This two-part series presents a structure for understanding why IT projects fail, in a way that goes far beyond project management alone. Part one elaborates the problem while part two discusses the need for greater accountability on the part of senior management.
RISK AND ACCOUNTABILITY
While executives cannot anticipate every risk, current standards of accountability are clearly too low. The incidence of failed IT projects, leading to dramatic examples of waste, remains high and there is little cause to assume this situation will change soon.
Author and Suffolk University ethics professor, Lydia Segal, sees the result as “economic abuse” on the part of company executives. “Disregard for successful outcomes is the unintended, if frequent, consequence.” she says. “We expect senior management to be financial stewards on all matters of material importance, including large IT projects.”
And those who assess corporate risk agree. One of the UK’s top authorities on managing risk, David Hancock, also refuses to excuse failures, saying, “Executives who do not protect this value are negligent in their duties. Failing IT projects can rapidly erode shareholder value and company reputation.”
As evidence, look at these examples, which do not even scratch the surface of IT failure stories:
- In March 2012, United Airlines changed a variety of ticketing and web systems as part of a merger with Continental. Problems arising from the upgrade caused prominent sourcing blog, SpendMatters to comment on the impact to United’s best customers: “across the globe, frequent flyer chaos, even for top-tier flyers, has ensued as a result.”
- The National Health Service (NHS) IT failure, a massive project, has ongoing ramifications for system integrator CSC, which is currently negotiating with the UK government. Earlier in 2012, the company was forced to write off almost $1.5 billion resulting from its participation in the ill-fated National Programme for IT (NPfIT)
- In 2010, publicly traded wood retailer Lumber Liquidators announced a 45 percent drop in earnings, due to “reduced productivity” associated with its ERP deployment.
- In the UK, in 2010, system integrator EDS was forced to pay £318 million ($460.3 million) to British Sky Broadcasting (BSkyB) to settle another CRM failure case
- In 2008, clothing giant Levi Strauss reported a 98 percent drop in net income due to problems with its SAP implementation.
- Also in 2008, retailer J. Crew reported weak earnings due to problems deploying a new CRM system and website
- In 2007, Arizona State University had to bring in armed guards on payroll days, due to problems with an Oracle system. One can only imagine the reputation damage to the university when the Wall Street Journal published that story.
ADVICE FOR MANAGEMENT
IT failures are a byproduct of poor management practice and can be prevented. Organizations committed to change and improvement should consider these points carefully:
Make your CIO an equal partner in the business – if he or she doesn’t measure up, then find a replacement. Many sophisticated CIOs seek a “seat at the table,” hoping to forge a genuine partnership with business peers. However, not all CIOs possess the experience and understanding needed to discuss business issues at that level. For the good of all concerned, senior executives should invite the CIO to participate in strategic discussions while demanding that IT play a user- and business-centric role.
Enlist the Board behind your effort to improve. The size and scope of many IT initiatives requires approval from the Board of Directors. Too often, the Board is so far removed from IT projects that members do not fully understand the risks and practical realities of complex project execution. Enlist the CEO to champion IT change at the Board level – do so by considering the aggregate IT budget and making the strategic relevance of IT to the business as a whole. The more the Board is seen actively sponsoring the change, the greater the acceptance of the change among the employees.
Take control of change management, the silent killer of IT projects. Despite lip service to the contrary, most organizations treat change management as a relatively low-priority activity. As a result, change budgets are low and companies do not invest adequately in engaging employees at early stages of change or properly training them to perform new processes.
Define success and failure metrics; track progress over time. Many IT departments track key performance indicators such as system uptime and user logins. However, these technical measures do little to address the underlying reasons for IT failure. Instead, develop metrics related to user satisfaction, collaboration between business and IT, and senior management support for IT delivery.
Acknowledge failure when it happens; sweeping a mess under the carpet won’t fix it. Transparency can be painful at first, but it also encourages trust and enhances long-term credibility.
CIOs should take personal control to assess and track the buy-in of employees to ensure they:
- Are aware of the need for change
- Possess the desire to change
- Understand what they must do to make the change
- Possess the necessary new skills to enable them to handle the changed way of doing things
- Reinforce the change over time
Responsibility and accountability for IT project success or failure lies with senior management – transferring blame to project managers or third parties is ultimately a misguided effort that will not solve this massive problem. It is time for the business community to expose IT project failures as an important source of economic waste and take steps to fix the problem.