Working With Risk
Categories:
Risk Management
Categories: Risk Management
| Risk exists at all times. The less planning we do for it, the higher the chance of failure or uncertainty of results. I am a strong believer in integration. Therefore, risk management must be an integral part of any organization's project management methodology. Risks are generally identified, assessed and quantified. Risk is then monitored until it is no longer a risk or to ensure that any events identified as a risk do not actually go unanswered. That's where risk response comes into the picture. Response to risks comes in the form of: - Acceptance - Rejection - Mitigation Organizations must ensure they: - Identify key risk-management processes to map them out to the organization's processes for project delivery - Identify risk factors (i.e., elements that cause probability of risk occurrence to increase) - Standardize risk identification, assessment and quantification, and documentation across the organization Think of it this way: Risk equals money. It's the amount of money we are going to spend (or not spend) on either activity A or B. If we identify a risk of executing activity A for a price of X, but have a moderate to high level of confidence in success of this activity, we may choose to forgo doing anything else or delay the activity to remove or reduce the risks. If risks end up being realized and we end up facing the results of it, the cost of it would be linked to loss of revenue and added support to resolve the issue that was created by unresolved (but accepted) risk. And if it is less expensive for an organization to actually accept the risk and deal with its impacts rather than continuously applying resources to making things perfect, then the justification of taking risk from financial standpoint can be very convincing. How do you work with risk? |
Easy EAC Calculation
| Experts on the assassination of U.S. President John F. Kennedy have come to a couple of conclusions: 1) the Warren Commission got it right and 2) many people have a hard time accepting that such a monumental, history-changing act wasn't the result of a massive, expensive, difficult-to-execute conspiracy. So, when I started writing about how earned value management systems (EVMS) can accurately predict the future with some simple calculations, I received some responses that expressed varying levels of incredulity. It simply goes against intuition that an information element as important as at-completion project costs could quickly and easily fall out of an EVMS. But since I've already firmly ensconced myself at the end of this limb, let me take it a step further: The estimate at completion (EAC)--the brass ring of management information systems--can be calculated without a baseline, a work breakdown structure or a formal change-control process--none of what we've been told are essential parts of an acceptable EVMS. None. Nada. Zilch. Now, I'm well-aware that the previous sentence is the metaphorical equivalent of pulling the pin on a grenade and rolling onto the floor of a conference room full of EVMS experts, but I can explain. The traditional formula for calculating an EAC (EAC = BAC/CPI) can be algebraically reduced to dividing cumulative actual costs by cumulative percent complete. That's right, we're talking two date elements, easily collected. And the resulting information is far, far more accurate than anything that the general ledger can produce. It's also much more accurate (and faster and easier) than re-estimating the remaining work and adding that to cumulative actual costs. In fact, it's so much more accurate, faster and easier than any competing information stream, that I'm frankly flummoxed that the calculated EAC isn't the centerpiece of EVMS use everywhere. I can't wait to see the responses to this one. |
Are You Really Ready for a PMO?
Categories:
PMO
Categories: PMO
| Organizations that have a project management office (PMO) show they are moving toward a centralized management of project resources and strategic alignment to business goals. But I find a certain level of readiness has to exist in an organization for it to create the platform for a worthwhile and cost-effective PMO--the type of PMO that contributes to the business not by simply being an extension that offers extra resources, but that works and evolves with the business. There are key issues in organizations that usually hinder this: • Senior teams do not understand the PMO or its purpose • Senior management teams do not understand what project management is all about and how it can help them lower the costs of implementing projects • The PMO is viewed as something you install without careful and business-aligned planning In my mind, PMO implementation must be viewed and managed as a project. A company should know why it's seeking to implement a PMO in their organization, what business issues it's trying to fix and what inefficiencies it's trying to improve. A company has to consider: 1. Organizational Readiness Organizational processes will require changes to ensure the process flows into and out of the PMO are integrated into the organization. 2. Cultural Readiness The organization has to assess its readiness based on current resource pools, whether the resources can be migrated to PMO teams, and how other members of community will be able to align with PMO requirements based on their knowledge, experience, skills and mindset. 3. Strategic Alignment The goal is not just to have another department, but to have a team of people agile enough to act quickly and in a focused manner. And planning of the PMO has to include reasons that align with direct impacts on strategic goals of the organization. |
Agile: The Great Debate
Categories:
Agile
Categories: Agile
| Over the last week or so, there seems to have been a flurry of activity in the blogosphere discussing Agile and waterfall software development, A Guide to the Project Management Body of Knowledge (PMBOK® Guide) and project management. This is an important debate. A letter in the Feedback section of the March PM Network said Agile is not a project management methodology--I agree. Waterfall and various forms of Agile are definitely software development methodologies, not project management methodologies. However, we can learn a lot with an open dialogue in both directions. One common misconception among IT professionals is the assumption that the PMBOK® Guide approach to project management and the waterfall software development methodology are synonymous. Nothing could be more wrong. Certainly you can manage a waterfall development using the PMBOK® Guide processes but nothing in the PMBOK® Guide mandates developing a fully detailed project plan before starting work on development. All the PMBOK® Guide requires is the current phase is planned before starting work. This is absolutely compatible with the Agile approach to iterative development. Another misconception is that any new software development is automatically a project. Projects are temporary endeavors--this means temporary teams. If your IT shop is set up with stable teams working on a prioritized list of jobs using scrum or something similar, it is far more likely to be operational work rather than project work. With these misconceptions cleared, there seem to be three key areas for discussion. (Your comments will be welcome leading into some future blogs.) What are the differences in the way project management processes are applied in an Agile project compared to a waterfall project? Some thoughts: • The need for a much lighter "touch" managing an Agile project • The need for a higher level of trust in managing Agile teams • The need for robust change management and configuration management to track the evolution of the Agile project • The critical importance of developing the correct strategy and architecture at the beginning of the Agile project Can traditional project management learn from Agile? Some of the trends in Agile seem to have wider application in any project involving knowledge work, including: • The need to trust knowledge workers more than manual workers • Success measured by customer satisfaction rather than quantitative outputs • The need to keep the client involved What triggers the choice between operational maintenance and development versus projects and waterfall versus Agile. More later. |
Predicting the Future
| My earlier post, Our Biggest Unused Weapon, posited that the ability of even a basic earned value management system (EVMS) to predict when a project will be complete and how much it will cost at completion is unparalleled in the management information system world. But I also argued it was being under-used by most practitioners. William Goelkel, PMP, responded with: "EVM can lead us to make bad decisions, or forecasts, when the standard against which we measure everything is the plan we baselined at the point in the project's life cycle when we were most ignorant of its requirements." And "I'm not convinced a calculated EAC [estimate at completion] as you described is always useful." I'd like to further my arguments to the contrary while responding to Mr. Goelkel's thoughtful comment. Mr. Goelkel's main example concerns software projects, where "goals change and our understanding of the users' needs evolves." Either this understanding evolution is captured formally and introduced into the baseline, or it is not. If it is, then there's no problem. If it is not, then we have scope creep, the most pernicious attribute of managing projects. Even so, EVMS have a remarkable ability to predict the future, even when the baseline has been turned to rubber. Say you had a US$100,000 project, but "evolving" customer expectations will end up costing the contractor double that, or US$200,000. At the point that the project should be half-done (cumulative budget = US$50,000, and actual costs are at the same level) the task leader assesses that she is only 25 percent done. The calculated EAC will instantly indicate the real EAC of US$200,000, allowing for either elimination of the scope creep or a request for more money. For a more real-world example, try to find a project that (impishly) has a "Project Managers' EAC" column right next to the calculated EAC in their cost performance reports. Ninety-nine times out of 100, the project manager's version is lower than the calculated one and less accurate. It's like clockwork. In my next post, I'd like to tackle how project management trends in the software world--like scrum or Agile--are actually attempts to accommodate the rampant scope creep that so often afflicts those projects. For now, I'd like to hear what other EV practitioners have to say. I'd also like to thank William Goelkel for this discussion. |
