Identifying and managing troubled projects

We all have troubled projects that are at risk of not achieving their expected business outcomes. These watermelon projects, which appear green on our project dashboards but are actually red if we dig deeper, are all too common in agencies' project portfolios.

CEB research shows that as many as 30 percent of projects in an average portfolio are troubled at some point during their life cycles. Some 20 percent of projects eventually fail, wasting significant time and money without delivering expected benefits to the agency or the public. Even more disconcerting is the fact that 20 percent of organizations don't know whether they have troubled projects. (It is fairly safe to assume that they do.)

In government agencies, troubled projects typically arise for three reasons:

• Inadequate metrics. Project management offices typically base their assessments of project health on schedule- and budget-related metrics, but those metrics are lagging indicators that do not allow PMOs to spot problems proactively. Consequently, nearly three-quarters of PMOs report that more than 20 percent of their healthy projects actually conceal problems.
• Cultural barriers that discourage escalation. Many project managers and members of project teams hesitate to escalate identified problems for fear of career repercussions. The result is an environment with low team morale, disengaged sponsors and stakeholders, recurring renegotiation of deadlines or expectations, and brewing tension between project teams and sponsors.
• Strained communications between permanent and contractor staff. Agencies often have the added challenge of managing troubled projects with internal and external contractor-based teams. Differing objectives and management approaches generate significant challenges to effective collaboration across internal staff and contractor lines.

Our research with PMOs across industries suggests that more effective management of troubled projects can save organizations up to 8 percent of total annual portfolio spending. The most progressive organizations realize that early problem identification and escalation are among the best ways to bridge the gap between expected and actual project returns. And they use three key risk-mitigation techniques:

1. Look beyond traditional project metrics to help identify trouble early. The best PMOs define a set of qualitative leading indicators of project issues and use them to identify troubled projects that would otherwise appear to be healthy. Those leading indicators generally fall into common categories -- for instance, stakeholder engagement issues, such as sponsors who are dismissive of project risks or stakeholders who are missing project team meetings and sending delegates instead.
2. Remove cultural barriers that discourage escalation. The best PMOs work hard to create an environment where it is safe for project managers to raise issues without blame or personal attack. They educate sponsors and other executives on how to constructively participate in project review sessions, and create an independent communication channel to allow all project stakeholders to voice their concerns without fear of retribution.
3. Expand the trouble-sensing network. Identifying and fixing troubled projects are not solely the responsibility of a project manager or PMO. The best PMOs work to expand their network for sensing trouble to include project team members, sponsors and other key stakeholders. They provide sponsors with training on how to spot potential problems and create mechanisms that allow the broader set of stakeholders to register their concerns.

Effective strategies to mitigate troubled projects can significantly expedite fixes that typically occur late in the project, increasing the likelihood of success and cost avoidance. To see returns on those strategies, PMOs need to actively engage project stakeholders in spotting and fixing problems and create a culture that encourages, rather than penalizes, early problem identification and escalation.