What Is Your Cost Of Inaction For Projects?
And are you too risk averse
Goal: To discuss rigid vs. loose decision making within companies
I recently worked for a company that had a very rigorous process for justifying projects. It seemed to me that no matter how much data was given management was scared to pull the trigger.
Since I am no longer with the company, I have spent time thinking about this process and whether it had merit. The question that I kept posing to myself is ,” Is being very conservative the best way to make a decision?”
In my career I have been in many companies as a part of a projects team. The behaviors in some was very conservative. In other companies the funding process was very liberal. Probably the biggest difference was access to capital due to profitability. BUT that is not the only one. Mindset is also a very big factor.
The companies that are very conservative approach the funding process with the idea that they do not want to get the project wrong. They assume that there is a way to control 100% of the variables and that through details they will succeed.
I am yet to be convinced that their hit vs. miss ratio is better than the more liberal ones. As a matter of fact they had many projects in the past that had gone of the rails.
The more liberal ones allow themselves more freedom to be wrong. By realizing that projects can by definition fail due to their nature of doing something new, they fund their groups better. It is not rare for them to give a healthy contingency of 30%.
30% allows a project manager to be adaptive. If halfway through the project a better path is found, the manager can take that path and not have to explain to the stakeholders the change. It is still advisable to do so BUT often the execution of a project and completing it safely within reasonable cost and schedule is more important to an organization. The more cooks there are in the kitchen, the less tasty the meal will be.
There have been several projects for which I was directly responsible that I added to the scope of work WITHOUT having to ask for permission that have benefited the companies today. Some members of these team have contacted me and told me so directly that the additions that cost a few hundred thousand dollars have saved them millions later. They were done strategically and with vision towards the future. And every single one of those projects came under budget.
What the more conservative organizations don’t consider is the cost of delay in action or NOT taking action at all. That is a big mistake.
Delaying or not doing anything is a decision. Consider your own life and look at what inaction costs. If things stay the same, how will you feel about your life in a year or two? It is no different for companies.
One such project was in jeopardy that we would lose a client because we have not upgraded a plant. The search for an optimal solution was more important to the company than one that was not good enough. Because of this search for an optimal solution and not being able to keep the customer happy, we had projects to remove plants from customer sites. This is crazy when you consider that customer acquisition cots are always high.
Maybe the conservative companies need to set a delay timer? They can say to themselves, “We have until this day to develop the ‘optimal’ solution but after this day the best solution that we know of gets executed.” By looking for the optimal solution and “trying” to eliminate ALL of the risk, the management in these companies shows their ignorance of what it takes to execute a project in order to please upper management that projects can be controlled.
It is a fantasy…
My two cents….(this is what I earned from Medium.com in October 2020)
I got to go…my future self alarm went off
Robert Trajkovski is professional with experience in leading people and projects in Steel/ Power, Refining, Chemicals, Industrial Gasses, Software, Consulting and Academia. He has worked for both owners and engineering companies. In addition, he has instructed 73+ courses at several institutions and often offers his courses for free on LinkedIn.
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