The Project Management Institute’s 2016 study shows that organizations around the world waste an average of $122 million for every $1 billion spent on projects as a result of poor project management practices.
Poor project management practices are costing us big time, says the Project Management Institute’s (PMI) 2016 Pulse of the Profession®: The High Cost of Low Performance study. Wasting $122 million for every $1 billion spent represents an increase of 12 percent over last year.
The 2016 study features feedback and insights from 2,428 project management practitioners, 192 senior executives and 282 Project Management Office (PMO) directors from a range of industries including government, financial services, information technology, telecom, energy, manufacturing, healthcare and construction. It also includes insights from eight corporate leaders and 10 PMO directors and directors of project management. The global totals in the report represent feedback from North America, Latin America, Europe, the Middle East, and the Asia Pacific region.
Of the geographic regions covered in the report, the Middle East reported the lowest average monetary waste on spending projects: $99 million per $1 billion spent. Brazil reported the highest average waste on project spending: $202 million for every $1 billion spent. North America came in under the global average, wasting on average $119 million for every $1 billion spent.
Of the industries included in the study, government agencies had the lowest average monetary waste on spending projects: $108 per $1 billion spent (does this surprise anyone else as much as it surprises me?). Financial services reported the highest average waste on project spending: $149 million per $1 billion spent.
PMI speculates that the following factors are influential in the amount of project management waste a company might incur.
- Value: Just over half of organizations fully understand the value of project management, a number that has remained the same over the past five years.
- PMO: The percentage of organizations with a PMO has also remained the same for five consecutive years, with nearly seven in ten having a PMO. Furthermore, the types of PMOs in organizations have remained unchanged since PMI began tracking them six years ago; two-thirds of organizations report having a department-specific, regional, or divisional PMO(s), and nearly half of organizations report having an EPMO.
- Practices: Nearly six out of ten organizations use standardized project management practices throughout most or all of the enterprise. But only one in four uses standardized project management practices organization-wide, a decline of three percentage points from one year ago.
- Training and Development: The percentage of organizations providing project management training on tools, competency development, and a defined career path remains unchanged since 2012. Just under half of organizations report having a formal knowledge transfer process — a decline of five percent since last year. This leads to stressed out and ineffective PMs.
- Executive Sponsors: The average percentage of an organization’s projects with active sponsors declined compared to last year: only 59 percent of projects on average have actively engaged executive sponsors.
- Strategy Alignment: Less than half of organizations report high alignment of projects to organizational strategy, a number that has been fairly constant for the past three years. And, organizations report that, compared to last year, fewer of their projects are strategic initiatives (an average of 48 percent of projects, down from 54 percent in 2015).
- Maturity: The percentage of organizations with high project management maturity has not changed for the past six years. Program and portfolio management are equally established in organizations, with only one in six reporting the high maturity of each.
- Benefits Realization: The percentage of organizations reporting high benefits realization maturity is at 17 percent, static for the past three years. And, the percentage of organizations reporting low maturity in benefits realization is trending upward—nearly four in ten now report low maturity.
The report shows that organizations that effectively use formal project, program and portfolio management practices waste 13 times less than organizations that don’t, but it also demonstrates that few organizations are successfully embracing these capabilities. And little improvement is occurring from one year to the next.
So what should PMOs do to stop hemorrhaging money? PMI offers these recommendations:
Look beyond technical skills
Effective project and program management relies on blending technical skills with broader leadership and business qualities. The most successful organizations empower well-rounded professionals capable of overseeing long-range strategic objectives. Organizations that expand their focus in this way see 40 percent more of their projects meet goals and original business intent.
Recognize the strategic role of an enterprise-wide project management office (EPMO) and get it aligned to strategy
Project Management Offices are essential to overseeing strategic initiatives throughout an organization. Organizations that align their EPMO to strategy report 27 percent more projects completed successfully and 42 percent fewer projects with scope creep.
Drive success with executive sponsors
Executive sponsors are uniquely positioned to overcome barriers to successful project outcomes. They are able to secure funding, champion strategies and objectives and foster collaboration within an organization. As a result, when more than 80 percent of projects have an actively engaged executive sponsor, 65 percent more projects are successful.
It was terrific to see so many of the best practices we’ve talked about here at The Fast Track mentioned in this report. I’m sure we’re now going to get the question: given my degree of power as an individual PM, how can I lessen the waste on my projects? I think what PMI says about sponsors is critical. Even if you’re not handed a sponsor, you can proactively solicit one – especially if a project is high-profile and important to the overall success of the organization.
Advance communication is key too. As we’ve recommended before, your first step on a project is to get your purpose and anticipated results down on paper and share them with your sponsor and all relevant stakeholders. Scope creep and over-budget projects are notoriously caused by misunderstanding, or various parties with different ideas about project outcomes. So now is the time to invite detailed feedback, and don’t proceed with development until everyone agrees.
Posted in Project Management, Team & Project Management | Tagged budgeting, EPMO, geographic differences, PMI, PMO, portfolio management, project management, scope creep, skills, sponsors, strategy