PMOs and project managers are faced with failing projects more often than they would like to and it often turns out to be a demoralizing experience for all stakeholders. Consequently, it is vital for PMOs to recognize the signs of a failing project and take corrective action before it is too late. In order to engineer a successful turnaround, PMOs and PMs need to watch for certain leading indicators of project failure.
Leading indicators of project failure
- Progressive scope creep: While some scope changes may be necessary, constant updates to the project scope indicates that the project sponsor and other stakeholders don’t have their business case buttoned up or the assumptions under which the project was sanctioned are no longer valid.
- High rate of churn in project staff: It is normal to have long projects to have planned rotation of staff. However, you need to watch for unplanned attrition from the project team. Each person who leaves in an unplanned way takes with him/her knowledge of the project. Areas of the project can be put at risk and the team may need to revisit some past decisions because no one knows why the decision was made. All this results in extra time and cost with no increase in value.
- High cash burn rate: Are you tracking your Cost Performance Index (CPI)? CPI = Earned Value/Actual Cost. If your CPI is trending less than 1, then you are not using your budget efficiently and are burning through cash.
Reversing the trend (Turning around a failing project)
- Revisit the scope statement periodically (say once a month) and verify if you are still delivering the same project. If the nature of the scope change is so drastic that it will potentially change the deliverable, take it up with the project sponsor and decide if the project should be stopped in its current state.
- Review the staffing situation every month. Evaluate how many unplanned vs. planned exits have occurred. If a critical resource or a member of the project leadership team has left, it is a red flag. Summon a meeting with all stakeholders and the project sponsor to assess the situation and plan to bring in an alternate equally capable resource who is committed to delivering on the project.
- If your CPI is trending less than one month over month, you are putting the project in a financially unsustainable situation. You should jump into cost control mode and only approve critical expenses. If you are buying from an outside vendor, use your purchasing team to negotiate a lowest possible price or do this yourself.
Walking away from a failing project
Pulling the plug on a project that is underway is often not an easy thing to do. There usually are a lot of personal and political forces at play. More often than not, people will waste money (and time) in order to justify costs they’ve already spent. The key here is to maintain objectivity and avoid the Sunk Cost Fallacy. Meet with your project sponsor and review the costs-benefits of the project and be prepared to justify why the project should be cancelled or stopped.