Art of mega-project management could create trillions in benefits

13 November 2017 Consultancy.uk

Art, not science, may be key to the management of mega and ultra-projects. These projects often require a range of skills that extend beyond methodology, systems and process, demanding various capabilities of leaders: from building trust to effective collaboration, leadership skills and ownership. According to a new report, the complex art of mega-project management could yield huge economic benefits, if mastered.

Mega projects have become a key part of the wider project ecosystem, as increasingly complex demands, increased capital concentration and project management sophistication allow for bigger and more expensive infrastructure projects. The size and complexity of projects has continued to rise, with a relatively new class of project, the ultra-project, becoming increasingly common.

New research from McKinsey & Company has explored the current ultra-project environment, as well as the art and science of getting the increasingly complex projects on the ground, in time and on budget.

The number of mega-projects remains relatively robust, with the firm’s analysis pointing to around 3,660 new mega-projects in the pipeline, averaging around $3.8 billion, for a total investment profile of $14 trillion.

Global project spend

Total spend is projected to rise by around 3.3% per annum between 2016 and 2025 topping $15 trillion, on the back of investor appetite for relatively stable asset classes. In 2016 the industry stood at around $10.5 trillion, or 14% of global GDP. Mega projects as a share of total projects has grown steadily in recent years, climbing to 42% of all such projects, up from 4% ten years ago.

Art not science

The rise in mega-projects as a percentage of total construction spending reflects considerable increases in investment to the segment. Although the trend has been skewed by results from 2016, which saw a total increase of around 100% of investment into mega-projects, from $2.2 trillion to $4.4 trillion. Across the period as a whole, 2005 until 2016, investment grew by 28% per annum on average, while total global spending grew by 3% per annum.

Mega-project overruns

According to the study of 500 US-based mega-projects, they tend to face relatively burdensome overruns. Oil & Gas projects saw the most significant cost overruns, with downstream projects clocking an average of 53% above budget, followed closely by mining projects, also at 53%. Real estate has relatively the lowest cost overrun, at 24%. In total, just 5% of projects came in on time and on budget.

Real estate, meanwhile, sees the most significant schedule overruns, at 86% of additional time, significantly above the average of 53%. Transport infrastructure and ‘other infrastructure’ mega-projects too were well above average in schedule overrun, at 63% apiece. The relative effect of the overruns represents around an additional $5 trillion on the projects’ total costs.

The art of project leadership

Given the relative value of the losses, understanding the dynamics that give rise to the overruns, and how they can be mitigated or checked, represents an area of considerable value for project developers and the capital that funds the projects.

Some areas have seen considerable research in recent years – largely what the firm terms the ‘science’ of project management. A large variety of analysis has been carried out to identify best-practices for various aspects of the wider mega-project management lifecycle, including for methodology, systems and processes. These segments have, as such, been relatively well honed for efficiencies.

Lack of art

McKinsey’s research also sought to look further, at what are often deemed ‘soft’ aspects of project management, and, as such, have received less rigorous attention – in part due to their characteristic ‘artistic’ form. The art of project management is often developed through a less formal process of industry experience, trial and error, as well as capable judgement and wider talent.

Art of language

Interestingly, when it came to the difference in the use of art as a term to describe mega-project management, considerable disparities were noted between the literature and interviews. In the interviews, for instance, art made up 45% of the combined total mentions of arts and science, compared to a difference of 1% to 99% in the literature.

The contrast was made considerably starker by comparing the number of words actually used across the two formats. The literature had a drastically less diverse vocabulary on the matter, and was largely missing research into ‘soft’ factors, such as leadership, collaboration, trust, mind-set, ownership and coaching. Most likely, this is because they are not simple enough to use in a theoretical environment without further explanation that an interview allows for, while requiring a broad background in the project side itself.

The consulting firm concluded, “We believe a critical element for successful large project delivery has so far been neglected: specifically the “soft” issues of project delivery such as leadership, organizational culture, mind-sets, attitudes, and behaviors of project owners, leaders, and teams. In our report, we refer to this blend of soft organizational topics as “the art of project leadership,” as opposed to standards, systems, processes, and technical subject-matter expertise, which we refer to collectively as project management “science.” A better understanding of how to get this art right will materially improve delivery of large capital projects—this is especially true in the context of the largest and most complex capital projects.”

News