Truer words haven't been heard in a while

Knowing When to Quit

Ian Stewart, PMP

January 30, 2008

In the opening of its Standard for Portfolio Management, the Project Management Institute describes the difference between project management and portfolio management as “doing the work right vs. doing the right work.” Hearing this described, I’m always reminded of one of my favorite project anecdotes that a friend related to me once.

In this story, my friend Bill once worked as a contractor on a year-long project to build an order-entry system for a Fortune 100 telecommunications company. At the conclusion of the project, Bill presented the system to a group of high-level stakeholders to get approval to move the system into production. During the meeting, one of the stakeholders mentioned that he had been involved with another project that will deliver a similar system that will have the ability to handle orders for more of the company’s products. After a series of meetings, the company elected to use the system developed in the other division. Bill’s contract ended soon after and his order-entry system was never used. The final cost to the telecommunications company was just shy of one million dollars.

Bill’s story is similar to hundreds of other examples of wasted time and effort spent due to lack of corporate oversight and active prioritization of projects across divisions or lines of business. The larger the organization, the greater the effort required to sort out the scores of competing projects.

In the extreme instances, like Bill’s project, time and money can go unaccounted for and lead to delivered projects that are never used. At the conclusion of these types of projects one can ask, “Does it even matter how the project is delivered if the final results are never used?” As suggested in PMI’s Portfolio Management Standard, doing the right projects will usually have an equal or greater significance to a company than doing a project well.

While most would acknowledge that the preceding statement is true, many organizations still struggle with keeping project portfolios organized and making hard decisions between competing projects. The greatest example of this internal organizational struggle comes in the form of projects like Bill’s, which make it to completion without having been cancelled months or even years prior to completion. Leveraging good portfolio management techniques and strong governance structures, though, will aid an organization in its quest to know when to quit a project.

The Organization for Economic and Cooperation Development defines corporate or organizational governance as “the structure through which the objectives of the company are set and the means of attaining those objectives and monitoring performance are determined.” One of the more common structures created for organizational governance leverages a series of stage or phase reviews of projects as they complete differing stages in the project development cycle, like project definition or project design.

As is the case in most organizations, projects can be cancelled, given more funding, given less funding, placed on hold and so forth based on a combination of financial and strategic considerations that help determine where and how resources (people and capital) are best committed. More than anything else, it is the decision to cancel a project that the typical organization struggles with most. Changes in scope, large cost variances, changes in organizational strategy and any number of other project warning signs rarely lead to the cancellation of a project in most organizations.

As evidence, take PMI’s Organizational Project Management Maturity Model (OPM3). In the assessment phase of an OPM3 review, the initial organizational assessment checks for the presence of any project kill decisions in helping to determine an organization’s project portfolio management maturity--not a percentage of projects, but any projects. This is telling of typical practices of organizational phase-gate review for projects. Ultimately, the most advanced organizations don’t kill a benchmarked percentage of projects--they’re the ones that are willing to kill a single project.

Given the tendency of most organizations to shy away from ending projects early by cancelling them, it can be difficult to easily identify benchmarked approaches to limit an organization’s risk of allowing the wrong projects to continue to completion. The key to limiting this risk of completing a bad project involves the following three important changes for an organization: (1) an organizational commitment to learning from failed projects; (2) well-defined and objective project thresholds enforced at stage gates; and (3) constant evaluation of project objectives against those of other projects.

Organizational Commitment to Learning from Failed Projects

For an organization to handle project kill decisions more effectively, a paradigm shift of sorts is required in the organization’s definition of a failed project. Many organizations will be reluctant to cancel projects because cancelling the project will appear to be resigning to the fact that the project had failed to meet its original objectives.

Ironically, it’s the positive “never say die” or “overcome all obstacles” attitudes in organizational cultures that prevent the organization from knowing when to cut its losses on projects. Balancing the need to be persistent and overcome obstacles with the need to be objective and make clear decisions on when to end projects that no longer will meet original goals or objectives can prove to be a challenging conundrum for organizations.

Parviz Rad addressed this very state in a paper he presented in 2004 for the PMI Global Conference called “Using Metrics as a Catalyst in Achieving Successful Project Performance.” In this position paper, Rad outlined a solution for this conundrum by advocating that organizations view all projects as learning opportunities rather than in black or white/success or failure terms.

Critical to an organization’s ability to accept the failure of the project is the willingness of that organization to accept the project’s results and evaluate key measures in hopes of avoiding the same mistakes in the future. In taking this view, organizations can place value on the lessons learned from cancelled projects to offset lost dollars from cancelling the project.

For example, in the project mentioned earlier, Bill’s project might have presented future savings opportunities by prompting an evaluation of project portfolios across divisions. Rather than simply being lost dollars at the point that his project was cancelled, the organization has now been able to mitigate future risks by creating new policies that advocate cross-divisional project portfolio reviews.

Creation and Enforcement of Project Thresholds at the Project Stage Gates

In his book entitled Risk Assessment and Decision Making in Business and Industry, Glenn Koller advocates the use of risk analysis techniques combined with pre-defined project value measures during stage gate reviews to determine whether to proceed with a project. This combination of risk-weighting and financial value-add measurement, especially for larger projects, can significantly help decision-makers in objectively assessing a project’s long-term chances fo
r success and help to limit political factors influencing project decisions.

Philosophically, most organizations would likely agree to this approach in principle. In practice, though, performing updated risk and value assessments on projects can be difficult, expensive and time-consuming. Many project teams will already be focused on the next project development stage as they pass through governance gates. Executive commitment to using independent project assessment measures, coupled with the creation and empowerment of independent governance or measurement groups to perform the assessment, will likely be required to use risk and value measure thresholds at governance gates.

Comparison of Project Objectives and Corporate Strategy at the Stage Gates

Returning to our project example given earlier, careful review of the objectives and deliverables for Bill’s project would have revealed that the project was looking to deliver functionality that was similar to another project. Though the anecdote appears to present an obvious example of a project that should have been cancelled early, the reasons behind the error in not cancelling the project earlier were not necessarily due to negligence or incompetence but rather due to significant changes to the organization that occurred during the life of the project.

Projects lasting one or more years may span any number of mergers, acquisitions, organizational restructuring, product changes and so forth. To expect individuals on the project team to be aware of significant changes that might affect their projects and self-enforce adjustments to the project is unrealistic. Groups responsible for the assessment of projects that are completing project governance cycles and passing through project toll-gates must stay aware of significant organizational strategic changes or tactical results created from competing projects in determining whether to allow a project to pass through to subsequent project lifecycles. Project teams must also be responsible enough to adhere to governance processes and provide full disclosure to governance groups during stage-gate reviews.

Doing the Work Right vs. Doing the Right Work

Those of us focused on the successful execution of complex projects or programs will undoubtedly be focused and concerned in “delivering the work right” with minimal waste and plan variances. From the perspective of shareholders or major organizational stakeholders, it is essential that an organization perform the right work and minimize the chances of either duplicating work in a project or delivering a set of project deliverables that is no longer relevant or delivered in a cost effective way.

This balancing act is where the art of portfolio management coupled with good organizational governance can make a difference in the organization’s overall effectiveness. One of the more difficult facets of both portfolio management and organizational governance will be electing when to cancel a project. Organizations can make these decisions easier by taking a three-step approach of (1) developing an organizational commitment to learning from failed projects, (2) enforcing well-defined and objective project thresholds at stage gates and (3) constantly evaluating project objectives across competing projects in its project portfolio.

Ian Stewart is responsible for project metric analysis in the corporate program management office of one the 10 largest banks in the United States. Prior to this, he worked as both a project manager and decision-support manager in the banking industry. He graduated from Georgia Institute of Technology with a Masters degree in Business Administration and also has a Bachelor of Arts degree from Davidson College. Ian is a member of the Project Management Institute and has worked on the development of PMI’s Organizational Project Management Maturity Model (OPM3). Ian has also worked as both a technical editor and an author for PMP exam preparatory materials.

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