Theoretical background

2. Theoretical background

2.1 Culture

In international projects, it is vital to understand the major stakeholders as well as possible, including their social identity. The stakeholders’ behavior is embedded in a context, and an important part of it is their national culture. Hofstede (1997: 5 cited in Köster 2010: 78) defines culture as „the collective programming of the mind which can distinguish the members of one group or category of people from another”.  The „collective programming” refers to deeply rooted values, attitudes and behaviors. According to Hofstede (1997), culture is learned usually when people are young and easy to educate. The culture remains unconscious. In international projects, a person needs to be conscious of his culture and needs to be able to view other cultures as different instead of perceiving it better or worse. (Köster 2010: 78-79.) National culture is not the only force shaping individual behavior, attitudes and norms. The culture of the particular organization that the individual works for can also affect the way of thinking and behavior of a person. Organizational culture is defined as „ a pattern of shared basic assumptions” (Schein 1992: 12 cited in Köster 2010: 51). In other words, it is the way things are done in an organization. Organizational culture is not as deeply embedded in an individual as national culture, but it has a large effect on people working in it. The third type of culture that should be mentioned is the professional culture. This includes certain methodology, standards and ethics prevalent in a given profession, for example medical doctors, lawyers, software developers etc. It can also be a feature of particular organizational functions such as Sales and Marketing or Research and Development departments and people working in those. Functional cultures in firms can be referred to as sub-cultures and these can be part of national cultures. Moreover, large organizations usually have sub-cultures in their subsidiaries because the national cultures can have an impact on organizational cultures. For instance, the organizational culture of Lufthansa will differ in the headquarter in Germany and its Brazilian subsidiary. (Köster 2010: 79-80.)

All these features affect the management of international projects and make it even more complex. These cultural issues arise in all aspects and phases of project management for example in time, cost, quality and risk management among others. Thus, it is crucial in international projects to take these cultural issues into consideration and manage projects accordingly.

2.2 Time management

International projects are more complex than national projects, therefore more time is needed for planning, communicating and coordinating them than in the case of local projects. (Köster, 2010.) This indicates that the critical path of projects will be assumingly longer than in case of domestic projects. In the following, critical issues that may cause longer critical path are introduced.

Extra time is needed first of all for local adaptations, for instance gaining information about the different national legal legislations, requirements and regulations, getting knowledge about and acting according to the local cultures and adapting to the local institutional system and bureaucracy. These kind of adaptations need extra time in case of an international project. (Köster 2010; Project Management Institute 2008.) Moreover, because of the cultural differences, the length and frequency of meetings and appointment sessions can as well differ in countries. Furthermore, extra time might be needed for team building activities due to the complexity of projects and the possible diversity of teams. (Köster 2010.) For the same reason, more time is needed for the adaptation of collaborative tools such as the technical details of meetings and discussions. It is important to note that even though the high technical development might help to connect people from all around the world, it can be time-consuming and complicated to coordinate online meetings when the managers live in different time zones (Binder 2008). Another issue worth considering is the problem of different public and religious holidays and vacation times all over the world. While creating a schedule it has to be taken into consideration that people in different countries spend their holidays at very different times of the year. Moreover, not all countries have their dates according to the Gregorian calendar, thus international project managers cannot forget to think about the lunar calendar for instance while planning schedules for a project. (Köster 2010.)

2.3 Cost management

The cost estimating, cost budgeting and cost control processes are more complex in case of an international project as well. While working on those issues, special attention should be paid to currency conversation rates since those can fluctuate widely during the project implementation and by affecting the actual costs of particular local services and other activities, can affect the outcomes of the project itself. Great currency fluctuations can cause serious extra costs that can change the needed budget for delivering the project in time. (Köster 2010.)

Then, during the process of an international project the project managers have to think about the additional travelling expenses, because „an international project with geographically dispersed stakeholders means a lot of travel activities” in order to enable face-to-face meetings when needed. Additionally, the more sites are involved in a project, the bigger the costs might get because of the above mentioned additional costs. Some sites might require a bigger budget than others, depending on the local situation, economical differences, prices, wage levels etc. (Madhavan 1993.) The costs of local permits, registrations and any other documents add to the required budget as well. Thus, the project manager has to gain knowledge about the local bureaucracy level and system, and estimate the costs of the project according to the local needs. Information about local costs can be found for instance on the internet (Doing Business 2011).

Naturally, the above mentioned issues does not only make the cost estimation and budgeting processes more complicated in international projects, but the cost control planning and implementation as well. Since cost management becomes more complex in an international context, the monitoring and control of that becomes complicated as well. The project manager has to consider more determinants and has to deal with more sudden and wide-ranging changes in needed monetary resources. And at the same time, it is harder and more-time consuming to react which can lead to even bigger changes in costs.

2.4 Managing quality

Quality as a concept is ambiguous and consists of several parts. Therefore, it is technically impossible to give an all-encompassing definition of it.  Several representations of quality, however, define good quality as being fit for purpose, meeting specifications or fulfilling customer expectation (e.g. Karhu 1995, Turner 1999). Furthermore, contemporary definitions of quality are generally centered upon a prevention approach to avoiding defects (Cleland & Gareis 2006).  Part of the difficulty of defining quality is due to the fact that what we understand by quality, greatly depends on who we ask. Even if certificates such as ISO standards composed by international organization for standardizations unify the differing perceptions people have of quality, quality expectations might vary considerably among different countries. Köster (2010) gives an example: When purchasing a TV, people in some less developed countries might be happy with any defect-free product, whereas in other, more “advanced” economies, the expectations might also contain additional services such as maintenance. In other words, different countries might define the levels of quality differently and hence, place the same products into quality categories of different label. Moreover, different interest groups of a project are likely to put stress in respect to quality on different matters. (Karhu 1995, Turner, 1999; Hokkanen & Strömberg 2006.)

The elements determining quality can be examined via several different models. According to Turner (1999), the quality of the project takes shape through fife elements: quality of product itself, quality of the management process, quality assurance, quality control, and attitudes. In international projects the second, third and fourth element might be seen as critical points. Quality of management processes deals with developing general guidelines of the project procedures. Having people with different cultural backgrounds, values and learned practices it might be difficult to reach consensus on these. The third and the fourth elements that deal with the means of managing and monitoring quality might emerge as challenges especially in international projects conducted in several physical locations. In this kind of setting, continuous monitoring of processes is difficult and thus, so might be preventing possible mistakes and correcting them right after the moment of occurrence. To centralize the control and to ensure quality aspect is sufficiently kept in mind throughout the project, some projects choose to establish a specific quality organization (Karhu 1995).

Cleland and Gareis (2006) state that along with detailed planning, qualification of participants is the key issue in the success of international projects. This goes also for external partner organizations. In case an international project chooses to use vendor or other partner organizations located in different countries, it is therefore vital to first assure oneself that the capabilities and quality levels of the potential partners-to-be are in accordance with the aims of the leading organization. Several specific contracts should be signed and even a distinct quality program might be a good idea. In this way, it can be ensured that co-operation with these partners is suitable, will produce desirable outcomes and will help the project team bring value to its customers. (Cleland & Gareis 2006)

2.5 Managing risks

Risks need to be well managed especially in international projects because they are usually highly complex and involve huge investments. Possible risks can be for instance natural-, technical-, partner-, financial- or political events. In addition, laws and regulations make it even more complicated. A high degree of complexity also leads to high potential risks, which can be seen as financial losses. Risk management plays a huge role in managing international projects. There are two kinds of risks that can exist, risk that can be anticipated and risk that cannot be foreseen. The classic methodology of project management deals with the risks that can be anticipated. Those risks can be usually identified or modeled, but are not entirely known. The probability of risk to happen and its impact to the project can be calculated. (Köster, 2010:98)

However, because of their nature, international projects often face emergent risks. This is connected with uncertainty. High uncertainty means that future events cannot be foreseen, and they cannot be factored into the overall project planning. In international projects, such events could be a bankruptcy of a partner or a supplier, a radical drop in demand triggered by a distance cause, adversarial attitudes by local authorities after new officials have been appointed, or a coup d’état. Emergent risk might also emerge if stakeholders of international projects get a better understanding of their actual needs, or that the original needs of stakeholders have been misunderstood or misinterpreted, for example due to cross-cultural misunderstandings. In addition, one special risk in international projects is corruption. The success in international projects depends highly on having an effective approach in place to handle both types of risks.  (Köster, 2010:99)

In international projects there are most probably different meanings and attitudes towards risks by people from different backgrounds and cultures. Those differences can turn into project inherent risks and lead to unidentified external risks, the project manager needs to be aware of these cultural differences and include them in his or her project planning. There can be differences between people from different national cultures when considering equality versus hierarchy, embracing risk versus avoiding risk and individuals versus group orientated behavior. (Köster 2010:100)

Figure 3. Issues to consider in risk management in international projects. (Köster 2010.)

2.6 Communication

Intercultural communication is crucial in international projects. Different communication styles need to be adapted in low-context or high-context cultures. Since cultural dimensions have great impact on communication, it is very important to choose appropriate communication modes in international projects (Köster 2010). Because of the cross-boundary nature of international projects, there is diversity in natural and functional languages, which may have a big influence on international projects. Stakeholders and the project team should have the ability to communicate in a common language to a reasonable level. However, intelligence and competence should not be judged according to the language proficiency. Upgrading language skills and improving communication skills will solve the language diversity dilemma in the long term.

To have efficient and smooth communication, it is essential for the project management team to determine communication protocols and all project members to agree on basic communication guidelines. Meanwhile, it is necessary to understand the cultural connotations between different languages to ensure the accuracy of communication and minimize misunderstanding. Managing international projects requires effective use of modern communication technology for different communication modes. In international projects, communications are often done by email, long-distance phone call, teleconference, video conference and so on. Advanced technology will enhance the efficiency of the communication. However, different time zones and public holidays in different regions are factors need to be considered when in communication.

2.7 Cooperation

Establishing trust is one of the most difficult issues in cooperation when managing international projects. Trust must be built between the project manager, the project team and the customers. According to Köster (2010: 283), trust-building activities in international projects could be “overcoming prejudices, providing informal interaction opportunities, exploring similarities, bonding the international project team and proving context”.

Conflict management is another critical issue in the cooperation of complex international projects. Conflict is usually caused by “scarce resources, scheduling priorities and personal work styles” (Project Management Institute 2008: 239). Conflict resolution approaches in international projects need to be chosen depending on the national culture, the organizational culture and the individuals involved. It’s challenging to solve conflicts, however, successful conflict management would create greater work productivity and better working relationships.

2.8 People Management

2.8.1 The project manager

The international project manager plays an evolutionary role in international projects. The international project managers need to be transformational leaders, adapting different leadership styles in different circumstances. Since leadership is much more complicated and challenging when managing international projects, the project manager has to possess cross-cultural knowledge, global organizing and communicating skills, technical competence. Effective international project managers often have key characteristics such as “adaptability, authenticity, empathy, context- and cultural- sensitivity, courage, enthusiasm, initiative and innovativeness, personal stability, open-mindedness, patience and persistence, respect differences” (Köster 2010: 233).

2.8.2 Managing the international project team

Human Resource Management is the major managerial difficulty when managing international projects. A successful international project team should have strong commitment towards the project, high team spirit and effective communications. According to Thamhain and Nurick (1994: 19-20), professionally stimulating work environment, good program leadership, qualified personnel, technically and organizationally stable environment are four major considerations.

Building an effective team has always been crucial determinant of project success and a challenge to project leaders. Staffing the project team should be based on clear criteria and detailed job descriptions. Clarification and transparency can help avoid conflicts later in the project. It is important that key players possess proper language, communication and technical capabilities and even have some similar talents to the project manager. Team members must feel professionally comfortable by being properly introduced to the group about their roles, strengths. Trust and teamwork between project members are essential.

2.8.3 Stakeholders

“Identifying stakeholders and understanding their relative degree of influence on a project is critical” (Project Management Institute 2008: 24). It is crucial to manage the stakeholders’ expectations to increase the support and minimize the negative impact of them in international projects. Meeting their expectations could be so challenging because their interests and objects are considerably different. The quantity of the stakeholders in international projects is often higher compared with domestic ones, therefore sufficient communication is essential. It is truly important to keep the customers updated and build trust to avoid dissatisfaction.