Project termination – a question of the future

by | 22.02.2018 | Project management | 0 comments

If you had the choice, would you choose a project manager for a new project who has successfully completed all his projects so far or one who has had to abandon several projects in his career? A lot of managers would choose the first project manager, because success in the past is an indicator of success in the future. Abandoned projects are perceived as failures. Experiences with failures do not appear in any resume. And how would you decide if you knew that the second project manager was able to avoid costs of 500,000 euros through his actions and that other projects were successfully designed by the additional employees available?

Project managers find it difficult to admit the failure of projects and organisations find it difficult to terminate projects. Project abandonment is associated with financial losses and image damage, so that projects are often continued against one’s better judgment. Why exactly? Why is there so much concern about image damage? And what should organisations pay attention to when they decide to abandon a project?

The admission

Many organisations find it difficult to stop projects because they have to admit to themselves that they are not perfect. Perfection is the goal, it is the yardstick. Without perfection, the image suffers. Only rarely do organisations succeed in focusing on the insights they have gained instead of on the supposed failure. This makes it almost impossible to value the achievements. Perhaps a workflow that will be used in new projects in the future has proven its worth? Or have features been developed that can be reused in other software? Often in the course of a project experiences are gained which can be very valuable. New approaches and ideas, better processes for defining goals or a clearer communication of responsibilities – with the right view, organisations can also take positives from a failed project with them.

Interestingly, organisations are made up of employees and employees also find it difficult to terminate projects prematurely. Are you perfect? Admittedly, that’s a strange question. I am certainly not. Of course I make mistakes and most of the time I can admit them. Sometimes the environment doesn’t allow it or at least I think it would be better in a situation not to report my mistakes openly. Maybe this is similar for you. If you want, just talk to your next interviewer at an event or conference about the last project that failed. Most people will probably have a hard time talking to each other. But I can tell you a very interesting conversation if you find someone who talks openly and honestly about his experiences with failed projects and you share possible causes and insights. Imperfection can also be something positive.

​The time factor in project termination

Every project termination has a temporal component. At the beginning of a project, during the idea or planning phase, image damage is usually very small. The longer a project runs, the greater the image damage assumed or actual. It is irrelevant whether the image damage is linear or disproportionate to the project duration or the project costs. The longer a meaningful project termination is delayed, the greater the damage. If a project is only terminated towards the end of a project, the potential damage to the company’s image is almost maximum. In fact, it is maximum if the developed product is delivered but the commissioning does not work or the product does not fulfil its purpose in operation.

The Concorde Effect

Do you know what the new BER airport in Berlin has cost the German taxpayer so far? It’s almost 5.6 billion euros (as of 22.02.2018) and the counter is running and running. The construction of the airport is certainly anything but ideal and is now 2,091 days late.¹ But those who have invested so much money and put so much effort into it will not abandon the project. Whether it would make more sense to finish the project and instead initiate a new, less complex one, I can’t judge. Obviously, however, a termination does not seem to be an option at all. Nobody wants to take political responsibility for this unprecedented project. The damage to Germany’s image as a business location and to the companies involved would be immense. In addition, the costs incurred are often used as an argument to justify further project work. This phenomenon is called “Concorde Effect” or “Sunk Cost Fallacy”. “The Concorde was the prime example of a government deficit project. Even after the two partners England and France had long realised that the operation of the supersonic aircraft would never pay off, enormous sums were still invested – just to save the national face. Abandoning would have been tantamount to surrendering.”²

Of course, there are always reasons to continue investing in projects that are in trouble. A look into the future and not a look into the past should be decisive for a continuation. Is further investment in the project worthwhile or is it not? The companies involved in the construction of BER Airport have decided to continue the project. Considering the fact that the companies can compare a relatively difficult to measure damage to their image with an easily quantifiable turnover and profit, this is not really surprising. It almost seems that there are aspects that are even more important to companies than a potential image loss.

The coordinated project termination

Many process standards and process models define milestones at which decisions on the continuation of a project are made. The German process model V-Modell XT defines so-called decision points and the British project management method PRINCE2 uses a corresponding stage gate concept. What these quality gates have in common is that a steering committee, the project management office or a person with the appropriate decision-making authority and decision-making competence evaluates the results achieved in the project up to this point and decides on the continuation of the project. It is essential to have all information that is relevant for a decision. It has to be clarified who collects this information how, in what way, to what extent and until when. It may be necessary to adjust the business case if new requirements or risks arise or if the framework conditions change. Ideally, the release of the next phase takes place, including the determination of the required employees and the provision of the required financial resources. Of course, a project termination could also be decided at the quality gates; at least in theory, because the concrete design of a premature project end does not define the process standards and procedure models.

The use of indicators

Organisations should always consider which indicators are important for the continuation or termination of a project. If there are new laws or standards, an important stakeholder changes his attitude to a project, possible goals shift in the course of a project, employees drop out or are needed in higher-priority projects – there is a large number of possible indicators. By looking at the indicators, companies gradually develop skills to make better decisions about the continuation or termination of projects. At the same time, they can also adapt to different scenarios. For example, there are companies that use Minimum Viable Products to obtain early feedback from users. Or organisations that prepare different solutions for possible changes in the law and separate themselves from the unnecessary alternatives when a new law comes into force and concentrate on the sensible alternative from now on. Such a procedure with different variants naturally requires not only foresight, but also appropriate capacities and financial resources, and the vast majority of companies will not be willing to make these available. As a matter of principle, companies should always check the indicators when quality gates are reached, especially as this also increases their competence in actively shaping projects.

Communication after project termination

If there are reasons for project termination, then organisations should communicate them. It is important to understand the causes of a necessary project termination and to learn from them. Did the project team take on too much, were requirements only incompletely captured because there was no defined process in requirements management or were efforts misjudged? Did the company management run too many projects in parallel, quietly change goals in the course of the project and poorly define responsibilities? Did a supplier make promises that he could not keep because he misjudged technical challenges? Recognising mistakes, naming them and wanting to do better in the future can create additional trust in the organisation, among those involved in the project and also among partners and customers. And this trust can even lead to an image gain in the medium term.

Conclusion

With the exception of BER Airport, a project termination is always a possible scenario. Studies have reported for many years that more than 50% of projects fail. Irrespective of whether such figures are correct, there is in fact always the possibility that a project will be terminated or that consideration must be given to its termination. Organisations should therefore not think about indicators, a coordinated process and meaningful communication just before a project is discontinued. The reasons leading to a project termination are a good basis to learn from problems and mistakes; they should not be concealed under any circumstances. The decisive factor in the continuation or termination of a project is always a look into the future, because the expenses and costs up to the concrete project status have already been incurred. The only thing that helps here is to assess whether a further investment is worthwhile or not. The termination of a project can simply be the right decision.

 

Hints:

[1] In its daily newsletter Checkpoint with the BER count up, the Berliner Tagesspiegel publishes the number of days since non-opening. As of 22.02.2018 it is 2091.
[2] Rolf Dobelli describes in Die Kunst des klaren Denkens, 52 Thinking Errors You Better Leave to Others, page 21-23, published by Carl Hanser Verlag Munich

Michael Schenkel
Michael Schenkel

Head of Marketing, t2informatik GmbH

Michael Schenkel is a graduate business economist and is passionate about marketing. He has a certificate for excellent hiking characteristics, Odenwaldtour in classes 6a/6b and since 1984 the Seahorse. He likes to blog about requirements engineering, project management, stakeholders and marketing. And he will certainly be delighted if you meet him in the real world for a cup of coffee and a piece of cake or for a virtual get-together.

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