Internal controls: fly or flop?

In association with KPMG

Unlike the Ministry of Defence, which has spent millions on helicopters that
are not safe to fly, you may not be in the running for public humiliation, but
failure is a very real possibility if you are trying to deliver a large project.

Project failure makes no distinction between successful or emerging
businesses, according a report from IT research company Standish Group. Its
Chaos Report shows that 31% of projects are cancelled before
completion, and 88% exceed their deadline and/or budget. The report also finds
that cost overruns average 189% and schedule overruns average 222%.

The humiliating publicity resulting from major project failure erodes
investor confidence and can lead to a fall in a company’s share price. In some
cases, it can even bankrupt the business.

But failure can be avoided by undertaking a thorough risk analysis of the
project and implementing the controls identified. Ian Lamplough, head of project
assurance services at
recalls one recent project with a global utility company. The organisation was
implementing a major transformation programme with numerous technical and
business workstreams, and engaged PricewaterhouseCoopers to provide independent
project reviews. The firm focused on high-risk activities during build, test and
implementation, and highlighted areas of concern. ‘This provided assurance to
management that the programme status was being reported accurately, and that
risks and issues were being raised and managed appropriately, resulting in the
expected benefits being delivered,’ says Lamplough.

Carrying out proactive reviews from the beginning of a project ensures
genuine independence and additional expertise throughout. And that, in turn,
underpins successful delivery.

Chris Gumn, a partner in
KPMG’s IT advisory group,
says one of the biggest challenges for large-scale projects is management
throughout the life cycle. ‘We estimate that companies are losing more than a
quarter of the benefits of their large-scale technology projects because they
fail to manage them properly,’ says Gumn.

Gumn has found that the loss of benefits is particularly important in the
context of the changing definition of success. ‘With an increased focus on
governance issues, board and executive involvement has increased, and we have
evidence that shows that boards have been approving up to 40% of business
cases,’ Gumn says. ‘However, this senior focus tends to wane as the project
progresses and there is insufficient emphasis on ensuring that the forecast
benefits are actually delivered.’

Success is increasingly defined as achieving the promised benefits, as
opposed to the traditional focus on time and budget measures. ‘We have research
results from around the world, which show that 59% of organisations have no
management process to measure benefits, or at best have an informal process.
This needs to change – and a sound management function can make sure that value
is being delivered back into an organisation,’ says Gumn.

To avoid being caught on the back foot, good project management is essential,
and companies are starting to outsource this function. Project-based
organisations have also begun to emerge, while some audit firms have developed
‘business advisory’ units.

Peter Cunningham, head of programme advisory services at Ernst & Young,
is quick to remind project managers to set themselves up for success, not
failure. ‘If you don’t have a clear idea where you are trying to go and what you
are trying to achieve, you are setting yourself up for failure,’ he says. ‘It is
very important to have a view, vision or objective. The next important step is
to get people to genuinely buy into that.’

Cunningham has come across several large-scale efforts that failed because
the right players were not on board. ‘The people who are on board don’t
necessarily view the project as important enough, and delivering the project
becomes even more difficult to deliver when you couple this with competition for
resources,’ he says.

Cunningham advises project managers of FTSE 100 companies, which often have
numerous large projects going ahead simultaneously, to get the right people on
board. ‘You want to get the big players to buy into the project, and to commit
to the programme,’ he says.

Planning then is core to successful project management. But it is essential
to remember that the nature of business is dynamic. ‘Plans should therefore not
be set in concrete, because things do change,’ Cunningham points out. ‘Sometimes
projects fail because the environment of the business changes and project
managers don’t respond to that change, but instead stick hard and fast to the
plans they had at the beginning.’

At all times, the most important consideration is whether the project will
still achieve its business goals. When the right people have adopted and
committed to the idea, the initial phases of a business are incredible, and the
enthusiasm pushes the project forward. The challenge is to keep that momentum

To keep people’s attention and commitment, it is important to create a sense
of urgency, even though the project is set for delivery a year or two down the
line. ‘You can do this by having a number of short-term wins, but it may still
be difficult to maintain momentum,’ says Cunningham. ‘And later, you will also
find that those who kept quiet at the beginning of the project will suddenly
start voicing critical opinion, which can result in the project’s failure.’

In fact, Cunningham says that some may even set out to actively disrupt a
project. ‘At the core are people who are opposed to change, because change means
that people are affected in their individual capacities,’ he says. Winning over
the malcontents is certainly worth a try, but in most cases it is a near
impossibility. ‘You either get them on your side, or get them out of the way
because they will get in the way of a successful project,’ he advises.

If you are a newcomer tasked with implementing a strategy, Cunningham warns
that taking a Draconian approach will not help you win friends and influence
people. ‘The way you approach delivery, in this instance, needs to be rooted in
the way a company does its business,’ he says. ‘If the enterprise is very
consensus-based, then a top-down approach is not going to work.’

Communication is key with stakeholders at all levels. People are more likely
to get on with the project if they know why they are doing it, and have some
idea what the project is meant to achieve. ‘I once worked on a project that was
divesting a part of its business,’ Cunningham recalls. ‘Communication with
everyone ensured this was at the top of everyone’s agenda. Actions followed
words because everyone understood what the project was meant to achieve and knew
if it was actually making any progress. The plan had milestones, so people could
see progress along the way.’


Phil Keown, head of technology and risk management at Grant Thornton,
recommends taking the following measures to prevent project failure:

? Provide project assurance – Make sure the right techniques
are being used and that you have the right support. You also need the right
reporting mechanisms to monitor progress.

? Factor business needs at all stages – Address this right
from the start. When it comes to IT projects in particular, the departmental
manager is responsible, but if their understanding of what should be delivered
is not fully aligned with what the board wants to achieve, the business may end
up with a project it is not happy with.

? Build in security controls – Implement these as the
project is developed rather than after it has been delivered.
Leaving it to the end will cost more and could mean a less effective security
system. You also risk losing huge amounts of data and spending a great deal more
on extra software and hardware. The knock-on financial effects of leaving risk
control to the very end translates into lost business, lost stock and lost

? Give training in the new processes – Changes in process
have to take into account clients as well as those supported by new functions.
Some of those affected will be averse to change because they are uncomfortable
with new strategies or technology. Training can help staff to overcome this from
the outset. Helping staff become comfortable with new systems achieves the best
business outcomes.

? Manage time – The project timescale should be managed step
by step by continuous forecasting, which should also keep a tight rein on the

? Set out implementation quality – Define quality goals to
be achieved along the way. This means putting steps in place to measure what the
project periodically achieves. Ultimately, you need a system that works and
delivers business benefits.

? Get an objective view– If you want a review of the
project’s success, then don’t ask the project leader or delivery team to deliver
this. These individuals have a vested interest in reporting success. You need an
independent voice, who will deliver an honest assessment of how the project is
progressing, and what it has brought to the business.

Related reading