This is the end of a busy week in Rio de Janeiro working with the ISO PC236 committee drafting ISO21500 – Guide to Project Management. My particular area of interest is terminology and one of the more interesting debates was around what’s produced and created by a project. The Dutch delegation started the ball rolling with a very well thought out proposal, this is my personal views on what makes sense at the end of a long week discussing this and a wide range of other comments and issues on the standard.

The first line of discussion was around the creation of the projects ‘outputs’, both deliverables and project management outputs.

• Processes transform one or more inputs into one or more outputs by applying tools of techniques. This applies to production processes used to create deliverables and project management processes used to manage the work of the project. Therefore:
• Outputs are created by a process. Most outputs are inputs to other processes; many project management outputs are used within the project to manage the work.
• Deliverables are the final outputs that are transferred to a third party outside of the project, usually either the customer or the performing organisation.

The second, more important line of discussion focused on understanding the project’s goals and objectives. The way these elements interact are:

• Project Goals describe the overarching purposes for which the project was created. They tend to be wide reaching and related to the expectations of senior managers and clients. The ultimate success of the project is dependent on achieving its goals. There are two broad types of goals:
  • Goals focused around the realisation of the benefits the project was created to enable. Projects rarely deliver benefits directly, see: Value is in the eye of the stakeholder
  • Goals linked to the project achieving is stated objectives.
• Project Objectives are the direct responsibility of the project manager. He or she should be assigned the authority, responsibility and necessary resources to achieve the defined project objectives. Objectives fall into two broad categories:
  • Objectives that are achieved by undertaking the project work in an appropriate way. These include objectives such as safety, sustainability, workforce development and stakeholder management.
  • Objectives that are achieved as a consequence of successfully completing the project, the deliverables. These include enhancements to the Organisational Process Assets (OPA) of the performing organisation and the assets transferred to the customer.

The successful delivery of ‘deliverables’ includes achieving technical requirements such as time, cost and scope; plus stakeholder requirements such as value and usefulness (see more on stakeholder management).

Whilst benefits realisation it is usually outside of the objectives that can reasonably be assigned to the Project Manager, the project team are responsible for making sure what they deliver is what is needed to facilitate the organisation (or client) in achieving the overall goals the work of the project is central to achieving; see: Avoiding the Successful Failure!.

The question is, does this structure work in for you? Your comments will be appreciated.

This is just a short post to clear my mind of some converging thoughts. The first background element is the announcement this week that the UK government has slashed its school building program (although the new government is still likely to do more then the old); and finding a place in an Australian University is a difficult as ever.

The second element is a couple of radio features discussing the evolution of mankind in particular the key point some 100,000 years ago when our ancestors developed trade and probably saved themselves from extinction. Followed by the development of agriculture some 10,000 years ago followed by cities that allowed the time for arts and science to flourish.

Arguably, the shift from low density, low interactive populations of hunter gatherers to the relatively high density, high interactive communities of the late Stone Age and Early Bronze Age facilitated the emergence of early civilisations in the Middle East, Indus Valley and Central America some 3 to 4,000 years ago.

The third element is a book on ‘The Lunar Men’ a group of natural philosophers, scientists and business men that largely kick started the industrial revolution in the UK Midlands (Birmingham) in the 18th Century. This group were the last of the European ‘renascence’ which itself was based on the ability to communicate effectively assisted by the development of printing and inter European communication.

All of these leaps in knowledge were based on the ability to interact and communicate in a more effective way than was previously possible. The supporting elements are improvements in trade and commerce and the ability (in latter times) to overcome entrenched opposition to new ideas. A modern example of this phenomenon is Silicone Valley and the massive leap in the way the world interacts caused by the development of the Personal Computer.

Waves of innovation seem to be partially serendipity, you need the right people and the right ideas, but this is helped by the quality, density and flexibility of the communication network between them. Discussion, argument, collaboration and competition in an environment that allows multiple independent threads to develop concurrently seems to be the catalyst for literally changing the world. Based on this construct, my prediction is the next massive wave of innovation is likely to come out of China.

The one statistic that for me sums up where China is going is the 60 million qualified university graduates that enter the workforce each year. Many of China’s Universities are world class and the concept of an annual intake of new graduates entering the workforce that is three times the total population of Australia speaks volumes for the skills, innovative capability and sheer energy being generated in this vast economy.

The region I visited was the Yangtze River Delta. This region has always been a major industrial centre and the emergence of Shanghai as the economic capital of China has simply accelerated its development and expansion. Today, this part of China has double the foreign trade of the entire Indian economy and represents 25% of China’s GDP.

The China I saw actively encourages innovation and technical development, has effective communication and a very large talent pool. All that is needed is a little serendipity and who knows what may be developed. In the same way efficient steam engines created the industrial revolution (Watt and Boulton were both Lunar Men) and the PC created the knowledge revolution anything may be possible (and predicting the outcome in advance is nearly impossible).

There are alternatives – the internet allows everyone to communicate so location is no longer a central issue to collaboration; and the major limitation on the Renascence was the entrenched interests of the Church and secular authorities. However, overall I feel the next major wave of innovation cannot be far away what it looks like and where it starts are open questions but slashing access to quality education and limiting the desire to learn certainly won’t help the UK or Australia be in the forefront.

On a smaller scale, every organisation can help its people innovate by creating the right environment for ideas to emerge.

One of the interesting juxtapositions around Expo 2010 is its theme of sustainability contrasted to a massive temporary exhibition focused on an intensive 6 months with much of the site to be demolished in October.

The Expo is certainly a success with a projected attendance of 75million visitors. From the sustainability perspective there have been many innovations and initiatives.

Much of the heating and cooling uses heat pumps powered by solar (PVC) cells. Movement across the site has been optimised in three planes, above on, and below ground encouraging walking and most of the transportation is electric powered. Several of the larger buildings are designed for re-use and one incorporates the world’s largest green wall. Another innovation has been refurbishing many of the pre-existing industrial buildings on-site to preserve Shanghai’s heritage.

The Expo is also hosting a string of conference events focusing world experts on its theme of ‘better city, better life’ and sustainability. This was also a key focus of the CIOB events we attended.

The World's Largest 'Greenwall' diring construction. Now it's a mass of green.

Part way through, it’s hard to assess if the Expo will contribute a net benefit to sustainability and ‘better city’ development but from what we saw, it is looking positive.

Before moving onto other topics though, there were many pavilions that really caught our attention. The Chinese and UK pavilions have already been mentioned. The Australian pavilion is a standout design looking like cross between Ayres Rock and a tin shed. The design is very distinctive and ‘Australian’.

Many of the countries used interesting cladding to focus on sustainability and insulation. The Canadian pavilion was covered in lumber, the Portuguese in cork. The ‘paper cut’ effect of the Polish pavilion combined a classic Chinese art from with shading and ventilation.

The Polish Pavilion's 'Paper Cut'

Overall the experience was fantastic, as long as you don’t mind the crowds, and will be long remembered. Thoughts on sustainability and ‘Zero Carbon’ will follow in later posts.

The Chartered Institute of Building for the first time in its 187 year history held its AGM, Board of Trustees and Members Forum meetings outside of the UK. In addition to the working meetings, the two highlights of a busy week were the International Construction Conference focused on sustainability and ‘zero carbon’ construction and a visit to World Expo 2010.

Shanghai Hotel (background) and Conference Venue

The business part of the week was centred in the impressive J.W. Marriott hotel and the adjacent Grand State Theatre. Given some time to reflect on these experiences, I intend writing a couple of posts focusing on some of the ideas and observations from the meetings and conference.

I want to focus this post on an incredible experience from World Expo. Lynda has described the size and intensity of the Expo in her post World Expo Shanghai 2010. And whilst the China Pavilion undoubtedly had the longest queues, another ‘long queue’ pavilion is the remarkable British ‘dandelion’. The design concept is that of a ‘gift’ to the Chinese people surrounded by its wrapping paper.

The wonderful fuzzy effect on the outside is created by 60,686 hand crafted acrylic rods, each 7 meters long which allow light into the inside of a 20 meter plywood cube.

Some of the 60,000 rods

Remarkably each rod has between 1 and 10 seeds embedded in the end representing Chinese plant species that are growing in the UK.

Some of the seeds embedded in the rods

The effect outside is fascinating, inside it is simply mind blowing. I have never experienced anything quite like this.

The effect inside

At one level the display is totally useless, at another the juxtaposition of 60,686 individually hand crafted rods focusing on plant seeds to the overall scale of the Expo simply has to be experienced. Judging from the fact over 1 million people a month are queuing for hours for the experience, I feel the UK designers have achieved their objective of raising the UK’s profile at all levels of Chinese society.

At the moment, plans are to demolish the pavilion in October and to distribute the section of each rod holding the seeds to schools and other institutions. I hope this changes and the ‘cube’ can be found a home intact somewhere in the city for future generations to experience.

I have just finished a week in Shanghai; the main purpose of my trip was to participate in a panel session at the CIOB International Construction Conference. For more on this see Patrick’s post CIOB Shanghai Meetings. However, the highlight of the trip was a day spent at World Expo.

The Expo is simply enormous. The site covers a total area of 5.28 square kilometres spread along both sides of the Huangpu River in downtown Shanghai; it includes gardens, wet lands, paved walkways and 100s of new and renovated buildings.

In the two months since opening the Expo has hosted over 20 million visitors and expects over 75 million before closing in October. On busy days over half a million visitors are on the site. Everywhere you look on the site there are queues but the organisers keep things moving, the officials are polite and helpful and the crowd rubs along without friction, maybe even enjoying the experience. From a stakeholder management perspective, expectations are managed and information is readily available, particularly if you speak Mandarin – international visitors are not likely to exceed 5 million.

The China Pavilion dominates the site and is a wonderful experience. For locals to visit the pavilion, someone has to join the queue outside the gates at 6:00am to so when the gates open at 9:00am they can be near enough to the front of the next queue at the China Pavilion to receive some of the 50,000 tickets issued daily to allow them join another queue for 2 to 3 hours to get inside to see and experience the exhibits.

I was more fortunate, the hosts of the CIOB conference were able to arrange VIP access but I can understand why the Chinese pavilion is worth the wait. Its exhibits really are wonderful. There are over 200 countries and international organisations represented, ranging from Tuvalu to the USA; the World bank to the International Council of Museums, as well as numerous major corporations and most Chinese provinces. Almost every pavilion had its queue! In a long day I only managed to see a small section of the total experience but could start to appreciate the overarching purpose of this great festival.

My visit to the Expo was a once in a lifetime experience. If you can’t make the trip personally, you can be a virtual tourist on line at http://en.expo.cn/. Either way World Expo 2010 is well worth the visit.

This is the start of an interesting couple of weeks. First stop Shanghai for the CIOB AGM, Members Forum meeting and an International Construction conference. For the first time in its 189 year history the Chartered Institute of Building (CIOB) will be holding its 2010 Annual General Meeting (AGM) outside of the UK.

I will be participating in the CIOB International Construction Conference, the 2010 Members Forum and the AGM as well as visiting the Shanghai Expo 2010.

Watch this space for updates!

For more on the conference see: http://www.mosaicprojects.com.au/PDF/CIOB_2010.pdf

It has been a fascinating 24 hours in Australian politics. The former Prime Minister Kevin Rudd was dumped and we now have our first female Prime Minister Julia Gillard. The unfolding drama was a mixture of ruthless efficiency in the coup to oust the previous Prime Minister, immediately followed by the start of a process of inclusion and healing.

Managers faced with difficult decisions can learn a lot from today’s events. My thoughts on several key issues are:

1. Ethical dilemmas are always difficult and need decisions. As Henry Kissinger said: “Competing pressures tempt one to believe that an issue deferred is a problem avoided, more often it is a crisis invented”. There is no right answer to a dilemma, every option has a downside. Leaders choose a way forward and live with the consequences.
   [See: Ethics and Leadership]
2. When you do decide on a course of action, don’t hide the issues that created the dilemma in the first place, explain your reasoning and acknowledge both the greater good and the consequential harm. When a Deputy takes over from her leader there are inevitable questions of loyalty and trust, honest reasoning lets observers understand the reasons for the decision.
3. Conversations and transformational negotiations lead to better outcomes than win-lose transactional negotiations but often you need to make the first concession to start down this path [see: Win-Win Negotiations]. The Government and the mining industry were locked in a head to head battle over a new tax. In the space of 5 hours the new Prime Minister had unilaterally cancelled government advertising over the issue and offered open negotiations. The mining industry had reciprocated and suspended their advertising campaign. The negotiations may or may not reach a consensus (no one like having their taxes increased) but both sides are likely to end up with a better outcome if the transformational negotiations work.
   [See: Negotiating and Mediating]
4. In a disagreement over principles, you only need to achieve your objective; you don’t need to destroy the other party. The former Prime Minister has been offered a position of his choosing in the new government. If accepted, this means his talents and knowledge are still available to the team. Reluctant allies are better than committed opponents.

It’s certainly been an interesting day watching a really effective communicator in action in action; I feel as though I have learned a lot.

I never cease to be amazed by the number of people holding leadership roles in the project management community who denigrate ‘soft’ skills. The latest attack on ‘soft’ skills is in a letter to the editor in the May edition of Project Magazine published by the APM, UK.

The Honorary Secretary of the APM Contracts and Procurement SIG, Gerry Orman states ‘soft skills are merely a form of manipulation’; and suggests including them in the knowledge framework for the project management profession will result in the dumbing down of our emerging profession. He also asserts the role of the project manager is to fulfil a contract, not deliver the project so apparently people leading the delivery of internal projects within organisations are not project managers!

Apart from the difficulty of defining projects in terms of one sourcing methodology, writing contracts, Orman seems to conveniently forget the thousands of contracts that end up in the courts each year because of the breakdown in relationships within the contract. Stakeholder management is a key skill for project managers, including identifying, prioritising the project’s stakeholders, and then developing effective communication within relationships that work (for more on this see WP1007 The Stakeholder Cycle). The success of the construction phase of Terminal 5 at Heathrow was largely due to BAA’s focus on the ‘soft’ skills needed to develop and sustain the integrated delivery teams that created the success. This was a revolution in procurement and supply chain management and led to this project being celebrated as the most successful construction project in the UK (for more on this see my presentation to the CIPS Australasia Strategic Procurement Forum in Auckland).

The same argument applies to most project management artefacts. The most perfectly developed schedule is totally useless if the information it contains is not communicated to the people who need to work to the plan; communication is a ‘soft’ skill. But communication on its own is not enough! The people receiving the communication need to understand the message and agree to use the schedule in the coordination of their work. This is unlikely to happen if the people have not been involved in the schedule development which requires more stakeholder engagement and communication, consensus building and a range of other ‘soft’ skills (see: Communication in organisations: making the schedule effective).

Putting it another way, developing an effective schedule that is useful because it is actually used to manage time on the project demands the project manager and/or project scheduler engage effectively with the people who will be responsible for implementing the schedule. This requires interpersonal, contextual and behavioural competencies.

Orman also states professional skills should be unique to the professions, examinable in a written exam and uses the medical profession as an example. Two members of our family recently completed a multi year journey to become qualified anaesthetists. Over the years there were many written examinations but there were also searching interviews and clinical assessments along the way and years of ‘apprenticeship’ under the direction of more senior professionals to ensure they were competent as well as knowledgeable. If medical professionals need more than book learning and written examinations why should project managers be any different?

Project success is achieved by persuading people in the project team to enthusiastically and collaboratively work together to achieve the contracted output. Developing a motivated team capable of achieving this requires a range of ‘soft’ skills including leadership, motivation, communication and conflict management to name a few. Organisations cannot do work; it is the people within the organisation that do the work and management is about directing and leading people!

Answering the question, what is more important, the ‘hard’ skills of scope management, scheduling and cost planning or the ‘soft’ skills of motivation, communication and leadership, is difficult. My feeling is the synergy of ‘hard’ skills powered by ‘soft’ skills will create a far more powerful engine for success than the sum of the two parts in isolation. Successful project managers need both capabilities either within their person or within their leadership team.

If we ignore stakeholders and the ‘soft’ side of our project management skill set we severely reduce our ability to meet our client’s requirements for on time on budget and on scope delivery. ‘Soft’ is not a synonym for easy!

I have just read an interesting article by Bob McGannon on selecting the right IT projects for Agile development. Bob is a Founder and Principal of MINDAVATION, a company providing project management training, consulting, keynotes & coaching services throughout North America, Europe, the Middle East and Australia.

Here is a précis of Bob’s guide to creating an appropriate filter for determining which projects would benefit from the use of Agile processes.

• An eager sponsor willing to conduct frequent reviews and evaluations of the evolving product.
• Ambitious, knowledgeable and available business representatives – The Agile process is purposefully collaborative.
• Minimal time to verify product viability: its power comes from its ability to produce quickly, adjust consistently to new knowledge and business change but only if the learning can be understood, interpreted and absorbed quickly.
• Minimal business exposure if the product produced is broken; it would be high risk to put a piece of functionality into a production environment if an error in that product would have a substantial impact on the business.
• A willingness to consider a very different approach; the ability to invest in a different work and management approach is necessary for the project stakeholders.
• The ‘DNA’ to deal with a bit of ambiguity. Priorities are consistently reassessed and work sequences changed.

The full article can be found at http://www.mindavation.com.au/articles/may10_intellections3.html

Bob’s approach is closely aligned to the ideas discussed in Mosaic’s White Paper on Project Strategy; see: http://www.mosaicprojects.com.au/WhitePapers/WP1038_Strategy.pdf; one approach to every problem seldome dilivers optimum outcomes.

Your project will only be considered successful if its key stakeholders perceive the project’s outcome as a success. These perceptions of success or failure are heavily influenced by the effectiveness of the project’s communications, and relationships, with its stakeholder community, particularly senior managers. Communicating effectively is both a science and an art framed within a relationship.

The starting point if you wish to be taken seriously is to develop a reputation for credibility. Senior management need to recognise that if you say something, it is backed up by facts, and if you commit to something, it is delivered. Credibility is earned by performance, but there is no harm in quietly making sure your performance is noticed in the right places. Your reputation is a general underpinning to all internal organisational relationships. Developing a specific relationship needs a specific, culturally appropriate focus before you can expect to communicate effectively.

Also, the last few years have seen significant changes in people’s understanding of acceptable behaviours and have forced a re-evaluation of the way Project and Program managers need to communicate to influence their stakeholders; particularly when ‘advising upwards’ and dealing with difficult people. The first key to building any effective relationship is to avoid stereotyping. Upwardly mobile managers with a focus on being promoted, frequently have a different life focus to project managers. These differences are not uncommon in successful senior executives and need to be respected as a component in the relationship, not denigrated.

The second key is to recognise that in every relationship there is a power dimension. How a senior manager uses his or her power is to an extent a generational issue. As long as they understand their purpose, many younger managers would see nothing wrong in a more junior manager setting reasonable boundaries and procedures to the relationship and communication. Older managers used to operating in a command and control environment are likely to react negatively to a ‘junior’ pushing rules upwards.

The solution is mutuality. You need to understand what you need from the relationship (support, resources, backing) and also what the senior manager needs from the relationship. Then, work within the relationship to negotiate mutually beneficial outcomes that meet both sets of requirements. It is by linking your needs to the achievement of the senior manager’s requirements; you can start to achieve real communication.

As already mentioned, crafting advice to senior management to achieve effective outcomes from the communication is as much an art as a science. Communicating for effect requires a clear understanding of the objective of the communication and the skills to create messages that are focused:

• On the right people
• At the right time and carry
• The right information in the right format.

Mutuality and credibility are the two keys to advising upwards, but in the end, all relationships depend on the situation. If you are seen as a serious contributor to the organization’s success and can link your needs to the needs of senior management, there’s a high probability of achieving your desired outcome and benefiting the organization at the same time.

My next book, Advising Upwards: A Framework for Understanding and Engaging Senior Management Stakeholders, will be published by Gower in 2011. For more on the book see: http://www.mosaicprojects.com.au/Books.html#AdvisingUpwards

In the meantime, our popular workshop, The science and art of communicating effectively will be run in Sydney and Melbourne over the next few weeks. For more information see: http://www.mosaicprojects.com.au/Training-Comms.html

Mosaic’s Program Management Professional course is up and running! Developing a cost effective delivery method that accommodates the busy working life of most program managers has not been simple.

Our unique One-on-One mentored delivery model is designed to support PgMP candidate through the work needed to achieve the three phases of the PgMP certification process at a pace that suites the requirements of each individual. We offer the resources and support needed to pass: all you have to do is the work!

To achieve this, we have replaced class time with a scheduled telephone call from one of Mosaic’s mentors at each step through the course. Using VOIP we can deliver this support cost effectively world-wide, but at present only have English language capability.

For more on the PgMP course and our One-on-One delivery methodology see: http://www.mosaicprojects.com.au/Training-PgMP_One-on-One.html

Research by Dr. Brian Hobbs, University of Quebec at Montreal, Quebec, Canada published in a White Paper prepared for the Project Management Institute (PMI) highlights the precarious existence of the majority of Project Management Offices (PMOs). Approximately half of the PMO’s in existence are seeing their relevance or very existence questioned.

Whilst PMOs have been popular since the middle to late 1990’s and new PMOs are being created at a relatively high rate; PMOs are also being shut down or radically reconfigured at a similar rate. As shown in the figure below most PMOs in existence today are rather recent creations. The sample suggests more than half the PMOs in existence today (54%) were created in the last two years and only 17% have been in existence for more than five years.

This data suggests a PMO often has only a short time to demonstrate its ability to fit into the organisations culture and create value before it is restructured or closed down. We have looked at some of the issues and challenges associated with PMOs in a Mosaic White Paper ‘PMOs’.

Based on years of observation, the key to achieving an effective start up for a PMO has more to do with the PMO’s management being able to effectively manage their key stakeholders, particularly in the executive suites than any methodology or reporting processes the PMO may import or develop. For more on this see the numerous papers we have published [paper listing]. The key message is technical competence is never going to be enough to justify the existence of a PMO.

We were sad to hear of the passing of Rita Mulcahy, Founder of RMC Project Management and the best-selling project management author. Rita passed away on Saturday, May 15th 2010, from complications related to a five-year battle with cancer. She was 50; Rita leaves behind husband Tim Mulcahy, current Vice-President and Chief Legal Counsel for RMC, and two children, ages 7 and 5.

Rita was diagnosed with cancer in September of 2005, and over the last five years worked to expand RMC’s training and product distribution to nearly 50 regions worldwide based on her innovative methodologies and learning techniques.

Rita’s books were a key source of information when we passed our PMP exam many years ago. Her focus on effective questions to encourage adult learning was one of the key inspirations for the development of Mosaic’s Mentored Email™ CAPM and PMP courses.

The Project Management industry has lost a passionate leader, advocate and friend.

Cost performance is a symptom of other management functions. It is impossible to ‘engineer costs’. The only way to change cost outcomes is to change the other processes that incur costs.

The three key areas of business operations and project management that incur costs and where a change in the process will cause a change in costs are:

1. Changing the procurement / purchasing / supply chain processes that acquire the required inputs to the process being managed.
2. Changing the way the work that transforms inputs to outputs is undertaken through enhanced management and leadership including skilling, motivating and directing the people involved in the work and ensuring they have the correct resources and equipment to undertake the work.
3. Focusing on the quality of the outputs produces to ensure the ‘right scope’ has been delivered at the ‘correct quality’. Too low and there are cost consequences in rectification, too high and you may have spent money unnecessarily.

These three elements exist in a risk frame. Whilst risk management will not ‘control’ the future, it will allow opportunities to be identified and grasped and threats mitigated and avoided by changing the way the work is undertaken and as a consequence optimise cost outcomes.

The two key facets that permeate all of the above are stakeholder management and time management.

• Stakeholder management both within the team and externally, (including effective communication) is central to achieving a successful outcome at the best price. Stakeholders are in the supply chain, include the project team and contractors and can have a major impact on the risk profile of the work. For more posts on stakeholder management see: http://www.stakeholder-management.com/blog/?cat=5
• Time management focuses on ensuring the right people are in the right place at the right time, with the right resources and equipment to do the work in the optimum sequence. For more posts on time management see: http://mosaicprojects.wordpress.com/category/project-controls/scheduling-project-controls/

Both of the above need regular reviews and adjustment within the overall frame of the emerging risk profile.

Where ‘cost engineering’ adds value is via techniques such as Earned Value (EV). Applying EV effectively allows the symptoms of a deviation from the expected performance to be highlighted through Cost Variances and other reports.

As with medicine and diseases, it is capability to recognise and correctly interpret symptoms that allows diagnosis that leads to the effective treatment of the under-laying problem. In project and business management space, this should translate to the requirement for managers not only to report a cost variance, but also to identify the cause of the variance and to recommend and/or implement corrective actions.

Whilst it is impossible to directly manage or control costs; timely and accurate information on cost performance can be a valuable diagnostic tool to remedy the real issues. What’s needed is for senor managers to stop focusing on ‘cost’ and start asking deeper questions about performance and risk. I know many readers of this blog will say this already happens in their organisations, but I also know that far too many other managers focus on the symptom of cost performance rather than the under-laying problem to the detriment of their businesses.

The IT industry is moving ever closer to mainstream contracting and vendors will be sued for non-delivery. Construction and engineering companies have been used to litigation over the non-delivery of contractual obligations for well over 100 years. Following the BSkyB v EDS judgement, the IT industry is now firmly in the same boat!

Earlier this year, the UK High Court handed down its decision in the long running case of BSkyB v EDS (now owned by HP) with the damages awarded against EDS likely to exceed £200m (US$300 million). The judgement will be appealed but stands as a warning for all IT vendors world-wide.

The dispute concerned the failed implementation by EDS of a new customer relationship management (CRM) system for use in BSkyB’s Scottish call centres. The project did not go well. After numerous key deadlines had been missed and various attempts to rectify the situation had failed (including re-planning delivery of the project by signing a ‘Letter of Agreement’ to supersede the primary contract), BSkyB severed its relationship with EDS in 2002 and completed the project in house (at a reported cost of £265m).

Litigation ensued, in which BSkyB made claims of, among other things, deceit (fraudulent misrepresentation), negligent misstatement and breach of contract by EDS. Despite EDS arguing that the project was derailed by the inherent risks in an IT project of this nature and BSkyB’s ‘vague and shifting requirements’, EDS was held liable for fraudulent misrepresentation, negligent misstatement, and breach of contract.

This decision highlights the fine line that must be trodden by service providers in promoting their offerings whilst pitching for jobs. Above all else, service providers should ensure that during tender processes they do not exaggerate their capabilities and should conduct thorough, documented assessments of prospective delivery timing before making any representations. Reliance on inherent risks in IT projects is unlikely, in itself, to be sufficient to substantiate any failure to meet representations “made by the sales guys”.

Welcome to the ‘real world’ guys…… See more on the judgement

One of the interesting similarities between stakeholder management and risk management is the challenge of knowing what we know and more importantly understanding what we don’t or can’t know.

An enduring part of Donald H. Rumsfeld’s legacy will be his somewhat garbled comment at a DoD news briefing in 2002: “as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know.” Despite the wide spread ridicule these comments have attracted, Rumsfeld was right!

The challenge in both risk and stakeholder management is to identify the things we don’t know. This is made more important because what we don’t know about key stakeholders may constitute a significant risk to the project or business.

Plotting what we know in terms of our knowledge of the person’s wants expectations and attitudes in one dimension and how aware we are of that knowledge in another offers four possibilities.

The Knowledge / Awareness Matrix

The consequences of the four quadrents are:

• Management Zone: When we are aware of our knowledge proactive management is possible. We know we know and can take appropriate actions. This is where tools such as the Stakeholder Circle® are at their most useful.
• Risk Zone: When we are aware that we don’t know something, we can assess the implications and invest effort as needed. This is the zone traditional risk management works best in and we can use risk management techniques to asses the probable impact of our lack of knowledge and take appropriate actions to mitigate any undesirable consequences.
• Research Zone: We don’t know we have access to knowledge that we could use ‘if we ask the right questions’. This zone is created by amnesia, inexperience and false assumptions (eg, assuming you cannot ask someone a question). Research and experience minimise this quadrant. Facilitated processes such as brainstorming, affinity diagrams and focus groups can help to unlock the knowledge that exists and allow it to be used effectively.
• Reactive Zone: We don’t know we need to know. Particularly with people, there can be many issues problems and opportunities that you are simply unaware of. This area cannot be managed, you have no knowledge you need to be managing something. When issues and opportunities arise you need to be ready to react quickly and there needs to be processes in place to regularly scan the overall stakeholder environment to identify emerging opportunities and issues as early as possible.

Effective stakeholder management is focused on moving all of the key and important stakeholders into the Management Zone. However, you can never be 100% certain you know everything about everyone that matters and need to regularly review the other three quadrants to identify opportunities and minimise issues.

Several thousand years before Rumsfeld, Confucius said: To know that we know what we know and that we do not know what we do not know – that is true knowledge. Given the continually evolving nature of the stakeholder community surrounding any endeavour, achieving true knowledge is always going to be a major challenge.

The precautionary principle states that protective action should be taken in any situation where there is a threat of severe or irreversible harm.

Furthermore, if there is no positive proof that harm would not result decisions should be taken to protect people from the worst-case scenario until there is positive proof that harm would not result.

The latest scenario where this principle was applied was the eruption of the Eyjafjallajökul volcano in Iceland on the 20th March, which was the first activity since the eruptions of 1821-23, followed by the major eruption on the 14 April. There were also fears that Eyjafjallajökul could trigger a similar eruption in the nearby Mount Katla which is much larger.

The Plume

Both eruptions sent clouds of volcanic ash into the atmosphere which at high concentrations definitely poses a hazard to aircraft. There have been previous incidents of aircraft being affected by volcanic ash, including probably the most dramatic incident when a British Airways flight from London to Auckland in 1982, lost all four engines after flying through the ash cloud from Mount Galunggung, a small volcano which had erupted on the island of Java. Fortunately the crew were able to restart the engines and land safely at Jakarta (but the plane was close to a write off). What’s not known is when the ash density is a threat and when it is not – aircraft happily fly through ice particles, birds and other airborne debris.

Based on an interpretation of the precautionary principle, European airspace was closed for eight days stranding about five million passengers across the globe and costing billions of dollars. Was this justified?

Dr. David Hillson, the ‘Risk Doctor’ thinks the decisions were appropriate despite being stranded in the USA for most of the 8 days; see: http://www.risk-doctor.com/publications-briefings.asp.

My questions fall into several parts:

• Assuming on day 1 applying the ‘precautionary principle’ was correct, why did it take authorities 8 days to decide the atmosphere was now ‘safe enough?
  • Clouds band at different levels in the atmosphere (including ash clouds) why not change flying levels?
  • What difference in pollution density occurred between day 8 and 9?
  • What tests were carried out on day 2, 3….???? We have satellites, observation balloons and a host of military and civilian aircraft that don’t carry commercial passengers.
  • How come all of Europe suddenly became ‘safe’ virtually overnight??
• Why is a low level of risk from ash different to many other low level risks that occasionally cause air crashes?
  • The likely cost in lives caused by Americans choosing to drive rather than fly after 9/11 has been estimated at over 5000. The number of accidents and serious injuries dwarf the totals actually killed and injured in New York.
  • Why not ban all flights over the Atlantic until the cause of the A330-200 crash of Brazil is resolved? (see the BEA Report)
• If the prospect of any fatal accident is unacceptable to authorities why not ban private cars? They kill massive numbers of people each year and applying the precautionary principle would demand this dangerous activity be stopped.

I believe in many situations public authorities hide behind the precautionary principle to avoid making decisions that may attract liability. Every decision and action has a degree of risk; the difference between allowing people to drive cars and banning flights over a vast area of Europe is very few effective legal challenges have been made against authorities for allowing people to drive. However, once a ban had been imposed on flying, the authorities would be potentially liable for a claim if they lifted it and any incident occurred. My feeling is the delay in re-opening airspace was not about passenger safety rather the responsible authorities attempting to avoid any possibility of liability regardless of the cost and damage caused by not making a balanced decision.

On a different aspect of the same issue, the lack of contingency planning and workarounds was appalling. Europe has a high density road and rail network why weren’t flights diverted on a priority basis to ‘safe’ airports and passengers, mail and freight moved on by land or sea? Everyone seemed to take the view if they could not operate business as usual they would simply stop operating!

Certainly when confronted with an unusual and potentially dangerous situation, applying the precautionary principle is a valid first step. However, it is then incumbent on the authorities that take this decision to urgently assess the problem, determine options and start allowing alternative workaround to happen to mitigate the damage caused by their imposition of the precautionary principle. The European authorities seem to have failed miserably in this second essential part of the response, preferring to avoid decisions rather than acting for the overall good of society. Proving a negative proposition is impossible, therefore it is impossible to prove harm would not result from reopening the airspace… so sooner or later the precautionary principle has to be ignored for the practical purposes of living.

I would like to know what happened on days 7 and 8 of the European air traffic shutdown to shift the balance of the decision from no flying to flying, my guess is pressure for airlines and politicians on the decision makers built to a level where there best option was to allow flying rather then apply the precautionary principle. The erupting ash was still in the atmosphere and as at 2nd May, the Institute of Earth Sciences reported changes to the eruption during the last 2 to 3 days. This included lava producing phase being larger than the explosive phase and the plume becoming darker, denser and wider than in the preceding week (see Wikipedia).

I may be wrong in this view – what do you think?

In addition to normal bound books, Stakeholder Relationship Management: A Maturity Model for Organisational Implementation, is also available as a Gower eBook. We have just been updated on the first quarter sales for the 150 or so Gower books that are available as eBooks and Stakeholder Relationship Management is the second best-seller for the last quarter.

Gower’s eBook can be purchased in their entirety or you may opt for short term access to the book or access to only one or two chapters. The eBook format currently available is Adobe eBook (pdf). For more information visit the Ashgate/Gower website.

To purchase normal books, see http://www.mosaicprojects.com.au/Book_Sales.html for the options available.

20 years ago, stakeholder management and shareholder/owner management were almost synonymous. In the intervening period, much has changed.

Most enlightened thinkers now place stakeholder management at the centre of effective business operations. The business needs to support, empower and satisfy the people working within the organisation, the general public and customers (now classes as Corporate Social Responsibility or CSR) and the owners of the business. All of these people are stakeholders.

Since the passing of the Sarbanes Oxley Act, organisational governance has become an important focus. For all types of organisation this is directly linked to governing the work of the people engaged in the work of the business; ie, stakeholders.

Since the GFC effective risk management has also become of increasing concern. Risk management is not the foolish attempt to avoid all risk – this is impossible, rather the effective management of risk within the risk tolerance thresholds of key stakeholders including the organisations owners and managers; ie, stakeholders.

Stakeholder Management

As summarised by the diagram above, business operations are intrinsically linked to, and require, effective governance, to meet the expectation of the organisations owners, within acceptable risk parameters to deliver value to society and the organisations clients or customers.

However, whilst stakeholder management is central to all of these processes, effective stakeholder management requires the allocation of scarce management resources to focus on the relationships between the work and the most important stakeholders. At the most fundamental level, the purpose of the Stakeholder Circle® methodology is understand ‘who’s who, and who’s important’ in the stakeholder community surrounding your work.

Once you understand this the effective management of stakeholders becomes possible. However, without the clarity of insight created by the careful analysis of the stakeholder community to determine who is really important the potential for wasted effort is enormous. As with most planning process, the payback from effort expended in analysis, is the reduced incidence of issues and problems as the work proceeds.

Can you afford not to focus some effort on effective stakeholder management?

I am amazed by the number of project management commentators who flatly refuse to recognise that  risk = uncertainty that matters and that uncertainty can be positive or negative (ie, it’s uncertain).

The latest commentator in a long line of negative thinkers is Michael Hatfield in PMI’s Voices on Project Management blog. His approach to risk suggested in ‘PMBOK® Guide for the Trenches, Part 4: Risk’ is simplistic and assumes all uncertainties are negative…..

There are numerous problems with this simplistic view of the world:

• Firstly the same risk – a future uncertainty – can have both an upside and a downside. Failing to manage the upside equates to guaranteeing failure (or at least missing opportunities).
  • Future weather conditions are a risk; they could be good or bad. A major motorway near my home town was finished months early and under budget because they were lucky enough to build the project at the tail end of a 10 year drought. The last few months have had above average rain. If the people building the road only worried about the ‘downside’ risk the road would only just be finishing now.
  • A similar example is the management actions taken to accelerate work on the Panama Canal through the GFC to take advantage of then upside risk of lower construction costs.
• Second, the environment around projects does not stop changing just because someone has signed off a cost performance baseline. Ongoing risk assessments are critical to avoid surprises; good or bad! The more warning of changed circumstances the project team have the more likely they are to manage the situation effectively.

One of our key areas of expertises is stakeholder management – each stakeholder can be a threat to the project if badly managed and a supporter if well managed. The Stakeholder Circle® methodology has been explicitly developed to first prioritise stakeholders then focus on the important high priority stakeholders to achieve an optimal level of support to allow the project to succeed (for more see http://www.stakeholder-management.com/)

Where we do agree with Michael is on the mumbo jumbo of statistical paralysis many so called risk management systems bog down in. The purpose of risk management is to identify opportunities and threats and then actually do something about them. Recording risks in a risk register and then qualitatively and quantitatively analysing them is a complete and total waste of time unless someone actually takes action. This is the focus of our ‘How To’ build a Risk Management Plan workshop – yes we have a cute Excel risk register but the purpose is action not documentation.

The biggest weakness in the current version of the PMBOK® Guide is the total omission of a process for treating risks. The idea of risk treatment is implied, but not overtly set out as a process, which allows people to think identification and analysis is the end game. Unfortunately managers need to make decisions based on the risk assessment and then take actions if risk management is going to deliver any benefits at all. Hopefully the 5th Edition will fix this.