Maintaining strict project controls not only helps to instill ethics but improves your image and your bottom line.
by Gregg M. Schoppman
February 27, 2013

Editor’s Note: This is the fifth in a six-part series titled “The Project Manager’s MBA,” which analyzes six key components of leading business practices and applies them to the construction industry. To read the other articles in the series, visit www.constructionbusinessowner.com.

In the late 1980s comedy “Naked Gun,” there was a scene in which Priscilla Presley discovered Ricardo Montalban’s character was the mastermind behind an insidious plot.  Presley’s character exclaims, “How could you do something so viscous?” Montalban’s character quickly responds, “It was easy, my dear. You forget, I spent two years as a building contractor.” Image of a graduation cap

Construction is arguably one of the key segments in American industry. Unfortunately, there remains a stigma about it. Furthermore, it is likely that the high-profile integrity breaches presently found among all industries continue to undermine the public’s faith in any business.

Integrity and ethics appear in many corporate charters and value statements, but how many companies live and breathe the value of integrity at all levels of the organization? Ethics is largely a gray area to many people; however, managers are faced with ethical dilemmas daily that will never make the covers of newspapers or magazines. Such ethical issues should always be addressed.

The Foundation of Ethical Behavior
The root of ethical behavior begins long before an employee makes it to the corner office. Dr. Ralph James addresses this in his book, “The Integrity Chain.” There is a perception that stakeholder value, a main driver of project performance, is influenced strictly by profitability and with little regard for the decisions that are made to achieve that profitability. Dr. James argues that decisions at the project level are precursors to decisions at the corporate level. Small breakdowns in integrity, or the “little white lie syndrome,” at the project level lead to larger breakdowns later.

For example, examine the cost-reporting function in most companies. Project managers routinely complain about the inaccuracy of the field’s reporting of quantities and percent complete. Field managers might not argue against the inaccuracy of their reporting but rather state that the fault lies in the office’s creation of an unrealistic budget and shuffling of dollars on cost reports. This situation is not generally viewed as one of the deadly sins, but, while far from catastrophic, such a breakdown of integrity at the project level can lead to poor decision making later.

A lack of adherence to project controls and standards has the ability to affect overall corporate profitability. One important question to ask, with regard to Figure 1, is why the first four boxes in the process map exist. In many companies, the appropriate amount of time to establish the correct budget is not provided. The rush to start the job, regardless of planning, outweighs the need to establish a realistic budget. Collaboration up front is imperative. Planning takes time, and the integrity chain breaks when firms do not consider ethics to be a critical aspect of their work.

Additionally, there exists in many firms the belief that bad news on project performance is met with harsh repercussions. Hiding losses and covering one’s tracks becomes the modus operandi to avoid a reprimand. Rather than ask probing questions, such as “Why did we lose money in this category?” many senior managers shoot first and ask questions later. Companies with a culture of asking questions with the sole purpose of bettering performance rather than casting blame, however, will improve their performance. Project ethics should not be an afterthought; it should become the embodiment of a firm’s corporate values.