We had a fantastic day with the MTM Operations Division Safety Forum last week, facilitating an Appreciative Inquiry process for 100 of the leaders in the business. We were proud to be part of this event and were inspired by the team’s appetite to make a profound and lasting difference.
Great leadership, great commitment and great momentum!
Thanks for having us on board Mike, Anthony and the SLT.
Projects can fail as a result of poor decisions or management at any stage from the initial tendering through to procurement and delivery. Almost always, the delivery team gets the blame, but a closer look reveals there may be other issues.
According to recent research by Caravel Group and Melbourne Business School, major project success rates in Australia are around 40-50% and this poor result can be attributed primarily to failures in governance.
These are the findings of a ‘self-assessment’ survey of approximately 100 public and private sector board, CEO and senior management-level project participants across a range of industries.
Governance at it’s worst?
We’ve seen the catastrophic results of poor governance play out with the Queensland Health Payroll disaster. In his recent report into the matter, Former Supreme Court judge Richard Chesterman QC plainly states “The replacement of the Queensland Health payroll system takes a place in the front rank of failures in public administration in this country. It may be the worst.”
In his report, Chesterson identifies numerous failures on behalf of both the State’s management and the supplier, IBM. But regardless of the blame and finger-pointing that takes place in the aftermath of a failure like this, it’s difficult not to draw the conclusion that better Project Governance could have led to a much different outcome.
Lessons to learn
The payroll fiasco will most likely be remembered for the pricetag – an estimated $1.2 billion in taxpayer dollars to remedy a $98m project – but according to Ken Lowe, Managing Director at Systemix, a Melbourne firm specialising in the management of complex projects, those close to the industry can learn much more from the findings.
Ken has been brought in to recover more projects teetering on the edge of failure than he can remember and in picking back over what’s gone on, he has to agree that in too many cases, governance was almost always found lacking.
“Often it takes some time before a (governance) team can acknowledge something is seriously wrong, even though failures usually don’t just happen. There is always a string of poor decisions that ultimately culminate in issues that simply cannot be ignored any longer.” says Ken.
The real reasons for failure
It would appear that in many cases, human issues can get in the way of making good decisions or failing to recognise bad ones quickly enough in a governance team. The reports highlighted in this article, as well as Ken’s experience reveal that good governance can be hijacked by conflicting motives, team dysfunction, accountability issues, poor leadership and even a lack of understanding of the true meaning of governance.
Graeme Cocks, Melbourne Business School Professor says “Too many governance teams are stacked with ‘stakeholders’ to secure buy-in rather than people with proven ability to govern projects. These people are often heavily conflicted and have no accountability for their project governance role.”
There are numerous instances in the Health Payroll Enquiry that also highlight how human issues impacted on outcomes. In fact, the summary of the enquiry is littered with human failings, stating that much of the trouble came down to ‘unwarranted urgency and a lack of diligence on the part of State officials.’ And in relation to a particular aspect of the IT, it is believed that fear of failing motivated poor decisions; ‘Decisions were made to press on regardless of other considerations which ought to have had a bearing on the direction of the Project.’ Lines of responsibility were blurred, and obvious conflicts of interest ignored.
“There are two key elements to good governance. The quality of the decisions made, and the quality of the team making those decisions: The two work hand in hand.” Says Ken Lowe.
The purpose of governance is to ensure a project meets the desired outcomes. The governance team is the advocate of the owners. It is tasked with the role of providing clarity around accountability and responsibility, and ensuring clear lines of communication exist at all levels. Once this framework is in place the governance team provides oversight and monitoring around fulfillment of the strategic intent as defined in the agreed business case.
A governance team should operate within an agreed governance plan. Its members should have a mix of skills and experience to ensure that there is an understanding of all aspects of the specific project and (importantly) of governance principals. The most common departure from these principals is around conflicts of interest, usually arising from stakeholder representatives.
Systemix works with large organisations, public and private, on high-yield project performance solutions. The Systemix heritage was built largely on our expertise in commercial modelling and commercial alignment processes. With a deep understanding of the systemic interplay between the commercial and psychological contract, Systemix has successfully established the commercial basis for many projects, programs and services agreements.
When it comes to awarding a tender, there are many factors an Owner will take into consideration and it is important to know that decision making is rarely based purely on price. Whilst price may be a major factor, Owners are on the hunt for the team with the greatest capability to deliver good cost and non-cost outcomes over the long term, especially when it comes to service contracts.
Teams win tenders
With this in mind, a winning bid team must clearly demonstrate their inherent capability, both in terms of experience and an authentic cohesiveness. Owners are assessing your teams inherent capability in a number of ways, some more intuitive than others.
As well as initial target costs (and beyond the written submission of technical aspects of your solution), your team will be assessed on:
- A demonstrated capability to drive efficiency in future years via initiatives yet to be identified;
- their confidence in answering questions on its proposed solution
- the way they interact
- visible quality of leadership
- the energy it projects
Owners realise that a successful project requires a strong and united team whose collective force will assist them in delivering on both known KRAs and overcoming the unknowns that will appear along the way. When bids are competitive in terms of price and approach, the strength of the team becomes even more critical in the decision making process.
Here are some basics to keep in mind when you’re working on your next submission:
Meet the team
To have a good chance of succeeding, a proponent must be represented at presentations or interviews by the key team members that it proposes to assign to the job. Typically the owner does do not want to meet the marketing team – it wants to meet the people that will deliver the services – hence it is important that the team presenting the proposal has full ownership of the written submission content, and comes across as a fully prepared high-performance team committed to the job.
Forget the sell
Under a closed-book tender or arms-length selection process the focus of the effort is to “win the job”. However, proponents who approach a long-term services contract selection process with that focus are much less likely to succeed than a proponent that focuses on “delivering the services”. The Owner’s evaluation panel is always more impressed by a team which is knowledgeable and enthused about its proposed approach than one which is just out to sell. Aside from the subtle shift in messaging, a focus on delivery forces the team to understand the client’s issues, risks, opportunities and challenges, and start developing ideas for addressing these – which is the foundation for becoming the team they want to appoint.
Build the team
A well-directed proponent team will focus on delivering the services and their internal team dynamics. By the time they get to presentation or interview stage they are already performing strongly as a team – for instance they are obviously comfortable with each other and are relaxed even under interview pressure; they give answers or engage in conversations quite naturally; they support each other yet are able to debate and challenge each other; there is no sense of hierarchy in the team (senior members naturally defer to other team members where appropriate); and they understand and believe the content of their written submissions because they have obviously been closely involved in the content.
There are no shortcuts to achieving this kind of team performance and non-price impact so it’s important for leaders to immediately start the team spending time working together with a common focus. Furthermore, it is important that the nominees for senior roles are fully involved in team preparation, as a senior leadership figure who is not “bonded” with the team can be quite damaging to client perceptions.
6 components of a successful bid
Ken Lowe, Managing Director at Systemix has worked with numerous proponents across a range of industries in preparing successful tenders. He has identified 6 key ‘streams’ in the preparation of a successful bid:
1. Market Stream
This part of the process requires investigation to understand the key drivers of the project as well as the stakeholders, Key Results Areas and current trends. This information then informs the development of a unique selling proposition, potential ‘win themes’ and honest “why us?” elements that fit with your brand as well as the Owners value drivers.
2. Commercial Stream
At this stage of the process, the focus turns to establishing internal alignment and developing a compliant and innovative offering.
Key activities in this stream typically include the following:
- Understanding the Owner’s proposed commercial framework
- Focussing on aspects which will make a ‘fair’ offer look less competitive or which present opportunities for a ‘fair’ offer to look super-competitive
- Quantifying and pricing risks or costs passed to the Service Provider under the Owner’s proposed commercial framework
- Identifying an optimal balance between ‘compliance’ to the proposed T&Cs (minimising departures which the Owner must concede) versus ‘departures’ (minimising headline price to be offered)
- Reviewing the potential for innovative alternative offers (particularly around incentives & risks) and ranking them in terms of acceptability and impact
- Supporting one or more reviews of the final offer from a commercial and legal perspective
- Preparing the team for commercial alignment discussions or negotiation sessions.
3. Organisation & Culture Stream
With a basic framework in place, the team has begun to form and this stage is about cementing the operational structure and organising principals at the foundation. The team and its leaders must take steps to understand each other’s skills and knowledge (and that of the team as a whole) in order to work effectively and plan ahead, and work also begins on developing a “vibe”. The all-important non-price elements of your bid are now being built.
Key activities in this stream typically cover:
- Identifying the principles which should be used to shape the organisation structure for the proposed team, then developing a coherent structure enabling clear accountability and agility
- Developing a charter of operations as a focus for the goals and culture of the proposed team
- Developing skills and knowledge in technical, human, and commercial areas which are relevant to the ‘essence’ of the solution and the approach being offered
- Developing the “vibe” – working with the team in a variety of real task-related situations whilst simultaneously developing shared awareness of self and team dynamics, and building the skills and behaviours that underpin high performance
- Ensuring through mock interviews and workshops that that a high-performance culture will be tangible during selection and delivery.
4. Staging & Methods Stream
It’s time to work on the project and develop an appreciation of job challenges and overall strategies for delivery. As well as the technical aspects of delivery, the team should spend time on framing and expressing integrated methods and approaches and developing the skills to communicate those effectively.
5. Pricing & Targets Stream
The proponent team needs a clear philosophy and plan for price and target development and should have an approach through to post-award phase. With this in place, the focus can turn to ways to fast track mobilisation to ensure success.
Key activities in this stream typically include:
- Building a clear pricing philosophy for both input costs and margin, that aligns to the published evaluation criteria
- Developing a pricing plan with clear tasks, accountabilities and timelines for constructing each price and non-price target required in the tender submission
- Testing the emerging price proposition against the pricing philosophy, in particular with respect to pricing of risks and coherence with the commercial terms
- Developing the approach and process for continuous improvement, including credibility of ongoing cost reduction methods, and the right balance between known improvements and ‘good faith’ expectations.
6. Submission & Logistics Stream
The design, development and production of a physical document is the final stage in the preparation process. Start by developing a structure and writing plan, refine content and then plan review and management.
“These workstreams are the visible manifestation of a proponent organisation which – to be successful – needs to be driven by an effective ‘core’ of management, leadership, and strategy / governance”, Ken explains.
Working through each area, and tailoring them for the individual client, the Systemix approach prepares proponents for both the price and people evaluation they will encounter during the process.
The importance of leadership
Generally, teams that ‘crank out the tender’ without creating an environment of effective management and leadership, are often perceived by the client as focused on the sale rather than focused on excellent delivery. Whilst task-focused management is essential to get the tender in the box, a high-performance team (with a high probability of success) requires effective leadership and governance. Any buying decision is highly influenced by intangible factors as calibrated by the degree of trust between buyer and seller, hence attention to these underpinning factors is essential.
When Systemix works with project teams, they focus on maintaining an undercurrent of conversations and interventions which enables effective functioning of the team – both during the bid phase and during delivery – always with one eye on the leadership dimension to ensure that the management, leadership, and governance is enabling the team to be the best that it can be.
Taiichi Ohno, whose founding role in the development of Toyota subsequently birthed the concept of Lean Manufacturing, identified 7 key types of waste:
1. Defects and mistakes;
2. Overproduction of goods not needed;
3. Inventories waiting the next stage in a process;
4. People waiting for something to happen or materials to be available before they can proceed;
5. Unnecessary processing, doing things which are not required;
6. Too much movement of people; and
7. Transport of goods that are not really required.
The same basic wastes of resources occur just as much in most projects as they do in manufacturing, causing expensive losses of time, money and even morale.
Obviously, the planning work you do at the outset can greatly reduce waste, but how do you manage if the systems in place are already inefficient?
Whether you call it Lean Manufacturing, Lean Construction or simply Lean Enterprise, essentially what you’re talking about is the elimination of inefficiencies and waste with a high-performance culture and a process focus. The result is improved profitability, happier clients, more engaged people and increased sustainability.
Old school vs Lean
Let’s take Lean Construction as an example and compare it to the traditional approach. Construction is notorious for the amount of time wasted as people stand around. That’s because typically, most attention goes into planning projects but very little on design or redesign of procedures. Add to this a strong hierarchical structure, where few people are involved at the top end and communications flow generally one-way from the top down, and it’s easy to see why the traditional approach results in almost every one of Ohno’s key waste areas.
Lean Construction takes a different approach. Firstly, there is a recognition that the grassroots work team have knowledge and ideas that could improve outcomes – sometimes resulting in enormous tangible benefits. Secondly, there is a methodology in place for this knowledge to find its way back to the leaders of the project or organisation. And finally, there is the compounding effect of the two… a more productive, more engaged workforce that delivers a better end result and an organisation that becomes literally ‘wiser’ with each completed project.
When Lean doesn’t work
The concepts of empowerment, communication and collaboration can send chills down the spines of many business leaders. Not because they don’t make sense… but because they seem so nebulous and difficult to manage. Afterall, moving to Lean (in any form) is about making a lasting cultural shift… Something that so many have tried and failed to do.
Perhaps it is helpful to consider what Lean is NOT, in order to understand exactly how it works. Lean is NOT warm and fuzzy. It’s not about ‘team building’ and high fives and staff barbeques. It’s not about cutting back to save money or increase profitability. These can (and often are) outcomes in a Lean organisation, but they’re not the basis. Often, failure to benefit from the Lean approach comes from targeting these outcomes directly and not the fundamental shifts that enable them to occur.
Lean = business intelligence = improved performance
The Lean approach is extremely formulaic and scientific. High-quality implementation involves careful examination and questioning of everything from a strategic level to a detail level, from design to implementation. The goal is to create predictability and reliability at every stage. The outcome of that is a greatly increased likelihood to meet all your objectives including client satisfaction, timeframes and budget.
By harnessing collective intelligence every step of the way, everyone who participates begins to think differently about the work they’re doing together. Claude Levi-Strauss captures the essence of this change in thinking; “The scientific mind does not so much provide the right answers as ask the right questions.” People working in Lean organisations have an increased desire to learn about how to solve problems (and from actually solving problems), which leads to a desire to understand the root causes of problems, which results in a sense of urgency to address root causes of problems. Ultimately, this creates a culture that strives for continuous improvement.
Lean actually provides leaders with information and questions that can fast track organisational and competitive advantage. By unlocking the wisdom inside your organisation, you’re better able to anticipate future obstacles, problem solve quickly and act on new opportunities. Plus, through careful analysis and redesign of the processes in your organisation or project, your business or project can become more efficient, productive and profitable.
High-yield project & business performance solutions
Systemix works with large organisations to increase efficiency, profitability and sustainability with Lean performance concepts and many others. We guide you in identifying and capturing high-yield efficiency and performance improvement opportunities both in a project context (Lean Project Delivery) as well as in the organisational setting (Enterprise Efficiency), using an array of methodologies and techniques.
Working with business leaders to create a Lean culture at a project or organisation level, Systemix addresses the critical factors of both people and process to create significant outcome improvements.