Olfa Hamdi explains how your org chart and your contracting strategy are undermining project predictability
Do you know the reasons why your project is late and over-budget?
Concord® was born out of a passion for Advanced Work Packaging (AWP). Before co-founding this company, I was the Executive Director of the Institute for Advanced Work Packaging, published my thesis in Advanced Work Packaging and was a member of the CII research team that produced IR-272, which is widely regarded as the industry bible for AWP implementation.
As I worked with organizations to implement AWP, however, I began to realize that it is not a panacea. Construction-driven projects using AWP are far more efficient than other types of projects, but there was still plenty of room for improvement. I came to believe that, as an industry, we had to expand our thinking beyond work packages and begin to consider all the factors that influence project predictability.
Here are two simple examples of how a Predictability Thinking™ paradigm can shift the way you think about your capital project organization.
Organizational Structures That Undermine Predictability
Most companies view their org charts as a visual representation of departmental responsibilities, as well as a guide to established, hierarchical reporting structures. This is a useful lens for many applications, but it doesn’t support predictable project delivery.
Here at Concord®, we know that predictability is inextricably linked to accountability, and so, we view org charts through an accountability lens. Try it yourself. Pull out your org chart and consider: How does accountability flow through your organization? Is everyone rowing in the same direction?
Probably not. In most capital project organizations, departments are structured in such a way that each department operates under its own set of accountability measures. For example, the procurement department may reward its employees for finding good deals and securing long-term purchasing agreements — both of which are objectively good goals for a procurement team. By this accountability measure, a procurement professional who saves $500,000 on a key project component will be in line for a solid quarterly bonus.
The trouble is that, in the absence of accountability measures that support predictable project delivery, even a well-run, successful procurement department can unwittingly undermine project predictability. This is one of the reasons why your project is late and over-budget.
Here’s how. Perhaps saving that $500,000 on a key project component means waiting an extra 6 weeks to get it. That doesn’t concern the procurement professional, since his bonus is contingent on his ability to find and secure good deals. However, the cascading impact of that seemingly innocuous delay increases the schedule risk of the project and may set it back two months, costing an extra $2 million in overtime or penalties. Is the procurement professional held accountable for these impacts? Is he even aware of them? Are you?
This is how siloed accountability structures undermine predictable project delivery, and this is why they’re not a good fit for project-centered organizations. By definition, capital project organizations are multidisciplinary, and your accountability structures will determine whether everybody is working toward predictable project delivery — or not.
Contracting Strategies That Undermine Predictability
Your contracting strategy is a key driver for predictable project delivery. You simply cannot expect people and companies to act with predictable project delivery in mind unless your incentive structures encourage, support and reward predictability. The most powerful leverage here is financial: the best contracts link predictable results to financial reward. If your contractor makes more money when delays and problems arise, you can be sure that you’ll encounter more problems and delays.
A classic example of this is the standard time-and-materials contract. Most of these contracts tie financial gain directly to time spent, which means the longer the project takes, the more money the contractor makes. Companies committed to predictable project delivery build cash-flow expectations, clear milestones and meaningful incentives and penalties into these types of contracts, so that the on-time and on-budget delivery benefits significantly outweighs the cost of the delay.
The Power Of Predictability Thinking™ For Your Project
Organizational structures and contracting strategies are just two of the project areas that benefit from Predictability Thinking™. There are management tools and approaches that hinder predictable project delivery, as well as business planning methodologies and financing options that undermine predictability.
Today, Concord® has developed an innovative framework and powerful new tools to support predictable project delivery. This promising new model has been successfully deployed at some of the largest petrochemical organizations in the world.
Our vision is to empower and support our clients in achieving predictable outcomes on 100 percent of their projects. It is a bold vision, but we believe it can be achieved with hard work, solid research and development, a commitment to excellence and, most importantly, visionary capital project leaders like you.
Discover Why Your Project Is Late And Over-Budget
If you’re interested in learning more the reasons why your project is late and over-budget, and how Predictability Thinking™ can transform your organization, contact us by clicking here.