Accountability demands a strong conflict of interest policy to be in place, in both the public and private sector. PMI defines conflict of interest as “a situation that arises when a project management practitioner, PMI volunteer or employee is faced with making a decision of doing some act that will benefit the practitioner or another person or organization to which the practitioner, volunteer or employee owes a duty of loyalty and at the same time will harm another person or organization to which the practitioner owes a similar duty of loyalty”.
Basically, the conflict of interest arises when the project manager has a private interest, which is such to influence the impartial and objective performance of his/her duties. Private interests are not an issue in themselves. Conflict of interests do not necessarily lead to damages or unjustified benefits. It is when they go unmanaged that harm is done.
The management of the conflict of interest has a number of features, among which:
- identification and disclosure of a conflict of interests on a regular basis and through a clear procedure;
- awareness of all corporate, personal, and family business interests and relationships that may involve or relate to the project manager and the client;
- a procedure for solving conflict of interests;
- training on preventing and solving conflict of interest in projects.
For a project manager, the potential areas of conflicts of interest could be related to:
Owning a business or a share in a business likely to be selected as a vendor or service provider for a project you manage can be a source of conflicts of interest.
The proper thing to do in situations like this is to let the customer and your company/organisation know of your affiliation so that decisions can be made jointly on how to handle the process. Likely, the project manager will need to step out of any part of the decision-making process on procurement, starting from needs assessments, planning, design to tendering and evaluation and audit. The process must be documented for a record of the way it was handled should any questions arise later from any sides: audit, shareholders or the general public.
Example: the project needs consultancy services on insurance of goods to be purchased. The project organises a call for offers and the project manager’s spouse, who managers an insurance broker, submits an offer. The project manager shall declare the conflict of interest and do not participate in the procurement of services.
Family, relatives, close friends, your children godparents (in some cultures), alumni, clubs and leagues memberships and other affiliations are potential sources of conflict of interest.
This requires the project manager to know of his/her family and relatives affairs and interests and act in an appropriate way, once the potential conflict of interest arises. Some organisations require candidates to declare the positions/business of family members before hiring the project manager. It is a good practice in particular in small jurisdictions, where everyone is “related” to everyone.
Same is valid in hiring processes. Helping a friend or family member landing a job in the project you manage necessarily hurts the chances of people you do not know and thus the interests of the project in getting the best expertise on the market.
Example: a project manager is often seen spending his evenings on private time in a certain restaurant, which is managed by his childhood friend. The town is small and the usual suspects are in the usual places. The procurement notices that the restaurant was constantly proposed as a venue for project’s events in the last months and no call for offers was organised.
Another potential area for conflict of interest comes from stakeholders, in particular in development management, when the project addresses public authorities needs and interests. Stakeholders can be individuals with authority and important positions in an organisation. That in itself is not a harmful issue. It is the using of their ability to reward or promote certain people or interests for the project manager’s own personal/private gain. Personal interests shall not prevail over the interests of the project.
A project manager has be to aware of the stakeholders influence on all members of the project team, as it can be very direct – through statements – or indirect and subtle.
Example: a consultant on a project had a car with a driver to drive him around for business and private purposes offered by the Prime Minister office. The project manager had to stop that practice as it was influencing the balance of the consultant’s loyalty towards the politics of the Prime Minister, which was against the independence required to carry out policy advice.