Business Strategy: The “Best Determinant” of Project Success

Many factors influence project success and failure, including schedules, resources and funding. But new project management research from training company Insights Learning and Development, certain chapters of the Project Management Institute* and a strategic execution consultant suggests that the single most important factor influencing project success is the project’s link to the organization’s business strategy and the project manager’s understanding of how the project supports the business strategy.

In other words, the tighter a project’s connection to the business strategy, the smoother it will progress. Conversely, the more tenuous the link between the project and strategy, the more challenges the project will encounter.

[ Project Management: 8 Steps to On-Time On-Budget Delivery ]

Insights Learning and Development and the Project Management Institute came to this conclusion by comparing two different data sets: the number of challenges project managers who participated in a research study cited vis à vis their projects, and the number of project managers who said that their projects have direct strategic value.

Respondents’ rankings of the various challenges their projects face broke down into two groups: One that perceived few project management challenges, and another that saw several challenges strongly impeding project success.

Among the group that cited fewer problems, 68 percent said that their project was performing “better than OK.” By contrast, only 47 percent of the other group believed their project was performing at the same level.

[Project Management: The 14 Most Common Mistakes IT Departments Make.]

Meanwhile, more than three-quarters (77 percent) of the 609 survey respondents stated that their projects “have direct strategic value for achieving their organization’s objectives,” according to the research. Nearly one in five (17 percent) indicated their projects have indirect strategic value; 2.7 percent said their project was initiated to meet a regulatory requirement; 1.8 percent said their project had no apparent strategic value; and 1.2 percent didn’t know.

“By looking at which groups are having the most challenges and which ones are having the least, it is clear that the connection of projects to strategy is the best determinant of project progress,” write Suzanne Dresser and Mark Morgan, authors of the research report. “Projects with more challenges were less likely to have clear strategic value.”

Project Managers Need to Understand a Project’s Value

Strategic value alone is not enough to ensure project success, as the data suggests. Project managers need to understand the business strategy and how the project supports it. Unfortunately, Dresser and Morgan note, project managers don’t always understand the strategic nature of the projects they’re overseeing. Of the 77 percent of project managers who think they’re working on something strategic, only 24 percent knew it was strategic because someone told them or because they saw it in a written document.

Consequently, project managers lack “the context required to flag when the project is veering from its original intent and course-correct towards the intended strategic outcome,” they write. And that’s when cost and time overruns begin and when projects start to veer from business requirements. (See How to Spot a Failing Project.)

Portfolio Management Helps Keep Projects On Track

Part of the reason project managers don’t know projects are strategic is because projects are chosen in many organizations in an ad-hoc manner. Half of survey respondents said that projects are selected in their organizations on the basis of a stakeholder requiring it or through some other informal process, or they indicated that they didn’t know how projects were chosen.

Since projects are often initiated through informal processes, organizations shift project priorities in an equally informal manner. This severely complicates project managers’ work.

“The top challenge cited by project managers is ‘changing priorities among projects impacts resources available to the team,'” write Dresser and Morgan. “There is no question that strategies need to be flexible in this challenging economic environment, but once the projects are chosen and underway, there needs to be limitations on resource shifting as this can dilute the effectiveness of a project. Project managers noted that the number of bodies on the team is less important than having the people with the right capability at the right time.”

Dresser and Morgan recommend that organizations connect project selection and portfolio management to the strategic planning process to ensure that the projects an organization undertakes are quantifiably strategic and to prevent shifting priorities from hampering project success. (See Prioritizing IT Projects Based on Business Strategy and Why Project and Portfolio Management Matter More at Recession Time.)

Insights Learning and Development and the PMI chapters conducted the research from May through September 2009. They surveyed 609 professionals, most of whom are project managers working in North America, the United Kingdom, India and Spain. Eight-five percent of respondents hold project management certifications and have a minimum of four years of experience. They were asked to pick a current or recent project as their frame of reference for the survey, and the projects they chose were evenly distributed across the project life cycle. The research report is available on Insights’ website.

Follow Meridith Levinson on Twitter at @meridith. Follow everything from CIO.com at @CIOonline.

*Correction: In a previous version of this story, we reported that the Project Management Institute, along with Insights Learning and Development and a strategic execution consultant conducted this research. In fact, it was certain chapters of the Project Management Institute that were involved in this research.