Identifying and Recovering Troubled Projects

IDENT TIFYING AND RECOV G VERING TROU G UBLED PROJE ECTS: H HOW TO RESCUE YOU PRO O UR OJECT FFROM ITS FAI ILURE Ric cardo Viana Vargas, M a MSc, IPMA A-B, PMP Professor – Fundação Ge etúlio Vargas (F FGV) – Brazil Professor – Fun P ndação Institut de Administ to tração (FIA – U USP) - Brazil Partner – Macrosolutiions – Brazil r ricardo.var rgas@macrosolu utions.com.br © Ricardo V Viana Vargas. All R Rights Reserved Pub blications PMI Glo obal Congress Asia Pacific Hong KKong - 2007 Mundo PM Magazine M Curitiba - October - 2006 1/12

ABSTRAC CT The purpos of this a se article is to c conceptualiz and iden ze ntify troubled projects a and allow their evaluaation and p possible reco overy, minim mizing the im mpact of th negative effects in he the event of a total fa ailure. The word recov very, as use here, ha a meanin that is ed as ng different than usual. It does not m mean leading the projec to the int ct tended succcess from the plannin phase but to minimiz total failur ng ze re. Currently there are lots of pa apers and studies o project manageme on ent tools, methodologies, strateggies, and processes. A these effo are inte All orts ended to ennable and prepare pr roject manaagers and ttheir teams to ensure the succe of their projects. s ess BERRY (20 002) complements this concept saying that virtually all the metho s odological patterns of projects a an impo f are ortant knowledge base on how to properly c o conduct a project, completing the work withiin its deadlin and with high-qualit deliverables. e ne, h ty However, t reality th many pro the hat oject managgers make e evident is sig gnificantly diifferent. In fact, even t most ex the xperienced project mana p ager end up as acting a a “firemen” to their p as projects, tr rying at any cost to so y olve the pro oblems and the difficullties found along the d road. These “Trooubled Projeects” are a r reality in the worldwide business s e e scenario; mo of the ost times, deaaling with a troubled prroject is a particularly challenging task for th project p he manager a and his or her team. T These proje ects require for differe reasons specific e, ent s, attention an care. nd Finally, the article deals with lesso learned w trouble projects a how to use them s ons with ed and to avoid futture problemms. DEFINITIO OF TRO ON OUBLED PR ROJECT A troubled project can be define as a pro ed oject where the differen between what is nce expected aand what h been ac has ccomplished exceeds the accepta d able toleran nce limits, pushing int a course that will inev to vitably lead to failure. By assessing the natu of the pr ure rojects, we c say tha any projec is charact can at ct terized by a challenge whether f its intrins complex or its short deadline or low cos To this e, for sic xity e st. regard, any project re equires a le evel of control and ma anagement different frrom usual engagemen many t nts, times dema anding a diff ferentiated effort from the project manager and his/her team. r However, when the variances e exceed an acceptable limit of to e olerance we have a e troubled pr roject that requires a sp pecific effor In this case, a specif approach strategy rt. fic h becomes necessary, by defining a possible recovery or even d n g deciding for an early r termination n. 2/12

Exhibit 01 – Con ntinuous sequence of troubled projec (ESI, 2005). e cts It is import tant to note that troublled projects are not faiiled projects Failed pro e s s. ojects are unrecovera able, since t highest level of loss possible h been re the s has eached. On the other hand, the ttroubled pro oject has a possibility o being reco of overed altho ough it show strong ws indications that if it is not manag in a spe ged ecific manne it can qu er uickly deterio orate and become un nfeasible. When we use the term “recover” what we mean is tha there is a chance of recovery u m ”, at f and not th the reco hat overy is simp or easy Exhibit 02 shows some of the e ple y. 2 erroneous perceptions regarding troubled pr rojects. Exhibit 02 – Erroneous p perceptions on troubled projects. 3/12

IDENTIFY YING AND A ASSESSIN A TROU NG UBLED PRO OJECT A troubled project alw ways presen indicativ factors th might he recogniz it as a nts ve hat elp ze problem. SSome aspec related to stakehold cts o ders, project resources, documenta t ation, and the triple constraint (scope, co ost, and sc chedule) allow us to get a quic direct ck, perception of the prob blem degree the project is in, as sho e own in Exhibit 03. Exhibit 03 – Min ndmap of the indic cators of a troubled project. Based on SAROKIN (2005 WU (2000), and WARD (2003). d 5), Although t the aforemeentioned w warnings are quite stra e aightforward it is imp d, portant to highlight th none of them indica hat ates that a project is a isolated p an problem. Mo of the ost times, they operate to y ogether and indicate, in several wa n ays, that the is a prob ere blem with the project. In addition to the warn nings listed before, a s of vital s set signs and quualitative assessment models ca be built to develop a more ac an ccurate crit terion on th real vitality of the he project. KA AMPUR (200 says tha the vital siigns are me 01) at easured by t variance between the e current sta atus of the project and the values as planne as show in the ex d s ed, wn xample in Exhibit 04. Vital Sign Varia ance Score Peercent varian nce between actual and < 10% 0 planned scheduule 10-20% 1 > 20% 2 Pe ercent variannce between actual and < 10% 0 bu udgeted cost 10-20% 1 > 20% 2 Pe ercentage of contractual deliverables > 90% 0 co ompleted on s schedule 80-90% 1 < 80% 2 Pe ercent varian nce between resources n < 10% 0 ac ctually used and budgeted r resources 10-15% 2 > 15% 4 Number of r risk events with high 1-3 Risks 1 pr robability and high impact 4-5 Risks 3 Above 6 Rissks 5 Exhibit 04 – Example of vita signs models (KA 4 al AMPUR, 2001). 4/12

ESI Internaational (ESI, 2005) dev , veloped an assessmen process of troubled projects nt d based on a process o interviews analysis a consolid of s, and dation of res sults that alllow us to assess the problem’s potential an the chan e nd nces of recoovering the project. The process e is highlighte in Exhibit 05. In this process the participation of the m ed t e main stakehoolders and their persoonal perceptions are th key to t he the success of a poss s sible recove of the ery project. Exhibit 05 – Troubled projec assessment mod (ESI, 2005). ct del Several oth models can be d her s developed to identify s scenarios in each org n ganization. However, a these mo all odels should include a brief, quick direct ass d k, sessment; o otherwise, when a pro oject is identtified as a problem it miight be too llate to recov it. ver PROJECT RECOVER VS. PRO T RY OJECT TER RMINATIO ON Once the t troubled pro oject is ass sessed, we have to make the decision of ab borting or recovering the project. Different factors ma influence this proce ay e ess, but some basic consideratiions have t be obser to rved. LONG (2003) pr G roposes five key quest e tions that should be cconsidered to decide if the project will be reco overed or ab borted, as fo ollows: 1. How importan is the project for the sponsor, the sta w nt p akeholders, and the organization? 2. Can the proje continue as plann n ect ned and de efined or d does it nee to be ed commpletely red defined? 3. The organizatio e onal impacts and the re esource nee for the recovery ar feasible eds re to p produce the desired rec e covery? 4. Is th here a need for political support so that the project can be recovered d o e d? 5. Are you (the p e project manager) perso onally motivaated and in nterested to do what o nee to be do to recov the proje eds one ver ect? As a comp plement to th five prev he vious questioons, severall factors can evidence that there n is no chanc of recove ce ering the prooject. The m most commo factors ar as follows on re s: → Bus siness bene to be gen efit nerated by t business cannot be delivered the s → The political en e nvironment is no longer sustainable e → The is no lon ere nger a projec sponsor and there is no apparen capacity t replace ct a nt to them 5/12

→ The business n e needs have changed → The have bee significan changes in technolog ere en nt i gy → Con ntractual or judicial disp pute in progress that ma akes the pro oject unfeas sible → Market conditio have ch ons hanged If you decide to disco ontinue the project, its early termin nation can b carried o in two be out different wa ays, each w its own level of com with mplexity, spe eed, and stre ess. STEWART & SHEREM META (2000) assessed the different drivers and impacts in ) t d nvolved in the early te ermination o a project. They say th there are basically fo ways to terminate of hat e our a project, a follows: as → Adddition – Disc continue the project by adding the work to be performed and all its e resoources to a larger proje ect. → Abssorption - DDiscontinue the project having ano other project absorbing the work t of t troubled project, w the d without the r resources a and infrastru ucture accompanying the work. → Inan nition - Discontinue th project b inanition (starvation), with the r he by resources that sustain t t the project no longer being supplied, and the proje r d ect being term minated due to complet lack of re e te esources. → Extinction - D Discontinue the projec by exting ct guishing it, with an im mmediate canncellation ac ction being taken, and the projec ceasing to exist and only the d ct d wor already completed and that can possibly be used is rec rk e covered. In order to group all th hese concep we dev pts, veloped the flow chart iin Exhibit 06 starting 6, with the pproblem ass sessment u to the p up possible rec covery strattegies and the early termination of the proje n ect. 6/12

Exhibit 06 – Flow chart of the decision-making process identification regarding a troubled project. e a o 7/12

Regarding the decisio on projec recovery or terminat on ct tion, we sh hould empha asize that there is no formula or quantificatiion to suit a projects, in all organ o all nizations. Ma times any the search for the des sired results can include the cance e ellation or an nticipated te ermination of a project t. DEVELOP PING THE R RECOVERY PLAN Y When a rec covery strat tegy for a pproject is preepared, man say that it is not imp ny portant to know what drove the project to its current s t status but r rather to se what can be done ee n and will be done to pu it out of t e ull that situation However, this statem n. ment is inco orrect. It is very hard to have a co orrect recov very strategy without kn y nowing the f facts that cr reated the problem. PParticularly, if the drivers are not eliminated, th project m s he might be rec covered in the short te erm, but wit time it can fall back into the sam critical sta it was b th me age before the recovery prrocess. Another im mportant issu is that re ue ecovering a project is to save the loss and r e restore its usefulness, preventing the projec total faiilure (ESI, 2 g ct’s 2005). Thus, when we intend to recover a project we are not d e discussing the full rec covery of t the project, but the , avoidance of its total fa ailure. Basically, recovery con r nsists of rea adjusting the basics of the scope, schedule, a costs and and resour rces of the project, wh hich is methodologically known a the proje as ect’s triple constraint, as shown in the projec triangle in Exhibit 07. n ct Sco ope Cost Sch hedule Exhibit 07 – Pro oject’s triple constr raint (scope, sched dule, and cost). The propos below c be discu sals can ussed and a assessed ba ased on thes constrain se nts. Option 1 – Reducing t project scope, maintaining the planned budget and schedule. the e b This proces can save parts of the project that may surv without full scope, as shown ss e vive in Exhibit 0 08. 8/12

Scope New Scope - = Cost Schedule Reduced Scope d Cost Schedule Troubled Pro T oject Action Recovered Project Exhibit 08 – Pro oject recovery by re educing scope. Option 2 – Maintaining project sco g ope, inflating project co g osts and ma aintaining the planned e schedule. Usually this process is used when project sco cannot be reduced and the U n ope d interest in r results outw weighs the sh hortfall caus by an in sed ncrease in co osts (Exhibit 09). t Scope Scope + = Sc chedule Schedule Cost Ne ew Cost Increase Co ost Tr roubled Proje ect Action n Recovered Project Exhibit 09 – Project recover by increasing av 9 ry vailable budget. Option 3 – Maintainin project s ng scope by ex xtending prooject deadlines and th budget he forecast. U Usually this is used wh hen schedule is not es ssentially cr ritical for the project, e where a sloowdown ma avoid an increase in c ay cost, thus a allowing us t maintain t scope to the (Exhibit 10) ). Scope Scope + = Co ost Tempo Cost T Time New Schedule Incr S rease S Schedule Tr roubled Proje ect Action Recovere Project ed Exh hibit 10 – Project r recovery by extend ding schedules. 9/12

Option 4 – The proje is totally redefined, thus creatiing a new relationship between ect y scope, sch hedule, and cost, with oonly portions of the orig ginal project scope. Us ts sually this is used when options 1 to 3 are not considere as appro ed opriate (Exhibit 11). Scope Useful pa of art the Pro oject New Project Cost Schedule Troubled Pro oject Act tion Rec covered Pro oject Exhibit 11 – Full redefinitio of the project, u on using part of the re esults obtained. The four o options show above a the foun wn are ndations for any type o recovery. All other r of . types and s solutions proposed are but variatio resulting from one o these optiions. ons g of In addition to this resiz zing of the triple constr raint, severa other actiions should be taken al to ensure tthat the reco overy attains the expec s cted success In these c s. cases, it is n necessary not only an radical ch hange in pllanning or in project requirements but also a radical i s, change in the behavio of the pe or eople. LONG (2003) mentions various actions that the G s project maanager and t team sh the hould take t ensure th success of the recov to he very plan, as follows: → Res structure the project tea and/or in e am ncrease the controls ov the work e ver k. → Politically cons solidate the project with its spon e nsor, comp pany execut tives, and stakeholders, ssearching fo broad, unrestricted su or upport. → Cre eate a solid communic cation program with a positive me essage in co onnection with the chang h ges. → Con nduct and maintain an optimistic attitude an environm n nd ment and, h hoping for suc ccess. → Ens sure the per rsonal comm mitment to a assure the success of th recovery strategy. he 10/12

RECOVER PLAN S RY SUCCESS F FACTORS A LESS AND SONS LEAR RNED When cond ducting the assessmen of the troubled project and its p nt possible recovery it is possible to say that so o ome of the le essons learn need to be present again: ned o ted → Alw ways prioritiz . There is never time or money to solve all problems. ze o → Be aggressive. Look for th problem a find the solutions. he and e → Pro oactivity. Do not wait for problems t be solved on their ow r to d wn. → Estaablish acco ountability liines. Know who is re w esponsible for what w within the pro oject. → Woorship exper rience. The authority to make dec o cisions shou be trans uld sferred to the most expe erienced pe erson and not necess sarily to the highest hierarchical e possition. → Find the probllems. Try to identify th problems in a struc d o he s ctured way and as a team, thus avo oiding that th project b found due to its prob he be e blems. → Do not microm manage. Details prevent the whole f from being eeasily identif fied. → The real prob e blem may not be evide ent. It is not always tha what nee to be t at eds solvved is wha is more apparent in the proje at n ect. Check what is be ehind the currtains. → Loo for and as ok ssess the im mpacts. → Nev miss o ver opportunities An oppo s. ortunity los can be one of the biggest st e pro oblems for th project. he → Poo decisions hurt. Makin a wrong decision is as harmful for the proje as not or s ng ect decciding at all. → Con ntextualize oopinions. Outside opiniions need to be inside a context and must be integrated. Finally, it is important to break th cycle tha created the problem You shou always s he at m. uld remember the rules of Newton's L f Law. This la states tha objects in motion ten to stay aw at n nd in motion u unless an ou utside force opposes them. CONCLUS SIONS Preventing a project f from becom ming a challenge requir proactiv action. F res ve First of all, recognizing that a pr g roblem exists is itself already a p problem. Th article “W he Why Bad Projects A So Hard to Kill”, p Are d published by Isabelle Royer in th Harvard Business b he Review in 2 2003 (ROYE 2003) has, in its ow title, the search for m ER, wn more answe on the ers difficulty to assess an solve pro o nd oblems. She says that this is due to an unc e e conditional belief that the projec even w ct, when going through stages of c complete chhaos, will overcome the obstacles and be a success in the future This perception is co e. ontagious; everyone e ends up beliieving that in the future a “miracle” might occ and transform the e ” cur project in a huge success. Unfortunate reality a ely, always prov to be th opposite of a “mirac ves he cle”. If we lo again ook figure 1, w will note t we that when the ones inv volved really accept tha there is a problem, y at then the prroblem no lo onger exists. Now, it is a failure. 11/12

Therefore, when are fa aced with a troubled project, the f first thing to do is to ac o ccept that there is a problem an quickly id nd dentify its m magnitude, and the ac ctions that s should be immediately taken. In a project this close to danger, any day lost is a day tha will never be recover. t t a at ... REFEREN NCES BERRY, D (2002). Y D. Your Projec is in Tro ct ouble! Now What? San Antonio Project w S o: Manageme Institute Global Congress United States. ent ESI Internaational. (20 005). Rapid Assessme d ent and R Recovery of Troubled Projects. f Arlington: ESI International. E HARVEY, J B. (1996 The Abile J. 6). ene Paradox and Othe Meditatio on Man x er ons nagement. New York: Jossey-Bas ss. KAMPUR, G. K. (2001 How to K a Troublled Project. San Ramo Center fo Project 1). Kill on: or Manageme ent. LONG, S. P. (2003). Succee eding With Troubled Projects. Baltimore: Project h d Manageme Institute Global Congress 2003. ent ROYER, I. (2003). Wh Bad Pro hy ojects Are S Hard to Kill. Boston: Harvard Business So Review. SAROKIN, M. (2005). 10 Indicator of a Troub rs bled Project EDS Next Big Thing B t. Blog. STEWART, W. M. & SHEREME ETA, P. W. (2000). W You Be Terminate Today. . Will e ed Houston: P Project Mana agement Ins stitute Globa Congress 2000. al s VARGAS, R. V. (20 004). Using Earned V g Value Mana agement Inndexes as a Team Developme Factor a ent and a Comppensation T Tool. Prague Project M e: Managemen Institute nt Global Con ngress EMEA A. WARD, J. L. (2003). There is a Signpost Up Ahead! Recognizin and Dea ! ng aling with Project Wa arning Signs. Baltimore: PMI Global Congress North Amer rica 2003. WU, J. (200 Busines Intelligence: Top 10 Warning Sig of a Tro 00). ss gns oubled BI Pr roject. DM Review Online website (www.dmr e review.com). 12/12

Identifying and Recovering Troubled Projects

by Ricardo Vargas on May 07, 2009

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Identifying and Recovering Troubled Projects — Document Transcript