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Government Failure and Corporate Sucess

COMPANY OR CORPORATE PROJECTS

Project Size

Corporate projects come in all sizes. Typically large projects undergo a "pilot" mini-project or at least a feasibility study to better understand requirements and challenges. Corporations rarely jump from nothing to a mega project. Large corporate projects not developed under government contracts are rare indeed. Budgets and deadlines are allocated realistically with the understanding that although there may be some flexibility there really isn't going to be too much of it. Resources are allocated based on preliminary plans and adjusted as plans are improved. Resource allocation is primarily driven by the need to succeed and not based on group or departmental turfs. Cooperation is mandated from the top and followed. If projects seem like they are going to fail, they are readily abandoned thus decreasing the amount of wasted resources. Because of these factors we have to rate this parameter as GREEN.

New or Unknown Project Processes

Corporations loath bureaucracy because it is an unproductive activity. Which means that project plans avoid "paper" project plans. What this means is that plans must be realistic because if they go wrong the consequences will be very real and they cannot be swept under the rug or fixed cheaply. All corporate projects must work in the real world, not in the parallel make-believe world in which bureaucrats live. Money matters. Corporations are used to deal with systems that must operate without or with very little failure in real life. As such when plans are drawn they are automatically assumed to be imperfect, executable but flawed. There is no assumption that everything will go as planned. The notion that there will be unknowns is embedded in these characteristics. Corporations have a very clear idea that there will be "problems" and they understand that solutions will come from many sources. The news that corporate projects tanked (particularly large ones) are rare indeed. Most corporate projects are successful albeit not perfect. Because of these factors we have to rate this parameter as GREEN.

Human Dynamics

Typical corporate projects are staffed by employees from different groups. Although there are turf wars between divisions or groups, cooperation is understood as beneficial to all because it increases profits. Therefore serious consideration is given to make the project team strong -by selecting appropriate people regardless of division or group- and not to make the division or group look good. As such whatever weaknesses these people bring with them, they will be compensated by other people's strengths and as such the team will be strong.

Team cohesion is typically quite important. This is so because all managers realize that non-cohesive teams are inefficient teams. Inefficiency is costly and reduces profits. Every employee in any corporation learns that profits drives the corporation. No profits no jobs. Working "to contract" is a sure-way to get you fired. As such, there are strong incentives to interact cohesively and smoothly with other team members.

As team member assignments are made from within the corporations, the familiarity of people with project tools is strong because experienced people are recruited for the project. Although there may be some training, corporations prefer to hire experienced people for a specific project.

Lastly, there is a very, very strong emphasis of having a perfect execution. This stems from the notion that plans need to work in real life. There is a gigantic incentive to execute properly. This is so because if a project fails the failed resources have already been utilized and the fix becomes prohibitively expensive. Because of these factors we have to rate this parameter as GREEN.

Quality

In the realm of corporations everything is absolute simply because corporations operate in the real world. What this means is that there are clear profit requirements. Corporations perform economic calculations to determine profits or loses (see Austrian Economics For Dummies - Economic Calculation) all the time and are guided by them. As such, because these are numbers depending in large part from markets which are not controlled by corporations, corporations pay a great deal of attention to them. The typical example of this process are bonuses which are tied to sales or profits and not some foggy concept. This drive for profits creates a way to define the meaning of quality in an objective manner. As such corporate minds think in terms of quality as something specific that cannot be changed at a whim or better off, made up along the way. In real life quality matters. Quality will define if a development or system will actually work. Having weak (and cheap) cement for a bridge is not the same as having a strong and resistant one because if something happens the corporation will be sued and profits will drop. Removing bugs from a large software system so that it does not crash is not the same as leaving them in for the same reason. How quality is defined matters. Because corporations know very well how to do this, quality is typically very effectively implemented in corporate projects. There is a conscious effort to have good quality systems, properly defined and adequately embedded in project plans.

Yes, there are exceptions to this rule but again, they are exceptions. Corporations make mistakes. Corporations implement insufficient quality because it consumes profits and so on. There is always a risk/reward calculation being generated and sometimes corporations get it wrong. Because of these factors we have to rate this parameter as YELLOW.

Summary

In summary, corporate projects typically succeed because they succeed enough in all four of the project management factors. Furthermore, these successes are not project-based or one-time events, they are systemic and systematic. They are based on the very basic operations on which corporations are created; profits and loses. Corporations cannot go against those systems because in so doing it would mean to go against their own self-interests. Essentially, corporations succeed at project management because they are designed in such a manner as to drive project success. In visual summary:

Four Factors for Corporations

CONCLUSION

In ultimate analysis large government projects fail because they follow the principles upon which all governments are setup. On the other hand, most large corporate projects succeed because they are based on objective standards (i.e. profit and loses). This analysis is, of course, an oversimplification and a profiling task. In real life we will find corporate projects that fail and government projects that succeed. The difference is that when a corporate project fails it is typically abandoned and it does not cause hardships to taxpayers. On the other hand, when a government project fails it is typically not allowed to fail consuming vast amounts of money that will be further extracted from taxpayers. Horror stories of government failed boondoggles going on forever are so vast as to be historical events. Corporate failures on the other hand fade away quickly as people realize that there is no impact in their lives.

Basically, corporations have a much better track record of project success than governments and this is not a mistake or a statistical anomaly. This is so by design. Governments are designed to be failure-impervious because there is an unlimited supply of taxpayers or at least an unlimited manner to keep spending (the unholy trinity, tax, borrow and print). Corporations are designed to be profit-driven as there is only a limited supply of customers with a limited supply of wealth.

This is the truth but there are people "out there" who believe that government projects fail for some mysterious reason. They believe that if we could only get the "right" people in the "right" places eeeeeeeeverything is going to be OK. We have a question for them. Considering that large failures have been going on for 200+ years, at which point in time will they consider the possibility that there is something else at play?

Note: please see the Glossary if you are unfamiliar with certain words.

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