April 9 – Avoiding Hindsight Management

This article was originally published at http://projectmanagementlearningcenter.com/.

Growing up in rural western New York we had cold, long winters. Natural gas wasn’t cheap even then. With 4 sons and a chain saw, my dad would cut enough firewood to heat a big, four-bedroom, 2-story home from October to April.

Cutting firewood has its dangers, though. Those large oak and beech trees don’t fall quietly to the ground and stack themselves into neat, tidy rows. This manly job sparks famous last words like:

“I wonder how close I can drop this to the truck.”
“The ground looks solid enough to drive on today, doesn’t it?”
“Why is that tree hung up like that? Maybe if I pull on this…”
“What does poison ivy look like again?”

In hindsight these are all great questions but they should have been answered before taking another step. Risk Management begins with asking questions about what could possibly go wrong and then determining what to do with the answers.

Once you have identified your risks, there are 4 ways to deal with them: avoid, transfer, mitigate or accept. We will take a brief look at each of these and weigh them against their cost.

Avoid. The best way to keep from dying from a shark bite is to never go near the ocean. To the best of my knowledge, no one vacationing in Bolivia has ever been killed by a shark. On your project there are simple things that will help avoid risks. Developing detailed specifications will help reduce the risk of creating the wrong product. Choosing a known, stable development platform will lower the time expended on the learning curve and potential technical hang ups.

The down side to avoiding risks is that you limit your options. Detailed specifications limit flexibility during development. Using existing platforms will take you off the cutting edge.

Transfer. By finding someone else to take the responsibility of the risk you can transfer it to them. This is usually done for financial purposes. One way is to contract with a 3rd party vendor to fix bid a portion or the entire project. This transfers the risk of going over budget to them. Insurance is another form of risk transfer that we are familiar with. We buy insurance against the risk that our house might burn or our new gadget might break.

The problem is that this doesn’t really reduce the risk. It simply passes ownership of it to someone else. Because they won’t take it on without some reward it will probably cost you more to transfer your risks.

Mitigate. Mitigation is a proactive approach to reduce the probability of a risk occurring or the impact to the project should it happen. Documenting, assigning and tracking specific actions that will reduce the risk’s probability or impact allows you to manage risks effectively. If there is a risk that IT Architect Committee may not approve your approach, you should work with members of the committee from the beginning of the design to incorporate their ideas early.

For more information on Risk Mitigation refer to the Risky Business series at http://www.cuttingsedgepm.blogspot.com/.

Accept. Sometimes the best way to handle a risk is to not take action. It may be that the cost of avoiding, transferring or mitigating the risk is too high. The probability or impact of some risks is not worth the effort to deal with them. You may want to develop steps to take if the risk turns into an issue (i.e. contingency plan), but action other than keeping an eye on it isn’t necessary.

You will never completely eliminate risks, but by taking one of the options above you can lower the impact of it to your project. With better foresight you won’t need as much hindsight.