Earned Schedule comes of Age

2013 is the 10th anniversary of the publication in The Measurable News (March & Summer 2003) of Walt Lipke’s seminal paper Schedule is Different, introducing the concept of Earned Schedule (ES) to the world. This milestone was celebrated at the inaugural Governance and Controls Symposium held in Canberra earlier this month.

One of the notable features around ES has been the amount of hostility towards the concept generated by traditional Earned Value advocates (for an overview of ES see: http://www.earnedschedule.com/).

Everyone who understands EV recognises traditional EV is a very useful cost predictor and also recognises that the traditional SPI and SV calculations lose relevance later in the life of a project and fail completely if the project overruns time (ie, in approximately 80% of projects SPI and SV are less then optimal). To resolve this problem, the traditionalists suggest ‘looking to the CPM schedule’ for answers and decry ES.

Unfortunately, whilst a reliable and accurate CPM schedule is a critical underpinning of any competent EV system, CPM itself is a ‘wildly optimistic process’, see: http://www.mosaicprojects.com.au/Resources_Papers_117.html

One step towards eliminating this destructive debate was achieved this month – at last there is definitive research that validates ES as a technique. A research thesis from the AFIT (US Air Force Institute of Technology) Masters student, Capt Kevin Crumrine compares EVM and Earned Schedule indicators on US DoD ACAT 1 programs (for non-military types – ‘big’ programs). The thesis documents a series of five descriptive statistical tests conducted on the Earned Value data for 64 Acquisition Category (ACAT) I MDAP’s. The research found that Earned Schedule was a more timely predictor of schedule overages than Earned Value Management.

Unfortunately the statistical data did not compare ES with the CPM predictions. The thesis notes ‘One shortcoming to this research is the inability to map the Earned Schedule data to the critical path, but we consider Earned Schedule to be a strong tool for schedule prediction at the summary/contract level.’ The stated reason was ‘Our example produced earned value data no deeper than the Work Breakdown Schedule (WBS) level 3 (ex: WBS Element 1.2.3). The Critical Path data is collected much deeper, as detailed as WBS level 7 (ex: WBS Element 1.2.3.4.5.6.7). This disconnect prevented us from conducting a detailed analysis’

My feeling is the detailed nature of Capt Crumrine’s analysis meant the researcher could not see the ‘wood for the trees’. The only date that really matters on most projects/programs is the completion date! The level the data is collected at does not matter; neither does the activity/work package that that actually drives the final completion. What matters is the end date!!! The fact ES is a better predictor then EV should be 100% accepted and proved by now, and if not this detailed thesis should remove any residual doubts.

What is not proved is does ES provide a more reliable end date than CPM? My assessment outlined in Why Critical Path Scheduling (CPM) is Wildly Optimistic is that ES should be more accurate. Given the mass of data collected by Capt Crumrine it would be a pity if this last step is not applied by a future researcher.

The key role of CPM is (or should be) making the best use of the currently available resources on a project – this is the antitheses of predicting outcomes based on current trends in the way ES does. All that’s needed is another Masters candidate!!

Capt Kevin Crumrine’s thesis, ‘A Comparison of Earned Value Management and Earned Schedule as Schedule Predictors on DoD ACAT I Programs’ is now in the CPM electronic library at http://www.evmlibrary.org/library/Crumrine%20Final%20Thesis.pdf. If you are into analysis it is well worth the read.

PERT – What’s in a name?

I could choose to call the image at the top of this page a tennis ball – it is about the right shape and is a bright colour, but if I chose to do so all that results is confusion! The name we call things matters because it communicates what we are talking about to our audience.

Over the last week we have been dragged into a number of Linked-In discussions focused on questions such as ‘Do you use PERT?’ Partly as a result of our latest blog on the PMBOK 5th Edition  and also because Mosaic Project Services (and particularly Patrick) has a high profile writing about scheduling history.

The overriding conclusion from the debates we’ve witnessed is no-one knows for sure who is saying what. Each user of the term PERT may be referring to a Network Diagram, a Monte Carlo simulation, some other simulation or the actual PERT technique developed in the 1950s. If the basic premise of the debate is not clearly defined the net result is a lot of noise and no possibility of reaching a conclusion of consensus – in exactly the same way as playing tennis using the ‘ball’ pictured above, all you end up with is a mess.

I’m not sure why so many organisations and people chose to use names that have a very specific meaning completely out of context but it seems increasingly commonplace:

• it may simply be a lack of awareness, assisted by seeing many similar incorrect usages of the name;
• it may be a desire to look clever by using technical jargon, which of course backfires big-time as soon as someone who knows hears the misuse;
• it may be an overt commercial move to trade off a well know ‘brand’ to make a tool or offering seem better than it is.

What is important to consider though, is apart from the first option none of the other factors are ethical behaviour and all of the factors destroy effective communication.

To help bring some level of knowledge into the discussions around PERT, we have published a White Paper today on ‘Understanding PERT’.  This paper outlines exactly what PERT is and was, identifies the shortcomings in the technique and delineates what PERT ‘is not’ and the reasons why. After everyone has understood what PERT is and is not, let the debates continue but this time with the effective communication of ideas between the protagonists, ie, a communication in which the receiver actually understand what the sender is meaning.

The alternative was effectively described by Robert McCloskey, a US State Department Spokesman several years ago ‘I know that you believe that you understood what you think I said, but I am not sure you realise that what you heard is not what I meant!’  Effective communication needs a mutual understanding of the terms used.

Download the White Paper

AustPMA – Final Meeting

The meeting to formalise the closure of the Australian Performance Management Association and discus the formation of a less structured network for project controls professionals will be held on the 9th April 2013, at the Rydges Capital Hill, Canberra, ACT.

The AustPMA – Final Meeting is being held in conjunction with the Project Controls Community Evening (free event) which will start at 6:00pm to conclude at approximately 7:00pm – a cash bar will be available from 5:30pm.

The free Community Evening will include:

• The formal finalisation of the AustPMA
• A brief presentation on developments in the International Standards Arena (ISO) and the work of the ISO Technical Committee focused on project, program and portfolio management.
• An update on the qualification of planners and schedulers including the launch of the CIOB PTMC (Project Time Management Certificate) qualification in Australia
• An update of the CIOB contract for ‘complex projects’ and its approach to proactive time management.
• An open discussion on the ‘way forward’ to establish a dynamic community of project controls professionals in Australia, effectively linking the work of the AIPM Controls SIGs, the Governance and Controls Symposium, the College of Performance Management, Planning Planet, and any other group working to advance skills and knowledge in this important discipline.

The costs of the room hire are being covered by the not-for-profit, PM Global Foundation, the organisers of the Governance and Controls Symposium that will be in the same location on the 10th April.

Any former AustPMA members may download:

• The Notice of meeting.
• Form of proxy. 

Or email me to request copies at patw@mosaicprojects.com.au (many of you have moved and we don’t have your current email).

Regardless of your involvement with AustPMA in the past, we cordially invite all project controls professionals and interested project managers to attend this free community meeting to network and discuss the future direction of our discipline, as well as bidding a short but fond farewell to the AustPMA.

To assist in organising, please register for the free Project Controls Community Evening at: http://wired.ivvy.com/event/GCSM13/ (scroll down page for details).

Project Time Management Workshops for Planners & Schedulers

We are pleased to be part of the team launching the Project Time Management Certificate (PTMC) in Australasia. Mosaic’s Project Time Management Workshops are designed to:
- Offer a practical one-day scheduling and planning course.
- Underpin studies for the CIOB PTMC examination.
- Start a Blended training course for the PMI-SP credential.

In cooperation with the Chartered Institute of Building, Mosaic will be running a series of practical 1 Day Project Time Management Workshops that will be followed by a PTMC examination conducted by CIOB in the same city a few weeks later. Our first workshop will be held in Canberra as part of the Project Governance and Controls Symposium on the 9th & 10th April:
- Project Time Management Workshop – 9th April
- Free Controls Professional networking evening – 9th April (follows workshop)
- Project Governance and Controls Symposium – 10th April
- PTMC Examination – 4th May

These events are designed to re-frame project controls in Australia and provide an on-going forum for cross-industry, cross-association, cross-discipline discussions to advance the status and understanding of project controls. 2013 is the foundation year for what is planned to be a regular annual event.

The PTM Workshop is a valuable 1 Day course as well as providing a foundation leading to professional credentials.

Unlike the PMI-SP credential which requires formal training and a minimum of 3 years of experience for a candidate to be eligible for the examination, the PTMC is designed as a rigorous knowledge test that is open to anyone. Potential candidates can choose to self-study or take a course or any combination that works for them:

The PTMC is designed to provide experienced schedulers with proof they understand their discipline and offer graduates and others wishing to become a scheduler an opportunity to learn the art and skills associated with being a professional planner and scheduler – there is far more to the profession than simply using software!

More information:
- The PTMC Credential.
- PTM workshops (full schedule of dates).
- Book into the Canberra PTM workshop.
- Book into the free networking evening  (scroll down page – cash bar)
- Join us at the Project Governance and Controls Symposium.

The Symposium and networking events are underwritten by the not-for-profit PM Global Foundation and apart from physical costs, all of the income from the PTM workshop will be used to help develop this important initiative. We look forward to your support.

Be careful what you govern for!

Governance is an interesting and subtle process which is not helped by confusing governance with management or organisational maturity. A recent discussion in PM World Journal on the subject of governance and management highlighted an interesting issue that we have touched on in the past.

The Romans were undoubtedly good builders (see: The Roman Approach to Contract Risk Management). They also had effective governance and management processes, when a contractor was engaged to build something, they had a clear vision of what they wanted to accomplish; assigned responsibilities and accountability effectively; and failure had clearly understood, significant consequences.

Roman bridge builders were called pontiff. One of the quality control processes used to ensure the effective construction of bridges and other similar structures was to ensure the pontiffs were the first to cross their newly completed construction with their chariots to demonstrate that their product was safe.

An ancient Roman bridge

This governance focus on safety and sanctions created very strong bridges some of which survive in use to the present day but this governance policy also stymied innovation. Roman architecture and engineering practice did not change significantly in the last 400 years of the empire!

No sensible pontiff would risk his life to test an innovative approach to bridge design or construction when the governance systems he operated under focus on avoiding failure. Or in more general terms; the management response to a governance regime focused on ‘no failure’ backed up by the application of sanctions is to implement rigid processes. The problem is rigid process prevents improvement.

To realise the significance of this consider the technology in use in the 17th century compared to the modern day – the vast majority of the innovations that have resulted in today’s improved living standards are the result of learning from failure (see: How to Suffer Successfully).

But the solution is not that simple, we know that well designed and implemented, processes are definitely advantageous. There is a significant body of research that shows implementing methodologies and processes using CMMI, OPM3, PRINCE2, P3M3 and other similar frameworks has a major impact on improving organisational performance and outcomes.

However, organisational maturity is a similar ‘two edged sword’ to rigid governance and management requirements. We know organisational maturity defined as the use of standardised processes and procedures creates significant benefits in terms of reduced error and increased effectiveness compared to laissez-faire / ad hoc systems with little or no standardisation. But these improvements can evolve to become an innovation-sapping straightjacket.

Too much standardisation creates processes paralysis and a focus on doing the process rather than achieving an outcome. In organisations that that have become fixated on ‘process’, it is common to see more and more process introduced to over come the problem of process paralysis which in turn consume more valuable time and resources until Cohn’s Law is proved: The more time you spend in reporting on what you are doing, the less time you have to do anything. Stability is achieved when you spend all your time doing nothing but reporting on the nothing you are doing.

Avoiding this type of paralysis before a review is forced by a major crisis is a subtle, but critical, governance challenge. The governing body sets the moral and ethical ‘tone’ for the organisation, determines strategy and decides what is important. Executive Management’s role is to implement the governing body’s intentions, which includes determining the organisation’s approach to process and methodology, and middle and lower level management’s role is to implement these directives (for more on this see: Governance Systems & Management Systems). The governance challenge is working out a way to implement efficient systems that also encourage an appropriate degree of innovation and experimentation. The ultimate level in CMMI and OPM3 is ‘continuous improvement’. But improvement means change and change requires research, experimentation and risk taking. As Albert Einstein once said, “If we knew what it was we were doing, it would not be called research, would it?”

To stay with the Roman theme of this post: Finis origine pendet (quoting 1st century AD Roman poet and astronomer Marcus Manilius: The end depends upon the beginning). The challenge of effective governance is to encourage flexibility and innovation where this is appropriate (ie, to encourage the taking of appropriate risks to change and improve the organisation) whilst ensuring due process is followed when this is important. The challenge is knowing when each is appropriate and then disseminating this understanding throughout the organisation.

Organisations that follow the Roman approach to governance and avoid taking any form risk are doomed to fade into oblivion sooner or later.

_______________

Note: According to the usual interpretation, the term pontifex literally means “bridge-builder” (pons + facere). The position of bridge-builder was an important one in Rome, where the major bridges were over the Tiber, the sacred river (and a deity). Only prestigious authorities with sacral functions could be allowed to ‘disturb’ it with mechanical additions.

However, the term was always understood in its symbolic sense as well: the pontifices were the ones who smoothed the ‘bridge’ between gods and men. In ancient Rome, the Pontifex Maximus (Latin, literally: greatest pontiff) was the high priest of the College of Pontiffs (Collegium Pontificum), the most important religious role in the republic. The word pontifex later became a term used for bishops in the early Catholic Church and the Bishop of Rome, the Pope, the highest of bridge-builders sumus pontiff.

The UN/CEFACT format for project data

The UN/CEFACT format for project data is an XML schema that standardizes schedule, cost, and earned value data from organization to organization no matter the software used to input the information.

UN/CEFACT is a subcommittee of the United Nations Economic Commission for Europe (UNECE). It is an official intergovernmental standards organisation connected to ISO. The goal of the UN/CEFACT is to improve worldwide cooperation by facilitating trade and electronic business by developing international EDI (Electronic Data Interchange) standards for electronic trade documents in XML format.

UN/CEFACT XML is the current data standard used for an Integrated Program Management Report (IPMR). The US Department of Defense implement this standard via Format 6 of DI-MGMT-81861. The IPMR’s primary value to the Government is its utility in reflecting current contract status and projecting future contract performance. It will be used by the DoD component staff, including program managers, engineers, cost estimators, and financial management personnel, as a basis for communicating performance status with the contractor.

The DoD IPMR contains data for measuring cost and schedule performance on acquisition contracts. It is structured around seven formats that contain the content and relationships required for the electronic submissions.
Format 1 defines cost and schedule performance data by product oriented Work Breakdown Structure (WBS).
Format 2 defines cost and schedule performance data by the contractor’s organizational structure (e.g., Functional or Integrated Product Team (IPT)).
Format 3 defines changes to the Performance Measurement Baseline (PMB).
Format 4 defines staffing forecasts.
Format 5 is a narrative report used to provide the required analysis of data contained in Formats 1 to 4 and 6.
Format 6 defines and contains the contractor’s Integrated Master Schedule (IMS).
Format 7 defines the time-phased historical & forecast cost submission.

With this weight of interest and support, the UN/CEFACT format for project data will become increasingly important and already a number of organizations, including Acumen are now offering a free, web-based file converter to translate proprietary schedule information into the XML format (see: http://www.projectacumen.com/news-item/acumen-launches-un-cefact-file-converter/).

At the moment the UN/CEFACT format seems to be used by clients to receive and compare project data from contractors or tenders. But I expect before long, the concept of data exchange will take hold and importing the XML file will become a standard feature on most main-line tools; however, a word of warning!

A consistent file format is not the same as a consistent analytical outcome. Different tools, different versions of the same tool and different switch settings within a singe tool can produce significant variations in the calculated results from identical data. To quote Fredric L. Plotnick, Ph.D., Esq., P.E. “Choose your Software – Choose your Options – Choose your Results”. Identical data formatting does not mean identical analysis results. We have a long way to go for standardized data analysis. For more on the analytical challenges see: http://www.mosaicprojects.com.au/PDF/Schedule_Calculations.pdf

Construction CPM 2013

Tennessee Williams once said “America has only three cities: New York, San Francisco, and New Orleans. Everywhere else is Cleveland.”  Having now been to all four places I can understand the sentiment.

As I write this, the Construction CPM 2013 conference is in full swing and is proving as dynamic as its host city of New Orleans. A strong line-up of speakers focusing on the tools, techniques, art and science of critical path management is supported by an equally diverse and interesting social program.

Many of the interesting concepts and ideas we have encountered will undoubtedly be finding their way into our thinking and writing over the next few months, whilst the papers we have presented so far have been well received with one to go tomorrow. Our presentations are available from:

• Controls Communicate?
• Avoiding the ‘Tipping Point to Failure’
• Estimating Fallacies – excessive detail does not help  

It’s not all hard work! The networking and social program are always a highlight of Construction CPM and when you overlay the excitement of the French Quarter of New Orleans and you start to really challenge the stamina. The final event last night was a ‘Bourbon on Bourbon Street’ tonight its jazz in ‘Fred’s Nightclub’, both finishing at midnight!

If you are involved in project controls start planning for 2014! If the USA is too far to travel, we have a local Governance and Controls Symposium coming up in Canberra in the 10th April.

What’s the Probability??

The solution to this question is simple but complex….

There is a 1 in 10 chance the ‘Go Live’ date will be delayed by Project 1
There is a 1 in 10 chance the ‘Go Live’ date will be delayed by Project 2
There is a 2 in 10 chance the ‘Go Live’ date will be delayed by Project 3

What is the probability of going live on March 1st?

To understand this problem let’s look at the role of dice:

If role the dice and get a 1 the project is delayed, any other number it is on time or early.
If you role 1 dice, the probability is 1 in 6 it will land on 1 = 0.1666 or 16.66% therefore there is a 100 – 16.66 = 83.34% probability of success.

Similarly, if you roll 2 dice, there are 36 possible combinations, and the possibilities of losing are: 1:1, 1:2, 1:3, 1:4, 1:5, 1:6, 6:1, 5:1, 4:1, 3:1, 2:1. (11 possibilities)

The way this is calculated (in preference to using the graphic) is to take the number of ways a single die will NOT show a 1 when rolled (five) and multiply this by the number of ways the second die will NOT show a 1 when rolled. (Also five.) 5 x 5 = 25. Subtract this from the total number of ways two dice can appear (36) and we have our answer…eleven.
(source: http://www.edcollins.com/backgammon/diceprob.htm)

Therefore the probability of rolling a 1 and being late are 11/36 = 0.3055 or 30.55%, therefore the probability of success is 100 – 30.55 = 69.45% probability of being on time.

If we roll 3 dice we can extend the calculation above as follows:
The number of possible outcomes are 6 x 6 x 6 = 216
The number of ways not to show a 1 are 5 x 5 x 5 = 125

Meaning there are 216 combinations and there are 125 ways of NOT rolling a 1
leaving 216 – 125 = 91 possibilities of rolling a 1
(or you can do it the hard way: 1:1:1, 1:1:2, 1:1:3, etc.)

91/216 = 0.4213 or 42.13% probability of failure therefore there is a
100 – 42.13 = 57.87% probability of success.

So going back to the original problem:

Project 1 has a 1 in 10 chance of causing a delay
Project 2 has a 1 in 10 chance of causing a delay
Project 3 has a 1 in 5 chance of causing a delay

There are 10 x 10 x 5 = 500 possible outcomes and within this 9 x 9 x 4 = 324 ways of not being late. 500 – 324 leaves 176 ways of being late. 176/500 = 0.352 or a 35.2% probability of not making the ‘Go Live’ date.
Or a 100 – 35.2 = 64.8% probability of being on time.

The quicker way to calculate this is simply to multiply the probabilities together:

0.9 x 0.9 x 0.8 = 64.8%

These calculations have been added to our White Paper on Probability.

A Technical question for the risk experts??

Three schedule activities of 10 days duration each need to be complete before their outputs can be integrated.

Activity 1 & 2 both have a 90% probability of achieving the estimated duration of 10 days.

Activity 3 has an 80% probability of achieving the 10 days.

Scenario 1:

The three activities are in parallel with no cross dependencies, what is the probability of the integration activity starting on schedule?

Possible solution #1

There is a 10% probability of the start being delayed by Activity 1 overrunning.
There is a 10% probability of the start being delayed by Activity 2 overrunning.
There is a 20% probability of the start being delayed by Activity 3 overrunning.

Therefore in aggregate there is a 40% probability of the start being delayed meaning there is a 60% probability of the integration activity starting on time.

Possible solution #2

The three activities are in parallel and the start of the integration is dependent on all 3 activities achieving their target duration. The probability of a ‘fair coin toss’ landing on heads 3 times in a row is 0.5 x 0.5 x 0.5 = 0.125  (an independent series)

Therefore the probability of the three activities achieving ‘on time’ completion as opposed to ‘late’ completion should be 0.9 x 0.9 x 0.8 = 0.648 or a 64.8% probability of the integration activity starting on time.

Which of these probabilities are correct?

Scenario #2

The more usual project scheduling situation where activities 1, 2 and 3 are joined ‘Finish-to-Start’ in series (an interdependent series). Is there any way of determining the probability of activity 4 starting on time from the information provided or are range estimates needed to deal with the probability of the activities finishing early as well as late?

There is a correct answer and an explanation – see the next post
(its too long for a comment)

Value is created by embracing risk effectively

The latest briefing from the real ‘Risk Doctor’, Dr David Hillson #75: RESOLVING COBB’S PARADOX? starts with the proposition: When Martin Cobb was CIO for the Secretariat of the Treasury Board of Canada in 1995, he asked a question which has become known as Cobb’s Paradox: “We know why projects fail; we know how to prevent their failure – so why do they still fail?” Speaking at a recent UK conference, the UK Government’s adviser on efficiency Sir Peter Gershon laid down a challenge to the project management profession: “Projects and programmes should be delivered within cost, on time, delivering the anticipated benefits.” Taking up the Gershon Challenge, the UK Association for Project Management (APM) has defined its 2020 Vision as “A world in which all projects succeed.” The briefing then goes on to highlight basic flaw in these ambitions – the uncertainty associated with various types of risk. (Download the briefing from: http://www.risk-doctor.com/briefings)

Whilst agreeing with the concepts in David’s briefing, I don’t feel he has gone far enough! Fundamentally, the only way to achieve the APM objective of a “world in which all projects succeed” is to stop doing projects! We either stop doing projects – no projects – no risks – no failures. Or approximate ‘no risk’ by creating massive time and cost contingencies and taking every other precaution to remove any vestige of uncertainty; the inevitable consequence being to make projects massively time consuming and unnecessarily expensive resulting in massive reductions in the value created by the few projects that can be afforded.

The genesis of Cobb’s Paradox was a workshop focused on avoidable failures caused by the repetition of known errors – essentially management incompetence! No one argues this type of failure should be tolerated although bad management practices mainly at the middle and senior management levels in organisations and poor governance oversight from the organisation’s mean this type of failing is still all too common. (for more on the causes of failure see: Project or Management Failures )

However, assuming good project management practice, good middle and senior management support and good governance oversight, in an organisation focused on maximising the creation of value some level of project failure should be expected, in fact some failure is desirable!

In a well-crafted portfolio with well managed projects, the amount of contingency included within each project should only be sufficient to off-set risks that can be reasonably expected to occur including variability in estimates and known-unknowns that will probably occur. This keeps the cost and duration of the individual projects as low as possible, but, using the Gartner definitions of ‘failure’ guarantees some projects will fail by finishing late or over budget.

Whilst managing unknown-unknowns and low probability risks should remain as part of the normal project risk management processes, contingent allowances for this type of risk should be excluded from the individual projects. Consequently, when this type of risk eventuates, the project will fail. However, the effect of the ‘law of averages’ means the amount of additional contingency needed at the portfolio level to protect the organisation from these ‘expected failures’ is much lower than the aggregate ‘padding’ that would be needed to be added to each individual project to achieve the same probability of success/failure. (For more on this see: Averaging the Power of Portfolios)

Even after all of this there is still a probability of overall failure. If there is a 95% certainty the portfolio will be successful (which is ridiculously high), there is still a 5% probability of failure. Maximum value is likely to be achieved around the 80% probability of success meaning an inevitable 20% probability of failure.

Furthermore, a focus on maximising value also means if you have better project managers or better processes you set tighter objectives to optimise the overall portfolio outcome by accepting the same sensible level of risk. Both sporting and management coaches understand the value of ‘stretch assignments’ – people don’t know how good they are until they are stretched! The only problem with failure in these circumstances is failing to learn and failing to use the learning to improve next time. (For more on this see: How to Suffer Successfully)

The management challenge is firstly to eliminate unnecessary failures by improving the overall management and governance of projects within an organisation. Then rather than setting a totally unachievable and unrealistic objective that is guaranteed to fail, accept that risk is real and use pragmatic risk management that maximises value. As David points out in his briefing: “Projects should exist in a risk-balanced portfolio. The concept of risk efficiency should be built into the way a portfolio of projects is built, with a balance between risk and reward. This will normally include some high-risk/high-reward projects, and it would not be surprising if some of these fail to deliver the expected value.”

Creating the maximum possible value is helped by skilled managers, effective processes and all of the other facets of ‘good project management’ but not if these capabilities are wasted in a forlorn attempt to ‘remove all risk’ and avoid all failure. The skill of managing projects within an organisation’s overall portfolio is accepting sensible risks in proportion to the expected gains and being careful not to ‘bet the farm’ on any one outcome. Then by actively managing the accepted risks the probability of success and value creation are both maximised.

So in summary, failure is not necessary bad, provided you are failing for the ‘right reason’ – and I would suggest getting the balance right is the real art of effective project risk management in portfolios!