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Viewing Posts by Michael Hatfield
Taking on Project Management Myths, Part 4
Categories:
Risk Management
Categories: Risk Management
| Part four of my taking-on-the-myths series will challenge our statistically minded segments: the risk managers. Myth 4: Using Monte Carlo simulations to generate contingency budgets or schedules is an appropriate approach and should be more widely adapted. Truth: Monte Carlo simulations are needlessly complex and shouldn't be used. Of the three most common risk analysis methods used in creating a contingency schedule or budget--risk classification, decision tree analysis or Monte Carlo analysis--the latter is by far the most complex, so naturally it has the reputation for being the most robust. But is it really? Consider the data points your Monte Carlo simulation driver asks of you: original budget (or duration), one or two "things-going-wrong" alternatives, their odds and costs, and at least one "things-go-great" scenario, with its odds and estimated costs. This is the exact same data set that would support a single-tiered decision tree analysis, except that the Monte Carlo version invokes a random-number generator to fill in hundreds (or even thousands) of other data points, which can then be used to analyze confidence intervals--at least supposedly. But all of these other data points are artificial! The ensuing confidence intervals are far from reliable, hoopla notwithstanding. Myth 3: Risk management is so important to project management that it should be employed throughout the project's life cycle. Truth: After the baseline is set, formal risk management is pretty useless. This last assertion is guaranteed to invoke a passionate debate, but consider your personal performance. Do you function better when you are confident or when you are worried? And what does formal risk management bring to the table once the project is underway, other than institutional worrying? Analyzing ominous trends or performance information indicating a problem in order to head off threats to project success is what project managers do on a daily basis. Spending excess time quantifying those threats doesn't improve your odds of success. |
Taking on Project Management Myths, Part 3
Categories:
Communications Management
Categories: Communications Management
| In my last post challenging project management myths, one responder noted that I was unclear about what part described the myth and what part described the challenge statement. Here are numbers 5 and 6 on the hit parade, with the parts a bit better defined. Myth 6: Complete and detailed procedures are an essential part of a successful project control system implementation. Truth: Writing procedures are generally a waste of time and they don't help advance project management maturity. Think about it, is there anything in the universe easier to ignore than a document? But the myth persists that procedures by themselves can advance an organization's project management capability. Usually these procedures are signed by a high-ranking member of the organization, who is attempting to compel obedience or participation in the project control system. But unless the organization has authorized someone to actually fire or demote others for failure to comply with the document--which happens rarely if ever--then the procedures themselves won't help. Myth 5: If a schedule based on the critical path method isn't available, a good interim step to manage a project's schedule is to create a list of milestones or action items and meet to review them on a regular basis. Truth: Action item lists and milestone databases are essentially polls and have no place in legitimate management information systems. I once worked on a major program in which participants entered project data into a milestone database and provided monthly updates to those milestones. At the beginning of the year, all of the milestones were scored "green," meaning the milestone would be met on time. Byabout the ninth month, a few "yellows" would show up in the status column, indicating a possible delay. More yellows would show up in month 10, followed by even more in month 11 along with a few "reds," indicating the milestone would be missed for that fiscal year. By the last month, easily half of the milestones were either red or yellow. Lots of scolding and badgering would then ensue, followed by a new "baseline" for the next fiscal year, and-- shazaam!--all the milestones would be green again. Asking participants what they think of their performance is not a performance management system -- it's a poll. And polls are not substitute for real management information systems. I look forward to your responses because I know a whole bunch of people are going to disagree with these two. |
Taking On Project Management Myths, Part 1
| I'm going to spend the next several posts discussing commonly held, but, in my opinion, profoundly erroneous tenets of project management. Two esteemed colleagues, David Hampton and Alice Skehan, PMP, rated my list of 10 assertions in order of contrariness to common project management precepts, as well as the extent with which even they disagreed. Here, then, are my numbers 10 and 9: Myth 10: Trying to leverage organizational power to implement project management in the macro-organization is futile. Oh, I know, people try it all the time, and in many cases the ultimate outcome bears a strong resemblance to a legitimately installed project management office (PMO). As I discuss in my book, Things Your PMO Is Doing Wrong, the so-called coercive strategies don't work in the long run for the simple reason that people are being, well, coerced into doing project management. The moment they can opt out of the system, they will, and no reason that can provide reasonable cover will be considered too silly. I once had a project team that tried to use a paperwork-reduction initiative as a reason why they shouldn't have to send along their earned value reports. Really. Myth 9: There is no cost performance management without earned value. Period. No exceptions. And yet, the comparison of budgets to actual costs persists. When I'm instructing new cost engineers in earned value, I like using the following scenario: You're a project manager, assigned to get 2,000 widgets created in two months, with a US$2,000 budget. You time-phase your budget US$1,000 in month one and US$1,000 in month two. At the end of month one, your accountant comes to you and says that your project has spent US$1,100. Then I spring the question: "How are you doing?" Invariably, one of them will say "Poorly, because I'm overspent." "What if I told you that you had made 1,300 widgets?" Obviously, that little fact changes everything. In this instance, comparing the budgets to the actuals was not only useless, it was actually misleading. Management information systems can be forgiven for offering up the occasional jejune tidbit, but never for misleading. And yet that's all you're left with if you don't have an earned value management system. Next up, I'll be taking on the capabilities of the general ledger and re-visiting the bottoms-up estimate at completion debate. |
Practitioners Versus Accountants on Earned Value
Categories:
ROI
Categories: ROI
| Most of my regular readers know I like to take accountants to task for pretending to be able to deliver cost performance or estimate-at-completion information to decision-makers based on generally accepted accounting principles. But that door swings both ways: Earned value practitioners are also guilty of trying to further their technical agenda using the resource managers' arguments and analysis, which, in my opinion, is profoundly flawed. The most prominent of these tactics is to try to justify the cost--or even the existence--of the project management office by running some sort of ROI analysis. This is simply illogical if for no other reason than the ROI calculation pertains to assets, not capabilities. Less notorious but every bit as pernicious is the tendency of earned value practitioners and accountants to compare the time-phased budget's basis of estimate document with its associated actual costs at the line-item level. In the earned value world, comparing budgets to actuals is worse than useless: It's actually misleading. And yet, some practitioners seem to think that if such an analysis were simply done at a very detailed level, it would suddenly become relevant. It doesn't. Oh, they may try to make some lame argument about the need to benchmark the estimators' work, but this assertion lacks validity that can be demonstrated in the following scenario: A US$100,000 task is estimated to require US$25,000 in heavy equipment and US$75,000 in labor. At task end, US$74,000 was spent in heavy equipment and US$25,000 was spent in labor. An earned value management system correctly--would not raise the red flag for cost performance, but the system that compares budgets to actuals would erroneously report a severe problem--never mind that the task came in under budget. Any management information system that reports a phantom cost performance problem isn't good for very much. Next up: The absurdity of maintaining milestone lists in lieu of real schedules. |
Risk Is Not An Opportunity
Categories:
Risk Management
Categories: Risk Management
| In my continuing series on commonly held but, in my opinion, highly suspect project management practices, I want to ask the question: Exactly what do the risk analysts do that improves a project's ability to come in on-time, on-budget? Now, as the firestorm I've just ignited races to engulf me, let me be crystal clear about what I'm asserting. I am not saying that risk management is without value. What I am saying is, once the contingency budget and/or schedule have been baselined, the value of the information produced from risk-analysis techniques drops off dramatically. U.S. General Dwight D. Eisenhower believed that once you're on the battlefield, all plans were out the window. And, while (most) projects don't approach the level of chaos and mayhem associated with a battlefield, I think his ideas are highly applicable in our works. That's what project managers do; they respond to the changes in circumstances, resources, demands, and hundreds of other parameters, every single working day. The notion that project management decisions can be quantified and reduced to formulaic responses in most circumstances is absurd, and furthering that approach using excessive statistical jargon does not automatically make it legitimate. As for the assertion that risk management includes an "upside risk" component--a.k.a. opportunity management--I would like to point to the Unabridged Webster's New International Dictionary, Second Edition. Its definition of "risk" reads, in part, "Hazard; danger; peril; exposure to loss, injury, disadvantage or destruction." Indeed, nowhere in the definition will you find any reference to any possibility of a positive outcome or environ, much less opportunity. And yet, you see people make the comparison risk management equals opportunity management. I know the risk management aficionados have had a lot of success re-defining the verbiage associated with their area of expertise in A Guide to the Project Management Body of Knowledge (PMBOK® Guide) space, but isn't there another way of furthering risk management notions without pounding away at the lexicon? |