Poor project performance - A risk based case for change

There is a plethora of research and news headlines providing evidence of poor performance in the delivery of projects. These are not just isolated cases relating to mega projects but span industries, geography and time. The Project Management Institute’s (PMI) ‘Pulse of the Profession 2020’ report is based on a global survey of over 3,000 project professionals, senior executives and directors. Respondents stated that of projects completed in the previous 12 months (pre-Covid), 59% were completed within budget, 53% were completed on time and 13% deemed failures.

Whilst care is required when attempting to interpret these headline statistics, on the surface, they do highlight a cause for concern because poor project performance or failure can lead to more than just financial consequences. Individuals, projects, organisations, society and the environment can all be adversely impacted to varying degrees.

What’s disappointing is that not only were these statistics similar in 2015, implying little improvement to date, but the underlying causes have been consistent in recent years too. From the above PMI report, the top two causes of project failure were listed as change in organisational priorities and change in project objectives which in some circumstances may be beyond the control of the project team, especially when considering the influence of the complex external environment. However, these are somewhat vague descriptions and further investigation is required to reveal the true root causes by continuing to ask “why”. Some root causes for poor performance or failure may be less forgivable by project stakeholders.

For example, other reasons for project failure from the same survey (including response rates) are listed as follows: inaccurate requirements gathering (33%), poor upfront planning (31%), inadequate/poor communication (26%), ineffective risk management (25%), poor change management (23%) and poorly managed dependencies (22%). Unfortunately, these have been reported as common ‘offenders’ for some time and one could argue many of these factors point to the poor execution of project management fundamentals for which solutions have existed for some time (i.e. best practice promoted by professional bodies).

In reality a combination of factors are likely to lead to poor project performance and some may be interrelated or compound each other. Digging a little deeper might even suggest the above reasons represent ‘symptoms’ rather than actual root causes of project failure. For example, poor organisational culture may lead to treating risk management as a ‘box ticking’ exercise and poor leadership or politics may influence how bad news is or isn’t communicated, storing up problems for the future. Regardless, those involved in delivering projects have volunteered those reasons through surveys which act as ’signposts’ because they have either felt the pain in those areas or observed sub optimal practices.

Another concerning set of statistics has been quoted by Professor Bent Flyvbjerg, Executive Chairman of Oxford Global Projects. From his research based on over 11,000 projects, he quotes that a mere 8% of projects were on budget AND on time. More shockingly, only 0.5% were on budget AND on time AND on benefits. This alone provides a compelling need case for change in the way projects are managed and delivered.

It’s worth noting that Professor Flyvbjerg chose to look at the achievement of multiple success criteria rather than solely focusing on each individually which the PMI study was limited by. By shifting the perspective in this subtle way he revealed a more significant issue. This is a simple example of how deeper insight can be generated by analysing data in more intelligent ways and in future articles this will be explored further.

Much has been written about project failure and many factors have been attributed to it. According to an article by McKinsey & Company (2015) which was also influenced by Professor Flyvbjerg, one of the main reasons relates to an overly optimistic view where “cost and timelines are systematically underestimated and benefits systematically over estimated” in order to justify a project before it starts. The project team is then bound to this unrealistic cost and time budget which may lead to poor execution of design, planning and construction. This additional pressure may also contribute to the causes of project failure suggested by the PMI research.

In the same article, McKinsey & Company quoted their study of 48 troubled mega projects which showed that poor execution was responsible for cost and time overruns in 73 percent of the cases. Part of this was down to poor assessment of foreseeable issues not being analysed, assessed or mitigated (e.g. “if steel does not arrive at the job site on time, the delay can stall the entire project”) which implied poor risk management practice being an influencing factor. This appears to support the PMI research where 25% of respondents felt ineffective risk management was one of the causes for project failure.

Looking ahead, many industries are now attempting to grapple with not only a legacy of poor project performance but attempting to navigate their way through the fallout from the coronavirus pandemic. By way of example, the UK government has recently challenged the rail industry (February 2021) to pioneer new ways of working that will halve the time and significantly reduce the cost of delivering critical infrastructure projects. Given the prior levels of project performance quoted above, instinctively, these types of challenges may result in greater levels of pressure, change, uncertainty and risk. There is little doubt that risk management has been firmly pushed up the agenda following the pandemic.

Effective risk management is going to be essential to help organisations to not only respond to the immediate challenge but to become more resilient, more agile, embrace opportunities and even thrive. Whilst research doesn’t prove poor risk management alone leads to poor project performance or failure, it may need to evolve to deal with the rapidly changing world and the pandemic may just be the spur to innovation the discipline needs to move forward.

Two areas where risk management has been slow to embrace change has been in the adoption of project data analytics and exploitation of new technology such as artificial intelligence. They shouldn’t be viewed as ‘golden bullets’ to solve poor project performance but developments in technology can be a complimentary ‘change agent’ to help address many of the causes of poor performance highlighted earlier. This will be the underlying theme for future articles which will showcase and explore how innovation in risk management software and analytics is beginning to help organisations better manage project risk, reduce uncertainty and improve outcomes.

Now that the context has been set, I’m really hoping to take readers on a much more interesting journey through some thought-provoking topics which will be mainly based on interviews and research. However, in order to be ‘genuine’ I’m going to offer my own personal thoughts along the way. I’m also going to try exercising a bit of creative thinking to see if I can inspire the risk profession to innovate or stimulate discussion (across boundaries hopefully). I welcome your comments and opinions and all that I ask is that we keep an open mind about the future and remain respectful for differences in perspectives.