Stakeholder Power

In my last post called Speaking Truth to Power, I introduced a project that had a remote sponsor, uninvolved targets, some opportunistic hangers-on and a new project manager. Fortunately, the PM persisted with some critical yet fundamental practices, sometimes in the face of fierce executive resistance, to achieve success.

Here’s an example of a project that could have used stakeholder power to advantage. Unfortunately, it was a challenged undertaking due, in part, to absent oversight and flawed incentive compensation. That’s way I call this post You Get What You Pay For!

The Situation

This organization provided pension administration services to clients and their employees. Its obsolete technology and obsolete application software along with a large manual work load resulted in high error rates and less than desirable service to its customers. There was about 150 staff at head office.

The Goal

To modernize the administrative and service processes including a technology upgrade to provide internet access for customers, improved quality, more automated function to reduce costs and improve responsiveness. Expected cost was $50 million.

The Project

The organization reviewed available alternatives and selected a vendor based on a comprehensive review of its capability. The company decided to co-source the operations, where the organization’s employees would use the application software operated by the vendor, rather than totally outsource administrative processes. A unique requirement was to be able to manage the pension records for staff that moved from one participating employer to another and could also work for more than one participating employer at the same time.

The organization had two managers in place to run the project, one from the internal IT organization and one from the vendor. They also contracted with an independent third party to provide oversight on an ongoing basis.

The Results

The project appeared to be progressing well up to the planned implementation of the first release with costs of $20 million on target. Both the internal and vendor project managers reported solid progress and the external third party agreed with their findings. With these glad tidings, the organization planned a first release celebration to recognize the achievement.

In actual fact, the implementation was a disaster. Nothing worked. The changes were pulled out. There was no contingency plan so the reversion to the original systems was messy and time consuming. The post implementation review found the following factors contributed to the failure:

  • The product from the selected vendor had two major deficiencies – their systems needed major modifications to handle individual pension records across organizations and they had never co-sourced a solution before. The latter fact did not come to light until the first phase implementation failed.
  • The vendor and internal managers were to receive substantial bonuses based on making their delivery target. They covered up the problems, hoping that they could clean up the issues after implementation and still be entitled to their bonuses.
  • Why didn’t the third party consultant discover the problems and blow the whistle? The consultant used two sources for input to the periodic reports – the internal and vendor managers. Their definition of an independent review differed significantly from what was expected.
  • The estimated cost to complete the project ballooned to $80 million, 60% greater than originally forecast.