Fad or fundamental?
BY PETER FRETTY
PHOTOGRAPHY BY SHAWN HENRY
WHILE PROJECT MANAGEMENT IS AN ESTABLISHED BUSINESS METHODOLOGY, OTHER RELATED METHODOLOGIES ARE STRIVING TO OUTLAST THE FIRST WAVE OF ENTHUSIASM TO INTEGRATE WITH BUSINESS BEST PRACTICES.
David Menninger, Vice President, Global Product Management, Applix Inc., Westborough, Mass., USA
FLAVORS OF THE MONTH, business philosophies, trends, fads or best practices—regardless of what tagline or buzzword they carry, every year seems to have more than its share. While most business fads ultimately fade, their mere existence does ultimately have a positive side; unlike many consumer fads, they offer management a new view that, while sometimes difficult or impossible to embrace wholeheartedly, at least exposes knowledge that can help make a company operate or compete more efficiently.
A few business fads have each either already become a mainstream component of project management (social responsibility and human capital management), have considerably impacted how project managers approach the workplace (outsourcing/offshoring) or show promise as a fundamental for the future (business intelligence).
Founder: SAS Institute Inc.
Year: Late 1990s
How It Works: Uses real-time software and hardware solutions to connect every internal and external component of an enterprise.
Business ROI: The effective implementation of business intelligence eliminates the common silos of efficiency and provides all levels of management with a dashboard view of operations, which ultimately facilitates the decision-making process.
Touchpoints: A business intelligence-enriched environment encourages and simplifies shareholder involvement.
Viability: On the Rise. While very few have achieved a fully functional business intelligence environment, it has proven highly effective in improving firms’ capability to compete in highly global and overly crowded markets.
Initially considered by most as a far-fetched trend, business intelligence continues to demonstrate its staying power as a powerful business tool that most world-class organizations strive to implement. Sporting many names, which include manufacturing intelligence, top-floor-to-shop-floor and, most recently, business performance management (BPM), the focus of business intelligence is to connect all aspects of operations to make real-time information readily available for timely and well-informed business decisions throughout an enterprise.
“As a set of integrated, closed-loop management and analytic processes that are supported by technology, this philosophy addresses financial as well as operational activities and is a true evolution of business intelligence,” says David Menninger, vice president of global product management at Westborough, Mass., USA-based Applix Inc. “This is a discipline that captures some of the practices of project management and applies them to running a business. Project managers have always had to track key performance indicators (KPIs) such as percentage complete, cost to complete and budget variances. When BPM is in place, they need to create plans forecasting the future, i.e., a project plan, and then measure performance against that plan.”
Hewlett-Packard (HP) is a prime example of a firm that has been effective in its pursuit to implement business intelligence philosophies. HP immediately recognized that the ability to make quick, effective decisions in a closed-loop environment—even when that environment includes outside parties—is a competitive advantage. As a result, not only can the company's leadership know at a glance what is happening on the plant floors of each of its global facilities, it benefits from integrated intelligence infrastructure in its outsource partner operations, ranging from ink cartridges production facilities in Puerto Rico to packaging and assembly operations in Sacramento, Calif., USA.
The principles that support the global acceptance of this trend are sound, according to Theresa Welbourne, Ph.D., founder and CEO of Ann Arbor, Mich., USA-based eePulse Inc. “It is quite evident as mundane tasks such as paper surveys and manual information collection have given way to real-time data collection and application to the decision-making process,” Ms. Welbourne says. “Leaders need to know about issues going on in their organizations right away so they can take action and stop problems before they escalate.”
However, Warren Slabe, managing director of Melbourne, Australia-based BPM Partners Pty Ltd., adds this also strengthens the level of accountability placed on the project manager role. While many good project managers get key stakeholders involved in the beginning of an initiative, as the project rolls forward, many key stakeholders became less involved—something that cannot continue with business intelligence in place. “A project manger needs to loop back to key stakeholders on a regular basis, updating them on the progress of the rollout but also listening to hear if any business issues have shifted,” Mr. Slabe says.
LEADERS NEED TO KNOW ABOUT ISSUES GOING ON IN THEIR ORGANIZATIONS RIGHT AWAY SO THEY CAN TAKE ACTION AND STOP PROBLEMS BEFORE THEY ESCALATE.
Theresa Welbourne, Ph.D., Founder and CEO, eePulse Inc., Ann Arbor, Mich., USA
OUTSOURCING AND OFFSHORING
Founder: The Big Three U.S. Automakers
How It Works: Contracting outside firms to produce products or provide services generally considered relevant to the rollout of a company's core offering.
Business ROI: In price-competitive marketplaces with economies of scale, offshoring has allowed firms to increase competitiveness. Outsourcing to domestic operations has allowed firms to improve focus on core competencies.
Touchpoints: Many effective project managers already tap into outside personnel to either stay on budget or meet a need outside corporate capabilities.
Viability: Here to Stay. As long as people continue to demand lower prices, firms will continue to look for cheaper labor markets. And as firms look to focus only on their core competencies, they will continue to look to others to pick up the slack.
The multifaceted trend of outsourcing and off-shoring will become particularly germane to project management in the coming years, says Lonnie Pacelli, the Sammamish, Wash., USA-based management consultant and author of The Project Management Advisor: 18 Major Project Screw-Ups and how to Cut them off at the Pass (Prentice Hall, 2004). “In the spirit of trying to cut costs, businesses will try to move as many things offshore as their culture will allow,” he says.
Cost savings continue to be the principal driver for most organizations considering outsourcing and offshoring. North America has remained quite tolerant of the practice, considering that more than two-thirds of all companies outsource and the desktop outsourcing market alone will grow to $11.8 billion by the end of 2005, according to a 2003 Forrester Research report, “Trends 2005: Desktop Outsourcing,” by Robert McNeill. At the same time, outsourcing and offshoring have gained added awareness as standards continue to improve because of increased competition, better systems management tools as well as standardization and commoditization.
The pendulum will swing back slightly as prices adjust to demand, however outsourcing and offshoring will continue to impact operational tactics, especially because firms must accommodate differences in culture that are not present when everything is handled in-house. “As a result, project managers need to accept that rather than having all full-time equivalent employees working on projects, projects will increasingly include an array of other people from third-party companies that supplement staffing on projects,” Mr. Pacelli says. “Some may be employees, some from a company that specializes in deploying a technology and some that specialize in other functions, such as testing. It all deals with stitching together core competency skills and bringing those together as one piece to get projects done.”
By continuing to outsource non-core functions, companies will find better ways to focus on their natural abilities, pushing the enterprise maturity envelope, Mr. Pacelli says. “This is part of becoming better companies, which will also force project managers to get out of the ‘command and control’ capacity, and begin to focus seriously on operating out of influence.”
MORE THAN TWO-THIRDS OF ALL COMPANIES OUTSOURCE, AND THE DESKTOP OUTSOURCING MARKET ALONE WILL GROW TO $11.8 BILLION BY THE END OF 2005.
Simply put, most of these fads have faded because, while they may have offered an interesting or enlightening insight into a recurring business problem, in many instances, they simply repackaged familiar concepts under new terminology.
■ Business Process Reengineering
■ Learning Organizations
■ Management by Objectives
■ Matrix Management
■ Mission/Vision Statement Driven
■ Models of Excellence
■ One-Minute Management
■ Participatory Management
■ Peak Performance
■ Total Quality Management
■ Team-Based Management
■ Zero-Based Budgeting
Because project managers will continue to work with blended project teams in the environment that outsourcing and offshoring creates, they will experience greater pressure to hone people skills, handle greater authority more judiciously and effectively inspire leadership confidence. “You need to operate out of influence so that the team believes in what you are doing from a project perspective,” Mr. Pacelli says. “Team members must want to follow you. You need to be able to demonstrate how what you are doing is a good thing for the company and truly present the team with the value proposition of not only how the success will impact the company, but also how it will impact the individuals involved.”
Year: While the concept has been in place for years, the Enron debacle and other large-scale ethical breaches that have followed definitely have brought social responsibility to the forefront.
How It Works: As executives make decisions, they must heavily weigh the overall impact not only on the bottom line, but also on society and the workforce.
Business ROI: The importance of ethics has returned, and the bottom line no longer serves as the primary influencer.
Touchpoints: Project managers have long held to an ethical standard that social responsibility totes. However, project managers may look closer at how the project outcome will ultimately impact society.
Viability: Jury Still Out. Since the happenings at Enron, Worldcom and Qwest are fresh in the minds of both internal and external shareholders, social responsibility is unlikely to fade fast. However, as history shows, greed has a way of working into the corporate decision-making process.
Now that legislation, such as Sarbanes-Oxley, supposedly holds executive leadership personally responsible for corporate decisions and society is demanding a new face for the traditional corporate landscape, a renewed sense of social responsibility drives business leaders to focus on their core operations and the impact they have on society. “CEOs can no longer say that they did not know that something was happening. It is just not acceptable in today's environment,” Mr. Pacelli says. “There is a need for a sense of accountability that necessitates a back-to-the-basics push throughout organizations from managing risks to strong execution. The cowboy mentality of running companies is gone.”
A RENEWED SENSE OF SOCIAL RESPONSIBILITY DRIVES BUSINESS LEADERS TO FOCUS ON THEIR CORE OPERATIONS AND THE IMPACT THEY HAVE ON SOCIETY.
Essentially, social responsibility centers on how companies manage internal business processes that positively influence society, regardless of the firm's bottom line. With this current focus, outside stakeholders are increasingly interested in how a company's actions impact the corporate environment, local communities and the workforce. True believers purport that social responsibility is an integral part of the profit process that ultimately enhances both corporate competitiveness and a business’ value to society.
As a result, today's businesses are moving away from simple regulations compliance and toward improved corporate governance, which could impact the role project managers play especially on larger, more visible projects, according to John Colbert, vice president of Stamford, Conn., USA-based BPM Partners. “Compliance is an important side-benefit of such initiatives and often is used for internal financial justification,” he says. Fortunately, the ethics-rich structure project managers already adhere to should help firms not only develop, but also implement more governance objectives. This actually could prove an area of opportunity for project managers to make a greater impression with executives.
Ivor Herman, managing director of BPM Partners Ltd.‘s Watford Herts, U.K., office, adds that as social responsibility continues to come to the forefront, performance management initiatives will become more enterprisewide activities with multiple owners in different departments and with shifting priorities. “Project managers need to be closely aligned with business issues, not simply tracking a schedule set at the beginning of the project. Today's project managers still need to have strong technology backgrounds, but they also need a strong understanding of line-of-business needs,” he says. “The end-user community must be involved in all performance management initiatives early and often.” After all, when either internal or external society itself is involved in a business's processes, these stakeholders too are responsible for the outcome or impact businesses have on the community and workforce.
YOU NEED TO OPERATE OUT OF INFLUENCE SO THAT THE TEAM BELIEVES IN WHAT YOU ARE DOING FROM A PROJECT PERSPECTIVE. TEAM MEMBERS MUST WANT TO FOLLOW YOU.
Lonnie Pacelli, Management Consultant, Sammamish, Wash., USA
HUMAN CAPITAL MANAGEMENT
How It Works: Develops a capital assessment of each employee.
Business ROI: A renewed focus on the role individuals play in accomplishing corporate goals.
Touchpoints: Many project managers already assess the value of human capital when determining component assignment.
Viability: Marginal. As a software-based objective, the push for human capital management will fade or integrate itself into other products. While the principles remain solid, companies will not fully buy into the concept of having software manage and assign employees. When people are involved, far too many intangibles exist for Long-term success.
Commonly defined as the strategy of acquiring, retaining, managing, measuring and leveraging human capital, Human Capital Management (HCM) has far-reaching implications for the way organizations operate. When properly implemented, HCM recognizes how much value lies in each employee's skills, experience and knowledge and provides a framework for organizations to capitalize on that value. Obviously, this is a substantial evolution from the transaction-oriented focus of traditional human resource management.
Fortunately, much of the required infrastructure already exists within most organizations’ business processes and IT tools. As a result, success rests with the ability to leverage and identify areas where tactical investment will deliver real benefits.
As the workforce ages and the economy shakes loose additional employment opportunities, HCM applications, including pay-for-performance and succession planning, increasingly become an important part of an operation's IT plan, according to Todd Chambers, vice president of marketing for Waltham, Mass., USA-based Authoria Inc. “As companies have moved beyond the ERP, CRM and supply chain management implementations that have monopolized their IT attention over the last two decades, they have focused on their workforce as a way to enhance their competitive advantage, control costs and contribute value to the bottom line,” he says. “However, recent high-profile changes across the vendor landscape ensure that executives are looking at human resource applications with a fresh eye.”
Businesses now want to know an application's value, its ROI and the true cost savings. “This tactic simply removes the mundane tasks from the project manager's desk and promotes focusing on more important strategic concerns,” Mr. Chambers says. “On-demand was once thought of as the domain of smaller, more resource-challenged organizations, but in truth we are seeing interest from companies of all sizes, even the largest global businesses. They realize that the vendor's expertise is unrivaled and the resource savings can be significant.” PM
Peter Fretty, a Whitehall, Mich., USA-based freelancer, has appeared in more than 40 trade and consumer magazines including Advanced Manufacturing, Continental In-Flight, Food Engineering and Industrial Engineer.
PM NETWORK | JUNE 2005 | WWW.PMI.ORG