On Wednesday, I told you all how wonderful risk is. Yesterday, I talked about the two different types of risk a project can face, and why a business should be happy to embrace one of them. But should project managers be happy about this type of risk?

Well… it depends. As I said yesterday, the competency type of risk, that involved with making sure you and others have done their job, should be ruthlessly fought. But the other type of risk, the business risk that any project will face, needs to be balanced against the possible rewards.

For a business, this is simple, even if it isn’t easy. You look at the likely rewards if the project is successful, the cost of doing the project, and the chance of the project being successful or, in other words, the riskiness of it. Then, you use a simple calculation to get the expected value – multiply the likely rewards by the probability of success, and if the answer is greater than the cost of the project, go out and do it!

That’s all well and good for the overall business, but what about you, one project manager inside it? This is where it becomes more complicated. And it becomes more complicated because people are much more complex than a business.

As a project manager, you are naturally going to want your project to be a success. But the reasons for wanting the project to be a success are a lot more complicated than the reason a business wants the project to be a success.

A business gets (usually) a clear and obvious financial reward from a successful project. A certain amount of money goes into running the project, and at the end of it, hopefully a larger amount of money comes out as a result. This is pretty much the only concern of the business.

For a project manager, though, it goes beyond that. Yes, you will want to deliver value, and profit, for the business. But you will have other reasons for wanting the project to be a success.

You will want the people on the project to do well in their careers, and a successful project helps that. You will want to do well in your own career! You will have an emotional attachment to the project. There are many reasons why you want the project to be a success.

But there is another side to a project manager’s connection to the project. Yes, we will want it to be a success. But we will also fear it being a failure. And fear of failure can be a very dangerous thing.

We fear having a failed project on our record. We fear a history of failure could hold us back in the future. We fear a loss of prestige. And, worst of all, we fear losing our jobs due to a project failure.

The problem is that we, as people, rather than project managers, have to deal with two risks. There are the project risks, and there are the personal risks. We know how to deal with the project risks, how to evaluate them, mitigate them, remove them, or accept them. But personal risks are a lot more complicated, a lot more difficult for us to deal with.

Let’s face it, no matter how confident we are, the personal costs of a failed project can seem huge. When we fear for our jobs or our future careers if a project fails, is it any wonder we shy away from risky projects? Even if we did the same evaluation as a business, the project manager personally seems to have so much to lose from a failure, and relatively little to gain from a success.

And that makes it rational for us to stay away from risky projects – even though they may be of great benefit to the business!

Now, this is a problem which has to be tackled by the business. After all, they have the most to gain from running riskier projects. So what can be done?

Well, as we’ve seen, the risk versus reward needs to be rebalanced. The project manager fears losing so much, but gains so little from a successful project. This leaves two obvious solutions.

The first one is to greatly increase the possible rewards. Offer huge bonuses, promote a successful project manager, give him or her a share of all the profits.

On the whole, I suspect businesses are unlikely to go this route.

The second one is to greatly reduce the possible losses. Now, this has, I think, more mileage in it. There are simple and inexpensive ways for a business to do this. Here are five examples:

• Don’t just praise success – praise failure. We learn more from failure than success. If the project team has done their job well, but didn’t quite make it, praise them for their efforts.
• Stop saying a project has failed when it hasn’t. If the project team did their job well, but the project still didn’t give the hoped-for result, then praise the project team. The project team can control the output of a project – what is actually produced – but they can’t control the outcome – how that output is received. In other words, if they created the new product that everyone thought the market wanted, but it didn’t sell, they still did their job!
• Stop pointing the finger. Given we know there are risks we can’t control, the business risks that can’t be got rid of, businesses, and the people in them, should stop working so hard to assign blame. Not everything is someone’s fault. Quite often, bad things happen without anyone causing it. Accept it.
• Support project managers. Accept that some things are outside of the control of even the best project managers. If the project has shown areas they are weak in, help them get better. Stop using the result of one complicated, difficult and unique project to predict how the project manager will do in another complicated, difficult and unique project.
• Judge a project manager by project management success, not the project success. Be fair, and only evaluate a project manager based on what is actually in their control.

By taking these and other steps, by working hard to change the culture of the business, they can change the personal risk versus reward calculation for a project manager. Reduce those risks, and get good project managers excited about doing risky projects.

Because risky projects worth doing offer the best reward for businesses, and, in my experience, are a lot more fun to work on for project managers. So, I ask again the question that started all this, I ask it both of project managers and of businesses that run projects – don’t you wish you had riskier projects?

(Image courtesy of afanc. Some rights reserved.)

Yesterday, I told you all how wonderful risk is. But it is fair to say that most of us work very hard to get rid of risk from our projects. Why this difference?

Well, I think it is because there are two broad types of risks in a project. The first type is one that we all should try to reduce. It’s to do with competence, with doing our job well, with checking we are putting the project in the best position to be a success.

The second type of risk is the one I like. It’s to do with the change we are trying to bring about, the effect we are trying to have on the world outside our project. It’s the risks that you can’t get rid of, because they are part of why you are doing the project.

But because as project managers we have to deal with so many risks of the first type, we seem to get stuck in the mindset that risk is bad, that risk must be removed, that we have to play it safe. But trying to play it safe may be the most dangerous thing you can do.

Let’s look at these two types of risk. The first type are risks that we can and should get rid of. If you are creating a new product, of course you’d do market research to find out if there is demand for it. If you are putting in place a new business process, of course you’d talk with users to find out what they want from it.

To put it bluntly, of course you’d do your job. A lot of the risks we can easily get rid of in a project are really around making sure we’ve done our job correctly, and around making sure others in the business have done theirs. So of course we need to be interested in getting rid of these risks.

It’s like climbing Mount Everest. Before you go, you do your research and decide that it’s probably best to pack warm clothes. You may even investigate further and decide a few bottles of oxygen will come in handy. You make the preparations that get rid of the risks that can be got rid of.

But that still leaves the second type of risks. We may know there is a market demand for a new product – but will your product actually be successful? We may know what the users have told us they want from a new process – but will they actually use it?

These are the risks we can’t get rid of. Yes, we can do everything we can to create a product that meets the apparent needs of the marketplace, but we can’t know people will buy it. We can do everything we can to produce a process that is simple and easy to use, but we can’t know users will switch to that from what they already know.

Going back to our Everest metaphor, you can wear cold weather gear, carry oxygen, and make sure all the equipment you could need is available. But at some point you actually have to go out and climb the mountain, facing the dangers of the cold, the thin air, the strong winds, and the avalanches.

In other words, before you set off on your adventure, you make sure you have taken all the sensible precautions – and then you set off to face the danger anyway.

And there’s actually a good reason for that. Setting off to face the danger only makes sense if the rewards for overcoming it are significant. Those rewards, whether they are financial, social, personal, whatever, are the reason for facing the danger – the value of that payoff is weighed against the danger in achieving it.

In the same way, we weigh up the possible rewards of a successful project – be it increased profit, reduced costs, and so on – against what we are risking if the project fails – wasted money and time, lost opportunities, and so on.

So risk is good – at least, the right type of risk is. If there is a high risk project that we can do cheaply, then we definitely should. The concept of expected value (here’s an example of expected value in poker) comes into play here – though the probabilities involved with success and failure of projects tend to be harder to estimate!

For a business running a lot of projects, they can almost treat their projects as a gamble – they will stake a certain amount of ‘value’ (money and time) to try and achieve a larger amount of ‘value’. If the probability stacks up that you are making a profit, then do the project – accept the risk, embrace it.

Now, all of this makes sense if we are a business looking at risk, and trying to find a sensible way to deal with it. But what about just us, as project managers? It’s all very well knowing the second type of risk is different for the business, but is it different for us? Well, it all depends – and that’s what I’ll talk about tomorrow.

(Image courtesy of psd. Some rights reserved.)

Risk is the absolute best thing you can have in your project. Yes, you read that right. I’m a project manager who craves risk, who wants risky projects.

I feel like I should start a support group: “Hi, my name is Trevor. I am a project manager and I like risks”. But my group wouldn’t be trying to stop anyone taking risks, it would be encouraging it.

Think about it. A project is a new venture, a new risk. Or to use another word from the same root, a project is a new adventure. Now, doesn’t that sound better? Doesn’t that sound a bit more, well, exciting?

“A new adventure” brings to mind much more interesting ideas and concepts than “a new project”. We think of excitement, of courage, of winning through against the odds. In other words, we think of the upsides of overcoming danger, the positive aspects of risk.

For many project managers, though, “a new project” immediately brings to mind thoughts of caution, of danger, of failure. We think of the negative aspects of risk. And not unnaturally, we start to think of how to get rid of the risk from the venture, to ‘de-risk’ the project.

But consider this: Any project has to include risk. Yes, it has to. A project is about change, about creating something new, or doing something differently. And any change has a risk associated with it – we simply can’t know exactly what will happen.

But this isn’t a bad thing! It is thought that the word ‘risk’ derived from an Arabic word ‘rizk’, meaning ‘to seek prosperity’. Similar words were used in the Middle Ages specifically to do with the dangers involved in sea trade, in sending goods you had paid for out onto an unsafe sea, in the hope of selling them for a profit elsewhere.

If you think about it, we often use risk to mean the same thing today – we risk our money by buying shares, or by trading in commodities, or even by starting a project! We are putting our money in harm’s way, risking it being wasted or lost, in the hope that we will in fact get a bigger return.

Risk is good. Without an element of risk, we won’t be able to achieve success. Without risk, we don’t have a project. Without risk, we’re just doing the same old thing again – we’re doing business as usual management, not project management!

And usually, the bigger the risk, the bigger the potential reward. A big reward sounds great! So why do we all, (project managers, I mean) seem to avoid risk wherever we can? Well, that’s what I’m going to talk about tomorrow. See you then!

(Image courtesy of szlea. Some rights reserved.)