What does the Board and Executive team need to measure to ensure their project investments deliver their strategy, desired business results and optimized value?
Deming defined a process as being in control when “the goals of the system can be predictably met better than 95% of the time.” On this practical measure projects are way out of control.
Claimed success rates for projects and strategies vary from 40% to only 5%. Predictability is ephemeral as each project is a challenge to complete.
You can only manage what you can measure – and the common measures for projects are inadequate. “On time, on budget, to specification” are not meaningful measures of strategy, value or success.
To control projects you need five key measures that are missing in most organizations.
You need to measure:
- Your strategy’s execution
- Each project’s likelihood to succeed
- Each project’s actual progress
- Each project’s actual value (to be) delivered
- Your organization’s ‘change agility’.
These five measures equip you to:
- Ensure your strategy is successfully delivered and the results are fully realized
- Eliminate the massive downstream waste caused by discoverable project deficiencies
- Identify late projects immediately so action can be taken to preserve the business value
- Maximize, optimize and realize all of the available business value
- Ensure your organization can respond to market opportunities and challenges.
These five measures can reduce your project costs while increasing your results, financial returns on investment and competitiveness.
It really is that simple.
NB Some board members have been depressed when reading of these five measures because it crystallizes to them just how far they are from where they need to be. But 'plugging the gaps' is simple, it just takes the will to do so (and the relevant TOP tools).
1 How do you measure your strategy’s execution?
Do you know exactly how your project portfolio is executing your strategy and when each element will be delivered?
Capital management is much more than a financial exercise—it is a strategic process.
Strategic capital management requires you to formally measure in detail each project’s specific strategic contribution. You need to objectively measure which detailed strategic imperatives each project contributes to, how it contributes and how much.
NB While your organization may have four to six overall ‘strategies’, it can have 30-40 ‘strategic imperatives’ required to deliver these strategies. You need to be measuring and controlling your strategy’s execution at the detailed imperatives level.
The all-too-common ‘tick which overall strategy you align to’ approach negates the opportunity to effectively measure your strategy’s execution.
When you measure each project’s strategic contribution in detail you can track exactly which strategies and imperatives are (and are not) being implemented, by which projects, when each element will be delivered and the value that will then be realized.
You will then be in control of your strategy’s execution and the delivery of the planned results.
2 How do you measure each project’s ‘likelihood to succeed’?
Do you really believe the business cases that are presented to you? Do you assume that the project is set up for success? Are you confident you are truly optimizing your capital investments?
Most of the problems that lead to downstream project cost blowouts and delays are visible at the business case stage—if you know where to look.
Conventionally, business cases are reviewed and the costs scrutinized in detail. Alternative solutions may be evaluated and the ROI/NPV computation checked. But this is all superficial. To measure if the project is set up to succeed you need a much more detailed, rigorous assessment.
Each project needs to be thoroughly dissected to objectively identify, measure and score each gap or deficiency so as to calculate its likelihood of success.
This requires an in-depth analysis of the project’s strategy contribution, value equation, its feasibility, proposed approach and deliverability, as well as the project’s relative priority – each assessed across multiple dimensions.
An objective ‘likelihood to succeed’ measure puts you in control of your project’s delivery quality so as to avoid the all-too-common large-scale levels of waste, delay and cost blowouts.
3 How to you reliably measure each project’s delivery progress?
Do you only hear of project disasters when it is too late to act? Do you only see approved projects again if they come back to ask for more funds, or more time? Do you actually know if your projects are on track to deliver their promised value?
Conventional project reporting revolves around time, cost and quality. Progress is reported in terms of ‘percentage complete’ and illustrated in Gantt charts. On occasions ‘Earned value’ can be calculated and reported. None of these measures or reporting methods reliably convey the project’s true progress.
The simple rule to remember is, “Ninety-five percent complete is 100% incomplete.” Tracking progress through the “percentage complete” measure is useless. Only tasks verified as “100% complete to plan” represent real progress towards the delivery of the business value.
You should know each month which measurable deliverables are due to be verified as delivered, and whether or not they have been 100% delivered to the required quality. If they have been delivered – your project is on time and is on track to deliver the desired business outcomes and value.
If they have not been delivered, your project is running late and the business value (ROI) will be reduced by at least the duration of the delay.
Only when you measure progress by verified 100% completion will you be in control of your projects and know their true progress and when the value will be realized.
4 How do you measure the actual value (to be) delivered?
Do the financial benefits ‘vaporize’? Is it claimed that there were so many changes or variables that the benefits are no longer measurable or applicable?
Perhaps surprisingly to most, the value of the financial benefits contained in the business case is its least stable element. This financial value can legitimately change during the project due to factors outside the control of the project—caused by changes in interest or exchange rates, changes to market conditions or competitor actions, for example. The benefits’ values are, therefore, not fixed but potentially dynamic and need to be tracked and measured.
Each financial benefit’s value drivers – its bases, assumptions and inputs – need to be clear, tracked and measured throughout the project and beyond so that any changes, whether caused by the project or not, can be identified and their impacts quantified. In a worse case scenario, these changes can cumulatively cause the project to become unviable and need to be stopped.
Knowing the up-to-date value of your benefits puts you in control of each projects’ viability and eliminates wasting time, effort and costs on projects that are no longer worthwhile. It also ensures you realize all of the available value.
5 How do you measure your ‘Change Agility’?
Are you frustrated at your organization’s seeming lack of agility — its inability to respond rapidly to new opportunities or market events?
Your organization’s ‘change agility’, its ability to respond to competitor actions, leverage new technologies and take advantage of market opportunities, is determined by its ‘strategic execution and value delivery capability’ – its capability to reliably, quickly and consistently deliver strategies and projects. This capability can be measured.
Your organization’s ‘core capabilities’ need to be far more than just ‘efficient’ they need to be highly effective and competitive. You now need to extend this need for competitive effectiveness to strategy execution and value delivery to your 'delivery capability'.
To be and remain competitive you need to be ‘change agile’.
Your level of agility/capability determines the types of projects you can successfully deliver. A low level of capability means you just can’t do what you need to do fast enough, effectively or at low cost. As a result your project investment returns are marginal, breakeven or even negative over time.
To remain competitive, to take advantage of new technologies and deliver the desired results fast, you need to be agile. To be agile you need a high level of value delivery capability—yet most organizations around the world have low capability. You therefore need to measure your organization's current level of capability so that you can uplift it to the level required to successfully deliver all of your plans and portfolio.
Then you will be in control of your organization’s ‘change agility,’ your future responsiveness and competitiveness.
Taking Action
These five measures can significantly increase your project results, increase your investment returns and improve your strategic competitiveness.
The question is,
“Which of these five measures do you consistently and reliably use to manage and govern your project portfolio today?”
NB Many executives and practitioners will want to claim they have most if not all of them. But they are often assessing their status in terms of what ‘should be’ or what they ‘want it to be’ rather than what actually happens.
In measuring your current state you need to be brutally honest as each gap or deficiency in your measures directly
- increases waste
(eg causing unnecessary time delays, excess costs and effort), - reduces business value
(eg causing compromised business outcomes to be delivered, benefits to be missed and value to be lost) and - reduces your future agility and competitiveness.
Extracting value from your project capital investments is critical to your future success. These five measures are not areas that can be ignored, assumed to be ‘okay’ or left to ‘the project people’. They are five critical measures that every board and executive team needs to have in place.
TOP can help you measure if you have the required measures in place and if they are effective. We can also equip you to install the processes and embed these controls into how you manage and measure your strategy and project portfolio.
That’s what we do for organizations around the world – put them in control of their strategy’s execution and value delivery.
