A Systems Dynamics Look at Delusional Project Management

According to the Project Management Institute Pulse of the Profession Survey – “… on average organizations waste 9.9 percent of every dollar* due to poor project performance and that around one in three projects (31 percent) do not meet their goals, 43 percent are not completed within budget, and nearly half (48 percent) are not completed on time. Alarmingly, executive leaders may be out of touch with this reality, as 85 percent surveyed said they believe their organizations are effective in delivering projects to achieve strategic results…….“There is a powerful connection between effective project management and financial performance,” continued Langley. “Organizations that are ineffective with project management waste 21 times more money than those with the highest performing project management capabilities.”

There are three elements to the system creating this level of delusion in project performance:

1. Ineffective Governance – This allows the “wishful” thinking that often leads to delusions of grandeur on projects. This then bleeds into corporate reporting on performance, perpetuating the “it’s all good here” while in reality, the ship is sinking (and the group think is stinking).
2. Lack of Diversity at the Executive Level – This enables problems to be kept in the closet, “where they belong” and where they can stay because of a lack of effective governance.
3. Slow reaction to change – lack of diversity decreases the ability to respond to changing situations.  Unique insights highlighting opportunities on the horizon are routinely squashed in low-diversity organizations where maintaining the status quo is closely guarded.

The cycle on the left in the image below is the system’s dynamics drihttps://registration.cheetahlearning.com//rs/courselist1.asp?group_id=384-LeadershipLiveving the reinforcement of this situation.  The correction to this “delusion of grandeur” issue (called the balancing feedback loop in “System’s Dynamics” lingo) is to increase the diversity of the executive leadership.

In a Systems Dynamic model, the forcing function either drives (+) or dampens (-) the related elements of the system. In the system on the left, all the elements drive the other elements – that means they all reinforce each other. This amplifies their collective contribution to the issue of delusion in project performance.

The research below shows how a sincere, consistent, and significant attempt to increase diversity at the executive level,  can dampen both the other elements thus reducing the delusions of project performance. When committed executives adhere to governance policies that increase diversity at the top of the organization – it more consistently flows through to the rest of the operation. There are measurable improvements in project performance in organizations that have a more diverse staff with policies that enable diversity. Increasing diversity lifts the veil of delusion all too common amongst mono-culture, male-predominant makeup of executive leadership at all levels of society.

Research shows companies with more gender and ethnic diversity have increased profitability. This chart from the McKinsey & Company research shows the bump in profitability from increasing diversity. Just increasing the percentage of women in leadership by 1% increased the profitability difference between the most and least diverse by 40% from 2014 to 2017. Imagine what could happen when gender equity is 50/50 in the executive ranks!

Boston Consulting Group also did a study on the impact of diversity and innovation.  They found “the most-diverse enterprises were also the most innovative, as measured by the freshness of their revenue mix.”  They looked at diversity based on ” migration, industry, career path, gender, education, age.”

To increase diversity, they found it was the governance of the organization that enabled diversity:

“enabling conditions for diversity, including fair employment practices (such as equal pay), participative leadership, top management support for diversity, and open communication practices, less than 40% of firms employed them. And not surprisingly, firms that had such practices in place had better diversity scores, and as a result better innovation performance. This strongly suggests that diversity represents a tangible missed opportunity and a significant potential upside for most companies. In total, the presence of these enabling factors is worth up to 12.9% points of innovation revenue.”

To reduce the delusions of grandeur problem on project performance in the executive ranks, increase the diversity of the executive ranks through improved governance requiring policies that support and encourage diversity.

Michelle LaBrosse, PMP, PMI-ACP, CCPM, RYT

Chief Cheetah, www.cheetahlearning.com

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