70 percent of New Zealand companies waste investments

6 December 2010

Media Release

70 percent of New Zealand companies experienced project failure, representing a significant waste of investments

New Zealand’s first major nationwide survey into Project Management has found that in the past 12 months, 70 percent of New Zealand companies had experienced at least one major project failure, says KPMG.

This reflects organisations’ inability to translate significant investments in projects, into real business value.

According to the KPMG New Zealand Project Management Survey while 44 percent of survey participants spent more than $ 15 million on their projects in the past year, most organisations were far from being business-like in the way they conduct projects and for many, embarking on a project appears to be a ‘leap of faith’, in the hope, rather than the expectation, of delivering on time, on budget.

Perry Woolley, a KPMG Director who specialises in Project Management says, “The productivity and profits of New Zealand companies are being impacted by their inability to consistently deliver projects that fulfil the expected objectives.

“In the current economic environment, value for money is a priority. While many have cut back discretionary spend in recent times, we see that many businesses can no longer hold off essential projects. Companies must be inventive and competitive to survive, while at the same time avoiding investments that don't pay off. Effective project management practices help control the added risks that project activity introduces to normal business practice.”

The survey also shows that only 13 percent of respondents always analyse the risks involved in project investments.

Gina Barlow, KPMG New Zealand’s Director of Project Advisory Services, and one of the authors of the report says, “The lack of benefits management is particularly concerning – if organisations do not measure the benefits of their projects, they cannot understand if the investment was worthwhile”.

The survey finds that nearly 60 percent of New Zealand companies failed to consistently align their projects with corporate strategy.

“Organisations need to realise that doing the right project is just as important as doing the project right,” says Gina.

Furthermore, 50 percent of survey participants observed that their projects do not consistently achieve what they set out to achieve, and many projects performed poorly in at least one of the following areas – lack of timely delivery, cost (project runs over budget), or inability to achieve the stated deliverables.

However, the findings are not all gloomy. The KPMG survey also reveals some high-performing organisations, whose projects share a number of characteristics. High performers may come from both the public and private sectors, cover the full range of organisational sizes, and spend varying amounts of money; however their projects share some of the following attributes. Their Projects:
• Are aligned with corporate strategy and have a high-quality business case
• Use resources with a high level of project management capability
• Use programme or portfolio-management disciplines
• Are co-ordinated by a Project Management Office (PMO)
• Have an effective sponsor who provides clear direction for the project
• Manage risks actively
• Have timely, accurate and up-to-date reporting
• Report variations and implement recovery actions in a timely manner
• Have project managers that adopt a formal methodology
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