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.