Project Termination – How to Do It Right: Establish a Culture of Successful Failure!

Project termination is still rather unusual for many companies. In theory, most agree it makes sense not to flog a “dead horse”. Yet, the reality is often different. Even if a project is beyond remedy, it is often seen through to the bitter end against all odds.

The reasons for refusing project termination are manifold. In this article, Thomas Brustbauer, a seasoned IT project manager, gives his opinion on why many enterprises refrain from terminating projects and how this could be changed.

Look forward to the following chapters:

• What makes project termination so difficult? – Some reasons
• When is the time to terminate a project?
• Is the communication about the status of the projects appropriate?
• Mistakes and experience as part of company culture
• How do you terminate a project without losing face?
• What are the criteria for project termination?
• Project termination example
• Conclusion – Project termination

Let us get started!

What Makes Project Termination So Difficult? – Some Reasons

Thomas Brustbauer is managing director at InsData, a subsidiary of the Austrian insurance group Uniqa. In his long career as a project manager, he has only rarely experienced that a project was terminated right in the middle. On the contrary, at that point the parties involved like to argue as follows: after investing all that money into the project, it is necessary to get something in return.

“I think this is where a distinctly human component comes in,” the experienced project manager reflects. “I think halfway through the project people are still too emotionally involved. The project team has the ambition to keep their promise. Likewise, on the customer’s side there is still hope that their money was good for something. And that the project will somehow be carried through.”

Key reasons for the difficulty of carrying out a project termination can be:

1. Project termination and failure: Project termination is often considered a failure, which has negative connotations. Many people and organizations fear the associated loss of image.
2. Profitability and sunk cost fallacy: Organizations tend to factor past investments into the decision to continue a project. They do not concentrate on future profitability. This can lead to bad decisions due to sunk cost fallacy.
3. Strategic and political significance: In some cases, project termination is considered unfeasible if the project has immense strategic or political significance.
4. Avoidance of difficult decisions: Some people and organizations shy away from difficult decisions and hope project difficulties will resolve themselves. This can lead to hesitant action or no action at all.

Project Termination either at the Very Beginning or Shortly Before Completion

From experience, Thomas Brustbauer is more familiar with the following scenario: projects are abandoned at the very beginning or shortly before closure. At the very end, the project team has no other choice. They have to present the results – however fragmentary they may be. It may be that a production date is coming up, but there is no product yet. Or what one has developed is now available from the competition.

When Is the Time to Terminate a Project?

There is no rule of thumb when one should terminate a project. Those responsible have to be able to recognize the infeasibility and pull the plug.

There are situations in which project termination is painful but necessary to avoid more serious consequences. Below, you will find a list of indications that might make a project termination necessary below:

1. Scarcity of funds and resources: If the project cannot be completed on time due to lack of funds and resources and there is a lack of willingness to invest further resources, a project termination should be considered.
2. Continuation unprofitable: Progressive inefficiency due to underestimated efforts or activities that have been overlooked can be a signal that a reassessment of the project is necessary.
3. Deterioration of the risk situation: If the risks increase to the detriment of the opportunities, it makes sense to critically examine the impact on the project and evaluate possible consequences.
4. Change in priorities: If organizational priorities shift and other projects take on more strategic importance, this could have an impact on the continuation of the current project.
5. Loss of key project team members: The loss of key team members or knowledge carriers, without the availability of an adequate replacement, can jeopardize the implementation of the project considerably.
6. Non-compliance with partnership agreements: If partners are unable to deliver promised services in the required quality or quantity, the continuation of the project may become difficult or even impossible from a technical, logistical or logical point of view.

Recognizing these signals enables you to check alternative courses of action in good time. If necessary, you must set the course for an orderly project termination to avoid long-term damage. However, this requires a compatible company culture that does not “stigmatize” managers and team members of terminated projects.

Our tip: The company must have a culture permitting a project termination. If terminating a project means that team members will lose respect, many project managers will not even consider it.

Is the Communication About the Status of the Projects Appropriate?

It may not always be the case that the people who could pull the plug are even aware of the project’s difficulties. If the information culture in the company is not cultivated, knowledge of the dying project must “leak out” first.

In more and more companies that have reached a higher maturity level of project management, a Project Management Office (PMO) is responsible for monitoring and reviewing the status of projects. The project portfolio meeting is a good example of a platform for informing the decision-makers at the company.

Our tip: If the decision-makers are aware that projects can also fail, the actual termination is not such a big deal.

Mistakes and Experience as Part of Company Culture

For Thomas Brustbauer, Europe lacks the company culture of allowing for occasional calculated mistakes. “I hear there is a different attitude in the USA. There, an entrepreneur who has not gone bankrupt three times is not considered a good entrepreneur. This position would be inconceivable in Europe. A project manager is also a small entrepreneur, but if he or she makes a mistake no one will forgive them in this part of the world.”

One could actually benefit from these people’s experiences – for instance when training project managers.

Our tip: In training sessions for project managers, these people could explain what exactly went wrong. This could help the others to overcome the fear of making mistakes. Facilitating this exchange of experiences would be a task for the project management office (PMO) of the company.

How Do You Terminate a Project Without Losing Face?

There are several ways to avoid losing face entirely.

On the one hand, it is important to highlight the consequences of going through with the project. They tend to involve a high monetary loss and the waste of valuable resources. This will persuade those responsible to lend you an ear. On the other hand, one has to be prepared to:

• admit one made some bad decisions,
• acknowledge poor performance, and
• realize that some fellow workers are simply not well trained.

It is important that the leadership ranks are prepared to do the same. They must act as role models in the way they work.

Whoever claims not to have made mistakes cannot have worked.

Our tip: After a failed project, one should openly analyze the mistakes made by oneself and the team. Launching a quick but successful project in its direct aftermath can help. This will show to the outside world that you are generally successful. And that a failed project will not change that.

More Power to the Project Managers

The matrix organization is firmly rooted in many European enterprises, according to Thomas Brustbauer. In most cases, the project managers carry the entire risk. They put their neck on the line if a project is not going well.

However, it is very important to give the project managers more power.

“If I only carry the risk without backing from management or power to act, I will try to avoid risk. I will only take on projects that are easy to manage. And if I cannot get out of a complex project, I will try to be very quiet and make it work somehow. There is a lot of hope involved and very little realism,” says Thomas Brustbauer.

How to Deal with the Notion of ‘Failure’?

Failure is normal; failure is part of life.

Every one of us has failed at some point and will do so again. That means: making mistakes and learning from them is all right. To keep on making the same mistake is not all right.

Our tip: Project managers should take preemptive measures. Certain events should be classed as risky before the project starts. After all, project managers will have to report if a project gets into difficulties. For this, a company culture openly acknowledging mistakes is key – advocate it!

Once a project has failed at the company, the necessary culture of failure should ensure that lessons can be learned from it. Establish a learning culture at the company. This implies that mistakes are viewed as opportunities for improvement.

Regular Lessons Learned meetings at the end of each project can help ensure that future projects do not have to struggle with mistakes made in the past. You should definitely take the time to hold this meeting.

What Are the Criteria for Project Termination?

The criteria for project termination are quite simple according to Thomas Brustbauer. There is a project order, and it lists the goals. If these goals cannot be achieved, the unachieved goals are also the termination criteria.

In the course of the project, it might transpire that these criteria cannot be met. In this case, someone should really shout ‘Stop!’. A possible scenario could be that you have used most of the budget by a specific milestone.

Yet, the problem is that those responsible often do not know what is happening at project level. Some people might be trying to cover up the actual progress of a project until things hopefully improve.

Our tip: No matter if you call it goal or termination criteria: it should be clearly defined from the start what benefit has to be achieved with which milestone. If this benefit fails to materialize and you have already spent a certain amount of money, you should consider terminating the project.

Are some Projects ‘Too Big to Fail’?

In theory, no project should be too big for termination. In practice, you have to weigh the damages. After all, some projects are big enough to ruin a company financially.

This can happen especially in medium-sized companies. It may be that you promised a customer a solution at a fixed price that you can only realize at great additional expense. This discovery may come late on in the project after you have already billed the major part. In such a case, you may have to struggle through the consequences in spite of everything. Rescinding the contract would drive the company into financial ruin.

So, yes, projects can be too big to to be terminated.

Thomas Brustbauer comments: “This was exactly the reason why we reduced the project size at our company. That is, a project should not take longer than one year. In the past, very long projects were not always successful – we simply lacked the capacity for such large-scale projects.” Now, Brustbauer continues, the company has defined its scale of feasibility, and the projects go well.

Test Project and Possible Exit Points

The management of a company should be able to make a realistic estimate regarding the feasibility of a project.

On occasion, the feasibility is not so easy to determine. In such a case, they should have the courage to take a justified risk. In the end, you may save an awful lot of money and time if you do a trial run first.

Our tip: You start the project with a certain budget. At a preassigned milestone, you check whether the project can succeed. If it transpires that it will not, you terminate it.

A test project gives the responsible project manager the opportunity to operate freely for one thing. There is no need to be constantly afraid of failure.

At the same time, customers can be sure that their money is not bogged down in a project that has been painstakingly kept alive.

The same can be achieved by carrying out a Pre-Mortem analysis. A Pre-Mortem is a forward-looking review that can be used to identify the risks of a project. You act as if the project had already gone wrong and come up with possible reasons for this failure.

Reading tip: Learn about Pre-Mortem analysis in our Agile Retrospectives article.

Project Termination Example:

Thomas Brustbauer: “One project termination was a bad experience for me. A large-scale project with a seven-figure sum to be invested and thousands of man-days came to a premature end. The customer did not like the results we delivered. On first seeing the product, they said plainly that they had not pictured it that way. And my team and myself were unable to rectify the situation. In the end, the customer said they did not care about the money but wanted to back out of the project.

I learned from this experience to involve the customer at an early stage. I show them prototypes. This is helpful for both sides. They can find out what the other side expects or can deliver. This constant feedback to the sponsor is already built into the agile approaches which are widely used these days in the software and IT sector.

Conclusion – Project Termination

To be well prepared for a necessary project termination, you should clearly define reasons for a premature project end in advance. Transparent communication between PMO, steering committee and project managers plays a key role in this. Coordinated communication with other stakeholders, such as the project sponsor and partners involved, may also be necessary.

What makes reasonable project terminations possible in the first place is a company culture that permits a project termination (a “culture of failure”). If terminating a project leads to project managers and team members losing respect, many will not even consider stopping the project. This can significantly increase the damage for the company.

A crucial step towards a culture of failure is to establish a learning culture within the company. This assumes that mistakes are seen as opportunities for improvement. As Thomas Edison said: “I have not failed. I’ve just found 10,000 ways that won’t work.”

Our final tips:

Get to know the individually adaptable “PPM Paradise” – the optimal environment for your enterprise-wide project, program, portfolio and resource management (PPM). Download the free eBook “The PPM Paradise” now (just click, no form).

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What are your experiences? Have you ever terminated a project? Please share your thoughts or let us know your questions in the comment area below.

About the guest author:

Thomas Brustbauer has a long and successful career in software development and management. He has been with UNIQA Versicherungen AG since 1990 and has held various important positions. He is currently Managing Director of the UNIQA subsidiary, UNIQA Group Service Center, in Slovakia. Leading a team of more than 250 IT experts in Austria and Slovakia, Thomas has a broad expertise and enables his teams to develop world-class IT solutions for customers in a transformational and agile way.

Read more on Thomas Brustbauer on LinkedIn.

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