The effect of Strategy Management and PerformanceEvaluationonproject success
Juma Hassan Alzaabi1 (Corresponding author), Hassan Saleh Al-Dhaafri2
1Management and Science University, Malaysia
2 Dubai University, Dubai, UAE
Abstract
This study is to examine the mediating effect of Performance Evaluation(PE) between Strategy Management (SM) and Project Success (PS). It also attempts to establish an explanation of the mechanism to have the performance of the projects contained in the business strategy to achieve Project Success.Asurvey questionnaire was employed to examine the research modelwhere157 respondents were collectedout of 215 overall distributed questionnaires among Sharjah Construction Companies. Based on statistical reached results, the effect of SM on PE, and PS was confirmed. In addition, the effect of PE and on PS was also confirmed. Moreover, PE was found to have a full mediating effect in the relationship between SM and PS. Moreover, the study introduces a framework to identify the processes to be included within thePerformance Evaluations withinthe organizational strategy.
Keywords: Strategy Management (SM), Performance Evaluation(PE), Project Success (PS).
1.Introduction
The recent high competition in the business environment forces the Companies to enhance their strategy management and increase their performance for the sake of having a sustainable growth in the business and remain successful (Al-Dhaafri & Al-Swidi, 2014). To have a control on strategic success, companies have to adopted some modern approaches and philosophies such as Strategy Management, and BSC. Strategy Management (SM) can be one of those factors that can help Performance Evaluation management systems to achieve the aimed targets. It is a debate that SM became a foundation to any management practices in order to win and succeed in the competitive business environment (Kaplan & Norton, 2001; Niven, 2008; Porter, 1996).
Project Success as a desired outcome from any strategy and practice help Performance Evaluation management to control the scope and the proposed practices in an effective way and achieve the requiredlevel of success. Although, most of strategy management practices are moving, but there are is still a lack found in the role of employees in developing strategic Performance Evaluationitemsin-order to accomplish success in the business(Srivannaboon & Milosevic, 2006)
This study examined the relationship between SM, PEand PS. Due to the findings in the literature, this study investigated the explanation mechanism of PEas mediator variablebetween SM and PS.It employed a quantitative research method based on questionnaire survey to give a full picture and deep explanation to the relationships between the paper variables.
2.Related Literature review
In the literature of Strategy and Performance Evaluation studies, there are a great numerous researches that address Project Success. This is because of the importance of these two main related factors to have sustained growth in very high competitive environments. In the literature, Project Success is considered as a main strategic goal for the construction companies (Din, Abd-Hamid, & Bryde, 2011). Therefore, academics and practitioners in project managements devoted their efforts in how to align project with business strategy and gain the highest strategic success (Bryde D. J., 2003; Srivannaboon & Milosevic, 2006).
2.1.Business Strategy
The origin of strategy as a word is “Stratos” which is derived from Greek which means general. The use of the word was firstly found in the military in the 18th century where it was defined as a set of ideas implemented for the use of the military operations to achieve strategic goals(Bruce & Langdon, 2000; Gartner, 1999). Moreover, Strategy as a word was also used to name a person that leads an army(Matloff, 1996). However, now a day there are other adapted strategy definitions.
Due to the diversity found in the world of business, strategy has a various meanings.For instance, Michel Porter defines competitive strategy as being deferent by choosing deferent set of activities in order to deliver unique mix of value (Porter M. , 1980). WhileGrant and Jordan (2013) argued that strategy can be defined by the means of how objectives are achieved. However, others debated that strategy is about the future key issues of an organization(Johnson, Whittington, & Scholes, 2011).
Kaplan and Norton (1996)identified four specific barriers prevent implementing strategy rightly and they are; not actionable vision and strategy, goals are not linked to strategy, resource allocation is not linked to long term and short term, and finally the absence of strategic feedback. Moreover, strategy framing as Kaplan and Norton argued relies on four processes in order to have framework that enables converting short term activities into long term objectives and implement aligned strategy and they are; translating the vision into understood strategy, communicating and linking strategy to performance measurement, setting targets and Planning, and learning and feedback of performance that is relative to strategy. Therefore, Kaplan and Norton (1996) strategy alignment method is selected with adaption in our research in-order to align business strategy with project management because it includes a very clear process to implement strategy and accordingly leads to project success.
In conclusion, the model formed by Kaplan and Norton is widely accepted and used by the researchers, therefore it is used to align strategy in this research (Ahn, 2001; Al-Ashaab, et al., 2011; Bryde, 2003; Cooke-Davies, 2002; Din, et al., 2011; Hussin, et al., 2013).
2.2.Performance
Organizational performance is the measure of how well are the organizations is managed and how can it deliver the value to the stakeholders and customers(Moullin, 2007). According to Antony and Bhattacharyya (2010),organizational performance is the measurement and tools that is used to evaluate and assess the organization's success to form and handover the value to the internal and external customers of the organization(Antony & Bhattacharyya, 2010).
In addition, the main goal of performance measurement can be formed to check the progress towards the targeted goals(Kanji & Sá, 2007). Moreover, organizational performance needs a measurement framework and tools to monitor the organizational performance effectiveness (Al-Dhaafri & Al-Swidi, 2014; Antony & Bhattacharyya, 2010).
There are many studies suggest an implementation of the BSC as a tool to measure the organization’s performance (Ahmad, et al., 2000; Al-Ashaab, et al., 2011; Al-Dhaafri, et al., 2014; Bourne, et al., 2000; Bose, et al., 2007; Niven, 2008). The BSC provide guidance to managers to view the business from four perspectives; customer, internal, learning and innovation, and financial perspectives (Kaplan & Norton, 1992; Al-Dhaafri & Al-Swidi, 2014). To summarize, the BSC is a performance measurement modelthat focuses on vision and strategy (Karanseh & Al-Dahir, 2012).
2.3.Project Success
Project success is the main target of all organizations that use projects in their forms. In addition, Perceptions and relative importance of success dimensions vary because of individual personality, contract type, project type, and nationality(Mir & Pinnington, 2014). Success means different thing to different people(Shenhar, Dvir, Levy, & Maltz, 2001).
This research used with adaption a given construct by Din et al. (2011) to measure the project success. It is concentrating on four main points; meeting project targets, project efficiency, customer utility, and organizational improvement (Din, Abd-Hamid, & Bryde, 2011).
2.4.Strategy Management and Project Performance
The balanced scorecard and strategy are two parties have to be woven together in order to get the best benefits(Niven, 2006). This paper used the BSC which was formed by Kaplan and Norton in order to strategically evaluate the performance of the organizations (Al-Dhaafri & Al-Swidi, 2014; Kaplan & Norton, 1992). In another word, the BSC is a Strategy-Focused-Organization modelto translate the top management strategy into operational actions which are addressed to a continuous organization performance improvement(Sarhan & Fox, 2013). Finally, it can be formed that the strategy Management has a positive impact on the organizational performance evaluation processes.
H1: strategy Management has a positive and significant effect on performance evaluation processes.
2.5.Project Success and strategy
Project success is measured across four measuring dimensions; meeting planning goals and design, meeting developing organization benefit, meeting customer benefits, and finally meeting the defense and national infrastructure benefit (Lipovetsky, Tishler, Dvir, & Shenhar, 1997). On the other hand, Yetton et al. (2000) debates that there are many standing issues found behind the increase of the project failures such as; the absence of a clear vision and statement of requirements, unrealistic expectations due to estimating difficulties and organizational politics, lack of project decomposition, inadequate staffing policies and team conflict, lack of stakeholder involvement and focus, and lack of strategic focus and executive management support. As a result, it can be clearly concluded from the above that the project success can be achieved by accomplishing the organizational strategic objectives (Shenhar, Dvir, Levy, & Maltz, 2001).
H2: Strategy Management has a positive and significant effect on Project Success.
2.6.Project success and Project Performance
Project Management is an effective tool to increase the organization productivity (Mir & Pinnington, 2014). Moreover, if the project fulfills the expectations it can be said that it is successful(Bryde D. J., 2003). However, project success can only be measured after the project is completed (Cooke-Davies, 2002). In addition, organizations should have a system that ensures achieving the stakeholder’s short-term and long-term benefits(Mir & Pinnington, 2014).
As a result from the given in the literature, the project success is the measurement tool that detect to what degree the strategy implemented(Din, Abd-Hamid, & Bryde, 2011). Finally, this research proposes that Performance Evaluationacts as mediation construct between Strategy Management and Project Success.
H3: Performance Evaluation has a positive and significant effect on Project Success
H4: there is a mediating impact of Performance Evaluation on the relationship betweenStrategy Management and Project Success
3.Methodology
This is a quantitative research that employed a survey questionnaire research method to gather data and examine the relationship between the investigated variables (Kerlinger & Lee, 2000). According to the record taken from the engineering department of Sharjah on November 14th 2014, there were 2536 companies registered as active companies. And as the study required, the managerial level was targeted with the survey because it is the most concerned level with building, executing, or monitoring strategy(Bryde D. , 1997; Kumar, Maheshwari, & Kumar, 2002). From this standpoint, every specified respondent wasplaying or mediating a role between the employees and the stakeholders. Based on the European Commission, the targeted companies are classified into four sizes; mini companies which includes less than ten employees is a micro company, small companies that have less than 50 employees, medium size companies which employs less than 250 employees, and large companies that include more than 250 employees.
Moreover, this paper is designed to test the factors that affect the relationships between the variables used in the (SM-PE-PS) model. This framework of the variables implies a suggestion works as a base to how to align strategy in-order to have project success. The survey was divided into headlines where each part has its own scope and represents a separate variable.
The source of data was Emirate of Sharjah construction companies where there was a random distribution among them in order to fill the questionnaires through the managerial level. Two hundred Fifteen questionnaires were distributed and one hundred fifty seven usable returned. The study Constructs and their dimensions were adopted with adaption from previous studies. PEand PM measurements have been adopted from Kaplan and Norton (1996), while Project Success measures have been adopted from Bryde (2003). For the purpose of testing the hypothesis, the study was used Structural Equation Modeling (SEM) technique through Smart-PLS statistical software.
3.1.Research Framework
There are several theoretical and managerial issues that shaped the framework of this study (SM-PE-PS). Furthermore, the direct relationship between independent and dependent variables were studied separately. In addition, the mediating effect between the variables was also investigated. The examination of the cause and effect of Strategy management, Performance Evaluation, on project success is lacking in the literature. In other word, there is a lack of studies that investigates the relationship between Strategy management and Performance Evaluation, and the effect of strategy Management on raising project success level (Srivannaboon & Milosevic, 2006). Because of the study limitation in this gap, there is a call for more research conduction to fill it in. Therefore, this research is designed to increase the number of this type of studies that covers the relationships between Strategy Management (SM), Performance Evaluation(PE), and project success (PS).
The variables in the research framework of the study are classified into two categories which are; endogenous and exogenous. The exogenous are the independent variables and not affected by any other variable, while the endogenous variables are affected by the others and may sometimes have an effect on other variables. More specifically, the exogenous variable in the research model is Strategy management (SM), whereas the endogenous are; Performance Evaluation(PE), and project success (PS).
3.2.Proposed Data Analysis Techniques
The gained data from the questionnaire is to be analyzed by two different techniques. The first method of the data analysis in this study is Statistical Package of Social Sciences (SPSS) version 20 and the second method is SmartPLS 2.0. Furthermore, the data analysis methods are selected based on the variable characteristics and the questions of the research (Byrne, Structural Equation Modeling with AMOS, 2010). Among the various tests conducted are preliminary analyses of missing data and data screening, and outliers. In addition, there are some other applied tests to the data which are reliability and validity of measures, correlation analysis, descriptive statistics, goodness of Fit, and regression analysis.
4.Data Analysis
4.1.Demographic Distribution of the Respondents
The data was collected using the survey questionnaire over the period of five months from Jan 2015 to April 2015. The final collected data sample includes 157 participants from all targeted companies as a sample over the Emirate Sharjah what make the percentage of the respondents (157) to the targeted samples (215) is 73%. According to the given data, there were 91 small, 48 medium, and 18 large responded companies.
4.2.Descriptive Statistics
A descriptive analysis for data was conducted to describe the Strategy Management Processes (SM), Performance Evaluation management (PE), and project success (PS). The results obtain the implementation level of each construct in the covered companies. The result of the descriptive analysis also reflects the respondent concentration on project success with respective mean and standard deviation values of (3.766 and 0.620).This result addresses the importance of success to the respondents. Moreover, it is clearly revealed that the project success has higher value than strategy management with 3.766 mean and 0.620 standard deviation values. In addition, Strategy management construct is reported to have the lowest mean value which is 3.392 and 0.667 standard deviation. The indicated results declare that there is shortage in Strategy alignment among the hierarchies of the surveyed contracting companies which supports the study done by Srivannaboon and Milosevic (2006).
Moreover, the lowest mean and the highest standard deviation reflect the resistance to be monitored found in the contracting companies. Therefore, the result shows that there ismore resistance found to monitor strategy management in comparison to the other constructs. As observed and from the respondent’s point of view, strategy Management system is a new practice in the companies and it replaces the familiar and widely understood old practices. In the progress to enhance employing strategy Management system in the companies, many initials have to be taken in order make it comfortable system such as training, lecturing, and customizing.
4.3.The Construct Validity
Construct Validity is the degree to which applied test measures what it claims to be measuring (Trochim, 2006). According to Hair et al. (2010), construct validity can be examined by a simultaneous implementation of the content validity, discriminate validity, and convergent validity.
4.3.1.The Convergent Validity Analysis
The convergent validity is the degree to which a group of variables are closed in the concept of measuring a specific item(Hair, Anderson, Tatham, & Black, 2010). As the argument of Hair et al.(2010), there are three required criteria tests to apply the convergent validity and they namely are; the composite reliability (CR), factor loadings, , and average variance extracted (AVE). Moreover, in-order to provide an evident that the construct items are related, correlations reading should be in the range of (-1.00 to +1.00)(Trochim, 2006). Convergent Validity and significant of the factor loading analysis shows that all the loading of the used items in the accepted range and they are significant at the 0.01 level (Hair, Anderson, Tatham, & Black, 2010). The Composite Reliability and the values of Cronbach Alpha are examined and explained using SPSS statistics. Cronbach Alpha values are in the range of (0.732 and 0.890) and the Composite Reliability (CR) range is between 0.856 and 0.912. In summary, thegiven results of the composite realability and Crompach alpha are more than minimum recommended level which is 0.7 (Fornell & Larcker, 1981; Hair, 2010). As a result, the outer model convergent validity is confirmed.
Furthermore, to confirm the outer model convergent validity it is important to examine the average variance extracted (AVE) values. The used set of items to measure a construct would have sufficient convergence if the AVE value is more than 0.5 (Barclay, Higgins, & Thompson, 1995). In this paper, AVE values range is (from 0.566 to 0.819) what demonstrates a good construct validity level (Barclay, Higgins, & Thompson, 1995).
4.3.2.The Content Validity
The content validity is the extent to which the measurement item represents the concept of a givena construct (Hair, Anderson, Tatham, & Black, 2010; Pennington, 2003). Based on the literature reviews, it can be concluded that all the used items in the research model are correctly assigned to their constructs.
The content validity is clearly given in Table (1). Firstly, items loading are high in on their respective constructs if comparison applied with the other constructs. Secondly, the items loading are significant on their respective constructs what assures the content validity of the employed measures as illustrated in Tables (1 and 2)(Chow & Chan, 2008).