How Boards and Senior Managers have governed ICT projects to succeed or fail Dr Raymond Young raymond.younggsm.mq.edu

1. How Boards and Senior Managershave governed ICT projects to succeed (or fail) Dr Raymond Young raymond.young@gsm.mq.edu.au Project Management and Organisational ChangeCanberra, 21-22 February, 2006 It�s an honour to follow Christine for a number of reasons, one of which is her recent boardroom guide on IT Governance published by CPA What I am going to do is develop one aspect of her presentation/book and discuss how governance applies to projects specifically. My presentation will be based on the last four years of my research which lead to my PhD and the work I am doing with Standards Australia. It�s an honour to follow Christine for a number of reasons, one of which is her recent boardroom guide on IT Governance published by CPA What I am going to do is develop one aspect of her presentation/book and discuss how governance applies to projects specifically. My presentation will be based on the last four years of my research which lead to my PhD and the work I am doing with Standards Australia.

2. How to fail �successfully� $10M ERP, $100M pa, <200 staff CEO initiated Selection by snr management But Board unconvinced Business case: $6M benefits over 5 years Snr managers sign off

3. Major Governance Principle: Focus on a standard definition of success The reason why the first case study is important is because it captures the #1 reason why projects fail from a board perspective. If stakeholders are left to their own devices, they will work toward their own definition of success, but even if they achieve success in their terms, it will not resultThe reason why the first case study is important is because it captures the #1 reason why projects fail from a board perspective. If stakeholders are left to their own devices, they will work toward their own definition of success, but even if they achieve success in their terms, it will not result

4. Common sensebut not the common practice! The generic advice to senior management is simplistic with prescriptions for communication, enthusiasm, involvement and participation (Schmitt and Kozar 1978, Izzo 1987, Lederer and Mendelow 1988, Jarvenpaa and Ives 1991) Some recommendations are very demanding of top management time but the justification for the effort is couched in terms of improving technical quality or user satisfaction (Brandon 1970, Dinter 1971, Doll 1985, Izzo 1987) rather than any objective of direct concern to senior managers (Young 2005) generally promoted as inherently good (M�hring 2002a) yet there is clear evidence that inappropriate managerial support leads to dysfunctional behaviour, escalation and failures (Keil 1995, Collins and Bicknell 1997).The generic advice to senior management is simplistic with prescriptions for communication, enthusiasm, involvement and participation (Schmitt and Kozar 1978, Izzo 1987, Lederer and Mendelow 1988, Jarvenpaa and Ives 1991) Some recommendations are very demanding of top management time but the justification for the effort is couched in terms of improving technical quality or user satisfaction (Brandon 1970, Dinter 1971, Doll 1985, Izzo 1987) rather than any objective of direct concern to senior managers (Young 2005) generally promoted as inherently good (M�hring 2002a) yet there is clear evidence that inappropriate managerial support leads to dysfunctional behaviour, escalation and failures (Keil 1995, Collins and Bicknell 1997).

7. There are many layers of sophistication around these questions, particularly when an organisation has many projects competing for resources (portfolio) or when a program of many projects need to be undertaken to achieve the desired outcome. Never-the-less, I would argue even when you are talking about a portfolio or a program of projects, you still have to address these same basic questions before you get into any other considerations AND I would argue that because we aren�t even getting these basics right all the other considerations become secondary .There are many layers of sophistication around these questions, particularly when an organisation has many projects competing for resources (portfolio) or when a program of many projects need to be undertaken to achieve the desired outcome. Never-the-less, I would argue even when you are talking about a portfolio or a program of projects, you still have to address these same basic questions before you get into any other considerations AND I would argue that because we aren�t even getting these basics right all the other considerations become secondary .

8. How Boards & Senior Managers should govern ICT projects Discussion

9. Top management support activitiesHard & Soft prescriptions

10. What is the most important critical success factor? 28% of IT projects are abandoned before completion (Standish 1999) 30�40% of projects are implemented without any perceptible benefits (Willcocks 1994) 80-90% of projects fail to meet their performance objectives (Clegg & al 1997)28% of IT projects are abandoned before completion (Standish 1999) 30�40% of projects are implemented without any perceptible benefits (Willcocks 1994) 80-90% of projects fail to meet their performance objectives (Clegg & al 1997)

11. Case Studies What is the most important success factor?

13. Theoretical Models of top management support

14. IT Project GovernanceEstimated Financial Benefits Terminated: 15% (2003) - 28% (1999) Standish (2003) Latest Standish group CHAOS Report shows Project Success Rates Have Improved by 50%. March 25. The Standish Group, West Yarmouth, MA http://www.standishgroup.com/press/article.php?id=2 Standish (1999) CHAOS. The Standish Group, West Yarmouth, MA No benefits: 30-40% Willcocks, L. and Margetts, H. (1994) Risk assessment and information systems, European Journal of Information Systems, 3:2, 127-138. Deliver: 10-20% Clegg, C., Axtell, C., Damodaran, L., Farbey, B., Hull, R., Lloyd-Jones, R., Nicholls, J., Sell, R. and Tomlinson, C. (1997) Information technology: a study of performance and the role of human and organizational factors, Ergonomics, 40:9, 851-871. Estimated benefits: 130% At a minimum it is reasonable to claim the $9.6M (40%) that delivered no benefits should now deliver some benefits but this seems too conservative. An estimate of the benefits of effective IT project governance can be made by applying Brynjolfsson and Hitt�s (1998) 130% to the $24M (15%) spent on projects. If it is assumed that underperforming projects deliver 50% of the promised benefits (cf Garrity 1963) then the rate of return of every effective dollar can be calculated to be 400%, and the effect of effective IT project governance within DAIS can be estimated to be $55.2M ($24.0M more than is currently being realised). Brynjolfsson, E. and Hitt, L. M. (1998) Beyond the Productivity Paradox: Computers are the catalyst for bigger changes, Communications of the ACM, 41:8, 49-55. Assume the 130% is related to the projects that delivered anything at all, and that the part deliver projects deliver 50% of the promised benefits (Garrity has found 1/3 of projects deliver benefits). This implies $1 good dollar invested in IT produced $4 of benefits (whereas the rest of it delivers nothing) An alternative much more conservative estimate assumes only the projects that deliver anything, deliver 130% and the rest deliver nothing. (need to check Brynjolfsson again) Terminated: 15% (2003) - 28% (1999) Standish (2003) Latest Standish group CHAOS Report shows Project Success Rates Have Improved by 50%. March 25. The Standish Group, West Yarmouth, MA http://www.standishgroup.com/press/article.php?id=2 Standish (1999) CHAOS. The Standish Group, West Yarmouth, MA No benefits: 30-40% Willcocks, L. and Margetts, H. (1994) Risk assessment and information systems, European Journal of Information Systems, 3:2, 127-138. Deliver: 10-20% Clegg, C., Axtell, C., Damodaran, L., Farbey, B., Hull, R., Lloyd-Jones, R., Nicholls, J., Sell, R. and Tomlinson, C. (1997) Information technology: a study of performance and the role of human and organizational factors, Ergonomics, 40:9, 851-871. Estimated benefits: 130% At a minimum it is reasonable to claim the $9.6M (40%) that delivered no benefits should now deliver some benefits but this seems too conservative. An estimate of the benefits of effective IT project governance can be made by applying Brynjolfsson and Hitt�s (1998) 130% to the $24M (15%) spent on projects. If it is assumed that underperforming projects deliver 50% of the promised benefits (cf Garrity 1963) then the rate of return of every effective dollar can be calculated to be 400%, and the effect of effective IT project governance within DAIS can be estimated to be $55.2M ($24.0M more than is currently being realised). Brynjolfsson, E. and Hitt, L. M. (1998) Beyond the Productivity Paradox: Computers are the catalyst for bigger changes, Communications of the ACM, 41:8, 49-55. Assume the 130% is related to the projects that delivered anything at all, and that the part deliver projects deliver 50% of the promised benefits (Garrity has found 1/3 of projects deliver benefits). This implies $1 good dollar invested in IT produced $4 of benefits (whereas the rest of it delivers nothing) An alternative much more conservative estimate assumes only the projects that deliver anything, deliver 130% and the rest deliver nothing. (need to check Brynjolfsson again)

15. IT Project GovernanceEstimated Financial Benefits