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MIDLANDS STATE UNIVERSITY
FACULTY OF COMMERCE
DEPARTMENT OF A CCOUNTING
AN ASSESSMENT OF PROJECT MANAGEMENT DECISION ON FINANCIAL
PERFORMANCE OF MIDLANDS STATE UNIVERSITY
BY MORGEN MAVHUNGA
R103045E
THIS DISSERTATION IS SUBMITTED IN PARTIAL FULFILMENT OF THE
REQUIREMENTS OF THE BACHELOR OF COMMERCE ACCOUNTING
HONOURS DEGREE IN THE DEPARTMENT OF ACCOUNTING AT
MIDLANDS STATE UNIVERSITY
GWERU ZIMBABWE MAY 2014
APPROVAL FORM
The undersigned certify that they have read and recommend to the Midlands State University
for acceptance, a dissertation entitled “An assessment of project management decision on
financial performance of Midlands State University’’ submitted by Morgen Mavhunga in
partial fulfillment of the requirements of the Bachelor of Commerce in Accounting Honours
Degree (HACC).
……………………………… ………………………………
Supervisor Date
……………………………… ………………………………..
Chairperson Date
……………………………….. ………………………………….
External Examiner Date
i
RELEASE FORM
Name of Author: Morgen Mavhunga
Dissertation Title:
An Assessment of Project Management Decision on financial performance of Midlands State
University.
Degree Title:
Bachelor of Commerce Accounting Honours Degree (HACC)
Permission is hereby granted to the Midlands State University Library to produce single
copies of thins dissertation and to lend or sell such copies for private, scholarly or scientific
research purposes only. The author reserve other publication rights neither the dissertation
nor extensive extracts from it may be printed or otherwise reproduced without the authors’
written permission.
....................................... ............................................
Student Date
Contact Address: Contact phone:
3636 Simbi Park +26377 4381 036
Redcliff
Kwekwe
ii
DEDICATIONS
To Jehovah Jireh, God the Provider, Our Father who art in Heaven, Great is thy name, all
angels and man pray and honour thee.
iii
ACKNOWLEDGEMENTS
Advice and support will always remain the key drivers to success. I appreciate many people
who were there at the time of my research, who provided their unwavering support and
assistance leading to the success of my project. My gratitude goes to my family and friends,
Midlands State University Bursars’ Department staff and the Department of Accounting Staff
as well. Special thanks to:
My Supervisor, Ms Nyamwanza for her guidance, support and patience during the research.
Without her patience, I do not think I would have made it through.
My friends P Dhlakama, L Kandiga, T Masikati and T Mutsago for the encouragement and
accessories they contributed towards my research.
My family Mr and Mrs Ngandu, Mr T Mavhunga and Ms J Mavhunga for their strong
support, encouragement as well and financial assistance.
Mr T Marufu, Mr C dokotera and Mrs N Makonya from Midlands State University
Bursars’Department. I thank you all for your support.
To all my classmates thanks for the inspiration and support.
iv
ABSTRACT
Since the year 2010, when Midlands State University decided to undertake various projects, it
has suffered an increasing rate in the costs resulting in huge amounts of outflows affecting
the organisational performance as a whole. This has resulted in reflections like many
incomplete projects on the ground financed for the commencing and not finished due to the
lack of funding. The organisation undertaking many projects at once has resulted in a difficult
state to manage the costs. The organisation encountered problems in funding as well because
there were no other sources of finance to depend upon hence costs increased as the projects
increased in number. The study therefore sought to assess the project management decisions
thereby evaluating the cost management policy and its impact on the financial performance of
the organisation. The research methodology, Descriptive Research design was used where
questionnaires were distributed and interviews were also conducted so as to gather data and
the data was presented and analysed. Sample was derived by the procedure of non-probability
sampling that includes the convenient sampling technique. The data was presented in form of
graphs, tables and pie charts. Following the presentations an analysis was done and a
conclusion was made. Major findings outlined the ineffectiveness of policy implementation,
risk assessment techniques and cost techniques that are employed by the organization. A
conclusion was reached that the policy exist but it is not documented therefore no guidelines
to implementation. The researcher however made recommendations at the end of the study
upon policy implementation and controls necessary.
v
TABLE OF CONTENTS
APPROVAL FORM………………………………………………………………………….. i
RELEASE FORM……………………………………………………………………………. ii
DEDICATIONS……………………………………………………………………………. iii
ACKNOWLEDGEMENTS………………………………………………………………… iv
ABSTRACT v
LIST OF TABLES……………………………………………………………………………. ix
LIST OF FIGURES…………………………………………………………………………... x
LIST OF APPENDICES……………………………………………………………………... xi
CHAPTER ONE INTRODUCTION
1.0 INTRODUCTION 1
1.1 BACKGROUND TO STUDY 1
1.2 PROBLEM STATEMENT 3
1.3 MAIN RESEARCH QUESTION 4
1.4 SUB-RESEARCH QUESTIONS 4
1.5 RESEARCH OBJECTIVES 4
1.6 JUSTIFICATION OF THE STUDY 5
1.7 DELIMITATIONS TO THE STUDY 5
1.8 LIMITATIONS 5
1.9 ASSUMPTIONS 6
1.11 DEFINITION OF TERMS 6
vi
1.12 SUMMARY 6
CHAPTER TWO: LITERATURE REVIEW
2.0 INTRODUCTION 7
2.1 COST MANAGEMENT POLICY IN PROJECT MANAGEMENT (CMP) 7
2.1.1 EVALUATING COST MANAGEMENT POLICY 7
2.1.2 COST MANAGEMENT POLICY PROCESS 9
2.1.3 PROJECT MANAGEMENT CONSTRAINTS 10
2.1.4 RESULT CONSTRAINT 11
2.1.5 BUDGET CONSTRAINT 12
2.1.6 TIME CONSTRAINT 14
2.1.7 CLIENT ACCEPTANCE 15
2.1.8 VALUE DRIVEN PROJECT MANAGEMENT 15
2.2 EFFECTS OF PROJECT COST MANAGEMENT POLICY ON FINANCIAL
PERFORMANCE
16
2.3 EVALUATING RISK ASSESSMENT TECHNIQUES 17
2.4 OTHER DECISIONS AND CONTROLS APPLICABLE IN PROJECT MANAGEMENT 21
2.5 BEST PRACTICES 25
2.6 SUMMARY 26
CHAPTER THREE: RESEARCH METHODOLOGY
3.0 INTRODUCTION 27
3.1 RESEARCH DESIGN 27
3.1.1 DESCRIPTIVE RESEARCH DESIGN 28
3.2 CASE STUDY 29
vii
3.3 TARGET POPULATION 30
3.4 SAMPLING 30
3.4.1 SAMPLING PROCEDURES 30
3.5 TYPES OF DATA 33
3.5.1 PRIMARY DATA 33
3.5.2 SECONDARY DATA 34
3.6 RESEARCH INSTRUMENTS 35
3.6.1 QUESTIONNAIRES 36
3.6.2 INTERVIEWS 37
3.7 TYPES OF QUESTIONS 37
3.7.1 CLOSED ENDED QUESTIONS 37
3.8 LIKERT SCALE 38
3.9 RELIABILITY AND VALIDITY 39
3.10 DATA PRESENTATION 39
3.11 DATA ANALYSIS 39
3.12 SUMMARY 39
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.0 INTRODUCTION 40
4.1 RESPONSE RATE 40
4.1.1 RESPONSE RATE OF QUESTIONNAIRES 40
4.3 INTERVIEW RESPONSES 55
4.4 SUMMARY 58
CHAPTER FIVE: CONCLUSION AND RECOMMENDATIONS
5.0 INTRODUCTION 59
viii
5.1 SUMMARY OF CHAPTERS 59
5.2 MAJOR FINDINGS 60
5.3 CONCLUSION 62
5.4 RECOMMENDATIONS 62
5.5 SUMMARY 63
REFERENCE LIST
ix
LIST OF FIGURES
FIG 4.1 COST MANAGEMENT POLICY 41
FIG 4.2 POLICY IMPLEMENTATION 44
FIG 4.3 EFFECT OF COST MANAGEMENT POLICY ON FINANCIAL PERFORMANCE 47
FIG 4.4 CONSULTATION BETWEEN FINANCE AND PROJECT COMMITTEE 50
FIG 4.5 RISK ASSESSMENT TECHNIQUES 51
FIG 4.6 CURRENT COST MANAGEMEN POLICY 44 52
FIG 4.7 MSU PROFITABILITY AND LIQUIDITY
POSITION……………………………..
54
x
LIST OF TABLES
TABLE 1.1 SUMMARY OF INVESTMENT PROJECTS 1
TABLE 1.2 MSU COMPARATIVE CASH FLOW STATEMENTS 2
TABLE 3.1 SAMPLE SIZE 33 33
TABLE 3.2 LIKERT SCALE ……………………………………..……………............. 38
TABLE 4.1 QUESTIONNAIRE RESPONSE RATE 40
TABLE 4.2 POLICY DOCUMENTATION 43 43
TABLE 4.3 CONTROLS OVER IMPLEMENTATION 45 45
xi
LIST OF APPENDICES
APPENIX A: INTRODUCTORY LETTER…………….……………………………. 53
: QUESTIONNAIRES……………………………………………………. 54
APPENIX C: INTERVIEW GUIDE………………………………………………….. 55
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An Assessment of Project Management decision on financial performance of MSU
CHAPTER ONE
1.0 Introduction
The chapter contained background of the study, problem statement and main topic. It
continued also to outline the sub research questions, research objectives, and significance of
the study, limitations and delimitations, abbreviations, definition of terms and chapter
summary.
1.1 Background to study
The period from 2010 to 2013 MSU has been undertaking the following summarized
projects:
Table1.1 Summary of Investment projects
Year Capital
projects
Projects costs Work in
progress
Completed
projects
2010 3 US$1400000 2 1
2011 5 US$2750000 3 2
2012 7 US$5800000 5 2
2013 Fairly more
than 10
US$10000000 9 3
(Source-business development office MSU)
MSU’s project costs increases from $1 400 000 to $10 000 000 as its projects increase in
number from 3 to 10 during the period .As incomplete projects gives an average number of 4
projects with an average cost of $5 500 000 which the firm fails to manage since 2010 as
income was $3 450 000 on average from operating activities. The bursar highlighted in the
annual general meeting held in December 2012 that the increase of projects have pulled out
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an amount of $8 322 000 against an inflow of $2 735 000, being large amount and yet almost
9 of other projects were still on the ground and therefore the firm has failed to manage over
these costs that a further increase in capital projects in 2013 led to an increased outflow of
$10150000. The year 2010 to 2013 projects increase in number from 3 to fairly more than
10. It is noted that management fails to reduce costs as they increase every year ($1.4m ,
$2.75m, $5.8m ,$10m) and work in progress there increased from (3 to 9) year 2011 to 2013
resulting to more projects being incomplete hence is tying up capital in projects. Following is
Table 1.2 showing a statement of cash flows.
Table 1.2 MSU comparative cash flow statements
CASH FLOWS FROM OPERATING ACTIVITIES
2010
$000
2011
$000
2012
$000
2013
$000
Operating income 2890 2100 3200 5670
Depreciation expense 65 55 123 879
Increase/decrease in accounts receivable -84 -198 -400 -750
Increase/decrease in accounts payable -97 -233 -366 -434
Net cash flow from operating activities 2774 1724 2557 5365
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of equipment 96 12 178 -
Purchase of equipment -158 -1300 -3500 -3700
Capital investment projects -450 -2800 -5000 -6450
Net cash flow from investing activities -512 -4088 -8322 -10150
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of bond -180 -1300 -4846 -7970
Net cash flow from financing activities -180 -1300 -4846 -7970
Net change in cash 2082 -3664 -2591 -1777
Beginning cash balance 350 2432 -1232 -3823
Ending cash balance 2432 -1232 -3823 -5600
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(Source-business development office MSU)
According to the minutes of the financial meeting held in December 2012 the Bursar
highlighted that “MSU is falling into cash problem to finance day to day activities and
operational activities’’. Investing activities are pulling out huge amounts of cash (-$512 to -
$10 150) as increased by project costs increasing each year ($450 to $6 450) as shown by
Table 1.2. Operating income from year 2010 to 2013 increased from $2 890 to $ 5 670
respectively resulting in a positive balance in the net cash flow of operating activities. As
highlighted by the Bursar ,management fails to manage project costs as they rise to have a
negative increase on investing activities, representing huge outflows of cash to finance capital
projects (-$512 to -$10 150 year 2010 to 2013 respectively). Financing activities reflect out
flows of cash, towards bond repayment. This led to balances at year end to reflect a negative
cash flow position of -$1 232, -$3 823 and -$5 600 year 2011 to 2013 as shown in the cash
flow statement. This has therefore led the researcher to assess the management policy
implemented at the organization.
1.2 Problem statement
As highlighted by the bursar in a meeting December 2012, increase in projects increases
the project costs to manage which are pulling out funds to finance operations. This
shows a cost management problem as project costs increased every year ($1.4m -$10m)
at an increasing cash outflow status of the firm as (-$ 512 to -$10150 ) year 2010 to
2013. This assessment will therefore pave way for the proliferation of recommendations
aimed at ensuring that organizations do not fold but surpass expectations in as far as
their performance is concerned. The researcher therefore proposes to assess the impact
of cost management as an element of project management affecting financial
performance.
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1.3 Main research question
What is the impact of Project cost management on financial performance?
1.4 Sub-research questions
The following sub-research questions arise from the main topic.
i. What is MSU cost management policy in project management and how it is applied?
ii. What are the effects of project cost management policy on financial performance?
iii. How effective are the risk assessment techniques implemented by MSU in Project
cost management.
iv. What other project management decisions and controls are applicable to achieve
project success at MSU?
v. What are the best practices recommended in Zimbabwe University policy formulation
and implementation in order to increase organizational performance?
1.5 Research objectives
The following research objectives arise from sub-research questions.
i. To evaluate MSU cost management policy in project management and assess its
application.
ii. To assess the effects of project cost management policy on performance.
iii. To evaluate the risk assessment techniques implemented by MSU.
iv. To outline other applicable project decisions and controls relevant to achieve project
success.
v. To assess the best practices in University finance policy formulation and
implementation useful in Zimbabwe.
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1.6 Justification of the study
To the student
The research is done in partial fulfilment of the requirements of the Bachelor of Commerce
Honours Degree in Accounting.
To the university
The research will serve as reference material to be used by other different scholars.
To Midlands State University [organisation]
The research gives recommendations for adoption by the organisation.
1.7 Delimitations to the study
The Research study is based on assessing the impact of project management on the financial
performance of MSU in Gweru. It is enclosed to Midlands State University bursars
department and its management from 2010 to 2013.
1.8 Limitations
Time constraint
The time was limited, within which the research was to be concluded. However the
researcher had to maximise weekend and semester break time.
Confidential information not readily available
In some cases the researcher was deterred confidentiality from accessing information.
However secrecy oaths had to be signed by the researcher with the management. Thereafter
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following lines of assurance to information access was allowed with agreement that
information would be used for research only and be held in confidence.
1.9 Assumptions
Information provided is deemed accurate basing on that university policy doesn’t alter
therefore reflects a true and fair view of MSU. Respondents hence provide a reasonable
cooperation level.
1.10 Abbreviations
MSU- Midlands State University
CMP- Cost Management Policy
1.11 Definition of terms
Project Management: According to PMBOK® Guide 2012 (PMI’s A Guide to the Project
Management Body of Knowledge) it is the application of knowledge, skills and techniques to
execute projects effectively and efficiently. It’s a strategic competency for organizations,
enabling them to tie project results to business goals.
Cost management policy – According to Drury (2012; 543) it is defined as a document
containing a set of rules, limitations, standards and guidelines governing the management in
decision making.
1.12 Summary
The chapter covered the introduction, background of the study, problem statement, main
research question, sub-research questions and objectives .Included also is the justification of
study, limitations and delimitations to study, assumptions , abbreviations and definition of
terms .Chapter two (2) is on Literature review.
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CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
This chapter reviewed the researches done by other writers. It reviewed what policy the
organization had and have its implementation evaluated the, what literature says about the
viability of project cost management on financial performance, the extent to which risk
associated with project management is considered, other decisions and controls applicable to
achieve project success and the effectiveness of best practices in policy formulation and
implementation. It includes also the chapter summary at the end.
2.1 Cost management policy in project management (CMP)
2.1.1 Evaluating cost management policy
In project cost management an organisation that bases on quality and activity policy as
outlined by Drury (2012; 543) should have a document containing a set of rules, limitations,
standards and guidelines governing the management in decision making. As it is adapted by
management to control costs in project management Bender (2010; 191) suggests when
organisations bases on quality there is involvement of meeting requirements and
specifications on a set of given inputs, conditions or state. The actions are taken by managers
to reduce costs where some of which are taken as first priority on the basis of information
that would have been extracted from the accounting system. Drury (2012) highlighted that
usually managers become unaware of all the approaches that can be implemented to reduce
costs where opportunities can be identified to perform processes more effectively and
efficiently.
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It is suggested by Venkataraman (2010; 238) that organisations may complete good quality
policy, but results in reduced intentions ,where top management according to activities on
ground delegates the implementation to the lower level managers where there is no
prioritisation of projects that is made. There is a gap in the project environment between the
definition of project quality and organisation therefore it is found difficult bridging between
quality expectations since all necessary steps to translate the requirements are not taken and
this results in cost overruns and lower project value.
The policy includes the tools and techniques as outlined by Knapp (2010; 80) which are the
cost benefit analysis and benchmarking but, however mistakes are made consequently and it
is unlikely that the project’s facility will solve the problem or be fit for its purpose.
According to Gray (2011; 127) project estimation is taken as a yardstick for project cost
control. It is suggested that if the yardstick is faulty management can start on the wrong foot,
therefore the policy should not direct management not to underestimate the estimate’’
Guidelines are made for estimates that are needed to support good decisions in project
management. The policy involves also the guideline for the estimation basis where cost, time
and budget are to be the lifeline for control. They are expected to serve as the standard for
comparison of actual and plan throughout the life of the project.
Venkatarum and Pinto (2010; 235) argues that although cost, time and quality are vital to
enhancing value in projects considering other factors which includes the service expected by
customers during or after project a wide broad definition of quality will be warranted.
Focusing on quality drives management is led to ignoring all other factors and techniques
useful to project management. However most organisations including MSU their project
status reports depend on reliable estimates as the major input for measuring variances and
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taking corrective action. It is outlined therefore that as managers recognise time, cost and
resource estimate as guided by policy standard basis, it must be accurate if project planning
and control are to be more effective.
2.1.2 Cost management policy process
According to Kliem (2012; 103) initiating is the first phase of the process where vision and
goals, objectives and scope of the project are given a clear definition up front in the form of a
charter, statement of work or contract. The written down template enables the project
managers to determine an adequate cost budget, monitor and control the instances of
overspending there by keeping the projects and financial plans up to date. Therefore to
deliver projects under a budget it is essential to implement a project cost management process
that helps to identify, monitor and control costs at each phase in the project.
However there is a need for determining the road map for executing the contents of the
charter, statement of work or contract. Gray (2011; 101) argued also and said “We can
control only what we have planned’’.
Maylor (2010) defined the execution processes, which is the second phase, as carrying out the
plans laid down, therefore execution comes after planning to enable control over .Monitoring
and controlling means keeping abreast of how well a project is executing according to plan in
such a way that it is achieving its initial vision .In the last phase of the process, closing is the
process of administratively and contractually concluding a project. It is also when project
managers ensure that all terms and conditions as well as any outstanding obligations have
been met.
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Thomsett (2010; 5), however described project as an exception as projects has different
meanings in each organisation varying from one department to another. Project management
is defined by comparing projects to a routine. It is stated that project goals and deadlines need
to be specific, where the project’s desired result is identified and the project becomes well
defined only when a specific result is known. On his argument there are also operational
constraints associated with projects that are to be considered in the project cost management
process. An argument is raised that priority is also supposed to be given to the constraints
attached to the project process as project activities are related, unlike routines, projects
involve investigation, compilation, arrangement and reporting of findings in some way that
provides value.
2.1.3 Project management constraints
The three constraints triangle is reviewed as the triple constraint. Program Success (May 2;
2011) stated that the major take away that the triple constraint, being in triangular form, one
cannot make adjustments or make changes to one side without in effect altering the other
sides. Therefore the triple constraint by program success includes scope constraint as the
result leading to the same meaning and definition of the project end result and the budget
constraint reviewed as cost also by various authors.
Towey (2013) argued that the triple constraint must be understood in consideration that
scope (result), time, budget (cost) is interrelated. In many cases management may be
somewhat aloof adding scope to a project or accepting a budget cut without an effort to
determine what the consequences of that alteration will be. Denying potential repercussions
of alterations to the scope, time, and cost are leading to the issues of project failure. However
there is lack of triple constraint which needs monitoring to ensure that management dwells on
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top of the key attributes of the triple constraints which will make the likelihood of project
success higher. The constraints are as follows:
2.1.4 Result constraint
According to Wysocki (2011) it is noted that a project is well defined only when the specific
result is known .The work is non-recurring ,therefore that means in every case the demands
of a project is not seen to be easily identified, Schwable (2014) .It is also stated
that ,completion of a specific ,defined task or a series of tasks serves as the primary driving
force behind the projects .Projects are distinguished from recurring tasks that are faced on
departmental level ,however the project is aimed to the idea of a finite one-time result.
Kerzner and Belack (2010; 9) reviews result constraint as scope constraint in the triple
constraints .In a management perspective the preceding feature is the goal of the project
including meeting the result constraint so to facilitate the project success and performance.
This constraint refers to what must be taken into consideration and done to produce the
project’s end result but being overseen in the organisation. However the scope constraint
often has a relation with other constraints in the sense that a tight budget could mean
increased time but reduced scope.
According to Heldman (2011; 119) a constraint is anything that impedes the ability of the
management in performing their project work or specifically dictates the manner in which the
project should be handled. Therefore the result constraint is the third element of the triple
constraint that defines the project deliverables and situations where scope is predefined by
project sponsor. The budget in this case impacts the scope of the project and will require a cut
back on the deliverables originally planned.
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An emphasis on the adherence to initially determined technical specifications was given by
Pinto (2010; 35), who reviewed the result constraint as performance where a policy based on
it fails. The project therefore is supposed to be known what exactly the final product is
supposed to operate .Measuring performance, determining whether the finished product
operates according to specifications commonly found with no specifications met. Internally
this focuses on efficiency and productivity providing a quantifiable measure of personnel
evaluation and allowed accountants to control expenses.
2.1.5 Budget constraint
High construction costs result from, budget the organisation has failed to estimate. Budget or
cost constraint according to Thomsett (2010; 8) is when management operates with a degree
of independence in terms of control and money, .It is separate from the department’s budget.
There are some questions which management could ask, in defining the project. These
include how much the project is costing matched against the available funds to finance the
projects.
According to Greenhalgh (2013) the aspect of time to cost and quality has also to include the
plan of the amount of expenses involved and how much needs to be set aside for the final
completion of the project is to be considered. If expenses are to be found more than the
budget additional controls should be put into place to avoid further variances. Managers
recognise cost estimates to be accurate if the project planning ,scheduling and controlling are
to be effective .Therefore Maylor (2010) concluded by stating that there is substantial
evidence that suggests that poor estimates are a major contributor to projects that fails.
However efforts should be made to ensure that initial estimates are as accurate as possible
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since the choice of no estimates leaves a great deal to luck and does not seem acceptable to
serious management.
According to Towey (2013; 267) the cost constraint is reviewed as the second key
determinant of project success as limited budget. Projects are expected to meet the budgeted
allowances in order to use resources as efficiently as possible and achieve the desire result
that does not negatively affect the overall financial performance. The author outlined the
relevant dimension of success as project efficiency, which is the meeting of the budget and
schedule expectations. Other dimensions of success mentioned include impact on the
customer that is meeting technical specifications and creating a project that satisfies the
client’s need. Business success also is a relevant dimension of success which is to determine
whether the project achieved significant commercial success. The last dimension is future
potential determining whether the project helped to develop new technology or opened new
markets.
Philips et al (2011) suggests that the triple constraint can be confusing, but it is an important
one to understand and manage early in the planning process. How to plan and manage the
projects relies upon an understanding of the constraints which can be prioritised differently
on any given project. Cost or budget constraint clarifies the appropriate resources demanded
by the planned project and how much the project will cost. In addition, there is a relationship
between triple constraints meaning that as performance factor becomes priority it may require
a sacrifice of another.
Gupta (2009) stated that when a project is having a tight budget yet for which the quality also
important it therefore requires more time to complete so as to motivate performance
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expected. A project with tight time and budget constraints will also require a trade-off from
features or scope or the performance specifications of the project.
2.1.6 Time constraint
The amount of time required to finish a project should be directly related to the amount of
requirements that are part of the scope along with amount of resources allocated to project
costs, Program success (2011; may 2) .According to Jeffery P (2010; 35), time constraint is
one of the key determinants of project success which much be taken into consideration when
planning a project. Projects are constrained by a specific time frame during which they must
be completed. Therefore the first constraint that governs the project management involves the
basic requirement which is the project should come in on or before it’s established scheduled.
Time can also be replaced by schedule according to Heldman (2011) where most projects are
seen operating under a deadline .Taking for example that the stakeholders or perhaps the
project requester have stated that the new Centre should be opened by October 1.Therefore
one works hard on the schedule to come up with a plan that allows for all the activities to be
complete by the deadline. Time constraints which usually involve scheduling can cause some
problems for the project management team. If a project schedule calls for paving crews at a
specific point in the plan but no paying crews are available at the scheduled time, a dilemma
may arise within.
According to Thomsett (2010; 7) a conclusion is drawn that the projects fail purely on the
basis of the triple constraints which are result, budget and time. Projects have specific starting
and ending, however many projects fail since they fail to have such specified time frame
adhered. A well planned project is based on the careful controls over completion phases
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which involve careful use of each team member’s time. There is also the use of deadlines
outlined set for the project completion.
2.1.7 Client acceptance
Turner etal (2010; 40) states that the principle of client acceptance argues that projects are
developed with customers or client’s in mind and their purpose is to satisfy customers’ needs.
If the client acceptance is the key variable, then the completed project should be acceptable to
the people it was intended .An emphasis was given that ,most companies that evaluate the
project success according to the triple constraint may fail to apply the important test of all ,
which is the client’s satisfaction with the completed project. More recently however, the
traditional triple constraint is coming under criticism as a measure of project success .It could
be a failure, but if it has been delivered in time and on budget and satisfies the original
specifications, the project itself could still be declared a success.
2.1.8 Value driven project management
It is not a matter of the triple constraint alone, according to Kerzner (2010; 297), over the
years we came to accept the traditional definition of project success namely to meeting the
triple constraint. However the definition of success has been modified by stating that there
must be a valid business purpose for working on the project .Argument is that success is then
recognised as having the business component and a technical component. The purpose of
working on a project should provide some form of a value to both the client and the parent
organisation. Kerzner (2010) suggests that if there is no project value identified, and then the
project should not be undertaken at all. Value therefore can be defined as what the
stakeholders perceive the project’s deliverables as being worthy. Completing a project in time
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and on budget does not guarantee success if you were working on the wrong project or that
the project will provide value at completion.
2.2 Effects of project cost management policy on financial performance
According to Finnerty (2013; 20) the firm’s internal cash flows with the borrowing capacity
that is unused is the limited financial resource. The resource affects performance by imposing
a significant cost, which management can take advantage of opportunities that would cause
so. Without transparent projects there are no ways they can therefore take advantage of the
opportunities. The policy tends to incorporate no selection of project financing in situations
that entail high costs, thereby reducing the firm’s financial flexibility by exploiting the firm’s
internal financing capacity to fund future projects that have potentially high costs.
Wysock (2011) suggested that project management concept involves the use various tools
and approaches to determine the value in a project undertaken by an organisation. Various
factors are reviewed by authors that are valued for achieving project success in an expected
manner that does not leave an organisation in a dilemma, where the company suggests either
to cease projects to facilitate the operating activities hindered or hinder the core business of
the organisation to achieve a project success.
A project according to Brown and Hyer (2010, 2) it is a temporary endeavour intended to
solve a problem, but if failed it tends to increase the problems to the operational performance
of the organisation, seize and opportunity or respond to a mandate. Therefore project
management policy being implemented is expected to provide a smooth flow of project
activities without losses or increased cost or time that will affect the operations of the
organisation causing a reduced performance
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.According to Brown and Hyer (2010; 7), the project management policy involves a
consideration of factors essential to financial performance. These include clear and shared
purpose and goal meaning that all project participants are supposed to agree on the purpose or
mission of the project in concern and measurable goals, that is what is expected to be
achieved by the project according to what is available as resources. It is suggested that clear,
shared, challenging but realistic goals have a powerful influence on individual and team
performance. Inadequate support and resources when they are needed achieving the goal of
the project will be difficult.
According to a systems approach to planning, schedule and controlling by Kerzner (2013),
project management is useful to institutions or organisations undertaking projects. An
emphasis on the benefits of project management was provided, whereby, he states that it
allows management to accomplish more work in less time with fewer people. Profitability is
expected to rise as well. Having any changes to the scope project management allows a way
for a better control over the changes making the organisation more efficient and effective
through better organisational behavior principles as well.
2.3 Evaluating Risk Assessment Techniques
2.3.1 Project Risk Management
Projects are undertaken in environments full of uncertainties, of what will be achieved and
encountered during and at the completion of the project. The uncertainties arise in various
forms, which include uncertainties in funding and availability of resources necessary.
Therefore having uncertainties, like these, comes the basis for the project risk and the need to
engage in risk management. Risk management is defined by Pinto (2010; 221) as “the art and
science of identifying ,analysing and responding to risk factors throughout the life of a
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project and in the best interests of its objectives. Project risk can be defined as any possible
event that can have a negative effect on the viability of a project. Risk management consists
of estimating at the start of the projects, the situations that are unexpected that may rise
beyond the management control.
According to Kerzner (2009; 423)adding on project risk management he stated that it
includes the process of identifying the possible risks, the assessment of the risks
quantitatively or qualitatively, thereby choosing the appropriate method to handle these
risks ,monitor and document the identified risks. Effective risk management requires that the
management should be proactive so as to demonstrate a willingness to develop contingency
plans. They are expected also to actively monitor the projects and be alert to respond quickly
when a serious risk event occurs. Time and money however, also is required thereof for the
risk management to take place. Risk management is applicable at an organisation through a
process called four stage processes.
2.3.2 Risk identification
According to Lester (2013; 71) in our everyday life we take risks, crossing the street we risk
also being run over. If we go down the stairs, we risk missing a step and tumbling down.
Taking risks is such a common occurrence that we tend to ignore it. Indeed, life would be
unbearable if we constantly worried whether we should or should not carry out a certain task
or take an action, because the risk is, or is not, acceptable. This is described as the process
where the specific risk factors that can be expected to affect the project are determined. It
classifies the likely risks in a classification scheme.
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With projects, however, this luxury of ignoring the risks cannot be permitted. By their very
nature, because projects are inherently unique and often incorporate new techniques and
procedures, they are risk prone, and risk has to be considered right from the start,
Kloppenborg (2011; 319). There is financial risk which refers to the financial exposure a firm
opens when developing a project. It also includes the contractual or legal risk which is often
consistent in which strict terms and conditions are drawn up in advance. Contracted terms
like cost-plus terms, fixed cost, liquidated damages result in a significant degree of project
risk.
2.3.3 Analysis of probability and consequences
“The potential impact of these risk factors, determined by how likely they are to occur and
the effect they would have on the project if they did occur” Pinto (2010; 223). A risk impact
matrix can be constructed showing the identified risks, there hence being prioritised as to the
probability of its occurrence and the potential consequences for the project and management.
Management at MSU involved in project management without analysing the probability to
with which the consequences occur, it is involved in a double process of curing the
consequences like those at the ground where, operations slows .Cash outflows consequence
of MSU as suffered since 2010 can be well overcame by the risk impact process in
management.
Therefore the extent to which risk considerations should be made is to be higher so to ensure
that no consequences to affect performance due to project management failure in assessing
the risks involved in the project. This incorporates even the relations with the stakeholders,
taking for instance if operations fails due lack of funding customers are affected and that
means suppliers suffer late payments or no payments at all. The team identifies risk factors
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and then evaluates their impact using the matrix. Under the dimension of consequences of
failure, the management will be concerned with the issues that will highlight the effects of
project failure. For example MSU highlighting the effects of taking many projects increasing
the costs to manage and making outflows. Probability of failure or likelihood shows that each
project may therefore have a set of issues related to the consequences of failure that should be
clearly be identified.
2.3.4 Risk mitigation strategies
The effectiveness of risk mitigation strategies lies on the possible alternatives an organisation
can adopt in making a decision on how to address risks. Lester (2013; 72) suggested that
these are necessary when the management has accepted that the risk exist in a project that is
having risk awareness. These include accepting the risk, minimise risk, share risk, transfer
risk. Accepting risk is an option when management consider whether the risk is sufficiently
strong that any action towards is warranted. However if the likelihood of the occurrence is so
small or the consequences of their impact are so minor they may be judged acceptable and
ignored.
2.3.5 Contingency reserves
Contingency reserves being in several forms including managerial and financial, are among
the common methodologies to mitigate risks. They are defined “as the specific provision for
unseen elements of cost within a project scope’’ Allen (2010; 231).They depend upon the
type of project undertaken and the organisation. In construction projects it is seen most
common setting aside between 10% and 15% of the construction price in a contingency fund.
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2.4 Other decisions and controls applicable in project management
2.4.1 Ethics and project management
Ethics according to Kliem (2012; 1) refers to ‘‘a systematic study of the norms and values
that guide how humans should live their lives’’. Ethics revolves around the project
management concept for an organisation valuing the project. An organisation implementing a
project management process should also consider the concept of ethical behaviour as it
affects the process. The process involves the initiating, planning, monitoring and controlling
and closing stages.
2.4.2 Initiating
It is when mission, vision and the goals of an organisation’s project can be defined by a
charter as supported by Kuehn (2009). However sometimes few of the stakeholders will
engage in unethical behaviour with the anticipation of gaining even more advantage once the
project begins. They may as well not bargain in utmost faith, but do some illegal competitive
behaviour or for example indulging in bribery.
2.4.3 Planning, Monitoring and controlling
Acording to Luckey and Phillips (2011 ; 14) it refers to the determination of the road map so
to execute the charter contents .It also opens a gap by providing an opportunity for some
stakeholders to engage in a part of unethical practises. For example they may not provide
reliable estimates or purposely may underperform in working hours so they can receive
overtime pay. Keeping abreast of how successful the project is executing according to
objective and in such a way that it is achieving its initial vision.
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However opportunities are there for unethical situations and transgressions to arise. Timely
submittals on cost and schedule status for fear project termination should be made then. Since
a possibility that deliverables in project may be sabotaged for some reasons, for example
personality conflicts.
2.4.4 Closing
When the management ensures that all terms and conditions as well as any outstanding
obligations have been met, ethical dilemmas may arise. Kliem (2012; 104) emphasised that
these processes do not mean or indicate that dilemmas exist but simply they are said to give
an opportunity to do so. Therefore management need to be aware also of the unethical
dilemmas that could rise in the context and processes of projects. It is also important to
realise that not all ethical dilemmas can be intentional, so people are to be aware of the
occurrences and take any appropriate corrective actions. Categories of ethical dilemmas
include compliance, effectiveness, accurate and timely information, efficiency, and protection
of resources.
2.4.5 Management attitude towards project management
Maylor (2010) most business managers goes for less risk than more risk on a given return.
Therefore, they are risk averse. In general, a manager derives less satisfaction or utility, from
gaining an additional US$15000 than foregoing in losing US$15000. The basis on the
concept of diminishing marginal utility (DMU), as it suggest that an increase in wealthy ,
decline in marginal utility at an increasing rate is noted, that is making a concave for the
utility function for risk averse managers.
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2.4.6 Project portfolio management (PPM)
Following the principle of transparency on projects towards better performance goal,
according to Koster (2010; 43) aims at relating the project management cycles to the strategic
goals, rather than to the political power plays or emotional attachments. Portfolio refers to a
collection of projects that are managed under one umbrella. A project portfolio is defined as a
set of all the projects than an organisation runs. Therefore PPM is the management of the
project portfolio so as to maximise the contribution of the projects to the full welfare and
success of the enterprise.
MSU has been having more than 5 projects a year ,and according to Koster (2010) it is
emphasised that, If an organisation is having many projects in its portfolio, it will make sense
that project portfolio networks for projects with commonalities for instance projects which
cover same geographical region. Project portfolio and networks are cluster. The purpose of
the clusters is to ensure an optimal composition of the projects in the light of the overall
business objectives of the organisation.
According to Pinto (2010; 112) PPM is “the systematic process of selecting, supporting and
managing a firm’s collection of projects’’. Projects here are suggested to be concurrently
made under a single umbrella and therefore may be related or independent of one another. It
is suggested that there is a key to portfolio management which is the realisation that a firm’s
projects are to share a common strategic purpose and the same scarce resources.
Hobbs (2011) also supported by saying that the concept of PPM suggests that the
organisation is not expected to manage its projects as independent entities but, rather to
regard the portfolios as unified assets. The authors review here in agreement that for
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organisations like MSU undertaking such projects, PPM however, poses a constant challenge
among the long-term and short-term strategic goals and constraints.
Smith etal (2010 ;140) emphasised that managers are therefore said to make a number of
questions in management, and these include, the projects the company should fund which is
seen difficult to answer, any reinforce on future strategic goals by the projects, and if the
projects are complementary with others as well. In each of the question the long-term and
short-term strategic implications should be involved and taken together to constitute the basis
for both strategic project management and effective risk management. Portfolio therefore is
expected to entail the factors like decision making, prioritisation. A criterion for prioritising
can be used where it can consider the cost of the projects, opportunity, risk, and desire for
portfolio balance.
The available project alternatives are not evaluated according to the organisation’s
prioritisation scheme. Therefore projects that can be selected for the firm’s portfolio are to be
those that are based on the priorities and they offer maximum return to the organisation,
Bender (2010).
2.4.7 Controls on policy implementation
Pike etal (2009) stated that commitment should be made to devote the time, human resources,
and funding necessary to carry out a management policy, which involves also making a team,
collecting the necessary data, entering it into a spread sheet tool, analysing the information
generated, undertaking various “what if” analyses, and making decisions. A multi-
disciplinary team of staff from key management areas should be formed, that will work
together in conducting the analysis, analysing the various project management options, and
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decision making.Information should be provided to the entire staff about the initiatives being
undertaken and explanations of how important their participation is the process.
2.5 Best practices
Kliem (2012; 151) suggests that project governance is essential where there is identification
and implementation of policies and procedures, tools and techniques for achieving specific
goals and objectives. The policies are often associated with efficiency and effectiveness.
New York: Ford Foundation and Strategic Development Solutions, (2009); Best project
management strategies provide project managers with practical strategies used by many
organizations for controlling investment and project decisions and destinations. There is no
detraction, but enhancement of workflow allowing finding more time in the day.
Continuation in monitoring for compliance and violations is then essential for any practice.
According to Callahan etal (2011), what happens in a major project have a serious impact on
the financial performance of a firm. Therefore good practice of project management strategy
will provide training that works with your schedule, so that your practice can continue to
function while the implementation proceeds. The company should not have to stop to
implement a new practice management. Choose a policy that will maximize returns on
investment on available capital on an agreed risk level. Various organisations in European
countries the policies should be documented, consulted and monitored over time. In addition
investors in Brazil outlined that, they should provide the expertise to help you re-train or
change setup as needed to bring policy requirements up to industry standard.
Following Koster (2010; 43) who emphasised that the organisations has to make assessment
on which projects are conducive to the organisation’s overall business objectives matching
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the availability of funds ,such in a way that there will be none negative impact on the
operational performance in terms of resources and funds for financing.
Koster (2010) added that at no fund base prioritisation and selection might fail the project
considering an organisation having many projects on the ground. Therefore an evaluation
criterion has to be determined given the complexity of strategies; the financial success of the
project although paramount of importance will not suffice. Adding to that the constraints of
the organisation’s resources has to be taken into account with the rightful consideration of
procedures laid down so to avoid the project failing.
2.6 Summary
The chapter focused on cost management policy in project management as reviewed by
various authors of books and journals, its viability towards project success and performance
of an organisation. It also included relevance of risk management, other decisions and
controls relevant and deemed necessary for a better performance in project management. Best
practices as suggested towards management policy in project management rounded up the
chapter.
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CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introduction
This chapter focused on the research methodology used by the researcher in this study, that
is, the research design and technique applied in gathering data on the assessment of project
management decisions on financial performance. Included therein is the sample data, target
population, description on how data was collected and the data collecting instruments used. A
lay out on how data was analysed, processed and interpreted is also provided in the chapter.
Enhancement of the acceptability in the research findings and credibility of the research
recommendations is facilitated by the chapter content.
3.1 Research Design
Research design according to Mitchell and Jolley (2012) refers to a tool useful in obtaining
the answers to the questions thereby allowing the evaluation of the information. Hakim
(2012) described it as the point where questions can be raised theoretically or in policy
debates and these are converted into research projects and programs deemed feasible and
provide the answers to the those questions. It primarily deals with aims, purposes, intentions
and plans in the practical constraints of times, location, money and staff availability.
According to Mckenney and Reeves (2013) research design is research genre in which the
iterative development of solutions to complex and practical problems are to give the context
for the empirical investigation that can yields theoretical understanding to inform the work of
others. The goal and methods of it said to be rooted in and not therefore cleansed of the
complex variation of the real world. In the research knowledge is constructed in the form of
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insights among the involved participants and shared with other researchers and practitioners
and these studies tend to be methodologically creative.
Saxena (2009) outlined that it has two types which are explorative and descriptive method.
Therefore this research is carried as a descriptive, as it enables the researcher to make use of
the questionnaires and interviews in the extraction of the relevant information to his study.
3.1.1 Descriptive Research Design
Mathanajan etal (2009; 163) described descriptive research as the fact finding containing
interpretations that are adequate and involving just data gathering. There is form of reflective
thinking also that is involved in the method, where reflective thinking relate the gathered
facts to the objectives and assumptions of the research. There is also simple analysis of data
used and the statistically obtained parameters are to be discussed and as well as interpreted. A
descriptive research also is guided by a hypothesis that the researcher continues to generate
along with data gathering and this is deemed philosophically appropriate for the researcher.
According to Cant C (2009) the method attempts to derive a complete and accurate
description of the situation. It is suggested that it have questions to ask about the size, form,
distribution or the existence of a variable .The different techniques used in the data collection
include personal interview and questionnaire.
Descriptive research is also described by Sharma (2009) as the supplication of an accurate
description for something that is said to be occurring .It is also used to explain monitor and as
well as test hypothesis and can be used to a lesser extent to help in making predictions and for
discovery.
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Jerry etal (2011; 19) emphasised that descriptive research is concerned with the status. The
researcher adopted this method since it has an ability to provide answers to questions like
how, where and why of the study. The need to obtain responses from people is fulfilled often
from a wide range of activity. The method strives to provide a descriptive position
concerning the theme of the research and provide facts where decisions are based on. The
researcher can rephrase questions and by asking the additional ones the responses are
clarified and proper they become to secure the results that are more valid.
Sharma (2009; 44) added that “the descriptive research is more structured and more flexible”.
The design has interviews and questionnaires that strive to secure information about the
present practices, demographic data and conditions. Occasionally these ask for opinions or
the knowledge. Therefore the research is formal as it makes use of interviews and
questionnaires making it easy for the researcher to get the relevant factual information about
MSU. The researcher found it easy to use the design for he was in the area making it easy to
administer and follow the questionnaires and even carry out effective interviews with time.
3.2 Case Study
Joseph (2010) a case study is used by the researcher in the aim to sought the exploration of a
research and provides the researcher the ability to deal with a wide spectrum of guidance. The
researcher used it in the assessment of the impact of project cost management decision on
financial performance of Midlands State University. According to Dominic (2010; 141) case
study is the most valuable when the researcher has an aim to obtain a wealth of information
about the research topic as they provide a tremendous detail. It is useful in gathering
descriptive and exploratory data and suggests why something has occurred. Therefore it
affords the researcher the ability to deal with a wide spectrum of evidence. Case study supply
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and presents the prospects that the researchers could not otherwise have. It proved to be a
good method in challenging a variety of theoretical assumptions.
3.3 Target population
According to Johnson and Christesen (2010; 257) target population refers to the population to
whom the study results are to be generalised. Babin and Zikmud (2010; 321) also stressed
that target population or frame is a list of elements or individual members of the overall
population from which the sample is drawn, where population is that group which the
researcher is interested in gaining information and drawing conclusions from. Target
population constitutes Midlands State University non-academic staff.
3.4 Sampling
Sampling as defined by Lohr (2010; 3) refers to the selection of individuals included in the
population and make a list of them, that is they become a sampling unit. Thompson (2012; 1)
also added that sampling involves the selection of some part of the population to observe so
that someone may estimate something about the population as whole.
3.4.1 Sampling procedures
This refers to ways in which issues of interest concerning the population are to be selected.
Thompson (2012) outline that there are two types of sampling which are probability sampling
and non-probability sampling. The researcher therefore used Non-probability Sampling.
3.4.2 Non-probability sampling
According to Babbie (2013; 199) non-probability sampling is the technique whereby samples
are selected in some way that is not suggested by theory, that is, reliance on the available as
well as purposive or judgemental sampling. Denscombe (2010) ,non-probability sampling
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involves an element of discretion or choice on the part of the researcher and at some point in
the selection process there is still a retainment of the aim of generating a representative
sample. Using this approach elements are selected by judgment or convenience. Using this
approach implies that samples can be judgmentally controlled to provide a representative
cross section of the population. Non probability sampling techniques used by the researcher
were the convenience and judgmental sampling.
Sekeram and Bougie (2010; 280) highlighted that with non-probability sampling the most
easily accessible members are chosen as subjects. The method is deemed accurate since the
researcher targeted a specific group, the answers can be similar to what the rest of the
population will also provide as answers. It can be effective upon trying to generate ideas and
getting feedback, the results cannot be generalized by the researcher to the entire population
having a high level of confidence. Also it is more convenient and less costly method of
sampling.
Non-probability sampling is used because it is cheaper and faster compared to probability
sampling Denscombe (2010) also suggested that in the interest of saving costs the selection of
sample involves an element of expediency and established better practices than strict
adherence to the principles of the random sampling. It can also be used where there is an aim
of explorative sample than representative cross section of the population. In these cases it is
useful because people or items involved are chosen to the sample basing on their expertise,
experience or the fact that they might be different from a norm or might be unusual, therefore
their selection is taken not as only as pure chance matter.
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3.4.3 Convenience Sampling
According to Wild and Diggines (2009; 200) ,convenience sampling is when there is a
population that is readily accessible and available only to the researcher the same time at the
same place and a sample is selected from them. These will stand a chance to be selected for
the interviews. Therefore in this case the sample is not respectable of the population and there
is no generalizations reached reliably
As the sample is selected because they are convenient since not every person in this volatile
environment characterized by hyperinflation is found all ready to respond to any
questionnaire nor interview for example a person like the general manager is very important
to the research under study but it is very unlikely that he will find the right time to respond to
the questionnaire and therefore it renders in this case convenient sampling relevant.
According to Sekaram and Bougie (2010) therefore it is quick, convenient, less experience
and the most easily defined accessible members are to be chosen as subjects. The
convenience sample therefore assists the researcher to gather valid data and information that
would not have been possibly obtained using probability sampling techniques.
3.4.4 Sample Frame
According to Denscombe M (2010) a sampling frame is a complete list that contains all the
information about the research population in focus, from which the sample to be selected.
The frame consists of the administration workers that are the Bursars, clerks and
administrators.
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3.4.5 Sample size
A sample size refers to a selected subgroup that represents the research population. Cargon
(2010; 236) a sample size is dependent on a defined population, and it is necessary to
determine what size is appropriate for the study. Kotler et al (2009) reviewed sample as a
segment of the population selected for a research to represent population as a whole. These
are to enhance the researcher in making the proper estimates of the thoughts and behavior the
population at large. Table 3.1 below shows aggregate distribution of sample unit from the
chosen population.
Table 3.1 Sample size
Target population Population sample Percentage sampled
Bursar 1 1 100%
Deputy Bursars 3 3 100%
Assistant Bursars 7 7 100%
Accounts clerk 10 10 100%
Administrators 5 5 100%
3.5 Types of data
3.5.1 Primary data
According to Strydom etal (2009) primary data refers to data that is specifically collected for
the research problem that is at hand. Also according to Dominic and Wimmer (2010),
primary data is information collected for the specific purpose at hand. Johnson and chrestesen
(2010), refers to primary data as a new data specifically collected through field research for
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the project. Specifically it generates information for the project in hand. Any original
research performed by individual researchers or organizations to meet specific objectives.
The research used first-hand information obtained from the study. This data was collected
through on site research of target population through personnel interviews and self-
administered questionnaires. In addition Strydom sight the following as the advantages and
shortcomings of primary data. The author employed both face to face interviews and self-
administered questionnaires as primary source data gathering techniques.
Primary data is closely more connected to the field and is not collected through a process of
filtering that is used in secondary sources, (Sreedharan 2010; 11).Therefore primary data is
original and relevant to the research requirements and therefore it increases the degree of
accuracy of the information provided. A large population is included and a wide geographical
coverage. Moreover primary data is current and it gives the researcher a realistic view on the
problem statement. Also the reliability on the primary data very high since these are collected
by the concerned and reliable party since it is collected from source.
3.5.2 Secondary data
Thompson K (2012) suggests that secondary data is viable alternative source which provides
comparative and contextual information results in other discoveries. Usually data which had
been collected for other purposes might be relevant to a particular study. It is said to have
been collected by someone other than the researcher himself for purposes other than the
solution of the problem at hand but, is utilized by the latter. Secondary data also can be
viewed as information that is already gathered and is readily available. Internal and external
sources of secondary data were used by the researcher. Internal sources were in the form of
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reports and memorandums. External sources include the academic journals by various
educational institutions and text books by various authorities in relation to accounting
information systems. The secondary data was also gathered through the desk research
technique.
According to Sindhu (2012; 4) secondary data provides a framework by which direction on
how the specific research should be taken by the researcher. This data was readily available
and summarized therefore researcher saved time and costs .A better starting point is provided
for research and often helps define the problem and research objectives, that is, acted as a
guide and benchmark for the research .An opportunity to examine the data from theoretical
perspective is granted to the researcher as well. Adding more secondary data is faster to
access and a way to access the work of other scholars all over the world is provided too.
3.6 Research Instruments
According to David J (2009) research instruments are defined as a model that logically guides
in the process of collecting data, analysing and interpreting it. The questionnaires and
interviews that follow were used.
3.6.1 Questionnaires
Matharajan etal (2009; 164) point out that “a questionnaire is a self-report where the
respondent is expected to write her/his answer in response to questions on a questionnaire
printed document”. Aakere’tal (2009) also emphasised that a questionnaire can be refered to
as a vehicle of communication between those seeking insight (the survey sponsor) and those
from whom insight is sought (the respondents).
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Jerry R etal (2011; 19) also supported the use of questionnaire by emphasising that they
usually strive to achieve the secured information about the present practises, conditions and
demographic data, that is , occasionally a questionnaire is to ask for opinions or knowledge
deemed useful during the study. The responses to be obtained from people are often from a
wide section of activity. The responses are gathered in a formal standardised way that is
being more of objective. There is low cost of conducting the questionnaires and there is also
much saving of time. Chances of bias between researcher and respondent are also eliminated
where it can be administered to many people and can anonymously be completed. A written
record of what was asked is provided
The researcher used questionnaires since they make it very possible for the researcher where
various aspects of the research are quantified, that is those being studied. They were issued
and the respondents were expected to fill at their own time and were collected at a later as
agreed. The structure of the questionnaire was in a way that allowed respondents to make
quick responses since the clearly laid question are simple.
3.6.2 Interviews
An interview according to Babin (2010) refers to a discussion that is purposeful between two
or more people. Personal interviews were used in this study. The interviews are oral verbal
and the responses are also oral verbal therefore quick instant and honest responses are
obtained in a limited time scheduled for the interviews.
The researcher used the personal interviews where there is much of personal ingenuity and
greatly a deal of flexibility in stimulating management staff so as to reveal more of their
motives and attitude. Time is not much consumed as well. There is positive response in all
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questions since there is ready assistance available. A monitoring of body language during the
interview on sensitive questions is also noted.
3.7 Types of Questions
3.7.1 Closed ended questions
According to Babbie E (2012; 255) closed ended questions are the survey questions in which
a respondent select an answer from among the list that the researcher provides. They are
constructed when guided by structural requirements which includes that the first response that
is provided should be exhaustive and they are expected to contain all the possible responses
which are expected. The questions therefore rely on the structuring of responses by the
researcher. Having clearly relative answers to the questions however there is no problem.
Also they can be in a scale format, whereby the respondent is to decide on rating the situation
along the scale continuum provided, fairly similar to the Likert questions. The researcher
used closed questionnaires for his research.
Popularly recognised in research since they are to provide a greater uniformity of the
responses and they are easily processed as exclaimed by Babbie (2011). Closed questions
demands minimum motivation and answering them is also less threatening to the participants,
therefore it provides respondents with a guide. They provide ready-made categories whereby
respondents are to reply to the questions asked by researcher, this help to ensure that the
information to the researcher is obtained and the data is easy to analyse.
3.8 Likert scale
The likert scale according to Purcell and Purcell (2009; 124) it is called a 7 point scale that is
known to provide more variability and wider range of response choices. The choices are
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suggested not to be more than nine. The scale is psychometric and it is mostly involved in
researches that adhere to questionnaires. The common responses involved in the scale include
strongly agree, disagree, neither agree nor disagree, agree and strongly disagree. The range
captures the intensity of the respondent’s feelings over a given item. Over the full range of
the scale, there can be created a simple sum questionnaire response. In so doing, Likert
scaling assumes that distances on each item are equal. Items are importantly considered to be
parallel instruments or they are assumed to be replications of each other. The following is an
illustration of the scale used by the research showing the available
Table 3.2 Likert scale
Item Strongly agree agree uncertain Disagree Strongly disagree
points 5 4 3 2 1
3.9 Reliability and Validity
According to Rubin and Babbie (2010) reliability is to describe the consistency of the
indicators that the researcher has applied in the research and generally being expressed as a
correlation value in between them .It is the extent to which the measures are free from error.
Validity refers to the extent the correspondence concept is affected by a certain measure.
Validity and reliability are taken as the indicators that are essential for quality in a relatively
large research community. Therefore the researcher made use of simple and precise questions
without calculations so as to ensure validity and reliability.
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3.10 Data Presentation
The illustrative methods which include pie charts, bar graphs and tables are used in data
presentation. The researcher is using these presentation methods because they are easy to
understand and they are also very clear in providing depiction of trends and summary of
information that is gathered.
3.11 Data analysis
Yin (2011) describes this as a type of data analysis that is special and involving attempts to
building explanations while collecting data and analysing than a predicted explanation
testing. The most significant observations emerged from all the data gathered in the field,
while reducing the volume of data through the screening process. This process involves
systematically the application of mode statistical technique to describe and illustrate, recap,
condense and evaluate data.
3.12 Summary
The chapter provided a report on what has happened during the research process by the
researcher. The research design, sampling, types of data, research instruments, types of
questions are highlighted in the chapter. The likert scale and presentation of data and analysis
in the research study is conducted. Research methodology presented, is supported to be the
most effective and minimization of research errors can be noted thereby making the study
better representative.
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CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.0 Introduction
Following the methodology used by the researcher to collect data in the previous chapter, this
chapter therefore provides the presentation and analysis of data gathered from questionnaires
administered and interviews that were carried by the researcher.
4.1 Response Rate
This study had a population of 25 respondents
4.1.1 Response Rate of Questionnaires
Table 4.1 Questionnaire Response Rate
Number Percentage (%)
Questionnaire distributed 25 100
Questionnaire returned 23 92
Questionnaire not returned 2 8
According to table above 23 of the questionnaire distributed were returned therefore giving a
percentage response of 92% and only 2 (8%) of the questionnaire was not returned. This
shows that the response was 92% successful. According Lohr (2010) Response rate of at least
50% is to be considered adequate for an analysis and even reporting, whereby 60% is good
and 70% and above is very good. Marsden and Wright (2010) also outlined that working with
a poor response rate is known to destroy the all careful work that would have been made
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through an appropriate sample design. He added that it makes no sense attempting to estimate
the population parameters from a sample statistics when the response rate is just below 85%.
It is therefore important to make efforts in achieving a high response rate as possible most
commonly for samples.
4.2.1 The firm has a cost management policy (CMP) on project management decisions
The question seeks to establish the existence of a cost management policy that serves as a
standard in project management towards decision making at the firm.
Fig 4.1 Cost Management Policy
Strongly agree
Agree Uncertain Disagree Strongly disagree
0
5
10
15
20
25
30
35
40
45
Cost Management Policy
Strength
Perc
enta
ge (%
)
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Data presentation above shows that 43.5% (10/23) strongly agree, 34.8% (8/23) agree, 13%
(3/23) are uncertain and 8.7% (2/23) disagree that the policy do exists. In overall 78.3%
(18/23) agree and 13% (3/23) disagree. The interview responses 4/4 (100%) also reflected
that there is a cost management policy on the institution. The respondents are found more to
agree than disagree since most of them and those interviewed are also included in the
management team and on annual basis the policy is said to be reviewed by them. Those 13%
found disagreeing argued that policy existence is proven by documentation. At the
commencing of each project reference is made to what the policy stipulates hence that serves
as evidence for the existing policy and the basis provided to the team for the quality making
of the projects. Respondents suggested that for costs to be managed a policy is put on the
ground to follow and be in line with objectives. Brent (2010) emphasised that if a company
have no formal policy the management and project team are supposed to draft one so as to get
the reliable guideline on projects leading to success. This serves as a standard to the team
working towards the objectives of the organisation. The responses therefore are showing that
the cost management policy towards capital project does exist though they are not mentioned
to have been documented and adhered to, but from the objectives laid for the projects ,the
management based them on the achievement of a good quality of project resulting.
4.2.2 The CMP is documented.
The question sought to establish the documentation of the cost management policy for an
easy access of guidelines to facilitate project success by managing cost. Table 4.2 shows the
responses given by respondents towards the documentation of the policy.
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Table 4.2 Policy documentation
Strength Response Respondents %
Strongly agree 1 4.4
Agree 7 30.4
Uncertain 3 13.0
Disagree 11 47.8
Strongly disagree 1 4.4
Total 23 100
Responses highlight that 1/23 (4.4%) strongly agree, 7/23 (30.4%) agree, 3/23 (13%) are
uncertain, 11/23 (47.8%) disagree and 1/23 (4.4%) strongly disagree that the policy is
documented. In total 12/23 (52.2%) disagree whilst 8/23 (34.8%) agree. The respondents
argued that during the project process, there are no set of rules guiding the projects provided
to the project managers as a guideline towards the implementation hence this shows that no
document circulated to the team serving as a policy though discussed in the meetings and it
ends with the management There is no information provided stipulating project priorities that
is knowing which project to fund and not to at a limited capacity of funds, all projects are
taken , causing costs to increase. Considering the responses given it is concluded that the cost
management policy is not documented. Mittal (2011) outlined importance of policy
documentation by stating that it enables the examination of activity funding and allows easy
analysis of data based on guidelines on the note.
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4.2.3 Policy implementation in line with documented procedure
Fig 4.2 Policy implementation
Strongly agree Agree Uncertain Disagree Strongly disagree
0
10
20
30
40
50
60
70
4.4
21.713
60.9
0
% of respondents
The presentation in fig 4.2 shows that 1/23 (4.4%) strongly agree, 5/23 (21.7%) agree, 3/23
(13%) are uncertain, 14/23 (60.9%) disagree. Collectively 6/23 (26.1%) agree and 14/23
(60.9%) disagree. Since there is no documentation of the policy at the organisation most of
the respondents, 60.9% are found not in agreement that implementation is in line with
documentation. What is being done in the process has no written evidence laid down for the
team as lines to follow, so what is practised is not found producing what is expected. Projects
are undertaken at the expense of company’s operational performance. According to Drury
(2012) a policy has to be a document with a set of rules and guidelines and has to be known
by the employees so that what has to be done is focused on objectives. According to the
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undesirable results of high costs and more outflows in conclusion the responses show that the
implementation of the policy and documentation are not inline.
4.2.4 The following are the controls over policy implementation
Table 4.3 Accountability, Monitoring, Transparency and Compliance
Strength Accountability Monitoring Transparency Compliance
Response % Response % Response % Response %
Strongly
agree
4 17.4 2 8.7 4 17.4 0 0
agree 8 34.8 6 26.1 6 26.1 2 8.7
Uncertain 4 17.4 0 0 0 0 0 0
Disagree 7 30.4 5 21.7 10 43.5 15 65.2
Strongly
disagree
0 0 10 43.5 3 13 6 26.1
Total 23 100 23 100 23 100 23 100
According to table4.4, 17.4% (4/23) strongly agree and 34.8% (8/23) agree that there is
accountability whilst 4/23 (17.4%) were uncertain and 7/23 (30.4%). In overall 12/23
(52.2%) agree and 7/23 (30.4%) disagree. 4/4 (100%) interviews response agreed on
accountability. The respondents in overall agreed on accountability basing on the knowledge
of understanding what the projects are aiming for to the organisation without the
consequences caused of cost management failure, they are said to be understandable but in
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parallel to what the policy is expected to provide Accountability should be practised directed
to policy guidelines and rules, however the organisation has no documented policy.
On monitoring 2/23 (8.7%) strongly agree and 6/23 (26.1%) where 5/23 (21.7%) disagree
with 10/23 (43.5%) who strongly disagree. In total 8/23 (34.8%) agree whilst 15/23 (65.2%)
disagree. According to interviews 3/4 (75%) disagree that monitoring is there. Respondents
argued that monitoring is routine and if practised effectively the projects are to be achieved at
a better state of performance in finance and will not result in cost increases since it will be
aiming at cost minimisation but however in this case the firm is running out of funds due to
projects showing lack of effective monitoring. Thomsett (2010) suggested that projects
should be practised with project constraints in mind which shall incorporate much of
monitoring and if it lacks the firm is hindered from achieving the good results and can even
spend more time to complete the projects than expected. In conclusion the responses show
that monitoring is of much lacking.
On transparency 4/23 (17.4%) strongly agree, 6/23 (26.1%) agree, 10/23 (43.5%) disagree
and 3/23 (13%) strongly disagree. In overall 10/23 (43.5%) agree and 13/23 (56.5%)
disagree. Responses show that most of the employees are not that much aware of what
exactly is the direction to which the projects should be undertaken. Therefore response
reflects that there is no transparency over the policy since the document is also not circulated
through to the relevant sections responsible for projects. According to Finnert (2013) the
resource affects performance by imposing a significant cost, which management can take
advantage of opportunities that would cause so. Without transparent projects there are no
ways they take advantage of the opportunities.
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The responses on compliance shows that 2/23 (8.7%) agree whilst 15/23 (65.2%) disagree
with 6/23 (26.1%) strongly disagreeing that compliance is upon policy implementation.
Summing up, 21/23 (91.3%) disagree and 2/23 (8.7%) agree. The organisation has nowhere
to refer what is implemented and test for compliance for the team is working at no guideline
but acting only towards quality achievement , which may be achieved but in a wrong and
unexpected costly way, Kliem (2012). Interview responses also shows that 3/4 (75%)
disagrees that there is compliance and transparency on the policy implementation because
most members of the team were not aware of what the guidelines of the policy should be
since they were not documented. Drawing up the conclusion, there is no compliance upon the
policy implementation.
4.2.5 Current Cost Management Policy (CMP) affects financial performance of MSU.
Fig 4.3 Effect of CMP on Financial performance
Strongly agree
Agree
Uncertain
Disagree
Strongly disagree
0 10 20 30 40 50 60 70
21.7
65.2
4.4
8.7
0
% of Respondents
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The question aims on the establishment of the impact of CMP on financial performance. A
conclusion therefore can be drawn that CMP has an impact.
According to data provided in table 4.5 and fig4.4, there are responses showing that 5/23
(21.7%) strongly agree and 15/23 (65.2%) agree whereas only 1/23 (4.4%) is uncertain and
2/23 (8.7%) disagree that CMP affects financial performance. As a whole 20/23 (86.9%)
agree and 2/23 (8.7%) disagree. Interviews responses were 4/4 (100%) who agreed and the
respondents highlighted the outflows noted as a result of high project costs increasing each
and every year, and these were failed by the management on the policy implemented. This
was stated by Finnert (2013) who outlined that it is affected by reducing the firm’s financial
flexibility by exploiting the firm’s internal financing capacity to fund future projects that
have potentially high costs. Once the funds at the firm are diverted, it shows that what is
being implemented is effective enough to achieve the goal. Operating activities of the firm
are also found slowing down as a cause of the funding procedures, where by the priority in
terms of funding is now given to the projects already on the ground. This leaves a gap as to
what then shall be the source of finance for operational activities.Therefore a conclusion
based on the responses is drawn for Cost management Policy as having an impact on the
performance as it is seen decreasing at an increasing rate against expectation.
4.2.6 There are policy reviews in the organisation
The objective of the question is to assess how often the Cost Management Policy is reviewed
in each year.
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Table 4.4 Policy reviews
Quarterly Bi-annually Annually Total
Response 4 1 18 23
%Response 17.4 4.4 78.3 100
The responses show that 18/23 (78.3%) the reviews on the whole are done annually.
Following also interview responses 3/4 states that reviews are done every year but an issue of
in effective strategies or lack of strategies that can be put in place to protect what has been
reviewed upon the policy. According to the University of Antioch it is suggested that for an
organisation to ensure relevance of guidelines, objectives and financial status policy reviews
must be made.
Larson and Gray (2011) also outlined that when we control what we have planned it is
necessary to take review as one of the controls over what is implemented and value
communication so to make everyone aware of what is expected. The policy is reviewed by
the top management and there is lack of communication among the management and those in
the operations to guide them on how changes are effected upon their operations. Therefore it
leaves the firm resistant to change even though policy reviews are done, that is, if only
management knows it remains with superiors and have no effect upon implementation. It is
suggested that on reviews, it is better to do them as much in a year and effectively
communicate, to keep the firm updated even to economic changes. However, there is an
agreement that policy review is conducted by the firm and suggestions from interviewees
state that it should frequently be reviewed in a year and be tested for effectiveness.
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4.2.7 Consultation occurs between finance and project committee
The question aims at establishing consultation between the finance committee and project
committee.
Fig 4.4 Consultation between finance and project committee
Strongly agree Agree Uncertain Disagree Strongly disagree
0
5
10
15
20
25
30
35
40
45
50
0
43.5
4.4
21.7
30.4
% of respondents
The presentation above shows that 10/23 (43.5%) agree, 1/23 (4.4%) is uncertain, 5/23
(21.7%) disagree and 7/23 (30.4%) strongly disagree. As a whole, 12/23 (52.1%) disagree
that there is consultation between the committees and 10/23 (43.5%) therefore agree. Due to
the financial problems faced towards the projects it terms of funding that is insufficient funds
and fund misuse it is argued that finance has no communication with the project team. The
responses 52.1% supported by disagreeing since it is expected that before the project
commences the committees must meet to discuss. The discussions thereof are focused on
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what project is worthy a success matching to how much funds are available to finance as
emphasised by Pinto (2010). The project team must addresses the projects to be done and the
finance team outlines the possibilities of either all to be undertaken or not since this will have
an impact on operational performance as a whole. In conclusion the responses show that there
is no consultation between the finance and project committee.
4.2.8 Risk assessment techniques are implemented towards project decisions.
Fig 4.5 Risk assessment techniques
Strongly agree
Agree
Uncertain
Disagree
Strongly disagree
0 10 20 30 40 50 60
21.7
52.2
13
13
0
% of Respondents
The responses towards risk assessment techniques show that 5/23 (21.7%) strongly agree,
12/23 (52.2%) agree whilst 3/23 (13%) were uncertain and 3/23 (13%) disagree. In total
17/23 (73.9%) agree and 3/23 (13%) disagree. Respondents from interviews 3/4 (75%) agree
that the techniques are there but argued that they are ineffective since the firm is still exposed
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to the financial risks. It is shown that as most respondents agree on risk indicators, the
company still suffers from financial risks associated with more outflows and high project
costs. Bender (2010) however added that when monitoring, review and communication lacks
among the project committees most likely all techniques implemented towards successful
results will find no value. This reflects that monitoring, review and communication lacked
within the project towards risk minimization and made the techniques ineffective. Therefore
in overall there are risks assessment techniques implemented at the organisation and found
ineffective due to lack of monitoring and review upon the implementation.
4.2.9 Should MSU continue using the Current Cost Management Policy (CMP)?
The question sought to derive opinion of respondents towards the current policy on whether
to continue using it or not.
Fig 4.6 follows showing the responses given by the respondents expressed as in percentages.
Fig 4.6 Current CMP
22%
17%
39%
22%
AgreeUncertainDisagreeStrongly disagree
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The chart shows that 22% (5/23) agree that the firm can continue using the current policy
whilst 17% (4/23) are uncertain probably because of the unawareness of the policy and
different operational functions some are not exposed close to such section. 39% (9/23)
disagree with an additional 22% (5/23) who strongly disagree. In total 22% (5/23) agree and
61% (14/23) disagree. 50% (2/4) of the interview respondents outlined that the policy should
be changed. Most respondents disagreed on the organisation continuing with the policy since
it is seen that it is affecting performance directing organisation towards poor liquidity and
low profitability. It is found ineffective to implement the policy that is producing the
unexpected results when other controls are put in place. Koster (2010) emphasised that
policies that seek to accommodate project costing are found lacking transparency of project
management portfolio which aligns projects to strategic goals. He suggested that it is better
for an organisation to have such a one when it needs to undertake a large number of projects
as it seek to maximise contribution of projects to the overall welfare and success of the
enterprise In conclusion the responses highlights that MSU should not continue with the
current Cost Management Policy for is noted that it has failed to meet the stated objectives of
the firm mainly focused on the cost minimisation.
4.2.10 Rank of MSU regarding Profitability, Project Management and Liquidity
The question seeks to establish the position of MSU on profitability, project management
and liquidity through opinions provided by the respondents. The responses regard the
variables as excellent, good, average or poor. Following is Fig 4.7 showing the ranking
thereof MSU as suggested by the respondents:
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Fig 4.7 MSU Profitability, Project management and Liquidity position.
Profitability Project Management Liquidity0
20
40
60
80
100
120
26.1
0 0
43.5
21.7
69.6
34.8
78.3
30.4
Good Average Poor
Findings show that 6/23 (26.1%) of the respondents indicated that profitability is good whilst
10/23 (43.5%) says it is average with 8/23 (34.8%) who indicated that it is poor. In terms of
operational activities responses shows that profitability has been average only to be affected
by project management which sought to divert the funds thereby limiting the operations of
the organisation and undesirable levels of profitability therefore are achieved.
On project management, responses shows that only 5/23 (21.7%) says it is average whilst the
rest 18/23 (78.3) indicated that project management is poor. The respondents relied on the
results that are on the ground so far In terms of the projects. Increase in costs causing the
organisation to run out of funds is because of the unlimited projects undertaken. There is no
efficient fund allocating method based on priority so as to reduce the increase in costs and
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achieve a better performance. Finnerty (2012) stated that it is easy for the organisation to
collapse if its profitability level and liquidity position is poor and findings here also indicate
that 16/23 (69.6%) respondents highlighted that liquidity is on average whilst the other 7/23
(30.4%) outlined that it is poor. Therefore in conclusion of the findings the responses show
that profitability and liquidity position of MSU is average and project management is poor.
The conclusions are supported by the increasing costs noted in the projects which the
management has therefore failed to manage.
4.3 Interview Responses
The researcher in his sample targeted 4 individuals from various sections so that he can
interview and had 6 questions for each person. According to Babbie (2011) interview
response are more reliable, it is a matter of first-hand information provided mostly as asked
by the researcher. The number of interviews conducted was 4 and therefore interviews were
100% successful.
4.3.1 Cost management policy technique used in project management decisions.
The question sought to assess the existence of a cost management policy being implemented
by the organisation. 4/4 (100%) were interviewed and all of them stated that MSU has a cost
management policy that serves as a guideline towards the project management. MSU value
the quality of the project to be achieved and there bases their policy. The other response upon
the question stated that there is much uncertainty on the documentation of the policy since
transparency over implementation is not there. The final response given by the last
interviewee was that the policy is ineffective towards projects, with which it seem not state
the limitations in terms of the number of projects the firm should undertake in order not to
exploit the funds available. Therefore findings show that MSU has a cost management policy.
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4.3.2 The extent to which MSU financial performance is affected by the policy.
The question establishes the extent to which the cost management policy is affecting financial
performance as given by the interviewees. The interviewees, all outlined that the policy is
affecting the financial performance giving a response rate of 4/4 (100%) all agreeing to the
policy affecting. It is stated in that costs are increasing at an increasing rate due to projects,
which are now limiting funds to operations, more outflows are noted. Therefore interviews
over the question show that the policy has an impact on financial performance. The
performance of the organization is giving a status that is difficult to boost funds as they are
all directed towards projects. Creditors needed to be paid as the company was withholding
the processing of their papers, delaying payments due to lack of funds, one of the creditors
clerk responded.
4.3.3 There are reviews done over the cost management policy.
The question aimed at assessing the reviews of the policy at the organisation as a control over
policy implementation.3/4 (75%) responded that the reviews over implementation are there.
They sated that, reviews are done each and every year so to keep the guidelines updated and
effective for decision making whilst 1/4 (25%) was uncertain to how often the organisation
does the reviews and suggested that they should be done three times yearly to get maximum
updates upon the standards. Findings hence show that the reviews are there and are stated to
be done annually at the organisation.
4.3.4 Challenges faced by the organisation through the implementation of the policy.
On this question 3/4 (75%) said that the firm has a challenge of cost management and the
firm is also resistant to change since the policy has never been change to try other policies
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since the beginning of projects at the organisation. These therefore suggested that the policy
is worthy a change, so as to try another one that can assist the firm by cost minimisation for
the firm to perform as expected. One of the interviewees a rate of 25% was unaware of the
challenges in the implementation, he stated to have no much knowledge over policy
implementation. In conclusion the findings show that the firm fails to manage cost as
supported by 75% of the respondents who suggested also that the organisation should not
continue with the current policy. Mainly from the creditors section as the assistant bursar
exclaimed, it is found that the organization struggles to pay its creditors, further more making
the battle worse word was already done and it was completed.
4.3.5 Evaluation of the risk assessment techniques as applied by MSU
The question sought to evaluate the strength of the risk assessment techniques implemented
by MSU. The interviewees, 4/4 (100%) accepted that risk assessment techniques exist at the
organisation but argued that, they are not effective since they are failing to mitigate the risks
or to minimise the risks. It is added that the objectives are not even met as expected and this
serves as evidence of improper or ineffective implementation. The firm is increasing its
exposure to many financial risks. One of the respondents suggested that more effective
techniques should be put in place so as to mitigate these risks. In overall 4/4 (100%)
suggested that the risk assessment techniques are not effective and better means should be
applied in terms of planning and monitoring to counter risks. It is evidenced by the losses or
increased levels with which the outflows were experienced and since 2010 the organization
has been facing increased costs thereby increasing outflows.
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4.3.6 There are strategies implemented to ensure that the policy is up to date with
economic changes.
The responses from the interview shows that there are no any other strategies implemented
towards the policy when considering the economic changes since they all mentioned
resistance to change , where organisation struggles to change due to lack of these strategies to
be up to date with economic changes. It is suggested that management engage into
consideration of these external factors also affecting the organisation apart from the reviews
which are done. In conclusion there are no other strategies implemented except policy
reviews.
4.4 Summary
The chapter focused on the analysis of data gathered by the researcher through questionnaire
administering and interviews carried out. The total of 25 questionnaires was administered and
there was a response rate of 92%. Interviews conducted were 4 giving rise to the achievement
of 100% response rate.
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CHAPTER FIVE
CONCLUSION AND RECOMMENDATIONS
5.0 Introduction
The chapter serves as the final chapter of the study whereby the researcher summaries and
makes conclusions, remarks and recommendations as well as providing suggestions of areas
for further studies. Reference to chapter one research objectives and findings as presented in
the previous chapter is made.
5.1 Summary of chapters
The research began with the background to study on which the researcher assesses the impact
of project management decisions on financial performance. The policy resulted in a failure to
manage project costs, which led to unexpected increase in outflows. There is also statement
of the problem, sub research questions, main research question and research objectives. The
chapter also consists of the significance to study, assumption, delimitations, limitations,
abbreviations and definition of terms, all these were discussed.
Literature review by various authorities then followed linking the literature to the study by
the researcher. What the authors proclaim and argue about the cost management in project
decisions was assessed by the researcher in the study. Drury (2012) suggested that an
organisation should have a document containing a set of rules, limitations, standards and a
guideline governing the management in decision making that is the policy and its vital
purpose in project management. Brown and Hyer (2010) also emphasised that the project
management involves a consideration of factors essential to financial performance and
suggests the documentation of the policy when implementing cost management policy.
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Paladino (2010) stated that if the trends focus on one scenario communication is necessary to
be made so as to get needed financial and operational results performance since significant
costs can be imposed by the limited financial resource.
Research methodology is covered by the third chapter and the researcher used descriptive
research design to assess the impact of project cost management decision on financial
performance. According to Mathanajan et al (2009) described descriptive research as an
accurate fact finding containing interpretations that are adequate and involving just data
gathering. The sampling method, non-probability sampling was used in the determination of
the population and the sample size. Sekeram and Bougie (2010; 280) emphasised that with
non-probability sampling the most easily accessible members are chosen as subjects. The
sample was made up of the Midlands State University non-academic staff. The researcher
administered the questionnaires and conducted some interviews so as to collect the primary
data and secondary data was therefore obtained from company articles and reports.
The research study findings were presented, analysed and interpreted in the fourth chapter. A
successful response rate of 92% was achieved from questionnaires administered and a 100%
rate from interviews conducted. Basing on the question by question the findings were
therefore presented with the use of pie charts, graphs and tables. The percentages were used
by the researcher in analysing the research findings.
5.2 Major findings
The university has an established cost management policy. However according to the
research the existing policy is found not documented.
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The project committee and finance committee was not having adequate time to plan
and work towards what the projects need, hence the management was failing to
effectively implement the policy.
Management does not conduct workshops or committees to educate employees on
project issues and policy guidelines which led to the absence of guidelines written to
support the implementation process. Therefore the policy failed because there were no
standards to align with the policy implementation.
The controls over the policy were also seen to be existing but were not adequate
enough to make implementation a success and these include monitoring and
transparency. The study shows that there was no monitoring enough of the projects
when the policy was implemented and hence led to lack of compliance as well.
Transparency is also lagging behind.
Risk assessment techniques were found there but also not effective enough to mitigate
the risks associated with the project management. The firm is also lacking in
implementing other strategies apart from reviews that will make the best practises on
the policy implementation and keeping the policy up to date with the economic
changes.
Therefore findings rounded up that the firm is resistant to change due to lack of interaction in
the management who make decisions and it is a major challenge being faced by the
institution. It is concluded in the research findings that the profitability level and liquidity
position of the firm is average and the project management is poor.
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5.3 Conclusion
It can be concluded that the research was successful since all the research questions were
addressed. Following the findings it was concluded that cost management policy employed
on project management decisions has an impact on financial performance. The performance
of the university is therefore affected as a whole.
5.4 Recommendations
The organisation should document the Cost Management Policy and its Statement
which must serve as guideline towards the project management decisions. The
institution should clearly outline the projects to be undertaken as well as the personnel
or effective committees that will be responsible for activities.
Workshops and regular consultation between finance and project committees is
required to equip employees on project cost techniques, making them understand the
policy as capabilities improve to implement the policy efficiently. Philips etal (2011)
advised that it is not simple to establish and implement the cost management policies
and as such all employees should be fully aware of both the positive and negative
effects of the cost management policies.
Management to establish a framework that assists in adjusting to market, reflecting
the policy effectiveness and improving controls and risk assessment techniques. On a
more regular basis management should review controls so as to ensure that they are
still adequate and meet the objectives. This is supported by Drury (2012) who
emphasised that cost management policies with the related controls are not said to be
permanent but they are worthy a revision on a more frequent basis.
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5.5 Summary
The chapter has covered only the chapter summaries, major findings and recommendation to
the study by the researcher.
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Program Success 2011 (May 02).
APPENDIX A
COVER LETTER
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Midlands State University
P Bag 9055
Gweru
To whom it may concern:
RE: APPLICATION FOR RESEARCH ASSISTANCE
I am a fourth year student at the above-mentioned institution and I am carrying out a research
on “Assess the impact of project management decisions on financial performance”. The
research is being carried out in partial fulfillment of the Bachelor of Commerce Honours
Degree in Accounting that I am currently undertaking.
I kindly ask you to assist me by completing the questionnaire attached to this letter. The
information that you provide on this questionnaire will be highly confidential and used
strictly for academic purposes only.
Your cooperation is greatly appreciated
Yours faithfully
Mavhunga Morgen
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RESEARCH PROJECT QUESTIONNAIRE
Questionnaire for Management and Employees
Assess the impact of project management decisions on financial performance of MSU.
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Instructions
a) Do not write your name on the questionnaire’
b) Show response by ticking the respective answer box for close ended questions.
1. The firm has a cost management policy on capital project decision making
Strongly agree Agree Uncertain Disagree Strongly disagree
2. The cost management policy is documented
Strongly agree Agree Uncertain Disagree Strongly disagree
3. Policy implementation is in line with the documented procedures?
Strongly agree Agree Uncertain Disagree Strongly disagree
4. The following controls are in place over policy implementation.
Controls Strongly agree Agree Uncertain Disagree Strongly disagree
Accountability
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Monitoring
Transparency
Compliance
5. The current cost management policy used affects the financial performance of the MSU
Strongly agree Agree Uncertain Disagree Strongly disagree
6. Policy reviews are conducted in the organization.
Quarterly Bi-annually Annually
7. Consultation occurs between finance and project committee
Strongly agree Agree Uncertain Disagree Strongly disagree
8. There are risk assessment techniques implemented towards project decisions
Strongly agree Agree Uncertain Disagree Strongly disagree
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9. Should MSU continue using the current cost management policy?
Strongly agree Agree Uncertain Disagree Strongly disagree
10. How can you rank MSU with regard to the following?
Variable Excellen
t
Goo
d
Averag
e
Poor Very Poor Don’t
Know
profitability
Project
management
Liquidity
APPENDIX B
INTERVIEW GUIDE QUESTIONS
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1. Which cost management policy technique is being used currently by the university in
carrying out their project decisions?
2. To what extent are these policies effective in overall operational performance of the
university?
3. What challenges are being faced by the university in implementing effective cost
management policy to make quality project decisions?
4. What reviews are done on the controls of the cost management policy?
5. How best can u evaluate the assessment risk techniques as applied by the
management?
6. What strategies are being implemented to ensure that the cost management policy is
up to date with economic changes?
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