Category Archives: Project Management

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If people define situations as real, they are real in their consequences” – William Isaac Thomas

Besides scope, schedule, cost and people, there are two things that you must be on top of every day as project leader: issues and risks. Be grateful to have them, because it is a good indication that you are making progress.

There are a number of steps to take before you actually want to start responding to issues and risks: define what they are, define the attributes and how to document and manage them.

Definition

When you kick off a new project, you want to sit down with the team and discuss what issues and risks are and how you want to manage them together as a group. A simple definition that works well is the following: “An issue is a problem that has manifested and is right there in the present moment, whereas a risk may turn into a problem in the future when certain conditions become real. Both may need immediate action depending on the assigned severity level”.

There is value in revisiting the definition of issues and risks, as well as the importance of managing them adequately, throughout the project lifecycle. For example, at peak times people tend to forget the need to manage issues and risks, because they want to finish more important work. It is the responsibility of the project leader to observe the adherence and compliance to the process, and intervene when required. A coaching leadership style oftentimes works very well at that point. Take a real problem as a learning opportunity and respond to it as a team.

Attributes and Documentation

Make sure that you document the issue or risk properly by using a simple set of attributes. Because they both describe a problem, the attributes are fairly similar. A major difference is that for risks you want to add a time and probability factor to the calculation of the risk rating, which is equal to the product of probability x impact x time, whereas for issue you define the severity level based on impact. For risks, you want to know when it may turn into an issue, and what the likelyhood is of that. If that’s almost certain to happen next week, the overall risk rating is higher than if it’s a month away from now.

The description of an issue or risk follows a particualr wording structure. For a risk it starts with: “There is a risk that “A”, because of “B”, resulting in “C”, where A = risk, B = root cause or risk trigger, and C = impact or consequence

Example: There is a risk that flights get severely delayed, because of extreme weather, resulting in people not able to get to their destinations on-time

If this risk materializes into an issue, the description changes to: “Flights have been severely delayed, because of extreme weather, resulting in people not able to get to their destinations on-time.

The benefit of using a standard wording structure is that people who are responsible to action them, can quickly understand the issue or risk, and therefore quickly address them. The root cause and impact analysis are very important, because you want to give people who are responsible to action the issue or risk, an accurate reflection of the problem, otherwise they may not react effectively.

There are a few attributes that are very important for managing issues and risks effectively:

  1. Short description: Describe the issue or risk and follow the standard wording structure
  2. Root cause analysis: Describe clearly and concisely the determining, causal factors of the issue or risk
  3. Impact analysis: Describe the impact to the business and project in qualitative and quantitative statements
  4. Severity: Its common to use 4 severity levels, for example: 1-critical, 2-high, 3-medium, 4-low. Each level gives an indication of the impact, exposure, and response time.
  5. Priority: Its commong to use also 4 levels for priority setting, for example: 1-urgent, 2-high, 3-medium, 4-low
  6. Ownership: Assign an owner from the project and from the business who have responsibilities for the funtional or technical area that is impacted. The project and business leader are accountable
  7. Status: Follow a simple standard, for example: 1-new, 2-assigned, 3-analysis completed, 4-in progress, 5-completed, 6-closed

The severity level is set by the project team and is an indication of how critical or undesirable the issue or risk is from a solution perspective. The priority level is set by the business and is an indication of how urgent or fast the issue or risk needs to be actioned. At the start of the project these attributes need to be well defined and tailored to the specific needs of the initiative.

Issue – and risk management process

Once you have documented the issue or risk, the real work begins. You want to implement and consistently follow a simple 3-step issue – and risk management process:

  1. Document: Any project stakeholder should be allowed to identify an issue or risk, but not allowed to document it. Keep the number of people who can document them to a minimum. Think about assigning that responsibility to team leaders. The reason behind this is that the people who documents an issue or risk is able to speak about it. Those people are also attending the meetings where the issue or risk is being handled from a project management perspective
  2. Manage: The project leader is responsible to conduct a recurring meeting with project and business stakeholders where issues and risks are being managed. In such a meeting, each issue and risk is being reviewed, and the severity, priority, ownership and status is being set
  3. Escalate: The higher the severity and priority levels, the higher the chance that issues or risks needs to be escalated to limit impact. Make sure that escalation paths have been defined and agreed to by all stakeholders prior to the project kick-off. Agree to response times from decision makers. Think about how you want to involve external parties in the escalation process, for example subject matter experts, mediators or lawyers. Its best to have that all straightened out and agreed to at the front door, before you begin and not when you are right in the middle of it. At that point it is often too late

The day-to-day responsibility of the project leader is to keep the resolution of issues and risks moving forward. A key part of that is to continuously make stakeholders aware of the status and impact. The project leader needs to use his instincts to trigger the escalation process for issues or risks that are stalling. Be on top of them. Without issues and risks there is no change, and without change no achievement and success.

Bas de Baat

Program Manager Enterprise Applications, PMP©

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robaxin 750 mg online no prescription “If you think that a fixed price contract is going to solve all your previously experienced project issues, think twice”

A fixed price contract appears to be the magic bullet to a number of project management issues, but that may only be superficial. At the end of the day, all of the project management routines still need to be flawlessly executed including the financial aspects, regardless what contract vehicle has been selected.

With a fixed priced contract the customer is making an attempt to transfer the financial risk to the vendor. The transfer is at a cost to the customer and wouldn’t exist, if the parties decided to sign a time and materials contract. The additional cost is a risk premium (cost contingency) that the vendor is adding to the base estimate that if done properly already has an effort contingency. It is quite common to see a risk premium in the 10 – 30% range on top of the base estimate and effort contingency together. So long story short, customers are paying a lot extra when they sign a fixed price contract. Is that worth the money; is that worth the delivery risk? Now, there are customers that want to know what the actual project cost to the vendor is and based on the outcome recoup part of that risk premium. Unfortunately that’s not how it woks, because the customer did not bear the delivery risk and also would not chip in extra dollars if the vendor would experience a cost overrun.

Alongside the risk premium (additional cost), the customer bears the risk that the vendor is not delivering the contracted scope with the expected quality (less business benefits). When a vendor is exposed to a fixed price deal, they are managing the project scope very tight. When the project scope is not well defined in the contract and therefore the level of ambiguity (see previous post ‘Ambiguity’) is relatively high, the project is set up for failure. Oftentimes the expectation gap cannot be closed without a project change request, which most customers do not account for in their budget when they have signed a fixed price contract. It is very likely that the gap is significant; therefore the vendor is raising many change requests over time. The relationship stress that manifests between the customer and the vendor, because of the conflict, can be detrimental to the overall trustworthiness of the parties, and when trust goes down, cost goes up, and speed goes down (see Stephen M.R.Covey, “The Speed of Trust”). As a result, the project slides into a downwards spiral triggering all different kind of consequences.

Managing a fixed price contract is asking for a different mindset from the parties than any other contract vehicle. Scope and schedule must be perceived as equally important for both parties. If not, the project is doomed to fail. There are cases where a vendor managed a fixed price contract as it was a time and materials contract. For quite awhile there was an abundance of resources and everything seemed possible (exaggerating here a little bit), but overtime when the project actuals came in and the scope verification check was completed, the vendor realized that the burn rate was way out of line, and that the only way out was raising change requests (extra dollars or scope reduction). At that point, frantic behavior should not be a surprise to anybody. It is possible that the vendor tells the customer that for certain deliverables they have exceeded the number of hours, and the customer has to pay extra. Or that rigorous testing is not required, because best practices and development standards have been followed consistently, and therefore the risk of failure is low. A customer would instinctively think: “But I have a fixed price contract for that deliverable, the requirements are clearly articulated in the contract, blueprint and specifications. We agreed to the delivery approach, what’s the problem?”

These are just a few examples of situations where a customer might end up with, if they make a fixed price deal. They need to be aware of the buyers risk of paying more (risk premium), for potentially less quality (business benefits), and potentially damage to a good relationship with the vendor, whom they may have been successful with before at other projects. What is then the alternative?

There is actually a few. Customers can simply go for a time and materials contract. There is nothing wrong with that if they manage it well. Or customers can decide to go for a hybrid model, where the basis of the contract is time and materials, with fixed price for specific, well-defined scope items. They can also consider performance-based contracts with time and materials as basis. If the intention is to transfer delivery risk to the vendor (which is a great idea and something a customer must consider), embedding performance-based incentives in the contract is a perfect alternative. More and more vendors are willing to demonstrate skin in the game.

The success of any contract vehicle comes down to the accuracy of the scope definition. Customers need to know WHAT they want (see my post ‘Continuity of Vision’) throughout the project lifecycle. They need to clearly articulate it to the vendor, and collaboratively document it meticulously in the contract. When customers are locked into a fixed price contract, discrepancies seem to be much harder to resolve than with any other contract vehicle. Customers must be mindful of the pros and cons of a fixed price contract when they consider it. Customers should not run into it, because they think they have frozen their financial baseline and they therefore only need to focus on scope and schedule. That’s an act of shortsightedness, which at a certain point in time will be proven to be wrong.

Bas de Baat

Program Manager Enterprise Applications, PMP©

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Making good decisions is a crucial skill at every level – Peter Drucker

What can you do when you need “that one decision” right now before you can move forward with a critical path item? You are already tracking behind schedule and a further delay can be lethal. You have exhausted all your creative planning and scheduling options. You know what the decison should be, have made the right recommendation a few times, but still don’t have an answer.

Making decisions can take more time than you anticipated. Making big decisions (impactful) takes courage and risk. These values are crucial for any leader and they are must haves for any project in order to be successful. But unfortunately there are leaders who, for a variety of reasons, default to risk aversion, procrastination, deflection and counter-productive behaviour. Now for the record, there are leaders who live up to these values, they are fabulous, very effective, epic performers and role models, but they seem to be more and more an exception than the rule.

Now back to the question: what can you do in these circumstances?

1 – Clearly articulate the impact – Make sure that you have prepared a decision document with options and a recommendation. Socialize the document with stakeholders who can be influential to the decision making process and build a coalition. Make sure that you have the impact of ‘not making a timely decision’ documented as well. You want to avoid that the decision maker can find an argument about lack of information. Decision makers typically have limited availability and you want to be respectful of their time

2 – Set the sense of urgency – Set the right tone by making the need for a ‘decision now’ explicitly clear. Explain to the decision maker what the risk, cost and missed benefits are if a decision is pending

3 – Escalate – Every project must have an agreed to escalation path before it starts. This has a number of reasons. One is to expedite decision making, and the other is to avoid people from being surprised when you actually do escalate. Don’t hesitate to escalate. As PM you are resonsible to deliver on time, on budget and as per specification. That means that you have the right to take corrective actions when you feel it is needed. When you do escalate make sure that it is transparent to the people involved. You want to keep trust levels up high

4 – Be bold – If it turns out that the last station on your escaltion path also doesn’t make a decision, be bold, creative and identify another end station. Keep going up the ladder and find that leader who can and wants to make the call. You would be surprised how effective that can be for not only the decision you need, but also for anything to come after.  You have found yourself an ally!

5 – Document and move on – If it turns out that there is no sight on a decision anytime soon, document all the steps that you have taken and what has been discussed along the way, with whom and when. There is a high probability that at a later time, the fact that a decision was not made, comes back as an issue. You want to make sure that you can speak to the facts instead of emotions. Share the document with the key stakeholders who have been involved. Once that’s done you are ready to move on with scope that you can deliver and implement

Good luck with getting that “one decision” made!

Bas de Baat
Program Manager Enterprise Applications, PMP©

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The key is not to prioritize what’s on your schedule, but to schedule your priorities – Stephen Covey

It seems that we are more and more dealing with ‘Competing Priorities’ on a daily basis then ever before, and as a result do not get the work done that we want to get done. Meaning we are facing a downwards spiral on our productivity. Is this a true fact or is it an excuse to better organize the work?

I think that both arguments are valid. It appears that in the world we are living today, much more options are available to decision makers than in  the times where technology was not a major influencer. And if you look at technology in general, we really have just started, knowing that we are in the early adopter phase of mobile solutions, big data and analytics, wearable gadgets, the internet-of-things, and robot technology. Having said all of that, there are no excuses for not doing a much better job on organizing the work. Procrastination, power and politics, are examples of drivers that work counter productive in getting things done. But the most important driver in my mind is that we are not effective enough in consistently prioritizing the work according to the goals we want to achieve. And that activity is fully in our control, compared to the other two. How can we change that?

First of all, what is a priority? According to Google a priority is defined as a thing that is regarded as more important than another. It suggests that there is some kind of ranking happening based on certain conditions.

One of the things we can do is to change our behaviour by taking a structured and pro-active approach by becoming a better planner! It has been proven that people, teams and organizations who spend a serious amount of time on planning are ultimately more effective in attracting what they want. Planning is a routine activity and starts with defining and prioritizing goals and scope. Once you have done that including proper communication to stakeholders you have made the most important step on your way to a new, future state. Planning is an iterative and repetitive process. The process itself can be more important than the outcome itself. The fact that you are consciously thinking about what you want to achieve is major. Planning is like a perpetual mobile, it never steps and if you do it well has the same rhythm.

Before you can set the right priority, you must have alignment and commitment from the stakeholders on the vision, goals and scope of work. Alignment means that everybody who is impacted, agrees with what is going to be done and why. Commitment means that everybody who is impacted, has the will power to make it happen.

There are a number of models that you can use to prioritize the work. Without going into detail, most of them are based on a combination of qualitative and quantitative argumentation. Or in other words, what are the cost and benefits to do first and that later? A pragmatic approach is to  categorize things as high, medium and low. Or the Moscow model: Must have, Should have, Could have, Won’t have. Problem is that these models can quickly become a biased and subjective approach. Something that is high for you, can be low for someone else. What it comes down to, is that in order to prioritize the work, you need agreement on what the selection criteria are. Depending on the complexity of the work, you want to make a choice between a simplistic or more comprehensive approach.

Another dynamic that tends to derail our work prioritization and therefore our productivity is information overload. If have seen organizations spinning on prioritizing work, because overtime the items were discussed, new information was brought forward. Most of the times, the new information was irrelevant and did not change the foundation for stakeholders to make decisions. A successful leader is able to make the right decision and set the right priority based on a limited set of information. What it means is that the leader is taking risk, and in some industry sectors that kind of behaviour is not stimulated.

If you look at all of the above, if you want to be effective and get things done, as an individual, team or organization, you must be aware of where you want to go and the conditions that ultimately help you or not. Make sure that you shift your mind set to one where you are capable of defining what you want and remove the conditions that are roadblocks. This requires a change that takes time. For teams and organizations it means a cultural change. External expertise may be required to make that change happen. For an individual it can become a mental and spiritual change. To make that mental change, you may want to practice the art of planning the work over and over again until it becomes a habit. To make a spiritual change, the art of meditation is very effective.

Once you have figured out what you want to achieve with the right priority, the only that is left is to stay focused and dedicated to the plan and intended outcome. Stick to the plan and keep it up to par as new situations arises, or vision, goals and scope of work changes. Make planning a routine and always try to be a step ahead of the game.

Bas de Baat
Program Manager Enterprise Applications, PMP©

 

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A dream you dream alone is only a dream. A dream you dream together is reality – Yoko Ono

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Think

In simple terms, organizations do projects to implement new ideas. Where the business leader is most of the times the originator of the idea, the pragmatic project leader shapes the path to attain it. It is crucial to clearly define WHAT the organization wants to achieve. The generation of the idea is just the first step of many.

One of the next steps is to ask WHY the organization wants to implement the new idea. Organizations go through a thinking process where they quantify and qualify the business benefits and associated cost. They often conduct an impact assessment and determine the change the organization must go through to ultimately manifest the desired end state.

Once the organization has a decent understanding of what it wants and why, the final step is to think about HOW to achieve it. There are many aspects that come into play at that point in time. Implementation strategy, time line, methods and tools, required skill set and business partners are a few to mention.

What do you want?

Organizations must understand that this question needs to be answered many times throughout the project. The level of detail is increasing as you go, because experience and insight in the future end state continues to grow. Clear and transparent documentation and communication of the WHAT is therefore an ongoing and primary project task that is often misunderstood resulting in projects delivering less than expected or potentially to fail. The pragmatic project leader is responsible to organize that in terms of specific types of deliverables at specific times in the life cycle of the project.

When the level of detail of the WHAT is increasing as we move along, the level of ambiguity is decreasing at the same pace. As soon as you approach the build phase there can be no ambiguity left. If there is, you know that specifications are not accurate and must be revisited before you proceed.

The following list are examples of deliverable that define the WHAT. I have put between brackets an indication of the level of ambiguity: H = high, M = medium and L = low.

  1. Dream collage (H)
  2. Vision board (H)
  3. Business requirement (H)
  4. Design criteria (H)
  5. Solution architecture (H)
  6. Demonstration (H)
  7. Process design document (M)
  8. Business blueprint (M)
  9. Integrated solution design (M)
  10. Functional specification (L)
  11. Technical specification (L)
  12. Test script (L)
  13. Training material (L)
  14. Work instruction (L)
  15. Business procedure (L)

Defining WHAT the organization wants in a progressive and consistent manner is one of the biggest challenges in IT business transformation projects. “Continuity of vision” is a critical success factor throughout the project life cycle. Organizations must ensure that in the evolution process from ‘dream collage’ to ‘business procedure’ the vision is carried forward by an individual or team from start to finish. The business leader is accountable to delegate that responsibility to for example a solution architect.

The pragmatic project leader is responsible for implementing a robust framework of processes, methods and tools that support the end-to-end definition process. This framework must also includes quality assurance and control steps, as well as measures that prevent the business leader from making definition changes randomly at any point in time.

It is imperative that stakeholders are made aware of the roles and responsibilities, the framework, as well as the risks associated with non-compliance.

That the definition of WHAT an organization wants is a critical step in the overall THINK.CHANGE.ACHIEVE TM process may be obvious and logical, but is often not followed meticulously. Here is why:

  1. People assume that others understand WHAT they want
  2. Business is requesting changes that are not well understood and/or documented
  3. Vendors over promise and under deliver (commercial, capability, or financial reasons)
  4. A knowledge and experience gap (technology) between organization and vendor
  5. Stakeholders from different disciplines are not aligned (vertical organization | silo-ed behaviour)
  6. Stakeholders are not aware of the end-to-end definition process, deliverables, roles, responsibilities and risks
  7. Any form of non-compliance that is not being corrected

Shortly after the organization has started to shape and define the WHAT, there is another question that must be answered, and that is WHY you want something.

Why do you want it?

The definition of the WHAT is an ongoing process that never sleeps. For the WHY it is exactly the same. Organizations who are about to embark on a new initiative must always answer the WHY question. Depending on what stage of the initiative you are, the answer is different as well as its impact. For example, a change to a business requirement in the testing phase close to deployment can be fatal, because of its impacts to the core of the solution, whereas rolling out a solution to a country that was not in scope before can be accomplished because resources are available and the timing is right.

Organizations often make the wrong decisions, because of a lack of awareness and/or understanding of the impact. And if the awareness / understanding is there, its often an inadequate ranking and prioritizing of the WHAT that pushes things off track. It is the responsibility of the pragmatic project leader to bring that awareness, insightfulness and reality check to the key stakeholders and decision makers. As long as that reality check is based on factual insights it is meaningful and situations can be corrected and reversed. If the executive stakeholder and/or sponsor needs to be involved to steer the decision making in the right direction, the pragmatic project leader, must do that without hesitation. In order to make that happen, escalation paths need to be pre defined, transparent and respected.

The general rule of thumb for answering the WHY is two fold. You need a business case and an impact assessment. The materiality of the WHAT determines the effort to complete these tasks. Less material requirements can almost have an immediate answer, whereas material business needs require a documented process with formal reviews and approval steps. The pragmatic project leader is responsible to orchestrate that process.

Examples of deliverable types that you can expect are:

  1. Cost-benefit analysis
  2. Business case
  3. Impact assessment 
  4. Strategic decision document
  5. Key decision document

How do you achieve it?

The last question that is part of the THINK step is about HOW you are going to achieve the WHAT. The result of this step must set the entire project up for success. You cannot proceed to the CHANGE or ACHIEVE steps if you are not a 100% confident on the overall approach. The pragmatic project leader is best positioned to determine whether the project team is ready to move forward or not.

Here are a number of items (there are many!) to be considered while answering the HOW:

Implementation strategy – This item is primarily about how the organization is going to deploy the solution when it is ready for use. The typical options vary from a big bang to an incremental approach by function, organizational entity and/or geography. The key decision driver is the level of risk the organization finds acceptable. Risk averse organizations tend to go for incremental, pilot, staggered and phased deployments, whereas on the opposite side of the risk continuum, risk taking organization tend to go for a big bang go live. The pragmatic project leader must provide detailed insight in the various deployment options, their risk profiles and cost/benefits. This is one of those steps where the organization must do sufficient research and listen to experiences from other organizations, the software vendor, the system integrator and industry experts. Be aware that key stakeholders who have defined the WHAT, oftentimes want to achieve that fast. There is nothing wrong with an expeditious process and aggressive timeline as long as it is realistic, do-able and warranted by build in contingencies. The pragmatic project leader must bring that reality to light.

Required skill set and eduction –  You can only start the initiative, project or program when you have the right team with the right mix of skills. As I wrote in one of my other posts, it is key to select talent based on knowledge, experience and personality. These criteria are equally important. Set the bar high and don’t easily walk away from the requirements if you cannot seem to find the right person. The pragmatic project leader must develop a learning strategy and team leads learning plans for each of their team members. Learning must be a key performance metric in the project performance plan. Education is a critical success factor for the short and long term. For the project (short term), organizations want to make sure that they can deliver quality. Organizations also want to bring their people close to the knowledge and experience level of the external project resources as soon as possible to minimize ambiguity and maximize output. For operations (long term), the organization must be able to develop talent that can sustain the new solution and operating model. To make that happen, education and knowledge transfer must be carefully planned and executed

Methods and tools – This item is oftentimes not well taken care off. Organizations spend a lot of time on defining WHAT they want, WHY they want it, and HOW to get there from a time line, business partner and required skill set perspective, but underestimate that methods and tools ultimately determine the quality of the outcome of the project. You cannot simply assume that the vendor brings that to the table, although some do. The pragmatic project leader must organize ‘method and tools adoption workshops’ where the organization and the vendor assess, review and decide what methods and tools will be used. Part of the selection is also the implementation, education and support requirements. Depending on the size of the project and available budget, organizations can consider to assign a ‘method and tools’ subject matter expert, who is responsible to implementation, support and education. Make that a serious consideration and realize that a robust set of methods and tools are essential for crafting WHAT the organization wants.

The THINK step is one that continuously needs to be revisited throughout the project lifecycle. It interacts with the other steps CHANGE and ACHIEVE all the time. It is important to be mindful about that as pragmatic project leader.

Bas de Baat

Business consulting | Program Management | Coaching

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When  I decided that it was time to broaden my horizon beyond leading projects into areas like business coaching and writing, one of the things I did was looking up quotes of successful, accomplished and famous people. I find that a very inspiring activity. Besides great leaders like Colin Powell, Peter Drucker, Einstein and Stephen Covey, I came across George Bernard Shaw.

I would not be surprised that after reading and internalizing them, your perspective on project leadership changes, and that you are excited to follow a much more practical style.

“George Bernard Shaw (26 July 1856 – 2 November 1950) was an Irish playwright, a co-founder of the London School of Economics and Nobel prize winner in Literature. Although his first profitable writing was music and literary criticism, in which capacity he wrote many highly articulate pieces of journalism, his main talent was fordrama, and he wrote more than 60 plays. He was also an essayist, novelist and short story writer. Nearly all his writings address prevailing social problems with a vein of comedy which makes their stark themes more palatable. Issues which engaged Shaw’s attention included education, marriage, religion, government, health care, and class privilege. ”

Here is a selection of this famous quotes:-

  1. Progress is impossible without change, and those who cannot change their minds cannot change anything
  2. The single biggest problem in communication is the illusion that it has taken place
  3. Imagination is the beginning of creation. You imagine what you desire, you will what you imagine and at last you create what you will
  4. Success does not consist in never making mistakes but in never making the same one a second time
  5. The secret to success is to offend the greatest number of people
  6. You see things; and you say ‘Why?’ But I dream things that never were; and I say ‘Why not?’
  7. Take care to get what you like or you will be forced to like what you get
  8. Beware of false knowledge; it is more dangerous than ignorance [there is nothing wrong with saying “I don’t know”, see also the book “Think like a Freak” from Steven D. Levitt, Stephen J. Dubner]
  9. People who say it cannot be done should not interrupt those who are doing it
  10. A life spent making mistakes is not only more honorable, but more useful than a life spent doing nothing

Hope you liked it. Let me know what you think.

Bas de Baat

Program Manager Enterprise Applications, PMP©

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In business, words are words; explanations are explanations, promises are promises, but only performance is reality – Harold S. Geneen

How often have you experienced that the Vendor (implementation partner), who you carefully selected, does not perform as you expected?  How often have you not been able to turn that around?

Organizations spend a significant amount of time on the commercial aspects of the project. Lengthy and complex selection processes that ultimately lead to contracting the preferred Vendor. Both organizations are at that point in time very excited to further engage, keen on celebrating the partnership, and eager to start the project as soon as possible. Overtime, vendor performance issues start to occur and you are spending more time on corrective actions instead of working with your team on manifesting the project goals.

Vendor performance is a risk area that you must address and manage in the contract negotiation stage. The best strategy to manage it is to transfer a substantial part of the performance risk to the Vendor.

Behaviour drives performance. In order to have the ability to influence behaviour of the Vendor you want to negotiate an incentive score card and include that as a risk sharing agreement in the contract.

The incentive score card contains a number of pre defined and mutually agreed to performance criteria that are directly tied to the payment schedule. Incentives work in both directions. If the Vendor exceeds expectations and reaches a certain score, there would be a financial reward. If the Vendor performance is poor, the organization has the opportunity to penalize the Vendor by for example withholding payments.

It is important that the performance criteria are well defined and unambiguous. Keep it simple. Performance criteria are very similar as the critical success factors of the project. Make a list of approximately 10 criteria and score the Vendor on a monthly basis. You do not want to score the Vendor only at the end of the project or stage or every quarter, because those lapse times are too long. Behaviour can change quickly and you need to have an effective instrument to influence it right away. Doing that on a monthly basis is best. Use a weighted average calculation as some of the criteria have a higher impact than others

There are many ways to define incentive score cards, but to keep it simple consider only 3 performance rating outcomes:

  1. Performance above expectations
  2. Performance met expectations
  3. Performance below expectations

In case the Vendor has met expectations there is no incentive required as all goes according to plan. The organization pays the planned amount to the Vendor. When the Vendor performance is above or below expectations an incentive action is triggered and the Vendor receives a financial reward or penalty.

The incentive does not always need to be a financial reward or penalty. I have used score cards that had non-chargeable consulting hours as incentive. As long as you can quantify the incentive (like $ and hours are) you can be as creative as you want. Be careful though not making it too complex and that you loose sight of its purpose: the ability to influence behaviour and performance.

Here are some scenarios where you have a higher success rate of turning the situation around when you have an incentive score card:

Key resources availability – You are dependent on the Vendor because they have expertise and skills that you do not have at all, or do not have at the maturity level that is required. The Vendor promised you during the selection process that their top notch solution architect is available to the project. Success guaranteed! You were actually introduced to the resource by the Vendor and were very impressed. At the start of the project there are suddenly two solution architects showing up, the resource that was selected and a junior resource. Within a few weeks into the project, the selected solution architect slowly disappears. You asked the Vendor what is happening and for awhile you are being kept in the dark

Action: Identify the key vendor resources, define their skill set and level, and determine when they must be available to execute tasks. Include that in the contract. Consider adding a condition that you have the right to source a qualified resource from a third-party if the Vendor falls short

Performance criteria: measure turn-over of key resources + lead time to replace key resources

Quality of deliverables – You are preparing the deployment of the solution. The go live is just around the corner. There are a number of critical defects outstanding and the deadline is rapidly coming closer. The project team is heads down with hands to key board, working over time and not consistently following procedures, because a lot of work has yet to be completed. The clock is ticking fast, much faster than you have ever seen. Your IT staff has discovered that the development, test and production systems are not in sync and that the overall integrity of the solution is at serious risk. You escalate it and the Vendor tells you: “This is normal for these kind of projects, it is typical and we see it more often at other clients.”

Action: Identify the key deliverables and provide a clear description / specification. Define the complexity level and acceptance criteria. Use external references if needed to indicate the level of quality you are expecting. Design and implement quality assurance and control processes. Train project resources in methods, tools, technology and procedures

Performance criterion: measure on-time completion of deliverables according to specification

Schedule attainment – You are waiting for a detailed project schedule from the Vendor with major milestones, tasks and target dates for key deliverables. The contract clearly states that the Vendor is accountable to create and maintain such a schedule, but does not seem to be in a hurry to provide it. There is a high level GANTT chart that has some merit, but in order to execute the work and monitor progress you really need a detailed project schedule. Meanwhile the Vendor has started the work. You escalate it and the Vendor tells you: “This is how we work, don’t worry, it will get done…”

Action: Collaborate with the Vendor to create and maintain a detailed schedule. Follow a 3 plan level approach: GANTT, project schedule and team work schedules. Clearly document roles and responsibilities for schedule management and status reporting in the contract

Performance criterion: measure on-time completion of milestones and key tasks [you may want to consider using EVM – earned value management techniques, but that can make it more complex]

Vendor performance rating by using incentive systems coupled to payments, is a must have for all major IT business transformation projects. It is the preferred mechanism, because it is following a pre defined and mutually agreed to system between the Client and the Vendor. It is an effective approach to keep your critical business initiative on track and out of trouble.

Feel free to contact me for more information about vendor performance and incentive score card. Just click the email button at the top right corner.

Thank you for reading my post!

Bas de Baat

Program Manager Enterprise Applications, PMP©