The Failed Strategy of Corporate Executives

Why It’s Costing Investors Billions

Published: Monday, February 6, 2006 - 22:00

Corporations throughout the world are losing billions in wasted quality-project spending, and this waste is carefully hidden from both management and investors. A new global research report by Business Improvement Architects, a provider of consulting solutions and customized training in leadership development, quality management, project management and change management, shows that one of the biggest contributing factors for this waste is the lack of executive alignment of quality projects with corporate strategy. A billion dollar problem
The cost of the problem is staggering. In the IT sector alone, the results of a survey from The Standish Group, a research service provider, shows that 71 percent of all projects are either “challenged” because of late delivery, being over budget, delivery of less than the required features, or they’re “failed” because of cancellations prior to completion or the product is never used. This statistic hasn’t effectively changed since 1994. The Standish Group estimates that the United States spends $250 billion yearly on IT projects, with an estimated waste of over $140 billion. The rate of failure for IT projects in the Standish Group’s survey is supported by similar results found by the Gartner Group, a provider of research and analysis about the global information technology industry.

On a global perspective in 2004, accounting and consulting firm PricewaterhouseCoopers found that only a handful of projects ever achieve success. Their survey focused on a broad range of industries, large and small, in 30 different countries and altogether represented 10,640 projects for a total value of $7.2 billion. The survey found that only 2.5 percent of global businesses achieve 100 percent project success.

The lack of success isn’t surprising, according to the research findings from Business Improvement Architects. According to “From Crisis to Control: A New Era in Strategic Project Management,” the company’s recently published research conducted with more than 750 organizations worldwide, a major reason for project failure is that most organizations don’t recognize the strategic role of projects in organizational success. The findings indicate that 80 percent of organizations had no formal business case for the development of their project management offices (PMOs) (Figure 1) and 73 percent of organizations identified “lack of executive sponsorship” as being the primary reason for the failure of their PMO (Figure 2).

Figure 1. PMOs were implemented for the right reasons and failed to deliver. Essentially, they operated at too low of a level and needed to move up to the Senior Executive level so that projects could be strategically aligned.

Figure 2. PMOs are doomed to failure when there is no or insufficient executive support and the organizational structure does not support it.

If organizations implemented only those projects that were strategically aligned to the organization’s goals, their success rate would dramatically increase, because executive sponsorship wouldn’t be an issue. However, Business Improvement Architect’s research findings indicate that the majority of projects being implemented aren’t aligned to the corporate and/or departmental strategic plans. Only 32 percent of respondents said they had a process for prioritizing projects. Therefore, it’s not surprising that failure is rampant because senior executives aren’t at the helm to provide guidance, direction and support to projects within their organization. Likewise, organizationally there’s no systematic approach in place to prioritize projects, including quality-project initiatives or linking them to corporate and strategic goals among 68 percent of organizations.

What you can do to align quality projects with corporate strategy

1. Undertake a review of all quality project initiatives that are currently being implemented within the organization and any that have been completed over the past year.

• Ask all departments to list all of the quality-project initiatives they’re currently working on. What’s the goal of each of these? What’s the strategic alignment? For example, determine what Six Sigma, ISO standards implementation, process review quality-project initiatives are being undertaken.
• Create an inventory of all quality-project initiatives gathered in the organization-- regardless of size or scope--that are currently being implemented within all departments and within the whole organization.
• Measure each of these quality-project initiatives. Are they on time and budget according to the original scope? Are they meeting customer requirements as defined? Are there any measurements in place?
• Identify quality-project initiatives completed over the past year and measure their success rate. These will help you identify project prioritization in the next step. For example, if many quality-project initiatives were unsuccessful because of a lack of resources, then resources required to complete future quality-project initiatives should be a criterion for determining project viability. If a quality project initiative requires many resources, they may rate low on this criterion. If you decide that it’s a strategically important project, you’ll have to ensure that the right resources will be available.

2. Develop a systematic approach to prioritizing all quality-project initiatives.

Develop universal criteria with which any project can be prioritized. Include the effects on corporate strategy and the customer. This is best done with a subcommittee of senior management who’ll review all projects, including quality-project initiatives.

List all quality-project initiatives along with their goal, purpose and strategic alignment, as well as the criteria necessary for determining the expected effect each project will have on the organization, its departments and its customers. This process will allow you to rank each quality-project initiative quantitatively and to determine its priority.

Establish a committee of senior management to review and assess project prioritization monthly, including quality-project initiatives. This committee will provide final approval on all project-implementation priorities.

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