9.0 INTRODUCTION

Over the past 30 years, one of the most significant changes in project management has been the idea that informal project management does work. In the 1950s and 1960s, the aerospace, defense, and large construction industries were the primary users of project management tools and techniques. Because project management was a relatively new management process, customers of the contractors and subcontractors wanted evidence that the system worked. Documentation of the policies and procedures to be used became part of the written proposal. Formal project management, supported by hundreds of policies, procedures, and forms, became the norm. After all, why would a potential customer be willing to sign a $10 million contract for a project to be managed informally?

This chapter clarifies the difference between informal and formal project management, then discusses the four critical elements of informal project management.

9.1 INFORMAL VERSUS FORMAL PROJECT MANAGEMENT

Formal project management has always been expensive and time-consuming. In the early years, the time and resources spent on preparing written policies and procedures had a purpose: They placated the customer. As project management became established, formal documentation was created mostly for the customer. Contractors began managing more informally, while the customer was still paying for formal project management documentation. Table 9-1 shows the major differences between formal and informal project management. As you can see, the most relevant difference is the amount of paperwork.

Paperwork is expensive. Even a routine handout for a team meeting can cost $500 to $2,000 per page to prepare. Executives in excellent companies know that paperwork is expensive. They encourage project teams to communicate without excessive amounts of paper. However, some people are still operating under the mistaken belief that ISO 9000 certification requires massive paperwork.

Figure 9-1 shows the changes in paperwork requirements in project management. The early 1980s marked the heyday for lovers of paper documentation. At that time, the average policies and procedures manual probably cost between $3 million and $5 million to prepare initially and $1 million to $2 million to update yearly over the lifetime of the development project. Project managers were buried in forms to complete to the extent that they had very little time left for actually managing the projects. Customers began to complain about the high cost of subcontracting, and the paperwork boom started to fade.

Real cost savings did not materialize until the early 1990s with the growth of concurrent engineering. Concurrent engineering shortened product development times by taking activities that had been done in series and performing them in parallel instead. This change increased the level of risk in each project, which required that project management back away from some of its previous practices. Formal guidelines were replaced by less detailed and more generic checklists.

Policies and procedures represent formality. Checklists represent informality. But informality does not eliminate project paperwork altogether. It reduces paperwork requirements to minimally acceptable levels. To move from formality to informality demands a change in organizational culture (see Figure 9-2). The four basic elements of an informal culture are these:

1. Trust
2. Communication
3. Cooperation
4. Teamwork

Large companies quite often cannot manage projects on an informal basis although they want to. The larger the company, the greater the tendency for formal project management to take hold. A former vice president of IOC sales operations and customer service at Nortel Networks believes:

The introduction of enterprise-wide project process and tools standards in Nortel Networks and the use of pipeline metrics (customer-defined, industry standard measures) provides a framework for formal project management. This is necessary given the complexity of telecom projects we undertake and the need for an integrated solution in a short time frame. The Nortel Networks project manager crosses many organizational boundaries to achieve the results demanded by customers in a dynamic environment.

Most companies manage either formally or informally. However, if your company is project-driven and has a very strong culture for project management, you may have to manage either formally or informally based on the needs of your customers.

9.2 TRUST

Trusting everyone involved in executing a project is critical. You wake up in the morning, get dressed, and climb into your car to go to work. On a typical morning, you operate the foot pedal for your brakes maybe 50 times. You have never met the people who designed, manufactured, or installed the brakes. Yet you still give no thought to whether the brakes will work when you need them. No one broadsides you on the way to work. You do not run over anyone. Then you arrive at work and push the button for the elevator. You have never met the people who designed, manufactured, installed, or inspected the elevator. But again you feel perfectly comfortable riding the elevator up to your floor. By the time you get to your office at 8 A.M., you have trusted your life to uncounted numbers of people whom you have never even met. Still, you sit down in your office and refuse to trust the person in the next office to make a $50 decision.

Trust is the key to the successful implementation of informal project management. Without it, project managers and project sponsors would need all that paperwork just to make sure that everyone working on their projects was doing the work just as he or she had been instructed. Trust is also key in building a successful relationship between the contractor/subcontractor and the client. Let’s look at an example.

Perhaps the best application of informal project management that I have seen occurred several years ago in the Heavy Vehicle Systems Group of Bendix Corporation. Bendix hired a consultant to conduct a three-day training program. The program was custom designed, and during the design phase the consultant asked the vice president and general manager of the division whether he wanted to be trained in formal or informal project management. The vice president opted for informal project management. What was the reason for his decision? The culture of the division was already based on trust. Line managers were not hired solely based on technical expertise. Hiring and promotions were based on how well the new manager would communicate and cooperate with the other line managers and project managers in making decisions in the best interests of both the company and the project.

When the relationship between a customer and a contractor is based on trust, numerous benefits accrue to both parties. The benefits are apparent in companies such as Hewlett-Packard, Computer Associates, and various automobile subcontractors. Table 9-2 shows the benefits.

9.3 COMMUNICATION

In traditional, formal organizations, employees usually claim that communication is poor. Senior managers, however, usually think that communication in their company is just fine. Why the disparity? In most companies, executives are inundated with information communicated to them through frequent meetings and dozens of weekly status reports coming from every functional area of the business. The quality and frequency of information moving down the organizational chart are less consistent, especially in more formal companies. But whether it is a problem with the information flowing up to the executive level or down to the staff, the problem usually originates somewhere upstairs. Senior managers are the usual suspects when it comes to requiring reports and meetings. And many of those reports and meetings are unnecessary and redundant.

Most project managers prefer to communicate verbally and informally. The cost of formal communication can be high. Project communication includes dispensing information on decisions made, work authorizations, negotiations, and project reports. Project managers in excellent companies believe that they spend as much as 90 percent of their time on internal interpersonal communication with their teams. Figure 9-3 illustrates the communication channels used by a typical project manager. In project-driven organizations, project managers may spend most of their time communicating externally to customers and regulatory agencies.

Good project management methodologies promote not only informal project management but also effective communications laterally as well as vertically. The methodology itself functions as a channel of communication. A senior executive at a large financial institution commented on his organization’s project management methodology, called Project Management Standards (PMS):

The PMS guides the project manager through every step of the project. The PMS not only controls the reporting structure but also sets the guidelines for who should be involved in the project itself and the various levels of review. This creates an excellent communication flow between the right people. The communication of a project is one of the most important factors for success. A great plan can only go so far if it is not communicated well.

Most companies believe that a good project management methodology will lead to effective communications, which will allow the firm to manage more informally than formally. The question, of course, is how long it will take to achieve effective communications. With all employees housed under a single roof, the timeframe can be short. For global projects, geographical dispersion and cultural differences may mandate decades before effective communication will occur. Even then, there is no guarantee that global projects will ever be managed informally.

Suzanne Zale, Hewlett-Packard operations director, emphasized:

With any global project, communications becomes more complex. It will require much more planning up front. All constituents for buy-in need to be identified early on. In order to leverage existing subject matter, experts conversant with local culture, and suppliers, the need for virtual teams becomes more obvious. This increases the difficulty for effective communications.

The mechanism for communication may also change drastically. Face-to-face conversations or meetings will become more difficult. We tend to rely heavily on electronic communications, such as video and telephone conferencing and electronic mail. The format for communications needs to be standardized and understood up front so that information can be sent out quickly. Communications will also take longer and require more effort because of cultural and time differences.

One of the implied assumptions for informal project management to exist is that employees understand their organizational structure and their roles and responsibilities within both the organizational and the project structure. Forms such as the linear responsibility chart and the responsibility assignment matrix are helpful. Communication tools are not used today with the same frequency as in the 1970s and 1980s.

For multinational projects, the organizational structure, roles, and responsibilities must be clearly delineated. Effective communications is of paramount importance and probably must be accomplished more formally than informally.

As Suzanne Zale stated:

For any global project, the organizational structure must be clearly defined to minimize any potential misunderstandings. It is best to have a clear-cut definition of the organizational chart and roles and responsibilities. Any motivation incentives must also contemplate cultural differences. The drivers and values for different cultures can vary substantially.

The two major communication obstacles that must be overcome when a company truly wants to cultivate an informal culture are what I like to call hernia reports and forensic meetings. Hernia reports result from senior management’s belief that that which has not been written has not been said. Although there is some truth to such a belief, the written word comes with a high price tag. We need to consider more than just the time consumed in the preparation of reports and formal memos. There is all the time that recipients spend reading them as well as all the support time taken up in processing, copying, distributing, and filing them.

Status reports written for management are too long if they need a staple or a paper clip. Project reports greater than five or 10 pages often are not even read. In companies excellent in project management, internal project reports answer these three questions as simply as possible:

1. Where are we today?
2. Where will we end up?
3. Are there any problems that require management’s involvement?

All of these questions can be answered on one sheet of paper.

The second obstacle is the forensic team meeting. A forensic team meeting is a meeting scheduled to last 30 minutes that actually lasts for more than three hours. Forensic meetings are created when senior managers meddle in routine work activities. Even project managers fall into this trap when they present information to management that management should not be dealing with. Such situations are an invitation to disaster.

9.4 COOPERATION

Cooperation is the willingness of individuals to work with others for the benefit of all. It includes the voluntary actions of a team working together toward a favorable result. In companies excellent in project management, cooperation is the norm and takes place without the formal intervention of those in authority. The team members know the right thing to do, and they do it.

In the average company (or the average group of any kind, for that matter), people learn to cooperate as they get to know each other. That takes time, something usually in short supply for project teams. But companies such as Ericsson Telecom AB, the General Motors Powertrain Group, and Hewlett-Packard create cultures that promote cooperation to the benefit of everyone.

9.5 TEAMWORK

Teamwork is the work performed by people acting together with a spirit of cooperation under the limits of coordination. Some people confuse teamwork with morale, but morale has more to do with attitudes toward work than it has to do with the work itself. Obviously, however, good morale is beneficial to teamwork.

In excellent companies, teamwork has these characteristics:

• Employees and managers share ideas with each other and establish high levels of innovation and creativity in work groups.
• Employees and managers trust each other and are loyal to each other and the company.
• Employees and managers are committed to the work they do and the promises they make.
• Employees and managers share information freely.
• Employees and managers are consistently open and honest with each other.

Making people feel that they are part of a team does not necessarily require a great deal of effort. Consider the situation at the Engineering and Construction Services Division of Dow Chemical Corporation several years ago. Dow Chemical had requested a trainer to develop a project management training course. The trainer interviewed several of the seminar participants before the training program to identify potential problem areas. The biggest problem appeared to be a lack of teamwork. This shortcoming was particularly evident in the drafting department. The drafting department personnel complained that too many changes were being made to the drawings. They simply could not understand the reasons behind all the changes.

The second problem identified, and perhaps the more critical one, was that project managers did not communicate with the drafting department once the drawings were complete. The drafting people had no idea of the status of the projects they were working on, and they did not feel as though they were part of the project team.

During the training program, one of the project managers, who was responsible for constructing a large chemical plant, was asked to explain why so many changes were being made to the drawings on his project. He said, “There are three reasons for the changes. First, the customers don’t always know what they want up front. Second, once we have the preliminary drawings to work with, we build a plastic model of the plant. The model often shows us that equipment needs to be moved for maintenance or safety reasons. Third, sometimes we have to rush into construction well before we have final approval from the Environmental Protection Agency. When the agency finally gives its approval, that approval is often made contingent on making major structural changes to the work already complete.” One veteran employee at Dow commented that in his 15 years with the company, no one had ever before explained the reasons behind drafting changes.

The solution to the problem of insufficient communication was also easy to repair once it was out in the open. Project managers promised to take monthly snapshots of the progress on building projects and share them with the drafting department. The drafting personnel were delighted and felt more like a part of the project team.

9.6 COLOR-CODED STATUS REPORTING

The use of colors for status reporting, whether it is for printed reports or intranet-based visual presentations, has grown significantly. Color-coded reports encourage informal project management to take place. Colors can reduce risks by alerting management quickly that a potential problem exists. One company prepared complex status reports but color coded the right-hand margins of each page designed for specific audiences and levels of management. One executive commented that he now reads only those pages that are color-coded for him specifically rather than having to search through the entire report. In another company, senior management discovered that color-coded intranet status reporting allowed senior management to review more information in a timely manner just by focusing on those colors that indicated potential problems. Colors can be used to indicate:

• Status has not been addressed.
• Status is addressed, but no problems exist.
• Project is on course.
• A potential problem might exist in the future.
• A problem definitely exists and is critical.
• No action is to be taken on this problem.
• Activity has been completed.
• Activity is still active and completion date has passed.

9.7 CRISIS DASHBOARDS

Over the past several years, dashboards have become common for presenting project status information to the project team, clients, and stakeholders. The purpose of a dashboard is to convert raw data into meaningful information that can easily be understood and used for informed decision making. The dashboard provides the viewer with situational awareness of what the information means now and what it might mean in the future if the existing trends continue. Dashboards function as communication tools that allow us to go to paperless project management, to hold fewer meetings, and to eliminate waste.

Projects in today’s environment are significantly more complex than many of the projects managed in the past. With today’s projects, governance is performed by a governance committee rather than just a single project sponsor. Each stakeholder or member of the governance committee may very well require different metrics and key performance indicators (KPIs). If each stakeholder wishes to view 20 to 30 metrics, the costs of metric measurement and reporting can be significant and can defeat the purpose of going to paperless project management.

The solution to effective communications with stakeholders and governance groups is to show them that they can most likely get all of the critical data they need for informed decision making with 6 to 10 metrics or KPIs that can be displayed on one computer screen. This is not always the case, and drill-down to other screens may be necessary. But, in general, one computer screen shot should be sufficient.

If an out-of-tolerance condition or crisis situation exists with any of the metrics or KPIs on the dashboard screen, then the situation should be readily apparent to the viewer. But what if the crisis occurs due to metrics that do not appear on the screen? In this case, the viewer will be immediately directed to a crisis dashboard that shows all of the metrics that are out of tolerance. The out-of-tolerance metrics will remain on the crisis dashboard until such time when the crisis or out-of-tolerance conditions are corrected. Each stakeholder will now see the regular screen shot and then be instructed to look at the crisis screen shot.

9.8 INFORMAL PROJECT MANAGEMENT AT WORK

Let’s review two case studies that illustrate informal project management in action.