How to run a project over budget by 300-500%

A playbook you don't want to follow

A while back, I was working for a large consulting firm. When I was returning to the US from an overseas assignment, I was allowed to select the city I would return to. I told my boss, who was on the board of this firm, my choice. He counseled against it as apparently the office was being hollowed out, having just hosted the largest project writeoff in the history of the firm. (This was a while ago so these numbers will seem like rounding errors to today’s consultants, but I think the lessons remain the same.)

When I found out that we had written off something like $30 million, I asked how anyone could possibly miss a project estimate by that much. He said, it’s pretty hard, but you have to follow this specific playbook:

• The consulting firm starts the project, creates an estimate, staffs up the project and goes to work (so far this is pretty much like any other project).

• At about the time they’ve burned through most of the budget, they realize they’re not done, and not likely to finish anytime soon. At this point they declare a change in scope and convince the client to accept most of the projected overrun. Typically at this point it’s projected to be about 50%.

• As they near the end of the extension it becomes obvious that they won’t hit the extended budget either. Senior management in the consulting firm recognizes this as well and sacrifices the project manager, and brings in Project Manager #2.

• PM #2 has a very standard script (I don’t know if there is a school for this or if they all work it out on their own): “This is way worse than we thought. It’s not 90% complete (as the outgoing Project Manager had said). It’s not even 50% complete.” New estimates and budgets are drawn up, the client is apprised of the situation. The client has a lot into the project at this point, but also is very reluctant to pay for all this mismanagement. Eventually both parties agree to split the cost of the overrun. The total budget is now between 250% -%300 of the original.

• In order to spend all this extra budget, and to get some new much-needed talent on the team, PM #2 brings in more staff. If the project completes in the new (3rd) budget (and sometimes they do) you have a reluctantly satisfied client (at least they got their system) and consultants (even at half price for the last portion they were making money).

• Alas, sometimes even that doesn’t work. And when it doesn’t, back to the playbook. Bring in PM #3. PM #3 has to be very senior. This has to work. PM #3, in order to maintain his or her reputation, has to make this troubled project succeed.

• PM #3 doesn’t miss a beat. “This is way worse than we thought…” (almost any number can be inserted at this point, but 400 – 500% of the original is not out of range. ) At this point there is no more going back to the client. They consulting firm will eat the rest of the overrun. PM #3 will make sure the new number will absolutely assure success. The consulting firm accepts the write off and finishes the project.

That is pretty much the playbook for how to run over a project by that amount. You might well ask, how did they manage to run over in the first place?

Tolstoy said, “Happy families are all alike; every unhappy family is unhappy in its own way.” And so it is with software projects. Each seems to go bad for a different reason. And if you do enough, the odds will catch up to you. But that will be a subject for another article.

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