Episode 338: Successful Project Management Depends on the Business (Free)

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This episode is sponsored by the PMP Exam Simulator:

Cornelius Fichtner and Frank Parth

This interview with Frank Parth (www.projectauditors.com) was recorded at the 2015 PMI® Global Congress in Orlando, Florida. We discuss his paper and presentation "Successful Projects Depend on the Business". Here is the paper's abstract:

This paper looks at the literature on successful critical projects and examines the impact of decision making on project success. When are the most critical decisions made? Who makes them? Where are the sensitive areas that can have a huge impact on project success? Research in this area shows that the only part of the effort where traditional project management approaches makes sense is in the later stages, the engineering and EPC stages. The earlier stages require a different approach to ensure success.

While all projects are dependent on decisions made outside the project, large projects are particularly susceptible to this because of the increased number of stakeholders and increase complexity. This paper will focus on the pre-project decision process for large construction, engineering, and infrastructure projects. We will examine how these projects are most effectively divided into several stages and compare the approaches promulgated by both academic research as well as by private industry. They are all consistent with each other in where the critical decision points are.

We will examine those critical points, the data needed to receive a “go” decision, and who should be involved in those decisions. We will see that the data needs to be increasingly complete and accurate the later in the life cycle the decision is made. Giving the engineers and the contractors bad data will ensure cost and schedule overruns as well as claims. Yet the most critical decisions are done when we have the least amount of accurate data, before the project managers ever get involved.

We will look at four areas and provide recommendations for the project manager at the end:

1. The business environment
2. Current research
3. Approaches to assessing the adequacy of the early planning
4. Proposed Development stages for programs

Episode Transcript

Podcast Introduction

Cornelius Fichtner: Hello everyone and welcome to the Project Management Podcast. We are coming to you live from Orlando, Florida. We are here at the Disney Resort at the 2015 PMI Global Congress and with me, almost like at every congress, it seems, is Frank Parth. Hello, Frank.

Frank Parth:   Hello, Cornelius. Good to see you again.

Cornelius Fichtner:   Same here, same here. It seems like we meet here, at these places once a year.

Frank Parth:   Well, we don't go to the chapter meetings anymore because both of us, we're traveling all the time.

Cornelius Fichtner:   We're on the road so much. So your presentation is about successful projects and the fact that they depend on the business. But we're going to start somewhere completely different. We're nearing the end of 2015. What do you see ahead of us in 2016 for project management? What are the big trends coming?

Frank Parth:   Cornelius, when we look back at Project Management over the last 10, 20, 30 years, PMI and other organizations have done an extremely good job setting up the processes that we have to follow. The methodologies, the tools, the techniques, and all this. So we have a very well defined approach to project management but projects are still failing. The Standish Group Chaos Project where they survey IT projects in North America since 1995 shows a very poor success rate for IT projects. Ed Merrow and his book, Industrial Mega Projects looks at these large market billion-dollar oil and gas processing projects, he says 70% of them failed by his criteria. So with all the methodologies we have, we're still failing projects much too often. I think what has to happen and I think what PMI is heading in the direction with the new standards and certifications and everything, is project managers have to get involved much earlier in the project selection process, laying out the project and even before we start officially approving the project, they have to get involved in decision making process. In fact, a lot of my talk this afternoon is about that and we're seeing PMI saying no. The feedback we're getting from our corporate executive council is that project managers have to understand the strategy of the organization, they have to have strong leadership qualities, they have to take on a much more inclusive role than just managing schedule and identifying risks and the more typical things we've been concentrating in the past. I think that's the direction we're all going.

Cornelius Fichtner: All right. So your talk, Successful Projects Depend on the Business, it's going to be this afternoon. What interest you this topic? Why did you choose this topic?

Frank Parth:    I chose this topic strictly because in my experience that I won't admit to more than 30 years even though I have quite a bit more than that, so many of the successful projects and the unsuccessful ones are controlled outside the project itself. Project managers never have all the authority that they need to do the work. They have the responsibility but not the authority. The business people keep changing their mind on what they want. Oh, I don't like the side the way the webpage looks, I'd rather have it look this way. All these continual changes impact the project. Or when we're talking about the large complex, engineering construction projects, the external economic environment has a huge impact on that. And I'll give examples of that in my talk this afternoon. But there's so much that makes the project successful that is completely outside the project manager's control. Much of it is in the control of the business itself. So what we need to do is do a better job educating the business leaders, the senior executives, that this is what we have to do to make project successful. Otherwise, they'll likely make decisions that totally impact the project without understanding the impacts, the long term impacts of that. What got me interested in this was several years ago, I did the risk analysis for Aramco Refinery. This was planned as a $9.6 billion project. I was there with a small team for about four days and I get back to Aramco headquarters and said, you're not going to make it. They said, you don't know that, you just got here. And I said, yes I can and I laid out reasons. And the reasons were all good business decisions, they were trying to save money. And so they did things that had huge impact on the project. The project finally ended up 40% over budget and nine months late, and it was for the reasons I predicted. So, they make these decisions without understanding what the impacts are.

Cornelius Fichtner:   Right. And I think that's also, I've read your paper, that is also the main problem that you're seeing today, right. Big decisions are made early on with very little date on projects. Did I translate that correctly?

Frank Parth:   You did indeed, yes. Decisions are made actually before the projects even starts that has a huge impact on it.

Cornelius Fichtner:   Yes, yes.

Frank Parth:   I looked at some of the research that's done by some college professors like Bent Flyvbjerg at the University of Oxford in London. Now, he's a political scientist but he looks at large complex infrastructure projects. And he says okay, these are the reasons they fail and they have very little to do with the technology or the project management itself. There's other research going on where we're saying that, okay, the business decisions are where the greatest value where the project is corrected.  Hutchinson and Wabeke did this research back 10, 12 years ago. And most of the value created in the project is done by the business before the project managers or the engineers ever get involved. And they came to the conclusion, they don't phrase it this way, but they came to the conclusion that it's better to manage the right project poorly than the wrong project perfectly. You get much value out of the right project.

Cornelius Fichtner:   Right. Your paper and your presentation looks at four areas: business environment, current research, approaches to assessing the adequacy of the early planning and then finally, proposed development stages for programs. So we're going to take a look at all four of these. The business environment, what are we seeing here?