Simple Rules for Project Cancelation / by John Schlichter

by John Schlichter

In any organization with many projects, although control mechanisms are created explicitly and often in a centralized manner, the projects must adjust and adapt to each other, creating new systems and subsystems that exhibit a degree of self-organization enabled by the adoption of simple rules, customs, and rituals by project teams. Simple rules create the possibility of behavior that is independent in detail and governed by higher organizing principles, i.e. emergence.

An example of an area where simple rules help in project-based organizations is project cancelation. In this context, rules are heuristics or guidelines and are not intended to do the thinking for you or to act as a replacement for the consideration and wisdom of leaders. Here are five simple rules that OPM Experts LLC created recently for a client through a one-hour facilitated working session:

1.     We will suspend or terminate the project if there is a change in the market or competitive landscape.

a.     “Change in the market” is defined as

i.     developments indicate the demand for product(s) of the project has declined to the extent that the business case is no longer valid

ii.     the external environment has rendered our strategies nonviable

b.     “Change in competitive landscape” is defined as

 i.     the state of rivalry has made competing in this space undesirable

 ii.     changes in supplier power or customer power make product development too difficult

 iii.     or new entrants and/or substitutes invalidate the business case.

The <insert name of person or team here, e.g. Vertical Marketing Leader, Product Management Team> will proactively monitor these parameters, which will be reviewed at each stage of the project.

2.     We will suspend or terminate the project if there is a negative change in the forecasted financial benefits.

a.     Forecasted product cost target or capital target degrades, e.g. 10% degradation.

b.     Forecasted ROI, Payback, NPV, Revenue degrades.

c.     Forecasted savings degrade.

d.     Sourcing supplier challenges increase forecasted costs.

These parameters will be evaluated monthly.

3.     We will suspend or terminate the project if the forecasted delivery date is delayed substantially from what had been agreed.

a.     Upon presentation of feasibility studies, the forecasted delivery date is unacceptable.

b.     Upon presentation of business requirements, the forecasted delivery date is unacceptable.

c.     Upon approval of functional requirements, the delivery date that was forecasted upon approval of business case or business requirements is no longer within a quarter of the target.

d.     At approval of final testing results, if the project closure date that had been forecasted upon approval of functional requirements is now forecasted to be delayed an additional three months, the project will be evaluated for suspension or termination.

4.     The project will be suspended or terminated if it becomes technically infeasible or if a failure in testing reveals high impact risks that cannot be mitigated or transferred.

a.     “Technically infeasible” means the functional requirements cannot be delivered within the constraints of the business requirements. 

b.     “High impact risks” are risks that could harm the customer or the company.

5.     The project will be suspended or terminated if resource bottlenecks invalidate the business case.

a.            When evaluating any project for suspension or termination, we will consider whether allocating resources to other projects creates a more optimal portfolio.

Simple rules like these provide a straightforward way for people to align their thinking and action-taking. They empower individuals by improving one’s ability to pursue problem solving creatively within a shared view of the situation. And as always, the litmus test for any rule is simply “Does it work?”