We're wasting $1 million on projects every 20 seconds: study
A study conducted by the Project Management Institute shows that organizations around the world are typically wasting $1 million every 20 seconds due to poor performance, not meeting budgets and not hitting targets.
And Canadian companies are among the top worst for this type of waste.
“Project management is the driver of strategy, but organizations are failing to bridge the gap between strategy design and its delivery,” said Mark A. Langley, President and Chief Executive Officer, Project Management Institute. “Effective project management to implement an organizations’ business strategy is key, and has a significant impact on the bottom line.”
On average, organizations globally waste 9.9 per cent of every dollar due to poor project performance, and that around one in three projects (31 per cent globally; 28 per cent in Canada) do not meet their goals, 43 per cent globally (same percentage for Canada) are not completed within budget, and nearly half (48 per cent – both globally and specifically in Canada) are not completed on time.
Alarmingly, executive leaders may be out of touch with this reality, as 85 per cent surveyed said they believe their organizations are effective in delivering projects to achieve strategic results. These factors are leading to colossal financial losses for businesses around the world, with a significant broader macro-economic impact.
Of the geographic regions included in the survey, China reported the lowest average monetary waste on projects (7.6 per cent or $76 million per $1 billion), followed by Canada (7.7 per cent or $77 million per $1 billion), and India (8.1 per cent or $81 million per $1 billion). Contrarily, Australia reported the highest average waste on project spending at 13.9 per cent or $139 million per $1 billion.
“There is a powerful connection between effective project management and financial performance,” said Langley. “Organizations that are ineffective with project management waste 21 times more money than those with the highest performing project management capabilities. But the good news is that by leveraging some proven practices, there is huge potential for organizations to course correct and enhance financial performance.”
In an era of increased financial scrutiny, shifting competitive pressures, and business disruption from evolving technology, the survey results point to five critical factors that can help organizations drive performance through more effective implementation of strategy.
1. Executive Sponsor Engagement is the Top Driver of Effective Strategy Delivery
The top driver of projects meeting their original business goals is an actively engaged executive champion or sponsor. But at the same time, organizations report an average of 38 per cent of projects not having active executive sponsorship, which points to the need and opportunity for executive leaders to be more engaged in the delivery of strategy.
2. Greater Connection Between Strategy Design and Delivery
Executives often fail to recognize that effective project and program management is what delivers on strategy. More than one in three organizations (35 per cent) report not having strong alignment of initiatives and projects that directly deliver against strategy. This indicates the need for C-Suite executives to better recognize the full potential of project management to execute strategy, and to ensure they are leveraging the right programs to directly deliver against strategy.
3. Optimize Investment in Strategy Implementation
Organizations often prioritize investment in developing strategy over proper execution. There appears to be a big disconnect between executive leaders and project managers on strategy implementation funding. While 84 per cent of executive leaders believe they are effectively prioritizing and funding the right initiatives and projects, only 55 per cent of Project Management Office (PMO) leaders agree. This suggests that organizations might not be leveraging the optimum focus and investment to deliver against strategy.
4. Leverage Disruption – Don’t Just React to It – Get Agile
In a world with an accelerated pace of innovation, disruption is the new normal. So, it’s not surprising that 83 per cent of project managers report digital transformation has either moderately or dramatically impacted their work over the past five years. What’s key to success in today’s business environment is leveraging an agile approach with project management and delivering against strategy through ongoing evaluation of shifting market dynamics, new technologies and innovation.
But while 71 per cent of organizations report greater agility over the last five years, only 28 per cent report having high organizational agility overall. Though agility is increasing, the pace of change is inconsistent. In fact, from a broader organizational perspective, only 40 per cent of organizations report prioritizing the creation of a culture receptive to change.
Looking forward, organizations that can leverage disruption and remain agile can drive both financial gain and competitive advantage.
5. Define and Track Success Metrics
The survey showed that on average, around half (52 per cent) of projects experience scope creep and roughly half (48 per cent) are not delivered on time, leading to huge financial losses. Defining success measures upfront helps ensure projects stay on track, and meet budgets and goals.
The Pulse of the Profession Survey® was conducted online in October 2017. The report highlights feedback and insights from 4,455 project management professionals, 800 Project Management Office (PMO) directors, and 447 executive leaders from a range of industries, including information technology, financial services, manufacturing, government, energy, healthcare, construction, and telecom around the globe.
(Project Management Institute)