Projects and Investments

In a previous post, we discussed the reality that while the practice of project management may continue to advance, overall project results will not significantly improve until better decisions are made through the full lifecycle of an idea. One of the most significant barriers to improvement, however, is the comprehension of what this lifecycle represents in terms of stages — and where the responsibility for decisions resides in each stage.

From the perspective of a project manager, the project starts when they get assigned to it and stops with the completion of whatever it is that they've been tasked with building. Simple and straightforward as far as it goes, but it's also perfectly clear to most readers that there is work that still happens before the project starts and after the project ends. In particular, there is whatever decision making process actually led to the project being initiated and a project manager being appointed, and the later process after a project is done of beginning to use whatever was produced to get the value that the organization desires.

From the perspective of the organization, or of a senior manager, there is therefore a different view of project that starts with idea and ends with realized value. What we have is two very different definitions of project, which have different start and finish points. This is not to say that one definition is right and the other is wrong. Both are important, yet we tend to use the same term of ‘project' to describe both. It is the failure to distinguish between these two ideas that leads to enormous misunderstandings in organizations. Not only is it not clear where the project starts or finishes, but there is confusion around who is responsible for what.

To clarify, it helps to separate out for the project manager and for senior management what it is that they are trying to accomplish. The project manager wants to know what they need to get done. The executive wants to get the value out of their investment. Both are necessary. The product that is produced is what allows the value of the investment to be realized. As a result, both are also inextricably intertwined. Yet they represent separate ideas, which means that we need to speak of them and consciously identify them as being different.

To illustrate this distinction, it helps to look at a case study. One example I often use in workshops is an organization that undertook a quality improvement project associated with their billing system. The impetus for the project was a benchmarking study that indicated that there were 5 times as many people in the organization responsible for correcting billing errors than the average for the industry. To bring these numbers in line, the organization initiated a project whose objectives were to reduce billing errors by 95%, which would allow them to redeploy up to 45 people elsewhere in the organization.

The project proceeded forward quite successfully. Tracking their reduction in errors over time, the team eliminated 97% of errors, focusing on the most significant ones first. They delivered on time and under budget. Throughout the project, extensive consultations were made regarding plans to redeploy staff members to more significant, value-added positions. When the project was completed, however, the organization in the middle of intense negotiations with their collective bargaining unit, and chose — in order to avoid a grievance being filed — not to redeploy the staff members. As a result, 50 people were now doing the work of 5, and the organization failed to realize any of the projected savings. It's a sad story, but a true one, and not necessarily out of place in any number of organizations.

When I asked workshop participants whether or not the project was successful, invariably the room was divided along 50-50 lines between those who say ‘ye's because the team did what they were supposed to do, and those who say ‘no' because the organization failed to realize its investment objectives. Both statements are objectively true, however only one describes project success.

The reality is that the project was successful–more than successful, in fact, in the context of the objectives set for it. Defects were reduced to a greater extent than hoped, and the project delivered under budget. By every objective measure of what the result of the project was to be, the project team delivered. The investment, however, was a failure. Over $1 million of investment was written off, for reasons that had nothing to do with the project. The reason to not redeploy staff was a business choice, made for operational reasons. Not to say that this was a bad decision either — the cost of a grievance could well have been much higher than any projected savings. Yet this was not a project decision, it was an organization decision.

The point here is a simple one — any initiative must be evaluated with respect to both dimensions. Project success evaluates whether or not the process and what was produced as a result of the project — the ‘final product' — was successful; in other words, did you get what you had hoped for out of the project, and was it delivered within the allowable envelope of time, cost and resources? Investment success evaluates whether or not you realized value out of getting the final product of the project; in other words, did you get your hoped for return on investment, however that was being measured.

That these concepts get blurred is understandable, but they genuinely define different concepts and therefore must be considered differently. We must objectively understand what the expectations are of both the project success and the investment success. Ideally, we realize both. Where one is realized despite — or at the expense of — the other, it is important to understand the underlying causes. To simply blur the two together, however, is to avoid the need to manage both, and to avoid setting accountability for each where it truly lies.