Monday, January 13, 2020

Designed by Clowns, Supervised by Monkeys (Or How to Work With Your Regulators)

How to Work With Your Regulators
Boeing expressed regret at the embarrassing communications it sent to investigators early January, which included a comment that “this airplane is designed by clowns, who are in turn supervised by monkeys.”

Employees of Boeing mocked federal rules, talked about deceiving regulators and joked about potential flaws in the 737 Max as it was being developed, according to over a hundred pages of internal messages delivered to congressional investigators.

“I still haven’t been forgiven by God for the covering up I did last year,” one of the employees said in messages from 2018, apparently in reference to interactions with the Federal Aviation Administration (FAA).

The most damaging messages included conversations among Boeing pilots and other employees about software issues and other problems with flight simulators for the 737 Max, a plane later involved in two accidents, in late 2018 and early 2019, that killed 346 people and threw the company into chaos.

The employees appear to discuss instances in which the company concealed such problems from the FAA. during the regulator’s certification of the simulators, which were used in the development of the Max, as well as in training for pilots who had not previously flown a 737.

“I just Jedi mind tricked this fools. I should be given $1,000 every time I take one of these calls. I save this company a sick amount of $$$$.”

“Would you put your family on a MAX simulator trained aircraft? I wouldn’t.”

“I’ll be shocked if the FAA passes this turd.”

“This is a joke. This airplane is ridiculous.”

“Best part is we are re-starting this whole thing with the 777X with the same supplier and have signed up to an even more aggressive schedule!”

“Jesus, it’s doomed.”

In an exchange from 2015, a Boeing employee said that a presentation the company gave to the FAA. was so complicated that, for the agency officials and even himself, “it was like dogs watching TV.”

Several employees seemed consumed with limiting training for airline crews to fly the plane, a significant victory for Boeing that would benefit the company financially. In the development of the Max, Boeing had promised to offer Southwest a discount of $1 million per plane if regulators required simulator training.

In an email from August 2016, a marketing employee at the company cheered the news that regulators had approved a short computer-based training for pilots who have flown the 737 NG, the predecessor to the Max, instead of requiring simulator training.

“You can be away from an NG for 30 years and still be able to jump into a MAX? LOVE IT!!” the employee says, following up later with an email noting: “This is a big part of the operating cost structure in our marketing decks.”

Last year, Boeing disclosed internal messages from 2016, in which a top pilot working on the plane told a colleague that he was experiencing trouble controlling the Max in a flight simulator and believed that he had misled the FAA.

“I basically lied to the regulators (unknowingly),” the pilot, Mark Forkner, said to his colleague, Patrik Gustavsson.

Boeing did not inform the FAA about the messages when the company first discovered them, waiting until about two weeks before Mr. Muilenburg was set to testify in front of Congress to send them to lawmakers. The conversation, which took place before the Max was approved to fly, angered key FAA officials, who felt misled by the company, according to three people familiar with the matter.

Representative Peter DeFazio, a Democrat from Oregon who is leading the House investigation into the development of the 737 Max, called the newly released messages “incredibly damning.”

“They paint a deeply disturbing picture of the lengths Boeing was apparently willing to go to in order to evade scrutiny from regulators, flight crews and the flying public,” he added, “even as its own employees were sounding alarms internally.”

Besides an appalling disrespect for human lives, Boeing shoes how not to build relationships with regulators.

Depending on how regulated your industry is, your company will have more or less contact with its regulators. You should think about your relationships with regulators in four categories:

1) Relationships in ordinary periods where no proposed regulation is being considered and no examination is underway,

2) Relationships when a rule is proposed or likely to be proposed by your regulator;

3) Relationships when you are being examined by your regulator, and

4) Relationships when your regulator is investigating your company or individuals associated with your company.

It is critical for the long term success of your company and the success of your regulator that you interact with your regulator in a constructive way in each of these circumstances.

During Ordinary Periods

The most important time to build a relationship with your regulator is when you have no current matters with your regulator.

For everyone in this technology-fueled age, we all feel like they are in fact no quiet times because it feels like there’s always too much work to do and not enough people to do it. But during the times when you are not engaged with the regulator about a rulemaking, examination or an investigation is the best time to develop your relationship with your regulator.

Your regulator may have access to a tremendous amount of data about your industry and that may lead you to think that your regulator is on top of developments in your industry and even with your company. The reality is that your regulator is a branch of the government. As such, your regulator is almost undoubtedly dealing with technology that is way behind the technology that you take for granted every day.

So when things are quiet I urge you to approach your regulator and offer your assistance. One very simple way to provide that assistance is to meet with the regulator and let them know what you are seeing in your industry. What business developments are driving innovation and change in your industry? What holdover practices from earlier times do you feel have not caught up with current operations? What risks do you see in your industry in the future?

These are topics that you are thinking about anyway in the course of managing your business and implementing sufficient compliance efforts for your business to comply with applicable rules and regulations. If you can convey your knowledge of these issues to your regulator, you’ll make your regulator better informed and better able to craft policies to address issues in your industry.

During a Rulemaking

When your regulator turns to action, like a proposed rulemaking that will impact your industry, you have another opportunity to build an effective relationship with your regulator. If you are already engaged with your regulator and communicating regularly you will have a distinct advantage in engaging on a rulemaking. If you are not already engaged with your regulator at that point, you should get engaged.

Rule proposals from the SEC for example often asked for data about particular issues and they often would not get any data from the industry. I know that there is an argument that says that industry is better off not sharing information with an SEC or another regulator. The idea behind this argument is that sharing information and data may lead the regulator to do something it wasn’t otherwise considering.

Just like in industry, the vast majority of regulators are trying to do the right thing with the information they have. If you give them more information, you have a better chance of them coming out with a rule that will be well thought out and supported by the data.

During an Examination

If your company is subject to an examination by the FINMA, SEC, RAB, BaFin or another regulator, you have another opportunity to build your relationship with your regulator.

I realize there are a number of my readers who might not have quite that reaction to an exam! I understand that an exam can be a tremendous expenditure of resources by your company and can be a source of concern that examiners may find something that you may have overlooked. Nonetheless, an examination involves a sustained interaction with your regulator.

It gives you an opportunity for the regulator to understand who you are and what your company is trying to do. Don’t waste this chance. If the examination does show an issue or a problem, you are far better off if you have been cooperative during the examination and explained your compliance efforts. If you have been uncooperative and hostile and the examiners find something, I promise you they will take a less charitable view of any explanation that you give.

During an Investigation

If all of your best efforts do not work out and you come under investigation from a regulator, are you past the point of maintaining a relationship with your regulator? While I hope that you don’t end up under investigation, I also would argue that all is not lost.

If you find yourself under investigation, I recommend that you maintain a spirit of cooperation and continue to explain the facts that landed you in the investigation. I have seen investigations being dropped because the company involved was able to adequately explain its conduct.

Enforcement departments of regulators like to win their cases as well. If you have an explanation for facts that may seem to be a problem, enforcement teams will listen. They would rather find out sooner rather than later. Don’t let your relationship with the regulator lapse just because you are under investigation. Keep up your effort to engage and to provide information that your regulator needs. You will have a better chance of the investigation being closed out without being charged.

In a nutshell: Develop and maintain relationships with your regulators for the long term success of your company.

Read more…

Tuesday, January 07, 2020

Tell the Story of Your Project

Tell the Story of Your Project
Persuasion is essential for a business and the projects that originate from this business.

Customers must be convinced to buy your company’s products or services, employees and colleagues to go along with a new strategic plan or reorganization, investors to buy (or not to sell) your stock, and partners to sign the next deal.

But despite the critical importance of persuasion, most executives struggle to communicate, let alone inspire. Too often, they get lost in the cesspool of company speak: PowerPoint slides, dry memos, and hyperbolic messages from the corporate communications department.

Even the most carefully researched and considered efforts are routinely greeted with cynicism, lassitude, or outright dismissal.

I firmly believe that you can engage listeners on a whole new level if you toss your PowerPoint slides and learn to tell good stories instead.

Stories have been implanted in you thousands of times since your mother took you on her knee. You’ve read good books, seen movies, attended plays. What’s more, human beings naturally want to work through stories. Cognitive psychologists describe how the human mind, in its attempt to understand and remember, assembles the bits and pieces of experience into a story, beginning with a personal desire, a life objective, and then portraying the struggle against the forces that block that desire.

Stories are how we remember; we tend to forget lists and bullet points.

If a story is “good” or “bad” is relative to the opinion of the listener. But there are a few non-negotiable components that make for a great story, for both the listener and teller.

Good stories are …

entertaining. Good stories keep the listener engaged and interested in what’s coming next.

educational. Good stories spark curiosity and add to the listener’s knowledge bank.

universal. Good stories are relatable to all listeners and tap into emotions and
experiences that most people undergo.

organized. Good stories follow a succinct organization that helps convey the core message and helps listeners absorb it.

memorable. Whether through inspiration, scandal, or humor, good stories stick in the listener’s mind.

There's no such thing as a true story. As soon as you start telling a story, making it relevant and interesting to me, hooking it into my worldviews and generating emotions and memories, it ceases to be true, at least if we define true as the whole truth, every possible fact, non-localized and regardless of culture.

Since you're going to tell a story, you might as well get good at it, focus on it and tell it in a way that you're proud of.

Storytelling is a skill. It’s not something you’re born with, it’s not based on charisma or authority. It’s more simple than you think, but it takes practice.

So tell the story of your project.

If you aren’t then someone else will be. And their version is likely to be worse than yours.

In a nutshell: You can engage listeners on a whole new level if you toss your PowerPoint slides and learn to tell good stories instead.

Read more…

Friday, January 03, 2020

How to Deal With Stakeholders Resistance to Change

How to Deal With Stakeholders Resistance to Change
There is a simple truth about projects.

All projects result in change.

Some projects bring about small modifications to the status quo, and others introduce a large-scale transformation.

No matter the size or scale of the project, people resist change. Overcoming this resistance to change is a top challenge faced by organizations and project sponsors today.

The better we are at seeing what causes resistance, the easier it will be to build support for our ideas. In other words, if we understand resistance, we also understand the other side of that coin – support for change.

Rick Maurer identified in his book “Beyond The Wall Of Resistance” the three reasons for resistance.

1) I Don’t Get It
2) I Don’t Like It
3) I Don’t Like You

I Don’t Get It

This is about information: facts, figures, ideas. It is the world of thinking and rational action. It is the world of presentations, diagrams, and logical arguments.

Resistance may come from ...

> Lack of information
> Disagreement with data
> Lack of exposure to critical information
> Confusion over what it means

Many make the mistake of treating all resistance as if it is because of not understanding the change. Well-meaning leaders give people more information – hold more meetings, and make more PowerPoint presentations – when, in fact, something completely different is called for. For example...

I Don’t Like It

This is an emotional reaction to the change. Blood pressure rises, adrenaline flows, pulse increases. It is based on fear: People are afraid that this change will cause them to lose face, status, control – maybe even their jobs.

It is not soft stuff. You can’t say, “Just get over it,” and expect people to say, “Wow, thanks, I needed that.” It runs deep. When it kicks in, we can feel like our very survival is at stake.

When this kind of resistance is active, it makes communicating change very difficult. When adrenaline shoots through our system, we move into fight-or-flight mode (or we freeze like a deer in the headlights). And we stop listening. So no matter how terrific your presentation is, once people hear “downsizing” their minds (and bodies) go elsewhere. And this is uncontrollable. They are not choosing to ignore you, it’s just that they’ve got more important things on their minds – like their own survival.

Organizations usually don’t encourage people to respond emotionally, so employees limit their questions and comments to “I Don’t Get It” issues. They ask polite questions about budgets and timelines. So it may appear that they are with you, but they’re not. They are asking for more information while hoping that you’ll read between the lines and speak to their fears. And here is a really tricky part – they may not even be aware that they are operating on such a basic emotional level.

I Don’t Like You

So maybe they like you, but they don’t trust you – or don’t have confidence in your leadership. That’s a hard pill to swallow, I know. But lack of attention to this is a major reason why resistance flourishes and changes fail. And it is seldom talked about. Books on change talk about strategies and plans (all good stuff, to be sure) but most of this advice fail to recognize a major reason why change fails.

In this case, people are not resisting the idea – in fact, they may love the change you are presenting – they are resisting you. Maybe their history with you makes them wary. Perhaps they are afraid that this will be “a flavor of the month” like so many other changes, or that you won’t have the courage to make the hard decisions to see this through.

But maybe it's not you. People may resist those you represent. The statement, “Hi, I’m from headquarters, I’m here to help,” often leaves people skeptical. If you happen to be that person from headquarters, you’re going to have a hard time getting people to listen to you.

Whatever the reasons for this deeply entrenched resistance, you can’t afford to ignore it.

People may understand the idea you are suggesting (Reason 1), and they may even have a good feeling about the possibilities of this change (Reason 2) – but they won’t go along if they don’t trust you.

So How You Can Turn Resistance Into Support?

Here are a few ideas to get you started addressing the various levels of resistance. And remember, all three reasons could be in play simultaneously.

Make your case

> Make sure people know why a change is needed. Before you talk about how you want to do things, explain why something must be done.

> Present the change using language they understand. If your audience isn’t made up of financial specialists, then detailed charts showing a lot of sophistical analysis of the numbers will be lost on them.

> Find multiple ways to make your case. People take in information in different ways. Some like to hear things. Others like to see things. Some like pictures. Others text. Some learn best in conversation. The more variety in the communication channels, the greater the chance that people will get what you have to say.

Remove as much of the fear as you can – and increase the excitement about what’s positive about the change.

> Emphasize what’s in it for them. People need to believe that the change will serve them in some way. For example, work will be easier, relationships will improve, career opportunities will open up, or job security will increase.

> Get them engaged in the process. People tend to support things they have a hand in building.

> Be honest. If a change will hurt them – downsizing, for instance – then tell the truth. It’s the right thing to do, and it stops the rumor mill from inventing stories about what might happen. Also, honesty bolsters their trust in you.

Rebuild damaged relationships – and tend to neglected relationships

> Mea Culpa. Take responsibility for things that may have led to the current tense relations.

> Keep commitments. Demonstrate that you are trustworthy.

> Find ways to spend time together so they get to know you (and your team). This is especially helpful if the resistance comes from “who you represent” and not just from your personal history together.

> Allow yourself to be influenced by the people who resist you. This doesn’t mean that you give in to every demand, but that you can admit that you may have been wrong and that they have ideas worth considering.

In a nutshell: There are three reasons for resistance to change. I Don’t Get It, I Don’t Like It, and I Don’t Like You. Understand them and you can change resistance into support.

Read more…

Sunday, December 15, 2019

Case Study 9: The Payroll System That Cost Queensland Health AU$1.25 Billion

Case Study: The payroll system that cost Queensland Health AU$1.25 billion
The payroll system implementation disaster at Queensland Health in 2010 is said to be the most spectacular technology project failure in the Southern Hemisphere and arguably the second worst failure of public administration in Australia’s history. The handling of the fires this year being first.

Queensland Health is the public sector healthcare provider for the Australian state of Queensland, located in the country’s northeast. It provides dental, medical, and aged-care facilities in Queensland, which has the most geographically dispersed population of all Australian states.

Queensland Health needs to ensure that adequate healthcare services can be provided in the most remote parts of the state, which has a population of 5.07 million across an area of 1.85 million square kilometers. Every day, the organization provides hospital services to approximately 40,000 people and is responsible for approximately 85,000 employees across 300 sites.

What began as an AU$6.19 million contract between the State of Queensland and IBM Australia to replace Queensland Health’s aging payroll system eventually led to over 35,000 payroll mistakes and will ultimately cost taxpayers a whopping AU$1.25 billion, which translates to approximately US$850 million.

When the system went live, a large number of Queensland Health employees, including doctors and nurses, were either incorrectly paid or not paid at all. It led to the resignation of the minister of health, industrial strike action and loss of staff members to other employers.

To download all my Project Failure Case Studies in a single eBook just click on the image.

Timeline of Events

2002

At this point in time Queensland Health used two systems for their payroll: Lattice and the Environment for Scheduling Personnel (ESP) rostering engine. Lattice and ESP were rolled out progressively over six years from 1996 to 2002.

Payroll departments were part of their respective districts. Processing of pay was undertaken locally and there were close working relationships between line managers and local payroll staff.

Whilst processing of pay occurred locally, the actual running of the pay was undertaken centrally; essentially, a 'hub and spoke' model was used.

Lattice required a substantial amount of manual interventions to accommodate the complex award and incentive structures within Queensland Health.

2003

In 2003 the Queensland State government formally established a government shared services initiative (SSI) mandating that all state government departments, including Queensland Health, replace their existing legacy payroll systems with a standardized software solution that incorporates SAP HR and SAP Finance. The overarching objective of the SSI was to consolidate technology and resources through delivering a high-quality solution with standardized business processes.

The SSI was expected to deliver the following benefits: (1) increased opportunities through enabling workforce mobility; (2) increased visibility into the cost of services; (3) reduced data duplication through the consolidation of systems; (4) reduction in costs associated with licensing agreements; (5) reduction of personnel; (6) achieve economies of scale; (7) enable the government organizations to focus on their core competencies, thus increasing the standard of service; and (8) consistency of HR and finance information across all government agencies.

2005

In 2005, just three years after the progressive rollout was completed, Queensland Health received notification from the Lattice system vendor, Talent2, that their existing Lattice system was becoming obsolete and was no longer going to be
supported, with services and updates ceasing on June 30, 2008. As a result, Queensland Health needed to consider replacing the obsolete Lattice system much sooner than it would have liked.

SSI decided that the system for payroll would be SAP ECCS and Workbrain. Accordingly, it was decided that Queensland Health would replace the Lattice I ESP system with SAP ECC5 I Workbrain as part of the shared services initiative.

2007

As part of the SSI, the Queensland government established CorpTech within the Queensland Treasury to oversee the standardized implementation across all state government departments.

CorpTech was responsible for overseeing the consultant selection process (Request for Information, Request for Proposals, and Invitation to Offer) and managing the consultant organizations. CorpTech sent out a Request for Information (RFI) on July 2, 2007, and four consultant firms responded: Accenture, IBM, Logica, and SAP. Afterwards, CorpTech requested detailed proposals from the aforementioned consultant firms on July 25, 2007.

Prior to the RFI being issued, CorpTech had managed the implementation of SAP HR at the Department of Housing, and SAP Finance at the Department of Justice. These implementations proved to be quite costly as a substantial number of consultant firms and private consultants had been utilized. Due to the large expense associated with the multiple consultant firms, the consultant methodology for the SSI was changed to the prime contractor model on August 16, 2007.

Subsequently, on September 12, 2007, CorpTech released an Invitation to Offer, and IBM, Accenture, and Logica responded. Ultimately, on December 5, 2007, IBM officially signed an AU$98 million contract to be the prime contractor of the SSI.

2008

Around October 2008, IBM had not achieved any of the "contracted performance criteria." It had, however, had been paid AU$32 million of its AU$98 million contract.

The idea to build a payroll system across the entire Queensland public service was now officially scrapped, but the decision was made to push ahead with a payroll system for Queensland Health.

2009

To cater for Queensland Health's specific business needs, including the complex award structure, retrospectivity, and concurrent employment, a significant number of customizations were made to both Workbrain and SAP.

Payroll and user acceptance testing was performed in parallel over a series of stages starting July 2009. The first test of the payroll compared the pays of only 10 percent of employees from all employee groups when performed in the SAP HR and Workbrain rostering solution as opposed to the legacy Lattice system, which resulted in an AU$1.2 million discrepancy in the biweekly payroll.

2010

A second payroll test occurred in February 2010, which only resulted in an AU$30,000 discrepancy; however, casuals and overtime claims were not tested. Queensland Health accepted the inherent risks and opted to go-live without full testing of all the functionalities of the system.

IBM continued to operate under varying scope and the state government kept signing off on the change requests. The project documentation reveals that prior to the payroll system going live, the project underwent four revised go-live dates and four separate stages of change requests, often done at the last minute.

By the time the system finally went live in March of 2010, 20 months after the original start date, the bill had already ballooned to AU$101 million.

Given the significant issues identified following the initial go-live, it was decided to establish a payroll stabilization project specifically focused on stabilizing the new payroll system. The four key focus areas for this project were: standardization and improvement of district and division business processes; payroll processing; payroll system performance; and support and communications for staff, line managers, and other key stakeholders.

2012

The cost of going live with a premature system resulted in more than 35,000 payroll mistakes, and by this point it had cost the state in excess of AU$400 million just to operate the system. KPMG estimated that the cost of making the system function for the next five years would be another AU$836 million.

2013

IBM should never have been appointed as the prime contractor in Queensland’s failed health payroll project, according to the finding of the Commission of Inquiry that investigated the bungled project. The inquiry, which ran for nearly three months at a cost of AU$5 million, heard from some 50 witnesses, including former premier Anna Bligh, former health minister Paul Lucas, and senior IBM executive Bill Doak.

The report, by Commissioner Richard Chesterman, was handed down on July 31 in the Queensland Parliament by Premier Campbell Newman. The premier described the project as "arguably the worst failure of public administration in Australia’s history."

The report was particularly damning of the procurement process that led to the appointment of IBM, and decisions made by senior public servants and contractors involved with the project.

The report also found the state government could not recover any funds from IBM for the failure of the project, and that the decision to reach a negotiated settlement with IBM rather than commencing legal proceedings was made without any proper analysis.

2016

The Queensland government was ordered to pay significant costs to IBM Australia after failing in a bid to recoup losses from the health payroll debacle.

The Newman government launched legal action against IBM in 2013, arguing the company had misrepresented its capability to deliver a new payroll system on time and on budget.

But IBM challenged the lawsuit and pointed to a 2010 agreement that the company said released it from the damages claim.

A trial was held in the Brisbane Supreme Court in 2016 with Justice Glenn Martin ruling in favor of IBM.

What Went Wrong

System availability

During the payroll cut-over period to the new system, there were significant issues with the availability of the system to payroll staff which reduced the processing time available. This created an initial backlog of payroll forms and unprocessed adjustments for the period just prior to the go-live date that grew over subsequent pay periods.

It took approximately eight months to process the backlog of pay adjustments and forms to return to previous business as usual (BAU) levels.

Performance issues

The degree of retrospectivity accommodated by the Queensland Health payroll system, whereby staff could submit forms for work completed up to six years ago, was creating significant payroll system performance issues.

System issues

As of 2 May 2012, there were 570 logged system issues, 76 of which were identified as having the potential to impact on staff pay. System defect fixes and enhancements were required to occur during designated 'major release' schedules, of which there were three scheduled per annum. There were some delays in addressing specific defects and issues due to the prioritization of other 'fixes' including the pay date change, changes associated with enterprise bargaining changes, legislative compliance changes, etc. There was a need to gain endorsement for an agreed longer-term approach to implementing key system changes so that the release windows could be utilized more effectively.

Overpayments and entitlements

As of May 2012, Queensland Health had overpaid staff AU$112.3 million, of which AU$16.5 million had been repaid and AU$3.3 million was waived, leaving AU$9 million outstanding. Queensland Health had an obligation under the Financial Accountability Act 2009 to recover these amounts; however, there was a moratorium in place preventing Queensland Health implementing Queensland Health-instigated overpayment recovery.

Queensland Health was required to fund fringe benefit tax (FBT) liabilities associated with overpayments, and this represented a significant additional cost burden to Queensland Health. While the previously agreed overpayment moratorium was in place, the amount increased by approximately AU$1.7 million every two weeks.

In addition to overpayments, the issue of employee leave and balances requires further investigation and analysis. PwC has conducted a number of reviews into leave balances and they have identified that up to 20,000 leave transactions are still outstanding since the move from the previous Lattice Payroll system across to SAP.

New business processes

Part of the implementation of the new system was further standardization and centralization of payroll processing, including the introduction of central processing teams and a centralized pay run. As such, the key linkage between the districts and their local payroll providers was severed — payroll staff were required to process unfamiliar rosters for staff members across the state.

In addition, fundamental differences in how districts and line managers were providing pay information and rosters were identified, with each district continuing to provide the information in the format they had developed locally (this was a continuation of what had occurred with the Lattice system; however, now the payroll officers responsible for interpreting the pay information from the districts did not have the local knowledge or relationships that had previously assisted with the interpretation process).

How Queensland Health Could Have Done Things Differently

The key findings from the auditor general's report were as follows:

Project governance

Project governance prior to go-live, including managing relationships with key
Stakeholders, was not effective in ensuring roles and responsibilities were clearly
articulated and in ensuring there was clear accountability for efficient and effective
implementation of the system.

The governance structure for the system implementation, as it related to CorpTech, the prime contractor, and Queensland Health, was not clear, causing confusion over the roles and responsibilities of the various parties.

Management of the project became even muddier after it commenced. Numerous agencies and boards divided oversight and authority, causing significant confusion which, in the end, rendered them all "ineffective in establishing a shared understanding of stakeholder expectations in relation to the quality of project deliverables":

> The Solution Design Authority (SDA) (which, during this period, transformed into the program delivery office (PDO) of the state's CorpTech IT division);

> The Queensland Health Enterprise Solution Transition (Queensland HealthEST), the state's information technology management program and acting project manager (which inexplicably retitled the "Interim Solution" as the "Queensland Health Implementation of Continuity" (Queensland HealthIC) — no confusion there!);

> The executive steering committee (ESC), which included personnel from CorpTech as well as the shared services agency (SSA) and the Department of Education, Training and the Arts (DETA), and

> The "Release Steering Committee," which answered to both the ESC and CorpTech and counseled its chair regarding the development of the Interim Solution.

While there appeared to be lots of oversight of the program, Australia's auditor-general reported that "it was not clear which Accountable Officer had responsibility for the overall governance and successful completion of the whole project."

Scope and requirements

There was inadequate documentation of business requirements at the commencement of the project. The absence of a periodic review of the business needs contributed to subsequent difficulties with system testing and the implementation of a system which did not meet the needs of Queensland Health's operating environment.

The complexity of the project was immense and involved the management of over 24,000 differing combinations of wage payments and withholdings for over 80,000 workers and subcontractors spread over 13 contractors and multiple industrial agreements. Because of the fear that the existing system was in imminent danger of immediate failure, IBM agreed to take just seven months to develop and implement an "Interim Solution" to tide the agency over until a full replacement became operational.

Within that seven months, only two weeks were set aside at the beginning of the project to scope out the "critical business requirements" needed by the agency and the digital solutions that would respond to those demands. Not surprisingly, the lack of identifiable objectives was a significant cause of the project's abject bungling.

Testing

System and process testing prior to go-live had not identified a number of significant implementation risks, and therefore, the extent of the potential impact on the effective operation of the payroll system had not been fully understood and quantified.

Neither system usability testing nor the validation of new processes in the business environment were performed. As a result, Queensland Health had not determined whether systems, processes, and infrastructure were in place for the effective operation of the new system.

Business processes

A number of critical business readiness activities and practices were not fully developed prior to the implementation of the new system. Several changes to payroll administration practices including the reallocation of processing duties within payroll were introduced at the same time as the release of the SAP and Workbrain systems.

Standardization

The implemented Workbrain (1,029 customizations) and SAP (1,507 customizations) systems were heavily customized and are not operating optimally in the Queensland Health environment. Customizations are costly to manage, increase risk and impact on system performance and should be minimized where practical.

Supplier

Despite its affiliation with a global digital leader, this was IBM Australia's first attempt at delivering a project of this size. That fact was not helpful considering that Queensland Health was probably the most complex of the Australian agencies needing the overhaul and was perhaps not the best candidate for IBM's first go.

Layer on top of those contributors the reality that the "Solution Design Authority," the state agency with the responsibility to define and maintain the scope, architecture, and design of the new system, was "passive, perhaps lazy" about communicating its requirements for a payroll system. Before project development began, the Solution Design Authority accepted IBM's "incomplete, ... unsatisfactory scope [of work] documents" as-is and with no questions. The project was off to a horrible start.

Closing Thoughts

As a consequence of Queensland Health’s disastrous payroll implementation project, the Queensland Government changed their Information Technology (IT) strategy and governance procedures.

Furthermore, the Queensland Government IT audit specified a series of constraints
that must be placed on high-risk projects, which include the following:

1) project management personnel must be of the highest quality;

2) rigorous application of the Queensland Government project and program methodology;

3) the project must be approved by numerous chains of command, and

4) a reporting regime is to be established to increase the visibility of the costs associated with IT projects.

Being a state government department in the healthcare industry, Queensland Health is by definition already riddled with substantial layers of bureaucracy, adding to the complexity and increasing the difficulties associated with decision making, visibility, and accountability.

And these reforms, whilst necessary, add additional layers to the governance process, increasing both the number of bureaucratic decisions and the degree of red tape.

Consequently, both client and consultant organizations have been more cautious throughout recent technology projects in the public sector due to the increase in compliance which leads to project delays, and increased project costs.

Thus, aside from the financial and societal implications associated with the Queensland Health payroll implementation failure, the failure has also had national, industry-wide ramifications.

But do we really learn from these massive failures? Looking at the long list of big technology projects gone wrong after this one, I doubt it.

Especially in the area of public services.

Other Project Failure Case Studies

> For an overview of all case studies I have written please click here.

> To download all my Project Failure Case Studies in a single eBook just click on the image.

References

> Queensland Health Payroll System Commission of Inquiry Report (2013)

> KPMG Review of the Queensland Health Payroll System (2012)

> Rebekah Eden and Darshana Sedera, The Largest Admitted IT Project Failure in the Southern Hemisphere: A Teaching Case (2014)

> Raul Manongdo, Queensland Health Payroll system – A case study on business process management and application enterprise integration (2014)

Read more…

Wednesday, December 04, 2019

Interview With Teresa Mandl (CEO, T.V.T swissconsult gmbh) on Project Sponsorship

Interview with Teresa Mandl (CEO, T.V.T swissconsult gmbh) on Project Sponsorship
For the last decade I have dedicated myself to helping C-level executives recovering troubled projects. If there's one thing I've learned in the process, it's that executive project support is priceless.

Engaged executive sponsors help organizations to bridge the communication gap between influencers and implementers, thereby increasing collaboration and support, boosting project success rates, and reducing collective risk.

Teresa Mandl is an example of such an engaged project sponsor. She is an expert for bringing technology-enabled innovation to market with 15+ years of experience in serving industrial and consumer-goods companies from SMEs to big corporates.

She selects and capture the right tech opportunities and turns them into successful products or services with the corresponding business models by aligning strategic perspectives, technological opportunities and customer needs in multi-stakeholder settings.

Tell us a little bit about yourself.

I am the founder of T.V.T swissconsult gmbh, a firm for innovation management, product and service design across industry boundaries. I am the managing director of the company.

My roots, education-wise, are in business and economics, while I grew up in a family business that comes from classic industrial design and engineering. Currently, my company grows together with my dad’s business, which is a very good experience. In addition, I teach innovations management in advanced studies at the University of Applied Sciences in Winterthur and Lucerne.

Here, I have gained a lot of insight from various industries and perspectives on what’s moving companies right now. I am involved in start-up juries such as the Female Innovation Forum as I care a lot about fostering entrepreneurship and at the same time sharing my experience as an entrepreneur with others.

Can you tell us something about your experience as a project sponsor?

I have been in the role of project sponsorship for more than a decade. Moreover, I have experienced many sponsorships on my client-side from an outside perspective. The size of the projects I’ve been involved in varies a lot, from two to approximately ten people.

These experiences include not just one firm, but a variety of involved companies and disciplines such as research, materials development, product design, and sourcing. The duration of the projects varies from three months to two years.

What do you think is the single most effective thing a project sponsor can do to positively influence a project?

To me, the joint definition of goals and project success factors is key. As such, it may be that the project sponsor sets the project up with goals in mind. However, I find it critical to reframe these goals from different perspectives and in the ‘language’ of the involved parties, so to speak.

Starting and conducting a project as a joint venture and not in a hierarchical way can be achieved that way. Staying involved in the course of the project, together with an open dialogue-oriented culture, is also critical.

What do you think is the single most effective thing a project sponsor can do to negatively influence a project?

Having an “I’ve seen it all, I’ve done it all, I know everything” attitude is a killer, especially in innovation projects. Also, the notion that failure is not acceptable. Innovation projects require a lot of resilience from project members, and this is something that can be nurtured by giving project members the feeling that they control the outcome.

What was your biggest success as a project sponsor, and why?

I would say my biggest successes are always projects with many critics that, in the end, turn out a success—the projects that convince the critics. One of these was starting my own company right after university in spite of the chance to enter the family business right away, or to go work for one of the Big 5 consulting firms. I had to fund the business myself, acquire clients from scratch, and grow it in a way that it is respected by, first of all, my father, and second, his staff. Now we are in an equal position where we respect each other and where one plus one is greater than two.

What was your biggest challenge as a project sponsor?

My biggest challenge so far was to deal with some offshore technology sub-suppliers in a very time-critical and prestigious project. They kept communicating that the project was going really well, but two days before the result was due for presentation at senior level, the suppliers would not deliver at all. The challenge here was not living up to expectations—both our own and those of others. First, it was hard to communicate to the client the sudden turn of the project. Second, we had to determine how to go on with the sub-supplier; they had taken advantage of our trust, but we also relied on them for other matters. In the end we were able to move critical activities to another company, so although the project took a bit longer, the outcome was positive.

The experience showed me that not everything should be done on a fully remote basis, how important regular face-to-face contact is, and that there is a need for sub-suppliers to regularly demonstrate progress in a way that is comprehensible for the sponsor. My personal learning was to add certain items to consider when judging whether to use a sub-supplier or not, and to look a bit closer and beyond merely technical criteria when selecting who to work with. It is better to do an extra loop in evaluating the team fit than be sorry afterwards. Plus, oftentimes the willingness of a team member to go the extra mile is more important than technical skills alone.

What was your biggest failure as a project sponsor, and why?

My biggest failure was a project where we thought we could convince a client to use top-edge technology when our client was not ready to do so, neither from a cultural perspective nor from a skills perspective. A couple of years later, the industry widely adopted the technology that we recommended early on.

However, in order to be innovative, all parties must be ready to risk something and try things out, which our client at that time wasn’t. We ended up developing a much too advanced product that our client could not justify within the company, and therefore the project was killed. Since then, we have tried to assess the risk aversion and cultural aspects much better before starting a project with clients.

How do you determine a project is really necessary and valuable?

To determine a project’s necessity, we match projects against a hierarchy of quantitative goals and qualitative aims that we have with the project. We determine whether a project stays valuable by clear project controlling.

It is more and more essential that such project controlling is done for various stakeholders. As innovation projects are less singular and more and more a matter of ecosystems or systems, different perspectives must be clarified; these could be a firm’s profit or societal impact perspective, an eco or sustainability perspective, or many others.

Here, I feel it is important to acknowledge that in the course of a project, the priorities of the goals may shift, so there is a continuous need for review in terms of necessity and value.

How do you recognize your project is in trouble?

Our innovation project controlling serves as a quantitative dashboard for projects and lets us determine whether projects are off track. Once we determine that a certain number of priority targets have not been met for a certain amount of time (this varies according to the estimated duration of a project), we see the call to action.

But an evaluation of the project never goes without applying a good amount of gut feeling at the same time, especially for qualitative factors. In order to allow that gut feeling to be communicated, we do regular project sounding meetings in a very open-minded atmosphere so the involved parties feel free to voice any concerns they might have. From time to time expert judgement, customer feedback, and stakeholder input is employed.

What advice would you give to a first-time project sponsor?

My advice would be, of course, to talk to people who have been sponsors before. Ask about the pitfalls and success factors as well.

Next, I am a visual person. I like to sketch stakeholders, timelines, critical incidents that could happen, and limitations. Sometimes such a visualization discloses a lot, and it also serves as a very good means for discussing a project with others. Also, to be convinced about a project, it is crucial to have intrinsic motivation on top of extrinsic motivators. It is so much easier to master a project with passion than out of pure obligation.

Finally, once a project is done, go back to what went right or wrong and why … and take these findings into the next project to do even better.

What are you looking for when selecting a project manager for your project?

I am most of all looking for a person who shares similar values and vision, with a “can-do” attitude. At the same time, a project manager must be a logical person who can overview many different things at once and put them into an order that all project members understand.

That being said, for innovation projects, a project manager needs to understand that the nature of innovation means that many things don’t work out according to plan. So for innovation projects, project managers must be trained to think in hypotheses and experiments. Once a hypothesis is tested and its viability is determined, the project manager needs to be able to define the levers for progress.

Last but not least, a project manager in innovations needs to bring in a certain level of empathy capability. Engineers function very differently from user experience (UX) designers or product managers. An innovation project manager must be aware of that and handle any feelings for the good of the project.

What are you looking for when selecting a steering committee member for your project?

Among other traits, steering committee members need to be people who are not afraid to ask questions and who can challenge approaches in order to prevent group-think in projects.

What is/are your most important lesson(s) learned as a project sponsor?

Set ambitious goals but manage expectations wisely.

This is the third in a series of interviews with executive project sponsors. The interviews will be part of my upcoming book “The Art of Project Sponsorship.”

The first interview was with Urs Monstein (COO, VP Bank).

The second interview was with Carole Ackermann (CEO, Diamond Scull).

To read more about the book just click on the image.

The Art of Project Sponsorship

Read more…

Sunday, December 01, 2019

What Is the Real Value of Your Technology Project?

What Is the Real Value of Your Technology Project?In order to assess project opportunities and make difficult trade-off and priority decisions about where to focus your limited resources, you need to be able to compare projects on a like-for-like basis.

And since there’s just no getting around the fundamental challenge that all organizations should be sustaining themselves, at some point the projects we invest in should create value.

Therefore, you should make project valuation — estimating the value of your projects — a part of your decision-making process.

So what is the value of a project? It’s simple:

Value = Benefits − Costs

In previous articles I discussed estimating project costs (see “What Are the Real Costs of Your Technology Project?”) and project benefits (see “What Are the Real Benefits of Your Technology Project?”).

If you have both the costs and benefits of your project in dollars, the computation of value is very straightforward.

But what this definition is completely ignoring is time. And time has a major impact on the value of a project.

Let’s take two projects, A and B, as an example. All figures are expressed in thousands of U.S. dollars.

Project A
Year
1
2
3
4
5
6
7
Total
Costs
800
100
100
100
100
100
100
1400
Benefits
400
500
400
300
300
200
200
2300


Project B
Year
1
2
3
4
5
6
7
Total
Costs
2000
1000
1000
1000
500
500
500
6500
Benefits
0
0
3000
3000
2000
1500
1000
10500

Now we will have a look at how time influences the value of these projects.

Measurement Period 

Let’s take one of the most used project valuation methods as an example: return on investment (ROI).

Return on investment (ROI) is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment’s cost.

To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio. In our case, the investment is our project. The return on investment formula is as follows:

ROI = (Current Value of Investment − Cost of Investment) / Cost of Investment

When we apply this formula to our project A we will get the following result:

Project A
Year
1
2
3
4
5
6
7
Accrued Costs
800
900
1000
1100
1200
1300
1400
Accrued Benefits
400
900
1300
1600
1900
2100
2300
Value
-400
0
300
500
700
800
900
ROI
-50.00%
0.00%
30.00%
45.45%
58.33%
61.54%
64.29%

And for project B we get:

Project B
Year
1
2
3
4
5
6
7
Accrued Costs
2000
3000
4000
5000
5500
6000
6500
Accrued Benefits
0
0
3000
6000
8000
9500
10500
Value
-2000
-3000
-1000
1000
2500
3500
4000
ROI
-100.00%
-100.00%
-25.00%
20.00%
45.45%
58.33%
61.54%

You see that, depending on what year you use for measuring your ROI, the results are totally different.

Time to Value

The time to value (TTV) measures the length of time necessary to finish a project and start the realization of the benefits of the project. One project valuation method incorporating this concept is the payback period (PB).

The payback period refers to the amount of time it takes to recover the cost of an investment. Simply put, the payback period is the length of time until an investment reaches a break-even point. The desirability of an investment is directly related to its payback period. Shorter paybacks mean more attractive investments.

When we look again at Project A and Project B you see a massive difference in the payback period.

Project A has a payback period of 24 months, and Project B has a payback period of 42 months.

Time Value of Money

There is one problem with the payback period: It ignores the time value of money (TVM). 

TVM is the concept that money available at the present time is worth more than the identical sum in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also sometimes referred to as present discounted value. 

That is why some project valuation methods include the TVM aspect. For example, internal rate of return (IRR) and net present value (NPV).

Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. NPV is used in capital budgeting and investment planning to analyze the profitability of a projected investment or project.

The following formula is used to calculate NPV:

What Is the Real Value of Your Technology Project?

As you can see, the higher your rate of return “r” is, the lower the current value of your project. Typically the value for “r” is determined by management.

The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. IRR calculations rely on the same formula as NPV does.

To calculate IRR using the formula, one would set NPV equal to zero and solve for the discount rate (r), which is the IRR. Because of the nature of the formula, however, IRR cannot be calculated analytically and must instead be calculated either through trial and error or using software programmed to calculate IRR.

Generally speaking, the higher a project's internal rate of return, the more desirable it is to undertake. IRR is uniform for investments of varying types and, as such, it can be used to rank multiple prospective projects on a relatively even basis. 

Assuming the costs of investment are equal among the various projects, the project with the highest IRR would probably be considered the best and be undertaken first.

Cost of Delay

Cost of delay (CoD) is a key metric that represents the economic impact of a delay in project delivery. It is a way of communicating the impact of time on the outcomes we hope to achieve. More formally, it is the partial derivative of the total expected value with respect to time.

CoD combines urgency and value — two things that humans are not very good at distinguishing between. To make good decisions, we need to understand not just how valuable something is, but also how urgent it is.

I discussed CoD in detail in the article “What Is the Real Cost of Delay of Your Project?”. Depending on your urgency profile, your project end date can have a significant impact on the value of the project.

So what is the real value of your project? 

As we have seen in this article, the value of a project is determined by its benefits, costs, duration, and urgency. Putting it all together leads to the following diagram.
What Is the Real Value of Your Technology Project?
An ideal project valuation method is one where all metrics will indicate the same decision.

Unfortunately, the approaches mentioned above will often produce contradictory results.

Depending on management's preferences, your economic situation, and selection criteria, more emphasis should be put on one metric over another.

As explained above, there are common advantages and disadvantages associated with these widely used project valuation methods.

Nonetheless, you should use one or more of them in your selection process.

In a nutshell: Determining the dollar value of your projects is essential for selecting the right one. Value = Benefits − Costs, and is dependent on duration and urgency.

Read more…

Wednesday, November 13, 2019

What Is the Real Cost of Delay of Your Project?

What Is the Real Cost of Delay of Your Project?
One challenge that every organization faces is deciding which project should be prioritized. Would it be in a company’s best interest to embark on a $1 million project that would take three months to finish or a two-year project that would cost $30 million?

And if you want to do both, which one should be done first? Or is parallel the best option? Does it makes sense to speed up or slow down an existing project?

All these questions center around the economic impact of the project's delivery time on it's business value.

Starting what date can we expect value to be delivered? And what happens when we don't deliver on that date?

Cost of delay (CoD) is a key metric that represents the economic impact of a delay in project delivery. It is a way of communicating the impact of time on the outcomes we hope to achieve. More formally, it is the partial derivative of the total expected value with respect to time.

Although the word "delay" implies this only applies to ongoing projects, exactly the same metric can be used for projects that have not started yet.

CoD combines urgency and value — two things that humans are not very good at distinguishing between. To make good decisions, we need to understand not just how valuable something is, but also how urgent it is.

Unfortunately, many organizations don’t use CoD in their decision-making process — mostly because they do not know why it's important and how to do it. This can be a very expensive missed opportunity as delays may cost millions depending on the scale your organization operates on.

In my opinion, every organization needs to understand what CoD is, how to calculate it, and how to optimize your project portfolio to reduce CoD.

Estimating cost of delay

As stated before, CoD is the economic impact of a delay in project delivery. Before we start with estimating this economic impact, here are some examples of possible CoD:

Product development – the amount of money you will lose if the launch of your new product will be two months later.

Software development – the amount of money you will lose if the release of an essential feature causes a big client to move to a competitor.

Solution implementation – the amount of money you will lose if you fail to replace the existing ERP system by the end of this year.

IT operations – the fines you have to pay if your systems do not comply with new regulations on time (GDPR, FATCA, etc.).

To estimate these potential costs of delay for your project, start with estimating the benefits that you will receive per week after you deliver anything to the market or to your organization.

These benefits typically take the form of:

1) Increased Revenue
2) Protected Revenue
3) Reduced Costs
4) Avoided Costs
5) Positive Impacts

See my article “What Are the Real Benefits of Your Technology Project?” for details on estimating your project's benefits.

For example, if you are selling a software-as-a-service (SaaS) product and you plan to deliver a new add-on feature that you anticipate will bring you $20,000 per week, every week that you postpone the release will cost your company this sum in missed revenue.

After you've estimated the benefits per week you can estimate the costs of the project per week. After all, when you are not starting a project the costs are zero, but when you do start the project you will have costs.

See my article “What Are the Real Costs of Your Technology Project?” for details on estimating your project's costs.

In order to estimate the real cost of delay per week you have to subtract these costs from the benefits. Not doing this is unfortunately a mistake many organizations make when using CoD.

Always remember that CoD is the partial derivative of the total expected value with respect to time.

Value = Benefits - Costs

When your project has a duration longer than six months you can estimate the benefits and costs per month instead of per week.

Types of cost of delay

Before you start estimating the CoD of your project it's important to understand that there are different types of CoD. Remember CoD combines value and urgency. Where value is depending on your project and your business, urgency takes usually one of four forms. These can be described with so called urgency profiles. Each of these profiles will lead to a different type of CoD.

In order to understand the urgency of projects, we need to understand the life cycle of benefits, and the effect of being late. The effect of delay can be different depending on what the type of benefits are, and whether there is any influence from the wider market.

The two main variables to consider are a) the length of the lifecycle of the benefits (how quickly the benefits ramp up and down) and b) whether the peak is affected by delay or not.

Profile 1: Short life-cycle; peak affected by delay

In some cases the life cycle of benefits is relatively short. Benefits ramp up to a peak and quickly decline again. Sometimes this is because the value-add quickly becomes standard for customers.

This is for example common for mobile phones. What is hip and differentiating today will be bargain-basement stuff in months rather than years. In other examples, the market is always creating new alternatives, moving on quickly to the new “new thing.”

The fashion industry is also a good example of this, which is why Zara competes by having very short lead-time from spotting the new look on the catwalk, to selling it on the hangers in the store.

With these types of benefits, if you are late, the peak benefits are affected, as shown below.
What Is the Real Cost of Delay of Your Project?
Profile 2: Long life-cycle; peak affected by delay

Another urgency profile is where there is a first-mover advantage, making it difficult for latecomers to recover position. This can be due to barriers to entry or the advantage that scale can bring.

A good example of this is cloud computing services. Offering something similar to Google Cloud Platform, Amazon Web Services, or Microsoft Azure can only be done with huge investments, and even then your chances are slim. This urgency profile is typical for services for which the market consolidates down to two or three major players. These products benefit from some form of preferential attachment mechanism or “network effect.”
What Is the Real Cost of Delay of Your Project?
Profile 3: Long life-cycle; peak unaffected by delay

A third urgency profile is where the lifecycle benefits are long-lived. Benefits ramp up to a peak and are sustained over a long period. In most established organizations this is the most common urgency profile you will find.

A typical example is where we are automating a process or improving efficiency, reducing time or cost. The ramp-up and peak of benefits is effectively the same whether the solution is late or not. This is also the easiest urgency profile for which to calculate the cost of delay, as it approximates nicely with a simple parallelogram.
What Is the Real Cost of Delay of Your Project?
Profile 4: Impact of an external deadline

Where requirements have a specific deadline the urgency profile is slightly different. The benefits profile itself can look like any of the above three, but the benefits only ramp up around a certain date.

As a result, the cost of delay is zero until the point where you need to start development — to avoid incurring any delay cost. To calculate the point at which the CoD kicks in, we need to consider the likely lead time, ensuring that the solution is delivered just-in-time, rather than too early or too late.

Let’s take for example a new regulation that will be effective from the 1st of January 2021. As of that date, front-office staff will need to prepare extra documentation in order to meet this regulation. The requirement is to automate the new documentation process so that the front-office employees can produce the documentation automatically.

The requirement will avoid the additional manual processing resource, which is estimated to cost about 10 full-time equivalents (FTEs) at $52K per FTE. The benefit type is categorized as “Avoided Cost.”

10 FTEs x $52K = $520,000 per year = $10,000 per week

Let’s say it is the 1st of March 2020 right now, which means we have 10 months to do something about this requirement. It’s going to take about 20 weeks to deliver this new feature. If we start developing the solution now it will be delivered in August 2020, but we don’t need it until December 31.

We deal with this by calculating when we need to start developing the solution by subtracting the duration from the external deadline. In this case we need to start development by the 1st of August at the latest (20 weeks before the external deadline of January 1st).

Before the 1st of August: cost of delay is $0 per week.

After the 1st of August: cost of delay is $10,000 per week.

In a nutshell: It’s vital for companies to understand what cost of delay (CoD) is and how to calculate it. Knowing the impact CoD will have on a business will give management greater insight on the projects in the pipeline and help them determine which ones should be prioritized.

Read more…

Tuesday, November 12, 2019

Interview With Carole Ackermann (CEO, Diamond Scull) on Project Sponsorship

Interview With Carole Ackermann (CEO, Diamond Scull) on Project Sponsorship
For the last decade I have dedicated myself to helping C-level executives recovering troubled projects. If there's one thing I've learned in the process, it's that executive project support is priceless.

Engaged executive sponsors help organizations to bridge the communication gap between influencers and implementers, thereby increasing collaboration and support, boosting project success rates, and reducing collective risk.

Carole Ackermann is an example of such an engaged project sponsor. I met Carole for the first time at an event held by Business Angels Switzerland; at the time, Carole was the club's president. She is heavily involved in the startup scene of Switzerland, is an experienced corporate board member, and CEO and co-owner of Diamond Scull.

«Diamond Scull» is the leading rowing event of the «Henley Royal Regatta» on the river Thames. It’s where the best scullers meet to race. ― the spirit of going for the best especially under harsh conditions is what guides Carole.
.
I asked Carole for her insights on project sponsorship because of this highly interesting mix of experiences.

Tell us a little bit about yourself.

Passion for innovation — that's what drives me. I hold a PhD in business administration and have more than 20 years of leadership experience in SMEs and large organizations. I invest in startup companies, and I support various companies such as Allianz, BKW, BVZ Holding and Plaston as a non-executive board member.

Participating in a management buy-out and building up businesses led me to my current engagements as a member of the board of be-advanced, as a jury/investment committee member of different startup initiatives, and as a senior lecturer at the University of St. Gallen and other universities.

Can you tell us something about your experience as a project sponsor?

Through all of my career I have been sponsoring different projects. I started as a consultant with Arthur Anderson, where I launched the EMEA Branding initiative together with colleagues from the UK. The core team consisted of eight people involving all regional heads.

During my time at Saurer and Ionbond I often brought up special topics worth digging into; many times, this led to projects with several members. Depending on the project, the budget started from several thousand dollars to millions of dollars, and the duration was from several weeks up to two years.

Today I am also engaged in projects with the aim to increase the number of female entrepreneurs. I support talented women in their careers and partly secure the financing of their startups.

What do you think is the single most effective thing a project sponsor can do to positively influence a project?

There are a number of highly effective things a sponsor can do.

> Be clear about what is to be achieve and what success means
> Involve the right people
> Show passion for the project
> Trust people and give them decision power

But if I had to pick only one, it would be to make sure that the right people are in charge and strengthen their confidence in themselves.

What do you think is the single most effective thing a project sponsor can do to negatively influence a project?

Here I find it also hard to limit myself to one.

> Distributing information selectively
> No skin in the game, i.e., not taking responsibility
> Withdrawing important resources mid-project
> No milestones, organization, and success criteria

But the one thing that guarantees a negative influence on the whole project and each of its members is to sponsor a project without believing in it. People will notice and feel this.

When you don’t care and don't believe in it, why should they?

What was your biggest success as a project sponsor, and why?

Leading without power and budget. During a vacation in China i realized how big this market is and saw new business opportunities for the company I worked for. When I pitched the idea to my boss he said, “Go for it, but you will have a very limited budget." So, I commuted intensively to China, and using just a very small budget of the marketing division, I evolved the idea to a project that resulted in a substantial business with three production sites.

I was by myself far away from home, started without a budget, had very limited China experience, and finally created a strong result. This was a very satisfying and empowering experience.

What was your biggest challenge as a project sponsor?

The post-merger integration of marketing departments from six previously independent business units.

As Head of Corporate Marketing I was responsible for aligning all the marketing people of these business units. But none of them asked for this integration or for alignment. They all wanted to stay independent, and the last thing on their agenda was an integrated marketing program.

What was your biggest failure as a project sponsor, and why?

As a longtime investor and sponsor of a startup in ophthalmology I recognized too late that the first technology was not attractive enough for the market, and the second technology could principally not work.

I took decisions without fully understanding the technology and depended on blind trust in our “specialists” and “academic advisors.” Since that experience I recognized how important it is for a sponsor to have a judgement about the key matters of a project or startup.

How do you determine a project is really necessary and valuable?

As a project sponsor you need to see a purpose in the project; it must have a reasonable chance to be doable; and, if successful, it must have an impact.

This can be something that increases the value of a company or a person or does something good for the society. Today organizations are expected to create more than profits. Moreover, they are expected to focus on creating positive values for clients, employees, and society. Activities that create societal value are more likely to remain profitable in the long run.

The Integrated Profit & Loss (IP&L) approach provides all you need to report and steer your total value creation objectively and transparently. IP&L enables a better understanding of value creation per capital and stakeholder. In the IP&L, value is distributed across different stakeholders. Examples of stakeholders are investors, clients, employees, suppliers, governments, local communities, and society as a whole.

As a board member I address the importance of Corporate Social Responsibility for a sustainable business and I hope more and more organizations start seriously addressing challenges such as decarbonizing the business to name one.

How do you recognize your project is in trouble?

If people involved in the project lose faith and fun, you know you are in trouble. And you will only notice this if you spend time with these people and start listening in order to understand. This way, you will notice (potential) issues before they appear on your status dashboards.

What advice would you give to a first-time project sponsor?

There are two types of project sponsorship: casino sponsoring and project sponsoring. The second is more promising. You should only sponsor a project if you are experienced with projects and if you understand its content. Otherwise it’s just gambling.

There are very few projects you can do alone. One of the most basic success factors is to be able to work in teams or even better to love it. If you do not want to do everything by yourself, you have to win their heads, their hearts, and their hands — also known as the 3 Hs.

I am convinced that the more you know about how to work with people, how to involve people, how to lead people, how to listen to people, and how to support people, the more successful you become as a project sponsor. If you are not born with these qualities, you can cultivate them. Learn how to work with people, gain experience, and reflect on what was good and what could be done better.

What are you looking for when selecting a project manager for your project?

The fundamental task of a project manager is to deliver a project on time and at cost. So he definitely needs a good understanding of project management and must understand or at least have a judgment on the substance of the project.

But this is not enough. Project managers should also have experience and interest in the project and enough emotional intelligence to lead people. Finally, they should be passionate about the project.

What are you looking for when selecting a steering committee member for your project?

Very simple. I'm looking for E, N and K — experience, network and knowledge in a specific field. The same holds for strategic advisors.

What is/are your most important lesson(s) learned as a project sponsor?

Everything is about people. It’s about passion, persistence, knowledge and teamwork.

This is the second in a series of interviews with executive project sponsors. The interviews will be part of my upcoming book “The Art of Project Sponsorship.”

The first interview was with Urs Monstein (COO, VP Bank).

To read more about the book just click on the image.

The Art of Project Sponsorship

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