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This year, as in every year for many decades, corporate leaders around the world will bet a substantial portion of their organizations’ budgets on ventures that have less chance of paying out than a roulette wheel. With estimated failure rates of 66%–91%,1 companies’ collective inability to execute high stakes cross-functional initiatives like major product releases, strategic information technology projects, organizational restructurings, fast-paced downsizings or aggressive quality initiatives costs hundreds of billions of dollars a year. For example, it’s estimated that of the $255 billion spent per year on IT projects in the United States, more than a quarter is burned up in failures and cost overruns.2
In addition to sapping organizational performance, these project failures also cost careers. Now more than ever, chief executive officers are under pressure to either get results or get lost. In 2005, CEO turnover doubled from the year before.3 In just the past five years, close to two-thirds of all major companies have replaced their CEOs. Chief information officers are similarly vulnerable, with a quarter losing their jobs each year.4 Studies suggest that an inability to deliver on critical projects is a primary reason for this alarming rate of dismissals. Leaders’ shortcomings were less about strategy and decision making than about their ability to execute.5
Project professionals and management experts have attempted to respond to these failures by improving the formal systems related to program governance, project management and project-related technologies. However, while these new approaches have somewhat improved results, with more than two out of three projects continuing to disappoint, clearly something is still missing. Our research shows that most projects fail for reasons that are widely perceived and that the failures can be both predicted and prevented with surprising reliability. (See “About the Research.”) The best predictor of the future of a project is the quality of just a handful of high-stakes conversations that must occur along the way — but tend not to. More importantly, the study suggests that leaders can substantially improve their organizations’ ability to execute high-stakes projects and initiatives by breaking a code of silence on five astoundingly common yet largely ignored problems.
Crucial Conversation #1: Are We Planning Around Facts?
A vexing problem reported by 85% of project participants is something we call “fact-free planning.” Project leaders under pressure from various stakeholders determine deadlines, scope, deliverables and budget with little or no regard for the hard facts about what will actually be required. At other times, they base their estimates on facts, only to have the estimates ignored. In either case, the result is a set of project parameters and goals that is unrealistic from the beginning.
Interestingly, success or failure is not determined by whether project teams are pressured to make unrealistic commitments (as happens all the time), but whether those teams are able to confront, discuss and manage the phenomenon effectively. The problem is that fewer than one in seven people who are afflicted by fact-free planning are able to succeed at this very crucial conversation. The result is agonizingly predictable. When the crucial conversation fails, there is an 82% chance that the project will come in far over budget, terribly past schedule or woefully short on quality.
Fact-free planning sometimes happens when an executive or customer makes commitments to another stakeholder without the project team’s consent and then presents the finished plan as afait accompli. Over time, teams that suffer from these mindless demands begin to exaggerate when they are asked for project estimates. They pad budgets and timelines, anticipating that their estimates will be ignored. Imagine what happens when this padding gets multiplied by each level of a project – front-line teams, supervisors, managers, directors — and on up. One senior executive frustrated by this dynamic confessed, “The contingency padding gets so thick and is so opaque that at the top level all you can do is make arbitrary demands for cuts and hope it doesn’t go to the bone.”
Fact-free planning in all its incarnations reflects failures of crucial conversations at several levels. When project managers realize it is taking place, they must be willing and able to call the bluff. If they avoid this crucial conversation and either commit to something they know can’t happen or pad their way to success, they set themselves and their projects up to fail.
“I went to my sponsor to explain why we couldn’t get the job done with the budget and timeline he’d set,” says one manager. “I’d calculated out exactly what we’d need. But he wasn’t interested in listening. He pulled out his project management skills and pencil-whipped me into submission. I knew I’d never convince him, so I backed off. But I knew right then that the project would be a disaster.”
Similarly, executives who drive fact-free planning are often avoiding crucial conversations. Instead of discussing their doubts about an estimate’s validity or the team’s competence, they use their power in a way that generatespolitical rather thanrational agreements. Then, when failures follow, their doubts about theteam are confirmed, and they feel justified in their use of pressure to extract irrational commitments in the future.
Crucial Conversation #2: Is the Project Sponsor Providing Support?
Project teams often need support and resources from leaders who are senior to them. When one of these leaders fails to come through as required, the team may need to involve its sponsor. Project sponsors are responsible for providing leadership and political support to ensure that the project succeeds. The sponsor has the organizational position, perspective and clout to work through these alignment issues. But often the sponsor goes absent without leave and allows the project to founder.
Our research shows that 65% of project managers regularly face problems with AWOL sponsors for a variety of reasons: Some sponsors just don’t care about the project, some have no bandwidth, and some lack competence in the project area.
But whatever the reason, the problem must be discussed if it’s to be resolved. About half of the project leaders make a tentative attempt to bring up their concerns, but fewer than one in five are able to hold the crucial conversation with their sponsor in a way that solves the problem. Unless the conversation is forceful enough to bring the sponsor back, the project is destined to fail. More than three-quarters of projects afflicted by AWOL sponsorship come in substantially over budget, behind schedule and below specifications. In fact, 11% come in more than a million dollars over budget.
Crucial Conversation #3: Are We Faithful to the Process?
Powerful stakeholders and senior leaders often skirt the formal decision-making, planning and prioritization processes. They need what they need and don’t want to be burdened with practical considerations. So they work around the process. The result is often outrageous overcommitment, disappointment and burn-out. Projects get approved for which there are no resources. Scope creep bloats approved projects far beyond the resources originally budgeted. And team members deliver a succession of disappointing results and suffer from battered morale.
This study found that 83% of project leaders routinely contend with stakeholders and others who skirt the formal planning and execution system. “As a real simple example,” offers one executive, “somebody might be walking with me to the coffee machine and they start talking about something. I have to stop and say, ‘You realize this is just a conversation — that you did not just initiate a project. Talking to me on the way to the break room is not how you contract for our services.’”
With so few people able to succeed at this kind of crucial conversation, it’s no surprise that 78% of the projects in which formal channels are skirted go over budget, 87% miss their deadlines, and 80% fail to achieve their deliverables.
Crucial Conversation #4: Are We Honestly Assessing Our Progress and Risks?
Once a project gets underway, it can derail when various sub-teams or team members fail to report project risks honestly. More than half of project managers say they face this regularly. Project participants often fail to admit they may fall short on deliverables and need more time, instead hoping that some other group that has problems will speak up first. Whoever speaks up first will be blamed for causing the delay. When participants play this sort of “project chicken,” the status and review process becomes a joke. The team loses opportunities to respond to problems gracefully by revising goals, shifting resources or reorganizing plans. Instead, the project hurtles forward on a collision course with failure while everyone watches — nervously but silently.
Fewer than one in four project leaders are able to discuss project chicken effectively with those who appear to be playing the game. And when they fail, 86% of their projects miss schedule commitments, 78% go over budget and 74% deliver less than they were required.
Crucial Conversation #5: Are Team Members Pulling Their Weight?
Four out of five project leaders report being hobbled by team members who don’t show up to meetings, fail to meet schedules or lack the competence to meet ambitious goals. Often these leaders have no say in selecting or replacing nonperformers and feel powerless to coach them. Instead, they ignore their deficiencies and “work around” the problem.
A second source of team struggle comes when project leaders must negotiate with functional managers to staff their projects. These functional managers often have many other priorities and are unresponsive to the project leader’s needs. Once again, if project leaders can’t hold effective crucial conversations with functional managers who fail to deliver, project success is dicey.
From Silent Crisis to Flawless Execution
While the data show that one in five project managers and executives effectively engage in these five crucial conversations, the good news is that one in fivedo. And much can be learned by studying them and the organizations that support their skilled intervention. In our research, we identified five best practices that leaders use to foster a culture of candor and rapidly improve project execution.
Make the Case
Speaking up or challenging others about these issues won’t happen by accident. Successful leaders must acknowledge the frequency of the five problems and communicate a commitment to fostering more candid dialogue.
For example, when Tom O’Dea took over the customer relationship management systems at Sprint Corp., things were rough. “Application availability” was in the low 90% range. This meant that customers calling to question or complain about bills often either were kept on hold for unacceptably long periods of time, or their calls were terminated with their problems unsolved. Sprint was feeling the pain in the form of raging customer complaints and frequent defections to any of a dozen hungry competitors. At the same time, O’Dea’s group struggled with embarrassing quality problems during major software releases designed to fix the application availability issue. Releases were typically late, and the software commonly crashed. The department’s credibility was at an all-time low. And to make matters worse, all of this was taking place amid regular corporate downsizing announcements that hammered already sagging morale.
One of the first things O’Dea did was to rally his 700 troops, then acknowledge the massive problems the organization faced. He also demonstrated his commitment to candid dialogue about anything standing in the way of improvement. Through an aggressive listening campaign, he publicly committed to hold the senior team accountable — even tying a sizable portion of their annual bonus to efforts to change behaviors related to the five crucial conversations.
Within less than a year, the story was remarkably different. Release quality was up more than 50%. Application availability was well above 98%. Almost every release went in on time. Costs were reduced by nearly 30%. And most amazingly, while down-sizing continued, morale had improved significantly.
Measure What Matters
We were stunned at how few of the managers in the 40 companies we interviewed during our research had any reliable information about corporate performance at project execution. In spite of the fact that billions of dollars were spent in the form of strategic projects every year, only a handful could tell us what percentage performed to specifications.
This is different in places where the five crucial conversations become a priority. At Sprint, for example, O’Dea published a dashboard showing clearly how well the function performed cumulatively for the year. The dashboard tracked projects’ timeliness, costs and quality. In addition, senior managers committed to clear and measurable goals for improving their overall project execution and tied half of their incentive pay to achieving those goals.
But O’Dea went further. Since he was betting that the quality of dialogue around crucial issues would profoundly affect managers’ ability to improve execution, he measured behavior change as well. A brief survey was created that allowed O’Dea and his lieutenants to track, area by area, how frequently each of the crucial conversations was raised and resolved — or not. And unlike most attempts to measure “soft” factors, these data were captured once every four months. Typically, leaders track behavioral or attitudinal data only yearly — if that often. O’Dea reasoned that, in order to sustain leadership attention, the measure would have to be refreshed much more frequently. Also, in order to allow leaders to test whether their interventions were changing behavior, they needed to compress the learning cycle from once a year to three times a year.
Finally, the top 10 managers were held accountable for achieving substantial improvement in their areas in the five crucial conversations.
As we’ve already seen, the results were astounding. Within nine months, release quality improved markedly. On-schedule releases shot up. Morale improved. Unwanted turnover dropped. And most importantly, application availability soared.
If leaders are serious about creating a culture in which crucial conversations thrive, measurement is a key to focusing and sustaining the attention of senior management.
Make It Easy
Making the case helps increase people’s motivation to have the five crucial conversations — but that step, while necessary, is insufficient on its own to change behavior. In addition, you have to lower the hurdle for speaking up. That means ensuring that people have easy access to leaders and other stakeholders with whom they need to have these crucial conversations.
In some ways, the IT turnaround at Sprint presented challenges that were even more complex. Tom O’Dea wasn’t managing a single program, he was managing hundreds of employees and contractors involved in dozens of software updates and releases at any point in time. Many of these fell on critical paths that, if delayed, could stymie the progress.
O’Dea made it easier for project managers to raise issues by redefining his role. He delegated technical leadership of almost every effort in his area and focused instead on enabling the success of others. He spent a great deal of time in release reviews. His primary role in these was to encourage and facilitate any crucial conversations — more than to review technical decisions.
O’Dea and his senior team took steps to eliminate another troubling pattern that blocked crucial conversations from happening. In one critical incident, a new release of their CRM system was flawed with dozens of Severity One glitches — catastrophic errors that literally shut down the system. A root cause of the problem was “project chicken.” Front-line software engineers had predicted right up to the release date that the project was doomed. Unfortunately, this information was filtered on its way five levels up the chain of command, and O’Dea was assured the odds of success were good. Those involved in that weekend refer to it as Black Sunday — a very dark day for the function and an enormous embarrassment for O’Dea personally.
This never happened again. Not only did O’Dea capitalize on the disaster to draw greater attention to the cost of project chicken, but he also engaged his senior team in skip level sessions he called Key Opinion Leader Briefings. Influential and respected people were identified — those who had their finger on the pulse of the systems and organization — and were invited periodically to sessions where they could speak freely with senior leaders. The result was a much more rapid response to issues and concerns and a far more accurate view of reality when release decisions were made.
In addition, as these opinion leaders returned to their functions and reported informally to peers about their positive experiences with raising tough issues with upper management, trust blossomed. The investment of time and attention in opinion leaders’ experiences was leveraged over and over as those they shared their experiences with took greater risks to raise crucial issues they previously would not have raised.
One potential concern with skip level meetings is that they create mistrust in the chain of command. Bosses worry that their subordinates might make them look bad with higher-ups. Interestingly, this was not a concern at Sprint. Since O’Dea had done so much to socialize the need for greater dialogue, and since managers up and down the chain of command were being held accountable for measurable improvement in these behaviors, the skip level sessions became a natural and acceptable method for achieving the shared goal. O’Dea and his team were also careful when issues emerged to get key players together and reveal the true complexity of the issues rather than using single-sided statements in Key Opinion Leader Briefings.
Make It Safe
Not only must it be easy for team members to have the five crucial conversations, but it must be made absolutely clear to all that there will be no negative repercussions for speaking up. This is obviously essential to creating a culture of candor. It’s astounding how even a very small gesture can damage the feeling of safety, even for the most senior staff. Slights, put-downs, huffs of impatience or eye rolling send powerful messages that crucial conversations aren’t welcome. Questions, encouragement and affirmation send the opposite message.
O’Dea was consistently effective at creating such an environment. A front-line software engineer described his participation at a Key Opinion Leader Briefing. O’Dea asked about a major upcoming release. The engineer, full of frustration, took a shot at O’Dea. “You’ve been telling us to ‘Yell Early. Yell Often.’ We’ve been doing it. We’ve been communicating risks for the release and you have stuck with the date anyway.” Now all eyes were on O’Dea. The real audience for his next few words, he recalled afterward, was not just the engineer, it was the other 15 opinion leaders in the room who were riveted to O’Dea to read his reaction. His response communicated complete safety. “You’re right. You have been yelling and we have not been responding. We have, in fact, heard you, but we’ve given no feedback. And shame on us. Shame on me.”
The conversation that followed helped the opinion leaders understand that O’Dea faced many tradeoffs and that the risks they had raised were only one set of considerations. But the respect with which O’Dea responded was the real lesson of the day. Trust in O’Dea and his team increased. Opinion leaders learned that they were safe challenging O’Dea. And the “safety” story spread to others.
Influence By Teaching
People lack confidence when raising crucial issues in part because they lack competence. Most struggle for words when trying to determine how to confront a project leader or sponsor. When someone pressures them for commitments they believe are unrealistic, they feel tongue-tied and nervous.
Whereas in most companies the problem of soft skill building is handed to the training department, companies that are successful in creating a culture of candor know the task must be owned by line managers. At first, leaders can be resistant to the idea, both resenting the extra work and expressing skepticism that people who are not communications experts should be asked to teach communications skills. In actuality, however, these considerations prove not to be problems.
First of all, in successful companies, leaders quickly begin to understand that this is not “extra work.” In fact, the primary job of a leader should be to influence behavior. According to our survey scores, as leaders began to experience success in influencing others, they themselves began to feel more engaged and appreciative.
Second, they found they didn’t have to be experts in order to teach. Instead, they became facilitators — fellow students — in the process. But more than just fellow students, they became advocates. The very process of preparing for and publicly teaching the skills caused them to feel more responsible for the application of the skills. The reason, we found, was that after having taught, the leaders felt a special responsibility to point out opportunities in real time when their direct reports could apply skills from a previous lesson. These natural coaching opportunities tended not to occur to leaders whose people had been trained by others. And when leaders seized these coaching opportunities, it sent a powerful message of encouragement to employees that these skills were relevant and supported. Follow-up research showed that when leaders taught, behavior changed rapidly. When professional trainers taught, it changed more slowly — if at all.
Sprint followed this model to a tee. Tom O’Dea and his direct reports personally taught 10 lessons on skills for holding the five crucial conversations to all of their direct reports. In doing so, they avoided the tendency of many leaders to expose the organization to skills as quickly as possible — often in intensive two- to five-day sessions. The problem with this “flavor of the month” approach is that rapid exposure leads to rapid decay. A few months after such intensive sessions, people usually retain a very small percentage of what they learned.
O’Dea and his team took a more patient approach. They taught a one- to two-hour session on a key crucial conversation skill every two to four weeks. Those who attended these sessions (typically manager-level employees) were then given a few weeks to teach the same skills to their direct reports. These sessions cascaded down through the organization until everyone was introduced to the new skill. Sessions were always taught in intact groups by the supervisor responsible for that team. Research shows that to the degree the training session resembles the real world where application is expected, transference increases. This was very much the case at Sprint.
This patient approach meant that over the course of seven months, every member of the organization was taught in hands-on, application-focused sessions all of the crucial conversations skills. By keeping the organization’s attention on the skills and new behaviors for this sustained period, O’Dea and his team broke through the “flavor of the month” cynicism that meets most new ideas and instead coached people to try, adopt and habituate to a new way of working.
The result was dramatic and measurable. Within just four months, the “vital behaviors” survey registered 20% improvement in people’s likelihood to speak up effectively about the five crucial conversations. And this improvement was accompanied by 50% improvements in quality. Costs dropped by 30%. Application availability shot above 98%. And while insecurity continued in the larger corporate environment, morale increased substantially in O’Dea’s shop.
An Integrated Approach: The Six Sources of Influence
Our research demonstrates that the pervasive failure to have the five crucial conversations contributes profoundly to widespread disappointment and disaster in critical project execution. The data suggest that when the five recommendations above are pursued in a coherent fashion, the result will allow the talents of project participants to lead to flawless execution and stellar results more consistently. But following those five recommendations requires that fundamental individual and organizational behaviors must change. There are six fundamental conditions — or sources of influence — that make the new behavior not just possible but inevitable.
People need to feel personally committed to changing behavior. They need to see the moral imperative implicit in the changes. As leaders at Sprint worked to make the case for change, they helped people see how the quality of their work, pride in achievement and desire to make a difference were bound up in changing how they dealt with the five crucial conversations.
People must be capable of enacting the new behaviors. Leaders often fail at influencing change because they grossly underinvest in the deliberate practice required to help people adopt new behaviors. Sprint invested substantially and reaped the benefits.
People have to know that they will be supported — even praised if they do change. They also need to see that those who don’t change are held accountable. At Sprint, the fact that leaders did the teaching sent a loud social message and enlisted leaders in creating social support.
People also need help, coaching, permission, authority and other socially provided enablers in order to beable to change. At Sprint, O’Dea and his team gave people the access they needed to be able to hold the crucial conversations they were being asked to have.
Organizations must provide incentives to show that they place a value on behavioral change. O’Dea’s group tied leadership bonuses to success at influencing change, to great effect.
Organizations must find ways to reinforce the message of behavioral change. O’Dea’s group frequently gathered and disseminated data to keep the crucial conversations front and center in people’s minds. They also used posters, e-mails and other mechanisms to make the new behaviors ubiquitous in their early stages.
Serious leaders must develop a robust influence strategy to change deeply entrenched behaviors that sap organizational results. When they do so, change is not just possible, it’s predictable.
1. The Standish Group International Inc., “CHAOS Chronicles,” 2004; and R.S. Kaplan and D.P. Norton, “The Strategy Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment” (Boston: Harvard Business School Press, September 2000).
2. Standish Group, “CHAOS Chronicles.”
3. Challenger, Gray & Christmas Inc., cited in “CEO Pay Soars in 2005 As a Select Group Break the $100 Million Mark,” USA Today, April 10, 2006, sec. B, p. 2.
4. J.P. Lucas, “Work Management: Why Can’t Information Managers Manage?” PMI Seminar/Symposium Proceedings, 1995, 304–310.
5. Study by LeadershipIQ.com.