EXECUTIVE SUMMARY
Benchmarking milestones must be linked to high-level corporate goals.
New markets are challenging executives around the world to improve their companies' ability to deliver value and efficiency. However, best practices aren't always universal. Cross-cultural differences, people skills and niche needs all make a difference in what truly can be considered best. The key is to approach process improvement with your eyes wide open.
Rising from the Ashes
Prior to 1997, Pentagon construction costs soared, project teams did not communicate, and there were many failed commitments. Clearly, there had to be a better way.
The 11 September 2001 attacks added a major setback to an already complex effort. Thousands of man hours, teamwork, and process and project innovations, such as a fully integrated schedule, were required to ensure the Phoenix Project met its goals, says Michael Sullivan, then the deputy program manager for the Pentagon Renovation Program (PENREN).
All projects awarded by PENREN were tracked and rolled up into a composite view of program progress. Critical items were identified, and conflicts were prevented. As the program continues, earned value monitoring now keep cost and schedule on target, says Sullivan, who was appointed program manager in 2002. Further, a refined acquisition strategy and source-selection process help to get the right contractors.
Sullivan successfully benchmarked the innovative acquisition concept across several levels of government—federal, state and local—to see what others were doing. From this data, the agency compiled a top 10 list and concluded that it was pursuing eight of the 10 best practices, a better score than elsewhere.
Sullivan feels his agency uses goals and milestones more aggressively than the industry standard and cites innovative programs such as design/build and incentive awards and fees for contractors as part of the new approach. Lower costs have resulted across the board.
Three Become One
William Kessler, vice president of Advance Enterprise Initiatives at Lockheed Martin Aeronautics Company, Fort Worth, Texas, USA, has a defense industry focus. In the 1990s, he says, national defense acquisition budgets shrank by 60 percent, and government customer focus turned to affordability. This situation resulted in an emphasis on best practices and benchmarking throughout Lockheed Martin Corp.
At the same time, mergers and acquisitions had added many diverse companies to Lockheed Martin, many with different ways of working. A best practice transfer plan implemented in Kessler's business unit resulted in “right sizing” that realized “huge” benefits. Executives combined three separate aeronautics companies into one, with a single vision and strategy, saved money and improved quality. They also improved the supply chain and set up a supporting infrastructure.
At Lockheed Martin, 90 percent of the savings have been in cost avoidance for the future and savings for the customer. Ten percent of the savings have gone to increasing program reserves and to shareholder earnings.
Kessler has seen best practices fail only when they were not related to company-level objectives or linked to the balance sheet. As to benchmarking, he says, Lockheed guides employees by setting yearly companywide objectives for process capability and work force vitality as well as traditional financial and program objectives.
Common Tongue
Best practices should use a “universal language,” says Joe Luciano, vice chairman of Pcubed, based in Ann Arbor, Mich., USA, with offices in 17 countries. Luciano's standard steps for process improvement are:
Firms must train people in project management, set rules for standards and develop a clear charter with lucid milestones that everyone agrees on.
Companies need a tracking vehicle to show benefits accrued. In Luciano's experience, too many projects should be killed early on, long before money and time are wasted.
CONTINUOUS IMPROVEMENT
COMPANY: Robert McBride Ltd., a Middleton, U.K.-based producer of household goods and personal care products
KEY GOALS: Customer service, people, best value products and continuous improvement
IMPROVEMENT STRATEGY: Continuous improvement facilitators worked with Larry Reynolds and Andrew McFarlane, consult-ants with 21st Century Leader, to choose improvement projects and ensure that those projects were worthwhile, would be fully supported by the sponsoring manager and could be completed within a realistic timescale.
After taking a one-week training course on project management, tools and facilitation skills, the facilitators assembled their project teams and began improvement efforts.
RESULTS:
- Reduced packaging waste, saving £60,000 per year
- Diminished liquid losses in production, saving £56,000 per year
- Better personnel utilization, saving £50,000 per year
- Lessened overdue debts by 40 percent
- Increased forecast and promotion accuracy.
The reporting system must identify the decision maker. Tools can't help, he says, “if the right management is not in place, or is not committed to changing the company culture.”
For example, in the upcoming Athens Olympic Games, Luciano says, many parties were involved in the rush to meet deadlines, and it was not clear who was making decisions or who should be. The project was behind schedule. Pcubed, which worked on almost 40 programs related to the Olympics, including major construction of stadiums and the Olympic Village, instituted best practices that included time limits on decision-making, project prioritization and reporting tools. Planners now can forecast project completion with 95 percent accuracy, compared to 65 percent when the project started.
Pcubed currently is engaged in “pure” research on project management maturity and overall business success. For example, in the U.S. construction field, the Florida Department of Transportation, Tallahassee, Fla., USA, evaluated road and bridge projects. Its average project overran budgets by $450,000, or 15 percent. They saw project management as a major opportunity for improvement. Pcubed's research shows that small improvements in project management maturity would yield returns exceeding 200 percent.
Brain Trust
The best practices at global outsourcing services company EDS Corp., Auburn Hills, Mich., USA, derive from vast data repositories, says Cindy McPherson, program and project management capability manager.
It can be tricky to convey best practices in a multicultural organization. EDS always includes a representative from each geographic region affected in early project conversations, McPherson says, citing potential barriers to programs such as the “not-invented-here” response.
There are cross-cultural differences in employees' “willingness to spend face-to-face time” to discern the subtleties inherent in benchmarking, says Terry Cooke-Davies, managing director and founder of benchmarking specialist Human Systems Ltd., Folkestone, Kent, U.K., with offices on four of the five continents. Americans are at one extreme, with a tendency to want speed, to be able to punch in the numbers and get a swift diagnosis, says Cooke-Davies, while Australians are at the other end. “They are willing to spend high-quality time looking at what's behind the numbers.”
Cooke-Davies emphasizes the importance of understanding the human factors, interpersonal relations, psychology and the actual practices and results. He cites three levels of benchmarking:
- Doing the project right
- Doing the right project
- Ensuring that projects are consistent with the firm's high-level strategic goals.
The Same Boat
Dozens of software packages can help with best practices and benchmarking, but projects don't all work the same way, nor do all divisions of a large firm have the same culture.
Due to variety and complexity of companies' cultures, consultants and industry experts are a good resource. The Internet abounds with business sector and government groups with benchmarking services. One example is the Construction Industry Institute, based in Austin, Texas, USA. With 65 member firms ranging from large global petroleum companies to major contractors in the United States, the Institute offers best practices and benchmarking assistance customized to this niche.
While there's no absence of advice, executives considering these management tools should understand some principles before following it. They must begin with an assessment of company performance. However, some firms compile a less than complete assessment because they fail to set clear baselines and don't ask enough questions. Shelley Gaddie, president of Project Corps, a Seattle, Wash., USA-based business management consulting firm, says, “They track return on investment and revenues instead of asking, for example, ‘How many projects are we doing vs. how many should we be doing, how much money have we spent vs. how much should we have spent, or even, are we doing the right projects?'” PM
Virginia Fairweather, former editor-in-chief of Civil Engineering magazine, is a freelance writer based in Wyckoff, N.J., USA, who often writes about project management, particularly in the construction industry.