Project failure

Many international studies have pointed out the speed of radical change. At the same time there have been reports about problems when implementing development projects and about alarming low success rates of projects (Kotter 1996; Beer & Nohria 2000; Schaffer & Thomson 1992). Hartman and Ashrafi (2004, 500) argue that the overall project success rate is no more than 40 %, and for information technology and construction projects the rate of success is even lower.

It is difficult to define exactly what constitutes a failed project. The causes of failure may vary by the type of the project, and they may be contingent on the stage of the life cycle in which the project resides. The reasons a project might be viewed as a failure early in its life may be quite different than those seen to cause failure at some later point (Pinto & Mantel Jr. 1990, 269).

According to Boddy and Macbeth (2000, 298), the process implementation matters as much as the content and substance of the change. The changes that affect how the people work, who they work with, their status, interests and future prospects are inherently different from those that involve isolated physical changes.

Schultz et al. (1987, 34 - 35) describe project implementation as a two-stage process, consisting of an initial goal setting and planning stage followed by an action-oriented, operational stage. The process contains the strategic and tactical activities. The strategic issues are the most important at the beginning of the project implementation and the tactical issues gain importance toward the end (Slevin 1989, 312). This two-stage process has further implications for the project performance introduced in the project implementation effectiveness matrix (Figure 3.7). It consists of four possible combinations of strategy and tactics, indicating four possible errors taking place in project implementation (Schultz et al. 1987, 43;

Slevin 1989, 313):

Type 1 Error occurs when an action that should have been taken was not taken Type 2 Error happens if an action is taken when it should not have been taken Type 3 The error is taking the wrong action or solving the wrong problem

Type 4 The action taken does solve the right problem, but the solution is not used

Figure 3.7 Strategy-tactics effectiveness matrix (Schultz et al. 1987, 43)

Beer and Nohria (2000, 133) emphasise that the reason for project failures is a rush to change the organisation, and the managers end up immersing themselves in an alphabet soup of initiatives. They lose the focus and become mesmerised by all the advice available in print and on-line about why companies should change, what they should try to accomplish, and how they should do it. Schaffer and Thomson (1992, 82) criticise the activity-centred improvement programs. They argue that in many companies new activities have been launched that sound good,

look good, and allow the managers to feel good - but in fact contribute little or nothing to the bottom-line performance. Many of these activities parade under the banner of total quality or continuous improvements. The companies introduce their programs under the false assumption that if they carry out enough of the right improvement activities, the actual performance improvements will inevitably materialise.

Instead of the activity-centred programs, Schaffer and Thomson (1992, 85), recommend the launching of result-driven programs. According to them, successful change programs begin with results. In the result-driven transformation, the management begins by identifying the performance improvements that are most urgently needed and then, instead of studying and preparing and gearing up and delaying, sets about at once to achieve some measurable progress in a short time.

Successful companies introduce managerial and process innovations only when they are needed. The results-driven projects require the managers to prioritise carefully the innovations they want to employ to achieve the targeted goals. The frequent successes are a powerful motivator and energise the improvement process.

Both the activity-centred and the results-driven programs are ultimately aimed at producing fundamental shifts in the performance of the organisation. The activity-centred programs focus on sweeping cultural changes, large-scale training programs and massive process innovations. The results-driven programs start by identifying the most urgently needed performance improvements and carving out the incremental goals to be achieved quickly. The management creates a continuous learning process by building on the lessons of the previous phases in designing the next phase of the program (Schaffer & Thomson 1992, 85 - 86).

Many managers have been eager to adopt the model of the manager portrayed by a loving, understanding and supportive father figure. The managers who demand better results and have higher expectations for the performance, feel concern for the increasing risk of resistance from their subordinates (Schaffer 1991, 143).

According Beer et al. (1990, 159), most change programs do not work, because they are guided by a theory of change that is fundamentally flawed. The common belief is that the place to begin is with the knowledge and the attitudes of individuals. The individual behaviour is powerfully shaped by the organisational roles that the people play. The most effective way to change behaviour is to put people into a new organisational context, which imposes new roles, responsibilities

and relationships on them. This creates a situation forcing new attitudes and behaviour on the people.

According to Kotter (1995, 59), only a few corporate change efforts have been successful, a few have been utter failures and most fall somewhere between. He argues that the change process goes through a series of phases that in total require a considerable length of time. Skipping the steps creates only an illusion of speed and never produces a satisfying result. Kotter's (1995, 61) eight steps to successful transformation and the common errors for these steps are introduced in Table 3.5 below.

Table 3.5 Eight steps to successful change efforts (Kotter 1995, 61)

Eight steps to transform

an organisation Common errors done in transformation efforts

Establishing a sense of urgency

Managers underestimate how hard it can be to drive people out of their comfort zones

Lack of patience

Too many managers and not enough leaders - change requires real leaders

The majority of the managers is not convinced about the need of change

Forming a powerful guiding coalition

Renewal programs start with few people and the minimum mass is not achieved early in the effort

Managers underestimate the difficulties of producing change and thus the importance of a powerful guiding coalition.

Lack of teamwork at the top

Creating a vision

The company does not create a sensible vision

Without a sensible vision a transformation effort can dissolve into confusing and incompatible projects

Plenty of plans, directives and programs without a vision or with unclear vision

Communicating the vision

Inadequate communication through wrong or inadequate channels

Senior executives do not behave in accordance with new vision People do not understand the new approach and vision Empowering others to act

on the vision Not removing obstacles to the new vision, the blocker could be organisational structure, wrong reward systems, individuals, ...

Planning for and creating

short-term wins Instead of creating short-term wins, only passively hoping for them

Consolidating improvements and producing still more change

Declaring victory too soon; first clear performance improvement does not mean that the change has been rooted very deeply

Institutionalising new approaches

Not anchoring changes in the corporate culture

People are left on their own to guess the connections between the new behaviour and improved performance

Insufficient time to make sure that the next generation top management really does personify the new approach

3.6 Summary

As Salminen (1995) has defined, a business development project is a project targeting at more effective business operations. Many authors emphasise the importance of linking the projects to the strategy. The business development projects need to be built around the business objectives for success: improving the quality, achieving high productivity, decreasing the cycle time, utilising the resources effectively, etc. The basic purpose behind the project is that the company can achieve a more effective and efficient way of doing the business.

The business development projects have the nature of a change project characterised by a difficulty to define the methods and/or the goals for the project implementation. Because of this nature, a combination of project management and change management are needed in the project implementation to ensure the success. Project management means the technical project management including the planning, documentation, monitoring, training, etc. Change management means the human leadership targeting at a well-communicated need for change, high level of motivation and commitment, low change resistance, efficient communication, etc.

It is not easy to define project success. The success is time dependent and stakeholder dependent. A project is hardly ever perceived as a failure for all the stakeholders during all the phases in the project life cycle. Furthermore, it may be perceived as a success one day and as a failure the next. Traditionally the project success has been measured based on the project efficiency – cost, time and quality.

Nowadays this short-term thinking about project success has been enlarged to project effectiveness. It covers the customer and business perspectives and also the impact of the project on delivering future benefits to the organisation.

Several authors have produced lists of critical success factors. These factors have mainly been categorised according to project and change management perspectives or strategic and tactical perspectives. Some authors have generated universal success factors, when others highlight that the factors are contingent upon the specific type of project. A third group of authors emphasise that the factors are subject to change at the different phases of a project. The literature does not show unanimity about the success factors, but it shows unanimity about the alarmingly low success rates of business development projects.

This Chapter 3 has displayed the characteristics and challenges of business development projects. The prior research in the area of project and change management emphasise the connection of a project to the company’s strategy.

Because a business development project has the nature of a change project, sophisticated management and leadership skills and practices are needed.

The implementation of business development project needs a combination of ‘hard’

project management and ‘soft’ change management. Project management can be summarised under five central issues:

1. Purposeful planning and documentation

2. Project organisation and identifying the key persons 3. Control and feedback on the progress

4. Risk management and problem solving 5. Training provided to the employees

These factors constitute a compact entity to evaluate the success of a business development project later called the project management success dimension.

Also the change management can be summarised under five essential issues:

1. Human leadership

2. Communicated need for change 3. Participation of the people 4. Communication

5. Motivation of the people

These factors constitute a compact whole, later called the change management success dimension.

This chapter has also displayed the multi-dimensional phenomenon of the result of the project (project success). The project success has been defined with two domains: project efficiency and project effectiveness. Project efficiency is related to achieving the project goals on the schedule and within the budget. Project effectiveness is related to performance improvements, to the impact on the customer and to future benefits as a result of the project. In this study the project success consists of four categories:

1. Project efficiency 2. Impact on customer 3. Business success 4. Future potentiality

These four categories constitute a general view of results of the business development project, later called the project success dimension.