PMI’s PULSE OF THE PROFESSION IN-DEPTH REPORT THE HIGH COST OF LOW PERFORMANCE: THE ESSENTIAL ROLE OF COMMUNICATIONS ORGANIZATI ONAL AGILITY MAY 2013 EXECUTIVE SUMMARY In the context of organizational project and program management, communications is a core competency that, when properly executed, connects every member of a project team to a common set of strategies, goals and actions. Unless these components are effectively shared by project leads and understood by stakeholders, project outcomes are jeopardized and budgets incur unnecessary risk. As reported by PMI’s 2013 Pulse of the ProfessionTM, an organization’s ability to meet project timelines, budgets and especially goals significantly impacts its ability to survive—and even thrive. As they address the urgent need to improve project success rates, organizations are faced with a complex and risky environment that includes: »» »» »» A “do more with less” economic climate Expanding global priorities Necessity to enable innovation The Pulse study also revealed that the most crucial success factor in project management is effective communications to all stakeholders—a critical core competency to all organizations. In a complex and competitive business climate, organizations cannot afford to overlook this key element of project success and long-term profitability. Business research from Forbes, PricewaterhouseCoopers LLC and Towers Watson shows that organizations are very aware of the positive impact that effective communications has on projects, programs, and portfolios. However, what hasn’t been clear until now is how much of an impact ineffective communications has on project outcomes and subsequent business success. PMI’s Pulse of the ProfessionTM In-Depth Report: The Essential Role of Communications provides that eye-opening insight. PMI’s 2013 Pulse of the ProfessionTM report revealed that US$135 million is at risk for every US$1 billion spent on a project. Further research on the importance of effective communications uncovers that a startling 56 percent (US$75 million of that US$135 million) is at risk due to ineffective communications. (See Figure 1) US$135 MILLION Despite this risk, many organizations admit that they are currently not placing adequate importance on effectively communicating critical project information, especially when explaining the business benefits of strategic initiatives to stakeholders at all levels of a project. Organizations cannot execute strategic initiatives unless they can effectively communicate their strategic alignment and business benefits. US$75 MILLION 56 PERCENT IS AT RISK DUE TO INEFFECTIVE COMMUNICATIONS TOTAL DOLLARS AT RISK DOLLARS AT RISK DUE TO INEFFECTIVE COMMUNICATIONS Figure 1. The amount at risk for every US$1 billion PMI’s Pulse communications research finds that effective spent on a project. communications leads to more successful projects, allowing organizations to become high performers (completing an average of 80 percent of projects on time, on budget and meeting original goals). These organizations risk 14 times fewer dollars than their low-performing counterparts. The report also focuses on communications challenges that prevent organizations from accomplishing more successful projects, and identifies key initiatives that can help organizations improve their communication as they face their own unique challenges in such a complex and risky environment. 2 ©2013 Project Management Institute, Inc. The Essential Role of Communications, May 2013. EXECUTIVES AND PROJECT MANAGERS AGREE: COMMUNICATIONS IS CRITICAL Executives and project managers around the world agree that poor communications contributes to project failure. The Forbes Insights 2010 Strategic Initiatives Study “Adapting Corporate Strategy to the Changing Economy,” found that nine out of ten CEOs believe that communications is critical to the success of their strategic initiatives, and nearly half of respondents cite communications as an integral and active component of their strategic planning and execution process. And project managers see it similarly from their side; according to PMI’s Pulse research, 55 percent of project managers agree that effective communications to all stakeholders is the most critical success factor in project management. US$75 MILLION % OF UNSUCCESSFUL PROJECTS WHERE INEFFECTIVE COMMUNICATION IS CONTRIBUTING FACTOR (55.7%) 2 = % OF PROJECTS THAT FAIL DUE TO INEFFECTIVE COMMUNICATION (CONTRIBUTING FACTOR) (21.0%) + + % OF PROJECTS NOT MEETING GOALS (37.7%) 1 THE AMOUNT AT RISK DUE TO INEFFECTIVE COMMUNICATIONS, FOR EVERY US$1 BILLION SPENT ON A PROJECT % OF FAILED PROJECTS’ BUDGET LOST (35.9%) 1 % OF EVERY DOLLAR AT RISK DUE TO INEFFECTIVE COMMUNICATION (CONTRIBUTING FACTOR) (7.5%) =ORGANIZATIONS THAT COMMUNICATE MORE EFFECTIVELY HAVE MORE SUCCESSFUL PROJECTS Figure 2. Ineffective communication puts US$75 million at risk. The third global PricewaterhouseCoopers LLC (PwC) survey on the current state of project management reveals that, according to executives, effective communications is associated with a 17 percent increase in finishing projects within budget. MET MET ORIGINAL ORIGINAL GOALS GOALS 71% ON ONTIME TIME Similarly, the Towers Watson 2011-2012 “Change and Communication ROI Study Report” shows that companies that have highly-effective communications practices are 1.7 times more likely to outperform their peers financially. 52% WITHIN WITHIN BUDGET BUDGET HIGHLY-EFFECTIVE HIGHLY-EFFECTIVECOMMUNICATORS COMMUNICATORS MINIMALLY-EFFECTIVE MINIMALLY-EFFECTIVECOMMUNICATORS COMMUNICATORS 37% 76% 48% Figure 3. Organizations that communicate more effectively have more Clearly, organizations are very aware of successful projects. just how critical effective communications is to the success of strategic projects and, ultimately, organizational success. However, the Pulse communications research finds that only one in four organizations can be described as highly-effective communicators. This suggests that the majority of organizations have opportunities to identify problem areas and chart a course to improve the effectiveness of their project communications. The Pulse communications report quantifies just how much effective communications can lead to more successful projects, and just how much ineffective communications can cost an organization. Sources: 1 PMI’s 2013 Pulse of the Profession™ 2 PMI’s Pulse of the ProfessionTM In-Depth: The Essential Role of Communications ©2013 Project Management Institute, Inc. The Essential Role of Communications, May 2013. 3 THE REAL RISKS OF INEFFECTIVE COMMUNICATIONS Not all projects succeed. On average, two in five projects do not meet their original goals and business intent, and one-half of those unsuccessful projects are related to ineffective communications. (See Figure 4) This translates to US$75 million at risk for every US$1 billion spent – more than 50 percent of the US$135 million reported by PMI’s Pulse report. (See Figure 2) Due to ineffective communication UNSUCCESSFUL PROJECTS SUCCESSFUL PROJECTS Not only is an organization risking dollars, but it is risking project success rates. Our research proves that ineffective communications leads to fewer successful projects; organizations that are minimally-effective communicators report significantly fewer projects that meet original goals, come in on time, and complete within budget. (See Figure 3) Organizations must take ownership of this problem and spearhead initiatives that will improve communications and prevent additional project failures. Figure 4. One out of five projects is unsuccessful due to ineffective communications. THE COMMUNICATIONS GAP, LANGUAGE CHALLENGES Results reveal that while all aspects of project communications can be challenging to organizations, the biggest problem areas are: »» »» A gap in understanding the business benefits. Challenges surrounding the language used to deliver project-related information, which is often unclear and peppered with project management jargon. The Gap Surrounding Business Benefits PMI’s research indicates that organizations recognize that effective communication is an important component of success. However, it also reveals that understanding the importance of communication does not always guarantee successful communications. Our study finds a disconnect within organizations; while business owners and executive sponsors report that communications about business benefits and alignment to strategy is communicated, project managers do not agree. PMO directors and senior project leaders in the organization must take ownership of this gap and translate the business benefits of strategic initiatives to the project teams. (See Figure 5) 60% 57% 54% 64% 62% 57% 66%65% 67% 63%63% 59% 68% 65%67% 60% 62% 52% 43% OBJECTIVES BUDGET PRACTITIONERS SCHEDULE SCOPE EXECUTIVE SPONSORS OUTCOMES BENEFIT/STRATEGY BUSINESS OWNERS Figure 5. Compared to project managers, business owners and executive sponsors report that their organizations are communicating business benefit/ contribution to strategy of projects more frequently. (Average Top 2 Box (Virtually Always/ Most of the Time)) 4 ©2013 Project Management Institute, Inc. The Essential Role of Communications, May 2013. “Everyone needs to understand the long-term goal so they can know how they’re contributing, how they’re making an impact.” Jennifer Georgius, Program Manager at TD Bank COMMUNICATION ABOUT BUSINESS BENEFIT AND CONTRIBUTION TO STRATEGY = MORE SUCCESSFUL PROJECTS PERCENT OF PROJECTS MEETING ORIGINAL GOALS AND BUSINESS INTENT When companies close the gap between the developers of the strategy and those that must execute it, projects are more successful. Organizations that report more frequent project communications, particularly surrounding the business benefit and contribution to strategy, average significantly more successful projects versus organizations that communicate that same information less frequently. (See Figure 6) The Pitfalls of Poor Language 100%- Research findings show that organizations 90%- have difficulty communicating with the appropriate 80%-levels 70%of clarity and detail. This difficulty is likely exacerbated by the divide between each key audience60%and its 50%understanding (or lack thereof) of project-specific, 40%technical language. (See Figure 7) 84% 81% 82% 65% 60% 54% 30%20%- the Not surprisingly, this trouble spot also impacts 10%success of an organization’s strategic initiatives. 0%-of five The data show that an average of four out NON-TECHNICAL WITH SUFFICIENT BUSINESS LANGUAGE CLARITY & BENEFIT/ projects that are communicated with sufficient DETAIL STRATEGY clarity and detail—communicated in the language COMMUNICATE FREQUENTLY COMMUNICATE INFREQUENTLY of the audience—meet their original business goals Figure 6. COMMUNICATE Frequent communication thatFREQUENTLY is clear and relevant, and HIGH PERFORMERS MORE and intent, compared to just over half of projects frequent communication about business benefit and contribution to ACROSS TOPICS, INCLUDING COMMUNICATING THE when communications are not sufficiently clear and ALLstrategy leads to more successful projects. (Percent of projects meeting STRATEGY/ BUSINESS detailed. (See Figure 6) original goalsBENEFIT and business intent) From these indicators, it is evident that project success is dependent upon communicating the correct information to the appropriate stakeholders, using clear and relevant language that resonates with the audience. IMPROVE COMMUNICATIONS TO MAXIMIZE SUCCESS AND MINIMIZE RISK Clearly, organizations that communicate more effectively have more successful projects. Findings show that high performers are more effective communicators. Thus, it is no surprise that highly-effective communicators are five times more likely to be high performers3 than minimally-effective communicators. And as reported in the Pulse study, high-performing organizations put 14 times fewer dollars at risk. These findings suggest that low performers can clearly benefit from improving their communications practices, as improvements will enable them to realize more successful projects, and fewer dollars at risk. (See Figure 8) More projects that finish on time, within the original budget, and with meeting the original goals and business intent of the project are the hallmarks of high-performing organizations, as they average 80 percent or more of projects for these three measures (compared to low performers’ average of 60 percent or fewer projects for all three measures.) 66% 63% 64% 62% 62% TIMELY MANNER PRACTITIONERS 59% 57% 56% SUFFICIENT CLARITY & DETAIL 66%66% 59% 57% APPROPRIATE SETTINGS OR MEDIA NON-TECHNICAL LANGUAGE EXECUTIVE SPONSORS BUSINESS OWNERS Figure 7. The most difficulty reported is communicating with the appropriate clarity/ detail, while the largest gap is communicating with universally understood language. (Average Top 2 Box (Virtually Always/ Most of the Time)) 38% HIGHLY-EFFECTIVE COMMUNICATORS ARE MORE THAN 5 TIMES MORE LIKELY TO BE HIGH PERFORMERS THAN MINIMALLYEFFECTIVE COMMUNICATORS 7% 3 HIGHLY-EFFECTIVE COMMUNICATORS MINIMALLY-EFFECTIVE COMMUNICATORS Figure 8. Communication effectiveness and high performance: those who communicate more effectively are more likely to be high performers. ©2013 Project Management Institute, Inc. The Essential Role of Communications, May 2013. 5 Data show that high-performing organizations distinguish themselves by excelling in all quantified aspects of project communications, specifically with regard to the gap and trouble spots noted earlier. »» High-performing organizations are better at communicating key project topic areas, including objectives, budget, schedule, scope, outcomes and the project’s business benefit. (See Figure 9) »» Additionally, high-performing organizations are notably better at delivering project communications in a timely manner, providing sufficient clarity and detail, using non-technical language, and choosing appropriate settings or media for the delivery. (See Figure 10) »» High-performing organizations use formal communications plans more frequently, and more effectively compared to low-performing organizations. High performers create formal communications plans for nearly twice as many projects. (See Figure 11) And, project communications plans for high-performing organizations are more than three times as effective compared to their low-performing counterparts. (See Figure 12) 83% 81% 73% 79% 76% 75% 77% 75% 72% 64% 49% 42% 36% 38% 39% 39% 36% 40% 34% 25% OBJECTIVES BUDGET SCHEDULE SCOPE OUTCOMES BENEFIT/STRATEGY TIMELY MANNER SUFFICIENT CLARITY & DETAIL NON-TECHNICAL LANGUAGE APPROPRIATE SETTINGS OR MEDIA HIGH PERFORMERS LOW PERFORMERS HIGH PERFORMERS LOW PERFORMERS HIGH PERFORMERS CREATE FORMAL COMMUNICATIONS PLANS FORperformers NEARLY TWICE AS MANY PROJECTS Figure 9. High communicate more frequently across Figure 10. High performers communicate more frequently all topics, including communicating the strategy/business benefit. (Average Top 2 Box (Virtually Always/ Most of the Time)) than low performers in all ways of delivering the message. (Average Top 2 Box (Virtually Always/ Most of the Time)) PROJECTS CONTAINING A FORMAL PROJECT COMMUNICATION PLAN HIGH PERFORMERS 68% 38% LOW PERFORMERS 68% 20% LOW PERFORMERS HIGH PERFORMERS LOW PERFORMERS Figure 11. High performers create formal communications plans for nearly twice as many projects. 6 Figure 12. Project communications plans for high-performing organizations are more than three times as effective. ©2013 Project Management Institute, Inc. The Essential Role of Communications, May 2013. EFFECTIVE STAKEHOLDER COMMUNICATIONS LEAD TO MORE EFFECTIVE PROJECTS Communications are impacted when different stakeholder groups use different jargon and language. This communications issue can also lead to different expectations for a project, which ends up impacting the bottom line. “… In any project you have to adjust the language depending on the audience [in one example] there is a technical team who understands the technical terms very well but doesn’t understand all the project management terms. So the project management terms need to be translated into terms they can understand.” “At the middle management level, they understand ‘operations.’ They understand more details, and probably these are the people that I can use the project management terminology, and some technical terminology, with – but not deep, deep technical terminology… Senior management, they speak the language of money. They want to know ‘hard numbers,’ ‘yes or no,’ … They are more focused on the ‘business value,’ on ‘cost and benefits… but not so much on the project management terminology. So in that case I also have to translate that language into terms they are familiar with and that they want to hear – which most of the time is about money.” It is clear that high-performing organizations are far more successful at communications. Not surprisingly, the study also reve

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