June 2014 Collaborating Project Management for High Performance Business Insight
SYNERGY 02
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Message from Editor-in-chief Quality attracts quality. The response on previous editorial helped us pull more traction for this editorial.
Message from the President Changes and gearing up the activities in the board and the same is shared in this edition.
Agile, Agility and Project Management One day event at Hotel Clarens, Gurgaon to understand all about Agile and PMI’s support of the same.
Employee engagement & Soft Skills Projects are created & executed by humans. As a leader or manager, let’s look into as how to connect with our resources on at the required frequency to help them deliver what is expected. by Neelima Chakara
Interview Series—Prof Vilas, Shah, ASCI Prof Vilas Shah has been training civil servants and practicing managers in Operations Management. He is leading key projects from the government sector too. We caught him for a small chit-chat to understand how differently corporate & government sectors operate on projects.
Cloud Storage Everybody talks about cloud; one likes to stay on Cloud 9. Know what’s all it takes to stay on the cloud. by Nitin Anand
Pros & Cons of Negotiations Understand the pros & cons of Negotiation. Also, let’s get behind the curtain to understand tactics, counter tactics and shifting of power. by Ajay Bhargove
Agile Requirements Is agile fit for all? If not, then let’s uncover some insights to make different type of projects fit under the umbrella. by Jahnavi Rao
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Platinum Sponsor Project Management National Conference 2013
Managing the MESS Humans are complicated, hence the projects created by humans are even further complicated. Revisiting six steps to simplify. by Nafees Ahmad
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Foreword Hello Members, I hope you would have enjoyed reading our March (HOLI Edition). As the new government after a miraculous win comes to power, creating hopes for better India; similarly I hope we too do better every day, and enjoy the journey of learning every single second.
On journey aspect, I remember that taking the first step is always tough and once you are in momentum, it becomes easier to go along. The interesting aspect which no one realizes is that remaining in momentum is way tougher, harder than the initial step. It only looks easy, as we have companions walking along making the journey mesmeric. We received praises from many members, chapter presidents and senior members on our last release and hope to raise or at least maintain that quality on this journey of Synergy. I would like to thank my editorial team once again in making our last edition a great success. Abhijit Kumar, PMP
Nirmallya Kar
Senior Executive Siemens Ltd.
Sr. Program Manager STMicroelectronics
Hemant Seigell, PMP,MBA,CPP,ITIL
Pooja Kapoor
Director - Riskpro India Risk Consulting & Advisory
Sr. Engg. Proj. Mgr. (Program Manager) Aricent
Kumar Saurabh, PMP
Shashank Nepalli
Asst. General Manager Samsung Heavy Industries Pvt. Ltd.
Assistant Manager TVS Motors
We have started including articles that give education to our member society in general, one such example is ‘Cloud Storage’ that we have covered this time. As mentioned last time, if something comes to your mind about our editorial whether it is an area of improvement, something is missing or this journal is great, please feel free to share across. We are open to any kind of feedback, be it good or bad as we treat bad news as an opportunity to improve and excel further down the lane.
Prashant Malhotra
“Take advantage of every opportunity to practice your communication skills so that when important occasions arise, you will have the gift, the style, the sharpness, the clarity, and the emotions to affect other people.” — Jim Rohn
I again r With best regards
Prashant Malhotra Vice President - Communications, PMI North India Chapter Feedback: pminicmag@pminorthindia.org, Prashant@pminorthindia.org
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Message from the President Dear Chapter Members & Practitioners, Welcome to this monsoon edition of our Q2-2014 Quarterly magazine Synergy!! This magazine now comes with a new interview feature of senior practitioners being covered on specific topics and sharing their experience with our member community and readers. As earlier, we will continue to strive for new features and new ideas to continuously improve the quality and readership base of this magazine. Also to keep you posted on some key initiatives on which chapter board is working and will be in front of you soon for review and approval are:
Manoj K Gupta
1. PMI Chapter Multi-Year Business Plan Support Program – This is an initiative on which we did initial work last year and few weeks back had a work with our Regional Mentor, Tejas Sura on the same. As per this initiative, chapters are expected to identity their long term high level objectives as per the geography and environment they are working in along side Economic Intelligence Unit report provided by PMI to the respective chapter for their environment along with certain key indicators for setting and tracking goals for their multiyear performance for coming years. This initiative is being led by me directly along with other board members besides Jay Kumar, our new Director Finance playing an important role on account of his position 2. Chapter Board Position Alignment with PMI Role Delineation Study – This exercise is being led by Pritam D. Gautam with inputs from board and supported by Amit Aggarwal directly in the initiative. This initiative is aimed at aligning our board positions and their role definition with PMI’s Role Delineation study exercise which is targeted to standardize board positions and their roles globally for all PMI Chapters. The exercise will go through few round of reviews and approvals between board, chapter members, PMI before being implemented for future volunteers coming into the chapter board / working within the chapter board from next year. 3. Volunteer Recognition & Opportunities – No chapter can function or grow without volunteers or their active participation in chapter activities. As part of our chapter recognition initiative, Pritam as Conference Director for the conference has rolled out the following new placeholder on our chapter website for National Conference 2013 volunteers with details of their profile and their personal experience in the conference, all put together on a single link. This is being updated with details from volunteers who have been left out or whose complete details are being collated. We are going to work out more extensive recognition programs like recognizing loyal members of the chapter (say 7 Years or more) at chapter AGM and few more initiatives soon and details will be shared with the community in following months. With best regards Manoj K Gupta President & CEO, PMI North India Chapter
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EVENTS @
PMI NIC Feedback: pminicmag@pminorthindia.org, Prashant@pminorthindia.org
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Agile, Agility & Project Management Agile is a topic of growing importance in project management. The marketplace reflects this importance, as project management practitioners increasingly embrace agile as a technique for successful projects. This was a full day event starting with Agile Manifesto taken by Ashish. It was followed by a Scrum session by Naveen. While the brains had their feast during session, we were surprised to know when delegates shared that the food was
yummy too. Despite of a lovely meal, delegates were incredibly active in postlunch session taken by Saket on Pull Planning, Lean & Kanban. Before closing out, we had an open discussion on PMI-ACP for one full hour where our speakers & PMI NIC guided as how to go about attaining PMI ACP certification. The event had overwhelmed response and turnout, good meal, interactive sessions & nice networking opportunity. Event Date 26th Apr 2014 Members were awarded 6 PDUs.
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EMPLOYEE ENGAGEMENT AND
SOFT SKILLS
BY NEELIMA CHAKARA
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Employee engagement is the emotional connection that an employee feels towards his/her job. This connection is a function of and also drives: the enthusiasm and dedication of employees towards their work, the feeling that they contribute to the achievement of the organization’s goals, and the pride in the work done by them Multiple studies suggest that engaged employees put discretionary efforts in their work. They care about their work & the performance of their organization. Engaged employees are more productive. In fact, according to Towers Perrin research companies with engaged workers have 6% higher net profit margins, and according to Kenexa research such companies have five times higher shareholder returns over five years
Macro To help employees understand organizational aspirations How their day to day contribution leads to accomplishing organizational objectives What needs to change to reach the goals What does the change means for employees? After all, if they do not sign up for it, they will fear it and resist it.
Micro Communicate expectations clearly Build accountability for progress in the system Offer rewards and recognition for good work Provide regular feedback Build career paths
This makes for a compelling business case for organizations to invest in employee engagement at both macro and micro level. It is important that senior leaders drive this culture, build trust with employees and are seen as role models. However, the role of immediate supervisors / managers is most important in driving engagement. They can make a difference by building strong relationship with employees, create robust team interactions and lead in a person centric way. Here is how a supervisor/manager can prove that he/she cares for team members:
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CONNECT WITH AN INDIVIDUAL Relating with employees at a personal level, makes them feel appreciated. It does not mean that a manager knows day to day details of team members’ lives but sharing their major life events and knowing their significant others tells them that they matter as individuals and not just as resources to meet corporate goals. Good bosses extend help to meet personal challenges. One of my bosses helped me find accommodation to suit my budget when I shifted cities for a particular role. This conveyed a message to me that he would do anything in his power to support me.
APPRECIATE CONTRIBUTION Recognizing a job well done is the top motivating factor. Thoughtful, sincere and personal appreciation is very inspiring to employees. It is important that appreciation is expressed in a manner which is valued by employees. Some employees like to be publically recognized while others prefer it in private. A certificate in the employee town-hall, a personalized thank you mail from the boss or a chance to have coffee with the big boss are some of the ways of expressing gratitude and bringing out the best in individuals.
KNOW THEIR PERSONAL GOAL AND CHALLANGES When employees know, how their roles contribute to achieving organizational objectives, they feel inspired to do their best. Similarly, if what they do also aligns to achieving their personal objectives, they are doubly invested in their job. A good manager tries to sculpt roles, which allow employees to play to their strengths in achieving team targets while steadily marching towards their personal goals.
UNDERSTAND THEIR POTENTIAL
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High potential employees are not only talented and engaged but aspires to take responsibility, face challenges and be rewarded in the form of senior positions in the organization. A smart manager can spot them, tap their potential and not feel threatened by them, thereby strengthening the talent pipeline of the organization.
CREATING NEW EXPERIENCES Paying attention when employees show interest in different aspects of business and creating occasions to explore those interests, breaks monotony of daily work, stretches employees and hones their personalities. For example, having a training content creator contribute to the marketing collateral for the team!
CREATE A CAREER PATH Helping employees chart a course for career development within the organization is a win for both employees as well as employers. A manager can help employees
focus on their growth,
think about what knowledge, skills, characteristics and experiences they need, to perform better and progress in their careers
know what options do they have/need to get help to build particulars skills, for example coaching, job shadowing, mentoring, etc.
The above steps ready the employees for challenges of tomorrow and make them feel valued as individuals, mentally stimulated and regarded a part of the organization’s future! The last two factors are possibly the most significant winning approaches, especially, since our educational curriculum is too academic and does not focus enough on creating well rounded personalities. The soft skills that an employee needs to become an effective leader cannot be taken for granted. Employees do not come equipped with good communications skill, emotional intelligence, ability to collaborate and be resilient and respectful under all circumstances. As organizations have become flatter and matrix, knowing how to handle self, deal with ambiguity, get things done without being in the direct chain of command, relate to customers & colleagues go a long way building credence for an employee and positive, productive workplace in an organization. Hence, organizations in general & managers
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in particular can make a huge impact by investing in developing these much needed soft skills in employees. This effort requires comprehensive planning, knowing each team member’s areas of strengths & focus, creating a development plan for them, making them accountable for implementing that plan while supporting them with necessary inputs and opportunities. At different points of their career, employees need a differential skill set to be effective. An indicative list of skills needed at junior, middle and senior levels of career is given below for reference. Having of all these skills in requisite measure is not a mean task. The good news is that they can be acquired with the help of appropriate interventions.
To provide the right impetus to develop soft skills, sending employees for training sessions is Level A
Level B
Level C
Time management
Interviewing skills
Influencing skills
Presentation skills
How to build effective teams
Negotiating skills
Building trust
How to provide feedback
Change management
Setting SMART goals
Asking effective Conflict resoluquestions tion CommunicaStakeholder tions managemanagement ment Inclusive culture / leveraging diversity
not enough. Creating opportunities for experiential learning and setting stretch targets are an integral part of supporting their journey of learning and growth. Engaged employees appreciate being put in waters untested by them. The excitement of a challenge and the pride of having risen to the occasion strengthen the engagement. Developing employees’ soft skills also enhances their personality, increases their confidence, broadens their horizon and motivates them to stay invested and grow with their organization. This is a strong pull factor creating stickiness in the organization. Employee who see themselves get better in the softer aspects of personality, appreciate the investment made in them by the organization. They know they are listened to, treated with respect and trusted
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and thus are emotionally engaged with their organization. Here is further proof in the form of Gallup study - Data from over 23 thousand business units showed that those with the highest engagement scores (top 25%) averaged 18% higher productivity than those with the lowest engagement scores (bottom 25%) and also:
31% in turnover for high-turnover companies (those with 60% or higher annualized turnover) 51% in turnover for low-turnover companies (those with 40% or lower annualized turnover 12% in customer loyalty/engagement 62% in safety incidents 51% in shrinkage 18% in productivity 12% in profitability
This is impressive proof that the right management commitment and focus on people and their skill building can lead to every employee feeling like they have a stake in the organization!
References The Towers Perrin research, Kenexa research and Gallup study are taken from open sources /internet, www.delta7.com , 123rf.com
Neelima Chakara is a Management Accountant and a Project Management Professional by qualification. She has 18+ years of work experience in Finance, operations and projects management. She is currently working for EYGBS India Private Limited and have worked for organizations like Infosys, Oracle, Accenture and ITI Limited in the past. You can reach her out on LinkedIn
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BY JAHNAVI RAO Feedback: pminicmag@pminorthindia.org, Prashant@pminorthindia.org
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The essence of Agile lies in being able to define the requirements in such a manner that the product/ solution gets created with features that are implemented incrementally. Unlike waterfall models, we do not need to wait till the business users are able to visualize and define the entire requirements fully before starting off with the designing and other phases of the product/solution. The Agile philosophy is for the entire team, a set of experts in their own fields, to own up the solution and move fast towards achieving the milestones, with intellect and understanding amongst themselves. Agile is adopted by businesses with the objective to be able to market/implement the product/solution early, in order to start reaping the benefits as quickly as possible. The objectives could differ depending on the business model. Few objectives for adopting agile could be as follows:
Catch users’ attention and get them interested in the new product by launching it early, highlighting some of the major features that convey the vision of creator/innovator. Newer features can be then incrementally introduced.
Reduce maintenance costs of corporates by introducing new systems and getting rid of the legacy systems.
Launch the solution (like online shopping site, job related web sites) with a few critical modules and start reaping the benefits quickly.
Many-a-times, the entire system’s requirements clarity is missing, even though the business may know what it wants on-the-whole. In such cases it is important to adopt Agile. It is important for business users to be able to visualize the product/ solution skeletally as a whole, and be able to pass on the vision to the business analysts. Then they should give guidance on aligning and planning the
dependent features together, and that would reduce the risk of huge changes & rework in the subsequent iterations. The business analysts’ responsibilities increase many folds of being able to visualize and translate what the business users want and define requirements incrementally. Requirement volatility actually defines success or failure of any Agile project. Also, the efficiency with which the requirements are broken into stories makes huge impact on the achievement of goals. If the business analysts are able to visualize the iteratively incrementing product and define the stories; keeping in mind the impact of each such story on the already defined/implemented product, the going is smooth.
It is important for business users to be able to visualize the product/solution skeletally as a whole, and be able to pass on the vision to the business analysts. At times just for the sake of adopting Agile model, which is in vogue, certain contracts are signed without even analyzing whether business teams would be able to visualize and define requirements incrementally or not. In such cases the sequencing of stories are completely unorganized and randomly picked, causing chaos and huge rework during each of the subsequent iterations. This results into additional effort and cost. To quote an example, one such project was picked recently where the stakeholders, from the client and the vendor realized quite too soon the mistake of defining Agile model for the project. The requirements included heavy UI components with multiple grids, almost like an excel sheet, and complex calculations, along with all possible complex algo-
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rithms. Such requirements cannot be broken into smaller stories and therefore one cannot plan such requirements incrementally or in parallel. Two major issues that were faced :
The UI could not be broken into smaller chunks to fit into 6/8 weeks’ iteration
Even a small change due to implementation of another functionality in the next iteration ended up in huge rework in the earlier complex algorithm resulting in schedule slippage and quality concerns.
It is therefore very important to decide, during contracting period itself, whether to go Agile for certain projects or not, instead of struggling later to keep a check on cost and quality. Unmatched methodology adoption may result in chaos because of huge ripple effects resulting from complex interrelated requirements not planned correctly!! In the above example it would have been helpful to both parties to have gone in for a combination of an iterative-waterfall model where the entire project could have been divided into stages with specific features that in turn could have been developed adopting waterfall model within, that is by adopting Agile Waterfall Hybrid. There are other challenges as well. At times the fixed price contracts for products/solutions to be developed using Agile approach, end up in huge losses for the vendor because of uncertain requirements. Both time and effort are lost in trying to get the right business user (from client’s end) to help define the system’s requirements efficiently and in one go. This challenge, results in chaos and loss for both the parties involved. In such cases again, it is always recommended to have the contract split into Time & Material for Requirements phase and Fixed Price for rest of the
phases of the project.
At times, the fixed price contracts for products/solutions to be developed using Agile approach, end up in huge losses for the vendor because of uncertain requirements. Another scenario is when an existing system is being re-built using Agile approach. In this case not only the definition of existing and newly required features a challenge but also being able to completely map the external systems’ dependencies and mapping of these systems’ requirements becomes a tough task. The business user has to have a holistic approach keeping in mind what external inputs and outputs might be needed and accordingly define the approach/requirements for agile development. If you are getting the system developed in the Agile mode, then the biggest challenge is having your business users give appropriate guidance and inputs around the requirements of the system to be developed incrementally. If you have a team defining the requirements then you would benefit defining the KPI’s for the business analysts around the following:
REQUIREMENT VOLATILITY This is to measure the extent of changes in the requirements. This can be evaluated as (Agreed change in size FP or KLOC/ Planned Size in FP or KLOC as per the contract) * 100. The greater the value the higher instability in requirements. QUERY QUOTIENT This is to measure how much of clarity
“We don’t need an accurate document, we need a shared understanding.” - Jeff Patton. Feedback: pminicmag@pminorthindia.org, Prashant@pminorthindia.org
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found in the requirements. Measured as ((number of internal queries which are raised by other stakeholders from the organization+ number of external queries raised by the vendor team)/ Planned Size for the specific Requirement in FP or KLOC) * 100. The higher the number, the poorer the quality of the requirements written. Looking at all the above scenarios, it is evident that in order to have a project succeed using Agile model, the requirements team has to be the smartest. It may also pay off better if some mature solution architects are also consulted while defining the requirements, which would ensure having the technical aspect also looked into and thus the project could be expected to be a sure shot success!!
A Senior Management Professional with 23+ years of experience in successfully delivering efficient IT solutions across varied domains and technologies to cater to customers’ needs. I have successfully managed duelshore programs around .NET, Java/J2EE, AS/400 Technologies and HR Solutions, Media Sales, Commercial Insurance, Banking and Financial Services, Travel and Inventory domains for Customers across Australia, US and UK Geographies. You can reach him on LinkedIn
US $109 million Organizations
lose an average of US $109 million for every US $1 billion spent on projects. Source: PMI Pulse 2014
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MANAGING
THE
BY NAFEES AHMAD Feedback: pminicmag@pminorthindia.org, Prashant@pminorthindia.org
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A complex project or situation deals in the ‘UNKNOWN UNKNOWN’, therefore to manage such projects exploring and experimenting approach is recommended with patience and creativity. “Managers are not confronted with problems that are independent of each other, but with dynamic situations that consist of complex systems of changing problem that interact with each other, I call such situations messes.” R.L. Ackoff wrote in his book ‘The Art of Problem Solving.’ Mess or complex situations generally categorize into STATIC Complexity – where there are too many variables to manage and DYNAMIC Complexity – where factors and variable might be less but speedy changes, feedback loops, evolution, self-organizing and changing environment make it difficult to comprehend it. In complex situation the relationship between cause and effect is not evident and can only be perceived in retrospect. Therefore exploration and experimentation are key techniques to establish a cause-effect relationship or rather sense a pattern. Owning to dynamic nature, involvement of too many variables and complex relationships – it further demands vigilance over longer time to correctly see the linkages and impact of introduced changes into the complex situation. This article focuses on how to decipher complex situations and organize them. Changing and influencing complex situations into intended direction is of equal or rather more importance however it is not covered here.
With so much uncertainty, complexity and risks, PMs are puzzled; they don’t know where to start , how to grasp and organize the situation within stipulated schedule and produce ‘matching’ or expected deliverables.
CONTEXT SETTING As a project or program manager, one of the daunting thing is to take the responsibility of complex project or simply a ‘mess’ and then it is expected of you to collect information, organize the things , seek common ground and kick start the realization. Though, it is easier said than done even for experienced PMs. These types of projects involve many different, connected and moving parts. Multiple Inter-dependencies, feedback loops and lack of knowledge furthers the difficulty at hand. New and emerging technologies, cross-functional projects with dispersed stakeholders, highly connected and evolving situations, implementation of complex government regulations, mergers, process-re-engineering etc., all fall under this category. With so much uncertainty, complexity and risks, PMs are puzzled; they don’t know where to start , how to grasp and organize the situation within stipulated schedule and produce ‘matching’ or expected deliverables. We will, in this article, try to answer these questions and provide a generic framework to successfully manage such
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situations. Proposed framework comprises of following steps :
EAT ONE BITE AT A TIME “You can’t cross the sea merely by standing and staring at the water.” - Rabindranath Tagore How to eat an elephant? Answer is: one bite at a time. Take a plunge; every big journey starts with a small step. At the outset, adjust your vision downward from the big and complex picture, to zero in on one small ‘action area.’ While selecting an action area - the focus is on progression and not perfection.
a)
Figure-A represents complexity or messing situation; where do we start from? Remember that there is no clear cause-effect existing in a mess, so we do not know the best Figure-A action area to start upon. However, there are some generic techniques to help us here. In sampling technique, we take a part of the picture i.e. a sample and start from there. A second technique is called Boundary Management. In boundary management we draw an artificial boundary and define an ‘action area’ or ’bounded area’ within the big picture. This reduces the scale and provides more focused handling of situation. Additionally, we need to clearly define our priorities that really matters and keep these few over-riding priorities firmly in mind. These would act as ‘complexity-reducers’ and help us select the most appropriate action area, that aligns with our priorities. For example, if we are deploying an emerging technology; most probable implementation area and environment could be R&D related location, environments, processes or low impact sites. Please note that the action area is a partial and temporary view of complete situation. As we further dive down, irrespective which part of picture we select; iteration remains the key to understand the complete situation.
DIVIDE AND CONQUER “Nothing is particularly hard if you divide it into small jobs” Henry Ford After selecting ‘action area’, next task is to divide the action area into multiple sub-systems or windows or categories. Many well known frameworks and methodologies are available to select from, with their own pros, cons, suitability and applicability. Enterprise architecture framework (business, proFigure-B cess, information/data, application and technology), System thinking framework (process, structure, meaningfulness
b)
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and knowledge power), 7 S organization model (structure, strategy, systems, skills, style, staff and shared values) are some of the popular way to categorize the action area for further analysis. As shown in figure-B, we will use system thinking framework as articulated by Robert Louis Flood in his book “Rethinking the Fifth Discipline - Learning within the unknowable”. An alternative approach could be to combine and use multiple frameworks either in sequence or in parallel.
GO GET THE DETAILS
c)
“God is in the details” – Ludwig Mies In this step we will get into the details of each of selected category and try to understand more about them. In figure-C, processes are related to how activities and functions are performed in present or are supposed to be performed in future. Processes are concerned with efficiency and reliability. Structure is about how functions and teams are organized; and are concerned with effectiveness. Meaningfulness and knowledge-power have to do with culture, style and power groups of the organization. For more details you may refer to “Rethinking the Fifth Discipline - Learning within the unknowable”.
As complex situation is non-linear, dynamic, self-evolving and unpredictable, the best way to understand such system is to observe the system in action. Get a feel of the complex situation, spend some time with team who manages its operations, understand their concerns and challenges, brainstorm, and interview them. Find out pros and cons about different aspect of situation. Figure-C
SOLICIT DIVERSE VIEWS AND VIEWPOINTS “Everyone you will meet ever knows something you don’t” – Bill Nye No one knows everything. In fact, as humans we have limited physical and cognitive capabilities. We live in our bounded rationality and limited perspective. We only know partial, incomplete and relevant part of the whole. I am sure you have heard the story of nine blind men and the elephant. In the story nine blind men were put in a room with an elephant. Everyone was asked to observe the creature and report back once out of the room. Each could report only a part of elephant which he was facing and sensing. One talked about trunk, other one talked about long tail, another one about big feet and so on. Everyone was right but nobody could explain the whole. Similarly no matter how much expert, experienced and intelligent we are, we can’t understand everything from all angles. We have to have more, different, diverse and cross-functional views and perspectives to figure out the big picture. As mentioned in Figure-D, we need to encourage and interact with key stakeholders and understand their side of the story; concerns
d)
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and challenges. This will plug the gaps in our own understanding of action area, augment and enrich the collected information. Another useful place to look at is past trends and metrics. These could also provide valuable insights and clues about the behavior of the complex system and help further deepen and widen our understanding. Yet another method is to go out and seeking external help in the form of expert support, consultant, books etc. It is rarely that this is the first time someone in this world is facing such problem.
Figure-D
REPEAT WITH RENEWD FOCUS “Success is the sum of small efforts repeated day in and day out”- Robert Collier It is time to repeat. Iterate through step 1 to 4 however for a different action area. Duration of and coverage in each iteration depends upon many things and can range from weeks to months. Shorter iterations are better. Number of re-iteration is again dependent on urgency, risks, available time & knowledge and complexity apart from many other contextual conditions .While selecting a second action area (action area B in figureE ); keep in mind that this could mean different scope, new stakeholders and news questions. As before, choosing appropriate action area is very Figure-E important. Albert Einstein beautifully summarizes it in his famous quote, “Insanity: doing the same thing over and over again and expecting different results”.
e)
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CONNECT THE DOTS “You can't connect the dots looking forward; you can only connect them looking backwards” – Steve Jobs Put all the information and metrics on the table. It is time to digest and synthesize. Using post-it to write key findings, labeling and grouping them is very handy technique in this step. Special focus should be on – inconsistent and misaligned and outliers’ points (point that falls beyond normal and expected range). Place conflicting data or opinions side-by-side and reconcile with key stakeholders to select the most appropriate and applicable ones. This exercise should provide enough clarity in terms of important goals, tasks and risks. Subsequent discussions should produce multiple hypotheses. The most important hypotheses must be selected as per agreed priorities. These hypotheses should then be tested one-by-one or in parallel to ascertain and prove basic assumptions.
f)
At this point either we may decide to charter a project to implement necessary changes as per tested premises or may go back to above framework for another around.
TO SUM UP Human body is an example of complex system. If you have some health problem and go to a doctor, an experienced doctor will not right away starts with the prescription. He first collects as much information as possible through tests and health records. He asks you questions focusing more on your behavior; reading between lines and not just your answers. Sometime, he goes back and even asks questions related to the health concerns of your parents like blood sugar problems, diabetes or your surrounding environment like pollution level, water qualities or even your lifestyle including smoking and drinking etc. Sometimes, he may need to consult another doctor. Once he thoroughly probes and senses the complexity involved, it is then that he prescribes appropriate medication. If prescribed medication doesn’t generate expected results, he would change as per reaction (quantity and quality) of medicine to the body. Similarly, to decode any complex system or situation, we need to feel the system, collect as much data as possible, run tests, talk to concerned people, go back to history to check for clues, understand context and surroundings and then only formulate hypotheses and test them. If not successful, we need to go back and form new hypotheses and test again. If you observe closely the overall pattern here revolves around:
Convergent thinking for congregating information, views and perspectives to make sense, focus and prioritize Divergent thinking for opening up, collecting information , views and perspectives Agile execution for testing the hypotheses in small , calculated and controlled environment
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Iterative process for repetition to get more insights, enrichment and learning
A long , diligent and sometime painful exercise though please remember that we are dealing with ‘UNKNOWN UNKNOWN’ and therefore we need exploration and experimentations with patience and creativity.
Nafees is a seasoned professional with more than 16 years of experience in IT/ ITeS /Telecom/Financial sectors. At present, he is heading Nokia Networks Customer extranet platform called NSN Online Services (NOLS). He had played leading roles in the area of product development, program management, process reengineering, technologies road- mapping, enterprise architecture, platforms and operations management. With global exposer (worked in Boston, Singapore, Germany, Finland); Nafees is a trained enterprise architecture practitioner (TOGAF 9.1 level-1&2). His certifications include PMP, 6sigma GB, CCNP and ITIL. You can reach him on LinkedIn
Companies that actively managed ethical issues outperformed their peers financially by between 3.3% and 7.7% over a five-year period.
Source: Ethics @ Work, Alankar Karpe (PMI Virtual Library) Feedback: pminicmag@pminorthindia.org, Prashant@pminorthindia.org
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A TEA BREAK WITH Prof. VILAS SHAH Prof. Vilas Shah is an M.Tech from IIT Bombay and has 35+ years of experience out of which 30 years has been invested in education industry. He is currently teaching Operations Management in ASCI (Administrative Staff College of India). ASCI was established in 1956 and has sharpened skills of more than 75000 civil servants and practicing managers in both Government and Corporate sectors. He specializes in Procurement, Projects, Operations Management and Strategic Initiatives in start-up and high performance organizations. As you have worked into multiple projects across industries and since you are in education industry, it would be nice if you could share, as how has advocacy of Project Management evolved over the past many years in India. Most difficult problem of advocacy of project management has been that although almost every stake holder accepts the need for Scientific Project Management but have not been able to implement / implemented the same due to various reasons. In my opinion, organizations working in project management advocacy have failed to impress on the govt. authorities the possible gains of adopting scientific project management. The projects in government sector suffer mainly due to delay in land acquisition & various clearances like environmental, forest etc. These delays are sometimes so huge but nobody realizes that there can be serious delays due to bad project management. So all the stake holders are almost resigned to the fact that the projects will be delayed and there is little that they can do about it. Hence when Project Management advocacy is done, it should also be impressed upon the government to manage clearances as part of Project Management. In some large projects like Delhi Mumbai Industrial Corridor Project (DMICDS), they have been carving out projects by taking all the necessary clearances as part of Project SPV creation phase and then outsourcing the projects to potential bidders / vendors to avoid project delays. You have worked in private sector and government sector. Please share some unique challenges of both the sectors. Private sector has very strong objective and target driven culture and most of the time it is the monetary objective, along with the pressure to deliver to manage performance expectations of senior management. However in private sector, there may be some people who will take shortcuts and as a country we have not developed the culture or laws which dissuade them from preventing shortcuts. But private sector does use scientific project management to certain extent, inspite of small and medium (including some large) sized players still not following the same and appreciating the same. However even in that sector they unlike their overseas competitors, they are not developing new ways of managing projects and analysis and research in the domain, something which is seriously missing and impacting their growth and maturity in project management.
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Government sector is now a days working mostly by employing outsourced services. This has taken away the need and hence the zeal to acquire new techniques and mastering and retaining the old expertise. Many small and medium scale contractors do not use project management to manage the projects and mostly not interested in reporting along with the updated program. The accountability of delays are not normally fixed as the delays due to reasons discussed earlier are so huge that everybody accepts the delay as a given fact. Also there is no incentive / dis-incentive lot of times on the officers to manage projects efficiently and not exceed time, cost & quality parameters of the project on account of various other political and economic reasons. Can you share some insights of defense sector projects. And how do they differ from other government projects Defense sector projects are normally research projects. There are high level of uncertainties while estimating the time for research activity. Also customers are always pressing for aggressive delivery schedule due to strategic reasons. Hence ambitious targets are taken up and most of the projects end up in delays in time and cost overrun. As a result of over ambitious targets and the past culture of procedural delays, the project team is ready for delays from day one. Another peculiar fact in this area is that as the project gets delayed, new technologies and capabilities are displayed in the global area. This results in request from customers to enhance the scope of the project to include these advances. This causes further delays in the projects. How do you see Project management scaling up among IAS people after coming to ASCI. There is increasing awareness in government and bureaucracy that IAS officers should be aware of project management but the initiatives are yet to deliver the result in terms of larger adoption. Senior IAS officers need to be made aware of the importance of project management. Most of the administrators feel that the projects are delayed due to external reasons (mentioned above), so the efforts are generally focused on addressing those reasons due to which project management takes a backseat. There needs to be some demonstrative projects where ideal conditions, tools and techniques can be demonstrated on a realistic scale and visits to these projects can be organized to impress upon the benefits derived from project management.
As everybody is more aware of saving energy or moving towards go-green initiative; how do you see Govt. of India's contribution in encouraging govt. projects in alignment with it. (One may list some successful projects and statistics related to it Saving energy has been a priority area of the government and there are various awards, mechanisms, reporting structures instituted by the government in these areas. But these initiatives do not differentiate between ongoing operations and projects. There is possibility of instituting separate awards for green projects etc.
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CLOUD
STORAGE BY NITIN ANAND
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Cloud storage has become the new standard for file and data sharing between users, companies, institutions and corporations. As no two clouds in the sky are unique, same principle applies for cloud storage systems too. Cloud storage indirectly refers to storing and saving data [Documents, movies, photos, emails and much more] for further or immediate use to an off-site storage system maintained by a third party and made available over a network, typically through internet. So instead of storing your data on a physical hard drive or a local storage device, the data is saved remotely. This gives the users the access to their files from anywhere in the world 24x7 all around the year. Cloud storage systems always rely on many data servers. Everything in the world requires maintenance including these servers which brings in the concept of redundancy that ensures that same data is stored on multiple systems so that data is available all round the clock. Does the adage “don’t put all your eggs in one basket” ring a bell right now? Facebook, Myspace, Google, Picasa, Flickr, GoDaddy, Startlogic, Strongspace, Mediamax, Hostmonster, Hotmail, Yahoo all use cloud platforms.
Cloud storage has become the new standard for file and data sharing between users, companies, institutions and corporations.
These are some of the questions that put companies at a standstill for decisions. Risk vs. convenience is a key consideration for deciding on cloud migration strategy and a proper balance needs to be maintained between the two for startups, small businesses and enterprises. The complete data and applications that need to be migrated to cloud storage can be divided on the basis of urgency, importance, risk and criticality to a company. The companies can follow the 80:20 rule on deciding the cloud storage migration. 20% of the data might be 80% critical to the user and might be given due consideration for keeping it on local storage systems whereas 80% of the data might be only 20% critical, which can be migrated. The infrastructure performance over a period of time and the network latency are crucial factors in decision making process. There are 4 main cloud storage models:
Change is never an easy thing. Questions such as, will cloud be useful for the organization? Is the investment feasible enough? What benefits may be realized out of cloud? Readiness factor and the fear of implementation? Will we get the same security that we get on our premises, in the cloud too?
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Public cloud This type of model is generally preferred by companies or individuals that are much less concerned about data availability and data security. The individuals preferring the Public cloud model don’t have or don’t want to,
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shell out much money to avail the benefits. Amazon’s S3 service provides a multi tenanted storage interface that is most suitable for unstructured data.
Private Cloud This offers a dedicated environment with firewalls intact for increased security. This is most suitable for companies that need a more control and more flexibility over their data. Risk and security is a major concern for going in, for Private Cloud strategy.
Hybrid cloud This is a combination of the public and private cloud models. The small businesses might want to store mission critical and increased risk data on private cloud and backup and archival data on public cloud. Remember the 80:20 rule?
Community Cloud These are infrastructures that are shared by several different groups based on common concern or mindset. For example a number of medical institutions and schools might get together to share common knowledge that helps a wider audience. There are several cloud storage providers in the market and it is not easy to choose them, as per your defined needs. Several factors can be accounted for on your choice:
Efficiency and value for money You may choose a cheap cloud storage provider and end up at loss. There can be missing data and also data not available on time. Amount of storage space offered, superior features provided and the reliability when weighed against the costs define this factor. Total cost of ownership and return on investment, setup costs and operational costs, should always be considered during this phase.
Technical support and customer service This factor defines how fast a customer gets a response for his query and a solution for his problem as in relation to the technicalities. SLA and TAT form an important criterion for this factor.
Reliability and Uptime If we consider statistics and analytics into our discussion then we can very well imagine that the customer would never like to miss accessing his data even for 1 minute. Expectations from cloud storage companies are more than for 99.99% uptime.
Storage space How much is the storage space available for each rupee of money. This factor is closely related with efficiency and value for money.
GUI and ease of use features The interface between the storage and the user also plays an important role in deciding which cloud storage to go for. The more the number of features and the more the ease of operating would surely make a distinction. It all depends on the customer on whether those features are really useful to him or not. At the end customized packages tend to be more favorite among in the market where companies can choose from pre-defined packages or on a long term relationship even create new refinements.
Future amendments How easy it is to remove services in future? Can the package be modified according to customer preferences and needs? Are all current and future requirements been met during the deal? So the overall rating will comprise of the above mentioned factors on a scale of 10 and getting a common rating for each cloud storage provider on that basis. Proper validation needs to be completed and tested after data migration to the cloud before production gets re-enabled and optimized. Perfor-
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mance analysis of before and after, need to be conducted by technical resources and differences highlighted. For sure, the performance on outsourced storage will be more likely to be lower than local storage, depending on how much a customer is willing to release from his pocket. Also cloud storage is more prone to hackers and other unscrupulous needs. Proper Authentication procedures and Authorization practices need to be implemented at a ground level. Companies may not exist in future or maybe overtaken by big enterprises or may vanish in thin air leading to your data being dangled and exposed freely with no access for months. Who owns the data in the cloud system? Does it belong to the company that owns the physical equipment or does it belong to the company that hosted the data? The legal aspect from compliance and regulatory stance is of apprehension. There’s more to come in cloud storage in future. Happy Flying on cloud 9 !!
Nitin is working with EMC Corporation as Project manager and has more than 14 years of experience in Supply chain management and IT infrastructure Project management. He has been involved with long term projects with American Express, Coke, Pepsi, Singulus Gmbh, and McGraw Hill during his stint as project manager. Nitin holds B.E. Degree in Electronics from Pune University. MBA from IMT Ghaziabad and 2nd MBA from University of Texas at Dallas, USA. He is PMP, ITILv3 and EMC Cloud certified professional. His hobbies include travelling, psychology and Numerology. You can reach him on LinkedIn
Source: NPA Computers
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PROS CONS
TACTICS POWER SHIFT BY AJAY BHARGOVE Feedback: pminicmag@pminorthindia.org, Prashant@pminorthindia.org
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Everything is shrinking like our world economy today, leading to lesser availability of working capital and pushing project based business to operate almost at no premiums. The scope of this paper is to analyze “how to achieve the win-win situation in project business”. We go through traditional negotiations tactics & counter tactics and pros & cons of using them. We must understand, why not negotiate hard, especially when we know that the other side is very desperate to have the business and may accept everything whatever thrown on them. So, the need generated to know the possible ways to ensure win-win position in current market scenario without losing business and making scenario profitable for all the negotiating parties.
INTRODUCTION We are negotiating all throughout life, every moment we are negotiating. Somebody is negotiating on some matter may include personal, diplomatic, hijacking or even higher salary & perks or transfer to other department or with the prospective employer. We do negotiate back at home with children on matters of their interests and ironically we lose all such negotiations. Countries do negotiate often on matters of common interests including but not limited to, creating trade free zone, entering into double taxation avoidance agreements and lesser duties on some commodities or they negotiate to resolve disputes, which can be anything like to isolate the border areas from army of the countries, not to promote the Nuclear Weapons or its first use by one country on the other etc. A professional negotiator know the importance of cultural differences and prepares the negotiations accordingly. In India, while shopping in local markets, it is a tradition to ask for double digit discount, which is contrary to other international markets.
of this paper is to understand the traditional negotiation tactics, counter tactics and why to use or not use any of them. To know the latest Practices to avoid lengthy negotiations every time for same set of terms & conditions with familiar suppliers.
NEGOTIATION TACTICS Irrespective of Project Management areas negotiations tactics can be used in other fields too or even in daily life. There are more than hundred ways to negotiate and thousands of books written on the subject. Using correct tactics depends on the professional negotiator and the scenario in his hand. We must learn the art and science of negotiations, involved tactics, counter-tactics and implications of using them. Let’s see some of the traditional negotiation tactics first and then know the associated limitations of these tactics.
Reject the First Offer This is the first thing you can say even without having a detailed look at the offer. If you are sales person, then have heard this thing many times already, where customer says “your offer is many times their estimate and they will not be able to proceed further, kindly correct the offer even before we react on to it.” Customer doesn’t have to put much effort to get the first level discount here and major corrections by the bidder. Counter tactic is to dig out for more strategic information on the submitted offer from customer, to know if they are not bluffing. This tactic is mastered by Customer as you might not be shortlisted further for evaluation if they are honest and not bluffing. Bidder should be ready to offer corrections after knowing the strategic points, where customer is quoting bidder’s offer higher than their estimate.
Overlooking
Negotiations cannot be avoided, as somebody else definitely drags us into the negotiations. The purpose
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When you are being dragged by someone to negotiate, you have two choices 1) may overlook the request 2) cancel the request. When your customer is trying to get hold of you to negotiate for an improvement in terms & conditions or for reduction in pricing, you may behave as if you didn't even hear their request.
Deferral
This is especially easy for contractors to do, if you are trying to negotiate by an email and / or fax. Ignorance is the popular tactic followed by Contractors or sometime by the Customer if contractor is looking for a change order during project execution. Generally, this approach is followed by trainee negotiator and is not useful except bringing delays in getting to the real negotiation.
When you negotiate for an improvement to pricing or terms, a Contractor representative will often say "I gave you the best price/terms that I am allowed to give. I'll have to check with senior management to see, if we can do any better." This is where Contractor creates the impression that nothing further can be accomplished through the conversation, the Contractor gets you to stop negotiating in the hopes that you will not ask again before awarding the order or contract. Hammer down such requests by saying that “we are deciding the order shortly and you have to inform your final decision within the next few hours”. This will shift the pressure back onto the contractor shoulders and you know the bottom line offer.
Deflect
Splitting the Difference
When you negotiate for a reduction in price and improvement in terms & conditions, a common tactic is to deflect your attention to another business issue for which you might not be responsible. It is very common that when contractor is discussing with Customer’s Technical Person they will try to divert attention to commercial issues, which may include but not limited to Payment issue or any other issue. On the contrary when discussing with Customers Commercial team, the contractor may say "I can't really discuss price until I understand how the technical arrangement will work and the value that you are seeking to get out of the arrangement.” Counter tactic is to negotiate collectively not in isolation.
This approach especially used when both sides of the party are not ready to accept other party’s opinion / claim completely. This approach is used often, when we are executing the Project and dispute arises for reasons including but not limited to because the unclear and improperly written contract order, where contract order deliverable are not identified clearly and in detail. So, such situation are normally handled by splitting the share between the contracting parties, it may be 50-50 or any other ratios. However, you never want to be the first to offer to split the difference. It transfers veto power to the other side and may worsen your position (Robert Menard 2004).
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Negotiation after award The least desirable negotiation, gives an unpleasant taste to the contracting parties. Such negotiation generally carried out when one party realized that they are at a loss and they have agreed a Contract Price which is lower, where reason could be including but not limited to current market fluctuations or currency variations or budget problems or maybe some other reason. Such negotiations are least preferable. These negotiations hit the reputation of the initiator afWhen you negotiate for a reduction in ter
price and improvement in terms & conditions, a common tactic is to deflect your attention to another business issue for which you might not be responsible.
contract award for unjustified reasons. Rarely successful!
Electronic Auctions They are the latest negotiations tactics, most popular with the organization lacking experienced and professional negotiator or even the project procurement teams. As many companies have come up providing these auction services at nominal fee. Perceived benefits includes saving on time, effort and money. These exist in various formats e.g. Dutch auction, English auction, reverse auction etc. Generally these are conducted after everything has been agreed including Technical Scope and Commercial Requirements except the Price. As a rule of auctions E-Agreement were signed before logging onto the system. Other advantage of such electronic auctions is that prospective contracting parties don’t have to be face to face for negotiating a contract. Good Organization needs to decide wisely before implementing such auctions, as they can definitely get the better price (as contractors are under pressure to be the lowest to win the contract) compared to tradi-
tional negotiations, but creates increased chances of claims during execution from contractors. Also, this is being misused by some of the small organizations.
Persuasions Persuasions’ is important for all dealings as nothing can be achieved without persuasion. Definitely Professional Negotiator needs to be persuasive, because Contractors know that weak procurement negotiators only ask for improvements to pricing or term once and often end up awarding the order or contract to the Contractor. Negotiator should be determined enough to ask again and again, and again if necessary. By showing how important it is to get what you want, you will increase your chances of getting it.
Counter Offer This is common negotiation tactic, where customers smartly throws counter offer onto the contractor as take it or leave it option. Sometime it is good to make the counter offer but other times it is better to hide the Target Price.
Good Guy, Bad Guy Good Guy / Bad Guy tactic is arguably the most barefaced. Virtually everyone has used it or has been abused by it (Robert Menard 2004). The two main objectives of this tactic are : (1) to win the contractor trust by the Good Buyer, who is very good in attitude, open to understand the contractor’s Issue and ready to understand the terms and conditions or even the costing/pricing submitted by the contractor, and (2) to make the contractor insecure of the exact situation, where a Bad Buyer play the role, who is often a person higher in authority and behaving as if contractor is of no importance to him/her, not ready to discuss the issue with supplier, having less of time for discussion and sometimes very harsh during the meeting or even sometime behind the sce-
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ne and represented by the Good Buyer only in conversations during the meeting with contractor. If Bad Buyer is present in the meeting, then contractor should not be afraid of facing him rather be more attentive towards the Good Buyer, contractor should keep the cool & calm and try to discuss only issues with the Good Buyer. Also, when bad buyer is behind the scene, contractor should bring him from behind the curtains.
Demeaning This approach is followed up by some of the professional negotiators, but often customer’s person who is higher in authority or the decision maker in the process. In this approach customer not ready to give any respect to the contractor or his organization and is trying to have the entire ground during negotiations. Such negotiators may keep the contractor’s waiting in the reception areas for hours or sometime they offer a chair lower in height. If you find yourself in such a scenario, refuse such demeaning conditions politely and ask for another chair, also the best approach to handle such negotiators is to treat the negotiator the same way but with humility. And if you have to wait for more than 20-30 minutes, then you must notify him that you are leaving as you have another meeting lined up with another client or you should not give him the importance once the negotiation starts.
Exigency This is also the approach being followed by professional negotiators, when the deadlock has reached and the contractor is not ready to offer any further discount in terms and conditions or in pricing. In such scenarios, normally the direct contact will call up the contractor and asks for his final offer stating that the management approval meeting has started and customer will decide in another hour. Because these urgent situation puts the entire pressure on the contractor’s shoulder and most often contractor of-
fers better discount as they treat this as their final chance otherwise they might lose the prospective contract order. The best approach is to handle such urgencies is that you need to sense the buyer is bluffing, if so, then ask for more time 5-8 hours to respond.
Authority Limits This seems also one the tactic applied by the customer some of the times, when he senses that contractor is not moving an inch. Normally customer’s procurement guy states that “he is not authorized to negotiate contracts over a particular value or cannot approve the contracts beyond a particular value and if contractor keep the same offer than he has to start from scratch and have to discuss the complete package with the customer’s higher management”. Naturally, Contractor feel trapped just for two reasons, (1) Tempted to have the Order immediately maybe even on Customer Terms and (2) Contractor don’t want to start all over again.
Surprise This approach is also used some of the times by the professional negotiators. In such cases the contractor is made comfortable by notifying that he has won the contract and when customer sense that contractor is comfortable, he surprises him with either additional terms & conditions or price. This approach commonly followed by Human Resource departments where only incomplete offer only mentioning role & price is made to the prospective employee, but the companies all policies are kept hidden till such time when employee came for the appointment letter.
PROJECT PHASES Project Business organizations can have many phases and these can be any number based on organizations internal decision to deal with the Projects. But, for simplicity and to understand the things in better
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way, we will divide the Project into three phases namely, pre-award, execution, warranty.
to the customer and if works are acceptable by the customer then Contractor has nothing to perform against the Contract except to comply with the warranty requirements of the contract agreement. Normally, Warranties are back to back, which means end -customer warranty requirements are passed on to the end-contractor to avoid all the risk of the interFig1 - Power Shifting Curve
N E G O TI A TI O N
Pre-Award Project Phase, where customer is discussing the possible requirements of the project, including but not limited to scope of work, deadline to complete the project, licensing requirements, environmental clearances, health & safety instructions to be followed and all other deliverables. Once all is agreed, time is to shake hands and sign the contract order. The output of this phase will become input to the execution phase, warranty phase and based on contract agreement work will be performed by the contractor and verified by the customer.
Execution Phase where Contract agreement will become input to the execution phase and now its contractor turn to perform against the agreed deliverable and Customer will verify the scope. This is the phase where all work is being done and performance reporting initiated against the contract deliverables. This is the project phase, where the contractor, if not performing well as per the contract then customer has to look for the other available options to get the project work done.
Warranty Phase Project Phase, where the contractor has performed against the contract and had handed over the works
P O W E R
B U Y E R
S E L L E R PRE AWARD EXECUTION WARRANTY
mediate customer or contractors. Now, we keep these three project phases in mind and make an attempt to understand who is having upper hand at negotiation in which phase of project.
NEGOTIATION POWER SHIFT We are not living in the perfect world, where customer is always having the upper hand at negotiations just because they are customers, there are times when contractor can also influence the results of negotiations. Therefore, it is important to understand who can influence the negotiations results during which phase of the project, then we will be able to decide our moves accordingly before starting the negotiations.
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It is evident from curve that Customer is having an not having much influence on the contractor as proupper hand in the negotiation during the pre-award ject acceptance date is approaching and customer has as all the bidders are in competition mode and they to meet the deadline agreed with their customer othhave to compete against each other. On the contrary erwise they will make huge loss and have to pay high to above, contractor will become more and more liquidated damages if misses on the agreed deadline. powerful during execution phase as his involvement This Liquidated damages or penalty may be many at site increases as the project progresses. If we have times the contract value of the non-performing consqueezed our contractors to the maximum possible tractor. Moreover, less repeat business in future from extent during pre-award, then this is the contractor’s the end customer for lost reputation. So, what will turn to trap us by submitting claims even for a small make the contractor perform beyond threshold change including but not limpoint? ited to small change in scope Project Phase, where customer is disof work or terms & conditions Somebody may say we will cussing the possible requirements of or because of other reasons on go to arbitration and the project. As the contrac- the project, including but not limited thereafter into litigation if tors are mobilized to site, required; definitely these to scope of work, deadline to comthey got to know how their are last solutions to conperformance will affect the plete the project, licensing require- front the disputes when project and what is critical negotiation fails. The proments, environmental clearances, cess of arbitration is for customer on the project and there contractor will lengthy and will eat lot of health & safety instructions to be folmake an attempt to tap all time to get to the solution these opportunities to recover and if the decision awarded lowed and all other deliverables. for the perceived losses and by the arbitrator not acaccepting small changes, which is sometime totally ceptable to any party, then they can approach the unjustified and customer has no choice but to pay court of law and further delay to reach to the concluthrough nose sometimes for these small changes. sion. Frankly speaking, we don’t have much time to go through this when we are into executing the proYou might ask, why would customer pay to a mobi- ject. So, what really motivate contractor is the conlized contractor a huge amount for accepting small sideration in terms of Bonus, Incentive for mitigation changes? The one answer to above question, is in measures. These are the only allurements which can question itself, which is no one can meet the schedule motivate the non-performing contractor to start perbetter than mobilized contractor and second answer forming and finally achieving the project milestones. the customer is lacking all the time to go back into Work once completed, the Project is handed over to the market and get this small change executed from the end client. Therefore, only priority during executhe new contractor. tion is to get the work done. The disputes between the contracting parties should be parked till then and Definitely termination of Contracted work is the least if required then the affected party should approach desired option, not only because of schedule con- the arbitrator and subsequently the litigation. straints, but sometimes we have no other option being as contractor is having a monopoly in the market Third major phase of any project, involves a period and they are the sole source or maybe end customer’s for complying with the warranty Requirements preference for project. Also beyond threshold point as agreed under the main contract with the end Custommarked in the power shift curve above, customer is er. This is the phase where Contractor will definitely
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be having upper hand as no payment is withheld by the customer except as agreed under the contract. If you analyze this situation, the contractor has already created buffer for these retentions while submitting the offer to you as their risk mitigation strategy. So, whatever retention amount or performance bank guarantee amount withheld by the customer is only a bonus for them, which they might like to have or just don’t care about it.
NEGOTIATIONS ALONE NOT SUFFICIENT All negotiations tactics, counter-tactics are being used very often by one party with other party. Being these are traditional Negotiation tactics, therefore everybody knew them. So, might not be very useful. The negotiation tactics were very successful in the twentieth century, but not today. This is the era, when we need to devise new tools & tackles to achieve better results. Let’s have a look why the negotiation tactics are not generating the desired results. Some of the points are mentioned below:
Obsolete Tactics These days’ company executives are coming from the Top Business Schools, where they have played roles on all these traditional negotiation tactics and have mastered the art and science of it. Therefore, they know how to handle these negotiation tactics and come out as a successful negotiator. Even if the executive not experienced enough to handle these tactics the first time, they will recover losses from future projects. Therefore, advisable is not to use these tactics when you want a long term relationship.
Constrained Project Schedules Project completion periods have shrunk compared to the earlier days, hence the timelines for negotiations and placement of order. Therefore, this is the time when you are not allowed to have a procurement or-
der placement cycle time of 16-20 weeks. Today, Procurement is supposed to place the contracts as soon as they have the approved purchase requisition, as the rest of the construction milestones can be achieved once the resources mobilized to site.
Affected Relationship As the timelines for completing the projects has shorten considerably, therefore compared to last decade when we have time of 5 years to complete the project but now we have only 3 to 4 years. Therefore it is not desirable at all do the repetitive negotiations for the different projects with the same party for similar requirements all over again. For sure, Vendor development efforts are part of project procurement team and customer development is part of sales team, therefore procurement personal is tempted to misuse contractor strategy to develop customers and sales team is tempted to have the contract agreement from the new customer. In such scenario if the procurement personnel is strong enough in negotiations, they will influence the results and contractor will have to make some sacrifices to have the contract order. Here, Procurement Professional has achieved the targets in short term even without much negotiation but in long term customer will have troubles due to more execution claims planned by the new contractor for them. Due to all this mutual relationship will be at stake once these claims are on the table for solutions. Therefore, Better approach is to create a long term business relationship.
More Execution claims, Arbitration & litigations issues First timers may fail to negotiate a better contract as they are not familiarized with enterprise environmental factors. If one party makes loss on account of these factors, then there will be more claims ongoing back & forth during the project execution stage, especially when particular party is having more influence to drive the results of negotiations in their favor. Also, If the contracting parties are not satisfied with
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the contractual obligations and considerations created under the contract order, then there will more arbitration cases and subsequently increased litigation issues. Therefore, the attempt is to have long term relationship and less arbitration issues. From above, it is clear that rules of the game have changed and squeezing of Contractor is not correct.
ALTERNATIVES Squeezing of Contractor is no more preferred because even if contractor accepts the Order under pressure irrespective of whatever negotiation tactic followed by the customer, contractor will very likely not to perform well against the set performance standards, as nothing comes for free. Gone are the days, when negotiations used to generate better results for the organizations and enhancing the direct revenue through negotiation savings. In fact, Negotiation approach is changing minute by minute and seconds by second. Now, Negotiations are being conducted by having a long term view which not only include the present project in hand but also the future projects which may come up. Therefore, contracting parties will make every effort to create better relationship making Project Business profitable for each other and sustenance in business is ensured.
Long-Term Agreements (LTA’s) The only possible solution to above issues is to create a long term relationship. So, Long-term agreements are the future of the relationships between customer and the contractor. In the Long-term agreements Price, terms & conditions are already agreed so customer don’t have to discuss the same standard set of terms and conditions again and again, hence reduction in order placement time, cost and efforts. However, Project specific additional terms & conditions will be discussed even if required for delta changes.
LTA’s Timing & Structure In project business the Long Term Agreements are being agreed by the organization at the proposal stage, when customer is bidding for specific project and even before that in some cases especially when customer is only doing one kind of projects, like Power EPC (Engineering, Procurement and Construction) companies doing only Power Projects. However, different industries can have different approach or the nomenclature of these agreements but the idea is only to secure more business through collaborations. The Long Term Agreement Structure solely depends on the organization contractual arrangement with the clients because of the associated risks. If the organization is doing Lump Sum Turnkey (LSTK) projects then definitely they would like to pass on the risks associated in executing the LSTK Projects. Otherwise, for Cost Reimbursable Contract, the EPC Organizations may take a business call to have the LTA’s on LSTK approach or Cost reimbursable basis with their contractors. This LTA’s structure solely depend on the kind of arrangement the organization would like to have with their contractor, whether they want to exploit the opportunities by taking more risks or to transfer the risks to the contractors and just play safe.
How LTA’s work The approach is very simple, as can be best judged from the figure, where the Long Term Agreements are already agreed between the contracting parties and they will become the framework for entering fu-
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ture contracts. The future contracts can be for same project or for different projects of the EPC Company. We would not be wrong if we say they are the heart and everything depends on this. The LTA’s can be agreed for projects coming up in different parts of the globe or for different project locations with the same country. When LTA’s agreed for project for different project locations, normally following may be affected including but not limited to applicable law, place of arbitration, transportation costs (if agreed), and licensing requirements etc., which are to be taken care while framing the Long Term Agreements. Whereas Customer is saving on time, efforts and money on agreeing on Long term agreement and Contractor is also having the same benefit in addition to less competition available for him in the market while quoting for individual project, creating win-win situation for each other.
BENEFITS OF LTA’s Savings on Time, Efforts & Cost The main benefit of these agreements is that, you save on time, efforts and hence savings on cost, which lead to enhanced chances to win the project during proposal / bidding phase. Also, time is saved in executing the projects if you already have agreed terms and conditions beforehand. Other Benefit will be that contracting parties are experienced enough with each other and understand each other constraints, requirements, style of operating, and which matters a lot in Project Business. Therefore, if you are successful in saving time maybe during bidding or execution, this will create additional free floats in the project leading to projects completed comfortably on time and enhanced reputation in the eyes of the customer. We can use this energy to create more value in the projects and have definitely more time for these value creations things, which again will enhance our reputation. As less man-hours spent during execution, hence savings on overhead costs which would
otherwise be required to maintain more manpower to discuss contracts during executions. This will lead to competitive price for the customer and more savings for contracting parties. This will also enhance our chances of winning more projects.
Relationship remains Intact The heat generated during negotiating the contracts is avoided and the relationship remains maintained. As the negotiation is required for agreeing the Long Term Agreement, it is required only once. Here the contracting parties are more than customer or contractor, as they know they have to work for all other projects as well and small issues can be ignored.
Repeat Business and No Execution claims & Less Arbitration and Litigations Issues The main benefit of Long term agreement is lesser claims during the execution or any other phase of the project. Hence, closing project would be faster, easier and without any re-negotiations. There can be claims for the first time on the first project but this will get eliminated completely for future projects as the involved parties will be more aligned on expectation, requirements and way of working. Such arrangements will definitely ensure the repeat business as far as the Long term agreements are valid and not limited by any regulatory requirements for public projects. As the contracting parties have been experienced enough in executing the project under the long term frame agreements, there are less issues of arbitration or litigation as both have to work for a long time defined in the LTA’s.
LIMITATIONS OF LTA’s Long-term agreements are definitely better than the traditional approach of agreeing contracts every time based on the specific Projects requirements. As eve-
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rything has its pros and cons associated with it, similarly the long Term agreements too have cons. Some of the limitation including but not limited to are as follows:
Good for Standard Project Requirement Long-term agreements are useful only when you have standard set of deliverables, which is hardly the case as every Project is unique in nature including but not limited to whether because of Projects Location or deliverables etc.
petitive bidding process especially when you are dealing with the Government projects. Therefore, in Government Project such agreements are rarely possible. Therefore, Pre-existing Long-term not of much use. So, we have to have spent time, effort and money in freezing the contracts in compliance with AntiCompetition Laws of the Land or local regulatory requirements.
May go uncompetitive
Most Often Customer is also having the Customer and therefore to avoid risks or to transfer the Project risks to the Contractor, better approach considered is to have back to back arrangements, which means that Obligations of the end customer passed onto the Contractor and intermediate Customer is safe because of any associated risks. Therefore, it is very difficult to agree on project specific terms and conditions with the same price at least.
Where long-term agreements are long enough suppose more than a year, there are flourishing the chances of becoming you less competitive in market and we might lose the projects from our customers especially, when we are not able to agree the Price Variations in case of downfall in Prices of the Raw material in the market. Therefore while agreeing the Long Term agreements it is desirable to agree on the market fluctuations in the prices and not to agree on lump-sum basis which can make Long-term agreements ineffective and useless. Therefore, special effort is required during negotiating long term agreements to avoid such situations.
Regional Laws & Limitations
Let’s Collaborate
Projects of highly complex natures which may involve building Nuclear Power Plant in any country has its associated law limitations which may force to have maximum local contents be used for the Project which may vary from 80% to 100% in some of the cases. There can also be limitations related to licensing and inspections of the material being imported into the country, so this long-term agreements may not be useful or viable in such countries if the Contractor is not able to fulfill the regional or local law requirements.
This is the era where more efforts, time and money are being spent to increase the customer-contractor collaborations. These days Customer and Contractor are sitting on the same side of the table and are attacking the differences collectively and think open points as a common problem where both are contributing to find the solution.
Additional terms & Conditions agreement
Compliance with Anti-Competition Laws In almost all the countries there are laws which says to avoid any monopoly, you have to have the com-
Customer-Contractors are no more walking off the negotiation table because of the heated arguments but they treat the differences as a common problem. Contractor is treated like Business associate by the Customer instead of contractor and this association starting from the proposal stage even and collaborating at the as early as possible can take the form of MoU (Memorandum of understanding) or Customer Relationship Agreement or anything else, but the
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target is to achieve a common goal. Now, Customers is not wholly and completely dependent on the independent cost estimators for making a proposal to their Customers rather they are collaborating with their contractors as early as on the Project, where they are going ahead collectively and have a shared interest which is to win the Project from the end customer, so if contractor’s customer secured a contract from the end customer then contractor will also get his share for supporting the proposal phase and the contractor don’t have to compete with others during the project execution phase. The crux of such collaborations early on the project is only “If I win, you will also win, so let’s collaborate!!”
REFERENCES 1. Roger Fisher & William Ury and for the revised editions Bruce Patton. Getting to Yes negotiating an agreement without giving in: Random House Business Books 2012. 2. Robert Menard 2004. You’re the Buyer You Negotiate It! Author House 04/26/04.
A Project Professional with over 9 years experience in the construction, infrastructure, commercial, and government specializing in Procurement Management, Planning, Scheduling, and Project Management. Talented and inventive professional with a proven track record of accelerating revenue growth through strategic and tactical decisions driving revenue growth, cost savings, and market development. Was a Lead Member from Siemens India for Costing Workshops held in Germany for Steam Power Project Proposals of 6400 MW (6X800 MW). You can reach him on LinkedIn
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