They need to continually maximize the value of the business while minimizing the risk. Where many companies go wrong, however, is in over-emphasizing the value creation and underestimating the critical nature of managing risk. However, many risks can be foreseen. This short white paper cannot address all the categories of business risk nor all the methods through which risk can be mitigated. It will focus on five common risks that plague mid-market companies.
Risk Happens – Managing Risk & Avoiding Failure in Business Projects
Risk avoidance is not the goal of business leadership, rather a skillful balancing of risk and reward is required. This failure often derives from issues that the company lacks the experienced talent to recognize early enough to ward off. Hiring risks are among the most expensive risks companies make, especially at the executive level. The wrong person in the job can lead to costly and sometimes fatal results for an SMB company.
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The risks are several:. A company hires an individual who, while possibly having great credentials in a related area, does not fit with the job at hand. For example, perhaps a company really needs a super sales person, and instead hires an expensive sales operations individual. The definition of the objective and expected results of the job at hand are at odds. Inexperience is a key cause of project failure, especially in a small to mid-sized business SMB.
Jim Johnson, founder and chairman of the Standish Group cited project manager expertise as one of the top ten criteria in ensuring project success. Kirit Patel, regional managing director Europe at EOH International, a global consulting company that specializes in IT implementation, said that in his experience, project success—or failure—is often impacted by the level of executive sponsorship and that IT project failure is rarely caused by technology. Appointing the right people to implement the plan is not as easy as it sounds, however, and can be another source of potential failure.
It is a common mistake to nominate people internally to lead the project in addition to letting them continue with their day job. Instead, organizations need to set up a dedicated full-time project management team that reports directly to the executive. Bringing in other people from within the business to help manage the project or contracting parts of the project out to different suppliers on short-term contracts can also lead to disaster.
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Even engaging a lead partner to take control can have its downside, especially if key project managers are rotated on and off the implementation. Among a number of problems, the study cited high workforce turnover as a key factor in efficient project planning and execution. The relationship between technology contractors and the client can also be a source of tension and failure. Project planning and establishing expectations up front are also important.
Why Risk Is Hard to Talk About
Organizations should set meaningful milestones to ensure that the project is properly scoped out and that those in charge of managing and implementing it properly know their roles and responsibilities. The plan should also be flexible enough to allow for changes to priorities if necessary without having to restart the process. To iron out any initial kinks, organizations should run a pilot program as early as possible.
Lukasz Lacniak, business solutions architect at IT integration specialist Comarch, advises organizations to plan for a degree of flexibility, whether in time, budget or scope. They should also revisit plans frequently to make sure they are still on track and that they can make adjustments as necessary before it is too late. He added that it is important to make someone accountable for monitoring the plan in order to identify risks sooner so that there is a better chance of mitigating them before they spiral out of control.
Risk managers should expect the unexpected, and mitigate the risk of delays by involving all relevant teams in this process. He said that if a company is planning to migrate multiple sites, it should plan to focus on one large site a week, with small ones around it, and avoid major migrations on Fridays when—if problems do occur—it will be more difficult to pull the necessary people in to fix them see sidebar.
Lisa Heneghan, global head of technology, management consulting at professional services firm KPMG, said that a key factor to identifying problems early is ensuring at the outset that there is an effective governance mechanism in place.
Spotting the early signs that things are not working is therefore critical so that interventions and improvements can be made. Choosing the right product is often a bone of contention as well.
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This causes two key problems, Patel said. First, if the project scope or delivery expectations are lost in translation between the implementation team and the business, the risk of failure will likely increase. Second, experience shows that bespoke solutions are often more suited to meeting the needs of the business rather than off-the-shelf solutions, which means that companies risk making a huge investment in a product that will not deliver the expected benefits.
For example, we sometimes see businesses being advised against cloud solutions as those advising them are unfamiliar with this option. Organizations should design the solution around how people actually work to get the most out of the investment.