Lessons from a vineyard

We are at the end of a long lazy ‘members weekend’ enjoying the hospitality of our favourite local winery Pfeiffer’s of Rutherglen. Reflecting on the discussions around their range of fortified wines and the way modern business and projects are focused raises an interesting paradox.

When you are taught to drive fast, the key lesson is the faster you go, the further in front of the car you need to be ‘driving’. Quick reactions are not enough, you need to be planning and positioning the car now to be in the right place to two or three curves down the track.

Modern business is going faster and faster and pressures are on projects to complete quicker and better but unlike racing drivers, no one seems to be planning ahead – if there is a panic on the current project, everyone forgets about transiting staff onto the next project sensibly. Rather than optimising the overall outcome to benefit the business ‘down the track’, the short term focus outweighs the long term benefits and produces suboptimal results.

This destructive short term focus is encouraged because most business management and directors seem to concentrate on satisfying the demands of short term speculators rather than the needs of the organisations stakeholders. Commercial companies are driven by the needs of the high speed traders operating second by second, day traders and other short term speculators who are only focused on movements in the share price, not the long term health of the organisation and its ability to meet the needs of the majority of its stakeholders. Consequently, the daily and quarterly share price movements seem to mean more than long term plans future growth.

A classic example is the regular announcement by major corporations that they are sacking 100 or 200 staff. This creates an immediate boost in the share price and makes management look good to the short term speculators whilst destroying the organisations relationship with all of its staff. In reality, the monthly staff turnover is more than enough to make this type of adjustment in a smooth way that looks after the interests of this group of key stakeholders, the employees that actually do the work needed to allow the organisation to operate. But few managers seem to even ask what’s more important – share movements over the next couple of days or maintaining and enhancing the relationship with the organisation’s “most important asset”, its people??? Apparently the speculators win every time in the mind of management.

The situation is not much different in government organisations where the focus seems to be a combination of the 24 hour news cycle and short term personal advantage, a focus on ‘petty politics’ rather than long term policy and the good of the organisation. Different drivers but the same outcome, a prioritisation of immediate gratification over long term best outcomes.

But what has all of this got to do with fortified wines??

The simple fact is you cannot develop world class fortified wines in a generation. Pfeiffer’s are now into their 40th vintage and in the last three years have succeeded in rounding out their range of both Muscat and Topaque to include a good example of all four classifications of these wine types. The classifications below are defined by the characteristics of the wine, not by age, but in general terms:
The ‘Rutherglen’ classification is blended from wines that are on average 5 years old;
The ‘Classic’ classification is on average 12 to 13 years old;
The ‘Grand’ classification is on average 18 years old; and
The ‘Rare’ classification is on average 23 to 24 years old.

But the average age is misleading, all four classifications include some of the original blend created 30 or 40 years ago, that has been topped up and enhanced every year since. Obviously there is a far higher percentage of old wines in the ‘Rare’ compared to ‘Rutherglen’ classification but all of the wines have the same origins. In short, the characteristics of the current wine are based on decades of decisions ranging from how to manage the vines and the vineyard, how to develop each barrel of wine and what to add to the residual ‘base’ carried forward from last year to create each year’s release across all four classifications.

The decisions of 5, 10 and 30 years ago have an influence on the wines of today which puts a relatively new winery like Pfeiffer’s at a disadvantage when competing with some of their Rutherglen neighbours such as the Morris family who have stocks that have been developed over more than 100 years.

The current generation of winemakers do not see themselves so much as the ‘owners’ of the current stock of fortified wines, rather the custodians of a heritage that they hope will go on developing and improving for generations into the future. This is true of all types of blended fortified wines and is one of the reasons old world wine regions such as the Ports of Portugal and Sherries of Spain have characteristics that are hard to replicate in newer countries such as Australia that only have 100 to 150 years of development.

In many ways organisations are similar to a wineries stock of fortified wine. The current group of managers are the custodians of a complex set of capabilities, facilities and cultural beliefs, behaviours and relationships that have been created by the thousands of decisions and actions made by their predecessors and their decisions will create the organisation that will be passed onto their successors.

For example, a new ‘culture change’ initiative by current management does not start from a blank canvass, the outcome will inevitably be coloured by everything that has gone before that has created the current culture, and will inevitably influence everything that happens later. It is impossible to erase the past without erasing the organisation!

The paradox is that far too many managers seems to act as owners with a focus that extends days or months into the future and their directors look at reports focused on the past, whilst the organisation needs a focus that is long term and future focused to meet the needs of its stakeholders.

Perhaps a weekend at a winery that produces a world class range of fortified wines could pay real dividends…..

Who Manages Benefits?

I attended the Benefits Realisation Summit in Sydney earlier this week which was focused on two significant ‘launches’ – the Australian launch of Managing Benefits, the official reference guide for the APMG qualification of the same name and the launch of the Maximiser benefits management software:
- See more on Managing Benefits
- See more on Maximiser

Managing Benefits will require a couple of posts over the next couple of months to cover the depth of information available to organisations to achieve the best return on their investments in projects and programs, and my contribution to the Benefits Realisation Summit was focused on understanding the links between stakeholders, the overall value chain, and the organisation’s project delivery capability (download the presentation).

The area of discussion I found most interesting at the summit was around the roles and responsibilities of the different managers involved in realising benefits and creating value. As a starting point there was a very good definition of the stages involved in creating value, based on the concept of developing a new retail shop:

• The output from the project to build the shop is a fitted out facility.
• The outcome from the staffing and stocking of the shop is a shop selling goods to customers.
• The benefit realised from the shop is the monthly profits from sales.
• The value created by the new business is its potential ‘sale price’ which is usually calculated as a multiple of the annual earnings (typically somewhere between 5 and 12 times the annual profit).

The realisation of the value outlined above requires a ‘chain’ of decisions and management actions:

• The chain starts with decisions around the type of shop, its location, size, etc. The overall value chain is discussed in The failure of strategic planning and the front end processes in Linking Innovation to Value.
• Once the optimum project has been selected, the organisation then needs to be capable of efficiently delivering the project and creating the required output. Project Delivery Capability (PDC) is discussed in White Paper WP1079.
• Once the project’s outputs are created, the requirement to make efficient use of them within the organisation requires effective organisational change management; this facet of the value chain is discussed in WP1078.
• Then, assuming the original concepts used in the business case were accurate, the intended benefits are realised and value is created.

Within all of these stages, the key to creating the intended value is effective benefits management; this is the focus of the Managing Benefits book and the objective of the Benefits Realisation Summit.

Maximising the benefits realised from a project or program is not a solo effort, it requires the effective cooperation of a number of managers with defined roles and responsibilities operating effectively as a team:

Each of the managers above has a distinct role to play:

• The Senior Management Grouphave ultimate responsibility for generating value from the organisation’s investment in a project:
  • The role of senior management and portfolio management in the pre-project phase is ensuring the right projects are selected for the right strategic reasons
  • Once the project has transitioned its output into operations, the senior management group responsible for the operation of the organisation’s business-as-usual processes need to make effective use of the deliverable to realise benefits and as a consequence, generate the intended value.
• The Sponsor is the senior manager responsible for taking ownership of the business case, approving the Project Charter once the organisation has agreed to fund and resource the project and ensuring the project’s outputs are effectively transitioned into operations and used effectively. The role of the sponsor is discussed in WP1031. From a benefits realisation perspective, the Sponsor (or Senior Responsible Owner – SRO) is the manager with primary responsibility for ensuring the intended benefits are realised. The sponsor may fulfil the role of benefits owner personally, or liaise with the designated benefits owners to ensure the benefits are realised (the benefits owner is the person responsible for the realisation of a specific benefit).
• The Sponsor is supported by two specialist managers:
  • The Project Manager responsible for the efficient delivery of the project and
  • The Change Manager responsible for managing the organisational change needed to make use of the new product, process or service.
• The role of the Benefits Manager is partially advisory, and partly an assurance role. The Benefits Manager should be responsible for developing an effective set of metrics supported by a system for identifying and measuring benefits (planned and realised) and should also be responsible for validating the realised benefits (see more below).

The relationship between the project and change managers
Change management and project management are different skills requiring different training and different personality types. Both roles are critical and should support the sponsor in achieving the best possible transition of the project’s outputs into operations.

During the life of the project the project manager is assisted by the change manger to ensure the project delivers the most useful output, the change manger also works on preparing the organisation for the change. The focus is creating the ‘right’ outputs as efficiently as possible and this is primarily a project management function.

During the critical transition phase the focus changes, the project manager’s role should shift to focus on helping the change manger to ensure the projects deliverables ‘work’ in the organisational setting. The project manager will also be working on project closure during this period but this should be secondary to ensuring the planned benefits are capable of being realised.

Throughout the whole process, the change manger is primarily responsible for facilitating the organisational change aspects of the initiative including of all of the processes involved in embedding the new product, process or service within the organisation and supporting its adoption through to the point where it is functioning as a normal part of the organisation’s ‘business-as-usual’ capabilities. This may require some level of support for two or three years after the project has finished.

The effect of programs and program management
Programs are created to manage the work of several projects in a coordinated way, may include some operational work for a period and many are set up specifically created as organisational change agents. The different types of program are outlined in WP1022.

If a project is a component of a program, the program manager is responsible for creating the project and is usually acts as the project’s sponsor. The program is responsible for the change management processes as part of its core integration and coordination functions and the program sponsor has overall responsibility for the return on investment in the program.

The roles and responsibilities of the Benefits Manager
The concept of a Benefits Manager is relatively new. The Benefits Manager provides a benefits realisation support service to sponsors, program managers, change managers and benefits owners. Some of the functions include:

• Develop, maintain and progressively enhance the benefits measurement system used by the organisation.
• Provide scrutiny of each business case to assure the organisation the benefits claimed are realistic and achievable within the proposed timeframes.
• Lead the benefits identification and mapping processes for project and programs.
• Assisting with the development of the benefits realisation strategy and plans for projects and programs.
• Help with the identification and optimisation of additional benefits, dis-benefits and assess the impact of changes from the benefits realisation perspective.
• Tracking and reporting on the actual realisation of benefits by the organisation.

This is an important role both from the facilitation perspective and the assurance perspective. People with a vested interest in the value of benefits proposed or realised should not be the people measuring their value; this is an untenable conflict of interest. The Benefits Manager provides independent assurance that the benefits proposed in the benefits realisation plan have been achieved to the extent defined in the plan, at the time defined in the plan and any variances are identified and explained or understood. For more on assurance see WP1080.

Conclusion
Benefits cannot be managed directly; they are a consequence of other management actions and decisions. An organisation will maximise the benefits actually realised by maintaining a focus on benefits from the early stages of project initiation right through to the point where they are fully realised by the operations of the changed organisation.

Productivity decline should generate more projects

Projects and programs are the key organisational change agents for creating the capability to improve productivity through new systems, processes and facilities. But only if sensible projects are started for the right reason.

Declines in productivity seem to be widespread. In Australia, labour productivity in the market sectors of the economy increased at 2.8% per annum between 1945 and 2001, reducing by 50% to an annual rate of 1.4% between 2001 and 2001.

• The measure of Labour Productivity is the gross value added per hour of work.
• The ‘market sectors’ measured exclude public administration, education and healthcare where measurement is almost impossible.

Some of this change can be attributed to macro economic factors, there were massive efficiency gains derived from the shift from paper based ‘mail’ and copy typist to the electronic distribution of information, improved global transport systems (particularly containerisation) and the restructuring of manufacturing post WW2. These massive changes in the last half of the 20th century are not being replicated in current.

Whilst this decline in the rate of improvement in labour productivity is significant, the capital inclusive index is a more telling statistic. The multi-factor productivity index which includes the capital invested in production, giving a purer measure of the efficiency with which labour and capital are combined to produce goods and services. In the six years leading up to 2001, this measure of productivity grew by an average of 1.5% per annum, in the decade between 2001 and 2011 this reversed and productivity fell by 0.4% per annum.

Around 40% of the decline in the last decade can be explained by massive investments in mining and utilities that have yet to generate a return on the capital invested. The other 60% represents the massive cost of ‘new capabilities’ in general business for relatively small, or no improvement in productivity.

One has only to look at the ever increasing number of ‘bells and whistles’ built into software systems ranging from high definition colour screens to features that are never used (and the cost of upgrading to the ‘new system’) to understand the problem. 90% of the efficiency gain came with the introduction of the new system many years ago, the on-going maintenance and upgrade costs often equal the original investment but without the corresponding improvement in productivity. Another area of ‘investment’ for 0% increase in productivity is compliance regimes. Whilst there may be good social arguments for many of these requirements, the infrastructure and systems needed to comply with the regulations consume capital and labour without increasing productivity.

In Australia general management have been rather slow to appreciate the challenge of declining productivity, the impact being cushioned by a range of other factors that helped drive profitability. But this has changed significantly in the last year or so. There is now an emerging recognition that productivity enhancing organisational change is an imperative; and smart management recognise this cannot be achieved through capability limiting cost reductions.

Organisations that thrive in the next decade will:

• Enhance customer satisfaction and service,
• Enhance their engagement with their workforce, the community and other stakeholders,
• Enhance their products and capabilities, and
• Improve their labour productivity.

Achieving a viable balance across all four areas will require an effective, balanced strategy supported by the efficient implementation of the strategic intent through effective portfolio, program and project management capabilities that encompass benefits realisation and value creation.

The three key capabilities needed to achieve this are:

• The ability to develop a meaningful and practical strategic plan.
• An effective Project Delivery Capability (PDC); see: WP1079_PDC.
• An effective Organisational Change Management Capability; see: WP1078_Change_Management.

Improving productivity is a major challenge for both general management and the project management community; and the contribution of stakeholder management and project management to the overall effort will continue to be a focus for this blog.

Organisational Change Management

We have just posted a new White Paper that looks at Organisational Change Management. We have focused on ‘organisational’ for two reasons:

• Firstly, any significant change is a change to the organisation – projects and programs cause the change but the organisation has to adapt to the change.
• Secondly, the only valid purpose for a change is to create value and the only way to generate value is through sustained improvements (changes) in the way the organisation operates.

This new White Paper, WP1078 Organisational Change Management, consolidates and augments a range of posts over the last couple of years. The full set of original blog posts can be viewed at:
http://mosaicprojects.wordpress.com/category/governance/change-management

Change is essential

If you don’t like change you had better get used to irrelevance! By 2006, of the approximately 60 highly successful companies listed in ‘In Search of Excellence’ (1982, Tom Peters & Robert H. Waterman, Jr.) and ‘Built to Last’ (1994, Jim Collins & Jerry Porras), only 33% remained as high performers (source: Beyond Performance, Scott Keller & Colin Price). Of the rest, 20% had ceased to exist and 47% were struggling.

The message from ‘Beyond Performance’ is that focusing on current performance such as return on capital is never enough. The primary driver for long term success is focusing on the health of the organisation, supported by performance. Sustained excellence needs an organisation that has a vision of a medium and long term future as well as performing effectively in the current environment. This requires investment in change to meet those futures with no guarantees the investment will pay off, in the short-term, or at all.

A ‘healthy’ organisation has a clear sense of direction, inspirational leadership and an open and supportive culture of shared beliefs. Within the organisation, the people are motivated and empowered to take responsibility and accept accountability for their work, within a coordinated and controlled environment that deals effectively with risks, issues and opportunities. The organisation is effectively governed and designed by its leaders to execute strategy effectively; it is outwardly focused on a wide range of stakeholders and most importantly, creative and innovative.

But innovation is not enough; the key enabler of sustained excellence is the ability to implement change! This requires good project capabilities to transform innovative ideas into the elements needed to enable the change such as new processes, products or procedures, supported by the ability to implement the change effectively within the organisation to realise the benefits. There is no magic formula for this; different styles of leadership can be equally effective. However, what is certain is that organisations that don’t create the ability to continually change and grow quickly fade into irrelevance as the world around them moves on.

This applies equally to private sector companies and government departments and agencies – there are very few government processes that can’t be privatised, commercialised or simply abandoned if the public service executive don’t rise to the challenge. Australia Post makes a profit for the Government; the Royal Mail in the UK carries far more mail over far shorter distances with a far greater population density and charges far more for its stamps but despite all of these advantages is only marginally profitable through the sale of property assets – guess which organisation’s future is in serious doubt!

All types of organisation need to embrace the ability to change or the cultural inertia I’ve been discussing in a series of posts over the last few weeks will have its inevitable consequences sooner or later.

Resistance to change is not new……

My last couple of posts on the subject of change and executive leadership generated a range of comments many suggesting if we did ‘better project management’ the problems would be resolved. Unfortunately for this to be true, the organisation still needs executive buy-in and leadership to support the process, in fact demand better project management.

An article in the December edition of ‘project’, the journal of the UK Association of Project Management (APM) by Martin Samphire, a committee member on both the APM Governance SIG and the APM Portfolio Management SIG highlights more project failures. This time the FiReControl project which was described by the House of Commons Public Accounts Committee as ‘one of the worst cases of project failure the committee has seen’, followed by a catalogue of fundamental failures; and the NHS Connecting for Health program which is beset by weak program management.

The UK industry and Government know how to deliver large complex programs, the work of the Olympic Development Authority is a world class example; it’s just that many other managements simply choose to ignore good practice, or more accurately refuse to change to allow good practice to be introduced.

The challenge of getting senior management to actively support change that brings better systems into use to the benefit of the organisation they work for is not new. Henry Gantt had similar problems introducing his systems that demonstrably increased production by over 100% and massively increased profits. Here are a few of his comments:

• The changing of a system of management is a very serious matter and cannot be done by a superintendent in his spare time (Work Wages & Profits, p168).
• In every workroom there is a fashion, a habit of work, and every new worker follows that fashion, for it isn’t respectable not to (Work Wages & Profits, p186).
• The most casual investigation into the reasons why so many of the munition manufacturers have not made good, reveals the fact that their failure is due to lack of managerial ability rather than to any other cause (Organizing for Work, p64).
• Our most serious trouble is incompetency in high places. As long as that remains uncorrected, no amount of efficiency in the workmen will avail very much (Organizing for Work, p64).
• Our industries are suffering from lack of competent managers,—which is another way of saying that many of those who control our industries hold their positions, not through their ability to accomplish results, but for some other reason (Organizing for Work, p64).

By the way, Henry was also less than impressed with the bankers of his time as well: “No …laws…. have so far been framed that restrain the ‘high financier’ who, without giving anything in return, taxes the community for his own benefit to an extent that makes all other forms of acquiring without giving an adequate return seem insignificant.”

The framework needed by senior executives is well established the APM has just published the 2nd edition of Directing Change – a guide to the governance of project management (60,000 copies of the 1st edition have been distributed since publication in 2004). This guide is written by senior managers for senior managers. It provides clear overall guidance to an organisation’s governing body (board or equivalent) and executives on their responsibilities and more specific guidance on choosing the right projects (portfolio direction), project sponsorship, project management capability and disclosure and reporting. Copies can be downloaded from the APM website or: www.mosaicprojects.com.au/Resources_Papers.html#Governance

Martin Samphire’s view is that applying good governance in their management is 80% of the answer to successful projects. I feel he is understating the importance of the role and responsibility of the senior executives, particularly when it comes to the process of changing an organisations culture to accept good governance and effective project management!

Culture eats strategy for breakfast 2!

In my first post on this topic I suggested that:

• Even where a smart business has aligned the project with a sensible/necessary strategic intent, and then properly leads and resources the effort, failure is still likely if the power of culture is ignored.
   
• And culture can be loosely defined as ‘the way we do business here’ and incorporates attitudes, expectations and the way both internal and external relationships work. The people in the organisation are there because they can operate in the culture as it currently is and embody the culture; they are predisposed to resist change.

This post looks at the entrenched nature of culture and its affect on change.

Surveys by the Australian Institute of Management and others consistently show that around 30% of people in an organisation are looking to leave; which means 70% are content. This majority are comfortable within the current status quo and know how to ‘work the system’ to their advantage. The 30% who aren’t happy may be open to change but are also already disaffected and therefore probably disinterested.

Introducing a new ‘best practice’ will inevitably change the status quo and change the relative power balances within the organisation. A couple of examples:

• The organisation decides to introduce an effective scheduling system (possibly supported through a PMO). The people involved in doing the schedule gain ‘power’ they develop the schedule and report progress against the plan. The project teams lose power, they need to conform to the plan (losing the flexibility to do what they feel like on a day-to-day basis) and failures to achieve the schedule are highlighted to management much sooner than if the schedule was not being used. We can prove having an effective schedule improves the probability of project success (see: Proof of the blindingly obvious), but what’s good for the organisation as a whole is not necessarily going to be seen as good by the individuals affected by the ‘improvement’.
   
• The organisation decides to introduce a Portfolio Management process to select the best projects to undertake to achieve its strategy, within its capacity to properly support the work. This is a great strategic initiative that maximises the value to the organisation but will mean rejecting more the 60% of the potential projects it could do if it had unlimited resources. This means 60% of the pet projects supported by various members of the executive will be canned! Which means these people will lose power and status firstly to the team making the portfolio decisions and secondly to the executives whose projects were selected. Another group disadvantaged by the selection process (or more accurately the rejections) are the teams who develop the idea and build the business case for the non-selected projects.

In both cases what’s good for the organisation is potentially bad for a large group of individuals who are currently happy and effective working within the current culture and structures of the business – if they weren’t happy they would not be there!

In Culture eats strategy for breakfast! #1, I raised the concept of creating ‘space’ in the existing culture for the change initiative to move into and fill. This ‘space’ is created by crafting a general acceptance within the culture that the current status quo is not working well for the majority and some sacrifice of existing power and ‘comfort’ is generally warranted for the good of each individual as well as the organisation. This objective can be achieved in a number of ways:

• by identifying a ‘clear and present danger’ that is threatening the group and the organisation as a whole – the need to change to survive;
• alternatively a competitive challenge to beat an opposing organisation may work or;
• best but most difficult to achieve a engendering general striving for excellence simply to be part of something great.

Engendering the move towards accepting or desiring the change requires powerful leadership embodying credibility and a clear message that identifies the reason for the change and generates buy-in to the concept of changing and improving before the specifics are even discussed. This leadership has to come from the top! (see more on leadership)

The more established the ‘culture’ is the harder creating the desire for change becomes. Small and medium sized businesses can link the well being of the business to the benefits of the individuals far easier than large businesses. Commercial organisations can link their success to the well being of individuals far easier than stable government organisations with permanent employment as part of the public servant’s culture. The more resistant the culture, the more important effective leadership linked to powerful communication becomes in creating the space for change.

Once the ‘space’ has been created and the desire to improve is generally present, a careful two-way dialogue is needed to define the best options for change and build engagement, to recognise those who will inevitably lose power or be inconvenienced by the change and to help these ‘losers’ re-gain their losses (or perceive a better future despite the losses). Altruism is wonderful but it is unwise to rely on it as the primary mechanism for change.

There will always be resisters to change, the challenge is to shift the majority to a point where they want the improvements (or at least recognise the changes are essential). In addition to leadership, this also requires effective stakeholder management (see more on stakeholder management ). Once this shift is achieved, traditional change management processes cut in to deal with the implementation of the change, supported by project management processes to create the necessary deliverables to implement the change.

However, if the organisation fails to create the ‘space’ in its existing culture for the new processes to work within, the existing culture will definitely eat the intended strategy for breakfast!

Culture eats strategy for breakfast!

Most business changes involve a strategic intent, implemented by a project or program that defines the new processes and procedures needed to achieve the change and then develops and implements the processes.

Smart organisations realise this is not enough and include training to make the organisations staff familiar with the new processes and the really smart organisations link achieving the intended benefits to a key executives KPIs. And the changes still fail!

Two areas of notable failure are IT projects where the focus is on the technology rather than the business and PMO start-ups where the focus in on processes and reporting rather than improved project outcomes.

However, even where a smart business has aligned the project with a sensible/necessary strategic intent, and then properly leads and resources the effort, failure is still likely if the power of culture is ignored. Culture can be loosely defined as ‘the way we do business here’ and incorporates attitudes, expectations and the way both internal and external relationships work. The people in the organisation are there because they can operate in the culture as it currently is and embody the culture; they are predisposed to resist change.

There is an old joke that asks ‘how many consultants do you need to change a light bulb?’ The answer is ‘one, provided the light bulb wants to change!’ This adage applies to changing culture in any organisation – it wont change unless the people in the organisation want it to change, and overall most people in the organisation are quite happy with the culture as it exists (if they were not, they would move on to another job).

The challenge with implementing changes falls into two areas:

• The first is doing the ‘right project right’ by implementing effective Portfolio, Program and Project management. Whilst it is true that $billions of projects fail due to poor management practices, these failures are a deliberate choice of executive management. We know how to do projects, programs and portfolio management properly, not implementing effective systems is a cultural decision that prefers the status quo and failure over change.
   
• The second challenge is cultural; the need to move the organisations culture to allow the change to be implemented effectively. This is a much more difficult process that needs leadership and drive. You need to create the willingness to allow the change to happen, before the change can be implemented effectively, before the benefits of the change can be realised. This requires the people in the organisation to buy into the concept of the proposed change long before the benefits can be tangibly appreciated.

Meeting the challenge of ‘culture’ requires effective leadership; the people in the organisation need to be prepared to follow their leader into the new, unproven future. These traditional aspects of leadership are outlined in our White Paper: Leadership.

Another important facet of leadership is ‘Tribal Leadership’, everyone belongs to one or more tribes of associates (defined as people they know well enough to greet socially) and effective leadership at this social group level can also be a powerful influence for change, firstly to build engagement within the group (see diagram below), then to generate support to allow the change to happen.

Whilst project managers can only ever have a small role to pay in the overall leadership of the organisation (this is the province of CEOs and executive managers), they can be effective tribal leaders.

Most tribes are quite small, less then 120 people. In their book, Tribal Leadership, Logan, King and Fischer-Wright describe an organisation as a tribe of tribes and if the project manager’s tribe expands to include key members of the wider organisational community affected by the planned change, their influence can be significant.

Creating the ‘space’ within a culture to allow change, both from the executive leadership perspective and tribal leadership perspective are elements of effective stakeholder management. What most organisations forget is this part of the change effort has to precede the role out of the new processes and procedures.

Creating the space to allow for the possibility of success is not the end of the change effort. For the change to be fully successful you still need to role out strategically effective processes and procedures, provide effective training and transition support, and then maintain visible support for the change over an extended period until the ‘new’ processes and procedures are fully absorbed in to the culture of the organisation and simply become part of the way the organisation does business.

Unfortunately very few organisations start soon enough or continue long enough with the overall change effort to be successful. But without this sustained effort, culture eats strategy for breakfast.

See also Culture eats strategy for breakfast 2!

Stakeholders and Change Management

When considering stakeholders, there are very few one-to-one relationships. Most stakeholders are, and have been, influenced by a range of relationships in and around your project, program and your organisation.

Change Management and Stakeholder Management

Stakeholder management is a key facet of organisational management where stakeholder management is often aligned with marketing, branding and corporate social responsibility (CSR) initiatives.

Similarly, stakeholder management central to change management and the ability to realise the benefits the change was initiated to deliver. The benefits will not be realised unless the key stakeholder communities accept and embrace the changes.

Project and program management also has a focus on effective stakeholder management. In a change initiative, the project and/or program undertakes the work to deliver the elements needed to facilitate the change but are only ever part of the journey from concept to realised value.

A typical evolution of a change initiative would flow along these lines:

• The organisation decides on a major organisational restructure and as a consequence initiates a change management process and appointed a change manager.
• The change manager develops the business case for the program of work and the executives responsible for the organisations portfolio management approve the business case and agree to fund and resource the program.
• The program manager sets up the program management team, established the program management office (PgMO) and charters a series of projects to develop the various deliverables needed to implement the change.
• The projects deliver their outputs.
• The program integrates the outputs with the operational aspects of the organisation.
• The organisation’s management make effective use of the new systems and processes.
• Value is created for the organisation and its owners.

The change manager is the sponsor and primary client for the program but the people who need to be convinced of the value of changing are the operational managers and their staff. If the organisation does not accept and use the new systems and processes very little value is generated.

Within this scenario, stakeholders in the operational part of the organisation, and particularly the managers will be key stakeholders for a range of different entities:

• They are stakeholders in the organisation itself and part of the organisational hierarchy.
• They are stakeholders in the change process being managed by the change manager.
• As end users of the new systems and processes they are also stakeholders of the program.
• As subject matter experts (SMEs) they are likely to be stakeholders in at least some of the projects.

In one respect change management is stakeholder management. Therefore, in a change management initiative, stakeholder management should be an integrated process coordinated at the change manager’s level. All of the organisational elements working on the change need to coordinate their stakeholder management efforts to support the overall outcome. Confusing and mixed messages don’t help anyone.

But this is just one typical business scenario. When considering stakeholders, there are very few one-to-one relationships. Most stakeholders are, and have been, influenced by a range of relationships in and around your organisation. Consequently, focusing on a simple one-to-one view is unlikely to provide the best outcome for anyone.

Effective stakeholder management requires a mature organisational approach. One approach to developing this capability is the SRMM (Stakeholder Relationship Management Maturity) model described in my book. Stakeholder Relationship Management: A Maturity Model for Organisational Implementation. I will outline the SRMM model in a later post.

The Scope of Change

This blog is going to try and link project and program management with change management and benefits realization.

As a start, the only point of undertaking a project or program is to realize some form of value. Benefit realization! To realize value, three elements need to be brought together:

1. There needs to be a new product or process created (an artifact);
2. People within the organization need to make effective use of the artifact to deliver a service;
3. The service as delivered needs to be accepted and used in the ‘market’.

The role of Strategic management and Portfolio management is to determine what services are likely to be accepted or needed by the market; a new shopping centre, an improved insurance package or simply a more efficient process to deliver information. These decisions will depend on the objectives of the organization, and is not the province of this blog.

The generally accepted role of project management is to create a unique product, service or result (an output) and the role of program management is to manage a group of related projects to achieve an outcome more efficiently than if the projects had been managed in isolation. Neither of these processes achieves real value in themselves. The realization of sustained value is achieved by the organization using the program’s outcome effectively over many months or years.

The Scope of Change Management

Projects and, to a greater extent, programs can realize some benefits, partially in the design and delivery of their respective outputs. Early benefits realization is frequently linked to ‘soft’ elements in the range of deliverables such as developing effective training, managing the transition to operations and ensuring a proper support framework is developed. Achieving these elements require the project/program team to really understand the requirements of their stakeholders. However, as demonstrated by the cost/benefit graph, benefits realization should continue for years after the program is finished and closed.

The extended timeline for value realization has important ramifications for organizational change management. Each project is an intense burst of change and the program absorbs these changes and has additional change effects of its own. These ‘activity related changes’ will include beneficial and negative impacts on a range of associated stakeholders. Some changes are disruptive caused by the execution of the work, learning curves, etc. Some changes positive caused by the improvements the projects and programs were initiated to deliver. Achieving a successful project/program outcome requires the effective management of these stakeholder communities, but the stakeolder management activity is essentially tactical.

The critical requirement to deliver sustained value is the organizational culture change needed to actively embrace the program’s outcomes and make valuable use of them. Embedding a culture change into an organization is a 2 to 3 year process as the change migrates from ‘new and threatening’, to ‘accepted (but the old way are still fondly remembered)’ to the ‘established old way’ things are done around here. This type of long term organizational change can only be accomplished by the organization’s line management supported by senior management. This is the realm of the program sponsor and executive management!

These ideas also have important ramifications for effective stakeholder management:

• Project level stakeholder management is relatively short term and focused on minimizing opposition to the work whilst ensuring necessary organizational support is in place to deliver the project’s outputs effectively. This is essentially tactical in nature.
• Program level stakeholder management has a wider view that needs to engage with the organizations strategic vision to ensure the program’s outcome is optimized to the changing circumstances within and around the organization. The key issue here is identifying and responding to changing stakeholder requirements, needs and expectations/perceptions over time; so as to optimize the value of the ‘outcome’ the project was established to deliver.
• Organizational level stakeholder management needs an even broader and longer term view focused on the strategic needs of the organization and its long term relationship with both internal and external stakeholders. Sustained value creation requires both the organizations internal staff and its external customers to jointly perceive the programs ‘output’ as valuable to them and also to perceive the organization favorably so they together maximize its use:
  • For a new shopping center with a 20 year lifespan this translates to retail tenants being willing to rent space and the ‘public’ seeing the shopping center as a ‘good place to shop’.
  • For a new call centre management system this translates into the call centre staff seeing the system as efficient and easy to use and clients of the business perceiving the system and staff as friendly, efficient and effective so they are happy to make repeated use of the system.

Conclusions

Change management and stakeholder management are closely aligned. Effective stakeholder management is essential for successful change management.

Change management and stakeholder management must start as soon as the project or program are initiated but should continue well after the project/program are completed.

The on-going organizational component of change management supported by strategic stakeholder management is critical if the real value of the outputs/outcomes created by the projects and program are to be realized.

Benefits realization is a line management responsibility starting with the project sponsor. All project and program managers can do is ensure their deliverables are crafted to facilitate and encourage benefits realization.