We often think of risk management as primarily a technical project management discipline, but the last decade of research from the Construction Industry Institute (CII) paints a very different picture. Implementing formal risk management practices, with an intentional focus on maintaining team alignment and establishing a culture of transparency and trust, is critical to achieving predictable performance in capital projects.
Cultural and human behaviour factors have a significant impact on the effectiveness of our risk management practices. It is simply not enough to have a well written standard operating procedure and a great risk register template. When we equip our project leaders to address both cultural and human behaviour factors, formal risk management becomes a game-changer to achieve predictable project performance.
It takes tremendous skill to consistently deliver a large portfolio of capital projects that meets the expectations of your sponsors. Predictable project performance is the name of the game.
“Do what you say you will do.”
For capital projects, predictable performance translates into “on time, on budget, at the required level of quality, and delivered safely.”
The Construction Industry Institute (CII) has studied predictable project performance extensively. Team alignment is the most influential factor, and a key component of maintaining alignment is transparency and trust among your project stakeholders1 .
One of the biggest derailers of team alignment is when transparency and trust are compromised. For example, when a team member doesn’t share their knowledge of a challenge or risk that could have a negative impact on the project, team alignment and ultimately project predictability suffers.
In a world where every Project Management Professional (PMP) is educated in risk management, how does this keep happening to our projects?
You Can’t Manage a Secret
It was a pivotal moment for me this summer when Alan Mulally, former CEO of Ford, shared his turnaround story at the Global Leadership Summit in Chicago. Mulally explained how he arrived at Ford in 2006 when the company was fighting for its life. Changing the product line or the organizational chart wasn’t going to save the company. He had to tackle a deeply ingrained cultural issue. “You can’t manage a secret,” were Mulally’s words.
When he first started, he shared that his weekly meetings with divisional chiefs walked through management dashboards that were lit up with “green” status updates. It just didn’t add up for Mulally. How can there be no problems that his leaders were willing to acknowledge when they were forecasting a $16B loss? The culture at Ford had evolved such that leaders buried problems. Ford couldn’t solve those problems until their leaders stopped living in fear that the company will shoot the messenger.
My first co-op job in University taught me that valued employees don’t bring problems to their manager – they bring solutions! As an individual contributor, this is a rational principle that serves us well. But as the size and complexity of our responsibilities increase, so do the problems and risks that we have to manage. Herein lies the challenge with risk management in capital projects. Complex projects have complex risks, and we can’t realistically address many of these risks without collaboration from the diverse group of experts that form our “project team”.
Just like Mulally had to tackle Ford’s cultural issue, as project leaders we need to establish a culture that is accepting of risks and changes. If we want to improve project performance, our stakeholders must feel safe to identify risks, and confident that and we will not shoot the messenger.
If you are focused on achieving predictable project performance, formal risk management can be a game-changer. However, the greatest impact requires a leadership commitment to place an intentional focus on maintaining team alignment and establishing a culture of transparency and trust.