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From Crisis to Control


Last updated 8/5/2010

Effective Project Management Can Help Organizations Save Money

Many organizations have set up Project Management Offices (PMOs) in response to the financial drain of projects in crisis. However, these initiatives fail more often than they succeed. In fact, recent studies show that over 75% of organizations that set up a Project Management Office shut it down within three years because it didn’t demonstrate any added value.

To get to the root cause of this problem we need to take a broader perspective and look at how organizations approach project management from a strategic level.

Here are four key strategies that, if implemented, will immediately improve any organization’s project management initiatives.

1. Ensure That All Projects Are Strategically Aligned
Recent findings show that the majority of projects are not associated with corporate and/or departmental strategic plans. Eighty percent of organizations have no formal business case for the development of their Project Management Office and 73% of organizations identify “lack of executive sponsorship” as the primary reason for failure of their Project Management Office.

If organizations were to implement only those projects that were in alignment with their strategic goals, their success rate would increase dramatically because executive sponsorship would not be an issue.

Action Steps: What You Can Do to Align Projects with Corporate Strategy
First, review lessons learned from current and recent projects to uncover success criteria and to determine project prioritization issues. For example, if many projects were unsuccessful because of a lack of resources, then, resources required to complete future projects should be considered a criterion for determining project viability.

Next, develop criteria against which all projects can be prioritized. Include impact on corporate strategy and customers. To do this, work with a sub-committee of senior management. List all projects along with their goals and strategic alignment. Then try to identify criteria to determine the expected impact each project will have on the organization, its departments and its customers. Rank each project quantitatively and determine its level of priority.

Finally, align projects to corporate and departmental strategic plans, thereby demonstrating how each project’s successful execution will support the corporate and/or departmental strategic plan. Terminate projects that are of low priority or not somehow linked to corporate and/or departmental strategy. This will prevent the loss of money, resources, time and customers.

2. Create a Culture That Supports a Project Management Environment
Research identified a number of reasons why organizations set up a Project Management Office: more successful implementation of projects (82%), predictable, reusable project management tools (74%) and organizational improvement (66%). It is interesting to note that organizational improvement and building the project management culture were not the top reasons cited in the research.

If a project is strategically aligned and if project management is built into the corporate culture then everyone who works on a project will immediately know what their part is in making the project successful. Staff will not have to locate a Project Management Office to tell them how to manage a project, what tools to use, what templates to use and so on. Project Management will be a competency embedded into everyone’s role. Much as quality management has evolved over the past 20 years to become a competency requirement for all jobs, project management is following the same route.

Action Steps: What You Can Do to Create a Project Management Culture
Undertake what Business Improvement Architects calls a Project Culture Initiative™ (PCI™). This requires the formation of a cross-functional steering committee to develop a process for creating the corporate change. Values and principles need to be created to identify the unique project approach for the organization. Staff must be educated so that they understand the benefits of the change to them, the organization and its customers.

3. Implement Strategic Project Management Best Practices
The research identified the strategic priorities of most Project Management Offices and determined that: 77% developed project management methodologies, 76% developed structures for their Project Management Offices, 69% identified project roles and responsibilities, 60% developed tools and templates and 54% implemented project management training programs. From these results, it became evident that Project Management Offices were task-oriented, not strategic. They didn’t consider lessons learned to be of great importance in their overall mandate.

Action Steps: What You Can Do to Implement Strategic Project Management Best Practices
Knowledge retention is a major benefit to organizations because it contributes to continuous learning and to the avoidance of repeated mistakes. In order to retain project knowledge that can be passed on as “lessons learned” for future project teams, the Project Management Office must hold a formal “project closeout meeting” as soon as possible after a project is completed, while the knowledge about the management of the entire project is still fresh in everyone’s mind.

The purpose of the meeting is to review what happened over the course of the project and what the team and the organization can learn from what happened. The project sponsor, project manager and project team should be in attendance as well as any outside resources and/or stakeholders who would like to contribute their ideas. The outcome of the project closeout meeting will be the creation of a formal document of “lessons learned” to be carried to future projects, their managers and their teams.

4. Create a Strategic Project Measurement System
The research identified how Project Management Offices measured their success. Their measurements included projects on time (76%), projects on budget (67%), achieved scope requirements (66%), customer requirements met (65%) and achieved all milestone deliverables (52%). The Project Management Offices chose traditional metrics to demonstrate success, not strategic ones.

Action Steps: How to Create a Strategic Project Measurement System
The establishment of project success measures will help provide the senior management team with relevant information needed to make decisions affecting project completion. For example, the presentation of project success measures may convince management to re-prioritize projects or to re-allocate resources.

Project success measures will also provide the Project Management Office with the necessary information to continuously sell the impact on organizational effectiveness. The strategic project success measurement criteria should include:

  • Ability of the project to be managed within specified quality criteria.
  • Ability to meet regulatory requirements.
  • Number of resources actually used versus the number of resources originally anticipated.
  • Ability of the project to meet its defined targets and deliverables.
  • Customer post-surveys that indicate satisfaction with the product or service delivery from the project.
  • A successful and problem-free launch.
  • Business case was proven through the rate of return.

Summary
Project management systems have a profound effect on: reporting structures, performance systems, communication systems and resources. The research shows that successful project management systems require that organizations undertake a significant cultural change and that employees need to be prepared for the changes and understand the benefits. A quality-based approach to the management of projects gives corporations the ability to successfully execute projects time after time.