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Executing Risk Mitigation Strategies and Executive Sponsor Support

AS PROJECT MANAGERS, we all know that risks will always be present during the course of a project. Many risks will never materialize, and the planning for risks will remain just that—planning. However, a smart project manager will know which risks might require the participation of the sponsor as part of the strategy for managing risks when they do occur. As we know, most project managers must manage three types of risks during the course of a project (see Figure 13.1):

1.Technical risks

2.Business risks

3.Organizational risks

Figure 13.1: Traditional Risk Breakdown Structure

These risks usually come in three categories:

1.Known risks

2.Predictable risks

3.Unpredictable risks

When most leaders think of risks to their project, they move directly to the technical risks. And they usually do a very good job of mitigating those risks because they fall into the categories of known or predictable risks. However, they often fail to consider the two other areas of risk. Business risk and organizational risk are often just as predictable but are usually not assessed or planned for. If these hazards are not considered, they can affect the overall benefit delivered by the project.

Risk Tolerance of the Sponsor

Before you can begin to make decisions about how to plan for risks, you need to consider the amount of risk (the risk tolerance) your sponsor is willing to take in completing the project successfully. Often the risk tolerance will have a direct relationship to the tolerance that the Steering Committee or the executive committee will accept. Often the risk tolerance exhibited by the sponsor mirrors the risk tolerance of the company as a whole. Over the years, I have managed projects for energy companies and have learned that the risks they will tolerate encompass a broad spectrum. Companies engaging in energy-trading activities accepted much higher risks than companies that operated oil and gas fields.

See Figure 13.2. As project managers, we have long seen the classic triple constraint and have also seen more expanded models over the past few years. However, for purposes of discussion here, I would like to focus on the simpler model in exploring how you engage with the sponsor on risks.

Figure 13.2: Classic Triple Constraint

Ask most sponsors, “Which of these constraints is the most important?” You are likely to get an answer something like, “They all are!” In my experience, however, usually one is more important than the others. For example, as part of a discussion with your sponsor, you may learn that actually the project schedule is the most important for the reason that the product your team is developing is very important to the future product line of the company. As part of that future product line, there is a strong desire within the management team to be the first company into the market. The management team believes that there is a significant risk in letting a competitor hit the market first and begin locking up market share. In that case, risks that impact schedule will be far more important to them, and they may tolerate risks to the budget if it means being first to market. In that type of situation, it will be important to talk with your sponsor to determine the protocol for requesting either contingency funds to mitigate risks or additional funds that might be required as events unfold.

In another instance, your sponsor may tell you that he really cannot go back to the executive team for more money. The belief is that the budget is set in concrete and overruns will not be well received. In that case, you need to have a discussion about how to reduce the scope of the project should problems arise while executing the project. The reason for having that discussion now, not later, is illustrated in the next section.

Effective Management of Fear

A wonderful professor I had illustrated the reason for having that conversation early in the project as part of the planning stage. As you can see from Figure 13.3, as the level of fear rises, rational thinking is reduced. If you think about your own experience, you have probably seen this dynamic in action. Working with the sponsor while everyone is in a steady state during the early stages will provide far better brainstorming about solutions. Once in the process of executing the project, talking about budget might be considered similar to requesting a break during hand-to-hand combat. You will not get a good answer.

Figure 13.3: Effect of Fear on Decision Making

I would also suggest that you discuss the organizational and business risks with your sponsor. In some of the organizational risks, he will be far better equipped to help you in those circumstances. For example, suppose you are building a team, and some of the team members are being drafted from the business to help. However, they are still expected to pull their weight in their day jobs. In my experience, their day jobs will be their primary concern and could begin to erode the amount of time they are spending on your project. Since you have no line authority over these people, you cannot “order” them to complete their project work. In those situations, you will need your sponsor, who can have a discussion with that individual’s manager to work out a solution. You must recognize that risk right at the beginning of the project and get a commitment from the sponsor to help in those situations.

There are other operational risks as you move your project deliverables into operations. I have found that a strong effort in change management is required if the project is to succeed. In an automation project I led, there was significant resistance from the field operators. Let me give you some background so that you can understand how the sponsor and I worked together to solve the resistance problem.

This project involved the onshore operations of a midlevel company in North America. The way they had managed their field assets in the past was to use technicians who had a defined route to check in on the fields and make adjustments to the equipment as needed. The company wanted to build central operations centers in various regions controlled by automation equipment. In the center, the technicians could monitor the performance of the wells and make adjustments using remote control if necessary. If something significant happened, then the center could effectively shut in the well, send one or more technicians to that location, or both. Once the technicians were at the site, they could assess and fix the problem.

As you can imagine, the field technicians who enjoyed a great deal of autonomy under the old system were not eager to embrace the new way of working. One of the biggest fears for the field personnel was the assumption that this automation system would eliminate jobs. My sponsor, the director of research and technology, and I had to develop a plan to engage the managers in each region to make sure that the communication was regular and consistent—that this project was not a project to eliminate jobs. My sponsor had to lead that effort, but, in reality, people trust that kind of information only when it comes directly from their personal supervisor. There was little trust for corporate, which is where my sponsor sat, and I have found that sentiment is pretty common everywhere. We developed a communication for the field supervisors every two weeks and asked them to deliver the message to their people during their Monday morning staff meetings.

While our effort did not eliminate all the anxiety or resistance, it helped tremendously. I believe our efforts allowed the company to meet their business objectives for this project.

Another situation I have experienced during a project is when the budget is suddenly reduced by some arbitrary (in my mind) amount, but I am still expected to deliver the scope of the project without the money originally allocated. This is clearly a risk in all the projects I have led. Therefore, having a conversation with my sponsor early on in the project is important.

I learned a very important strategy from one of my mentors in project management that refers back to Figure 13.2 on the triple constraint. The conversation steers a sponsor to understand that he may demand two of the three constraints, but you are entitled to the third. So in my example of the budget cut, I would refer back to the triple constraint and ask the sponsor to help me figure out how to reduce the scope and the schedule. The focus of the conversation is not that I will not accept the change in budget because my sponsor is probably not happy about that either. In a project that comes to mind right away, my sponsor was the chief technology officer (CTO) for the company. In most cases, you would think you are on pretty solid ground having a sponsor at that level of the company. Unfortunately, he also had a boss—the chief executive officer (CEO). The CEO directed my sponsor to cut the budget on the project. After what I am sure was a lively discussion, the CTO had to accept the directive. And so did I! However, because we had talked about just such a risk during our early risk management discussions, we were able to immediately get into the task of determining how to reduce the scope of the project to match the reduced budget.

Business Risks

I have found it very helpful to engage with my sponsors on business risks as well. I talk to them early on and ask them to help me stay informed if changes in the marketplace might affect our project. Many of these projects take more than a year to fully complete and put into production. A lot can change in a year, but often I am heads-down trying to deliver my project and may not notice that something has changed in the business environment.

For example, I recall a project in which the desire of the business was to be the first one in the market for the new product my project was developing. My sponsor came back from a technology conference where there was a rumor that a competitor was coming out with new equipment that sounded very similar to what we were designing and building. Because my sponsor and I had discussed this very issue several months earlier, we had a plan in place to mitigate the risk of the competitor coming to market first. And very importantly, the sponsor had cleared our strategy with the Steering Committee early on, so we did not have to wait for approval to put our mitigation plans into action. We moved forward and entered the market first with the new and innovative equipment. As a result, the company captured over 50% of the market share.

Although my sponsor was the one who received the kudos for delivering on the project at the company level, he was very grateful for the work the project team did to make it happen. As a result, the sponsor sent the entire team to Las Vegas for the weekend on an all-expenses-paid trip as a way to say “thank you.”

It is my firm conviction that the sponsor must be the driver on the business risks. As project managers, we:

Do not have the visibility on some of these risks early enough.

Are not in a position to mitigate those risks because we lack the organizational authority.

Points to Remember

Understand the risk tolerance of your sponsor and other key executives.

Fear and uncertainty need to be managed carefully.

Understand that your sponsor and other executives are more concerned about business risks than technical risks.