The Karma of Postponing Due Diligence

There is a trade-off between doing work now and postponing it until you are forced to do it.

The law of karma says that what you do and don’t do causes a ripple effect. So, be careful to avoid the unwanted consequences of putting off review and assessment, risk management, planning, project administration, and resource management work.

Due Diligence

Due diligence is the opposite of negligence. In finance, project, and acquisition management, it is the effort to collect, analyze, and use data to make decisions. Due diligence is the work to collect, assess, prevent, mitigate, and account. In project management, it is the process of deciding whether to pursue or pass on a project based on a risk-reward assessment. It seeks to determine if the project is feasible, legal, ethical, and profitable. From a project and process management view, add planning, regular maintenance, and quality management to the definition of due diligence.

Bypass due diligence and the risk of failure goes way up.

Accounting and Due Diligence

Doing my tax accounting reminded me of the importance of the accounting part of due diligence and the understanding that not doing accounting and regular status reporting makes the rest of due diligence far more difficult than it needs to be.

Every year I resolve to take the time to clean up my data and set things in place for a far easier next year. But it is already March and I’d have to spend even more hours dealing with this ‘stuff’ when I have many other things to do to catch up for all the time I spent on the taxes. Then because I have so much else to do, I do not take the time to regularly do the accounting that would make taxes easy, even if not pleasant.

I postpone the effort and each year I repeat the pain.

Project Management

For one reason or another, we often put off doing unexciting and easily postponed chores.

With the pressure to “act now” and get our projects off the ground, we often find that risk-reward decision-making is given only cursory attention or bypassed altogether. Amid a dynamic complex project with tight deadlines, limited resources, and “problems” the only thing that matters is getting the work done, now. Anything else is a distraction.

This kind of heads-down, undistracted, focused work on a project can be useful. However, if you are working without regularly stepping back, you and your organization will suffer. If you think and act as if doing status reports, risk management, communication, human caretaking, and project accounting are distractions, think again.

Project performance includes Project management. Due diligence during the project means doing:

• project accounting – cost and effort tracking, issue logs, status reports
• regular quality assurance/process-focused meetings
• risk management
• quality control
• communication
• human caretaking (stakeholder management)

Above the project level, in the higher-order process, due diligence means:

• process management – making sure the process, methodology, standards, templates, roles, and responsibilities are as best as they can be
• portfolio management – making sure that the right projects are being initiated and realistically scheduled to avoid overwhelming resources and taking on projects that are likely to be disappointing.

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The Higher-order Process

When we refer to the project level and above, we recognize that projects are being performed within a higher-order process, which includes process and portfolio management, environmental conditions, and resource management. Both the project and higher levels are important, and they are interrelated. However, given the nature of organizations with short-sighted priorities, the higher-order process is often overlooked.

The higher-order processes are complex and operate in multiple dimensions such as portfolio management occurring in the context of organizational strategy, market conditions, regulatory issues, and more. The benefits and costs of doing and not doing due diligence at this level are not immediately realized. They make themselves known when something goes wrong, and the problem cannot be explained by and resolved at the project level.

For example, your project resources may be taken away and reassigned to another project causing your project to be delayed. If senior stakeholders are ok with the delay because it was factored into their decision to remove the resources, then there is no problem. But if this happens frequently across multiple projects it is a sign that the project portfolio may not be being effectively managed.

If you do not take the time to evaluate the legal, budgetary, risks, and reward factors of a project, the consequences are not felt until the project fails or a regulatory body steps in to put the brakes on. If project performers are constantly complaining about having to do useless work on administrative tasks, it may be a sign that procedures and templates need to be reviewed and repaired, performers need to be better trained, or that the wrong methodology approach is being used.

Fine-tuning or more radically changing the higher-order process affects the quality of individual project performance.

Project-level Due Diligence

Accounting within each project is part of project management due diligence. Every team member, not just the project manager, must allocate time and focus attention on tasks that may seem to be distractions from the so-called “real work.”

Project accounting is done to satisfy regulatory and administrative needs, for example, knowing how money has been spent and resources used. In addition, stakeholders want to know what is going on and how it is affecting their expectations. Will the project be on time and budget? What events have occurred that can get in the way?

But that’s not the only reason. Project accounting sets the stage for due diligence at a higher level. It leaves an audit trail with the data needed to refine portfolio management decision-making and methodology assessment. With project-level reporting comes the ability to look back at what happened to learn from it. Hindsight is not 20-20 unless there is a record to review. Memories are imperfect. How will the data from this project influence decision-making at a higher level?

Commitment and Follow-Through

The bottom line is to build due diligence activities into work plans and commit to following through with effective portfolio management decision-making, raising the consciousness of stakeholders, and ongoing refinement of the project performance approach.