• Why do Projects Fail

    AMBARISH GUPTA

    PROGRAM MANAGER – CIGNA INSURANCE

    Projects are high visibility, and generally high-value initiatives undertaken by organizations with an aim to make a significant difference in which they conduct business. However, every year, organizations around the world bear the brunt of millions of dollars wasted in the form of failed projects. Furthermore, in a bid to salvage or bring such projects on track, another fortune is spent on expensive consultants to assess and recover failing projects. The resultant, more often than not, is a significant deviation from the original plan, and a disproportionate degree of success. Such projects are labeled as “failed”.

    What causes a project to fail? How often do projects fail? What kinds of projects are more likely to fail? These are some of the questions that arise to the thinking mind. Before we get on to find the root causes of project failure, let’s look at some statistics to get a perspective of how “big” an issue are we talking about.

    • In 2018, nearly 70% of projects met their original goals or business intent (30% failure), while nearly 60% were completed within the original budget (40% overrun). Both these figures are up from 62% (38% failure) and 50% (50% overrun) respectively in 2016. (PMI)
    • A survey published in HBR found that the average IT project overran its budget by 27%. Moreover, at least one in six IT projects turns into a “black swan” with a cost overrun of 200% and a schedule overrun of 70%. (HBR)
    • Among IT projects, failure rate corresponds heavily to project size. An IT project with a budget over $1M is 50% more likely to fail than one with a budget below $350,000. For such large IT projects, functionality issues and schedule overruns are the top two causes of failure (at 22% and 28%
      respectively). (Gartner)
    • A PwC study of over 10,640 projects found that օnly 2.5% of companies complete their projects 100% successfully. The rest either failed to meet some of their original targets or missed the original budget or deadlines.
    • Failed IT projects alone cost the United States $50-$150B in lost revenue and productivity. (Gallup)
    • While software projects have an average cost overrun of 66%, the same figure for non-software projects is 43%. However, 133% of non-software projects fail to meet their stated benefits, compared to just 17% for software projects. (McKinsey)
    • 17% of IT projects can go so bad that they can threaten the very existence of the company. (McKinsey)

     

    Image for blog

    Bridge on the river Choluteca

     

    Bridge on the river Choluteca

     

    Search this one up, this would give you some perspective. This is in Honduras, Central America. It’s a fine, well-built bridge except that the river does not flow under it, but to one side. It’s rather funny when you see it, but it must be tragically unfunny for those who depended on the bridge. Apparently, when the bridge was built, it was in the correct place. However, a massive hurricane came and caused terrible flooding. It completely destroyed the approach roads, and forced the river to chart a new course, leaving the bridge spanning dry land! Many failed projects come to resemble the bridge, giving a grim reminder to the fact that projects can be left “high and dry” when they do not adapt and adopt to the changing environment.

    Common Causes of Project Failure

     

    While there can be multiple reasons of project failure, the usual suspects are the following:

    • Scope Creep: Scope for a project is sacrosanct and should always be zealously guarded. However, when scope is subjected to unplanned changes outside the agreed control mechanism, all project parameters start behaving erratically and are the first warning bells indicating “spoilers ahead”.
    • Poor resource allocation: Certain organizations encourage their resources to treat projects as “side of the desk job”, resulting in certain resources being allocated for far too many projects than they can actually handle. On the other hand, there are instances when there are far too many resources working on a project. Both scenarios are recipes for project disaster.
    • Poor communication: Importance of communication in a project environment cannot be overstated. Lack of a well-crafted communication strategy catering to all project stakeholders is a potent situation for unwarranted developments in the project, those that do not augur well for the success of the project.
    • Poor Stakeholder Management: This goes hand in hand with the communication. Not knowing your stakeholder well in a project is akin to a time bomb waiting to explode. Expectations, when not managed, can run wild, and when they do, project is the first thing to get sacrificed.
    • Unsupported project culture – “Culture eats strategy for breakfast” a phrase originated by Peter Drucker and made famous by Mark Fields, President at Ford, is an absolute reality when it comes to project! Projects need a delicate balance between flexibility and rigidity, which is often provided by an environment, culture of projects. An unsupportive culture can be the single biggest factor for project failure.

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