The True Cost of Poor Project Management

The True Cost of Poor Project Management

A study conducted by PricewaterhouseCooper found that only a mere 2.5% of companies complete all the projects they set out to do, and about 1 in 6 projects had a cost overrun of 200% or more. We thought it worth following up to see if anything had improved over the past couple of years—and if not, why not?

Another Wake-Up Call on Poor Project Management

What we found were even more sobering statistics to add to the list. For example, the Project Management Institute (PMI) published its 2016 Pulse of the Profession, the findings of which were based on interviews with 2,500 project managers, directors, and other executives in a position to assess both the cost and the success of various projects. They reported that, for every $1 billion spent on projects in the U.S., there was a loss or waste of roughly $122 million—meaning that 12% of the budget for projects, on average, was wasted due to poor management, counterproductive behaviors, and bad decision-making.

Beyond that dollar amount, several studies have found that poor project management can have a cascade effect throughout an organization. It can erode employee confidence, which leads to further resistance to change and perhaps even blaming and finger-pointing. It can also betray the trust of clients and customers, especially if a failed project means that services were not delivered or promises were not kept. Finally, poor project management has been to blame for organizational maladies ranging from lack of innovation to poor marketing to lack of a substantive learning culture.

Why Project Management Continues to be a Challenge: The 4 Cs

Which brings us to our second question: Why haven’t we seen more improvements when it comes to project management?

Like many economy-wide phenomena, the causes are likely very complex and interrelated. Different industries are likely to have their own patterns of cause and effect as well. But there are some broad trends contributing to the stagnant project completion numbers:

Increasing Complexity. Most projects companies embark on today are what business analysts would consider complex: They have many interdependent parts, people, and procedures. Much of this complexity is due to the fact that modern projects involve many different types of work spanning different departments and requiring different skill sets.

Greater Speed of Change. The business landscape can change rapidly—so rapidly, in fact, that projects are often abandoned before they can come to fruition. Add in faster, smarter data analysis made possible by large computing networks in the cloud and you have business decisions that are made and changed more quickly than they can possibly be implemented.

Customization Through and Through. In some corners, business gurus are claiming that the days of “best practices” are quickly coming to an end. Not that there aren’t better and worse ways to do things; rather, the idea of creating a set of reusable practices and re-deployable solutions is over. The speed of change and innovations in technology are allowing more and more projects to be custom, every time. In essence, every project will be a first.

Communication Glitches. Many projects come screeching to a halt because requirements were not adequately defined, opportunities and risks were not understood, or internal communication within the team broke down. While projects are becoming more complex and involve more parts of an organization (see above), investment in teaching soft skills like communication skills, management skills, and presentation skills has not kept pace. The bigger the project, the more costly such miscommunication becomes.

These four trends highlight what the true cost of poor project management entails. When projects fail, the organization doesn’t just lose money. Failed projects are the outward sign of deeper problems surrounding complexity, change, customization, and communication glitches. Once these manifest in failure, feelings of frustration and resentment at the failure erode the organization’s ability to deal with these “4 Cs”...and the recycle repeats itself.

Organizations can break the cycle, however. By teaching employees the basics of teamwork, communication, and good management practices, struggling organizations can “educate their way” toward better project management and higher success rates. And successful organizations, for their part, can put in place a culture of sustained success, no matter what the changing business landscape brings. To see some of our quality courses on these topics, simply request a free trial of our HSI LMS. Sometimes a few small changes are all that is needed to break the cycle and achieve success.

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