Why can’t IT organizations figure out how to avoid the high project-failure rate experienced by so many companies? You would think that with all the project portfolio management (PPM) solutions available today, companies would be able to successfully deliver projects on time, within budgeted cost, and achieve the desired business results.
Peter Weill has been studying project governance for years. Weill is Chairman of the Center for Information Systems Research and Senior Research Scientist at MIT’s Sloan School of Management. In his epic MIS Quarterly Journal article in March 2004, “Don’t Just Lead, Govern: How Top Performing Firms Govern IT,” he said IT organizations with good governance practices have “up to a 40 percent greater return than their competitors for the same IT investment.”
Well, guess what? Many IT organizations didn’t listen to Weill’s advice. Just ask John Chiang, controller for the state of California. On Feb. 8, 2013, he terminated an SAP contract for a new payroll system “that burned through more than a quarter of a billion dollars.” Better yet, read the related report, “Crash Course: Failure to heed early warnings, troubles of the past contributed to payroll system collapse,” released Aug. 12, 2013, by the California Senate Office of Oversight and Outcomes. A key finding of the report is that key project oversight personnel failed to heed early warnings of potential project failure, hence the title of the report.
This type of project failure happens all the time. Jack Bergstrand, CEO of Brand Velocity, can attest to that. The former CIO of The Coca-Cola Co. and CFO and vice president of manufacturing and logistics at Coca-Cola Beverages Ltd. is the author of Reinvent Your Enterprise and creator of the Strategic Profiling tool and Action Planning process. You might say that Bergstrand is an expert in how companies operate, and he definitely understands the importance of project success. In his 2009 Architecture & Governance magazine article, “Why IT Project Governance Is Flawed—And How To Fix It,” Bergstrand wrote, “Large information technology projects fail too often. The statistics have been disturbing for decades — with seven out of ten enterprise projects not delivering on their promised results. This is important because, over time, the value of your corporate brand and enterprise IT success rate are related.” He cited an example of how a major issue on a supply-chain project at Nike went unnoticed and caused what CEO Phil Night called a “$400 million speed bump” in the company’s supply chain.
I can cite another dozen examples of major project failures but won’t bore you with the details. You are surely aware of many of them. The real question is, what is the underlying problem that causes these failures? Here’s my take.
PMO organizations and project managers generally focus mostly on historical data like cost, schedule and resource availability rather than putting energy toward managing projects proactively, identifying key predictors for project success, and engaging stakeholders in the process of assessing project performance.
The Georgia Technology Authority (GTA), the technology arm of the state of Georgia, does focus on the right areas and, as a result, has achieved great results. I had the opportunity to spend time with GTA leadership team members in Atlanta to find out more about how the organization saved millions of dollars implementing a governance process and solution for its $500 million portfolio of hundreds of projects across the state’s 119 agencies.
Each of Georgia’s state agencies operates in a federated structure. Each agency has a governor-appointed commissioner, as well as a CIO who is responsible for leading the agency IT organization. In January 2011, Georgia Governor Nathan Deal appointed Calvin Rhodes as the state CIO to ensure consistency of process and services across all the state agencies.
Each agency CIO has a dotted-line reporting relationship to Rhodes, whose extensive business and technology experience was critical to his selection. His mission is to “connect Georgians to their government by leveraging technology.” One quickly learns after speaking with Rhodes that he views the GTA as a business that “provides value to its customers.” One of his three main strategies is to “implement a full IT governance structure, providing transparency across state agencies so everyone can see anything relative to spend.” Rhodes and his team are well on their way to doing this and have achieved great results so far.
In any successful organization, teamwork is essential. Rhodes recognizes this in the three key players who implemented the governance process across the state agencies: Tom Fruman, director of enterprise governance and planning; Teresa Reilly, director of the Enterprise Portfolio Management Office; and Hank Oelze, program manager. Fruman developed the strategy, and Reilly and Oelze developed and successfully implemented the tactical plan.
After the team developed and implemented a set of governance processes, it needed to select a solution to enable those processes. After three failed attempts at implementing PPM solutions, the team realized that “many of the PPM tools are great, but at the end of the day, you are a slave to the tool,” says Rhodes. “They are rigorous, and you spend a lot of time making the tool work, as opposed to making it work for managing the portfolio of projects.”
Finally, the team discovered a software-as-a-service (SaaS) governance solution that was a perfect fit for GTA: Computer Aid Inc.’s (CAI) Automated Project Office (APO). When the GTA leadership saw a demonstration of the solution, Fruman said, “this was what they needed to ensure adequate project governance across agencies.” GTA licensed the solution from CAI in March 2012 and renamed it the Georgia Enterprise Management Solution (GEMS).
The results have been impressive. Each agency uses a PPM solution of its choice. GEMS imports key project data from agency projects, analyzes the data using a set of algorithms and predictive analytics, and then displays pertinent project data for key performance indicators (KPI) via a dashboard. The GTA governance team uses this data to identify potential project risk areas that otherwise would go unnoticed and potentially result in quality issues, late delivery and cost overruns. The ability to predict areas of project disruption enables a more proactive approach to project governance and saves money in the process.
The following four unique features were the primary reasons the GTA governance leadership team chose the APO solution:
- APO imports the traditional cost and schedule data from any PPM solution. Furman says this functionality will “allow each of the state agencies to continue using the PPM solution of their choice.”
- The solution provides an initial set of configurable KPIs as well as the capability to add more. “This would enable the GTA governance team to identify and measure the key indicators that impact project success,” Reilly says.
- A set of best-practice benchmark assessments enables stakeholders to provide individual feedback on a project’s progress. Oelze says he saw this feature as the most important, since it will “enable the teams to improve their team communication, work more effectively together, and identify early indicators for any potential project risk.”
- APO displays the results on a configurable dashboard. “This would enable the GTA governance team to proactively identify and measure key predictors for project success and take appropriate mitigation actions,” Rhodes says.
Every CIO needs a solid governance strategy that incorporates a set of robust processes enabled by a solution that is proactive, predicts key indicators for project success, and promotes teamwork among key stakeholders. If your IT organization is experiencing project governance challenges, and you are not willing to accept a 25 percent to 35 percent project failure rate as the norm, heed the lessons learned by the GTA.
This article was originally featured at CIO.com.