The Seven Practices We Could (and Should) Implement to Improve IT Project Management
IT projects are frequently known for cost and schedule overruns and for delivering less functionality than originally planned. If the promise of project management was to address haphazard software delivery, why are so many IT projects still challenged?
This paper will review seven organizational practices that can improve project performance, Program Management, Project Portfolio Management, Institutionalizing Project Management, Collecting Project Metrics, Measuring Project Managers, Developing the ˜How To™ Skills, and Mentoring.
The Standish Group™s 1995 CHAOS report set the standard for measuring and reporting IT project failures. They found a project cancel rate of 31.1%; 52.7% of the projects demonstrated a cost of 189% of their original estimates; and only 42% of the originally proposed features were implemented. More recent studies have found similar IT project performance challenges. For example: Robbins-Gioia (2001) surveyed 232 ERP implementations and 51% of the respondents viewed them as unsuccessful; The KPMG Canada Survey (1997) found that of the 176 respondents, more than 75% demonstrated schedule overruns of >30% and over half missed their original budgets by substantial margins.
The rise of project management over the last 50 years has been widespread across all types of businesses and organizations. It would be hard to find successful global and domestic companies anywhere that do not use project management within their organizations. Even with the use of project management IT projects continue to be challenged, but it is not necessarily project management disciplines that are the source of these continuing problems; rather it is organizational issues and challenges that are preventing project management from having the expected impact. This paper will identify seven organizational practices that can improve IT project management.
1. Program Management
Program management is the effective implementation of change through multiple projects to realize distinct and measurable benefits for an organization (Becker, 1999). There are significant differences between programs and projects. Programs represent strategic change that is cross-enterprise, requiring a higher degree of coordination between business lines, and aligned directly to organizational goals. Ultimately, programs must address the reason for being in business; making money. This includes increasing revenue, reducing costs, improving organizational efficiency, and addressing survival initiatives such as required regulatory changes to operations and systems.
Projects are the tactical components by which value is delivered by the programs. Whereas projects are focused on scoping and delivering a finite deliverable in a specific period of time, programs are not necessarily time-bound, and they are focused on measurable business benefit. A program consists of a portfolio of projects.
The organizational construct is Strategy, Programs, and then Projects. C-Level executives develop the company™s strategy and identify resulting programs to achieve organizational goals and benefit targets. Senior Business Managers define the initiatives for their respective business lines to meet the strategy™s goals and benefits. This includes the development of the measurements by which program success will be evaluated. IT and Project Management groups then frame the initiatives and devolve them into projects to be scoped, estimated, and analyzed for cost-benefit and alignment to the strategic objectives of the program.
Aligning projects to the objectives of the programs is accomplished by project portfolio management.
2. Project Portfolio Management
It does not pay to get better at project management if the projects that get started do not provide business benefit. The second organizational practice for improving IT project management is to ensure that the beneficial projects are the ones that get started by using portfolio management tools and techniques. Recent studies conducted by AMR Research indicate that organizations that have implemented an IT portfolio management process report strategic alignment with business plans and savings of 2% to 5% of their annual IT Budget (Austvold, 2002). Their study also found that as much as 75% of IT organizations have little visibility of their entire project portfolio and have, at best, chaotic and non-repeatable processes in place (Austvold, 2002).
Portfolio management is an ongoing process of decision-making (Rosenstock, 2002). It requires the organizational discipline to inventory all projects, categorize them, develop a set of measurements and analytics, score and evaluate the projects, and fund the projects that best fulfill program objectives.
The first step is to gather the list of all projects and compile them into a single database. Depending on the size and maturity of the organization, this can be done manually or through a software tool that is able to capture relevant information about the projects. Minimally, one needs the project name, purpose/objective, estimated cost, estimated duration, and cost benefit data or return on investment. Determining the categorization of projects is dependent on the type of organization; it should be based on how the organization is structured to meet market needs. Operational efficiency, new product development, research and development, or customer focus are all appropriate categories. Certain categories or projects may entail more risk than others and the portfolio of accepted projects may reflect a mix of risk versus return.
Portfolio management analytics tools and techniques facilitate the scoring process. These can fall into any of three categories; Value/Cost Performance, Strategic Alignment, and Continuous Improvement (Rosenstock, 2002). Value/Cost Performance uses project financials to determine the best performers. Strategic Alignment measures how projects align to organizational objectives. Continuous Improvement metrics determine how well the projects improve operational effectiveness. All three represent valid ways to calculate project value prior to the evaluation process where the individual merits of each project are compared to each other and the beneficial projects selected for execution.
It is during the evaluation where the intangible benefits of project portfolio management are realized. Because the projects have been measured objectively and ranked against each other based on categorization, management gets a clear picture of which projects deserve to be funded and resourced. The ensuing discussions between business and IT management improve communication between groups and get the leaders to focus on organizational benefit instead of what™s in it for me.
Project portfolio management does not end after the selection process. Organizations that constantly review the set of active projects along with the pending ones are able to respond to changes in business strategy more quickly and kill or suspend projects that no longer match organizational objectives so that newly important pending projects can start. This is but one additional benefit as to why project portfolio management is a critical organizational function in support of better IT project management.
3. Institutionalizing Project Management
Having a project management methodology or project management office are a good start, but unless organizations truly institutionalize project management, they are unlikely to realize the full benefit. Institutionalizing project management means taking the necessary steps to implement full project management capability maturity (PMM) and establishing project management job categories and the associated career path within the human resources structure.
Rather than get into an in-depth discussion of project management maturity, this paper will focus on the research that demonstrates the value of PMM. The project management maturity model has evolved from the Software Engineering Institute™s CMM for software development processes; Initial, Repeatable, Defined, Managed, and Optimized. Work at the University of California at Berkeley has applied those concepts to a similar model applicable to project management processes; Ad-hoc, Planned, Managed, Integrated, and Sustained (Kwak, Ibbs, 2000). The Berkeley study goes several steps further than merely developing a maturity model.
Initially the Berkeley research showed a correlation between an organization™s PM maturity level and actual project cost and schedule performance which could be used to forecast potential gains as an organization matured (Kwak, Ibbs, 2000). As the study has progressed over time, improvements to the assessment tool and refinements to the Berkeley PM maturity model have allowed the researchers to capture better data specific to the six project phases and nine PMBOK® functional areas along with overall organizational PM cost and individual project performance for CPI and SPI (Ibbs, Reginato, Morris, 2001).
Recent findings within the study data have demonstrated that many of the most mature organizations actually spend less on project management than their less mature peers¦ Organizations that have achieved a PMM approximately greater than 4 have a PM Cost of less than 12%, and the overwhelming majority have a PM Cost of less than 9% (Ibbs, Reginato, 2002).
The UC Berkeley data clearly demonstrate the value project management maturity has on project delivery and bottom-line financials.
The second component of institutionalizing project management addresses the human side. Project management methodologies and project offices cannot deliver value if organizations do not hire and train the people required to do the work. Project management is often referred to as the accidental profession™ because so many project managers fell into the job by chance or circumstance. Based on anecdotal evidence, this is especially true in the world of IT. If organizations expect to reap the benefits of project management, a defined and distinct job category and career path must be developed for project managers.
There is nothing wrong with on the job training, but project management-specific job categories and levels are required to develop project managers. There must be entry-level jobs that lead to project managers assuming more responsibility as they progress from junior to senior project skills. Attributes, capabilities, and demonstrated behaviors must be documented for each level and performance reviews must reinforce these qualities. Just like projects have stage gates, project managers should too; only progressing to the next level once they have demonstrated the ability to do so. To ensure that the ˜right™ project managers are assigned to appropriate projects, projects must be categorized based on type, size, complexity, visibility, and politics, then matched to the demonstrated capabilities of the project manager. This is nothing more than common sense, yet anecdotal evidence points to poor organizational performance in this area.