PMI: More Than Half of All Project Budget Risk is Due to Ineffective Communications

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Carey Learnard
PMI
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Megan Maguire Kelly
PMI
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High-level, executable communications strategy is essential to reducing financial risks, study says

NEWTOWN SQUARE, PA, 22 March 2013 — According to the 2013 Pulse of the Profession In-Depth Report: The Essential Role of Communications, recently released by Project Management Institute (PMI), poor or substandard communications accounts for more than half of the money at risk on any given project. The report expands on findings from the 2013 Pulse of the Profession, which revealed that companies risk $135 millionfor every $1 billion spent on a project. The new research indicates that $75 million of that $135 million (56 percent) is put at risk by ineffective communications, indicating a critical need for organizations to address communications deficiencies at the enterprise level. Respondents also reported that ineffective communications is the primary contributor to project failure one third of the time, and had a negative impact on project success more than half the time.

“Without a considerable focus on communications, even the most thoroughly planned strategic initiatives are at risk of underperformance,” said PMI President and CEO Mark A. Langley. “At every level of the organization, stakeholders should understand how projects and programs connect to the overall organization strategy, and be speaking a common language that facilitates collaboration and clearly identifies evolving expectations for project outcomes. Companies that cut corners on communications are unnecessarily incurring extra risk.”

View From the Top: Execs and Planners Recognize Communications Needs

The urgent need for effective communications is being acknowledged at a high level. According to the FD | Forbes Insights 2010 Strategic Initiatives Study “Adapting Corporate Strategy to the Changing Economy”, nearly all CEOs (92%) say that communications is critical to the success of their strategic initiatives. Nearly half of respondents (46%) report that communications is an integral and active component of the strategic planning and execution process.

Addressing the Disconnect Between Strategy and Execution

Despite high-level awareness of the critical need for effective communications, there is often a disconnect between boardroom strategy and project execution.  Nearly two in three executive sponsors in our survey said that their organization did a good job of communicating a project’s connection to strategy frequently enough. However, only 43 percent of project managers agreed.  When companies close the gap between the developers of the strategy and those that must execute it, projects are more successful.  According to the FD | Forbes report, 41 percent of respondents said that increased communications is the most important change their organization is making to improve the success rate of their strategic initiatives, while a large majority of companies (73 percent) plan to increase communications to better engage their workforces.

High Performers Communicate Better

Effective communications factors significantly in company performance. According to the Pulse Communications report, high-performing organizations (those completing an average of 80 percent or more of projects on time, on budget and within goals) create formal communications plans for nearly twice as many projects as their lower performing counterparts (which complete fewer than 60 percent of projects on time, on budget, and within goals).  Additionally, project communications plans for these high-performing organizations are more than three times as effective in achieving their intended objectives. Organizations that communicate more effectively are also more than five times as likely to achieve high performance than minimally effective communicators.

The Way Forward

In pursuit of high project performance, there is an organizational need to get back to communications basics: disseminate information for every aspect of a project in a timely manner, with sufficient clarity and detail, using non-technical language and through appropriate  media. This process should begin with a sound communications plan that has received buy-in from stakeholders at all levels.

The 2013 Pulse of the Profession™ In-Depth Report: The Essential Role ofCommunicationsis the latest follow-up study to PMI’s benchmark 2013 Pulse of the Profession report, which charts the major trends for project management and reports on implications for practice.

To access PMI's Pulse of the Profession please visit www.PMI.org/pulse. To view PMI’s 2013 Pulse of the Profession In-Depth Report: Talent Management and other talent-related resources, visit www.PMI.org/Talent.

About the Pulse of the Profession/Methodology

Conducted since 2006, PMI's Pulse of the Profession™ is the annual global survey of project management professionals. The Pulse of the Profession charts the major trends for project management now and in the future. It features original market research that reports feedback and insights from project, program and portfolio managers, along with an analysis of third-party data. The newest edition of the Pulse features feedback and insights from nearly 800 project management leaders and practitioners across North America, Asia Pacific, Europe, the Middle East, Africa (EMEA) and Latin America and Caribbean regions.

About Project Management Institute (PMI)

PMI is one of the world’s largest not-for-profit membership associations for the project management profession. Our professional resources and research empower more than 700,000 members, credential holders and volunteers in nearly every country in the world to enhance their careers, improve their organizations’ success and further mature the profession. 

PMI’s worldwide advocacy for project management is reinforced by our globally recognized standards and certification program, extensive academic and market research programs, chapters and communities of practice, and professional development opportunities.

Visit us at www.PMI.org, www.facebook.com/PMInstitute and on Twitter @PMInstitute.