Project Managers Waste Money - and Lots of It!

The Project Management Institute’s 2016 study shows that organizations around the world waste an average of $122 million for every $1 billion spent on projects as a result of poor project management practices.

Poor project management practices are costing us big time, says the Project Management Institute’s (PMI) 2016 Pulse of the Profession®: The High Cost of Low Performance study. Wasting $122 million for every $1 billion spent represents an increase of 12 percent over last year.

The 2016 study features feedback and insights from 2,428 project management practitioners, 192 senior executives and 282 Project Management Office (PMO) directors from a range of industries including government, financial services, information technology, telecom, energy, manufacturing, healthcare and construction. It also includes insights from eight corporate leaders and 10 PMO directors and directors of project management. The global totals in the report represent feedback from North America, Latin America, Europe, the Middle East, and the Asia Pacific region.

Of the geographic regions covered in the report, the Middle East reported the lowest average monetary waste on spending projects: $99 million per $1 billion spent. Brazil reported the highest average waste on project spending: $202 million for every $1 billion spent. North America came in under the global average, wasting on average $119 million for every $1 billion spent.

Of the industries included in the study, government agencies had the lowest average monetary waste on spending projects: $108 per $1 billion spent (does this surprise anyone else as much as it surprises me?). Financial services reported the highest average waste on project spending: $149 million per $1 billion spent.

PMI speculates that the following factors are influential in the amount of project management waste a company might incur.

• Value: Just over half of organizations fully understand the value of project management, a number that has remained the same over the past five years.
• PMO: The percentage of organizations with a PMO has also remained the same for five consecutive years, with nearly seven in ten having a PMO. Furthermore, the types of PMOs in organizations have remained unchanged since PMI began tracking them six years ago; two-thirds of organizations report having a department-specific, regional, or divisional PMO(s), and nearly half of organizations report having an EPMO.
• Practices: Nearly six out of ten organizations use standardized project management practices throughout most or all of the enterprise. But only one in four uses standardized project management practices organization-wide, a decline of three percentage points from one year ago.
• Training and Development: The percentage of organizations providing project management training on tools, competency development, and a defined career path remains unchanged since 2012. Just under half of organizations report having a formal knowledge transfer process — a decline of five percent since last year. This leads to stressed outand ineffective PMs.
• Executive Sponsors: The average percentage of an organization’s projects with active sponsors declined compared to last year: only 59 percent of projects on average have actively engaged executive sponsors.
• Strategy Alignment: Less than half of organizations report high alignment of projects to organizational strategy, a number that has been fairly constant for the past three years. And, organizations report that, compared to last year, fewer of their projects are strategic initiatives (an average of 48 percent of projects, down from 54 percent in 2015).
• Maturity: The percentage of organizations with high project management maturity has not changed for the past six years. Program and portfolio management are equally established in organizations, with only one in six reporting the high maturity of each.
• Benefits Realization: The percentage of organizations reporting high benefits realization maturity is at 17 percent, static for the past three years. And, the percentage of organizations reporting low maturity in benefits realization is trending upward—nearly four in ten now report low maturity.

For more, read the rest of the post at the QuickBase Fast Track blog.

Comments

[David]

I can tell you from experience that experiences with some very very very poor practitioners of PM have a significant impact on the general perception of the project management in general. There are plenty of people running around with the PM title who are absolutely not using best practices. This might explain why so many of those factors are in place.