I have heard it said on many occasions, “But we don’t do any projects!” Of course, the company executive who has said this really means it. And, in a certain sense, he is correct. His company more than likely does no client projects. The reality is that if the company has a strategy, and renews that strategy periodically, then the company has projects. The fundamentally projects are about change, any change. And the reality is that without proper project management that links together strategy and finance, many attempts at renewing strategy are futile.
Proper project initiation and planning asks a series of fundamental questions that set a performance baseline that can be integrated into pro forma financial statements. Once integrated, the pro forma statements enable a company to review a range of possible financial outcomes in order to decide whether or not the project meets the company’s criteria for being undertaken. The baseline also permits the company to make intelligent decisions at markers along the way, called Phase Gates, as to whether or not the project should continue.
Here are questions that will help a company get the project right the first time around:
What is the project; what will it deliver? Fundamental question – often ignored. This is like taking off on a trip without ever determining where you are going. Now, the answer to the question may not be readily apparent when it is first asked. The company may have an idea of the business objective that they want delivered by the project, without understanding exactly how it will be accomplished. A crucial part of planning is determining, in more detail, what the end objective will be?
Who are the stakeholders? As with the first question, this one is frequently unanswered, in particular with strategic projects. As I mentioned in a previous blog posting, A Simple Strategy, identifying each of strategic stakeholder and what their stake is can be the difference between success and failure. Stakeholders can be both internal and external to the company, but most often it is employee stakeholders that are missed.
What is success and how is it defined? You would think that this is a question that would never be missed. Not so! When defining success for a strategy project, each area of the company needs to have their particular element define, and how that element is linked to success measures. The link needs to be concrete and measurable.
What is the work, who will do it and how much is there to do? Defining the actual work to be done to a level of detail that guides competent team members is foundational. This work will lead to the creation of a project schedule, cash flow statement and budget. Of course, the previous questions set the stage for these last three, whose answers become the baseline mentioned above.
Once all of the information about schedule, budget and cash flow are integrated into forward looking pro forma financial statements, the company has information for good decision making.