The Cost of Poor Project Management

Have you considered the cost of poor project management on your organization?  When I say “cost,” of course I mean the bottom line, but I'm also including the soft cost: people costs.

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 I get to cap the week off with statistics about the costs of poor project management. So let’s get right to the numbers, shall we?

Below are two separate studies on the costs behind inefficient project management.

First off, there’s the study done by PricewaterhouseCoopers.  During their lengthy study on 10,640 projects from over 300 companies, across 30 countries, they found that only 2.5% of the companies successfully completed 100% of their projects.

OK, but what about when you focus on a specific industry?

That's what the Harvard Business Review did with their research. They concerned themselves with project management trends in the IT industry. They analyzed around 1,471 IT projects and discovered that 1 in 6 projects had a cost overrun of 200%, and a schedule overrun of nearly 70%.

However you try to analyze it, that’s a lot of wasted resources!

But what's that equate to in dollars? Well, it’s estimated that the rate of IT project failure falls between 5-15%, with total labor cost losses between $50-150 billion in the United States alone. That’s money wasted because projects aren’t managed tightly enough to be completed on time or within budget.

And beyond dollars, poor project execution impacts many parties. An unsuccessful project can break trust with customers. Lose that trust, and you might as well hope for the best on future business with that customer. Trust is also lost internally when a project fails. Members of project teams begin pointing fingers, creating animosity, losing respect for one another, and building grudges against stakeholders or project managers. Failed projects break morale, and create disruptions in future projects before they start.

Project management can break down in many places. But it has been in my experience that ultimately, a project fails for two reasons: either from poor planning or poor communication, or maybe both.

I’ll admit, I’m sometimes guilty of rushing through the planning phase to get a contract signed or a project launched, only to realize later that hurrying through the details meant dealing with larger issues midway through the project.

On the flip side, I’ve worked on projects where we carefully hammer out specifics with stakeholders and team leaders, and keep communication lines open and efficient as possible. Nine times out of ten, those projects should, and do, run smoothly. And it shouldn’t come as a surprise, either. Projects with thorough planning and reliable communication have the ability to remain successful even when occasional hiccups try to derail progress. And let's face it, there’s always potential for some part of a project to stall or not run according to plan.  No company's immune to it.

With that said, what are some other hard or soft costs you’ve experienced as a consequence of poor project management? More importantly, what steps have you taken to prevent similar costs in the future?

For more tips, check out "Managing and Tracking" from our Project Management series on Thinkzoom. Start your free 15-day trial now!

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