Project Management Institute

Bridging the chasm

PMI'S 2014 PULSE OF THE PROFESSION®

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Project prowess loses impact if not in the service of strategy—and strategy that can't be implemented is useless. Here's how to stay competitive by connecting the two.

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Think about it. When was the last time an organization created a game-changing product or launched in a new market or threw out the old way for a new way—without defining a schedule, budget and scope?

Yet, when it comes to project management practices, organizations don't always make that connection. Strategy is often set without putting practices in place to ensure successful implementation. Or projects are hitting the mark—but the mark is afield of the organization's larger vision. PMI's 2014 Pulse of the Profession® found that nearly half (44 percent) of strategic initiatives are unsuccessful, and a staggering 58 percent of projects are not highly aligned to organizational strategy.

That chasm between projects and strategy isn't only ineffective—it's costly. The Pulse of the Profession report found that US$109 million is lost for every US$1 billion spent on a project. The more organizations can improve on their strategic initiatives, the more they can improve their bottom lines.

As customers grow increasingly tech-savvy, organizations must respond rapidly to their evolving needs to stay competitive. In the next three to five years, 40 percent more CEOs plan to include customers in strategy development compared with today, according to a 2013 IBM study. Today, fewer than half of CEOs collaborate with customers extensively, while 90 percent foresee doing this type of collaboration by 2018.

Executing these strategic initiatives successfully means bridging the current divide between projects and strategy. PMI's research found that high-performing organizations—which complete 80 percent of projects on time, on budget and meeting original goals—have more successful projects and strategic initiatives. Those successes connect to the bottom line, too: High-performing organizations lose 12 times less money on projects than low performers, which achieve 60 percent or fewer of projects on time, on budget and meeting original goals.

Though they may vary in size, sector and location, high-performing organizations have some things in common: a strategic focus on people, processes and outcomes.

TARGETED TALENT

When organizations focus on talent management practices like defining a career path and providing ongoing development, the results can be dramatic.

At organizations with ongoing project management training, 60 percent of strategic initiatives are successful, compared with only 48 percent at organizations without. Sixty-two percent of high-performing organizations have a defined career path for project managers, for instance, while just 32 percent of low performers do.

At BAYADA Home Health Care, project managers were promoted on a mostly ad-hoc basis. But a formal career path, established in October 2013, created promotion criteria, including complexity of projects worked on, risk levels and team size.

The formal process allows departments to see more easily what skills need to be developed in the broader talent pool. Project managers themselves and their supervisors also appreciate the clear direction the career path offers.

“My project managers now understand what is needed to move from one level to the next,” says Gary Rosenfeld, PMP, PMO director, Moorestown, New Jersey, USA. “Then we're able to use those job descriptions and criteria to help create a development plan for that individual—where are the gaps and what type of experiences and learning they need to move to the next level.”

BAYADA has also begun sharing its “strategy maps”—business objectives and a list of the projects and initiatives that support them—with project managers. Project practitioners who understand their organization's strategy are better able to ensure their projects support that strategy.

Warning: Change Ahead

Customer collaboration will soon be the new normal.

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of CEOs collaborate with customers extensively today.

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of CEOs foresee customer collaboration in the next 3 to 5 years.

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of CEOs plan to include customer in strategy development the next 3 to 5 years.

Source: The Customer-activated Enterprise, IBM, 2013

Yet organizations aren't poised to adapt to the new shifts.

44%
of strategic initiatives are unsuccessful.
58%
of projects are not highly aligned to organizational strategy.
Only 15%
of organizations report high organizational agility.

That misalignment means

US$109 million

is lost for every US$1 billion spent on a project.

Strategic focus leads to greater success on strategic initiatives.

Percentage of successful strategic initiatives with the listed practice in place Percentage of successful strategic initiatives without the listed practice in place

Projects highly aligned to organizational strategy

65%

35%

Active project sponsors

66%

41%

High organizational agility

69%

45%

Highly effective change management

69%

41%

Highly effective knowledge transfer process

70%

45%

High portfolio management maturity

72%

46%

Mature benefits realization

73%

44%

Many organizations still haven't embraced strategic practices.

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Less than 20% report high project, program and portfolio management maturity.

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Only 15% report high organizational agility.

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Only 21% report highly effective organizational change management.

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Only 17% characterize their benefits realization as highly mature.

CULTURE OF CHANGE

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A strategic focus on people isn't limited to talent management. As the rate of change accelerates in business, so does the role of organizational change management to drive people through the changes brought on by strategic initiatives. In fact, 69 percent of strategic initiatives are successful at organizations highly effective at organizational change management, compared with just 41 percent at organizations minimally effective.

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“It is a fact that companies with a clearly defined project management strategy are more successful.”

—Kristian Pohlmann, PMP, HP Enterprise Services, Düsseldorf, Germany

It's not just employees' reluctance to change that needs to be managed, says Philip Baillie, freelance business transformation program director and consultant, London, England. Even enthusiastic change can threaten strategic initiatives if it's not coordinated. Mr. Baillie once worked with an organization that decided to increase capacity and capability to give it international reach. Rather than facing opposition, the plan sent eager employees rushing into projects.

“Even the most senior members of the leadership team charged off to pursue ‘good ideas,' producing what they believed to be good for the organization,” says Mr. Baillie. “Unfortunately, whilst this was done with the best of intentions, it was piecemeal, resources weren't prioritized centrally, and on occasion one local initiative would pull against another.”

To get the plan back on track, a pause in new initiatives was called. Leaders clearly defined and communicated the organization's goals, and projects that didn't lead to achieving those goals were put aside.

“Effective change management ensured close alignment between the organization's long-term vision, goals and strategy and its development activity,” Mr. Baillie says.

Duncan Swenson, PMP, most recently a project manager with PMI Global Executive Council member IBM, Dubuque, Iowa, USA, compares translating goals across a portfolio of strategic initiatives to a communication relay race: Without change management processes in place to keep the message clear and consistent, it gets more muddled the farther down the line it goes.

“The president has to articulate what he or she wants really clearly and then try to get buy-in from all the top people, then get the communications down to the levels where the change is actually going to be implemented,” he says.

MATURE PROCESSES

The Pulse data is clear: Organizations that recognize the value of project management—and have developed the project, program and portfolio management (PPPM) practices to support it—far outpace their competitors when it comes to strategic initiatives.

Organizations with high project management maturity complete 70 percent of strategic initiatives successfully, compared with just 44 percent for those with low project management maturity, according to the Pulse of the Profession report. Two-thirds of strategic initiatives are successful at organizations that use standardized practices, compared with just 41 percent at organizations that don't.

“It is a fact that companies with a clearly defined project management strategy are more successful,” says Kristian Pohlmann, PMP, EMEA PMO transformation leader, HP Enterprise Services, a PMI Global Executive Council member in Düsseldorf, Germany.

When setting up PMOs for various accounts across the enterprise, for instance, Mr. Pohlmann witnessed “an increase in productivity, efficiency and standardization of processes, from project initiation right through to execution and closure, leading to cost reductions, increased governance and ultimately increased delivery of projects on time and in budget,” he says.

The Pulse of the Profession report shows 58 percent of strategic projects are successful at organizations that have PMOs, compared with half at those that don't.

Still, maturing PPPM practices requires time and resources, Mr. Pohlmann says. “There has to be a willingness to take that long, hard look at how the organization is working and which areas should be improved. There has to be buy-in from senior management, and you need the expertise and the talent and a culture that encourages continuous improvement.”

High-performing organizations are three times as likely to have organizational agility. High-performing organizations are twice as likely to have high alignment of projects to organizational strategy. High-performing organizations have twice as many successful strategic initiatives.
img Percentage of high performers with high organizational agility img Percentage of high performers with high alignment of projects to organizational strategy img Percentage of strategic initiatives of high-performing organizations that meet original goals and business intent
img Percentage of low performers with high organizational agility img Percentage of low performers with high alignment of projects to organizational strategy img Percentage of strategic initiatives of low-performing organizations that meet original goals and business intent

TRACKED OUTCOMES

Measuring not just the projects in progress but the benefits they deliver is one hallmark of maturity. Indeed, 39 percent of high-performing organizations have high benefits realization maturity, compared with only 5 percent of low-performing organizations, according to the Pulse of the Profession. Organizations with this in place complete 73 percent of strategic initiatives successfully, compared with just 44 percent for those organizations without it.

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“Organizations not using benefits realization tend to focus more on the number of projects in their pipeline than the planned or expected benefit of doing the project.”

—Jonita Floyd, PMP, YP, Atlanta, Georgia, USA

“Organizations not using benefits realization tend to focus more on the number of projects in their pipeline than the planned or expected benefit of doing the project,” says Jonita Floyd, PMP, director, enterprise PMO, YP, Atlanta, Georgia, USA. “Oftentimes they waste valuable time and resources working on projects with little or no return on investment.”

Even organizations with a PMO can perceive process and governance as bureaucracy or unnecessary overhead, adds Ms. Floyd, who calls understanding benefits realization “a journey, not an overnight stay at a motel.”

Vicente Mora, PMP, says a governance board can help with the benefits realization process. Mr. Mora, PMO director at Xerox, Monterrey, Mexico, once worked for a company whose governance board defined and prioritized projects or investments based on a project's ROI or benefits within a certain timeframe. Each project had a senior leader accountable for that benefit.

“I believe this strategic group and the process around it can facilitate benefits realization and allow the organization to focus on what brings more value to the investments done,” he says. PM

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.

PM NETWORK APRIL 2014 WWW.PMI.ORG
APRIL 2014 PM NETWORK

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