February 2014 PL - The High Cost of Low Performance

For the past several years, PMI’s Pulse of the Profession reports have emphasized the benefits of effective project, program and portfolio management. More recently, we have begun focusing on strategic initiative management to drive organization success through improved efficiency.

Though executives know what they should be doing – 88 percent say that strategy implementation is important to their organizations – sixty-one percent acknowledge that their firms often struggle to bridge the gap between strategy formulation and its day-to-day implementation.1 This gap demonstrates a lack of understanding among organization executives that all strategic change happens through projects and programs. While some projects improve an organization’s ability to “run the business” and don’t rise to the level of a “strategic initiative,” all of an organization’s strategic initiatives are projects or programs, which inevitably “change the business.” Most in the C-suite fail to realize this simple truth. Maybe more would if they assigned a senior executive to oversee strategy implementation the same way many of them designate a Chief Strategy Officer (CSO) who has responsibility for strategy development. When that person is supported by an organization culture of project management, including a high performing PMO, that is when we will see project success rates climb.

This year’s Pulse research reinforces these findings and demonstrates the significant implications of this chasm:

  • ?Very few organizations (9 percent) rate themselves as excellent on successfully executing initiatives to deliver strategic results. Consequently, only 56 percent of strategic initiatives meet their original goals and business intent.
  • This poor performance results in organizations losing $109 million for every $1 billion invested in projects and programs.
  • High-performing organizations successfully complete 89 percent of their projects, while low performers complete only 36 percent successfully. This difference in success results in high-performing organizations wasting nearly 12 times less than low performers.
  • Projects and programs that are aligned to an organization’s strategy are completed successfully more often than projects that are misaligned (48 percent versus 71 percent). PMI’s earlier research reported that aligning projects with strategic objectives has the greatest potential to add value to an organization.2 But on average, organizations report that three of five projects are not aligned to strategy.
  • Organizations that are highly agile, nimble and able to respond quickly to changing market dynamics complete more of their strategic initiatives successfully than slower, less agile organizations (69 percent versus 45 percent). But only 15 percent of organizations report high organizational agility.

How can mature project management practices lead to a competitive advantage? What lessons can be learned from high performers that can be replicated across organizations of all types to improve their value?

Our research highlights key practices that maximize organizational value. By maturing project management capabilities, focusing on talent and change management, and insisting on a benefits realization review, high performers successfully complete more projects. They are more flexible and waste fewer dollars.

The following pages explore these findings in greater detail and provide a clear path forward for organizations to achieve success through optimized project management practices.

Let’s do great things together.

Mark A. Langley
President and CEO
Project Management Institute


Click here to download the full article