ProjectRunaway

| By russ Banham | illustrations By neil weBB

Strategic visions are great, but they can turn into nightmares at the

project level. Here’s how to keep a project

from becoming a…

F

CFO

inanceexecutivespayasteeppricefortheirversatility.sure,theyplayastrategicroleinthec-suite.Buttheyalsohavetoactuallygetthingsdone,andmakesureothersdoaswell.theyhavetohelptheirceOsconceivethebigpicture,andthen implement it.¶corporatelifebeingwhatitis,thatmeansthatcFOsspendahugeamountof time on projects. some they lead, others they delegate—

CFOprovidesbasicanalyticsandcurrenttrends,strategicinitiativesandmajorcapitalinvestments(from the strategic-planning process),andothermaterialassumptions(including regulation changes, payer-contract negotiations, merger-and-acquisition activities, labor contracts, and so on).

Seniorteamapprovesmajorbudgetassumptions.Financestartsanalyticsatdepartmentlevel,overlayingmajorassumptionsapprovedbyseniorleadership.Thisincludesoneweekofunallocatedtimetodealwithunanticipatedtimedelaysoraneedtoreworkinformation.

CFO,finance,decisionsupport,andinformationsystemsprovidecurrenttrendsatadepartmentlevelandotherassumptionstodepartmentheadsforfirstdraftofoperatingbudget.Thisinformationincludesallthemajorinitiativesandas-sumptionsapprovedbyseniormanagementteam.

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Operationsandfinancedepartmentscreatefirstdraftofbudget,whichincludesoperatingstatisticsandperformancemetricsatadepartmentlevel.

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Implementation of annual budget process for a large, multihospital/physician organization

Case Study: Project Management Timetable

which can often be harder than leading.technology investments and implemen-tations,acquisitions,divestitures,carve-outs, new product launches, new mar-ketentries,younameit.Whenitcomesto capital management, value creation,

andbusinesstransformationefforts,therubbermeetstheroadattheprojectlevel.

andwhobettertoleadabig,hairyprojectthanthecFO?asRichRorem,principalandu.s.financetransformationleaderatDeloitteconsulting,putsit,“cFOsareoftenpickedtoleadproj-ectsbecausetheyhavedeepknowledgeoftheorganizationandgreattechnicalunderstandingofhowthebusinessworksandwhatdrivesit,andtheydon’tshyawayfromtheharddecisions.”

“MostcFOshavethementalitytotakeacomplexinitia-tiveandcreatealinearprocesstoseeitthroughfrompointatopointZ,”addsDougFenstermaker,formercFOatHeal-theastcaresystemandcurrentlymanagingdirectorofWar-birdconsultingPartners.“andweunderstandthetechnicaldetailswellenoughtotranslatethemintoenglish,whichisafarcryfrombeing[simply]acPawhokeepsscoreonthefinancialstatements.”

But assuming the mantle of project leadership presentsproblems.again,projectmanagementistime-consuming,tak-ingupmuchofthebrainspacethatfinancechiefsneediftheyaretofunctionasstrategicallyaspossible.Moreover,ifaproj-ectfails,thecFOmaybeblamed—andprojectscanfailforsomanyreasons.Manystrayfromtheoriginalbusinesscase.Oth-erssufferfromscopecreep,unforeseencostoverruns,teamapathy,orcompetingpriorities,orthreatentoberenderedob-soleteoroff-targetduetounanticipatedmacroeconomiccri-ses,technologicalshifts,orthemovesofcompetitors.

Yetprojectsremainanindispensablepartofbusinesslife.sincetheyarenotgoingaway,andsincesomeoneneedstobeincharge,cFOsneedtohavethebestproject-managementskillsettheycanmuster.Hereweofferasurveyofbestprac-ticesinprojectmanagement,fromchoosingtherightprojectstoassemblingteamstosettingmilestones.

Making the Business Case

Those who wish to succeed as a project managershouldbeginbyrecognizingthatit isultimatelyagovernance role. cFOs have the responsibility forgreenlighting the business case, assembling the

projectteam,establishingmilestonesanddeadlines,monitor-ingprogress,measuringthecontinuingefficacyoftheeffort,

anddecidingwhenenoughisenough—thattheprojectnolon-gerpromisesasuitablepayoffandmustbekilled.

“allprojectsmustbedrivenfromaclear-endbusinesscasethatsays,‘Herearetheobjectives,hereiswhatwehopetheywillachieve,andhereiswhatwebelievethiswillcost,’”saysDennisconley,managingpartneratconsultingfirmtransitionPartners.“astheprojectmovesforward,feedbackmustcon-stantlybouncebackagainstthebusinesscasetodetermineiftheobjectivesarebeingmet,thecostsareinline,andyou’restillfightingtherightwar.”

aprojectmaylookgoodonpaperfromafinancialstand-point,butapositivereturnoninvestmentisnot,inandofit-self, a sufficient rationale to move forward. Projects musthavesomestrategicpurpose.“Youwanttopickprojectsthatwillhaveamaterialimpactontheorganization,”saysterryschillaci,whohastakenonseveralinterimcFOassignmentsasatatummanagingpartner.

Othersagree.“Manyorganizationslaunchprojectswithoutclearjustification,”saysedBarrows,apartneratconsultancycambridgePerformancePartnersandco-authorofManaging Performance in Turbulent Times.“thecFOisinanopportunepositiontoaskthetoughquestionsandenablegoodanalysis.Hecanhelphisbusinesspartnersstructureandthinkthroughthebusinesscasetoensureaprojectofenduringvalue.”

critiquingthisvalueisimportanttodecidingwhichproj-ectstoundertake.“thereisatendencytotakeontoomanyprojects or not even understand what a project is,” saysMark Bashrum, vice president of strategic intelligence atesi international, a project-focused training company. “iwas in a room of executives who worked at an airline inasia, and i asked them, ‘How many projects do you havegoingonrightnow?’theresponsesrangedfrom5to300.theupshotwasthatnooneunderstoodwhataprojectwas:it’saninitiativethathasabeginningandaclearend,notasteady-stateoperation.”

to keep the number of projects manageable, BashrumsuggestsanapproachwherebyexpectedROi,risks,costs,re-sourcerequirements,andtimingarerankedandprioritized.Barrowssaysthatthevalueofestablishingabusinesscasedoesn’tjustpayoffattheindividualprojectlevel,butalsopro-videsawaytocompareoneprojectwithanother.

“twentyto30projectsatonetimeleadsto‘peanutbutter-ing,’”Barrowssays.“You’respreadingyourselftoothin.”Herecommendsnomorethan6majorprojectsatatime.“ionceworkedwithacFOwhosaidhehad20projectstoconsider,”herecalls.“isaid,‘Whatareyourtop3,andwhatwoulditbeworthtoyoutojustgetthose3done?’andhesaid,‘amazing.’”

Project Runaway

Seniormanagementapprovesbudgetoutcomes,includingactionplansandotheritemsneededtoassurebudgetoutcomesarecompleted.

Budgetpresentationismailedtofinancecommitteemembersoftheboardofdirectors.

Boardap-provesbudget.

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Financecompletesanalysisofbudgetgapsandsubmitstooperationsforadditionalactionsrequiredtoclosegaps.Thisisacriticalperiodtomakesurethefinancialoutcomesandactionsrequiredtoachievethegoalsaredoableandfullyunderstoodbythemanagementteam.

Boardpre-sentationisfinalizedandreadyformailing.

Financecommitteeapprovesbudgetandrecommendsfullboardapproval.Fi-nancebeginsenteringdataintomonthlyreport-ingsystemstobeusedbyoperationsfornextbudgetperiod.

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Quarterbacking

Oncetheprojecthasbeengiventhegreenlight,thenexttaskistoassembletherightteam.Whilesomeprojectsaresofocusedthatteammembersmightbedrawnfromwithinasinglefunction,moreoften

thesedayssuccesshingesonassemblingacross-functionalteam.italsohelpsifatleastsomeofthemembershavepre-viousprojectexperience(see“Dreamteam,”page50).thespecificcompositionoftheteamiscritical,andthereforeakeychallengeforcFOsisto“knowtheirbenchstrength,sotheycanensuretheyhavetherightpeopleintherightslots.thatrequiresthattheygetmoreinvolvedintalentdevelopment,”saysDavidaxson,partnerinthefinancepracticeataccenture.

Findingteammemberswhocanspeakacommonlanguageiscrucial.“Youdon’twantsomeonefromitwhotalksjustincode,orsomeonefromfinancewhotalks just innumbers,”axsonexplains. “Youwanta teamthatcommunicateswellamongthemselves.”

Davidenglish,cFOofRyanLLc,learnedthatlessonthehardway.WhenenglisharrivedattheDallas-basedglobaltaxservic-esfirmasitsfinancechiefin2007,businesswasgrowingfast,butthegeneral-ledgeraccountingsoftwarewasa15-year-olddemocopyofarudimentaryprogram.“Wewerea$150millioncompanywithalmost750employeesin45citiesincanadaandtheunitedstates,andwewereusingaccountingsoftwarethathadcost$1,500,anditshowed,”saysenglish.

insponsoringanaccounting/itprojecttoimplementandintegrate new finance, customer relationship management,and human-resource management systems for forecastingandbusinessreporting,englishrealizedhehadtorelyonin-dividualswhohadexpertisehelacked.“iknewweneededtohavethecurrency-conversionfeatureoftheexpense-report-ingtoolworkingbyacertaindate,andicouldtellthemhowitshouldworkandwheretheratetablesresidedinouraccount-ingsystem,”hesays. “But icouldn’twrite thecodemyselforevenbesuretheywerewritingitthemostefficientway.”

englishfoundthatthekeytomanagingtheprojectwastoletthesubject-matterexpertsdrivetheirportionofthepro-cess,withhimridingherdontheteam’sprogress.“iessen-tiallymanagedthem,ratherthantheirarea,”hesays.“Micro-managingjustgetsineveryone’sway.”

anothercommondistractionthatcanimpedetheprogressofprojectteamsis,simply,theirdayjobs.Participationinaprojectoftenaccountsforjustaportionofagiventeammem-ber’sworkweek,andit’saportionthatcansteadilydiminishiftheprojectleaderfailstomotivateteammembersandkeep

themon track. “acFOmustcontinuallydrive themessagetotheteamthattheproject isvital,”sayschuckBest,cFOof BlackLine systems, a provider of accounts-reconciliationsoftware.“Youdothatbystayingengaged,askingquestionscontinually,andreallylisteningtotheresponses.You’reask-ingfortheirtime,andyouwon’thaveitunlesstheyandtheirbossesbelieveintheproject’svalue.”

thisrequiressignificantcommunicationsskills,whichDe-loitte’sRorembelievescFOshavegreatlyimprovedoverthelastdecadeorso.“cFOsroutinelyinteractwiththeinvestorcommunityandgoonroadshowsnow,”heexplains.“theyhavetheabilitytoinfluencepeopleintheorganization,whichiswhatateamleadermustbeabletodo.”

Mile Markers

Keepingeveryonefocusedontheendgamerequiresaroadmapwithreststopsclearlymarked.inproj-ectmanagementparlance,a“stagedgatingpro-cess”breaksaprojectintoaseriesofmilestones,

eachinvolvingspecificgoals,tasks,andareconciliationofex-penses.“Milestoneshelpestablishassignmentsofresponsi-bilityandgiveyousomethingtomeasureagainst,”saysWar-birddirectorandseniorcFOconsultantJamesFox.

Withoutdefinedsteps,projectsmeander.“iworkedonaprojectoncewheretheteamtooksixmonthstogettoapointwherepeoplefeltcomfortablewitheachother,”saysBarrows.“Meanwhile,theclockkeptticking.”

“it’slikethatsigninthemovieOffice Spacethatsays‘Plan-ningtoPlan,’”englishsays.“iknowacFOwhogotsofedupwithallthetimeeatenupatprojectmeetingsthathetookthechairsoutoftheroom.thatgotthosemeetingsdownto10minutesfast.”

severalexpertsadvisestagingmoregatestostaycontin-ually intouchwithteamsandtheirprogress.axson, for in-stance,saysbigprojects“oughttobebrokeninto90to120chunks,eachfollowedbyanin-depthreview.”

cFOprojectleadersswearbythestaged-gatingprocess.

“Many organizations launch projects with- out clear justification,” says Cambridge Performance Partners’s Ed Barrows. “The CFO is in an opportune position to ask the tough ques-tions and enable good analysis.”

Source: Warbird Consulting Partners

“eachtimewepassthroughanestablishedtollgate,wecallameetingtoevaluatethenexttollgate,”saysRobstamper,vicepresidentoffinanceat lighting-fixturemanufacturerHubbellLighting,asubsidiaryof$2.8billionHubbellinc.“thiswaywedigintothedeliv-erables,howmuchwe’vespent,whetherwearestillwhereweneedtobe,and,ifwearebehind,howtogetbackontrack.”

stamperwasatthehelmofamajorinitiativeundertakenbyHubbelltoreduceitsmanufacturingfootprint,whichulti-matelyledtothecompanysellingoffanoncoredie-castingfa-cilitytoasupplier.“Wehadaverydisciplinedsetofmeetings,whichhelpedstructurethepacingof theproject,”hesays.“everyonestayedonpoint,knowinghowimportantitwasforustoreducecosts.Wealsoestablishedincentives—abonusforeachteammemberbasedonthesuccessoftheproject.”

a caveat: in determining project milestones, resist stickingthemtoofarintotheground.“Youwanttosetaharddate,butbuildinacushionthatallowsforcontingencies,”saysenglish.“Ob-viously,youdon’twanttobeperpetuallyresettingdates.thereisafinelinebetweenalegitimatecushionandsandbagging.”

still,notbringingaprojecttofruitionontimewillhurt,sayssanjeevGupta,ceOofRealizationtechnologies,aconsultancythattouts itsabilitytohelporganizationscompleteprojectsfaster.“ifyouestablishthepaybackperiodforaprojectinsevenyears,andtherearedelaysthatpushthisforwardanotheryear,itcancreatecostoverrunsof20%to30%,”Guptamaintains.

Onesourceofdelaythathesaysmanyprojectleadersfailtoaccountforisthingsoutsidetheircontrol,suchasregula-toryapprovals.“taketheexampleofanewdrugwithapat-entthatwillexpireinfiveyears,”Guptasays.“ifthemanu-facturersetssevenyearsasthetargettobringthedrugtomarket,butitactuallytakeseightyearstogetthere,you’venowlostafullyearofexpectedrevenue.andyou’veaddedtheassociatedcostsofanotheryearofresearch,development,

Dream TeamYou’ve given the go-ahead for a major initia-tive and now have to select the individuals to help bring the project to fruition. The problem is, who are the people you should tap, and how can you ensure they will get the job done on time and within budget?

Every CFO who has faced this conundrum acknowledges the difficulty and importance in building a project dream team. Not only can

andlabor.”Headvisesprojectleaderstodevelopachecklistofpotentialtimingrisksupfrontandde-terminehowthesewillbemitigatedbeforespend-ingthefirstdime.

PerhapsthebiggestchallengeforthecFOasprojectleaderisknowingwhentopulltheplug.aprojectbesetbydelays,costoverruns,andabusinessenvironmentinwhichtheorigi-nalobjectivesnolongerholdisclearlyadisaster.Butinothercasesfailurecanbehardtoforesee,andevenhardertoaccept.“i’vehadtodoitseveraltimesinmycareer,anditisn’teasy,”concedesFox.“Yougettoapointwhereyouhavetostopandquestionwhetherthegoalsremainachievablewithareason-ableamountoftimeandcapital.ifnot,youneedtomakeaverytoughdecision.”

Killingaprojectgoesagainsthumannature.“it’sanemo-tionalthingtopulltheplug,”saystatum’sschillaci.“iworkedasaninterimcFOleadingalargeconstructionprojectinvolv-ingthebuildingofapolyethylenepipe.theeconomychangedandsalesweretoughtocomeby.theprojectjustdidn’tmakefinancialsenseanylonger,andresourceswereneededelse-where.nevertheless,ittookmethreemonthstoconvincetheceOtoacceptthetruth,takethehit,andmoveon.”

Hisadvice?“You’vegottoletgoofpride,”hesays.“itjustisn’tworththemoney.” CFO

◗ Russ Banham Is a contrIbutIng edItor of CFO.

“A top project team is likely to require a mix of subject-matter experts, those who know how to navigate the organization, and those who know how to get things done,” Levin says. “It’s what they’re tasked to do—whether you need real diversity in thinking, experience, and expertise versus pulling the best and deepest functional leaders togeth-er—that determines who best to select.”

Another factor is how interdependent the team needs to be. “Is it together for a brief, de-

fined time, or is it a standing team tasked with sponsorship and review of multiple projects?” Levin asks. “Is it a team that operates by con-sensus, or does it surface its best recommen-dations to a designated leader for decisions? One size does not fit all.”

turf issues upend progress, so can malaise. So who gets to play? Lawrence Levin, a consul-tant and author of Top Teaming: How Leader-ship Teams Navigate the Now, the New, and the Next, says it depends on what a project team is tasked to do.

Project Runaway

CFO project leaders swear by the staged-gating process. “Each time we pass through an estab-lished tollgate, we call a meeting to evaluate the next tollgate,” says Hubbell Lighting VP of finance Rob Stamper.

About the worst project team is one that is inherited, says Terry Schillaci, a Tatum managing partner. “I’ve had situations as a CFO where the CEO said to me, ‘Here is your project team,’” he says. “That’s no way for a project to begin. You want to have the team’s confidence from the get-go.”

Other CFOs agree. “Half the battle of a successful project is getting buy-in up front,” says Chuck Best, CFO of accounts-reconcili-ation software provider BlackLine Systems. “And you do that by making sure you set out

what you’re trying to accomplish early, so you don’t muddle through days and weeks

of being unproductive.”Levin concurs. “Time is the great

commodity of busy executives,” he says. He recommends that project leaders ask

three questions to keep team members col-laborating toward the project’s completion: What did we set out to do? How well is this working? What do we need to correct or fine-tune? “This way,” Levin says, “you remain in lockstep.” ◗ R.B.

“A top project team is likely to require a mix of subject-matter experts, those who know how to navigate the organization, and those who know how to get things done.” ›› author Lawrence Levin

www.warbirdconsulting.com Phone: 404-496-5230 100 Glenridge Point Parkway, Suite 200 • Atlanta, GA 30342

Reprinted with permission from CFO, May 2012. Visit our website at www.cfo.com.© CFO Publishing LLC. All Rights Reserved. Foster Printing Service: 866-879-9144, www.marketingreprints.com.