features, objectives
and stakeholders. A project manager interested in
implementing a PMS on specific projects first needs
to identify significant features such as major type and
size of facility (e.g. industrial) and type of owner
(e.g. private, frequent buyer of the facility, large
staff for project involvement). Clear project objec-
tives in terms of scope, time, cost and technical
quality also form an important part of a PMS. To
manage a PMS effectively, a project manager should
seek to control major environmental project stake-
holders.
Project features, objectives and stakeholders inter-
act to establish the context of the PMS. They can
work separately or in combination to create special
challenges and opportunities for the PMS. As an
example, consider a project which is financed on a
build-operate-transfer (BOT) basis, has a tight con-
struction schedule, and faces strong resistance in the
form of local community and ecology movements.
The interaction of these requirements should strongly
encourage meticulous planning and other efforts to
implement a PMS.
Included in such planning and effort are planning
for approach to the PMS and building the project
team.
Plan for approaching the PMS. Planning of the PMS
is a critical action in the PMS implementation. The
relationship between the project team and stake-
holders, as well as between members of the project
team, determines the options for implementing the
PMS. Certainly, it is possible to introduce the PMS
under any one of the options. However, the unique
and demanding elements of the PMS context should
be considered in choosing the right option. For
example, if the project objectives call for an unusually
rigorous scope (change) control, designing a man-
aging unit of the PMS to suit this need may be an
important consideration. Because planning for the
PMS approach affects all subsequent project activities,
it merits analysis, careful consideration, and an
appropriate degree of formalization. It should, there-
fore, be a part of developing the project strategy.
Build the project team. Team building activities play a
major role in obtaining consensus on introducing the
PMS. However, it is the PMS content that impacts
the necessary scope of planned team building activi-
ties. In particular, project features, objectives and
stakeholders, and chosen approach to the PMS
indicate size and structure of a team required. They
also indicate care to be taken of the team members
understanding roles and integrating diverse project
activities on a systems basis. In addition to this, a
project manager should take several actions to foster
a systems approach on a project.
These actions are a part of the usual teambuilding
activities. Such an action is keeping all project
disciplines involved and informed. Another one is
making sure that key individuals on the project team
have a systems view of the project and project
177
management. The purpose of these teambuilding
actions is to create a project situation supportive of
running the PMS. The teambuilding sets up a
rapport which will enhance commitment to the PMS.
Make the PMS a top issue. To reinforce awareness of
the PMS, a project manager has another major role.
This is the role of creating a supportive project
situation, providing a PMS commitment, and using
the PMS to meet project objectives.
The care of a project management system begins
with senior management commitments. Therefore,
project authority and responsibility pattern, and
communication should support such a systems
approach. Thus, the basis for creating a supportive
project situation is set. However, a supportive
project situation also means fostering relevant in-
novation and risk. In other words, a project situation
supporting the PMS includes a tolerance of mistakes
in implementing the PMS.
Building the PMS commitment is likely to be one
of the most critical steps in introducing the PMS. It
must pervade all members of the project team. A
project manager should advocate the appropriateness
of this concept to the project team and foster it by
insisting on a systems view input to major decision-
making. In so doing, he or she might expect that the
PMS would become a top project issue.
Make the PMS happen. If an effective PMS is to be
created early in the project lifecycle, a project
manager must place high priority on initiating and
implementing the PMS building process. This means
that the effective PMS does not just happen, but one
has to make it happen. For this purpose, a project
manager should first set the organization. After-
wards, he or she should approach implementing the
PMS, which involves documentation or formalization,
systems integration, systems decision taking, moni-
toring and taking corrective actions.
An appropriate degree of documenting the PMS is
beneficial in facilitating its work. There are several
steps to be taken in this documentation. A project
plan should include the basis of the PMS philosophy,
its elements, structures and interaction of the ele-
ments. On this basis, procedures should be developed
to describe the structure of the elements in detail,
identify major interfaces in the PMS, provide system
integration, and issue the PMS status reports. Con-
ducting systems decision-making in consonance with
the project plan and procedures is another important
step in making the PMS happen. Results of the
decisions should be monitored, problem areas pin-
pointed, and corrective actions taken to resolve
conflicts, internal or between elements of the PMS.
PROBLEMS OF THE PROJECT
MANAGEMENT SYSTEM
This description of the PMS points out some dis-
advantages and problems which need not be considered
as an obstacle for implementing the PMS, but as stimuli
for improving the PMS. Major disadvantages of the
PMS are as follows:
l I nfluence of the PMS context. The PMS context was
defined to include project features, objectives, and
stakeholders. However, there is not enough knowl-
edge of the relative influence of various elements on
the PMS opportunities and implementation. As an
example, a precise answer is lacking to the question:
Which elements (e.g. elements of project stake-
holders) are most important in creating opportunities
for a successful PMS? The answer should facilitate
structuring a more effective PMS.
Narrative relationships. A model of the PMS shows
what elements are important for achieving project
objectivies and describes their interrelationship in a
narrative form. However, it does not mathematically
capture the essence of the PMS. A project manager
could use such a mathematical model to assess
effectiveness of the PMS even before he or she gets it
started. Certainly, he or she could also use it in the
course of the project to assess likely project outcomes
and initiate any corrective action necessary.
Experience transfer. Can the PMS capture and
transfer experience from projects? It can, but to a
limited extent, by learning appropriate lessons from
past projects and applying them to new ones.
However, this is not enough. For better organization
and dissemination of good project experiences, the
PMS should be further enhanced. A way for this to
happen could be the aforementioned mathematical
model of the PMS. Such a model would be valuable
in developing tools (e.g. expert systems) for effective
experience transfer.
Measuring efficiency. Pragmatic senior management
could call for measures of returns on investments in
the PMS. The current problem of the PMS is that it
generates costs which are not readily quantifiable,
and provides intangible benefits. Further improve-
ments of the PMS should produce appropriate
measuring of the benefits and the cost.
SUMMARY
This paper adopts the systems approach to strategic
project management in terms of the project manage-
ment system. This system is designed to fill two
principal needs. The first need is for a framework
controlling the interdependencies between the elements
of the project management task. These elements are
interrelated in such complex ways that action taking
place in any element can bring about changes in any
other element as well as in the state of the overall
project management system. The second need is for a
comprehensive view of project management that ex-
tends its scope beyond immediately controllable ele-
ments to embrace elements of the environment called
environmental project stakeholders. The rationale for
taking such a view is that these stakeholders facilitate
the accomplishing of the project objectives.
It is worth noting that the project scope, time, cost
and technical quality are considered throughout inter-
dependencies between the elements, the feedback
loops, and the structure of the project management
system; in short, throughout the entire system. In
reality, the project scope, time, cost and technical
quality are a background to the concept of this system.
To implement the project management system,
action must be taken. It is the project manager who
must make this happen. This involves recognizing the
system context, planning how to best approach the
system, building a team approach, making the system a
178 Project Management
top project issue, and executing the system. However,
the system will only work if the entire organization is
thoroughly sold on the systems concept. This means
that the system will result in improved project pro-
ductivity if senior management gives its unwavering
support and if functional management and the project
personnel accept the system.
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Dragan Milo~evi~is a member of
the project management staff for
the Yugoslavian company, FDSP,
where he is responsibie for project
execution through engineering,
procurement and construction.
Prior to joining FDSP, he worked
for four years as a plant engineer.
/ He has had IO years experience in a
variety of engineering construction
activities in Yugoslavia and the
1 Middle East. He holds a BSc in
1 Chemical Engineering and an
MBA and PhD in the f?eeld of
project management.
Vol7 No 3 August 1989 179