8/ Evaluating and Terminating the Project

8/Evaluating and Terminating the Project

Chapter 8

Evaluating and Terminating the Project

This chapter discusses the issue of appraising the progress of a project and its performance and describes the various ways that projects can be terminated. Project evaluation criteria are listed and discussed. Also, the formal process of auditing a project is overviewed including the information that should be contained in the audit report. Guidelines for when to consider terminating a project, the types of project termination, and the termination process itself are also discussed. The chapter concludes with a discussion of the project final report.

Cases and Readings

Some cases appropriate to the subject of this chapter are:

Harvard: 9-696-083 Biogen, Inc.: rBeta Interferon Manufacturing Process Development This 18-page case concerns a biotech firm that is wrapping up a new manufacturing process project for a newly developed drug. One of the senior scientists is charged with performing an evaluation of the project to document the lessons learned and provide guidance for future projects.

Harvard: 9-692-069 Motorola, Inc.: Bandit Pager Project This 17-page case places the student in the role of conducting an evaluation of an automated production process for radio pagers. Although considered a major success by the company, there appear to be some difficulties in marketing and production that need more attention. A 19 page teaching note (5-692-069) is available.

Harvard: 9-175-184 Northeast Research Laboratory (B) This excellent 17-page retrospective case describes a clients unexpected cancellation of what was thought to be a successfully on-going project. Involves issues of control, auditing, evaluation, termination, behavior, leadership, and organization.

Some readings appropriate to the subject of this chapter are:F.R. Gulliver. Post-Project Appraisals Pay (Harvard Business Review, March-April 1987). This article points out the gross fallacy of ignoring the outcome of projects that had thousands of hours of planning invested in them. Without postproject appraisals, the organization learns nothing from the execution of the project, either in terms of how to do a better job in selecting and supporting projects in the future or in terms of what was learned from the project itself. This article gives advice on how to organize and conduct postproject appraisals. In addition, it describes four major lessons the involved company learned from their appraisals.

B.M. Staw et al. Knowing When to Pull the Plug (Harvard Business Review, March-April 1987). This article has already become a classic on the psychological basis for continuing a project invariably headed for disaster. The authors clearly point out the dangers of certain personality types in project managers matching the needs profile of certain organizations. In these all-too-frequent situations, projects are continued way past the point where common sense would have called for their termination.

Answers to Review Questions

1. The termination project is similar to any other project except that there is only one person conducting the termination itself and there is no "project selection" phase. Also, it is a process of distribution of resources and personnel rather than acquisition of them and the tasks to be conducted are relatively standard or else specified in advance. It is best conducted by someone without an emotional investment in the project. And finally, it is a completely administrative project with a single purpose.

2. There are often political, psychological, and other reasons why projects are continued when they should be terminated. At times, projects that fail to meet their objectives are continued because they are accomplishing other things of value to the organization.

3. Any aspect of termination may cause an otherwise successful project to become a failure, such as an inability to complete the work, not delivering the result, providing poor product support, etc.

4. Inside auditors would probably be more efficient and less expensive. However, they would not be as objective and they may not be familiar with how other firms or organizations operate and could not make accurate comparisons. For example, internal auditors may positively evaluate a situation that appears favorable when outside auditors would report that the situation is not up to market standards based on industry experience.

5. As discussed in the previous answer, internal and external auditors each have their advantages and disadvantages. Students that initially answered external auditors based on perhaps higher objectivity might note that in situations when cost or time is critical, internal auditors might be preferred. Likewise, students that favored internal auditors might recognize the need for external auditors when objectivity or expertise is the key concern.

6. Frequent, brief evaluations have a better chance of finding problems as they are developing and can thus be solved easier and quickly. The frequent, low level evaluations are also less disruptive to the project team. Because of their frequency, they would also better lend themselves to use as a control device.

7. Except for any confidential personnel items, the project team members should have access to the full report. Without feedback, the team members are limited in their growth possibilities.

8. The major value of a post-project audit is to inform senior management of poor practices that should be avoided in future projects, or of beneficial practices that should be adopted by future projects. The audit may be required by a customer who wishes to manage future relationships with the firm.

9. When a general audit exposes a serious problem in the project or in the methods by which the project was conducted, a detailed audit may be required to study such problems in detail and recommend solutions.

Suggested Answers to Discussion Questions

10. For an effective audit, the team must have access to all project records and personnel, as well as all functional and other organizational area records and personnel. Only access to the customer should be limited to require prior clearance from top management. If access is denied by team members, the audit team may have to appeal to the project manager. If the project manager is the cause for the problem, the audit team may have to appeal to senior management. In cases where full access was not provided, the results must be qualified noting the lack of access.

11. Having familiarity with the administrative requirements of project terminations as well as the new environment for the project, if there will be one; being objective and impartial; being calm under stress; being task rather than functionally oriented; and having the ability to effectively and efficiently execute the eight termination tasks.

12. The termination method should depend primarily on what is to happen with the project. For example, if it is to be an ongoing entity, addition is best. If its job is complete, then extinction is best.

13. The focus of the audit must be positive with the reports kept constructive, unemotional, and professional. Pre-release discussions and a formal "appeal" procedure for disagreements are also helpful.

14. The reasons for project selection are often more general in nature while the projects goals are much more specific. One danger of evaluating the project based on the reason it was selected is that a change or shift in the projects specific goals could go undetected. This could result in a situation where projects goals become out of sync with broader organizational goals. It might also lead to project proposals written in such a way as to minimize expected project goals, always consistent with making them high enough to insure selection. In spite of these dangers, the criteria for project selection is a good, but not sufficient, tool for evaluating completed projects and for helping to determine if a project should be terminated before completion.

15. Major risks associated with the project and their potential impact on the projects schedule, cost, or performance should be identified. If alternative courses of action exist that may change future risks, they should also be identified. The parent organization should also insist on proper ethical standards of behavior from the project manager, team, and all functional managers connected with the project. A large majority of the problems referred to in this question concern credit-for-success and blame-for-failure. If a project succeeds or fails, the success or failure belongs to the entire team. 16. There is no theoretical correct way of dealing with these problems. Any method of sharing costs and/or profits that is acceptable to the several functional managers is acceptable. The method of cost/profit sharing must be accepted prior to initiating the project. Attempts to solve the problem when the project is completed are doomed.

17. Co-opt means to appropriate as ones own. This is a common tactic for parties being audited. Passive resistance is advised. The audit team should listen interestedly to all complaints, advice, etc., and proceed as if the co-opting had not occurred. Noncommittal is the best attitude for the auditors.

18. Introduction: This is the key to all that follows. It is important to make sure that all parties are in agreement with the statement of project direct goals and objectives.

Current status: It is also important that all parties agree about the current status of the project. All direct costs and the actual state of work on the project should be detailed in this section. This serves as the basis many of the reports recommendations.

Future project status: Based on the current status section of the report, this section describes what must be done to complete the project, including any required changes in budget, schedule, scope, and goals of the project. This serves as a major input in the decision to continue the project without modification of the plan, continue it with modifications, or to terminate the project.

Critical management issues: This section allows senior management to exercise control over any aspects of the project or its management that seem to be desirable. Senior management may also consider alteration of any project management policies that appear to be dysfunctional. Management may also install new project management policies.

Risk analysis and risk management: This allows senior managers to reassess the risks associated with the project given its current state. This assessment would include both technological and monetary risk.

Final comments: This section provides information to senior managers about the underlying assumptions made during data collection as well as the statistical reliability and validity of the data if such an assessment can be made. The section may also be used to collect any recommendation that might apply to future projects. Incidents for Discussion Suggested Answers

General Construction Company: The member of the auditing team is not following appropriate procedure in contacting the customer directly. The PM should immediately inform top management of both the technical problem with the contract and of the breach of audit procedure. Then the PM should arrange to get in touch with the client to resolve the problem. The auditor should be disciplined for his breach of procedure. The customer should include such an audit process in the contract, with results coming directly to them. The customer may also insist on the audit being conducted by their own people, or an outside party.

Lexi Electronics: Addition is the method of choice for this example. The project team members should be utilized to lead, at least initially, the production of the new phone. They have the most familiarity with the process and the product.

Suggested Case Analyses and Solutions

St. Dismas Assisted Living Facility -- VI

Teaching Purpose: This installment concludes the St. Dismas case. Issues include estimating the final construction budget, addressing a work slowdown, revising the Gantt chart, and the reporting of staff expenses.

1. Estimate the final construction budget.

BudgetedEstimated Actual at CompletionRemaining $

Construction Costs:

Building6,743,000.00$6,743,000.00$0.00

Contingency 674,300.00$674,300.00$0.00

Land600,000.00$600,000.00$0.00

Program development & equipment costs405,000.00$405,000.00$0.00

Furniture400,000.00$400,000.00$0.00

A&E Fees @ 5%347,000.00$347,000.00$0.00

Financing costs202,000.00$202,000.00$0.00

Capitalized interest135,000.00$135,000.00$0.00

Site improvements125,000.00$147,655.00-$22,655.00

Phone & IS system30,000.00$30,000.00$0.00

Kitchen equipment30,000.00$23,776.00$6,224.00

Total9,691,300.00$9,707,731.00-$16,431.00

Organizational Costs:

Legal and accounting25,000.00$0.00$25,000.00

Initial marketing250,000.00$0.00$250,000.00

Project consultant80,000.00$0.00$80,000.00

Follow-up Market survey20,000.00$0.00$20,000.00

Total375,000.00$0.00$375,000.00

Total10,066,300.00$9,707,731.00$358,569.00

The organizational costs can not be reflected in the final budget until the CFO explains when and how the expenses will be allocated back to the projects budget for the expenses incurred by the parent organization. The above reflects the information provided in the case.

2. What should they do about the work slowdown?

The work slowdown is probably being caused by the construction crew because they have not been informed of their next assignment. They are concerned about the lack of work after the facility is completed. The project manager needs to urge the contractor to inform his crew of their next assignment. Kyle also needs to insist that no additional slowdowns be allowed, and that tighter controls are put on the system to monitor that the project stays on schedule during the last few months.

3. Create a Gantt chart with the revisions to the duration of the interior step. When will the project be completed?

The project will be completed 8/1/01.

4. What is the importance of the fact that the Hospital staff expenses were not reported under the project budget?The importance of the omission of expenses on the project is significant. The CFO should have provided the PM with the overhead allocations at the beginning of the project. Those expenses can and will effect the projects budget and need to be included in the overall project. The PM may not have control over the expenses but they effect his bottom line and the success of the project in meeting its budget. This late in the project there is little anyone, include the CEO, can do to have an impact on the success of the project budgetarily without knowing these costs.

Datatechs AuditTeaching Purpose: This case illustrates how many of the topics discussed in previous chapters can contribute to project failure and perhaps the need to terminate the project early.

1. To what extent were the problems facing the notebook computer development project avoidable? What could have been done to avoid these problems?Indeed, all of the problems noted in the case were avoidable. First, there was no project planning done on Steves part. This was, in part, due to Steves failure to recognize significant differences between a minor product line extension project and a more substantial new product line development project. Furthermore, there was no team involvement in developing the WBS. Had the team been involved, the need for a hinge system would probably have been identified. The problem with manufacturing not being able to produce the notebook computer design could have been avoided had this group been more involved earlier in the project. Finally, there is need for a formal change request process. This would have helped with the VPs request to redesign the computer to work with the new PDA.

2. Would it make sense to apply a project selection model such as the weighted scoring model to the project to determine if it should be terminated?Absolutely. Project selection models can be used to determine if a project should be continued. When used in this fashion, updated information can be entered into the model and a decision can be made regarding whether it makes sense to continue this project, particularly in light of new opportunities the organization may have.

3. In your opinion, are the types of problems that arose in this situation typical of other organizations? If so, what can organizations in general do to avoid these types of problems?

These problems are indeed common. In some organizations, project managers that spend little time planning a project are referred to as cowboys. Besides the problem of inadequate planning, the problems of little team involvement, little cross-functional integration, and lack of processes to control change are also all too common. As discussed above, the solution of these problems is to ensure adequate project planning is carried out, that there are adequate levels of involvement both within the team and across functions, and to manage the scope of the project.

Test Questions

True/False and Multiple Choice

T 1. ___ A project evaluation measures the projects performance relative to its plan.

F 2. ___ One should evaluate the project only after it is completed.

F 3. ___ The most difficult thing to evaluate is the projects budget and schedule.

T 4. ___ It is a best practice to set the evaluation criteria at the beginning of the project.

F 5. ___ A project audit should only be conducted after the project is completed.

F 6. ___ Audits conducted after the project is finished have little or no value to the

project manager.

T 7. ___ The audit team should establish a relationship with the project team.

T 8. ___ Project team members should be made aware of audits when or before the audit

process is started.

T 9. ___ The method used to terminate a project has a major impact on the work

environment of the organization.

T 10. ___ Termination by addition occurs when the project is made a new part of the

sponsoring organization or its client.

F 11. ___ Termination by integration occurs when the project is made a new part of the

sponsoring organization or its client.

T 12. ___ Formally ignoring a project by not giving it enough budget and resources is

also known as project starvation.

F 13. ___ Determining the best method for project termination is usually done by the

project manager.

T 14. ___ The process to be followed when terminating a project should be included in

the original project plan.

F 15. ___ The termination manager and the project manager are always the same person.

F 16. ___ It is best to have the project manager assume responsibility as the termination

manager of the project.

T 17. ___ When a project is terminated, the project manager should help with the

reassignment of project personnel.

F 18. ___ In a functional organization, layoffs of project personnel are likely when

projects are terminated.

T 19. ___ The projects final report is a history of the project.

F 20. ___ The project manager should only include objective, measurable data and

findings in the projects final report.

T 21. ___ A primary purpose of the projects final report is to improve future projects.

F 22. ___ Follow-up and communication on the projects performance is of little

importance after the project is completed.

T 23. ___ Project evaluation determines the progress of the project relative to the

objectives of the organization.

F 24. ___ Project evaluation will not increase the cost of the project.

F 25. ___ Team members should not contribute their opinions to or participate in the

project audit because they would bias the findings.

F 25. ___ The primary purpose of the project evaluation is to identify the projects

weaknesses.

T 26. ___ The project auditor must maintain political and technical independence during

the audit.

T 27. ___ A good time for a project evaluation is when major milestones are scheduled

for completion.

F 28. ___ A financial audit has a broader scope than a project audit.

F 29. ___ In conducting an audit, the auditor must remember not to worry about the

anxiety he may cause the project team.

T 30. ___ All project records and files should be accessible to the audit.

F 31. ___ The primary purpose of the project final report is to determine the success of

the project.

T 32. ___ An official termination should be part of every project.

b 33. ___ What are the ways to terminate a project?

a. Starvation, depletion of resources, distribution and abandonment

b. Extinction, addition, integration, and starvation

c. Neglect, adoption, exterminating and assassination

d. A & C

e. B & D

b 34. ___ Who is best to determine the project termination method?

a. The project team

b. The senior executive termination team

c. The function department managers

d. The project manager

e. The project champion

e 35. ___The termination manager is responsible for which of the following:

a. Check that all work is completed

b. Make sure subcontractors completed work

c. Clear accounts for final billing

d. Determine what documentation to keep on the project

e. All of the above

b 36. ___ The primary purpose of the projects final report is?

a. Document the project

b. Improve future projects performance

c. Keep a diary of the project

d. Serve as an method of project evaluation

e. All of the above

d 37. ___ The primary focus of the project evaluation is to:

a. Identify what is going well on the project

b. Identify the problems on the project

c. Determine the cost of the project

d. Aid in achieving the projects goals

e. Give the project manager a good idea of how the project is progressing

b 38. ___ The formal audit report should contain

a. A list of the project team members and their roles

b. The current status of the project

c. The Work Breakdown Structure with costs

d. The cost of resources used to date on the project

e. None of the above is necessary

Short Answer

39. Why is the post project audit important?

To learn from the project. To account for all project property and expenditures.

40. What are some of the goals of the project evaluation?

Make recommendations to improve project performance, speed achievement of results, identify what is going well and what are some mistakes made, fix problems and avoid them in the future.

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