Projects, by their definition, are often challenging - whether it is a technology implementation project, a physical plant expansion or a product development project. Projects start with a blank slate and involve temporary periods (phases) of intense action by a team of individual specialists.

Although I have worked with a number of great project managers and project team members who have delivered some great project results, most projects are on the cusp of failure at any time with the potential for problems such as:

• Significant accidents or environmental incidents
• Costs that spin out of control
• Delays that postpone the benefit/revenue of a project (and impact the rate of return). These delays can be especially damaging when the project is seeking to take advantage of a limited time window of opportunity in the marketplace
• Design, functionality or operability issues

Armand V. Feigenbaum (who died last month at the age of 92), authored a Harvard Business Review article in 1956 that outlined the four costs of poor quality. Those costs are described below and include including my thoughts on how those costs impact the quality of a project:

Cost of External Failures

External failures can be the greatest cost of a poor quality project because the failures are experienced by the customer or user. These are failures after the software product goes live or the physical asset is mechanically complete and commissioned. It could be safety/environmental incidents, poorly performing equipment, features not functioning as promised, etc.

These failures can be so costly because they have a negative impact on the customer's/user's credibility and trust in the asset. This can result in a negative buzz, a lost customer or the loss of a potential referral. Also, the cost to remedy/repair the problem can be significant - not just to fix the problem with that asset but if the root of the problem impacts other similar assets, then similar remedies/repairs may be needed to prevent the problem before there is an external failure.

One highly visible failure was the with the 2011 Fukushima nuclear plant accident in Japan following a major earthquake - the worst nuclear accident of its kind since the 1986 Chernobyl accident. The plant was shut down and there was a significant radioactive release. The site remains highly radioactive three years later.

Also in the news this week are the OSHA investigations into EI Du Pont de Nemours for tanker truck chemical leaks that could have been prevented through proper inspections/tests. Du Pont has been cited by OSHA for a number of serious leaks in the last few years including one that caused a loss of life.

Another highly visible external failure was the 2010 oil spill in the Gulf of Mexico associated with BP's Macondo field and the Deepwater Horizon drilling unit operated by Transocean. There were a number of causes of this failure including a poorly performing blowout preventer. In addition to the financial cost, people lost their lives -- an impact well beyond the dollar costs. I am sure both of these companies would gladly go back in time, if they could, to address any issues during the project design, engineering and construction stages that would have prevented this problem from occurring in the first place.

I have facilitated alignment sessions for a number of major projects at BP (and Amoco) over the last 20 years (not Macondo). I have observed some great people doing the right things to prevent failures like this but unfortunately those prevention successes don't make the news like this failure did.

Cost of Internal Failures

An internal failure for a project is often a failure/problem discovered prior to going live in a technology launch or the startup of a physical plant. The later the error is discovered, the more costly the internal failure will be.

Imagine a project to expand a chemical plant. A discovery is made that will cause a 15% cost overrun and a 2 month delay in start-up. The cause is traced to an engineering failure due to poor communication and alignment between the engineering contractor and the plant's engineering and production personnel. I wouldn't want to be in that project manager's shoes who has to report this failure, would you?

Cost of Appraisal

Performing testing, inspections and audits during a project can often be seen as bureaucratic delays. The cost of discovering any problem at the earliest possible stage (and certainly before the project has been completed) can be money and time well spent.

Many companies often utilize peer reviews, use of peer subject matter experts, to assess the process, decisions or design. This is an excellent appraisal method - to identify where the project did not follow standard procedures or to identify findings that are seen as "showstoppers" by the peers. Even if 9 out of 10 peer reviews do not identify any "showstopper" issues, the one problem or potential failure that is discovered and prevented as a result of the peer review will easily pay for the 9 that did not have any issues. I have seen this to be true in peer reviews I have facilitated.

Unfortunately, appraisal steps for projects are usually instituted after a past failure. As a former auditor for Price Waterhouse, I know that the "industry" of external audits of publicly-traded companies came about in 1934 when the Securities and Exchange Act created the requirement that the financial statements of public companies be audited annually. What was the past failure that caused this requirement to come about? Any guesses? You would be right if you guessed the stock market crash of 1929.

Cost of Prevention

Prevention activities (such as planning, training, goal setting, alignment, etc.) may seem like extra work and cost but are generally the lowest cost of quality compared to the cost of failures and appraisal.

A colleague and I recently worked with an organization to help them with their project plan for a software development project. The project was well underway and significant investments had been made already. It would be an exaggeration to say they had not done any project planning. However, it was also clear that additional project delays could be prevented and confidence in the end product could increase with a better project plan and alignment around that plan. When I facilitated the first alignment meeting for the updated project plan, I discovered that this was the first time the project team had ever all come together at the same time and place to review a written project plan - for a project that was at least 75% complete.

This team was no different than most. These team members had regular jobs in addition to their project job. Alignment meetings would just take more time they didn't have. Time will tell whether this investment in prevention will make a difference but their confidence level in the project plan and the end product is much higher. A couple of team members do have some remaining concerns but if the plan is executed successfully, then those concerns will be a thing of the past soon. The cost of this prevention activity involved additional time of team members on project planning/alignment. But the cost of that time (and the cost of external consultants) will be very low if this project delivers an end product that is in demand by the marketplace.

The following are some recommended investments in prevention activities to reduce the costs/incidents of external/internal failures:

• Document (in writing) the project plan that includes project objectives/metrics, scope of work, deliverables, key work activities/timeline, critical path, roles/responsibilities, resourcing plan and risk management plan. Share the plan with key project team members and stakeholders to get alignment on the plan document.
• Schedule a Goodfriend Teamwork Sharks event (a shameless plug) patterned after the Shark Tank TV show to focus on the project opportunity that is achievable only by working well as a team
• Encourage healthy debates of opposing views about design requirements, scope definitions and functionality alternatives where pros and cons are vigorously debated to learn from each other through a productive disagreement
• Leadership's orchestration of coordination and collaboration by defining the expected processes/activities to reduce the risks of project failures. This could include designing meeting/communication processes, outlining cross functional deliverables to be planned/executed interdependently, roles/responsibilities alignment sessions, defining requirements for handoffs between disciplines/functions and outlining decision making authorities
• Activities to build trust and working relationships between discipline/function leads. Communication between key members can help in anticipating failure events including sharing information that others need to know (instead of protecting self by not sharing information that others can use against you). Activities might include a "team building activity" like going bowling or playing golf. It also could include trust building activities in a workshop format.

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When it comes to the costs of a poor quality project, you can either "pay now" or "pay later." But as too many project teams have discovered, the cost of external failures can be much, much greater than the cost of prevention. Some research indicates that for every $1 invested in prevention, the cost associated with failures can be reduced by $15. So take advantage of the opportunity to prevent those failures. As Thomas Edison said, "Opportunity is missed by most people because it is dressed in overalls and looks like work."

Mike Goodfriend is a teamwork engineer, executive coach, and meeting facilitator. Since 1989, Goodfriend & Associates has been helping leaders and leadership teams increase their strategic advantage through achieving higher levels of competitive advantage, teamwork/alignment, leadership competency and excellence/customer satisfaction. Mike Goodfriend can be reached at 713-789-6840 or via email at mikeg@goodfriendconsulting.com.

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