Communication!

The recently released Sixth edition of the APM-BoK consists of four major sections: context, people, delivery and interfaces. Typical ‘hard’ project management processes such as scope, schedule, cost, resource, risk, integration and quality comes in the section focused on delivery. This is after the section concerned with people and interpersonal skills and the first area featured in the APM-BOK under the people area is communication. The APM-BoK recognises that communication is fundamental to the project management environment, and makes a very powerful statement: “None of the tools and techniques described in this body of knowledge will work without effective communication”.

To an extent the PMBOK is playing ‘catch-up’ with other key standards including the Association of Project Management (UK) Body of Knowledge (APM-BoK) 6th Edition and ISO 21500. The good news is all three standards now see identifying the important stakeholders in and around a project or program and then communicating effectively with each stakeholder as the fundamental driver of success.

The recently released Sixth edition of the APM-BoK consists of four major sections: context, people, delivery and interfaces. Typical ‘hard’ project management processes such as scope, schedule, cost, resource, risk, integration and quality comes in the section focused on delivery. This is after the section concerned with people and interpersonal skills and the first area featured in the APM-BOK under the people area is communication. The APM-BoK recognises that communication is fundamental to the project management environment, and makes a very powerful statement: “None of the tools and techniques described in this body of knowledge will work without effective communication”.

The PMBOK® Guide 5th Edition has followed PMI’s standard practice of retaining existing chapters and adding new sections at the back so the positional prominence in the APM-BoK is not possible. However understanding the changes between the 4th and 5th Editions and comparing these to ISO 21500 does show the extent of the increased focus in the PMBOK on communication and the stakeholders you communicate with.

MANAGE STAKEHOLDERS

This is a new section in the PMBOK® Guide 5th Edition (Chapter 13). It is based on two processes moved from the communication section of the 4th edition and has been expanded.

Identify stakeholders is a beefed up version of the same process in the 4th Edition, focused on understanding who the project’s stakeholders are.

Plan Stakeholder Management is a new process that describes how the stakeholder community will be are analysed, the current and desired levels of engagement defined and the interrelationships between stakeholders identified. It highlights the fact that levels of engagement may change over time.

Manage stakeholders remains basically the same as in the 4th Edition and is similarly defined in ISO 21500.

Control Stakeholder Management is a new process that ensures new stakeholders are identified, current stakeholders are reassessed and stakeholders no longer involved in the project are removed from the communication plan. The process requires the on-going monitoring of changes in stakeholder relationships the effectiveness of the engagement strategy, and when required, the adaption of the stakeholder management strategy to deal with the changed circumstances.

As with ISO 21500, the early parts of the PMBOK discussing the management or projects in organisations also has a strong emphasis on stakeholders (Chapters 1, 2 and 3).

COMMUNICATIONS MANAGEMENT

This section of the PMBOK® Guide 5th Edition has been consolidated and expanded and is very similar to ISO 21500 in its effect.

Plan Communications remains basically unchanged, the key input is the stakeholder analysis.

Manage Communications is a new process that amalgamate the 4th Edition processes of Distribute Information and Report Performance, and in doing so removes a lot of unnecessary confusion. This new process goes beyond the distribution of relevant information and seeks to ensure that the information being communicated to project stakeholders has been received and understood, and also provides opportunities for stakeholders to make further information requests. ISO 21500 has an interesting additional function (not in the PMBOK) which is the management of the distribution of information from stakeholders to the project in order to provide inputs to other processes such as risk management.

Control Communications is a new process that identifies and resolves communications issues, and ensures communication needs are satisfied. The outputs are accurate and timely information (resolved communications issues) and change requests, primarily to the communication plan.

Summary

Communication is the means by which information or instructions are exchanged! Communication is the underpinning skill needed to gather the information needed to make project decisions and to disseminate the results from all of the traditional ‘hard skills’ including cost, time, scope, quality and risk management. Good communication makes these processes effective, whereas poor communication leads to misunderstood requirements, unclear goals, the alienation of stakeholders, ineffective plans and many other factors leading to failure.

The common theme across all three standards is that communicating the right information to the right stakeholders in the right way (and remembering communication is a two-way process) is fundamental to success. The basic requirement is to deal effectively and fairly with people, their needs, expectations, wants, preferences and ultimately their values – projects are done by people for people and the only way to influence people is through effective communication.

Project communication skills include expectation management, building trust, gaining user acceptance, stakeholder and relationship management, influencing, negotiation, conflict resolution, delegation, and escalation.

What’s really pleasing to me is how similar these ‘standard’ requirements are to the ideas embedded in my Stakeholder Circle®methodology, books, blogs, White Papers and tools. I have no idea how much influence my writings have had on the various standards development teams but it is pleasing to see a very common set of ‘best practices’ emerging around the world. Now all we need is the management will to implement the processes to improve project and program outcomes.

The role of Oration in Communication – a lost art?

The core purpose of communication is to elicit a change in perceptions, understanding or behaviour in the receiver; this is particularly true of communication with your team members. But if you want a person to remember or respond to the contents of the message, the first essential is for the message you are communicating to be ‘received’ – far too many messages are simply ignored because the sender is perceived as ‘boring’ or the message is seen as repetition of the same old information.

Effective written communication is a skill that is still appreciated and used by a range of professionals. How to write effectively is outlined in our White Paper WP1010 – Writing Skills and page layout is discussed in WP1065. However, you need to apply a completely different set of skills and re-structure the information if you want to communicate the same message verbally, this is the art of ‘oration’.

The Ancient Greeks developed the art of oratory over 2000 years ago. In classical Greece and Rome, the main component was rhetoric (that is, composition and delivery of speeches), and was an important skill in public and private life. Good orators are able to change the emotions of their listeners, not just inform them.

The ancient art of oration is still an important skill to acquire even when you have access to powerpoint or are only speaking to one or two people. The challenge of effective oral communication is staying on message (mixed messages don’t help anyone) whilst changing your style and rhythm to avoid becoming boring……

Great communicators use a similar approach to great music. It does not matter if you listen to Beethoven’s 5th or one of my favourites, Queen’s ‘Bohemian Rhapsody’ you find consistency and variety in the same piece. Patches of high intensity contrasted with quieter movements within a memorable and complete masterpiece.

The same effect can be achieved in your communication by balancing positive and negative elements of a message or changing the direction of the information flow, for example:

• If you want someone to stop an undesirable behaviour certainly point out the problem (a negative) but also highlight the benefits of the change you want to occur (the positive).
• Rather then just telling the team they are behind schedule change the direction of the information flow and ask then for ideas to regain the lost time.

The message can be consistent but the variety leads to engagement, the other key element is to finish on a high – great music does not fade away, it builds to a crescendo!

Really great communicators such as, Martin Luther King, Winston Churchill, JFK and others all had a consistent heartfelt message they wanted to communicate in a way that would create a strong reaction in their listeners, all had very different speaking styles, but each had a real sense of rhythm and performance. Read any of their great speeches and you can see the words are carefully crafted for effect, but when you listen to the speech, the presentation adds enormous weight to the message.

Whilst you may never need to ‘fight on the landing fields’ or ‘have a dream’ to change a nation, taking the time to think through how you will present the information in your communication in a way that is engaging and memorable will help you be more effective in literally getting your message across to your audience.

Rhetorical devices
Effective communicators use a range of devices to increase the resonance of their message, some of the more common include:

1. Allusion: an indirect or casual reference to a historical or literary figure, event, or object (but the link has to be understood by the audience).

2. Antiphrasis: the use of a word opposite to its proper meaning; irony. Example: The project manager calmly yelled at his team about the importance of testing!

3. Apophasis: accentuating something by denying that it will be mentioned. Example: I won’t even mention that you misspelled the client’s name in the report.

4. Aporia: expressing doubt about an idea, conclusion, or position.

5. Aposiopesis: stopping abruptly and leaving a statement unfinished, giving the impression that the writer or speaker is unwilling or unable to continue. Example: Pat’s behaviour in the meeting made it clear to everyone that he was . . . but we won’t go there.

6. Analogy: a comparison of two things. Metaphors and similes are both types of analogy.

7. Hyperbole: using exaggeration for emphasis or effect; overstatement. Example: If you take the challenge of speaking to the team too seriously, you will surely go mad.

8. Sententia: quoting a maxim or wise saying to apply a general truth to the situation, thereby offering a single statement of general wisdom. Example: Perhaps we should all remember what Stephen King once said, “The road to hell is paved with adverbs.”

9. Pleonasm: using more words than necessary to express an idea.

10. Epizeuxis: the immediate repetition of words for emphasis. Example: The answer to that question is no, no, no, a thousand times no (used a lot by politicians…)

You don’t need to remember the names of these techniques but the concepts can help develop the effectiveness your communication in every circumstance. Formal presentations also need preparation, for more on this see WP1009 – Presentation Skills.

Developing an effective oral communication capability is a skill that requires practice and benefits from pre-planning before you start an important communication. How much time do you spend working on the data in your messages compared to the way you are going to communicate the information?

PMBOK 5th Edition some key changes #1

We are starting work on the updates to our training courses (for the change dates see: Examination Updates) and rather like most of the enhancements in the 5th Edition (due for publication on 31st December). Over the next few months we will be posting a number of commentaries on the changes and improvements. This post looks at some of the key changes.

The new PMBOK® guide now has 47 processes (up from 42) and a new Knowledge Area:

Four planning processes have been added: Plan Scope Management (back from the 3rd Edition), Plan Schedule Management, Plan Cost Management, and Plan Stakeholder Management. This change provides clearer guidance for the concept that each major Knowledge Area has a need for the project team to actively think through how the related processes will be planned and managed, and that each of the subsidiary plans are integrated through the overall project management plan, which is the major planning document for guiding further project planning and execution.

The addition of a new knowledge area called ‘Stakeholder Management’ has been created making 10 Knowledge areas. In keeping with the evolution of thinking regarding stakeholder management within projects, this new Knowledge Area has been added addressing Project Stakeholder Management. Information on stakeholder identification and managing stakeholder expectations has been moved from Project Communications Management to this new Knowledge Area to expand upon and increase the focus on the importance of appropriately engaging project stakeholders in the key decisions and activities associated with the project. New processes were added for Plan Stakeholder Management and Control Stakeholder Engagement. We will be discussing this important initiative in later posts.

Data flows and knowledge management concepts have been enhanced:

The PMBOK® Guide now conforms to the DIKW (data, information, knowledge, wisdom) model used in the field of Knowledge Management. Information/Data is segregated into three phases:

Work Performance Data. The raw observations and measurements identified during the performance of the project work, such as measuring the percent of work physically completed.

Work Performance Information. The results from the analysis of the performance data, integrated across areas such as the implementation status of change requests, or forecasts to complete.

Work Performance Reports. The physical or electronic representation of work performance information compiled in project documents, intended to generate decisions, actions, or awareness.

Understanding the information in the reports and making wise decisions are functions of the competence of the individual manager reading the report and are therefore beyond the scope of a process (for more on effective communication visit our PM Knowledge Index )

Annex A1 – The Standard for Project Management of a Project created.

This new annex has been designed to serve as a standalone document. This positions the Standard for Project Management away from the main body of the PMBOK® Guide material allowing the evolution of the Body of Knowledge material to be separated from the actual Standard for Project Management. Chapter 3 remains as the bridge between Sections 1 and 2 and the Knowledge Area sections and introduces the project management processes and Process Groups as in the previous editions of the PMBOK® Guide.

More on the improvements next time – in the interim, from now onward our daily question will be Tweeted with reference to both the 4th and the 5th Editions of the PMBOK® Guide: see today’s question.

Thoughts on communication

There have been a couple of ‘stories’ in the Australian media of late that suggest a fundamental change in the communication landscape is emerging. One is the ongoing furore around a comment in very bad taste made by radio presenter Alan Jones at a private function organised by a political party, the other concerns perceptions about one of our political leaders. For the purpose of this post, the facts of the two situations are less important than the trends they suggest are emerging.

The Australian government does not try to moderate good taste and within sensible limits around defamation, incitement and vilification we enjoy the privilege of freedom of speech which I believe is critically important; therefore:

Alan Jones has a right to exhibit bad taste and make his comment and the 1000s of other people who are using social media to express their objection to the comment have an equal right to ‘free speech’ and the whinging from the 2GB management (Jones’ radio station) about the effect of the social media campaign on their advertises is also ‘free speech’.

Having said that, what I believe is really interesting is the shift in power that is evident. As a high profile radio presenter, Jones used to have almost complete power, he controlled the microphone, could rubbish detractors on air and cut off their response. That power still remains but has been circumvented by social media; a sustained campaign by the ‘twittering classes’ has cost 2GB hundreds of thousands of dollars in cancelled advertising – a new paradigm for directors and managers to deal with.

In a similar vein, the ongoing ‘noise’ around opposition leader Tony Abbot’s attitude to women will be interesting to watch through to a conclusion, if one is ever reached……

But even at this early stage there are a number of observations that are likely to become increasingly important in an effective stakeholder engagement and communication model for any entity; both individuals and organisations.

1. Negativity is becoming a very dangerous weapon to deploy. American politicians of all persuasions have been running negative advertising about politicians of the other persuasion for many years. The negative advertising has worked, the America public consistently place politicians at the very bottom of any list based on ethics, trust, etc. Used car salesmen and journalists are preferred to politicians and the situation is not much different in Australia. If you start using negativity, the power of social media to spread the negativity almost guarantees it will come back to damage the initiator. In the connected age, negativity is rapidly becoming a WSD (of similar power to a WMD but read ‘weapon of self destruction’).
2. Perceptions are easily created and hard to dispel or change. I have no idea how Tony Abbot actually works with women, but a negative perception has emerged. Perceptions are frequently wrong, but they are based on what people believe they saw or heard. Consequently this type of social perception cannot be changed by people with a vested interest telling others they are wrong, to quote Margaret Thatcher “Power is like being a lady… if you have to tell people you are, you aren’t” – the same applies to perceptions. Perceptions can be managed but they are built over time and have to be changed over time and this can only be achieved with a sustained change in observed behaviour – words are not going to do anything.
3. There seems to be an emerging disconnect between perceptions and emotions and reality. This was the focus of my blog post Credit, Trust and Emotions. What’s not mentioned in the blog, but is in the RBA report, is that non-mining business investment has been increasing rapidly despite the flat business sentiment. The real economic situation and actual investment levels are aligned, but the business sentiment is failing to recognise business reality.

Managing a corporate image, your project’s image within the organisation or your personal image is certainly getting to be a whole lot harder. What I’m wondering based on the above is, are we starting to see a real shift from positional power, supported by negativity and traditional advertising to something more subtle, distributed and potentially positive, and if so how can this be effectively managed?

Credit, Trust and Emotions

Last night we attended the Deakin University, Richard Searby Oration, delivered by Dr Guy Debelle, Assistant Governor (Financial Markets), Reserve Bank of Australia. His topic was: Credo et Fido: Credit and Trust.

The 2012 Oration explored the importance of credit and trust within the financial system and how the breakdown in trust post 2007 and the Global Financial Crisis (GFC) is severely hampering the global recovery.

Debelle’s hypothesis is that there is no credit without trust because there is always asymmetrical information in a loan transaction, the borrower always knows more about his/her/its financial situation and intentions than the lender and trust is needed to bridge this knowledge gap and allow the loan to be made.

This is as true of a depositor lending to a financial institution as it is of a bank lending to a borrower or importantly one financial institution lending to another institution. When trust breaks down, the lending process slows up or stops altogether. For more on the value of trust see: WP1030_The_Value_of_Trust

However, trust implies risk, the root cause of the GFC was overconfidence, leading to lax lending practices, supported by a lack of effective due diligence, leading to a chronic underpricing of risk. This allowed highly unethical, if not criminal practices to develop exponentially with institutions offloading risk to other institutions at a fraction of the real price. This complacency and ‘lazy trust’ allowed vast ‘bubbles’ of underpriced risk to develop across the whole financial sector. When the finance system was eventually forced to take a severe look at its situation, trust evaporated, credit dried up and the GFC destroyed value around the world.

The sovereign states (ie, governments) as lenders of last resort were in many cases unable to counterbalance the situation because trust in their ability to repay debt also evaporated. Pricing risk requires a reasonable degree of confidence that the parameters of the ‘unknown’ are knowable and a reasonable probability can be assigned to a defined risk exposure. Post GFC the breakdown of trust and confidence in financial markets has lead to uncertainty. When lenders ‘don’t know’ what the risk is they cannot price the risk, set a reasonable premium and use the information to strike a loan rate. If lender cannot set an interest rate for a loan, there is no loan (or the rates are exorbitantly high and the loan periods very short).

On-going banking scandals in Europe and the USA are continuing to erode trust and slow the rebuilding, despite money supply being expanded by the central banks. Having money is no good if you cannot trust anyone to lend it to.

The thread of argument that can be drawn from the above is that access to the credit needed to fund economic growth is based on a large proportion of a society having enough confidence in their financial systems for a reasonable degree of pragmatic trust to be extended by lenders to borrowers (and the borrowers having sufficient confidence in the situation and system to seek loans). This is as much a function of the underlying emotional settings within a society as the actual facts of the situation.

Australia is an interesting example. The GFC had minimal overall effect on the economy due to much tighter fiscal and banking policies, supported by swift government action. The current situation is also good with relatively low debt and the Reserve Bank has significant options open to keep the economy growing.

The overall strength of the economy was outlined in a speech entitled ‘The Glass Half Full’ given by Glenn Stevens’, Governor of the Reserve Bank of Australia (RBA), in his address to the American Chamber of Commerce (SA) AMCHAM Internode Business Lunch held in Adelaide on the 8 June 2012 (see: http://www.rba.gov.au/speeches/2012/sp-gov-080612.html).

One of the key charts presented by Stevens shows the inflation adjusted per capita GDP in Australia has hardly missed a beat – the GFC had a flattening effect but overall business conditions for the last 5 years have remained basically the same and are improving.

GDP = Gross Domestic Product and is directly correlated to the spending power per person (compounded by the growth in the Australian population). The only significant change highlighted in Steven’s report was a shift from an unsustainable growth in personal borrowings back towards a more sustainable savings rate which under any normal circumstance would be seen as good economic sense, particularly given the disasters in places like Ireland, Spain and Iceland caused by excessive borrowing.

So given the basically solid performance of the Australian economy, one would expect a similar trend in business confidence?? Unfortunately this is not the case:

A survey of business confidence by DBM Consultants shows confidence crashed in the period between 2007 and 2009 and continues to ‘flat-line’ with the vast majority of businesses being concerned about the economy. This flows through into low expectations for increasing employment and taking on borrowings (see: www.dbmconsultants.com.au).

The question is why is there such as big disconnect between the financial facts as presented by the RBA and the emotional distrust expressed by business in the DBM report?

My feeling is the key driver is the almost unrelenting stream of negative reporting in the press focusing on ‘bad news’ stories such as plant closures rather than good news stories such as the overall growth in employment (even in the manufacturing states such as Victoria), supported by a similar campaign by the federal opposition for short term political gain. This combination of unrelenting negativity will undoubtedly lower the level of optimism in the community (shown by numerous surveys) and lower the levels of trust in the government which as the ‘lender of last resort’ flows through into the financial and business communities.

Given the press appear to believe bad news sells papers and the opposition has a vested interest in winning the next election, both legitimate objectives, one wonders what needs to happen to start the shift in confidence highlighted as essential in Dr Debelle’s oration? The belief highlighted in the DBM report above has to be having a direct effect on the rate of growth in the economy because businesses are not investing, not training staff and not employing at the levels they could if there was more confidence – to an extent, the emotions are self-fulfilling.

As individuals we cannot do much at a national or international level, but we can learn from the wider world. When dealing with your team and/or communicating with stakeholders a proper balance is needed between achievements and issues. Focusing only on bad news and you will damage future prospects – unrelenting negativity is likely to be self-fulfilling; whilst unfounded optimism is a recipe for disaster if you ignore prudent good practice.

Advising Upwards for Effect

The only purpose of undertaking a project or program is to have the deliverables it creates used by the organisation (or customer) to create value! Certainly value can be measured in many different ways, improved quality or safety, reduced effort or errors, increased profits or achieving regulatory compliance; the measure is not important, what matters is the work of the project is intended to create value. But this value will only be realised if the new process or artefact ‘delivered’ by the project is actually used by the organisation to achieve the intended improvements.

The organisation’s executive has a central role in this process. There is a direct link between the organisation’s decision to make an investment in a selected project and the need for the organisation to change so it can make effective use of the deliverables to generate the intended benefits and create a valuable return on its investment. The work of the project is a key link in the middle of this value creation chain, but the strength of the whole chain is measured by its weakest link – a failure at any stage will result in lost value.

In a perfect world, the degree of understanding, knowledge and commitment to the change would increase the higher up the organisational ladder you go. In reality, much of the in-depth knowledge and commitment is embedded in the project team; and the challenge is moving this knowledge out into the other areas of the business so that the whole ‘value chain’ can work effectively (see more on linking innovation to value).

To achieve this, the project team need to be able to effectively ‘advise upwards’ so their executive managers understand the potential value that can be generated from the initiative and work to ensure the organisation makes effective use of the project’s deliverables. The art of advising upwards effectively is the focus of my book ‘Advising Upwards’.

An effective Sponsor is a major asset in achieving these objectives, providing a direct link between the executive and the project or program. Working from the top down, an effective sponsor can ensure the project team fully understand the business objectives their project has been created to help achieve and will work with the team to ensure the project fulfils its Charter to maximise the opportunity for the organisation to create value.

Working from the bottom up, new insights, learning and experience from the ‘coal face’ need to be communicated back to the executive so that the overall organisational objectives can be managed based on the actual situation encountered within the work of the project.

The critical importance of the role of the sponsor has been reinforced by numerous studies, including the PMI 2012 Pulse of the Profession report. According to this report, 75% of high performance organizations have active sponsors on 80% of more of their projects (for more on the value of sponsorship see: Project Sponsorship).

If you project has an effective sponsor, make full use of the support. The challenge facing the rest of us is persuading less effective sponsors to improve their level of support; you cannot fire your manager! The solution is to work with other project managers and teams within your organisation to create a conversation about value. This is a very different proposition to being simply ‘on-time, on-scope and on-budget’; it’s about the ultimate value to the organisation created by using the outputs from its projects and programs. The key phrase is “How we can help make our organisation better!”

To influence executives within this conversation, the right sort of evidence is important; benchmarking your organisation against its competitors is a good start, as is understanding what ‘high performance’ organisations do. PMI’s ‘Pulse of the Profession’ is freely available and a great start as an authoritative reference.

The other key aspect of advising upwards is linking the information you bring into the conversation with the needs of the organisation and showing your organisation’s executive how this can provide direct benefits to them as well as the organisation.

In this respect the current tight economic conditions in most of the world are an advantage, organisations need to do more with less to stay competitive (or effective in the public service). Developing the skills of project sponsors so that they actively assist their projects to be more successful is one proven way to achieve a significant improvement with minimal cost – in fact, if projects are supported more effectively there may well be cost savings and increased value at the same time! And what’s in it for us as project managers? The answer is we have a much improved working environment – everyone wins!!

The value of stakeholder management

One of the questions I’m regularly asked is to outline the business case for using stakeholder management in a business or project. This is a difficult question to answer accurately because no-one measures the cost of problems that don’t occur and very few organisations measure the cost of failure.

The problem is not unique; it is very difficult to value the benefits of an effective PMO, of improving project delivery methods (eg, improving the skills of your schedulers), of investing in effective communication (the focus of my September column in PMI’s PM Network magazine) or of better managing risk. The costs of investing in the improvement are easily defined, but the pay-back is far more difficult to measure.

There are two reasons why investing in effective stakeholder analytics is likely to deliver a valuable return on investment (ROI).

• The first is by knowing who the important stakeholders are at any point in time, the expenditure on other processes such as communication can be focused where it is needed most, generating efficiencies and a ‘bigger bang for your buck’.
• The second is stakeholders are a major factor in the risk profile of the work, their attitudes and actions can have significant positive or negative consequences and understanding the overall community provides valuable input to a range of processes including risk identification, requirements definition and schedule management.

At the most fundamental level, improving the management of stakeholders is directly linked to improving the quality of the organisation’s interaction with the stakeholders and as a consequence, the quality of the goods or services delivered to the end users or client (ie, stakeholders) as a result of being better informed whilst undertaking the work.

Quality was defined by Joseph Juran as fit for purpose, this elegant definition applies equally to the quality of your management processes as it does to your production processes and to the deliverables produced. And the three elements are interlinked; you need good management systems and information to allow an effective production system to create quality outputs for delivery to the client. A failure at any point in the chain will result in a quality failure and the production on deliverables that do not meet client requirements.

Placing stakeholder management within the context of quality allows access to some reasonably well researched data that can be interpolated to provide a reasonable basis for assessing the ‘return’ likely to be generated from an investment in stakeholder management.

Philip B. Crosby invented the concept of the ‘cost of quality’ and his book, Quality Is Free set out four major principles:

1. the definition of quality is conformance to requirements (requirements meaning both the product and the customer’s requirements)
2. the system of quality is prevention
3. the performance standard is zero defects (relative to requirements)
4. the measurement of quality is the price of nonconformance

His belief was that an organization that established a quality program will see savings returns that more than pay off the cost of the quality program: “quality is free”. The challenge is knowing you fully understand who the ‘customers’ actually are, and precisely what their various requirements and expectations are, and having ways to manage mutually exclusive or conflicting expectations. Knowing ‘who’s who and who’s important’ is a critical first step.

Feigenbaum’s categorization of the cost of quality has two main components; the cost of conformance (to achieve ‘good’ quality) and the cost of poor quality (or the cost of non-conformance).

Derived from: Feigenbaum, Armand V. (1991), Total Quality Control (3 ed.), New York, New York: McGraw-Hill, p. 109, ISBN 978-0-07-112612-0.

The cost of achieving the required level of quality is the investment made in the prevention of non-conformance to requirements plus the cost of testing and inspections to be comfortable the required quality levels have been achieved.

The cost of poor quality resulting from failing to meet requirements has both internal and external components. The internal costs are associated with defects, rework and lost opportunities caused by tying people up on rectification work. External failure costs can be much higher with major damage to an organisation’s brand and image as well as the direct costs associated with fixing the quality failure.

The management challenge is balancing the investment in quality against the cost of quality failure to hit the ‘sweet spot’ where your investment is sufficient to achieve the required quality level to be fit for purpose; overkill is wasted $$$$. But first you and ‘right stakeholders’ need to agree on precisely what fit for purpose actually means.

Also, the level of investment needed to achieve the optimum cost of quality is not fixed. The better the organisation’s quality systems, the lower the net cost. Six sigma proponents have assessed the total cost of quality as a percentage of sales based on the organisations sigma rating.

This table demonstrates that as the quality capability of the organisation improves, the overall cost of quality reduces offering a major competitive advantage to higher rating organisations. Most organisations are rated at 3 Sigma so the opportunity for improvement is significant.

Within this overall framework, the costs and risks associated with poor stakeholder engagement are significant and follow the typical pattern where most of the costs of poor quality are hidden. Using the quality ‘iceberg metaphor’ some of the consequences of poor stakeholder engagement and communication are set out below:

Effective stakeholder analysis and management directly contributes to achieving the required quality levels for the organisation’s outputs to be fit for purpose whilst at the same time reducing the overall expenditure on the cost of quality needed to achieve this objective. The key components are:

• Effective analysis of the stakeholder community will help you identify and understand all of the key stakeholders that need to be consulted to determine the relevant aspects of fit for purpose.
• Understanding the structure of your stakeholder community facilitates the implementation of an effective two-way communication strategy to fully understand and manage the expectations of key stakeholders.
• Effective communication builds trust and understanding within a robust relationship.
  o Trust reduces the cost of doing business.
  o Understanding the full set of requirements needed for the work to be successful reduces the risk of failure.
  o Robust relationships with key stakeholders also contribute to more effective problem solving and issue management.
• Maintaining the stakeholder engagement effort generates enhanced information that will mitigate risks and issues across all aspects of the work.

Calculating the Return on Investment:

Effective stakeholder management is a facilitating process that reduces the cost, and increases the efficiency of an organisations quality and risk management processes. Based on observations of similar process improvement initiatives such as CMMI, the reduction in the cost of quality facilitated by improved stakeholder engagement and management is likely to be in the order of 10% to 20%.

Based on the typical ‘Level 3’ organisation outlined above, a conservative estimate of the efficiency dividend per $1million in sales is likely to be:

Total cost of quality = $1,000,000 x 25% = $250,000
Efficiency dividend = $250,000 x 10% = $25,000 per $1 million in sales.

Given the basic costs of establishing an effective stakeholder management system for a $5million business, using the Stakeholder Circle®, (See: http://www.stakeholder-management.com) including software and training will be between $30,000 and $50,000 the efficiency dividend will be:

($25,000 x 5) – 50,000 = $75,000
(or more depending on the actual costs and savings).

The element not included above is the staff costs associated firstly with maintaining the ‘culture change’ associated with introducing an effective stakeholder engagement process and secondly with actually performing the stakeholder analysis and engagement. These costs are embedded in the cost of quality already being outlaid by the organisation and are inversely proportional to the effectiveness of the current situation:

• If current expenditures on stakeholder engagement are relatively low, the additional costs of engagement will be relatively high, but the payback in reduced failures and unexpected risk events will be greater. The overall ROI is likely to be significant.
• If the current expenditures on stakeholder engagement are relatively high, the additional costs will be minimal (implementing a systemic approach may even save costs), however, the payback in reduced failure costs will be lower because many of the more obvious issues and opportunities are likely to have been identified under the current processes. The directly measurable ROI will be lower, offset by the other benefits of moving towards a higher ‘Sigma level’.

Conclusion:

The introduction of an effective stakeholder management system is likely to generate a significant ROI for most organisations. The larger part of the ‘return’ being a reduction in the hidden costs associated with poor stakeholder engagement. These costs affect reputation and future business opportunities to a far greater extent than their direct costs on current work. For this reason, we feel implementing a system such as the Stakeholder Circle is best undertaken as a strategic organisational initiative rather than on an ad hoc project or individual workplace basis.

The path to organisational Stakeholder Relationship Management Maturity (SRMM®) is discussed at: http://www.stakeholdermapping.com/srmm-maturity-model

System Support?

At times I’m pleased we only have to support our Stakeholder Circle software. The following was forwarded by a colleague – the veracity of the conversation cannot be determined!

Support log:
Caller : Hi, our printer is not working..
Customer Service: What is wrong with it?
Caller : Mouse is jammed.
Customer Service: Mouse? … Printers don’t have a mouse!!!
Caller: Mmmmm??.. Oh really? .. I will send a picture.

Stakeholder Circle in the ‘cloud’

The Stakeholder Circle® methodology and tools have been in use for several years. However, many potential business users found accessing the system difficult, with company policies preventing the installation of the necessary software.

By moving to ‘the cloud’ and transitioning to a standard Microsoft operating environment these issues should be in the past. Anyone on any computer platform can access the tool running on our secure servers and larger corporations can elect to install the system on their own intranets. The flexibility of ‘the cloud’ has also allowed us to offer an increased range of options to suite organisations of all sizes.

As part of the overall system upgrade, we have also enhanced our websites:

• Our Stakeholder Relationship Management website has been overhauled and is being progressively developed into the world’s leading resource for stakeholder management information. See: http://www.stakeholdermapping.com 
   
• The Stakeholder Circle website has been simplified and now focuses on the Stakeholder Circle® tools, methodology and a comprehensive help system, see: http://www.stakeholder-management.com

We have set up a separate server to allow interested people to try out the new ‘cloud’ version of the Stakeholder Circle® register on-line at http://www.stakeholdermapping.com/free-trial and your access information will be emailed to you within a few minutes.

Making a TV Show

This weekend we went to see the taping of the last ever episode of ‘Good New Week’ (GNW) – a comedy program we’ve enjoyed for years. Unfortunately all did not go according to plan (a topic we have discussed in other posts).

There were two sessions of 2 hours each with an hour’s break; we were booked to attend the second session starting at 5:00pm. Technical problems in the first session meant the second session did not start until after 6:00pm and generated a host of problems with some good learnings……

First, once the problem became apparent, the queue for the 5:00 show were told of the delay and the time to come back – good communication and good decision making (we went for a drink).

Second, the star host of the show, Paul McDermott apologised and explained the cause of the problem before starting the second session – admitting a problem and apologising is a great starting point; see: http://mosaicprojects.wordpress.com/2011/10/01/mistakes/

Then the show had to be taped out of sequence because several of the panellists also had their own shows to give as part of the overall Melbourne International Comedy festival. A lot of the re-organising was done on the fly but again as far as possible the audience were kept informed.

With all of the disruptions, our 7:00 dinner was delayed to 9.00pm (but we kept in communication with our stakeholder’s in the restaurant).

Thinking back on the experience one lesson learned is to extend a quotation often attributed to Otto von Bismarck (the first Chancellor of Germany) to the making of TV shows:

“If you like laws and sausages, you should never watch either one being made*”. This definitely applies to taped TV shows and highlights the skill and luck needed for ‘live-to-air’ shows.

*Note: This quote probably was not by Bismark, there is a quote: “Je weniger die Leute darüber wissen, wie Würste und Gesetze gemacht werden, desto besser schlafen sie nachts” (The less the people know about how sausages and laws are made, the better they sleep in the night) attributed to him but not referenced, an earlier version “Laws, like sausages, cease to inspire respect in proportion as we know how they are made” was said by American poet John Godfrey Saxe (1816-1877).