Bulls & bears – the impact of expectations on perceived project performance

Projects act in many ways like the stock market – short term wins can result in long term mediocrity and the past is a poor predictor of future performance.  Another area of similarity is the impact that shareholder (a.k.a. stakeholder) expectations have on market and project performance.

If market performance was purely reliant on objective data, a complex expert system should be capable of predicting market behavior.  Similarly, if project performance were primarily an output of of metrics such as schedule or cost variance and achieved business benefits  then many more projects would be classified as successes.

The intangible element that makes prediction challenging is expectations and how to manage them.  Most project managers learn early in their careers that even if you are woefully behind schedule or over budget, if you have done a good job of managing stakeholder and sponsor expectations such that they feel engaged and want to be part of the solution you can still come out smelling like roses.  On the other hand, a project that was managed to defined baselines but in which the stakeholders were kept in the dark may be branded a failure.

The positive elements of this analogy are offset by some negatives.  Just as shareholders’ expectations can become unrealistic and even lethal for solid companies with good track records, the same can be said for expectations placed on so-called “miracle” project managers.  This is when it is crucial for those project managers (like good economists) to ensure that their stakeholders remain grounded in reality –  one of the ways to do this is leveraging solid project metrics coupled with open communications.

David Maister defined it as “The First Law of Service” in his book, Managing the Professional Service Firm: “SATISFACTION equals PERCEPTION minus EXPECTATION”.  Substitute “PERCEIVED PROJECT SUCCESS” for “SATISFACTION” and you’ve got another useful formula for project managers to master!

Categories: Project Portfolio Management | Tags: , , | 1 Comment

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