# Transforming Project Management by Duane Petersen - Blinkist

What’s in it for me? Take your project management to the next level.

In business, mistakes can be expensive.

When budgets are miscalculated, schedules run over, and risks go underestimated, the results can prove disastrous – and firms can go under.

That’s why project management is so important.

By breaking vast and complicated projects down into precise, workable stages, forecasts can be made more accurate, monitoring can become more precise, and projects can hit their targets.

At least, that’s the idea.

The fact of the matter is that current project-management processes are inadequate.

Many projects fail, and many project managers fail to deliver their promised results.

These blinks cut through the noise and show you exactly what the deficiencies are in traditional approaches – and how you can start avoiding them.

In these blinks, you’ll learn  why you might need to double the hours on your schedule; how to avoid disasters with contracting ; and why some “project managers” aren’t project managers at all.

In the world of business, you can’t get very far without a plan.

Make sure your strategic planning focuses on the right things.

Whether you’re applying for loans, making cash-flow forecasts, or just sketching out your latest ideas, making plans for the future is always an essential step.

That’s why so many businesses engage in strategic planning – a process that involves taking stock of where the firm is right now, where it should be in the future, and what steps it needs to take in the meantime to make that happen.

In theory, it’s vital to plan ahead like this.

But in practice, strategic planning is often done wrong.

Your firm might schedule regular strategic-planning meetings – but unless you’re planning in the right way, you’re wasting your time.

The key message here is: Make sure your strategic planning focuses on the right things.

Done properly, strategic planning has three key elements.

The first consists of assessing the current environment, by weighing up the state of the firm and the world around it.

One common way of doing this is by completing a SWOT analysis: a breakdown of the business’s main strengths, weaknesses, opportunities, and threats.

Interpret these categories broadly.

For example, changes in social values or government regulations can pose serious threats, which matter just as much as the dangers posed by competitors.

In the same way, not all strengths are obvious – having a dedicated and loyal workforce can be as important as attracting investors.

The second aspect of proper strategic planning is establishing a baseline.

This is simple: in short, select one important figure that represents your firm’s current performance.

That might be total revenue or net annual profit.

It might be your firm’s error rate.

What’s important is that you choose a metric that operates as a vital sign that indicates the health of the company.

The third and final step is crucial because it sets the course for the business’s trajectory in the future: after noting your baseline, you need to set a benchmark.

Your benchmark is your aim.

If your current unit cost of production is 10 percent higher than your main competitor’s, then make matching its figure – or even beating it – your benchmark for the year.

Once a benchmark has been set, a project manager can help break down the process of accomplishing it into several separate, manageable projects.

So, we’ve established that it’s vital for a strategic plan to focus on the right things.

Get a mix of people on the strategic-planning team.

Planners need to assess the lay of the land, set a baseline, and choose an ambitious benchmark for the future.

But that’s not all there is to it: for your plans to make any difference, you need to have the right people sitting at the table when the decisions are made.

After all, nothing could be more important than the direction the company will take in the future – the success of the whole firm is at stake.

So you’re going to want your best people on the job.

What should you do?

Pick a handful of the firm’s most senior executives, and let them work it out on their own?

Not quite.

The key message in this blink is: Get a mix of people on the strategic-planning team.

On the one hand, it seems natural that decisions about a firm’s future should be made by its most senior employees.

They’re the ones running the place, after all – why shouldn’t they map out its trajectory?

Well, for a couple of reasons.

The first is that senior executives are often emotionally attached to the established way of doing things.

After working at the same firm for years, some become resistant to change.

Things have worked out so far, they reason – so why change a winning formula?

That’s why it’s important to add some fresh blood to the strategic planning team.

Shake up the top brass by inviting some less experienced but more energetic junior employees to the meetings, too.

But be careful: these up-and-comers should be ambitious, but they shouldn’t be suck-ups.

All too often, junior employees rise up the ranks by parroting whatever powerful executives say – and when it comes to strategic planning, these people are a disaster.

Instead of challenging bad ideas for the good of the firm, they endorse them to further their own careers.

So, who should make the cut?

For a start, probably no more than 12 people – add more than that, and meetings can get messy.

The planners should be a mix of senior management, a few directors, a couple of up-and-coming employees, and representatives from sales, marketing, and finance.

And, last but not least, every strategic planning team should include a project manager.

Her job is to help devise budgets and schedules for any touted projects, and act as an intermediary between planners’ idealistic expectations and the firm’s day-to-day possibilities.

Project managers have a lot of responsibilities.

Traditional budgeting strategies leave out far too many details.

They devise schedules, consult with clients and employees, and oversee vast and often complex projects.

But of all their duties, the most important is probably devising budgets.

Budgets matter.

A project might be completed to absolute perfection in every other way – but if it goes even 10 percent over budget, it could spell disaster.

That’s why it’s so important that project managers factor each and every cost into their forecasts.

For the most part, they really do try – a lot of time and energy goes into their calculations.

So why are they so often wrong?

The key message here is: Traditional budgeting strategies leave out far too many details.

Sometimes the problem isn’t with individual project managers, but rather with the instructions they’ve received.

The Project Management Institute, or PMI, which certifies project-management skills, has largely been a force for good in the business world – but when it comes to budgeting, its approach is simply inadequate.

How so?

In short, the PMI underestimates the number of costs that need to be factored in.

It includes the obvious and straightforward ones, like work and materials, but neglects less conspicuous expenses.

As a result, costs like staff meetings, recruitment, training, project initiation, and planning don’t always figure in budgets.

And taken together, these costs really can accumulate.

One metric the PMI does emphasize is the monetary value of risk.

But even here, it doesn’t go far enough.

The monetary value of risk is the likelihood of an event occurring, multiplied by the expense of addressing it.

If a hurricane has a 1 percent chance of striking but would wreak $100,000 worth of damage, then the monetary value of risk is 1 percent of $100,000: $1,000, which should be added to the budget as a reserve.

Accounting for risk in this traditional way is a step in the right direction – but it stops short of completion.

That’s why the author invented the concept of time value of risk.

This concept factors in the specific risks posed by delays.

So if there’s a 10 percent chance that your building will be constructed a year late, which would cost you $10,000 in rent, the time value of risk is 10 percent of 10,000: $1,000, again.

By adding these less obvious costs to their calculations, project managers can dramatically reduce the risk of projects running over budget.

Don’t overestimate how fast employees work.

Along with devising budgets, project managers face another tricky but crucial task: drawing up schedules.

Just like going over budget, going over schedule can turn a brilliantly executed project into a complete catastrophe.

Think that’s an exaggeration?

Look at it this way: if you’ve been contracted to build a stadium for the 2024 Olympics, and you complete it in 2025, then it doesn’t matter how well-constructed the arena is: the project is a total failure.

So how do you start devising more realistic schedules?

One basic principle will get you a long way.

Here’s the key message: Don’t overestimate how fast employees work.

It’s not a stab at employees to say most workers just aren’t as productive as project managers expect them to be.

It’s not because they’re especially lazy or pampered.

It’s just the nature of work.

A 2011 study estimated that just 50 percent of work time is actually spent doing productive work.

In the remaining time, employees do what you probably do in your downtime at work: chat with colleagues at the watercooler, answer messages from friends and family, or just stare idly into space.

Project managers who follow the PMI’s recommendations often don’t realize this.

When they estimate how long a project will take to complete, many project managers unthinkingly assume that employees will work at 100-percent efficiency: in reality, though, they should be halving that figure, and hence doubling the projected work hours.

In fact, even doing that will probably lead to an overly optimistic estimate.

In addition to unproductive time, project managers also need to factor nonworked time into their schedules.

What exactly does nonworked time refer to?

In a few words, lunch breaks, holidays, vacations, training, and sick days.

When you combine all of this time, you lose another 20 percent of the time you pay for.

So let’s recalculate.

If 20 percent of paid time isn’t actually worked, and 50 percent of work time isn’t spent productively, then employees are actually performing productive work for less than half of the time they’re paid for.

A project manager who assumes that all paid time is productive time will be very far off the mark, then: the real hours will be far more than his initial estimate.

Contracts can be tricky – but, more’s the pity, project managers will probably come across their fair share over the course of their careers.

They’re confusing, dense, and precise documents, in which every single word counts.

The author learned this the hard way.

Be careful with contracts – a lack of precision can cost you dearly.

In the process of hiring a company for a client, the author set out, detail by detail, exactly what the work would involve and what a breach of contract would look like.

When the company he hired ultimately failed to perform the job properly, he was sure that he could sue and be awarded damages.

He wasn’t, though.

You see, although he’d defined a breach of contract, he hadn’t specified any penalty if the company did breach it.

The judge ruled that a breach had occurred, but awarded the author nothing in damages.

The key message here is: Be careful with contracts – a lack of precision can cost you dearly.

There’s a lot riding on contracts, so scrutinize every line before you sign.

From a project-management perspective, some types of contracts are better than others.

The gold standard is a cost-plus contract, such as cost-plus-fixed-fee and cost-plus-incentive-fee.

The way these contracts work is that a contractor is paid for all expenses, plus an additional payment to allow for a profit.

If it’s a cost-plus-incentive-fee contract, then the contractor’s fee can be greater if the firm hits certain targets.

Here’s an example.

A cost-plus-fixed-fee contract might guarantee to reimburse a builder for his costs, plus a fee of $80,000.

A cost-plus-incentive contract, on the other hand, might increase that $80,000 fee if the contractor completes the project early.

What about other types of contracts?

Well, if you’re considering opting for a fixed-fee contract or a time-and-materials contract, think again.

A fixed-fee contract puts an unchanging, fixed price on the entire contract.

The issue with this approach is that contractors often inflate the fee they charge in an effort to reduce the risk that the project will run over budget and eat into their profits.

A similar problem plagues time-and-materials contracts.

In this agreement, the client pays the contractor for the time their employees worked and any materials they used while working.

Here, it’s all too easy for dishonest contractors to lie about their hours and falsify timesheets.

For these reasons, cost-plus contracts should be your go-to choice for most projects.

Being an effective project manager requires real skill.

So, you’ve heard some advice on what good project management looks like.

But there’s one basic question we haven't properly examined yet: we haven’t asked exactly what a project manager does.

These days, unfortunately, the term is used far too widely.

At Microsoft, the author discovered, a “project manager” just oversees checklists – marking tasks as open or complete.

And in other companies, workers who track and supervise customer orders are often referred to as project managers.

The work these people do is important and necessary, no doubt.

But it’s not project management in the specific, skilled sense in which the author means it.

There’s a big difference between people who happen to get put in charge of managing a project, and professionally skilled project managers.

The key message in this blink is: Being an effective project manager requires real skill.

Here’s a typical scenario.

Imagine that a company decides that it’s finally time to launch an app to accompany its long-established and popular website.

Who do you think they’ll elevate to the position of project manager?

A qualified and experienced career project manager, with a number of successful projects under her belt?

Wishful thinking.

Very often the company will choose an expert on app development.

Superficially, this kind of makes sense.

The project’s aim is to develop an app, after all, so who better to oversee the work than an expert developer?

Well, probably a seasoned project manager.

Only a project manager has the skill set to devise an accurate budget, draw up a precise schedule, and mediate effectively between strategic planning and on-the-ground obstacles.

In our example, the app-development expert might be fantastic at his job.

But will he have the people skills required to oversee a complex project, while managing dozens of people’s complaints and frustrations?

Possibly not.

This isn’t to say that regular workers can never become effective project managers.

They can – but it always requires time, experience, and training.

Don’t let that discourage you, though.

As these blinks have shown, project management is fascinating, complex, and vital to the success of any business.

Get into good habits, and it’s something you can add to your skill set with pride.

Final summary

The key message in these blinks: Traditional approaches to strategic planning and project management are inadequate and can lead to the failure of a project or even an entire business.

In order to achieve success, appoint the right people to form your strategy, make sure your schedules and budgets take account of all risks, and recognize that good project management is always central to success.

Actionable advice: Run your planning meetings democratically.

When it comes to strategic planning meetings, it’s best if the CEO and board members don’t dominate.

At the end of the day, they’ll have the final say – but during the meeting itself, new ideas should be discussed freely and openly, without any senior figures monopolizing the speaking time.

After all, the future of the company hangs in the balance.

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