Culling projects: A critical portfolio process

With most organisations reporting more projects that they can resource, stopping projects which are addressing yesterday’s problems may be even more important than not starting those projects designed to address today’s.

In a 2011 review of 15 client portfolios, the UK project consultancy group, CITI reported that in annual portfolio prioritisation more than one third of the projects and programmes approved were carried forwarded from previous years, with 20% having survived two annual review processes.  The question perhaps to ask is – does this reflect a real need for long-term projects or is it that management decision making around stopping something is just so much harder than approving a project to start?

Significant portfolio management attention has been paid over the last few years to developing improved governance processes around the front-end selection and prioritisation of projects.  But portfolio monitoring and control is a much greyer area and often confusion arises between the governance responsibilities at the portfolio and project sponsorship levels.

According to PRINCE2, the Senior Responsible Owner (SRO or sponsor) should be responsible for recommending the termination of a project.  However, in the absence of confidence and trust between the portfolio governance levels and projects sponsor, the portfolio board often steps into the perceived management decision making vacuum.  Not that portfolio boards often stop projects, preferring instead to starve them of management attention and resources in the hope that they will just go away. The trouble is that projects just don’t go away that easily.

Why don’t projects just stop?

Stopping a tanker: it takes 14 minutes and three kilometres, once you decide to alter course or speed, before the manoeuver is complete.

In a recent analysis of three large portfolios which had undergone a ‘torrid’ cut-back exercise, we found that over 30% of curtailed project activities were continuing under the portfolio radar.  In these cases, the project office was reporting the projects as terminated, while effort, directly trackable back to the project, was still being applied in the organisation.

So why don’t these projects stop?  Stopping a project is more like applying the brakes to a very large oil tanker than stopping a video recorder.  

Any project which is out of dock (i.e. past initiation) will be accelerating – engaging resources and stakeholder attention.  Project activities have to be stepped down in a controlled fashion, else the collateral damage may cause degradation in unexpected ways and places.

Redirecting a tanker to a different port is not simply a case of changing the direction of the ship.  Port authority approvals must be obtained; loading contracts changed; maritime services informed…a formidable list which makes such options costly and risky to implement.  

Projects within a portfolio are interlinked by the resources they use, the impacts upon the business and even the outputs they deliver – a problem considerably more complex in a programme.  While this complexity is likely to cause the types of delays described in the previous section, it also contributes to the psychological pressure on the project team to “just finish this” before stopping.  

There are at least two forces at work: the first is the inertia of any moving body, the second is more subtle, more psychological and was caught so aptly by Magnus Magnusson (from the Quiz programme Mastermind) in his bye line “I’ve started, so I’ll finish…”

This phenomenon is well documented in the field of organisational and human decision-making as a concept known as “escalation of commitment”.  Even in the face of obvious and clear negative consequences, decision-makers maintain or increase resource commitment and risk further losses.

Originally analysed as the impact of sunk costs on decision making, it has strong resonance in project-based management actions.  Indeed it is regarded as political commonsense that once you have spent a lot of money you really shouldn’t give up.

“To terminate a project in which $1.1 billion has been invested represents an unconscionable mishandling of taxpayers dollars” Senator Denton, 1984

The feeling that we have invested too much to quit is psychologically compelling but is not necessarily rational.  There are a myriad examples of projects, particularly Government ones, where in the face of diminishing returns, the economically rational decision has been overturned by the desire (unsupported by any historical evidence) to recover something from the investment.   

In recent years, academic research has turned to the impact of the project stage on escalation of commitment.  Here it was found that project participants were unduly affected, not by sunk costs, but by the project’s closeness to completion.  In fact, when the project is close to being finished, project participants often recommend completing the project even when it is clearly economically unwise to do so.

The escalation of commitment has an impact in the context of decision-making around whether to terminate a project.  It also explains the determination to continue with project activities even when the project has been ‘terminated’. Escalation of commitment manifests itself by enlisting senior commitment to undermine the termination order; slowness in actioning close-out activities; the continuation of project activities in ‘secret’ or under the portfolio radar; or simply blatant continuation of the project activity in the belief that the problem will go away or be moved to somebody else’s project.

The challenges of stopping a project

The project close-out stage is generally estimated at around 3-7% of the total expenditure on a project.  This small percentage is mirrored by the very small amount of documentation on the project close-out process.  Apart from exhortations to do it, and to do it properly, there is little valuable guidance on what’s important at this stage.  Even PRINCE2™, the market leader in project methodologies, merely states that “Every project should come to a controlled close”, and lists nine administrative activities, none of which address the fundamental purpose of a close-out.

Discussions of project close-out usually focus on the organisational benefits from managing knowledge and lessons learned back into the project profession and the fundamental requirement to ensure that the transfer into the operational environment occurs.  The literature largely ignores the necessity of ensuring that the outputs from the project are handed over to their new ‘owners’ in such a way that they can genuinely result in the desired beneficial outcomes, and ensuring that the stakeholders and team members are debriefed, both technically and emotionally.

These last two goals are even more important on a project which has been thrown into early termination.  The increased pressure to walk away as early as possible, attempting to disassociate from what will be perceived as a ‘failed’ project, and the desire to become engaged in something valued, all work towards abbreviating the close-out process.

Early project termination does not, however, necessarily require a shorter or abbreviated close out stage.  The prolonging of the close-out is a natural consequence of such factors as the escalation of commitment found in later stages of projects.  In a survey of projects, the elapsed time from the termination point to when all resources were released and stakeholders were adequately informed of close-down varied by project stage as follows:

Initiation stage: 1-2% of total elapsed time spent on the project

Planning stage: 2-10% of total elapsed time spent on the project

Execution stage: 5-25% of total elapsed time spent on the project

Close-out: no data available

There is a clear case that in early termination the need is for an extended close-out process to support the salvaging of residual value from the project.  As reported by one project manager

The project was stopped after 6 months with another 3 months left to run.  It was felt that what had been delivered so far was good enough. But we then had to persuade the stakeholders of this.  They just took the fact that the project had been stopped as an indicator that the products were unusable. A communication plan was developed but it took a month of hard communication work to really get people signed up to using the new processes.

Getting the return from early project termination

Project culling is an essential part of the portfolio management process, but as described at the start of this article, curtailed projects often end up continuing under the portfolio radar – “ the project office was reporting the projects as terminated, while effort, directly trackable back to the project, was still being applied in the organisation”.

Stopping a project poorly is a ‘double whammy’ hit on portfolio performance.  Not only are the planned project benefits lost or reduced, but cost savings anticipated from the termination are not realised.  

The challenge is to ensure that project culling is systematically and beneficially applied.  The ‘culling’ process must maintain the linkage to the normal portfolio ROI decision-making while taking into account the ‘termination risks’, i.e. the risks associated with stopping the project and realising the return from stopping the project.  Can we be successful in turning off the effort and expenditure being applied to the project?  If the focus of the culling is on reduction in costs; then can CAPEX costs genuinely be avoided?  If the focus is on release of resources; then how quickly and effectively will these resources really be redeployed?  

Without a process for determining and following through the termination of projects, ‘project culling’ becomes a subjective, political and tactical process which encourages ‘dog eat dog’ behaviours between project staff and undermines any attempts to implement strategic portfolio monitoring and control.

Project culling is a necessary part of portfolio management

The need to terminate projects within a portfolio is not a transient problem brought on us by the need to retrench.  It is a natural consequence of running portfolios with changing and competing priorities. This ‘culling’ processes must be made an integral part of the portfolio management process with clear and understood accountabilities into the portfolio management structure.  

To terminate projects successfully, we must address the technical and the human and political factors, involved in bringing it to a controlled and satisfactory conclusion.  Closing out a project must, most crucially, involve the management of the close down of the commitment levels of all stakeholders. Without this the project is likely to suffer a prolonged, ineffective and potentially costly death – most likely as not to be reborn out of the ashes at some later date.

Project close-out, as is culling, is a management decision.  It is not a technical response to a project finishing all its planned activities.  After project selection/initiation, it is senior management’s most important contribution to the success of its project investments – whether they are completed or culled – so it is an interesting question as to why the process of stopping projects still maintains its position as one of the least cared for members of the project life cycle.

This article was first published in The Project Manager magazine, March 2012 and is based upon a paper presented at the AIPM, 2009 in Adelaide, Australia.  https://www.academia.edu/36149916/Stopping_projects_early

 

 

 

 

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s