Saturday, April 5, 2014

Risk or opportunity?

Here's a challenge question I often put to my risk students:

If you are challenged by your sponsor (or circumstances) to take a risk on a new and unproven technology, process, or supplier/partner for your project, what is your likely attitude
1. Would you be more likely to put it on the risk register to be managed, or
2. To evaluate it as an opportunity to be exploited, shared, accepted, or enhanced?

I make the point: There's no school answer; there's no "right" answer.

A student replied:
  • 1) Depends on the inherent risk culture of the company. Is it risk adverse or not? Risk adverse companies I notice tend to more setup up project KPIs whereby it's in the PM's benefit to keep a tight rein on any possible new circumstances and almost treat any deviation as a negative one that must be controlled immediately.
  • 2) Support from your project sponsor and overall stakeholders. This probably fits into point 1 above, however is your sponsor okay with the project possibly running over budget /schedule to see the introduction of the new concept or okay for the project to be possibly re-baselined? Do your stakeholders see this as a positive introduction, negative introduction or just plain neutral to the whole thing
  • 3) Depends on when the introduction of the circumstance occurs. If the new technology, process... is introduced in the early stage of the project (e.g. project initiation or even planning) I would see it more as an opportunity to be exploited. Otherwise, treat it as a risk and apply it to the risk register.

To which I replied:
The theme of reward/punishment or risk/payoff that runs through your comments is at the heart of the discussion question.

Your observation seems to be: That PMs are often -- too often perhaps -- scored/rated/rewarded on fidelity to the "input" side of projects. That is, they are scored/rated/rewarded on the volume of resources consumed/invested -- cost, schedule, plant/equipment, hours.

I agree (with the student); this is the way many scorecards are set up and the way many comp plans are drawn. That's too bad. The true value of the project is on the "output" side: Deliverables useful to the business for which the project investment "was worth it". 
Thus sponsor attitude is a key factor, as you (the student) note. But is your specific sponsor an investor or a resource manager?

The former takes risks; the latter is averse. The former is more output focused -- results with value; the latter is all about delivering according to the plan -- the plan uber alles.  If an investor, hopefully they are endowed with judgment and wisdom is required on the part of the investor, thus to not preside over the rags--riches-- rags cycle of bust-boom-bust. 

Understanding which risk culture you are a part of is key to your (the student) personal success, though the rogue -- if successful -- is often celebrated for both bravery and foresight... if you have the stomach for it.


Read in the library at Square Peg Consulting about these books I've written
Buy them at any online book retailer!
Read my contribution to the Flashblog