Thoughts on Fractional Reserve Concept: Balancing Acts in Project Management

 

The failure of Silicon Valley Bank (SVB) has brought attention to the dangers of fractional-reserve banking. Fractional reserve banking is a banking system in which banks are required to hold only a fraction of their deposits as reserves and can loan out the remaining funds. Similarly, a project management professional may only be able to deliver a fraction of what others are requesting from her because she has limited resources, such as time, budget, and personnel.

We often make promises to our friends, family, and colleagues, but we have a limited amount of capacity to fulfill them. This is similar to the fractional reserve principle, where we have reserves to cover only a fraction of our total commitments at any particular moment. If we receive too many requests at the same time, it can quickly overrun our capacity and lead to burnout.

Just as a bank needs to ensure it has enough reserves to meet withdrawal demands from its customers, a project management professional needs to ensure that there are enough resources to complete the project successfully. Just as a bank may run into trouble if it lends out too much of its reserves and can't meet customer demands, a project management professional may run into trouble if she overcommits resources and cannot deliver what was promised.

In both cases, there is a balancing act between maximizing resources and managing risk. In fractional reserve banking, banks aim to maximize profits while ensuring they have enough reserves to meet customer demands. In project management, professionals aim to maximize the project's outcome while ensuring they have enough resources to deliver on time and on budget.

How about the trust angle?

If depositors trust the bank, it is less likely that there will be a bank run. A bank run occurs when a large number of depositors withdraw their money from a bank at the same time because they are concerned that the bank may fail and they will not be able to access their funds. When depositors trust a bank, they believe that their money is safe and that the bank will be able to meet its obligations to them. This confidence reduces the likelihood of a bank run.

If stakeholders trust the project manager, it is less likely that they will request all at the same time or micromanage pushing for sub-par deliverables. In general, stakeholders are less likely to request changes or updates to a project if they have confidence in the project manager and believe that the project is progressing as planned.

However, it's important to note that stakeholder requests are often driven by a variety of factors, including changing business priorities, new information, and unforeseen events. Even if stakeholders trust the project manager, they may still request changes if they believe that it is necessary to achieve the project's goals or address new challenges.

Effective communication and stakeholder engagement are critical for project success. A project manager who is able to establish trust with stakeholders and maintain open lines of communication is better positioned to manage stakeholder requests and address concerns in a timely and effective manner.