The old saying goes that "god is in the details." That might be. Success is often made or lost in how the details are handled. However, if you want to align and do what they need to do to all arrive in the same place, god is in the why. If you want people aligned, they better see the same why, they better be singing from the same hymm book.
A child asks why something happens, why something was done, why people came together. It's when everyone can honestly answer the question as it uniquely applies to them and find the direction that takes everyone to the same place, that you get alignment.
You cannot supply every answer, convince every skeptic or solve every problem necessary to make a project succeed. If everyone knows the why and it relates to them, they'll come up with the right answers without you.
If you want alignment and success, god is in the why.
Who is adding to your teams success and who is just along for the ride? Are the free riders really free? There is a rule of thumb in the IT industry that each employee costs $250K. Whether you agree with that number or not, using some metric like that forces you to confront a cold hard reality. Each person on your team costs you $4,800. Almost $1,000 a day. Are they adding that kind of value? Are you?
Warren Buffett used an investing analogy many years ago in one of his Shareholder Letter's that is relevant to people making business decisions. Aesop's question of whether a bird in the hand is worth two in the bush. Or if this is too theoritical for you, ask if a brunett in a convertible is worth five names in a phonebook. [Editor: How would you know?]
To answer Aesop's question, one has to decide how much more valuable the birds in the bush are relative to the one in your hand? How difficult will the be to get them out? Are there other benefits to gaining the bush? How long will it take to get those benefits?
How often do business question come back to this? If I invest in this project, will it improve my business? How will I know? How will the people working on the team know?
If you can articulate those answers with everyone on your team, aren't you much closer to aligning your team towards achieving those goals?
With all the tools available to us, how often are these basic questions ever asked or answered?
Is it easier to align five people or five hundred? There's an old Dilbert cartoon which discusses how to determine the IQ of a meeting. Start with 100 and then subtract 5 for every person added. [Editor: I subtract 10 for you.]
Everytime someone is added, complexity is added. Agreement, understanding, shared vision, the ability to communicate effectively all become more difficult as more people are added. If less is so obviously more, why do we continually add people?
Economies of Scale
The industrial revolution and the 20th century demonstrated the benefits of economies of scale. It costs $3,000 to make 100 of Adam Smith's pins, however it only costs $4,000 to make 1,000 pins. The price for each pin goes from $30 to $4.
Where fixed costs are high and you have to build factories and assembly lines and have marketing departments and sales teams, economies of scale make a lot of sense. Is that the world we face?
Less is More
In a world where you can outsource manufacturing, marketing, legal and accounting functions and focus only on the real areas you know, do you need the extra departments? Do you need the headachs finding, hiring, training and aligning all those people?
Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks. - Warren Buffett
There is no point in denying that change is in the air. You can prepare yourself so that you’re in the best position where you are, but that is a short term outlook. You also want to think about the business where you are and the environment it operates in. How will that business and environment be effected by a recession? Those are the long term questions to ask.
The Credit Crisis: Why It Is Important? - A Little History - To get some context, we’ll look at why companies were set up and why investors, like Carl Icahn are so outraged. Understanding this is important to recognizing good opportunities.
The Credit Crisis: For Project Managers - What should you Expect? - What are things to look for and think about.
What are you looking for?
Would you like to travel and experience new cultures?
Is job security critical to you?
Do you need to stay in a particular location?
What are your financial needs (not wants)?
Are the answers aligned with your current job?
If you are looking to travel and experience different cultures, this is an excellent time to do so. The sun always shines somewhere. Dubai is booming, Singapore and Hong Kong are growing and for people with skills, China is growing. This is an excellent time to explore opportunities.
If job security is critical to you, look at the business and it’s environment. Is the overall environment secure? Growing? Filled with competitors? Much as we’d like to believe our own individual abilities will trump these things, you’ll swim much faster with the current than fighting against it.
Do you need to stay in a particular location? Then find the businesses doing the best in that location. Cultivate relationships with people in those businesses. Join a PMI chapter, Toastmasters, some other professional group or the Rotary Club. All these organizations are designed to help you network. Network yourself into the best positioned company where you want to be.
What are your financial needs? Know what your monthly expenses are and make a budget. You are as independent as you are financially independent. You can make yourself financially independent. This change has made everyone think about tightening their belt, take advantage and fill your bank account too.
Know what your requirements are and think where you’ll want to be in three to five years. No one knows how long the credit crisis will last or the economic slowdown or the recession or whatever you want to call it. However, it’s a good bet that if you make plans that get you where you want to be three to five years from now and you execute them (you are a project manager, right?), you will succeed, how ever long the bad times last.
"Times change, we change with them.” - Latin Proverb
In 1983, US companies spent $32 billion on IT, which accounted for 9.8% of their total investment in fixed assets that year. By 2006, spending had risen almost tenfold, to $294 billion, and IT accounted for 21.1% of new fixed assets purchased that year in the US, according to Harvard’sAndrew McAfee.
Much of this growth has come from projects and been led by project managers. The credit crisis marks a change. If you want to lead and benefit, think about some of the changes likely to come and how to position yourself to take advantage of them.
The Credit Crisis: Why It Is Important? - A Little History - To get some context, we’ll look at why companies were set up and why investors, like Carl Icahn are so outraged. Understanding this is important to recognizing good opportunities.
The Credit Crisis: For Project Managers - What Does It Mean? - What are some things as project managers you should be doing.
The Credit Crisis: For Project Managers - What should you Expect? - What are things to look for and think about.
What does the Credit Crisis Mean?
The credit crisis is simply the event that woke everyone up. There are several issues: financial, corporate governance, excessive supply, globalization and a host of others that could have caused the re-evaluation. Now that the re-evaluation has started, there are a couple areas that will be effected. Spending, corporate governance or transparency and excessive supply. Look for your opportunities to excel in the areas relevant to your firm and you will be a hero. Spending Estimates have S&P 500 forward earnings for 2009 decreasing by 20%. It’s a good bet internal budgets will decrease by even more. Expect that budgets to be cut. There will be fewer projects and less money. Position yourself to succeed by thinking about:
What will projects costs be? Be able to show how you arrived at those costs and what interim measures can be taken to measure progress. Think EVM - Earned Value Management or other measures that can be checked by people with no understanding of the project.
What will the ROI (Return on Investment) for the project be? Demonstrate that the project must be done by showing the risks of not doing it.
People with strictly financial concerns will scrutinize projects looking for ways to cut costs. Help them see how a project is progressing in cost and benefit ways.
Where can thresholds or gates be set up to evaluate the projects progress by people who are not savvy about what the project is doing. If you can schedule gates where progress can be evaluated as a way of controlling costs, you’re helping those who are being evaluated on how money is spent.
What external contracts will the project require? How much will those contracts cost to execute? How much has it cost other businesses to execute similar contracts? Can those contracts be written so that the vendor succeeds or fails based upon whether the project succeeds or fails?
What are mitigation plans if the project has to be ended?
If a project has to be ended, how can you, as a leader, effectively end it? (You’ll make yourself a hero if you can set up gates and show how a project can be shut down if it’s not meeting its targets.)
Corporate Governance
“The collapse of Lehman Brothers, with it’s massive losses for shareholders and employees and near catastrophic market consequences, obviously reflects an abject failure of management in risk oversight. - Carl Icahn Oct 13, 2008
There is a second element that hasn’t received as much attention, transparency and corporate governance. Shareholders who have lost money in other companies want to be sure they will not lose money again. Activist investors are going to demand accountability from boards, executives and through them, all of management.
Look at some of the resources on Corporate Governance. Zebablog offers many insights. Be able to speak intelligently about corporate governance and know where you can research items specific to your area. There is limited knowledge in this area. That limited knowledge is a huge opportunity for you. Take the opportunity, learn and lead. SOX is not the same as corporate governance. Governance and transparency are going to become more critical, why don’t you take advantage of this?
Finally, there are long term considerations. Where is your company? Where is your company going? Can it adjust to the changes occurring in the world? Can you?
Many people don’t want to think about these things. You should. Thinking about what’s happening and things to keep your eyes open for, are what we’ll cover in the fourth entry, The Credit Crisis: For Project Managers - What should you Expect?
Are there other things you’ve seen that might be beneficial to think about?
The Credit Crisis: Why It Is Important? - A Little History - To get some context, we’ll look at why companies were set up and why investors, like Carl Icahn are so outraged.
A little background on business To get some insight to this, let’s think about why businesses were really founded. The modern corporation came started in Britain in the early seventeenth century, when some very intelligent and presumably humble nobleman noticed that there’s no correlation between intelligence and wealth. In fact, there may even be an inverse correlation, but I’ll resist the urge to rant about Paris Hilton and spare you my other Hiltonesque urges. [Editor: Please do.]
What these noblemen realized was that if they gave up a portion of their capital and entrusted it to an organized group of intelligent, motivated and hungry workers, they could make themselves much wealthier. A side benefit to this was the incredible improvement in the standard of living for those working for them. This is the genesis of the modern corporation.
Why is this important? What these noblemen and now women realized was that they had to set up the appropriate structures and oversight so the intelligent, motivated and hungry workers didn’t keep all the profits for themselves. Corporations were created for the benefit of the owners, not to make the workers wealthy.
What Does This Have to do with My Business? Remember AIG
AIG stockholders, the people who own the company, invested in the expectation that they would earn returns, instead lost over 95% of their money. While the details haven’t all come out, it appear AIG Financial Products, a 377 person unit brought down the 18th largest company in the world.
“Since 2001, compensation at the small unit ranged from $423 million to $616 million each year”, according to corporate filings. AIG Financial Products took positions that were much more risky than their executives realized, they walked away with huge paychecks and their liabilities lead to AIG’s downfall.
“Debts are easy to fix, but liabilities the nightmare!”
Where was the transparency? How come no one knew how much risk they had put the company under? How much will this cost? What will our returns be? These are not only historical questions, these are questions you are likely to have to answer in this next budgeting cycle.
Know that these questions are coming. Be ready to answer them and you will be a star. That is what we will look at next in part 3: The Credit Crisis: For Project Managers - What Does It Mean?
One of the biggest problems we face today is the egregious mismanagement and reckless incompetence of many American corporate boards which utterly fail to do their primary job of holding managements accountable.
Don’t Be an Ostrich Many people watch what is happening on Wall St hoping they will not be affected. Sooner or later, it will affect you. Rather than avoiding the issue and burying your head in the sand, let’s understand what’s happening, what it means and what you can do to get ahead of the curve.
We will do this in four posts:
The Credit Crisis: What Does it Mean for You and Your Company? - This will look at what’s currently happening and what it means.
The Credit Crisis: Why It Is Important? - A Little History - To get some context, we’ll look at why companies were set up and why investors, like Carl Icahn are so outraged. Understanding this is important to recognizing good opportunities.
A couple of things about this clip. In addition to its humorously irreverent and more accurate than you might think description; it is also over a year old. The credit crisis is not new. It has been brewing for awhile and its resolution will take awhile.
Expect to Feel the Pain Even if you’re not in financial services, expect to feel the pain. Consider that as of Friday Oct 8th 2008, US stock markets are down over 42%. $8.2 Trillion dollars has been lost. If there are 300M Americans, each is out $28,000. [Editor: This is worse than a divorce. I lost half my money and I still have to put up with you!]
More concerning is that this is a credit crisis, not an equity crisis. The stock market crash is the symptom, not the cause. I won’t go into the details [Editor: Please don’t], but the cause is the credit crisis - banks unwillingness to lend to other banks and now businesses.
How this will work out is the real question. Uncertainty leads to questions of confidence. How will the uncertainty be resolved? Transparency. What’s visible can be dealt with, it’s what isn’t currently visible that will drive people to want to know more.
Who will want to Know? For public companies, executives and the board of directors will want to know. Hence the Carl Icahn quote. Consider this:
NEW YORK, Sept 15 (Reuters) - Shareholders sued Merrill Lynch & Co Inc Chief Executive John Thain and the company’s board of directors on Monday over the proposed buyout by Bank of America Corp, claiming the terms of the deal are unfair [to shareholders]. (Full Story)
What is important is that the suit is filed personally against John Thain and the board of directors. They are personally liable. The suit claims John Thain and the board “have clear and material conflicts of interest and are acting to better their own interests at the expense of Merrill public shareholders.” There will not be enough D&O (Directors and Officers) Insurance to satisfy investors after all the money that’s been lost.
Nothing like the fear of a class action lawsuit to persuade you to get more transparency in your business. Where is money going, how is it being spent, what returns are we getting from projects we invest in?
Private companies will answer similar questions from their own investors and executives. Furthermore, suppliers will want to be sure firms can pay. Vendors will want to be sure they can deliver. Banks will want to know how funds are being used.
We are heading into budgeting season. Expect Ronald Reagan’s “Trust, but verify” to accompany the belt tightening. Whether you call it transparency or regulatory oversight or SOX or corporate governance or [Editor: the following line was deleted, you can’t use that language.]; executives, directors and investors will want to know more.
Why Are Investors Like Icahn Using This Moment To Demand Change? In addition to the reasons stated above, but there are historical reasons for wanting transparency. Understanding this will provide you insight to take advantage of the opportunities which will arise. We will take that up in our second post: 2. The Credit Crisis: Why It Is Important - A Little History.
I'm sure you've talked about what's happening on Wall St. Very few firms will be spared and if you work in project management, it's very unlikely you'll avoid all the problems. As this chart from Sequoia Capital's presentation show, tech spending is heavily influenced by S&P 500 Earnings.
I've been doing a lot of work and I'm very excited that next week I'll be doing a series of posts for Silicon Valley Project Management on what the credit crisis means for people working in project management and in companies in general.
The outline is:
The Credit Crisis: What Does it Mean for Your Business - This will look at what's currently happening and what it might mean for your firm.
The Credit Crisis: Why It Is Important - A Little History - To try and get some context, we'll look at a little history of why firms were set up and why investors, like Carl Icahn are so outraged.
The Credit Crisis: For Project Managers - What Does It Mean? - What are some things as project managers you should be doing.
The Credit Crisis: For Project Managers - What should you Expect? - What are things to look for and think about.
I will be republishing it here a day after it publishes on SVProjectManagement. Predictions are difficult, especially about the future. I'd love to know your thoughts.
Posts
