PMOs play a vital role in driving business outcomes. They assist in the planning and execution of the ‘project investment portfolio’, making sure strategic goals and targets will be met.
During the execution, the PMOs major challenge is to deal with failing projects. On average, larger projects (>$15m) run 45% over budget and 7% over time, while delivering 56% less value than predicted, found by McKinsey, who surveyed and evaluated more than 5,400 projects.
Failing projects create a challenging moment that is demoralising to all stakeholders. Therefore it is crucial, that PMOs recognise the signs of failing project and take any necessary corrective action before the project fails.
Indicators that show failing projects
Successive scope creep: Although some scope changes are necessary, if the project is experiencing constant project scope updates, it shows that the project sponsors and stakeholders are not strict with the project or the primary assumptions are ineffective.
Higher Costs: It is necessary to closely monitor the cost performance index (CPI). The CPI is calculated by earned value/actual cost. If the CPI value is less than 1, it is an indication that the budget is not being used effectively and instead your project is burning through cash.
High rate of unplanned project staff: It is normal for long projects to have planned staff rotation but the PMO should watch closely unplanned project team attrition. This is because every person who leaves in an unplanned attrition goes with vital knowledge of the project. Changing staff too often would put some areas of the project at risk causing the team to revisit the project because they do not understand why the decision was made and hence the need to maintain same staff in the same area. Putting new staff on a running project would result in extra cost and time but with no additional value to the project.
Reversing failing projects
The PMO should periodically revisit the scope statement and verify if they are working on the same project goals. If the change is likely to alter the expected results, the PMO should consult with the sponsors on the best way forward.
The PMO should review staffs on monthly basis to determine the number of unplanned vs. planned shifts that occurred. If a critical member of the project has left, the PMO should summon a meeting to assess the situation and plan for replacement.
The PMO should also review the trend of the CPI to determine the financial situation of the project. If the trend is unhealthy, you should looks for ways that you can stabilise the situation such as negotiating for lower supplies.
Pulling out of failing projects
It is not easy to stop a project that is already running, due to many political and personal forces that would come into play. In most occasions, people tend to waste money and time while justifying costs that have already been spent. Instead, the PMO should maintain objectivity and explain to the sponsors why the project should be cancelled based on cost-benefits analyses.