A state government department navigation in project risk management, the unexpected and novel projects
Using a compass to get from point A to point B requires the map, the compass, the declination, and the understanding of how to triangulate your position of where you are and where you want to be. In the same way, Project Management uses project planning, project risk management, and project monitoring and control to take a process, procedure, or product from inception to completion. However, today’s projects deal with more uncertainty and complexity than ever before. This paper looks at managing risk, uncertainty, and novel learning using project risk experiences at the Alaska Department of Labor and Workforce Development (AKDOLWD).
Projects are temporary structures using flexible methods that put in place new products, processes, and procedures to further the organization’s vision, and capability to deal with risk. Yesteryear’s projects in government looked at project management in light of planning, and handling complexity of tasks and relationships of product, environment, and process through the planning, communication, and control of activities. Projects today in government deal with the same issues, but are confronted with rapid change in technology, breaking new ground for implementing organizational strategy and business practices. As a result these projects are confronted with more uncertainty.
Novelty describes today’s projects. Their scope is broader, stretches across more business units and programs, and encompasses more complex activities to support the project goal. Confronted by more uncertainty for embracing untried, unpracticed, and unproved assumptions, they often pull concepts together that make the project unique in multiple areas. Novelty projects require more flexibility in project risk management than ever before.
In project planning, potential risks require project managers to take a Project Risk Management (PRM) mindset developing a risk register to avoid, transfer, mitigate against negative risks or threats, as well as exploit, share, enhance how to take advantage of positive risk or opportunities. In project execution identified risk events when triggered initiate, or adapt risk response plans from the pre-planned options to allow the project team to improvise its way back to the basic project plan. However, original project objectives missed when executing the improvisional risk response plans’ paths to get from milestone A to milestone B are often interpreted as failures. The reality is that these objectives are a result of the misunderstanding of the differentiation between project risk and project novelty. (Loch, 2005, p. 3)
Project Risk Management
PRM embraces planned flexibility in identifying obstacles, alternative paths, and alternative targets to provide preventive, contingent actions when triggering events occur. Normally these events are handled through: risk response strategies, decision trees and other decision support techniques; with resulting scheduled project slack, schedule buffers and cost contingencies and reserves; or by creating work arounds for secondary and residual risks that are left after the main risks have been rectified.
PRM looks at risk identification, qualitative and quantitative assessment, response strategy, and monitoring and control. Risk identification encompasses categories for technical, external, organizational, and project management. Risk identification is an important part of project planning even for decisions about portfolio projects such as follow on projects to Alaska Labor Exchange System (ALEXsys) (Joyce & Ra, 2006, p. 1) (Exhibit 1).
Exhibit 1 - AVTEC ALEXsys HGJTI Risk Breakdown Structure
PRM recognizes factors that can make a project plan suboptimal and prepares management for decisions as well as the project team for adverse or opportune events. Risk identification starts with a risk breakdown structure and then proceeds through risk qualification and quantification. (PMBOK, 2004, p. 237-238)
The Risk assessment and prioritization group risks by category, and screen the risks for quantification and probability: results are compiled in a risk register along with risk response strategies. (Exhibit 2)
Exhibit 2 – Portion of AVTEC ALEXsys Risk Register
Risk response strategy reviews system standards for policies and procedures, responsibility assignments, monitoring and review. Risk response plans entail insurance, prevention, mitigation, or contingency options to provide rough-cut solutions for quick team response as the events are triggered. Residual risks that may potentially become nagging problems while not catastrophic can be damaging to the project objectives. Risk prioritization allows the project team to focus attention on the most important risks. PRM can never see all events that might occur but is key for the ability to deal with foreseen risks as they occur, and through risk monitoring and control continues to update, assess, and address risks and potential triggering events.
PRM cannot be implemented by an organization overnight. Exhibit 3 shows the progress of the AKDOLWD organizational project maturity and that PRM is improving though still primarily handled for the larger projects. During ALEXsys unexpected problems came from outside and inside the project that had not been identified as risks. One event triggered after the first set of code from the vendor. A desired different quality of the coding practices had been expected by a number of technical staff than what was received, for which the vendor contract had no enforcement. This event fed into a stakeholder agenda for a rewrite of the entire system by the ES DP Tech lead and required an immediate risk impact analysis to alleviate her generated concerns. The results presented some issues that were not really problems but desires that were addressed by project management. There were also legitimate issues such as web security that had to be addressed. An impact scale and probability of impact matrix resulted with additional updates to the project plan through the change control process. The Impact Scale used a modified version of A Guide to the Project Management Body of Knowledge (PMBOK® Guide) Impact Risk scales that added the project object of customer satisfaction. A portion of the actual assessment is in Exhibit 4 (both pre-implementation and post-implementation impacts were analyzed).
Exhibit 3 – AKDOLWD Project Maturity Spider Plot
Exhibit 4 – ALEXsys Impact Scale on DP Concerns
In this case the original ALEXsys project plan dealt with risk identification and mitigation of foreseen uncertain potential events while the risk impact analysis that occurred during the project was a result of unforeseen uncertain events and could be attributed to project novelty.
Project novelty is the result of unforeseeable uncertainty and complexity. Project novelty planning is challenging where contingency planning makes little sense. Often using the standard toolbox for PRM in novel projects is difficult and increases discomfort for the project team whose normal mode of execution is to carry out the plan or improvise their way back to the plan. A frequent result of the PRM mindset in novel projects is that the project team makes promises that the project will be on track after some degree of effort, but after an improvisional and often stressful effort finds the project is still not on track. The endeavor repeats itself a number of times and the team finally realizes that the stakes in the ground provided should not have been the ones that they should have been following. (Loch, 2005, p. 3)
Novel projects are not Risky Projects. They are projects that require the diagnosing of novelty and have different challenges than standard project risks. Standard PRM deals with the possibility of known potential events that could happen. Novelty challenges deal with having too many unknown unknowns and too much complexity to even imagine how to create a contingency plan. Project managers need sophisticated skills and flexibility to observe the project and project portfolio terrain. This mastery of the unknown requires more experienced and flexible people who can keep an eye on the project conditions and can make decisions in response to what they are learning while the project is underway.
Variations of events and most foreseeable uncertain events can normally follow traditional PRM practices. However, when interactions of events cause too many simultaneously occurring foreseeable uncertain events, or too many unknown unknowns, project management needs to look at the diagnosis of novelty, and the available processes for applying techniques through project learning and selectionism. (Loch, 2005, p. 75)
[T]here is a built-in assumption that learning [innovation] occurs randomly and uninhibitedly during the project. On the contrary, “learning within a project does not happen naturally; it is a complex process that needs to be managed. It requires deliberate attention, commitment, and continuous investment of resources. (Sense, 2003, p. 4)
Organizational routines inhibit dealing with risk and novelty since they generate security and a comfort zone. Original problem solving occurs outside the routine with small groups in short bursts of intense effort. These bursts place stress on the project team and cannot be maintained continuously for the life of the project. However, from these bursts changes occur to processes and procedures the team can use to maneuver the challenge and which turn into organizational assets and capabilities.
Problem solving capabilities in projects are not just problem tracking and setting up meetings. Project managers and team members must engage deeply in what is going on and understand that they are still accountable for targets and milestones. Project team competencies must handle uncertainty in novel projects are the abilities to: innovate; maintain a frame of reference and a sense of understanding of what is going on without panicking and becoming confused; and articulate a common purpose with team cohesion.
In ALEXsys a number of innovation bursts occurred in both the technical and program areas dealing with training, technology, security, and program procedures. On the technology side there was standardization of web environments and of migration procedures needed, as well as addressing of security issues. There was the learning of newer technology, the crossing of organizational units, and the partner outreach and marketing against acceptance risk.
The learning approach in novel projects deals with assumptions, probing questions, improvising, and experimentation through either: single loop learning, double loop, or deutero learning. Single loop learning detects errors and makes corrections according to existing plans, contingency plans, and organizational procedures. Double loop learning detects errors that need to have the method of response corrected as opposed to the error itself. Double loop modifies existing plans and policies to create new methods and uses improvision and experimentation. Deutoro learning involves changing the learning system to shift the project mindset, infrastructure, and governance toward expecting the unexpected. (Loch, 2005, p. 112-116)
The AKDOLWD Workers Compensation Electronic Data Interchange (WC EDI) project is currently using deutoro loop learning to deal with the complexity of the multi-matrix segmented file validation from the insurance industry and state requirements that had not been fully understood by the prior tech lead and project manager. This complexity was compounded with using the new .Net 2.0 and VS 2005 environment, and in-house skilled resources that existed were theoretical in their approach. Other states that had implemented EDI were still using older technology. This project required looking differently at experimental learning for implementing new practices not just for this project, but for future projects as well.
Competencies in expecting the unexpected shift the project manager from executor to innovator with the ability to motivate the team to: spot risks and deviations from the plan; turn around experiments quickly; learn from experiments; and foster learning in the project team. The project manager also needs the ability to mobilize an external network of resources that are not available within the project when unanticipated events occur. She/he needs the ability to explain the project mission and sell changes and problems to the rest of the organization: this is the selling of the innovation that will occur toward the organization’s vision
Flexibility guides the team in an altered direction based on new information that is obtained during the project. These alterations require developing new planned solutions during the course of the project. This happened twice in ALEXsys: once in November 2005 to present alternative targets due to the second vendor coding response, and again in February 2006 dealing with application supporting of cross organizational unit program policy requirements and the complexity of newly implemented Federal common measures reporting requirements. In WC EDI this occurred to move from SFTP to HTTPS with the state’s MyAlaska authentication.
Selectionism launches several experimentation solution attempts, or subprojects with different solution strategies to obtain a best successful outcome. Often these subprojects are run simultaneously and provide enough variation so that the most desirable results can be used on a larger scale or for issues that cover multiple projects in the organization’s project portfolio. Selectionism is often not employed due to the number of resources that are required, the overwhelming level of implementation planning, the unpredictability of the market for the results by the time the trial is complete, and the leveraging of nonselected outcomes from the parallel or alternate development subprojects.
In earlier web exploration pilot projects at AKDOWLD there had been CA:Gen attempts at separating block mode procedures into client and server procedures for the ESTeR environment decision; CA:Gen Client Web Enablement for the Employment Services Self-service application; and the various CA:Gen proxies for component DLL and web service consumption for TOS. Selectionism in this case was not parallel but a necessity for project learning and future direction options moving from the mainframe to the web environment.
PM areas for dealing with unknowns
Project uncertainty requires the project manager to plan for uncertain foreseen risks and plan for novelty learning. Novelty is difficult to define and often subjective. In addressing novelty it helps to view the project as one of four types.
A Type 1 project is where all project team members have the ‘we know how to do it’ expertise. A Type 2 project is where ‘most team members know how to do it’ so that the remaining few that do not know can catch up – for this project learning needs to be included in the planning and activities. A Type 3 project has one person on the team that is the ‘I know how to do it’ and requires that planning take place so that the experienced person can transfer the knowledge. For a Type 3 project assessment of the ‘I know’ expert must take place since the expert could either be truthful or a charlatan. A Type 4 project is one where ‘nobody knows’ or only a theoretical understanding of the technology or skill required exists. A Type 4 project needs evaluations of intermediate results for continuation and termination decisions and requires total team cooperation. (Brockhoff, 2006, p. 3)
Assessing AKDOWLD recent, current and proposed projects for project type can be seen in Exhibit 5.
Exhibit 5 – AKDOWLD Projects based on Project Type
Monitoring foreseen uncertainty progress can be observed with taskplan progression through the Gantt chart comparing today’s progress to predicted progress with variance deviations due to mitigation and contingency planning. For the unforeseen events progress monitoring is difficult through the Gantt and taskplan alone and should be complemented with methods such as monitoring tables for potential unknowns and knowledge gaps. (Loch, 2005, p. 190-191)
A portion of the knowledge gap monitoring table for ALEXsys can be seen in Exhibit 6.
Exhibit 6 – ALEXsys Knowledge Gap Monitoring Table
Risk and uncertainty require project management to address what is to be measured: milestones, achievements, knowledge obtained, or actions executed. Project managers must coordinate and coach the project team to adjust their actions with respect to others in response to information that becomes available and exchanged during project learning and knowledge gap adjustment. In ALEXsys there were Knowledge Transfer sessions on techniques as well as coding process areas for the project team and interested interdependent team members.
Information management for the project team and their interrelated functional teams is critical when dealing with risks and novelty. Mitigation and novelty goals must have objectives that are specific enough for all to agree as to whether the project is meeting the goals and not confusing the “how of the project” with the “goal of the project.”
Performance evaluation during risk mitigation and project novelty learning needs to look at progress, process, and results.
PM Unknowns dealing with Partners
Direct control over external partners in projects generally exists through contracts and persuasion. Relationships can create project risk, but when unexpected events unravel due to novelty the projects relationships tend to disintegrate due to different objectives and priorities. The more parties involved the more difficult the relationship management when risk becomes compounded by the complexity of project tasks, and the dispersal of expertise. To collaboratively innovate in this environment for novelty issues requires establishing a shared process of problem solving at the onset of the relationship, or contract. (Loch, 2005, p. 211)
Steps in partner management require: choosing partners that can assemble their collection of competencies; clearly establishing the allocation of responsibilities, risks and rewards with the ability to remain flexible in the details; applying fair processes in problem solving; providing an early warning system for issue detection; building relationships with partners over time; and enabling collaborative problem solving.
Project management and partners must understand relational capability chemistry to achieve the project goals intended and understand what each side brings to the table. Organizational routines are not always consciously recognized by partners and can cause clashing between team members and must be addressed as soon as possible through project planning, project learning, and conflict management.
Project management must address and monitor the partner relationship structure for interaction of information, learning, and interaction. The process works differently for the various levels of the project organization: senior managers’ agreement on strategy, technical experts on collaborative problem solving, and cooperation on the operating level.
ALEXsys had two external partner relationships: one vendor that was configuring and delivering the Off the Shelf (OTS) product through an RFP; and the second with a consulting group through a task order for mentoring and assistance in new technology. The OTS vendor did not have the ability to remain flexible; was not used to collaboratively problem solving with their partners; and their organizational routines for problem priorities for multiple projects caused friction and delays that could not be leveraged through payment delays or contract. The mentoring consulting group on the other hand was intent on building a productive relationship for future opportunities; understood the allocations of responsibilities, risks, and rewards for the project objectives; and were flexible in the details and fully engaged in collaborative problem solving and technical knowledge transfer and mentoring.
The development of organizational capabilities for novel projects needs to be assessed in terms of culture, organizational project management maturity and the necessity of fulltime project managers. A project manager that is doing true project management should not be seen as unnecessary overhead or as a technical lead, but as a vital organizational asset for strategy, planning, facilitating, monitoring, and coordinating the diverse activities of project execution. For novel projects the project manager becomes the orchestrator and ambassador for solutions and project content to change while maintaining the integrity of the organization’s vision, and the buy in of partners.
The organizational culture needs to: encourage reporting of near misses and be wary of complacency; be alert to challenge assumptions and acknowledge complexity; be sensitive to operations to know what is going on and to detect patterns; be able to deal with the unexpected and problem solve; and be able to change strategy based on new expert knowledge and keep the team and stakeholders informed. (Loch, 2005, p. 168-171)
Project Management Team
In assembling the project management team, senior management needs to look at experience, flexibility, and the organizational mind-set. Project management experience needs to be the deep experience that comes from technical discipline having been through and responded to unknown unknowns so that they do not cause project team members to panic or become disoriented from the project goal when uncertainty arises.
Project management discipline requires project managers to: be flexible; not be dependent on fixed routines so that they abandon work when it becomes too stressful; and have the ability to exploit early information. Project managers need to mindful of the organizational memories and intuition that are automatic in project team members and develop with functional managers the project team members so they: have the ability to learn from failure; be alert to simplifying complexity; be sensitive to the consequences of organizational operations; be committed to resilience when the unexpected happens; and be able to defer to experience.
Sponsor and Senior Management
Project sponsorship is the support, protection, and advocacy for the project. The project sponsor is the “political heavyweight” and buffer for the team and has the ability to protect the project and influence decision makers. Effective sponsorship is critical for novel projects when responding to unexpected events and is helpful in devising solutions that keep the project vision within reach.
It is the responsibility of senior management to ensure that project sponsor is not just paying lip service to the project. Senior management needs to ensure that the sponsor comes with the ability to ensure resources and timeframes. The sponsor encourages and supports the team through tough times, has the ability to ask the tough questions, as well as the ability to cool off the team when they are under stress.
Novel projects require more time commitment from senior management than routine and planned projects with little risk. Novel projects require senior management to invest time to be well informed; open to questioning assumptions; understanding and allowing discomfort and insecurity to ride the course of positive organizational change; and step in when the results are not compatible with the organization’s objectives, or detrimental to the team support.
Senior management needs to understand the project vision and think through the process of how the organization will react if the project is successful as well as what the detriments to the organization would be if the project is not. Project managers need to provide information so that senior management can be clear, open, and frank in their assessment of the organization’s vulnerability to the unknown unknowns, and how to involve key partners in the process.
The project infrastructure is supported by senior management. Only senior management can “install” the governance of the project management infrastructure. Project management includes systems for planning, monitoring, coordination, information management, and performance evaluation. Project managers are responsible for leveraging, adapting, and improving these systems.
Managing project risks and novel projects is not trivial. Risks and uncertainty exist in projects due to the project’s objectives to meet the Organization’s visions and goals. Risks and novelty are a result of addressing processes, procedures, and implementing products that could not be accomplished operationally due to time, resources, and novel learning.
Project managers are responsible for diagnosing, assessing, handling risk and novelty in projects. Organizational maturity in project management for risk and novelty builds the organization capabilities dealing with uncertainty and requires fulltime project managers.
Through the first five of the PMBOK® Guide six risk processes as part of Project Planning Process Group, the levels of stakeholder tolerance, risks and novelty must be defined, have senior management commitment, sufficient project team competency and adequate schedule and budget reserve based taking into consideration PRM and planning for novelty learning. (PMBOK, 2004, p. 237-238)
Brockhoff, K. (2006, August) On the Novelty Dimension in Project Management, Project Management Journal 37 (3), pg 26.
Bourne, L. & Walker, D. (2006, March) Visualizing stakeholder influence-two Australian examples, Project Management Journal 37 (1), 5.
Douglas, J. & Ra, J (2006, October). A State Department Case Study in Project Team Building, Constraints, Competencies, Conflicts, and the People Side of Change, PMI North America 2006 Global Congress Proceedings Seattle, Washington.
Loch, C., DeMeyer, A. & Pich, M. (2005). Managing the Unknown: A New Approach to Managing High Uncertainty and Risk in Projects. John Whiley & Sons, Inc.
PMI (2004) A Guide to the Project Management Body of Knowledge—3rd Edition. Newton Square, PA: Project Management Institute.
Sense, A. J. (2003, August) Learning generators: Project teams re-conceptualized, Project Management Journal 34 (3), 4.
© 2007, Joyce Douglas and Jang Ra
Originally published as a part of 2007 PMI Global Congress Proceedings – Atlanta, Georgia
This standard focuses on the “what” of risk management, including: core principles; fundamentals; and life cycle.