Not all projects will be completed successfully. Some may be partial successes but others may be complete failures. If all of the projects you work on are successful, primarily ones internal to your company, then you are probably not working on enough projects (nor are you working in a company that takes risks).
First and foremost, we must understand that the only real failures are projects from which nothing is learned. In one company, more than 80% of the projects related to research and development were considered failures by senior management. But the director of the Project Management Office (PMO) looked at it differently. She stated that even though these projects were considered failures by management, many of them created intellectual property that was used on other projects and led to commercially successful products. Therefore, we must be careful in how we define failure.
Second, knowing when to say "I give up!" seems to be more important to the project manager. The earlier the decision is made to cancel a project, the quicker the resources can be assigned to other projects that have a greater opportunity for value creation and commercial success.
Waiting until the next gate review meeting to make a decision is not a viable way to provide governance to projects. Senior management must create templates or checklists that seek out the critical parameters that indicate project cancellation should be considered. The decision to cancel a project is not easy, especially if the project's objectives can no longer be met but the project is creating intellectual property that can be used in the future (which could lead to successful spin-offs from the original project).
Establishing criteria for cancelling a project may include factors such as:
- The project's objectives cannot be met and continuation of the project will not necessarily create intellectual property
- The project's assumptions have changed and it may not be the “right” project to work on
- The project can be completed but it will not create any sustainable value for the company
- Market conditions have changed such that the ROI or sales expectations will not be met, or the competition is expected to introduce a more advanced product
- The final product may become obsolete earlier than expected, or the company may not be able to provide customer support for the product to meet customer expectations
- Costs have risen on the project and the schedule has slipped significantly
- There are technical difficulties beyond the capabilities of company personnel
- The problem is too complex for the company to manage
- Key resources have left the project or resigned from the company
- The company is experiencing a significant cash flow problem
- There has been a significant change in the company's interest and strategy
It is the responsibility of senior management to make sure that project audits are conducted in a timely manner. Project managers must be willing to bring forth any bad news that may lead to project termination. Likewise, senior management must create a culture where people are not punished for bringing forth bad news.