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Question: Health Care Partners (HCP) was a 40-year-old company providing health care benefits for large cor...
Health Care Partners (HCP) was a 40-year-old company providing health care
benefits for large corporations. In order to keep health care costs down for its
clients, HCP needed to get a large group of physicians and health care providers
in the group who were willing to accept the cost reimbursement rates established
by HCP. HCP provided reimbursement rates that were in line with its
competitors. Although HCP had some success in getting service providers into
its network, several hospitals and physicians resisted joining the network
because HCP had a reputation for reimbursing service providers slowly.
In order to pay service providers more quickly, HCP had to modernize its
operations and eliminate a lot of the paperwork that generated delays in
payments. HCP upgraded its computers quickly. But the real problem was
software. No software was readily available in the marketplace to satisfy the
needs of HCP. HCP hired a software development company, SoftSmart, to assist
its information technology (IT) personnel in the development of the package.
SoftSmart was provided with offices for on-site personnel on the same floor as
HCP’s IT personnel. HCP had budgeted $15 million for the entire project,
entitled QuickPay, and had promised all physicians and hospitals in its network
that the system would be up and running in a year or less.
FIRST QUARTERLY REVIEW MEETING
In the first quarterly review meeting, which was attended only by HCP
personnel, Paul Harris, the chief information officer, stated how furious he was:
Why can’t I get a straight answer from anyone on the status of the QuickPay
Project? We’re spending $15 million and nobody seems to know what’s
happening. Whenever I ask a question, it appears that all I get in response is
bad news. Why aren’t there any metrics for me to look at each week or each
month?
Since the project began about three months ago, I have seen requests for more
than 200 scope changes. Now I’m told that we will probably be missing
deadlines and the schedule slippages cannot be corrected. We have escalating
costs because of the scope creep and it looks like we’ll have some
deterioration in value expected for our clients.
Evelyn Williams, the project manager for HCP, spoke up.
When we hired SoftSmart, we gave them a fixed price contract. We had no
idea how many scope changes they wanted, but we assumed that there would
be a small number. We were a little naïve. Last week, when we asked them
for their position on the status of their work, they said that they cannot
provide us with detailed status information because they say that it depends
on the number of scope changes that we approve. Their schedules keep
changing.
Paul Harris was furious. It appeared that the company would be spending
significantly more than $15 million, and he could not get metrics, schedules, or
effective status reporting. This project had the potential to be a colossal disaster.
Paul demanded that the company now have monthly rather than quarterly review
meetings with him and possibly other senior management personnel. He was
convinced that everyone understood what had to be done, but he was equally
unsure as to whether they would do it.
REVIEW MEETING AT END OF MONTH 4
Paul Harris was still quite unhappy after seeing the data in the review meeting.
There were schedules and metrics. During the briefing, Paul was told that work
was progressing but not as fast as originally hoped for. However, the metrics
provided no useful information and the schedules had a series of footnotes at
various locations stating dependencies on the approval of various scope changes.
Once again, Harris found it difficult to determine the true status of the project.
Evelyn Williams, the HCP project manager, spoke up again.
We’re making progress in status reporting but not as fast as I would have
liked. Some of the team members from SoftSmart are reluctant to provide us
with good metrics. They tell us that they simply do not believe in the use of
metrics, probably because they are afraid of what the metrics might reveal.
That’s why they often select the easiest metrics to report or those that provide
the least amount of information. Some of our own personnel are infatuated
with metrics, and we simply cannot afford to create all of the metrics that
these people desire. I’m not sure right now which way we should go or what
would be a reasonable compromise. To make matters worse, we have lost
some of our key personnel to other projects.
CRITICAL DECISIONS
There was now no question in Paul Harris’s mind that things were not going as
planned. The morale of the team was poor; key personnel had left the project,
probably by choice; and status reporting was unacceptable. SoftSmart was
probably taking advantage of HCP by pushing through questionable but
profitable scope changes, and the end date would most likely slip. The decision
was clear; there was a definite need for a health check on the project.
Several questions had to be answered before officially conducting the health
check. First, should the health check be performed using internal personnel such
as representatives from the project management office? The project manager
would most certainly not be the person allowed to perform the health check.
Using project management office personnel is an option, but they may have
friendships and loyalties to some people on the project team and may not be
honest in their conclusions as to the real status and health of the project. External
facilitators may be the best choice, provided they can operate free of politics and
create an environment such that people will feel free to vent their personal
feelings. They also bring to the table experience in conducting health checks in
other companies.
The second question is whether the interviewees will be honest in their responses
to the health check facilitators. Paul believed that the personnel at HCP would be
honest. However, the real issue may be with SoftSmart. HCP may not be able to
get SoftSmart to agree to the interviews, and, even if the interviews were
conducted, SoftSmart personnel would most likely not provide honest responses.
Therefore, it would have to be a health check at HCP only.
Third, Paul was unsure as to how other executives at HCP would respond when
hearing the truth about the QuickPay Project. The results of the health check
could cause other issues previously hidden to surface. This could make the
situation worse than it is already. People could lose their jobs or be demoted.
However, there could also be good news and the early detection of problems that
could have led to disasters later on.
Paul concluded that there was really no choice: A health check must be
conducted. HCP must know the true status. HCP must identify issues early such
that sufficient time exists for corrective action.
Paul called an emergency meeting of the QuickPay Project team and asked
SoftSmart representatives to be present as well. When informed that he was
authorizing an outside company to come in and conduct a health check, several
team members expressed their dissatisfaction. One team member argued that
outside resources do not understand the HCP culture or the project and that this
would be a waste of time. Another argued that the project was already in
financial distress and the cost of the health check would make matters worse. A
third team member asserted that critical resources would be tied up in
interviews. SoftSmart argued that, by the time the results of the health check are
known, it may be too late to make changes because of the ongoing scope
changes occurring on the project. Harris held his ground and stated emphatically
that the health check would be performed and that everyone would be expected
to support the company conducting the health check.
THE HEALTH CHECK
HCP hired Pegasus Consulting, which had experience in health checks on IT
projects and also some experience with hospitals and the health care profession.
An agreement was reached that the health check would be completed within
three weeks, just prior to the project review meeting scheduled for the end of the
fifth month of the QuickPay Project.
Pegasus spent part of the first week reviewing the business case for the project
and the project’s history over the past four months. During the remainder of the
first week and all of the second week, Pegasus interviewed project personnel
from HCP to discover the facts. The interview sessions went well, and the
interviewees were quite honest in their opinion on the status of the project and
what needed to be done to correct the deteriorating situation. A few of the on-site
representatives from SoftSmart were also interviewed, but Pegasus believed that
their contributions to the health check were meaningless.
By the end of the third week, Pegasus had prepared its report and was ready to
brief Harris on the findings. At the briefing meeting, a spokesperson for Pegasus
made the following statements:
There are several issues, but the most critical one is the schedule. It is our
opinion that the project will be at least three months late. We did a root cause
analysis and discovered the following:
Performance is not following the baseline because the baseline is
continuously changing due to the number of scope changes. While we
believe . . . some of the scope changes are necessary, many could have been
delayed and performed later as an enhancement project.
HCP will not be able to meet its forecasts. The culprit appears to be the
requirements package which was ill-defined. Had the requirements package
been properly prepared, the original forecast may have been achievable.
The benefits and value expected, as identified in the business case, seem
realistic and it is our opinion that both HCP and its clientele will receive
these benefits.
The governance for the project is poorly structured. For a project of this
magnitude and with the associated risks, a governance committee should
have been established. The chief information officer should not be the only
person responsible for governance on this project.
Risk mitigation has not been performed by the project team. We cannot find
any plan on risk management and this is unheard of in a project of this
magnitude. This reflects poorly upon the project manager and the assigned
team.
It is our opinion that HCP may have assigned the wrong project manager.
Several of the interviewees commented that they had little faith in the ability
of Evelyn Williams to manage this project. Several of the interviewees had
worked for her on previous projects. We recommend that she be replaced.
We were not able to find any contingency plans. Everyone told us that they
wanted to develop contingency plans but the number and frequency of the
scope changes made this impossible.
There are opportunities for some corrective action. Included in our report is a
fix-it plan that we believe will work. However, even with the implementation
of the fix-it plan, the project will still be about three months late.
Paul Harris did not seem surprised with the findings of the health check. He read
the final report and believed that the recommended fix-it plan could work. But
now Paul had to prepare for two more meetings in which he was expected to
report on the findings of the health check: an executive staff meeting and the
five-month QuickPay Project review meeting.
QUESTIONS
5. Do 200 scope changes in the first three months of the project indicate that there was a poor definition of the requirements?
6. Once the bad news appeared in the first quarterly review meeting, should HCP have gone to weekly rather than monthly review meetings?
7. Why did it appear that HCP’s team members did not want to establish metrics?
8. Why did it appear that SoftSmart’s personnel also did not want to establish metrics?
9. Would the establishment of metrics have had any impact on the project up to that point?
Explanation / Answer
Case facts:
5. Scope changes in a project generally result due to internal as well as external factors. Although few number of scope changes are acceptable for a project, however if there are numerous and frequent changes in the scope it means the scope as well as the baseline of project is poorly defined.
Hence, it is concluded that 200 scope changes in the first three months of the project indicate that there was a poor definition of the requirements.
6. The first quarterly meeting involved numerous bad news for HCP including missed project deadlines, rising costs, decrease in value expectations for the clients, and frequent changes in scope. Since the project was experiencing major setbacks, HCP should have gone to weekly review meetings rather than the monthly meetings. Doing this would have enabled the company in identifying the problems involved in the project in a better way. The problems could be identified at earlier stage and corrective actions can be taken accordingly. Besides, the development in the project can be monitored properly.
7. From the given information it appears that HCP’s team members did not want to establish simple metrics, rather they wanted to create large number of detailed metrics. However, the company was not in the position to allow them to create all the metrics that they desired. As a result of this, employees were not much motivated to create the metrics.
8. SoftSmart’s personnel also did not want to establish metrics, because they were afraid that the metrics would reveal the actual status of the project. Therefore instead of providing metrics with required information, they used to provide easiest metrics with least amount of information that do not reveal much anything about the actual status of the project.
9. Establishment of metrics might have some impact on the project up to that point as it would helped the project manager and chief information officer to understand the actual status of the project, identify the loopholes in the process, align the project activities and adjust their time and budget accordingly.
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