Lessons From Times Of Management Duress

 

Depending on one’s particular flavor of PM, much of the data needed to make informed decisions can be gleaned through means other than donning a hard hat and walking the site, or showing up to the Weekly Scrum in-person (masked and distanced, of course). With the adjustments made to virtually all of our business models to accommodate the pandemic, several hypotheses of management science have rightfully made progress towards acceptance as theories, while some widely-accepted theories that have served as the basis for many analysis techniques have been shown to be suspect at best, and openly fraudulent at worst.

In the former category, I offer up as Exhibit A that it’s the Earned Value Management Systems that represent the optimal tool for assessing the impact of a negative macro-economic event, and not the general ledger. The reason for this is simple: an EVMS can readily document the delta between an organization’s pre-COVID performance and what happened afterwards. Of course, a little bit of binning is in order. Once a usable baseline of Project performance can be established (say, its cost/schedule behavior for the three months leading up to the shutdown), then a comparison of its execution afterwards with such a baseline will yield the desired impact information, so:

Note that in only half of the scenarios above should a documented change in cost/schedule performance be attributed to the macro-economic event.

Now, if Earned Value has been shown to be the most appropriate tool for capturing the cost and schedule impact of a macro-economic event, what did it displace? Traditionally, it’s our friends the accountants who have been the go-to team for answers on any and all questions where the solution involved a dollar sign. Unfortunately, the only way to attempt to glean pandemic-related impacts from the General Ledger would be to examine all expenditures, and try to estimate some causality-related connection as a precise number. A few honest questions will show how utterly impossible such estimations can be:

• Should any increase in costs of a budgeted line item be attributed to the shutdown?
• If yes, then by what amount – the amount of the delta, or should some factor be included that takes into account other influences, of which there are multitudes? Also, should any decrease be subtracted from the overall impact factors?
• If no, then by what other GL-owning data could impact numbers be derived?
• What happens if costs went up, but so did actual performance? Oh, wait, the GL has no way of capturing that, so never mind.

I could go on (and often do), but GTIM Nation sees my point.

As for which commonly-invoked theories have been hit with serious challenges to their efficacy, I think the most blatant is the use of Return on Investment as the ultimate arbiter of “good” and “bad” in the management decision-making universe. Inanimate assets don’t perform. People, usually collected into – what’s the term I’m looking for, oh, yeah, Project Teams – perform, usually taking advantage of the other assets at their disposal. The printer doesn’t perform, the person creating the document does. However, in supposedly first-rate business schools around the globe, the analysis method for determining which projects to pursue within a portfolio is its anticipated ROI. Even a cursory review of the formula for generating the ROI shows it to be so chocked-full of subjective (or even crazy speculative) data that it makes our friends, the risk managers (no initial caps) seem positively insightful.  So, when the shutdowns descended upon us, a large segment of the parameters used to assess ROI, such as the need for employees to use office space, were shown to be, rather abruptly, utterly irrelevant.

Savvy Program Managers will have quickly recognized the sea-change in the menu of acceptable management science theories in these times of duress, both those added, and those that should have made an exit long ago.

Others? Not so much.

[i] Cost Performance Index (CPI) is the Earned Value divided by Actual Costs, and the Schedule Performance Index (SPI) is the Earned Value divided by the cumulative time-phased budget.