Engineering design projects are implemented to accomplish a variety of goals in organizations. As the complexity of each project grows, the risk and uncertainty accompanying each project increases as well. As a result project managers must identify potential risks to projects and create plans to avoid realized risks leading to project failures. A risk indicator is a set of circumstances that are indicative of the strong likelihood of a risk event occurring during a project. This research was created to explore the relationship between risk indicators and various project characteristics, including project classification (the type of business goals the project was created to fill) and project type (whether the project was a first or a second attempt to solve an engineering design problem). The results of this research are applicable to engineering managers who are responsible for the successful completion of design projects.
The research questions addressed in this study were: 1) Is there a difference in the frequency of occurrence between the 36 risk indicator codes? 2) If there is a difference, in the risk indicator frequencies, which risk indicator codes occur most often? 3) Which risk indicator codes are the most prevalent in association with certain project characteristics? These research questions were explored with the intent of discovering the risk indicators that are most important for project managers to consider in creating risk management plans based upon project characteristics.
The goal of this research is to contribute to the project management body of knowledge and to provide insight into the nature of the relationship between various project characteristics and risk indicators. To achieve this objective, eleven medium-complexity engineering design projects were selected for study. Two interview protocols were developed to elicit information about critical events occurring during the life cycles of these engineering design projects. Employees from a variety of job functions, who were directly involved in the selected projects, were interviewed. Multiple researchers coded transcripts created from the interviews. Researchers used a code scheme, developed from the literature on project success factors. The text from interview transcripts was analyzed to identify similarities and differences in the frequencies of different risk indicator codes for different project characteristics. Frequently occurring risk indicators were noted and implications for project managers were identified. The projects were divided into groups with similar project characteristics. Differences in the rates of occurrence of risk indicators were used to identify risk indicators, based on these specific project characteristics. Similarities and differences in the rates of occurrence of risk indicators in the different groups of projects were analyzed for emergent themes.
The results provided strong evidence for significant differences in the frequency of occurrence for risk indicators based on project characteristics. The most frequently occurring risk indicators differed for three project classifications (strategic, compliance, and operational). The most frequently occurring risk indicators also differed for original and rework projects. Nonparametric statistical tests were also applied to the data to test between significant differences across all risk indicators, using the same project characteristics.
Communication challenges were prevalent for all types of projects. Research has shown that inadequate communication can cause time and cost overruns on projects and can lead to rework projects. The types of communication challenges that were the most frequent differed between project classifications. For compliance projects, the most predominant communication risk was between the organization and suppliers. Communication risks between the organization and the customers occurred most often in operational projects. Finally in strategic projects, the most frequently occurring risks to communication occurred internally, between different business and engineering groups within the organization.
Another important theme was the need for standard procedures to provide adequate documentation to the different groups involved in projects. Risks associated with a lack of information provided to the different business and engineering groups working together on projects, were common among all projects. Many interviewees suggested the need for standard procedures to provide all necessary information to all groups assigned to each project, in order to facilitate the coordination of the work.
A lack of up front planning was detrimental for both original and rework projects. A lack of up front planning in original projects, at times, resulted in project failure, thereby creating the need for a rework project. In rework projects, planning at the beginning of a project was sometimes rushed due to the urgency of the project, thereby causing additional risks to the success of rework projects later on in the project life cycle.
Project managers can use the findings from this research to create more effective risk management plans tailored to the characteristics of a particular project. Knowledge of the risk indicators with the highest frequency of occurrence in each type of project can direct managers to the most effective use of risk management resources. The results of this research also add to the project management body of knowledge and provide a deeper understanding of the relationship between project characteristics and specific risk factors. The results also provide evidence that the project classification and project type are important determinants of the types of risks that will likely be faced in the course of a project. The approach used for this study can be applied to other industries and other types of projects to further extend the understanding of the relationship between project characteristics and risks. While there was evidence that some risks are typical to all design projects, a larger study is needed to generalize these findings beyond design projects and beyond the engineering organization studied.