November 10, 2013

Delivering Value with Project Assurance

Recently there have been two very high profile technology project failures reported with the Obamacare website train wreck and the NHS Patient Records System.

Those involved in delivering major projects and programs know that value is being lost every time a project is delivered late, over budget or doesn’t deliver as expected. While major catastrophes like the ones above may not hit an organisation every year, the reality is that the majority of projects don’t achieve their goals.

Yet despite this knowledge, in many organisations, the cycle tends to continue year in and year out with little change in performance. Projects are executed poorly, there are lessons learned, action plans and yet project failures persist and value continues to be left on the table.

The Financial Impact of Well-Managed Projects

A recent survey from PMI1 found that high performing organisations risk US$20 million for every US$1 billion spent on projects, whereas low performing organisation risk $280 million for the same US $1 billion spent. A high performing organisation was defined as one that delivers more than 80% of its projects on-time, on budget and meeting requirements and a low performing organisation one which delivered the same 3 criteria less than 60% of the time. Based on this information alone, the scope for improving the bottom line via stronger project management is enormous but unfortunately often ignored because of its complexity.

The Causes of Project Failure

There are many areas that may contribute to technology projects not delivering on their goals. These include poorly defined requirements; weak project management, lack of key skills, unproven technology, poor change control or lack of alignment with business requirements.

One area that is often overlooked but is frequently the cause of project failures is external dependencies that were not foreseen at the time the project was started such as an acquisition or divestiture of a business unit, an internal reorganisation or possibly a change in government regulations. These are the “unknown unknowns”2, which are difficult to anticipate, except to know that the longer the project the higher the risk that they will arise.

Based on our research and experience we defined a comprehensive model for Project Performance that takes into consideration the most common causes of project failure.

Strategies for Improving Project Performance

If we know why projects fail, then it should be relatively easy to prevent outcomes such as the Obamacare website, the NHS Patient Records system and other similar project failures. However there are several reasons why lessons learned from the past may not be transferred into future projects such as a lack of organisational learning, biased forecasting or as described earlier a lack of appreciation of external dependencies.

Yet some organisations are able to capture the value of delivering successful technology projects. These projects may still experience the same challenges in terms of technology, skills or governance, but they are able to overcome these and deliver on their defined success criteria.

As there is no single cause of project failure, there is no silver bullet for project success. A comprehensive approach is needed that continually challenges the project against the known failure causes and success drivers and takes the right actions based on this assessment. Major problems can be identified early and resolved before it is too late.

For example, in the case of Definition, the following needs to be understood:

  • Are the project goals, success criteria and expected benefits clearly defined?
  • Are the project goals completely in line with business expectations?
  • Is the plan both detailed and realistic, including milestones, resources, and budget needed?

When it comes to Project Management, having a high-quality project manager and following a recognised PM methodology provides the foundations to manage changing requirements, team motivation and ensure proactive risk management. Strong project management is also more likely lead to less risk of skills gaps and improved project communication across the team and stakeholders.

Applying this comprehensive Project Assurance approach across all 10 areas of the reference model ensures that no stone is left unturned in pursuit of delivering the expected project outcomes.

Fig. 1: Project Success Drivers

success drivers

For example, this reference model was used as part of a Project Performance Assessment on 3 different application implementation projects as shown below:

Fig. 2: Project Performance Assessment

performance assessment

Project A ran nearly 90% over the scheduled timeline. Not only did it exceed the planned budget by a similar amount, but the system was revenue generating, so the impact of lost business benefits was much greater. The key issue was the selection of an immature technology, which was compounded by overall poor project management and lack of integration and software quality. However, after a project recovery effort, a working system was eventually implemented.

Project B was delivered 30% later than planned. It did finally deliver all requirements to the satisfaction of customers and stakeholders, but the original budget and business case were not met. The main cause of delay was weak project management, which also impacted the quality of results and ability to obtain enough skilled resources.

Project C was delivered on-time, under-budget and despite some minor technology glitches at go-live, it achieved its goals. The project was affected by some external dependencies in the form of late requirements, but through strong project management, the risks were mitigated without significant impact.

The benefit of assessing project performance in this way is that problem areas can be identified as early as possible using tangible measurements and corrective actions taken to get back on track.

The Value Delivered

While customers have various contractual mechanisms to manage the risks of project failures with their suppliers such as penalties, liquidated damages, or step-in rights, these are all reactive approaches that are unlikely to compensate the complete financial impact of a failed project. This is especially true when the customer has not completely fulfilled its own responsibilities for the project delivery.

Improving project management via a comprehensive assurance approach provides a more effective way to proactively overcome the challenges that exist in all major technology projects & programs and deliver a successful outcome. As seen from the PMI survey there are huge benefits for those organisations that improve their project management performance.

To learn more about improving business results through the project and program assurance contact us.

1PMI’s Pulse of the ProfessionTM: The High Cost of Low Performance, May 2013
2Donald Rumsfeld, US Secretary of Defence, used the term “unknown unknowns” in 2002 in relation to the search for WMD’s in Iraq.