BackBusiness at Oxford | Wanted: ‘CEOs’ for big projects
Business at Oxford | Wanted: ‘CEOs’ for big projects
PremiumPaul Chapman
Even macro-level economics has some simple rules of thumb where “i before e" reminds us to consider “infrastructure before expansion". This simple idea has an inherent tension of being both full of wisdom and fraught with difficulties, and it is of national importance to find the people able to navigate a way through this conflict. On the one hand, it is clear that failure to improve infrastructure hampers growth and the achievement of societal goals, while on the other hand, the funding requirement seems overwhelming and needs to be justified against anticipated benefits that often fail to materialize.
The tendency for cost and schedule overruns in major programmes, such as those of infrastructure development, remains an unwelcome reality that haunts the reported $500 billion (around Rs23.65 trillion) India plans to spend in the coming years. This means that while delays and squandering of scarce funds have always been issues, the need to understand this problem, address the causes and find cures has become particularly pertinent.
India has a desperate need for large-scale investments in a number of areas ranging from physical infrastructure to addressing the zeitgeist of poverty. Emphasizing recent underperformance, the World Bank contrasts India with China, which it considers “has an enormous—and growing—advantage in infrastructure". On the face of things, this is simply a question of scale, with India’s 4% of GDP comparing unfavourably with China’s reported 9%. While the level of investment is an important issue, so is the effectiveness with which programmes and their planned benefits are delivered.
Large-scale projects can be found across India in a number of sectors, including transport, construction, energy, raw material extraction, defence and information technology, or IT. A particularly interesting subset of such projects are “major programmes", which lie at the top end of the “mega projects" scale in terms of size, complexity and ability to transform. Major programmes are those that cost around $1 billion, possess inherent political or technological complexity and have the potential to deliver benefits that are significant at the state or, indeed, national level.
The Delhi Metro is a good example of a programme with these characteristics. Phase I of the work drew plaudits both at home and abroad for providing the rare mix of efficient service at a reasonable tariff, and in having done so to budget—and ahead of schedule. While examples such as this are encouraging, the general trend falls short of these achievements, which leads to disappointing results on specific initiatives and a cumulative delay of wider economic and social progress.
Data compiled by the ministry of statistics and programme implementation shows significant delays and cost overruns across a range of major projects valued above Rs100 crore, and at an overall level, found projects in all but one of the industrial sectors tracked falling behind target.
It is cold comfort that this tale of underperformance is repeated internationally, with reports of delays and cost overruns in major programmes issued annually by the national audit office in the UK and the government accountability office in the US.
While there seems widespread agreement that Indian infrastructure is in a poor state, the bigger issue here is not the revelations associated with yet another delayed programme, rather it is the realization that things are not getting better despite apparent advances in planning, monitoring and delivery. This points to a clear need for a re-examination of major programmes to improve understanding of why they fail to deliver.
A cursory glance would suggest that poor project management or financial management would top the list of weaknesses—however, this masks a failure to understand the risks inherent in many programmes. Across a range of sectors, key important risks that are poorly managed include “optimization bias", the tendency to favour optimistic projections, and “strategic misrepresentation", which is lying to distort or misrepresent facts. Failure to recognize and address either risk has a tendency to lead to cost and time overruns, and seeking to resolve where the impact of these risks would surface is of vital importance when setting up the contractual frameworks of public and private sector programmes. This identifies the need to couple the traditional skills of financial probity and contract management with an improved understanding of risk and to identify where this is best borne.
At the level of individual programmes, success requires much more than domain specialists and good project managers; it requires a variant of the sort of leaders you would expect to find in the best major corporations. These are people who act like chief executive officers, with the insight into strategy that allows them to see beyond the technical challenge of a programme in order to explain, champion and deliver its benefits. They require the ability to inspire a team of specialists across a range of governmental and private organizations and be politically savvy while retaining the credibility and moral authority to reach out and engage with a range of stakeholder groups to listen to and act on their concerns.
India’s pipeline of major programmes requires the development of a cadre of such major programme managers—need currently outstrips the supply of talent. While nothing can replace experience as a central means for developing skills and competence, supporting people to step into these roles calls for improved efforts to identify and develop talented individuals.
This means that those supervising current major and mega projects need to recognize their responsibility to develop a legacy of people capable of taking on India’s unfinished business, leading major programmes in infrastructure development and delivering the benefits that lie beyond.
Paul Chapman is director of MSc in major programme management at Saïd Business School at the University of Oxford.
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