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Risk exists in all things. It is how we manage that risk that decides if we succeed or not. Just because we can, does not mean we should. We can drive down the freeway at 100 mph without a seat belt - but I think we agree it would be risky, and the outcome might well be disastrous.
RISK MANAGEMENT
Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities (Wikipedia).
How does risk management apply to services? Many do a 'pray and hope process' regarding possible risks. Some do a 'how did we do it last time' methodology. Some negotiate a fee and then work to fit the service within that fee. All of these options do little to mitigate risk. In fact, I believe they increase risk, by inducing a false sense of security or safety.
To mitigate risk, information/communication is the best approach. Both receiving and delivering information is critical. Two key parts (though not the complete answer) to risk mitigation are:
- Scoping
- Setting Expectations
SCOPING
This is an easy process to by-pass. We have already had discussions with the customer, we don't want to seem un-knowledgeable, etc. However, scoping is a very important part of risk mitigation and management.
Scoping, or project scope statement, is the process of defining the who, what, where, how of the project. In Project Management Professional (PMP) terms this process is the developing of a Baseline Scope.
Here are my best practices in developing Scope:
- Always complete the scope in a document that is reviewed by the client.
- For best results, have the scoping conversation directly with the customer (face to face is better than phone). Never do it via email. Have the discussion with the decision maker, if other people are in the meeting (stakeholders, team members, etc.) that is good too, but sometimes hard to achieve. Contract Manager, etc. are not good candidates - you need parties with domain expertise to provide input.
- Have an agenda - what items do you need to have input and confirmation upon. It is your meeting - own it.
- Items on the agenda will vary, but some main items might include:
- What definable outcomes will make the project a success?
- What items will not be covered in this process - what will be provided by others.
- What are time, people, material constraints that are known?
- Ask precise, information gathering questions - reconfirm all you knew and now know.
- Get the draft document reviewed and approved by all prior to proceeding.
- This should all be done PRIOR to establishing the fee or budget.
SETTING EXPECTATIONS
This part of the process is rarely done enough. Why bother to set expectations? Won't the customer get upset if we set an expectation? Risk mitigation is all about reducing risk, therefore, isn't there a reasonable risk the customer is expecting something different than you are proposing.
What is included in 'setting expectations'? It is a discussion that outlines what makes a successful project for the customer.
- What do they want to understand better
- What process will need to be implemented
- What workflow needs to be improved
- What are the possible blockages to success (corporate culture, etc.)
By discussing, and documenting, and getting agreement on what the customer expects in a definable way, many headaches that occur at the end of the service delivery are avoided.
There are many aspects to Risk Mitigation, however, Scoping and Setting Expectations is a good starting point, and where many service providers stumble.
David Haynes, NCARB, PMP, LEED AP
Ideate Director of Consulting
David is a Registered Architect, Project Management Certified Professional, who previously had his own architectural practice and was President of a commercial design-build construction company for 15 years. A graduate of University of Arizona, he has worked as an Architect, contractor, developer and as a national construction manager for a national retailer. David currently provides business process analysis, virtualization and change management solutions for AEC clients across the United States involved in the design and building industry. Follow David on Twitter: @dhaynestech
Get it. Know it. Use it.
Has your company ever done a proactive, unbiased review of where you stand in comparison to your competition? Not the usual "we are better because of our people" review, but a more analytical, comparative review.
Why, might you ask? In order to know where a company wants to go in the future we need to understand where we are right now. Usually, companies focus on what they want to do, not what they may be best at, or what others are better at.
An effective tool for understanding where the company stands, and where it might want to go, is a SWOT analysis:
SWOT Analysis is a structured planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. A SWOT analysis can be carried out for a product, place, industry or person. (Wikipedia).
When I was first introduced to SWOT, I asked myself "What benefit could my company receive - this is silly." Over time and with a little practice, valuable information can be gained. Some feel SWOT is business school 101 stuff, but if thoughtfully done, SWOT brings insightful analysis.
The strongest benefit is that, done correctly, good business decisions (both strategic and tactical) can be achieved. These decisions and directions will be derived from a realistic view of your company's position in the marketplace.
First, the process:
- Sit with a group of people, this can include customers, it is important to include many internal stakeholders (not just management people). Bring unbiased people to this discussion - you need a hard analytical look, not Pollyanna types.
- Decide on SWOT topic (ex: your company, your competition, the key objective).
- We use a white board divided into four quadrants.
- Note the top half is about internal issues (strengths and weaknesses) and the bottom half is about external issues (opportunity and threats).
- Be free form about putting things in each quadrant, just make sure the statement is really a strength, weakness, opportunity, or threat. Specific is better than general. Question if the statement is real, or what we wish it to be.
Examples:
- Strength - great people (way too general).
- Weakness - not enough projects (that is more of a threat than a weakness).
- Opportunity - there is a bond issue to create new infrastructure (great example)
- Threat - competition (this can be a threat, it can also be an opportunity) - see below.
So here is an interesting thing you will find: There is a relationship, or correlation between the different quadrants.
Strengths can lead to opportunities, while weaknesses create threats (orange arrows).
Strengths reduce threats, while weaknesses, when corrected, can create new opportunities (yellow arrows).
Looking at the problem in a new way, brings new connections, new data to review, and maybe a new look at a familiar set of issues.
I have done SWOT analysis numerous times, and have found that it has been a valuable exercise, with new insights, new connections, and also the stakeholders are both engaged and educated.
David Haynes, NCARB, PMP, LEED AP
Ideate Director of Consulting
David is a Registered Architect, Project Management Certified Professional, who previously had his own architectural practice and was President of a commercial design-build construction company for 15 years. A graduate of University of Arizona, he has worked as an Architect, contractor, developer and as a national construction manager for a national retailer. David currently provides business process analysis, virtualization and change management solutions for AEC clients across the United States involved in the design and building industry. Follow David on Twitter: @dhaynestech
Get it. Know it. Use it.
