Adaptive Project Management: Early problem detection to mitigate mega project risk

By Hendrik Lourens & Gary Wong

Stratflow

We recently (March 2021) delivered a webinar on Adaptive Project Management to the Australian Institute of Project Management (AIPM). The technique uses the principles of complexity science and specifically distributed ethnography to deal with the notoriously poor performance experienced in mega projects. Below is an article summarising the accompanying videos (scroll down to end).

Introduction

In major construction and capital-intensive projects most of the work is done by third parties under commercial contract agreements. According to a McKinsey report, more than 90% of megaprojects face cost overruns and delays. To turnaround the poor track record, construction executives are under tremendous pressure to keep the promises made to project owners and investors. This means catching PM problems early and taking correction action before it’s too late.

Source:?Companies’ public reports, IHS Herold Global Projects Database, November 19, 2013 Press Release

The picture would be brighter if productivity was increasing, but according to the Project Production Institute, the construction industry has increased productivity by less than 1% per year over the last 20 years worldwide.

There should be no surprise that project leaders and managers feel overburdened and have sleepless nights worrying about problems:

“I have no idea whether we’re in trouble or not.”

“All seem to be on track until the end of the project, and then it is clear it is not.”

“As we near the end of the project, our contractors are having to choose between financial survival (completing on time) and safety; it is clear that they are choosing the former.”

“The meetings we have are not productive; by the time we figure out what has been done, we have no time to figure out what needs to be done.”

“Why do we spend so much time doing status reports?”

“Will I have the necessary resources (specifications, material, resources, information, designs, authorisations) available on time?”

In the authors’ experience construction projects in Australia often start with incomplete engineering plans, designs outsourced, and labour contracts late. Adversarial relationships with contractors make win-win execution even harder. Each side is driven by their own competing profit-generating practices and safety motives. Under these conditions finishing a project within budget, on time, at a prescribed quality level, and with stakeholder satisfaction can be a promise not kept.

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Constraints - the fundamental limitation to maintaining control of projects

How problems typically arise during the construction project lifecycle:

Major projects are planned, scheduled, and costed assuming reasonably stable, predictable conditions. Mitigation plans can be drawn up to deal with impacts of known constraints. However, little preparation can be done about unforeseen and unexpected problems due to uncertainty and complexity. Approvals don't happen on time, task sequence needs to change, suppliers are late, scope and specs change, cost reduction becomes imperative, decisions are made on erroneous information.

Identifying the constraints causing these problems can be difficult. A constraint can be associated with policy, resources, collaboration, clarity, or adaptability. On some projects it could be a misuse, underutilization, or in the worst case, totally missing. Constraints are dynamic and can shift during the life of the project.

Consider labour resource constraints. Construction companies familiar in open environments (roads, bridges etc.) may encounter labour skill and experience problems in spatially constrained sites such as light rail, complex towers, hospitals, urban streets and tunnels. Time and money may be required for necessary skills and safety training.

In confined workspaces unanticipated collaboration problems can surface. Tradespeople can easily get in each other's way throwing the optimal task sequence out of whack. Beside creating a PM scheduling headache, contractors are adamant they are paid for work “completed” plus any associated rework. Costs will rise with the “cost plus extra” charge. Of a bigger concern is that progress payments as scheduled in the contract terms & conditions are paid even if the actual work has not been finished. Consequently, project managers reporting Earned Value Management (EVM) as a progress measure are led astray.

If Bill of Material specifications are late, insufficient or incorrect, clarity becomes a constraint. Wrong shipments and back orders can negatively affect labour resource constraints. Efforts to seek alternate suppliers means adding more interfaces to manage and increasing complexity. When a project reaches the halfway mark, anxiety levels naturally increase. So more questions seeking clarity and assurance create more work for the PM manager and staff and constrains their available time.

Project managers who rigidly “stick to the original plan” are self-constrained. They lack the flexibility to adapt to the current situation. Not helping is the reports they receive from contractors do not contain information on interdependency and variation (peak demand constraints).?What they are able to deal with and what they receive is often weeks later than what they require.

Information tends not to flow horizontally across project streams and is not readily available in a format project leaders can use to make critical decisions. Evidence includes “back pocket” spreadsheets, late PM reporting, email churning, and salient questions asked but left unanswered.

Different views of work adds to the information quagmire. Top Management approves “work-as-imagined” in the original project plan. The PM office adapting to complexity issues give “work-as-prescribed” to contractors who complete as “work-as-done.” Project managers report “work-as-disclosed” to Top Management. When “work-as-imagined” matches “work-as-disclosed”, all seems fine but then again, it could be an illusion. Why does bad news not flow upward?

Firstly, no one likes to be the bearer of bad news and face a possible reprimand. Secondly, a project manager will choose to remain silent on the hope problems will be resolved or eventually disappear. These coping behaviours are reinforced in companies where managers are rewarded or promoted if they can demonstrate the ability to deliver with the resources as estimated at project inception.

The reluctance of Top Management to act quickly can be a constraint. Instead of a “just do it” attitude, being risk adverse and demanding a “business case” to justify a significant PM change, can introduce costly delays.

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Identifying and Managing Constraints

Humans have a limited span of attention. A constraint that is left unattended slows down the rate of project completion and can cause many negative second order effects.

The solution is a focussing mechanism to ensure that constraints in the project are identified and hidden capacity is liberated. Three approaches will be described.

Approach 1

?- Critical Chain Project Management analysis

Dr Eli Goldratt made a number of valuable contributions to management Science through developing the Theory of Constraints (TOC). He claimed that TOC can be summarized in one word “focus”. In The Theory of Constraints handbook he summarises his philosophy:

“In organizations, there are numerous interdependencies and relatively high variability; therefore, the number of elements that dictate the performance of the system — the number of constraints — is extremely small….one might say that in organizations 0.1 percent of the elements…dictate 99.9 percent of the result. This realization gives new meaning to the word focus.”

?Dr Goldratt developed Critical Chain Project Management (CCPM) in the late 1980’s to identify and deal with the constraints that negatively impact projects. Published results show exceptional performance as demonstrated in the table below.

Public information from 60 organisations that applied CCPM

Every project has only a few constraints that limits the speed and ease with which work can be done. The key is focussing on the right constraint and giving priority to fixing the bottleneck.

While CCPM is very effective , circumstances are not always favourable towards its implementation. A CCPM engagement requires an experienced consultant with intensive TOC knowledge and TOC tools know-how. The process involves several facilitated workshops and can be time consuming.

To attain the extraordinary results, a significant level of change is compulsory. This approach begins with buy-in from all parts of the organisation and a willingness to think and work differently. Management needs to free up time and attention before the process will kick in to make more time available.

Therefore, from the project managers point of view it is often not practical to launch Critical Chain Project Management, especially if the project is already underway. A faster intervention with fewer up-front complications would be beneficial. (There have been exciting developments in simplifying and improving the ease of implementing CCPM in the last few years, but we will not go into this here.)

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Approach 2

- Current Reality Tree diagnosis

This approach involves a consultant conducting several facilitated discussions with different groups seeking answers related to what is going well and what is not. The group performs limited diagnosis on the opinions and comments shared. Data can also be collected via recorded interviews with selected people.

The consultant is then tasked to interpret the data and prepare a Current Reality Tree (TOC term) to show cause and effect relationships and to identify the constraints blocking the fast flow of work.

In contrast to CCPM, a Current Reality Tree diagnosis is easy to introduce in Construction. In the example shown with feedback loops, the coloured blocks are bottleneck areas where a small amount of effort or expense will have a dramatic effect on the overall project. It is an extremely useful tool to help senior managers visualise what otherwise seems to be many random cause and effect outcomes that all have to be managed to regain control of the project. It provides a focus for Management that is often missing.

A generic Current Reality Tree for construction

The author has achieved great success quickly in light rail, and metro road construction by applying TOC principles to develop a Current Reality Tree.

While this method is much lighter on management time and attention than CCPM, it has its drawbacks. It requires a consultant fluent in TOC/systems thinking and can be overly prescriptive in its implementation. Danger can unknowingly emerge if project leaders are too trusting and depend on the consultant’s honest but misinterpreted recommendations. Consultants are human and thus fallible. They carry cognitive biases and are challenged to separate out what’s really happening on a particular project from a set of beliefs amassed from past engagements.

Facilitating discussions and interviewing is resource intensive. To manage time and costs, the number conducted is limited to a selected few; there is always doubt if the right people were assembled. Opinions expressing frustration can be emotionally charged and turn meetings into damaging blame sessions.

Drawing the Current Reality Tree flowchart is a judgmental task placing filtered data into categorical boxes. A valid question to ponder is: Does the consultant’s tree truly reflect what was said or is it an exercise to confirm pre-determined conclusions seen on other client engagements?

The approach captures what is happening at a specific juncture. If a month or two have passed, does the information hold true? As previously noted, constraints may shift along the project lifecycle.

The author has experienced projects where the constraint declared to be the bottleneck was the wrong focus. It can be a trial & error process. If an intervention to fix a perceived bottleneck is launched, how will the project manager quickly and easily monitor the positive or negative impacts for validation?

The Current Reality Tree approach is a prescriptive TOC diagnostic solution that can tackle current PM deficiencies. But it is a reactive snapshot-in-time. For the expense incurred, it doesn’t include the proactive capability to early detect emergent problems.

Approach 3 - Adaptive Project Management dialogue

The Adaptive Project Management methodology & tools was developed by Stratflow to overcome the weaknesses of the previous two approaches and the shortcomings of traditional project management practices. It also leverages two 21st century proven techniques: distributed ethnography and data visualization. It is science-based and is underscored by the principles of natural science, cognitive science, and complexity science.

Dealing with Complexity

In the Construction world of owner, consultant, contractor and subcontractor, the level of complexity is incredibly high. And complexity increases with every new relationship and interaction between the multitude of project players. Complexity cannot be managed, reduced, nor simplified. The best one can do is make sense of complexity in order to act. And we act by adapting to the surprises and changing constraints to get back on track.

Distributed Ethnography

Distributed ethnography has been widely used globally by military, government, non-profits, private companies in all industries for the past decade.

Ethnography involves collecting observations of what people actually do. Humans are natural storytellers and stories are ideal for making sense of complexity because they include context. “Distributed” means stories are collected from anyone who is willing to share good and bad experiences about the project.

Stories can be gathered in facilitated sessions as well via the internet using SenseMaker?, a patented software tool developed by Cognitive Edge. Online stories can be submitted on a 24/7 basis. SenseMaker? has engaged people of all ages (children to seniors) to share their authentic experiences.

The problem of story misinterpretation by a consultant is avoided by allowing storytellers to signify their perceptions as part of the sharing. This is how valuable insights on past, present, and future PM issues are captured.

Data Visualization

Besides being a collector tool, SenseMaker? is designed to convert stories in quantitative data points. The 2D contour map below shows the monitoring of safety and productivity on a Dashboard. In this example, there are many events in the “X” area when workers had to bend the safety rules to get some work done. This might be the early detection of a pending failure and warrants immediate attention. By clicking on the dots, narratives can be read to pinpoint where this is happening.

Another benefit of a Dashboard map is prompting a desired direction. In this example, the green area is where quality work is getting done within the safety rules. The intervention question asked is: “What constraints might be adapted so that we get fewer stories here (red) and more stories there (green)?”

As new narratives are entered; map contour lines automatically change. This means intervention improvements can be observed in real time. Narratives maps are a welcomed addition to any project Dashboard to gauge progress. Since narratives describe what people do, essentially it is a dynamic representation of the project culture.

?To better understand the situation, clicking a dot opens the story for reading. This feature is called “disintermediation” and provides a direct line-of-sight connection between storytellers and decision-makers. Storytellers feel empowered knowing their messages are not being filtered nor suppressed by someone in the middle. The Adaptive Project Management approach gives equal voice to everyone without prejudice.

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Project Dashboard

This map is a welcomed addition to the project dashboard to gauge progress. Since stories describe what people do, essentially it is a dynamic representation of the project culture.

As new stories are added, the map contour lines automatically change. No waiting for a report to be prepared. This is dashboard monitoring in real-time compared to scorecard reporting using lag KPIs. To encourage constructive dialogue, the map is available to all project streams. Data can be filtered to explore different perspectives and explore why people behave the way they do.

The map acts as a visual guide to help project managers understand where PM changes are needed. The intervention question now becomes: What system constraint(s) might we change to get more stories like these and fewer like those?

The Adaptive Project Management is a faster, less disruptive, total workforce empowering approach that aims to deliver excellent results. The process to set up online story collection can be quickly accomplished. Consultant assistance is recommended to launch interventions and applying TOC techniques to focus on the constraint that is the bottleneck.

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Sustainable Project Management

We believe the long-term vision is developing an adaptive PM practice that is sustainable. In this vision, a significant percentage of employees and contractors are engaged in the continuous process of recording not only observations and experiences, but also the meaning and influences that such observations and experiences have on them. This is a human sensor network.?Stories generating the 2D contour map will primarily relate to project culture, safety, and risk mitigation but its value can go beyond.

The human sensor network can replace the traditional performance appraisal. Instead of going through a time-consuming annual 360o rating system, a manager receives 24/7/365 feedback from stories told about actions taken and behaviours observed. The main benefit is that a manager has the opportunity to personally respond to “more stories like this, fewer like that” and adapt immediately.

Sustainable PM is built on caring relationships. It extends to changing adversarial relationships with contractors and suppliers. A starting point is opening up a dialogue by gathering stories to make sense of the current situation and discovering win-win solutions.

Project managers running major capital projects which have political or controversial tones will likely face social license to operate issues. Citizen protests, blockades, and special interest group legal injunctions are fast becoming norms to stop workflow. The Adaptive PM approach provides the method and tools to dialogue with all stakeholders and tackle the constraints of a wicked problem.

Success Stories

Light Rail

During 2018 a large construction company battled with a light rail project that was running over time and budget. Senior executives were especially worried about rising level of near misses and safety risk. After a series of interviews with frontline, management, supervisors, engineering, contractors the author helped them to analyse the patterns involved and identifying the bottlenecks preventing the smooth flow of work. Within a few months this project returned to schedule, costs were in control again and safety improved dramatically.?

Authors

?About Hendrik Lourens

Hendrik Lourens is a Sydney based management consultant who has worked with Aurizon, Qantas, John Holland, CPB, Downer & Anglo American. He has qualifications in Physics, Polymer Science as well as an MBA. Hendrik has worked at Director level in manufacturing businesses and for a number of Tier 1 companies. On completing the "Managing the Theory of Constraints Way" in 2010 Hendrik became the first practitioner to pass all exams involved in the TOC Body of Knowledge within one year. His focus is on applying Complexity Science & Theory of Constraints to deliver breakthrough results. He has turned around manufacturers and improved the safety & productivity of mining and construction companies as well as published in various journals on efficiency and innovation.

W: www.stratflow.com

E: hendrik@stratflow.com.au

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About Gary Wong

Gary is a Canadian engineer residing in Vancouver Canada. He worked for Ernst & Young Consulting as a Senior Manager in Strategy & Transformation. Gary has operated on his own over the past decade focusing on complexity thinking and safety. He is a training associate with Cognitive-Edge Inc. and co-authors and delivers complexity courses and workshops. Gary is a regular contributor on the safetydifferently.com website and has been a Stratflow Associate since 2019.

W: gswong.com

E: GaryWong@gswong.com

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