We have planned and initiated our Strategic Initiatives with a solid requirements specification and documented result expectations agreed to by sponsor and other key-stakeholders, but how can we make sure that we actually get what we want?
What we demand and expect is supposed to happen in the future, but we know an old saying (origin unknown) that “It’s hard to make predictions, especially about the future.”
We might get help from pure luck by hanging a horseshoe over our door such as did Niels Bohr, a famous Danish scientist and Nobel Prize recipient, who replied to a friend that asked him if he really believed that it helped: “Of course not … but I am told it works even if you don’t believe in it.”
Our plans and our requirements specifications are predictions and it is pure luck if we get a solution that fits the requirements specification— unless we manage the solution delivery.
Contrary to good weather and true love, which we all want to achieve but where we have very little influence, the delivery of business solutions is after all more under our own influence:
Within the budget and other constraints concerned with, for example, people, technology, and legal compliance, we can achieve a higher probability to get what we want if we make an effort to manage the implementation of our required result.
Strategy governance is performing this management task.
While projects are relatively easy to manage because they produce predictable and tangible results with known resources and well-defined baselines, once they have been planned and are executing the program part of Strategic Initiatives is more difficult to manage because the benefit target is much less tangible.
The Strategic Initiative not only plans and executes projects; it also changes business behavior, re-organizes organizations, and invests in the development or acquisition of new products and improved methods where the outcome depends on how the market and the internal stakeholders accept the change. This makes the outcome of Strategic Initiatives random, and for both forecasting and tracking we need to apply statistical methods in order to understand the magnitude of variance with which we are faced.
In the Strategic Initiative world of random outcomes, agile planning and tracking of our activity allows an easier to understand follow-up on progress. By measuring progress only by user and management accepted solution components delivered, installed, and ready for production, we know what we have and we have a steadily improving foundation for estimation based on the gained experience.
To work in an agile way does not happen without prior planning and organizing. Solution components that lend themselves to agile processes, organizations, and management are identified and you plan for their scenarios to be available with “no excuse for failure.”
The benefits from agile solution delivery in terms of solution quality, process efficiency, and cost reduction far outweigh the planning effort and the scenario establishment investment for their realization.
Agile planning and tracking do not completely remove the uncertainty from your planning and execution of Strategic Initiative solution component delivery:
• We cannot be sure that we will not have to add use cases or other unforeseen components to our solution before we can make the stakeholders happy.
• Even the best agile team can lose important members.
• We do not know if the implemented solution component will yield the expected benefits, especially if we have not estimated or forecasted these benefits in tangible measurable terms.
• We are still depending on the forecasted figures of duration time and cost to completion of the outstanding solution components from the Workgroups being reliable.
In order to satisfy the stakeholders, all Strategic Initiative elements of solution, organization, and process stay variable and manageable until the day when the Strategy Governance Team decides that the program can close out. These are the Strategic Initiative elements (variables) that the involved organization of Governance Teams, PQA decision-making teams, and Workgroup Teams can manipulate in order to ensure that all stakeholders accept the final result.
Whenever it becomes evident that the original targets cannot be met or that the original targets no longer are valid, it is time to change the strategy. Changes and adjustments to solution scope, organization, and process make the Strategic Initiatives fit the reality that becomes visible only as the Strategic Initiatives progress and meet the obstacles that we did not expect and for which we did not plan.
Strategic Initiative governance is about negotiation.
The Governance Teams and the Workgroup Teams continually get and deliver information that indicates that planned activity is not executing the way it was planned:
• Resource availability is not as promised.
• Resource skills and experience is not what was contracted, so important activity does not yield the result quality expected and it takes too long to get the results.
• Critical activities cannot start because they wait for resources to be released from other activities.
• Critical activities are interrupted because important resources leave or because development components from the COTS vendor do not work as expected.
I have never been involved with projects and programs that do not have these problems. The risk management can just tell you that it might happen and that you need to plan for this eventuality with appropriate risk response. However, planning to avoid these events is only possible if you double or triple the resources and with them the cost of the project and the required budget.
By allowing a little more time for delivery, you might have time to adapt to the problem without major cost increases and still have happy stakeholders.
These alternative possibilities for avoiding or mitigating the risk demand that the Strategic Initiative Sponsor and Governance Teams negotiate with solution delivery Workgroups of internal and external resources in order to find the best possible way to handle the risk situation.
It is never a good idea to let one party dictate how to mitigate the risk. This way of tackling the problems removes responsibility from parties that might have good ideas and might be willing to take on responsibility.
Negotiations without one dominating party is a first step on the way to obtain win-win solutions and synergy effect, while domination from one party has a demotivating effect that most often touches all involved stakeholders because the dominating party will have doubts about the effect of what was dictated in the light of the demotivation of the dominated party.
To prepare for negotiation, we need to know where we are and we need to agree on where to go based on what we know now about the Strategic Initiative conditions.
When a major SAP client chose an implementation partner for its future Information System solution delivery, the client thought that SAP had this solution embedded in all of its functionality.
On this basis, the client committed to accept solutions based on what SAP could offer as standard only. This implied that the client accepted to adapt the client organization and the client business process workflows to whatever SAP could offer. In this way, the implementation budget was kept to a minimum.
Unfortunately, SAP did not have all the solution elements foreseen by the client, so a lot of adaptation was needed. Certain legally compliant solution elements could only be delivered at costs that far exceeded the initial budget. Alternative solution elements existed in SAP, but setup requirements already implemented in other solution components prevented the client from using these solution elements.
The solution delivery partner was very clever at negotiation, so it was able to convince the client that its original scope and baseline was not what it really needed.
The client management was under pressure to get the solution implemented as fast as possible, so it was very happy to agree with the solution delivery partner about the “minor” scope changes.
Twelve months later client management and the solution delivery partner could agree on and announce publicly that the implementation program was a success, delivered on time and on budget. What they did not tell the public was that the success had been achieved on one-third of the solution elements expected by the client at the start of the solution implementation process.
The third of the expected solution that was implemented was in production and the users of this part were happy.
This story is an example of how you can make stakeholders happy through Strategic Initiative governance:
• Whatever you think you need or whatever you require from the outset of the Strategic Initiative is never what you get.
• You are successful if and only if at the end of the Strategic Initiative you are happy with what you get.
The result of a Strategic Initiative is delivered based on ongoing negotiation throughout the life of the initiative.
Successful negotiations about the direction and the result of the Strategic Initiative in order to meet the demands of the stakeholders require that the negotiation stakeholders know where their currently executing initiatives are relative to their baseline.
For this purpose, you will need Key Performance Indicators (KPI) related directly to your Strategic Initiatives that can tell you if the initiatives are moving in the right direction with a reasonable performance, where performance is measured relative to the baseline, for example:
• Are we heading at a cost overrun in the end or will we be within budget?
• Do we deliver partial results on time or are we heading to a delay in the end?
• Does the deliverable quality of partial deliveries meet our expectations?
• Are the resources required to progress available on time?
On top of these KPI, we need less tangible performance indicators to tell us:
• Is the solution we are creating still relevant?
• Will unexpected competition prevent us from getting the expected ROI?
• Do our Strategic Initiatives still have the same priority with the sponsor?
I trained the project and program managers of a major Swedish industrialist in project and program management with high weight on communication management and key figure usage from project progress tracking such as Earned Value Analysis Cost Performance and Earned Schedule indexes.
My sponsor and I had developed the training material dedicated to their situation as vendors and implementers of major industrial production structures in a market with strong competitors.
Two years after giving the training, I went back to understand how and with what result they had used what they had learned. This is the answer I received:
Soren, we were happy to plan and track our programs and projects as you had suggested. We even used the coffee bean to structure the Work Breakdown Structures for agile behavior and tracking, and we delivered reliable tracking information to our sponsors all the time; but our sponsor closed out our project with 32 persons full time occupied from one day to the next without any warning. Even today, we do not understand the precise reason for this action.
How could we have prevented this situation from happening?
There are events that will hit you as manager or participant in a Strategic Initiative that you can do nothing about. Even the best communication and the best negotiation-based relationship with your sponsors cannot prevent this from happening.
In my opinion, this is not a reason for not at least trying to make good tracking and communication. Even though you have nothing to negotiate about you might at least know why.
Negotiation is based on communication. Somebody discovers that deviations from expectations have occurred and this somebody needs to know how to treat this discovery for negotiations to be initiated about how to react.
Ongoing communication of pertinent performance key figures as soon as they are known can ensure that deviations from baseline are discovered early and that these deviations are handled in the best possible way.
Communication means that there is a sender and a receiver of the information and that they both make sure that the other party understands the implication of what is communicated. Somewhere in the Swedish case mentioned previously this did not happen because some pertinent information from Sponsor to Workgroup and even Governance Team was not communicated before it was too late for negotiation and explanation.
In previous chapters, we prepared the tools and methods for how to respond to deviations from baselines and how to execute change. In this chapter, we will cover the information, methods, and tools that can tell us early on when the deviations from baseline are pertinent so that we can initiate plan adaptation and initiate change before it is too late:
• Strategic Initiative KPI
• The Compound Expected Value (CEV) of the Strategic Initiatives with reference to PQA success factors
• Communication
6.2 ESTIMATION AND FORECASTING
PQA is our first foundation for estimation and forecasting when we plan a Strategic Initiative and when we adopt major changes to the Strategic Initiative, that is, when we re-plan the initiative:
• The success factors give us targets of tangible and intangible nature that can be used for negotiation about where to go and for asking questions as to whether a success factor has been achieved.
• The success factors give us an idea about what to implement and why.
• By showing the expected tangible and intangible values of needed solutions and the planned activities to perform their delivery, the success factors provide a base of reference for prioritizing and evaluating the requirements specifications for the solution components to be delivered by the Workgroup Teams.
• The PQA activities with their outline estimated duration and resource usage give us the foundation for more exact estimation and establishment of milestones and baselines against which we can measure progress.
• The milestones tell us the expected delivery date of solution components so that we can have requirements, test scenario, and people ready for simulated and final Accept-Testing.
• Other baseline elements such as the critical path of Workgroup tasks can tell us about the probability of delivery of the final result on planned time.
The forecasting of the product quality is the requirements specification. We measure the quality of delivered solution components against the requirements specification that has been broken down into very specific and tangible test cases and expected test results.
The breakdown of the requirements specification in use cases and work-flows prepares for an agile delivery process with agile planning and tracking.
6.2.1 Monte Carlo Simulated Forecasting
Forecasts of activity duration and cost are random. Activity cost is most often measured in number of person-hours worked multiplied by an arbitrary person-hour cost per hour. The activity duration at least in the beginning of a Strategic Initiative is close to the wishful thinking of the sponsor because no one can prove this thinking wrong unless it is completely unrealistic.
The Sponsor’s early forecast is probably based on studies of other similar initiatives if they exist, or on opinions of subject matter experts, or on available funding opportunities. Not many managers will protest against this Sponsor forecast before they have gathered some experience from their own initiative execution.
Strategic Initiative Sponsors and Governance Teams know quite well that the initial forecasts are random with very high uncertainty, but once the Workgroup managers have launched an estimate the randomness is most often forgotten and the poor Workgroup manager is punished or blamed for cost and time overruns or might even get a bonus for doing better than forecasted. Punishment, blame, or bonuses are not deserved here as the results achieved are based on pure luck or lack of it.
Forecasts are better used as information for negotiation. It is possible to establish a realistic foundation for negotiation if you break the activity cost and duration forecasts down into task-based forecasts, where the people working on the task have a more realistic idea about how much time and money they need to deliver what is required from them.
Furthermore, if you add realistic information about dependencies between tasks and maximum availability of resources per period, you get an opportunity to use Monte Carlo simulation to tell you:
• The probability of different levels of total activity cost
• The probability of different activity durations
You can find easy to use free or professional tools available for Monte Carlo simulation that is fully integrated with Microsoft Project and Excel.
The Excel spreadsheet with your estimates per task will draw a probability distribution of your random activity duration and cost after simulation of your project plan. The tools allow the forecasting of three cost and duration estimation figures to be entered into the Microsoft Project task information for this simulation to take place:
• Most pessimistic, say in only 1 percent of cases will duration and cost exceed this value.
• Most likely, what we would have committed to if asked for only one figure.
• Most optimistic, say in only 1 percent of cases can we do it so fast and so cheap.
The Monte Carlo tool will simulate between 100 and 1000 plan-cases and tell you the probability of different cost and duration estimates. The number of plan-cases to be simulated is decided by you. Increasing the number of simulations above a certain number will not yield better results. The more advanced tools will tell you what the optimal number of simulations is for your plan. Besides the simple triangular probability distribution, some tools allow you to use more advanced statistical probability distributions such as the normal distribution.
It is now up to you as Sponsor, Governance Team member, or Workgroup Manager to decide on which probability level you want to plan the work:
• If you are optimistic or you want to stress the Workgroup or you hope to convince an external vendor to give you a favorable offer, you will go for an estimate, where you have only 50 percent probability to succeed.
• If you are more realistic, you will go for an 80 percent chance of success and put less stress on the Workgroup to get a better result quality.
Now you can negotiate and both parties can go to work knowing the cost and duration risk they are facing.
Monte Carlo results, shown in Figure 6.1, look like this based on the cumulative probability of being below a given cost and duration figure.
I like Monte Carlo simulation because the results are easy to interpret and therefore provide a basis for negotiations, where you can go back to the three-point estimates on each task and adapt these to new knowledge and experience as you move forward with your Strategic Initiative.
If now the Workgroup Team and its manager over-perform on agreed targets, it is still lucky, but in this case, a team bonus will be good for its
FIGURE 6.1
Monte Carlo accumulated probability of cost and duration as made with software from e.g. www.palisade.com/Risk.
motivation to keep the performance up and participate in future negotiation and decision making.
6.3 STRATEGIC INITIATIVE KEY PERFORMANCE INDICATORS
Once initiated, the progress of the Strategic Initiatives is tracked in order to be able to adapt to new knowledge and other changed conditions.
Over time the risk profiles change and with those the probability of opportunities and threats.
The tracking is based on KPI that can provide information about:
• Organizational condition changes
• Solution condition changes
• Process condition changes
Some KPI are specific for each condition type, while others look at cross-initiative environment indicators that indicate if duration or cost is under control for the Strategic Initiative.
You will also need KPI that can tell you whether your Strategic Initiatives perform as they should from a business perspective, that is, looking at all opportunities and threats known at a given point in time:
• Is what we are doing still attractive?
• Do we need to change the strategy and re-establish more valuable
Strategic Initiatives?
A KPI that can help with Strategic Initiative tracking from a business point of view is the Compound Expected Value (CEV). Calculation of CEV per Strategic Initiative makes it possible to compare the initiatives mutually and to evaluate them in the context of overall business strategy performance.
6.3.1 Classic Strategic Initiative KPI
Well-known KPI comprise:
• Cost Performance Index from Earned Value Analysis that allows you to measure if you are on track cost-wise and can give you an estimated cost at completion.
• Time-based Schedule Performance Index [SPI(t)] from Earned Value Analysis with the difference from classic cost-based SPI being that you measure duration. SPI(t) allows you to estimate the final delivery date, which the cost-based SPI does not allow.
• Critical Path Method (CPM) float calculation based solely on task duration and task dependency can show you if you are early or late by task or in total.
• Baseline Variances (activity delays, missing resources, missed milestones).
• Outstanding issues based on your list of issues with reference to issue documentation and indication of status and expected time to closure.
• Quality control results (error log) from SAT and Acceptance Test that shows an objective status of the quality of solution components to be delivered.
You can look up how these statistics are calculated in project management textbooks or on the web. In order to calculate these KPI, you need information systems and procedures that ensure the necessary discipline from the planning data and result reporting Workgroup Teams.
An example of a quality management COTS is HP Quality Manager.
An example of project management COTS is Microsoft Project.
These applications are COTS applications just like any other COTS application, so they require setup, support, and trained users to give you benefits from planning and tracking. I would never try to use such systems without Project Office support, facilitation, and coaching.
The Strategy Governance Teams can work together with the Project Office if it exists to establish Information Systems in support of planning and tracking of the Strategic Initiative Workgroup activity. If an Information System-based foundation for planning and tracking is not established, the Workgroup Managers and the Governance Teams get the tracking information too late about problems and incidents to respond to these in time because:
• The Workgroup Teams do not discover that they are late until deadlines have passed without delivery of the expected solution in the right quality and until milestones have not been met.
• The Workgroups only report progress when asked to do it in the form of “we’re fine and we’ll deliver in time” even though more reliable Estimated Work-hours To Complete would tell you and them that this is not possible.
• Even though the Workgroup Team knows that it is struggling to make it on time and cost, the members are too proud and optimistic to admit it.
• The busy Workgroup Team does not discover its dependency on the performance of other Workgroups before needed resources or deliverables do not turn up on time.
• The Workgroup thinks that it can deliver the expected quality on time by working faster or by adding resources although all known experience shows that this is never the case.
The Project Office supports the usage of the required Information Systems to ensure that the Workgroup Managers register the plans from PQA and estimation activity correctly and so that the Workgroup participants can report:
• How many person-hours they need to finish their work.
• How much calendar time they need to complete the work.
• If and when they are available to do the work.
• Expected unavailability not planned.
The Workgroup Manager will approve this information and further add information about dependencies between tasks.
Based on this information, the Information System can calculate delays and cost overruns with key figures such as Cost Performance Index or duration variances on the critical path of the Strategic Initiative, where any delay has an impact on the final duration of the initiative.
On a regular basis, all active Workgroup Managers get together with the managers from organizations that provide the required resources to coordinate that these resources become available as needed or are released for other purposes if they are no longer needed in an already agreed period.
All of this tracking and ongoing re-planning work can function well if supported by a Project Office.
I have never seen project tracking and timely strategy re-planning work well without the support of a Project Office.
The Workgroup activity results in delivery of solution components. Another way to track the performance of this work is by measuring how fast error-free solution components are delivered. This is the agile tracking method.
When working agile with the development and implementation of working solution elements, you are supposedly not interested in all the nitty-gritty planning and coordination presented previously.
You “simply” get the right people together, provide them with all required material and resources, and wait for them to send out white smoke when a solution has been produced, tested, and approved for production.
Your agile work breakdown structure consists only of use cases or autonomous solution components closed out with passing SAT. The solution components to be produced are your burn down list that you make shorter and shorter by delivering result components.
You control the delivered solution component quality by SAT testing and an outstanding error and issue list that allows you to accept changing conditions and requirements as you get wiser.
The solution that passes SAT is what the stakeholders want, so you have no quality issues once the solution component has been delivered.
In theory, you produce solution components at a fixed rate of speed (velocity) that based on your burn down list allows you to calculate the outstanding duration of the work.
By having all needed resources available all the time, you do not need to do resource planning more than once, when the resources for the agile delivery process have been allocated to the Workgroup.
When planning Strategic Initiatives, you should look for opportunities to work agile. When you manage in an agile way, you can concentrate all your effort on the design of solution architectures with use cases and on building the use case-based solution elements fast and with good quality based on SAT.
To establish and govern the agile opportunity will demand all your project management skills.
Before you get to the opportunity to go agile, you still need to do classic planning and arrange for classic performance indicators to be produced in order to manage all the tasks that are needed to cater to the agile Workgroups:
• Procurement of resources
• Procurements of COTS
• Establishment of development environment
• Establishment of SAT scenarios
• PQA preparation and conduct
• Preparation of the basic requirements specification
6.3.3 Solution Quality Evaluation
Once you have isolated the agile teams, you get the best possible foundation for evaluation of solution quality because solution components passing SAT by definition are accepted by the stakeholders.
These solution elements do not have to be exactly what is written in the requirements specification as long as the stakeholders represented by the Accept-Testers accept them. Quite often, the solution is better than required, and if this happens without increasing the cost such as on fixed price contracts, everybody is happy.
In the private bank swap-case, each Workgroup consisting of developers, IT supporters, and end-user SAT and Final Accept-Test testers was an agile group. That their result was finished and ready for use was underpinned by the fact that this result released invoicing and immediate payment to the involved external solution providers.
Once the Workpackage producing Workgroups had been established, the Governance Team had no interest in intermediate results, only in fulfilling the changing demand for resources and material that was requested by the Workgroups ongoing as they acquired experience with setting up the needed solution components and the COTS.
As not all use cases were equally complicated, the Workgroup Managers had some classical planning to do in order to provide the Governance Team with progress information and expected delivery dates, but there was no control needed from the Governance Team side, only support to ensure “no excuse for failure.”
Based on the agile strategy and the clear rules of solution acceptance, there were practically no outstanding errors and issues except for the ones that originated from an exceptionally bad quality of the underlying COTS. The error and issue documentation was of great value during negotiations with the COTS vendor.
When you are not working in an agile way based on technically error-free delivered use case-based solution components, the evaluation of the solution quality is more complicated:
• You have no guarantee that the delivered solution components are free from errors that have nothing to do with your business needs. This means that when you find errors or when the solution component simply does not work, you and quite often the delivering Workgroup do not have a clue as to what is wrong. Error correction will demand profound analysis before the reason for the error is found and a correction can be implemented.
• You have to develop test cases that concern COTS functionality that is not relevant to your business processes, but that have to be set up for the COTS system to work.
• If your solution component communicates with already installed information systems, it is quite possible that an error in the original system that had no influence on this system on its own will prevent your new system from communication. Errors like this can be difficult to correct because the reason is hidden somewhere that you cannot know about before you trace the system functionality until the error occurs in a controlled manner.
• The COTS vendor only guarantees that the COTS system works as documented in the user guide and the installation guide, but it is up to you to find the errors in COTS. Finding errors in COTS is not easy because you most often think that you have made a setup error, and it can take a long time before you can prove that the reason for the error is COTS and not you.
• It is difficult to know when you have finished testing because corrections can lead to new unforeseen and unknown errors that might be more serious than you thought could be possible.
While testing a new “Know Your Client” COTS application in a major bank, the COTS worked well on its own, but once we tried to load client data from the central banking application the COTS hung up and the users refused to accept the solution. In this case, the reason for the error was the message queue application that had been especially adapted to the central banking system data types, which were not supported, by the “Know Your Client” application.
The message queue system was no longer supported and the new owner of this demanded an unacceptable fee to re-establish support without guarantee that this support could solve the problem.
Fortunately enough, the original developers had started their own business and they were willing to fix the problem if we had access to the escrow source, which we had.
The problem was small when we found the reason and the skilled people to fix it. However, it took 6 months to get this far with multiple new error corrections from the vendors of COTS and the “Know Your Client” application for which the bank had to pay. Furthermore, it resulted in a lot of testing of new versions that did not work, taking time from busy bank employees.
In the same bank we were installing a major new release of a COTS-based Client Relationship Management (CRM) application introducing MiFID compliant procedures and new reporting.
This new COTS version installation was concerned with new functionality and reports delivered from the COTS vendor based on a simple release document that explained implemented changes since the last release:
• There was no requirements specification from the bank’s side.
• There was no test model or test cases.
• The test of the new release was performed by a consultant from the COTS vendor and the IT support person based on pure intuition.
• The only issue documentation was e-mails sent back to the COTS vendor with errors for correction.
• There was no issue list produced to track the issue status.
• The only response to the errors and issues was new release documents and new bug fixes.
This iterative Accept-Testing dragged on and on and only closed out because the bank IT management and future user test management declared the new release ready for delivery to be Accept-Tested by the user test group.
The user test group had a set of standard test cases that it applied on the new release and that immediately showed production blocking errors.
Furthermore, the CRM COTS interfaced the central banking solution that worked with completely different periods and data types resulting in other production and usage blocking errors that had not been tested by the CRM COTS vendor and the internal COTS support person.
Finally, production and usage was established by force with a delay of 8 months because of immediate business need. Usage required daily manual corrections in both systems until both systems were finally swapped out.
The lessons learned are as follows:
• You cannot implement solutions without requirements specification.
• You cannot test a solution without test model and test cases that are complete. If you are not agile, you need many more test cases on the user side to be complete:
• The test cases are complete with respect to the requirements specification.
• The test cases are complete with respect to the release document.
• You cannot test information system functionality properly without testing business process functionality and COTS functionality (release documented) concurrently.
• The people testing, reporting errors, correcting errors, and finally delivering into production must be competent.
6.4 THE COMPOUND EXPECTED VALUE
The Strategic Initiative Sponsor and the Strategy Governance Teams require KPI to measure the progress of Strategic Initiative benefit delivery. It is more complicated to establish such KPI than to establish the ones that relate to project progress and solution quality tracking. Most often benefit delivery KPI are confined to indexes or absolute values showing their development over the period of the Strategic Initiative implementation:
• ROI
• Number of employees
• Profit growth
• Corporate value expressed in share price and stock exchange value
An example of corporate KPI is an extract from a corporate annual report with figures from 2011 and 2012 shown in Figure 6.2.
Strategic Initiative management has a problem with these figures because they only tell us where the corporation is heading based on historic figures. We cannot see if the currently executing Strategic Initiatives are performing well.
We can only see how Strategic Initiatives have succeeded in the past, and even here, we do not get an evaluation of the progress of each initiative.
We cannot use these KPI to give us an indication about in which direction to change our strategy; they can only and normally much too late tell us that a change of direction is needed if we want better key figures next year.
What we can get from historical KPI is at best a benchmark:
• We get an impression of the magnitude of the organization with which we work.
• We can see what management and shareholders regard as important.
• If we read the annual report, we can get a lot of detailed information about markets, market share, products, services, organization structure, geographic location, etc.
• We might be able to see what sort of information is important as arguments for initiating and implementing a Strategic Initiative:
• Entry into a new market with high growth and profit expectations
• Improved employee efficiency
• Improved logistics management
• Higher product quality
FIGURE 6.2
Corporate KPI examples.
However, how do we measure that our Strategic Initiatives will deliver the expected benefits from these initiatives?
Why and how do you assess that the underlying Business Case is still valid?
Does the original idea hold or do we have to improve or change strategy completely because the corporate situation has changed?
How do we know that the required benefits have been achieved and a new strategy might be needed?
We need a system to give early warning on strategy level, not only on Strategic Initiative level, a system and KPI that can tell the Strategy Governance Team why the Strategic Initiatives can be improved and by what means.
On this background, it is suggested to use the more strategic CEV to complement the classic Strategic Initiative KPIs.
The CEV of the strategy is calculated over the full lifecycle of the strategy:
CEV = Compound expected benefits (CEB) –Compound expected costs (CEC)
CEB = Σ P{opportunity}*Impact (sum over all opportunity events)
CEC = fixed cost + Σ P{threat}*Impact (sum over all threat events).
The fixed cost element is the initial investment in the strategy implementation in order to ensure that the agreed quality of the strategy is attained (P{fixed cost} = 1).
All other costs and benefits depend on the incurred risk, where the most important opportunity is that the strategy delivers the agreed and expected result; and the most important threat is that the strategy for some reason fails to deliver the expected benefits.
CEV is based on risk and therefore looking into the future.
The probability and impact factors applied by the Strategy Governance Team using the CEV to evaluate the corporate strategy and the Strategic Initiatives contribute to explaining the current view on the future opportunities and threats based on what has been experienced with the Strategic Initiatives and other corporate events until the evaluation date.
The initial events can come from the success factors and risks documented under PQA (Figure 6.3).
CEV offers several benefits:
• It can be used to compare Strategic Initiatives of different types.
• It can be accumulated for any set of Strategic Initiatives with adaptation to the risks changed by establishing this set (the synergy effect of the set of Strategic Initiatives)
• It can be used to compare individual Strategic Initiatives for choosing the most appropriate ones for implementation.
• CEV calculation gives full traceability of the calculated value in terms of the probabilities assigned and the impact evaluations used over time.
FIGURE 6.3
CEV calculation example.
• CEV will change throughout the lifecycle of the Strategic Initiative under the influence of progressive elaboration, for example, new experience, new knowledge, improved decisions, changed conditions, and new or obsolete risk.
• The CEV value is a strong indicator of whether the strategy is in or out of control, if the organization establishes relevant thresholds for the CEV value, that is, acceptable minimum and maximum values.
We have already used several types of communication in the previous chapters:
• PQA
• Meetings for initial scope definition
• Presentations for PQA and IRS participants
• IRS Interviews
• OLA-based IRS consolidation
• 9:00 meetings for progress check and fast reaction to issues
• Change request tracking from Workgroup to Strategy Governance Team
• Status meetings to announce major changes in direction and objectives
All of this communication is planned for and supported by standardized documentation and presentation formats that can be adapted to specific situations or improved over time as experience is obtained.
The most important communication tool is probably PQA because it builds on a profound stakeholder analysis and lets us understand the stakeholder attitudes and wishes. Much better than with PQA, we cannot initiate our foundation for communication management.
Furthermore, the rules of PQA conduct pursue high quality of the information that is communicated in order to ensure that the communication becomes SMART. The PQA process ensures mutual respect, which contributes to ensuring that the PQA-based communication becomes:
• Courteous (people problems are not treated under PQA)
• Concise (concrete, pertinent, precise)
• True
• Coherent
• Complete
• Credible
• Valid
• Creative
Unfortunately, we cannot do PQA all the time, so we also need other tools to ensure that the strong team feeling and mutual respect created by PQA stay intact until the Strategic Initiatives close out.
We need to communicate in order to keep all stakeholders happy all the time or at least to make sure that the stakeholders understand why they have a reason to be unhappy.
If a stakeholder does not understand what is going on, we can be sure that this stakeholder will be unhappy and suspicious at some point in time, especially if the stakeholder has a reason to fear that the Strategic Initiative results will have a negative effect on the personal or professional life of this stakeholder and the stakeholder’s organization.
Stakeholder unhappiness based on not knowing why the Strategic Initiatives are implemented and how they will influence their personal or work life leads to conflicts and discussions that you want to avoid. Such conflicts and discussions can be avoided with targeted communication and negotiation based on valid and concise information about the solution, the organization, and the process of the Strategic Initiative and how the initiative is planned to have influence on the stakeholders, as well as where this influence is negative.
You might not be able to establish agreement with all stakeholders, but you can certainly establish visibility and get to understand why someone might try to block the progress of the Strategic Initiative.
6.5.1 Workgroup Manager Communication Management
As a Workgroup Manager, you are also a member of a Process Governance Team. In your role as Workgroup Manager, you manage the communication in the Workgroup and between the Workgroup and the Governance Team. You also manage the communication between the Workgroup and the internal and external stakeholders whether these are other Workgroups, external COTS vendors and solution providers, or internal departments that provide resources or expect delivery of solution components.
In your role as Governance Team member, you represent the Workgroup in the Governance Team and you communicate the Workgroup status, for example, new resource and material requirements, KPI, and the issue and error situation with the Governance Team.
The objective of your communication is to ensure that “no excuse for failure” is obtained through negotiation:
• With the Governance Teams, you want to obtain whatever scope changes are needed with respect to funding, time, and solution quality. This negotiation is based on what you know from dialogues with team members, the issue and error documentation, and the Workgroup KPI. Scope changes and new baselines are initiated and negotiated by you in the Governance Team that can approve changes on its own or after further negotiation on a Strategy Governance Team level.
• Within the Workgroup, you ensure that development and implementation teams work together or at least communicate in an agile way.
• You ensure ongoing “no excuse for failure” conditions.
• You listen to Workgroup resources in order to ensure efficient solution delivery and fast and pertinent adaptation of the work and the solution components and sometimes the resources based on the daily work experience and approved changes from the Governance Team.
• You call the Workgroup Team together to inform them about needed changes and you negotiate how to implement these changes with the Workgroup Team members. This negotiation about how to implement change can sometimes take place under PQA-like conditions, especially if changes to the Workgroup Team are involved.
• On a daily basis, you meet the active Workgroup Team members in person-to-person dialogues and in 9:00 meetings simply to keep the team spirit high, but also to discuss issues and problems of both personal and work natures.
• You make sure that you have a reliable and competent deputy manager to replace you in case of your absence.
• With internal and external stakeholders, you negotiate the resource needs and ensure that these resources are informed and motivated to work in or be used in your Workgroup team during development or implementation and SAT. The communication here is negotiation based on knowledge about not only your own Workgroup needs, but also insight into the status and needs of other Workgroups demanding the same resources as your Workgroup.
When I see Workgroup Managers personally refining Gantt charts and other planning instruments to a detailed level that is not required for communication, negotiation, and establishment of KPI instead of communicating and negotiating, I know that something is wrong.
When I see Workgroup Managers developing requirements specifications instead of communicating and negotiating, I know there is a high probability that the Strategic Initiative will fail. The Workgroup Manager will defend this situation with a lack of qualified resources in time and limited access to funding, but these are bad excuses. If the manager spends the time on planning, communication, and negotiation, the funding and the resources will be available in time because all stakeholders have agreed to the arguments for this fact. If you just do the work, there is no more room for negotiation and everybody loses time and, even worse, they lose motivation.
Workgroup manager communication, negotiation, and the preparation of this is a full time job. The manager job is to ensure the timely availability of qualified and competent resources that can perform development, IRS, OLA, implementation, testing, training, etc. much better than the Workgroup Manager can because they get the time demanded to perform these tasks. The manager is the guardian of “no excuse for failure.”
IRS and operation of the Planning Information System can be left with other resources such as Facilitators and Coaches from the Project Office and a Program Office:
• Once the project plan has been estimated, the Project Office can make sure it is registered in the Planning Information System for correct tracking and reporting.
• The Project Office can ensure and control that Workgroup team members add task status information in the form of person-hours worked on tasks and work effort estimates in the form of person-hours to complete the task. As Workgroup Manager, you are still responsible for reliable time and cost to completion forecasts because this is a result of negotiation.
• Project Office can ensure that the Workgroup Manager gets the pertinent information for plan adaptation and KPI generation as required by this manager.
• Professional business analysts and facilitators from the Program Office perform IRS and OLA best; seldom do the Workgroup Managers.
Management is about communication and negotiation in the context of planning and tracking of the Strategic Initiatives.
Planning and tracking systems and techniques are communication and negotiation tools that can be driven by others once the Manager has laid out the foundation with PQA and other communication scenarios.
As Workgroup Manager, you establish a situation with reliable planning and tracking information supported by the Project Office and the Program Office that allows you to understand where you are and to think ahead. You need detailed progress information reports that show organizational performance (productivity), resource availability, cost control information, procurement information, and much more that let you adapt quickly to situations of problems and new risk before major changes are needed.
6.5.2 Governance Team Communication
Governance Teams and Sponsors need information that allows them to act and react fast on unexpected results, events, conditions, risk triggers (events or conditions that imply a higher probability of a known risk), and new risk.
It is quite popular to provide this information in the form of corporate scoreboards with a variety of KPI. As debated previously, scoreboards are worth nothing if the figures do not compare to expected values, that is, the values established by PQA or some other agreed benchmark.
When we talk Strategic Initiatives, the corporate KPI such as shown above are on a too high level to be useful for strategy governance. One size or type of information does not fit all stakeholders:
• Leaders and other Strategic Initiative sponsors need information that shows whether the delivery of the required results is on a good track. This information is not only in report form, but also is presented and discussed in a dialogue between the involved stakeholders in order to evaluate the real progress and to negotiate about what can be done to improve the situation.
• Valid interpretation of pertinent Strategy Initiative scoreboard statistics such as CPI, SPI(t), error and issue lists, change requests, Gantt charts with tracking, and critical path float might require involvement of competent subject matter experts (SME).
• It is the Workgroup manager’s interpretation of the Strategic Initiative progress information that is the most valuable information required by the Governance Teams and the strategy Sponsors, not the progress information itself.
The Workgroup Manager interpretation can be presented as a PowerPoint presentation or in more formal status reports accompanied by change requests as needed, but none of these reporting elements can stand alone; they always need a personal presentation by a competent manager.
6.5.3 Project Office Communication Support
The acquisition and presentation of valid and pertinent tracking information in organizations with many initiatives demanding the same scarce resources is a complicated task that cannot be left to a single Workgroup Manager.
Each Workgroup Manager will report and validate their part of the Workgroup KPI foundation, but the consolidation of this information is more technical than management oriented.
The Project Office is needed to produce and ensure the technical validity and completeness of the tracking information across business functions, departments, and Strategic Initiative Workgroup Teams.
Information validated and completeness checked by the Project Office can be used by Workgroup Managers and other internal and external stakeholder management to produce pertinent status reports and PowerPoint presentations to the Governance Teams and the Sponsors on a regular basis.
The responsibilities of the Project Office are secretarial in this context. Contrary to many beliefs, the Project Office does not develop or implement corporate standards for Strategy Initiative management and execution. Neither does the Project Office establish the corporate Strategic Initiatives. These tasks are handled by corporate leadership and management such as shown in previous chapters.
Once the standards are documented and agreed to on a corporate level and sometimes on a Strategic Initiative level, the Project Office can facilitate and coach the Workgroup Managers by using the standards to verify that the reporting and information produced by Workgroup Management has a quality that allows it to be used for Governance Team and Sponsor reporting, presentation, and decision making.
The Project Office does not interpret reports and information, it only makes sure that the information is delivered in a timely manner on a form that allows the reporting to be produced, distributed, and communicated.
The role and responsibility of the Project Office should not be underestimated. In organizations with many ongoing business operations and Strategic Initiatives, the standards-based collection, validation, and distribution of basic and consolidated planning and tracking information is a complex task.
6.5.4 Program Office Governance Team Communication Support
The Governance Teams do not have a permanent presence such as an ordinary business organization. The Governance Teams meet periodically or they are assembled for solving critical issues and to respond to demands for change from Workgroup Managers or Governance Teams on a lower level. It is therefore essential that the Governance Team be supported by a professional secretarial function—the Program Office.
A Program Office can be specific to a Strategic Initiative or it can have the responsibility to support all Strategic Initiatives.
The Program Office can be interpreted as the executive organization of the Strategy Governance Team.
The Program Office coordinates the scope of the Governance Team’s information needs with the Governance Teams and the Workgroup Managers supported by the Project Office.
The Program Office experts lobby with external stakeholders in order to understand their needs and expectations. In this context, the Program Office produces reports and requirements of legal and other compliance nature that are important for the decision making events such as PQA on the Strategy Governance level.
The Program Office facilitates and coaches PQA and Risk Management workshops on behalf of the Governance Teams that it supports based on the results of their particular investigations of external stakeholder demands.
The Program Office can perform IRS if it has been established to have access to the needed skill and competence.
While projects are relatively easy to manage because they produce predictable and tangible results with known resources and well-defined baselines, once they have been planned and are executing the program part of Strategic Initiatives is more difficult to manage because the benefit target is much less tangible.
The outcome of Strategic Initiatives is random and for both forecasting and tracking we need to apply statistical methods in order to understand the magnitude of variance with which we are faced.
In the Strategic Initiative world of random outcomes, agile planning and tracking of our activity allows an easier to understand follow-up on progress. By measuring progress only by user and management accepted solution components delivered, installed, and ready for production, we know at least for sure what we have and we have a steadily improving foundation for estimation based on the gained experience. Whenever it becomes evident that the original targets cannot be met or that the original targets no longer are valid, it is time for change of strategy. Changes and adjustments to solution scope, organization, and process make the Strategic Initiatives fit the reality that becomes visible only as the Strategic Initiatives progress and meet the obstacles that we did not expect and for which we did not plan.
Strategy governance is negotiation.
Negotiations without one dominating party is a first step on the way to obtaining win-win solutions and synergy effect, while domination from one party has a demotivating effect that most often touches all involved stakeholders because the dominating party will have doubts about the effect of what was dictated in light of the demotivation of the dominated party.
Negotiation is based on communication. Somebody discover that deviations from expectations have occurred and this somebody needs to know how to treat this discovery for negotiations to be initiated about how to react.
Communication means that there is a sender and a receiver of the information and that they both make sure that the other party understands the implication of what is communicated.
PQA is our first foundation for estimation and forecasting.
Strategic Initiative sponsors and governance teams know quite well that the initial forecasts are random with very high uncertainty, but once the Workgroup Managers have launched an estimate the randomness is most often forgotten and the poor Workgroup Manager is punished or blamed for cost and time overruns.
Forecasts are better used as information for negotiation. It is possible to establish a realistic foundation for negotiation if you break the activity cost and duration forecasts down into task-based forecasts, where the people working on the task have a more realistic idea about how long they need to deliver what is required of them.
When planning Strategic Initiatives you should look for opportunities to work agile. When you manage in an agile way, you can concentrate all your effort on the design of solution architectures with use cases and on building the use case-based solution elements fast and with good quality based on SAT.
Once you have established the agile teams, you get the best possible foundation for evaluation of solution quality. The solution components that pass SAT are, by definition, accepted by the stakeholders. When you are not working in an agile way based on technically error-free delivered use case-based solution components, the evaluation of the solution quality is more complicated.
We need a tool to give early warning on strategy level, not only on
Strategic Initiative level, a tool to deliver KPI that can tell the Strategy Governance Team why the Strategic Initiatives can be improved and by what means. Establishment and calculation of the Compound Expected Value is such a tool.
We need to communicate in order to keep all stakeholders happy all the time or at least to make sure that the stakeholders understand why they have a reason to be unhappy.
Stakeholder unhappiness based on not knowing why the Strategic Initiatives are implemented and how they will influence their personal or work life leads to conflicts and discussions that you want to avoid.
You might not be able to establish agreement with all stakeholders, but you can certainly establish visibility and get to understand why someone might try to block the progress of the Strategic Initiative. The objective of your communication is to ensure that “no excuse for failure” is obtained through negotiation.
Workgroup Manager communication, negotiation, and the preparation of this is a full time job.
When I see Workgroup Managers developing requirements specifications instead of communicating and negotiating, I know that the Strategic Initiative will probably fail.
IRS and operation of the Planning Information System can be left with other resources such as facilitators and coaches from the Project Office and a Program Office.
Management is about communication and negotiation in the context of planning and tracking of the Strategic Initiatives.
The Project Office is needed to produce and ensure the technical validity and completeness of the tracking information across business functions, departments, and Strategic Initiative Workgroup Teams.
The Program Office can be interpreted as the executive organization of the Strategy Governance Team.