Tag Archives: Project Management ROI

Productivity decline should generate more projects

Projects and programs are the key organisational change agents for creating the capability to improve productivity through new systems, processes and facilities. But only if sensible projects are started for the right reason.

Declines in productivity seem to be widespread. In Australia, labour productivity in the market sectors of the economy increased at 2.8% per annum between 1945 and 2001, reducing by 50% to an annual rate of 1.4% between 2001 and 2001.

  • The measure of Labour Productivity is the gross value added per hour of work.
  • The ‘market sectors’ measured exclude public administration, education and healthcare where measurement is almost impossible.

Some of this change can be attributed to macro economic factors, there were massive efficiency gains derived from the shift from paper based ‘mail’ and copy typist to the electronic distribution of information, improved global transport systems (particularly containerisation) and the restructuring of manufacturing post WW2. These massive changes in the last half of the 20th century are not being replicated in current.

Whilst this decline in the rate of improvement in labour productivity is significant, the capital inclusive index is a more telling statistic. The multi-factor productivity index which includes the capital invested in production, giving a purer measure of the efficiency with which labour and capital are combined to produce goods and services. In the six years leading up to 2001, this measure of productivity grew by an average of 1.5% per annum, in the decade between 2001 and 2011 this reversed and productivity fell by 0.4% per annum.

Around 40% of the decline in the last decade can be explained by massive investments in mining and utilities that have yet to generate a return on the capital invested. The other 60% represents the massive cost of ‘new capabilities’ in general business for relatively small, or no improvement in productivity.

One has only to look at the ever increasing number of ‘bells and whistles’ built into software systems ranging from high definition colour screens to features that are never used (and the cost of upgrading to the ‘new system’) to understand the problem. 90% of the efficiency gain came with the introduction of the new system many years ago, the on-going maintenance and upgrade costs often equal the original investment but without the corresponding improvement in productivity. Another area of ‘investment’ for 0% increase in productivity is compliance regimes. Whilst there may be good social arguments for many of these requirements, the infrastructure and systems needed to comply with the regulations consume capital and labour without increasing productivity.

In Australia general management have been rather slow to appreciate the challenge of declining productivity, the impact being cushioned by a range of other factors that helped drive profitability. But this has changed significantly in the last year or so. There is now an emerging recognition that productivity enhancing organisational change is an imperative; and smart management recognise this cannot be achieved through capability limiting cost reductions.

Organisations that thrive in the next decade will:

  • Enhance customer satisfaction and service,
  • Enhance their engagement with their workforce, the community and other stakeholders,
  • Enhance their products and capabilities, and
  • Improve their labour productivity.

Achieving a viable balance across all four areas will require an effective, balanced strategy supported by the efficient implementation of the strategic intent through effective portfolio, program and project management capabilities that encompass benefits realisation and value creation.

The three key capabilities needed to achieve this are:

  • The ability to develop a meaningful and practical strategic plan.
  • An effective Project Delivery Capability (PDC); see: WP1079_PDC.
  • An effective Organisational Change Management Capability; see: WP1078_Change_Management.

Improving productivity is a major challenge for both general management and the project management community; and the contribution of stakeholder management and project management to the overall effort will continue to be a focus for this blog.

Advising Upwards for Effect

The only purpose of undertaking a project or program is to have the deliverables it creates used by the organisation (or customer) to create value! Certainly value can be measured in many different ways, improved quality or safety, reduced effort or errors, increased profits or achieving regulatory compliance; the measure is not important, what matters is the work of the project is intended to create value. But this value will only be realised if the new process or artefact ‘delivered’ by the project is actually used by the organisation to achieve the intended improvements.

The organisation’s executive has a central role in this process. There is a direct link between the organisation’s decision to make an investment in a selected project and the need for the organisation to change so it can make effective use of the deliverables to generate the intended benefits and create a valuable return on its investment. The work of the project is a key link in the middle of this value creation chain, but the strength of the whole chain is measured by its weakest link – a failure at any stage will result in lost value.

In a perfect world, the degree of understanding, knowledge and commitment to the change would increase the higher up the organisational ladder you go. In reality, much of the in-depth knowledge and commitment is embedded in the project team; and the challenge is moving this knowledge out into the other areas of the business so that the whole ‘value chain’ can work effectively (see more on linking innovation to value).

To achieve this, the project team need to be able to effectively ‘advise upwards’ so their executive managers understand the potential value that can be generated from the initiative and work to ensure the organisation makes effective use of the project’s deliverables. The art of advising upwards effectively is the focus of my book ‘Advising Upwards’.

An effective Sponsor is a major asset in achieving these objectives, providing a direct link between the executive and the project or program. Working from the top down, an effective sponsor can ensure the project team fully understand the business objectives their project has been created to help achieve and will work with the team to ensure the project fulfils its Charter to maximise the opportunity for the organisation to create value.

Working from the bottom up, new insights, learning and experience from the ‘coal face’ need to be communicated back to the executive so that the overall organisational objectives can be managed based on the actual situation encountered within the work of the project.

The critical importance of the role of the sponsor has been reinforced by numerous studies, including the PMI 2012 Pulse of the Profession report. According to this report, 75% of high performance organizations have active sponsors on 80% of more of their projects (for more on the value of sponsorship see: Project Sponsorship).

If you project has an effective sponsor, make full use of the support. The challenge facing the rest of us is persuading less effective sponsors to improve their level of support; you cannot fire your manager! The solution is to work with other project managers and teams within your organisation to create a conversation about value. This is a very different proposition to being simply ‘on-time, on-scope and on-budget’; it’s about the ultimate value to the organisation created by using the outputs from its projects and programs. The key phrase is “How we can help make our organisation better!”

To influence executives within this conversation, the right sort of evidence is important; benchmarking your organisation against its competitors is a good start, as is understanding what ‘high performance’ organisations do. PMI’s Pulse of the Profession is freely available and a great start as an authoritative reference.

The other key aspect of advising upwards is linking the information you bring into the conversation with the needs of the organisation and showing your organisation’s executive how this can provide direct benefits to them as well as the organisation.

In this respect the current tight economic conditions in most of the world are an advantage, organisations need to do more with less to stay competitive (or effective in the public service). Developing the skills of project sponsors so that they actively assist their projects to be more successful is one proven way to achieve a significant improvement with minimal cost – in fact, if projects are supported more effectively there may well be cost savings and increased value at the same time! And what’s in it for us as project managers? The answer is we have a much improved working environment – everyone wins!!

Governance -v- Management: A Functional Perspective

In an earlier post I looked at the governance and management of organisations from the perspective of Systems Theory, (See the post), this post looks at the functional differences between the two roles.

The purpose of any system is to deliver functionality or capability; governance and management are no different. However, for there to be a valid difference between governance and management, there has to be a different functional purpose. The purpose of this post is to define this difference!

There are three basic layers of functionality within any organisation:

  • The producers of goods and/or services, the production workers and/or knowledge workers;
  • The various layers of management who oversight and direct the production/knowledge workers;
  • The ‘governors’ of the organisation who oversight and direct the managers.

Within this functional framework an individual may operate at different levels at different times depending on the actual function they are performing. A few examples include:

  • A front line supervisor or team leader may spend some of her time working as the first line of management directing the work of others, and the rest of the time as a worker producing goods or services.
  • A newspaper editor is primarily responsible for the direction and management of sub-editors and journalist with a view to getting ‘today’s issue’ to the presses on schedule, but also functions as a knowledge worker when drafting the ‘editorial column’.
  • In corporations, executive directors operate at the governance level when acting as Board Members, as managers when directing the operations of the organisation.

The above clearly demonstrates function and position are not synonymous. But equally, it is important for a person in a position to understand the function they are currently performing.

Production/Knowledge work
The function of any worker is to produce goods services or other outputs as efficiently as possible. In simple organisations and pre-industrialisation, workers were typically responsible for all aspects of the production process in ‘cottage industries’; exchanging their surplus production for their other needs in local markets.

The advent of industrialisation and the division of work into highly specialised operations introduced the requirement for managers to organise the supply chain, the work and the workers; in order to obtain the efficiencies available from these ‘new’ production systems. The concepts of management were largely defined in the late 19th and early 20th century.

Management
There were many contributors to the development of management theory, Taylor’s Scientific Management focused on performance measurement and process optimisation. The Gilbreth’s, Henry Gantt and George Mayo added the concepts of efficiency, leadership, incentivation and motivation; and Max Weber introduced the concept of bureaucracy (standardising procedures and record keeping).

The overall definition of the function of management was created by Henri Fayol. His six primary functions of management are:

  • Forecasting.
  • Planning.
  • Organising.
  • Commanding.
  • Coordinating.
  • Controlling.

Implicit in these 6 factions is the requirement for decision making! The core purpose of management is to make the optimal decisions to make the work of the organisation as efficient and sustainable as practical.

It’s worth remembering, the production and knowledge workers in any organisations will generate some level of output without any input from management. And as Peter F Drucker commented ‘So much of what we call management consists of making it difficult for people to work.’

The function of effective management in a well structured organisation is to create efficiencies in the accomplishment of the ‘right amount’ of the ‘right work’ at the ‘right time’ that are greater than the costs associated with managing the organisation (or at the very least, better then competing organisations). To achieve this, the functions of forecasting, planning, managing and controlling the work, and recording the outcomes; needs to be undertaken within a governance framework that informs the decision making to achieve the optimum outcomes.

Governance
The function of governance is to provide oversight and direction to the management of the organisation. The Organisation for Economic Co-operation and Development in the OECD Principles of Corporate Governance 2004 (www.oecd.org) define governance as: ‘involving a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined’

The primary elements necessary to achieve this objective are outlined in the diagram below:

Governance is a holistic process, a failure in any one area will cause damage in others; a few recent examples include:

  • The damage to David Jones’ reputation and share value caused by inappropriate interactions between a senior manager and a female employee.
  • The vast amount of damage caused to BP due to failures in safe operating procedures leading to the Deepwater Horizon disaster.
  • An inaccurate press release leading to the conviction of several Directors of the James Hardy group (under continuous disclosure requirements of the ASX).
  • The legal actions brought against Centro for the misallocation of debt despite receiving and applying advice from a leading international accountancy firm.
  • The personal liability of Directors under various legislative regimes for breaches of taxation requirements, OH&S failures, insolvent trading, etc.

Whilst avoiding ‘failure’ is important, the primary function of governance is to create sustainable success. This is of necessity, a multi-faceted process that requires the careful balancing of different, frequently contradictory, objectives. For example:

  • The resources committed to implementing a future strategy cannot be used to enhance current viability or profitability causing a short term loss of value or revenue.
  • However, if no commitment is made to develop the future of the organisation, the organisation itself will quickly become uncompetitive and irrelevant, destroying value for its owners in the longer term.

Determining the right balance is a governance decision. Implementing the decision is a management function.

In the area of strategic change, doing the ‘right project right’ is woefully inadequate. An effectively governed and managed organisation starts with a well defined strategy, and manages each selected project or program through the organisational changes needed to make full use of the outputs to the maximisation of the benefits realised; recognising that in a changing world, the potential benefits will be changing throughout the whole life of the initiative and adapting to optimise the overall outcomes (for more on this see: The failure of strategic planning).

Who governs?
There are two schools of thought about governance. One body of literature sees different types of governance, primarily corporate governance, IT governance and project governance. The people developing this concept are almost exclusively project mangers, IT managers and academics focused on these disciplines. Interestingly there does not seem to be a similar body of literature focused on HR governance, financial governance or any other area of management. This school of thought sees governance being a function of almost any management position or entity responsible for overseeing the work of IT departments or projects including sponsors and project boards.

The alternative school of thought developed by organisations such as the OECD, various Institutes of Directors and the agencies responsible for governing the various stock exchanges see governance as a single process with different facets. The approaches taken by various governments in legislating liability for corporate and governance failures supports this holistic view. The Directors of corporations are being increasingly made personally responsible for governance and management failures.

An interesting exception to the concept of ‘project governance’ being something different and special is the various guides developed by the Association for Project Management (APM, UK). The recently published 6th edition of the APM Body of Knowledge sees ‘the governance of portfolios, programs and projects as a necessary part of organisational governance.’ And governance as: ‘the set of policies, regulations, functions, processes, procedures and responsibilities that define the establishment, management and control of projects, programs and portfolios.’

In the referenced source document: Directing Change A guide to governance of project management, the body defined as responsible for governance is the organisations ‘Board’. In this context, the term ‘board’ applies to management boards and their equivalents in the public sector and to councils in companies limited by guarantee. It does not refer to project boards.

In a well governed organisation, responsibility for implementing defined aspects of the governance system is delegated to the appropriate management levels together with the necessary authority to undertake the work. Accountability for the governance of the organisation remains with the board of the host organisation. The resulting governance structure is outlined as:

Figure 1.2 Governance Structure © 6th Edition, APM-BoK, UK.

The concept of delegation outlined above is important; a key principle in managing governance is summed up in the legal doctrine ‘delegatus non potest delegare’… unless expressly authorised a delegate cannot delegate to someone else.

Part of the governing board’s responsibility is to ensure appropriate delegations of authority are made to management so they can develop an effective system of management that meets the governance needs of the organisation. However, delegating authority and responsibility to management does not remove the ultimate accountability for ensuring ‘good governance’ from the Board.

Interestingly, the APM-BoK acknowledges that in poorly governed organisations project teams may have to take responsibility for governing themselves. This lack of organisational maturity (and capability) is the focus of our paper The Management of Project Management  (due for publication Oct. 2012) and is the likely reason for the emergence of the separate concepts of project governance and IT governance outlined above.

Unfortunately the creation of ‘special’ governance sub-sets separate from the overall governance function compounds the immature governance the special functions are supposed to resolve – when projects fail and benefits are not realised the organisation suffers as a whole. In the absence of an effective governance system these ‘project failures’ are far more likely to be caused by general management failings than by project management failings (see: Project or Management Failures?).

Summary
The function of governance is and should be separate from the function of management although some managers may fulfil both governance and management functions at different times.

The core principles of effective governance are:

  • It is a holistic process focused on the creation of sustainable value by the organisation. Authority for some aspects of governance can be delegated to management, accountability remains with the governing Board.
  • Governance and management should be separate; importantly a manager cannot govern his/her own work.
  • The governance structure is defined by the governing board and implemented by management (see our White Paper: Project Governance).
  • A core aspect of good governance is making the decisions to invest in developing the appropriate capabilities to ensure organisational resources are used efficiently and effectively. The management systems and structures needed to create value from projects and programs are outlined in our White Paper: Project Delivery Capability.

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.

The Capital Crime

A recently published, free e-book, ‘The Capital Crime’ focuses on the massive loss and waste of capital being perpetrated on an ongoing basis in most organizations across the world, through their executive management, failing to effectively ‘manage the management’ of projects and programs.

Cobb described his Paradox more than 15 years ago , but organisations still deliberately set up projects so they are almost guaranteed to fail and waste vast amounts of capital as a result. However, fixing Cobb’s Paradox and doing projects ‘right’ is only part of the answer, a wider capability is needed focused on using capital effectively in support the organisations strategy to generate real value for the organisation’s stakeholders!

We refer to this as ‘Project Delivery Capability’ or PDC; the e-book’s authors use a wider definition, ‘Value Delivery Capability’. Regardless of the name, we agree with Jed Simms, the only piece of the value delivery chain that is understood is the piece in the middle called ‘project management’. The surrounding envelope of organisational abilities to only start the ‘right projects’, set the selected projects up for success and then make effective use of the project deliverables to create value is poorly understood – the strength of a chain is defined by its weakest link, not its strongest!

The consequence of this lack of understanding of the ‘value chain’, at the very top of the organisation, is organisations setting their project up to fail, failing to support projects during their execution, and failing to make use of the project deliverables to generate value. The failure of any of these ‘weak links’ reduces the organisations ability to achieve its strategy and a return on investment. The associated waste of capital caused by sub-optimal project outcomes is the core of the ‘capital crime’ discussed in an easy to read ‘story’ format in the free e-book, ‘The Capital Crime’.

You are invited to download your copy of ‘The Capital Crime’ from: http://www.thecapitalcrime.com/

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:
  • 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.