Why IT Project Governance Is Flawed - And How to Fix It

Large information technology projects fail too often. The statistics have been disturbing for decades—with seven in 10 enterprise projects not delivering on their promised results. This is important because, over time, the value of your corporate brand and enterprise IT success rate are related.

When major technical systems go off-track and over-budget, they can make the news—which then makes the situation even more difficult to manage. One infamous incident occurred when a Hewlett-Packard (HP) software consolidation program disrupted the company’s supply chain. Another often-cited example was when Nike ran into a software glitch in its demand-planning engine that called up factory orders for thousands fewer Air Jordans than the market needed. Nike CEO Phil Night colorfully referred to this technology debacle as a $400 million “speed bump.”

Both HP and Nike had the resilience to work through these setbacks on their path to creating better enterprise systems, but other companies haven’t been as fortunate. Drug retailer FoxMeyer and Tri-Valley Growers were unable to get their enterprise systems working, and this was a key factor in both companies closing their doors.

Enterprise IT projects are massive undertakings for a company, and with every large-scale project, there is inherent risk at many stages. In the current recession, many companies are reluctant to incur risk, which could cost the enterprise millions, even if the successful end-goal is a better, more integrated enterprise system. However, avoiding the enterprise IT project doesn’t eliminate risk; in fact, a well-managed IT project can save companies millions in costs and generate millions in revenues.

According to a recent study by Corporate Board Member and PricewaterhouseCoopers, 81 percent of U.S. corporate directors agree that risk management has become more difficult—and important—this year than in the past five years. Clearly and justifiably, risk management is a top boardroom and operational priority to executives.

It’s important to ask and answer the question, why does 70 percent of large enterprise IT projects fail to deliver? For decades, experts have struggled to explain the technology productivity paradox—the lack of productivity generated despite massive investments. Yet, when I ran the global IT function for The Coca-Cola Company, I often observed that when enterprise projects struggled it was usually due to disconnects resulting from project management issues—not from the technology itself.

By now, it’s clear that the project management approach developed during the twentieth century for traditional projects like building roads and buildings has proven to be unsuccessful in the twenty-first century with enterprise IT project management and other projects that have high “knowledge work” components.

The father of modern management, Peter F. Drucker, was the first to recognize this problem with respect to managing knowledge work and emphasized repeatedly our need to solve it. I also address this in my recent book, Reinvent Your Enterprise, a book which has been endorsed by The Drucker Institute. There is no question that knowledge work productivity issues introduce the greatest risk to enterprise IT projects because knowledge work is invisible, holistic, and ever-changing, and traditional project management is geared for projects that are visible, specialized, and stable.

To reduce the risk of enterprise knowledge work projects, a better approach to enterprise IT governance is needed. As a part of this, enterprises should evaluate four critical areas to improve their large enterprise IT project governance:

1. Clearly articulated master plan. What is the project—and what isn’t it supposed to achieve? It is common for large enterprise projects to focus too much on the parts and not enough on the whole. When there isn’t a clear master plan—articulated in clear business language—strategy, business objectives, and the IT project itself often go in three different directions. Over time, this results in scope confusion, project delays, and cost overruns.
2. Streamlined decision making. How are decisions made—and who has the authority to make them? Large enterprise projects often confuse decision making with the need for functional expertise. This produces decision-making structures that are far too complex and ultimately unworkable. This results in scope creep, bad technical designs, time delays, and cost overruns. A streamlined governance structure is required with a 24-hour deadline for critical decisions, a rapid escalation/trade-off process, and a shared framework for project steps and the timing and dependencies between those steps.
3. Communication and change leadership. Are project communications and change leadership separated from line management? They shouldn’t be. Communications and change leadership programs often miss the mark—with large teams of consultants vying for the attention of the organization. Communication and change leadership need to be focused and should be executed through the line management hierarchy. If communications and change leadership initiatives don’t come from somebody’s boss, they aren’t going to be productive enough. This work needs to be precise, clear, consistent, and credible.
4. Independent and experienced facilitation. Is there an independent and experienced party to facilitate your project’s five major players? There are five key players in large enterprise IT projects that require facilitation, or—even when people have the best intentions—conflicts will inevitably develop that increase project risks. The five key players include executive management, program director, consulting systems integrator, software owner, and board of directors. To successfully manage enterprise projects and their risks, this facilitation requires a combination of independence, senior experience on the ground, and an accelerated approach for managing project productivity.

With large enterprise IT projects, the governance structure is a big part of the problem and the solution. After decades of failure, it’s clear that better enterprise IT project results require a better approach. By articulating a clear master plan, streamlining decision making, integrating change leadership, and improving facilitation, corporate boards and executives can improve the results of their enterprise IT projects and their companies themselves.

by Jack Bergstrand, founder and CEO of Brand Velocity, Inc., a project acceleration company, and author of Reinvent Your Enterprise. He can be reached at jb@brandvelocity.com.