It is the nature of classified projects that "successes are unheralded and .... failures are trumpeted"JFK
So, if you have an idea of putting your successes on your resume, looking for your next job, gig, or career move, beware!
Projects are transformative of disparate inputs into something of greater value. More than a transfer function, projects fundamentally alter the collective value of resources in a cybernetics way: the value of the output is all but undiscernible from an examination of inputs
But this posting is about asymmetry. Asymmetry is a different idea than cybernetics
"Value" is highly asymmetrical in many instances, without engaging cybernetics. One example cited by Steven Pinker is this:
Your refrigerator needs repair. $500 is the estimate. You groan with despair, but you pay the bill and the refrigerator is restored. But would you take $500 in cash in lieu of refrigeration? I don't know anyone who would value $500 in cash over doing without refrigeration for a $500 repair.
Of course there is the 'availability' bias that is also value asymmetrical:
"One in hand is worth two in the bush"
And there is the time displacement asymmetry:
The time-value of money; present value is often more attractive than a larger future value. The difference between them is the discount for future risk and deferred utility.Let's not forget there is the "utility" of value:
$5 is worth much less to a person with $100 in their pocket than it is to a person with only $10
How valuable?
So when someone asks you "how valuable is your project", your answer is ...... ?
The tactical--strategic bridging difficulties could be one of mechanics at the bridge or one of attitude about even crossing over the bridge.
I'll handle everything today, and you handle everything tomorrowwhich, on its face, sounds like a clearly delineated division of effort. Everyone in their own sandbox. On the other hand, some call a sandbox a silo, meaning: no visibility.
You are not successful unless the enterprise is successful. Local metrics count little in the face of enterprise failure.
|
Business Category and Project Objectives |
||
|
Category |
Business
values |
Project
Objectives |
|
Government department |
Mission satisfaction for public
constituency Protection of taxpayer
interests |
Best value outcomes (most bang
for the buck) |
|
Non-profit or voluntary
organization |
Betterment of target
constituents Organizational sustainment Donor satisfaction |
Simplest outcomes that serves
constituent interests |
|
For profit business |
Improvement of business
scorecard Shareholder (owner) benefit |
Maximize scorecard impact |
Projects are most successful when executives, sponsors, stakeholders, and project managers all share an understanding that projects only exist to promote and benefit the organization at large
And no, I didn't leave out beneficiaries, customers, or users. The stakeholders and at-large organization cover those bases. So, no busy work; no painting rocks to absorb excess labor. If it doesn't add value, then do something else.
Concepts of Value
Along the way, value takes on multiple meanings. At one level, value—or values—is (are) what we believe in, a “truth” of sorts that needs no proof. It’s just there, and we believe it without reservation.
Value, defined as beliefs, is often extended to a belief system constructed of beliefs and principles. Principles are actionable statements of doctrine; they give beliefs behavior. Thus, like any other system, a value system is a structure of elements supporting defined behavior.
At another level, value is worth we place upon something that is really meaningful to us for which we are willing to give up something else. In the transaction, it’s possible to acquire value-add; indeed, adding value is often, but not always, a transactional objective.
For value-add transactions to be possible value cannot be a zero-sum game; the value pie can be made larger. There is no “conservation of value” principle like there is for energy.
Perspectives
At the end of the day, there are these perspectives for the PMO to take into account:
|
Value Perspectives |
||
|
Sponsors |
Project
Managers |
Beneficiaries |
|
Value is achievement of
business scorecard objectives |
Value is delivery of outputs
for the intended business investment |
Value is being better off,
more effective, and more efficient than before |
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(*) This posting's material taken from my book "Maximizing Project Value, A project manager's guide". See the cover photo below.
But you may have to take in a lot from marketing, sales, architects, and stylists about how to spread that cost to maximize utility and thereby maximize the business value of each input dollar spent.
Projects are transformative of disparate inputs into something of greater value. More than a transfer function, projects fundamentally alter the collective value of resources in a cybernetics way: the value of the output is all but undiscernible from an examination of inputs
But this posting is about asymmetry. Asymmetry is a different idea than cybernetics
"Value" is highly asymmetrical in many instances, without engaging cybernetics. One example cited by Steven Pinker is this:
Your refrigerator needs repair. $500 is the estimate. You groan with despair, but you pay the bill and the refrigerator is restored. But would you take $500 in cash in lieu of refrigeration? I don't know anyone who would value $500 in cash over doing without refrigeration for a $500 repair.
Of course there is the 'availability' bias that is also value asymmetrical:
"One in hand is worth two in the bush"
And there is the time displacement asymmetry:
The time-value of money; present value is often more attractive than a larger future value. The difference between them is the discount for future risk and deferred utility.Let's not forget there is the "utility" of value:
$5 is worth much less to a person with $100 in their pocket than it is to a person with only $10
How valuable?
So when someone asks you "how valuable is your project", your answer is ...... ?
In simple terms, here's what your finance officer is talking about:
Thanks for that! Your project actually improved cash flow and added to business financial success!
A better opportunity?
If there was another opportunity competing for the capital funds, then it would have to do better than return $40K on $1M raised the capital markets. The CoC might have been lower; or the ROI greater in order to best your project.
And the risk attendant with making $1M in profit would also be evaluated with discounted cash flow analysis. Maybe your project is given a more favorable discount rate.
The finance officer makes all those assessments as input to the decision process to fund your project or not.
_____________________
(*) I say dubious because cause-and-effect is notoriously difficult to prove, to wit: there may have been other business changes during your project's time frame that also influenced profit. How do you disentangle that?
You have hard facts, figures, gadgets, devices, applications, and hardware
"They" have soft power: concepts, promises, understandings, reputation, and the moral high ground
In the life of the project, there may come to pass a disagreement, a challenge, or an argument about which way the project should go: Your stuff vs their stuff; hard vs soft; which are to be the deciding factors?
Sometimes, this dilemma is posed as "they" coming at it "top down" as a value judgment, and you coming at it bottoms up, building your case from the ground up with 'facts'.
Sometimes this dilemma as posed as the 'strategic business vision' vs the tactical objectives of the project: cost, schedule, scope, and quality.
Who's on first?
Sometimes, the 'strategic' trumps the 'tactical', and that's that. The intangible argument simply overcomes any tangible facts to the contrary. That is -- if the facts are right -- there will be compromises and perhaps sacrifices in the name of strategic vision.
Sometimes, those with the intangibles and the soft power try to reach an accommodation with the project 'facts': if so, a common factor is needed. And, by the way, if you can find a common factor between the seeming 'apples' an 'oranges', you'll find it's most likely to be money.
Money speaks
Now, monetizing soft power is notoriously tricky, and certainly more tricky than monetizing the facts, figures, gadgets, etc.
But, there are those that contend that there is a price -- or cost -- for everything, so maybe you can monetize it all
Projects vs business
At the end of the day, all else considered, business usually trumps project. Your job, as PM, is to use 'your stuff' to attain or make good 'their stuff', taking commensurate risks to do so.
In effect, you own the balance sheet: Your assets, inflated -- as required -- by the risks you'll take, builds the outcomes necessary to match up to the business 'druthers'.
This all collectively is the conception I call the project manager's balance sheet. More detail here.
'Throughput' is the stuff that gets through to end-users, beneficiaries, or customers that they can apply to whatever it is they do.
One might ask: is there a way to map all this stuff so that a picture emerges? If there is, I've not seen it. But, taking those questions one at a time, Kano Analysis may help see the bigger picture.
Four elements of strategy
Of course, attention to strategic finance and customer satisfaction are two of four components of a good business strategy.
A third is development of the business capability and capacity to innovate and produce. Typically, there is a cost-benefit and cost-outcome analysis that is required to figure out how much to invest in training and development of people, and how many robots to purchase.
A fourth is just do what you do all the better. That is, invest in operational effectiveness -- lower overhead, fewer reworks, more throughput for the dollar.
All four contribute
So, when you are considering all economics contributions to or effects on strategy, the balanced scorecard of finance, customer satisfaction with the value delivered, investments in organizational development, and improvement in the economics of throughput
The planning challenge for project sponsors is to fashion a practical and rewarding opportunity from the myriad of permutations and combinations of needs and wants, colored by urgency and importance, affordability, and risk.
OE and project objectives:
Business goals, extended through business strategy, drive project objectives. But of course business strategy also drives operational effectiveness (OE) ....
OE being the quality of the operations and operating programs that amounts to doing things better with predictable repetition (see: Michael Porter for more ideas like these). But even predictable repetition, if done better over time, like projects, add value to the business.
OE and projects, working together, are two instruments of strategy. They are interdependent. The outcomes of projects may well affect operations—add, change, or delete them—thereby closing the loop on goals and strategy, as captured on the business scorecard
Strategic Plan
Here, at the bottom of this post, is the bottom line:
Strategy is a plan that integrates continuous improvement of operational effectiveness with a vision and narrative for differentiated innovation attained with projects