17-06-2013, 01:01 PM
PROJECT FAILURE EN MASS: A STUDY OF LOOSE BUDGETARY CONTROL IN ISD PROJECTS
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ABSTRACT
This paper investigates the tightness of budgetary control over projects in a large systems development
multinational. This represents a case of extreme ISD failure en mass, where all but 2 of the 22 projects in a business
unit went over budget, causing senior executives to refocus their strategic priorities and cancel all current and
potential projects that followed. This study focuses specifically on the two best performing (12% and 4% underbudget)
and worst performing (223% and 320% over budget) of these projects. Using a framework drawn from
control systems theory, this study examines the ‘tightness’ of budgetary control that was exerted over each project,
and what was done or could have been done to avert such failure. The study then identifies a set of emerging factors
affecting tight budgetary control in ISD.
BACKGROUND TO THE STUDY
It is well known that the majority of information systems development (ISD) projects run drastically over-budget or
fail altogether. Various studies have found that between 40% and 60% of ISD projects fails to meet budget estimates
and that the degree of overspend can exceed 200% (Robey and Keil, 2001, Keil et al., 2000, Goldfinch, 2007,
Whittaker, 1999, Chiang and Mookerjee, 2004, Bartis and Mitev, 2008). Although somewhat dated, the Standish
Group conducted one of the most extensive and often cited studies which showed that, of 8,000 projects, only 16%
were completed within budget (Johnson, 1995). There is no reason to suggest that this trend is improving. Such
failures are not restricted to certain industry sectors or project types; rather they occur with some regularity in
systems development projects and organisations of all types and sizes (Ewusi-Mensah and Przasnyski, 1991, Ewusi-
Mensah, 2001, Park et al., 2008) in both the private and public sector (Goldfinch, 2007, Whittaker, 1999).
THEORETICAL BACKGROUND
Project Management Control
According to one of the seminal texts on management control, the concept of control itself is probably “one of the
most ill-defined in the English language” (Emmanuel et al., 1990). Many others have noted the inconsistency and
ambiguity associated with the term (Merchant, 1985, Merchant, 1998), none moreso than Rathe (1960) who
identified 57 variants at a time when management control was said to be a relatively simple concept. Both the
APMBOK (AssociationforProjectManagement, 2000) and PMBOK (ProjectManagementInstitute, 2009) contain
major segments which address the issue of project control. In the former, a dedicated section includes many of the
tools traditionally associated with control. In the latter, control forms part of many different Knowledge Areas such
as ‘cost control’ within ‘project cost management’ and ‘schedule control’ under ‘project time management’. The
importance of effective project control has been highlighted, both in general (Rozenes et al., 2006, Avison et al.,
2001, Cicmil, 1997), and specifically in ISD projects (Kirsch, 1997, Henderson and Lee, 1992, Choudhury and
Sabherwal, 2003, Schmit et al., 2001, Whittaker, 1999, Chiang and Mookerjee, 2004, Chow and Cao, 2008, Kirsch
et al., 2002), and has been shown to “play a major role as the cause of project failures” (De Falco and Macchiaroli,
1998).
Measuring ‘Tight Budgetary Control’
Van der Stede (2001) highlights a general lack of agreement as to what defines and constitutes ‘tight budgetary
control’. His study identifies one of the earliest, and at the time most commonly used interpretations of the term
(Merchant, 1985), and then illustrates how subsequent research adapted and extended it (Anthony and Govindarajan,
1998, Simons, 1995, Merchant, 1998). He contributes to the literature by constructing a measurement instrument to
capture tight budgetary control. His original research instrument contained five subcomponents, namely low
tolerance for interim budget deviations, detailed line-item follow-ups, intense discussions of budgeting results,
emphasis on meeting short-run budget targets, and level of tolerance for budget revisions during the year. While he
found that the first four were all indicative of tight budgetary control, he found no support for the level of tolerance
for budget revisions during the year. The resulting measure is presented in Figure 1.
RESEARCH DESIGN
Research Site
This study explores the tightness of budgetary control exerted over four systems development projects. These
projects were based in one large multinational organization, were part of the same business unit, and were
purposively selected for this study. Firstly, the business unit within which the four projects reside was terminated
solely due to poor budgetary performance (only 2 of 22 projects were completed within budget). All non-critical
projects and projects in the pipeline were cancelled with immediate effect in February 2007. Tight budgetary control
is unnecessary and occasionally counterproductive if meeting the budget is not considered very important by any of
the stakeholders involved (Merchant and van der Stede, 2007), and so indicators of budget importance were critical
when choosing cases for this study. The fact that the entire business unit was disbanded due to budgetary problems
is a strong indicator that meeting the budget was very important in these cases. The two best performing projects
(12% and 4% under-budget) and worst performing projects (223% and 320% over budget) were chosen as
‘revelatory cases’ (Yin, 2003) to allow effective comparison and contrast between projects and identify interesting
insights. This choice helps distinguish between what may be an organizational or business unit problem (across all
projects) and what may be problem at the project or team level