The high cost of low performance

Jun 02 2014, 04:26 IST
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SummaryManagement students getting into corporate firms must understand that a clear way forward for firms to succeed is through optimised project management practices

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.

PMI’s 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 organisation’s highest priorities—strategic initiatives—are 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 projects—as well as programmes, portfolios and strategic initiatives—must 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. PMI’s 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, PMI’s 2014 Pulse of the Profession shows that organisations must continue to focus on the following:

Driving organisational success: An organisation’s 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

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