Knowing when to say stop

Jeremy Katz, senior consultant, Moorhouse Consulting, says more should be done to identify failing projects early and close them quickly, in order to save both face and valuable money.

It can often take a huge amount of effort to get a project off the ground. Getting the business case signed-off, money to proceed and a project team in place sometimes feels like half the battle has already been won. Getting sign-off for project delivery is a hard gate to get through. However, part of the reason that organisations neglect to close down failing projects is that their failings often only become obvious somewhere between initiation and completion. Interestingly this is when we tend to measure and control our projects least. This is because most projects tend to have soft gates through their delivery cycle; meaning failing projects keep on running. The most common reasons for soft gates are:

1) Ive started so Ill finish...

Its human nature to stick with something once weve started, especially when the project team has already spent a lot of time convincing other stakeholders its a good idea and is committed to a vision of its success. This occurs because a sunk cost, which
cannot be recovered, has already been invested in the project. Sunk cost is a type of cognitive
bias common to decision-making around project investment.

2) Ive got all the money I need...

Getting authorisation for the money to fund a project requires a lot of up-front work. A key driver for the effort that goes into the business case, project plan and PID is the investment sign-off. However, if all the investment is signed-off at the beginning of the project then the project team will never have to woo the investors to the same degree again. When the project money has already been handed-over project stage gates can become less meaningful affairs as funding for the next stage is not
threatened.

3) This report looks good...

Inaccurate reporting can occur due to a variety of cognitive biases including seeking evidence that confirms our previous view (confirmation bias) and aversion to believing the extreme (extreme aversion). Consequently its not very often that a progress report says this project will fail. The words used and measurements in place dont always tell the whole story.

4) My project feels like a neglected middle child...

Sometimes project sponsors may show so little interest in a project that is underway that they even fail to show up to end of stage meetings. This neglect often occurs when they are focusing their time on the natural touch points of projects with the business the beginning and end of projects.

How can failing projects be caught and closed?

Often the balance of hard and soft gates through a projects life cycle is incorrect. Introducing more hard gates into delivery is a great way to stop runaway failing projects. They provide new focus points between the initiation and closure where the projects sponsors essentially have to re-authorise the project. However, hard gates on their own will not be enough - project information and incentives to perform are also important. The following five criteria can be used to ensure that failing projects are caught and closed
early.

Early Warning Indicators

Understand what the early warning indicators are of your project failing. Using Key Performance Indicators (KPIs) is a great way to get early warning that project objectives arent being met. Useful KPIs that could be used include spend against degree of completion, or percentage of future milestones flagged as red or amber. It should be noted that there are other techniques that can address this problem such as EVM (Earned Value Management) provided that project planning and management is sufficiently rigorous and resources are available to undertake the analysis required.

Clear Status

Make it easier for sponsors to understand the status of the project from their perspective. This means tailoring reports to their business needs (not to the project management, technical delivery or supplier stakeholders). One way to represent this is to give a separate RAG status to each as follows:

Business status Is the project still on track to delivery against business/customer objectives and still aligned with the business strategy?

Project status Are milestones still on track against time/cost?

Technical status Is the solution still on track to deliver against expected specification or performance?

HM Treasurys Green Book business case model provides an excellent basis for ensuring that all dimensions of project success are in place (i.e. not just the financial criteria).

Incentivise Honesty

If there is one lesson to be applied from the recent banking crisis its that long-term success should be prioritised over short-term results. One facet of short-term results is that you can hide project failure in the short-term if there isnt an incentive to be honest early. Creating a good relationship between the project and business team, rewarding the performance of the project team rather than the performance of the project, and making sure there is an assurance function in place, all incentivise honesty regarding the status of a project.

Value Risks

Dont use risk management in isolation from decisions around a projects viability. A good rule of thumb is if the expected value of the risks on your risk log is greater than the net present value in your business case, it means the project is unlikely to deliver positive value! It should be noted however that in many instances it is hard to attach a monetary value to risks, so these shouldnt necessarily be taken at face value.

Hard Gates

Finally, define some hard gates where projects have to request the next increment of moneyand resources to proceed. When producing your overall project plan at the initiation stage, define some harder gates within the delivery stages. These can be placed to coincide with high-risk pinch points in the delivery lifecycle.

Also ensure that there is a well-defined and appropriate project board and/or assurance function who are equipped with objective success criteria to aid their decision-making. By undertaking these gates everyone has to ask themselves will this project be successful? at each juncture.

However much effort youve made getting your project off the ground its important to ensure that your business doesnt suffer from tunnel vision. Requiring iterations of active consent, engendering a culture of honesty and tailoring management information closer to the need of the business may not be the course of least resistance, but it will save you money in the long-run.

Human psychology may make us feel that stopping a project before it has reached its natural conclusion is a failure in project management. However, this is not always the case. Call it project failure if you must, but theres always a good way to fail, and that is to fail early.