The Costs of Struggling or Failing Projects

cost-of-project-failure

The costs of struggling or failing projects is very real and can result in both short and long-term impact on an organization’s ability to deliver its mission. This shouldn’t come as a surprise–every initiative costs time and resources. What are often a surprise are the less obvious costs that enter the equation as a complex implementation initiative starts to struggle. As a project’s risk of failure increases, it becomes difficult to establish a clear, objective viewpoint. It’s common for teams to scramble for solutions as well as find someone to blame for the problems they are encountering.

The situation is made more complex by the simple truth that prior to and immediately after launch of a new system, there is almost always a sharp drop in the same metrics that indicate a struggling project. Efficiency, productivity, and revenue dip dramatically as staff and constituents become familiar with new tools and processes. These are frequently established metrics, and accompany almost any change or initiative. A drop in early launch metrics is common and should not only be expected, it should be included as part of the system launch plan. Preparing the team for a dip in their performance metrics will go a long way to relieve stress and frustration they will undoubtedly feel as they transition to the new system. Left unaddressed, the team can feel overwhelmed and unsupported, increasing the risk of project failure.

Short-Term Costs

One of the earliest costs in a struggling project is a noticeable loss of efficiency and productivity. More concerning than the expected dip described above, this loss is not because the team is learning a new way to complete their tasks, but is struggling to get their tasks completed at all. Old processes are shutting down, new processes aren’t working reliably yet, and everyone is putting additional effort into getting things stabilized. Each day is filled with unexpected challenges and uncertainty, costing the organization more time and effort to deliver its mission. The longer this state of uncertainty continues, the more frustration builds to a point where the team is no longer willing to put in extra effort. The staff’s goodwill and patience are depleted.

The state described above is quickly followed by a loss in revenue, a cost that is closely monitored at any nonprofit. Broken systems and overworked staff combine to make it difficult for supporters to donate to the organization. This has become an even greater risk since modern technology makes it easy for patrons to give their support to another organization. Any development team understands that reestablishing a relationship with a disgruntled donor is even harder than attracting new ones.

Short-term costs are the first signs of a struggling project and should be a clear red flag for project leadership to take action. There are additional risk indicators that help identify a project that is truly struggling. The indicators appear not only in reports and dashboards, but in the comments and attitudes of everyone involved. Stay alert to these types of clues to prevent longer term consequences. Acquiring additional part-time staff to complete day-to-day tasks of processing gifts leading up to system launch can be well worth the investment to prevent staff burnout and loss of donor support.

Long-Term Costs

Long-term costs can be difficult to quantify because they arise from a buildup of smaller elements similar to a snow flurry building to a blizzard. One of the first of these costs is loss of confidence in both data integrity and organization leadership.

Every nonprofit possesses a wealth of information in its database describing donor, volunteer, event, activity and engagement over years of effort. During a system transition all of this vital information can be put at risk if not managed effectively. Bad data can quickly accumulate due to lack of time and effective training, or lack of monitoring, accountability, and reinforcement when using the new system. With bad data going in, the benefits and efficiencies that were to be gained cannot be realized. From here additional costs surface. Multiple campaign mailings are sent to the same household increasing mailing costs, a “Do Not Call” setting is missed upsetting a major donor, and gifts are miscoded impacting the budgets of different departments. Eventually these can combine to impact the overall reputation of organization.

As data errors build, data confidence starts to wane. Staff are no longer sure of the integrity of their reports, and in turn are not as confident in the decisions they make for the organization. Unaddressed, staff starts to lose confidence in their leaders because they know any decisions are a best-guess. As the organization struggles through a difficult transition, confidence erodes away as staff feels additional pressure to deliver on the organization’s mission despite the challenges. As with the loss of efficiency mentioned above, loss of confidence leads to frustration and eroding support for the project. Resistance to putting in extra effort for the initiative grows while morale and motivation drops dramatically.

As confidence fades, the next long-term cost is staff attrition. When individuals feel unrecognized, unheard, or unsupported, they are more likely to search for new opportunities outside the organization. In our experience with over 200 clients, core project team members feel a heightened level of pressure, responsibility, and project ownership. If this pressure can’t be relieved and they do not feel supported by organization leadership, this group is often one of the first to leave. Losing staff costs the organization and impacts budgets directly including costs of recruiting, onboarding, and retraining of new employees. There is also the loss of institutional and project knowledge, which has lasting effects on teams as well as user adoption. This loss can hinder an organization for years to come.

Finally, a cost that is hidden within a struggling project is losing the opportunity to strategically plan improvements and build on the past successes of the organization. When a team is constantly addressing immediate issues, they are not able to effectively innovate and look for solutions that can benefit the long-term goals of the organization. The organization can stagnate, more focused on maintaining the status quo than looking for ways to improve to positively impact their mission.

How to Prevent Project Failure

Hopefully it’s clear that the above scenarios are extreme cases, and are the result of complete inaction by the project’s management and sponsors. No organization should experience all of these costs at once, but all organizations will experience them to some degree. Fortunately, most of these issues are controllable and often preventable through effective change management strategies that address the human aspects of the transition project. Studies by change research organization Prosci have shown a majority of projects fail due to the human element of the project. In practice, this usually means the people impacted by the project are not prepared for, do not understand the business reasons for, or are resistant to the changes it will bring.

It’s essential for project leadership to nurture active and honest communication channels with the entire team, and gather frequent feedback from impacted staff. Open communication from leadership to staff, and from staff back to leadership will help develop an awareness of the warning signs of project failure. Here are a few of the most common:

  • Defeated language from the project team – “It won’t matter what we do”, “We’ll never get agreement”, and “I’m tired of going through this” are all red flag phrases
  • Over-emphasis on minutiae at the cost of the big picture and goals
  • Frequently missing project deadlines and milestones
  • Inconsistent priorities across the project team
  • Shutdown of internal communication about the project

There are many more behaviors and phrases that should be red flags to project leadership. In the coming weeks, we’ll be sharing more about these warning signs, as well as strategies to address and move beyond project resistance. Stay tuned!

Questions? Contact Us!

Project management industry studies reveal that more than half of project resistance could be avoided using effective change management strategies. If you have questions on specific situations or you feel your initiative is at risk, please contact us. Heller’s certified change management specialists are skilled in identifying and reducing project resistance that arises before, during and after implementations. Since each organization, and each change initiative, is unique, Heller offers a variety of change management services to ensure your organization successfully achieves your technology vision. Our services have clearly defined deliverables tailored specifically for nonprofits, and are coordinated to match your project phases. We can join your in-progress initiative to advise and realign teams that are showing signs of resistance and increasing risk.

About the author

Ralitza Zikatanova

I have always been passionate about the nonprofit sector and in finding solutions, making systems more efficient and manageable, and innovating to achieve an organization's goals. As a Salesforce.com Certified Administrator I have seen firsthand how Salesforce can drive success and efficiency in nonprofits and I want every organization to have the opportunity to effectively utilize the tools that are now available.

Leave a Reply

Your email address will not be published. Required fields are marked *

Copyright © 2018 Heller Consulting.