Why Do Projects Fail?

Why Projects Fail

"We tend to seek easy, single-factor explanations of success. For most important things, though, success actually requires avoiding the many separate causes of failure" - Jared Diamond

This site is a support reference to the online and in-person Project Management and leadership training offered by the "International Project Leadership Academy" (a division of Calleam Consulting Ltd). The site focuses on the causes of project failure and provides a platform for discussing what it takes to make a project a success.

Learn more, view our upcoming "Achieving Project Success" class or read our latest blog post below...



Our latest blog post...


IBM

The following entry is a record in the “Catalogue of Catastrophe” – a list of failed or troubled projects from around the word.


IBM (International Business Machines) - USA
Project type : Organizational performance improvement and strategic realignment
Project name : Roadmap 2015
Date : 2010-2014  Cost : Unknown

Synopsis :
Most of the projects noted in the catalogue were aimed at producing some form of product or tangible deliverable. IBM’s “Roadmap 2015” initiative is a little different; it was an “organizational change” project that attempted to improve the financial performance of an entire organization thereby unleashing a significant growth in “shareholder value”.

Started back in 2010, the Roadmap 2015 initiative set a financial performance target that the organization committed to achieving. Aiming to grow shareholder value, the roadmap set the goal of achieving “Earnings Per Share” (EPS) of $20 by the year 2015. The publicly announced $20 EPS goal was to shape policy and strategic direction for the organization over a 5 years period.

The path to $20 EPS involved, cost cutting measures, share buy-backs, plus divesting under performing assets, while simultaneously realigning to high growth and higher margin sectors. On paper that makes business sense and financial markets responded positively. Share price rose from below $130 in early 2010 to almost $215 by 2013.

However, some observers were concerned that the use of a single shareholder value oriented metric (EPS) against which to measure progress was too narrow. Where a performance measurement system is too narrow you can quickly end up with unintended side effects that can cause significant harm (even while the publicized metric itself makes things look relatively healthy). Of course, one stakeholder group who vented their concerns was the staff themselves. Staffs were concerned that the short-term perspective needed to achieve quarterly results and the EPS $20 goal distracted from longer-term investments in people and product. Turning to public bulletin boards, staff reported plunging morale and tales of internal strife as a result of high numbers of layoffs, use of under-skilled substitutes and a lack of investment in training. I spoke to a number of current and former IBM employees in writing this post and the feedback on the roadmap was resoundingly negative.

Over the years the concerned voices grew and the investment community started to voice concerns. Talk of a “crisis” appeared. Word that IBM was into financial-engineering rather than product creation spread and when asked in Oct 2014 outspoken billionaire investor Mark Cuban told CNBC that he would “absolutely not invest in IBM” … “IBM is no longer a tech company” … “they’ve evolved into is a company that does arbitrage on acquisitions. It’s stock buybacks. Who is IBM anymore?”

IBM’s own business results also pointed to problems. As of Q4 2014, IBM had suffered 10 successive quarters of declining revenue. Share price dropped into the $180’s and sentiment towards IBM turned negative (at the time of writing the share price is in the low $160’s). Along with the 3rd quarter 2014 results the IBM CEO announced that she was “disappointed” with the organization’s performance, and that the $20 EPS goal was being shelved. IBM remains committed to the underlying strategy of improving performance, but the goals used to measure success will apparently be changing. Hopefully the new metrics will use a more balanced set of measurements that reflect the complete picture of what it takes to make a services based organization a success.

Although a management strategy like Roadmap 2015 isn’t the type of project I usually included in the catalogue, I’ve included it because it allows discussion of several important points:

  1. The performance metrics an organization uses to govern itself set the context within which all other work (including projects) in the organization exists. If the metrics are purely financial, and oriented to the shorter term rather than longer term, short term results may look rosy, but long term value can be sacrificed. Yes share price might rise in the short term, but in the longer term, it is a set up for failures.
  2. An organization like IBM succeeds or fails based on its ability to delivery successful projects for its clients. If employee morale or skills are allowed to slide, the organization’s delivery capability will erode. Short term the effects may not show up, but eventually reputation is hit, productivity dives and business results are impacted.
  3. You can’t manage a service oriented business based purely on the numbers in a spreadsheet. Talent, good will, productivity and relationships don’t compute in an excel formula. They do however compute in the interactions between a business and its clients.

Was Roadmap 2015 a failed project? Well as for many projects the definition of success differs depending on who you are. Shareholders who rode the share price up the ladder and bailed at the right time may well see it as a success. Others who are exposed to its side effects or longer-term impacts may see it very differently. IBM does of course still have tremendous value to offer and hopefully putting in place the right performance measures will realign the organization’s capabilities with its underlying strengths.

Note: The idea that organizations should focus their energies on the creation of shareholder value is sometimes credited to a 1981 speech giving by then CEO of General Electric (Jack Welch). In that speech he extolled the importance of seeing shareholders as owners and the need to focus on creation of “shareholder value”. Welch’s speech is sometimes credited with triggering the short-term share-price oriented form of management that the IBM staff worried about. Jack Welch himself recognized how the shareholder value mantra could corrupt the core values of an organization and in 2009 he backtracked on his earlier speech saying that “On the face of it, shareholder value is the dumbest idea in the world,” … “Shareholder value is a result, not a strategy . . . Your main constituencies are your employees, your customers and your products.”

Contributing factors as reported in the press:
Performance metrics too narrow.

See also:

  1. The incentives infrastructure – a look at how incentives shape behaviours
  2. Boeing 787 Dreamliner – Another project that attempted to use a narrow performance metric and came unstuck as a result
  3. The bean counter’s blind spot – A look at how morale and other soft issues are hard to quantify and hence often ignored
  4. Cheese and onions – Frameworks for Analyzing Project Failure – A look at how the context in which a project exists can shape the outcomes it achieves.

Reference links:

  1. Why IBM Is In Decline?
  2. IBM Needs To Invest In People, Products And Processes – Not Paper
  3. IBM Plummets as CEO Abandons 2015 Earnings Forecast
  4. IBM’s Roadmap 2015 presentation
  5. Alliance press release