Is Your Project like Afghanistan?

The US faces a problem in Afghanistan.  How to define victory?  If you increase spending and resouces, how do you measure their effectivness?  If you decide you want to end the engagement, how do you do get out?

Have you found yourself in this position on projects?  I have.  The project has totally lost sight of what success would be.  All sorts of interium measure are created to show "progress", but no one really knows to what.  Many of the people working on the project have no where to go if the project is cancelled, so their main goal is keeping the project going.  Going in the frantic circle of showing progress, the project becomes more and more of a death march with the progress made becoming smaller and smaller.  Interestingly, the gap between what is reported and what is reality often becomes larger and larger.  

Do you recognize this situation?

There are really only two questions:

1. How do you end it?
2. How do you keep yourself from ever getting in that position again?

How will it end?  The ending is painful.  People are going to have to find new positions, little corporate "white lies" have to be exposed, and if the project is large enough, some people probably leave the company.  It started so well and went so wrong.  I wish there were an easy way to do it, but there isn't.

How to keep yourself from getting into that position again?  There are two steps one can take.

1. Set up SMART (Specific, Measurable, Achievabe, Realistic and Timebased) deliverables. 
2. Create contingency plans or exits at major deliverables.  If a project can't reach the deliverable, there is a known way it will end.

These are simple and doable.  Are there other ways people have found to avoid Afghanistan Projects?

2. The Credit Crisis: Why is it Important? A Little History

History is a guide to navigation in perilous times. History is who we are and why we are the way we are.     - David C. McCullough

This is the part 2 of 4 looking at the credit crisis:

1. The Credit Crisis: What Does it Mean for You and Your Company? - This will look at what’s currently happening and what it means.
2. 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.
3. The Credit Crisis: For Project Managers - What Does It Mean? - What are some things as project managers you should be doing.
4. The Credit Crisis: For Project Managers - What should you Expect? - What are things to look for and think about.

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?

1. The Credit Crisis: What Does it Mean for You and Your Company?

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.

- Carl Icahn, Oct 7, 2008

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:

1. The Credit Crisis: What Does it Mean for You and Your Company? - This will look at what’s currently happening and what it means.
2. 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.
3. The Credit Crisis: For Project Managers - What Does It Mean? - What are some things as project managers you should be doing.
4. The Credit Crisis: For Project Managers - What should you Expect? - What are things to look for and think about.

What’s Happening on Wall St?

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.

Have you started seeing changes?