Tag: Talent Triangle

Project Management Education: Cultivating Cognitive Readiness and Optimal Performance

Written by George Pitagorsky on January 9, 2018. Posted in Articles. 2 Comments on Project Management Education: Cultivating Cognitive Readiness and Optimal Performance

Many project managers are self-taught, often thrown into the water to sink or swim.

This article addresses the need for PM education to cultivate the cognitive readiness you, your team and your organization need to perform optimally.

The Need for Expertise

For the large number of small projects that are performed in organizations, ‘accidental’ project managers with intuitive skills may be OK. However, when it comes to larger, more complex and mission critical projects, project managers with significant project management (PM) knowledge, skills and experience are needed.

The Project Management Institute (PMI) identifies three dimensions of project management expertise:

Technical – the specific skills of scheduling, risk management, cost management, etc. and the use of project management tools that support these skills.
Strategic and Business Management – understanding organization structure and the impact of it on projects and projects on it, cost and benefits assessment from a business perspective, business strategy, etc.
Leadership – skills related to motivating and managing people, including communication, conflict management and relationship management skills

This has been a major step forward in the PM field, clearly recognizing that it is not sufficient to know how to construct a schedule or WBS to be an effective project manager.

Now, the field is recognizing Project Management education must go beyond the simple transfer of knowledge to the cultivation of the ability to integrate skills to manage in volatile, uncertain, complex and ambiguous (VUCA) situations.

Integrated technical skills, organizational awareness, mindfulness, communication skills, managing change, conflict and expectations, and the application of emotional and social intelligence are needed to ensure that qualified people manage projects in a way that contributes to a consistently high probability of success.

The PM Education Objective: Prepare for Optimal Performance

The key to effective PM education is remembering that the objective is to prepare people for optimal performance, measured by the degree to which project managers add business value and consistently satisfy stakeholder expectations.

Optimal does not mean perfect. It means continuously improving performance that is as good as it can be under prevailing conditions.

PM Education is essential to effective project performance. To be deficient in any PM skills, whether technical or not, increases the risk of project failure. For example, a person playing a PM role who has no knowledge of the use and importance of a WBS will be more likely to develop a task list that is incomplete and difficult to manage. A PM deficient in communication or decision-making skills risks developing poor relationships, causing confusion and making poor decisions. A PM deficient in mindfulness and emotional intelligence is likely to be reactive rather than responsive.

The State of PM Education

PM education is big business. The domain of technical PM education is filled with courses on every aspect of project management performance – task analysis, scheduling, procurement, critical chain and path, risk management, etc. Many of these courses are well done, with participants gaining knowledge that they can apply on the job or use to pass an exam.

When it comes to providing education regarding business management and strategy, the coverage is not as complete. Offerings in this domain tend to be theoretical. Though, they do raise awareness and provide frameworks to apply theory to specific organizations. Ideally, practical education in this area should be specific to the organizational environment.

Leadership courses abound – some are great, some OK and some terrible. For example, one young project manager shared that the course she took on handling difficult conversations left her frustrated because it did not address situations in which the other party was completely oblivious to anything but his own opinions and positions and was verbally abusive. The course assumed that everyone was rational and working toward a win-win outcome. The instructor had never actually worked in any complex project. For leadership courses to be effective they must be anchored in real world experience.

Many courses focus on specific subjects, often without putting the subject in the overall context of projects in organizations. They teach students how to do a risk register without dealing with the political, scheduling and budgeting issues that underlie risks.

Programs that integrate a full range of subjects into a comprehensive education program tailored to the specific culture of an organization are rare and often limited to fundamentals and certification training. Some of these comprehensive courses are nothing more than a string of individual modules on each topic that fail to address the interplay among the topics – for example the way communication and conflict management skills are used in the context of scheduling.

Comprehensive, Integrated PM Learning

No one learns a complex skill without applying it in real-world situations and getting feedback about performance. Integrated courses that center on case study’s and workshop simulations are needed. Though they are not enough.

Coaching and mentoring and opportunities to address questions and issues with subject matter experts and peers are necessary parts of education. This ongoing learning is far less prevalent than standalone courses that have little or no follow up to ensure that learning is applied and makes a difference in performance.

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A comprehensive PM education program is more than a traditional curriculum of courses. It must be fully integrated into the fabric of the organization and the individual’s personal practice. A full program consists of

Courses in various media, over time, with multiple levels of skill advancement
Integrated workshops
Self-paced opportunities to refresh knowledge
Coaching and mentoring
Regular Q&A sessions
Communities of practice
Lessons learned events
Feedback & Continuous improvement.

The program may be formal and provided by the organization. Whether that is the case or not, it is the individual’s responsibility to make sure he or she is continuously cultivating the readiness to perform.

Cognitive Readiness (CR)

The objective of PM education is to enable optimal performance. Optimal performance relies on cognitive readiness.

In the military “Cognitive readiness is the mental preparation (including skills, knowledge, abilities, motivations, and personal dispositions) an individual needs to establish and sustain competent performance in the complex and unpredictable environment of modern military operations.”¹Change “military operations” to “project operations” and we have a good working definition.

Cognitive readiness, is the readiness of individuals and teams to apply their skills and to explore their faults and deficiencies and make the effort to overcome them. Cognitive readiness implies the courage and candor to objectively assess performance and improve it as needed. It implies the resilience and the capacity to accept uncertainty and paradox. It is enabled by and enables a healthy perspective and the application of knowledge and experience.

Cognitive readiness (CR) is cultivated in an educational program that goes beyond traditional technical, business and leadership skills to include

Organizational awareness – Knowing the nature of people in organizations, particularly one’s own,
Mindfulness – The ability to step back and objectively observe
Emotional and social intelligence – The ability to effectively manage one’s emotions in the context of relationships
Wisdom – a perspective that recognizes that
- service is the ultimate motivation for leaders
- everything is impermanent in a continuous change process
- no one has complete control
- we are responsible for the results of what we say and do, and
- nothing is without imperfection

Wisdom, informed by mindfulness and education, leads to the personal dispositions (attitudes, beliefs, etc.) that promote optimal performance.

Learning and applying all that is not easy. Learning begins with awareness that, unless they are cognitively ready, individual practitioners are unlikely to be able to perform optimally. The performance of teams and the organizations will suffer along with individual careers.

Cognitive readiness and the cultivation of optimal performance should be a primary objective of any PM Education program. If your organization is not providing the right program, it is up to you to craft your own and to manage your own learning and development.

1 Morrison, John E. and J. D. Fletcher, Cognitive Readiness, Institute for Defense Analyses, 2002. Download at http://www.dtic.mil/cgi-bin/GetTRDoc?AD=ADA417618 , p. I-3

Overcoming Isolation as a Remote Employee

Written by Michael Huber on August 22, 2017. Posted in Articles. 6 Comments on Overcoming Isolation as a Remote Employee

We all strive to not only be successful in our professions as project managers, but want to ensure that in achieving those successes we take time to give ourselves new mental stimulation to avoid the pitfalls of stagnation.

This can prove to be challenging in today’s fast paced environment as a remote employee. Many people that work in an office environment see working remotely as a dream job, and it can be.

For extroverts it can prove to be very isolating and the consequences of that can be as minor as stagnation with one’s career, or as major as battling severe depression. I have been a remote project manager for the past six years and have battled both. I would like to share ideas and facilitate conversations on how to overcome these obstacles by opening a new dimension of working remotely while experiencing success, connecting with yourself, and furthering your career.

Today with advances in technology the impression is given that we are more connected with people and involved with their lives through social media outlets. This is merely an illusion of connectedness. Even with 5,000 friends on Facebook we are in fact becoming more isolated and losing the connection with our actual human emotions by masking our true appearances and developing an online persona. Which is not who we represent in real life. Working remotely can amplify those personas and actually suppress our true selves. This can be an extremely slow process and may not be noticeable to yourself or those close to you until you find yourself in a depressed state where you begin to lose productivity and interest in activities in which you used to find happiness.

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While working remotely I have found one of the best ways to avoid feeling isolated is to find or build a community. This can be accomplished by using resources within or outside of your organization. Build a strong relationship with your management and ensure they understand your needs. This can be accomplished by suggesting ideas such as face to face meetings, quarterly team building activities, or joining committees. These are ways to increase team productivity. Volunteering within your local PMI Chapter will provide you with new relationships, visibility, and a way to earn PDUs.

Take breaks from your electronic devices. It is a healthy habit to encourage more human interaction. Make it a point to not bring your cell phone or laptop into your bedroom and try to take one day off a week from using all electronic devices. Remote employees spend more time on phones, laptops, and other devices than most people that go into the office. Many of us wake up and begin our daily work immediately whereas others have an hour or so in the morning with family and water cooler talk with their coworkers. It is critical for remote employees to maintain discipline and reduce electronic communication and embrace real life relationships.

Removing geographic boundaries is another way to be able to satisfy your social needs. It provides a unique experience that will foster creativity by meeting new people in a never ending changing kaleidoscope of experiences. How much change do you require in order to reinvigorate yourself? It can be as simple as vacationing to an island for a long weekend and working your normal hours while enjoying the ocean during your time off, or selling everything you own and moving to a new country to absorb a new culture. There are no geographical limits as to what you can accomplish. Traveling is a great way to foster innovation and breed creativity. New solutions can be discovered by making new Global connections that offer different perspectives on problems. As a devoted project manager, you can introduce the efficiency and effectiveness to your organization. A project manager with the ability to work remotely can stimulate their mind and body through travel and change. It provides a way to refresh your perspective of life both personally and professionally.

Remote employees have to embrace an individualized work/life balance plan. The definition can be anything from living in a foreign country, joining an organizational committee, or reconnecting with yourself through nature. We need to continue to enhance our communications on a new level and use our interpersonal skills to build and improve relationships within our profession. This doesn’t and shouldn’t have to be work, it should be an enjoyable and creative experience.

6 Questions on the Path to Financially Justified Projects: Developing Cash Flow Models – Part 3

Written by Bill Kay, MSOL, PMP on August 15, 2017. Posted in Articles. 6 Comments on 6 Questions on the Path to Financially Justified Projects: Developing Cash Flow Models – Part 3

Click here to read Part 1 and Part 2 of this 3 part Series.

What is the hurdle rate your company uses?

No company has an unlimited source of funds from which to execute its strategy. It stands to reason that with limited funds available, those projects funneled through the selection criteria must be profitable if the organization is to achieve its intended strategy. This limitation imposes upon the organization the need to make thoughtful, calculated decisions concerning what projects receive funding approval. A key component of this decision process is a company’s selection of their expected/required rate of return, or the “hurdle rate” that must be achieved to make projects a worthwhile investment in their particular business setting.

To make it worthwhile, project investment returns always need to be higher than the cost of capital. The WACC (percentage) represents the cost of capital and is used most often as the hurdle rate, but not always. If used as the hurdle rate to make and evaluate investment decisions, the WACC would represent the minimum required rate-of-return at which a company produces value for its investors. The WACC is appropriately used as the hurdle rate if you are confident the promised future cash flows will be received.

Many finance professionals assume that the historical WACC is automatically the correct discount rate with which to assess a prospective project’s NPV. This assumption is the company’s WACC should not extend to all projects. What matters most is the relative risk profile of the specific project under consideration, and its ability to generate net free cash flow that is certain.

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While risky projects may provide leapfrog advantages to an organization, overall risk increases and financial certainty fades, as future cash flow estimates are likely to be flawed (e.g. high probability of cost overruns). When project risk is higher than the company’s existing complement of average or typical undertakings as reflected in its historical WACC, a project risk premium should be added to the company’s cost of capital. This provides a hurdle rate equal to the company’s cost of capital plus the project’s risk premium.

This protective measure employed by the company compensates for accepting the added risk by requiring a risk-adjusted rate of return. The profitability expressed by the NPV calculation is lowered and the chance of accepting the project is also lowered. Evaluating alternatives by requiring a higher rate tilts results in favor of selecting profitable projects, while eliminating from consideration marginally profitable projects. The inevitable tradeoff here is between realizing an “opportunity loss” versus realizing a “real loss.” In the latter situation, there is a real economic loss and the company is shedding value.

Risk premiums can vary from less than one percent to several percentage points; and inversely, especially-low-risk projects may warrant a downward adjustment in the WACC to account for the risk differential. Establishing the hurdle rate(s) has more to do with careful reflection and forward-looking vision than a finance department formula. Influencing factors, assumptions, or judgments might include the economic horizon, competitive forces, industry conditions, type of financing anticipated, risk tolerance (obviously a major factor), faith in the accuracy of the estimates, and the company’s overall situation (e.g., cash position/liquidly).

Conclusion

Always consult your finance department or CFO on these important questions and any appropriate method(s) or guidelines specified within your organization. Armed with this knowledge, you are likely to build cash flow models your superiors will take seriously. Furthermore, it will demonstrate your understanding and initiative, meaning you will likely earn considerable credibility with that department (or other key decision makers) which, incidentally, may ultimately have final word or control the purse strings on your current or future project.

6 Questions on the Path to Financially Justified Projects: Developing Cash Flow Models – Part 2

Written by Bill Kay, MSOL, PMP on August 8, 2017. Posted in Articles. 2 Comments on 6 Questions on the Path to Financially Justified Projects: Developing Cash Flow Models – Part 2

Click here to read Part 1 and Part 3 of this 3 part Series.

What is the payback period?

Payback period, also known as time-to-money period, is a measure of risk and more aligned with organizational liquidity than anything else. The longer the payback period, the riskier the project becomes. A risk averse company may have a smaller payback period stipulation, perhaps a cutoff period of less than two years, than one more tolerant and open to more risk.

If your company has established risk tolerance parameters around payback periods, you will want to know this. Your project may be cut off from further analysis before it even gets off the ground.

What determines whether a given cost is a “capital expenditure” or an “operating expense”?

Most capital expenditures are depreciable assets, while operating expenses are not. The difference and the relevance to your project is this: operating expenses directly reduce profit by showing up on your project’s income (cash flow) statement. Whereas with capital equipment, only the depreciation appears on the income statement and the capital expenditure (the large layout of cash) shows up on the balance sheet.

Organizations generally consider an asset as depreciable if it is greater than a specified dollar amount. Submitting project financials that align with company policy is the reason why you will want to address this question.

Do you know your company’s weighted average cost of capital (WACC)?

Ever get curious about where the money comes from to fund projects once approved? Companies fund projects (and other areas of the business) by one of two primary means: debt and equity, or a combination of both. Let’s explore debt and equity first, as this will help solidify your understanding and comprehension of the financial metric introduced in the above subtitle.

Debt

Debt is borrowed money. Financial institutions (the most common debt financing source) lend companies the money that often finances projects. The loan(s) could be in the form of a revolving credit line or issued as a direct loan(s). Companies incur interest rate charges on the various loans they acquire and/or the corporate bonds they issue. The interest rate may vary across the various sources of these funds. The average of these rates is the “blended rate.” This blended (interest) rate represents the “cost of debt” to the company expressed as a percentage.

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Equity

Equity represents another source (and more costly form) to fund projects and business operations. Corporations can secure funds by selling stock (or by utilizing retained earnings from business operations, another form of equity). In return for their investment dollars, shareholders receive ownership interest in the company, but they also expect a reasonable (or better) financial return on their investment (e.g., stock price appreciation, dividend payouts). Company directors may know that if the company provides an overall annual return to investors (of some amount, let’s say 8%) they are likely to remain happy and stay as investors. Companies must meet the financial expectation of shareholders; otherwise they could sell their shares, causing the stock price to drop. This is the “cost of equity” (also expressed as a percentage) and is essentially what it costs the company to maintain a share price theoretically acceptable to investors (e.g., the 8%).

Capital Structure

For reasons not relevant here, some businesses find that it makes more sense to purchase items by incurring debt (bank loans), and for others, to use cash (equity financing, selling stock). The balance between debt and equity funding signifies the company’s capital structure; it represents the percentage of debt and percentage of equity a company maintains to fund its projects and run day-to-day business operations. Capital structure can vary greatly from one company to another or from one industry to another (e.g., 30% debt to 70% equity structure for one company and 50% debt to 50% equity structure for another, or variations thereof).

Weighted Average Cost of Capital and its Relevance

We are now ready to explore the financial metric called weighted average cost of capital, referenced earlier as WACC, which is a measurement that refers to the capital structure of a company. It is a proportionately weighted calculation that brings together the weighted cost of debt and the weighted cost of capital (into one number) used to express an overall interest rate for a company to meet its obligations to financial institutions and shareholders. For example, WACC = 14.75%.

A specific company may have a 30% debt capitalization at 8.2% (the blended interest rate) and a 70% equity capitalization at 14% (rate shareholders kept happy, remain as investors). It is from these numbers that the WACC is derived. Note: The required rate of return on debt is after tax.

Keep in mind, WACC is also descriptive of company risk (not to be confused with project risk), as smaller firms are less likely to secure the same debt financing terms (i.e., the lowest possible rates), as larger and perhaps more creditworthy organizations. The business reality of higher opportunity costs (higher risk) reflects in the blended (debt) rate and in stockholders’ higher requirements, and then finally in the WACC calculation itself. Stable companies (e.g. Walmart) will have a lower WACC representative of lower risk, and therefore a lower hurdle rate to jump over when approving projects.

Perhaps we have arrived at the “Ah ha” moment, understanding the relevance of WACC to the project manager. When developing a discounted cash flow valuation model, WACC is used as a discount rate to derive a project’s net present value (NPV). NPV conveys the financial value a project brings to the organization in today’s dollars from the anticipated future cash flows. If the borrowing rate is 14.75%, the project submitted for approval must have a yield greater than this for it to be profitable. The project’s financial return or internal rate of return (IRR) must be greater than the money being borrowed to fund the project.

Keep and eye out for Part 3, to be published August 15th.

The Benefits of Closing Projects – Beyond Lessons Learned

Written by Andrea Brockmeier on August 7, 2017. Posted in Articles. 4 Comments on The Benefits of Closing Projects – Beyond Lessons Learned

In my experience, and in talking with my students and other practitioners, it is my perception that closing projects is one of the most overlooked processes in the discipline of project management.

It’s easy to understand why closing often gets neglected. By the time the project is over, many stakeholders, including the team, have already turned their attention to the next project. In fact, sponsors sometimes lose focus by the time there is confidence that the bulk of the work has been done and deliverables have been received. It doesn’t always feel like time well spent to go through the exercise of closing.

As with all project management processes, the degree of rigor needs to be scaled appropriately to the project, organization, and stakeholder need. It may not need to be a formal or heavy process, especially if it doesn’t involve regulations or compliance. In fact, a leaner process done periodically along the way often makes it not only easier but also more valuable.

Ignoring the process altogether may mean missing some important benefits. Some habit around a closing exercise will benefit the organization and serve the stakeholders well in the long run.

Along with conducting a lessons learned session, getting approval for deliverables, and resolving outstanding issues, a key closing activity involves the collection, organization, and storage or archiving of project information. Recently, a colleague and I were sharing project experiences and our conversation highlighted three interrelated benefits of this closing activity:

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1. Retrieval of Project Communications

Many organizations only keep email and other communications for a period of time. Typically, closing the project involves collection of project communications, including email. If there are questions asked about a project that closed 10 months ago, and the answer lies somewhere in an email string, you may not be able to get to it if the organization only keeps email for 6 months. For example, I have worked on projects in which it was enormously helpful to be able to go back and review emails from previous projects to help develop more effective strategies for working with stakeholders.

2. Captured Thoughts While People Still Have Them

Team members and SMEs who move from project to project often have invaluable information not just about things that are likely to be captured in a lessons learned exercise, but also how something was done, what options were considered, or various experiments that may have been tried. In fact, in my colleague’s case, they were asked what they had accomplished on a past project and because nothing had been closed out, it was difficult to present what had been delivered. It wasn’t that they had failed to deliver anything, but there was no acknowledgement of the intangible deliverables. Months later, they were hard pressed to present what had been done. In this particular case, the organization wanted to restart the project and it was hard to know where to begin. This case is a great example of the value of not waiting until the end to close. A closing process that includes collecting key information from the team will mitigate the problem of not being able to recall details later when it might be helpful to leverage that past experience.

3. Retained Context for Project Decisions

Capturing project information as part of closing typically includes market, financial, or other data that has gone into project decisions. While the decisions may be long remembered after a project is finished, it can be difficult to recreate the data context that lead to those decisions. When future projects require a decision, it may be helpful to know what the data looked like at the time a decision was made on a past project. Closing captures that snapshot of the data as it looked at the time, providing the context for project decisions that were made at the time.

People are often inclined to archive information, especially communications, for defensive purposes. But this is not about archiving simply to have a record or paper trail as proof of something (which suggests a lack of trust). Project information and data that is likely to be helpful in the future often goes beyond the thoughts and reflections captured as part of a lessons learned exercise. Without some intention around gathering that data, communications, records, etc., there is a missed opportunity to easily go back to refresh memories on what happened in order to answer questions or get input into new decisions.

So the next time you are tempted to gloss over or ignore closing, consider these benefits of collecting and archiving project information as part of closing your project — either at the end of the project or, better yet, periodically along the way.

I’d be curious about your experience with collecting and archiving project information. When have project archives served you well from past projects?