Go/No-Go

One way to check a project's health is to regularly survey the project team and senior management. To get a firmer sense of progress you can make the survey quantitative in nature, assigning a value to each response and developing threshold values for each critical area. If there is a big change in the total score in any category from one period to the next, or if the trends in a particular area are persistently declining, it is probably time to consider getting out.

"There are a range of mathematical models available to help determine a project's future viability, determining whether or not to continue a project," said a SAM Advanced Management Journal article called "The Project Life Cycle: The Termination Phase in 2000". "Some of the more common rely on financial techniques such as payback or net present value [NPV]. However, any final decision should take into account other important strategic factors such as whether the project helps the firm maintain its competitive position or is essential to its survival."

"Cybernetic control processes" and "Go/No-Go control processes" are both techniques that can monitor projects throughout their life cycle. The ongoing cybernetic control method compares the project's actual performance path against the anticipated or scheduled path, alerting the project team to schedule deviations so they can take remedial action. The SAM article's authors advise against using cybernetic control processes as a decision model. Rather, they say, cybernetic control processes should only be used as a tool to keep a project on track (in terms of performance, time and cost) so that it is not terminated prematurely because of poor planning or control.

Go/No-Go controls allow periodic testing to determine whether a specific precondition has been met. "This technique can be used on many facets of the project as the team finds appropriate. In addition, specific weights can be assigned to individual measures to provide a more quantitative dimension to the monitoring process," the authors say.

Cold, Hard, Light

Marcus Batten, managing director at software developer HigherGround, says conquering the psychology of over optimism can sometimes be a simple matter of looking at projects in the cold hard light of day.

When taking a project's pulse, Batten brings a questionnaire to the table covering everything from resourcing to performance against clear objectives, criteria agreed at the formative stages of the project. If at least two-thirds of those objectives are not met, he says, it is time to review whether to back off on the project or keep going.

Batten says that unless objectives and benchmarking criteria have been signed off by the parties expecting to be involved before the project begins, it is almost certainly doomed to failure. Yet too many companies run projects by having a group of people huddle together to devise an activity list before heading off in different directions.

You can also use road maps to detect biases against exit. For instance the McKinsey Quarterly article says where a signpost suggests a project or business should be shut down, but executives decide that the company has invested too much time and money to stop, you can assume the sunk-cost fallacy and escalation-of-commitment bias are at work.

"Of course, the initial road map might have to be adjusted as new information arrives, but the changes, if any, should always be made solely to future signposts, not to the current one," the authors say.

The McKinsey Quarterly article suggests one way to ease the emotional pain of shutting down or selling projects or businesses can be to bundle several flagging projects together and exit them at once. That way the psychological sense of failure that often accompanies an exit is not revisited several times. It also urges companies to focus on exiting businesses with products and capabilities that are far from their core activities, as Proctor & Gamble did in 2002 when it divested and spun off certain products in order to focus on others with stronger growth prospects and a more central position in its corporate portfolio.