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Enterprise Project Management
Contributed by Intellos Systems, Inc.
Enterprise Project Management, or EPM, is a term broadly applied to the systemic ability to match organizational capacity with organizational demand to maximize value. In PMBOK terminology, EPM is a mechanism by which one develops a “projectized” organization. At first glance, the process seems straightforward - understand and prioritize your projects, know the skills and competency levels of your resources, then schedule and track performance. In reality, however, linking activities to strategies is complex and difficult. Because of the inherent challenges in making EPM work, most organizations have taken baby steps toward becoming projectized, but few, if any, have maintained the motivation to see the process through. This paper explores a set of the catalysts that will hasten the pace at which organizations adopt EPM concepts, tools and techniques.
There is an urgent need to improve the selection, prioritization, and delivery of projects. The impetuses are fundamental macro-economic, geo-political and social change. Specifically, an unprecedented level of economic interdependence, free trade, and the democratization of information are leading to a new era in organizational development. Peter Drucker has argued that the corporation, as we know it, is dead. Kevin Kelly suggests that constant innovation is the primary mechanism to generate wealth. And Thomas Friedman has advised his children that they better increase their competitiveness or they will have no job.
One could argue that this is old news and that successful enterprises are necessarily and fundamentally better at identifying and executing good ideas. Such organizations, it could be said, proactively drive change and will maintain their advantage. While possible, this is unlikely. A variety of data sources argue that somewhere between 40% and 70% of all project work delivers no value. Moreover, another 30%-50% are challenged, with challenged meaning that there was a plan, but the execution did not deliver against scope, budget, schedule, and/or quality expectations. This data further suggests an incredible tolerance for waste and/or acceptance of an undesirable cost of doing “new things.” Independent of the rational that allows for low project success rates, all organizations would benefit from an increase in the return from project investments.
So the question is: why? Why is mediocrity in project output widely accepted? Ultimately, the main reason is a lack of competition. Inefficiency is typically a result of lack of knowledge (i.e., we do not know how to do this better) and/or lack of competition (i.e., no one else knows how to do this better or, maybe someone does, but we do not compete with them.) However, since the knowledge to improve project performance exists, the culprit for poor project selection and execution must be based on a lack of competition.
What has changed is that events over the past decade have created an impetus to re-evaluate the historical factors for success. Anyone can enter any market and create a competitive environment and doing so is getting easier every day. The barriers to entry in almost every market continue to decline as capital and information are readily available to overcome any historical disadvantage. Moreover, vertical service providers are making it cost effective to outsource everything from design to development to distribution to HR management to finance. Maintaining an expensive staff is becoming passť in a world where inexpensive labor can be leveraged to undertake nearly any activity.
Two primary drivers, or catalysts, are behind the shift: a general increase in Free Trade; and the worldwide deployment of Telecommunications Infrastructure. These catalysts provide a basis for a third, and most impactful element, the Globalization of Labor. Globalization of Labor necessitates a renewed emphasis on education, which will also be discussed. Like most large schedule historical changes, there will be some pain. Unlike in the past, however, the number of people affected and geographical distribution of the impact will be unprecedented.
This paper considers these drivers with respect to their social, economic, and structural impact on inefficiency. The combined catalysts (Free Trade and Telecommunications Infrastructure) have created a foundational rational to cause substantial individual and organizational change. This change is likely to be a massive shift to projectized organizations, facilitated by Enterprise Project Management (EPM) technologies and techniques.
WHAT IS EPM?
EPM is a set of concepts that, properly managed, deliver organizational change (some might say transformation.) There are eight distinct areas of focus that lead to dramatically improved effectiveness. The areas are: organizational buy-in, supporting policies and procedures, consistent program/project/product management process, effective capacity development and planning, smartly leveraging tools, applying portfolio theory to program/product/project investments, continuous and consistent measurement of results, and finally continuous improvement. For an overview of these items, see the presentation materials provided at the PMI Congress, Latin America, 2005.
Most organizations have undertaken steps toward EPM. Typical steps are certification programs (such as the PMP), acquisition of software solutions, development of a Program/Project Management Office (PMO), and/or some sort of balanced scorecard initiative focused on aligning organizational behavior with desired outcomes. In and of themselves, all these efforts are positive. However, few firms have realized the substantial benefits of a true projectized organization. While there are many possible causes as to this lack of benefit realization, this paper theorizes that the primary reason is a lack of sufficient motivational factors. Specifically, organizations have been allowed to be wasteful and, therefore, organizations have not had sufficient external drivers to cause change. As such, the primary drivers, or catalysts, for change are also the primary drivers for the adoption of EPM.
CATALYST ONE FOR EPM: Increase in Free Trade
Increase in Free Trade with countries such as China has had several beneficial effects for consumers. First of all, short-term prices are lower for goods that have a high labor component. While primarily due to lower production costs, the continued erosion of duties and tariffs is a factor in increased imports. Further, geo-political stability is generally required to maintain the political support for free trade, the economics behind leveraging unskilled and semi-skilled labor are difficult to overcome.
For that matter, one could argue that there is some inherent risk associated with NOT maintaining low labor rates. That is, as labor rates increase, the costs of the increases either are passed to the consumer as price increases (leading to inflation) or reduce profit. Of course, the former assumes some amount of price inelasticity (i.e., once the price reaches a certain point, customers will no longer buy) and overall continued demand.
As such, a larger question is whether or not global labor is being leveraged to produce goods and services that are core to the economy. It is possible, maybe even probable, that the many goods and services produced by leveraging cheap labor are, in fact, discretionary items. As such, those goods and services are only available at a low price point, necessitating a low production cost AND low overhead costs. Moreover, if the labor rates were to increase such that production costs were too high and the cost could not be recovered in price, the producer would be left with two meaningful options: find lower cost labor or automate (exiting the business is always an option.)
While the free trade catalyst is not unique to project management, it does provide some insight as to the need to create EPM oriented solutions. Given that wages are not increasing proportionally with health care and other costs, and given that the disparity between wealthy and poor (also educated and uneducated) seems to be widening across the globe, there are few options other than to increase the efficiency of organizations by providing them a mechanism to maximize their contribution in consideration of the skill levels available.
Doing so requires effective process. A process to make better investment decisions, a process to plan and deliver work that is linked to organizational objectives, and a process to maximize the cost/benefit ratio of all employees, contractors, and third parties are all required. Organizations across the globe need to better understand the value of their contribution in order to maximize value delivery and minimize wasted effort. EPM tools facilitate awareness, allowing improved business decision making.
CATALYST TWO FOR EPM: Telecommunications Infrastructure
While there are clear and obvious benefits that support free trade (e.g., supports efficient production techniques, develops local economies, provides inexpensive goods, creates broader and more competitive markets), Telecommunications Infrastructure acts like an enzyme that increases the fluidity and efficacy of any free trade related transaction.
Telecommunications provides a number of critical leverage points, ranging from inexpensive voice access around the globe to the untaxed (although governments will assuredly try to add “tax”) flow of information between entities. By sharing information, verbally or otherwise, organizations can leverage time zones (to work multiple shifts) and capabilities of labor throughout the world. The key challenges are associated with coordination of resources in consideration of statutory, cultural, ethical, and moral differences.
While one could argue that the skills associated with managing these differences are unique and gained only through experience, such an argument clearly fails to recognize that the scaling of an enterprise cannot be assured through anecdotal and individual experiences. In fact, organizations generally deliver extraordinary value because they are able to repeat the same set of activities with minimal variation. Such benefits are delivered via a process, also known as a procedure. As such, given that any organization can leverage the same underlying, general available infrastructure, the most important aspect of the use of an infrastructure, such as telecommunications infrastructure, is to have a deliberate plan. The plan (or strategy) must be to leverage technology infrastructure to accomplish work in a way that would previously have been considered impossible or unviable.
Once the process is put in place, the goal is to repeat and scale, leveraging all the associated efficiencies. With respect to EPM, the identification, planning, execution, and delivery of project work on a global basis is fundamentally made possible by connectivity, although the underlying process must be embedded in a software-based solution to provide continuity.
Although not an obvious conclusion, these concepts apply not only to organizations but also to individuals. It is plausible that our entire social structure could be reshaped by leveraging any set of technological and/or political catalysts.
REACTION ONE: Globalization of Labor
There are few motivators to change greater than threatening the livelihood and lifestyle or an individual or nation. Globalization does both. On one hand, jobs that could have been held by unskilled labor in one place are rapidly moving to places were the unskilled labor is less expensive. This is natural and necessary, and is only hastened by our two Catalysts.
The reaction is that either jobs need to be created that allow the unskilled labor of yesterday to find a new “skilled” job (that is unlikely to be moved in the short-term), or a giant social safety net needs to be created for those who cannot be moved into the new “skilled” workforce. While any macro-economic change is painful, the core difference between the historical leveraging of cheap labor (industrial revolutions, military powers) and the current situation is that, this time, “educated” labor is being affected as well.
Any country that wants to play on the global economic scale must have substantial natural resources, substantial financial capital, and/or an educated population. Two of three are required to do anything interesting and all three are necessary to maintain a meaningful advantage. Exploitation of global labor has two interesting side effects, namely the pre-requisite that the available labor is capable of performing higher-level work (which generally requires education) and that the labor can be relied upon.
The result is that any country desiring an increase in its wealth and global status must, by necessity, increase the level of education amongst its people. However, this can be a double-edge sword. Once people are educated, they generally expect to be compensated and to increase their quality of life, however this increase is defined. Increasing quality of life is basically a set of trade-offs associated with time and money. Many people tend to want to modulate their benefits to be commensurate with their efforts. Of course, everyone desires to gain as much passive benefit as possible, but those inefficiencies are eventually corrected. Even professions where such corrections seem unlikely (e.g., law, medicine, banking, senior management) are facing an unrelenting progression to a day of reckoning.
Global labor supports the free flow of goods and services, but the impact on quality of life ranges dramatically depending on the cost of living for the impacted labor. So, while someone in Eastern Europe, China, or India might consider someone who earns $20,000 (USD) annually to part of the wealthy class, the same person in the US is barely above poverty level. While these geographical considerations may be interesting and normal from an economic point of view, the number of people effected in high cost countries is expected to be large. Therefore, people around the world need to find new ways of delivering ever increasing value with the knowledge that free trade and telecommunications infrastructure will continue to increase individual and organizational competition for goods and services. EPM is the mechanism by which such value will be delivered.
REACTION TWO: Globalization of Information/Education
One meaningful barrier that is protecting the educated (the only other important barrier protecting the educated is distance) is unequal access to information. While the Internet may provide global access for anyone who has a connection, many folks do not have and, in all likelihood, will not have meaningful access. As an analogy, the availability of books and libraries is not necessarily correlated to individual knowledge. A system of disseminating information must be augmented by a mechanism to raise the knowledge level of the general population.
So, beyond the access challenge, the larger question is whether one can decipher the information available such that this information can support actions. Searching and sorting have long been interesting computing problems, and software companies have made substantial progress toward information identification and retrieval. However, very little has been done to match the information available to the capability level of the person seeking the information. That is, while you may be able to find information on a topic such as string theory (theorized to be the foundational elements of the universe), the ability of one to understand and leverage this information is a different story.
Ultimately, create a broad understanding with developing the ability to develop a depth of understanding is a key purpose of education. A quality teacher or professor helps identify the level of capability of the student such that the information being presented can be digested and leveraged. As anyone in education is aware, a great deal of time and effort is expended trying to teach students material that they fundamentally cannot grasp (due to interest, focus, genetic propensity, social conditions, health), so the educational system in most countries attempts to classify students and classify information such that the information is presented to the “right” subset of students. Of course, there is no “catch-up” time built into the educational system. So students that are improperly classified or classified as “slow learners” are often doomed to a poor didactic experience.
Historically, such students could compensate for lack of knowledge by entering the workforce. While in the workforce, the information missed could be added and digested at a pace the individual could accept. Furthermore, experience could, for some people, be the primary mechanism that awakens the interest to develop capabilities and skills. In some cases, it is plausible that the lack of structured information (whether withheld or simply not provided) provides an impetus for some to focus on and/or develop skills to generate wealth.
Unfortunately, the sheer amount of competition and awareness driven by our catalysts leaves progressively less time to build capability through experiences. As such, the plight on the moderately to poorly educated seems dire. Perhaps we will see a wholesale migration to lower cost areas of high cost countries (or from high cost countries to low cost countries) or maybe people will downgrade their lifestyle in accord with their income earning potential. While all the current trends and data suggest otherwise, trends and historical data and not always good predictors of future activities. Another strong possibility is a worldwide boom in marketing and travel led by high cost countries in an attempt to increase the overall size of the pie, but that is subject for another paper.
Moreover, thriving, or for that matter, surviving, are so closely coupled with market value that many individuals are likely to be left in an untenable situation if the overall number of “low skilled” but “reasonable pay” positions continues to decline. This appears to be a certainty, and it is difficult to create a plausible scenario to the contrary. Therefore, we need to both increase skills and leverage the skills more effectively (i.e., at their maximal value point) which, in turn, will generate more wealth.
HOW DO WE TIE ALL THIS BACK TO EPM?
Enterprise Project Management is focused on maximizing the value delivered from effort. Since effort is measured in time and value is measured by output or results, EPM links hours expended with value provided. While most EPM solutions are focused on capturing time applied to work in an effort to create the elusive link between effort and process, this is only the first step.
EPM must evolve to from managing project work (project work defined as non-operational or non-process oriented work) to linking organizational goals to underlying work effort. Doing so will allow individuals offering “skills for hire” to make decisions as to which projects look interesting. Further, understanding the skills and capabilities needed by the market will create a mechanism for laborers to bid for work on the market.
This increased transparency to proposed projects will also allow people to re-skill for positions where they maximize their return (given their individual value points.) For example, if project plans and staffing needs were to be readily available, individuals could bid for work activities at different skill points. The project manager would then be able to determine the skill level required and have access to the price points at any given skill level. Today, this is nearly impossible, and uninformed staffing decisions are the norm.
While areas such as Human Capital Management and Organizational Transformation are often promoted as the mechanisms to improve organizational performance, such solutions are generally expensive and ineffective. Maintaining support for “improvement for the sake of improvement” initiatives is difficult. Most firms eliminate or scale-back such activities under pressure, and management is unlikely to concentrate resources in areas that have nebulous return over long return periods. Improving performance on common projects such as introducing a new product, however, is something an executive can get behind.
EPM has number of elements that must be considered to deliver organizational success. The benefits from these elements will evolve at different rates in different places, but the inexorable march toward integrated decision making, transparent planning, and truly competitive labor necessitates behavioral changes in the way most organizations operate.
We believe that EPM will have impact to labor that is similar to the early use of process manufacturing during the various industrial revolutions around the world. Only by embracing EPM concepts can an organization hope to avoid the fate predicted by Drucker. Or, on a more positive note, taking a leadership position in Enterprise Project Management is likely to be the primary way in which an existing corporation can drive the transition to the next phase of organizational evolution.
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