28 April 2011

How to Identify Dangerous Projects

I often get asked "when do I know which projects require special care or input from external consultants?" My advice is always to analyze and understand the overall complexity of the issue and project. Complex projects are more difficult and fail more often than simple projects, and therefore require more care in setting up and following up (or can better be outsourced to your favorite consultant who is specialized in carrying out complex projects).

The follow-on question is invariably "how do I understand which projects are complex, and how can I compare the overall complexity of projects in my portfolio?" his can be done quite easily by understanding the key drivers of project complexity. The overall complexity of any project is driven by a combination of internal and external factors. External complexity consists of factors related to the overall environment in which the project needs to work. Internal complexity is related to the types of activities that the project is required to carry out and the project's internal organization. A project that scores high on both dimensions of complexity (see diagram) should therefore either be given special care, or be outsourced to an external consultant.

External complexity should be analyzed by looking at four specific drivers. Each individual project will have a different combination of external pressure brought on it through the following drivers:
1. Level of pressure from management to achieve concrete and challenging results
2. Openness of goals to interpretation and level of political elements in goal definition
3. Level of expected uncomfortableness to project participants resulting from project results
4. Required level of communication to various stakeholders for getting the necessary buy-in for conclusions

Each individual project will also vary in its internal complexity. Internal complexity is driven by:
1. Distance of project to day-to-day business
2. Organizational distance of project team members
3. Level of fairly sophicated data collection and analysis required for the project
4. Level of "out of the box" thinking required for developing optimal solutions

In my interaction with my clients, I typically go through these drivers and factors individually, and score them on a scale of 1-5. In a recent discussion this went approximately as follows:
• The corporate sponsor requires that we deliver a very concrete plan to turn this company around and make it profitable. However, our own management have very different and individual views on how this should happen, their plans are always to the benefit of their own department, and we will need to communicate extensively with them in order to get buy-in for any plans that are developed (high scores of first two and last driver of external complexity)
• Potential team members feel very uncomfortable about carrying out this project, as they worry that it will require them to "fire" colleagues (high score on third driver of external complexity)
• The people earmarked to do the project are excellent mid-level managers, but they have never carried out any strategic analysis or developed cost reduction plans (high score on first driver of internal complexity), but the advantage is that they know each other quite well and have worked together on previous projects (low score on second driver of internal complexity)
• The project will require sophisticated data collected and analytics and the solutions the team delivers will need to be innovative and different from our current "business as usual" approach (high scores on the last two drivers of internal complexity

Based on this fairly straight-forward discussion and scoring, we were able to agree that the project was very complex and that special care would be required in setting it up and following it on an ongoing basis. Direct actions from my client included ensuring that the project team had a structured kick-off meeting, and that the team planned in ongoing meetings with him to report back on progress, obstacles, and risks. My input included ensuring that the team carried out appropriate analytics, understood the outcomes, developed appropriate conclusions, and communicated these to all stakeholders. Based on this structured process, the team delivered more than 20 initiatives that will improve profits both in the short and the long term.

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