Most project managers consider a project “successfully closed” if they still have a job by the end of it. Jokes aside, the truth is that projects are often evaluated using a binary concept of success/failure.
According to 2014 data from The Standish Group in America, 31.1% of projects in the IT sector are considered a failure, including projects that have been cancelled, suspended indefinitely or deemed a failure by the board. This means that they either don’t get funded, they generate such losses that they are considered failures or are useless, harmful even, to the company strategy.
Sadly, not even the remaining 68,9% of those projects can be called successes.
Many companies consider a concluded and paid project an automatic success. As they say in the business: “We brought home the bacon”. However, if we take a look at the numbers, 52.7% of the projects end up costing up to 189% more than what was estimated. This is caused by delays (due to penalties, higher use of resources, etc.), additional costs (for components, resources, and so on) and missing features (penalties or missed gains that add up to the weight of general expenses).
It is important not to overlook the non-measurable side to these figures, that refers to the joint effect of lack of opportunity, credibility, and impulse.
What we have left is the 16.2% of projects that concluded within the parameters defined in the contract.
Is success that rare? Fortunately, for all of us, the answer is, once again, no.
So how should we interpret such data? If it is inadvisable to regard all projects that reach their conclusion as successful, we cannot say that only those who are on time, cost and within scope are successful either. We need to add a discriminating factor, which leads us to the introduction of the concept of
We need to add a discriminating factor, which leads us to the introduction of the concept of Project Tolerance. This concept is not being introduced to make a project that normally wouldn’t be successful a success, but to better analyse the causes that lead to a “critical project”.
A “critical project” is subjective for every company, as it is connected not only to the project itself and its economics but the company’s specific long-term vision.
One of the main tasks of the Project Manager is to manage project costs and timing. It is necessary to establish from the beginning of the project how big a deviation from the initial cost forecast can still be acceptable.
This is achieved by prioritising project parameters such as timing, cost, and features, and giving value to “acceptable losses” in any field. What has to be considered is not only economic values (margins, investments, and penalties) but also the strategic value of the project, the boost in image and the replicability. This reasoning is prerogative to the board and management team who hold the strategic vision of the project.
For example, if we consider a 20% deviation in timing acceptable, with costs and features staying the same (and coming after a cost/benefit analysis on penalties, resources, and so on), projects regarded as “successful” would increase from 16.2% to 30.1%. In short, if 20% of delays had acceptable consequences on all projects, we would see a 13.9% increase in projects that are regarded, to all intents and purposes, a success. Of course, this is not always possible.
Once again, why is this useful? Experience tells us that if a project is undergoing a crisis for more than a certain period, it gets out of control (costs rise, delivery’s late and the project has to change its features). Introducing the concept of tolerance allows us to divide critical aspects into smaller segments, and solve them before they get worse.
Remember that project management is a doctrine of prevention, needed to find the problem and face it as quickly as possible before it becomes uncontrollable.
Defining tolerance thresholds will provide us with a warning signal that lets us know when we are about to reach the point of no return.
Let’s assume our project has a 10% tolerance to cost and 20% to time deviations. The moment it starts approaching these parameters, it is time to apply some measures, contact the stakeholders and possibly limit the damage.
This won’t be enough to transform loss-making projects into successful ones (although it may help salvage a part of them). Still, establishing strict parameters will be useful for the company to have a better understanding of the problems that sometimes arise in project delivery and stop them from happening again in the future.
The objective is to reduce as much as possible that grey zone we call a “critical project” for the company to be able to evaluate its performance and strategies more accurately. Panicking and going into “crisis mode” will only generate extra costs, stress and time lost.
When planning for the long term, we shouldn’t be content with just knowing if the target was achieved, we should also analyse and understand our performance. This is the mindset that determines long-term success.