Impact of National Culture on Project Management

The impact of national culture on Project management in the Middle East,  By (Lars Baumann)  PhD theses 2013

2.3.1. Construction projects in the Middle East

A number of publications on international construction projects in the Middle East could be identified. Research results related to the construction industry should provide a good basis for this thesis by providing many linking points regarding the research objectives. As Halawa et al. (2011) concluded the construction industry in the Middle East is a significant driver for many large projects.

‘The construction industry in the Middle East represents a significant part of the world’s economy. Millions of dollars are spent each year on different

construction projects’ (Halawa, 2011, p. 1) Many of the Middle Eastern construction workers were immigrants from neighbouring African countries (Birks et al., 1979). In recent years, the project types changed from purely construction related activities to technical and highly skilled IT jobs. Dubai for example is seeking to invest into projects like ‘internet city’ or ‘media city’ for which a highly skilled workforce and many expatriate workers are required. As a matter of fact no later than during the strong growth during the 1970s and 1980s, the region was forced to import labour and specialist.

‘As most of the oil-rich countries of the Middle East have very small populations the construction boom of the 1970s and early 1980s not only created a huge market for foreign consultants and contractors, it also generated an enormous demand for foreign labour’ (Wells, 1996).

As mentioned above, the project teams were typically staffed with resources from countries with low labour costs and regions which are geographically close to the Middle East. Based on the author’s experience many construction sites rely on personnel from Asian countries like India, Pakistan or Bangladesh or other North African countries like Sudan, Egypt or Jordan. After reviewing some sources regarding the construction industry, this impression can be confirmed.

‘In the early years construction workers came to the Gulf mainly from other Middle East states -Egypt, Yemen, Syria, Jordan. But from the mid-1970s Arab workers came to be outnumbered by migrants from Asia.’ (Wells, 1996, p. 3)

Another trend were European or North American companies bringing the resources into the region to achieve low labour costs on the construction site, but to keep control over the management processes by delivering turnkey projects.

‘[…] Most of these huge contracts were let to firms from Europe and the US, and it was these firms who were instrumental in bringing in Asian labour. Originally the main sources of Asian labour were India, Pakistan, Bangladesh and Sri Lanka, the countries of South Asia which were close-by and had long ties with the Gulf countries.’ (Wells, 1996, p.3)

Many contracts have been awarded to these international contractors as they were also capable to quickly raise large project teams and move the workforce out of the country after the project was closed. Especially in recent years the interest to avoid a growth of the population with the workforce from Africa and Asia was one goal of local governments as they wanted to avoid cultural influences by this workforce which often outnumbered the own population in the country. A second instrument to keep control over the project was that many countries have laws and regulations which required all joint venture activities to be run by a local who holds a majority. Furthermore many permits may only be obtained by Saudi nationals, so in addition to the implications for the shareholder structure, there is also a requirement to implement a local Saudi manager acting on behalf of the company to obtain the required business permits. Due to these facts and many other regulations, the project sponsors and leading investors are often Arabic managers belonging to one of the country’s influential and wealthy families who are strongly investing in real estate, the infrastructure sector or other import and export joint ventures with foreign corporations. To look for results regarding the influence of national culture on project management, a review of recent findings is required to understand if construction projects face project delays and other culture related problems caused by cultural factors or not. Re-occurring project delays were confirmed by many construction related publications. One good example and starting point is a study from Sweis and colleagues (2007) analysing the Middle Eastern construction industry.

‘Recent events in the Middle East region coupled with restructuring of economies, emergence of the World Trade organization and the rising price of oil are expected to yield an unprecedented growth in construction activities […]. One major question of concern however arises: what are the major causes of delays in the Jordanian construction industry and their relative importance?’ (Sweis et al., 2007, p.665)

The following Table 2 shows a meta-level analysis of research findings by Sweis (2008) summarizing some main reasons for construction project delays in the Middle East. Interestingly, national culture has not been mentioned, but the presented results accentuate that for example change orders, slow decision making, financial problems of contractors, poor supervision or difficulties in obtaining a permit were identified in various studies as one underlying reasons for project delays. Sweis did not discuss the underlying root causes for these characteristics or explained links to national culture, but some of the mentioned causes may be related to the cultural characteristics of the Middle East. This assumption underpins the importance to expand the view to national culture as a root cause for reoccurring patterns and use that to question the applicability of standard project management processes for the Middle East.

Table 2: Summary of causes for delay Middle Eastern construction projects (Sweis et al., 2008)

More examples for the analysis of project related problems are the publications by Abdelsalam et al. (2009) who analysed the Dubai construction industry and indicated that project failure costs due to weak project quality management are estimated being around 7% of the overall project costs. Assaf et al. (2006), who analysed 76 projects in the Middle East, found evidence that project delays were often caused by change orders projects in the Middle Eastern construction industry. A paper by Lampel (2001) looked into the overall project setup and discussed the frequent involvement of EPC companies (Engineering Procurement Construction) in Middle Eastern and African (MEA) construction industry. These companies have a business model to move into a region with a team of project managers and project resources. Their goal is to deliver quick results in large scale international construction projects. Based on a case study at Stone and Webster (US-based EPC Company), the authors analysed profit and loss by region and came to the conclusion that during 1999 the company had a huge contract backlog, but operative loss of $59.3 million. The projects in the Middle East and Africa (MEA) region contributed largely to the loss with $170 million. One of the identified reasons for this finding was the lack of cultural competences among their staff. Another reason mentioned by Lampel was the weak ability to manage diverse project teams. It seems obvious that in less developed regions the project risks are higher compared with

projects in the companies’ home markets. The paper mentions different approaches to mitigate the risk of high project losses in diverse and international projects. One of its suggestions is a clear focus strategy, which means that the EPC Company has to decide if they have the required core competencies to manage projects in certain international markets. This paper provides some interesting facts, as it clearly underlines that the challenges in the Middle East are very different from working in other regions and imply higher risks for EPC companies than projects within their home regions. Reflecting these findings in the context of the research objectives, it provides clear evidence for the need to work on new approaches to manage projects in the Middle East. Even well-established project companies as analysed in the case study from Lampel have difficulties if they simply apply what works successfully in other regions. In addition to that, Lampel (2001) highlights that project related problems are often caused by cultural misunderstandings. This finding underlines the fact that ethnocentric views on project management approaches increase the probability of a project delay or project failure. There has to be a next step beyond the routine project management standard to become a successful project manager in the Middle East. Regarding the research question and the research objectives, the outcomes show that in the construction industry influences caused by national culture can be identified, that are leading to project delay and project problems. Besides the cultural challenges, there are other factors and complex local rules and regulations an investor has to follow. The next section (chapter 2.3.2) will take a deeper look into the nature of the IT industry in the Middle East aiming to seek for similarities and differences in the project typology.

2.3.2. Information technology projects in the Middle East

The global trend for multinational corporations and an increasing number of joint venture projects result into a large amount of projects within the information technology (IT) sector. Many corporations have to consolidate the decentralised market information of their worldwide subsidiaries at one place to enhance the ability of the organization to exchange information quickly e.g. via Email and other electronic channels. By looking at the Middle East, the local laws and regulations often demand to setup joint venture structures with local partners to reach the local market demand. This is especially true for the Middle East, where it is strongly enforced to set up joint ventures with US based and other international IT firms. A recent statistic from the Middle Eastern recruitment portal bayt.com shows the top three industries who are currently recruiting project managers:

1. Banking
2. Information Technology & Telecommunication
3. Construction

(Bayt, 2012)

The fact that the above industries are strongly hiring management positions suggests the analysis of the IT/Telecommunication branch in addition to construction projects for the results of the thesis to be representative for a majority of projects. With the selected cases for the empirical fieldwork, two of the top three hiring industries in the Middle East are represented. In addition to that some scholars presented findings related to IT projects in the Middle East. Haveluk et al. (2004) describes a case study from Kuwait, where a big data mining project was delivered. During their discussion, the long duration of this large scale IT project was described and the typology of the project was explained. Straub et al. (2001) looked at five Arabic countries and developed a model on how information technology and IT adoption in Middle Eastern projects are handled.

As this section aims to illustrate the research context for IT-projects in more detail, the paper from Gallivan and Srite (2005) offers a good starting point. It already became clear that research on IT projects in the Middle East seems to be under developed. The study by Gallivan and Srite (2005) looked at many studies on IT adoption and showed only few with a Middle Eastern focus. Their meta-analysis in

Table 3 of the available research results in the field of information technology covers multiple results with a global background. Only few studies were identified in the Middle East. As part of their meta-analysis only four papers were mentioned with a regional focus on the Middle East.

Table 3: Studies assessing information technology projects in the Middle East (Gallivan & Srite, 2005)

Since the authors have reviewed more than 50 publications with a focus on cultural issues and IT, the limited number of publication underlines two arguments. Research related to IT project in the Middle East is underdeveloped as only few studies looked specifically on the IT and its link to cultural characteristics. Although multiple search engines were accessed no further publications or statistics could be retrieved covering IT-projects in the Middle East.

As one conclusion for IT-projects the above findings show that there is a gap in the literature with research focussing on IT projects and the influence of cultural factors on project work in the Middle Eastern context. 

Another central conclusion by Gallivan and Srite is:

‘If researchers were to explicitly capture data and analyse the specific cultural attributes that are assumed to be responsible for the observed differences between groups, several benefits would occur, including greater statistical power and clearer link between the social identity attributes…’ (Gallivan and Srite, 2005)

The statement shows that regarding culture and IT, many theoretical constructs have been used for the analysis. This results into the problem that each cultural model introduces a new perspective on national culture, without ever relating to an appropriate common foundation providing a link to previous research findings. Finally the inquiry of results comparing the different studies becomes overly complex and linking the findings with each other is nearly impossible. Therefore Gallivan and Srite conclude:

‘Answering research questions with cultural implications in the IT field is a slow business.’ (Gallivan & Srite, 2005)

The authors see a clear need for more empirical findings to produce a comparable common foundation for cultural characteristics. In light of the IT industry being one major driver for projects in the region, this underdeveloped area urges for more empirical research to be done. Regarding the underlying cultural framework their paper encourages other researchers to follow the Hofstede approach and discuss findings on this common basis. By using Hofstede’s cultural dimensions, at least one fixed aspect can be created to understand the applicability of project management processes in the Middle East. Nevertheless, the recommendation to apply the Hofstede framework has many disadvantages according to the controversial discussion on its reductionist view on culture. This dissent is illustrated by Ford and colleagues (2003) who are critically discussing the nature of information systems in the context of cultural dimensions from Hofstede’s research. Ford and colleagues scrutinise the possible over-reliance on Hofstede’s dimensions and characterisation of culture in IS research. Nevertheless, they also point out that cultural dimensions can help to accelerate the analysis process regarding national culture influences on project management, no matter if the occurring influences are analysed in the IT field or in other industries. This general discussion opens the perspective on the currently available research in the information technology field and has to be expanded further. Both positions will be carried forward and discussed in light of the literature around national culture and project management in the chapters 3 and 4, before a decision for a cultural model has to be made.

2.4. Summary

As discussed at the beginning of this chapter, the Middle East is a region where religion and national culture influenced the historic development from of a tribal region to modern territorial countries with different political systems and religious streams. Until today many of the local conflicts arise between followers of the two main streams of Sunni or Shia Islam. From an economic perspective many countries face the situation that well-qualified resources for the industrial development are lacking, but abundant financial resources are available. Furthermore, the discussion throughout this chapter with findings from two important industries clearly show that many projects face problems such as project delay, communication problems or even failed projects. Evidence suggests that some of the mentioned problems are related to environmental factors, but many research results clearly showed that cultural factors may have an impact on project management in the Middle East. Thus, the discussed findings lead to the following preliminary research objectives:

O1* -Identify cultural factors that influence the applicability of the PMBoK in the Middle East

O4* -Analyse which other factors may influence the management of projects in the Middle East

O3* -Understand the key challenges for project managers in the Middle East

These objectives are preliminary as the discussion around the project management framework and models to describe culture are part of the subsequent chapters. In this chapter, it became clear that cultural characteristics have an impact on project work, but the question is which theory can be applied aiming to alleviate project related problems. As a logical next step, it is required to find a suitable cultural model which can be carried forward to identify cultural factors and other factors with an impact on project management. Based on this discussion the following fourth preliminary research objective is introduced:

O2* -Develop a theoretical model to explain the cultural influences on project management frameworks