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The 3 most important numbers in project management

Jed Simms
August 14, 2012

There are three numbers that should be indelibly burned on every sponsor, steering committee member, investment committee member and project manager’s mind when approaching projects. These three numbers are 15%, 35% and 5%—let me explain.

15% of projects fail.
They may not finish, they may vaporise, they may be cancelled, in some cases they may actually be implemented and found to either not work or not be used; by whichever of these means the project fails, the money spent is wasted and no value is delivered. Worse, often in the process of these projects failing, real existing value is destroyed.

(Another way of looking at this number is that of every $1 million spent on projects, $150,000 will be wasted.)

However, you don’t want a 0% failure rate; you want to invest some funds in speculative projects and ideas that you don’t know are feasible or whether they will come off. In our experience, a reasonable ‘failure’ rate of formally cancelled projects is about 5%. This enables innovation with minimum waste. Having an acceptance that some projects will and can be cancelled also prevents projects being ‘condemned to completion’.

Only 35% of projects deliver efficiently. By ‘efficiently’ I mean ‘on time, on budget and to specification’. These are often the project manager’s personal measures of success, but even so the majority of projects still fail on one or more of these three efficiency criteria.

While to be commended, projects are not commissioned to enable ‘efficient’ delivery as this is a project performance factor rather than a business goal. Projects are commissioned to deliver business value and, as many a project successfully delivered to time and budget and specification will attest, you can meet these three measures and still not deliver value to the organisation.

The key measure of project success is effectiveness: did the project deliver the outcomes and benefits expected? Did the project improve the performance of the organisation? The fact that a project can be delivered ‘to specification’ but not deliver value is an indictment on both our needs specification and value delivery processes.

Only 5% of projects are delivered effectively. This is the number of projects that deliver on time, on budget, to specification and deliver all of the expected and available outcomes, benefits and value. This number means that 95% of projects started are not going to deliver the full value expected.

Either way you look at these numbers, they are terrible and have not changed since AD Little did its first measure of project success in 1991. The reasons why these figures have not improved are many and include:

  • Projects are not set up or run to deliver value (to increase the 5%); they are set up and run to deliver outputs or ‘products’ or deliverables. The difference can be about 80% of the value!
  • Projects are still primarily measured with the ‘on time/on budget’ metric as this is more visible and easier to measure than the harder to measure benefits and value measures. So we’re still using simple, even if wrong, measures.
  • Many senior management teams still focus almost exclusively on cost. Indeed, many organisations seem to be content to see their projects come in late—which usually destroys more value than going over budget—but go ballistic if they go over budget. With this myopic focus on cost they basically have to ‘hope’ that the value will follow. As the figures show, it doesn’t.

So, if we’re going to change these numbers we need to change how we deliver projects and move our focus from mere project delivery to full value delivery.

The good news is, focusing on value delivery simplifies project delivery and makes meeting all of the project success measures more achievable.

Jed Simms
Jed Simms is the founder and co-creator of Totally Optimized Projects, an internationally recognised strategy-based, business-driven approach to delivering projects. He specialises in project governance and control and value and benefits management. He is also the founding partner of consultancy Capability Management.
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One thought on “The 3 most important numbers in project management

  1. In short, don’t waste time, money or effort if it doesn’t add value to the project. I agree whole-heartedly. More EVM discipline is needed as well. Another point I’d like to hone in on is point three of the reasons the numbers have not improved. One tactic here could surely be if the PMI, AIPM etc etc actually put in strategies to educate the executive levels in project management. How many times do you see a senior manager, branch head etc turn up to a PM association meeting … not often!? A ‘P3 for executives’ course is needed perhaps.

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