Project management has always been challenging, but the coronavirus has muddied the waters even further, making it difficult if not impossible for some companies to fund projects and keep them going. Business leaders also lack a clear timeline as to when this global pandemic will end and when things can start moving again. This crisis is forcing many to take a hard look at projects, especially if their companies are struggling.
“Companies are being hit really hard, and these types of organisations are in survival mode and have basically stopped all projects and capital expenditures,” said Robert Toledo, the CEO and founder of Mexico City-based Alpha Consultoria.
Pre-COVID-19, in 2018, organisations wasted 12% of their investment in project spend due to poor performance, and this number remained constant over a five-year span, reported the Project Management Institute (PMI), in its 2019 Pulse of the Profession report.
Even in the best of times, organisations must closely monitor project performance and re-evaluate projects regularly. In some cases, they may need to modify a project or plan.
That’s exactly what’s happening at Colle McVoy LLC, a full-service creative agency that was overhauling its phone system in its office in downtown Minneapolis in the US. Once the coronavirus hit, its staff moved to remote work, forcing the agency to rethink its strategy.
The company is now engaging with employees to assess the current needs, noted Lisa Miller, CPA, CGMA, the company’s CFO.
In other cases, projects may need to be abandoned altogether, especially if they were not kicked off properly, or had poor planning, a lack of involvement from senior management, or an ill-equipped project management team. And in this current environment, some projects may flop due to a dearth of funds, customers, or direction.
“In order to cancel a project, you need to understand what you wanted to achieve in the first place — and if your priorities have changed,” said Susanne Madsen, author and project leadership coach in London.
Regardless of why projects may end, managers have always been reluctant to terminate them, even during a crisis. They are passionate about these undertakings or don’t want to alert others — including their own bosses — to the fact that their baby is failing. They think it’s a shame to end a project and waste the funds already allocated.
But that’s a mistake, noted Amgad Badewi, Ph.D., senior lecturer in project and programme management at the UK’s University of Kent, and director of finance at PMI.
“The whole economic system is changing radically, which made a lot of projects started last year irrelevant,” he said. “If there is an opportunity to change the outputs to fit with the current challenges, this will be the best option. Otherwise, closing the project now is the key to success by saving unnecessary time and cost investment in something that has zero value in the future.”
So how do leaders know when to pull the plugs on a project, especially now, when everything is in flux? Experts offer these insights:
You’re wildly off track. Before you launch a project, you need to outline the reasons for the venture, the cost projections, and what you hope to gain. Then, you must examine your progress throughout the project to determine whether you are on track. If you are radically off course from your original plan, either due to poor projections, lousy planning, or unforeseen circumstances like COVID-19, you may need to redirect funds to another endeavour providing better value — or cut the project altogether.
“If you believe that you are working on something that won’t be of value, you have to move on and find an alternative as quickly as you can,” Toledo advised.
You are spending more than you expect to gain. If cost overruns are expected to significantly reduce the anticipated rate of return, the project needs to be re-evaluated and possibly stopped. “Projects are about making change happen, but if the cost is too high or if the market conditions have changed, it’s not going to fly,” Madsen said.
Badewi advised leaders to update their risk register and be prepared to safely halt projects if necessary, or to take on smaller projects versus large courses of action. “I believe short-life projects could be the best in this turbulent environment,” he noted.
Many of Colle McVoy’s clients, for instance, are “pivoting and changing, and instead of doing one large assignment, are deciding to do four to five smaller assignments”, echoed Miller.
You fail to assess estimated benefits and value. If you don’t continuously gauge a project’s projected benefits, things can spiral. “Tomorrow will never be like yesterday’s expectations,” Badewi said. “Revisit your business case with honest and realistic expectations.”
Most project management teams use a dashboard to monitor project performance for costs and deliverables, but few use a “benefits management dashboard” to “assess the validity and reliability of delivering the benefits”, he added.
This can make it difficult to decide whether or not to kill a project. To get around this, break down the project’s scope “into smaller deliverables” and then “evaluate the business case after each phase”, he advised.
There are signs of failure early. While some industries and companies are thriving now due to an uptick in business, for others, project failure is imminent early on. If things aren’t going well with the project, get out sooner rather than later before you are in too deep. “The faster you fail, the better,” Toledo said.
You lose focus on customers. During such a challenging time as this, it’s easy to lose sight of what’s most important: your clientele. “I always use the phrase, ‘Keep the car running while you are changing the tyres’, but that’s the way it needs to happen," Toledo said of projects. "Be very careful to hear the voice of the customers, and what they are expecting, and what value means for them."
Your company’s strategy changed. A project, Toledo explained, is merely a way to execute a strategy based on your organisation’s mission. So if your company’s strategy shifts, your project may no longer be in alignment and you may need to switch gears or kill the endeavour. “You need to make sure your projects are always aligned with your [company’s] strategy — and you have to be brutal about this,” he said. In this difficult period, especially, your strategy may need to shift from propelling forward to simply surviving and weathering the current crisis.
“You probably are going to have to redefine your strategy based on the new normal,” Toledo advised. “If you have been investing in a project that given the coronavirus situation is no longer attractive, cancel it.”
For more news and reporting on the coronavirus and how management accountants can handle challenges related to the pandemic, visit FM’s coronavirus resources page.
— Cheryl Meyer is a freelance writer based in the US. To comment on this article or to suggest an idea for another article, contact Drew Adamek, an FM magazine senior editor, at Andrew.Adamek@aicpa-cima.com.