| Articles » From Crisis To Control |
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From Crisis to Control: A New Era in Strategic Project Management |
| by Michael Stanleigh |
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| Corporations throughout the world are losing billions in wasted
project spending and this waste is being carefully hidden from management
and investors.
A new global research report shows that one of the biggest contributing
factors to failed projects is the lack of alignment of projects with corporate strategy. |
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| A Billion Dollar Problem |
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| The cost of the problem is staggering. A recent example is Royal
Dutch Shell on their biggest and most prestigious project, Sakhalin
Energy, a Siberian liquefied gas facility. For Shell alone, project
costs for Sakhalin Energy doubled from $10-billion to $20-billion
(U.S). According to The Times in London the humiliation was even
greater because, the Shell chief said, he had not been made aware
of the cost increase. The fiasco for Shell is not exclusive. In
the IT sector, the results of The Chaos survey from The Standish
Group shows that 71% of all projects are either “challenged”
because of late delivery, being over budget, delivering less than
the required features or they are “failed” because of
being cancelled prior to completion or the product developed is
never used. This statistic has not effectively changed since 1994. |
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| In addition, in 2004 Pricewaterhouse Coopers found that only
a handful of projects ever achieve project success. Their survey
focused on a broad range of industries, large and small, in 30 different
countries, which represented 10,640 projects, for a total value
of $7.2 billion. They found that only 2.5% of global businesses
achieve 100 percent project success. |
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| In Canada, project management waste is equally evident. According
to The Globe and Mail newspaper, the Ontario government recently paid out
$63 million to settle litigation with EDS Canada Ltd. from a failed
attempt to create a computer network meant to connect the entire
provincial justice system. Furthermore, Toronto’s auditor
general says that a police database project called “eCops”
that went $10 million over budget was woefully mismanaged. |
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| We’ll never know about the many projects in crisis
in the companies in which you or I may hold shares. The reality
is that examples can be found from just about every type of organization
in Canada and abroad. We’re left wondering what would it take
get these organizations to realize that a tiny fraction of their
losses is all they would have to invest in order to save millions.
Unfortunately, many firms seem willing to pay out millions needlessly
on bad project management. |
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| New Project Management Research |
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| The frequency of project failures is something we see quite often
and was the key factor driving our research study on project management.
We studied over 750 organizations around the world and looked in
depth at their project management practices, successes and failures.
Our findings indicate businesses are in a crisis with respect to
how projects are managed. |
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| The Crisis in Project Management |
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The research results confirm that many projects negatively impact
the bottom-line. Millions are being spent by organizations in project
cost overruns. Despite the money being spent on them, these projects
are not meeting customer expectations. As well, the wrong internal resources are often being applied to projects – further decreasing
their chances of success. |
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Many organizations set up Project Management Offices
(PMOs) as a tool to improve project management. However, the evidence
shows these fail more often than succeed. In fact, the research
indicated that over 75% of organizations that set up a PMO shut
it down within 3 years because it didn’t demonstrate any added
value. Project Management Offices cost organizations about $500,000
per year to run. Their return on investment should be positive but
it is not. |
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| After reviewing data from these 750 firms around the world,
it became clear that tinkering around the edges of project management
won’t help organizations work smarter. To get to the root cause
of the problem we’ve got to take a broader perspective and look
at how organizations approach project management from a strategic
level. |
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| In that regard, we were able to use our research findings
to develop a number of recommendations to help companies and organizations
develop the right strategies to create the environment for successful
project management practices. |
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| The Four Things Companies Need to Know to Move From Crisis
to Control |
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| There are four key strategies that will immediately make a difference
for organizations. |
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- Ensure all projects are strategically aligned.
- Create a culture that supports a project management environment.
- Implement strategic project management best practices.
- Create a strategic project measurement system.
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| 1. Ensure All Projects are Strategically Aligned
A major reason for project failure is that most organizations do
not ensure that all projects they implement align with their organization’s
core strategies. In fact, eighty percent (80%) of organizations
in the research study had no formal business case for the development
of their PMO and seventy-three percent (73%) of organizations identified
“lack of executive sponsorship” as being the primary
reason for failure of their PMO. |
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| If organizations were to implement only those projects
that were in alignment with their strategic goals, their success
rate would increase dramatically because executive sponsorship would
not be an issue. However, the recent findings show that the majority
of projects on the go are not associated with corporate and/or departmental
strategic plans. Only thirty-two percent (32%) of respondents said
they had a process for prioritizing projects. Therefore it is not
surprising that failure is rampant because senior executives are
not at the helm to provide guidance, direction and support to projects
within their organization. As well, it was found that sixty-eight
percent (68%) of organizations had no systematic approach in place
to prioritize projects or link them to corporate and strategic goals. |
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| What You Can Do to Align Projects with Corporate
Strategy
First, review lessons learned from projects currently underway or
completed over the past year to uncover possible success criteria
and to determine project prioritization issues. For example, if
many projects were unsuccessful because of a lack of resources then
resources required to complete future projects should be considered
a criterion for determining project viability. |
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Next, develop criteria against which all projects can
be prioritized. Include impact on corporate strategy and customers.
To do this, work with a sub-committee of senior management. List
all projects along with their goal and strategic alignment. Then
try to identify criteria necessary for determining the expected
impact each project will have on the organization, its departments
and its customers. Rank each project quantitatively and determine
its level of priority. |
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| Finally, align projects to corporate and departmental
strategic plans, thereby demonstrating how each project’s
successful execution will support the corporate and/or departmental
strategic plan. Terminate projects that are of low priority or not
somehow linked to corporate and/or departmental strategy. This will
ensure they stop costing the organization money, resources, time
and lost customers. |
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| 2. Create a Culture that Supports a Project
Management Environment
The research identified a number of reasons why organizations set-up
a Project Management Office. These included; more successful implementation
of projects (82%); predictable, reusable project management tools,
techniques and processes (74%); organizational improvement (66%);
help to build a project management-oriented culture (64%) and increased
staff professionalism in project management (48%). It is interesting
to note some of the more important reasons why organizations should
set-up a project management office such as organizational improvement
and building the project management culture, were not the top reasons
cited in the research. Rather, Project Management Offices were generally
implemented for the right reasons yet they failed to deliver. Essentially,
they operated at too low of a level and needed to move up to the
Senior Executive level so that projects could be strategically aligned. |
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| If a project is strategically aligned and if project
management is built into the corporate culture then everyone who
works on a project will immediately know what their part is in making
the project successful. Staff will not have to locate a PMO to tell
them how to manage a project, what tools to use, what templates
to use, and so on. Project Management will be a competency embedded
into everyone’s role. Much as quality management has evolved
over the past 20 years to becoming a competency requirement for
all jobs, project management is following the same route. |
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| What You Can Do To Create A Project Management Culture
In order to properly establish a culture that adequately supports
a project management environment it is necessary to undertake a
change strategy specific to creating it. Business Improvement Architects
calls this a Project Culture Initiative™ (PCI™). |
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| A Project Culture Initiative™ requires the forming
of a cross-functional steering committee to develop the approach
and process for creating the corporate change. This includes the
creation of Values and Principles that identify the unique project
approach for the organization. A Project Culture Initiative™
will prepare staff for the changes that will be necessary to implement
the Project Management and help staff to understand the benefits
of the change. Most importantly, a Project Culture Initiative™
educates the entire organization on how to manage the change to
a project management environment. This includes working with the
project teams and communicating frequently on the new process. |
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| Part of the cultural change will be to create some
structure around the management of projects. This includes the development
of project methodologies and processes. These will have to be closely
monitored in the beginning to ensure they are consistently used
so it is important to continue to sell the benefits. Some people
will think that the time spent on developing project scope and plan
is more work than they’ve been required to do before. Therefore provide
them with the support and encouragement necessary to move beyond
the initial time requirement. In this way, they will see the benefit
that spending time in the initial phases will save during the execution
phase of the project. |
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| Stay the course! Understand that changing the culture
is a slow process and recognize that this is a journey – it’s
never finished. A Project Management Office can be the change agent
and must champion a cultural change in how projects will be managed.
Therefore, be prepared to evolve, as the organizational needs change.
The outcome will be to move the Project Management Office from a
“push” department where it is giving information to
a “pull” department where people are asking for help,
guidance and coaching from the Project Management Office. |
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| 3. Implement Strategic Project Management Best
Practices
The research identified the strategic priorities of most Project
Management Offices and determined that: seventy-seven percent (77%)
developed project management methodologies, seventy-six percent
(76%) developed structures for their Project Management Offices,
sixty-nine percent (69%) identified project roles and responsibilities,
sixty percent (60%) developed tools and templates and fifty-four
(54%) implemented project management training programs. From these
results, it became evident that Project Management Offices were
task oriented, not strategic. They didn’t consider lessons
learned to be of great importance in their overall mandate. |
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| Organizations take huge amounts of project knowledge
every day and throw it away. They fail to retain the knowledge from
one project to the next. The type of questions that should be answered
includes: “What were the successes from one project that can
ensure other projects follow a similar path?” “What
were the challenges, issues, risks, etc. that one project suffered
that other projects might be able to anticipate in advance and prevent
or at least prepare for, should these events occur?” |
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| The overall accuracy of time estimation, resource
allocation and budgeting comes from the knowledge transferred from
one project to another. However, according to the research findings,
knowledge management, though often spoken about, was generally absent
in the field of project management. |
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| What You Can Do to Implement Strategic Project Management
Best Practices
Knowledge retention is a major benefit to organizations because
it contributes to continuous learning and avoidance of repeated
mistakes. In order to retain project knowledge that can be passed
on as “Lessons Learned” for future project teams, the
Project Management Office must hold a formal “Project Close-out
Meeting” as soon as possible after a project is completed
because, at this point, the knowledge about the management of the
entire project is still fresh in everyone’s mind. |
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| The purpose of the closing meeting is to review what
happened in the project and what the team and the organization can
learn from what happened. The project sponsor, project manager and
project team should be in attendance as well as any outside resources
and/or stakeholders who would like to contribute their ideas. To
ensure that the discussions are kept objective and that everyone’s
input is captured, it is preferable for an outside facilitator to
conduct this meeting. |
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| The outcome of the project closeout meeting will be
the creation of a formal document of “Lessons Learned”
for archiving, to be carried to future projects, their managers
and their teams. |
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| 4. Create a Strategic Project Measurement System
The research identified how Project Management Offices measured
their success. Their measurements included projects on time (76%),
projects on budget (67%), achieved scope requirements (66%), customer
requirements met (65%) and achieved all milestone deliverables (52%).
The Project Management Offices chose traditional metrics to demonstrate
success, not strategic ones. It is little wonder, then, that the
research indicated that over 75% of organizations shut down their
Project Management Offices within 3 years because they didn’t
demonstrate any added value. |
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| How to Create a Strategic Project Measurement System
The establishment of project success measures will help to provide
the senior management team with relevant information needed to make
decisions affecting project completion. For example, the presentation
of project success measures may convince management to re-prioritize
projects or to re-allocate resources. |
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Project success measures will also provide the Project
Management Office with the necessary information to continuously
sell the impact the Project Management Office is having on organizational
effectiveness. The strategic types of project success measurement
criteria should include:
- Ability of the project to be managed within specified quality
criteria.
- Ability to meet regulatory requirements.
- Number of resources used versus the number of resources they
thought they would use.
- Ability of the project to meet its defined targets.
- Ability of the project to meet all deliverables.
- Successful management of all major issues.
- Customer post-surveys indicate satisfaction with the product
or service delivery from the project.
- A successful and problem-free launch.
- Business case was proven through the rate of return.
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| Summary |
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| The outcome of project failure is wasted dollars that
steal investor profits and have a negative impact on the organization’s
bottom-line. Aligning projects with the strategic goals of the organization
is critical for project success and proper return on investment. Superior
business performance is dependent on good project management as well
as the creation of a culture that supports projects. To this end,
senior management needs to contribute more of their time and effort
to sponsoring and prioritizing projects on the basis of their strategic
fit. When projects are in alignment with corporate goals they will
be able to meet profitability targets and generate the necessary return
on investment. |
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| About the Author |
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| As President and CEO of Business Improvement Architects, Michael works with executives and senior managers around the world to help them improve operational effectiveness through strategic planning, leadership development, project management and quality management. He has been instrumental in helping his clients reduce waste and increase efficiencies and profits with his clear processes and quality approach. |
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| For more information about this article, please contact
bia™ at info@bia.ca. |
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| Michael Stanleigh is author of the global report: “2010 PMO Global Study: How a Project Management Office Can Improve Organizational Effectiveness”.
For more information about this report, please contact
bia™ at info@bia.ca. |
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| © Business Improvement Architects |
