Businesses risk reputation for bottom-line
Businesses risk reputation for bottom-line
“Organisations around the world are not committing sufficient people to effect change efficiently. Forty three percent of participants indicated their project failures directly impact the customer.” says KPMG in its Global IT Project Management Survey, released in November in New Zealand.
The survey of more than 600 organisations across 22 countries, including New Zealand, found that many are failing to deliver the value expected from their large IT projects, with nearly half of the respondents experiencing at least one project failure in the past year. This is an improvement over KPMG’s 2003 survey where 57 percent experienced one or more project failures in the prior year. However, a key finding is that 86 percent of respondents report losses of up to 25 percent of targeted benefits across their project portfolio.
Continual pressure on costs, head-counts and the drive to maximise the current bottom-line is causing executive management to attempt to effect change across their businesses with insufficient people committed to the task.
The essential disciplines around change and projects are not implemented. Management, when faced with the dilemma of delivery results ‘today’ or ‘tomorrow’, opt for the former.
“At a time where boards and executives are increasing their commitment to delivering business benefits through projects, it is surprising to find that 59 percent of organisations have no management process to measure benefits, or at best have an informal process. “The loss of benefits, and therefore lack of success of projects, may well be higher”.
A robust governance framework is the key to reducing project failures. “This includes; having a Project Management Office (PMO) that actively manages projects; reporting to the board regularly on projects; having a very formal benefits process; having formally qualified project managers and always performing a rigorous risk analysis during planning.”
New projects on the rise
According to the survey, in the past year, there has been an increase in the number of new projects in 81 percent of organisations, an increase in the complexity of projects in 88 percent of responses and that total project budgets have risen in 79 percent of organisations.
There are three factors are driving this demand:
- new products and services and business process improvements accounted for 74 percent of project activity;
- technology refreshes accounted for increased activity in 48 percent of organisations; and
- compliance and regulatory changes contributed to increased project activity in 24 percent of organisations.
This increased project activity should result in a corresponding increase in value being delivered back to an organisation. However the survey results indicate that while organisations are delivering some value back to the organisation, benefits are being leaked away. Worse still, no one is being held accountable for these leakages. As a consequence the organisation’s future delivery capability and reputation are being compromised because the failure to deliver is not being measured.
The New Zealand experience
New Zealand organisations were well represented in this year’s global survey, contributing around 5 percent of the survey, with participants from both the private and public sector. New Zealand’s organisations are no different to the global results. Bottom-line measurements cause the focus on and delivery of future benefits to slip.
Maturity of project management is regarded by New Zealand management as strong, and New Zealand has a higher connection between delivering project benefits and executive reward schemes when compared to the population as a whole. Yet only one New Zealand organisation surveyed reported tracking benefits until they are realised, and formally reported. This continues the trend shown in the 2003 survey, where New Zealand PMOs functioned well, but only within a narrow scope.
Principles to follow
KPMG found those obtaining the greatest value from IT projects are following five key principles:
- an integrated governance framework from end-to-end for the project;
- organisation-wide processes that continuously evaluate projects to maximise the value of investments;
- align initiatives clearly with the business strategy;
- individual accountability for achieving benefits, including integrating benefits with organisational plans and budgets;
- recognise the links between strategy and project execution, and have appropriate capability, capacity and risk models.