The manager of a typical project would consider the task well done if the project inished on time, according to its speciied performance and within its budgeted cost. These three objectives (time, performance and cost) are the traditional parameters for measuring project success or failure (and they will be discussed later in this chapter). However, although important, these three objectives relate mainly to the execution or fulilment stage of a project, which is the period of most direct interest to the project manager and the principal contractor. Other people (not least the customer) might have quite different views about the ultimate success or failure of a project. A customer who finds that the project fails to live up to its initial promise and fails to deliver its expected return on investment will see the result as a failure. Other stakeholders might have their own, quite different, parameters for measuring success. So a project can only be considered completely successful if it satisies all the stakeholders. This argument will be developed in the remainder of this chapter.
The upper portion of Figure 2.1 repeats the Gantt chart view of a project life history first seen in Figure 1.4. However, the project life is now compared not with rates of expenditure, but with some of the factors that determine actual or perceived success or failure as the project life history unfolds.
Success or Failure Factors in Relation to the Initial Project Definition
Initial project definition leads to the business case on which the decision to authorize or disallow the project start will principally depend. This initial deinition takes place during Phases 1 to 6 in the Gantt chart of Figure 2.1. This is clearly too early for anyone to measure the success or failure of the project but it is the time in the project’s life history when the foundations for success or failure are laid. Any of the following shortcomings during this early period can condemn a project to almost certain failure:
the project scope (the extent of work required) is not clearly stated and understood;
the technical requirements are vague;
estimates of cost, timescale or benefits are too optimistic;
risk assessment is incomplete or flawed;
the intended project strategy is inappropriate;
insuficient regard is paid to cash lows and the provision of funds;
the interests and concerns of stakeholders are not taken into account;
undue regard is paid to the motivation and behaviour of the people who will execute the project;
particularly in management change projects, insuficient thought is given to how all the managers and workpeople affected by the project will adapt to the changes expected of them;
approval to proceed with the project is given for political, personal or intuitive reasons without due consideration of the business plan.
These are some of the things that can condemn a project to failure before any work begins. These early tasks, analyses and decisions are clearly important, and the following ive chapters all deal in some way with project deinition.
Factors for Success or Failure during the Project Fulfilment (Execution) Period
When authorization has been given for the project to start, it is the contractor (or the main contractor, if there are several subcontractors) and the project manager who take over most of the responsibility for success or failure. Remember that the term ‘contractor’ is used here to mean not only a company that manages or undertakes a project for an external customer, but it can also apply to an internal manager or team responsible for a management change, IT or similar in-house project. Similarly, the term ‘customer’ can mean not only an external client or customer, but also the executive management of a company carrying out its own internal project.
The success of the contractor and the project manager will usually be judged according to how well they achieve the three primary objectives of cost, performance and time. Many things need to be in place and many actions taken during the project execution period to help ensure success. Among other things, these include:
good project deinition and a sound business case;
appropriate choice of project strategy;
strong support for the project and its manager from higher management;
availability of suficient funds and other resources;
irm control of changes to the authorized project;
a strong quality culture throughout the organization;
a suitable organization structure;
appropriate regard for the health and safety of everyone connected with the project;
good project communications;
quick and fair resolution of conflict.
These issues are all important for good project management.
The primary objectives of cost, performance and time are clear benchmarks against which to judge success or failure when (or soon after) a project is finished and handed over to the customer. The project manager needs to understand what each of these objectives implies and how the three can interrelate with each other.
The Cost Objective
Every project should be controlled against detailed cost budgets to ensure that the expenditure authorized in its contract or charter is not exceeded. Failure to complete work within the authorized budget will reduce proits and the return on the capital invested, with risk of a more serious (even terminal) financial outcome in extreme cases.
Most projects are undertaken with the expectation of benefits, either on completion or later in their life history. However, there are many projects where there is no initial profit motive. Here are some examples:
pure scientific research programmes;
ieldwork and other projects carried out by charitable organizations (with the exception of fundraising projects);
local or national government projects that are paid for from public funds;
other work carried out by organizations in the not-for-proit sector.
However, even when there is no proit motive, strict attention to cost budgets and financial management is usually vital. A project might have to be abandoned altogether if funds run out before completion, in which case the money and effort already invested become forfeit and must be written off. In extreme circumstances over-expenditure could even cause the end of the organization responsible.
The Performance (Or Quality) Objective
Quality has often been used as an alternative (but less satisfactory) name for the performance project objective. General understanding of project or product quality conjures up several things in our imagination. Perceived quality characteristics will depend on the nature of the project or product, but here are a few general examples:
performance at least equal to the speciication;
reliability and freedom from malfunction;
long useful and economic life;
safe: posing no unintentional threat of harm to living creatures (the adjective ‘unintentional’ is used here to accommodate, for example, projects carried out by arms manufacturers, pesticide companies and mouse trap manufacturers);
low operating and maintenance costs;
comfort and a pleasant impact on the human senses (sight, smell, taste, touch, hearing);
A refinery that was intended and designed to process 200,000 tonnes of cathode copper per annum must be able to do so, and it must produce that copper at the speciied level of purity. The plant must function reliably, efficiently and safely. There will be trouble for all concerned if the plant causes environmental pollution.
Development projects for consumer goods must produce articles that satisfy the market requirements and conform to relevant legislation. The design concept and manufacture have to result in a product that is safe, reliable and appealing to the customer.
If a project is undertaken to reorganize a company, relocate its headquarters and install new IT systems, the IT must perform as expected, and the accommodation and all other conditions must be conducive to staff satisfaction and productivity.
At one time quality in manufacturing and other industrial projects was seen primarily as the responsibility of a quality control department. Great reliance was placed on inspection and testing to discover faults (called non-conformances in quality management jargon), and then arranging for these faults to be rectiied. In more recent years organizations in all market sectors have embraced the concept of total quality management (TQM). In TQM a ‘quality culture’ is created throughout the organization, with quality built in to all design and work processes, and with responsibility for quality shared by all the staff and workforce from top management downwards.
Quality considerations extend well beyond industrial projects and are regarded as equally important in the service industries and other businesses. The ISO 9000 series of standards is widely accepted as the base from which to design, implement and operate an effective quality management system, with the ultimate objective of creating a quality culture throughout the organization. The International Organization for Standards (ISO) publishes the ISO 9000 series and a full range of other international standards (www.iso.org).
The Time Objective
Actual progress has to match or beat planned progress. All signiicant stages of the project must finish no later than their scheduled dates. Late completion of a project will not please the project purchaser or sponsor, to say the least. Consistently failing to keep delivery promises cannot enhance the contractor’s market reputation. Further, any project that continues to use resources beyond its planned finish date can have a knock-on effect and disrupt other projects that are either in progress or waiting to follow.
A common risk to projects is failure to start work on time. Very long delays can be caused by procrastination, legal or planning dificulties, shortage of information, lack of funds or other resources and a host of other reasons. All of these factors can place a project manager in a dificult or impossible position.
A project not started on time can hardly be expected to finish on time.
The Triangle of Objectives and Trade-offs Between Cost, Performance and Time
Of course, the aim of a project manager must be to achieve success in all aspects of the project. But it is occasionally necessary to identify one of the three primary objectives as being of special importance. This emphasis can affect the priority given to the allocation of scarce resources and the way in which management attention is concentrated. It can also influence the choice of project organization structure (which is discussed in Chapters 9 and 10).
In the mid 1980s Dr Martin Barnes introduced the first version of his triangle of objectives (shown in the top left-hand quadrant of Figure 2.2). The purpose of this triangle was to illustrate that the three primary objectives of cost, time and quality are interrelated. A management decision to place greater emphasis on achieving one or two of these objectives must sometimes be made at the expense of the remaining objectives. Thus project sponsors or managers sometimes have to decide on giving priority to one or more of the three objectives in a trade-off decision.
Shortly after his triangle’s first appearance Dr Barnes changed ‘quality’ to ‘performance’ because, in his own words:
‘Quality’ implied little more than compliance with spec. but ‘performance’ I intended to mean ‘theproject, on completion, does what it is supposed to do’
(quoted from private correspondence).
Thus the triangle, shown in the top right-hand quadrant of Figure 2.2, is the more widely known version of the Barnes triangle.
Whenever someone has a good, clearly stated original idea, be certain that others will come along later to complicate the concept needlessly. There are many such examples in the techniques and practice of project management. Thus the Barnes triangle has even been converted to a complex three-dimensional vector diagram in one book. However, two derivatives of the Barnes triangle are worthy of mention, not least because one of them is my own.
The good management, organization and motivation of all who contribute to a project cannot be taken for granted and this must be acknowledged from the start. With this in mind, Kliem and Ludin (1992) set out a modified triangle of objectives with people shown at its centre. The Kliem and Ludin triangle is shown in the bottom left-hand quadrant of Figure 2.2.
Like Dr Barnes, I was not content with the word ‘quality’ and searched for an alternative. For reasons explained in the following section, I prefer to use ‘level of speciication’ instead of ‘quality’. The triangle in the bottom right-hand quadrant of Figure 2.2 combines my preference with those of Barnes, Kliem and Ludin.
The outcome of a trade-off decision can be indicated by placing a spot or blob within the triangle boundaries. For example, if cost is the greatest consideration, the blob will be placed in the cost corner. If all the objectives are regarded as equal (balanced), the blob will be put in the middle of the triangle.
A project for a charitable organization with very limited funds would have to be controlled very much with budgets in mind, so that costs must be the project manager’s chief concern. Industries such as aerospace and nuclear power generation have to place high emphasis on safety and reliability, so performance becomes their most important objective. A project to set up and stock a stand at a trade exhibition, for which the date has already been announced and the venue booked, is so dependent on meeting the time objective that it might be necessary to accept overspent budgets if that is the only way to avoid missing the date.
The Quality/Cost Relationship
It is a mistake to believe that there can be a simple and acceptable trade-off between quality and cost. Those who promote TQM argue, quite rightly, that quality can be achieved without extra cost (see, for example, Crosby, 1979). However, there is an even more fundamental reason why quality is not an objective that can be downgraded or compromised. This becomes clear if we accept Juran’s definition of quality as a service or product that is ‘fit for the purpose for which it was intended’ (Juran and Godfrey, 1999). No contractor or project manager should contemplate a result that is not ‘fit for purpose’. Therefore ‘quality’ is not negotiable. Downgrading quality is not an option. That is why ‘performance’ or ‘level of speciication’ are more appropriate names for this objective because, in many cases, they are negotiable.
Suppose that the initial estimates for a new building are too high and that construction costs must be reduced. One option might be to build on relatively simple foundations instead of using deep sunk piles, which could save thousands of pounds. But if the ground conditions demand piling for the building to be safe, that cost-saving option is ruled out on the grounds of reliability and safety. It would compromise quality and is not a true option. The building would not be it for its intended purpose.
Now suppose that the same developer reviews the speciication for interior inishes and inds that marble-inished loors could be replaced with carpeted loors at a substantial cost saving. The floors would still be serviceable, safe, reliable and fit for purpose. Carpeting would, therefore, be an option that would not compromise quality. Quality has not been changed, but the level of speciication has.
The developer might also review the performance speciications for services such as lighting and air conditioning. It is possible that the performance parameters could be downgraded slightly for a signiicant saving in capital and operating costs. Again, this should not affect the safety and reliability of the building and, provided that lighting and ventilation remain adequate and within legislative requirements, would not render the building unit for its intended purpose.
The Cost/Time Relationship
There is usually a direct and very important relationship between time and money. If the planned timescale is exceeded, the original cost estimates are almost certain to be overspent. A project costs money during every day of its existence, working or non-working, week day or weekend, from day one of the programme right through until the last payment has exchanged hands. These costs arise for a variety of reasons, some of which will now be explained.
The effect of project delays on direct costs
The variable or direct project costs of materials and workforce man-hours are time-related in several ways. Cost inlation is one factor, so that a job started and inished later than planned can be expected to cost more because of intervening rises in materials prices, wages, salaries and other costs.
There are other, less easily quantiiable, causes where late working implies ineficient working, perhaps through lost time or waiting time (often the result of materials shortages, missing information, or poor planning, communications and organization). If any project task takes longer to perform than its planned duration, it is probable that the budgeted man-hours will also be exceeded. This is true not only for a single task, but also for the project as a whole.
The effect of project delays on indirect (overhead) costs
The ‘ixed’ or ‘overhead’ costs of management, administration, accommodation, services and general facilities will be incurred day by day, every day, regardless of work done, until the project is inished. If the project runs late, these costs will have to be borne for a longer period than planned. They will then exceed their budget.
The effect of project delays on the costs of financing
Another important time-related cost is financing. Where the contractor has an overdraft at the bank or relies on other loan financing, interest has to be paid on the loan. Even if the contractor can finance the project from internal funds, there is still a notional cost of financing, equivalent to the interest or dividends that the same funds could have earned had the contractor invested the money elsewhere (such as in a bank deposit account). If a project runs late, the financing period is extended, and the total amount of interest or notional interest payable must increase correspondingly.
Much of the finance raised for a large project is likely to be invested in work-in-progress as the project proceeds through the execution stage of its life history. This work-in-progress includes not only the tangible results of a project such as construction or manufacture, but also the intangible elements such as planning or design engineering. In many projects the contractor can only charge the customer for work that can be demonstrated as finished. For example, in construction and manufacturing projects the amount of work completed usually has to be inspected and certified by an independent quality surveyor or engineer before it can be charged out to the customer. The customer will not pay without the receipt of certiied invoices. Certiied invoices are often linked to planned events or ‘milestones’. If the planned amount of work has not been done, or if a milestone has not been reached, a certified invoice cannot be issued. The contractor’s revenue is then delayed, which means that the contractor must continue to finance the mounting costs of the project. The contractor could suffer severe cash low problems as a result, even leading to bankruptcy in the worst case.
Late completion can invoke the ignominy of contract cost penalties. Some contracts contain a penalty clause which provides the customer with the sanction of a cost penalty against the contractor for each day or week by which the contractor fails to meet the contracted delivery obligation.
The total cost effect of project delays
All these cost/time considerations mean that delays on a large project can easily cause additional costs amounting to thousands of pounds per day. It is clear, therefore, that if work can be carefully monitored and managed so that it proceeds without disruption against a sensible, achievable plan, much of the battle to control costs will already have been won.
Perceptions of Project Success or Failure Beyond the Three Primary Objectives
Most project managers are expected to complete their projects so that they satisfy the three primary objectives of time, performance and cost. These are usually the most important factors that drive the project contractor and they should be the foremost expectations of the project owner. Most project management procedures (and this book) are directed towards achieving these goals, which could be summarized as delighting the customer whilst creating a commercial success for the contractor. In this context the contracting organization and the customer are both primary stakeholders in the project.
But many projects have to satisfy more than two primary stakeholders. For example, a bank that has provided loan finance for a project will have a keen interest in whether the project succeeds or fails.
There will always be people and organizations who, while not being principal stakeholders, nonetheless have an interest in how the outcome of a project might affect them. Subcontractors and suppliers are obvious examples. Project workers have a stake in the outcome because project success or failure can (apart from contributing to job satisfaction) have profound implications for their future employment and careers.
Perceptions of success or failure will differ between the various stakeholders. The residents of houses lying in the path of a proposed new motorway would take a very different view from that of the potential motorway users. A project to build a transport system that runs out of cash and ruins its main contractor would be an undoubted failure from the point of view of the shareholders, project staff and unpaid creditors. But road users would not regard that project as a failure if a replacement contractor and fresh cash injections allowed the new road to be opened as planned.
Some environmental groups might be dismayed by new project proposals. Many project managers have learned to their cost that work can be seriously delayed by determined protesters, who may be able to publicize a good case, attract a great deal of public support and even trespass on the owner’s site or premises.
It is clear, then, that the true measure of project success or failure depends on how the project outcome is perceived by all the stakeholders. Hartman (2000) declares that a ‘project is successful if all the stakeholders are happy’. Although that ideal may not always be achievable, it is best project management practice to try to identify all the stakeholders and satisfy their aspirations as far as possible.
Identifying and Ranking the Stakeholders
The range and nature of stakeholders will vary greatly from one project to another but the principle of stakeholder identiication can be illustrated by an example. Suppose that a project has been proposed to redevelop a derelict urban area. This ambitious project will provide a shopping mall, ofices, cinema and live entertainments, other leisure facilities, new connecting roads and so on. The primary stakeholders for this project will certainly include the main project contractor and the project owner. The banks or other organizations financing the project will also have a considerable primary interest in the project’s success or failure.
Not least of the stakeholders are all those who hold shares or have otherwise invested in participating companies that, by accepting an element of risk, stand to make a proit or loss as a result of the project.
Subcontractors, suppliers, staff, artisans and labourers can all be considered stakeholders too, although perhaps these could be placed in the second rank. Intended occupiers of the shops, ofices and other premises also have a large stake in the project.
There are others who will be dependent on the secondary stakeholders. These are the wholesale suppliers of merchandise to be sold in the new shops, service staff such as car park attendants, shop and office workers, companies expecting to provide security, cleaning and maintenance services, and so on.
Public transport organizations must consider how the development will affect passenger numbers: some of their existing services might need to be changed to suit the new travel patterns (and take advantage of the new business generated).
Then there are the various regulatory authorities, such as the local building inspectors, planning ofice and many other oficial organizations. These are all stakeholders whose decisions and actions can affect the project.
People living near the proposed development will benefit from the new shopping and leisure facilities but might resent the inconvenience of construction works and the prospect of increased trafic and noise when the new premises start to function. Parents might be concerned that their schoolchildren will have to cross streets that are busier and more hazardous. Motorists and other road users will be interested in how the new road layouts will affect their journeys. The new entertainments facilities will provide wider opportunities for live artistes.
This discussion could be carried on at length to identify still more stakeholders. Some will have the power to inluence the project, while others will be able only to voice opinions. All stakeholders might be ranked (primary, secondary, tertiary and so on) according to the power that they can wield and the impact that the project will have on them.
Consideration of the Stakeholders’ Interests
Once all the stakeholders have been identified, the means of communicating and dealing with them will have to be considered. Regulations and local byelaws will determine how local government and other oficial bodies must be consulted. There might have to be meetings with some stakeholders’ groups or associations. Publicity can include, for example, announcements in the local press and advance public display of architects’ plans and models. Consultation is always better than confrontation.
When the preliminary investigation of stakeholders’ interests is inished, the triangle of objectives could, in theory at least, be supplemented by a more complex matrix of stakeholders’ perceptions. Figure 2.3 shows a theoretical format.
In most industrial and manufacturing projects the project owner should start to realize the expected beneits immediately or shortly after the project is successfully inished and handed over (Phase 13 in Figure 2.1). A chemical plant, once successfully commissioned, will be capable of producing saleable product. A new ofice building might require attention to the occupier’s snagging list during the irst few weeks of occupation but should nonetheless provide a pleasant working environment that can immediately improve staff satisfaction (and thus productivity). However, business change and IT projects can be quite different because their most signiicant beneits tend to be realized later in the project life history, during the irst months (or even years) of the period shown as Phase 14 in Figure 2.1.
Consider, for example, a large-scale project that is intended to replace and standardize the customer service and invoicing systems of all the companies in an international group. The execution phase of the project is inished when the IT designers have developed, documented and tested the software. If the IT was contracted out, the IT specialist contractor might have had a successful project outcome, with all three primary objectives of cost, performance and time satisied at the time of handover to the user company.
However, the proof of the pudding is in the eating. There is much more to the success of a management change project than the technical excellence and performance of the IT. It is only when the new system is up, running and accepted by the managers and staff of all the companies in the group that the project owner can begin to regard the project as a success. That implementation process can be long and dificult.
There may be a requirement for one or more special mobile implementation teams to be set up. A team will visit each of the different companies, and stay with that company until the staff are trained to use the new system, the initial problems are solved and beneits begin to become apparent.
Introducing new systems and procedures can be very difficult in any organization where the staff resist change, have understandable concerns about possible redundancies, come from a rich mix of different cultures, or resent having to cope with all the initial teething problems that significant changes create. Such difficulties are made worse by the spread of rumours (true or false) through the unoficial communication grapevine.
In recent years all these dificulties have led to new ways of assessing and managing the beneits realization of management change and IT projects. It is now recognized that the benefits realization process should start during early project definition by establishing benchmarks that can be put in place in the business plan. These benchmarks have some similarity with the milestones set in the project execution plans of all projects, but for management change and IT projects there are two important differences:
The most important benchmarks often occur some time after initial handover and commissioning of the project from the contractor to the customer (remembering yet once again that the contractor and owner can be in the same company).
Each benchmark must be directly associated with a cash inflow, cost saving or other real beneit that can be tracked to a favourable entry in the company’s accounts or management reports.
Benefits realization is appreciated among the more enlightened management fraternity as the most important driver in managing a management change or IT project, so that the intended long-term beneits are kept in the minds of the project manager and the other project stakeholders.
There are management consultant companies that specialize in helping organizations to achieve their project implementation beneits, and some have proprietary methods for the purpose. An Internet search for ‘beneits realization’ is a good pathway to these companies and their methods. One such specialist company is Isochron Limited, and that organization uses the terms ‘recognition events’ and ‘value lashpoints’ to identify milestones and financial benchmarks that can be used to drive a management change project forward to successful conclusion. Chapter 27, new for this tenth edition, takes this subject of management change implementation further and is based on Isochron’s methods.