"Slap my Forehead" Part 2: Moving the cloud from the mountain!

So in Part 1, I slightly dramatically layed out the position that many companies find themsleves at this point in the financial year / planning process ie a disconnect between the amount entered pragmatically into the annual plan for change initiatives and the real (greater) expectation of the combined business units.


In the past I have referred to this as the cloudy mountain scenario.

Imagine this. Senior management are at the top of the mountain in clear skies and bright sunshine. They can see for miles and have the vision of where they want to go. They genuinely endeavour to share this vision, from their perspective. In contrast most of their staff are on the lower slopes of the mountain, below the cloud level, carrying heavy loads, up through wooded slopes with no clear paths, trying to reach the top and satisfy the vision. Around the middle of the mountain is a layer of thick cloud that impedes communication and prevents anyone from knowing if any of the paths from the lower slope will reach the top.


In practice we need to remove the cloud and clarify the paths even if they are still complicated.

Does this sound at all familiar? Does it work as a metaphor?


So what can we do about this? I would like to give three real approaches to at least fitting a portfolio with a budget, mixing pragmatism and a little idealism. The best is possibly left to last so please do read it all.


BENEFIT REALISATION MANAGEMENT
The first, and maybe idealistic, way is Benefit Realisation Management (BRM). This is effectively a top down approach that looks to articulate and link a clear understanding of what needs to be done to sustain and develop the business and the components of the optimum portfolio of change required to deliver the required benefits.


Essentially this looks to four aspects:-

• The business OBJECTIVE(s)
• The BENEFIT(s) required to achieve the objective(s)
• The CHANGE(s) that will deliver the benefit(s); and
• The ENABLER(s) that support the change(s)

I don't plan to go into this in detail, but would refer you to one of the definitive texts called "Benefit Realisation Management" by Gerald Bradley. Heavily promoted by the UK Office of Government Commerce (OGC) and mandated for public sector change this has some intellectual rigour and even if you can't use all of it, some of it will help.


In my experience the failing of this approach in the financial sector is that there is insufficent clarity and/or articulation of high level strategy combined with an incredible impatience for quick answers. There are also too many personal agendas that are looking for a particular answer. This approach tends to expose these and subject "sponsors" to deeper scrutiny and expose flaws in management thinking. No bad thing you might say, but still rare and often unwelcome in many organisations.


I do know of one Bank that claims to use it, but they are in the vanguard.


Overall it is usually the time factor (ie not enough time to do it) that usually defeats this, along with the cost (it does takes some effort to do this well) in a financially challenged world.


Portfolio Triage
The second more pragmatic way is to operate an element of change triage. This is needed as Pareto's principle affects this as many other aspects of life.

In relation to planning change portfolios, Pareto's Principle (or the 80/20 rule) means that something like 80% of the information regarding a proposed change or project is held in 20% of the data, taking 20% of the effort and time to collect and collate. These are the big ticket items like estimated dates, sponsorship, deliverables, major risks, etc. The last 20% of the information (in term of value to understanding the project) would take 80% of the effort and time to gather. 

It is this last 20% that is required if we are to use mechanical tools properly(?) to rank and prioritise or indeed to build optimum portfolios using efficient investment frontiers (see note at the end). This does however miss much of the point that projects and change are new endeavours, with considerable uncertainty and a good share of unknowns. In striving to supply this detailed information (and get one's pet project selected), a false sense of certainty is often created.

So, back to the triage

In this we create a long list of possible change/projects and a call together a sensible group of people who can reasonably look across the business. Every company has them, the trick is to find, engage and empower them. The first act of this group is to split the proposals into three groups.

Group 1 - This comprises changes that are "must do". By this I don't mean that someone has shouted loudly, but rather those mandated by law or regulation or genuinely required to keep the enterprise going (ie failure to address at this point would most likely lead to a catastrophic failure). This last set includes absolute demands from major clients or repair of business infrastructure (including the control environment).

Group 3 - Yes I know, wait for it - These are highly speculative, wish-list types ideas. These probably lack strong sponsorship, credible supporting information or even any strength of vision. This can include those that seem excessively risky or improbably complicated.

Group 2 - These are the projects you would like to do as they are considered achievable and likely to bring significant benefit to the organisation.

Be brutal, be tough. Entry into Groups 1 and 2 must really be merited.

I suggest that some socialisation of these three groups outside the main team is worthwhile to check validity. Remember these are just lists and we are human, we can make changes as we go along if we recognise we have made a mistake.

When you are reasonably happy with the groups, do a sanity check. Total up the indicative investment required for the "must do" changes and see how that fits with your financial appetite? If it is already more than you wish to spend then one can pretty much disregard even Group 2. The focus then must be to review and reduce the "must do" list, challenge and reduce the cost to implement the changes and/or seeks additional funding.

Next assuming, one has some investment £ or $ left after the "must do"s one can look at Group 2. For this I suggest setting a small team to order that list in a way that makes sense. This will be different by company and indeed by year, but broadly will be about supporting the company's strategy direction. This will probably require the collection of additional data, but at least one is looking at a smaller set and not wasting effort on no-brainers and no-hopers.

I would counsel here against false precision and any sense of spurious accuracy. Just because a spreadsheet can calculate costs to pennies and cents, does not make that useful. Projects, particular at planning stage, are rife with uncertainty. The margin of error can easily be plus/minus 10% or 20% - maybe more. So if one is looking at a project circa £500k, the nearest one needs to estimate is probably £10k. So why do so many project lists report estimates down to the nearest £1 or £10?

The answer is because they can; spreadsheets make it easy and the detail oriented amongst us, often the financial planners, find comfort in that sense of accuracy, no matter how spurious it is.

I was around and used the first IBM PC XT in London back in 1980. The spreadsheet was pretty new then and the king was Visicalc - 64 columns by 256 rows if I recall correctly. It was fascinating how just putting the numbers on a spreadsheet and printing them neatly, immediately gave credibility to what had previously been "back of an envelope" calculations. This is still true today, but so many have only lived with spreadsheets that they don't realise it.

OK, back to the plot. Once you have ordered the Group 2 list draw a line, literally below the last project you could afford, given the budget you have. And now reconvene your group of wise men and women.

With the list, get the group to undertake a brief sanity check, moving any projects that are considered significantly out of order - no tinkering, just major corrections. Recast the cut of line and now focus on the few (say 5 or so) projects either side of the cut off. This is where your effort should go and where the fine tuning will happen. If a project is well above the line at this point it doesn't matter how far above the line, just that it is there; the same for below the line.

This may well be much more delphic in its execution, but supported with the data you have from planning and a knowledge of the business.

I will throw another consideration into the ring, one that has perpetually frustrated financial planners. That is that the list of projects you end up with "above the line" does not need to total the figure that goes into the finances. Yes, I know that the accountants like a sub-ledger with a set of detail that exactly matches a total and I have had to operate within such a regime in the past. The uncertainty surrounding change, means that in this instance a list that is plus/minus 10% of the budget is certainly workable, assuming one manages the commissioning of change and the emergence of new requirements as the year progresses.

So with your list and its line, perform a sanity check once more, to see what is still below the line, yet should be above. If there is anything, try and fit it in, if not at least highlight this with the relevant governing body.

Lastly, if you, have any investment appetite left, look at Group 3 and use your wise group to cherry pick from it. Avoid the wasted effort of trying to re-evaluate and prioritise every idea, instead focus on the ones with most informed support.

From this you will have a working change portfolio that can be exposed to the wider business with reasonable confidence that if there are more alterations they will be either minor tinkering or so unexpected that no one could see them coming. That is the best you can do.

The Best Bit

Now this is the best bit. Spreadsheets make it far too easy to have a negative number, to project overspending without anyone feeling the necessary pain. The neat trick is to make the issue material.

This was brought home to me a few years ago when the budget for a major programme was cut by 65%, yet the expectation for full benefit delivery remained. As Programme Manager I tried everything to establish a revised, yet reduced plan and set of change. The Sponsors held on to their expectations. The business and workstream leaders could/would do little more than pare a few % off here and there. No one was prepared to give anything up or think radically about what could be done.

I was tearing my hair out as the run rate was unsustainable, yet no one would accept the ineveitable consequences of the cut.

In the end I printed a load of monopoly money, pulled the "full" change list and called every stakeholder including the sponsors into a room. It would be fair to say there was a degree of scepticism when I dumped the monopoly money on the table and announced that it represented our remaining budget.


I then took them through the list of changes one by one as they appeared on the list, asking each stakeholder if they still needed the change and indeed how much they needed to complete it. When the meeting agreed an item I lifted the relevant amount of monopoly money and gave it to the stakeholder. This continued until somewhere around half way we ran out of money - the table was bare! There had been some give up, but not much and certainly not enough. The group saw that there were still some critical changes that had not been covered and there was no more money.


At this point the penny started to drop and the real conversations started to happen and the sponsors stepped up. They went back and challenged everything they had passed already. They then looked at each of the outstanding items and identified the must haves. When there was no money, they started horse trading between projects and workstreams. It was a joy to behold.


In the end we had a work plan that would fit within the budget. Yes, we had given something up, but we had done it together and everyone understood. Even a tough sponsor came to me after and said she never thought it would work, but it had and she was pleasantly surprised and very pleased that it had.


The trick was to make the issue real and tangible. To force the real, necessary debates by real stakeholders and not hide behind a pretty set of numbers that someone else has put in a spreadsheet, with its tolerance of negative numbers.


It also avoided spurious accuracy, keeping the process, numbers and tracking pretty simple.


Of course we had a load more work to do, but that was a real breakthrough and an approach I would commend to you if faced with the proverbial quart into a pint pot. You probably can't use it every year or it will lose its impact, but use it wisely and it will serve you well.


Please do comment on this is you think I am way off or you want to add anything?


Footnote
Efficient Investment Frontiers - this is from investment portfolio theory and looks to identify the sets of projects/investments that offer the maximum return for any set level on investment. If you select any set that is not on the frontier then it will be sub-optimal and, in theory, you can see why.

It can work reasonably well in the world of financial investment as there is plenty of pretty good quality information, but in change and projects they have less certainty, less quality data and plenty of subjective dimensions. In theory it should work if you spend the time collecting the data and trust it, but I will refer you back to the Pareto Principle.

I think that the use of this technique is another instance of spurious accuracy.

It is "Slap my forehead" time; we are all prioritising change portfolios - again!

Nearly everyone I know who is involved in planning and managing change is currently partaking of the annual portfolio prioritisation ritual. This is something I have seen year after year, yet still seems to come as a surprise to senior management, causing stress and uncertainty for much longer than necessary. I should stress here that I am talking across financial services and not just a single company.

I plan two posts on this. The first will be an analysis of why this happens, year after year. It is slightly enhanced (simplified in places, emphasised in others) in the hope that the reader can recognise and empathise with the situation. Please do tell me if it is way off.

The second will be some practical thoughts on portfolio prioritisation, based on a number of years doing this at a corporate level and forever trying to fight the dreamers on the one hand and those hell bent on spurious precision on the other.

One thing I have learnt is that we waste so much management time trying to create something, ie a change agenda, that will at best be only ~60% correct when reviewed with hindsight. The other 40% will be changes in plan, genuine errors, and unforeseen and unforeseeable needs and events. If we recognised and accept this truism we might find that Q4 each year can be made into a much more productive period.

Part 1

The root causes are, I believe, pretty simple.

STEP 1: A planning process that starts from the bottom up, with business units/lines generating more of a wish list than a strategic plan. Rarely is anything co-ordinated across units, relying instead on untested assumptions and supported by little more than the most basic data. If there is any articulation of benefits, it is usually optimistic with only limited understanding of the sensitivities and alternatives.
 
This happens despite the best intentions of many who draw up templates, guidelines, etc. and try to run an integrated process. There is something of a kid in a candy store mentality that descends when it comes to building most business driven change agendas
 
STEP 2: Someone (the PMO?) consolidates the data and, wonder of wonders, the total is almost certainly a serious multiple of what could be afforded and/or delivered in the current period. What reason is there to believe that the organisation has the capacity to drive and absorb 3x or 4x the currently acheived levels? We still ignore that basic sense check, time and again.
 
This is usually the first wake up call that it is not going to be easy. A common response is to challenge if it is all needed. The usual outcome is a minimal reduction by shaving some costs, a few per cent here and there, and removing those ideas/proposals that are clearly pure fantasy. This rarely solves the problem.
 
STEP 3: Put the inflated change apettite into the corporate mixing bowl and find that the financial targets that supposedly drove the planning from the start are unachievable. Now, as the circular logic hits home, the first signs of panic set in. Some management, usually the planning and financial teams, realise that the company can only deliver the sales, profits, etc if they address all that "change", but the organisation cannot afford it all and so won't get the income which will make the ratios worse. What to do? It seems so easy when it is just numbers on a spreadsheet. When you have to deal with a diverse set of people/interests and consider many implications, not just monetary aspects, it is so much more difficult.
 
STEP 4: There is a realisation that the information gathered so far is nowhere near good enough to really assess and prioritise the opportunities or to understand the full implications of not doing any one item. Linked to this is the realisation that there is not enough time to start again - there are almost always external timetables that have to be met.
 
Of course there can be some subjective tinkering and whittling of the list, but this rarely has any chance of being enough. There are too many interested parties fighting for their own rewards. A little horse trading may occur, but the old adage of follow the money (ie who gets the best rewarded for what) is no more true than in this process.
 
STEP 5: Decouple the financial budget from the composition of a detailed change agenda, and set a change budget that fits the targets and allows a set of financial figures to be submitted - even if the full business implications are not yet quantified.

This leaves a situation where low level business expectations still exceed high level management promises and considerable uncertainty remains about what will be needed or indeed delivered in the year ahead. This is very uncomfortable for many and still needs resolving if the "planners" amongst the management teams are to do what they do, ie plan, for next year.

The language that is often used is "deferred (to later years)" or "phased" rather than "dropped" and one would hope that there would be a rolling programme of work that these fall into, but as often as not, next year is a new year, with new management and new business ideas.

In practice this experience will most likely be repeated again, despite claims that the organisation has learned and is doing something better than the last time. In scenes reminisence of the film Ground Hog Day  most "actors" fail to recognise the repeating cycle.

This is where it seems many organisations are right now at the end of November.

Please share any insights that support or counter this post as comments.

I will shortly post Part 2 with some practical thoughts on how the change profession can help mitigate this situation.

 
Note: Of course it is possible that the avaialbility of internal and external resource could be a limiting factor, but in my experience, in most cases, the financial constraints hit first.

Really nice films....do you have any you would add?

Every now and then I have come across what I consider to be really nice films. These are films that gently entertain, offend no one, don't over tax the brain or strain the heart, but at the end you feel uplifted and glad you watched. There is also something about the pace of the film. It needs to be even and the story not overtly contrived.

Of course there were many old, black and white ones that we used to watch on Sunday afternoons, but I am not counting them.

I would like to put up three nominations and also explain why a couple did not make my list. I would then be interested if any readers of this post wanted to add their own thoughts.

My first is "Gregory's Girl". A low budget, Scottish film that just warms the soul. I watched it when it was first released in 1981 and am still happy to watch it now. Of course it could have something to do with the fact I fancied Claire Grogan (ex- Altered Images), but I honestly think it is much more than that.

My second is "The Motorcycle Diaries" from 2004 that is based on a journal from Ernesto "Che" Guevara.OK it is subtitled so takes a little more watching, but still it was a "nice" film. I received this as a free CD with a Sunday paper and had no expectations of it, but was quietly uplifted by the time it was finished.

My last is "The Legend of Bagger Vance", a lesser known film with Will Smith and Matt Damon from 2000. It may help that I play golf, but I got a good feeling from the moment I saw it was to be on TV. I have watched it now and not been disappointed.

A couple that did not make it into my three are "Home Alone", a great favourite with my family, but in my mind too contrived and too pacey, and "Miracle on 34th Street", again too contrived.

Now I would be interested to see if anyone cares to either argue with my three or add their own. Please feel free to do either.

Laziness breeds success? The rule of three!

I used to have a rule of three at a previous company. If my director mentioned something new I noted it, but unless instructed otherwise, did little more. If it was mentioned a second time I started thinking about what I would say about it. The third time it appeared I would mark it as important and make sure I responded quickly to it.

That way I avoided much wasted effort chasing fleeting ideas that never caught hold.

Recently the concept of laziness as a skill (?) that contributes to success has crossed my path three times. In this concept laziness is not about idleness or a negative approach, but more about how to realize the desired outcome at minimum personal effort.


One time.....

The first time was a colleague I respect referring a book to me - The Lazy Project Manager. It is subtitled "How to achieve twice as much and still leave the office early." My colleague was saying how much sense it spoke, but then like me has been around change for a while and has a lot of experience to gauge it against. In general it is about achieving through others rather than running around frantically trying to do it all oneself. It also has an element of being focussed on the right things.

An old friend used to ask students why projects fail? After all the usual suggestions of poor sponsorship, scope creep, poor delivery by others, etc.. his answer was "risks happen!" His argument was that estimating, planning, managing, etc were skills that could be learned and were essentially mechanical, but the killer was the unknowns, the uncertainties and it was here that project manager should be focussing. I can see the link to the "lazy" concept here.


It does not seem to be available as an ebook yet, but will soon be on my reading pile.

Two times......

Readers may be aware that a little while ago I asked around for examples of inspirational leaders of cultural change. The most interesting aspect of that was the dearth of suggestions (instead people offered themselves and their services or suggested tools, but did not identify an individual). When I raised that again recently someone immediately said they could think if at least two who they would cite. As he then mused he commented that he could describe them both easily in that they were lazy!

My ears pricked up at this second mention of lazy being a good characteristic. Indeed it then that the quality was coined as aiming to achieve the most with the least personal effort.

Three times.......

Soon after that I found myself in a natur e vs nurture debate about leadership skills, in particular the ability to evoke loyalty. We didn't agree, but we are still friends and that is the important bit. In this debate it turned out that my friend had worked for Richard Branson and he described him as "actively lazy". The context was that as a serial entrepreneur Richard Branson learnt how to win the support of others that allowed him to take his time learning about an opportunity, but then when he judged it worthwhile was able to focus, both his and his supporters efforts on it.


So....that was three times and here we are;

Laziness is good!

Well, it is when it manifests in working and achieving through others (could that be delegation?) AND focussing on the important things and not getting caught up in the morass of everyday life. When expressed that way it is not surprising it can be linked with inspirational leaders too!

Sounds easy, eh? But in much of work life it seems managers feel safer and indeed get rewarded for being busy, not lazy. They never want to appear lazy. Instead they control so much themselves, limiting the ability of their staff to develop under them. They get so caught up in the daily machinery of meetings and paperwork that they barely have time to think, often catching up with work and emails at 2am Sunday morning.

On balance, and with the caveat that it is the active laziness described here, I have decided that I can happily aspire to being "lazy".


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