Project management methodologies, regardless how good, are simply pieces of paper. What converts these pieces of paper into a world-class methodology is the culture of the organization and how quickly project management is accepted and used. Superior project management is attained when the organization has a culture based upon effective trust, communication, cooperation, and teamwork.
Creating a good culture cannot be done overnight. It may take years and strong executive leadership. Good project management cultures are leadership by example. Senior management must provide effective leadership in the same manner that they wish to see implemented by the corporate culture. If roadblocks exist, then senior management must take the initiative in overcoming these barriers.
Como Tool and Die (A)
Como Tool and Die was a second-tier component supplier to the auto industry. Their largest customer was Ford Motor Company. Como had a reputation for delivering a quality product. During the 1980s and the early 1990s, Como’s business grew because of its commitment to quality. Emphasis was on manufacturing operations, and few attempts were made to use project management. All work was controlled by line managers who, more often than not, were overburdened with work.
The culture at Como underwent a rude awakening in 1996. In the summer of 1996, Ford Motor Company established four product development objectives for both tier one and tier two suppliers:
The objectives were aimed at consolidation of the supply base with larger commitments to tier one suppliers, who would now have greater responsibility in vehicle development, launch, process improvement, and cost reduction. Ford had established a time frame of twenty-four months for achievement of the objectives. The ultimate goal for Ford would be the creation of one global, decentralized vehicle development system that would benefit from the efficiency and technical capabilities of the original equipment manufacturers (OEMs) and the subsupplier infrastructure.
STRATEGIC REDIRECTION: 1996
Como realized that it could no longer compete on quality alone. The marketplace had changed. The strategic plan for Como was now based upon maintaining an industry leadership position well into the twenty-first century. The four basic elements of the strategic plan included:
The implementation of the strategy mandated superior project management performance, but changing a sixty-year culture to support project management would not be an easy task.
The president of the company established a task force to identify the cultural issues of converting over to an informal project management system. The president believed that project management would eventually become the culture and, therefore, that the cultural issues must be addressed first. The following list of cultural issues was identified by the task force:
The task force, as a whole, supported the idea of informal project management and believed that all of the cultural issues could be overcome. The task force identified four critical risks and the method of resolution:
The president realized that project management and strategic planning were related. The president wondered what would happen if the business base would grow as anticipated. Could project management excellence enhance the business base even further? To answer this question, the president prepared a list of competitive advantages that could be achieved through superior project management performance:
The wheels were set in motion. The president and his senior staff met with all of the employees of Como Tool and Die to discuss the implementation of project management. The president made it clear that he wanted a mature project management system in place within thirty-six months.
Como Tool and 1 Die (B)
By 1997, Como had achieved partial success in implementing project management. Lead times were reduced by 10 percent rather than the target of 25–35 percent. Internal resources were reduced by only 5 percent. The reduction in prototype time and cost was 15 percent rather than the expected 30–35 percent.
Como’s automotive customers were not pleased with the slow progress and relatively immature performance of Como’s project management system. Change was taking place, but not fast enough to placate the customers. Como was on target according to its thirty-six month schedule to achieve some degree of excellence in project management, but would its customers be willing to wait another two years for completion, or should Como try to accelerate the schedule?
FORD INTRODUCES “CHUNK” MANAGEMENT
In the summer of 1997, Ford announced to its suppliers that it was establishing a “chunk” management system. All new vehicle metal structures would be divided into three or four major portions with each chosen supplier (i.e., chunk manager)
COMO TOOL AND DIE (B)
responsible for all components within that portion of the vehicle. To reduce lead time at Ford and to gain supplier commitment, Ford announced that advanced placement of new work (i.e., chunk managers) would take place without competitive bidding. Target agreements on piece price, tooling cost, and lead time would be established and equitably negotiated later with value engineering work acknowledged.
Chunk managers would be selected based on superior project management capability, including program management skills, coordination responsibility, design feasibility, prototypes, tooling, testing, process sampling, and start of production for components and subassemblies. Chunk managers would function as the second-tier component suppliers and coordinate vehicle build for multiple, different vehicle projects at varied stages in the development–tool–launch process.
STRATEGIC REDIRECTION: 1997
Ford Motor Company stated that the selection of the chunk managers would not take place for another year. Unfortunately, Como’s plan to achieve excellence would not have been completed by then, and its chances to be awarded a chunk management slot were slim.
The automotive division of Como was now at a critical junction. Como’s management believed that the company could survive as a low-level supplier of parts, but its growth potential would be questionable. Chunk managers might find it cost-effective to become vertically integrated and produce for themselves the same components that Como manufactured. This could have devastating results for Como. This alternative was unacceptable.
The second alternative required that Como make it clear to Ford Motor Company that Como wished to be considered for a chunk manager contract. If Como were to be selected, then Como’s project management systems would have to:
There were also serious risks if Como were to become a chunk manager. The company would be under substantially more pressure to meet cost and delivery targets. Most of its resources would have to be committed to complex coordination activities rather than new product development. Therefore, value-added activities for its customers would be diminished. Finally, if Como failed to live up to its customers’ expectations as a chunk manager, it might end up losing all automotive work.
The decision was made to inform Ford of Como’s interest in chunk management. Now Como realized that its original three-year plan for excellence in project management would have to be completed in eighteen months. The question on everyone’s mind was: “How?”
Apache Metals, Inc.
Apache Metals is an original equipment manufacturer of metal working equipment. The majority of Apache’s business is as a supplier to the automotive, appliance, and building products industries. Each production line is custom designed according to application, industry, and customer requirements.
Project managers are assigned to each purchase order only after the sales department has a signed contract. The project managers can come from anywhere within the company. Basically, anyone can be assigned as a project leader. The assigned project leaders can be responsible for as many as ten purchase orders at one time.
In the past, there has not been enough emphasis on project management. At one time, Apache even assigned trainees to perform project coordination. All failed miserably. At one point, sales dropped to an all-time low, and cost overruns averaged 20–25 percent per production line.
In January 2007, the board of directors appointed a new senior management team that would drive the organization to excellence in project management. Project managers were added through recruitment efforts and a close examination of existing personnel. Emphasis was on individuals with good people and communication skills.
The following steps were implemented to improve the quality and effectiveness of the project management system:
Haller Specialty Manufacturing
For the past several years, Haller has been marginally successful as a specialty manufacturer of metal components. Sales would quote a price to the customer. Upon contract award, engineering would design the product. Manufacturing had the responsibility to produce the product as well as shipping the product to the customer. Manufacturing often changed the engineering design package to fit manufacturing capabilities.
The vice president of manufacturing was perhaps the most powerful position in the company next to the president. Manufacturing was considered to be the main contributor to corporate profits. Strategic planning was dominated by manufacturing.
To get closer to the customer, Haller implemented project management. Unfortunately, the vice president for manufacturing would not support project management for fear of a loss of power and authority.
Coronado Communications, Inc. (CCI) was a midsized consulting company with corporate headquarters in New York City and satellite divisions in more than twenty-five of the largest cities in the United States. CCI was primarily a consulting company for large and small firms that wished to improve their communication systems, including computer hardware and networking systems. Each of the twenty-five divisions serviced its own geographical areas. Whenever a request for proposal was sent to CCI, corporate decided which satellite office would bid on the job.
In 2009, Fred Morse took over as president and CEO of CCI. Although CCI was successful and won a good portion of its contracts through competitive bidding, Morse felt that CCI could win more contracts if he created a climate of internal competition. Prior to Morse coming on board as the CEO, CCI corporate would decide which satellite office would bid on the job. Morse decided that any and all CCI branches could bid on each and every contract. This process meant that each satellite office would be competing with other satellite offices.
©2010 by Harold Kerzner. Reproduced by permission. All rights reserved.
In the past, CCI encouraged the satellite office that would be bidding on the job to use internal resources whenever possible. If the office in Chicago were bidding on a contract and were awarded the contract, then the Chicago office could use resources from the Boston office to fulfill the contract. The workers in the Boston office would then bill the Chicago office a fully loaded or fully burdened hourly rate, but excluding profits. All profits would be shown on the financial statement of the office that won the contract. This technique fostered cooperation between the satellite offices because the Chicago office would get credit for all profits and the Boston office would be able to keep some of its employees on direct charges against contracts rather than on overhead account if they were between jobs.
With the new competitive system, Boston would have the right to charge Chicago a profit for each hour worked, and the profit on these hours would be credited to Boston’s financial statement. In effect, Chicago would be treating Boston as though it were a contractor hired by Chicago. If Chicago felt that it could get resources at a cheaper rate by hiring resources from outside CCI, then it was allowed to do so.
The bonus system also changed. In the past, bonuses were paid out equally to each satellite office based upon the total profitability to CCI. Now, the bonuses paid to each satellite office would be based entirely upon the profitability of each satellite office. Salary increases would also be heavily biased toward individual satellite office profitability.
Over the years, the company had developed an outstanding enterprise project management methodology with a proven record of success. Now, each satellite office was still asked to use the methodology but could make its own modifications to satisfy its customer base.
TWO YEARS LATER
The following facts appeared after using the new competitive system for two years:
Radiance 1 International
Radiance International (RI) had spent more than half a decade becoming a global leader in managing pollution, hazard, and environmental protection projects for its worldwide clients. It maintained ten offices across the world with approximately 150 people in each office. Its projects ranged from a few hundred thousand dollars to a few million dollars and lasted from six months to two years.
When the downturn in corporate spending began in 2008, RI saw its growth stagnate. Line managers that previously spent most of their time interfacing with various project teams were now spending the preponderance of their time writing reports and memos trying to justify their position in case downsizing occurred. Project teams were asked to generate additional information that the line managers needed to justify their existence. This took a toll on the project teams and forced team members to do “busy work” that was sometimes unrelated to their project responsibilities.
Management decided to reorganize the company primarily because of the maturity level of project management. Over the years, project management had matured to the point where senior management explicitly trusted the project managers to make both project-based and business-based decisions without continuous guidance from senior management or line management. The role of line management was simply to staff projects and then “get out of the way.” Someline managers remained involved in some of the projects but actually did more harm than good with their interference. Executive sponsorship was also very weak because the project managers were trusted to make the right decisions.
The decision was made to eliminate all line management and go to the concept of pool management. One of the line managers was designated as the pool manager and administratively responsible for the 150 employees that were now assigned to the pool. Some of the previous line managers were let go while others became project managers or subject matter experts within the pool. Line managers that remained with the company were not asked to take a cut in pay.
In the center of the pool were the project managers. Whenever a new project came into the company, senior management and the pool manager would decide which project manager would be assigned to head up the new project. The project manager would then have the authority to talk to anyone in the pool that had the expertise needed on the project. If the person stated that he or she was available to work on the project, the project manager would provide that person with a charge number authorizing budgets and schedules for his or her work packages. If the person overran the budget or elongated the schedule unnecessarily, the project managers would not ask this person to work on his or her project again. Pool workers that ran out of charge numbers or were not being used by the project managers were then terminated from the company. Project managers would fill out a performance review form on each worker at the end of the project and forward it to the pool manager. The pool manager would make the final decision concerning wage and salary administration but relied heavily upon the inputs from the project managers.
The culture fostered effective teamwork, communication, cooperation, and trust. Whenever a problem occurred on a project, the project manager would stand up in the middle of the pool and state his or her crisis, and 150 people would rush to the aid of the project manager asking what they could do to help. The organization prided itself on effective group thinking and group solutions to complex projects. The system worked so well that sponsorship was virtually eliminated. Once a week or even longer, a sponsor would walk into the office of a project manager and ask, “Are there any issues I need to know about?” If the project manager responds “No,” then the sponsor would say, “I’ll talk to you in a week or two again” and then leave.
TWO YEARS LATER. . . .
After two years, the concept of pool management was working better than expected. Projects were coming in ahead of schedule and under budget. Teamwork abounded throughout the organization and morale was at an all-time high in every RI location. Everyone embraced the new culture and nobody was terminated from the company after the first year of the reorganization. Business was booming even though the economy was weak. There was no question that RI’s approach to pool management had worked, and worked well!
By the middle of the third year, RI’s success story appeared in business journals around the world. While all of the notoriety was favorable and brought in more business, RI became a takeover target by large construction companies that saw the acquisition of RI as an opportunity. By the end of the third year, RI was acquired by a large construction firm. The construction company believed in strong line management with a span of control of approximately ten employees per supervisor. The pool management concept at RI was eliminated; several line management positions were created in each RI location and staffed with employees from the construction company. Within a year, several employees left the company.
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