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RISK ADVISORY SERVICES
Risk Advisory Services
Project Risk Management
James O’Callaghan
October 2006
1
Increasing project commitments being made
Commitments are up, with increases in:
• 81% projects
• 88% project complexity
• 79% total project budget
….driven by compliance and performance
Key drivers for the increase:
• 74% by new products/services and business process improvements
• 48% by technology refreshes
• 24% by governance and regulatory
QUESTION??
How committed is your organisation to project management???
…..but do these stats mean that businesses are more committed to project management?
2
Introduction
James O’Callaghan
KPMG Hong Kong
Risk Advisory Services
IT Advisory Services
Project Risk Management
3
Key Points
Projects are increasingly seen as the strategic enabler for an organization
As project management evolves as a preferred management approach within an
organization, the complexity of the associated project risk management increases
significantly
There are ample methodologies around, but application is the key
A comprehensive risk solution framework is required – high, wide and independent.
Integrating people, process and technology
Too much focus on the project manager, and not enough on the whole project
“team”
Portfolio management offers the opportunity to do more with less
4
Agenda for this presentation
1 Introduction• some definitions• the traditional project dynamics • business versus technology projects
2 Projects• the past • the many reasons why they fail• the simple reason
3 Project Management• accidental or professional • methodology application • projectisation• project manager involvement and optimism
4 Organizational Implementation• from PMO to ePMO• maturity development• project to enterprise risk management
5 KPMG Project Management Survey • why punish your bottom line?
5
1. Introduction
• some definitions• the traditional project dynamics • business versus technology projects
6
What is a Project?
“…managing a collection of related tasks and activities which are undertaken within a specific timeframe to achieve a specific goal…”
“…the adoption or recognition by an organization that projects arethe enabler for strategy execution …”
“…the investment in management techniques to effectively and efficiently achieve the desired outcomes …”
Some Example Definitions:
7
The traditional focus of project risk management is on the dimensions of:
ScopeCostTimeQuality
Sounds simple ?
Balancing the constant tension between these dimensions is anything but simple…and its getting harder
The Traditional Dynamics of Project Management
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Important to accept the integrated relationship between business and IT
Pure IT projects maybe a technology refresh or upgrade. Pure business projects maybe a market analysisProjects that enable enterprise strategy are BOTH business and IT.
You can not divorce:
Convergence – Business and IT Projects
People from process; andProcess from technology.
9
2. Projects
• the past • the many reasons why they fail• the simple reason
10
The Past
50% of IT projects deemed failures (Meta
Group)
28% of IT projects are cancelled/ not
implemented (Standish Group)
75% exceeded time deadlines and more than
50% substantially exceeded budget (KPMG)
Only 33% of outcomes were viewed as
positive (Boston Consulting Group)
……or it is the present?
11
The many reasons why projects fail
The financial loss is large and often unrecoverable!Source: Survey of 256 UK companies
12
The many reasons why projects fail
“Silo vision”on IT projectsNo standard vision / communication on the IT project progressPoorly defined project scopePoor project managementIncomplete requirements/specificationsPoor project quality controlConflicts between IT projectsOrganisational politicsLack of proper project resourcesLack of proper project change management standards & proceduresNo study for (technical) feasibilityScheduling pressuresUnresolved frictions when treating project interdependencies Usage of immature / poor technology infrastructureInadequate testing procedures/controlsProblems are hidden for management - "shoot the messenger" syndromeResource draining - “hardest shouting man” syndromeIT Project crisis management instead of IT project risk managementHidden costsUnrealistic expectations ……and the list goes on
13
The simple reason
People ….who make up the organisation
….however, we’re only human!
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3. Project Management
• accidental or professional • methodology application • projectisation• project manager involvement and optimi
15
Whilst Project Management is about common sense
Common sense is often a ‘casualty’ when:
Egos;Internal Politics;Inexperience;Pushy vendors;Cost constraints; andTime pressures
…..“Get in the way”
“I don’t know why they call it common sense when it isn’t all that common!” Manager
16
Project management is an art form an not a science
A good project manager will:
• Fully understand the subject matter
• Be able to work with all types of people
• Be able to deal with ever changing environment and situations
• Be able to manage up down and sideways
• Apply a project methodology and make it work for them
A good project manager will not:
• Start a project unprepared
• Seek political alliances and alienate groups or individuals
• Blindly apply a proven methodology without full understanding how to make it work for them
• Shy away from making difficult decisions
For example……
17
Project Manager – Professional or accidental
Is it common sense to get onto a plane when you know the pilot has received little or no training ?
The “accidental” project manager – in wrong place, wrong timeThe “professional” project manager – training, certification, continuous development
Project Management “Profession” – very low barriers to entry, but is evolving rapidly. Project managers require a broad balance of skillsIncreasing specialised roles Capability versus experience versus time
….Which one are you?
18
Project Management Methodologies – which one?
A number of methodologies or knowledge banks have emerged. Which one to use?
Project Management Institute’s (PMI) Project Management Body of Knowledge (PMBOK);Office of Government Commerce’s (OGC) Prince 2;Consulting organisations;Vendor-based methodologies; and/orOne of many hybrids.
Ultimately, is the methodology:
EstablishedCommunicated and trained; andConsistently applied?
19
Traditional focus and adoption of methodologies
Most methodologies focus on the project lifecycle, not business lifecycle.
Project risk processes traditionally focus on Project (not programme) Risk Management.
……having a methodology doesn’t necessarily equate to project success
20
Methodology investment in the project manager over the project team
Methodology investment appears to be on:
The project manager as the single person who will “make it happen”; and
Enterprise tools and technology to aid deployment.
Insufficient investment appears to be on:
Whole project team training; and
Whole of enterprise awareness
Is this under investment in the project “team” hindering the application of methodologies?
21
Project managers and the trend towards increased “projectisation”
We have observed the increased “projectisation” of organizations
Drivers include:
Greater volume of knowledge/information based work;
Need for real time reaction to market conditions; and
Greater number of networked, but often smaller, business initiatives.
Organizations are increasingly adopting a “stronger” matrix form of structure (refer PMBOK)
Promotion of “project” skills as core or common
22
Project managers – Are they involved ?
Often the person who needs to carry out the project is left out when all the important decisions are made – accountability versus authority
The project manager’s role is pivotal in project governance
Project complexity assessment –Need to involve project manager to balance:
Phasing design (workstream to portfolio);
Resource capabilities (project team to enterprise resources); and
External / market capabilities (current suppliers to market).
23
Project managers – The eternal optimists?
Project managers are often optimistic. They need to lead a group of people to achieve what often appears impossible. However, sometimes it is.
How many projects have you been on that were terminated ?
How many projects have you been on that were reborn in another form ?
Why does this happen?
Seeing the data, but not believing the data, is unfortunately too common.
Optimism has a good side, but also a bad side
Project managers can become too focused on “outputs”, not “outcomes”
24
4. Organisational Implementation of Project Management
• from PMO to ePMO• maturity development• project to enterprise risk management
25
Implementation Summary
The implementation of project management within an organization is commonly associated with:
Enterprise Project Management Offices;
Capability development against maturity levels;
Portfolio management; and
Enterprise risk management.
26
The PMO – Administrative or Strategic
With increased “projectisation”, the role of the Programme Management Office (PMO) has, or needs to, evolve:
The “P” can represent project or programme; andShould now also be an “E”for
Enterprise PMO.
Not a new concept, the strategic positioning and breadth of responsibilities is gaining momentum
27
Project Management Maturity
Within Project Management there are typically five levels of maturity. Below are the various components of the Berkley model. More popular alternatives include Project Management Solution's (PMI) Project
Management Maturity Model (PMMM) and Software Engineering Institute’s (SEI) Capability Maturity Model (CMM)Some organizations have developed a hybrid
28
Maturity and relative positioning
Evolution should be the capability development focus
Relative, not absolute, assessments are preferred
Establish progressive targets for year 1, 2, 3, etc
Recommend external assistance to provide creditable “benchmark”. Best practice
versus your practice
5. KPMG Survey
•why punish your bottom line?
30
KPMG Thought Leadership
KPMG is an industry thought leader;
KPMG conducts research activities in many disciplines;
Our research is frequently referred to by many other authors and the media;
2005 Global IT Project Management Survey
31
Survey Summary
The Asia-Pacific region is lagging behind our international counterparts in embracing Programme Management:
Higher incidence of project failure in the past 12 months across the majority of industry groups; and
A lower percentage adoption of Programme Management Office (PMO) across all industry categories and fewer years in operation
Why keep punishing your bottom line?
32
Summary – A Board Level Issue
Projects are an integral part of business and are a key vehicle to realising business strategy
Average failure is over USD$10M:
What Board can easily accept an unplanned write-off of this magnitude?
Stakeholders are even more unforgiving when it comes to failed projects and the resultant impacts on the bottom line
Failed projects are now becoming subject to more and more litigation
33
Summary – Investment for the Future
Projects are the conduit for change in an organization
Organizations need to invest in their programme and project infrastructure
The day of the bottomless project cost centre (i.e. “the black hole”) is over
34
Many survey participants defined the PMO as follows:
In essence = an administrative function
KPMG’s definition of a PMO for today and the future is:
In essence = an strategic function
Evolution of the PMO
“A function supporting a number of projects with prime responsibility for tracking and reporting on progress”
“A strategic function responsible for co-ordinating, prioritising, overseeing and monitoring an organization’s projects to achieve business strategy and benefits”
35
The major reasons for failure were described as:
Unclear / changing scope requirements;Poor project management;Poor resource management; andPoor cost management
It is alarming to note that “poor project management” is still given as a reason for project failure
So why are projects still failing? – The reasons
Project management is no longer a “nice to have”, it must be a core competency of an organisation
36
So why are projects still failing? – It’s time for clarity
Today’s leading Project Managers and Programme Managers, have vastly differing, and sometimes rather subjective measures
37
Average PMO maturity and project performance
Asia-Pacific is behind the Rest of the World in terms of the average number of years the PMO has been in operation
PMO maturity is an important factor in project success;
The number of years a PMO has been in operation is not, by itself, a valid measure of PMO maturity; and
The most important elements of PMO maturity:Executive sponsorship;PMO buy-in / acceptance; andAn established programme governance framework
38
PMO Maturity and Project Performance
39
Govern to achieve Establish an end-to-end integrated governance framework
Prioritise to realise Establish an enterprise-wide prioritisation processes to get more from less
Align and adjust Ensure all initiatives are clearly aligned with business strategy and maintain alignment
Safeguard value Control benefits leakage by clearly defining what, how and when you will receive value – and regularly reassess
Hold to account Clearly define individual accountability for realising benefits, and integrate into operational plans
Invest in people and process
Recognise project disciplines and develop capability, capacity and risk models to suit your organisational maturity and culture
We have found that applying these Golden Rules as key project principles will increase any project’s chance of success…
KPMG Golden Rules
40
7. Summary
41
Key Points
Projects are increasingly seen as the strategic enabler for an organization
As project management evolves as a preferred management approach within an
organization, the complexity of the associated project risk management increases
significantly
There are ample methodologies around, but application is the key
A comprehensive risk solution framework is required – high, wide and independent.
Integrating people, process and technology
Too much focus on the project manager, and not enough on the whole project “team”
Portfolio management offers the opportunity to do more with less
