Risk Management: Causes of Project Failure
It is a fact that the majority of business improvement projects underperform or cost more than planned. Most of this difference is often blamed on the expectation gap between what was sold and what was delivered. This is the information asymmetry that is always present in the sales cycle and can have significant downstream consequences if not mitigated with a sound qualification approach. However, most of these remaining gaps (except the most egregious) can be mitigated if not eliminated with a strong risk management program. The focus of this brief is to surface these risks and share practical ways to manage them in a traditional project work stream.
In our experience over the past three decades implementing supply chain improvements, we have guided clients to understand project risk and take steps to mitigate it. The following risks make up the majority of controllable causes leading to project failure (in no order of significance):
- ROI/capabilities not rationalized
- Role definitions unclear
- Decisions not evaluated on risk/reward basis
- Inadequate sponsorship
- Lack of change champion
- Compressed testing and UAT
- Unrealistic scope
- Irregular & incomplete status reporting
- No initial risk assessment
- Inadequate business function participation
- Masking process weakness with technology first
The key to managing these potential points of failure is a Risk Management Plan (RMP) connected to the project and change management plan. Unlike the change management plan, which focuses primarily on organizational (personnel) impact, or the project plan, which focuses on traditional implementation milestones/tasks, the RMP defines risk, impact, and mitigating factors affecting all aspects of the business.
The RMP is a natural outcome of the project justification analysis and is a useful tool to guide the development of a detailed project plan. In the same way, and RMP provides a baseline for the change management plan where detailed tasks are defined that mitigate the organizational impact of improvements. A strong RMP assigns a weight to each risk based on its occurrence likelihood and impact severity. Detailed mitigation actions are then defined for each risk. Ideally, these actions become tasks with ownership in the project and change management plan ensuring tight coordination. The RMP becomes the common filter and measurement tool for reporting project status. It promotes impact based discussion that will drive not only on-time on budget, but also expectations of senior management and ultimately value to the business.