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CEB Managing Troubled Projects v1
CEB Managing Troubled Projects v1
CEB Managing Troubled Projects v1
Troubled Projects
Most organizations have a
significant percentage of
TROUBLED PROJECTS MAKE UP A LARGE PART OF
portfolio value at risk as a THE PORTFOIO
result of troubled projects.
■ A project is “troubled” if it is at
significant risk for not 26% 26%
achieving its business
outcomes.
21%
11% 11%
5%
n = 19 organizations.
Source: CEB, CEB PMOEC Membership Survey, August 2012.
© 2013 The Corporate Executive Board Company. All
Rights Reserved. PMOEC4069112SYN
2
TROUBLED PROJECTS FOLLOW A COMMON PATH TO FAILURE
The Troubled Project Lifecycle
Illustrative
2. An unsystematic Approach to
Project Recovery
Expected Project Returns
Organizations initiate the recovery effort
after underestimating the extent of Actual Project Returns
trouble or
misunderstanding of the risks and costs
associated with recovery.
Break-Even
Point Slow Decline
Missed Break-
Even forecast
Time
3
nearly three-quarters of
organizations report that
1. INEFFECTIVE EARLY PROBLEM IDENTIFICATION
more than 20% of seemingly AND ESCALATION
healthy projects conceal
problems at their core.
What percentage of projects reported as healthy (or “green”) conceal hidden problems?
35%
25%
15% 15%
7%
3%
Sample Indicators of
“Watermelon” Projects
■ Low project team morale
■ Disengaged sponsor or stakeholder
Hidden ■ Recurring renegotiation of deadlines or
Problems expectations
■ Brewing tension between project team
and sponsor
n = 68 organizations.
4
The lack of a structured,
repeatable approach to project
2. AN UNSYSTEMATIC APPROACH TO RECOVERY
recovery delays recovery
efforts and risks the use of
scarce resources on projects
not worth recovering. Typical Pitfalls During Project Recovery
Achieve
Initiate
project goal
project
and
recovery
business
process.
outcome.
Lack of Confusion or
understanding of root disagreement about the
cause of project correct set or sequence of
problems recovery steps
5
Personal and political
motivations of project
3. DELAYED TERMINATION
stakeholders often delay
project termination decisions. Project Termination Discussion
Illustrative
6
Managing Troubled Projects
7
PMs fail to identify and
escalate project
BARRIERS TO PROBLEM IDENTIFICATION
problems early due to
retrospective metrics and
project team reluctance
to voice concerns.
Backward-looking status Sponsors don’t play an active role Project stakeholders don’t
metrics prevent early in identifying troubled projects. escalate project concerns for fear
identification of
of blame.
project problems.
8
To increase the chance of
successful recovery,
CAPTURE LEADING INDICATOR METRICS
progressive PMOs track
leading indicators of project
trouble.
Category Potential Leading Indicator of Project Trouble
Project 1. Project spending is trending significantly under estimate or not using allocated CAPEX.
Performance 2. A growing number of dependent projects are on hold.
3. Business case has not been reevaluated in light of changing business conditions.
Communication 4. No challenges or conflicts were raised in informal and formal project reviews.
5. Different perceptions were taken from the same meeting.
Process and 19. Project requirements frequently change without formal assessment.
Methodology 20. Interim goals are defined verbally rather than documented.
9
The PM provides sponsors
with guidelines to help spot
WARNING SIGNS OF PROJECT TROUBLE FOR 1
Project Objectives
Team Dynamics
1 Pseudonym.
10
PMs educates project 1
1. Undermined motivation
2. Team skills lacking
3. Uncontrolled problem employees
4. Adding people to a project behind schedule
5. Unrealistic expectations
6. Politics prioritized over substance
7. Wishful thinking
8. Overly optimistic schedules
9. Insufficient risk management
1 Pseudonym.
11
Theta conducts a 1
comprehensive review of
SURFACE PROBLEMS FROM ALL STAKEHOLDERS
project problems by
gathering feedback from Project Stakeholder Surveys
the project team, sponsor,
and PM. Survey Type Project Characteristics Assessed Sample Questions
Project Team ■ Comfort with Escalation
■ Project issues and risks are
Feedback
■ Escalation Path Clarity communicated.
■ Budget Reporting
PM Assessment ■ Escalation Path Clarity
■ It is clear whom to
of Sponsor 3. PMs assess the quality of
■ SME Industry Knowledge contact with questions
Compliance sponsor engagement to
and concerns about this ensure they have
■ Speed of Invoicing Issue
project. adequate support.
Resolution
■ The sponsor responds to the
■ Sponsor Collaboration on
change request process
Project Charter
within time frames specified
1 Pseudonym.
■ Sponsor Budget Feedback in the project plan.
12
Encourage project team
members to exercise
PROJECT TEAM SILENCE DRIVES PROJECT
judgment and COSTS HIGHER
independently report
project issues early.
13
The PM plays a critical role in
ensuring all project resources,
ESTABLISH A REPUTATION OF BEING OPEN AND UNBIASED
feel comfortable in escalating
their concerns.
Potentially damaging: “Please don’t come to me with Potentially damaging: “Don’t talk to me about
unconfirmed complaints about your project or project hypothetical situations. I only want to hear about real
team members.” problems.”
Preferable: “Thank you for coming forward about this. I Preferable: “My door is always open if you have a
know it took courage.” question or a concern.”
PM
Getting Started
Show you’re ready to have a discussion by giving the employee your full attention.
Thank the employee for coming forward.
During the Discussion
Listen actively. Remain objective.
Take notes. This communicates high interest and lessens the chance of forgetting what transpired during the meeting.
Ask open-ended questions to ensure you understand the concern.
Watch your tone of voice and body language.
Try to determine if the employee has sought help from others. This may speak to his or her level of frustration, and there may be additional action
steps.
Finishing up
Restate what you heard.
Ask what the employee expects to happen. This reassures and may pleasantly surprise the employee.
Explain the next steps. Be careful not to promise actions that mirror the employee’s expectations if they are not appropriate (e.g.,
“fire that individual!”).
Tell the employee when to expect follow-up.
Assure the employee that you will maintain confidentiality to the fullest extent possible (total confidentiality may not be possible during a review of
the project).
Ask the employee to maintain confidentiality as well (i.e., don’t talk to others about it).
14
KEY TAKEAWAYS: ENCOURAGE EARLY PROBLEM IDENTIFICATION AND
ESCALATION
For PMOs
■ Encourage all project stakeholders, not just PMs, to voice concerns by keeping an open-door policy and ensuring there are no negative
consequences of escalation.
■ Educate sponsors on the warning signs of project trouble and how to contribute to project success.
■ Do not rely solely on project health–check tools and templates to surface project problems. Apply judgment and meet regularly with
stakeholders to identify signs of trouble early.
■ Ensure the project team feels comfortable approaching you about project problems.
■ Ensure sponsors are providing adequate support and resources for project success.
For Stakeholders
■ Be transparent about project concerns, and discuss them with the PM as early as possible.
■ View the PM as a coleader of the project who can help solve problems, rather than simply as a facilitator or coordinator.
■ Be receptive when problems are escalated to you, rather than being defensive or blaming the PM.
15
An incomplete
understanding of project
BARRIERS TO PROJECT RECOVERY
problems and the lack of a
repeatable process for
addressing them when they
occur complicate project
recovery efforts and increase
project and PMO costs.
Carefully select projects for recovery, and Perform unbiased project health
target PMO involvement in those projects. assessments by incorporating
feedback from key stakeholders.
16
ROOT-CAUSE ANALYSIS PRIMER
■ Conduct a root-cause analysis of the problem, sequentially breaking Diagnostic ■ Use consultative, probing questions to identify underlying
down problem causes into their constituent parts. problem causes.
Approach
■ Draw a root-cause tree that visually shows the relationship among ■ Employ brainstorming techniques to identify potential problem
distinct problem causes. causes.
■ ______________________________________________
2nd Level: 2nd Level: 2nd Level: 2nd Level:
Level
Cause A.1 Cause A.2 Cause B.1 Cause B.2
17
Decision makers
frequently choose to continue
CLARIFY DECISION BIASES TO OVERCOME THE
projects— even after they are “SUNK-COST FALLACY”
not financially viable—based
on their perception of
“sunk” costs. Sunk-Cost Case in Point: The Concorde
Details of the Concorde Project
Source: http:/ /en.wikipedia.org/wiki/Concorde; Steve Fitzgerald, “Concorde Landing Farnborough,” http:/ /www.airliners.net/photo/British-Aircraft-Corporation/Aerospatiale-BAC-
18
Segregate roles and
responsibilities of
COLLABORATE WITH KEYSTAKEHOLDERS TO SAFE EXIT, INC.
1
2
Refer to comparable past projects to identify key performance indicators (KPIs) that were early predictors of
project success or failure.
0.6
0.3
0.0
Supermarket New Supplier Cash Flows Marketing
Preordering Customers Partnership in Campaign
Levels Acquired Planning Effectiveness
1 Pseudonym.
Source: CEB, CEB Corporate Strategy Board, 2012.
19
Establish exit triggers at each
stage of the project execution
MAP EXIT TRIGGERS TO CRITICAL SAFE EXIT, INC.
1
Launch in Launch in
Pilot Tests
Strategic Assumption Metro Cities Tier-Two Cities
Market for aspirational foods More than 30% variance More than 80% variance More than 50% variance
will grow by CAGR 8% over between projected and between planned and actual: between consumers’ price
2012–2017 across all Indian actual demand expectation and company’s
■ NPV
cities. target selling cost
■ IRR
■ Cash flow
One out of five people in More than 60% of potential More than 40% of potential More than 30% of potential
metros with monthly customers do not fit customers do not fit customers do not fit
income in excess of X targeted base. targeted base. targeted base.
rupees buy aspirational
foods.
Market expansion will not More than 20% of focus More than 40% of focus
impact brand perception. group participants indicate group participants
that expansion negatively indicate that expansion
impacts brand perception. negatively impacts brand
perception.
Exit triggers help monitor the validity of the key Exit triggers evaluate both financial and
strategic assumption during each project stage. strategic objectives.
1 Pseudonym.
20
Proactively documenting
termination criteria before
OBJECTIVE TERMINATION CRITERIA 1
1. Strategic fit ■ Geography and ■ Brand strength can be ■ Diversifying customer segments
Is this business aligned to Customer Coverage leveraged uniformly across all distances products from the brand
our long-term strategy? ■ Brand Leverage extension opportunities. promise.
■ Noncore extension negatively
impacts customer perception.
2. financial Attractiveness ■ Gross Margins ■ Parent company IP can help ■ Product customization to suit region-
Does this project meet our ■ Free Cash Flow create innovative products and specific tastes increases costs and
margin and cash flow extract premium pricing. invalidates margin assumptions.
requirements?
3. Sustainability and ■ Total Market Size ■ Favorable government ■ Industry consolidation and entry of
Scalability ■ Current Market Share policies will ensure the foreign players limit market share
Will this project help us ■ Market CAGR Projection organized industry grows growth.
achieve our long-term significantly.
■ Competitive Intensity
goals?
5. Predictability ■ Cash Flow Visibility ■ Increased awareness of costs ■ A highly volatile return schedule for
Does this initiative add a ■ Demand Variability and market trends will preempt sunk costs pressures the capital
disproportionate amount of risk ■ Market Cyclicality any valuation shocks. structure.
to the corporate risk profile?
1 Pseudonym.
2 For illustrative purposes only.
© 2013 The Corporate Executive Board Company. All
Rights Reserved. PMOEC4069112SYN Source: CEB, CEB Corporate Strategy Board, 2012.
21
Identify, document, and
agree with stakeholders
IDENTIFY RISK GUARDRAILS
on highly critical and
potentially immitigable Detailed Risk Assessment Calculator
risks—the “deal breakers.”
There are usually only a few highly
critical risks for each project.
Adoption
Escalate: Impact of the risk cannot be contained by project team; PMO, IT Governance committee,
or business sponsors must intervene for effective mitigation.
Rebaseline: Cost, schedule, or benefit baselines are no longer realistic and must
be recalculated.
22
Lack of a structured decision
process causes organizations
CREATE A SET Of PREDEFINED GUIDELINES TO
to continue spending on INFORM PROJECT RECOVERY DECISIONS
projects that are either not
recoverable or not worth
recovering. Guidelines for Determining Project Recovery Posture
Illustrative
Recover
No
Terminate
23
KEY TAKEAWAYS: ADDRESS PROJECT TROUBLE SYSTEMATICALLY
For PMOs
■ Target PMO efforts to the most value-added roles (e.g., problem identification, given sponsor skills, problem severity, and project
importance).
■ Ensure an objective approach to problem assessment, and gather feedback from multiple points of view.
■ Select PMs with consultative skills to diagnose and create the plan for solving project problems.
For PMs
■ Establish milestones for project recovery, and ensure stakeholders agree on next steps.
■ Define exit triggers and roles to identification at the start of the project.
■ Regularly check recovery execution against the revised project schedule and budget, and escalate deviations early to re-baseline, if
necessary.
For Stakeholders
■ Help PMs make informed project cost, schedule, and scope trade-offs.
■ Dedicate sufficient time to review and sign off on the final recovery plan; do not delegate without allocating explicit decision rights.
24
GUIDING PRNCIPLES FOR MANAGING TROUBLED PROJECTS
■ Do not rely solely on project health–check tools and ■ Establish milestones for project recovery, and ■ Cross-pollinate lessons learned through informal
templates to surface project problems. Apply judgment ensure stakeholders agree on next steps. mentoring and communities of practice to help peers
and meet regularly with stakeholders to identify signs of identify and course-correct other troubled projects.
■ Encourage a positive working environment by
trouble early.
quickly addressing internal conflicts or apprehension ■ Explain project termination rationale to project team
■ Ensure the project team feels comfortable approaching regarding the likelihood of project success. members to avoid confusion.
for PMs
you about project problems.
■ Regularly check recovery execution against the ■ Keep team morale high when a project
■ Ensure sponsors are providing adequate support and revised project schedule and budget, and escalate is terminated.
resources for project success. deviations early to re-baseline, if necessary.
■ Be transparent about project concerns, and discuss ■ Contribute to recovery planning by sharing past ■ Help the PM identify the exit triggers that would indicate
them with the PM as early as possible. experiences. a project should be terminated.
■ View the PM as a coleader of the project who can ■ Help PMs make informed project cost, schedule, and ■ Deprioritize personal or BU objectives in service to the
help solve problems, rather than simply as facilitator scope trade-offs. organization’s best interests when making the decision
For or coordinator. to recover or terminate a
■ Dedicate sufficient time to review and sign off on the
Stakeholders troubled project.
■ Be receptive when problems are escalated to you, final recovery plan; do not delegate without allocating
rather than being defensive or blaming the PM. explicit decision rights. ■ Monitor changes in the business environment that could
impact the project, and bring them to the PM’s attention.
■ Ensure SMEs are committed to recovery and clear on
their role.
25
Appendix
26
1
PROJECT TEAM SATISFACTION SURVEY
3. The project reporting structure was clearly communicated to each team member.
4. Project changes are communicated.
5. Project issues and risks are communicated.
10. Project management resources respond to individual team member issues and concerns.
1 Pseudonym.
27
1
PROJECT TEAM SATISFACTION SURVEY (CONTINUED)
15. Project team members understand where their due dates fit into the overall project schedule.
1 Pseudonym.
28
1
PROJECT TEAM SATISFACTION SURVEY (CONTINUED)
10. The project manager understands the business processes and issues associated with the project.
11.You are satisfied with the quality of project deliverables.
12. Scope changes are clearly communicated, including their effect on budget and schedule.
13. You are satisfied with the level of detail in project documentation.
14. You are notified about potential staffing changes.
15. Project issues are communicated proactively.
16. Project issues are resolved promptly.
17. The project will be completed within the approved scope.
18. The project will be completed within the approved budget.
19. The project will be completed on schedule.
20. Key milestone dates are met.
21. You are satisfied with the comprehensiveness and accuracy of the budget reported.
22. Invoicing issues are resolved promptly.
23. The project team promotes knowledge sharing with sponsor organization.
24. The project’s deliverables met your business requirements.
25. The objectives, as stated in the approved project charter, were met.
26. The project provided value to your organization.
1 Pseudonym.
29
1
PROJECT TEAM SATISFACTION SURVEY (CONTINUED)
10. The sponsor responds to the change request process within time frames specified in the
project plan.
11.You are satisfied with the level of detail in sponsor documentation.
12. You are notified about potential sponsor staffing changes.
13. Project issues and risks are communicated proactively.
14. Project issues and risks are addressed promptly.
15. The sponsor has met all project deadlines to date.
16. It is clear to you whom to contact with questions and concerns about this project.
17. The sponsor has collaborated in developing the project charter.
18. The sponsor responds to the deliverable acceptance process within time frames specified in
the project plan.
19. The sponsor has assigned the resources that were identified in the project charter.
20. The sponsor participates in project reviews.
21. The sponsor provides feedback on project status reports.
22. The project’s deliverables met your business requirements.
23. The sponsor has participated in project/phase closure activities, such as review of budget
reports and lessons-learned meetings.
24. The sponsor provides feedback on project budget information.
1 Pseudonym.
30