Project Practitioners > Why Projects Fail

Why Projects Fail

By Morley Selver, P.Eng IPMA B

This is the final article on why projects fail.

The project changes due to:

Mergers and acquisitions - when companies merge or are bought out their goals will

change. The new goals are typically not the same goals as the company being taken

over had. I once worked for a consulting firm who were part of the ownership of startup

companies. I was seconded as the General Manager of a small company where we

recovered precious metal from electronic scrap (we were getting 3 ozs of gold out of a

ton of scrap computers). The plan was to get the recovery process up and running, sell

the technology to others, and collect royalties from them. Things were working out fine

until the consulting firm went bankrupt. The new Owners of the consulting firm did not

want to be involved with the startup companies so we pulled out of the ventures. The

precious metal company had to fold as they did not have the funds to continue. There

were two other startup companies we were involved with, a blood platelets company

and a composting company, both of which folded. There was a lot of money lost due to

the bankruptcy and change in corporate goals.

 

Changes in top management personnel - with top management changes, relationships

change. Someone who was once your friend is now gone and the power structure

changes. Responsibilities change and you are not sure what the new direction should

be. When I worked for a consulting firm, we had a project where the Owners project

manager changed. The new project manager’s way of managing projects was not the

same as the previous project manager. In fact, he flew in once a month and always had

something new he wanted us to do. It was like he was reading the next chapter in a

project management book and wanted us to do what he just read about. For every

change he wanted we gave him a change notice which, of course he never paid. At the

end of the project we were out $300,000.00 that our management did not want to go

after as they were supposedly a ‘good’ client. We did not get much work out of them

after that as the project manager had his own favorite companies and we were not one

of them. Always take promises of upcoming work for you with a grain of salt. The only

proof of future work is a signed purchase order.

 

Inflation and/or labor demands or unrest - if your project is borderline profitable, any

drastic changes in these could make your project unprofitable and therefore get

cancelled. While your project is in progress, the Rate of Return is always being checked

to see if you still have a viable project. With inflation, you have to figure in to your

estimates a reasonable amount. A few years ago the price of steel was inflating at about

7% a month. We could not get firm pricing on steel, all we could get was an

approximation and the price would be the day the steel left the foundry. A tank we were

going to build was to be made from Hastaloy C and the tank vendor would not even give

us a steel price. If the vendor had given us a firm price and bought the steel there was a

good chance they would have gone broke with the steel inflation. The only way we

could make the project work was to have the tank vendor design the tank, tell us what

steel to purchase, and they would build it from the steel we bought. They made their

money off the labour rather than the steel as the cost would have killed the project.

Shift in market demand for product - it is the market that drives what your company

produces or the service you provide. I worked for a company that produced hand towel

from recycled paper. If the customer wanted white they used old newspapers and if the

customer wanted brown, they used cardboard. They had a small market with their main

customer the provincial government. The government required all government agencies

to use recycled products. The project we had was to increase production with a new

machine as the recycled market was expanding. With the project it would have been

inexpensive to add equipment or change the process to increase the quality of the

product. However, if we improved it to much that would have put us in competition with

the big players in the towel industry. They would have put us out of business and the

company was not going to go there. There as a fine line between low quality and having

a market and high quality and having no market. As long as we stayed with the low

quality the big players left us alone as we were not a threat to their business. With the

low quality there was a market for the company and our project plus others they had

were successful.

 

The arrival of new opportunities - the world is constantly changing and things can

change between the start of a project and its completion. A good example is an

aluminum smelter in Northern British Columbia. To power the smelter they have a huge

hydroelectric power system. There are times when they can make more money selling

the power than they can selling aluminum so they cut back on the smelting. If you

happen to be doing a project when the price they receive for the electricity goes up, the

project could get cancelled. The project may not come back depending on the

conditions the next time round.

 

The environment changes, such as

Changes in user requirements - this issue crosses all disciplines. You start a project

and as more end users come onboard the requirements change. The changes can put

the project Rate of Return into an unprofitable area resulting in the project being

cancelled. If you have been involved in projects you are familiar with “sticker shock”.

That’s where someone does a conceptual estimate, the project sites in limbo for a few

years, the time comes for the project to be done, you get the project, you have a

scoping meeting with all the stakeholders, prepare an estimate which bears no

resemblance to the conceptual estimate, present it to management, once they recover

from the “sticker shock” they tell you to get the cost back in line with their thinking or the

project is toast. I have been to meetings where the operators and maintenance people

came on board and were adding items to the scope. The Owner’s PM was new and

didn’t realize what was happening. The project had started out with a $3 million estimate

and when the $10 million estimate came in management was beside themselves. The

PM eventually got the estimate down to $5 million which management could live with.

When I worked for Central Engineering we went through this process all the time

generating estimates based on user requirements that bore no relation to the original

estimate. Fortunately the engineers in upper management had grown up together in the

company. They new what they wanted to move the company forward so we would do

the real estimate of what was required, they new what amount they could get through

the board of directors, so we would prepare a lower estimate. They would get the

funding approved for the lower amount and when the actual costs came in several

million dollars higher the took their lumps from the board. They got what they wanted so

they were happy. This would be hard to pull off today.

That’s the end of these articles on reasons for project failure.

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Comments
Not all comments are posted. Posted comments are subject to editing for clarity and length.

No matter what people say or have said about why project fail, many of the reasons cited including those above are really nothing more than symptoms of an underlying cause. This is because most businesses really don't want to deal with the harsh reality that the cause of failure is people.

Projects fail because people as in the Senior Executive or Sponsor is hands off and unconnected with the project.

Projects fail because we train project managers but we don't train most project team members on how to work and function effectively in the project environment and expect them to deliver outstanding results.

Projects fail because people make avoidable mistakes by not validating their actions, and the list goes on.

We are the cause for every aspect of project failure. Until we accept and come to terms with this we will continue to be the cause of failure regardless of the methodologies and planning we put in place. The latter may mitigate the impact of some of our failure but we will still fail nonetheless.

How many times will projects be short changed for time, funds, human and physical resources needed even before they commence? It's not what but who is accountable for these decisions. The C-level executives, shareholders and project boards, the senior executives and sponsors.

People are and will always be ultimately accountable for all failures. The question is what are we REALLY going to do about it?


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