Download Project Management: Causes of Failure and Mitigation Strategies and more Study Guides, Projects, Research Project Management in PDF only on Docsity!
PROJECT MANAGEMENT
PROJECT APPRAISAL NOTES
What is a project? A project is the process of working on temporary activities to achieve a goal with a single unique definable purpose, end-item or result. Projects cut across organizational lines with something at stake, and involve unfamiliarity, uncertainty, and risk. Project Characteristics
- Projects have a clear and distinct piece of work.
- Every project is slightly different and unique.
- Projects are temporary activities.
- Projects have a final delivery at the end.
- Projects have a clear objective. Many people will believe that projects just exist in the corporate world. But it is not true. The reality is that thousands of everyday endeavours could pass as a project. We will realise that you may be already applying project structures without even knowing. I will look into such cases as organising weddings, buying a new phone or a car and compare against some typical corporate projects like buying a laptop. 1. WHY PROJECTS HAVE A CLEAR AND DISTINCT PIECE OF WORK? First, the project has a distinct work or activity that we are completing to achieve a defined goal. Worth to mention that it is usually squeezed into cost, scope, time and quality constraints, which we will pick up later in the post. The idea behind is that you do not have an infinite resource (unfortunately); thus, you need to make some trade-offs. Project work is quite different from day to day activities like brushing your teeth, eating breakfast or watching YouTube. A business equivalent would have their daily operations like processing transactions or building new parts. These are the day-to-day tasks that you need to do to maintain current living standards or business operations (a.k.a. Business As Usual or BAU). In contrast, when we talk about projects, we talk about something new, like buying a house or a car. If we consider the business environment, project activities would be building a product that would increase sales or purchasing a new third party software that would improve processes.
Ultimately, it is a new piece of work distinct from current business operations, which has a specific outcome at the end.
2. WHY EVERY PROJECT IS SLIGHTLY DIFFERENT AND UNIQUE? Each project is unique; hence, you are doing something new that has not been done before. Say, even such routine activities as buying a new iPhone could be a project in today’s society. The point is that your circumstances, options, preferences are changing, and each time it is no longer the same exercise. Let’s explore a phone example a bit more. You might be a proud owner of iPhone 7, which you acquired ages ago (like me); yet, the time has come to jump on the opportunity to get your hands on a new iPhone 12. In both cases, you are buying a phone and might even follow the same process. You would look for the best deal, complete research on best handsets out there and create a list of the best options for you. So far, nothing is new, right?! Well, to start with there are many more phones to choose from in the market now. Plus, you might have altered your preferences towards Android, or your salary has increased. Thus, your circumstances, options and preferences have shifted. Suddenly, buying a phone in 2021 is much different and unique compared to purchasing an iPhone 7. Thus, just like that, you have a project on your hands. Now, companies are facing a similar situation with their projects as well. Say it is time to refresh corporate gear and acquire some new laptops for all employees. Data is increasing, and they need additional RAMs and CPU to deal with it. Last time our business did it was five years ago, which is ages in today’s standards. Guess what, similar to you; a company may have a different budget, more choices in the market, or even changing preferences towards using more cloud computing. Five years later, the situation is quite different, and buying laptops or more broadly computing power is a unique endeavour. 3. WHY PROJECTS ARE TEMPORARY ACTIVITIES? When you are looking to accomplish a new goal, you will organise resources, like staff, materials, equipment and facilities for a defined period. When the goal is achieved, the resources will be disbanded, redistributed or repurposed for new projects. Therefore, a project by definition can be only temporary. Let’s consider how this applies to nearly everyday life, and I will use my recent experience to organise a wedding. You will likely start 12 – 9 months before the big event. Typically, you will create a plan, get one online or hire someone to do it for you. My endeavour is looking more and more like a project—time to place all those resources on the timeline.
5. WHY PROJECTS HAVE A CLEAR OBJECTIVE?
Finally, the project always has one or numerous objectives. You would not start a project just for fun. Well, actually, that could also be your objective. Goals might be evident in your endeavour; For example, you need to work from home, keep your back straight; thus, you need to buy a new office chair. In business, objectives will be more defined and documented. Usually, you are dealing with large sums of money, and eventually, you will need to be accountable for achieving set out goals. One day, you have visited your local bar and had this genius idea. Why don’t I organise a music event to increase the bar’s popularity and contribute to a local community? Just like that, you have your primary objectives. The project will go through multiple steps like agreeing on the band, getting the bar’s owner approval and sending invites. In the end, you will have your fantastic event, which will hopefully achieve your two objectives set out in the beginning. Businesses’ projects are no different. They also have objectives, like increasing efficiency in the sales process, finance department or attracting more clients. In our bookstore example, they may decide to create a project to redesign a website to appeal to a younger generation, encourage readership and attract more clients. The company might have multiple business objectives, and one project would align with one or several of them. Project Failure Each year, enterprise organizations around the world face astronomical project failure rates, often wasting millions of dollars per failed project. The same enterprises agonize over the causes of project failure, call in expensive consultants to assess and recover failing projects, and often abandon what originally seemed like well-planned, well-organized projects, destined for success. There is no single method or organizational structure that can be used to manage projects to success. Different organizations handle the functional projects differently. Some have fragmented and decentralized groups with multiple titles indicating that they are projects, while others might have large aggregations of project management professionals in a centralized support organization. Regardless of the physical arrangements of the functions, there is a common set of related organizational needs when properly delegated to the appropriate groups that can be used to save or manage projects. Besides a well defined charter, the list that follows summarizes some of the major project management functions that are necessary to achieve success in projects:
- Recruit and maintain adequate technical and non-technical resource skills
- Manage the allocation of scarce resources
- Define and collect operational metrics to support project and stakeholders decision making
- Promote efficient and effective communications
- Select and utilize technology related tools
Many project management professionals who work well in this area would say that the list consolidates a significant and sometimes overwhelming task. While managing projects is one of the oldest and most replicated accomplishments of mankind, one only has to look at the achievements of the builders of pyramids, the masons and the craftsmen of great cathedrals and mosques, the constructors of the Great Wall of China, and other manmade wonders of the world. On the other hand, managing projects in an enterprise is one of the newest disciplines with its roots in the latter 1950s for most organizations. As a result, projects in organizations have simply not had sufficient time to mature to the state of other business disciplines such as finance, operations, or accounting. Many references are made in various articles that point out that project management as a profession has not been very successful from an outsiders view. Projects have high failure rates and there is even some debate about projects and their value in the organization. Is it a needed function? Should it be outsourced? Our view is that projects hold the key to an organization’s productive future and done poorly can lead to the failure of a business. Done well, projects can give a firm a significant competitive advantage. Projects are a business lever, in that they allow the organization to pickup more weight than would be picked up without them. Why Projects Fail Project failure can happen in any organization and to any project. There are an infinite number of reasons for failure. Sometimes it’s out of the control of a project manager and/or the team members. Sometimes failure is controllable. Failed projects and people involved with the failure have some things in common. In both cases they are given prescriptions for “quick fixes” which typically prove to be ineffective and can sometimes produce disastrous side effects. Using a medical metaphor, flu’s are viral and are unresponsive to antibiotic drugs. For projects, technology is the antibiotic often prescribed. Suggestions like, upgrade your software for tracking the project, use the critical chain instead of the critical path, or use a Monte Carlo simulation to compute the project risks. In many cases, these powerful interventions fail because they are inappropriately applied. The goal of project management is to produce a successful product or service. Often this goal is hindered by the errors of omission as well as commission by management, project managers, team members and others associated with the projects. The purpose of this paper is to enable the identification of the common causes of project failures through the use of surveys and questionnaires to provide information which can be used to mitigate their occurrence and in many cases repair the damage caused and hopefully, recover the projects. Projects most commonly fail because there is a lack of attention and efforts being applied to seven project performance factors: Focus on business value, not technical detail. This involves establishing a clear link between the project and the organizations key strategic practices. The project plan needs to cover t he planned delivery, the business change required and the means of benefits realization.
Phases of Project Management At the root of any successful project is a project manager (PM). While some people think a project manager’s sole job is to remind everyone about deadlines and set up status meeting, that’s simply not the case. There is a science to what they do -- they have a deep understanding of and can perfectly execute the five phases of project management. In this article, each of the phases of project management is covered in detail. Developed by the Project Management Institute (PMI), the five phases of project management include conception and initiation, planning, execution, performance/monitoring, and project close. PMI, which began in 1969, is the world’s largest nonprofit membership association for the project management profession. It has set the standards for project, program, and portfolio management and offers training and certifications. 5 Phases of Project Management According to PMI, “project management is the application of knowledge, skills, tools, and techniques to a broad range of activities in order to meet the requirements of a particular project.” There are five phases of project management and if the lifecycle provides a high-level view of the project, the phases are the roadmap to accomplishing it.
Phase 1: Project Initiation This is the start of the project, and the goal of this phase is to define the project at a broad level. This phase usually begins with a business case. This is when you will research whether the project is feasible and if it should be undertaken. If feasibility testing needs to be done, this is the stage of the project in which that will be completed. Important stakeholders will do their due diligence to help decide if the project is a “go.” If it is given the green light, you will need to create a project charter or a project initiation document (PID) that outlines the purpose and requirements of the project. It should include business needs, stakeholders, and the business case. Note: There are plenty of PID templates that adhere to PMBOK®^ Guide guidelines available online that you can download to help you get started. Tip: When creating a PID, don’t get too bogged down in technical requirements. Those will be clarified and clearly defined in Phase 2. Phase 2: Project Planning This phase is key to successful project management and focuses on developing a roadmap that everyone will follow. This phase typically begins with setting goals. Two of the more popular methods for setting goals are S.M.A.R.T. and CLEAR:
- Scope Statement – A document that clearly defines the business need, benefits of the project, objectives, deliverables, and key milestones. A scope statement may change during the project, but it shouldn’t be done without the approval of the project manager and the sponsor.
- Work Breakdown Schedule (WBS) – This is a visual representation that breaks down the scope of the project into manageable sections for the team.
- Milestones – Identify high-level goals that need to be met throughout the project and include them in the Gantt chart.
- Gantt Chart – A visual timeline that you can use to plan out tasks and visualize your project timeline.
- Communication Plan – This is of particular importance if your project involves outside stakeholders. Develop the proper messaging around the project and create a schedule of when to communicate with team members based on deliverables and milestones.
- Risk Management Plan – Identify all foreseeable risks. Common risks include unrealistic time and cost estimates, customer review cycle, budget cuts, changing requirements, and lack of committed resources. Tip : When creating a WBS, work packages shouldn’t be longer than 10 days. Be sure to solicit the input and perspective from team members about their specific tasks. Phase 3: Project Execution This is the phase where deliverables are developed and completed. This often feels like the meat of the project since a lot is happening during this time, like status reports and meetings, development updates, and performance reports. A “kick-off” meeting usually marks the start of the Project Execution phase where the teams involved are informed of their responsibilities. Tasks completed during the Execution Phase include:
- Develop team
- Assign resources
- Execute project management plans
- Procurement management if needed
- PM directs and manages project execution
- Set up tracking systems
- Task assignments are executed
- Status meetings
- Update project schedule
- Modify project plans as needed While the project monitoring phase has a different set of requirements, these two phases often occur simultaneously. Phase 4: Project Performance/Monitoring This is all about measuring project progression and performance and ensuring that everything happening aligns with the project management plan. Project managers will use key performance indicators (KPIs) to determine if the project is on track. A PM will typically pick two to five of these KPIs to measure project performance:
- Project Objectives : Measuring if a project is on schedule and budget is an indication if the project will meet stakeholder objectives.
- Quality Deliverables : This determines if specific task deliverables are being met.
- Effort and Cost Tracking: PMs will account for the effort and cost of resources to see if the budget is on track. This type of tracking informs if a project will meet its completion date based on current performance.
- Project Performance: This monitors changes in the project. It takes into consideration the amount and types of issues that arise and how quickly they are addressed. These can occur from unforeseen hurdles and scope changes. During this time, PMs may need to adjust schedules and resources to ensure the project is on track Tip : Review the business case at the end of each phase and make adjustments to the project plan as needed. Phase 5: Project Closure This phase represents the completed project. Contractors hired to work specifically on the project are terminated at this time. Valuable team members are recognized. Some PMs even organize small work events for people who participated in the project to thank them for their efforts. Once a project is complete, a PM will often hold a meeting – sometimes referred to as a “post mortem”
- to evaluate what went well in a project and identify project failures. This is especially helpful to understand lessons learned so that improvements can be made for future projects. Once the project is complete, PMs still have a few tasks to complete. They will need to create a project punchlist of things that didn’t get accomplished during the project and work with team
PRINCIPLES OF PROJECT APPRAISAL
Project appraisal is the process of assessing, in a structured way, the case for proceeding with a project or proposal, or the project's viability. It often involves comparing various options, using economic appraisal or some other decision analysis technique. A. INDEPENDENCE AND IMPARTIALITY Independence, objectivity and impartiality of evaluators and the appraisal process provides the credibility and legitimacy to the appraisal: 1. The appraisal process should be independent and impartial with regard to the activities being evaluated and free from any pressure or influence that evaluators may receive in carrying out an appraisal. Impartiality enhances the credibility of appraisal and avoids bias, and independence provides legitimacy and helps to reduce the potential for conflicts of interest. Policy makers and programme managers should not evaluate their own work or manage the appraisal process. The requirement for independence and impartiality must transcend all stages of the appraisal process including planning, formulation of terms of reference and the selection of the appraisal team. Evaluators should enjoy the full independence in carrying out appraisals. In cases where evaluators are exposed to pressure or influences as to the findings, analysis or conclusions of the appraisal, they should inform the Independent Appraisal Unit at UNODC as soon as possible. 2. The appraisal process should be independent from programme/project delivery and the management of the activities being evaluated, including the management and administrative structures that are responsible for programme/project delivery. B. STAKEHOLDER PARTICIPATION IN APPRAISAL Participation of various stakeholders in the appraisal process is paramount. 1. The various stakeholders must participate in the appraisal process in order to ensure that the appraisal findings fully reflect the different interests and needs of the many partners that are involved in activities. In this regard, it is important that various stakeholders and other partners participate in the appraisal process by providing their views and interests on the appraisal in question. The terms of reference should address the concerns of all stakeholders. The roles of each stakeholder during the appraisal must be clearly defined. 2. In the case of the appraisal on activities financed by the extra-budgetary resources, it is particularly important that both donor and recipient countries are involved in the process of appraisal by providing inputs to the formulation of terms of reference. They should also express their views on the impact of the programme/project activities as well as discuss the results of the appraisal. C. COMPETENCE
Evaluators should remain competent and rigorous in their practice of appraisal, and fairly represent their competence and experience to organizations and other stakeholders. 1. Evaluators should possess the education, knowledge, expertise, abilities, skills and experience appropriate to undertake the proposed appraisal of a particular field. 2. Evaluators should professionally represent their competence and should not practice beyond the limits of their professional training and competence. In this regard evaluators should decline to conduct appraisals that fall substantially outside those limits. 3. Evaluators should continually seek to improve their competences in order to remain relevant and to provide the highest level of performance in their appraisal work. D. INTEGRITY/HONESTY Evaluators must show honesty, integrity, objectivity and fairness in the entire appraisal process. 3
- Evaluators should discuss honestly with the organization and other relevant stakeholders issues concerning costs, tasks to be undertaken, limitations of methodology, scope of results likely to be obtained and uses of data resulting from a specific appraisal. It is the primary responsibility of the evaluators to initiate discussions and clarifications on these matters. 2. Evaluators should record all changes made in the originally agreed appraisal plans and the reasons why the changes were made. If those changes would significantly affect the scope and likely results of the appraisal, the evaluator should inform organization Independent Appraisal Unit in a timely fashion of the changes and their likely impact. If the changes are likely to increase the appraisal costs, then authority must be sought from organization before the work can proceed. 3. Evaluators should disclose any roles or relationships they have concerning the activities being evaluated that might pose a significant conflict of interest with their role as an evaluator. Any such relationships that pose potential conflict should be raised at the time when the assignment is being offered to avoid proceeding with an appraisal where there may be conflict of interests. 4. Evaluators should not misrepresent their findings or views of those they interview. They also should not knowingly make, prepare or certify as true any oral or written statement, which is false, incorrect, misleading or incomplete. Evaluators must always acknowledge or cite sources of information and avoid plagiarism or other unethical behaviour. 5. Evaluators should not receive any instructions, pressure, or influences from any person, which may distort the objective findings, analysis or conclusions of the appraisal. Evaluators should also enjoy access to any sources of information or data, which they find necessary for the appraisal. Others include:
- Appraisal is a continuous process (continuity).
- Appraisal should involve minimum possible costs (inexpensive).
- Appraisal should be done without prejudice to day to day work (minimum hindrance to day to day work).
- Appraisal must be done on a co-operative basis in which the entire staff and the board members should participate (total participation).
Shadow Prices: Meaning, Need, Limitations and Uses Meaning of Shadow Prices: Shadow prices reflect true values for factors and products for the calculation or estimations of prices in social cost-benefit analysis. J. Tinbergen defines them, “Shadow prices are prices indicating the intrinsic or true value of a factor or product in the sense of equilibrium prices. These prices may be different for different time periods as well as geographically separate areas and various occupations (in the case of labour). They may deviate from market prices.” According to E.J. Mishan, “A shadow or accounting price…. is the price the economist attributes to a good or factor on the argument that it is more appropriate for the purposes of economic calculation than its existing price if any.” Need and Determination of Shadow Prices: In developing countries for project evaluation the distribution of factors on the basis of market prices is imperfect because there exist fundamental disequilibria which are reflected in mass underemployment at existing wage levels, in the deficiency of funds at existing interest rates and in the scarcity of foreign exchange at the prevalent exchange rate. In such a situation, the equilibrium level of wages would be much below the market wage, the equilibrium interest rates would be higher than their market rates, and the equilibrium rate of exchange would be lower than its market rate. In order to overcome these difficulties, J. Tinbergen, H.B. Chenery and K.S. Kretchemer have emphasized the use of shadow or accounting prices for the following reasons:
1. Imperfect Market Mechanism: The price mechanism operates imperfectly in developing countries. Market prices do not correctly reflect relative scarcities, benefits, and costs. This is because perfect competition is entirely absent. Structural changes do not respond to price changes. Institutional factors distort the existence of equilibrium in the product, labour, capital and foreign exchange markets. Thus prices fail ‘to reflect and transmit the direct and indirect influences on the supply side and the demand side. All such difficulties are overcome with the help of shadow prices. Fiscal, monetary and other policies also help in bringing the market prices of products labour, capital and foreign exchange in conformity with their shadow prices and thus make investment projects a success. 2. Wage Rates: In developing countries, there exist fundamental disequilibria in the labour market which are reflected in mass underemployment and unemployment at existing wage rates. In such economies, wages are much lower in the non-organised agricultural sector. There is also surplus labour in rural areas whose marginal product is zero or negligible. But it cannot be assumed to be zero in calculating the cost of such labour on construction works. On the other hand, wages are much higher than the opportunity cost of labour in the industrial sector where labour is organised in strong trade unions. Therefore, unadjusted market wages of labour cannot be used for calculating the cost of such labour on investment projects. In such a situation, the equilibrium level of wages would be much below the market wage in the rural sector.
To solve this problem, an artificial equilibrium is achieved in the balance of payments by fixing a higher shadow exchange rate than the official exchange rate. For this, weight is attached to the cost of foreign exchanges in the project.
5. Inflationary Pressures: Developing countries suffer from inflationary pressures because the market mechanism operates imperfectly due to a number of socio-economic and administrative obstacles. Even otherwise, rise in prices are inevitable in the development process. So actual market prices do not reflect social benefits and costs. Some prices are fixed by the government. Others are free, but are influenced by restrictive trade practices or monopolies. Still others are influenced by quantitative controls. When prices rise, there is overvaluation of domestic currency. The prices of imported goods for projects underestimate their real cost. Thus there is need for shadow prices in the case of investment projects in different sectors of the economy. A factor that is expected to be in short supply should have a shadow price higher than its market price, while a surplus factor should have a lower shadow price than its market price. Thus the shadow price is the price which would prevail if prices were equilibrium prices. Limitations of Shadow Prices: The following are the limitations in the determination of shadow prices:
- The calculation of shadow prices pre-supposes the availability of data. But adequate data are not easily available in less developed countries.
- In order to establish the intrinsic value of a factor or product requires the existence of full equilibrium in all markets. In an underdeveloped economy which is characterized by a number of fundamental disequilibria, the knowledge of full equilibrium conditions for the entire economy is not possible. Thus the notion of shadow prices corresponding to intrinsic values is arbitrary.
- The assumption of full employment equilibrium in the whole economy makes the concept of shadow prices indeterminate. It requires a complete knowledge of demand and supply functions which are based on the existing socio-economic institutions in the economy. Thus shadow prices are difficult to ascertain under the existing institutional framework of underdeveloped countries. 4. Another problem arises with regard to the time dimension. The concept of shadow prices is static and timeless, because shadow prices are used to overcome the difficulties involved in project evaluation when factor prices change over time. All inputs and outputs are valued at fixed shadow prices in such cases. This is not realistic because investment projects relate to long periods. Hence the concept of shadow prices remains a static one.
- Another practical difficulty relates to the use of shadow prices in the economy where the private enterprises buy inputs and sell outputs at market prices. The government, on the other hand, uses shadow prices for the evaluation of its projects but buys all inputs at market prices and sells outputs at competitive market prices where it does not possess a monopoly.
- The determination of shadow prices is difficult in the case of projects with high capitalintensity and which are substitutes and complementary to each other. Suppose there are two projects in which the input of one is the output of the other and vice-versa.
