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Sleepless in Project Management

 

Project Business Management

SERIES ARTICLE

By Oliver F. Lehmann

Munich, Germany

 


 

“If a composer suffers from loss of sleep and his sleeplessness induces him
to turn out masterpieces, what a profitable loss it is!”
Antoine de Saint-Exupéry

 

Summary

Listening to project managers can bring many new insights. Here are results of surveys done over a time of seven years, that show how the profession has changed and what keeps project managers sleepless at night.

Surveys Revisited – What Happened Meanwhile?

An interesting question in project management is, what gives project managers sleepless nights. They have to meet different challenges in different projects. Some projects have static requirements from the onset, in others, they are ever changing, and in a third group, no one can tell the project manager, what these requirements are. Project managers have to find that out.

Another major difference are customer projects versus internal projects. The first are mostly profit centers, the latter cost centers.

How common are these different project types?

One of the greatest inventions of the age of the Internet is the availability to survey groups of people with simple and affordable means. This allows us to gain new knowledge about professions such as project management and adjust offerings for services to them, such as training or writing and publishing articles like this one.

It can be an even more interesting exercise, when the surveys are repeated so that older results get confirmed, or not, and the dynamics of the profession become visible. In this article, I report of such a survey I did between June and November 2019. This article is the first to publish the results that repeat older surveys.

Another opportunity that comes with these surveys is the ability to listen, instead of telling practitioners, what their practice is. While practices are changing, many basic principles are universal. Active listening over surveys are a great way to gather knowledge from that.

I made a decision in spring 2019 to do another survey repeating older ones. Here are the results.

More…

To read entire article, click here

 

Editor’s note: This series of articles is by Oliver Lehmann, author of the book “Project Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018. See author profile below.

How to cite this article: Lehmann, O. (2019). Sleepless in Project Management; Series on Project Business Management; PM World Journal, Vol. VIII, Issue XI, December.  Available online at https://pmworldlibrary.net/wp-content/uploads/2019/12/pmwj88-Dec2019-Lehmann-Sleepless-in-PM-PBM-series-article2.pdf

 


 

About the Author


Oliver F. Lehmann

Munich, Germany

 

 

 

Oliver F. Lehmann, MSc., PMP, is a project management author, consultant, speaker and teacher. He studied Linguistics, Literature and History at the University of Stuttgart and Project Management at the University of Liverpool, UK, where he holds a Master of Science Degree. Oliver has trained thousands of project managers in Europe, USA and Asia in methodological project management with a focus on certification preparation. In addition, he is a visiting lecturer at the Technical University of Munich.

He has been a member and volunteer at PMI, the Project Management Institute, since 1998, and served five years as the President of the PMI Southern Germany Chapter until April 2018. Between 2004 and 2006, he contributed to PMI’s PM Network magazine, for which he provided a monthly editorial on page 1 called “Launch”, analyzing troubled projects around the world.

Oliver believes in three driving forces for personal improvement in project management: formal learning, experience and observations. He resides in Munich, Bavaria, Germany and can be contacted at oliver@oliverlehmann.com.

Oliver Lehmann is the author of “Situational Project Management: The Dynamics of Success and Failure” (ISBN 9781498722612), published by Auerbach / Taylor & Francis in 2016 and ofProject Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018.

To view other works by Oliver Lehmann, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/oliver-f-lehmann/

 

 

Supply Chains Versus Project Supply Networks

 

Project Business Management

SERIES ARTICLE

By Oliver F. Lehmann

Munich, Germany

 


 

“The only profit center is a customer whose check has not bounced.”
– Peter F. Drucker

 

Summary

In many aspects, project managers working with Project Supply Chains (PSNs) can learn lessons from Supply Chain Management (SCM) in manufacturing and other industries. This corporate function has developed a high degree of maturity in the last decades, that can make it a role model for project management.

However, the differences should also be considered.

Modern Supply Chains

It was a coincidence in my professional life that I was a witness of the beginning of modern supply chain management. In the late 20th century, a major change in manufacturing took place, whose consequences became fully visible only decades later.

Before that time, manufacturing was mostly performed inside the protective walls of the own organization. Here and there, external vendors were used as a “verlängerte Werkbank”[1], providing additional production capacity and skills.

Several revolutionary developments, at least for that time, dramatically changed the way production was done:

  • After studying Japanese methods, in particular the Toyota Production System, Western production managers learned how to become more productive with limited internal resources by outsourcing more work to contractors. In contrast to the Verlängerte Werkbank, which solely outsourced shop floor work, System Suppliers also took over responsibility for organizational and commercial tasks. They became prime contractors managing an often large number of subcontractors over different tiers for the customer.
  • Essentially based on Ford’s Q1 quality management system, the ISO 9000 series of standards[2] for quality management and quality systems was developed. It expanded the rather narrow standard developed by Ford to an open family of norms that could be applied by all industries and across all application areas.

These standards allowed different organizations such as firms, agencies, and associations to put together a network of quality systems in a supply chain. While each of these organizations may differ in their actual implementation of the quality system, they all are based on the same founding principles and therefore compatible.

  • Electronic Data Interchange (EDI) enabled an undisrupted stream of communications between customer, direct suppliers, subcontractors, and so on. They used data structure and transfer protocols such as Odette, Edifact, and XML to ensure all contract partners spoke the same language, at least in a digital field. Its introduction was highly controversial by that time. It allowed a customer to trigger production processes at subcontractors, with whom they had no direct business relationship, just skipping the prime contractor in between.
  • National borders became permeable. An example is the European Economic Area, which includes 28 countries of the EU[3], plus Norway, Iceland, and Liechtenstein. The easiness of crossing borders inside the area led to the creation of millions of new jobs, particularly in manufacturing and supporting industries.[4]
  • Supply chain management (SCM) as a now well understood business discipline evolved. Today, it includes consulting, literature, education, research, standards, and certifications. In addition, the discipline has special software at hand, online services such as digital markets that bring together customers and contractors, and a lot of other supporting offerings. It is mature, and if help is needed, it is likely that this is available somewhere, typically against money.

Supply chains today are engineered and managed in a way that is almost as stringent as internal production management. As multi-tier meta organizations, they are set up in a way that places key players at strategically important nodes and delegates responsibility to them to manage the players that have more distance to the final customer. The intention to make the feasible over long durations and run them as smoothly ad efficiently as possible gives an incentive to all players to maintain a cooperative approach based on good faith and mutual empathy.

More…

To read entire article, click here

 

Editor’s note: This series of articles is by Oliver Lehmann, author of the book “Project Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018. See author profile below.

How to cite this article: Lehmann, O.F. (2019). Supply Chains Versus Project Supply Networks. PM World Journal, Vol. VIII, Issue X, November.  Available online at https://pmworldlibrary.net/wp-content/uploads/2019/11/pmwj87-Nov2019-Lehmann-supply-chains-versus-project-supply-networks.pdf

 


 

About the Author


Oliver F. Lehmann

Munich, Germany

 

 

 

Oliver F. Lehmann, MSc., PMP, is a project management author, consultant, speaker and teacher. He studied Linguistics, Literature and History at the University of Stuttgart and Project Management at the University of Liverpool, UK, where he holds a Master of Science Degree. Oliver has trained thousands of project managers in Europe, USA and Asia in methodological project management with a focus on certification preparation. In addition, he is a visiting lecturer at the Technical University of Munich.

He has been a member and volunteer at PMI, the Project Management Institute, since 1998, and served five years as the President of the PMI Southern Germany Chapter until April 2018. Between 2004 and 2006, he contributed to PMI’s PM Network magazine, for which he provided a monthly editorial on page 1 called “Launch”, analyzing troubled projects around the world.

Oliver believes in three driving forces for personal improvement in project management: formal learning, experience and observations. He resides in Munich, Bavaria, Germany and can be contacted at oliver@oliverlehmann.com.

Oliver Lehmann is the author of “Situational Project Management: The Dynamics of Success and Failure” (ISBN 9781498722612), published by Auerbach / Taylor & Francis in 2016 and ofProject Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018.

To view other works by Oliver Lehmann, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/oliver-f-lehmann/

 

[1] German for “extended work bench”

[2] An interesting contemporary comparison of Ford Q1 and ISO 9000 can be found at TQM Magazine (Stephens, 1997)

[3] The British Brexit, the exit from the EU may lead to the United Kingdom getting excluded from the EEA, which would then have 27 EU countries as members.

[4] One may also note the foundation of the World Trade Organization, a multilateral agreement of 165 countries, which also eased cross-border business, however not with the same impact as the EEA.

 

 

Taking Care of (Project) Business

 

Project Business Management

SERIES ARTICLE

By Oliver F. Lehmann

Munich, Germany

 


 

“I admire Picasso. He sold his oil more expensive than anyone else.”
Unknown

 

Summary

Project Business with clients and contractors comes with specific challenges for all professionals involved. They need a good understanding of project management, but also of commercial and legal matters in order to make the project satisfactory for the organizations and individuals involved.

More education is necessary to prepare even experienced project managers for these challenges. At the moment, most project managers learn Project Business Management through trial and error.

However, trial in project business is expensive, and error even more.

Liquidity

It is autumn 2019 while I am writing this article, and attentive readers of business press find the topic of liquidity addressed in many places:

  • On 23 September, UK’s oldest provider of package holidays went into insolvency after 178 years of operation. British travel firm Thomas Cook had failed to fully refinance huge debts and went out of business, forsaking 150,000 tourists, Britons and people from other nationalities, stranded in holiday destinations, sending several thousand employees into unemployment, and leaving an unknown number of invoices from business partners unpaid[1].
  • On the same day, a scathing letter became public by Ola Källenius, the CEO of German Mercedes-Benz car maker Daimler AG. In this letter, Mr. Källenius criticized the losses of the group, which added up to 4.2 billion Euros, and called for the protection of the “financial solidity”, which he called a “life vein of the corporation[2].
  • Automotive again, same day. South China Morning Post reported that during the second quarter of 2019, the Chinese maker of electric cars NIO burned 2.6 billion yuan (US$4 million) a day. Their cumulative losses since their foundation 5 years ago are reported at US$5.7 billion. The company, according to the article, hopes for an infusion of 10 billion yuan by an investor, however given its reported rate of burning money, this would just help the company to survive another four days.
  • One month earlier, in August, India Business Law Journal wrote that “More action needed to ease contractors’ liquidity crisis”. Blaming unresolved disputes and insufficient performance of contractors in infrastructure and construction projects as the culprit, the article describes how an entire national industry suffers from losses and late payments.[3]
  • US aircraft manufacturer Boeing may currently also be much more in liquidity troubles than what is communicated in public. The corporation had a stock buy-back program over US$20 billion in 2018 and are about to invest US$4.75 billion in buying Brazilian Embraer, a manufacturer of small commercial aircraft. Since March 2019, their most promising model, the Boeing 737 MAX has been grounded by aviation regulators around the world, and newly built aircraft are stockpiling and cannot be delivered. Already delivered aircraft have also been grounded, and their operators already began charging the costs of the grounding to Boeing. According to IBA Group, the costs of grounding are at about US$150,000 – per aircraft and per day.[4] At the same time, sales of Boeing aircraft are slumping[5]. Boeing is still a darling of investors, due to its large backlog of orders from the last years to be fulfilled and its second business in military, however this may finally prove to be a temporary relieve only.

The majority of the examples above are not from project management, however, they show the crucial significance of liquidity for any company’s survival. Most companies need to live from the earnings made from the business they do. The examples also show that the matter is not specific to an industry, or a certain country culture, it is a universal issue for every business anywhere in the world.

Such as project business.

Project Business

Project business takes place, when organizations come together to do one or more projects. These projects are no more just cross-functional, they are cross-organizational.

Figure 1: Cross-functional projects are performed inside the protective walls of a performing organization. Cross-corporate project span over several organizations.

Project Business Management (PBM) brings together project management and business management. However, it is different in its lack of experts who are qualified to help organizations do better projects with paying customers on one side and successful contractors on the other.

More…

 

To read entire article, click here

 

Editor’s note: This series of articles is by Oliver Lehmann, author of the book “Project Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018. See author profile below.

How to cite this article: Lehmann, O. (2019). Taking Care of (Project) Business; Series on Project Business Management; PM World Journal, Vol. VIII, Issue IX, October.  Available online at https://pmworldlibrary.net/wp-content/uploads/2019/10/pmwj86-Oct2019-Lehmann-Taking-Care-of-Business.pdf

 


 

About the Author


Oliver F. Lehmann

Munich, Germany

 

 

 Oliver F. Lehmann, MSc., PMP, is a project management author, consultant, speaker and teacher. He studied Linguistics, Literature and History at the University of Stuttgart and Project Management at the University of Liverpool, UK, where he holds a Master of Science Degree. Oliver has trained thousands of project managers in Europe, USA and Asia in methodological project management with a focus on certification preparation. In addition, he is a visiting lecturer at the Technical University of Munich.

He has been a member and volunteer at PMI, the Project Management Institute, since 1998, and served five years as the President of the PMI Southern Germany Chapter until April 2018. Between 2004 and 2006, he contributed to PMI’s PM Network magazine, for which he provided a monthly editorial on page 1 called “Launch”, analyzing troubled projects around the world.

Oliver believes in three driving forces for personal improvement in project management: formal learning, experience and observations. He resides in Munich, Bavaria, Germany and can be contacted at oliver@oliverlehmann.com.

Oliver Lehmann is the author of “Situational Project Management: The Dynamics of Success and Failure” (ISBN 9781498722612), published by Auerbach / Taylor & Francis in 2016 and ofProject Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018.

To view other works by Oliver Lehmann, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/oliver-f-lehmann/

 

[1] (Collinson, 2019)

[2] (Köster, 2019)

[3] (Negi & Kumar, 2019)

[4] (Whybrow, 2019)

[5] (Johnsson & Kochkodin, 2019)

 

The Cooperative Transformation

 

Project Business Management

SERIES ARTICLE

By Oliver F. Lehmann

Munich, Germany

 


“It is the long history of humankind (and animal kind, too) that those who learned
to collaborate and improvise most effectively have prevailed.”
Charles Darwin

Summary

The growing trend to cross-corporate projects done as businesses between customers and contractors challenge the ability of organizations and individuals to cooperate. Humans and their organizations are generally able to cooperate, however, the specific setting with its issues on project management level as much as on legal and commercial level makes it particularly difficult. A transformation is necessary to benefit from this trend.

Innovating Innovation

I often think back to the late 20th century, when I was employed in a leading position in a process-engineering company. Processes here in the meaning of classical chemical and physical processes, that were used in industries, such as automotive and aerospace. In my company, we had a Research and Development (R&D) department, internally, of course, that had a red “Entry for authorized personnel only” sign on its doors. The majority of corporate staff was prohibited from entering the rooms, in which the future products of our company were developed, those products that would secure our future. The innovative work was done inside the protective walls of the company, and the walls of the R&D added further protection.

I also remember the Chairman of the board of the company, an elderly, mostly unshaved man, who could spend days playing golf and nights in the R&D lab, mixing chemicals and developing physical processes for their application, and many of them were truly ground-breaking.

He was not formally educated in process engineering (I never found out, what his actual education was) and it was definitively not his ordinary job, but he was a kind of natural-born talent in process invention.

When he showed us in the morning the results of his long nights, everyone was impressed, however the next problem was, that he rarely documented his inventive work, so we had a perfect test tube of chemistry for which there was no recipe. It could not be reproduced, at least not accurately enough to deliver the lab performance.

I also remember that I received by that time an invitation by the University of Stuttgart to speak to their researchers. I was surprised to meet there the CEO of our direct competitor. He spoke before me and then listened to my lecture. We made a decision to sit together in a nearby restaurant after the event and talk about business. He was a man who loved talking, and I could derive a lot about the business situation of his company and where they stood with certain customers. Great information that I communicated home the next day.

The response was not a friendly one. “How could you sit and talk with that man? You are a soldier for the company, and you have to know, who the enemy is!” On that day, I decided to leave the company. I was their employee, not their soldier.

Today, as a trainer, I am a visitor in similar companies for preparatory talks and for in-house seminars. There are still internal R&D departments, of course, but for many of them, the entire working style has been changed. The lion share of the work is no more done internally but by contractors. The R&D department’s job is rather to is to distribute the work among them, to decide, which contractor does what research, and when.

There is not even certainty that the contractor does the work. The contractor may give it to one or more subcontractors, when specific skills are missing in-house, or when the lab capacity is not there to do the work. If the work is passed over, the customer may be aware and accepts it. Sometimes, customer are not aware and would not accept it if they knew.

Figure 1 illustrates, how projects such as R&D-driven innovation projects are no more done inside the more or less cozy world of the organization but extend out to external contractors. This brings new issues that need to be dealt with, such as contractual matters, non-disclosure of corporate secrets and general protection of intellectual property.

From a project management perspective, the traditional cross-functional character of internal projects is getting replaced with a cross-corporate fashion of doing projects, and the question remains, whether project managers are sufficiently prepared for this change.

More…

To read entire article, click here

 

Editor’s note: This series of articles is by Oliver Lehmann, author of the book “Project Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018. See author profile below.

How to cite this article: Lehmann, O. (2019). The Cooperative Transformation; Series on Project Business Management; PM World Journal, Vol. VIII, Issue VII, August.  Available online at https://pmworldlibrary.net/wp-content/uploads/2019/08/pmwj84-Aug2019-Lehmann-The-Cooperative-Transformation.pdf

 


 

About the Author


Oliver F. Lehmann

Munich, Germany

 

 

 

Oliver F. Lehmann, MSc., PMP, is a project management author, consultant, speaker and teacher. He studied Linguistics, Literature and History at the University of Stuttgart and Project Management at the University of Liverpool, UK, where he holds a Master of Science Degree. Oliver has trained thousands of project managers in Europe, USA and Asia in methodological project management with a focus on certification preparation. In addition, he is a visiting lecturer at the Technical University of Munich.

He has been a member and volunteer at PMI, the Project Management Institute, since 1998, and served five years as the President of the PMI Southern Germany Chapter until April 2018. Between 2004 and 2006, he contributed to PMI’s PM Network magazine, for which he provided a monthly editorial on page 1 called “Launch”, analyzing troubled projects around the world.

Oliver believes in three driving forces for personal improvement in project management: formal learning, experience and observations. He resides in Munich, Bavaria, Germany and can be contacted at oliver@oliverlehmann.com.

Oliver Lehmann is the author of “Situational Project Management: The Dynamics of Success and Failure” (ISBN 9781498722612), published by Auerbach / Taylor & Francis in 2016 and ofProject Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018.

To view other works by Oliver Lehmann, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/oliver-f-lehmann/

 

 

Are You Ready for Business Success as a Project Vendor?

Here are some Tools for You

 

Project Business Management

SERIES ARTICLE

By Oliver F. Lehmann

Munich, Germany

 


 

“Too swift arrives as tardy as too slow.”
William Shakespeare

Summary

A vendor in project business typically has three major goals: Making customers happy, generating profit, and protecting the own liquidity. These goals must be achieved in a high risk environment. What tools are at hand for the vendor as an organization or an individual to achieve them?


The Boon and Bane of Project Business Management

The practices of Project Business Management can be successfully applied when there are at least two players in a project, a client and a vendor. Often, the number of players is much larger, when contractors create large networks with other suppliers that also act as contractors, or as subcontractors, consultants, and many more. All these companies have expectations what they want to gain from the business. One of these expectations is naturally to bring money home.

The following pages will describe the problems meeting that expectation and recommend tools to improve the monetary benefits from the project contract.

When you work for a vendor of services and products for one or more paying customers, or when you are a self-employed contractor as a one-person business, your job can be a highly profitable business. It can be financially rewarding.

If you are among those who say “By lifting others we are blessed”[1], it is also satisfying to see how one can help customers achieve their objectives, develop products or services, drive improvements and transformations that the client alone would be unable to do, and help companies be more innovative and survive in fast changing markets. For this group of people, the payment is not the singular purpose of their work, but the confirmation that it is done well and the necessary basis to secure the presence and build the future. The sense of achievement is clearly what drives many professionals, self-employed or inside vendor companies, and the profitability derived from projects and their contribution to the own liquidity is one of several success metrics.

These are the successful contractors.

However, there are also contractor companies that are doing much worse. I call them “JAMs” for “Just about managing” in my book “Project Business Management[2]. They somehow get by with the day, but they are unable to build the reserves needed for growth and development and for coping with the potentially hurtful surprises that are part of project business and its temporary and ever unique nature. This “JAMming” may originate in dysfunctionalities on the side of the customer. There may also be shortcomings on the side of their subcontractors, or of course also inside the own organization.

Figure 1 shows the multitude of sources that can disrupt business for a contractor inside a project supply network (PSN), and in essence, they can be found at all players involved.

Figure 1: Sources of business disruption for a contractor in a project supply network (PSN) in project business

In project supply networks (PSNs), troubles of one organization can impact other players and like a complex system of rows of falling dominoes affect the entire project, possibly driving it and its contributing organizations into existential crisis.

More…

To read entire article, click here

 

Editor’s note: This series of articles is by Oliver Lehmann, author of the book “Project Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018. See author profile below.

How to cite this article: Lehmann, O. (2019). Are You Ready for Business Success as a Project Vendor? Here are some Tools for You; Series on Project Business Management; PM World Journal, Vol. VIII, Issue V, June.  Available online at https://pmworldlibrary.net/wp-content/uploads/2019/06/pmwj82-Jun2019-Lehmann-Are-You-Ready-for-Business-Success-as-a-Project-Vendor.pdf

 


 

About the Author


Oliver F. Lehmann

Munich, Germany

 

 

Oliver F. Lehmann, MSc., PMP, is a project management author, consultant, speaker and teacher. He studied Linguistics, Literature and History at the University of Stuttgart and Project Management at the University of Liverpool, UK, where he holds a Master of Science Degree. Oliver has trained thousands of project managers in Europe, USA and Asia in methodological project management with a focus on certification preparation. In addition, he is a visiting lecturer at the Technical University of Munich.

He has been a member and volunteer at PMI, the Project Management Institute, since 1998, and served five years as the President of the PMI Southern Germany Chapter until April 2018. Between 2004 and 2006, he contributed to PMI’s PM Network magazine, for which he provided a monthly editorial on page 1 called “Launch”, analyzing troubled projects around the world.

Oliver believes in three driving forces for personal improvement in project management: formal learning, experience and observations. He resides in Munich, Bavaria, Germany and can be contacted at oliver@oliverlehmann.com.

Oliver Lehmann is the author of “Situational Project Management: The Dynamics of Success and Failure” (ISBN 9781498722612), published by Auerbach / Taylor & Francis in 2016 and ofProject Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018.

To view other works by Oliver Lehmann, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/oliver-f-lehmann/

 

[1] (Ingersoll, 1902)

[2] (Lehmann, 2018)

 

 

Healing Conflicts in Project Business

 

Project Business Management

SERIES ARTICLE

By Oliver F. Lehmann

Munich, Germany

 


 

Summary

While project management must generally deal with conflicts among stakeholders, managing disputes gets particularly important when a project is done by more than one organization. Project Business Management experts have some tools that can help effectively resolving such conflicts. There is a need to develop more.

Conflicts in Project Business

Why does it Matter?

Project Business Management describes how organizations such as companies, agencies, and other institutions perform projects jointly in a customer-contractor relationship.

It is a measurable trend[1]: More projects are partially or fully outsourced and outtasked to vendors of products and services, based on the expectation that the external contractor is in a better position to do the work and deliver results as expected. However, this decision adds areas of conflict that are often poorly understood, and that should be addressed in a specific way to protect the success of the project.

The number of organizations involved may be just two, a customer and a contractor. Often, contractors hire subcontractors, who in turn may pass work on to sub-subcontractors, and so on. The number of companies (and individuals under contract, such as freelancers) involved may then become quite big.

This is a similar development that operations had in the recent decades, when they developed supply chain management (SCM) with its specific skills and software. However, the temporary nature of projects and hence the business relationships between the organizations makes it much more difficult to manage its Project Supply Networks (PSNs), while they are growing by number and complexity, and cope with their dynamics and opacity.

Causes of Conflicts in Project Management

Internal projects inside organizations are commonly done in a cross-functional style, also referred to as “Matrix”, and have various sources of conflict, among them:

  • Competition for human and physical resources between operations and project(s)
  • Operational disruptions caused by project(s)
  • Control over success-critical decision processes, such as staffing and procurement
  • “Servant of two masters” dilemmas for employees assigned as team members
  • Uncertainties for the performing organization from the level of risk that is inherent in projects
  • Competition for management attention, the scarcest resource in most organizations

The second item “operational disruptions” is often overlooked. It is among the hidden costs of projects in matrix organizations, when they impact operations, often even at times when the project has been finished long ago.

 

Figure 1: Disruptions and uncertainties from a project can reduce the effectiveness and efficiency of operations

More…

 

To read entire article, click here

 

Editor’s note: This series of articles is by Oliver Lehmann, author of the book “Project Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018. See author profile below.

How to cite this article: Lehmann, O. (2019). Title; Series on Project Business Management; PM World Journal, Vol. VIII, Issue IV (May).  Available online at https://pmworldlibrary.net/wp-content/uploads/2019/05/pmwj81-May2019-Lehmann-Healing-Conflicts-in-Project-Business2.pdf

 


 

About the Author


Oliver F. Lehmann

Munich, Germany

 

 

 

Oliver F. Lehmann, MSc., PMP, is a project management author, consultant, speaker and teacher. He studied Linguistics, Literature and History at the University of Stuttgart and Project Management at the University of Liverpool, UK, where he holds a Master of Science Degree. Oliver has trained thousands of project managers in Europe, USA and Asia in methodological project management with a focus on certification preparation. In addition, he is a visiting lecturer at the Technical University of Munich.

He has been a member and volunteer at PMI, the Project Management Institute, since 1998, and served five years as the President of the PMI Southern Germany Chapter until April 2018. Between 2004 and 2006, he contributed to PMI’s PM Network magazine, for which he provided a monthly editorial on page 1 called “Launch”, analyzing troubled projects around the world.

Oliver believes in three driving forces for personal improvement in project management: formal learning, experience and observations. He resides in Munich, Bavaria, Germany and can be contacted at oliver@oliverlehmann.com.

Oliver Lehmann is the author of “Situational Project Management: The Dynamics of Success and Failure” (ISBN 9781498722612), published by Auerbach / Taylor & Francis in 2016 and ofProject Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018.

To view other works by Oliver Lehmann, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/oliver-f-lehmann/

 

[1] The trend is confirmed in surveys on customer side, where “Make-or-Buy” decisions tend to select more often the “Buy” option than “Make”, and on contractor side, as a growing percentage of project managers say that they do projects for paying customers (Lehmann, 2018a, pp. 8-10).

 

 

When There is No Way Out

The Sunk Cost Dilemma

 

Project Business Management

SERIES ARTICLE

By Oliver F. Lehmann

Munich, Germany

 


 

Summary

In Project Business Management (PBM), one can sometimes observe a dilemma situation typical for games with one player. A series of decisions needs to be made, and each time, the momentarily best and most economic option is chosen. However, the series of good decisions adds up to a major failure.

 

The Magic Triangle of Customer-Facing Projects

There are surprising similarities of doing projects and playing one-player games, such as the card game Solitaire (Figure 1). While the game is not played against one or more competitors, one may nevertheless win or lose. The same can apply to projects, and when the project is done under contract, additional risks can impact project success, as I will show in the following example.

Figure 1: A game for one player: Solitaire

Talking with project managers in customer projects, there is often an opinion found that customer satisfaction is the only goal that one should have. It is then – correctly – emphasized that making customers happy generally justifies the existence of a project vendor company and protects its future by providing a reference that will make it easier to win incoming business opportunities. In addition, a happy customer may give the contractor the status of an incumbent provider, making it easier to make more business.

Figure 2: The Magic Triangle of customer projects. All three corners are equally important to protect the presence and the future of the company.

Laying out a game-theoretical model for games with one player, such as the card game Solitaire, I am showing that more aspects of project business need to be considered, particularly the profitability of the project for the vendor and its impact on the company’s liquidity, as shown in Figure 2. It cannot be the goal of a project to lead the vendor into insolvency, which would also incapacitate the company to satisfy the customer.

A Project for a Paying Customer

The First Decision: Winning the Contract or Stepping Back?

Sandworm, Inc.[1], was certain to have won the best project contract in the company’s history. It was a fixed price contract to deliver and implement a business software solution for Wolf Spider Corp. at a value of US $100 million over a period of nine months. To make the project even more attractive, the contract included a commitment by the customer to add an incentive of 10% on top if they would finish the project two months early. Sandworm had done similar projects in the past and felt it was in a good position to meet the seven months incentive date which would make project very profitable and would also ensure a happy customer.

Three aspects of the project seemed less favorable, one being that the bulk of the payment was to be made by the customer after delivery. Sales people had tried to negotiate better payment terms that would be less straining for the contractor, but the customer made it clear that no payment would be made before the software was running and its ability to meet the customer’s requirements would be proven, and insisted that otherwise “…there are many other providers, who are happy to do the business under our conditions.”

Another detriment was a liquidated damage clause of $20 million that would apply in the case of late delivery and would be deducted from the fixed price.

The most unfavorable passage of the contract was a performance guarantee in support of the customer. It said that if Sandworm was found unable to deliver at all, the customer would be permitted to immediately terminate the contract. In such a case, the customer would not pay anything to the contractor but the liquidated damages would still apply, meaning Sandworm would have to pay $20 million to the buyer. The same would apply if Sandworm terminated the contract before the project was finally finished.

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Editor’s note: This series of articles is by Oliver Lehmann, author of the book “Project Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018. See author profile below.

How to cite this article: Lehmann, O. (2019) When There is No Way Out – The Sunk Cost Dilemma, PM World Journal, Vol. VIII, Issue III (April).  Available online at https://pmworldlibrary.net/wp-content/uploads/2019/03/pmwj80-Apr2019-Lehmann-Sunk-Cost-Dilemma.pdf

 


 

About the Author

Oliver F. Lehmann

Munich, Germany

 

 

 Oliver F. Lehmann, MSc., PMP, is a project management author, consultant, speaker and teacher. He studied Linguistics, Literature and History at the University of Stuttgart and Project Management at the University of Liverpool, UK, where he holds a Master of Science Degree. Oliver has trained thousands of project managers in Europe, USA and Asia in methodological project management with a focus on certification preparation. In addition, he is a visiting lecturer at the Technical University of Munich.

He has been a member and volunteer at PMI, the Project Management Institute, since 1998, and served five years as the President of the PMI Southern Germany Chapter until April 2018. Between 2004 and 2006, he contributed to PMI’s PM Network magazine, for which he provided a monthly editorial on page 1 called “Launch”, analyzing troubled projects around the world.

Oliver believes in three driving forces for personal improvement in project management: formal learning, experience and observations. He resides in Munich, Bavaria, Germany and can be contacted at oliver@oliverlehmann.com.

Oliver Lehmann is the author of “Situational Project Management: The Dynamics of Success and Failure” (ISBN 9781498722612), published by Auerbach / Taylor & Francis in 2016 and ofProject Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018.

To view other works by Oliver Lehmann, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/oliver-f-lehmann/

 

[1] All names changed.

 

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