Project management lessons from investment management

In ROI: Risk of Ignoring, I started to explore investment management as a metaphor for strategic project management. Here are some more lessons from investment management:

• Risk / Reward: it follows, I think, that the projects with the greatest potential risk for failure carry the greatest potential rewards (all other things being equal). In traditional finance theory, advisors establish the risk tolerance of a client. Organisations too have a project risk tolerance. Conservative companies are just not that good a high risk projects - which goes a long way to explaining the relatively low levels of innovation (historically) in the financial services sector compared to the dot com sector, as well as the re-invention of big pharma.

• Diversification: particularly at the higher risk end of the spectrum diversification pays - that is running a portfolio of projects whose failure points are not correlated dramatically increases the chances of success. In organisational terms, that means not focussing all of your innovation and investment in one division or area of the business at the expense of the rest. It also warns those business who pin their hopes on a single transformative initiative. (On the other hand, people can only deal with so much change at a time, so that needs to be managed too.)

• Profit Taking: with investments, it makes sense to sell investments once you've made a respectable profit, rather than hanging on for the investment to peak, thereby leaving something on the table for the next investor. Similarly, it make sense to get you products out there before they have every last feature implemented. It's better to get something out there than it is to wait until the market turns and someone else has mopped up your target market.

• Liquidity: investments that are easy to monetise are more attractive than those that are not. Look for project structures that are easy to disaggregate into pieces that are easily repurposed or multi-purposed. Look for early wins that impact the bottom line. This is why Agile methods have become so popular.

Project Stakeholders have conflicting agendas

One of the biggest challenges in project management is managing stakeholder conflict. Even at the most basic level, different stakeholders have different relationships to the project.

• Team members - typically work on a single project for a long period of time. As a result their personal identity becomes wrapped up in the project. They lose objectivity and may try to keep the project going long after it makes sense to give up.

• Users - often see the project as unwanted interference - a change to be resisted. And if they carry the domain knowledge, they are uniquely positioned to consciously or unconsciously undermine it. (Although increasingly, it seems, projects have customers rather than users.)

• Sponsors - are more likely to see the project as one of many potential investments they currently have on the go.   Their perspective is almost completely the opposite of the team members, as they have to consider how much resource they give them and whether or not it's time to pull the plug.

A successful project manager understands these conflicting agenda and is able to keep them in balance.

Strategy as Public Relations

A former employer recently announced the outcome of its latest "strategic review".

It picked up a number of unfavourable comments about it not being particularly strategic.

It struck me how commonly companies' stated strategies don't seem that strategic.   Are companies really that bad at strategy?

Sun Tzu said: "All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved."

If you had a good strategy, would you share it with your competitors?

So why do companies go through the pretense of publicly stating their strategies?

The reason is simple - it's more about PR than it is about strategy.

My former employer wanted to send a signal to the market.   In this case, what they wanted to signal is that they are paying attention to the debate on corporate governance, and that they are interested in selling parts of the business, and possibly buying other types of business.   This latter point is particularly important - its one of the few ways a company has of advertising its interest in acquisition and disposal opportunities.

Of course, it's possible that some companies believe their and others' spin, and do confuse this PR with strategy, but hopefully that is not across the board or we're all in trouble.

The same logic could probably be applied to many companies vision statements, which just aren't that visionary.

So next time you read a company's public statement of strategy, don't make the mistake of thinking that's really what the company's strategy is.   Know it for the PR statement it is, and understand what it is signalling, and why.

Portable Pensions

Why can't contract-based company pensions attach to the employee, rather than to the employer, like bank accounts do?   You don't need to open a new bank account with your new employer's chosen provider each time you join a new company.  So why should you have to do that with your company pension?   Clearly the payment infrastructure is all there already, since they pay your salary directly into you bank account, so that can't be the problem.

When (if?) Personal Accounts arrive, they will offer this advantage.   Perhaps they'll do us all the favour of forcing similar benefits into the private sector?

A simpler solution, where each individual chooses their own single pension plan would make life a lot easier for everyone, and possibly even encourage people to save in pensions plan more.

This seems to be a prime example of a customer benefit innovation waiting to happen.