Abstract
Management of medium to large complex procurement and integration projects is a difficult challenge. All projects face the difficult proposition of how to execute efficiently while maintaining the required focus on goals and milestones to ensure schedule adherence, enhanced communications, overall acceptable risk, and satisfied stakeholders.
The ability to effectively identify and manage project stakeholders significantly improves the chances of successful project execution and organizational success. The project manager's ability to seek agreement on the goals of the project among the key project stakeholders, including the project team, management, and the customer, plays a large part in the project's success. Failure to do so may expose the project to unnecessary delays, missed opportunities, negative financial impacts, and potential damage to the organization's reputation.
A powerful method by which to approach stakeholder management is by the integration of two key items: project risk management principles and project management leadership. When properly integrated, these two result in a catapult effect in stakeholder management and overall project performance. The integration of these is known as Event Based Stakeholder Risk Management (EBSRM).
Improved Stakeholder Management Approach
The integration of project risk management principles and project management leadership is key to stakeholder management success. The importance of stakeholder management is emphasized with its inclusion as an additional Knowledge Area in PMI's A Guide to the Project Management Body of Knowledge (PMBOK® Guide) - Fifth Edition. Building on this emphasis, an overview of the discussed improved stakeholder management approach in this paper is shown in Exhibit 1.
Exhibit 1: Improved stakeholder management approach
Experience has shown that the lack of understanding of project risk management principles results in projects failing to meet their goals. To avoid this, it is critical that the project manager be able to understand what the key project risk areas are and always be in a position to communicate these effectively to internal and external stakeholders.
Project management leadership includes select project management and leadership skills, as well as a focus on a risk-smart attitude and accountability-based behavior. Stakeholder management requires project management leadership to foster a stakeholder environment where there is a healthy perspective on risk and accountability. The goal is to have a culture where all project stakeholders appreciate how risks interact across a project, accept accountability for assigned risks, and work together to maximize opportunities among them.
Further information on project management leadership may be found in The Power of Project Management Leadership: Your Guide on How to Achieve Outstanding Results (Retfalvi, 2014).
Project Risk Management Principles
A Guide to the Project Management Body of Knowledge (PMBOK® Guide) - Fifth Edition defines project management as “the application of knowledge, skills, tools, and techniques to project activities to meet project requirements.” Inherent in all projects is uncertainty. Risk is generally viewed as a state of uncertainty where some possible outcomes have an undesired effect or significant loss. A more appropriate definition of a project risk is “an uncertain event or condition that, if it occurs, has a positive or negative effect on project objectives.”
It is important that the project manager be knowledgeable and fully versed on the PMI project risk management principles, concepts, and processes. The six risk management processes that are recognized as good practice on most projects most of the time are shown in Exhibit 2.
Exhibit 2: Project risk management processes
A common misconception is that risk management is supplementary to the project management set of processes, and as a result is not considered in the forefront of project stakeholders. A more appropriate approach is to view risk management as core to the overall project management approach. By using this approach, stakeholders have an increased awareness of the set of processes.
From experience, Exhibit 2 is considered non-intuitive by many stakeholders. An alternate method by which to view the six project risk management processes is shown in Exhibit 3. This is referred by the author as The Risk Circle of Life.
Exhibit 3: The Risk Circle of Life
Exhibit 3 serves as a reminder to stakeholders of the following:
- Project risk management is not a supplementary or bolt-on activity. It must be properly planned and integrated into project activities;
- Project risk management consists of six basic steps;
- Project risk management requires open communications and consultation with others; and
- Project risk management is a recurring activity. We need to review and update project risks continually, not just at the start of a project.
Project stakeholders should play an inherent role in the project's risk management activities. As a result, a method by which to improve the engagement of project stakeholders is to use a method that is based on Exhibit 3. EBSRM is an excellent method to use in this instance.
The Need for Project Management Leadership
The Power of Project Management Leadership: Your Guide on How to Achieve Outstanding Results (Retfalvi 2014) defines project management leadership as comprising of the following four critical and interactive components:
- Project management expertise;
- Core leadership skills;
- Risk-smart attitude; and
- Accountability-based behavior.
Two elements that are critical to improved stakeholder management are a project manager's ability to inspire trust and confidence with project stakeholders. A project manager must inspire trust and confidence with project stakeholders in order to ensure success. Each EBSRM technique discussed in the following sections help build stakeholder trust and confidence. Failure to do so generally leads to project failure and stakeholder disappointment.
The Importance of Stakeholder Accountability
A critical step in ensuring that project stakeholders respond in an accountable manner is to clearly identify what is expected of them. Individuals need to know what is expected of them so they know what to aim for. Setting clear expectations for stakeholders can be a difficult challenge for project managers. Any expectations that project managers set need to be clear, concise, and relate easily to the project. They must be clearly understood by both the project manager and stakeholders.
Non-negotiable items, in the context of project management, are important items that must occur when they're expected to occur. Good examples of this include firm delivery dates, a financial profit or gross margin goal, or perhaps the launch date of a new product.
It is the responsibility of the project manager to identify a project's non-negotiable items and ensure that stakeholders understand that they must meet these expectations—that non-negotiable items are set in concrete. To avoid confusion, team members and stakeholders must have a clear understanding of what these non-negotiable items are so that they can communicate clearly amongst themselves as well as with other individuals involved with the work. This ensures an aligned approach.
Further information on creating an accountable culture that actively embraces stakeholder engagement may be found in Creating the Accountable Organization: A Practical Guide to Performance Execution (Samuel, 2006).
EBSRM is an excellent method by which to instill stakeholder accountability.
Event-Based Stakeholder Risk Management
EBSRM is a stakeholder management technique based on risk management principles and project management leadership. EBSRM offers the following discriminators:
- Top-down approach to provide the big-picture view, as opposed to a bottom-up approach
- Event-centric view with a focus on key events/deliverables
- An effective way by which to identify project stakeholders and ensure their accountability
- Inherent schedule and cost analysis to increase the probability of project success
- Key artifacts that greatly facilitate understanding of the entire project and of the key risks to the project. These artifacts are extremely effective for communicating important project information to both the project team and to other stakeholders, such as senior and executive management
- Consultative inputs from others who have had similar experiences and leverage of lessons learned
The integration of EBSRM into project planning and execution is key to its success and is discussed in the following sections. An overview of the EBSRM approach is shown in Exhibit 4.
Exhibit 4: EBSRM approach
One of the main objectives of the EBSRM process is the establishment of open and timely exchange of project information among all project stakeholders while addressing project risk and stakeholder accountability as an added inherent benefit. This exchange of information significantly improves the probability of project success and stakeholder satisfaction.
EBSRM process consists of eight proven management techniques in the form of steps, and an overview of each technique is discussed in the following sections.
Step 1 – Executive Project Summary
The Executive Project Summary (EPS) is a composite event diagram that captures, on a single page, key events and considerations over the life of the project. This graphic representation provides project managers, stakeholders, and senior and executive management with a comprehensive overview of a project, no matter how complex, and facilitates a common understanding of project goals. A sample EPS is shown in Exhibit 5.
Exhibit 5: Executive Project Summary
The EPS has the following characteristics:
- Illustrates a high-level, single-page view of the project;
- Captures key activities upon which the project is based;
- Depicts “swim lanes” based on how the organization executes a project;
- Identifies significant milestones in the top swim lane;
- Specifies project end date(s) and time remaining; and
- Identifies and illustrates key stakeholders and their expected contribution to the project. From experience, this may be a separate swim lane or a specific event
The EPS is an extremely effective tool for communicating important project information to both the project team and to other stakeholders. The EPS promotes open and timely exchange of project information. It also offers the opportunity to shape constructive team dynamics to ensure focus on common goals.
Exhibit 6 shows the concept of the EPS as a project briefing tool to stakeholders.
Exhibit 6: EPS as a stakeholder project briefing tool
The project manager's ability to seek agreement on the goals of the project among the key project stakeholders, including the project team, management, and the customer, plays a large part in the project's success.
The EPS is a very useful tool in the project manager's toolkit. It builds trust and confidence by demonstrating the project manager understands the bigger picture.
Step 2 – Identify Stakeholders
A Guide to the Project Management Body of Knowledge (PMBOK® Guide) - Fifth Edition defines stakeholders as “an individual, group, or organization who may affect, be affected by, or perceive itself to be affected by a decision, activity, or outcome of a project.” The affect may be negative or positive in nature and is analogous to threats and opportunities in project risk management. A key step in the EBSRM process is the identification and engagement of project stakeholders.
A challenge encountered by many project managers is to properly identify and prioritize those stakeholders that are directly and indirectly affected by the project. Stakeholder analysis is a general term used where stakeholders are identified, their needs and expectations documented, and their influence on the project characterized. Many forms of stakeholder analysis approaches exist. A popular method to help visualize stakeholders and their characteristics is by the use of a Power/Interest (PI) grid.
The EPS is a convenient and powerful method by which to identify and engage project stakeholders. By focusing on the key events and considerations over the life of the project, we can also focus on who is affected by these events and what engagement is expected by these stakeholders as we approach or complete these events. Engagement of stakeholders is improved by the clear visual identification of these events and expected involvement of the stakeholders.
It is also a powerful method by which to establish and improve stakeholder accountability, as stakeholders cannot easily “hide” and state they did not understand their expected involvement.
Step 3 – Critical Event Tree
The Critical Event Tree (CET) identifies key project events and presents them graphically in a tree structure. The EPS is used to develop the CET. The top-level nodes of the tree may be the Level Two nodes from the project's Work Breakdown Structure (WBS). The CET should be limited to the top 20 to 25 key project events.
Refer to Exhibit 7 for a conceptual overview of a Critical Event Tree.
Exhibit 7: Critical Event Tree
These key events are representative of the overall project. Each event must have a completion date and must be included in the project's schedule.
The determination of the top project events can be a difficult task and will require review and significant consultation with the project stakeholders. The project manager must consider not only the success of the project, but also project outcomes, such as perceived or required stakeholder success.
The CET is an excellent tool to build stakeholder trust and confidence. If the events in the CET are under control, the project manager and stakeholders can be assured that the project is generally in good shape.
Step 4 – Risk Event Tree
The Risk Event Tree (RET) identifies key project risks and presents them graphically in a tree structure. The CET is used to develop the RET. Building on the previously identified project critical events, the projects risks associated with each critical event are identified. Unlike a Risk Breakdown Structure (RBS), where risks are grouped into common areas, the RET is focused on the risks associated with the project's critical events. Each risk event includes a description of the risk, the associated risk drivers, the impact of the risk, and the horizon of the risk.
The advantage of the RET is the simple yet powerful graphical representation of the major risks associated with the project. Along with the EPS, the RET is an excellent presentation tool.
Refer to Exhibit 8 for a conceptual overview of a Risk Event Tree.
Exhibit 8: Risk Event Tree
Step 5 – Risk Register
The project risk register is a key artifact where the risk events and associated parameters are documented and maintained. Each risk event is included in the risk register with the results of any risk analysis and associated responses. The risk register is made available to all project stakeholders to ensure transparency and is reviewed regularly.
Ensure that the project has a properly developed risk register. The project risk register is an ideal method by which to promote transparency among stakeholders and increase stakeholder accountability by assigning stakeholders as risk owners as appropriate.
Step 6 – High Level Schedule
A schedule is a required tool of project management. Unfortunately, the development of proper schedules is not well understood by most project managers. Project managers need to properly understand the implementation and use of proper scheduling methods as a tool to plan, coordinate, and schedule the execution of projects.
A clear and agreed-to high-level project schedule, however, is required first. This is important if schedule or cost risk analysis is to be performed at a later stage, as full details are not required for these analyses. The schedule or cost risk analysis is performed on the high-level schedule. Schedule detail will emerge when required by the project and is not required as part of the EBSRM approach.
Project managers must avoid the trap where a schedule “deep dive” is done too early because available scheduling tools make it easy to do so. Without a clearly understood overview of the project and an agreed-to EPS, it will be very difficult to properly implement the project in a schedule, resulting in an increased likelihood of schedule rework.
As previously discussed, the EPS is a tool to develop stakeholder trust and confidence. It is also an excellent tool to develop a high realistic-level schedule.
Step 7 – Schedule and Cost Risk Analysis
Schedule Risk Analysis (SRA) is the application of the Monte Carlo technique to the project schedule. A Guide to the Project Management Body of Knowledge (PMBOK® Guide) - Fifth Edition identifies the Monte Carlo technique as “the typical method of modeling/simulating projects.” Similarly, Cost Risk Analysis (CRA) is the application of the Monte Carlo technique to the project costs.
One of the key artifacts of the EBSRM process is the distribution chart plots that predict the finish date(s) of the selected event(s) for each schedule simulation. This will provide the project manager and project stakeholders with an understanding of the likely range of finish dates; the confidence in meeting the target date; and the worst-case completion date.
In almost all cases, stakeholders need to understand that projected finish dates occur later than planned and need to be re-worked to be brought into the target range. SRA is an iterative process. Outputs are fed back into the development of the plan to get to an acceptable level of confidence. The goal is to have each event probability in the 80%–90% range.
Similarly, CRA ideally requires that the project costs be built using three-point estimates. To determine the contingency to be allocated to the project, we need to define what confidence level we would like to achieve. The higher the confidence level, the larger amount of contingency needed.
Exhibit 9: Sample schedule and cost risk analysis distributions
The best approach is to implement an integrated cost-schedule risk analysis that includes the impact of schedule risk on cost risk to properly identify cost contingency reserves. Exhibit 9 details examples of SRA and CRA distribution charts showing the typical distribution of the projected project schedule/cost against the probability of meeting the project schedule/cost. The two-sided arrow represents that schedule and cost are related, and a change in one generally results in a change of the other.
In this specific example, the planned schedule start date is April, 4, 2016, and the planned finish date is October, 11, 2016. The estimated project cost is $776k. The red arrows represent the planned schedule finish date and estimated cost. To achieve a 90% confidence level, the expected finish date is November, 10 2016, with an expected project cost of $820k.
The advantage of including SRA and CRA as part of the EBSRM process is that schedule/cost targets and probability of success in meeting these targets are identified and communicated to all project stakeholders. This ensures everyone is on “the same page” and further assists in ensuring stakeholders understand the challenges associated with the project and their potential outcomes.
This will assist in dealing with demanding stakeholders who do not fully appreciate the impacts of their demands on the project. The SRA and CRA artifacts are simple yet powerful graphical reminders of the range of probability of project success; in addition, they provide support for any contingencies required.
The advantage is that schedule/cost targets and probability of success in meeting these targets are identified and communicated to all project stakeholders. This is an excellent method by which to build stakeholder confidence and trust, as the presented data is more realistic and represent most likely scenarios.
Step 8 – Consult and Brief Regularly
There is a very good chance that someone has previously experienced the risk or issue that the project manager and stakeholders are currently trying to address. The object of this activity is to have experienced people review, identify, develop, and periodically update credible project-level risks. Expert advice may be available in other areas of the organization or associations. Reviews leverage the skills and experience of the right people at the right time.
A key element of the EBSRM approach is to leverage previous experience and lessons learned. A large number of project managers operate in an industry where the projects they manage will have similar components and attributes as previously managed projects. Since project managers who work on similar projects will run into similar obstacles, it is advantageous to the stakeholders that they share how they overcame these obstacles. This will ensure that the same mistakes are not repeated at the cost of project delay, budget overruns, and customer dissatisfaction.
One of the most challenging tasks that a project manager has to face is making sure that during the project all of the right people are given the right information at the right time. The use of the EPS, the CET, and the RET as core elements of any project communication plan supports this. From experience, an effective approach is to brief the EPS at the start of every project meeting and have the CET and RET Exhibits ready if there are detailed questions.
From experience, project stakeholders may be involved in more than one project at a time, and as a result, they may “drift” as they have too many items on their plate. Briefing the EPS at project meetings brings focus back to the project stakeholders and helps to remind them of the specifics of the project and their obligations.
The project manager is encouraged to review and emphasize project goals and key events frequently to the project team and stakeholders. This results in increased credibility of the project manager in the eyes of the stakeholders, including the customer, and senior and executive management.
Proper communications and consultation with stakeholders are excellent methods by which to build stakeholder trust and confidence while reminding stakeholders of the importance of accountability-based behavior.
Conclusion
The ability to effectively identify and manage project stakeholders significantly improves the chances of successful project execution and organizational success. Event Based Stakeholder Risk Management (EBSRM) is a proven project risk management approach that incorporates powerful techniques for the management of project stakeholders.
By using the EBSRM approach on projects, the benefits include not only improved stakeholder alignment and accountability, but a much improved overall project risk management approach. EBSRM is based on the integration of two key items: project risk management principles and project management leadership. When properly integrated, these two result in a catapult effect in stakeholder management and overall project performance. The approach also assists the project manager in keeping the project stakeholders aligned and focused on what is important to control, not what is easy to control.
