Why Projects Fail and How You Can Reduce Project Failure

With all of the time and energy that goes into projects, the last thing we want is for a project to fail. Unfortunately, this happens more often than we would like. Why do projects fail so often? How can we ensure their success? The Magic Triangle of Project Management is a model that outlines the three dimensions of project management: timing, costs and quality. For a project to be successful, all three of these dimensions come into play. The project needs:

• to be finished by the agreed upon completion date (timing),
• to have actual costs that do not exceed the budget (costs),
• and the service or product to be delivered satisfactorily (quality).

Failed projects cause frustration for all involved: the project team, project managers and upper management. They also create a huge financial burden on companies. In fact, Gallup has reported that 5 to 15% of all IT projects in the US fail, which equates to a cost of $50 to $150 billion per year. But again, why do so many projects fail? Is it that project managers lack skills, employees are unmotivated or something else entirely?

Through our research, here is a list of 5 reasons that projects fail:

• Insufficient capacity
• Changing project scope
• Inadequate risk management
• Lack of leadership
• Lack of strategic contribution

… lack of strategic contribution? A study in 2012 by Michael Stanleigh showed that 68% of companies worldwide do not use project prioritization processes or tools to align projects and corporate strategy.

Strategically aligning projects successfully has more advantages than just preventing a company from working on projects that will ultimately not have a major impact. It also directly affects the project success itself! How? Let’s look at how strategic contribution can improve a project’s chance for success.

Strategic Contribution

As the name implies, strategic contribution measures how much projects contribute to the strategic goals of the company. This shouldn’t be confused with ROI (return on investment) or NPV (net present value). While financial performance may be a strategic goal, it is (hopefully) only one of several. In order for a company to determine how successful its own projects are in terms of its strategic objectives, it must: (1) set those goals; (2) create a way to measure the strategic contribution of projects, and (3) ensure that resources are first allocated to projects with the highest strategic contribution.

Unfortunately, in many companies, there is no attempt to measure the strategic contribution of projects, even though doing so would offer a whole range of advantages with relatively little effort. The first advantage is obvious. Resources are allocated to the projects that actually contribute to strategy, rather than to projects that have just somehow been added to the list. Now let’s consider other benefits you gain when applying strategic planning to projects.

How Measuring Strategic Contribution Leads to Project Success

Evaluating all projects in terms of their strategic contribution creates a clear basis for deciding WHAT projects are done. This helps with resource planning – both during the initial project planning and when resolving resource conflicts in everyday operations ensuring that resources are saved for the most important projects.

If your sales force is beginning to work successfully, sooner or later you’ll find yourself in a situation where you are running out of resources (employees!), and you have to decide: Is Project X so important that you should pull Ms. Jones off Project Y? Should you approve Project Z, even if that causes delays in Project X and Y? Which projects are more important? Why?

For companies that do not purposefully and systematically align their projects with their strategic goals, the decisions are often based on gut feelings or even the idea that “All our projects are must-haves!” Sooner or later, the project managers of Projects X, Y and Z will argue over which project will be the one that Ms. Jones will be working on when she breaks the record of how many overtime hours one employee has worked in a year.

In the end, there is no clear winner, and you’re risking the success of all three projects.

Project Portfolio Management

It is worth pointing out that the reason these projects are failing isn’t because of bad project management or the execution of the individual projects. It is a lack of strategic planning. So how can you improve that? The answer is Project Portfolio Management (PPM), which includes targeted resource management. Fortunately, this is easier than it sounds. Below, we’ll outline a few steps that will help you strategize your project portfolio.

1. Develop a framework for decision-making.

Who in your company decides which projects should be done? And based on what information? Which meetings do you need? A PMO (project management office) could establish a process that ensures that the relevant decision-makers have all the information they need at the relevant time.

Tip: From the initial project proposal, it should be clear to what extent the project contributes to the strategic goals of the company.

2. Set measurable goals.

You can only measure projects against goals if you’ve formulated measurable goals. Click here to find out more about how to develop a rating system for your projects.

Tip: Developing rating systems can be weirdly fun. Suddenly you feel like you’re getting everything under control! Just remember that the rating system should be meaningful and easy for everyone using it.

3. Clearly rank all projects.

All the effort is in vain if you find out in the end that there is a five-way tie for the “most important” project. In other words, there should only be one top priority project. Each project should have a clear rank.

Tip: This is sometimes difficult to do, try it anyway. It’s worth it!

4. Assign your resources according to the priority of the projects.

Start with the most important projects and work your way down. Be careful not to overbook employees for the same time period.

Tip: It’s OK to do projects later or not at all. Sometimes it’s okay to say “no”!

5. Do it all on a regular basis.

The four points above can’t be worked from top to bottom. It is important to check and adjust all these points on a regular basis. Is the process itself efficient? Are the goals set in line with the actual goals and priorities of your business? Do the projects meet the goals they should contribute toward? Are the employees’ capacities still planned correctly? Has something changed or been delayed or postponed? Regularly checking that everything is in order is the key to successful strategic alignment.

Tip: Make sure that there is regular communication with the project managers executing and implementing the projects.

Our Recommendation – Lean PPM™

If you want to find solutions, processes, meetings and the people responsible for all the steps mentioned above, that’s a lot of work. Fortunately, we’ve done that work for you. Lean PPM™ is a well-designed portfolio management method that covers all these steps and has proven itself in practice. So, when you organize your PPM process with Lean PPM™, you have a template with all the necessary meetings, roles, and workflows that you need to adapt to your business.

Compared to other portfolio management methods, Lean PPM™ has a definite advantage: the method focuses entirely on the strategic direction of the projects, without you having to change anything regarding project management. So Lean PPM™ focuses on the question of WHAT projects you are doing, not on HOW to handle these projects. The resulting advantages are:

• Quick and easy introduction and implementation
• Concise meetings with clear goals
• Effective alignment of projects with strategic goals
• No additional reporting layer for the project teams
• Teams can continue to work with the project management methods and tools they like the most

If a lack of strategic contribution is threatening the success of a project, Lean PPM™ offers both quick and long-term remedies. We encourage you to learn more about the Lean PPM™ framework and how it can further benefit your company.

As you can see, by introducing a suitable project prioritization process, you can finally do the right projects, and in the future, you can be sure that your project implementation will not fail because of a lack of strategic contribution.