November 19, 2007 – Automotive Sponsor Problems

It is never good when your mechanic calls and asks, "How attached are you to this vehicle?" Friday was not one of my better days from that perspective. I drive a ten-year old Plymouth Neon and normally it gets me where I need to be. Sure it leaks oil and steering fluid but the AM radio still works and three of the four door locks are still automatic. But Friday it decided to die on the way to work.

The mechanic said it would take about $900 to get it back up and running. Then there was the list of things that "need" to be done totaling another $1000. I just checked and my car is only worth about $2500. I felt like the sponsor of a project that has gone bad. Actually there were three things that drove that feeling home.

Return on Investment. The mechanic was the first to bring it up with his opening question about my love for the Neon. He could tell the cost of fixing it wasn’t going to be cheap. Prior to undertaking a project, a company needs to understand the ROI, both the costs and the returns. The projected costs are more than the expenses to complete the project. Don’t forget to include training, maintenance, licensing and other life cycle pieces.

These costs should be balanced by the expected returns from the endeavor. Savings are usual the first thing considered. How many people will I replace? How much time and money will it save. Add to these benefits forecasted increases in projected sales because staff can spend less time fiddling with the system and more time with customers. Consider that the new online experience may lead to more purchases. Customer satisfaction may net more repeat business. Think through the project purpose and project the positive results of success.

Lack of Information. Friday morning I certainly didn’t have enough information to decide whether or not to give up on my car. I needed a multiple choice question and was handed only a true / false option. How much was my car actually worth? What would it cost to get an comparable vehicle? Was it worth more as scrap metal? What could I really afford? Would there be additional expenses I didn’t anticipate? If I bought a different car, would it have more problems than this one?

When deviating from or adding to the project scope, a Change Request documents the final decision, but the discussion starts by answering questions. Sponsors expect project manager to supply them with the information to answer those questions. Why wasn’t it in scope to begin with? What are the consequences of not doing it? How much is it going to cost? What other options are there? If the answers aren’t readily available, you may need to request funding to research and find them.

Risk Management. Among the "other" items my car needs are new front brakes, brake fluid flushed and replaced, and my back breaks aligned. Total cost an additional $450. The risk of not fixing them is obvious. If you can’t stop your car, something else will have to. Whatever you use to stop it (another car, a brick wall, etc.) will probably cost more than $450. As with any risk I could Avoid, Transfer, Mitigate or Accept it. Buying a new car would avoid the problem. Making sure my collision insurance is up to date would transfer the risk. Getting the brakes fixed would mitigate the issue. I opted to accept the risk and postpone the brake fix to a future phase of the project. You may want to stay off Beach Boulevard for the next week or so.

It could have been worse, though. Had the car continued to run it would have completely overheated and destroyed the engine. I wouldn’t have had any choices at that point and my next blog would have been about purchasing a new car. Don’t hide project problems from your sponsor until things overheat and there are not choice left.

Sept 24, 2007 – Starting Over

I survived the first week at my new job. Starting over can be exciting and a bit scary. Having survived nearly 15 years in the consulting industry, I am no stranger to rebooting my work experience. Actually, I even wrote an article for Computerworld about the topic (The New Guy's Guide to Building Trust).

Upon reviewing the list of 10 steps in the article, I think I’m off to a good start. I issued meeting minutes, started identifying preconceptions and even created an informative status report. With this new adventure I have discovered a couple of other steps to add to the newbie list.

Don’t Burn Bridges. It truly is a small world. I have run into several people from previous workplaces that have either worked with me or with someone who knows me. Fortunately I can work with almost anyone and know enough not to make enemies. Had I been a jerk to any of these people I would be paying for it now.

Don’t Jump the Gun. Like a runner, you need to be careful to not leave the starting block before the pistol is fired. Within the first day or so at a new client I began introducing myself to the extended team as the project manager. It soon became apparent that there were already two project managers on the effort and neither one of them knew I was coming. That was just a little awkward. Check with your management to make sure the announcement has been made before you step on anyone’s toes.

Know the Currents. On a camping trip to Martha’s Vineyard as a teenager we visited a beach with a riptide, a dangerous current that runs parallel to the beach. As you swim, you may think you are heading straight out from shore when in reality the current has pushed you 100 yards away. The best example of this in business came from an advertisement friend of mine.

While working a deal at a new client, one of the female executives asked if his company had done the ads for product X. In fact they had actually won awards for those ads and proudly said so. The executive said, “Those are the most sexist, degrading ads I have seen and there is no way we will be doing business with the company that created them.”

Deliver Value Quickly. On your first day start thinking about your status report. What are you going to put on it at the end of the week? Whoever hired you took a chance. They will be looking to see how soon you can be productive and contributing to the team. Identify some things you can accomplish during the first week to show an early personal Return on Investment. One of the new PMO objectives is to create project development standards and templates. I was able to report deliver of several draft templates on Friday’s status.

It may seem daunting to start over again, but soon those feelings will disappear as you pick up your new challenge.

June 12, 2007 - Project Gamble: Hold or Fold?

One of my co-workers is an avid Blackjack player…and he is good at it. On any given evening he can make several hundred dollars playing. The casinos he visits have started changing decks and dealers more often when he is in the house. One of his secrets is to know when to stop. He tells me about other players that start to loose and then start up their bets in an attempt to make it back. Unfortunately they tend to squander it faster instead.

Some projects end up like that. The company doesn’t know when to stop throwing time, resources and money at a project that isn’t going to pay out. But how do you know when to fold and walk away from a loosing project?

Forget the Sunken Costs. Whatever has already been spent on a project should not be a major factor in continuing it. Like our bad gamblers the business thinks “We’ve lost so much, we can’t give up now.” You can’t recoup the budget used to date but you can stop the flow.

Calculate the Cost to Complete. Realistically, how much will it take from this point to finish the project? Is it an acceptable amount? If the budget isn’t there, try again next year.

Revisit the ROI. Has the Return on Investment changed at all? ROI is always difficult for infrastructure type projects where the return is not necessarily found in this specific project. Add to the ROI the things you won’t be able to accomplish if the technical pieces aren’t in place. After recalculating the anticipated return compare it against the Cost to Complete. Since the sunken costs have already been spent, they don’t play a big part in this decision. It is like driving three quarters of the way to an amusement part and encountering a monsoon. It doesn’t matter how far you drove, if you aren’t going to have fun when you get there why drive any further.

Check the Requirements. If the requirements have changed drastically from the beginning of the project is isn’t the same project. It may be better to kill this one and start something completely new. Dragging the old baggage to the new requirements is counterproductive.

Directional Change. There are several things that can result in the company taking a new direction. New management may decide to drop a particular production line. Technology leaps may out pace the current project making it obsolete before completion. The market may not exist any more. Any of these factors can crumble the foundational purpose of the project.

Resource Wasteland. When you no longer have resources working on a project it is dead. I’ve mentored project managers who are issuing status reports on a project with no activity for months. The status report is easy to produce, if not a little redundant, but funds are being tied up that might better be used elsewhere. Unless the business reprioritizes the projects you can revisit this one when the resources show back up.

It may not be easy to walk away, but sometimes it is the right thing to do.

May 14, 2007 – Less Obvious ROI

When I was working with a system support group we had to scramble each month to determine the Return on Investment (ROI) for the system enhancements. Changes ranged from new reports to added functionality with other odd things in between. Needless to say, determining the ROI for adding a product color field to a report lacks a certain excitement and requires a lot of creativity. Technically it is the responsibility of the business group to assign ROI, but it generally falls on the technical team to make it happen.

I was particularly bothered by a formula one business group used to calculate the ROI. It was based on the number of hours expended to do the change and was calculated as follows:
Less than 40 hrs 100 * $105 = $10,500.
40 – 60 hrs 200 * $105 = $21,000.
Greater than 60 hrs Actual Hrs * 2.5 * $105
It had nothing to do with the value of the product, only the time expended to do it. With that logic we should have taken longer to do everything so we could save more money. Since ROI is the business’s responsibility whether it makes sense or not that is the calculation we use when ROI isn't obvious.

So are there any decent ideas for determining more realistic ROI values? Some are obvious like replacing inefficient hardware and decreasing the need for resources. Other times you need to dig for value. Three examples are time savings, employee satisfaction and client satisfaction.

Time Savings. Does the change allow people to do more in less time? One change we made allowed the users to copy and paste data from one system to another with a couple of key strokes. This simple change increased their productivity and save approximately 30 seconds to retype the name, address, phone numbers, etc. from one system to another. With 300 users processing 5 calls a day over the course of a year it would save $342,562 (2.5 minutes each day * 300 users / 60 seconds in a minute / 60 minutes in an hour * 261 days in a year * $105 an hour).

Employee Satisfaction. If turnover is a problem, changes like the one above can help with retention by impacting the way employees feel about the work they do. Each improvement can be ranked as low, medium and high based on how much it would contribute to retaining an employee. Assume it costs $5000 to replace an employee. If it is something slightly annoying the low value may be $1000. Medium might be $3000 and that thing everyone complains about would be $5000. Multiply that value by the number of employees impacted by the change. Ten employees using a high value change would have an ROI of $50,000.

Client Satisfaction. One company I worked for assigned a general value of $200 flat rate for client satisfaction. That seemed a little low to me and everyone had forgotten why $200 was chosen. For yours try basing the value of a modification on the likelihood of the client using your service or buying your product again. Dropping response time by customer service by 20 seconds may increase the loyalty in 1 out of 50 clients. What does an increase of 2% in repeat purchases do for your profit?

In the end the business owns ROI calculations and should have the final say in what is decided. It isn’t an exact science but together you can develop a meaningful way to attribute value to your changes.