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What is Project Termination? Types, Importance, Process

19th Feb, 2024
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    What is Project Termination? Types, Importance, Process

    Managing a project is never smooth. Challenges are a part of project management, but what happens when despite careful planning and execution, things don’t look promising? Or when the team is re-shuffled for a critical project and your own project is put on the back burner? Not just this, but what if the client decides to end the contract in the middle of a project execution? These are the harsh realities of a project manager’s life, and the answer to the above problems is Project Termination.

    Project termination is a bitter but necessary step that a project manager must take when there is a dearth of resources; it must be postponed since it is no longer a priority for the client or is turning out to be more expensive than the initial budget.

    That being said, before a project manager decides to pull the plug, it is crucial to follow a proper process and guidelines to ensure a smooth and efficient termination. You can as well learn how to efficiently execute, manage and terminate projects in the Project Management skills training.

    Let us understand what is project termination in project management and discover why and when this critical process occurs, not only to ensure a smooth project termination but also to understand how to execute a project efficiently.

    What is Project Termination?

    Project Termination is a crucial step in a project life cycle. However, unlike other steps, which are a must in order to execute a project efficiently, project termination is implemented when the project fails to deliver value or defined objectives. The prime goal of project termination is to cut down on losses incurred by a business during execution.

    While these are some of the common factors associated with project termination, other factors include:

    • Failure to meet deadlines
    • Change of requirements
    • Significant rise in the cost of the project, vis-a-vis the estimated revenue generated
    • Lack of resources and project planning
    • Outgrowth of the assigned budget and utility
    • Failure of collaboration between the business and client.

    Considering the above factors, among many others, the project is put to an end regardless of its completion, and its resources are reassigned to other projects.

    To understand the project termination definition, let us take the example of New Coke. This project had to be aborted because it was unable to sell the product. As a result, $30 million worth of inventory (back-stocked accumulated inventory) that was created to launch the product in the market became a dead stock.  

    Besides, Google Glass, Amazon Fire Phone, and McDonald's Arch Deluxe Burger are classic examples of project termination. In broader terms, these projects were terminated as they could not fulfill their objectives, and the companies saw that these projects could not deliver the desired, expected results.

    Types of Project Termination

    Learning about the different types of project termination can help you define project termination and understand its significance. Following are the two types of project termination:

    1. Natural Project Termination

    A natural project termination occurs when a project reaches its closure, successfully fulfills its objectives, is approved by the client, and is not terminated mid-way. It is declared to have successfully reached its completion and is closed. A formal closure is a part of natural project termination, which includes a final run-through of the product, formal approval from the client, acceptance, then handover of the project/product to the client or sponsor, finishing the project records, and finally, a proper documentation to mark the end of the project life cycle. Successful termination of a project allows the team to have a rest period, start another task, or migrate to other projects.

    2. Unnatural Project Termination

    There are times when a project has to be stopped abruptly in the middle of its execution due to numerous factors and thus sees an unnatural termination. A consciously planned closure is the only way to deal with a project that is not working out the actual way or is no longer relevant to the current demands. As mentioned before, many factors can feed the need for an unnatural project termination. An example of an unnatural project termination is when the customer declares an overspend in the budget, and thus the project needs to pause.

    10 Reasons Why Project Termination Becomes Necessary

    The project termination definition outlines the various scenarios within which a project is terminated. We can define project termination as the last phase of the project, where all planned activities are finalized and brought to a logical conclusion.

    Many factors can be considered in detail to understand why a project must be terminated. That said, before a strategy for project termination can be formulated and executed, the reasons for the project termination must be examined.

    Various signs can be observed to foresee if the project can be completed to fulfill the predefined requirements of the customer within an allocated budget and timeline. During project execution, these signs can be interpreted as green flags and red flags. The red flags are the noteworthy early signals that a project is not going as planned, and the strategy of execution might need amends in order to avoid unnatural termination. However, there are instances when a project has to be abruptly terminated even after the execution strategy has been reworked. Following are the reasons for project termination that can be put into review while formulating a project termination plan:    

    1. Lack of Budget/ Budget Overspill

    Allocating the budget for a project and marking its primary expenditures is an integral part of project management and planning. This includes bringing into account all the overheads and verticals that are needed for the execution of the project, along with the costs that are incurred due to a third party and auxiliary functions and new investments that might be required to carry out the project.

    However, when the costs begin to breach the estimated budget, while the aims and objectives of the project have not been achieved, it is a clear sign of a flaw in the project planning. To avoid losses, the project must be terminated in the initial phases of failure before it becomes a financial and resource burden.

    2. Lack of Market Understanding

    Every project a business undertakes aims to increase its market share and margins. While keeping that outcome in mind, the competition must also be calibrated. If, at any stage of the project, better alternatives in the market are discovered that are more cost-effective and provide a better value to the client, it is advisable to terminate the project and come up with a more efficient solution. Stubborn progression under unfavorable circumstances could prove costly and futile for the sponsor organization.

    3. Faulty Management of a Project

    There are instances of mismanagement and unplanned or unforeseen happenings in a project that can result in an abrupt project management termination. Faulty resource allocation, budget overspill, scope creep, and unaccounted variances can cause irreparable damage leaving project termination as the only solution to prevent further damage. You can hone your project management and termination skills by enrolling in the best PMP Certification online.

    4. Change in Organizational Strategy and Priority

    Sometimes midway through a project, an organization can decide to change its marketing or operations strategy. It could be because the policymakers do not see adequate returns, or while introspection, they find the deployed resources are not being utilized adequately for quicker and more efficient results. The decision, thus taken, would be to terminate the project with immediate effect.

    5. Failure of Landmark Targets Within the Project

    Despite meticulous planning and stringent project management, there can be unforeseen errors or misjudgments in the project design or execution strategy. This could result in landmark segments failing the field test for their successful completion. If the failure is repeated even after rectification, aborting the project might be the only course. The product cannot be launched into the market.

    6. Erroneous Safety Measures

    It is imperative to implement pre-set safety measures before initiating and completing a project to avoid casualties and accidents. An injury or harm to the emotional, mental, or psychological health of the consumer or the execution team means that the project does not fulfill safe-consumption parameters. In such cases, the project must be terminated without further indulgence.

    7. Inadequate Investment

    In a project, there would be stages where an extra investment is needed to maintain the product's high-quality standards promised to the sponsor. If the stakeholders refuse the deployment of more financial and human resources, the project might not be able to achieve the desired standard of deliverables. Under the circumstances, project termination is often recommended.

    8. Project Length

    Projects that exceed their expected time frames turn out to be costlier than initially budgeted for and thus require immediate termination. Putting an end to a project that has no foreseeable deadline for its completion is advised before it starts draining resources and overspilling the budget.

    9.  Unfulfillment of Client Expectations

    A client might have expectations of the vendor company that is beyond its team's capabilities. This often results in displeasure and dissatisfaction of the client. In this scenario, unless the vendor enhances the capabilities of the deployed team and fulfills the client’s requirements, project termination is the way to go.

    10. Naturally Occurring Circumstances

    Sometimes, a project has to be abandoned or aborted due to natural calamities. These include earthquakes, pandemics, hurricanes, floods, etc. When these calamities occur, an ongoing project might shift to the back burner before its gradual termination due to damage to infrastructure and property.

    There could be other reasons, like technical and financial limitations, lack of clarity, fuzzy scope of work, and even illogical, irrational expectations. The nature of the project, timelines, and the timing of its launch and termination also determine its successful closure or abrupt termination. If the project is not terminated on time, it could cost a good deal of money to the project owner and opportunity cost to the client. Due to this, a close-out of the project happens when it is decided there is no need for further continuation.

    Different Ways to Terminate a Project

    All projects have an algorithm that needs to be followed religiously. If not adhered to properly, termination in project management is the definite plan in order to minimize capital damage, mitigate threatening risks, and admit the faultiness of the idea.

    While project management has its own ways of execution, there are various angles using which a project termination strategy must be formulated to avoid any more losses and ensure smooth discontinuation. Successful termination of a project depends upon the appropriate approach that the vendor adopts. Four primary ways of project termination can be considered. They are:  

    1. Project Termination by Extinction

    This method is to close a project that has reached completion or does not promise to succeed. This type of termination is utilized under the following circumstances:

    • The project's scope has been completed, closure formalities have been initiated, and the client has taken the handover in its entirety.
    • The project has become irrelevant because market conditions and developments have made it so; technological advancements now require revamping the project.  

    Examples of a project termination by extinction include software launched successfully or a drug trial that failed to pass regulatory standards and was terminated at the completion/closure stage of the project life cycle.

    2. Project Termination by Addition

    Project termination by addition is a method where a project is onboarded to become a part of the parent organization. This happens when the project is initiated and executed by the in-house team of an organization, keeping in mind that the organization’s members are working on the project with the particular aim of it being utilized internally. Upon completion, the project outcome is added and institutionalized by the parent body as a formal part of itself. Examples of such a project could be a new, additional department of an existing university that is actively contributing to the university's daily operations.  

    3. Project Termination by Integration

    This is the most accepted way of dealing with a project that is either very complex or has been successfully completed. The project's output is integrated into the client’s or parent’s daily operational processes, piece by piece. Another scenario could be that the project to be aborted is integrated into other more extensive projects that are going on, or it becomes a part of the ongoing operations. The organization redistributes the project resources, and the project no longer has individuality.

    4. Project Termination by Starvation

    This is a mode where the client or sponsor is unwilling to make further financial or resource investments in the project. Still, the project demands that additional investment be made for further execution. The client or parent organization withholds any further financial or resource authorization. This leads to the project dying out due to a lack of sustenance that is willfully stopped. 

    Steps of Project Termination Process

    A formal closing out of a project continues beyond just delivering objectives. It has to follow an administrative, financial, and operations-oriented process. The steps involved in the project termination process are as follows:  

    Step 1: Confirm Work is Done as per the Requirements: 

    In the closing phase, all the deliverables must be listed, finalized, and transferred to the client. The consequent documentation has to be approved and signed, confirming completion by everyone involved in the project.  

    Step 2: Complete Procurement Closure

    Once approvals have been received from the client, contracts with vendors have to be closed. For this, project documentation should be reviewed, all the parties paid their outstanding dues, and all the invoices cleared from all sides. Non-completion of this step could result in unhealthy accounts at the time of year closing.

    Step 3: Gain Formal Acceptance

    After the project management team has delivered the finalized product, a formal acceptance from the client has to be sought. The customer must give a written acknowledgment that the project has been completed and the outcome is acceptable. Without this, the vendor might face unfortunate and unforeseen legal consequences.

    Step 4: Complete Final Performance Reporting

    This step involves drafting a report with all the project details. The report contains information about the budget, timelines, resources utilized, bottlenecks faced, pending issues, and more. Resembling a project termination pdf, the detailed report also carries calculations and reports of quality and budgetary performances that are recorded and archived for future reference.  

    Step 5: Index and Archive Records

    All the records, including project plans, design, and post-project termination, are collected, methodically indexed, and archived in the company records for future reference. These records can be used to prepare blueprints for future assignments and as a guide for avoiding pitfalls during the progress of a project.  

    Step 6: Update Lessons Learned

    With every project completion, lessons that add to the project manager's and their team's experience are learned. A formal project management course like PRINCE2 courses online goes a long way in guiding project personnel in handling this step skillfully. All the stakeholders contribute their experience of the project formally and in a reporting format. These lessons are safely stored in the organization's assets library, known as organization process assets, for future reference.

    Step 7: Handing Over the Completed Project

    On the completion of the project, the outcome is handed over to the customer. There follows a period after the handover dedicated to hand-holding or assisting the customer in understanding how to use the product. This period lasts till the customer is habituated with the product or for the time both parties have agreed upon it.

    Step 8: Reassigning Resources

    The resources deployed for various project phases are formally released after they have submitted their closure reports or the requisite documentation. They are either reassigned to other projects or released.

    How Can a Project Be Terminated in the Right Way?

    Terminating a project must be procedural, or it could end up having loose ends. There is a right way to do it that can be learned through a project management course like KnowledgeHut's certifications on Project Management. Upon termination of a project, all the departments and resources involved must be notified, explaining the reasons. Vis-a-vis the client, the explanation for project termination must also include suggestions on alternative vendors or services or another approach to the project. One-on-one interaction with the project team and the client is always recommended in such cases.

    Once the notification for project termination has been issued to all involved, all processes deployed for the project must be formally shut down, and tools for execution must be removed. This step should be implemented immediately to avoid the aggravation of financial loss.

    At the stage of project termination, it is recommended to prepare a balance sheet of all resources, listing the quantity used and what is left over. The leftover resources can be utilized for another project or help create a more valuable and detailed project report.

    Lastly, a terminated project also includes a report that maps its progression and termination. All the details should be included so that the organization or its project manager can use them to identify its ideology and growth path and avoid costly mistakes in future projects.


    Project termination in project management is a crucial decision that requires thorough consideration from the stakeholders and sponsors. However, when a project is terminated due to the lack of desired outcomes, client dissatisfaction, or lack of motivation to stay invested in it, the team members working on it can be negatively affected.  

    Forced project abortions have consequences that affect the team's morale and the public image of the organization handling the project. That said, a project that is terminated after coherent deliberations and conclusive actions becomes an effective decision in the best interests of both the stakeholders and sponsors.

    Frequently Asked Questions (FAQs)

    1Who is responsible for project termination?

    Senior management must make a choice to end a project, and it is the project manager's and team's duty to lessen the effect on project employees. The decision to end a project should, however, be preceded by precise and trustworthy information that will help stakeholders to decide the best interest of the organization. It is also important to note that terminated projects may carry some costs which may become sunk, due consideration and diligence should be made to review this before terminating a project.

    2What is a project termination report?

    A project termination report is a document with a summary of the results achieved by the project. It will be about the team's achievements, lessons learned during the project progression, and suggestions to improve current performance in future projects.

    3What are the challenges of project termination?

    A project nearing its closure can face challenges not foreseen during the planning phase. These could be technical issues concerning new products or designs, needing adequate hand-holding for the client, disagreement amongst stakeholders on deliverables, or a disinterested, irresponsible approach towards closing the project. And then, there are the challenges posed by the project team. The team members might need to work on formalities for fear of being retrenched, or they might lose interest once they have been reassigned to a new project. Lastly, there is the customer's aspect that could delay closure.

    4How can you avoid project termination?

    Project termination can be avoided by following specific thumb rules:

    Assigning a skilled and experienced project manager who keeps an alert eye on the project.

    Planning an effective project management strategy includes steps for its careful execution, allocation of resources, and maintenance of robust communication channels.

    To avoid project failure, all decisions and achievements should be meticulously documented and reviewed with the customer. 

    Customers should be encouraged to avoid harboring unrealistic expectations, and goals should be set according to the capabilities of the team members. Landmarks within the project should be carefully tracked, and risks constantly be identified, analyzed, and resolved to reduce the chances of failure.


    Kevin D.Davis

    Blog Author

    Kevin D. Davis is a seasoned and results-driven Program/Project Management Professional with a Master's Certificate in Advanced Project Management. With expertise in leading multi-million dollar projects, strategic planning, and sales operations, Kevin excels in maximizing solutions and building business cases. He possesses a deep understanding of methodologies such as PMBOK, Lean Six Sigma, and TQM to achieve business/technology alignment. With over 100 instructional training sessions and extensive experience as a PMP Exam Prep Instructor at KnowledgeHut, Kevin has a proven track record in project management training and consulting. His expertise has helped in driving successful project outcomes and fostering organizational growth.

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