Why traditional project management fails
TPM: traditional project management
PPA: profitably performing asset
Why project management fails. Modern project management is taken to be sound. Its theoretical underpinnings are assumed to be essentially complete save for a few details (echoing, in a sense, the 19th century views of physics before quantum mechanics and relativity obliterated the conceit). Project management theory predicts success for projects undertaken under its aegis. On the other hand, any theory, regardless of the field, is only as good as its ability to correctly predict outcomes. Theories must be grounded in facts, and facts only, lest faith-based dogma prevails (one is reminded of Goethe’s remark that “there is nothing so frightening as ignorance in action.”). A theory is acceptable when its pronouncements accord with the observed reality, preferably satisfying the Ockham’s razor test. Richard Feynman, Nobel prize winner in physics, suggested a very simple scenario to that effect. First, take a guess at what a physical law is, and write down its equation. From that equation, make a prediction for the outcome of a thought experiment. Run the experiment and compare those results with the predictions. If the two diverge, the initial premise is wrong and the equation, invalid. That is all there is to it. It does not matter if the law was posited by a famous scientist, a Nobel laureate, or a religious imam. If the predictions don’t match with reality, the theory is incorrect. End of story.
The point of projects. These words resonate with our discussion on the putative sufficiency of project management theory. Worldwide failure statistics show that it is incomplete and in need of advancement. Against the backdrop of the traditional definition quoted in a previous article, the following deficiency is posited:
Project management is more than the sum of the processes, procedures, resources and plans required to execute a project in accordance with the needs and expectations of stakeholders, as postulated by project management orthodoxy.
How is it more? For starters, the reader may notice that the definition does not address the nature of the project; one is left to infer it from the “needs and expectations of the stakeholders” – a risky leap of faith. The same goes for its purpose and what it is supposed to do. Secondly, the TPM definition assumes that the stakeholders are (or can be) aligned. That assumption is unrealistic. Numerous stakeholders such as landowners, environmental lobbies, political parties, special interest groups and local kings have no interest in agreeing to a project. These stakeholders may never be aligned (the appalling opposition to the Trans-mountain pipeline in Canada is a case in point). Thirdly, the definition is silent on the end game. Is the project done when all tasks and processes are completed? What about the performance of the actual asset once it is taken over by its owner? Relying on needs and expectations to infer the answers is not a substitute for explicit prescriptions.
The tacit meaning for the word “project” is equally generic, and posited in terms of an endeavor, with a start and end date, undertaken to create a result, a service or a product (or words to that effect). Notice that the definition is silent or whether the outcome is useful, productive or even implemented (it is tacitly implied). The emphasis remains on the creation of that outcome. The immediate consequence of that emphasis is to infer that the end of the project corresponds to the completion of the creation work. That is why, in traditional circles, the end of an industrial project is acknowledged to be the point in time when the physical asset has been commissioned and readied for transfer of ownership to the operators.
The project’s end point sets management priorities. The importance of the assignment of the end is significant to the philosophy of management of the project, since it dictates the priorities of the project’s owner and the management team. By the traditional definition, the priority will be to minimize project costs, in accordance with the constraint trifecta of Figure 1.1. The project, be it a capital expenditure (CAPEX) or operating expenditure (OPEX), is treated as a spend project, which demands the control of costs now rather than maximize asset profitability later. Total costs of ownership (TCO) rarely, if ever, enter into consideration. “Better cheaper now than richer later” is the modus operandi of the project. Managing a spend project guarantees one outcome: the entire budget will be spent. As soon as costs or schedules are threatened, the obsession to finish the job intensifies, at the expense of the outcome (i.e., the phase deliverables, rather than the profitably performing asset).
The ramifications of managing a project by either type (spend or investment) is illustrated in Figure 2.1. Figuratively, any project is akin to the proverbial iceberg. The execution works are the only ones visible above the water’s surface. Visible implies controllable; hence the reflex of adopting a spend project approach to budget management.
Nevertheless, what really matters is what lays beneath the surface, hidden from view (since profitability is in the future and measurable only when put into action). This is characteristic of an investment project. All that occurs above surface must be done to propitiate the profit-generating capacity of the future asset. Figure 2.1 clearly shows the differences between TPM and PPA philosophies. TPM focuses on what happens above the surface; PPA keeps its eyes on the bottom tip, deep below the surface.
Further insights can be gleaned from chapter 2 of Investment-Centric Project Management, available on Amazon.com.