Planning effort as an effective risk management tool

Abstract

In project management, high levels of risk are considered to be a significant obstacle for project success. This paper investigates whether improving the project plan can lead to improved success for high-risk projects. A quality of planning index was designed to explore how the presence of high risk affects the quality of planning and project success. The index includes managerial aspects such as costs, human resources, procurement and quality, as well as organizational support aspects based on organization maturity models. In a field study based on data collected from 202 project managers regarding their most recent projects, it was found that the levels of risk at the beginning of projects has no effect on their final success. Drilling down to find an explanation for this surprising phenomenon, we found that in the presence of high risk, project managers significantly improve their project plans. Hence, in high-risk projects, better project plans improve all four dimensions of project success: schedule overrun, cost overrun, technical performance and customer satisfaction. However, in low-risk projects, better project plans did not contribute to reducing schedule or cost overruns. In other words, while endless risk management tools are developed, we found that improving the project plan is a more effective managerial tool in dealing with high-risk projects. Finally, the paper presents the most common planning tools currently being used in high-risk projects. Show more