Portfolio Management is Risky Business

A friend of mine (we’ll call him Al) was out looking at daycare centers with his wife. Their two year old daughter was ready to expand her horizons and learn the intricacies of social behavior and all the risks inherent in her new world. To Al’s dismay, no daycare center met the standards of control he would have expected in a daycare. This new world was fraught with risk. Doors weren’t locked and children could escape. Gates were not on the stairwell and children could fall and injure themselves. Peanut butter was in the fridge and children could access it. Al wasn’t willing to run the risk of introducing his daughter to this environment. Oddly enough, Al didn’t have similar controls in his own house. No childproof door locks, no stair gates, and peanut butter in his fridge – sometimes on the counter!!It was clear to me that a person will hold an unknown environment to a higher level of scrutiny than a person who is familiar with the same environment. It also became clear that a person’s experience will determine the amount of risk they are willing to tolerate. For example, if I put three people in Al’s deficient daycare and put a jar of peanut butter on the counter, the first person with no children may shrug their shoulders. The second person with a child may say, “Maybe we should remove the jar of peanut butter.” While the third person who has a child with a peanut allergy may say, “I need a peanut free environment for my child. This is unacceptable.” This dependency on individual experience and individual risk tolerance becomes a greater issue to organizations. When trying to ascertain the level of risk inherent in a project portfolio at an enterprise level, it is difficult to compare like with like without a risk management process and model that will represent the enterprise’s willingness to accept risk.The ProblemRisks that are not identified cannot be assessed. While an organization is dependent on a project manager to identify risks associated with a point in time project, there is no clear way to determine inherent risks to the organization. Organizations that have made the move to portfolio management have been successful at time management, resource management and time and budget status reporting at the portfolio level. While each of these advancements is a major achievement on its own, an organization that makes decisions on this data does so without a sense of risk associated with the performance of the portfolio. Decisions get made and risks are reacted to. Many issues are created due to unforeseen risks.So what is wrong with this picture? After all, risk is an accepted part of business and life for pretty much everyone.Risk is inherently a function of value and as such the more value at stake the more risk one is exposed to. Therefore, the notion that risk is a negative situation to be entirely avoided is a flawed argument, as this can only be guaranteed if/when an organization invests in cash cow initiatives where high value can be attained with no risk. We all know that cash cow initiatives are not sustainable and are the exception, not the rule.The ultimate argument is found in the financial market where stocks and bonds are valued by level of risk tolerance. Bonds are considered safer bets and therefore yield lower returns while stocks are considered risky investments and are expected to yield higher returns. Over the past 100 years the financial market has designed numerous mechanisms to manage the dynamics of risk and reward with continued lessons learned along the way.Independent of industry, size and source of funding (i.e. capital market, private equity, tax dollars), organizations must be well versed in balancing risk and reward if they are to survive and succeed in the competitive and volatile economy of the 21st century.With Risk Comes OpportunityThe old saying that “the apple does not fall far from the tree” rings true when one takes a moment to reflect on why risk management practices are at such an elementary level. The answer lies in what organizations have come to believe to be good project management.So what happens to managing risk? Risks become issues, issues become actions, and actions get managed using the same project management processes designed to manage the value line. The problem is that project management practices designed to deliver value are based on nomenclatures such as deliverables, milestones, performance indicators, quality, timeline, budget, approval, benefit realization, etc. These notions work perfectly for the value line where the lingo describes value-based characteristics.To manage risks, organizations need to invest in elevating their risk management practices to the project portfolio level, to attain the same level of maturity as project management practices. Otherwise, risk management will continue to be at the mercy of an individual project manager’s experience and will be managed well by a few and missed by most. This key concept drives the requirement for organizations to baseline their risk tolerance and provide their project management team with a consistent set of risk management standards and practices. Absence of risk management standards and practices will result in an environment of inconsistent risk tolerance and management, since project managers’ personal tolerance for risk will driver their approach for managing project risk. The danger of such a notion is that some project managers will have high tolerance for project risks while some will have lower tolerance, which might or might not be applicable to the priorities of the organization.We have all come to appreciate the necessities of standardized project management tools and methodology, and there are very few organizations that allow a project manager to use his/her own favorite project management tool and methodology. Risk management is no different, and organizations need to invest the same level of diligence in their risk management practices as they do in project management practices.The FrameworkThe identification of potential risks within a project portfolio is of major importance to a proactive risk assessment process. It provides the opportunities, indicators, and information that allows for identifying all risks, major and/or minor, before they adversely impact an organization. An aggregate view of project risks within a portfolio will provide organizations with a holistic assessment of all risks, provided that the risk identificationframework at the project level is comprehensive.The first step in risk assessment is to clearly and concisely express the risk in the form of a risk statement. A risk statement can be defined in the following terms:o The risk assessment statement outlines a state of affairs or attributes known as conditions that the project members feel may adversely impact the project.o The risk assessment statement also articulates the possibility of negative consequences resulting from the undesirable attribute or state of affairs.o This two-part formulation process for risk assessment statements has the advantage of coupling the idea of risk consequences with observable (and potentially controllable) risk conditions.When formulating a risk assessment statement, it is helpful to categorize the risk statement within categories that best reflect the priorities of the organization. The project portfolio Risk Registry (Table 1) outlines the risk statement associated with “strategy” risk category. The project portfolio Risk Registry will have most value when customized to reflect organization risk categories and corresponding risk statements.Once the project portfolio Risk Registry is vetted to reflect business priorities and challenges, the risk statements need to be evaluated against the probability and impact of actualization. The variable chosen to measure probability and impact of risk actualization reflects an organization language, as it is critical that baseline assessment is understood internally and represents organizational risk and exposure.A quadrant analysis of risk category actualization in terms of probability and impact provides the organization with transparent disclosure of risk at the project and portfolio level. This assessment enables an organization to attain a baseline understanding of project portfolio risk based on the organization’s own internal knowledge and experience.The risk analysis model is designed to expand and normalize project management judgment, used in the risk assessment model, and apply a consistent baseline for the probability and impact of all risk categories. It is composed of the following steps:1. Industry sources are used to establish a complete repository of threats that are applicable to the organizations.2. Industry sources are used to determine the organization’s vulnerability to industry threats. Then, the organization uses internal knowledge to narrow the list of vulnerabilities to those most applicable to the organization.3. To further validate the applicability and relevance of threats and vulnerabilities, a processes of “so what” analysis is conducted where the probability and impact of identified threats and vulnerabilities are further validated. The “so what” analysis utilizes metrics similar to the probability and impact metrics used in the risk assessment model.4. COBIT control statements are used to determine the level of controls that an organization has in place or could have in place in order to effectively manage the risk associated with outlined threats and vulnerabilities. Although COBIT controls are mostly designed for IT, indepth testing has revealed that COBIT controls are applicable to both IT and non-IT threats and vulnerabilities.The outcome of the analysis phase is a repository of threats, vulnerabilities and controls assessed and validated through a series of workshops, where project and portfolio managers input is given the same weight as industry best practices. This ensures that the analysis result is applicable to the organization rather than a hypothetical environment.An organization’s risk tolerance is directly influenced by its ability and desire to invest in controls designed to adjust risk tolerance. The action model provides the framework to operationalize risk assessment and risk analysis findings based on the implementation of controls that provide the best level of risk mitigation for project portfolio priorities.The action model leverages “so what” analysis to determine which controls provide the optimal mitigation results for threats/vulnerabilities with the highest probability of actualization and/or most implications. Furthermore, the action model provides the ability to assess the utility of existing controls in order to determine portability/reusability opportunities.The action model also enhances the reliability of the quadrant report produced in the risk assessment and risk analysis phases, and specifically identifies the value of investment in controls as a means to mitigate threat probability and vulnerability impact.In conclusion, the action model enables organizations to improve the effectiveness of processes used to deliver projects through investment in controls. The action model also develops roles, responsibilities and processes required to operationalize the risk assessment and risk analysis models in the form of specific actions. Roles such as Risk Manager and Risk Analyst are defined and incorporated into the business process. Each role in the risk management process has responsibility and accountability, and specific tasks within the risk assessment, risk analysis and risk action model. Finally, the action model enables organizations to establish pragmatic risk management processes.SummaryOrganizations are expected to manage risks and deliver high value capital projects. Anything else is considered sub-optimal performance. Delivering high-value projects requires a project management workforce with significant talent for effectively managing both the value line and risk line.Managing project risk is no different than managing investment risk. In both cases, the “customer” who provides the capital demands that the investment is managed by professionals who understand and leverage risks to maximize return on investment. Failing to do so ends in the “customer” finding other alternatives, as capital investment is a precious commodity.Tools designed to automate risk management become extremely valuable once organizations have understood and implemented the appropriate level of management processes for risk management. Unfortunately, many organizations fall into trap of buying pieces of technology, without having an in-depth understanding of the requirements and processes to use the technology.Organizations have the technology and talent to deliver high value projects through effective and transparent management of risks and need to establish the supporting risk management processes. Start with a framework designed to build an enabling risk management process to manage project portfolio risk relative to organizational requirements. If we can all agree on the tenants of risk in our respective organizations, we won’t have to suffer through miscalculation and mismanagement of risk.After my friend Al communicated his concerns to his wife, they together created a framework to identify acceptable risk for a daycare provider. They discussed why they didn’t hold their own home (the primary daycare) to the same standard. They determined how much they were willing to spend to mitigate certain risks and the likelihood of acceptable risk they were willing to bare. In the end, Al and his wife were able to select a daycare provider that provided the most reasonably safe environment for their child. In addition, they were able to develop a clear picture of some of the deficiencies in their own home environment and addressed them accordingly. The framework was critical in defining the conversation and providing them with a basis for discussion that ultimately enabled them to make an important choice. If only all organizations were run that way.

Managing Employee Writing

The ProblemEnlightened organizations throughout the world are embracing the concept of total quality management (TQM), but at a time when many organizations ask their employees to “do it right the first time to improve productivity” the application of TQM to writing is overlooked. In fact, memos, letters, reports, instructions, proposals, and the many other forms of writing tasks in organizations are not done right the first time. Often, the third or fourth revision is still not “right.”The average professional employee (those with a college degree) spends 10 to 12 hours a week writing documents beyond the time spent on email. According to a survey by Boeing Aircraft, two-thirds of all memos and letters produced by employees and used by managers to make decisions required revision because the original was not clear. Most managers list good writing ability among the top three traits most desired in an employee without realizing that bad writing is a management problem, not an employee problem.If, as managers believe, an employee who cannot write is a problem, then a good writing training program, of which there are many available to corporations, should fix that problem. It does not. Millions of dollars are spent by organizations on training programs thought to help their college-graduate employees write better. It doesn’t work because training employees to write without also training their managers is wasted money.”Well, I don’t agree with that,” managers sometimes snap at me when I am hired to consult with them to solve problems they are having with bad writing among their subordinates. They continue, “People with college degrees should be able to write excellently. But I have to rewrite all their stuff because they can’t do it right the first time.” When a writing project doesn’t turn out right the first time blame is focused on the writer, and so begins a series of revision back-and-fourths that cost valuable professional time, and a great deal of money. And irritate managers.Myths about WritingThere is a mythology in organizations about writing. Here are a few of the more prominent ones:1. Managers have no responsibility for what is being written between the time they delegate the task and the time they see the result.2. Part of a manager’s role is to edit everything written by subordinates.3. Everyone should write on a computer.4. The English rules never change.5. Engineers can’t write.None of the above myths have any foundation in fact. As for number 5, I hear
the same thing said of computer programmers, geologists, physicists – almost any professional! Nonsense!Observations about Writing in OrganizationsFollowing are a few observations about the causes of writing failure in organizations gained from12 years as a writing consultant to a Fortune 500 clientele.1. Employee writing cannot be improved without changing the culture of the organization first. The “culture” of an organization is the sum of all socially transmitted beliefs, myths, and all other products of human work and thought. Culture is passed down from one generation of employees to the next, including the mismanagement of the writing process.An example of this was the corporation that hired me to improve their proposal writing efforts. Many organizations depend on competitive proposals – bids – to keep their business going. There are both commercial proposals, and proposals for the defense industry. I worked almost exclusively for defense contractors. One Fortune 500 client I worked with had lost 32 bids in a row. Employee strength dropped from 2,000 to 400. I was hired to teach people how to write winning proposals. From the 1960’s to the 1980’s proposal writing remained about the same, but in the 1980’s the style of proposals changed, and the organization wished to change to the new style. They spent thousands of dollars on training. It didn’t work because of a guardian of corporate culture, a senior manager, took it upon himself to rewrite every “new” proposal back to the style of the 1960’s. The last time I checked, they were still losing.Another example of the importance of organizational culture was the Space Station proposal to NASA by McDonnell Douglas. A colleague and I were hired for two weeks to train 176 engineers and others how to write well so a nine-volume proposal would sound and look alike throughout. It was apparent within the first hour that the company had no coherent process for managing the writing of the many departments involved. Worse, the strategy for winning the bid that had to be integrated into every section was going to be lost after Volume One because there was no knowledge of what it was below the management level.On our recommendation, McDonnell Douglas made a courageous decision to change the corporate culture about the way writing was managed, and we spent the next two weeks training 176 people to manage the process. This was 2 years before NASA issued the Request for Proposal (RFP). A year later I was asked to return and to oversee a “trial run.” The company took all 176 people off their jobs for two weeks to actually write a mock-up proposal. From that experience, every department and every writer had an opportunity to make the process work. McDonnell Douglas won the bid for $9 billion.2. Managers do not manage the “process” of writing because they think of writing as an “it.” We hear managers say, “I needed it yesterday.” or “I need it as soon as possible.” They perceive writing as an object.Problems that arise from the it orientation include 1) shallow insight, 2) compromised thinking and reasoning, 3) lack of logical connections between ideas, 4) abortive or omitted collaboration with others, and 5) time-consuming rewriting and editing by managers to correct the shortcomings that arise from these weaknesses. Writing is a process, and processes need to be managed!3. True delegation of accountability and ownership rarely occurs. When a manager delegates a writing task with the intention of editing it after it comes back, responsibility and ownership of the work stays with the manager. Many managers believe part of their job is to act as editor-in-chief, and they squander huge amounts of their expensive company time doing the job of secretaries or company editors.Managers who edit have the illusion that they are doing important and useful work. But their problem is not bad writing from subordinates. It is bad delegation.
When I ask writers in the ranks how writing assignments are delegated to them, this is what I hear:My manager, on her way out the door, throws stuff on my desk and says, “Take care of this.”My manager believes in progressive revelation. Every time I give him a revision, he reveals more information about the project that I should have had in the first place.My manager communicates writing assignments on post-it notes.With managers like these, employees adopt a foxhole mentality. They sayto me, “I just throw some words together and send it in. Why bother making it good. It’s just going to be changed anyway.” So much for ownership.4. Managers do not think to negotiate the time it takes to write a document when they delegate the task. A computer programmer asked me how to write faster. “My manager wants me to completely rewrite these 50 pages by Friday. Meantime, I’m supposed to get all my regular work done on time. I’ll be working overtime with no pay to get it all done.”When a manager does not consider the amount of time it takes for writing to
get done, writing becomes an unplanned activity sandwiched between ongoing daily duties, meetings, phone calls, email, and a variety of other interruptions. And unplanned activities lower productivity and profitability.5. Managers are insensitive to the need of writers have for uninterrupted time. Writing is difficult intellectual work. It requires concentration. But interruptions in many organizations are epidemic. They are frequent, uncontrolled, and tolerated.Overcoming inertia to start writing is hard. Interruptions cause the writer to stop, and afterward, the writer must collect their thoughts, reread what they just wrote, and overcome inertia again. Interruptions can change a 15-minute writing job to a 2-hour marathon of stop-and-start effort.I was recently working with six managers as they wrote a proposal that was critical to the company’s survival. The room was quiet as they were working on how to word their win strategy. A secretary entered the room and interrupted one of the managers with a question about scheduling a not very important meeting. Everyone in the room stopped writing to listen. When the secretary left, the group turned back to their writing. Some began rereading what they had just written. Some stared off into space. Two tinkered with paper clips. Haltingly, they resumed writing. Twenty-five minutes were wasted.Think of the ramifications for people who work in cubicles!The SolutionWriting has both an internal and an external manifestation. The internal manifestation is the complex, problem-solving, reiterative process of the writer. The external manifestation is what the manager sees happening. Good managers put steps in place to improve both the internal and external process of writing.Package the AssignmentEnlightened managers prepare a writing assignment before they delegate. They 1) establish the standards that will be used to review the completed document, and 2) provide the needed tools.Writers can not read minds. If standards are only in the mind of the manager, the first draft will be changed as the manager applies those standards. Standards are style guides, such as APA or Chicago. English is changing faster now than at any time since the 17th Century, and the “rules,” or standards that were taught in the classroom 20 years ago may not apply today. Managers provide writers with tools such as recent-edition dictionaries because meaning, spelling, and technical use of many words is changing. For example, nouns and adjectives are being changed into verbs. A perfect example from an Environmental Impact Statement, “We will tier to the Forest Plan,” or “Got milk?”Some people write better in longhand. Some like laptops, and some like the PC. If a writer does best in longhand, the manager should provide the writer with the ability to translate the longhand to the computer, such as a secretary, or copytalk.com. Secretaries are few and far between in modern organizations as managers increasingly expect their employees to do their own secretarial work. But is there anything more pathetic than watching a professional type on a $10 thousand computer with two fingers? A simple keyboarding course would solve the problem.A quiet place to work is a tool. One strategy is to set aside “quiet time” one morning or afternoon each week during which noise and interruptions are discouraged. Traffic in hallways and between cubicles is curtailed, phone calls are rerouted to message centers, and visitors are asked to wait or come back later.Finally, the manager creates an assignment sheet that contains specific directions and standards for the task such as 1) purpose of the assignment, 2) audience, 3) scope, 4) format, and 5) deadline. “I needed it yesterday,” and “I need it as soon as possible” are not deadlines. Such evasive directions signal a lack of planning, lack of respect, and lack of knowledge about the writing process. A deadline is a day and a time, “I need it by 8 a.m. Tuesday”. A reason helps, “I have a 10 a.m. meeting and I need to look it over before I go.”Touch Base as Writing ProgressesSome writers gather the wrong information because they misunderstand the assignment. Some gather too much, some too little. Some discover information that changes the nature of the assignment, as well as the deadline.The time to adjust the assignment is before it deviates into unacceptable territory.
A simple phone call, a quick meeting, or a short email can inform the manager of any potential problems; in fact, a verbal exchange of ideas helps both the manager and the employee clarify content, as does a review of brainstorming notes, sketches, or new information.Teach a Time-Efficient Writing TechniqueWriters everywhere say to me, “I have to make the first sentence perfect before I write the second sentence, and the first paragraph perfect before I can write the next one.” Ouch! Micro editing as the mind is trying to put thoughts together is a vice. It comes from the micro editing that goes on in school when students try to shorten the time required to write a paper by both writing and editing at the same time. In fact, they are two different tasks. Micro editing appears first in English classes where writing habits are formed, and appears next in department where the manager waits for it to appear and then tears it apart.Sad to say, but many English teachers, and many managers and employees are stuck in the past. When English teachers give students a writing project, they never teach their students how to get ideas out of their heads and down on paper in an efficient manner. In the 1980’s the firm I worked for was the first consultant organization in the United States to teach a rapid writing technique to employees in business, industry, and government organizations. I was one of four consultants traveling 48 weeks a year all over the United States and to some foreign countries to teach people how to write quickly and effectively. When I left, the organization had 60 consultants doing the same thing, which is an indication of the recognized need for more efficient writing in organizations everywhere.”What makes you think you know anything about how I can write better,” is a challenge I heard frequently as I challenged the habits and behaviors of employees and their managers. “I’ve been writing the same way since seventh grade and it’s working just fine.” Okay, but during WWII the US Army hired the finest English teachers they could find to come up with a technique they could teach recruits in 6 weeks of basic training that would result in fast, efficient writing. Armies run on writing, and personnel were taking hours to turn out documents that should have taken minutes. The result was a technique for rapid writing and editing that was ignored outside the military until the company I worked for adopted it for organizations in general.I once taught 2,000 engineers at Northup Aviation a 2-day rapid writing course. It took me one year. Most of them were very receptive, but I heard from class after class the same complaint, “This is all very interesting, but you need to be training my managers because they make me do things their way, not the right way.” Corporate culture invalidated the training program because managers thought their employees needed the training, not themselves.Managers need to recognize that writing problems begin with them, and although they teach their staff members rapid writing and editing techniques, they are part of the problem and need to be part of the solution.Manage Time-Efficient EditingEnglish teachers and other engaged in teaching writing fail to teach people a strategy of attack for editing documents. Most people adopt some kind of a strategy, such as the micro editing writer mentioned above. Others concentrate on punctuation, spelling, and grammar because experience has taught them that those things will determine acceptance or failure of their document. They leave everything else virtually untouched.What is universally forgotten is that reading is a visual process, and that people read a page from left to right and from top to bottom. They start reading at the first sentence of the first paragraph. If they do not find information that is important to them by the second sentence, most of them skip to the first sentence of the second paragraph. If they again cannot find a key idea immediately, most skip to the bottom of the page, or turn the page and try again. I am not talking about fiction writing. I am talking about technical writing.”Wait a minute,” people will say. “I have to put down all the facts before I get to the conclusion. And paragraphs have no less than five sentences.” Oh my. There go those pesky seventh-grade teachers again.With the way people really read a document in mind, it is clear that the most important ideas need to be up and left on the page, at the top of the page, at the beginning of paragraphs, and in headings and other devices that make the key ideas stand out. The body of the text may be technically perfect, but if the main ideas are buried, the writing will fail to communicate with the hurried reader, and people in organizations do not have time on their hands and are not reading for pleasure!Finally, peer review, if introduced well and managed well, can save a manager time, but the ground rules must be clearly set to protect writers from overzealous critique and irrelevant micro editing. Lastly, managers frequently do not think to provide positive rewards for good writing. Such rewards are energizing, motivating, and encourage writers to continuously improve. A simple “Good job!” can go a very long way to improve morale and productivity.SummaryWhen managers pre-package the assignment, delegate carefully, teach their employees how to write and edit quickly and effectively, they have little to do when the documents reach them except sign and send. Writers have ownership and accountability. They take pride in their work.Writing should be recognized as a process, and managers should be as interested in managing the writing tasks of their employees as they are managing the annual budget. Ineffective writing among employees has to be cured from the top down, not from the bottom up. Bad writing is a management problem, and only management can affect a permanent, workable solution.Copyright 2007