Benefit realization in execution focused companies vs. project management excellence

what really matters?

Abstract

  1. Project success is measured by executives against strategy alignment of project outcomes. Traditional triple-constraint focus does not reflect these most common success criteria. Projects need apply a different set of best practices to assure executive perception of success.
  2. To assure strategy alignment, we need a set of core competencies, of core best practices, necessary in all domains, independent of the context, independent if the domain is used isolated or together with other domains. Those capability network based core competencies/best practices should include, but not be limited to:

    a. Benefit management,

    b. Project selection and

    c. Organizational enablers, as listed in the OPM3 Knowledge Foundation.

  3. To foster common recognition of these core competencies, we need an OPMBOK, a recognized standard for organizational project management.

Introduction

Failure or success: It depends on the perception; it depends on how the actor defines failure and success. Which actors are the most important? On whose perception should we base our project success criteria definitions? How can clearly defined and managed success criteria increase the probability of project success? What is different in successful companies? Do they have a different perception of project success?

Projects fail. Ask the Standish Group; read its publication, the Chaos Report. Since 1994, the Chaos Report considers that project management is in trouble with a shocking 16% success. The Standish Group was not the first and is not the only one to consider that projects fail. Are Standish Groups success criteria relevant?

This paper will show that you cannot rely on scope, time and cost to measure success or failure of projects. We will show, as well, that a project can be a success for certain stakeholders and a failure for others, because the individual, stakeholder role driven, perception, the point of view, matters.

The conclusion is: we need an OPM Body of knowledge, defining capability based core competencies, core best practices, which apply in all project, program and portfolio management, independent of the use of the furthermore domains where they are documented today.

Definitions

Domain: A Domain refers to the three distinct disciplines of portfolio management, program management, and project management (also referred to as PPP)

Triple Constraint: The project management triangle (called also triple constraint or the iron triangle) is a model of the constraints of project management. Assuming that the “triple constraint” is the success criteria, success would mean that projects are on time, in budget, and in specifications. Failure indicates a gap between the estimates at the early stage of the project and what is eventually realized.

The iron triangle, also called the triple constraint

Exhibit 1 –The iron triangle, also called the triple constraint

Benefit: An outcome of actions, behaviors, products, or services that provide utility to the sponsoring organization as well as to the program's intended beneficiaries.

Program Benefit Management: Benefits management includes processes to clarify the program's planned benefits and intended outcomes and includes processes for monitoring the program's ability to deliver against these benefits and outcomes. The purpose of program benefits management is to focus program stakeholders (that is, the program sponsors, program manager, project managers, program team, program governance board, and other program stakeholders) on the outcomes and benefits to be provided by the various activities conducted during the program's duration.

OPM: Organizational Project Management is the integration of the strategic planning with portfolio, program and project management and operational management, integrating projects, people and processes.

Strategic Alignment: The process and the result of linking organizational groups together through organizational objectives and the people and projects accountable to achieve them. Strategic alignment is the realization of achieving business strategy through people and project contribution. This definition expresses a broad view of strategic alignment inclusive of alignment between organizations within a company or between companies.

 

Project Failure

Many try to understand why and what to do about this big issue. Many researchers and practitioners inquire about the reason of project failure. Morris and Hough (1987), for example studied 1,653 projects and concluded that typical sources of difficulty were unclear objectives, changing sponsor strategy, poor project definition, technology difficulties, concurrency, inappropriate contracting strategy, unsupportive political environment, lack of top management support, funding difficulties, inadequate manpower, and geophysical conditions.

Before going any further with the cause, are you sure that projects fail that much? To make sure, let's understand and stress the success criteria used. Over the Chaos Report studies, and over 90% of scientific publications mentioning project success, consider success and failure only on the triple constraint basis. In their criteria, to be successful, projects must be on time, in budget and in specification. But is there a direct relationship between organizational benefit realization and projects on time, in budget and in specifications?

If we compare the Iridium Project with the Ford Taurus, we see that successful application of project management techniques, assuring triple constraint fulfillment does not mean necessarily project success.

Table Ford Taurus vs. Iridium

Exhibit 2 – Table Ford Taurus vs. Iridium

Benefit Management

Following PMI's The Standard for Program Management – Third Edition, benefit management is defined as including “processes to clarify the program's planned benefits and intended outcomes and includes processes for monitoring the program's ability to deliver against these benefits and outcomes.

The purpose of program benefits management is to focus program stakeholders (that is, the program sponsors, program manager, project managers, program team, program governance board, and other program stakeholders) on the outcomes and benefits to be provided by the various activities conducted during the program's duration.”

The Cabinet office, formerly known as the OGC shows at Fig 7.8 at page 69 an example of benefit mapping in Program Management.

Benefit mapping as shown at Fig. 8.7 at page 69 of the OGC MSP

Exhibit 3 – Benefit mapping as shown at Fig. 8.7 at page 69 of the OGC MSP

Comparing typical triple constraint outcomes as schedules, budgets and WBSs, with mapped benefits, it becomes obvious where to look for criteria for successful projects.

Gartner surveyed in September 2008 130 organizations, asking their executives about their most important success criterion. Their answers were revealing. 19% chose project completion on budget; 12% named completion on time; and 9% chose achievement of the original project scope.

Budget, time, scope: that is the classic triple constraint of project management. Yet those three together add up to only 40% of the responses. In other words, success in meeting the triple constraint gets you less than half the way to what organizations mean by success!

The other 60% — alignment with strategy, supporting revenue, enhancing the competitive position — are not objectives of any one project or program. They make sense only in an organization-wide perspective.

This understanding becomes as well confirmed in other recent studies from PricewaterhouseCooper, PMI and academic studies (see Further Reading and Reference section).

Gartner results

 

Exhibit 4 – Gartner results

The Integrating Model

Accenture shows already 2006 in its research “Going the Distance: How the World's Best Companies Achieve High Performance,” * (Retrieved
from http://www.accenture.com/SiteCollectionDocuments/PDF/GoingTheDistance.pdf), the importance of execution focused on strategy alignment. They analyzed how 500 high-performing companies outran during a 3, 5 and 7 years periods 6,000 competitors in terms of:

  • Growth, as measured by revenue expansion.
  • Profitability, as measured by the spread between the return on capital and the cost of capital.
  • Positioning for the future, as represented by the portion of share price that cannot be explained by current earnings (what we call “future value”) and by the portion of the industry total each company's future value represents.
  • Longevity, as measured by the duration of out-performance in total return to shareholders.
  • Consistency, as measured by the number of years out of seven the peer set median in profitability, growth and positioning for the future was beaten.

The identified building blocks for high performance were:

  • Market focus and position, focus on bottom-line performance indicators
  • Distinctive capabilities
  • Performance anatomy as cultural element
  • Integrating strategy and operations executing the right projects at the right time and right place.

PMI uses in its institutional presentations a model based on this integration of strategy ad operations by portfolio, program and project management:

Value Chain

Exhibit 5 –Value Chain

This model can be seen in Terry Cooke-Davies and Paul Dinsmore's book, The Right Projects Done Right (Jossey-Bass); but to do so, organizations need to apply a broad set of competencies, not exclusive to one of the PMI-supported standards. This set of capability based competencies and best practices, which we call the “Success Core Competencies and Best Practices”, is a set of competencies and best practices that includes but is not limited to most of the Organizational Enablers as defined in the OPM3 Knowledge Foundation, benefit management competencies as defined in the Standard of Program Management, basic component selection practices as described in The Standard of Portfolio Management and most of the connectional understanding as described in PMI's A Guide to the Project Management Body of Knowledge (PMBOK® Guide)—Fifth Edition.

 

Conclusion

A project can be a success even though it does not fulfill the “triple constraint.” Project success and failure is only collateral related to scope, time, and cost. Some companies have reconsidered the prioritization of constraints in project management. For example, Disney considers safety, aesthetic value and quality as priority constraints, according to Kerzner and Saladis (2011, p143). Many firms use business objectives, which are generally measured by financial indicators or frontline focused performance indicators. The consequence is that more and more managers consider organizational benefits as expected project and program outcomes.

Ignoring strategy alignment during the component selection process and the component governance processes means too often delivering only short term shareholder value.

Based on the actual model of standards published and supported by PMI, an organization would have to have all three domains, project, program, and portfolio management, implemented for to be able to link strategy to successful organizational value generation. As over most of the organizations don't have all three domains implemented, we have identified the lack of use of core competencies like strategy-aligned project selection and organizational benefit identification, management and realization as one of the reasons for the lack of value perception for project management and PMO performance at the organizational “C” level. As there is typically no post-project benefit realization follow up, even successful projects and programs become often perceived as not successful.

That for, we need an OPMBOK, a body of knowledge for organizational project management, which describes core competencies and best practices, today described in distinct standards, but necessary even if the describing domain is not implemented. A first step to foster the implementation of those best practices is the clear definition of commonly accepted and understood project and program success criteria.

Atkinson, R. (1999). Project management: cost, time and quality, two best guesses and a phenomenon, it's time to accept other success criteria

Buehler, R., Griffin, D. , & Ross, M. (1994). “Exploring the ‘planning fallacy’: why people underestimate their task completion times,” Journal of Personality and Social Psychology, 67: 366–81.

Cavarec, Y (2011). IT project should not exist. Part of Proceedings 2011 PMI Global Congress – Dublin, Ireland

Cavarec, Y (2012). Revisiting the definition of IT project success. Part of Proceedings 2012 PMI Global Congress – Marseilles, France

Dune, T., Roberts, M. J., and Samuelson, L. (1988). “Patterns of firm entry and exit in U.S. manufacturing industries,” Rand Journal of Economics, 19/4: 495–515.

Flyvbjerg, B. & COWI (2004). Procedures for Dealing with Optimism Bias in Transport Planning: Guidance Document. London: UK Department for Transport.

Flyvbjerg, T. Holm, M. S., and Buhl, S. L. (2002). “Underestimating costs in public works projects: error or lie?” Journal of the American Planning Association, 68/3: 279–95.

Kahneman, D. & Tversky, A. (1979a). “Prospect theory: an analysis of decisions under risk,” Econometrica , 47: 313–27.

Malmendier, U. , & Tate, G. A. (2003). “Who makes acquisitions? CEO overconfidence and market's reaction,” Stanford Research Paper No. 1798.

Thiry, M. (2011). What your future look like. Part of Proceedings 2011 PMI Global Congress – Dublin, Ireland

Wachs, M. (1986). Technique vs. advocacy in forecasting: A study rail rapid transit, Urban Resources, 4/1:23–30

McDonald, R.(2013). Program Management-Mission Accomplished-Benefits Realized, PMI OPM Community of Practice

PricewaterhouseCoopers (2007). Current Programme and Project Management Practices

PricewaterhouseCoopers (2012). Global Project Management Survey

PwC Current Programme and Project Management Practices 2007. Retrieved from http://www.pwc.com/es_CL/cl/publicaciones/assets/insighttrends.pdf,

PwC Global Project Management Survey 2012. Retrieved from http://www.pwc.com/en_US/us/public-sector/assets/pwc-global-project-management-report-2012.pdf

OPM research by Dr. Berverly Pasian and Dr. Nigel Williams with support from the PMI OPM Community of Practice 2012, as presented at a PMI OPM Community of Practice webinar, available for associates of PMI in good standing at http://opm.vc.pmi.org/Public/Webinars.aspx as well as PMI's Pulse of the Profession™ reports for 2010, 2011 and 2012.

Books

 

Kerzner, H. & Saladis F. (2009). What Executives Need to Know About Project Management. John Wiley & Sons Inc.

Morris, P. W. G., & Hough, G. H. (1987). The Anatomy of Major Projects. Chichester: Wiley and Sons.

Machiavelli, N. (1513). The Prince. Bantam Dell, New York

Project Management Institute (2012). A guide to the project management body of knowledge (PMBOK® Guide) — Fifth edition. Newtown Square, PA: Project Management Institute.

Project Management Institute (2012). The standard for program management — Third edition. Newtown Square, PA: Project Management Institute.

Project Management Institute. (2013). Organizational Project Management Maturity Model (OPM3)Knowledge Foundation (Third ed.). Newtown Square, PA: Project Management Institute.

Taleb, N. N. (2007). The Black Swan: The Impact of the Highly Improbable. London: Penguin.

Wikipedia Additional resources, used in the presentation

Channel Tunnel. (2012, February 21). In Wikipedia, the free encyclopedia. Retrieved from http://en.wikipedia.org/wiki/Channel_Tunnel

Planning Fallacy. (2012, January 3). In Wikipedia, the free encyclopedia. Retrieved from http://en.wikipedia.org/wiki/Planning_fallacy

Strategic Alignment. (2013, August 3). In Wikipedia, the free encyclopedia. Retrieved from http://en.wikipedia.org/wiki/Strategic_alignment

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2013, Gerhard Tekes & Yves Cavarec
Originally published as a part of 2013 PMI Global Congress Proceedings – New Orleans, USA

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