Guest Post: Claire Schwartz on Optimal Decision Making: How to Get Better Information
| (Part 1 of a 3-part series)
“Facts do not cease to exist because they are ignored.” Whether you are a project manager, a PMO director or an executive, most of us want better information. Why? Information is the fuel for decision-making. Whether a decision is about what to have for lunch or about making a billion dollar investment, a decision-maker is reliant on information which is then used to evaluate options and ultimately choose a course of action. But just having information isn’t enough – it needs to be good information. What information is collected, how and when we gather it and what we do with it when we have it are all factors that contribute to information quality. Individuals and organizations that are mindful of these tend to be more effective in collecting better information and managing the flow of information across the enterprise than those who take a haphazard approach. So what do the effective organizations know that the others don’t? First and foremost, effective information managers recognize that data and information are not the same thing. Data is a set of facts while information is data that has been processed to create meaning. Data is the words, information is the story. Furthermore these managers recognize that good information cannot exist without good data. Good data does not just appear; it is collected through well-defined, well-supported processes. Processes for collecting data clearly define what is being collected and establish clear roles and responsibilities for both providing and collecting it. Attention is paid to timeliness and completeness and includes feedback to data providers so that data quality can be improved over time. Effective data collection processes also focus on quality not quantity – they don’t collect data for the sake of data. While its nifty to be able to say you’re collecting data on 1,000 different ‘key indicators,’ trying to collect data on everything is time consuming and contributes little to the objective of having information for decision making. Indeed having too much data can feed ‘analysis paralysis’ where the amount of data cannot be synthesized into useable and relevant information. Asking for a few key data elements rather than all the data available not only reduces the time and overhead associated with data collection, it emphasizes the importance of the data that we do collect. Consider the example of the manager who, in trying to understand how time is being spent by his staff, defines eight different categories of administrative work. Everything, from reading emails regarding benefits to attending team morale events with co-workers, appear as separate line items in the timesheet. Over time, and after thorough analysis, the manager notices: a) The aggregate amount of administrative time reported has increased, and b) The greatest increase is in the item labeled ‘timekeeping.’ But how can we be sure we’re collecting the right data? First, we need to work backwards from the decision. Not from what the decision will be, but what is the decision about. In other words, not what is the answer, but what are the questions. While we can’t predict all the questions that could arise at any time, there are certain questions that are part of an individual or organization’s decision-making DNA. If your answer can’t be supported with facts, you need to look at your data. In the timekeeping example above, the real question was not ‘how much time is spent onteam morale events with coworkers’, but rather ‘how much time is available for production or project work (non-administrative)’. With that in mind, a single line item for miscellaneous administrative effort would have provided plenty of data to determine the burden associated with administrative work. Collecting data is the beginning of the story for creating better information but it is by no means the whole story. In my next post, we’ll look at how we create information from the data and how that information is communicated all support better decision-making. |
Where's the Value in Earned Value?
| Here's my thoughts on Earned Value, and although it has some issues, you'll see that I actually think it’s a very valuable tool. I'm an old-time project manager that actually remembers when Earned Value was known as BCWP. That's Budgeted Cost of Work Performed. If you think about it, that's what the EV metric actually measures. And as a former financial officer, I fail to see why it's called Earned Value. First off, if nothing has been delivered yet, I haven't realized any value from my investment in this project. Second, if this measured the project's value it would mean the value is equal to the cost. With no ROI I'm not approving a project like that! I'm not sure who initially called it Earned Value, but the project management community seems to have bought it hook, line and sinker! I must admit, BCWP is quite a mouthful, but couldn't they have come up with something a little less misleading? One more note on the misleading name: If I'm in construction or a service industry where I bill based in percent complete, then I literally am "earning value" as we progress. But the customer sure isn't! So I still object to the term. That said, EV is one of the best tools for tracking a project's performance to plan. Why? Traditional variances like budget or effort variances turn red way too late. A project that ends up 20% over budget won't show a negative variance until it is almost over, and then it's too late too course correct. Further, trending budget and percent complete at the project level, while better, doesn't account for plans that aren't evenly loaded. If we're buying a bunch of hardware near the beginning of the project, that project will look like its trending way over budget very early. EVM gets past this by looking at the cost - both labor and material - for every task. Yes, there are other methods of EV measurement, but these are the most common ones here. By tracking planned and actual cost and time at the task level, then using percent complete to determine if we are ahead/behind on each task, we get a much more granular view that accounts for variable loads of cost and effort through the life of the project. And then we can roll that up to the project, program, or even portfolio level. Using our CPI and SPI factors, we can get a good reading on how far ahead or behind we are very early in the project, and can then make timely course corrections. So, while it may be mis-named, Earned Value is a great objective tool for gauging project progress and status. |
Guest Post: Alan Shefveland Addresses the Question "At What Risk?"
| News sources everywhere are streaming reports on the state of today’s economy. There is plenty of speculation, conversation and hyperbolae on the need to invigorate the economy with investment. Businesses and government organizations are being pressured to spend more to create jobs and boost the economy. But the fundamental question to ask is “At what risk?” I get this question all the time. Project investments are being made continually. Maybe not at the pace we would like to see, but it’s happening and the state of project execution remains high within organizations. A colleague of mine and I were recently discussing whether there is a void or opportunity to introduce new thinking in addressing the "at what risk?" question. Let's examine. First, let's examine the statement itself. What does “At what risk?” really mean? We can look at it in multiple dimensions. Project execution is a common place where we look at risk and risk management, where risk is anything that could potentially adversely affect the schedule, cost, quality or scope of a project. Basically, how does risk impact your project objectives? PMBOK outlines many processes and techniques for managing risk such as the ‘Probability and Impact Matrix for Qualitative Risk Analysis’ and quantitative risk analysis techniques such as ‘Sensitivity Analysis and Decision Tree Analysis’. Another perspective to view risk and risk management is from the finance angle. We can look at how cost benefit analysis (CBA) can present a financial perspective of risk and we get that from ROI, NPV, etc. But these dimensions are only at the perspective of the project and the projection of potential value. There are other dimensions of risk we can discuss, but those have specific vertical applications, like the risk of entering a market or the risk of applying a particular technology.
Drawing on portfolio management techniques helps identify "At what risk." But, you may say that risk is already defined as a dimension of portfolio management, and you would be right. Organizations have struggled with implementing portfolio risk models and maintaining them. I prefer something simpler. Can I answer our question early in the project lifecycle without spending a lot of energy? Yes. Simply put: alignment , through the identification of what is important at the portfolio level and defining the alignment dimension of your portfolio solves our problem. Why would we ever want to spend any energy at all on a project proposal if it doesn’t fit within the performance objectives and investment goals of the portfolio? From my perspective, answering the “At what risk” question can be a simple top-down exercise that can deliver great value to the organization. But the first question we should always answer is, “Does it fit?” Then we can focus on evaluating and managing risk in the financial and project execution domains. |
PMOs Must Evolve to be Relevant
| Recently, the Harvard Business Review conducted a surveyof nearly 1,500 IT projects, inspecting the preliminary budgets, actual costs, and the final results of each initiative. After reviewing these projects, the authors found an astonishing average cost overrun of 27 percent (with each project running about $167 million). Perhaps more shocking, one in six projects went over budget by an astounding 200 percent, and ran past their initial schedules by an average of 70 percent. If these projects are not viewed as delivering tangible benefits to the business, they can cost an IT executive their job, and the company can suffer a significant loss of reputation or revenue. Ambitious IT projects require PPM tools and processes that provide visibility and enable collaboration in real-time to avoid or eliminate massive cost overruns and schedule delays like those in the survey. To remain relevant, PMOs must prove their worth through integrated planning, consistent metrics for performance, flexible and adaptable methodology frameworks, and accountability for results. Recently during our global user conference, Adapt 2011, Daptiv met with more than 150 attendees from 8 countries. The theme of the conference was “Realizing Business Value through PPM” and a major focus for attendees was how PMOs adapt to the “New Normal” of business uncertainty in their companies and the broader economy. A few key lessons from successful PMOs emerged that are worth sharing: 1.) Where the PMO reports to is important for how it is perceived in the organization. According to recent Forrester research, PMOs that report to the CEO or CFO are much more likely to be perceived as delivering significant value. If your PMO reports to the VP of IS/IT then keeping a strategic focus is key to being perceived as delivering business value. 2.) Communities of practice are important to gain influence in an organization. Listening to individuals in your organization, frequent meetings, sharing knowledge and mentorship, and proving support (not mandates) will lead to a PMO being viewed as a valuable and influential partner in the organization. 3.) There is a growing trend for successful PMOs in IT to expand to an EPMO, covering business investments as well as IT strategy and planning. A Daptiv customer who has successfully made this transition and presented at the conference was Mercy, a health care system with over 25 hospitals and 200 clinic locations, which incubated their PMO in the IT organization before creating a very successful Enterprise Project Office in 2007. Yes, IT delays happen, even with the best of intentions. More often than not, they can be avoided through careful planning, communication and collaboration. IT governance and PPM tools have come a long way over the past several years and increasingly the PMO is playing a more strategic role within the organization beyond IT. Let us know whether you agree with these takeaways and what other trends you are seeing in your business as we move into 2012. |
Guest Post: Satish Kumar Reports from The PMI Global Congress North America
| The PMI Global Congress offers a great opportunity to interact with practitioners of project portfolio management (PPM). This year’s event was held in Dallas, Texas from Oct 22 – Oct 25. My time was mostly spent in group interactions and attending presentations. It provided a rich and diverse perspective on what people were experiencing in the project management space. If I were to distill my group discussions based on key challenges people are facing, they would include:
The PMI sessions as always are rich in content. The question is what is relevant to your area of interest. I mostly attended sessions that talked about new project management trends. Here are my key takeaways:
All in all, it was a great event for practitioners of project and project portfolio management. There was something for everyone and I for one came away with nuggets of information that would be very useful to me as a PPM professional. -Satish |
