The Importance of Killing Bad Projects

You can easily find a lot of literature on choosing good projects and managing them through the portfolio process. However, you don't see much about "bad" projects.

The question is, what is a "bad" project? But before exploring that, what is the benefit to you in recognizing a bad project? The bottom line is that not only can you potentially avoid a project with a poor return, but you can also avoid the drag on resources and morale that almost always results from continuing to work on poor projects.

opportunity cost of bad projects

Now we turn our attention to identifying bad projects. Here are ten indicators of a bad project:

  1. The project does not align with the direction of the company or organization. Look closely at the purpose and objectives for the project. These should line up squarely with some aspect of the organization's strategy.
  2. The project looks like it will take too long to return value. Quicker returns are obviously better. One of the reasons is that the further you project into the future, the less certain the returns become.
  3. The project entails a great deal of risk, and thus very uncertain results. Whether short or longer term, higher risks make a project less attractive. Go for the ones that are more certain...or work to reduce the risks.
  4. The project has a poor financial return for the resources invested. Payback period should be fairly short - usually three years or less, depending ont he situation. Returns should exceed alternative financial investments with similar levels of risk.
  5. There are better projects under consideration on the list. You need to prioritize the better projects up front.
  6. The project is not well understood. Uncertainty means risk. Research the project further and try to increase the certainties and reduce the risks before proceeding.
  7. The project does not have a clear objective. Going back to number 1, where the objective should be aligned with the organization's overall strategies and objectives...some projects actually have an unclear objective. Make sure you and others on the initial team have a clear picture of the objectives of the project.
  8. It is hard to measure whether the project succeeds or not. Every project needs to have associated metrics to help determine the projects degree of readiness. These metrics go back to the goals and objectives of the project - not schedule, resources, and quality.
  9. The project does not have sufficient support within the organization. Be sure to look for a strong project sponsor and a stakeholder following that really want the project. Without it, this could be a big sign that the project should not move forward.
  10. The organization's ability to support the project is limited. Look at the resources required, especially financial, external, and human resources. If you cannot feel comfortable that the project will get the time and attention that it needs to succeed, don't move ahead!

It is important that you and the team learn how to recognize the poor performers and use objective criteria to determine whether to cut them or not. It is as important to let go of the laggards as it is to keep and nurture the winners.

The biggest cost of hanging onto poor performing or marginal projects is that they divert the attention and resources of the organization. This represents a high opportunity cost to continuing to give attention to poor projects. It clearly will not only drain resources on the poor projects, but impedes performance on better projects - or even keeps better projects from even moving forward! The key is to recognize and kill bad projects as soon as you can!

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