Project 2011, Succeeding with Projects  Oslo  October 20, 2011  Beyond the Myth of Predictability  Dr. George F. Jergeas...
Learning Objectives <ul><li>Challenge some long-held ideas and best practices. </li></ul><ul><li>View unpredictability as ...
Introduction <ul><li>Larger and more complex projects </li></ul><ul><li>Cost overruns & lack of predictability </li></ul><...
Introduction Slide    <ul><li>Let ’ s blame each other: </li></ul><ul><ul><li>Engineering contractors </li></ul></ul><ul><...
Introduction <ul><li>INVESTMENT SUMMARY </li></ul><ul><li>“ We rate shares of [K3] a  Hold .  K3’s growth prospects are la...
Introduction <ul><li>Conventional approaches no longer sufficient </li></ul><ul><li>Traditional risk tools have exhausted ...
Conventional Risk Aversion Slide    George Jergeas
New Way of Thinking – Let Go of: <ul><li>The old perception that uncertainty is “evil”  </li></ul><ul><li>Decision-making ...
New Way of Thinking – Focus on: <ul><li>Becoming comfortable with uncertainty as a source of opportunity to improve busine...
Tunneling Concept Neglect of Sources of Uncertainty Outside the Plan Itself Slide    George Jergeas
Black Swans and Tunnel Vision Slide    George Jergeas
Fresh Thinking <ul><li>Extend project risk to include strategic and contextual risks </li></ul><ul><li>Define a “territory...
1. The Extended Project Risk Model <ul><li>No project goes exactly as planned </li></ul><ul><li>Accept deviations during p...
1. The Extended Project Risk Model Slide    George Jergeas
Operational ( Project ) Risks <ul><li>Availability of resources </li></ul><ul><li>Efficiency/productivity </li></ul><ul><l...
Strategic ( Enterprise ) Risks <ul><li>The project lifecycle </li></ul><ul><li>Maturity at project sanction </li></ul><ul>...
Contextual ( Global ) Risks <ul><li>Project location </li></ul><ul><li>Business practices </li></ul><ul><li>Market conditi...
Visibility, Accountability, Ability to Manage <ul><li>Strategic and Contextual Risks  are addressed by executive / managem...
Three Buckets for Project Risks <ul><li>Contingency : for the Operational Risks </li></ul><ul><ul><li>40% of the total  </...
Reasons for Changes: Owners Response
2. Define a Territory of Risks <ul><li>The Bermuda Project Risk Triangle </li></ul><ul><ul><li>The overlapping of corporat...
The Bermuda Project Risk Triangle  Slide    George Jergeas
START George Jergeas
4. Reshaping Governance System <ul><li>Shifts in Mindset </li></ul><ul><li>The Project Executive Officer </li></ul>Slide  ...
4. Re-shaping Governance System <ul><li>Shift in mindset: </li></ul><ul><ul><li>Moving from risk aversion to risk navigati...
4. Re-shaping Governance System <ul><li>Shift in mindset: </li></ul><ul><li>Project leaders will have to make a shift in t...
4. Re-shaping Governance System <ul><li>Shift in mindset may be achieved by:  </li></ul><ul><ul><li>Disrupting the sense o...
4. Re-shaping Governance System <ul><li>The Project Executive Officer (PEO) </li></ul><ul><ul><li>Projects are temporary o...
Leadership structure of a temporary organization  Slide    George Jergeas
4. Re-shaping Governance System <ul><li>The Management Role of the PEO </li></ul><ul><ul><li>PEO represents senior managem...
Six Areas for PEO Leadership, Organization and Strategy <ul><li>Project leadership fundamentals </li></ul><ul><li>Project ...
Project Leadership Fundamentals <ul><li>Focus on: </li></ul><ul><ul><li>People are different </li></ul></ul><ul><ul><li>Ho...
Project Team Composition and Development <ul><li>Teams are formed, brought to function for a given period of time, and the...
Setting Project Vision and Follow Through <ul><li>Projects are different, hence need for different strategies </li></ul><u...
Seeking Corporate Commitment <ul><li>360 degree Perspective.  The leader is put in a position of influence in a centre of ...
Influencing Project External Stakeholders <ul><li>720 degree perspective.  The PEO deals with stakeholders external to the...
Project Leadership Navigation <ul><li>Take on a business perspective. </li></ul><ul><li>Navigate dynamically and meet the ...
5. Team Alignment <ul><li>Team Alignment Programs: </li></ul><ul><ul><li>Project chartering and teambuilding </li></ul></u...
5. Team Alignment <ul><li>Project Chartering and Teambuilding </li></ul><ul><ul><li>Sets achievable, yet challenging, goal...
George Jergeas
Health Check Average of All Responses Slide    George Jergeas
Health Check Average Response by Organization Slide    George Jergeas
Issue Resolution and Dispute Management Mechanism Slide    George Jergeas
Reference <ul><ul><li>“ Risk Navigation Strategies for Major Capital Projects: Beyond the Myth of Predictability” </li></u...
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Plenum - Prof. George Jergeas - The Myth of Predictability

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  • Plenum - Prof. George Jergeas - The Myth of Predictability

    1. 1. Project 2011, Succeeding with Projects Oslo October 20, 2011 Beyond the Myth of Predictability Dr. George F. Jergeas PEng Department of Civil Engineering University of Calgary
    2. 2. Learning Objectives <ul><li>Challenge some long-held ideas and best practices. </li></ul><ul><li>View unpredictability as a dilemma that must be continuously managed. </li></ul><ul><li>Change focus from project level to the executive level. </li></ul>Slide George Jergeas
    3. 3. Introduction <ul><li>Larger and more complex projects </li></ul><ul><li>Cost overruns & lack of predictability </li></ul><ul><ul><li>Risks associated with the project’s size, duration, technology, location, and prevailing economic conditions . </li></ul></ul><ul><li>Projects over budget & schedule </li></ul><ul><ul><li>Consistently 50% to 100% cost overruns </li></ul></ul><ul><li>Client not happy </li></ul>Slide George Jergeas
    4. 4. Introduction Slide <ul><li>Let ’ s blame each other: </li></ul><ul><ul><li>Engineering contractors </li></ul></ul><ul><ul><li>Vendors </li></ul></ul><ul><ul><li>Construction contractors </li></ul></ul><ul><ul><li>Workers </li></ul></ul><ul><ul><li>Clients </li></ul></ul><ul><ul><li>Greater challenges to executives </li></ul></ul><ul><li>Economics suffer </li></ul><ul><ul><li>Increase risks to investors </li></ul></ul><ul><ul><li>Investors (boss) lose confidence </li></ul></ul>
    5. 5. Introduction <ul><li>INVESTMENT SUMMARY </li></ul><ul><li>“ We rate shares of [K3] a Hold . K3’s growth prospects are lacking relative to peers, and current performance continues to disappoint . K3’s next major Oil Sands project, [name], isn’t expected to produce oil until 201?, and production from the [name of development] isn’t expected until late 201?. As a result, we believe K3 will be challenged to grow its production in the near term. However, we believe these expectations are reflected in the current stock price , and we believe the industry-leading yield on the stock is attractive for investors to Hold . ….” </li></ul>Slide
    6. 6. Introduction <ul><li>Conventional approaches no longer sufficient </li></ul><ul><li>Traditional risk tools have exhausted their potential </li></ul><ul><li>Complete re-thinking of how we assess project risk, make decision and manage projects </li></ul><ul><li>Need a change in focus from the project level to the executive level </li></ul><ul><ul><li>Responsibility for strategic decision-making, planning and organization effectiveness truly lies with the executives. </li></ul></ul>Slide George Jergeas
    7. 7. Conventional Risk Aversion Slide George Jergeas
    8. 8. New Way of Thinking – Let Go of: <ul><li>The old perception that uncertainty is “evil” </li></ul><ul><li>Decision-making based on deterministic values  </li></ul><ul><li>Planning based on the perceived need to transfer or avoid risks.  </li></ul><ul><li>Execution management based on fixed objectives. </li></ul>Slide George Jergeas
    9. 9. New Way of Thinking – Focus on: <ul><li>Becoming comfortable with uncertainty as a source of opportunity to improve business results. </li></ul><ul><li>Becoming comfortable with organization based on risk-driven competencies.  </li></ul><ul><li>Becoming comfortable with decisions based on uncertain estimates. </li></ul><ul><li>Becoming comfortable with plans that accept and manage the risks that are rightfully ours.   </li></ul><ul><li>Becoming comfortable with an adaptive, flexible management style. </li></ul><ul><li>Uncertainty and risk have to be expected and accepted </li></ul>Slide George Jergeas
    10. 10. Tunneling Concept Neglect of Sources of Uncertainty Outside the Plan Itself Slide George Jergeas
    11. 11. Black Swans and Tunnel Vision Slide George Jergeas
    12. 12. Fresh Thinking <ul><li>Extend project risk to include strategic and contextual risks </li></ul><ul><li>Define a “territory” of risks or “The Bermuda Project Risk Triangle” </li></ul><ul><li>Near-term thinking </li></ul><ul><li>Re-shaping the Governance System </li></ul><ul><ul><ul><li>Shift in mindset </li></ul></ul></ul><ul><ul><ul><li>PEO </li></ul></ul></ul><ul><li>Team alignment </li></ul>Slide George Jergeas
    13. 13. 1. The Extended Project Risk Model <ul><li>No project goes exactly as planned </li></ul><ul><li>Accept deviations during project execution </li></ul><ul><li>Not sufficient to just look at Operational risk </li></ul><ul><ul><li>Strategic and Contextual risks also important </li></ul></ul>Slide George Jergeas
    14. 14. 1. The Extended Project Risk Model Slide George Jergeas
    15. 15. Operational ( Project ) Risks <ul><li>Availability of resources </li></ul><ul><li>Efficiency/productivity </li></ul><ul><li>Timeliness </li></ul><ul><li>Operability </li></ul><ul><li>HSSE </li></ul><ul><li>Site related risks </li></ul><ul><li>Normal logistics risks </li></ul>Slide George Jergeas
    16. 16. Strategic ( Enterprise ) Risks <ul><li>The project lifecycle </li></ul><ul><li>Maturity at project sanction </li></ul><ul><li>The project execution strategy </li></ul><ul><li>Changes to project objectives </li></ul><ul><li>Acceptance of project business risk exposure </li></ul><ul><li>Organizational Alignment </li></ul><ul><li>JV issues </li></ul>Slide George Jergeas
    17. 17. Contextual ( Global ) Risks <ul><li>Project location </li></ul><ul><li>Business practices </li></ul><ul><li>Market conditions </li></ul><ul><li>Culture </li></ul><ul><li>Geopolitics </li></ul><ul><li>Public opposition </li></ul>Slide George Jergeas
    18. 18. Visibility, Accountability, Ability to Manage <ul><li>Strategic and Contextual Risks are addressed by executive / management decisions </li></ul><ul><li>Operational are addressed by the project team who have the authority to make the necessary decisions and have clear accountability for results </li></ul>George Jergeas
    19. 19. Three Buckets for Project Risks <ul><li>Contingency : for the Operational Risks </li></ul><ul><ul><li>40% of the total </li></ul></ul><ul><li>Scope Allowance : for the Strategic Risks </li></ul><ul><ul><li>47% of the total </li></ul></ul><ul><li>Management Reserve : for the Contextual Risks </li></ul><ul><ul><li>13% of the total </li></ul></ul><ul><li>Numbers above MUST be tested and verified </li></ul>Slide
    20. 20. Reasons for Changes: Owners Response
    21. 21. 2. Define a Territory of Risks <ul><li>The Bermuda Project Risk Triangle </li></ul><ul><ul><li>The overlapping of corporate, project and environment creates an “ocean” containing operational, strategic and contextual risks. </li></ul></ul><ul><li>To navigate in the triangle requires new knowledge to take a three legged journey </li></ul><ul><ul><li>Explore </li></ul></ul><ul><ul><li>Adapt </li></ul></ul><ul><ul><li>Deliver </li></ul></ul>Slide George Jergeas
    22. 22. The Bermuda Project Risk Triangle Slide George Jergeas
    23. 23. START George Jergeas
    24. 24. 4. Reshaping Governance System <ul><li>Shifts in Mindset </li></ul><ul><li>The Project Executive Officer </li></ul>Slide George Jergeas
    25. 25. 4. Re-shaping Governance System <ul><li>Shift in mindset: </li></ul><ul><ul><li>Moving from risk aversion to risk navigation </li></ul></ul><ul><ul><li>Looking for the opportunities created by uncertainty in decisions </li></ul></ul><ul><ul><li>Postponing decisions for improved quality (reduced risk) </li></ul></ul><ul><ul><li>Exploring and capitalizing strategic and contextual risks </li></ul></ul><ul><ul><li>Training project managers in risk understanding </li></ul></ul><ul><ul><li>Trusting and empowering PMs in their ability to make good decisions </li></ul></ul>Slide George Jergeas
    26. 26. 4. Re-shaping Governance System <ul><li>Shift in mindset: </li></ul><ul><li>Project leaders will have to make a shift in their mind set: </li></ul><ul><ul><li>From projects as deliverables to a means to enhance project business value </li></ul></ul><ul><ul><li>From uncertainties as “evil” to acknowledging the project as being unique and uncertain </li></ul></ul><ul><ul><li>From projects as known tasks to be accomplished in known environments to embracing a continuum of known-unknown tasks to be executed in unfamiliar and often turbulent locations and business environments </li></ul></ul><ul><ul><li>From deviations from project baselines as inaccurate planning or inappropriate control to acknowledgement of deviations as being the rule and not the exception </li></ul></ul>Slide George Jergeas
    27. 27. 4. Re-shaping Governance System <ul><li>Shift in mindset may be achieved by: </li></ul><ul><ul><li>Disrupting the sense of comfort with the status quo (explorative behaviour) </li></ul></ul><ul><ul><li>Providing the tools, techniques and frameworks to meet emerging business needs (adaptive behaviour) </li></ul></ul><ul><ul><li>Heightening skills for self-reflection by creating awareness of the participants’ leadership behaviours, and accountability for change and personal growth (delivery-oriented behaviour) </li></ul></ul><ul><ul><li>Helping participants move along the leadership path and be in the appropriate place for the current context (integrative behaviour) </li></ul></ul>Slide George Jergeas
    28. 28. 4. Re-shaping Governance System <ul><li>The Project Executive Officer (PEO) </li></ul><ul><ul><li>Projects are temporary organization. </li></ul></ul><ul><ul><ul><li>The size and complexity and financial exposure of a major capital project make such an endeavor similar to the operation of the corporation. </li></ul></ul></ul><ul><ul><li>Managing major capital project cannot solely be reduced to a manager leading a project team. </li></ul></ul><ul><ul><li>In a project there are many leaders and at the top is the PEO </li></ul></ul><ul><ul><li>PEO is accountable for the results of what the organization produces </li></ul></ul><ul><ul><li>Reporting to the PEO are managers accountable for the physical parts of the project (project managers) and managers for project functions (functional managers) </li></ul></ul>Slide George Jergeas
    29. 29. Leadership structure of a temporary organization Slide George Jergeas
    30. 30. 4. Re-shaping Governance System <ul><li>The Management Role of the PEO </li></ul><ul><ul><li>PEO represents senior management </li></ul></ul><ul><ul><li>Possesses the skills and experience needed to manage the owner’s role in the project. </li></ul></ul><ul><ul><li>Maintains direct access to the people making key decisions. </li></ul></ul><ul><ul><li>Is vested with authority to take day-to-day executive action. </li></ul></ul><ul><ul><li>Sees the project through to completion. </li></ul></ul><ul><ul><li>Selects the right people </li></ul></ul><ul><ul><li>Requires professional advice: </li></ul></ul><ul><ul><ul><li>Strategy for project design and construction </li></ul></ul></ul><ul><ul><ul><li>Strategy for project monitoring and proactive approach to avoid claims and disputes </li></ul></ul></ul><ul><ul><ul><li>Strategy for teamwork </li></ul></ul></ul><ul><ul><li>The PEO is a Leader </li></ul></ul>Slide
    31. 31. Six Areas for PEO Leadership, Organization and Strategy <ul><li>Project leadership fundamentals </li></ul><ul><li>Project team composition and development </li></ul><ul><li>Setting project vision and follow through </li></ul><ul><li>Seeking corporate commitment </li></ul><ul><li>Influencing project external stakeholders </li></ul><ul><li>Project leadership navigation </li></ul>Slide George Jergeas
    32. 32. Project Leadership Fundamentals <ul><li>Focus on: </li></ul><ul><ul><li>People are different </li></ul></ul><ul><ul><li>How people think and act </li></ul></ul><ul><ul><li>How people are influenced </li></ul></ul><ul><ul><li>Contemporary leadership theories </li></ul></ul><ul><ul><li>Leading temporary organizations </li></ul></ul><ul><ul><li>Leadership style </li></ul></ul>Slide George Jergeas
    33. 33. Project Team Composition and Development <ul><li>Teams are formed, brought to function for a given period of time, and then disbanded </li></ul><ul><li>Getting the right people on the team and the wrong people off </li></ul><ul><li>Distinction between the executive team and project functional team </li></ul><ul><li>Communication within and between teams in the eco-system is crucial to achieving extra ordinary project performance </li></ul><ul><li>Build team coherence and trust </li></ul><ul><li>Extraordinary team performance </li></ul>Slide George Jergeas
    34. 34. Setting Project Vision and Follow Through <ul><li>Projects are different, hence need for different strategies </li></ul><ul><li>Project context, its objectives and execution strategies, should be questioned to test their relevance based on the overall vision of the corporation </li></ul><ul><li>Set performance goals </li></ul><ul><li>Set performance metrics </li></ul><ul><li>Managing contextual risks </li></ul><ul><li>Managing strategic risks </li></ul><ul><li>Managing operational risks </li></ul><ul><li>Performance volatility and compensation </li></ul>Slide George Jergeas
    35. 35. Seeking Corporate Commitment <ul><li>360 degree Perspective. The leader is put in a position of influence in a centre of a group of people including subordinates, peers, and superiors. </li></ul><ul><ul><li>How to manage your boss and your boss’ boss? </li></ul></ul><ul><li>Interact with corporate management team </li></ul><ul><ul><li>To seek corporate management support for changes to objectives and strategies </li></ul></ul><ul><ul><li>To inform management about deviations </li></ul></ul><ul><ul><li>Seek resolution of corporate level issues </li></ul></ul><ul><li>Enhance capabilities to communicate and influence. </li></ul><ul><ul><li>Leading without authority </li></ul></ul>Slide George Jergeas
    36. 36. Influencing Project External Stakeholders <ul><li>720 degree perspective. The PEO deals with stakeholders external to the corporation. </li></ul><ul><li>The PEO has to be capable of managing a variety of situation requiring: </li></ul><ul><ul><li>an ability to bounce back from major shocks (resilience) </li></ul></ul><ul><ul><li>to swiftly adapt to new situations by sidestepping upcoming threats and harvesting emerging opportunities (agility) </li></ul></ul><ul><ul><li>to drive change as appropriate to enhance project business value. </li></ul></ul><ul><li>Keep relevant stakeholders informed through feed forward and feedback. </li></ul><ul><li>Ability to lead without power </li></ul><ul><li>Ability to reshape/mold project boundaries </li></ul>Slide George Jergeas
    37. 37. Project Leadership Navigation <ul><li>Take on a business perspective. </li></ul><ul><li>Navigate dynamically and meet the business objectives of the project by considering: </li></ul><ul><ul><li>Owner’s perspective </li></ul></ul><ul><ul><li>Suppliers’ perspective </li></ul></ul><ul><ul><li>Project specific risks </li></ul></ul><ul><ul><li>Relevant corporate risks </li></ul></ul><ul><li>Navigate and meet the project production focus – reducing capital expenditures </li></ul><ul><li>Navigate and meet the project implementation focus – enhancing project life cycle profit </li></ul><ul><li>Navigate and meet the project business value focus – enhancing project net present worth </li></ul>Slide George Jergeas
    38. 38. 5. Team Alignment <ul><li>Team Alignment Programs: </li></ul><ul><ul><li>Project chartering and teambuilding </li></ul></ul><ul><ul><li>Monitoring team performance </li></ul></ul><ul><ul><li>Issue resolution and dispute management </li></ul></ul><ul><ul><li>Tailored training </li></ul></ul><ul><ul><li>Management coaching </li></ul></ul>George Jergeas
    39. 39. 5. Team Alignment <ul><li>Project Chartering and Teambuilding </li></ul><ul><ul><li>Sets achievable, yet challenging, goals and objectives </li></ul></ul><ul><ul><li>Defines criteria for measuring success </li></ul></ul><ul><ul><li>Identifies critical success factors </li></ul></ul><ul><ul><li>Identifies risks and response plans </li></ul></ul><ul><ul><li>Aligns stakeholders </li></ul></ul><ul><ul><li>Identifies lines of communication </li></ul></ul><ul><ul><li>Develops project team performance evaluation /health check tools </li></ul></ul><ul><ul><li>Develops a dispute/issue resolution mechanism </li></ul></ul><ul><ul><li>Agrees on team ground rules </li></ul></ul>Slide George Jergeas
    40. 40. George Jergeas
    41. 41. Health Check Average of All Responses Slide George Jergeas
    42. 42. Health Check Average Response by Organization Slide George Jergeas
    43. 43. Issue Resolution and Dispute Management Mechanism Slide George Jergeas
    44. 44. Reference <ul><ul><li>“ Risk Navigation Strategies for Major Capital Projects: Beyond the Myth of Predictability” </li></ul></ul><ul><ul><li>by </li></ul></ul><ul><ul><li>Per Willy Hetland, George Jergeas, Asbjorn Rolstadas, Dick Westney </li></ul></ul><ul><ul><li>July 2011 </li></ul></ul>Slide George Jergeas

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