Stakeholders generate profits for shareholders

A few months ago I posted on the concept of Understanding stakeholder theory and suggested organisations that focus on providing value to stakeholders do better than those focused on short term rewards for shareholders and the associated benefits flowing to executive bonuses.

A new report: From the stockholder to the stakeholder by Arabseque Asset Management and Oxford University supports this contention. The report reviews existing research on environmental, social and governance (ESG) issues. It is a meta-study of over 190 different sources the authors have demonstrated a strong correlation between organizations that take ESG seriously and economic performance. For example:

  • 90% of relevant studies show that sound sustainability standards lower the cost of capital;
  • 88% of relevant studies show a positive correlation between sustainability and operational performance;
  • 80% of relevant studies show a positive correlation between sustainability and financial market performance.

However, to translate superior ESG quality into competitive advantage, sustainability must be deeply rooted in an organisation’s culture and values. The consequences of failing to take ESG seriously continues to be demonstrated by another of my regular topics, BP. The report contains a plot of oil company share prices from 2009 (pre the Deepwater horizon disaster) through to 2014. BP’s share price continues to suffer the consequences of the short sighted cost cutting that precipitated the Gulf of Mexico disaster.

BP-Price

The report concludes that it is in the best economic interests of corporate managers and investors to incorporate ESG considerations into decision-making processes starting at the governance level right down the organisation hierarchy.

The full report can be downloaded from http://www.smithschool.ox.ac.uk/research/library/SSEE_Arabesque_Paper_16Sept14.pdf .

Understanding management

Two new White Papers look at the function of management and the sources of power and authority used by managers and leaders.

WP1094 The Functions of Management describes the five functions of management, the supporting principles and the challenges of managing in a post bureaucratic organisation. Download the White Paper.

WP1095 Understanding Power and Authority looks at the sources of power and authority used by management and leaders.  Different sources of personal power underpin different types of authority.

WP1095 Power Autority

Download the White Paper.

Whilst both White Papers are based on general management theory, project managers are by definition managers and are increasingly expected to be effective leaders, so an appreciation of both subjects is useful.

Understanding the M in PM

Questions and Answers signpostThere are many interpretations of the P in PM; Project, People, Politics being three ….  But precisely what is involved in the Management part of PM.

Our latest White Paper looks at the functions and principles of Management and can be juxtaposed with the functions of governance in Dr Lynda Bourne’s latest blog.

New Articles posted to the Web #15

BeaverWe have been busy beavers updating the PM Knowledge Index on our website with White Papers and Articles.   Some of the more interesting uploaded during the last couple of weeks include:

And we continue to tweet a free PMI style of exam question every day for PMP, CAPM and PMI-SP candidates: See today’s question and then click through for the answer and the Q&As from last week.

You are welcome to download and use the information under our Creative Commons licence

The Evolution of Ethics

ethicsOur White Paper on Ethics discusses a number of ethical approaches used to determine what is ethical in the modern world. What is not covered in the White Paper is the evolution of ethical thinking. A blog post by Ricardo I. Guido Lavalle outlining a presentation by Prof. Clovis de Barros, who teaches Ethics at Universidade de Sao Paulo (USP), Brazil; fills this gap.

Prof. Clovis suggests Ethics evolved through five main phases outlined below:

  • Greek times, when ethics were about fitting oneself into the great cosmological order. Right actions were those that helped the Cosmos achieve its maximum order. From this standpoint Greek philosophers (mainly Aristotle) assumed rigid, stable social layers where aristocracy had the most part in the game.
  • Consequentialism, holds that the consequences of one’s conduct are the ultimate basis for any judgment about the rightness or wrongness of that conduct. Niccolo Macchiavelli (The Prince, 1513) is the best known proponent of this school of thought; he strove to maximize prince’s power. Right actions were those that had achieved the most power for the prince. Attention here, the right actions were considered right after they proved to be efficient in achieving the desired outcome – ‘the ends justify the means’.
  • Utilitarianism, holds that the proper course of action is the one that maximises utility, usually defined as maximizing total benefit whilst reducing suffering or the negative consequences. Proposed by Bentham (1780) and John Stuart Mills, is a great justification for liberalism and aims for ‘the greatest happiness of the greatest number’. It is a simple and attractive standpoint, and it even fits with common democratic views. However, it presents some issues regarding minorities.
  • With Immanuel Kant (1781) emerges the inner spiritual origin of ethics. Kant contested utilitarianism with his deontology. An action was right if the very inspiration of it was good, regardless of the consequences. The ultimate goal was to form a corpus of universally valid actions, such they were valid in any context, and forever. The puritan ethics of duty and good purpose is an earlier expression of this long-lasting and very successful ethical view.
  • In contrast to all previous views, post-modernist ethics is about relativism. Ethics has become transactional, an agreement between parties, where openness and transparency of purposes are crucial. Post-modern Ethics is the result of a social contract, and agreement. Professional organisations such as PMI develop an agreed code of ethics to guide their members.

However, the transactional basis of post-modern ethics does not eliminate many of the founding concepts developed over millennia. PMI’s Code of Ethics and Professional Conduct balances many of these themes:

  • Overall the spirit of the Code is Kantian; a code developed by a ‘global’ body should seek to be of universal applicability.
  • Some elements of the Code are a quest for the good intentions inherent in Greek virtues (honour and fairness), (2.4 We make commitments and promises, implied or explicit, in good faith)
  • Others tend to utilitarian (2.1 We make decisions and take actions based on the best interests of society, public safety, and the environment).
  • Whilst others are post-modern ethics (3.1 We proactively and fully disclose any real or potential conflicts of interest to the appropriate stakeholders.).

What this brief scan of history highlights is the way the long history of ethical thinking affects the modern definitions of ethics. The White Paper looks at their practical application.

New PMP and CAPM Courses

Mouse_ThinkingTo meet the demand for PMP and CAPM training in the lead up to Christmas, we are please to announce new PMP and CAPM Intensive courses have been scheduled for the 1st to the 5th December.

Booking and course details are available on-line:

PMP:    http://www.mosaicproject.com.au/pmp-courses-melbourne/

CAPM: http://www.mosaicproject.com.au/capm-courses-melbourne/

This course is your last chance to complete a PMP or CAPM course this year!! Our 2015 program is also open for bookings at the same URL.

What is the critical path?

One of the most common misconceptions in planning and scheduling is that float somehow determines the ‘critical path’. For the PMI-SP exam and any serious consideration of the definition of the ‘critical path’, float is not the right answer.

Associating zero float with the critical path is correct if, and only if, there are no constraints placed on the schedule.  As soon as you introduce a contract completion date the critical path may finish before the contract requirement and have positive float or after the contracted completion date and have negative float (and knowing by how much is important to managing both the schedule and the work).

Then add in the common contractual issues of delayed access to areas of work (available on or after a specified date), and mandated interim handovers of part of the deliverables and float goes all over the place. These issues were considered at length when we were writing of the Guide to Good Practice in the Management of Time in Complex Projects.

The description of the critical path developed for The Guide is:

Critical Path = the longest sequence of activities from commencement to completion of a key date, section, or completion of the works as a whole. In relation to each, it is that sequence of activities, which will take the longest to complete or, put another way, the sequence of activities, which will determine the earliest possible finish date. Hence, it is timely commencement and completion of those activities on that path, which will secure completion of the key date, section, or the works as a whole on time.

This description was condensed to a definition in ISO 21500 Guide to Project Management (2012), as:

Critical Path: sequence of activities that determine the earliest possible completion date for the project or phase.

This ‘Standard Definition’ does not preclude the possibility of several ‘completions’ within the one project to account for interim handovers required under a contract. It allows for the possibility of the critical path starting at the beginning of the schedule or at some interim point where an external dependency allows the ‘critical’ work to start. Additionally, the sequence of activities may be determined logically (through links or dependencies) or through the sequential movement of resources. The definition is both concise and unambiguous. For more see: http://www.mosaicprojects.com.au/WhitePapers/WP1043_Critical_Path.pdf

You need to get with the game – people who want to ignore the current international standard definition will become increasingly marginalised as the various national standards move into alignment with ISO.