When Failure Is Not an Option

Five years ago, almost half of AG Edwards's IT projects were late and over budget. Now it boasts an 88 percent project success rate. How did it do that? By galvanizing IT, reinventing its PMO, and relying on a standard framework to track projects and create accountability.

John Parker had no illusions about the considerable challenges awaiting him as CTO of AG Edwards. The management team had painted a clear picture during his job interviews in late 2001. IT costs were too high. Projects dragged on for years, if they were completed at all. Some had derailed so dramatically that the St Louis-based retail brokerage firm had to write them off. Poor project management was taking a toll on the bottom line.

The executives told Parker they needed a CTO who could overhaul the IT department and ensure that a planned five-year, $US196 million migration of a mission-critical mainframe system would proceed smoothly. They simply couldn't afford to have a project of that magnitude follow IT's usual MO, where systems developed in isolation — sometimes over the course of years — often failed to meet the company's requirements once delivered. It just couldn't happen.

What Parker found after he was hired matched what he had heard during his interviews: Almost half of all projects were late and over budget. Most cost 54 percent more and took 54 percent longer than original estimates. And he found evidence of the write-offs. "We were running hundreds of projects over the course of a year, and 1 to 2 percent of them would have been written off and the write-offs would have been significant," says Parker, now CIO. In 2002, AG Edwards wrote off $US46 million worth of software investments, according to a company filing with the US Securities and Exchange Commission.

Fast-forward to 2006. The company's project success rate (defined by the number of projects that arrive on time, within budget and that deliver the expected business value) has soared from 54 percent in 2002 to 88 percent today. Improved project management has had a dramatic impact on the company's financials: The SEC filing shows that IT and telecomms costs declined from $US295 million in 2002 to $US241 million in 2005, even as investment in the mainframe migration continued. Meanwhile, net profits jumped from $US71 million in 2002 to $US186 million in 2005.

Parker achieved this project management turnaround by transforming how IT operated - from its interactions with the business to the structure of its project management office. Experience has taught him there's more to running successful projects than methodologies and tracking software, which is where most IT organizations get hung up. Successful projects hinge on sound leadership and constructive relationships between IT managers and the business. So Parker set out to improve his department's track record by working with the company's top executives to identify the most important projects and by providing all IT managers with leadership training to improve their credibility with the business.

"If you try to fix project management without fixing the top first, you're not going to have much success," says Parker. "Projects will always flame out if your leaders aren't flying air-cover for projects when they get into trouble, regardless of how good your project management procedures and tools are."

Parker also brought in a project management expert to instil some discipline into the process. Ed Pilewski, now VP of IT productivity and quality, chose not to take the traditional route of forcing a rigid project management methodology on the technology staff - a tactic that can backfire and create resistance to change. Instead, he implemented a standard framework for measuring, monitoring and reporting on a project's progress that fosters transparency and accountability. The framework also gives project managers some flexibility in how they approach their work.

The company also reinvented its project management office, or PMO. Project managers used to report into a centralized office; now they report into different functional groups within IT, such as application development, network engineering and quality assurance. The idea is to increase their stake in a project's success and put them on an even playing field with the functional managers. The mission of the productivity services office, as the PMO is now called, is to help project managers with planning and to provide them with the reports they need to keep their projects on track - a departure from the old, bureaucratic model.

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