The high cost of low performance

Updated: Jun 2 2014, 09:56am hrs
When organisations continue getting better at executing their projects and programmes, they derive success. But when organisation executives undervalue the benefit of effective project, programme and portfolio management, they put real money at risk and perhaps more.

PMIs 2014 Pulse of the Profession research shows that organisations face a wide chasm between their actual state and the state of success, mostly due to a lack of focus on people, processes and outcomes. As a result, their projects, including those focused on an organisations highest prioritiesstrategic initiativesare suffering, and organisations are losing an average of $109 million for every $1 billion spent on projects. Senior executives recognise the importance of strategy implementation but a majority of them admit there is a disconnect between strategy formulation and implementation.

Implementing strategy: As per PMI research, only 42% of organisations report having high alignment of projects to their organisational strategy. These results are troubling, as many top consulting and thought leadership firms, including IBM, PwC and McKinsey, have been touting for years that projectsas well as programmes, portfolios and strategic initiativesmust be aligned to the strategy of the organisation to achieve success. Organisations that report high alignment of their projects to organisational strategy average 65% of their strategic initiatives meeting original goals and business intent, compared with only 35% due to low alignment.

Improving agility: The lack of alignment of projects to organisational strategy likely contributes to the surprising result that 44% of strategic initiatives are reported as unsuccessful. When things are not aligned, there is less organisational agility. As change is constant, organisations have to become more agile in order to cope with those changes, and a focus on project management is key to that agility. PMIs 2014 Pulse report states that organisations with a high organisational agility report successful projects and more successful strategic initiatives, with successful strategic initiatives reaching 69% with agile companies as opposed to only 45% with less agile organisations.

To achieve these results, PMIs 2014 Pulse of the Profession shows that organisations must continue to focus on the following:

Driving organisational success: An organisations success is wholly reliant on understanding high project performance, which entails projects completed on time, on budget, and meeting the original goals. But what is the thing that sets high performing organisations apart from low performing ones It is their focus on agility and strategic alignment. When this is implemented, the differences are staggering. High-performing organisations, or organisations that achieve 80% or more or projects according to the aforementioned performance points, lose 12 times less money than do low performers.

Focus on people: One of the key things for organisations to concentrate on is their talent. PMI states there is a direct correlation between effective talent management and better project performance. Firms that align talent management to strategy have more successful projects and waste fewer project dollars. It also suggests that high-performing firms are more than twice as likely to align their management of talent to their organisational strategy compared to low-performing ones. Organisations need to invest in a broad label of talent management.

Change management: Organisations that are highly effective at change management are four times more likely to frequently use change management practices (94% compared to only 24% among organisations that are minimally effective). Our research points out that having actively engaged sponsors is the top driver of project success. Key practices that maximise organisational value are maturing project management capabilities, focusing on talent and change management, and insisting on a benefits realisation review.

In a nutshell, PMIs Pulse of the Profession report provides a clear way forward for organisations to achieve success through optimised project management practices. They reveal a clear imperative for organisations to take action now to become high performers and optimise their project management and change management practices to mitigate the millions lost on failed projects.

Raj Kalady

The author is MD, Project Management Institute India