Executive level capital project decision making: rational or rationale?
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2012
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Abstract
The Project Management Institute estimates the current annual global investment in all capital projects and infrastructure is $12 trillion US, yet we have very little information on how and who initiated these investment decisions. Further, despite the creation of numerous programs and processes aimed at improving project success, completing projects on time and within budget still seems to elude project participants. Interviews were conducted with 21 executives in the upstream oil and gas industry to provide insight into how high profile capital project decisions were made. While capital projects were thought to be initiated by managers and follow a stage-gate process or are an output of the strategic planning process, a key finding is that these major projects were independently and intuitively conceived either by the CEO alone or by the CEO and other executives or board members. Four decision-making paths were modelled based on the type of opportunity: planned, opportunistic, combined, and one followed a rational decision-making process. Formal risk processes were not used in the decision-making process, nor were other resources such as consultants. These findings have implications for existing project management practices, including aligning risk perspectives and how risk is managed, the role of a stage-gate model, how projects are conceived and moved into the planning phase, and how projects are communicated within the executive team and organization. The findings also raise questions regarding broader external implications. If major decisions are made independently by CEOs, how are companies ensuring our corporate leaders are trained to make good decisions, as major projects not only impact the organization but also affect the communities in which the company operates? This research provides some valuable insight into how executives perceive risk, equity markets, organizational readiness, project opportunities, and their perceived role in projects. This helps to prepare the expectations of project managers and others in organizations who are craving for more face time and insight into the strategic process as well as project planning and execution.
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Bibliography: p. 211-219
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Citation
Chenger, D. T. (2012). Executive level capital project decision making: rational or rationale? (Doctoral thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca. doi:10.11575/PRISM/4976