THREE VERSIONS OF PROJECT SUCCESS/ FAILURE: THEORY, REALITY AND HUMAN INTERVENTION- CASE STUDY OF THE MILLENNIUM DOME PROJECT
The Millennium Dome project was started in 2000, it is considered a major achievement because no status delay had been recorded (2000). However, the problem arose from the inability of the management to achieve their performance targets particularly on the number of visitors which should be at 12 million. Throughout 2000, paying visitors only reached 2.65 million and 87% of visitors expressed their satisfaction on the visit and services at the Dome. Although this figure stood as the national record for pay-to-visit attraction, the management was confronted critical bottlenecks that seemed like domino effect against its financial position.
Due to inability to reach its visitor target, sponsorship income had plunged resulting to lowering its target from ₤175 million to only ₤115 million including the fact that the timing of cash inflows was also experiencing delays (2000). In addition, the management also expected expenditure forecasts to overtake the budget by at least five percent. As a result of this unsuccessful financial performance, the 1997 vow that the government is willing to extend lottery funding beyond the original due date at December 31, 2000 to avoid jeopardizing the programs of the Dome is put into action. For example, the Millennium Commission approved four further grants totaling ₤179 million in conjunction with the strategy to lower the visitor target during and beyond 2000 to 4.5 million.
Human capital is also sub-optimal especially on the level of leadership and managerial positions. In 1996, it was apparent that the private sector was not willing to take the substantial risk in building, operating and maintaining the Dome Project (2000). As a result, the government took over the project through a non-departmental public body which has the same financial and government agreement like the private entities. However, such structure is blurred by the presence of principal (e.g. shareholders) and agent (e.g. managers). Leaders of the Dome Project are composed of Permanent Secretary of the Department of Culture, Media and Sports; external auditor of Millennium Commission and the Secretary of State for Culture, Media and Sports. Their funding and appointing capacities are characterized by lack of accountability, check-and-balance and conflict of interest.
With this kind of leadership structure, financial forecasting and other performance indicators are easily by-passed and overrated that led to the inability to meet sponsorship income and original lottery funding term. During the performance difficulties in 2000, specific leaders had stepped-down and replaced but the representative of their offices are also appointed as new administrators (2000). Further, the decision to allocated funding is unidirectional with the perception of the Finance Officer. As a result, the original plan and forecasts initiated by the Dome Project members were undermined and eclipsed by the contingent problems and requirements that are need by day-to-day operations. Only after the symptoms of leadership problems are emerging, the administrators commissioned the services of accounting/ auditing experts. And in August 2000, the Dome Project is concluded to be insolvent.
This is why the Dome project is successful in beating the completion date (e.g. before the first day of the year 2000) but a failure of obtaining its performance objectives and investor returns in the operation phase. In July 2000, the potential savior of the project from complete bankruptcy changed its interest in bidding for the Dome primarily due to the financial position and absence of formidable customer base ( 2000). However, this situation was undermined as the Dome is guaranteed by the government and there was an intention to continue the operations of the Dome after it supposedly closure on December 31, 2000. In this foregoing, what are the theoretical/ textbook explanations that can explain the performance failure of the Dome Project? What are the real-life explanations? Lastly, on what extent the role of the Dome leaders and administrators provide value to the Dome operations aside from merely guaranteed continuity clause by the government?
The Textbook Version: The Issues are Planning and Execution
Project life-cycle generally consists of four phases (in order); namely: concept and initiation, design and development, implementation or construction, and commission or handover (2003). Planning and execution stage are likely synonymous to the second and third stages which situate them in the middle of the project life-cycle. In this position, planning has the highest potential to add value as well as the level of influence throughout the whole project. On the other hand, execution has the highest cost of change (). Since the success of the latter is precedent to the success of the former, poor management in planning alone can cost one to several objectives of the project. However, underestimating execution contingencies to support or enhance planning inadequacies and loopholes can cause the same.
Planning can also refer to several planning steps throughout the whole project not just a single or overlapping phase. In fact, it is what the project participants used to build key objectives under project charter (). As poor management takeovers this crucial undertaking, they may be installing over- or under-estimated value of the project. Thus, irrational objectives could be created. In addition, going further back into project selection, inability to carry-on key objectives that initially made the project acceptable as the project accelerates can entirely deter its value-adding potential. For example, new technology (selected for customer-value centrism) is cheaply funded (cost-savings centrism) which resulted to sub-standard parts (defeats the former and supports the latter).
Theoretically, poor project management can be a cause of internal conflict and inadequate authority (1981). The former is characterized by poor schedule and budget control because of the absence of cooperation between the project team and functional organizations. This readily explains how the planning stage under the project life-cycle can be ineffectively made with this situation. As a result, time and cost objectives are at risk of distortion. As the project team would want to keep the objectives, the conflict can induce bottlenecks especially in coordination. In effect, the project team is bound to devise tactics to solve such bottlenecks which ultimately result in limiting the scope of the project, revising the original objectives and attempting to stand on their own.
The latter is highlighted by non-commitment of resources, personnel and facilities to the project as the top-management failed to provide backing on the project manager. The negative symptom of this is likely to emerge in the execution phase where the planned schedule and resource proposals are not diligently followed. There can be delays in issuing budgets to pay for supplier invoice or using project members to do other responsibilities that can hamper project efficiency. As a result, output targets like cash flows or early completion are reduced on their probability to be obtained. Task floats that can be used for flexibility to delay or expedite certain activities can be exhausted due to such symptoms.
However, with these circumstances, project objectives are not entirely unattainable because usually there are trade-offs. Using the integrated risk management model, project objectives can be transcribed to three most crucial project elements which is time, cost and quality (2003). Quality is the most complex and difficult to discern making it also difficult to evaluate. The management can simply choose their best engineers and maybe in the right position to assume a quality output. However, their assessment can only be figured out after testing and completion of the project. As such, this situates cost and time in the forefront of project analysis and consideration to become the foundation of objectives.
The banana curve clearly shows the trade-off between time and cost (2003). When project time is reduced, the cost usually escalates while the reverse is likely true. For a project initiated by an average manufacturer, the curve is very useful to obtain optimal returns from the project. This trade-off can be represented by two conflicting project objectives such as “To be able to finish the project as early as possible to position resources on their regular responsibilities and early inflows from the finished project” and “To implement the project efficiently to reduce the risk of loss and maximize project returns”. From this, priority is necessary for effective decision-making. This goes beyond time, cost or quality aspects but on how much the company believes on the feasibility of the project to provide benefits. But the question is “What is the ultimate objective of the project?”
As such, when a poor project management occurred in the planning phase, task schedules may not obtain their optimal levels (e.g. allow maximum floatation for flexibility and contingencies) but the conflict may as well teach project members to be resourceful and put the project to a greater level. Thus, a certain project objective (maybe an implicit one) that contributes to other project management knowledge areas like information communications is achieved even though schedule optimization has been a failure. This is the same for execution stage. When a contingent action is proposed and there is no support from the top-management, governance mechanisms (maybe another implicit objective) are adopted.
It is necessary for project managers and top-management to provide an identity to the project at hand. This will concretize the importance of the project objectives compared to organizational/ functional ones. In this way, poor project management can be prevented in the planning and execution stages. This will also limit the likelihood of the project to adversely affect implicit objectives that is beyond its scope. Prioritization can be applied and trade-offs can be measured. As this is in place, the final task is to prevent poor project management to emerge in both planning and execution stage. The ideal situation is to filter planning problems and correct it under execution stage. Otherwise, the project can face total failure of completion and all attached objectives will be bound also to demise.
The Real-Life Version: The Cause is the “Innovative” Project
In reality, decisions are based from incomplete information and uncertainty about the outcome that gives rise to an intrinsic element of every project which is risks (2003). As much as a project wants to avoid risks, it is unlikely to do so because the general rule is that higher (lower) risks post higher (lower) returns (1999). This is concretized with the universal business doctrine to profit. In addition, as the project not simply wants to have a partial competitive edge rather a sustainable one, complying with the four criteria on having sustainable competitive advantage necessarily accumulates greater risks (2003). When the project embraces valuable, costly-to-imitate, rare and non-substitutable capabilities, it already initiated to move its risks continuum towards total risks and away from no risk and limiting the assurance of the scope of risk management ( 2003).
For example, one of the root causes of a failed project is due to the level of innovation (). A high level of innovation is a candidate of producing a competitive platform like Amazon’s website that acts like a human salesperson (2003). The project is likely to result to high design costs as “one-click” technology should be developed including purchase of necessary rights/ license to execute the project. On the other hand, a low level of innovation may emerge from Amazon’s homogeneity with industry standards that restrains project initiation because it does not have the willingness to exploit the absence of innovation in the industry. Due to this, a project feature usually entails high level of innovation. This necessarily requires huge funding, technical expertise and restructuring from the company. In the contrary, as risks are high, the company has to gamble. It has to rely with the untested procedures, technology and techniques by exposing its liquidity and strategy to complete the project and derive anticipated returns.
In this situation, external and internal scanning including competitor intelligence is of little help because uncertainty goes beyond the risk management scope. Risks are identifiable but are hardly quantifiable because there is yet to provide systematic trend of risk occurrence associated with the innovation. Thus, probability and consequences/ impact of innovation risks (2003) are difficult to indicate. This positions any risk response under a highly subjective framework. In heuristic studies like that of (1983), information involving formal and probability characteristics that tend to obligate a person was less regarded than the more natural, informal and easier way of cognition (). According to (2003), other common reasons of project failure are port estimation, inadequate planning, insufficient control and lack of commitment () which are the most probable consequences of non-objective approach.
As observed, a successful feasibility study regarding an innovation is not an assurance that the project will also be triumphant. In concept phase, poor estimation will emerge in indirect costing. In the design phase, flexibility of task schedules is tightened by certain innovation dilemma like being the first-mover. In the implementation phase, human resource aspect of the project can be neglected as managerial skills would be overly-focus on anticipating difficulties from new and ambiguous technology. In the commission phase, innovation testing can result to persistent problems that require overtime and extension of the completion date. The overall phases of the project post threats to costs, quality and time due to the presence of large amount of uncertainties and risks. This particular phenomenon can be associated with innovation’s integrated approach to companies (2003).
Aside from innovation, projects typically affect a set of stakeholders which includes customers, employees, suppliers, the government and the public. What the project team and the company want are to minimize the negative effects of the project to them and maximize positive effects to aid in profitability and longer product life. This is where legitimacy theory takes place ( 1996) where an entity is required to provide evidence that it is indeed legitimate to be operating within a societal framework. Indication of failure to legitimize includes environmental pollution, employee abuse and fraudulent marketing. But stakeholders have their way to counter the company through hostile lobbying, product boycott and employee strikes.
In the contrary, the project is not perfectly funded, scheduled and customized according to specific needs of individual stakeholders. The project requires prioritization as it cannot satisfy all of them (2003 ). This is a rational strategy because the project has its own specific objectives that may not be intended to indirect stakeholders. The inability to obtain this goal can also be caused by the lack of stakeholder focus. As a result, most companies go on with stakeholder priority (e.g. customers) and leave others with minimum attention (e.g. environmentalists). The latter, however, can pose project closure even when successfully completed if the product does not meet certain standards. Due to this, environmental disclosures are used for corporate image-building (1996).
Options to mitigate possible retaliation of non-priority stakeholders are available to the company. However, such are in nature, are simply reactive tactics where ambiguity of success are minimally analyze throughout the life of the project. In addition, they are also necessarily includes unethical execution (e.g. greasing and fraud) to address any stakeholder difficulty. As a result, project members are squeezed in a challenging situation. If they will not use these options, they may risk not exploiting opportunities because of the associated substantial costs, time and quality constraints of a project with diversified stakeholders. On the other hand, not having second thoughts to refuse such options may lead to risking reputation and conscience that can have strategic and personal complications (e.g. Enron scandal).
Human Factor: An Issue Where Textbook and Reality are Undermined
There are several roles for the operations manager (OM). Generally, OM is the head of the operations department which in turn administer the transformational process (e.g. converting inputs to outputs). Therefore, OM should be knowledgeable and experienced in determining the creation of value for the activities comprising the transformational process. Otherwise, the servicing firm will lead to inefficiency and ultimately inability to produce value-added outputs. Since operations management deals with people, technology and deadlines, a qualified OM should have good technical, conceptual and behavioral skills (2003).
More than anyone in the company, the operations department intensively interacts with other departments ( 2003). For example, marketing information can be derived through operations department about product availability, lead-time estimates and delivery schedules. Without such data, marketing and even sales people cannot do their jobs in a satisfactory way that can cause loss of customers and revenues. As a result, operations leader should have ample theoretical background in order for the department to have tools necessary for efficient collaboration. The lack of knowledge of OM to use alternative courses of actions for departmental interaction can lead to devastating effect on the firm.
Further, human resources department coordinate their plans to operations department on employee recruitment, training and other motivational programs. This is crucial because the number of required workers, complexity of work and job satisfaction can serve as negative symptoms in which human resources department can interfere. In the early years of Ford Manufacturing Company (e.g. when its founder, Henry, is still the president), its operation engineers introduce the conveyor belts and “man high” line wherein simple worker movements was not allowed because timing was very crucial (2006). Although it improved efficiency, employee turnover was high due to very formal and machine-like working environment.
To complete the integrated role of OM against corporate departments, finance people relies on the level of productivity, cost cutting strategies and new product developments in building corporate budgets. Without the operational information, most of the capital outlay which are operational in nature (e.g. establishing a new manufacturing factory) will not be accurate and financial health and growth would not be attained to the detriment of investment opportunities of the organization. Since the OM holds the technical core or “hub” of the organization, ineffective communication with the finance department could obliterate the chance of securing important funding ( 2003).
As observed, the responsibility of OM goes beyond his own department. This is why there are several supporting supervisors under an OM to achieve the demand for an integrative outlook. In the case of Eveready, its OM manages the entire production process at the Maryville alkaline plant but has a total of thirteen (13) supervisors and more than five-hundred (500) production workers (2003). This example implies that OM has a large opportunity to coordinate on a corporate-level and it is given. However, it is expected that the new OM would be respectable enough for the integration to happen. Thus, technical expertise, experience, educational background, employment record especially supervision and behavioral assessment of former colleagues are necessary.
OM should be able to create, implement, monitor and evaluate an effective operations strategy. This is not an easy task considering that corporate strategies are intertwined with operational strategy or simply the latter is the day-to-day execution of the former into detailed actions (2003). In the case of Honda, a high-tech humanoid called Asimo embodies the operational and corporate strategy of the company (2007). The pioneering and sophisticated attributes of ASIMO relates Honda’s capability to provide its environmental and safe products/ services. The promises have relative ease of acceptance for customers to use such branding into their purchase decisions because Honda has already established itself of developing new and human-friendly technology.
The experience of Honda relates a successful operations strategy to value-added regard on the brand name as Asimo is also used in advertising. OM has succeeded in integrating corporate identity in the operations level (e.g. on how to develop technology and update it). Further, while thinking of efficiency measures, developing a buyable product is far more important. In effect, current offerings should be evaluated while prospect for installing technology as support to efficiency measures should be think about. Therefore, additional criteria that is within the project management skills, forecasting and scheduling would be very useful requirements.
As observed, textbook-suggested strategies and even real operational experiences does not prove an effective and efficient OM. There is a tendency to becomes overly short-sighted (e.g. focus on short-term) or overly far-fetched (e.g. focus on long term). In this regard, the new OM must have qualifications that can be used by the Board of Directors in assessing the depth of every candidate’s understanding about such tendency. This can be observed through a series of interviews, giving actual operational challenges and written examinations. It is far more important than any recommendation attesting the level of expertise of a candidate, however, to match the level of understanding against servicing company’s corporate values/ strategies/ working conditions. This is because operational department is where the action is, therefore, the new OM should be able to adjust in the general conditions on a daily basis.