The failure of strategic planning

Projects struggling for management support are one of the key indicators of a sub-standard value creation system that is failing to make full use of the deliverables created by projects and programs. But the problem is likely to be much deeper; surveys consistently show that between 15% and 80% of projects undertaken by organisations cannot be linked to the performing organisations strategy. These ‘ferrel projects’ are either symptoms of inadequate governance, or symptoms of inadequate strategic planning!

In many organisations, and particularly in business areas focused on system support such as IT the typical path taken by an innovative idea through to some confused delivery of value is a straight line from the innovation, to a business case, to a project that has to seek management support and the surviving projects eventually deliver their outputs to a bunch on unprepared and unwilling end users. The generation of value is far from certain!

Over the last few years, Portfolio Management has started to emerge. Portfolio management should have a strategic focus and make selections based on strategic priorities but in most current implementations tends to be a process oriented, stand alone function. Certainly by applying capacity constraints the number of projects that fail due to lack of organisational resources will be reduced but the focus on value creation is minimal. Management support and organisational change are not central to the process. There is literally a ‘fence’ between the executive ‘strategic planning’ processes and innovation within the organisation.

Most authorities describe project and programs as the ‘change agent’ responsible for creating the ability to implement strategic initiatives to grow and improve the organisation. For this to occur, the strategic planning system needs to be far more engaged with the organisation and central to the process of innovation, guided and supported by the organisations executive!

Within a value driven framework, the strategic planning process should be central to innovation, initiating work to develop prospective ideas, and receiving all of the innovative ideas to enhance the organisation from every source. Innovative organisations such as Google actively encourage innovation and experimentation within parameters but have careful selection processes before burning money on significant projects. They are also prepared use the innovative ideas to inform strategy, and to take significant strategic risks if an innovation warrants the speculation on a ‘whole new future’ for the organisation.
Within this framework, the evolution of the strategic plan is a cyclical process, possibilities and ‘blue sky’ ideas are communicated to the governing body, who formulate, review and update the overall strategic guidelines as new ideas and possibilities emerge.

However, my feeling is there is a tactical level missing from strategic thinking that will be needed for this process to work effectively. The overarching ‘strategic guidance’ needs to be fairly stable and take a long view and only be updated as needed (possibly twice a year). Based on this strategic guidance, a detailed strategic plan is developed at a ‘tactical level’, to frame the current implementation of the strategy. This process needs more rigour and more flexibility (the two are not mutually exclusive) compared to the high level plan, should only take a medium term view and be updated continuously. Based on this plan, feasible ideas that support the strategy are authorised for the development of a value oriented business case.

The creation of this flexible but rigorous tactical-level strategic process would place the ‘plan’ at the forefront of processes such as Portfolio Management and virtually eliminate ferrel projects.

Portfolio management also has a central role to play in developing strategy. The current strategy informs the portfolio selection process, and information on current projects and programs, the viability of assessed business cases and other consolidated information is absorbed back into the strategic planning process. Based on these factors, the key job of the portfolio managers is to select the most strategically important business cases, within the capability and capacity limitations of the organisation, for initiation as projects or programs, and cancel or modify projects that no longer align with the evolving strategic plan.

The role of management is firstly to implement the executive guidance by supporting the Portfolio Management processes and the selected projects. More importantly, management is also responsible for managing the organisation so that the necessary change initiatives are implemented to make effective use of the project deliverables to generate valuable returns over the life of the initiative, frequently a period of many years!

Developing a value driven system similar to the one described in this post is primarily a governance issue. The organisations directors and executives need to lead the process and be closely involved in the strategic management of the organisation.

Strategic planning also needs to evolve from a fluffy ‘high level’ process to a far more useful function that actually sets the strategy for the organisation’s management to implement. Within this framework, the organisations governance systems and leadership need to ensure their management support the process and are focused on creating value.

The Value Chain

However, the value creation chain is only as strong as its weakest link, which includes effective strategic planning supported by effective governance that ensures management support for the overall process. A clear indication the strategic governance processes are not working is when projects and programs have to fight to receive executive support to ‘exist’ and the organisation’s measure of success is limited to the ‘iron triangle’ of time, cost and scope focused at the end of the project.

Successful organisations focus on the more difficult, but more important measures of benefits realised and the value created for the organisation as a result of the project deliverables being used by the organisation to support its strategic initiatives and generate lasting improvements.

Most of the work needed to make this process work is in management areas outside of the traditional Portfolio, Program and Project management (PPP) arena. But no organisation will achieve the optimum results from its PPP initiatives without the front and back ends of the overall value chain being of equal ‘strength’.

This is not rocket science, many successful organisations, particularly in mining and engineering achieve this type of integration in their core business. For more on the governance aspects see: Mosaic WP1073 – Project Governance.  

For more on the overall project delivery capability see: Mosaic WP1079 – Project Delivery Capability.

Practical Scheduling Books

The last couple of months have seen the publication of two books designed to provide a practical foundation for people wanting to understand the basic ‘mechanics of scheduling’.

Murray Woolf published his CPM Mechanics, available from http://www.cpmmechanics.com and Aldo Matos published Planejamento E Controle De Obras, written in Portuguese, the book is available from http://construcao-engenharia-arquitetura.lojapini.com.br/pini/vitrines/produtos/produto3634.asp.

Both books are aimed at a similar market niche; working schedulers who have realised that understanding what their software actually does from the perspective of computational mechanics (to use Murray’s term), is essential for the creation and maintenance of effective schedules.

Simply being able ‘push the right buttons’ to drive scheduling software without understanding why the different functions exist is similar to being able to drive a car without being able to read a map and plan a route. The mechanical skills for driving the ‘hardware’ are only useful if you know exactly where you want to go! Once you have learned to ‘map read’ you can plan to go virtually anywhere and understand the potential challenges of the journey before you start.

The scope of Aldo’s book is wider, including sections on Line of Balance, Activity on Arrow, and balancing time and cost. With very limited Portuguese much of the text was beyond my reach but anyone working in Brazil, Portugal, East Timor, etc., I would certainly recommend this book as a valuable resource for understanding the technical aspects of the art of scheduling.

Murray’s book is true to its title and concentrates on the mechanics of CPM scheduling in Precedence networks. As with his other books, it is thorough and detailed, contributing another component to the library of scheduling books Murray has planned for publication.

Many of the more established tomes such as James O’Brien’s CPM In Construction Management (6th Ed. By Fred Plotnick & Jim O’Brien) are targeted at experienced practitioners and are both expensive and wide ranging.

By focusing on a specific and important skills development niche; both of the books discussed in this post are effective, affordable and useful to schedulers seeking to advance their careers and move from knowing what their software does to understand precisely why their software produces the results is does, and importantly be able to recognise any software induced errors.

Fortunately the language difference allows me to avoids the difficult job of determining which is ‘best’ and I’m happy to recommend both books – chose the one that ‘speaks to you’.

Governance from the perspective of Systems Theory

A brief overview of Systems Theory

Systems theory is the study of systems in general, with the goal of elucidating principles that can be applied to all types of systems at all nesting levels. The basic concept is that any organised group constitutes a system, which is composed of regularly interacting or interrelating groups of activities or people performing activities. . (For more on systems thinking see: WP1044, Systems Thinking)

Any single system consists of sub-systems and is itself part of a higher level system. The system being discussed or examined cannot function without its constituent sub-systems and its behaviours and outputs influence the higher level systems. These concepts are closely aligned with the ideas in Complexity Theory (see: A Simple View of ‘Complexity’ in Project Management)

Organisational Governance from a Systems Theory perspective

Organisational governance or to be more precise but explicit the governance of the organisation (ie, the governance of the corporation), is the explicit and exclusive responsibility of the Board of Directors in commercial organisation and their equivalent in other types of organisation (the Board). Organisational governance does not come in different types; it is a single system, the responsibility of a single entity, the Board. But this system relies on sub-systems to be effective. A framework focused on project management is suggested below, there are of course many other sub-systems:

Taking each system in turn:

• The Governance System is responsible for setting strategy and ensuring resources are used effectively (for more on this see: WP1033 – Corporate Governance). To achieve this, it is heavily reliant on the organisation’s management system and additionally, the Board may have some involvement in the management processes (eg, approving very large projects).
   
• The Management System manages the entire organisation within, and supporting the governance framework. Executive management are responsible for creating an organisation capable of achieving the objectives defined by the governance system and also capable of providing assurances to the governance system that resources of all types are being effectively and ethically used. Middle and front line managers are responsible for implementing the work.
   
• The Project Delivery System is a sub-set of the overall management system, this specialised area of management is responsible for all aspects of the ‘management of project management’ as described in our White Paper: WP1079 – Project Delivery Capability
   
• And naturally, a core component of the Project Delivery System are the individual Project Management Systems (and Program Management Systems), each system responsible for creating the ‘deliverables’ the project or program was initiated to ‘deliver’, for the organisation’s management to make effective use of, and generate value.
   
• Specialist sub-systems such as a Project Control Board (PCB) operate within this overall structure to fulfil specific purposes.

Our previous post, Management -v- Governance described the functions of the three key levels of management, the Board, Executive Management and Middle / Front Line Management (or General Management); whilst these three levels of ‘management’ have quite distinctly different roles and responsibilities, in a well governed and well managed organisation each ‘system’ is integral to and supports the objectives of the higher system.

However, in dysfunctional organisations, the different responsibilities become merged or blurred to the detriment of all. Possibly one of the key reasons middle managers working in IT and Project Management feel they are involved in ‘governance’ is the simple fact that the Board responsible for the governance of the organisation has failed in its responsibility to provide effective governance to the IT and Project Management functions, and the middle management level is trying to fill the void? More on this in my next post!

Management -v- Governance

Some areas of business seem to be confusing the concepts of organisational governance and effective management to the detriment of both processes. One of the important aspects of ‘good governance’ is to create the environment that allows ‘good management’ to be practiced and to require systems that ensure ‘good management’ is practiced at all levels of the organisation’s management, but governance and management are quite different processes undertaken by different groups of people.

As a basic starting point, Governance is the exclusive responsibility of the Board of Directors, or their equivalent, not management – the governing body (typically Directors) directs and governs; managers manage at various levels.

The three primary levels of involvement are:

• Governance. The governing Board sets the organisation’s objectives, agrees the strategy to achieve the objectives, define policies and rules for the organisation, requires effective management systems, and also requires processes to be in place to ensure these are implemented by management and to provide effective oversight to the governing body. This is the exclusive non-transferable responsibility of the Board.
   
• Executive management. The executive’s role is creating the organisation capable of achieving these requirements and providing input and advice to assist the governing body’s decision making processes. Developing an effective culture of openness and accountability is a core executive responsibility.
   
• General management. Senior and operational management’s roles are to develop and maintain the systems and processes needed to make the organisation effective within the parameters set by the executive. This includes supporting middle and lower management so they can effectively manage the work needed to implement the strategy set by the Board.

For some reason, these different roles are being confused in some business domains, including IT and project management to the detriment of the organisation and the respective disciplines. When a group of managers start referring to ‘normal good management’ practices as ‘governance’, they simply create excuses for bad management practice.

A good example is a project steering committee failing to support a project manager by refusing to make a difficult decision. This lack of support can be defined in two different ways:

• By claiming the committee is a governance body responsible for ‘governing’ the project, usually interpreted as making sure the project does not do ‘wrong things’, the imperative for a timely decision is removed or hidden, the requirement is no wrong doing which translates into not making a wrong decision. If the project fails as a consequence of the lack of decision, it is called a ‘project failure’ not a governance failure.
   
• Change the description of the same steering committee to the management entity responsible for the overall creation of value within the organisation based on the work of the project they are overseeing, the situation changes. As the management group responsible for implementing and managing the overall Project Delivery Capability (PDC) needed by the organisation to achieve a positive ROI on its investment in the project, the same failure to make a decision can be seen to have a direct impact on the ROI the managers in the steering committee are personally responsible for achieving. This is a management failure and the managers in the steering committee are directly accountable for the delays caused to the project.

Similar issues to the project management obfuscation described above also attach to calling pragmatic and effective management of IT processes ‘governance’ – data security, backups and recovery capabilities, other IT functions and managing the projects needed to enhance IT are not IT governance issues, they are IT management responsibilities.

My personal view is that if the project and IT management practices described above are determined to be a ‘governance’ function, almost everything in management is ‘governance’, fortunately:

• No one claims the processes used to make sure the accounts department pay the right people the right amount of money at the right time is a ‘governance’ process – it is seen to be a prudent accounting requirement.
   
• Similarly no one claims the processes used by the stock department to fill orders with the right goods, and ship them to the right customers is ‘governance’; it is simply a customer service process.

IT and project management should be no different!

The art of good governance is for the Directors to ask the right questions of the executive and have sufficient skills to understand the answers. I do not know of a good resource to help in this respect for IT, however, a really useful (and free) guide to help Board’s ask the right questions of their executive about PDC has been published by the Association for Project Management in the UK, it can be downloaded from: http://www.mosaicprojects.com.au/PDF/APM%20GoPM%20booklet.pdf

Once the Board starts asking the ‘right questions’ and sets a strategic framework my feeling is any executive manager worthy of his/her role will start taking appropriate actions and adapting their organisation. If they don’t the Board probably needs to start asking other questions about the suitability of the executive. However, changing the organisation to achieve effective PDC is a major change program in itself and will need time to be effective……

One short term solution that can be used to kick-start the cultural and organisational changes needed to move to an effective PDC is already in the hands of the governing body and executive. If the organisation cannot find a committed senior manager prepared to take personal responsibility for delivering the value promised by a project do not start the work! We know the lack of effective sponsorship is closely aligned to project failure, so it will be far cheaper and preserve shareholder value if projects without effective sponsors are not started. Conversely, if senior managers are responsible for the delivery of value from the projects they are sponsoring, the key people needed to create effective change in an organisation are already involved and have a vested interest in succeeding.

The important thing to remember is the realisation of value from effective benefits management is very much the end of a process. The overall capability to realise value from an investment in a project starts with selecting the right project to do for the right strategic reasons, then doing the work of the project effectively and efficiently before the organisation can implement the changes and generate value. The project manager is only responsible for the bit in the middle – the ‘doing the project right’, a steering committee, sponsor or other management entity is responsible for the beginning and end parts of the overall process as well as supporting the project team. Therefore PDC has to be seen as a general management responsibility.

The management concepts and framework needed to develop an effective PDC within an organisation have been discussed in earlier posts:

• The concept of ‘project failure’ -v- ‘management failure’ is discussed in our post ‘Project or Management Failures?’.
   
• Similarly, PDC and the organisational aspects of change have been discussed in length in a series of earlier posts, see:
  • Organisational Change Management
  • and PDC Value Proposition.
• An overview of the management framework needed to achieve effective PDC is in our White Paper: PDC Taxonomy – this White Paper is a conceptual framework not a methodology and is evolving, but should still be helpful in separating ‘governance’ from ‘management’.

These ideas are not new, work by the Boston Group in the 1990s reported in our latest blog, the PDC Value Proposition shows the significant increase in ROI when an effective project delivery capability level is achieved by an organisation.

The governance requirement is to ensure management accepts this responsibility and excel in creating value for the organisation.

Project or Management Failures?

Google ‘reasons for project failure’ and you get nearly 5 million responses! The question this blog asks is how many project failures are caused by project management shortcomings and how many failed projects were set up to fail by the organisation’s management?

The Project Delivery Capability (PDC) framework described in our White Paper Project Delivery Capability (PDC) offers a useful lens to separate the failings generated by project performance from those imposed on the project, inadvertently, or otherwise by organisational management.

The list below separates the root cause of failure into four categories based on this model:

Initiation: failures associated with project identification, business case development, requirements definition and portfolio selection; including establishing initial realistic time and cost budgets based on pragmatic risk assessments.

Project: failures associated with the project team failing to apply effective project management processes as defined in resources such as the PMBOK® Guide, ISO 21500 and PRINCE2

Support: failures associated with the lack of effective senior management support to the project (Capability Support), including inadequate sponsorship, failing to provide appropriate resources, inadequate business inputs, lack of direction/decisions and allowing excessive change.

Benefits: the failure to realise the intended value from the project’s deliverables associated with poor organisational change management, end use adoption and cultural resistance (for more on the overall scope of change see our White Paper, Organisational Change Management).

The table below is based on an amalgamation of dozens of lists found through a Google search.

Reason for Failure	Cause
Inadequate business case A good business case will clearly demonstrate the business benefit of delivering a project and define the objectives, requirements and goals.	Initiation
Undefined objectives and goals This is always a problem, if the organisation does not know what it wants, it is impossible to scope a project to deliver the ‘unknown’.	Initiation
Inadequate or vague requirements This is only a problem if the organisation fails to allow adequate time and appropriate contingencies in the overall scope of the project to define and firm up requirements. Defined requirements are essential for the project to be able to deliver a successful outcome.	Initiation
Unrealistic timeframes and budgets; unachievable objectives Fact free planning is always a problem. Initial ‘rough order of magnitude’ estimates need appropriate contingencies in the initial business case. The project outputs need to be feasible.	Initiation
Lack of prioritisation and project portfolio management Causing competing priorities leading to inadequate support and resourcing for projects.	Initiation
Estimates for cost and schedule are erroneous Estimates should be based on solid foundations. Unrealistic targets are unlikely to be achieved.	Initiation / Project
Failure to set and manage expectations Unrealistic expectations are unlikely to be fulfilled. From the start of the initiation through the life of the project effective communication to set and maintain realistic expectations is vital.	Initiation / Project
Business politics Lack of discipline within executive/senior management. Only present is the organisation is poorly governed and lacks a rigorous portfolio management process. Selected projects should be supported by management.	Initiation / Benefits
Cultural and ethical misalignment Misalignment between the project team and the business or other organization it serves will inevitably cause problems.	Initiation / Benefits
Lack of a solid project plan The failure to develop an effective project plan guarantees the project will fail. The type of planning required depends on the project methodology. Some specifics are included below	Project
Poor estimating Failing to use historical information, formulae, and questions to make sure that the estimate is not a GUESStimate.	Project
Poor processes/documentation Appropriate processes and documentation are essential for project success.	Project
Poor risk management All projects are inherently risky. Effective risk management reduces the degree of uncertainty to an acceptable level.	Project
Overruns of realistic schedule and cost estimates This is a project failing. Either due to poor management/motivation of the project team or poor risk assessment (leading to inadequate contingencies) or poor estimating.	Project
Failure to track progress Tracking progress against the plan and adapting performance is central to effective project management.	Project
Poor Testing Failing to adequately test project deliverables; including: - Poor requirements which cannot be tested - Failing to design a testable system - Failing to develop a realistic and effective test plan - Failing to test effectively with skilled staff - Inadequate time and budget allowed for testing.	Project
Poorly defined roles and responsibilities The organisations management is responsible for defining roles and responsibilities in the overall management stakeholder community; the project manager is responsible for the organisation within the project team.	Project / Support
No change control process / Scope creep A lack of effective change management processes is primarily a project failing, however, organisational management should require effective change management to be in place and support the change management processes.	Project / Support
Team weaknesses – Inadequate / incorrectly skilled resources Having people who are ill-prepared to complete a task can be worse than not having anyone. The organisation is responsible for providing adequate internal resources for the project, the project is responsible for defined training and procuring appropriate contracted resources.	Support / Project
Lack of user input The organisation is responsible for organising the necessary input from end users. The project is responsible for requesting and defining its needs and making appropriate use of the information provided.	Support / Project
Lack of management commitment / Lack of organisational support The organisation is responsible for properly supporting the projects it has initiated.	Support
Ineffective or no sponsorship Ineffective project sponsorship is almost a guarantee of failure.	Support
Poorly managed – project manager not trained/skilled The organisation is responsible for appointing an appropriate project manager and providing him/her with appropriate support, training and coaching.	Support
Inflexible processes and procedures, templates and documentation Any imposed process needs to be as light  as practical to meet the governance needs of the organisation without inhibiting the work of the project.	Support
Insufficient or Inadequate resources / lack of committed resources (funding and personnel) The organisation is responsible for properly resourcing the projects it has initiated. If the resources don’t exist or are already fully committed elsewhere, this is an initiation failure; if they are simply not made available it is a support failure.	Support / Initiation
Poor communication / Stakeholder engagement People tend to fear what they don’t know, therefore effective communication with stakeholders is vital if the project is to capture their support, and keep it. The project is responsible for project based communications; the organisation change manager (sponsor) is responsible for communication in support of the overall change initiative.	Benefits / Project
Poor or ineffective organisational change management The organisation has to implement, accept and use the project’s deliverables to generate value. Failures at the organisational change level mean most of the planned benefits cannot be realised.	Benefits
Stakeholder conflict The organisation is responsible for properly supporting the projects it has initiated. This includes the ‘through life’ management of stakeholders starting prior to initiation and continuing through to the realisation of the benefits.	Benefits
Inability or unwillingness to stop a project after approval ‘Death march’ projects destroy value. A key element of effective portfolio management is to stop wasting money and resources on projects that can no longer contribute value to the organisation.	Benefits

Of the 29 causes of failure outlined above, only 7 are exclusively the province of project management. The other 76% involve or are exclusively the province of the organisation’s general and executive management as part of an overall ‘Project Delivery Capability’!

This overall capability of an organisation to realise value from an investment in a project starts with selecting the right project to do for the right reasons, then doing the work of the project effectively and efficiently, and then making effective use of the project’s outputs to create value. Mess up any of the early stages and there are no benefits to manage. If the organisation fails to implement the changes effectively, the potential benefits are not realised.

The project manager is only responsible for the bit in the middle – the ‘doing of the project’, a steering committee, sponsor or other management entity is responsible for the beginning and end parts of the overall process involved in PDC. Even the 24% of failures assigned to project management have a link back to the role of the Project Director within PDC. The organisation should provide oversight, training and support to ensure effective processes are used by their project managers and teams. Conversely, a skilled project manager may be able to overcome some of the organisational failings identified above; by managing upwards and operating effectively within the organisation’s political systems a skilled project manager can cover some failings, others are fundamental and will result in a failure regardless of the efforts of the project team.

Therefore based on this table, it is reasonable to determine PDC is an executive and general management responsibility. The ‘project governance’ requirement within PDC is for the Board to ensure executive and general management accept this responsibility and excel in creating value for the organisation.

Based on this assessment, my personal feeling is we as project practitioners need to stop referring to ‘project failures’  every time a project fails to deliver the expected value and start talking about ‘business failures’ when the organisation’s  management fails to effectively manage or support the work and as a consequence, fails to achieve the intended/expected value.

Project and Organisational Governance

One of the themes running through several of my recent posts is the importance of effective Governance. Both organisational governance and its sub-set project governance.

Good governance is a synonym for ‘good business’, structuring the organisation to deliver high levels of achievement on an ethical and sustainable basis. This requires the optimum strategy and the right approach to risk taking supported by sufficient processes to be reasonably confident the organisations limited resources are being used to achieve the best short, medium and long term outcomes.

Project governance focuses on the portfolios of programs and projects used by the organisation to deliver many of the strategic objectives. This process focuses first on doing the right projects and programs constrained by the organisations capacity to undertake the work – Portfolio Management; secondly, creating the environment to do the selected projects and programs right- developing and maintaining an effective capability; and lastly systems to validate the usefulness and efficiency of the ongoing work which feeds back into the selection and capability aspects of governance.

 

Within this framework, portfolio management is the key. Strategic Portfolio Management focuses on developing the best mix of programs and projects to deliver the organisations future within its capacity to deliver. This means taking the right risk and having sufficiently robust system in place to identify as early as possible the ‘wrong projects’, so they can be either be reframed or closed down and the resources re-deployed to other work.

It is impossible to develop an innovative future for an organisation without taking risks and not every risk will pay off. Remember Apple developed the ‘Apple Lisa’ as its first GUI computer which flopped in the market, before going on to develop the Apple Macintosh which re-framed the way we interact with machines.

Apple Lisa circa. 1983

Obviously no organisation wants to have too many failures but good governance requires ‘good risk taking’. Apple had no guarantees the i-Pod and its i-Tunes shop would succeed when it started on the journey of innovation that has lead to the i-Phone, i-Pad and Apple becoming one of the largest companies in the world based on capitalisation. As Richard Branson says – ‘you don’t bet the company on a new innovation’ but if you don’t innovate consistently, obsolescence will be the inevitable result.

The balance of project governance focuses around creating the environment that generates the capability to deliver projects and programs effectively, effective sponsorship, effective staff development, effective and flexible processes and procedures, simple but accurate reporting and good early warning systems to identify issues, problems and projects no longer creating value (a pharmaceutical industry saying is that if a project is going to fail it is best to fail early and cheap!).

Good questions outrank easy answers! Every hour and dollar spent on governance processes is not being spent on developing the organisation. The challenge of good governance is to have just enough reporting processes embedded in an effective culture of openness and accountability to provide an appropriate level of assurance the organisation’s resources are being used effectively; whilst at the same time allowing innovation and development. Restrictive and burdensome governance processes are simply bad governance – they restrict the organisation’s ability to achieve excellence.

To help organisations understand these key governance processes we have updated our two White Papers on the subject:
Corporate Governance: http://www.mosaicprojects.com.au/WhitePapers/WP1033_Governance.pdf
Project Governance: http://www.mosaicprojects.com.au/WhitePapers/WP1073_Project_Governance.pdf

For more discussion around the subject of governance see the previous posts on this blog.

Project Governance

Corporate governance is defined as aligning as nearly as possible the interests of individuals, the organisation and society. Good governance is good business!

Project governance is a sub-set of corporate governance, focused on systems that ensure the right projects and programs are selected by the organisation, and the selected ‘few’ are accomplished as efficiently as possible. Projects that no longer contribute value to an organisation should be terminated in a way that conserves the maximum value and the resources reallocated through the portfolio management process to more valuable endeavours.

The framework for effective project governance is laid out above, and is an executive management responsibility. Sponsors and the Portfolio Selection/Management processes provide the key link between the executive and the working project and programs (for more see our Governance White Paper).

The focus of this post is to look at the pre-selection activities that inform the portfolio selection processes. One of the key conclusions to be drawn from the Ombudsman’s Report discussed in my earlier post Cobb’s Paradox is alive and well  was that many of the projects that contributed to the $1 billion in failures were set up to fail – the projects had absolutely no chance of delivering within the announced parameters: the inputs to the portfolio selection process were grossly flawed (or were non-existent).

This appears to be a wide spread issue. Most project management standards such as ISO21500 and the PMBOK® Guide start with an approved project and a business case or similar that defines what has to be accomplished; this is the end of the portfolio selection process outlined above and is assumed to set realistic and achievable objectives.

What is missing, are the steps leading up to this point; the life of a ‘project’ starts with an idea, need, opportunity, requirement or threat (the ‘concept’). The organisation assesses and studies the ‘concept’ hypothesises options and solutions and frames a proposal that becomes the foundation of a future project. These key investigative elements of a project generally sit under the portfolio umbrella developing information to allow a proper decision to be made. In mining this can represent exploration, feasibility studies, ‘bankability’ studies and concept designs which between them can cost $millions, leading to project funding. Importantly, this ‘Front End Loading’ (FEL) is seen as the key to a successful mine in most major mining corporations.

Similar problems exist in major infrastructure projects, defining a solution to prison overcrowding can involve building a new major prison, building several smaller prisons, extending current prisons, changing the way criminal justice system works to reduce the need for prison places, or a combination of the foregoing options (substitute University/hospital/school, into the previous sentence to see just one dimension of the challenge). However, unlike mining, most government and many corporate organisations see effective ‘front end loading’ as unnecessary.

Other organisations use the process to formulate definitive solutions to problems they have no real understanding of (typical in ICT) and then pretend the defined solution has no associated risk (because it is defined) despite the fact the full dimensions of the problem the project is supposed to solve are still unknown, and are frequently changing over time.

The challenge, requiring informed judgement and effective governance is recognising which development processes suits what type of ‘concept’:

• Sometimes, the ‘investigation’ requires a significant amount of work (eg, a bankability or feasibility study); this work may be treated as a project in its own right, and is time, cost and resource constrained with a defined deliverable (the report).
• If the work is expected to flow forward and will only be stopped in exceptional circumstances, project phases work best, with some form of ‘gateway’ or transition review.
• In other circumstances, studies are undertaken as part of the portfolio by corporate or PMO professionals with no dedicated budgets, assessing multiple proposals as an ongoing process, but once a concept gets the go ahead a project is created and a budget and resources allocated.
• Other concepts (particularly problems) cannot be defined and an ‘agile’ approach is needed where elements of a partial solution are developed and put into use developing new learning that will then allow the next module to be developed in a progressive sequence. However, whilst this may be the most suitable and cost effective way of developing an effective solution, budgeting in a traditional ‘iron triangle’ concept of fixed cost, time and scope is impossible.

The challenge is recognising which type of project is being proposed (based on Project Typology), and then deciding which type of process will develop the best input to the portfolio selection process and what level of uncertainty (risk) is associated with the proposal once developed. Certainty is not important, what matters is appreciating the extent of the risks and the likely benefits, so an informed investment decision can be made. Most ‘game changing’ initiatives involve high risk, high reward projects that create a totally new future!

OGC Gateway™

The OGC ‘Gateway Reviews’ is a flexible process that addresses this part of major projects from the client’s perspective:
Gateway 1 = Business Justification, options identified and appraised, affordability, achievability and value for money established.
Gateway 2 = Procurement strategy, will the proposed strategy achieve the project objectives?
Gateway 3 = Investment decision, based on realistic project cost information (eg, tenders or bids) can the business case be confirmed from both the cost and the benefit perspective?
Gateway 4 = Readiness for service. The completion of the project work and a reassessment/confirmation of the expected benefits as the deliverable is put into ‘service’.
Gateway 5 = Benefits evaluation. Did we get what was expected now the project’s outputs are being used?

Summary

Most of the risks and rewards associated with a project or program are determined long before the project manager is appointed; if these decisions are wrong (or non-existent) project and program management cannot resolve the problem.

The role of effective project management is to deliver a realistic and achievable outcome efficiently; if the parameters for the project are unrealistic in the first place, the best project management can do is stop the situation deteriorating further! As far as I know, none of the various BoKs and methodologies, including the PMBOK® Guide has a ‘miracle’ process that will magically transform an impossible set of objectives into achievable set of objectives. Wishful thinking is not an effective substitute for effective project governance!

Resistance to change is not new……

My last couple of posts on the subject of change and executive leadership generated a range of comments many suggesting if we did ‘better project management’ the problems would be resolved. Unfortunately for this to be true, the organisation still needs executive buy-in and leadership to support the process, in fact demand better project management.

An article in the December edition of ‘project’, the journal of the UK Association of Project Management (APM) by Martin Samphire, a committee member on both the APM Governance SIG and the APM Portfolio Management SIG highlights more project failures. This time the FiReControl project which was described by the House of Commons Public Accounts Committee as ‘one of the worst cases of project failure the committee has seen’, followed by a catalogue of fundamental failures; and the NHS Connecting for Health program which is beset by weak program management.

The UK industry and Government know how to deliver large complex programs, the work of the Olympic Development Authority is a world class example; it’s just that many other managements simply choose to ignore good practice, or more accurately refuse to change to allow good practice to be introduced.

The challenge of getting senior management to actively support change that brings better systems into use to the benefit of the organisation they work for is not new. Henry Gantt had similar problems introducing his systems that demonstrably increased production by over 100% and massively increased profits. Here are a few of his comments:

• The changing of a system of management is a very serious matter and cannot be done by a superintendent in his spare time (Work Wages & Profits, p168).
• In every workroom there is a fashion, a habit of work, and every new worker follows that fashion, for it isn’t respectable not to (Work Wages & Profits, p186).
• The most casual investigation into the reasons why so many of the munition manufacturers have not made good, reveals the fact that their failure is due to lack of managerial ability rather than to any other cause (Organizing for Work, p64).
• Our most serious trouble is incompetency in high places. As long as that remains uncorrected, no amount of efficiency in the workmen will avail very much (Organizing for Work, p64).
• Our industries are suffering from lack of competent managers,—which is another way of saying that many of those who control our industries hold their positions, not through their ability to accomplish results, but for some other reason (Organizing for Work, p64).

By the way, Henry was also less than impressed with the bankers of his time as well: “No …laws…. have so far been framed that restrain the ‘high financier’ who, without giving anything in return, taxes the community for his own benefit to an extent that makes all other forms of acquiring without giving an adequate return seem insignificant.”

The framework needed by senior executives is well established the APM has just published the 2nd edition of Directing Change – a guide to the governance of project management (60,000 copies of the 1st edition have been distributed since publication in 2004). This guide is written by senior managers for senior managers. It provides clear overall guidance to an organisation’s governing body (board or equivalent) and executives on their responsibilities and more specific guidance on choosing the right projects (portfolio direction), project sponsorship, project management capability and disclosure and reporting. Copies can be downloaded from the APM website or: www.mosaicprojects.com.au/Resources_Papers.html#Governance

Martin Samphire’s view is that applying good governance in their management is 80% of the answer to successful projects. I feel he is understating the importance of the role and responsibility of the senior executives, particularly when it comes to the process of changing an organisations culture to accept good governance and effective project management!

Cobb’s Paradox is alive and well

In 1995, Martin Cobb worked for the Secretariat of the Treasury Board of Canada. He attended The Standish Group’s CHAOS University, where the year’s 10 most complex information technology (IT) projects are analysed. The high level of failure led Cobb to state his now famous paradox: “We know why projects fail; we know how to prevent their failure—so why do they still fail?”

In 2011, another report into the management of IT projects asks the same question! This time the report was prepared by the Victorian Government Ombudsman, in consultation with the Victorian Auditor-General, it documents another series of failures largely created by executive management decisions. The report entitled Own Motion Investigation into ICT – Enabled Projects, examines 10 major Victorian Government ICT projects that experienced difficulties such as budget and timeframe blowouts or failure to meet requirements.

Portfolio Management
Problems identified by the Ombudsman in the area of Portfolio management and governance include a lack of effective leadership, accountability and governance. He was particularly concerned about poor project governance, the lack of accountability of project stakeholders and a lack of leadership — a reluctance to take tough decisions.

These failures contributed to poor decision making, and an inability or reluctance to make difficult, but necessary decisions. Leaders lead and determine governance practices; the resources needed to implement these facets of effective Portfolio management are readily available including:

• PMI’s The Standard for Portfolio Management – 2nd Edition, available in Australia from http://www.mosaicprojects.com.au/Book_Sales.html#PMI, elsewhere from http://marketplace.pmi.org
   
• The Association for Project Management’s Directing Change, a guide to the governance of project management: Download the booklet

Project Definition
It is impossible to deliver a project successfully if the decision to proceed is based on inaccurate assessments in the business case. The Ombudsman commented on the inadequacy of business cases, the failure to fully define requirements for new systems, a general reluctance to change business processes to better fit with off the shelf products (to reduce cost and risk) and a ‘tick the box’ approach to risk management (ie, avoiding any real assessment of risks and opportunities).

Linked to this lack of definition major project funding decisions were announced publicly before the business case was fully developed (representing either wishful thinking or a wild guess?), and high risk decisions being made to only partially fund some projects.

The solution to these issues is a robust and independent PMO that has the skills and knowledge needed to validate business cased before they go forward to management for decisions. Many years ago, KPMG released a series of reports that highlighted the fact that organisations that failed to invest in effective PMOs were simply burning money! The Ombudsman’s report shows that ‘burning public money’ is still a popular pass time.

For more on PMOs and to download the KPMG reports see: http://www.mosaicprojects.com.au/Resources_Papers.html#Proj_Off

Risk Management
Many of the factors identified above and in my view the primary cause of most bad decisions is the abject failure of senior management to insist on a rigorous risk management process. Risk management is not about ‘ticking boxes’, it is about having the ethical courage to objectively explore the risks and then take appropriate actions to either mitigate the risk or provide adequate contingencies within the project budget. This failure was manifest by an inconsistent approach to contingency funding. There are many examples of high risk decisions being made without any contingency provisions:

• The Myki ticketing system was let to an organisation that had never delivered a ticketing system before. No contingencies were made for this high risk decision and the project is years late, $millions over budget and will only deliver a small part of the original scope.
   
• Agencies preferred to be on the leading edge rather than leveraging what had been done by others elsewhere. This may be justified but not without proper risk assessment, mitigation and contingency.

Government agencies are not alone in failing to effectively manage risk in ICT procurements. The same problem has been identified in major infrastructure projects, in a series of reports by Blake Dawson; see: Scope for improvement

There are always difficulties in transferring project risks to vendors, and dealing with large vendors who may be more experienced in contract negotiation than their agency counterparts. Whilst modern forms of contract provide opportunities to adopt innovative procurement processes that could significantly reduce project risks for vendors and customers these were not used.

As our paper, The Meaning of Risk in an Uncertain World  and the Blake Dawson reports clearly demonstrate, not only is it impossible to transfer all of the project risk to a vendor, it is totally counterproductive to try! Organisations that try to transfer ‘all of the risk’ end up with a much poorer outcome than those organisations that actively manager the risks in conjunction with their vendors.

Large ICT projects are inherently complex and necessarily involve some significant risks. But these can be mitigated to some degree by taking heed of the Ombudsman’s observations, lessons learnt in other projects and the implementation of robust and independent systems.

The PMI Practice Standard for Risk Management provides  good starting point.

Recommendations
The Ombudsman’s recommendations on how to address these issues can be applied to ICT and other projects undertaken by other state, local and Commonwealth government agencies, and in the private sector: Download the report.

In my opinion, the primary cause of these failings, referenced but not highlighted by the Ombudsman, is cultural. Executives and senior managers overtly preferring the status quo and the current power structures they have succeeded within over leading the implementation of change that will deliver improved outcomes for their organisations but make people more accountable and redistribute organisational power. This was the focus of my last posting; Culture eats strategy for breakfast 2!

As Martin Cobb observed in 1995, “We know why projects fail, we know how to prevent their failure — so why do they still fail?” Unfortunately this is still a valid question more that 15 years later and, without leadership from the very top, I expect the effect of this report will be little different to the dozens of similar reports generated over the years and we will still be asking the same question in 2020.

The answer is culture and leadership – to change the culture within senior management ranks, the owners of organisations need to take actions similar to the Australian Federal Government and mandate effective processes and then measure performance in their implementation and use. The implementation of the Gershon Report that is being forced through the federal government departments is a Cabinet level initiative. It is still too soon to judge wether the initiative will be successful, effective culture change takes years to embed in major organisations, but at least the push has started at the right level. My feeling is that if the pressure is maintained for another 3 or 4 years (the original report was released in 2008) there may be some real benefits. To avoid similar reports to this one in the future, the leaders of other organisations need to take similar robust, strategic action tailored to the needs of their organisation.

Project professionals can help by effectively communicating to your top-level executives the real benefits of effective project governance. For many ICT and other technical/engineering professionals this represents is a whole new set of skills to learn, my book Advising Upwards may help!

Culture eats strategy for breakfast!

Most business changes involve a strategic intent, implemented by a project or program that defines the new processes and procedures needed to achieve the change and then develops and implements the processes.

Smart organisations realise this is not enough and include training to make the organisations staff familiar with the new processes and the really smart organisations link achieving the intended benefits to a key executives KPIs. And the changes still fail!

Two areas of notable failure are IT projects where the focus is on the technology rather than the business and PMO start-ups where the focus in on processes and reporting rather than improved project outcomes.

However, even where a smart business has aligned the project with a sensible/necessary strategic intent, and then properly leads and resources the effort, failure is still likely if the power of culture is ignored. Culture can be loosely defined as ‘the way we do business here’ and incorporates attitudes, expectations and the way both internal and external relationships work. The people in the organisation are there because they can operate in the culture as it currently is and embody the culture; they are predisposed to resist change.

There is an old joke that asks ‘how many consultants do you need to change a light bulb?’ The answer is ‘one, provided the light bulb wants to change!’ This adage applies to changing culture in any organisation – it wont change unless the people in the organisation want it to change, and overall most people in the organisation are quite happy with the culture as it exists (if they were not, they would move on to another job).

The challenge with implementing changes falls into two areas:

• The first is doing the ‘right project right’ by implementing effective Portfolio, Program and Project management. Whilst it is true that $billions of projects fail due to poor management practices, these failures are a deliberate choice of executive management. We know how to do projects, programs and portfolio management properly, not implementing effective systems is a cultural decision that prefers the status quo and failure over change.
   
• The second challenge is cultural; the need to move the organisations culture to allow the change to be implemented effectively. This is a much more difficult process that needs leadership and drive. You need to create the willingness to allow the change to happen, before the change can be implemented effectively, before the benefits of the change can be realised. This requires the people in the organisation to buy into the concept of the proposed change long before the benefits can be tangibly appreciated.

Meeting the challenge of ‘culture’ requires effective leadership; the people in the organisation need to be prepared to follow their leader into the new, unproven future. These traditional aspects of leadership are outlined in our White Paper: Leadership.

Another important facet of leadership is ‘Tribal Leadership’, everyone belongs to one or more tribes of associates (defined as people they know well enough to greet socially) and effective leadership at this social group level can also be a powerful influence for change, firstly to build engagement within the group (see diagram below), then to generate support to allow the change to happen.

Whilst project managers can only ever have a small role to pay in the overall leadership of the organisation (this is the province of CEOs and executive managers), they can be effective tribal leaders.

Most tribes are quite small, less then 120 people. In their book, Tribal Leadership, Logan, King and Fischer-Wright describe an organisation as a tribe of tribes and if the project manager’s tribe expands to include key members of the wider organisational community affected by the planned change, their influence can be significant.

Creating the ‘space’ within a culture to allow change, both from the executive leadership perspective and tribal leadership perspective are elements of effective stakeholder management. What most organisations forget is this part of the change effort has to precede the role out of the new processes and procedures.

Creating the space to allow for the possibility of success is not the end of the change effort. For the change to be fully successful you still need to role out strategically effective processes and procedures, provide effective training and transition support, and then maintain visible support for the change over an extended period until the ‘new’ processes and procedures are fully absorbed in to the culture of the organisation and simply become part of the way the organisation does business.

Unfortunately very few organisations start soon enough or continue long enough with the overall change effort to be successful. But without this sustained effort, culture eats strategy for breakfast.

See also Culture eats strategy for breakfast 2!