Top 10 Reasons for Project Portfolio Management (PPM) Failure
As organizations strive to become globally competitive while increasing shareholder value, they are forced to continually reduce infrastructure costs to get products into the market cheaper, faster and with higher quality.
In most cases, corporations rely on technology to achieve this objective through the use of positive liquidity from working capital funds. C-level Executives select projects to be approved based on capital metrics such as: payback period, return on investment, net present value, benefit to cost ratio, internal rate of return, etc. The capital metric that will provide the most long-term benefit to the organization as documented in the business case, proof of concept, or feasibility studies will probably get approval and funding by the Sponsor. (The Sponsor is the C-Level Executive Requesting Organizational Change.)
This is the inception of a project as it is codependent on 4 main categories:
1.) Strategic Roadmap
2.) Project Management Office Governance
3.) Tactical Execution
4.) Continuous Improvement.
This project codependency is established only in mature Project Management Offices (PMOs) that understand the big picture and the significance that the project management discipline brings to a successful implementation.
Unfortunately, this is not the case as documented in several reports by brand name organizations. (Please refer to the Appendix to review publications.)
Most organizations implement projects with a degree of tunnel vision and no consideration for a strategic roadmap (i.e., capital metrics) and continuous improvement (i.e. productivity improvement) pertinent to policy and work flow procedure for hard and soft dollar corporate savings. The primary focus is on tactical execution that is guided by the PMO Governance for managing the sponsors and stakeholders while the project is in flight.
Top 10 Principles
Generally, a strategic roadmap is a 5-year plan as determined by senior executives for technology changes that will assist in accommodating the voice of the customer (VOC). Rarely, do projects meet the capital metrics as defined in the pre-approval document or business case.
Upon approval of the business case, funding is provided by the Sponsor. At that point, the business case transforms into a project for tactical execution. Some organizations perform audits after the project is completed for comparison to capital metrics documented in the Business Case. But, hindsight will always equal 20/20 vision, and this allows for no corrective measures during tactical execution.
Leaders within the PMO are unable to predict with accuracy the current disposition of projects in flight, due to lack of application of the 10 project management principles. These 10 project management principles include:
1. Work Breakdown Structure (WBS) 100% Rule Violation
The planning phase is one of the most critical elements of project management because it defines the following: resources, rates, time, dependencies and costs. Ultimately, the budget is created based on the activities for inclusion in the Project Schedule, which has been time phased for capacity planning. If the WBS 100% rule is not applied properly, the project downstream impact will result in large variances (favorable or unfavorable).
2. Scope Creep
Project managers must clearly manage the extraction of the scope from the sponsors and stakeholders for conversion into activities for the inclusion in the WBS. Again, if these activities are not all-inclusive of the tasks to be performed by the project team, this will result in a downstream impact that will result in large variances (favorable or unfavorable).
3. Cumulative Underrun or Overrun
If the Project Plan omits tasks that will incur resources, costs, and impact schedule. The accumulation of omitted tasks (if significant) then becomes a key driver for the future forecasts for delivery on time and within budget. Also, the same applies to the accumulated tasks that are understated or overstated. The earlier those variances are identified by the project manager, the better. Early identification will provide analytical time to be proactive by providing corrective measures to the Project Management Office (PMO). That proactive approach results in the more efficient use of working capital funds.
4. Inaccurate Forecasting
Project management implies that “Bottom-Up Estimating” is the most accurate form of forecasting, which is done by the core project team. However, a run rate comparison to the baseline should be performed to determine the accuracy level of the core project team. Finally, the PMO should work very closely with the Project Manager to apply the Project Management techniques for accurately forecasting based on Triple Constraints (Scope, Schedule & Cost) as an alternative to Bottom-Up Estimating.
5. No Earned Value Management (EVM) Applied
Based on the PMP Certification requirements, project managers should be applying earned value management (EVM) to projects in flight for the PMO as it is a best practice. Again, this project management methodology is not consistently being applied to projects in flight.
The ability to assess the Project Management technique options generated by the EAC is vital to drive project On-Time within Budget. The lack of EVM usage on projects in flight is a major contributor to the resulting in a project failure rate of 61%. (Please refer to the Appendix to review publications.)
6. Resources Recruitment Priorities
Resources are often recruited based on rate instead of experience. The factor most considered when ascertaining a project leader is often cost. That said, it’s also the responsibility of a proven experienced project leader to always assess the current disposition of the project, applying Earned Value Management (EVM) to determine if the project is in alignment to the budgeted schedule. It is surprising that most organizations look at the actual costs and the remaining budgeted activities (without assessing prior performance) to determine the forecasted cost and delivery schedule. A proven experienced leader would know that this method is inappropriate because of lack of project analysis for CPI, SPI, and TCPI.
7. Masked Metric Reporting
It has become an acceptable practice for projects to submit a change request to the steering committee to reset the metric reporting for projects. This dilutes project accountability for the inexperienced project managers by reducing the metric variances, which are reset from the revised budget. It is the responsibility of the PMO to internally track the project performance to the original budget as a learning curve for continuous improvement, and to identify project activities of large cost underruns and overruns to the budgeted activity amounts.
8. No Scaled Project Portfolio Management (PPM)
The problem is the inability to accurately scale PPM for projects and programs holistically for the entire PMO portfolio. What is needed is a tool that provides automatic color coding for the triple constraints: scope, schedule, and cost to apply project management best practices. The tool called, PPM Executive Command Center (PPM – ECC) designed and developed in the Balanced Scorecard (BSC) is capable, through customization to achieve ALL PPM objectives. The ability of a PMO to forecast using Project Management EVM techniques on a monthly basis is a superior value-add feature for PMO Portfolio Management.
9. Project Management Office (PMO) Maturity
Today’s PMOs that are not practicing industry best practices are destined to repeat the same mistakes from prior year with no or limited project improvement results from low hanging fruit. The PMO should embrace and welcome Thought Leaders in their organization to ascertain the benefits of continuous improvement through streamlined process improvement and project management professional development.
10. Limited Continuous Improvement
All PMOs that are not operating within the acceptable performance thresholds for projects and programs should be continually reviewing project management processes for inefficiencies. PMOs should understand that inefficiencies in a project are amplified by the number of projects and programs in flight for the entire PMO Portfolio. The result is stakeholder and sponsor dollars are being burned on inefficient PMO processes because of lack of Continuous Improvement. The PMO is an overhead cost which should be continually striving towards productivity improvement — NOT a Pass-through Center entitled to repeat the same mistakes!
1. The PMO should deem acceptable thresholds of performance metrics in order to determine the color disposition. The performance metrics will roll through the category hierarchy to generate an overall category color of either red, green, yellow, or blue.
2. Earned value management (EVM) metrics should be automated and applied to projects in flight to determine impact of scope, schedule, and cost. These EVM performance metrics should have acceptable thresholds as established by the PMO to determine color status.
3. Exception reports should be automated and easily generated for all metrics that are noted in yellow or red so that corrective measures can be deployed to realign the metric with targeted baseline goals and objectives.
4. Dynamic project status reports should be generated for sponsors and stakeholders to create drill down functionality to display the problem root cause and corrective measures being deployed by the Project Team.
Project managers should disclose with accuracy the disposition of projects as this is the case in a mature PMO. Ultimately, this will free the project manager from putting out fires so that he/she can focus on completing future tasks with the project team.
High functioning PMOs use dashboard analytics to be proactive in project portfolio management (PPM). Through this, projects can be measured and monitored bridging the 4 main categories while the project is in flight.
These best practices will ensure compliance to corporate objectives for the strategic roadmap, PMO governance, tactical execution, and continuous improvement, while reducing costs and increasing productivity.
The HIGH COST of LOW PERFORMANCE 2014:
GARTNER SURVEY SHOWS WHY PROJECTS FAIL:
Gartner Survey Shows Why Projects Fail
Refer to the KPMG Report 2013, which speaks to the rationale of dismantling PMO’s because of PMO leadership and direction; it is an overhead cost, which should have a primary focus on productivity improvement.
KPMG Canada Project Failure Rate:
Apply the KPMG Canada Project Failure Rate to the Project Management Office (PMO) Portfolio x PMO Actual Threshold (+/-) = $ Burn Rate. This will provide a good estimate for the potential portfolio $ burn rate! KPMG Canada Project Failure Rate Report Hyperlink: http://www.it-cortex.com/Stat_Failure_Rate.htm
KPMG Project Report 2013 Hyperlink:
Harvard Business Review – Top 6 Products: