We now have weighty evidence of the most persistent management problems with projects. A survey of project managers conducted in 1999
TABLE 1.1 Project Management Quick Study Projects are:
Temporary endeavors undertaken to create a unique product or servicea Activities organized to deliver something of value to a customer (and
therefore to your organization)
The building blocks in the design and execution of your organization’s strategies
Project management is:
The application of knowledge, skills, tools and techniques to project activities in order to meet or exceed stakeholder needs and
expectations of a project. Meeting or exceeding stakeholder needs and expectations invariably involves balancing competing demands.a These demands include scope, time, quality and cost; identified requirements (needs) and unidentified requirements (expectations).
Management by projects or enterprise project management is:
A system that integrates all the project activity within an organization and links it to organization-wide strategies, priorities, and resource pools. The most common infrastructure to support management by projects is the Project Office.
What value can an organization expect to derive from implementing a Project Office?
Research shows that establishing a Project Office is predictive of success in IT projects: the Gartner Group states that companies with a PO will experience half the delayed and cancelled projects as compared to companies without a PO.
What challenges will the organization face?
Changes in organizational culture, including new information systems, altered communications channels, and new performance measurement strategies.
a Project Management Institute, A Guide to the Project Management Body of Knowledge, PMI, 2000.
The Strategic Project Office: A Catalyst for Organizational Change 5
by Robbins-Gioia, Inc., found that 90 percent often underestimate project size and complexity. Nearly half (44 percent) had cost overruns of 10 to 40 percent, and only 16 percent consistently met scheduled due dates.3 IT software development projects as presently managed are often 170 percent to 180 percent over budget.4
In the consulting field, several industry giants became targets of lawsuits in the late 1990s by companies furious about ERP and HR system imple- mentations that had dragged on for years, run millions of dollars over budget, and created a culture of dependency on the consulting firm.5,6
What is the solution? One of The Gartner Group’s “Strategic Planning Assumptions” for companies, through 2004, is that organizations should establish enterprise standards for project management, including a Project Office with suitable governance [italics ours]. Companies that follow the IT research firm’s advice will experience half as many major project cost overruns, delays, and cancellations as those that fail to do so.7
Why is project management and, in particular, the project management office, so important? The reason is that most of the value-adding activities that companies do come in the form of projects. Think of operations as interest on capital already amassed; think of projects as the entrepreneurs who create new wealth. New products, new marketing initiatives, new facilities, new organizational processes implemented, mergers and acqui- sitions: all of these are projects. Think of time as money: if a project is late for an amount of time equal to 10 percent of the projected life of the project, it loses about 30 percent of its potential profits.8 A study by McKinsey and Company has shown that high-tech products lose 33 percent of after-tax profits when they are late to market, but lose only 4 percent when they are on time — even if they are 50 percent over budget.9
In the past decade, there has been a trend toward improvement in our ability to pull off projects. Project slippage and failure rates are falling, at least in those application areas that attract research interest, such as software development and pharmaceutical R&D.10 Cost and time overruns are down. Large companies have made the most dramatic improvement.
In 1994, the chance of a Fortune 500 company’s project coming in on time and on budget was 9 percent; its average cost was $2.3 million. In 1998, that same project’s chances of success had risen to 24 percent, while the average project cost fell to $1.2 million.
Three factors explain these encouraging results:
1. A trend toward smaller projects that are more successful because they are less complex
2. Better project management
3. Greater use of “standard infrastructures,” such as those instituted through a Project Office. (Large companies show up as more
6 Optimizing Human Capital
successful in the Standish Group study for one simple reason, in our view large companies lead the pack in the establishment of enterprise-level or Strategic Project Offices.)11
The Project Office can also take credit for the implementation of better project management because it is only under the auspices of this organi- zational home for project management that some of the persistent man- agement problems that plague projects can be ameliorated, including:
Project managers who lack enterprise-wide multiproject planning, control, and tracking tools often find it impossible to comprehend the system as a whole.12 Such tools are rarely effectively imple- mented, trained for, or utilized except under the auspices of a project office. Buying a tool addresses the software issue; and the
“peopleware” issues must be addressed by a management entity that specializes in projects.
Poor project management/managers. Most of the reasons technol- ogy projects fail are management related rather than technical.
Technical ability is a poor indicator of project management ability, yet many enterprises have no processes in place to ensure that project managers are appropriately trained and evaluated.13 Does the average corporate HR department possess the knowledge to appropriately hire, train, supervise, and evaluate project manage- ment specialists? No; but a Strategic Project Office does.
There is a high correlation between lack of clear project sponsor- ship and failure. Executive support for and understanding of projects is lacking in many organizations.14 When project manage- ment gains a seat at the executive level, via the implementation of a Strategic Project Office, the chasm between projects and executives closes.
Accurate project resource tracking is imperative to successful project management, but many organizations are hampered by awkward or antiquated time-tracking processes.15 Most companies’
time-tracking processes are owned by and originate in the HR department; and most HR departments are still using an employ- ment model developed in the early Industrial Age. Project-based work requires new processes for reporting work progress and level of effort.
Many of the best practices for preventing failures are also directly related to Project Offices, including:
The Strategic Project Office: A Catalyst for Organizational Change 7
Enterprises that hold post-implementation reviews harvest best practices and lessons learned, and identify reuse opportunities are laying the necessary groundwork for future successes.16
A Project Office shines as the repository for best practices in planning, estimating, risk assessment, scope containment, skills tracking, time and project reporting, maintaining and supporting methods and standards, and supporting the project manager.
Sound project plans are realistic, up-to-date, and frequently reviewed; reviews focus not just on what has been done, but look forward to identifying risks and opportunities.
Project metrics and milestones are defined, measured, and reported.17
Experienced sponsors and project managers develop and maintain a “go/no-go” cancellation strategy. They do not hesitate to kill a project that becomes a liability — and do not indulge in blame and punishment.18
Monitoring critical dates is imperative, and enterprise time-tracking software — usually Web-based for ease of use — has become a necessity for larger projects, multiproject environments, and dis- persed project teams.19
However, the greatest area of promise for the Project Office lies in its effect on the management of project personnel. Competent and experi- enced project managers are not accidental: they are grown in an environ- ment that trains, mentors, and rewards them based on performance in projects — a topic that most HR departments know very little about.
Benefits of having a good project manager include reduced project expense, higher morale, and quicker time to market. The skills most executives cite as desirable in a project manager include technology and business knowledge, negotiation, good communications (including writing ability), organization, diplomacy, and time management. Understanding the business is more important than understanding technology. They must be able to define requirements, estimate resources and schedule their delivery, budget and manage costs, motivate teams, resolve conflicts, negotiate external resources, manage contracts, assess and reduce risks, and adhere to a standard methodology and quality processes. Obviously, there is a growing body of knowledge about who makes the best project managers, how to develop their skills, and what kinds of rewards motivate them. That body of knowledge has an organizational home in the Project Office.20 More facts and trends associated with the Project Office are noted in Table 1.2.
8 Optimizing Human Capital
Let us examine two big issues facing companies today — strategy execution and productivity of resources — and how the Strategic Project Office addresses each of them.