TITLE: - The practice of project management in Ethiopian real estate industry and its

contribution to project success: The case of selected company in Addis Ababa

Department of Project Management

Abdu Melka
Metu, Ethiopia
CHAPTER ONE

INTRODUCTION

Many definitions had been given to project by different authors, due to the fact that project is a
multi disciplinary word that has different meaning fromdifferent perspective and orientations.
Engineers, Architects, Managers and so on, have their definitions coined out from their
experiences as far as their professions are concerned. Project according to Project Management
Institute, PMI, (2000) cited in Pinto (2007) “is a temporary activity or end eavour undertaken
purposely to create a unique output (product or service) within budget, time and standards.
Turner and Muller (2003) in their own words defined project as “an organization of human
materials and financial resources in a novel way, to undertake a unique scope of work, of given
specification, within constraints of cost and time, defined by quantitative and qualitative
objectives so as to achieve a beneficial change”. This chapter is introductory part of the entire
study. It provides some insights about the ground and assumptions where the study is conducted.
It states background, statement of the problem, objectives, significance, scope, limitation,
definition of key terms, and organization of the study. Accordingly, it begins with background of
the study.

1.1 Background of the Study

Project management processes and project management knowledge areas are increasing in
importance as more and more projects are becoming constrained to budgets, schedules and
other performance factors. Project management brings structured and consistent performance
resulting successes which ultimately bring about satisfaction of stakeholders. Business
leaders and experts have proclaimed that project management is a strategic imperative.
Project management provides people with a powerful set of tools that improves their ability
to plan, implement, and manage activities to accomplish specific organizational objectives.
But, project management is more than just a set of tools; it is a results-oriented management
style that places a premium on building collaborative relationships among a diverse cast of
characters. Exciting opportunities await people skilled in project management (Larson and
Grey, 2011: P3). The need for elevating performance continues to challenge the project
management profession. The waste on failed projects and cost overruns is estimated in the
neighborhood of over billions of money. Most of the people who excel at managing projects
never have the title of project manager. They include accountants, lawyers, administrators,
scientists, contractors, public health officials, teachers, and community advocates whose
success depends
1.2 Statement of the Problem of the Study
Projects, be it a government project, private project or NGO project, usually encounter many
problems in developing countries in general and Ethiopia in particular. Since projects are
mostly initiated to increase organizational capabilities, meeting new demands, realizing new
opportunities or to overcome 20 | P a g e the challenges faced due to very frequent change of
organization’s environment then it is more likely that problems could occur during execution
 of the project. In Ethiopia, 79.06 percent of projects had failed to meet their objectives.
Moreover, 72 percent of projects financed by Development Bank of Ethiopia (2013) were
under failure category. Implementation delay, overestimation of project return and poor
manpower quality of projects were found to be statistically significant cause of project
failures to meet their objectives. Project management is very crucial for proper planning,
implementing and controlling of projects which can satisfy the required project performance
in terms of time, cost, and technical performance requirements. Due to the nature of the
business, companies that are engaged in Real Estate industry are expected to apply project
management widely. Several house demands are covered by the involvement of these Real
Estate developers. On the contrary, different problems are observed in Real Estate projects.
Of the common problems, delay of projects, nonperformance of projects, not meeting of
required specifications, and dissatisfaction of customers can be raised. For instance, some
Real Estate companies collected advance payment but couldn't deliver what they promised to
their customers due to different reasons. In this case, only project initiation is done without
following of the rest project management processes. There are other companies which are
engaged in to contract with their customers, but transferred incomplete houses to customers
because of financial constraints due to inefficient project execution management.
1.3 Objectives of the Study

The general objective of the study is “to assess the practice of project management in Real
Estate Industry and its contribution for project success”. Under the general objective, the
following are specific objectives of the study:

a. To assess the practice of project management in Real Estate companies in terms of project
management knowledge areas;

b. To assess the practice of project management in Real Estate companies in terms of project
management process groups;

c. To measure contribution of the different project management knowledge areas to project

success that are practiced by Real Estate companies;

d. To measure contribution of the different project management process groups to project

successthat are practiced by Real Estate companies; and

e. To identify the major causes of delay, cost escalation, and poor quality in Ethiopian Real
Estate Industry.

1.4. Research questions:

Does the practice of project management knowledge areas in real estate companies
help to improve their performance and success?
To what extent does the practice of project management knowledge area in real
estate companies contribute to project success?
 Does the practice of project management process group in real estate companies
contribute to project success efficiently and effectively?
1.5. Significance of the Study

Considering the importance of project management in the construction companies, specifically in

Real Estate companies, and the booming of construction activities in Ethiopia, it is assumed that
these research output contributes in identifying which project management processes has effect
on performance of building construction projects in Addis Ababa. Since project management is
an area with a growing body of knowledge, this research can contribute in adding some concepts
to the existing body of knowledge with a particular emphasis on Real Estate Company’s
practices being currently implemented. Even though the research focuses on Real Estate projects,
the findings and the outcome could be relevant to practitioners in other types of projects

1.6 Scope of the Study

This study is conducted on project management practice on housing development projects.

Among entities that are involved in housing projects, only private Real Estate companies that
have completed and/or ongoing projects located in Addis Ababa are involved to assess the
problem using available financial, labor, & time resources. Activities of selected companies that
are not related with project management are not included. Project document review is not
included in this study.

1.7 Limitation of the Study

There are some limitations of this study against achieving its objectives effectively. It was
impossible to access some important documents like project schedules and project performance
records. Accordingly, questionnaire and interviewed based data were obtained. To improve its
validity, cross checking were made by obtaining information from customers, and from
consultants,

1.9 Organization of the Study

This research paper is composed of five chapters. The first chapter is an introductory chapter. It
includes background of the study which gives insight on project management and base for the
study. Statement of the problemanswers why this research was conducted. General and specific
objectives of the study are also included in this chapter based on the research questions given in
the statement of the problem. Significance of the study which is about who will be benefited
from the fruits of this research is also part of this chapter. Scope and limitations of the study tells
about areas to be included and areas not to be included as well as the reason for not having
comprehensive research in the whole areas of project management. The second chapter is all
about review of related literature. It contains theoretical and empirical parts that are used as
frame work and supportive information for the study. It explains about Project Management and
other related issues. Research methodology which is the third chapter emphasis on: which data
source are used, what technique of sampling are the most appropriate and how the gathered data
are presented and analyzed. Chapter four contains the major parts of this research paper which
are data presentation and data analysis. Data presentation has the collected data in an organized
way. The data analysis is a bridge between the data presentation and the next chapter (chapter
four). It gives meaning for the data gathered and presented. Chapter five is the last and the most
important chapter. All findings of the study are included followed by conclusions and the
recommendations.
 CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 Introduction

The second chapter of this Research paper is review of related literature which contains both
theoretical and empirical parts which are used as a guide line throughout conducting the study.
The first part is theoretical review which includes theories of published books and previous
researches related with this study. The second part is empirical review. It has summary of some
selected previous researches on the area of project management. In addition, this chapter also
contains discussion on current situation of Ethiopian Real Estate projects and conceptual
framework of the study.

2.2 Theoretical Review

Construction Industry is the backbone for economic development. The industry is involving
increasing number of small companies and few big construction companies. Construction
process is labour intensive and also requires good management style because of difficult site
condition and bulky materials use. In spite of all the best practices, predictability of project
outcomes is still an issue of concern. Failure to achieve targeted time, budgeted cost and
specified quality result in various unexpected negative effects on the projects. In the achievement
of consecutive economic growth for the last twelve years in Ethiopia, the contribution of
construction industry is very significant. As it is mentioned in a recently published Construction
Magazine 8.5 percent of the growth domestic product (GDP) of Ethiopia is earned from
construction industry. According to the magazine, some professionals who participated in this
sector as well as some informal evidences remark that the contribution of construction industry
even could reach 15% of the GDP. Professionals and experts have stated that project
management is a crucial strategic view. Project management provides entities with influential set
of tools that develop their ability to apply managerial functions to accomplish specific
organizational objectives. But project management is more than just a set of tools; it is a results-
oriented management style that places a premium on building collaborative relationships among
diverse cast of characters. Exciting opportunities await people skilled in project management
(Larson and Grey, 2011: P3). In this section, issues related with project management, such as
project, types of projects, project management processes, project management knowledge areas,
and others are discussed.

2.2.1. Project

Many definitions had been given to project by different authors, due to the fact that project is a
multidisciplinary word that has different meaning fromdifferent perspective and orientations.
Engineers, Architects, Managers and so on, have their definitions coined out from their
experiences as far as their professions are concerned. Their definition depends on their areas of
studies and the point of view that each scholars used. But to have comprehensive understanding
of a project, it is better to refer different definitions. Eric Verzuh (2005:1 cited in Modesto
&Tichapondwa, 2009:P19) stated "we live in a world where change and the rate of change is
constantly increasing. In order to survive and prosper, organizations need to continually modify
their products and services. Projects are the means by which these innovations are effected.
Greater change = more innovations = more projects." In this context, Verzuh see project as a
means to cop up with changes. Accordingly, Modesto &Tichapondwa (2009:P20) define project
as initiative to bring about change in order to achieve specific objectives, within a timescale, in a
given context with allocated budget.

2.2.4. Project Management

Project Management Institute, (2013: P5) defines Projectmanagement as an application of

knowledge, skills, tools, and techniques to project activities to meet the project requirements.
Similarly, Chandra (1995) define Project management as an organized venture for managing
projects, involves scientific application of modern tools and techniques in planning, financing,
implementing, monitoring, controlling and coordinating unique activities or task produce
desirable outputs in accordance with the determined objectives within the constraints of time and
cost. This Chandra’s definition of project management is used as operational meaning in this
study. Project management is accomplished through the appropriate application and integration
of the different logically grouped project management processes, which are categorized into five
Process Groups. According to PMI (2013: P5), these five Process Groups are: Initiating,
Planning, Executing, Monitoring and Controlling, and Closing. These Project management
processes will be discussed below as an independent topic (section 2.1.5).

2.3. Empirical Review

As it is waved throughout the theoretical review part, effective project management is essential
for accomplishing projects with achieving the requirements. Unfortunately, different problems
are seen by scholars and researchers that projects encountered. As a result, different studies were
conducted in this area. Among the many researches some studies with critical issues in the area
of Project Management are reviewed in this section.

2.3.1. Project Management

Maturity in the Construction Industry of DevelopingCountries (The Case of Ethiopian

Contractors) There was a study entitled as Project Management Maturity in the Construction
Industry of Developing Countries (The Case of Ethiopian Contractors) conducted by Yimam,
Abadir H. in 2011. This research has studied the maturity of PM in the construction industry of
developing countries; in the course, the research has also identified two major gaps in the
existing maturity models and, proposed a PM maturity model to address the gaps and adapt it to
the developing countries context. Using the model, maturity assessment of contractors in
Ethiopia is undertaken and, low level of PM maturity (Informal practice of the basic processes) is
found. Further, the research found ISO certified contractors‟ PM maturity to be higher than those
which are not. Similarly, the PM maturity of contractors which took part in Capacity Building
Program is found to be higher than those which did not take part .Likewise, Road contractors PM
maturity is found to be higher than Building contractors. Moreover, the research found higher
maturity level for material, procurement, cost, financial, time, and human resource management.
Risk and safety management are found to be the least matured PM areas.

2.3.2. Building construction

project management success as a critical issue in Real Estate development and investment The
study named "Building construction project management success as a critical issue in Real Estate
development and investment" was conducted by Nwachukwu and Emoh (2011). The study
assessed Nigerian Project management practice on the area of building construction, particularly
in Real Estate development and investment. The study tried to address project success factors
that contribute to the achievement of project goals. In the paper project success and success test
criteria are discussed as the following. According to Cleland et al (1975, Cited in Nwachukwu &
Emoh, 2011: P59), a project is termed successful if it passes four success test criteria i.e. the time
criterion – completed on time; the cost or money criterion – completed within budget; the
effectiveness criterion – completed in accordance with the original set performance and quality
standards; and client’s satisfaction criterion – accepted by the intended users or clients whether
the client is internal or fromoutside the organization. "The above success criteria call for
successful project implementation by the utilization of proven management techniques of
planning, organizing, directing and control. The issues on life cycle management, time
management, conflict resolution and management, networking, contracts management, project
choice and project quality are the key factors that contribute to project success"
( Nwachukwu&Emoh, 2011: P59).At the end of the study, Nwachukwu&Emoh (2011: P73)
conclude the following
 CHAPTER THREE
METHODOLOGY
3.1 Introduction

The third chapter of this study is methodology. Following to internalizing the problems to be
studied and the knowledge area that backs the study in chapter one and chapter two, the
methodology part attempt to describe the methods through which the objectives of the study can
be answered. Accordingly, it states about the research design used, population and sampling
procedures, data gathering methods and instruments, validity and reliability of the study, and
finally procedures/models of data presentation.

3.2 Research Design

The type of research conducted in the study is descriptive research. The study is also both
quantitative and qualitative by its nature. It is quantitative since it involves statistical models
such as means, standard deviations, correlations, and regression analysis. On the other hand, it is
also qualitative research since it describes the actual condition of project management practice in
the Real Estate industry in a non-numerical ways aided by the quantitative approaches. Main
source of data are Real Estate companies. Accordingly, responses gathered through
questionnaires from these Real Estate companies are used as a main ingredient for the analysis,
such as for correlation, regression, standard deviation, mean, etc. calculations that describes the
phenomenon in Real Estate projects. Data obtained from consultants, instructors/researchers, and
Real Estate owners is used for cross checking purpose. The actual practice of project
management in Real Estate industry is described in terms of mean and standard deviation. Since
there are no national or industry standards for construction and Real Estate project management,
the mean and standard values are compared with the average mean and standard deviation of the
project management knowledge areas/ process groups. The research contains correlation and
regression analysis between the practice of project management (in terms of project management
knowledge areas and project management process groups) and success of Real Estate projects.
3.3 Population and Sampling Procedures a. For Real Estate developer companies In Ethiopia
there are 697 Real Estate developers registered by Ethiopian Investment Agency. This 697 is the
total population size. Of these Real Estate developers, the target population is 382 companies
that are recorded in Addis Ababa Investment Authority. The difference occurs due to the
regulation declared in 1995 E.C. that requires companies previously registered by

3.4. Data Gathering Methods and Instruments

Both primary data and secondary data were used with their respective sources. Primary data are
obtained using observations, questionnaires, and interviews. Observation was used to consider on
ground problems about Real Estate sites, progress of selected projects, and external appearance
of Real Estate houses. Questionnaires were used to gather data:
 • From Real Estate companies about their projects. This questionnaire is a hybrid of
open-ended and closed ended questions.
• From House owners about Real Estate houses they hold. This questionnaire is also
a hybrid of open-ended and closed ended questions.
• From consultants about their observation toward Real Estate projects and project
management practices. This questionnaire is composed of fully open-ended
questions.
3.5 Validity and Reliability of the Study

To check internal consistency of measurements, Split-half method and standard of error were
used. Under the split-half method, Spearce man-Brown Prophecy Formula is used. Responses for
Likert scale based questions were divided in to two groups to apply spearceman-Brown
Prophecy Formula so that relationship among the two groups is evaluated. Standard of error were
used to determine the deviation of responses by respondents from the average. The first method
used to check validity of data measuring instruments was personal evaluation whether or not they
accurately collect data. It is done by the researcher, its advisors, and some other individuals in
which they evaluated whether the questioned included in the questionnaires and interviews
enable to collect the necessary data or not. Content validity were also be traced to check the
questions in the questionnaires are fairly distributed among the different areas of the study,
particularly on project management.
 CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 Introduction

In this chapter, the data that are collected through primary tools are presented and analyzed.
Before the data were presented, negative closed-ended questions of questionnaires were
reciprocated to positive questions so that their responses were reversed. Return rate of responses,
checking of validity and reliability, profile of respondents, and presentation and analysis on
issues related with the research questions are included in this chapter. Return Rate of Responses
Among the different primary data collection tools, questionnaire and interview were used in the
study. After the required numbers of respondents were determined, questionnaires were
distributed more than the required number to compromise for non-return questionnaires.

4.2 Reliability and Validity

In this study, the main data sources are Real Estate companies. But, data were gathered from
Real Estate owners, consultants, and researchers in order to cross-check the responses from Real
Estate companies. For the sake of measuring the reliability of Real Estate questionnaire
responses Spearman- Brown Prophecy formula and standard error of measurement (SEM) are
used. The application of each methods in this study is discussed below.

4.2.1. Spearman-Brown Prophecy formula

This method is used to check/determine the reliability of measurement (i.e. Real Estate
Questionnaire), first by splitting the Likert-scale questions in to two groups as odd questions and
even questions. The formula used in this method is: rOE= N∑OE-∑O∑ √[N∑O2 (∑O)2]
[N∑E2(∑E)2]

4.2.2. Standard Error of Measurement (SEM)

It shows to what extent each respondents deviate from the accurate results. The following
formula is used in this method: SEM = √(Sx2 * (1 - rxx’) Where: S x2 = Variance of each
respondents’ total answer S x2 = Σ (X – Xbar)2 N-1 From MS-excel, Σ (X – Xbar)2= 692.5217
and from the Spearman-Brown Prophecy calculation above rxx’ = 0.97726. Accordingly, SEM
becomes 4.255, which means, the sum of the answers of each respondents deviates from the
accurate answers with an average of 4.255. So, the responses from Real Estate Questionnaires
have small error.
CHAPTER FIVE FINDINGS, CONCLUSIONS, AND RECOMMENNDATIONS

5.1. Introduction

This chapter is the final part of the study. First, important findings are summarized from the
previous chapter. Then, based on the summary of findings conclusions are inferred. Finally,
recommendations are provided at company level, at industry level, at national level, and for
further study

5.2. Summary of Findings In the above data presentation and analysis chapter, project
management of Ethiopian Real Estate industry is assessed in terms of project management
knowledge areas, project management process groups, relationship between project management
practice and project success, and major problems faced. Based on the analysis, major findings
are obtained in the study and listed as follow: - Project integration management, project scope
management, project time management, project HR management, project procurement
management, and project claim management are practiced above average practice of

5.3. Conclusions of the Study

In the above section of summary, major findings are listed. Based on the findings, conclusions
are inferred by the study. In this section, the driven conclusions are discussed below. This study
includes the assessment of project management practice in Ethiopian Real Estate Industry as well
as the contribution of the project management practice to success of Real Estate projects. It
doesn’t takes in to account in depth study of project performance of Real Estate projects due to
the reason that it requires detail evaluation of each project documents and day to day activities
which is difficult to assess with in short period of research. Information from Real Estate house
owners is collected not to conduct in depth customer satisfaction survey. Rather, it is for the
purpose of cross-checking responses of Real Estate companies in addition to the use of
consultants’ and instructors’ responses as a cross check.

5.4. Summary

In this chapter, the different findings that are drawn on project management practice, on the
contribution of project management of delay, cost escalation 118 | P a g e and poor quality are
summarized at first. Then, based on the findings, conclusions are drawn to achieve the objectives
of the study by answering the basic research questions. Finally, recommendation are given for
Real Estate companies for improvement of project management practice; for Real Estate industry
to establish Real Estate association; for government to set national project management
standards; and for further study such as project document based study, in depth study on single
project management knowledge area, etc.