The Iron Triangle

“We deliver the agreed scope, on time, on schedule”

This is what customers want! Since the customer is the king this is what the suppliers promise.

Very unfortunate, because it comes with a high price despite the best intentions.

As much as it makes sense in a world of simple projects, applying it to complex projects is the root cause of failure because it forces a financial paradigm based on a wrong assumption. All budgeting and controlling mechanisms are based on a high level of knowledge of the final delivery. This is by far the prevailing paradigm to a level, where very few financial executives even know of any alternatives. Not knowing any alternatives is the root cause of a lot of the expressed surprise and frustration when complex projects run off the trail, - again, according to the only known financial control mechanisms.

The project management world has been struggling with this for decades, and several methods have emerged to deal with the fundamentally flawed assumption.

“You can have any two of the basic constraints (scope, cost, deadline)” is one of the first movements that acknowledge the implications in complex projects. Discussed on a theoretical level, all seem to agree on this, but in reality, the “on time, on schedule, with agreed scope” is the default success criteria for the projects.

Change orders. This is the prevailing practice. Whenever a change to the scope baseline is identified, it is raised as a change order, discussed, analyzed, estimated, prioritized, and finally designed, implemented, tested, and released. In a simple project, there are none. In a complex project, there are devastating many. Each change order has a transaction cost, and the benefit of the change must compensate for the transaction cost. However, the unknown dynamic implication is that the transaction cost is not linear but exponential because each change has a systemic impact beyond recognition. The more change requests, the higher the individual transaction costs. When the tipping point is reached, there are two main structures to look for.

1.      Improvements, including all the smart ones, are being canceled, or as it conveniently is addressed: “postponed to a later release”. This structure tends to favorise the cost and schedule success criteria, and jeopardize customer satisfaction.

2.      The original scope is deemed insufficient, and most change orders are approved. This contributes to the “power law distribution” of cost overruns.

“Change orders” are only efficient for projects of little complexity. Surprisingly little.

Agile. The discussion of this concept is fundamental to the agile movement, which is seeking a smarter way to customer satisfaction. Agile projects change the structures in significant ways, and the concepts have proven very powerful and efficient—under certain conditions! One of the most important conditions is that the agile mindset must be present at all levels, including senior management. However, the most reported performance obstacle by the agile teams is “my senior management does not understand me.” Countless numbers of teams have presented to the steering group how they intend to drive the development in the smartest way, only to be met with lenience, and then finally, “Yes, all good, but when do you promise to deliver, and at what cost?” This is where grown-up professionals start to cry.

Other constraints/KPI’s. Project Management Institute advocates in PMBOK that there are multiple success criteria, including:

·        Meeting Business Objectives:

·        Delivering Project Benefits:

·        Stakeholder Satisfaction:

·        Quality of Deliverables:

·        Managing Risks and Opportunities:

·        Adherence to Governance and Compliance:

·        Team Performance and Satisfaction:

·        Efficient Use of Resources:

·        Adaptability and Responsiveness:

·        Completion on Time and Within Budget:

·        Sustainability and Environmental Considerations:

·        Post-Project Evaluation and Continuous Improvement:

This paints a much more nuanced picture, and PMBOK also recommends establishing a clear definition and prioritization of these and consensus among major stakeholders. Great intention, but rarely implemented.

Concluding caveat! Any senior management rhetoric that promotes the iron triangle is devastating for the success of complex projects.