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Some first steps to begin to change behaviors.
Well, in our last exciting episode, you might recall that it ended with the project team leader wagging his/her finger in my (the risk assessment/risk management (RA/RM) proponent) face and accusing me of wasting his/her time, money, and effort with this risk stuff. The newsletter article concluded with the queries: "On projects that take years to go from inception to fruition, what case can you make that might convince any project team that implementation of a cogent RA/RM process is well worth their while? In spite of the existing reward system, what can you do or say that will change their behaviors?"
IF I HADN'T BELIEVED IT, I WOULDN'T HAVE SEEN IT
Far be it for a guy like me - and you'd have to know me to realize how true this is - to attempt to convert you to "that old time religion," but I might as well admit right up front that at least some of the perceived "good" that emanates from a practical and well-implemented RA/RM process is a matter of faith. On long-term projects (years to complete), it really is partly a matter of "If I hadn't believed it, I wouldn't have seen it." I hate to admit it, but it's true.
Years ago, when the world was young, I worked in research support of the oil-and-gas-exploration arm of a major energy company. When I say "exploration" here, I mean actual "wild cat" well drilling (drilling in completely unexplored/untested areas) and not already-discovered-field infill drilling, etc. Every year, the exploration portfolio would contain on the order of 30 to 50 proposed wells worldwide. In a given year, the company might actually drill and realize the results from, say, about 20 to 30 of those wells. So, from the time someone got sanction to put a proposed project into the exploration portfolio to the time we actually found out the results of the drilling (whether or not it was an economically-successful venture), the elapsed time was, about, one to two years. In the energy business, this is really rapid-fire project execution. By the way, at that time, a "good" chance of economic success for any given exploration well ranged from around 15% to around 35% - that is, there was a pretty good chance that the exploration well would not be economically successful. This was generally true throughout the industry at that time.
Because of the yearly completion of, say, two dozen exploration projects, over the years it could be demonstrated that the success rate for exploration wells was low. To make a long story sort of short, when we implemented a consistent and holistic risk assessment process, it could be demonstrated that the success rate of exploration wells improved significantly. The positive impact of the risk process could be without-a-doubt touted because:
- Nothing else had changed significantly;
- The real-world results from these short-term projects could be calculated/documented;
- Our prediction of which projects would be most successful improved dramatically.
Improvement could only be demonstrated, however, because within a few years the great number of short-term projects allowed us to compile statistics about improved project success. Because nothing else had changed significantly in that same time period (no other new techniques had been introduced that could "steal the thunder" from the risk process), it was impractical to argue that implementation of the risk-assessment process had not dramatically improved our fortunes.
SEPARATE PERSONAL SUCCESS FROM PROJECT SUCCESS
Well, isn't that nice? How fortunate were we to have been working on a portfolio of short-term projects the results from which could be unequivocally known and documented? For portfolios of such sort-term projects in any business, demonstration of a positive impact of RA/RM will be similar. But portfolios of such projects are not the norm. Most projects take years - sometimes decades - from start to "finish." Often, at the "end" of such projects, it is difficult to demonstrate/document whether or not the project had been a success. Over long time periods there surely were many personnel changes, process introductions and removals, changes in scope, etc. So, in such situations, the perceived benefits from RA/RM-process implementation begin to fall into the realm of faith.
Those of us who believe in the RA/RM process can't imagine how it could fail to have a positive impact. However, if you are not a member of the choir, and you - a project manager for example - are charged with launching a project on time and within budget (and, of course, the schedule and budget both get "cut" as we go along), what might compel you to want to implement a RA/RM process? Remember, you (the project manager) are getting rewarded for successfully launching the project - this means on time and on budget. So, when the RA/RM proponent comes along and asks you to identify all of your project warts, record them for everyone to see, and implement threat-mitigation/opportunity-capture plans that would cause the threats to be less likely to materialize and opportunities more likely to be captured (i.e., spend money now on things that might or might not happen), why would you want to demonstrate such behavior? This, I think, is where we were at the beginning of this article - ah, nothing like progress!
The reward system is a primary driver of behavior. Sure, morals, ethics and such (if you believe in those things - just kidding) play a part, but the reward system is undeniably a major influence on behavior. So, the question becomes: How can we get the reward system to work in our favor - to encourage the use of a RA/RM process.
Just one approach is to separate a corporate employee's sense of security from the perceived success of a particular project. I always use the example of the assembly-line worker in a fictitious auto factory. Let's say that the worker on the assembly line linked hi/her job security to the sale of one particular car. If the worker saw serious flaws in that single car, he/she might be tempted to overlook or attempt to downplay flaws that could not readily be remedied so that the car would sell. In the project world, this is equivalent to a project-team member linking their personal fortunes to the success of a particular project. This philosophy seems strange for the example of the car-factory-assembly-line worker, but can be the prevailing attitude of corporate-project personnel.
Contrast this with the assembly-line worker who, more realistically, links his/her job security to the quality of the portfolio of cars that roll out of the factory. In this case, the worker knows that if the public perceives the line of cars to be of low quality, they will shop elsewhere and the car line and all of its workers will fall on hard times. In this case, the assembly-line worker is likely to point out flaws in individual cars so that a portfolio of the best cars they can build goes out the door. In the project world, this translates to a corporate project team member who links his/her long-term employment not with a particular project, but with the best portfolio of projects the corporation can assemble.
In the best-portfolio scenario, the reward system promotes individuals who "call 'em like they see 'em" with regard to threats and opportunities (risks) associated with a particular project. This philosophy aligns perfectly with the RA/RM process which promotes early identification of probable threats and opportunities and the establishment of threat-mitigation and opportunity-capture plans that will minimize the materialization of threats and the realization of opportunities.
So, how can we create an organization and a culture that promotes the best-portfolio reward system? That is, how do we encourage employees to take an objective view of their project and to want to spend money now to address potential (probable) threats and opportunities rather than attaining "hero" status later on by beating realized threats into submission with big bags of cash (i.e., firefighting)? This, of course, is outlined in detail (like this article, in layman's language) mainly in the latest of the three books referenced below and will be the focus of the next few articles in this series. Eventually, I'll get to the technical stuff - I promise.
By: Glenn R. Koller
References:
Koller, G.R., Modern Corporate Risk Management - A Blueprint for Positive Change and Effectiveness, J. Ross Publishing, Ft. Lauderdale, FL, 2007.
Koller, G. R., Risk Assessment and Decision Making in Business and Industry, A Practical Guide: 2nd Edition, Chapman & Hall/CRC Press, Boca Raton, FL, 2005.
Koller, G. R., Risk Modeling for Determining Value and Decision Making, Chapman & Hall/CRC Press, Boca Raton, FL, 2000.
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