In the third and final article of a series on remote management and decision making for pandemic constrained procurement managers, Jonathan Dutton FCIPS explains, for SUPPLY CLUSTERS members, the cultural phenomenon of ‘The Conspiracy of Optimism’ and how it can undermine supply-side driven projects both large and small:
Why is it, do you think, that almost all large capitals projects seem to always blow-out?
You know, years late and miles over budget? Pick your own example – large infrastructure builds in Victoria, large resources projects out West, tramlines in Sydney, desalination plants anywhere, almost all Defence projects; submarines presently.
My example might be our kitchen extension – as my wife crisply put it, “I thought you did this procurement thing for a living, not very good at it are you?” as we ran six weeks late on a six-week project.
Anyway, why all the blow-outs? Could it be down to one simple reason perhaps? Is it an Aussie thing? Can we just not manage any significant complexity? What on earth are we all doing so wrong?
How is it that we can organise a superb Olympic Games back in 2000, we can fight wars far overseas and we can easily orchestrate multiple footy codes interstate during a pandemic? (Although, granted, these are all usually over budget). Yet, we cannot dig a tunnel under the Yarra River, cannot get tram lines down George Street in Sydney promptly, and cannot even manage a simple kitchen reno? Truthfully, what are the chances of the Brisbane Olympic Games being on-budget – even with 10 years to organise it?
With ‘Project Management’ one of the fastest growing professions in the country (behind Procurement, of course), and given the success of their best-selling PMI (Project Management Institute) training manual PMBOK, and so much investment in Gantt charts and desktop apps, you’d think projects would increasingly be coming in on time and to budget?
Casual observation suggests otherwise, although data is scare. Maybe tardy project-managers don’t want to air their dirty-laundry – who does?
IT projects are most notorious, truly. And some data does exist in this sector – Gartner suggests over 50% IT projects do not succeed. The Standish Group say 70% of major IT implementations fail. And McKinsey suggested that 17% fail so utterly that they risk bankrupting their company. But why? What is the common reason? Is it all the project manager’s fault? Can it ever be the fault of just one, or is this systemic failure?
The Top 10 reasons why capital projects often blow-out
The bitter truth is that the reasons large projects typically “blow-out” have not really changed much in many, many years. Even since Roman times, perhaps? When revealed, the reasons that large projects often blow-out become all too obvious – and you will recognise many examples yourself.
These common reasons are not technological in nature, nor really process problems, software failures, financial issues or even weather dramas. Nope, they are mostly human reasons. And we don’t seem able to stop them happening: Here’s the Top Ten:
- We do not specify well at the outset
Too often we don’t know exactly what we want, specify it poorly and don’t offer enough detail measures of success. Clumsy specs without enough focused KPIs and focused more on WANTs than NEEDs undermine the deal from first principles.
Worse, this lack of clarity at the start can lead to change. Much change. Change in the spec, the options, the business case; everything really. And change leads to delays and cost increases. In fact, ironically, the project manager’s IRON TRIANGLE of certain cost-time-quality is often the first thing to be compromised on major projects. Those things that are fixed at the outset become variable almost instantly. Suppliers have caught-on. The “land’n’expand” strategy of selling a basic solution – knowing that it will not meet the client’s needs, let alone their wants, is a cynical sales strategy that works all too often.
Of course, once off the strictures of the project management Gantt chart, clients have “permission to change” things. This means that, well, since we’re going to be delayed anyway, we may as well add those bells’n’whistles we forwent. Or we could add the extra feature we thought of too late. Now there is time after all. How lucky is that! It won’t take long …. This is how that kitchen extension went from two weeks late to six weeks late.
- Thin business casing
Our business cases are often unconvincing. Often driven by WANTs over NEEDs, they can sometimes be poorly justified. Often heavy on benefits but light on cost, they can assume too much and test too little. With long lists of soft makeweight benefits to shore up the quantified benefits that feel too light.
A repeat offence seems to be wanting the project to happen more than analysing the actual benefit curve. Building self-fulfilling prophecies perhaps, for reasons more orientated to brand or personal ego than professional business needs possibly?
- Wishful Cost-Benefit analysis (CBA)
CBA can often fall into an exercise in wishful thinking. Costings can be incomplete, net present value (NPV) calculations skewed or theoretical over truthful. Benefits can become increasing woolly, even soft, as the laundry-list of PROS descends to out-last the obligatory list of CONS. Intangible benefits for stakeholder segments can work to undermine hard business cases with firm and measurable business benefits. Sometimes the benefits just ‘feel’ good enough. The CBA too rarely tests them.
- Risk planning is risky
Thinking the unthinkable is arduous. That cant happen, can it, really? We are predisposed to disbelieve the unlikely. Conditioned to think positively, to believe in our mission and our leaders.
This makes risk planning too often perfunctory – going through the motions. And not genuinely thinking ‘what if?’ – let alone crafting a viable Plan B. In fact, the heresy of a thought-through Plan B sometimes looks plain disloyal in some corporate cultures. Crafting a plan for failure, even. Unthinkable. Just who wants to be the one to work on the plan for failure?
- We do not expect the unexpected
Not only do we not expect-the-unexpected, we most often do not even countenance it. And with thin business casing, cursory site inspections, sloppy preparation, casual risk planning and an unwillingness to invest in order examine unexpected possibilities at the outset, meeting the ‘unexpected’ is usually more likely than not. With a solid Plan B very much the exception, persevering becomes the only option managers see.
In fact, chasing projects that sail past their break-even point is fairly normal. As professional managers in large blue-chip companies, we are conditioned (and often trained) to throw good money after bad. To chase rainbows. To claw at least something back for our over-investment. To get something for it all – just something. Entrepreneurs don’t think like that at all. They cut loose. They accept their failure, cut ties, learn and move on. Fail-fast to succeed is a motto they often espouse.
- We are too focussed on deadlines, not enough on getting it right
On larger projects, eager investors and clients want to know only one thing truly – when will it be ready? This drives deadlines and, even, unrealistic ones. Indeed, deadlines can quite often be arbitrary – set by an ambitious C suiter trying to please? To hit a bonus target? For fear of no-end-in-sight unless a tough deadline brings focus?
Worse, this eagerness to deliver drives milestone dates – deadlines on the way to deadlines – that must be met! Even ‘GATEWAY’ projects can suffer from the imperative to get on with it. Yet this so often compromises care, quality standards and getting it right for stakeholders. Why double-check something that looks and feels right enough and compromise missing the next milestone? The client will not understand the delay – they just want their vision. Fast.
- Teamwork can always improve – especially with suppliers.
Teamwork, and communication, with suppliers can always improve. And the results of this will always enhance the prospects of any project. Yet, the adversarial nature of contract formation can work against building a team approach at the outset.
This can be exacerbated with tardy CONTRACT MANGEMENT. In fact, contract management is an area of the procurement world that generally suffers under-investment and too little attention. Contract managers are normally tasked with multiple contracts to manage – rarely one, or even just a handful. And under-resourced procurement teams sometimes focus on the next deal more than the last one. It is easy to handover contract management to the business operations. But they don’t really want to do it either though – all admin, no glory. So, they often default it to, yes, guess where, the supplier. Who then contract-manage themselves. Buyers only truly seem to get genuinely interested in contract management when things start to go wrong.
- Supplier Relationship Management (SRM) with the prime contractor is often mixed
In order to have a successful SRM strategy in practice, you have to have the basics of contract management right first. And few do.
The SRM approach is also undermined with the “THEM and US” mindset with suppliers which starts in the adversarial sourcing and negotiation process. The two-sided tussle to reach an agreement – giving and taking, looking for advantage – over the genuine desire to build the best practical solution to the actual needs.
Where the THEM -v- US mindset continues beyond contract signature can lay the foundations of WHO is at blame when things go wrong, much more than immediately working to put things right. In other words, not a team orientated approach.
Yet AGILE PROCUREMENT methodology favours collaboration over negotiation, interactions over process, working solutions over documents and responding to change over a fixed plan. This builds a bedrock for the joint-team to start a solid and productive working relationship.
- Poor project management
For all the science poured into objective project management methodology, things can still go wrong all too easily. This list of “Ten reasons …” testifies to this. Yet these “Ten” are largely subjective reasons for collective failure – human reasons, not rational ones.
Project management itself has worked hard to become a profession, to add standards, measures, protocols, checks and balances. And it is not fair to scapegoat project managers when things go wrong. For one thing, that is too easy. Yet, just like the football coach, if someone has to carry the can – who better than the PM? At the end of the day, if a project has gone significantly wrong, it has usually not been project-managed terribly well.
- We make too many assumptions – and rely on them as if they are facts.
The old adage says it all really – “assumption is the mother of all stuff-ups.” Originally attributed to political scientist Mr. Eugene Lewis Fordsworthe (says google) who spotted that conclusions may be logical but still wildly inaccurate if based on false assumptions.
The problem with corporate assumptions is the nine reasons above. The cultural double-down is that in our group-think we act as if these assumptions are actually facts. Of course, it would be better to test assumptions before starting out on a major project. But this takes valid research. Time, money and effort. Usually, a price stakeholders are ill-prepared to afford to merely, “tell us what we already know.” A hubristic level of arrogance, sometimes. But probably the largest single reason our large projects blow-out?
The real 11th reason projects so often blow-out – The Conspiracy of Optimism
One aspect of the Aussie culture that has not yet fully disappeared is the concept of “Awwww …she’ll be right mate” … the idea that it’ll be okay on the day. Relax, have a tinny, and it’ll all work out. You can almost hear Paul Hogan drawling that line, “she’ll be right.”
Of course, you don’t really hear the phrase “she’ll be right mate” anymore in corporate meeting rooms. No way. What you hear people actually say in meetings is:
“They won’t do that – surely? No, they will know that, so that won’t happen”
“We’ll worry about that when we get there ..” Or,
“We’ll cross that bridge when we get to it …”
“The supplier knows what they’re doing, so I’m sure they’ve thought of that”
“I think that is the case; y’know”
In other words, then, ‘she’ll be right’ …
Alas, usually, in a modern, complex and volatile world, it won’t be right. And, in any case, trusting to luck and goodwill is not a strategy.
Yet, worryingly, there is a strong reason why things could be getting worse ….
Corporate culture in the 2020’s
Modern business culture demands uber respectfulness – even sensitivity. Scrupulously polite in the office and in meetings, we are all woke now. Carefully selecting nouns, crafting gender-equal language, avoiding clumsy adjectives, banning similes & metaphors, dodging pronouns and minding your manners. And absolutely no banter. Indeed, it might even be reaching a point where in some circles even disagreeing is impolite. Group-think anyone?
This can create an insidious business culture, though. Lots of agreeing-to-agree. Too many cliques developing with “their view” that is “preferred.” Too many pre-meetings or meetings-after-the meeting. No written minutes from meetings. Overuse of ‘bcc’ blind copies on emails, eroding teamwork. Mental health as an escape clause for any failure, however minor. Passive aggressive behaviour as standard. Diffident leadership. Nobody saying what they mean. All these, signs of a poor management culture – and possibly based upon a plain lack of trust.
But all a long way from the bad old days of FTDs (feet on the table discussions), smoking & drinking in the office, overt sexism, rank bad people-management and everyone swearing, arguing and feeling psychologically unsafe. (It wasn’t really that bad in the 1980-90s, but you get the point).
This sort of behaviour was not (quite) universal though and was not unique to Australia – although it may have been a tad worse here in Australia and a tad slower to correct itself (certainly in Parliament House if reports are to be believed).
On large projects, everyone wants to believe in the mission. Group-think is almost encouraged. Many of the ‘Ten reasons large projects often blow-out’ listed above have an “emperor’s new clothes” feel about them. Who is brave enough, in our modern culture, to call out the elephant in the room? To point out what some are really thinking? Who wants to risk their career?
Increasingly it feels, corporate culture doesn’t reward ‘negative’ people who express doubt against the wisdom of the crowd around a much-admired large-scale project. Who thinks she won’t be right? Who wants to be counter-cultural in a modern office?
Ironically, many of the “Ten reasons …” above have not changed much since Roman times, even Egyptian times perhaps, building those tricky pyramids (I bet they blew-out). That these reasons have not changed so much in Millenia does not mean they are easy to correct, however. They are ingrained in us as human beings – optimism and belief structured towards simple goals.
That said, at least if we understand the true reasons we stuff-up, perhaps we can work to not stuff-up quite so often and quite so easily? Can we set tougher business cases? Firmer specs? Work through better risk management approaches? Build stronger Plan B’s? Work in a more AGILE way? Even, invest more in testing our assumptions and in our contract management, never mind our SRM?
It is all a far cry from the old days – when we went on management training courses like ‘DeBono’s SIX HATS’ management theory. Each different coloured hat worn in a decision workshop represented a mindset the wearer has to adopt in that meeting. The six perspectives help to bring rigour to the decision-making process and ensure all viable options can be considered. The BLACK hat is the sceptic – the one arguing NO as the devil’s advocate. It is perhaps the most valuable role to play in forming a group-decision? Are we losing the ability to play this role honestly?
Source: DeBono, Wikipedia, trickle.app
But, even when we think through a decision to proceed more rigorously, we are still capable of derailing our project. Assumptions being the villain of the peace most often:
Nobody imagined that our family kitchen extension might hit rock one meter down digging new foundations – except the builder who casually mentioned we could do a $1,200 survey to test what’s under the ground before we start, plus GST – “Don’t be silly, it’ll be fine” said the dumb client at the time (a professional procurement manager by the way), “we’ll save the money for the nicer light fittings we saw” added the client, who unknowingly then took the risk of a six-week delay and a 30% budget over-run.
Jonathan Dutton FCIPS has a non-executive role at SUPPLY CLUSTERS and writes a monthly column for the website. Jonathan is the CEO of PASA who run a wide range of procurement events and training programmes each year www.procurementandsupply.com and cover all aspects of procurement thoroughly including AGILE PROCUREMENT www.pasaagile.com.au He has also worked extensively in the past as a senior procurement consultant and trainer including his own renowned training programme ‘THE STRATEGIC PROCUREMENT LEADERSHIP PROGRAMME’ www.jdconsultancy.com.au/training His kitchen extension worked out okay in the end; then they sold the house.