A
t the 2008 Beijing Olympics 110-metre hurdler Lolo Jones was
on course to win her first gold medal. Jones had failed to
qualify for the previous Games but four years later she was
fitter, she was faster and she was the firm favourite. With eight hurdles
behind her Jones was less than 100ft from the finish. Then disaster
struck.
Jones’ right heel clipped the ninth hurdle. Not very hard, but it was
enough to knock her off her stride. By the time she had recovered her
rhythm the other runners had overtaken her. Jones finished seventh.
I’m Bryan Barrow and in my work as a project consultant I’ve seen first
hand how dozens of companies manage their risks. Today we’re going
to talk about:
“
you all kinds of statistics on the cost of failed projects. I’m sure you
One study put the
could quote some at me too. But when you look at the whole bunch of
cost of failed projects them the key message is pretty much the same: too many of our
in the UK at almost projects are delivered late and over budget, if at all and too many fail
to deliver the expected benefits.
£19Bn. That’s almost
a Bernie Madoff every The cost of this failure is measured in billions. One investigation by the
”
other year Times newspaper and Computer Weekly magazine put the cost of
project overruns at almost £19Bn a year. Nineteen. Billion. That’s
almost a Bernie Madoff every other year. It’s criminal, but no-one’s
going to jail over this. What other part of business could get away with
that? If the insurance industry ran like this it would go broke.
And it’s not that we are not capable of delivering great results. We are.
A good example of what great project management can achieve is Y2K.
Here was a problem
• But only finally got around to doing something about in the late
nineties.
The cost of fixing legacy code and preparing for the turn of the century
is put at around $300Bn. When the clock ticked Jan 1, 2000 no major
problems were reported. Almost every bank worked fine, no major
power outages were reported, aeroplanes still flew and the whole world
went on with its normal business. Some say that the whole thing was a
hoax, a con, a put-up job. But we know different.
So we are capable of delivering, but all too often we fall short of that
standard.
Let’s take an entirely fictional project manager: we’ll call him Buddy.
Buddy’s in a jam. He’s in danger of getting fired because his latest
project is late and way over budget. The one before was too. Buddy’s
running around doing a hundred things at once in an effort to “save” his
project and his career. He’s stressed up to his eyeballs and he’s
working late every night. He’s living on a combination of strong black
coffee and Red Bull. Buddy hardly sees his family and when he does
he’s not the easiest person to be around.
Here’s some stuff that Buddy doesn’t know. We’ve all seen something
like this:
“ Instead of looking at
time versus costs,
look at time versus
• Time along here and Cost down here;
• The yellow area – a little bit over budget and a little bit late – is a
”
risk bad place to be;
• This red area here – here be dragons! Here is where you really
don’t want to be, but here is precisely where many of our
projects end up.
But here’s another way of looking at it. Instead of time versus cost
we’re looking at time versus risk. If Buddy fails to control his project’s
risks they get up to here and then suddenly it’s all hands on deck. The
only problem is that Buddy is on the deck of his own personal Titanic –
he can rearrange the chairs all he wants, his ship is still heading toward
the iceberg.
“
While Buddy is running around trying to bail out his sinking ship, the
So why does someone
people on his team are weighing up their options. Some of them are
allow risks to rise to already leaving, like rats off a sinking ship. You can’t blame them; they
this level? To me it can see for themselves what is happening. But the first rats off the ship
are the strongest swimmers. These are the ones that Buddy needs if
boils down to four he’s to save his project. And while Buddy has his hands full with his
things
” first problem, along comes another. Then another. And now Buddy’s in
permanent fire fighting mode.
It was Buddy’s failure to keep his risks under control that did for this
project. It is Buddy’s inability to learn from his mistakes that means
that his next project will also fail.
So why does someone like Buddy allow risks to rise to this level? To me
it boils down to four things:
• People mistakes;
• Process mistakes;
• The third is mistaking risks for issues and treating them in the
same way. Risks are things which have yet to go wrong. If you
deal with risks at the appropriate time then they don’t go on to
become issues in the first place.
• The first one is not publicising the risks to key stakeholders. This
means that too many projects get a green light that they
probably don’t deserve because the stakeholders are unaware of
the real level of risk they are running when they authorise the
project.
authorise the
• Identify your key risks and produce an effective risk management
project
” plan;
• Communicate your risks in a way that gets you the resources you
need, and;
• Manage your risks so that you avoid making mistakes that sink
your project.
Here’s a straightforward approach that will work for just about anyone.
Identifying risks
”
Don’t just do this on your own; involve your team and your key
this approach stakeholders in this. They may come up with risks that you wouldn’t
have thought of if you did this exercise on your own.
Once you’ve identified your potential risks, quantify them. Many of you
will be familiar with the idea of ranking the probability and impact of
risks as high, medium, or low. I don’t recommend this approach
because it’s not clear which of the group of high risk items requires my
attention first. Instead, use a percentage for the probability and, for
the impact, the actual time (or money) it would take to fix the problem.
Multiply these two together and you’ll see the likely impact on the
project. This is much better because now you can rank your risks by
likely impact and proximity and see straight away which ones you have
to deal with first.
Once you’ve quantified the risks, the next step is to decide on what you
can do about them. You need to look both at what you can do to
prevent the risks as well as what you’ll need to do to limit their effects if
you fail to prevent them. You may identify several things that you can
do for each risk, both in terms of preventative and contingency actions.
Spend more time thinking about preventative actions - these are usually
cheaper and easier to implement.
to do, then you can switch from preventative action to your contingency
immediately if you need to. There is a strong possibility that you will
never need your fallback plan. However, it is better to have a plan that
you don’t need than need a plan that you don’t have.
“
now? Now you have to tell people about your risks in a way that
Not starting a
creates action. So the second thing is to communicate your risks.
doomed project is Here’s how you do that.
the smartest thing
that you can do
” Communicating risks
First produce a risk management plan that:
• Identifies the key risks to the project and describes the actions
that you’re planning to take to manage them;
• Confirms whether or not you think the project is viable, once the
management of risks is factored into the revised plans, budgets
and timeline. Not starting a doomed project is the smartest thing
that you can do.
You may have identified a number of significant risks which have both a
high likelihood of occurring and a high cost to mitigate. If these risks
cannot be prevented or avoided and the cost of dealing with them is too
high, then your project is a non-starter and you have the arguments –
and the evidence - to persuade your sponsors to stop the project. If
your stakeholders still want you to continue with the project it will be
based on a better understanding of the risks and the likely outcome.
Next, you’ll need to create a realistic project budget. Many of you will
work in organisations where ten percent of the project budget is added,
“as contingency”. Why 10%? Your true project budget must cover:
• The cost of the work you aim to complete – the in-scope project
costs;
• The cost of dealing with the risks you’ve already identified, and;
From your risk assessment you already have an idea how much it may
cost you to deal with the risks that may occur. Once you’ve created
your contingency plans you can decide how much you should spend to
deal with the identified risks. This method is easy and far more
accurate than just praying that 10% will do.
• If your project is viable, but has significant risks, tell them about
10% will do
” the risks and your proposals for managing them. Your goal here
is to educate them and get their backing for your approach,
including your approach to managing the risks, and;
The final thing you need to do is secure the contingency funding that
you need, in advance. You’ll be able to explain precisely what extra
money you need for your contingencies and when. If your sponsors
can’t afford the cost of the contingencies you can work with them to
alter the scope of the project, avoiding the biggest risks. Securing your
contingency project funding now also helps you to avoid delays later on,
because you will be able to draw it down as you need it, rather than
having to stop and wait for the money. More important, your finance
director won’t be hit with a request for funding out of the blue, but
instead they’ll be able to plan for the expenditure. Believe me they will
love you for this!
Managing risks
Start off with your top ten risks and take the actions that you set out in
your risk management plan, starting with the preventative actions. The
Pareto principle applies here: 20% of your risks will cause 80% of your
problems, delays and fire-fighting. Now, I’m not suggesting that you
only work the top ten risks; you need to work on all of them, but let
your project team members be responsible for managing the risks on
the products that they are working on. If you’re the project manager
you should keep your personal focus on the top ten.
I carry a list of my top ten risks everywhere and I recommend that you
do too. By dealing with these first you’ll overcome the biggest
obstacles. You’ll deal with the root cause of what would have been
future issues by taking action in time to avoid problems, the kind of
problems that tripped Buddy up. As a result you’ll be able to spend
more time on the remaining risks. Pretty soon you’ll see that you have
more time available to work on planned project work, rather than
firefighting all day. This in turn means more risks get resolved faster
and increases the certainty of success. This will help you to build the
kind of momentum that eventually makes your project unstoppable.
However, this will only happen if you keep on top of your risks. So the
second thing you need to do is to review your top ten risks on a regular
basis. I include a review of both risks and issues as part of my weekly
team meetings. The key thing is to review the risks before looking at
the issues, so that we don’t overlook the long term actions we need to
take if we’re to avoid future issues from flaring up. Each week we work
through the top ten risks – as a team. We discuss progress, we record
agreed actions and, when appropriate, we update the ratings for both
probability and impact of the risk. Both of these should change as a
result of our efforts.
The result is that at any time my whole team know which risks to focus
on, how we are doing with them and what we need to do to maintain
momentum. As we bring our biggest risks under control, others will
replace them on the top ten risk log, but hopefully the overall level of
risk will continue to fall. That’s what we want to see happen.
• People outside the team also know which risks to focus on and;
• It shows your key stakeholders how, over time, you are reducing
your risks and achieving your goals.
“ Stopping a doomed
project - before it
bleeds you dry - is the
Once your stakeholders see that you’re taking action this creates a force
which becomes overwhelming. People love to back winners and when
they see that your project is moving ahead and under control they give
it their support. This is what eventually drives your project forward
second smartest thing towards a successful outcome.
”
you can do If, on the other hand, things get worse as the project progresses,
despite all your efforts, your updates will say this. Your stakeholders
will know exactly what’s going on, no matter what. It may be that the
project reaches a point where you need to pull the plug. If that’s the
case you’ll make that recommendation, rather than waste time, money
and effort. Not starting a doomed project is the smartest thing you can
do. Stopping a doomed project before it bleeds you dry is the second
smartest.
• Your project’s risk levels will fall as you take proactive measures
to reduce your risks;
• You’ll see that as you approach your target delivery date your risk
levels will be low and falling, rather than high and rising, and;
So, to wrap up. Today we’ve talked about why we need to manage risk
if we’re to tackle the criminal level of waste and failure associated with
projects. We’ve looked at the key people, process and publicity
mistakes. We’ve explored steps we can take to identify risks,
communicate them and, if our project is worth doing, to manage them.
There will come a time when all projects are managed this way. The
question is when and by whom? May it be now: may it be you.
www.bryanbarrow.com
Do you complete your projects on time, on budget, every time? Or are you too busy fixing today ’ s problem
to think about tomorrow ’ s deadline or the finishing line? If you would like to take complete control of your
project and deliver it successfully then this talk will help you.
Bryan specialises in helping IT Directors who are frustrated because they can't get their
projects delivered on time and on budget. With Bryan's help they are able to complete
projects faster and at a lower cost, so they go on to profit from delivering on time. Bryan
works as a professional speaker and consultant. He runs risk management seminars and
workshops and provides executive coaching.