Chapter 8 Evaluating and Terminating the Project This chapter discusses the issue of appraising the progress of a project and its performance and describes the various ways that projects can be terminated. Project evaluation criteria are listed and discussed. Also, the formal process of auditing a project is overviewed including the information that should be contained in the audit report. Guidelines for when to consider terminating a project, the types of project termination, and the termination process itself are also discussed. The chapter concludes with a discussion of the project final report. Cases and Readings Some cases appropriate to the subject of this chapter are: Harvard: 9-696-083 Biogen, Inc.: rBeta Interferon Manufacturing Process Development This 18-page case concerns a biotech firm that is wrapping up a new manufacturing process project for a newly developed drug. One of the senior scientists is charged with performing an evaluation of the project to document the lessons learned and provide guidance for future projects. Harvard: 9-692-069 Motorola, Inc.: Bandit Pager Project This 17-page case places the student in the role of conducting an evaluation of an automated production process for radio pagers. Although considered a major success by the company, there appear to be some difficulties in marketing and production that need more attention. A 19 page teaching note (5-692-069) is available. Harvard: 9-175-184 Northeast Research Laboratory (B) This excellent 17-page retrospective case describes a client’s unexpected cancellation of what was thought to be a successfully ongoing project. Involves issues of control, auditing, evaluation, termination, behavior, leadership, and organization. Some readings appropriate to the subject of this chapter are: B.M. Staw et al. Knowing When to Pull the Plug (Harvard Business Review, March-April 1987). This article has already become a classic on the psychological basis for continuing a project invariably headed for disaster. The authors clearly point out the dangers of certain personality types in project managers matching the needs profile of certain organizations. In these all-toofrequent situations, projects are continued way past the point where common sense would have called for their termination. Royer, I., Why bad projects are so hard to kill, (Harvard Business Review, February, 2003, 4956). This reading asks the fundamental question of why) managers keep pushing forward on a project even when faced with mounting evidence that success is pretty well unachievable. The article suggests that it’s not managerial incompetence or entrenched bureaucracy that makes projects hard to kill, but “a fervent and widespread belief among managers in the inevitability of their projects’ ultimate success.” This belief of success can spread from the project champion all the way up to top management and can lead to irrational behavior when it comes to project decisions. The reading offers suggestions to avoid the “blind faith” that is sometimes associated with failing projects. Answers to Review Questions 1. If the actual termination of a project is a project in itself, how is it different from other projects? The termination project is similar to any other project except that: o There is only one person conducting the termination itself and there is no "project selection" phase. o It is a process of distribution of resources and personnel rather than acquisition of them. o The tasks to be conducted are relatively standard or else specified in advance. o It is best conducted by someone without an emotional investment in the project, and o It is a completely administrative project with a single purpose. 2. What are some reasons that a failing project might still not be terminated? There are often political, psychological, and other reasons why projects are continued when they should be terminated. At times, projects that fail to meet their objectives are continued because they are accomplishing other things of value to the organization. 3. What might make a project unsuccessful during the termination process? Any aspect of termination may cause an otherwise successful project to become a failure such as: o An inability to complete the work. o Not delivering the desired result. o Providing poor product support, etc. 4. Who would make the best auditors: outside unbiased auditors or inside auditors who are more familiar with the organization, its procedures, and the project? Why? There are pros and cons to both options. Inside auditors would probably be more efficient and less expensive. However, they would not be as objective and they may not be familiar with how other firms or organizations operate and could not make accurate comparisons. External auditors would be more expensive. However, they would probably be able to better compare the outcome of the project with that of other firms in the industry. For example, internal auditors may positively evaluate a situation that appears favorable when outside auditors would report that the situation is not up to market standards based on industry experience. 5. Under what circumstances would you change your answer to the previous question? Students who initially selected external auditors based on perhaps higher objectivity might note that in situations when cost or time is critical, internal auditors might be preferred. Students who favored internal auditors might recognize the need for external auditors when objectivity or expertise is the key concern. 6. Would frequent brief evaluations be best, or would less frequent major evaluations be preferred? Frequent, brief evaluations have a better chance of finding problems as they are developing and can thus be solved easier and quickly. The frequent, low level evaluations are also less disruptive to the project team. Because of their frequency, they would also better lend themselves to use as a control device. 7. Should the results of an evaluation or audit be shared with the project team? Except for any confidential personnel items, the project team members should have access to the full report. Without feedback, the team members are limited in their growth possibilities. 8. What are the major purposes served by an after-the-fact project evaluation? The major value of a post-project audit is to discuss (and inform senior management): o Poor practices that should be avoided in future projects, and o Beneficial practices that should be adopted by future projects. An after-the-fact evaluation may be required by a customer who wishes to manage future relationships with the firm. 9. Under what circumstances is a detailed audit apt to be useful? When a general audit exposes a serious problem in the project or in the methods by which the project was conducted, a detailed audit may be required to study such problems in detail and recommend solutions. Suggested Answers to Discussion Questions 10. How should an audit team handle an audit where it is explicitly restricted from accessing certain materials and/or personnel? For an effective audit, the team must have access to all project records and personnel, as well as all functional and other organizational area records and personnel. Only access to the customer should be limited to require prior clearance from top management. If access is denied by team members, the audit team may have to appeal to the project manager. If the project manager is the cause for the problem, the audit team may have to appeal to senior management. In cases where full access is not provided, the results of the audit must be qualified noting the lack of access. 11. What might be some characteristics of a good termination manager? Among some of the desirable characteristics are: o o o o o Having familiarity with the administrative requirements of project terminations. Being objective and impartial. Being calm under stress. Being task rather than functionally oriented, and Having the ability to effectively and efficiently execute the eight termination tasks. 12. How should a committee determine which termination method to use? As indicated in the text, there are four types of project terminations: o Project extinction … when the project is either successfully completed or the expectation of failure is high. o Termination-by-addition … when it is an “in-house” project which is successfully completed and institutionalized as a formal part of the organization. o Termination-by-integration … when the output of the project becomes a standard part of the operating systems of the sponsoring firm or client. o Termination-by-starvation … when it is politically unacceptable to terminate the project so it is left to wither until it is a project in name only. The termination method selected will depend primarily on what is to happen with the project. For example, if it is to be an ongoing entity, addition or integration is best. If its job is complete, then extinction is best. Termination-by-starvation is not an ideal method since it leaves the project on the books. 13. What steps might be taken to reduce the anxiety of project team members facing an audit? The focus of the audit must be positive with the reports kept constructive, unemotional, and professional. Pre-release discussions and a formal "appeal" procedure for disagreements are also helpful. 14. What are the dangers of evaluating a project based on the reason(s) it was selected (such as being a competitive necessity), rather than the goals and objectives in the project proposal or contract? The reasons for project selection are often more general in nature while the project’s goals are much more specific. One danger of evaluating the project based on the reason it was selected is that a change or shift in the project’s specific goals could go undetected. This could result in a situation where project’s goals become out of sync with broader organizational goals. It might also lead to project proposals written in such a way as to minimize expected project goals, always consistent with making them high enough to insure selection. In spite of these dangers, the criteria for project selection is a good, but not sufficient, tool for evaluating completed projects and for helping to determine if a project should be terminated before completion. 15. It is frequently suggested that items that will become potential problems later in the project life be decided up front, such as how to allocate revenues or dispose of project assets. How can this wisdom be used for project problems that cannot be foreseen? Major risks associated with the project and their potential impact on the project’s schedule, cost, or performance should be identified. If alternative courses of action exist that may change future risks, they should also be identified. The parent organization should also insist on proper ethical standards of behavior from the project manager, team, and all functional managers connected with the project. A large majority of the problems referred to in this question concern credit-for-success and blame-for-failure. If a project succeeds or fails, the success or failure belongs to the entire team. 16. Can you think of any acceptable ways of assigning credit for profits (or responsibility for costs) resulting from a project on which several departments worked? There is no theoretical correct way of dealing with these problems. Any method of sharing costs and/or profits that is acceptable to the several functional managers is acceptable. The method of cost/profit sharing must be accepted prior to initiating the project. Attempts to solve the problem when the project is completed are doomed. 17. How might an audit team deal with an attempt to co-opt the team? “Co-opt” means “to appropriate as one’s own.” This is a common tactic for parties being audited. Passive resistance is advised. The audit team should listen interestedly to all complaints, advice, etc., and proceed as if the co-opting had not occurred. Noncommittal is the best attitude for the auditors. 18. In Section 8.2, subsection The Audit Report, six elements are listed that should be included in every audit report. For each element, explain why its inclusion is important. o Introduction: o Current status: o Future project status: o Critical management issues: o Risk analysis and risk management: o Final comments: This is the key to all that follows. It is important to make sure that all parties are in agreement with the statement of project direct goals and objectives. It is also important that all parties agree about the current status of the project. All direct costs and the actual state of work on the project should be detailed in this section. This serves as the basis many of the report’s recommendations. Based on the current status section of the report, this section describes what must be done to complete the project, including any required changes in budget, schedule, scope, and goals of the project. This serves as a major input in the decision to continue the project without modification of the plan, continue it with modifications, or to terminate the project. This section allows senior management to exercise control over any aspects of the project or its management that seem to be desirable. Senior management may also consider alteration of any project management policies that appear to be dysfunctional. Management may also install new project management policies. This allows senior managers to reassess the risks associated with the project given its current state. This assessment would include both technological and monetary risk. This section provides information to senior managers about the underlying assumptions made during data collection as well as the statistical reliability and validity of the data if such an assessment can be made. The section may also be used to collect any recommendation that might apply to future projects. 19. Referring to the “Evaluation Criteria” subsection of Section 8.1, how do you reconcile the difference between the goals and objectives of the project as given to the project manager in Chapter 1 and these criteria by which she or he is now judged? The initial goals and objectives set for a project are determined prior to the start of the project. While they are, as indicated, often changed during the project’s life (and relative to other similar projects) they are generally associated with the initial criteria. However, with the passage of time and the completion of the project, other factors come into play and, as a result, the PM is evaluated against a broader set of criteria including such factors as the project’s apparent “success” in terms of project’s efficiency in meeting the budget and schedule, the level of customer impact/satisfaction, its business/direct success, and future potential. None of these four criteria could have been established prior to the start of the project. There are, in fact, post hoc criteria. Incidents for Discussion Suggested Answers General Construction Company Question: If you were the project manager, how would you handle the situation? The member of the auditing team is not following appropriate procedure in contacting the customer directly. The PM should immediately inform top management of both the technical problem with the contract and of the breach of audit procedure. Then the PM should: o Contact the client to resolve the problem. o Discipline the auditor for his breach of procedure. How can a customer be assured of satisfactory project completion? The customer should: o Include such an audit process in the contract, with results coming directly to them, and o Require that the audit be conducted by their own people, or an external entity. Lexi Electronics Question: which of the three methods would you recommend, and why? The case specifies three methods: extinction, addition, and integration. Since the project has been successfully completed, addition is the method of choice. The project team members should be utilized to lead, at least initially, the production of the new phone. They have the most familiarity with the process and the product. The Shocking Machine Question: what do you suggest Mr. Lament do, if anything, to begin his preparation for defending or settling this potential lawsuit? As the corporate attorney for Lithotropic, Mr. Lament needs to: o Conduct a thorough evaluation of the project. o Evaluate the project’s performance related to the initial plan and project objective. o Review the minutes of any project meetings with the client, this should cover the entire history of the project from the original launch meeting until the end of the project. o Review any change orders to the specifications or steps that are documented. o Review the monitor and control systems that were in place for the project. o Examine any documented communications between the project team and the client. o Meet with the project manager to see if a project diary was kept on this project. Once he has fully familiarized himself with the history of the project through this evaluation process he will know better how to proceed if the hospital actually sues the Lithotropic Corporation. Suggested Case Analyses and Solutions St. Dismas Assisted Living Facility -- 6 Teaching Purpose: This installment concludes the St. Dismas case. Issues include estimating the final construction budget, addressing a work slowdown, revising the Gantt chart, and the reporting of staff expenses. Question 1: Estimate the final construction budget. Construction Costs: Building Contingency Land Program development & equipment costs Furniture A&E Fees @ 5% Financing costs Capitalized interest Site improvements Phone & IS system Kitchen equipment Total Organizational Costs: Legal and accounting Initial marketing Project consultant Follow-up Market survey Total Total Budgeted Estimated Actual at Completion Remaining $ 6,743,000.00 674,300.00 600,000.00 405,000.00 $6,743,000.00 $674,300.00 $600,000.00 $405,000.00 $0.00 $0.00 $0.00 $0.00 400,000.00 347,000.00 202,000.00 135,000.00 125,000.00 30,000.00 30,000.00 9,691,300.00 $400,000.00 $347,000.00 $202,000.00 $135,000.00 $147,655.00 $30,000.00 $23,776.00 $9,707,731.00 $0.00 $0.00 $0.00 $0.00 -$22,655.00 $0.00 $6,224.00 -$16,431.00 25,000.00 250,000.00 80,000.00 20,000.00 375,000.00 $0.00 $0.00 $0.00 $0.00 $0.00 $25,000.00 $250,000.00 $80,000.00 $20,000.00 $375,000.00 10,066,300.00 $9,707,731.00 $358,569.00 The organizational costs cannot be reflected in the final budget until the CFO explains when and how the expenses will be allocated back to the project’s budget for the expenses incurred by the parent organization. The above reflects the information provided in the case. Question 2: What should they do about the work slowdown? The work slowdown is probably being caused by the construction crew because they have not been informed of their next assignment. They are concerned about the lack of work after the facility is completed. The project manager needs to urge the contractor to inform his crew of their next assignment. Kyle also needs to insist that no additional slowdowns be allowed, and that tighter controls are put on the system to monitor that the project stays on schedule during the last few months. Question 3: Create a Gantt chart with the revisions to the duration of the interiors step. When will the project be completed? According to this revised Gantt chart, the project will be completed 8/1/01. Question 4: What is the importance of the fact that the Hospital staff expenses were not reported under the project budget? The importance of the omission of expenses on the project is significant. The CFO should have provided the PM with the overhead allocations at the beginning of the project. Those expenses can and will affect the project’s budget and need to be included in the overall project. The PM may not have control over the expenses but they affect his bottom line and the success of the project in meeting its budget. This late in the project there is little anyone, include the CEO, can do to have an impact on the success of the project budget without knowing these costs. Datatech’s Audit Teaching Purpose: This case illustrates how many of the topics discussed in previous chapters can contribute to project failure and perhaps the need to terminate the project early. Question 1: To what extent were the problems facing the notebook computer development project avoidable? All of the problems noted in the case were avoidable. What could have been done to avoid these problems? Steve could have taken the following steps to avoid these problems. He could have: o Begun by doing some project planning. His failure to do so reflected the fact that he didn’t recognize the significant differences between a minor product line extension project and a more substantial new product line development project. o Involved the team in developing the WBS. Had the team been involved, the need for a hinge system would probably have been identified. o Involved the manufacturing group earlier in the project. This would almost certainly have identified their inability to produce the notebook computer design. o Introduced a formal change request process. This would have helped with the VP’s request to redesign the computer to work with the new PDA. Question 2: Would it make sense to apply a project selection model such as the weighted scoring model to the project to determine if it should be terminated? Absolutely. Project selection models can be used to determine if a project should be continued. When used in this fashion, updated information can be entered into the model and a decision can be made regarding whether it makes sense to continue this project, particularly in light of new opportunities the organization may have. Question 3: In your opinion, are the types of problems that arose in this situation typical of other organizations? If so, what can organizations in general do to avoid these types of problems? These problems are indeed common. In some organizations, project managers that spend little time planning a project are referred to as “cowboys.” Besides the problem of inadequate planning, the problems of little team involvement, little cross-functional integration, and lack of processes to control change are also all too common. As discussed above, the solution of these problems is to ensure adequate project planning is carried out, that there are adequate levels of involvement both within the team and across functions, and to manage the scope of the project.
