A Billion Dollar Issue: How To Align Projects with Business Strategy
Is Project Management Really That Important?
Corporations throughout the world are losing billions of dollars in wasted project spending. A new global research report shows that one of the biggest contributing factors is the lack of alignment of projects with corporate strategy.
Many companies are almost purely project management enterprises (e.g., consultants, contractors, job shop manufacturers, design firms, and moving companies). Whether we’re better than our peers at managing projects can determine whether our company will survive and flourish. For businesses as varied as equipment manufacturers, retailers, hotels and resorts, health service providers, restauranteurs, logistics companies, and financial service providers, an enormous portion of their overall business activity involves project management. Other companies manage projects primarily to drive improvements, expansions, and necessary changes. What makes this topic so pregnant with potential is that so few companies – including many large project-driven businesses – follow a well-defined, disciplined, and unifying approach to managing projects.
If questioned, could your key people succinctly describe your company’s project management approach (i.e., methods/measures/reporting)? Probably not! Surprisingly few companies can, in spite of the following:
■ Top-level consultants and project management professionals know that less than half of major projects actually meet original expectations. An estimated 50-80% of all projects fall short of delivering their promised impact on-time and on-budget.1 Worse, when projects go off the rails the distraction and resource drain can threaten a company’s existence. Still, firms often fail to pull the plug or make remedial changes due to poor project management oversight and pride. When customer commitments are involved, project problems can lead to financial losses, aggravated clients, and a long, mutually painful, experience. Much of this failure, stemming from a lack of sound fundamentals and detached senior executives, is avoidable.
■ An estimated 50% of all work done in business is project work. This should alarm most of us, since 80% of us lack sound project management skills. It’s also estimated that 30% of every project dollar spent is wasted due to delays, mistakes, inefficiencies, excess materials, rework, poor planning, lack of teamwork, etc. Imagine taking a snapshot of the last 10 times you passed project crews working on roadways or major construction sites. What percentage of the labor and machinery were productively engaged? Typically, for each person you see working, there are multiple people idle, waiting, and watching. This also applies to expensive on-site equipment. On this basis, our 30% waste estimate might be optimistic! Still, what’s 30% waste worth to a typical company with 50% project-related work? It equates to a profit erosion of 15% on sales (i.e., .30 x .50), representing a huge opportunity to more than double the 10% pretax profit margin of a typical healthy company!
■ Highly-developed project management capabilities can improve a company’s on-target project performance by 50-66%. Focused effort and discipline based on shared project management protocol can eliminate most of our off-target projects and much of the waste in our companies. Although factors often exist beyond our control, enhanced project clarity and competence yields great dividends by enhancing staff and customer relationships and improving our top and bottom lines. Most companies have at least as much staff time devoted to project activity as they do to standard daily flow through activity. In fact, stripped of the daily issues associated with poorly planned and executed projects, most CEOs would be shocked at how little overhead is needed to operate their daily core business. The obvious question is, “How well are we managing the project resources we have on our payroll?” What’s it worth to improve our successful project batting average by 50% through highly robust project management?
For Christian leaders, projects are a key area where we can reflect excellence in serving, stewardship, communication, and delegated decision-making. Whether we’ve truly equipped our staff members to succeed is apparent as we see project teams interact and perform under the pressure of project commitments. CEOs can largely eliminate the frustration, confusion, distrust, and cynicism that afflict organizations with poor project discipline.
Have you adopted a clear project management approach and prepared your project leaders and teams well? Is their performance enhanced by your company’s project management discipline, or do they merely operate based on what they already knew when they arrived? What percentage of your projects satisfy their original goals while being delivered on-time and within budget? Project management, business strategy, and alignment are among the many critical topics we dive into each month our business advisory roundtable groups. Join us this month!