CLEAR and adequate project management systems, good risk management and measurements of project success aligned with corporate goals are some of the keys to effective project management identified in a report by the Economist Intelligence Unit (EIU).
The study, sponsored by Oracle and titled Closing the Gap: The link between project management excellence and long-term success, surveyed 213 senior executives and project management experts worldwide in September 2009. The report is also supplemented by in-depth interviews and desk research and focuses on six project-intensive industries— industrial manufacturing; architecture, engineering and construction; utilities, oil and gas; chemicals; aerospace and defense; and mining and metals.
While survey respondents are almost unanimous in recognizing a need for good project management, many admit that more than a quarter of their projects are late or over budget. One reason identified in the study is that only 40% of the organizations surveyed follow formal project management practices for all projects — regardless of size and scope.
Furthermore, only a fifth use a standardized set of project management tools.
Tom Bourgeois, chief project engineer for Shell International, who was interviewed for the study, warned that a lack of standardized tools can “lead to trouble” as in his experience, project managers using multiple tools that don’t integrate can be overwhelmed. “You are just begging for errors, and the bigger the project, the harder it is to find the mistakes,” he said in the report.
Confusing risk management with contingency planning is another problem identified by the study. While 48% of respondents say that adhering to project management practices helps them manage risk, only 26% evaluate how effectively they have identified and managed risk as part of the project review process. According to the report, the risk process is often looked at only when problems occur.
Equipping project managers with the tools they need and promoting good management skills and behavior is an ongoing process for many project-focused companies. More than half are continually working to improve their methods while 82% offer some level of project management training. The report added that training, mentoring and other development activities for project management professionals should be tied to specific skills gaps and career planning — this reinforces the necessary skills.
How a project’s success is measured is also essential. According to the report, projects should not be measured purely on meeting time and budget goals. But more than half the respondents surveyed don’t measure a project’s return on investment and three-quarter of them fail to ask clients if they are satisfied with project outcomes.
These companies are missing out on a valuable part of the project management process, observed Ajay Malhan, senior vice-president of project and development services for Jones Lang LaSalle, India in the report. The global real estate services firm conducts project reviews with the team, clients and contractors to evaluate problems that arose and discuss if they could have been better handled. “This process is considered a huge value-add by our clients, and it wins us a lot of repeat business,” said Malhan.
The report also found that project management skills have helped companies remain competitive during the worldwide economic crisis. For companies who are looking to improve, many admit the downturn underscored their shortcomings and is forcing them to “do better”.
Many companies are changing how they manage projects, with 40% investing more time in project planning and due diligence, 39% measuring project outcomes more frequently and 37% conducting more frequent project reviews to assess risks and overall value.
The report concluded that to make the most of the lessons learnt during the downturn, leaders need to “take a hard look at the methods their organisations use to select, manage and measure project outcomes, and align those methods with their long-term strategic objectives”.
“Leaders who continue to do so when economy rebounds will garner the greatest long-term success,” it said.