Risk Helps Set Realistic Project Sponsor Expectations
Sponsors
Project Sponsors are the senior managers or executives in an organization responsible for getting projects done. They represent the interests of the organization doing the project, trying to manage project investments to balance risk and reward. Project sponsors have a challenging job that is hard to do well. They rely on information provided by the project manager to support their decision making. This gets to the heart of why project managers must establish a good working relationship with their sponsors that includes setting realistic expectations and providing unvarnished truth as the project progresses. Yet the dynamic between sponsors and project managers can make setting expectations fraught.
Wagers
All projects are wagers. An organization bets that with the investment of X resources over Y period of time, outcome Z can be accomplished, and that the outcome is worth the investment and the risk. Discussion of risk is key, because all wagers have a possibility of loss that must be considered. This makes project inception/initiation difficult because humans (and their organizations) tend to be loss averse.
Value
We begin the project journey with assumptions about project value. Someone proposes a project they believe is valuable based on assumptions they are making about the project and about the future. The value derived from a project can take many forms, improve market share, increase revenue, decrease costs, expand capacity, improve morale, decrease operational friction, improve efficiency, improve safety, strengthen customer or partner relationships, develop a new product, provide a new service, or comply with regulations.
Estimated Time & Resources
Once we have a prediction about value, the organization must make crude predictions about the resources and time required to execute the project, based on more assumptions.
ROI (is Value > [Time & Resources]?)
The first crude project Go/NoGo decision relates to the potential return on the project investment: when we compare the assumed value of the project with the preliminary estimates of resource and schedule required and consider the risks we are aware of, does it make sense to pursue the project? Put another way, “With what we know now, should we continue?”
Throughout definition and planning, effective project managers have a delicate balance to maintain. On one hand, they want to assure that sponsor decisions to support and continue the project are informed by the best data available, on the other, they want to maintain a positive attitude and encourage the team to find ways to overcome obstacles.
There is an important distinction between a project manager who tells their sponsor,
“We can do this!”
and one who says,
“With what we know now, here is our current prediction about what this will cost, when it will be done, and the risks we are facing – if this is acceptable to you, I will supervise and monitor project execution and keep you informed as we get more information.”
To some, the first project manager is a bold and decisive leader who is taking command of the situation, while the second seems less assured. I’m sure the captain of the Titanic was a bold and self-confident leader.
Project managers cannot predict the future any better than the rest of us. To imply they can, may lull a sponsor into thinking that this project, unlike all others, is immune to failure. The truth is: any project can fail. Our predictions about a project’s future are no better than our understanding of the problem and our assumptions about what the future will be like.
This is where risk enters a healthy conversation. My favorite definition of risk is, “uncertainty that matters to the project”. There is lots of uncertainty in the future. There are things we can expect, a building project in Seattle can expect some weather delays. History might give us an idea of the average number of workdays lost due to inclement weather, but that doesn’t necessarily predict the number of days we will lose this year.
Identifying and communicating these points of uncertainty and opportunities for error to sponsors helps them better manage their investments—that is the primary goal of the project manager.
