Drive a stake through this cliché

Kill off "Stakeholders". Not my esteemed business partners, suppliers, customers, technology, providers, shareholders, backers, funders, board members: I love you. Really.

It is just the word. "Stakeholders". Worse still the phrase: "Stakeholder Management". It is very convenient shorthand - and I have been guilty using it in CVs and general project communications. So what's wrong?

It's lazy. The shorthand conveniently lumps everyone involved in a project or enterprise into a single bucket. But they are all different. And they need to be treated differently. What is their stake? They are all in it for their own benefit, and they have to be approached and communicated based on their interest.

It's patronizing. You don't "manage" stakeholders. They cannot be herded like sheep or bossed around. You can influence their expectations and get them to deliver their commitments, but you don't manage stakeholders.

It's dangerous. Having "Stakeholder Management" as a simple heading encourages the mentality that this is a single task, which can be done once, or in a single communication, or in a regular meeting. Its continuous. It is different for each counterparty involved. It is multi-media. Its two-way.

Communicating change requires a different approach for each individual.

Communicating to people in an office about an upcoming move can't be done in a single communication. Some will want to find out about the carpet colour or their chair, and will complain like hell about the new office if not involved. Others will want a detailed document about the move, being told each step in the move. Others will just want to be shown the boxes to pack, and the labels to stick on their belongings. Some will only be interested what pubs and cafes there are near the new office, or the route between the two. You have to communicate for every style and every possible concern.

I first came across "stakeholders" in employee communications from a bank I worked for. They communicated the need for change for the benefit of stakeholders: shareholders, management, employees, customers. The expensively produced video showed a bank branch manager who was now happily delivering milk. It just left everyone asking "Why?" and seeing a cynical underlying message. It failed because it tried to communicate change for the greater good, when you have to sell the benefits of the change to the individual.

I recently came across the one time you must use stakeholder; a small private bank to the horse racing community. They look after the prize money until it is paid out to the winner. They are the true stake holder.

So let's kill off "stakeholder management" - unless you are really managing a real stakeholder.

PPM and Agile dont mix.. Right?

Let me give a blatant but well deserved plug to the PM Podcast - An excellent podcast on all aspects of project management. Catch it at http://www.thepmpodcast.com .

The recent one that has caught my ear in particular was PPM and Agile dont mix.. Right? with a really good discussion of how you can combine the top down orderly approach of Programme Management with the bottom up informal (to the point of being anarchic) approach of Agile.

All Cornelius Fichtners prodcasts really earn the valuable space on my 8Gb iPod! There can't be a better way to earn professional development credits while walking my dogs.

Lets Do The Risk Warp Again

In this trilogy of blogs (triblogy?) we have been seeing how some basic intuition and understanding of projects can lead us to manage and master risks. Dont think all these charts and graphs are any great theory - they are just a graphic representation of common sense!

Having understood the "cone of uncertainty" let us see what we can do to reduce uncertainty by warping it - bending the rules of project management.

Lets look at bending it three ways:

• Firstly let's reduce the long period between the user saying what they want - Requirements Specification - and being able to get a finished product and saying "Yes - That's It!" - Delivery Acceptance.
• Then let's compress the process to get to the requirements.
• And then let's compress the design and development process.

How?

• Use iterative and prototyping approach - "So is this what you mean?"
• By getting the user and the developer together - to avoid the risk of misunderstanding so well illustrated by the Tree Swing Design cartoon.
• By breaking the process down into small steps.

While this is has the characteristics of an Agile approach, many of these concepts have been around a long time. Iterative methodologies grew up in the eighties when PC development tools and 4GLs allowed programmers to design databases with the screens and reports in hours rather than weeks. They could talk straight to users and show them the programs to get feedback on the spot.

This develops into Agile methodologies where:

• Product definintions and requirements get cut down to brief "User stories"
• The requirements and design specification are replaced by scrums of colloboration between users and developpers
• Rapid development techniques allow the deliverables to be demonstrated to get rapid confirmation of the design

What does all this do to the Cone of Uncertainty?
Well the risk reduces:

• the time between design and acceptance is reduced.
• The risk will increase again at the start of each new iteration stage.
• The initial risk is also cut down because the early stages of definition are reduced to a high level description of what each stage is going to address.
• There is still some final acceptance. But this is reduced to what I would call integration acceptance - confirming that the deliverables from each stage work together.

So our Cone of Uncertainty is warped into the Christmas Tree of Collaboration!

What have we got to loose?

Let's develop some consequences of the cone of uncertainty - in particular the high risk and uncertainty at the start of the project.

All is not lost down the cone of uncertainty. Although the inaccuracy is high at the start, the stakes aren't high because you have no investment in the project.

We're talking here in general terms about a typical project.

You could see scenarios where you have to have investment or commitment right up front; where, say, you are committed to a fixed price delivery or have to meet some absolute deadline like a regulatory change (although in

such cases you would have requirements specified so you would be some way down the curve already).

If we look at the spending through the project (Shown in the second chart of cumulative expenditure - with the steepness of the curve showing the "Rate of Spend" ):

• Spending doesn't really start in earnest until you get into the main development phase of the project - when construction starts or the programmers start to cut the code.
• That's the point too where most of the project capital expenditure gets made, such as purchases of hardware and licences for the production environment.

If we put together the risk and the cost we end up with the Value at risk - or to put it in plain English -"What have we got to loose?"

This goes from the start of the project when the risks are highest but the investment is low. The value at risk then rises steeply as we progress; the spending rockets while the uncertainties and risks are still significant. As we reach the home straight the risk decreases. You will see that I haven't taken it down to zero when the project is delivered. Most phased project payment schedules will have a "retention" at the end to cover those snags that come up after delivery.

(Try that the next time you call out a plumber to fix a leak - "I will pay you 90% now and the rest when it has stayed dry for a month")

Let us not forget too, that for the user, delivery acceptance is only the start of the benefits that will come from the project, which will have risks too.

So what does this all mean for project risk management?

• If the project is going to fail it is best to let it fail at the start - and your early risk assessments should consider this.
• You need to have gateway reviews at the start - for assurance you have the governance in place.
• You then need to have reviews at the start of any project phase where the value at risk is going to increase.
• And you need to have project assurance all over the project through the main build/development phase when the value at risk peaks.

This, of course, assumes complete honesty and assurance that each phase is complete with the quality needed. So what if you start development -with its high spend rate - when in reality the requirements aren't fully defined? Well the simple maths says that you should apply the higher rate of uncertainty during the requirements specification to the higher spend during development and the value at risk suddenly rockets!

We've seen how by taking a few generalisations about a project we can quickly infer a lot more about the risks of a project. Let's go on to think about how we can bend some of these rules to our project advantage..

Planning Uncertainty

I came back to Mike Cohn's great book on Agile Estimating and Planning. The Agile Manifesto that values responding to change over following a plan doesn't at first seem to warrant a whole book on planning. It still needs to be done - as well illustrated by his quote :

"A good plan violently executed now is better than a perfect plan executed next week." - General George S. Patton

The book starts with a useful tool for any project manager - "Cone of Uncertainty":
This clearly shows what we all know:

At the start of the project, when we don't know exactly what needs to be done, our estimates for the work to be done are the least accurate.

Unfortunately for the hapless Project Manager it's at start of the project, when the business case for the project is being prepared that accurate estimates are most needed!

Different authors give different vertical scales to this cone of uncertainty, with the upper extreme of estimate accuracy (or should I say inaccuracy?) varying between 1.4 and 4. Some (as I have) also skew the uncertainty toward the high end - on the basis that most things get more complicated, rather than easier than expected.

So what are the lessons for the project manager as he gets drawn into the Cone of Uncertainty?

• It is essential to communicate to the project board and stakeholders that the initial estimates are inherently less accurate.
• It is good advice that project managers should always qualify any estimates with a probability: "There is a ninety percent chance this phase will be delivered ontime" - although you may get a reputation for avoiding commitment to deadlines if you do this too much!
• It shows that the milestones/project checkpoints, particularly before the start of detailed design and development, are essential steps to re-estimate costs and the business case, before committing to the increased expenditure as you get down to detail.
• If you have a project contingency budget to cover this early uncertainty you may need to review that contingency as the estimating improves, so it doesn't get spent "covering up" other issues that arise later.
• It is not an excuse that you should leave all estimating until the end of the project so it will be 100% accurate!

Passing the point of no return

Pilots will know that when you are taking off there is a speed called V1. The plane has reached such a speed that there is not enough runway ahead of you to stop. So you are committed to take-off. Unfortunately V1 is usually less than V2 - the speed at which the plane can safely get off the ground. Any change after passing V1 – like a critical engine failure - can be catastrophic.

Many projects will feel like they have a similar point of no return. You have spent so much of time, effort, money and emotional investment that you have to go on. Going back to your old process may no longer an option: it is out of support or it won’t support new statutory requirements.
So what can you do if your project starts to fail after it has built up such a momentum?

Firstly Avoidance: your project management should have identified the risks before they happen, and mitigated them – a four engine plane is inherently safer that a single engine plane.

Secondly Act Decisively: A crew faced with an engine failure on take-off has to act quickly. They will have rehearsed the routines in simulators. Faced with a real situation they act in a split second. Can your project objectives and business case be quickly reconfigured so you still have a viable configuration? Throw out the catering trolleys to reduce weight for take off! But you can only act decisively if you have identified the risk.

If You Can, Stop. It is better to run off the end of the runway than to try to take-off without enough speed.

Finally Learn Lessons. All Air Incidents must be reported. There should be no fear of victimisation. Spin, cover-up or denial will only cause future catastrophes. If the crew followed procedures then they have nothing to fear. "Sully" Sullenberger, the US Airlines pilot who put down his crippled plane on New York’s Hudson River became a national hero. A project failure should lead to a process improvement.
A bank that bought PCs to re-equip its branch network found they were underpowered for the teller application when it was delivered. They could have sold them immediately to recover some cost but that would have realised an accounting loss. So the PCs sat in a warehouse for three years until they could be quietly scrapped. Was that the right outcome for me as a shareholder?

Risky Business

Here's a great white paper on project risk assessment in the context of corporate risk appetite.

http://www.projectperfect.com.au/white-paper-a-different-view-of-project-risk.php?b3note=riskmat

Unfortunately it doesn't extend onto management of project risks.

The Office Of Government Commerce also has some really useful risk potential assessment tools and techniques . They even have the spreadsheets set up to save you the math!

It just a shame that too many UK public projects don't stick to these principles. It is a major victory for common sense, the UK tax payer and for students of project management that Gateway Reviews are now published under Freedom of Information.

Whatever your views are on Prince2 there can be no doubt that its approach to project risk management is a sound framework. It will be interesting to see how the new guidance for Directing Successful Projects with PRINCE2 2009, aimed at project executives and sponsors, will clarify the project directors vital role in risk management.

How long will it be before this guidance has an impact on the Gateway Reviews?

Labour Saving Devices

Very occasionally an IT project will be producing something totally new and innovative which hasn't existed before. But the vast majority of IT change is all about improving business efficiency. The business case for the projects will have the costs of the projects which are offset by the benefits of reducing costs – most of which will be likely to be salaries.

In the new world economics you will need to go back and reassess any savings and benefits because there are some fundamental changes and major discontinuities in the economics that have come in to play.

In the old world order:

• your business volumes were growing at a healthy rate of, perhaps, ten percent. So your project efficiency gains will easily pay for the project costs. You simply don't have to recruit extra people to support the extra volume. You also save the additional HR costs including the recruitment fees and training costs.
  
• If you have very dramatic performance improvements then the headcount savings can be increased by normal staff turnover. When someone leaves you don't replace them. Again you save on the cost of on-boarding new staff.
  

Now the whole balance changes:

• As general unemployment increases then staff turnover suddenly stops. No-one will give up a job with several years of accumulated benefits for the uncertainties of a new job with the risk of "first in – first out". The goodwill of employees for a projects objectives will, not surprisingly, evaporate as benefits become threats to their personal livelihood.
  
• Any saving in employee costs completely change if the company has to make compulsory redundancies, with the costs and compensation that have to be made. These may well come on top of other redundancies that the organisation has hade to make because of drops in business volumes.
  
• And leaving the sensitive subject of job cuts – do the ecomomics of your project still stand if business volumes have dropped by ten percent?
  

I hate to see irony in such a black situation, where real people's livelihoods are at stake. Believe me: I've been there myself. But it is "funny" that as the need to make efficiency savings increases then it actually becomes harder to make those savings.

Risks out of control

In any project some of the projects costs and benefits are out of your control. Not through any fault of the project. It's just the way it is.
In any business case there will be a number of macroeconomic and other external factors in play, and with the market discontinuity in the last year these have seen unprecedented turbulence:

• Cost of funds -used for your IRR or NPV of cost and benefits, and possibly any project financing.
• Exchange rates, particularly for multinational projects : although for offshore work, the vendor bears this risk, any adverse movement in x-rates can impact the vendors appetite for continuing work, and so still pose a risk to the project.
• Raw materials costs, for the business or the project. Will high fuel prices blow your travel budget?
• End product prices and sales volumes. You will have heeded my warning not to justify projects on increasing sales without demonstrable justification but still a 50% drop in sales is going to impact the businesses willingness to invest in projects.
• And throw in a few non ecomomic factors. What would happen if 30% of you project team were suffering from swine flu in the month of go live?

How should a project cope with this turbulence?

• Firstly you should identify the risk. Any assumption made in planning should be documented and the risks from changes to the assumptions identified.
• Stress testing and scenario planning. Once you have established the assumptions see the impact on changing them: Double them and halve them. Double some and halve others. What does this do to your business case?

On the outcome of your scenarios then you can use the standard risk countermeasures:

• Prevention. If the risk has too big an impact then terminate the risk - even to the extent of stopping the investment.
• Reduction. If the project travel budget can't absorb a future increase in airfares then reduce travel plans now, and buy a good conference phone.
• Transference. Speak to your CFO or treasury department. Will they accept the risk for you? If you have FX exposure does the business have some opposite exposures? Offshore profits to be repatriated? Can the business hedge the risk?
• Acceptance. Just get over it. If your scenario planning shows the impact is small then the project board can decide to live with the risk and bear the costs when the happen.
• Contingency. Plan and budget for the impact, if the risk materialises. If airfares increase then stop travel or have a contingency budget only to be used if air fares increase. To be fair to your project sponsor you should also reduce the budget if air fares go down!

Management of risk should be a core discipline of your project management.

Increase Sales! and other lies to justify IT

"The website for the ten million pound sales campaign with this partner will take just two days effort to develop!" appealed the sales leader to the Star Chamber for technology project justification.

"This is not going to increase our revenue by one pound" said the CEO. "Our web developers' time is better spent on other projects. Next proposal..."

The CEO was right. The addressable sales opportunity was not going to get any bigger because of the website. The website was not going to reduce the sales force assigned to the program.

It is all too easy to justify benefits as simply increased sales. It is the easiest way to get a big number on the benefit side. And the easiest trap to fall into for a business case.

(A search on Amazon shows that there are 127 books with "increase sales" in the title, bought by sales people who justify the purchase as "cost £20, benefit increased sales".

They are written by very canny salespeople who have discovered the benefits of scalability: If they sell then their income is limited by the number of hours in their day. If they write a book on selling then their income is no longer limited by their time but the marketablity of their ideas.)

So if you use "increased sales" as one of your benefits look long and hard at it.

• The benefits of the process improvement are not the total sales increase – but the increase in net revenue, after allowing for the full cost of sales and marketing and all other overheads.
• It is essential that there is a clear link between the increase in sales revenue and sales process improvement. It is not enough to attribute the increase in sales revenue in the current year to the process change. You should provide some firm and auditable types of deals or specific sales that can be justified and backed by sales management - who will need to ensure that the specific sales revenues have not been double counted for benefits or commission elsewhere.
• If you have an innovative sales channel then you need to make sure that you allow for any loss of sales revenue from other channels.

If you don't have the specific link from the process improvement to the benefit the risk is all to clear in the current economic climate: The process is implemented but because of the global recession sales fall. Now where is the benefit in that?

See if you go for the lease option..

"It's inexplicable, but the low-cost system I sold you seems woefully underpowered. You could replace it with another vendor's system, thus showing everybody you made a mistake. Or you can pay my outrageous upgrade fees." says Catbert to Pointy Haired Boss.
Pointy Haired Boss replies: "How big a fool do you think I am?"
Catbert: "I won't know until I see if you go for the lease option"

There aren't many jokes about leasing. I have been looking for over 20 years. There is however that one Dilbert cartoon in 1995!
Technology leasing , particularly software leasing, has been in the news lately:

• Microsoft cut its rates for leasing software by 26% (although it looks as if it will recover some of that through insisting you take out software assurance maintenance.)
• IT software leasing is set to become “more important” as costs increase, according to German lessors attending CeBIT (well they would say that wouldn't they?)

Leasing isnt going to totally transform the business case for your project. However used wisely it can overcome issues, particularly with the cashflow. It can avoid the upfront capital cost (particularly if the capex wasn't in this years budget) and match the cashflows to the timing of benefits - even seasonal (like farmers paying more for their tractors during harvest times).

Just watch out for a few pitfalls:

• Lease rates: the rentals seem lower than the repayments on an equivalent loan. but include all cashflows in your comparison, including the value of the asset at the end of the lease.
• Discounts: if the lease rates are lower (often trumpeted as 0% finance) that may be achieved by a subsidy from the supplier - which you might have got as a discount off the price instead.
• End of lease term: Check what happens at the end of the lease. Most likely if you don't return the equipment you will carry on paying rentals at the same rate which quickly changes the costs of your project. (although if you do need to carry on using the equipment, negotiate with the finance company. They will still make more money from a reduced rental than if you send back the equipment)
• Are you allowed to lease? UK public sector organisations will not be able to lease (as it counts as PSBR unless it comes under the private finance initiative). Check with your CFO on their policy to leasing as early as possible.
• It's not SAAS: Most importantly once the lease has started you have accepted the asset. If you have a dispute with the supplier, you can't stop paying the rentals - as they are due to the finance company. If you don't need the asset any more you can't just return it, unless you settle with the finance company.

1. Don't sign that finance agreement until you have reviewed it with a financial and legal adviser.
2. As with any project you can work out the NPV /IRR of the lease vs buying.
3. As with any project assess the risks and you can easily model the cost impact of the risks - if you need to terminate early or carry on using the equipment.

As I said there aren't many jokes about leasing. Just make sure that you analyse the full costs, benefits and risks, or else the joke will be on you.

Anything is better than what we have..

When building a business case for a project it is all too easy to go for your first option.
OK, you haven't said its a "no brainer" and got the differences in cost, and the shiney benefits.

But with some thought you can justify anything.

But have you included the full costs, and factored in all the risks, in particular the implementation risks. Would a five percent increase in the development costs, or a three month delay to implementation, wipe out the benefits?

More importantly have you looked at all the options?

• An hour brainstorming with colleagues will come up with some different approaches.
• 30 minutes googling will get you a list of alternative suppliers.
• Two weeks for a proper Request for Proposal will be worth the investment in most cases. Get the full list of your business requirements and then put weighting on each.
• Don't just look at improving the efficiency of your current business processes. Option B may offer business transformation opportunities or a new sales model.

USwitch is a price comparison website for utilities, credit cards insurance, phones. And of course it will always find a lower priced supplier. But is it the best for your particular case ? - not the option that pays them the highest commission. When picking a phone supplier it will give you the cheapest local call rates or low cost inclusive minutes. But will you use all the inclusive minutes? And what if you make regular calls to your aunt in Australia?

Obvious? Just do the same for your business case.

"No Brainers" don't mean no brains needed.

A not unusual scenario, that has been repeated countless times:
The EVP Technology of the parent company had a successful first week visiting their new subsidiary declaring: "I have never seen a company with such a good fit to our system." As he headed back to the airport with the integration team, the newly acquired company was a bit bewildered: Aren't they going to look at our requirements in any detail? What are the benefits? What are the costs?

Two years later the project to implement the parent company system collapsed, leaving the subsidiary with some deep challenges. Commitments had been made to suppliers, business partners and regulators that couldn't now be met without a system.

The traps are all to evident with 20/20 hindsight.
Of course, if you start knowing an answer it will always fit the question. But is it the best answer? Is it the full answer? Most importantly if you are blinkered by the answer you will simply miss business requirements that can't be met by the "solution". They are simply missed if you just start from a checklist of package features.

It may be a "no brainer" but that doesn't mean you abandon all critical faculties, or tear up the methodology. It should mean you get through the process far faster. But don't leap to conclusions.