Knowledge Century Consulting

China Competes

2010-04-28T12:54:00.000-07:00

I was then introduced to a medium-sized IT companies. The CEO and all senior level managers were all post-80’s. Yes all of them except the CEO had not reached the age of 30. And the CEO was only 31! It’s almost like a technology company in the Silicon Valley. Having said that, their business was based on the old and tried relationship cum technology application instead of innovation. If you’ve ever been in direct contact with any Chinese companies, you know their ambition is much bigger than entrepreneurs in any other Asian countries. There are simply too many business opportunities in China. For smart people they can easily seize any one of these available opportunities and become rich - very rich indeed.

The next day I was back to Shanghai to sign a contract with a Sweden-based training company. Just like most multinationals nowadays, they’ve selected Shanghai to be the location of their Asia Pacific headquarters, not Hong Kong. Did Hong Kong lost its lustre as a favourite place for company headquarters? I believe so. The market is not there. All eyes are on China now. Hong Kong only has a better legal system now, and all other competitive advantages that were there in the 90’s gradually disappeared – Higher quality human resources, better financial system, and more advanced infrastructure. Infrastructures like highways, airports, public transportation are easy to catch. Hong Kong still has a slim edge over Shanghai in terms of financial system. At least its currency is freely convertible to foreign currencies, and there is no control of currency flow in and out. Some companies may not care too much though, as they keep reinvesting their income into this huge market.

Human resource quality, however, is the most obvious area that Hong Kong has lost its advantage. Hong Kong used to be known as an international city, then ‘Asia’s World City’. My worry is one day it will become just one of many ‘China’s international cities’. Do managers in Hong Kong possess international perspective? You got to be kidding me! Maybe those over 40 years of age still have more international exposure. Over the past 13 years since Hong Kong was reunited with China, it’s tried very hard to become a domestic city of China. People may say the future is China so it is natural Hong Kong turns its eyes to the Middle Kingdom. By doing so, however, competitors of Hong Kong have also changed from Singapore and Tokyo to Shanghai, Shenzhen, Guangzhou and Beijing. What can differentiate Hong Kong from these competitors, and what advantages does Hong Kong possess that can help it compete? Unfortunately there does not seem to be any. The youngsters in the Yangtze River Region are well educated. Their English are slightly poorer but not that far behind. Their international exposure is as much, if not more than, as their Hong Kong counterparts. More importantly, they have a strong sense of purpose and will to succeed, which people in Hong Kong and particularly youngsters are lacking.

Let’s get back to my partner training company in Shanghai. The President was a Swedish lady who started this office eight years ago. She was very proud of what she’s achieved. She told me her daughter and son both spoke some Putonghua, and would be volunteer workers during the Shanghai Expo. More and more foreigners are heading to China. They are preparing to stay there for a long time, if not for good. They all feel the dynamism and strong growth atmosphere there. As one of my foreign friend from Australia once said, “It’s a once in a lifetime experience to be in a high growth country like China. I’ll be there for experience, if not for fortune.”

We are probably lucky to have the chance to witness all these historical changes in China. It is not yet in the big league but close.

Career in China!

2010-04-18T09:20:00.000-07:00

Wuxi is a very different city from Shanghai. Shanghai is a metropolitan with more than 20 million people. Skyscrapers are everywhere. Wuxi is much quieter and in my opinion more livable. That does not mean that it is not economically active. It used to be an area with major heavy industries. And now it’s trying to turn itself into a technology hub. The local government has pumped tons of resources to kick start a technology sector, including building several science and technology parks. As CMMI is a top priority service, my friend was invited to set up a consulting company there a few years ago to support CMMI certification of IT companies in the Yangtze River region. Although there were plenty of incentives, I do not want you to think it was an easy decision for a professional in Hong Kong to uproot himself from a city he had lived for most of his life to an entirely new environment. The fact that his wife and almost grown up kids are staying in Hong Kong merely illustrates his determination.

To operate a company of similar scale in Hong Kong, we may be talking about a few hundred thousand dollars per month.

This may be a topic professionals including project managers in Hong Kong have to think through. There are plenty of opportunities, both business and professional opportunities in China. The living standard in China is also rising rapidly. Are you willing to give up, at least temporarily, your nice and comfortable living condition, even your apparently higher salary in Hong Kong, to move to a fast developing economy? When I say ‘apparent’ I mean the real living standard in China, based on the decreased nominal salary, can actually be higher. An obvious example is monthly rental for an apartment. You may be able to pay only RMB 2,000 for an apartment in a newly built and furnished low-rise building with good living space and all daily necessities including appliances, air-conditioners, TV, Internet and phone. In Hong Kong the same apartment can cost you HK$ 25,000. Adding to that, there is a real opportunity for you to ride along the fast-moving economic train, making much more than you currently do in Hong Kong in a few years’ time. If you are lucky, you may even become rich (say the company you work for is publicly listed).

The next day I went to his office in one of the science parks. The park also houses a Carnegie Mellon Technology training school, IBM, and numerous multinational and local technology companies. My friend’s company was nicely located on the second floor of a typical no-frill (minimum but still nice renovation) building, with a reception area, an executive room, a reasonable-sized meeting room, and multiple cubicles. He hired around 10 employees. That’s almost a dream office for a small company. In Hong Kong if you want the same setup and number of employees you may be talking about HK$300K per month. But in Wuxi we are talking about much less, one-tenth maybe. I guess we can pretty much conclude that the high rental and salary level in Hong Kong really kills lots of industries, including those high end knowledge-based ones. Yes you may argue with me using those archaic no-intervention theories of free economy. But the truth is when property prices in Hong Kong would eventually go down due to lower demand, many industries would have disappeared. Maybe part of the reasons why property would eventually go down is simply nobody wants to live there anymore, hmmm…

Carnegie University has a campus in this science park.

China Rising!

2010-04-06T15:00:00.000-07:00

I went to Wuxi and Shanghai of China last week to visit an old friend and business partner. My friend used to run a CMMI consulting company in Hong Kong but moved to China two years ago. My curiosity prompted me to go there and see for myself what could have tempted him to such a drastic change. It’s also partly my other business commitment that I had to be in Shanghai for a meeting with another business partner that week.

So I took the first flight on a Sunday morning, right after my last workshop in March. I started with a lunch gathering in Shanghai with two of my former colleagues at AT&T. They are still in the ICT industry and doing great. One of them became a senior manager of a US-based telecom, and another a senior technology professional of a global technology company. Both of them seemed to be in buoyant mood, just like any other professionals you would meet in China. They are optimistic about the economic growth and future prosperity of China. Like any other Shanghainese citizens, they were amazed about the trend of property price there. None of them would bet the price would go any higher, but they would not bet against it either. They just knew one day property price would go down, though nobody could tell when. At the same time, I could also feel the slight dissatisfaction of most people about the vast discrepancies between the ‘haves’ and ‘have nots’. Better wealth distribution is really a big problem in China.

Swamped with people in front of the Bund; Only later did I know it's the day of re-opening after extensive renovation works of the Bund for the upcoming Shanghai Expo.

My friend picked me up at the Shanghai train station. The new Concord train was both quiet and comfortable, despite lots of people trying to get onto one of the many trains running around in the Yangtze River region everyday. Compared to the train trip which was really relaxing, the time spent in the ticketing office was far too tense, and unnecessarily long. Most ticketing booths were automatic, and one thing I really admired was people started to get used to staying in a line now (that’s something I was really pleasantly surprised and liked.) Having said that, there were just too many travellers. Well Chinese constitutes one-fifth of the world population so one thing you would not be able to avoid was people.

No it is not demonstration! It was just a popular tourist place near the Bund. Chinese people are much more disciplined in public place and beginning to demonstrate good everyday etiquette.

To be continued...

Hospital Authority Luncheon Seminar

2010-03-02T05:48:00.000-08:00

The PM SIG of the Hospital Authority IT Division invited me to give a luncheon seminar last week. The topic was “Five Golden Rules for Managing Project Risks”. Risk is a topic that I am immensely interested in. Readers of this blog probably know I published a Risk paper here based on another seminar I delivered before.The PM SIG is organized by the PMO of the HA ITD, comprising several senior managers with rich and deep experience in project management. I really admire their enthusiasm and professionalism in promoting better management of their IT projects. It is appropriate to have many formal processes while at the same time elevating skills of individuals when delivering projects, as hundreds of millions of dollars are at stake there.

Given it was a luncheon seminar I did not want to burden the audience with heavy stuff so I focused more on the lighter side of risk management. One analogy that came out of the seminar is definitely similarities between managing risks in road traffic and projects. Both rely on a methodology – in the case of road traffic it is a set of stringent rules and regulations, as well as skills of individuals – drivers or project managers.

The funniest discussion probably is some drivers pretend to follow an important procedure when changing lane, namely check the blind spot, but do not really check. They merely turn their heads because their driving teachers trained them to just simulate this action to get past the exam. This is similar to some project managers in the real world pretend to follow an important risk process such as updating a risk log, but not really evaluating risks at hand. They do it for the sake of satisfying requests from senior management.

I look forward to another luncheon seminar at HA this month. This time the same topic will be delivered to a group of medical doctors, physicians and clinical staff.

WOW - Worst of the Worst Scenario analysis is an important concept in risk management.

Dr. Wing Nam Wong is a key driver of the HA IT PMO.

Although it was a luncheon seminar, projector and powerpoint slides were still essential.

A Few Cultural Observations

2010-02-02T09:57:00.000-08:00

You’ve probably heard of the term ‘title inflation’. Title inflation means the title shown on a person’s business card does not match his/her job responsibility, and the power that comes with it. In Asia you can easily come across people with the title “Project Manager” which is quite senior in Western countries (i.e. North America, Europe or Australia). They look so young that you can hardly believe that they have the experience required to be called a “Project Manager”. Well, a “Project Manager” title is in fact a junior title in Asia. People in the IT sector, after the first few years as “Programmer” and “System Analyst”, will be generously given the title “Project Manager”, even though in Western business community this title more likely carries more than 10 years of project experience with it.

Other examples of inflated titles include “Assistant Vice President” (this title contracts itself – how can one be both assistant and vice something?), “Vice President”, “Director”, “Managing Director”, and “Project Director”, especially in the banking and IT sector. I’ve once visited an investment bank for a presentation. When I entered the meeting room, a lady handed me her name card. Her title is “Director” which, accompanied with the Chinese translation (董事) led me to think that she is a very senior person within the bank. Then her boss came into the room and his title is “Managing Director”. I was confused. Then again the boss of this “Managing Director” came in and handed me his business card. He was an “Executive Director”. It is only then I understood this investment bank was quite generous with titles.

Another observation in Asia is people likes academic and professional titles too. Some people in Hong Kong have so many professional titles such as PMP, CPMC, CSOXP, CISA, CEng and so on, and they feel the need to show them all to the others. I've met a few people before and one side of their name cards just enlists all their 20+ titles – so pathetic. Needless to say they show all their academic titles such as PhD, DBA, MSc, MBA and even BSc as well. In US, Canada or Europe, I've never come across a name card that shows more than 2 titles, many cards show none - and they don't like to be addressed Dr. Bloke, just Joe.

In my opinion this only shows their lack of confidence on themselves that they need some grand titles to support them. My hypothesis is Asian (mainly Chinese) education system does not aim at building up students’ self-image and confidence. On top of that Asia is under the influence of Chinese culture which emphasizes on: Formal education with stringent structure; Conformance to collective behavior; Authority and obedience over individual differences; and tangible measurement of success such as high social status and material possession.

Next time when you are in China or Hong Kong, remember to address every manager as “zong” (总) which means general manager.

PMI Leadership Institute Meeting 2009 - Orlando

2009-10-12T15:00:00.001-07:00

Just back from Orlando after attending this year's LIM meeting. As usual, there were a lot of useful experience sharing and learning from other PMI volunteers. I'm most impressed by the session led by the San Diego chapter which is about volunteer development. These guys really apply management practices well, even their subjects are not paid workers. Motivation and skill development techniques still work here.

Bravo Management!

The keynote speaker, Dr. Gary Bradt, is a inspirational speaker with wonderful talents. All delegates have been inspired by his 'The Ring in the Rubble' and 'Golden Legacy' stories.

Both the opening and closing sessions drew a crowd of 700+ attendees, a record for LIM meeting.

Big news for Asia is Seo-san, Past President of PMI Japan Chapter, being awarded the 2009 PMI Component Award - Volunteer of the Year. (Left: PMI's CEO Greg Balestrero; Centre: Seo Megumu; Right: PMI's Chair Ricardo Vargas)

Me pictured with Seo-san and Kamba-san (President of PMI Japan Chapter).

Me pictured with delegates from the Hong Kong Chapter (Centre: Rossana Ho, Executive Vice President; Right: Patty Wong, Past President)

25-Minute Rule: The Art of Using Stretched Targets

2009-08-23T12:37:00.000-07:00

I deliver more than 40 workshops each year. Almost all these workshops have time slots for group discussion or activities and a final presentation from each group. When the time for group exercise comes, I often tell them they have 25 minutes for discussion. They’d usually think 25 minutes are more than sufficient, until about 3 or 5 minutes before the presentation time they suddenly realize that they need more time. They will then plead with me for more time. So we enter into a negotiation, or more likely a bargaining. “We need 10 more minutes.” No you can only have 3 more.” How about 5 minutes.” Okay, deal. Each group has 5 more minutes.” This almost happens in every workshop, even in every group exercise.

I call this the 25-minute rule. In the end, there will be effectively 30 minutes for each group, but I always start with a stretch target of 25 minutes. Does this sound familiar to you? In real-life projects, don’t most managers use this technique to squeeze the most out of their project teams? I do this all the time when I run projects. When activities are defined and leaders identified, there goes the difficult task of time estimation.

As a project manager I have to let them state their opening bid, i.e. how much time they think they need. They are the experts in their own tasks so I cannot enforce some timeline to them unless in the case that there is an externally imposed deadline for that task (for example the insurance product has to be submitted to a government agency for compliance review.) When the leader tells me he needs 6 weeks, I will start negotiating based on my experience about the task from previous projects, opinions from other experts, or some external factors we cannot control (such as dependency of the following tasks which the responsible organization has resource constraints after a certain date), we will eventually settle at a duration say 4 weeks that both of us are comfortable. So lesson number one is never accept the opening position as-is, because people tend to overstate what they need.

So how does this 4-week duration agreeable to both parties sound to you? Is this an optimal duration, taking into consideration of the interests of both the performing team and you, the project manager? The short answer is no. This is actually a duration that is more comfortable to you than the performing team. In project management it’s called a stretched target. In fact you may have 5 weeks in your pocket but you push for 4-week duration. Chances are the performing team feels that 4 weeks are not sufficient, and they have to work extremely hard to meet the deadline. You may probably ask, “Isn’t mutual trust, open communication, and fairness important to a project? Why don’t you use a target that’s comfortable and ‘fair’ to both sides? “The answer is pretty simple. If you use a target that’s comfortable to the performing team, say 5 weeks, they would eventually finish the task later than 5 weeks. That is not acceptable to you. You are the project manager, and you have to ensure the overall project is on time. So you push for 4 weeks and have a one week cushion that is kept only to you.

There are theories behind stretched target. The first is Student Syndrome as observed by Profession William Goldratt. Just like students, when a team knows that they have more time that is needed to perform task, they will relax in the beginning. So in a corporate environment they will probably work on some other urgent things first. Not until a time when they start feeling there is probably not sufficient time left, they won’t start working on your task.

The second theory is Parkinson Principle - People will expand work scope to suit the time given to them. If you give them 5 weeks which is more than what they need, and assuming they have nothing else to do except your project, they will still deliver the task late because they would keep adding new things to the original task. And most of the time these added things are not useful to your project (for example, more beautiful fonts and formatting for a Functional Specification document.)

So, is stretched target always ‘stretched’? Or since the work team knows that you are going to try squeezing on a stretched target, they would probably open a negotiation with a position that offers them more margins (say opening with 7 weeks instead of 6)? This is possible. And this happens in the real world all the time. Remember this is an art. Nobody knows exactly what the ‘right’ duration for a task is. Depending on your trust level with the working team, imposing a stretched target may harm relationship, or end up in a corporate bargaining game (for example, I heard some managers always cut duration estimation from the work teams by 50%, leading to the work teams increasing their opening position in the next round, and managers cutting by 60%, and so on.) Your ability to master this art of stretched target (and all these negotiations and politics) demonstrates your calibre as a successful project manager.

Next time when you attend my workshop, you probably won’t be surprised that when I say 25 minutes, I actually have 30 minutes in my pocket. :)

Copyright © 2009 Knowledge Century Limited.

Crisis Management vs. Project Management Part 3 (Final)

2009-08-03T14:17:00.000-07:00

For team composition, a project should have a team defined in the very beginning. Some may argue that in the real world this may not be possible all the time, particularly in this state of economy when resources in most organizations remain tight. Having said that, it’s fair to say for most projects cannot proceed without a team structure in place and a large portion of the team members (say 80%) defined before the project starts.

A crisis team, on the other hand, will change depending on the work at hand. Handling a crisis requires a series of actions, usually in the form of projects. During different stages of the crisis, various teams will be formed. Back in May this year, Hong Kong still tried to prevent the first case of H1N1 from happening. The Control Centre kept track of any possible outbreak cases that would be ‘imported’ from other countries. When the first instance of H1N1 was spotted, they quarantined a hotel. That required the support of the Police and Immigration. During the second stage when the virus was clearly spreading within Hong Kong, the Control Centre worked with the Education Department and their own clinical staff to try containing the spread of the epidemic.

Finally it is really hard to give a designated end date for a crisis. Human knowledge is limited and it is really hard to give an end date to a crisis. Even it’s quite clear a crisis has ended, most of the time a small team will still be in alert mode carefully watching for any sign the crisis may re-emerge. A project, in contrast, always has a well-defined end date. This concludes our analysis of differences and commonalities between project management and crisis management.

Copyright © 2009 Knowledge Century Limited.

Crisis Management vs. Project Management Part 2

2009-07-12T11:49:00.000-07:00

PM best practices demand that any projects should have well defined mission and objectives. In fact during project initiation stage the main task is to clarify and lay out clearly what the project wants to achieve in the end. For companies in the commercial sector, the objectives are usually tied to financial performance, customer satisfaction or company reputation. An example is a bank revamping its customer service center to improve customer experience, which in turn leads to higher customer satisfaction and hopefully more business. So revamping customer service center is a well-defined objective, and the mission is better customer satisfaction.

For public or non-profit organizations, a project’s mission is usually related to some social needs. For example a social enterprise organization in Hong Kong launches a project to help under-privileged youth establish their business that is self-sustainable. This is the project’s mission. The objective of the project may be to launch a barber shop or a car maintenance service. Regardless of what it is, it has to be defined clearly in the beginning.

To handle a crisis, however, the key objectives may not be always well defined, though its mission is clear. Take the recent H1N1 pandemic as an example. The mission is quite simple – To minimize its impact to public health. The objectives and their implied course of action may change from time to time. In Hong Kong, for instance, the original objective was to prevent H1N1 from coming into the city. With this objective came those high-handed strategies like locking up a hotel for 7 days, or mandatory isolation for patients who were tested positive for the flu. Later when signs showed that the flu was spreading domestically, the objective shifted to ensuring sufficient clinical facilities for treating patients, and preventing massive outbreak among the most vulnerable groups such as young students. This demonstrates the elusive nature of a crisis. A crisis is simply too complicated for any crisis team to define clear objectives in the very beginning.

The next major differences between managing a project and a crisis is the tradeoffs among key constraints, namely, scope, schedule, cost, risk, resources and quality. For projects, best practices dictate that a balance should be achieved among them. It may depend on project stakeholders but few would tell a project manager “you have to meet the original schedule at all cost.” Some projects may favour on-time delivery, some on the exact features and functions to be delivered, and some on controlling cost budget. But the job of a project manager is really to balance these constraints so that the objectives of the project can be met, to the satisfaction of customers and stakeholders.

On the other hand, the key mission of tackling a crisis has to be accomplished regardless of costs or resources involved. Think about how the Obama government dealt with the bank crisis last year, the Hong Kong government currently handles H1N1, you begin the understand what we mean here. A crisis simply has to be resolved within a particular time frame, usually at the expenses of cost, resources and risk.

To be continued...

Copyright © 2009 Knowledge Century Limited.

Crisis Management vs. Project Management

2009-07-05T12:54:00.000-07:00

Due to my recent involvement with the medical community in Hong Kong, I had the chance to speak to clinical and nursing staff of several hospitals. One frequent question raised during those occasions is whether project management skills can be applied to crisis situation, such as that they are facing right now in the form of H1N1.

My short answer is no. It is true crisis management is closer to project management than to operation management, and some attributes of a good project manager are directly applicable to the situation of a crisis. However there are some characteristics of a crisis that are substantially different from those of a project.

Let’s look at the following table:

Crisis	Project	Operation
Unique mission but key objectives may change	Unique and well defined mission and objectives	Well defined objectives that are slow changing, if at all
Accomplish key objectives at all costs	Trade-off among scope, cost, time, quality & risk	Cost is usually the no. 1 objective
Dynamic team structure and resources	Heterogeneous & well defined team structure	Homogeneous and steady team
No definite end date – sometimes fluid schedule	Definite start and end dates – well defined time schedule	Ongoing with no specific end date

A lot have been said about the differences between project and operation so we are not going to repeat here. Let’s just focus on crisis management and project management.

To be continued...

Copyright © 2009 Knowledge Century Limited.

PMI Asia Pacific Congress 2009 in Kuala Lumpur

2009-03-26T20:11:00.000-07:00

I attended the PMI Asia Pacific Congress in Kuala Lumpur in early Feb. It’s almost a week-long event consisting of series of meetings and seminars. The first two days were devoted to PMI’s Leadership Institute’s Meeting which allowed volunteer leaders to meet and discuss chapter and component business. As a regional component mentor of PMI, I found the meetings informational. They also presented a great chance to connect with volunteer leaders from other part of Asia.

The main Congress ran from 9th to 11th of Feb. As usual, there were many parallel sessions led by project management practitioners or consultants. Among all the sessions I’ve attended, the following three are the most interesting:

1. ‘How to Identify, Measure and Manage Risk Throughout the Life Cycle of the Project”. The speaker, Torsten Koerting, is an experienced project managers and an excellent speaker too. In this three-hour double session, he used a lot of real life practices and templates to illustrate a risk methodology throughout a project life cycle. His demonstration of report samples and scenario based on a corporate project made it credible. One of the best sessions in the Congress. Interested readers may take a look at the presentation slides at: http://www.torstenkoerting.com.

2. “A Comparison between Three Leading Program Management Standards”. Michel S Thiry is a leading expert in program management. His analysis of the three standards – one from PMI which is more US oriented, one from the OGC of the UK government, and one from Japan, resulted in an enjoyable read both from the perspective of process and … culture. Michel’s style is somewhere between an academic and a practitioner. His work is stringent yet not boring. Well done, Michel.

3. “In the Pursuit of the Elusive: Showing PMO Value!” I never heard of the speaker Jack Duggal. Apparently he is an expert in the area of PMO and his session is very entertaining and informative. I may be slightly biased since both of us are doomsayers of those PMO that don’t show any tangible values. In his unique way he managed to show us a framework for quantifying the value of PMO.

Over the years and after so many conferences and seminars, I’ve learnt to be content with 2 or 3 great ideas. To be honest, most of these education or experience sharing sessions are too banal for a veteran like me, and all I am looking for is just a few brilliant insights. Judging by this standard the PMI Asia Pacific Congress is worth my time and money. And I’ve made many new friends too. Look forward to seeing you in one of these events.

Copyright © 2009 Knowledge Century Limited.

Case Studies: Cultural Diversity When Delivering Projects in Asia (2 of 2)

2009-02-02T19:38:00.000-08:00

Let's conclude this series by sharing another project case study which encountered a major problem in China. The problem was eventually resolved by leveraging the team's strong knowledge in local culture.

Case 2: A US Company Procuring Telecommunication Bandwidth in China

A US Telecom was building a regional VPN network for an international client in the late nineties. The project was managed by a US and a Hong Kong project manager, with the support of local teams all across Asia. The network required local bandwidth in several Chinese cities. The international portion of the network was ready. The local project team went through normal application process and was told that the circuits would be ready in three months. One month later, bad news broke out. One of the local telecoms told the project team that due to demand upsurge, new cables needed to be installed requiring six more months of work. Circuits would only be available by then.

Analysis

The project team immediately assessed the situation. On the one hand they worked on a backup plan based on a redesign of the network, hence bypassing that Chinese city. On the other hand they tried to understand what indeed happened. The first question that came to the mind of the US and Hong Kong project manager: Was the local telecom trying to ask for something “funny”? However, the local Chinese team dismissed this possibility, and suggested that there might really be a bandwidth demand problem.

Solution

They then tried to work out a scheme to get the Chinese telecom to re-prioritize their request. They were aware of the face culture in China, and could not afford making the Chinese telecom people lose face, so a formal escalation was ruled out. As a US Telecom they were not an ingroup member, so could not get favor based on relationship though they did enjoy an excellent relationship with them. Since both the US Telecom and the international client were well known in China, they decided to play along that line. They invited senior managers from both companies to come to that Chinese city all the way from the US, and set up a special meeting with the local telecom. In the meeting, they emphasized the importance of this project to their business and to this Chinese city, and pleaded the local telecom to support them. After the meeting they went through the normal ritual, i.e. having dinner and Karaoke. Miracle did happen. Two weeks later, they were informed that the circuit would be available according to the original schedule.

Conclusion

Cultural diversity is an important factor to consider while delivering projects in Asia. When properly addressed, a project manager will be able to motivate the project team and avoid unnecessary conflicts. In general, a project manager in Asia should pay special attention to common traits such as face saving, avoidance of direct conflicts, indirectness of expression, and predominance of relationship. Subtleties like ingroup/outgroup, masculinity, power distance, and negotiation styles should also be observed.

References

Blake, T., Walker D., and Walker T. (1995). Doing Business Internationally: The Guide to Cross-Cultural Success. McGraw-Hill Professional Book Group.

Brahm J. Laurence (2003). When Yes Means No! – How to Negotiate a Deal in China. Tuttle Publishing.

Cauquelin J., Mayer-König B., & Lim, P (1998). Understanding Asian Values. In J. Cauquelin, P. Lim and B. Mayer-König (Eds), Asian Values: An Encounter with Diversity (pp. 1-19). Curson Press.

Ferraro, G. (1997). The Cultural Dimension of International Business. Prentice Hall.

Hofstede, G. (1980). Culture’s consequences. Beverly Hills, CA: Sage.

Hofstede, G. (1991). Cultures and organizations: Software of the mind. Loddon, Norfolk: McGraw-Hill Book Company (UK) Limited.

Peng Shiyong (2003). Culture and Conflict Management in Foreign-invested Enterprises in China – An Intercultural Communication Perspective, Peter Lang AG

Case Studies: Cultural Diversity When Delivering Projects in Asia (1 of 2)

2009-01-20T16:27:00.000-08:00

KUNG HEI FAT CHOY! GONG XI FA CAI! The Chinese New Year is coming this week. Let me wish all of the readers a successful Year of the Ox!

Let's continue our discussion about cultural diversity in Asia using two cases of project delivery in East Asia. Both encountered issues originating from diverse cultures and business practices.

Case 1: A Hong Kong Company Delivering an Interior-Design Project in Korea

A Hong Kong-based interior design company was awarded a contract to renovate a building in Korea in the early 2000. Their client was a European embassy. This embassy did try to manage this project themselves, and appointed a project manager out of their home country. After a year they hardly got the project off the ground, and they came to this Hong Kong Company which had been their vendor in Asia for a long time.

The Hong Kong Company helped the embassy prepare a RFP, and chose a local Korean contractor as their prime through a proper tendering process. They were aware that there might be collusion problem among Korean bidders, but decided there was not much they could do about it. They hired a local Korean site supervisor on contract basis to supervise the project and the performance of the prime contractor.

After the project was half way complete, problems started to surface. There were instances that subcontractors refused to ship their deliverables because they had not been paid by the prime contractor, even though the Hong Kong Company had not failed to pay the prime according to contract. They also had some quality problem with the prime contractor. The local site supervisor was not effective, and seemed to be on the side of the prime contractor hiding problems from the Hong Kong Company. The project could not possibly meet its original schedule.

Analysis

This is an illustration of several cultural concepts we discussed earlier. Local Koreans belonged to an ingroup of the same nationality. A foreign company, even from Hong Kong which is part of East Asia, was seen as an outsider. When dispute came up, it was uncommon but not impossible that local parties colluded to protect their ingroup members. The local business practices were also an issue. Only locals who were familiar with the local environment could possibly minimize the negative impact from these practices.

Solution

They chose a project manager in Hong Kong and sent her to Korea on site for two months. She acted as a communicator between the clients and the prime contractor. She also monitored the performance of the contractor on behalf of her company. Performance started to improve and the project was finally completed to the satisfaction of the client, albeit late by around two months.

To be continued...

Copyright © 2009 Knowledge Century Limited.

Project Issues in Asia (3 of 3)

2008-12-31T17:16:00.000-08:00

Negotiation

East Asians are more tolerant of ambiguity; sometimes even prefer to leave an issue unresolved in negotiations. They are also tough bargainers. Frontline negotiations are characterized by:

(1) it is usually a long process;

(2) it takes patience and skills to reconcile two languages into a contract;

(3) the concern about face. As East Asians are concerned about face, the principle-based negotiation strategy trying to achieve win-win for both parties may not always work, as face introduces an emotional factor and irrationality into the negotiation.

Negotiation in East Asia is not just limited to frontline formal settings. Relationship buildup through informal sessions such as karaoke, golf and dinner is of equal importance to the outcome of negotiations. Offline lobbying sometimes can get a negotiation out of an impasse.

Other Potential Issues

Payment Part of business culture in certain East Asian countries is to postpone payment to vendors. In Japan and Korea, there is no problem with payment. When a payment is due, it will be paid. In the Greater China region, however, this is a major headache for project managers. After a project has been completed, it may take a long time to receive all the due payments. A project manager may still need to work with the customer on payment issue even though the project has been officially closed.

Etiquette Although culture has many layers, the outermost layer, etiquette, can create a good or bad first impression. One has to carefully observe all etiquette on her first visit to a new city or country, to avoid creating a poor impression among the local stakeholders. For example, a Hong Kong project manager visiting Japan would try not to speak too loudly in public location such as restaurants or trains, and has to avoid using mobile phone in those places. On the other hand, a Japanese or Korean manager visiting Singapore need to be aware that it is a much less smoker-friendly country than their home country.

To be continued...

Copyright © 2008 Knowledge Century Limited.

Project Issues in Asia (2 of 3)

2008-12-23T16:24:00.000-08:00

Team Motivation

A project manager needs to deal with the issues of language and open communication while managing people in East Asia.

Language

Western and Asian project managers alike face the same problem of communicating in local language. Asia has more than 10 major languages, such as Mandarin Chinese (Putonghua), Cantonese Chinese, Japanese, Korean, Malay, Thai, and Vietnamese. There are also countless local dialects. Difficulty in communication with project team members or the customers in local language can impact the outcome of a project. For most business or IT projects, English can be used for team or customer communication though most Asians only possess limited English skills. When using English in Asia, it should be noted that:

• Most Asians’ reading and writing skills are much better than their listening and speaking skills;
• People from different countries have strong accents of their own, and can be a hindrance;
• Even people speak in English, the usage of words and expressions may carry the culture and patterns of their first languages.

Open Communication

In a project setting, open communication among stakeholders is important to the project’s success. The more candid are communication between all parties, the earlier problems can be identified and resolved, and a higher trust level and morale among all parties. However, this is not easily achievable in East Asia, particularly for projects that involve many parties. Sometimes the biggest challenge is to cultivate an open atmosphere within the project team. East Asians are generally shy and concerned about face, so they usually remain quiet in meetings. When they do speak, they sound humble and hesitant. If they have different opinions to their seniors, they do not speak out directly. Instead they only voice out their concerns in a very mild way, or simply keep to themselves. It’s quite common though they would speak out their concerns and disagreements in the most direct way during informal discussion with their colleagues, and complain about their managers not listening.

The only way to cultivate a candid and open communication environment is to build trust within the team, specifically between team members and the project manager. This requires the project manager to participate in team activities more frequently, adapt to local culture and customs, and encourage different opinions during meetings.

Motivators

To motivate a team in East Asia, the project manager needs to show a lot of respect to the local people, try to become a part of the ingroup, and cultivate an environment of trust and open communication. In general, East Asians are concerned about job security and monetary reward. They are willing to work long hours, and like to take up responsibility. Education and training can be a strong motivating factor for most people especially among younger members of the team.

To be continued...

Copyright © 2008 Knowledge Century Limited.

Project Issues in Asia (1 of 3)

2008-12-13T22:26:00.000-08:00

More and more projects are being delivered in Asia, with a wide spectrum of project types including infrastructure, construction, IT, finance, product development and business process. Project managers share common cultural conflicts and issues when delivering projects in Asian countries irrespective of business sectors.

Authority

Most Asians, in particular East and Southeast Asians are still receptive to dominant, dictatorial bosses, and authoritative figures. They expect their project managers to be decisive, firm, and assertive. The power distance is high compared to Western countries. European or US managers, though not considered ingroup by locals, have the advantages of being associated with the image of the successful developed world. However, one should carefully observe the indirect ways people express their discontent, and try to achieve a balance between authoritative and participative management style.

Conflict and Resolution

Conflicts are best resolved through smoothing and compromise. East Asians tend to avoid confrontation and relationship is the key to resolving conflicting situation. As Lao-tsu (600 B.C.) said, “Whatever is fluid, soft, and yielding will overcome whatever is rigid and hard.” It is advisable to adopt a soft approach to handle disagreement. Project managers should also note the following cultural traits in Asia.

Process and Methodology

The concept of shade combined with a strong sense of pragmatism has made East Asians (excluding Japanese and Korean) rather poor followers of process and procedure. They use their own judgment when asked to abide to certain processes and have a tendency to bypass processes or take shortcuts. This behavior pattern also diminishes their willingness to adhere to rules and regulations. Pragmatism is very deep-rooted in Chinese culture. A good example is Mr. Deng Xiao Ping, the chief architect of modern Chinese economic development. He made the famous comment “Regardless of white cat or black cat, the one who can catch mice is a good cat”. The legendary proverb of Ba Xian (Eight immortals) crossing a river using their own individual methods also illustrates the Chinese thinking of expedience.

Project managers in the Greater China region should pay particular attention to their team’s performance especially if following global processes or best practices is critical to the success of a project. For outside parties like vendors or sub-contractors, close monitoring and control needs to be exerted. It’s advisable to organize some training for local team members so that they fully understand the benefits of adhering to company process and methodology.

On the other hand, a project manager needs to be aware of how to get things done outside the organization. Formal process or procedures may not work even though they are official. A project manager has to work closely with the local team to understand leeway and flexibility of local procedures and rules.

Ingroup/Outgroup

As discussed above, East Asians have low trust level with people considered outside of their ingroup. Project manager, even a local, is usually considered an outgroup member because of their seniority level. A foreign project manager will definitely be considered an outgroup member by both the project team and the customer due to her nationality and ethnicity.

An outgroup person will receive far less information than an ingroup person because of lower trust. Their ideas and behaviors will be viewed with skepticism and distrust, hence making their project management task much more difficult. Conflicts can easily come up with outgoup people.

To be continued...

Copyright © 2008 Knowledge Century Limited.

Common Cultural Traits in Asia (3 of 3)

2008-12-06T23:58:00.000-08:00

The Art of Indirectness

Metaphors and allegories are part of Chinese culture. In the past government officials used metaphors and allegories to drive home a different opinion to the King, lest they would offend him by being too direct. This tradition is still practiced today and can be observed in everyday conversation in East Asian societies. Underlings seldom express direct feeling such as anger or discontent in front of their boss. In business meetings and negotiations people seldom give a direct answer, and use different ‘yes’ expressions to mean ‘no’.

Other notable values and traits commonly found in East Asia include:

Respect for age and seniority – Grey hairs and senior managers are seen as wiser than the younger members, regardless of their formal positions.

Importance of education – Learning and education is seen as the best way to climb up the social ladder. The highly educated are well respected in the society.

Masculinity – Hofstede (1991) said “Masculity pertains to societies in which social gender roles are clearly distinct (i.e. men are supposed to be assertive, tough and focused on material success, whereas women are supposed to be more modest, tender and concerned with the quality of life).” This fits in quite nicely with the dominant trait in East Asian countries like Japan, Korea, Taiwan, Hong Kong, and China. Although social status of women has improved significantly over the past five decades, men are still seen as the decision maker and bread winner.

Financial prudence – East Asians tend to save a much higher proportion of their income for future use, and hence are more financially prudent when spending. This can be explained by a strong sense of insecurity. Owning more money is usually seen as a symbol of success. Job security and monetary reward can be powerful motivating tools.

Avoiding conflicts – Conflicts are usually seen as bad and should be avoided. Emphasis is put on maintaining a harmonious relationship among all people in the society.

Work ethics – Diligence is seen as a virtue and a justifiable price to pay for success. From their primary education to college, East Asians are educated to “give out their best”, meaning studying long hours for the best results they can get. In the workplace, workers are willing to work extremely long hours.

To be continued...

Copyright © 2008 Knowledge Century Limited.

Common Cultural Traits in Asia (2 of 3)

2008-11-21T01:14:00.000-08:00

The Importance of Personal Network

Personal Network (or alternatively known as guanxi in Chinese, ningen kankei in Japanese) is mentioned in many literatures. To get things done in East Asia, it’d be easier to utilize a personal network of family members, relatives, friends, business partners, and government officials. Although the effect of guanxi has been exaggerated to a certain extent, it is common experience of business people that getting support from a few key contacts or pushing certain “hot buttons” can greatly facilitate the resolution of difficult problems. Although in a sense this also happens in the West, people in US or Europe tend to observe and stick to procedures, formal processes, rules and regulations, whereas Asians in general are easily influenced by personal relationship.

The Concept of Shade

Yin-Yang is another essential concept in East Asia. Chinese traditional thinking emphasizes the importance of maintaining a harmonious state between yin and yang in almost everything, resulting in notions that pervade in all aspect of life – balance, harmony, equilibrium, and steadiness. The ideal state is not a state that goes to one extreme, but rather between extremes. It also leads to the concept of shade, an area between black and white, or yin and yang. It can even be both yin and yang. Chinese and Japanese can usually accept ambiguities in business, can go ahead with a business deal without contract, and try to resolve an issue from the perspective of balance and equilibrium. This also shows in daily conversation, as few Chinese or Japanese will say things too definitive.

Humbleness

Being perceived as modest and humble is a virtue in East Asia. People showing off their possessions, knowledge or achievement are usually seen by the others as arrogant, and therefore in negative light. A common mistake for Western managers in China or Japan is that they appear too dominating in meetings, or to put forth their objections too blatantly. East Asians tend to be very quiet in meetings partly due to their upbringing and partly to their acting humble. They want to appear as modest by not saying too much, and even if they have to raise different viewpoints they would use words very carefully and indirectly.

To be continued...

Copyright © 2008 Knowledge Century Limited.

Common Cultural Traits in Asia (1 of 3)

2008-11-11T13:40:00.000-08:00

East Asian cultures are heavily shaped by traditions and thinking of Buddhism and Confucianism (whereas Central Asia is strongly influenced by Islam, South Asia by Islam and Hinduism, and Southeast Asia by Buddhism and Islam). (Cauquelin, Mayer-König & Lim, 1998) In East Asia the ideas of yin-yang, duty-based society, obedience to power, and personal network have been recurring themes. The followings are several cultural characteristics that appear consistently in most studies of East Asian cultures and values:

Face The concept of face (mianzi in Chinese) is very important in East Asia. Face is loosely associated with respect, but at a more superficial level. In most occasions, it’s critical not to make a person lose face in front of the others, regardless of the respect borne by the same group. To make a person lose face is equivalent to insult. This code of conduct can lead to phony behavior or sometimes extreme pretense. Foreign speakers in China or Japan have the following common experience. Accompanied by an interpreter, the speaker told a joke which received loud laughter and applause from the audience. Afterwards in a dinner, he was told by his local colleague that the interpreter did not actually translate his joke. Instead the interpreter told the audience that “the speaker just told a joke which I don’t think you’d find funny but please laugh anyway.” And the audience dutifully laughed and applauded. This is an example of saving face even for a guest people barely know.

We vs. They Mentality The concept of ‘we’ group (ingroup) in contrast to ‘they’ group (outgroup) was defined by Hofstede (1990). This is related to his individualism-collectivism construct. In general ‘we’ group is associated with collectivistic cultures. The ‘we’ group members in a narrow sense include family members and close friends and, in a broad sense people with a common race, religion, or political orientations. East Asians engage more easily in conflict with ‘they’ group members than with ‘we’ group members. In the business world, the mentality of they applies to people outside of one’s company or one’s industry, or foreign companies.

To be continued...

Copyright © 2008 Knowledge Century Limited.

Defining Geography and Methodology

2008-11-05T06:08:00.000-08:00

Geography - Which Asian Countries?

We first try to define which Asian countries are to be covered here. The most common way to divide up and identify all Asian countries is listed below:

East Asia: China, Hong Kong S.A.R., Japan, Mongolia, North Korea, South Korea, Taiwan
South Asia: Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka
Central Asia: Afghanistan, Iran, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan
Southeast Asia: Brunei, Cambodia, East Timor, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam
AustraAsia: Australia, New Zealand, Pacific Island Countries, Papua New Guinea

This paper will focus on East Asia and will touch upon South Asia and Southeast Asia. Central Asia and AustraAsia will not be covered.

Theoretical Framework

Culture is “everything that people has, think, and do as members of their society.” (Ferraro, 1997) Culture of a society evolves over many generations from religion, belief, history, and pervading values. Culture can affect people’s attitude, behavior, ethics, communication patterns, and etiquettes. (Blake, Walker, & Walker, 1995)

External behaviors originate from internal values, which cover the following: truth, honesty, harmony, order, liberty, democracy, justice, mercy, compassion, forgiveness, patience, love, respect, family and kinship, friendship, politeness, education, wisdom. (Cauquelin, Mayer-König & Lim, 1998) It’s generally agreed that Asian values are different from Western values in substantial ways, despite the fact that over the past fifty years or so they come much closer due to increasing interaction between the two worlds.

Of particular significance to the study of culture and its implication to work is Hofstede’s four dimensions of work-related values. (Hofstede, 1980) The four dimensions are: Individualism-Collectivism, Power Distance, Uncertainty Avoidance, and Masculinity-Femininity. They provide a useful framework for our analysis of cultural behaviors in Asia.

This paper will use the Hofstede’s four dimensions of work-related values as a basis for dissecting values and behaviors. We will focus on (1) project management and other related issues; and (2) the practical aspects of all these studies as applying to real-life project delivery in Asia. In particular, there will be in-depth discussion on several areas that a project manager will be particularly interested in namely, Authority, Conflicts and Their Resolution, Team Motivation, and Negotiation.

To be continued...

Copyright © 2008 Knowledge Century Limited.

Managing Projects in Asia

2008-10-31T10:44:00.000-07:00

I've had the privilege of working in a multi-cultural environment in Asia for many years. So many times I've seen conflicts arising from a clash of values, practices, and behaviors due to diverse cultures, particularly between people from different parts of the world. The old saying "East vs. West" may be a bit simplistic, but it's not far from the truth that Westerners do not truly comprehend subtleties of Asian culture.

I presented a paper three years ago at the first PMI Asia Pacific Congress in Singapore. The feedback to the session was very good and many people came back to me for more advice. I'll use this blog to share both this paper as well as some new thoughts on this topic.

Introduction

Over the past thirty years, Asian cultures have become a dominant theme when companies are considering business ventures or making investments in Asia. It started with Japan in the seventies, then the four “little dragons” – Hong Kong, Korea, Taiwan, and Singapore in the eighties, and then China, India, ASEAN, and the rest of Asia in the nineties. When managers from the West thought that they’d understood Asia based on their experience in one country, they discovered that in another not-so-far-away country, people with similar color and look think and behave differently. We are talking about a very diverse cultural environment – multi-racial, varied historical background, different values, and multi-lingual, in Asia.

Hand-in-hand with business ventures and investments are projects. So project managers are facing more or less the same, if not more complex, cultural issues. Even experienced managers with good people management skills find it daunting to manage projects in Asia which has more than thirty countries/territories based on geographical classification (excluding Pacific Islands), at least ten major languages spoken, and more than twelve major economies. A project manager typically faces issues like miscommunication, clash of values, disparity in religions and customs, misunderstanding resulting from petty etiquettes, and difficulties in motivating people.

This paper will provide an analysis of Asian culture from four perspectives that a project manager is most concerned with – Authority, Conflicts and Their Resolution, Team Motivation, and Negotiation. Asians exhibit dissimilar behaviors and thinking due to their diverse cultural background, yet on a closer look some commonalities exist in most countries irrespective of their geographies, ethnicities, and languages. Based on real-life experience in managing large and complex projects in Asia, this author will share his views on handling tough cultural issues and conflicts, and offer a list of do’s and don’ts. In particular, he will focus on areas that have prevalent impact on a project, namely stakeholders’ interests and behaviors, team building, and conflict resolution, all under the context of diverse cultures.

To be continued...

Copyright © 2008 Knowledge Century Limited.

A Pragmatic Model for Managing Project Risks （4 and Final）

2008-10-07T18:10:00.000-07:00

Execution Phase

During the project execution phase, risks should be regularly monitored and properly controlled. Just like any other activities during execution, this sounds like common sense, and I’ve not seen any organizations that say they are not doing it. There are also no hard and fast rule on who, what, when or how to do it. Overall speaking, we think the following guidelines should add value:

Regular meetings – Most people include risk review as part of the regular progress meeting. For really large projects there may be separate meetings. Sometimes regular meeting may not be able to help the team to deal with some unforeseen and urgent risks. Having said that, this is still the occasion when risks can be detected through discussion with team members.

Alertness to risks and open communication –Most risks can be discovered early if every project team member is alert to symptoms of risk. A seemingly harmless comment from the client, a minor concern expressed by a senior executive, or a report on the newspaper about your client being acquired by another company – All of these can indicate trouble for the project you are currently handling. And one person cannot do it all. If all team members have a high level of alertness to risk that would be a big plus to your project. Sure this sounds easier said than done, or even a bit far-fetched. In real life this differentiates a good team from an ordinary one. The project manager should at least cultivate an atmosphere of open communication and encourage sharing of any signs of risk, no matter how unlikely or remote they look, within the team.

There are a few things that should be consistently and regularly done to properly control risks:

Documentation – This is a very effective impact mitigation measure, in particular if there are external organizations involved. For example, vendors can use documentation such as meeting minutes, project reports etc. to protect themselves in an unfavorable situation. For in house projects, documentation can also be used by the project team to shield themselves from unnecessary accusation, albeit to a lesser extent.

Negotiation – This is a very effective means to avert the course of risk, or at least to reduce impact of certain risks. Before and during negotiation, you need to understand: What is at stake? The degree of criticality of each project objectives to key stakeholders? What are your bargaining chips? Any evidence to support your arguments? (Supportive documents would be very useful here.)

Communication - Information transparency through effective communication is an effective means to:

Foresee new risks and re-evaluate known risks
Avoid or control damage from risks
Get support from senior management
Open communication strengthens team spirit and the sense of being in a team. However, project team needs to be political savvy for external communication.

So that’s it. Our discussion of managing project risks stops here. Although we’ve spent 11 posts over a time span of 3 months to explore the subject, this can only represent the beginning of a somewhat long and difficult journey to shape the best risk management methods for projects of various scales.

Copyright © 2008 Knowledge Century Limited.

A Pragmatic Model for Managing Project Risks （3）

2008-09-10T17:38:00.000-07:00

Project Kickoff/Planning Phase

Project Risk Review

Key Activities

WBS
Stakeholders
Requirements
Resources
Solution/Technology
Environmental

While performing project risk review:

Focus on risks that could affect the satisfactory completion of the project. The key objective at this stage is to ensure successful project delivery, as compared to Concept stage which is to decide if a project should go ahead.
The team better refer to a framework of risk sources or risk checklist based on past experience.
This can be an individual or group exercise, depending on the size of the project.
In general the more experienced the project team the easier they can develop counter-measures and response plan.

What to review?

WBS & Schedule – Too tight? Unrealistic?
Requirements – Unspecific? Unclear?
Stakeholders – Who? Participation/Commitment? Hidden agenda? Resistance to change?
Resources – Sufficient? Probability of change?
Solution/Technology – Too new? Interface? Compatibility with existing platform?
Environmental – Compliance? Org change?

The outcome of the review is a short list of risks (no more than 10!) with high priority and their mitigation plan. The list typically consists of some common risks such as:

Unclear scope – Early user involvement, systematic approach in requirement gathering & analysis, change control formulation & buy in etc.
The end users do not know what they want - Perform focus group analysis; Formulate a more detailed user requirement gathering exercise with 2 prototype stages planned;
The user division keeps changing their requirements - Set up a change control system, and get their buy in from user division.
Unrealistic Schedule - Negotiate for a better schedule; Identify areas that can be outsourced.

The list may also contain some specific risks that require special attention and mitigation strategy. For example:

Use of new technology – Training; delivery in phases (pilot and full).
Regulatory compliance issues – Have compliance division check current status.

There are two overall risk control strategies that should be applied for every project:

Change Control

A well communicated and agreed upon Change Control Process is very effective in:

Reducing unnecessary changes;
Encouraging user groups to think carefully about requirements in early stage of the project;
Balancing scope change with other success criteria such as cost and schedule.

Negotiation

Negotiate everything – schedule, resources, $$, people, requirements, deliverables…
Negotiate early.

To be continued…

Copyright © 2008 Knowledge Century Limited.

A Pragmatic Model for Managing Project Risks （2）

2008-08-29T21:12:00.000-07:00

After a two-week summer break, let’s get back to our pragmatic model for managing project risks.

First a few rules:

Apply 80/20 - By 80/20 we mean this model does not try to do everything. Instead we focus on the activities that yield the most results.
Optimize total cost of risk management – We try to optimize the cost of prevention, mitigation, transference and acceptance. We even allow passive acceptance as a valid response if it generates less cost that doing something else. Passive acceptance means doing nothing, and if those risks happen, they happen.
Target small and medium projects – A significant proportion of business and technology projects are small and medium projects. Well we admit that the definition is not clear. Let’s just say any projects less than US$ 1m value are considered small and medium. Our argument is there is no need to apply everything in those formal methods to these projects.

An outline of our pragmatic model is shown below:

We divide a project into three distinct phases: Concept/Approval, Kickoff, and Execution. We propose several key risk activities during these three phases.

Concept/Approval Phase

Business Risk Review
Key Activities

Business Case
Stakeholder Analysis
Scenario Analysis
NewspaperTest

Project sponsors and top management reviews the project’s business case, potential financial return, tangible and intangible benefits, and risks involved. Risks can come from financial impact, stakeholders’ responses, and potential damage to organization’s public image if anything goes wrong, and so on.

Particular attention, in my opinion, should be paid to negative publicity generated. There have been several recent business projects that went out of hand, eventually leading to extremely damaging responses.

A local supermarket chain launched an initiative to charge 50 cents for each plastic bag handed out to their customers. Customers’ feedbacks were extremely negative. There were even reports of sporadic instances that some customers quarreled with cashiers trying to get free plastic bags. The initiative was eventually cancelled one week later by the supermarket chain without proper explanation, resulting in even bigger outcry from the public. From a project management perspective, we would argue that implementation plan had not been well thought out (measures such as phase lead-in and publicity campaign were missing). More importantly, risk of possible poor publicity had not been highlighted to senior management. Had scenario analysis been performed, senior managers surely would have been brought to this likely outcome. The likely decision would have been a no-go.

The key objective of performing risk activities during this stage is to make go/no-go decision for the project.

To be continued…

Copyright © 2008 Knowledge Century Limited.

A Pragmatic Model for Managing Project Risks

2008-08-09T10:27:00.000-07:00

So now what? If our daily experience and even a research report shows that formal risk management methods are not applicable to small and medium size projects, are there any alternatives available?

Well let’s explore a pragmatic model for small & medium projects. First let’s consider a real life situation of moving you home.

Just say you bought a new apartment from a property developer 9 months ago. It’s scheduled to close 3 months later. You plan to move to the new apartment as soon as possible. What’d you do to minimize risks for this project?

Below is a list of typical tasks for your home relocation project:

Hire a solicitor
Negotiate and confirm a bank mortgage
Perform pre-closing examination of the apartment
Conduct formal closing
Select and hire a contractor for minor renovation
Contractor performs renovation
Order and install utilities such as electricity, gas, phone, internet, TV
Buy and deliver furniture
Move to the new apartment

Examples of risk include:

Bank mortgage cannot be secured;
Apartment quality not up to expectation;
Developer postpones closing date;
Contractor fails to perform;
Renovation requires longer time due to contractor failure or unexpected events;
You are made redundant by your employer before closing;
You move to a new job, and so on.

There are also risks that are quite unlikely to happen, but still exist:

Developer bankrupt; bank withdraws mortgage;
Contractor sick or other accidents; and so on.

Typical approach for dealing with risks of this scale:

Gain as much knowledge and lessons learnt by talking to your friends who have previous experience or professionals such as property agents or solicitors.
Identify critical tasks and milestone dates (e.g., “Secure bank mortgage”, “Formal closing”, “Renovation complete”, “Move to the new apartment”). Try to schedule them in proper sequence and with as much buffers as possible.
For non-critical activities (such as “Buy and deliver new furniture”), try to schedule them with a large comfort margin or better with no dependency to other tasks.
During the project, monitor closely the progress of critical activities, and control them carefully.
Minimize changes (e.g. a new design proposed by your contractor in the middle of renovation, changing your job etc.) within the life cycle of the project.
For risks that are unlikely to happen (e.g. Developer bankruptcy), do nothing until they happen.

Note that (1) we start identifying risks and countermeasures by focusing on the WBS or task list; (2) we don’t apply a risk-by-risk analysis and response planning approach, instead we just apply an overall framework of careful WBS planning and close monitoring during execution; (3) we adopt reactive approach for those unlikely risks.

Hey, isn’t this common sense? Yes this is exactly the point we are trying to bring up. Risk management is not rocket science. Although there are all those formal methods, projects of smaller size only require some careful planning based on past experience and common sense. This is the first step to take away the myth surrounding risk management.

We’ll argue later that the same approach can be applied to projects in a business setting.

To be continued…

A Risk Management Research Report in Hong Kong (2)

2008-08-04T20:25:00.000-07:00

Let’s continue with the results of the research paper. Interviews with the 25 experienced project managers revealed their FOUR risk response strategies – Control, Negotiation, Research, and Monitoring.

Control Strategies

Control Strategies	Descriptions
WBS	- Understanding requirements - Assessing staff skills required, technology & solution etc. - Detecting and negotiating over-ambitious target schedule
Progress Control	- Close monitoring and control of each task’s progress
Change Control	- Tightly controlling clients’ change requests, sometimes through contract T&Cs
Documentation	- Documenting all changes - Controlling all documents for advantageous position in disputes
Reactive Problem Solving Strategies	- Increasing available person-hours (OT) - Rescheduling and problem isolation

Negotiation Strategies

Negotiation Strategies	Descriptions
Change Control	- Assessing clients during pre-sales to determine the best approach - “Hard” vs. “Soft” approach
Trust & Relationship Building	- Mitigation for all relationship risks - Trying to put self into others’ shoes
Managing Client Expectations	- Recalibrating client expectations from the start - Being honest
Balancing Cost, Schedule, and Scope	- Reprioritization of time, budget, or quality, e.g., postponing less critical req. to 2nd phase - More resources or lower profits
Escalation	- Last resort
Team-building	- Building and maintaining commitment through lead-by-example & sharing decision making

Research Strategies

Descriptions

Studying & Self Education

- Forming special team researching and studying new technology issues
- Requirement study trying to identify potential pitfalls in solution or technology

Monitoring Strategies

Descriptions

Constant Surveillance

- Paying special attention to potential problem areas identified during implicit assessment and evaluation of the project surroundings and contexts
- No preventive action
- Helping to shape negotiation strategies

In summary, these project managers:

Relied on contingencies built into the schedule (by pre-sales)
Applied broad project management strategies, regardless of specific risks identified

There is little evidence that they:

Revisited pre-sales risk checklist
Made own independent risk assessment

This is in complete contrast to formal Risk Management methodologies that emphasize on risk-by-risk analysis and response. Neither do the findings match recommended practices of proactive planning – Negotiation strategies, based on good relationship, were usually adopted in a reactive manner. Some practices such as Overtime (OT) are not completely in line with best practices.

There is NO risk quantification at all, as recommended by formal methods.

In the beginning of the research, it’s already established that this group of project managers were competent and knowledgeable in formal PM methodologies. So why were they not using formal risk methods? Is using broad risk strategies more effective than risk-by-risk approach for small/medium size projects?

To be continued…

A Risk Management Research Report in Hong Kong

2008-07-15T08:50:00.000-07:00

In our previous articles, we’ve discussed the importance of risk management in daily life. For corporate projects, risk management is a discipline that draws a lot of attention and executive effort. Formal methods for project risk management have been well established by organizations like PMI. However we’ve pointed out some of their limitations in applying to projects. So are there any research reports that tell us the current state of risk management in projects?

“Risk Management and Problem Resolution Strategies for IT Projects: Prescription and Practice” by Hazel Taylor of University of Washington was published in Project Management Journal, Volume 37, Number 7 in Dec 2006. The paper is based on research done in Hong Kong in the IT sector for large-scale IT projects. Twenty-five project managers were selected from twelve companies for interview. A total of 60 implementation projects involving extensive customization, development, and consulting work were discussed.

It’s essential to look at the profiles of interviewees in the research. Information collected from this group of project managers has to be representative and their competence and experience directly affects the credibility of the research results. Below is some background information of the interviewees:

Recognized by their respective organizations and peers as proficient and experienced in PM
Demographic information: 18 Chinese, 7 foreign
All well-versed in typical project management methodologies such as PMBOK
All had trained or worked abroad, and all had experience working with people from other cultures

So they were not rookie project managers. Instead they were all well-established professional managers within their own organizations, and knowledgeable about PM methodologies.

The paper tries to identify risk sources in typical IT projects. The response strategies and counter measures this group of project managers adopted are further investigated. The goal is to understand what risk management practice is used in real life situations.

Risk Factors Identified

There risk factors identified are classified into four main themes – Project Management, Relationships, Solutions ambiguity and Environment. Below are sample risk sources associated with each theme. For a full list, please refer to the original paper.

Project Management – Staffing resources, change management, schedule and budget, sign-off control
Relationships – Team morale, expectation management, management support
Solutions Ambiguity – Newness and complexity, technical environment, functionality
Environment – Reputation, legal and credit risk, contract terms and conditions

To be continued…

Formal Risk Management Methods (2)

2008-06-25T15:17:00.000-07:00

In our last article, we've discussed a basic framework of all formal project risk management methodologies. They basically follow a life cycle of Identification -> Analysis -> Response Planning -> Monitoring and Controlling. Below we discuss some common techniques throughout this cycle.

Risk Identification

Document review is a common technique for identifying risks at the early stage of a project. Review of project plan, schedule, WBS, resource plan, cost budget, quality plan and so on can generate useful ideas about where the risks lie.

Other meeting-based risk identification tools include interviews, brainstorming, and Delphi technique. Interviewing is very common in real life. A project manager would try to gather as much information about the project through talking to other project managers, the customer, other team members, internal units, vendors or anyone who would be involved in the project. Risks would be identified along the way.
Risk Analysis

There are basically three elements of risks - Event, Probability, and Impact.

The above framework is very popular in analyzing risks and their associated priority. There are many variations depending on the level of granularity required. In my opinion, however, a 3x3 table is sufficient for most purposes. I've seen company using a 7x5 or 7x7 scale. There is a false sense of accuracy when people are using a more granular scale. However, bear in mind that any estimate of the probability and impact of a risk, especially probability, is only an 'educated guess', and may deviate from the true picture by a wide margin. So what is the point of using a seemingly fine and accurate scale? Garbage in, garbage out, right?

Risk Response

The risk response strategies of different formal methods are surprisingly, or shall we say unsurprising, similar. For example, PMBOK published by PMI enlists four strategies for negative risks or threats: Avoid, Transfer, Mitigate, Accept. In the NIST 800-30, they are Assumption (a form of Acceptance), Avoidance, Limitation (similar to Mitigation), Planning, Research & Acknowledgement, and Transference. For the Risk Management Standard published by IRM, AIRMIC and ALARM in the UK, the risk treatment approaches are Control, Mitigation, Avoidance, Transfer and Financing. You can see they refer more or less to the same set of strategies, and stay at a high level without going into details how you can apply them in real life.

Risk Monitoring

Again the formal methods lack in-depth guidance here. Most of them ask you to keep monitoring status of existing identified risks, and take heed of any possible new risks. Should any risks materialize even after mitigation or limitation measures have been applied, the pre-meditated contingency plan should be carried out.

One tool that is useful for keeping track of risks, as well as for communication with stakeholders, is Risk Register. It's basically a list of identified risks with correponding attributes such as Category, Probability, Impact Level, Impacts (qualitative analysis such as scenario, or quantified measures such as financial loss), Proposed Action, Owner, and so on.

A Critique of Formal Methods

Formal methods share the following characteristics:

Risk-by-risk approach
Emphasis on proactive and preventive planning
Regular formal meetings for monitoring and review, likely at different levels
Formal documentation and reporting (risk register/ risk log, risk report)

There are a few observations about the limitation of formal Risk Management methods:

Definition of Risk too narrow - All focus on the success of the project, instead of expanding the definition to include impacts on the organization and stakeholders involved.
Highly dependent on organization culture, formal structures and processes - If the organization or client do not support these methods, there is no way a project manager can apply them.
Heavy on planning, light on follow-up action - Just like any existing methodologies, the processes and tools & techniques included for Risk Planning are the best written and provide the most insights. Comparatively, the Control & Monitoring section is rather weak and lacking details.
Difficult to quantify probability and impact, hence risk level is only an educated guess.
Show me the money! Is it more expensive to apply formal risk methods, in particular for small or medium projects, than simply take a reactive approach?

Next, we'll share with you insights provided by a research paper in Project Risk Management done in Hong Kong.

To be continued...

Copyright 2008 Knowledge Century Limited.

Formal Risk Management Methods (1)

2008-06-23T16:20:00.000-07:00

What are the popular formal Risk Management standards nowadays?

There are different standards for different industries and functional areas. Since our theme is about project management in the business and technology sectors, we just list several standards that are well accepted in these sectors and relevant to our discussion. These include PMBOK 2004, AS/NZS4360:2004-Risk Management, UK Risk Management Standard by IRM/AIRMIC/ALARM, and NIST 800-30 Risk Management Guide for Information Technology Systems.

We do not intend to go through them one by one. Instead we want to highlight some commonalities among them.

Definition of Risk

PMBOK: An uncertain event or condition that, if it occurs, has a positive or negative effect on a project’s objectives.

Risk Management Handbook by Max Wideman: The cumulative effect of the chances of uncertain occurrences which will adversely affect project objectives.

APM / BS: Combination of the probability or frequency of occurrence of a defined threat or opportunity and the magnitude of the consequences of the occurrence.

RUP: An ongoing or upcoming concern that has a significant probability of adversely affecting the success of major milestones.

Notice that all definitions focus on impacts on the successful delivery of a project. This definition may not be entirely relevant to the business world. For a real-life project, anything that can jeopardize the organization, stakeholders, or even the project manager herself, should be considered risks. The project itself is just a means to an end - the ultimate business objectives of the project, which is usually some tangible/intangible benefits to the organization or a group of stakeholders. If something bad may happen to them as a direct or indirect results of the project, they are to be considered risks and be probably managed.

Common Logic of Formal Risk Methods

All formal methods follow more or less the same logic.

Step 1: Identify risks
Step 2: Analyze risks (can be both qualitative and quantitative)
Step 3: Plan risk responses
Step 4: Monitor and control risks

In the next article, we will continue to explore formal methods for handling project risks. Some of their drawbacks and practicalities in the real world will also be discussed.

To be continued...

Copyright 2008 Knowledge Century Limited.

Risk Management in Daily Life (2)

2008-06-16T15:30:00.000-07:00

In our last article, we discussed two daily life scenario where you can apply some techniques in risk management. This time we continue with two more life situations.

Scenario 3: Finding a new job

You have worked in your company for 5 years. You are an above average performer and the average rate of salary increase over the past 3 years is 10%. Last year’s salary increase is only 8%.

A company has just offered you a new job and a salary increase of 30%.

Would you take the job offer? Analyze the risks and impacts and justify your decision.

It's tempting to take the new job. After all there would be nothing to lose with a 30% salary increase, right? Wrong. A more proper analysis is to perform a decision tree analysis using EMV, and extend the time horizon to at least three years.

On one side of the tree you should consider the total salary income for the next three years if you stay in your current company. Your past performance and credential should be taken into consideration.

On the other side, the total salary income for the new job over the next three years should be calculated. Remember to consider the scenario, no matter how unlikely it looks, when you would be let go in 6 to 12 months (risk of new job or sudden economic downturn). Note also that there may not be significant salary increase in the next one or two years due to the fact that you are new to the company, and you have not built up too much credentials yet.

Try to compare the total earnings and career prospect in the next three years.

In my opinion the fastest move in one's career is usually within the same company. If you consider yourself a top performer in a company, it's exactly the place where you want to be to propel up the career ladder. That is if your company is in good shape and growing.

Scenario 4: Buying a new apartment

Your family (you, your spouse, and two kids) is now living in a rented apartment. The rental amounts to 20% of your total monthly family income.

You are considering buying a new apartment of similar size in a nearby building. You figure that you have to use all your savings as down payment, and 30% of your total monthly family income will go to mortgage payment assuming a 20-year mortgage is secured.

Would you buy or not buy the new apartment? Justify your decision by analyzing the risks and impacts.

There are several things to consider:

Rental may go up. This should be compared with the probability of interest rate going up. Both affect your future monthly payment depending on whether you rent or buy.

Housing market may go up, remain steady, or go down. This affects your ability to get out in case you need to sell. If price goes up or remains steady, the sum amount received is higher than the remaining mortgage, and you have no trouble. In late 90's and early 2000's, many people in Hong Kong were trapped in 'negative equity' as price had dropped significantly. When they sold their apartment they need to pay the difference between the outstanding mortgage and selling price.

What is your family's future income stream going to be like? What if one of the bread winners lose job? Or any accident that impairs your earning power? Can you still afford the mortgage payment? Do you have sufficient cash for sustaining your current level of living standard for at least 6 months should anyone in your family lose job?

Our conclusion is there is risk in everything. If there are risks in everyday life events there are definitely risks in a corporate environment where projects are performed. As the famous Charles Tremper once said: "The first step in the risk management process is to acknowledge the reality of risk."

Next we will examine risk management in a corporate environment.

To be continued...

Risk Management in Daily Life (1)

2008-06-05T21:18:00.000-07:00

Before I venture into the use of risk management practice in a corporate environment, let's first look at how people manage risk in their daily life.

Scenario 1: Crossing a Road with No Traffic Light

Where would you cross the road? A? B? or C?

You typically make a decision based on weighing its benefits and risks.

Let's consider A. The obvious benefit is you gain at least 15 seconds compared to other options. Unfortunately the risk of being knocked over by the intimidating fire truck cannot be under-estimated, particularly the driver is sitting above ground level and concentrating on cars coming from the right. Given that the impact is quite severe as well, you must be a real risk taker if you choose A. Some people will label you as 'reckless' too.

What about C? It seems to be the safest option. The driver is at ground level. It has stopped for the traffic. On the negative side, you lose some time (perhaps less than 30 seconds). Since the traffic is moving, by the time you reach C, the car may have moved forward too, hence you may even lose more time.

A more reasonable option is B. You have a good chance of reaching point B before the road condition changes. Even if it has changed you'd still be able to cross the road since it'll take some time for a fire truck to start moving. You'd save some time too by crossing the road at B instead of C. However I think both B and C are reasonable option, depending on your appetite for risk.

A final option is to stand still and wait for the traffic to subside. You may be surprised but this could be the most time saving and life saving option, balacing all the benefits, costs, and risks.

Scneario 2: Investing in Stock Market

You have saved $50,000 and want to invest in the stock market.

The benchmark index has dropped 20% from its historical peak. 70% of the stock analysts predict it would rebound by 10% in the next 3 months.

However the remaining 30% of stock analysts forecast that the benchmark index would further fall by as much as 30% in the next 6 months.

Will you buy stocks now?

There are two things you have to consider:

(1) In risk management there is an Expected Monetary Value (EMV) concept. EMV is calculated by multiplying the probability of a risk and its impact, typically quantified in $ value or %.
Let's apply the calculation to the above scenario.
Upside EMV = 0.7x0.1 = 7%
Downside EMV = 0.3x0.3 = 9%

If we use EMV alone to make a decision, it'll be a not-invest.

(2) The second concept in risk management is even more important. What if the market suddenly fall for 30%, 40%, 50% or more? Do you have holding power? Many people lose their shirts because they need the money one month or two months later, and they have to sell at a deep loss. The same concept applies to decision that could have a severe negative consequence, no matter how unlikely it first seems. For example, if you are going to launch an initiative for your company that if it turns sour, could lead to really poor publicity, our advice is think twice. Many executives lost their jobs in the past because of exactly such actions which were deemed as 'low risk' in the first place.

Going back to our stock market decision, the more reasonable option is not to invest.

To be continued...

The Mystery of Project Risks

2008-04-28T15:42:00.000-07:00

Managing risks is always a tricky job for project managers. While experts and consultants advise you to follow formal methodology like the well established body of knowledge in PMBOK 2004 by Project Management Institute, many managers choose to apply their own common sense and intuitive approach. A researcher at HKUST interviewed 25 experienced project managers in Hong Kong working on local and multinational IT projects. None of them use formal risk management method in their projects. Instead they use their own pragmatic model.

Before you argue that this may be the exact reason why many business or IT projects in Hong Kong have problems, let’s not forget that these 25 managers were all well versed in PMBOK, recognized by their peers, and had trained or worked abroad with wide cultural exposure. Is there a gap between theoretical framework and situations faced by project managers in real life? Is the cost of applying formal risk management methodologies too high that overall benefits gained do not justify their use? Or are some techniques of risk management such as quantification of probability of risk events not practical in the real world?

Such is the mystery of project risks, or more accurately, project risk management. The million-dollar question is what model would be most cost-effective for business and IT projects in Hong Kong, which are well known for their rigid deadlines and limited resources.

I'll continue to explore this topics in this blog. Stay tuned!

Copyright 2008 Knowledge Century Limited.