by David Hillson

The Risk Doctor

Taking the plunge

The Risk Doctor: David Hillson
The Risk Doctor: David Hillson

 When Martin Cobb was chief information officer for the Secretariat of the Treasury Board of Canada in 1995, he asked a question that has become known as Cobb’s Paradox: “We know why projects fail; we know how to prevent their failure – so why do they still fail?”

Speaking at a recent conference in the United Kingdom, the UK Government’s adviser on efficiency Sir Peter Gershon laid down a challenge to the project management profession, that projects and programmes should be “delivered within cost, on time, delivering the anticipated benefits”. Taking up the Gershon Challenge, the UK Association for Project Management (APM) defined its 2020 vision as ‘A world in which all projects succeed’.

This all sounds very good, but is it really possible? And is it even desirable? Do we want to limit the scope and ambition of our projects to only those that we are certain can succeed? Will this not reduce innovation, creativity and appropriate risk taking? I recently heard a spectator at a Cirque de Soleil performance saying: “I want to see them do things they can only get right half of the time.” Isn’t this the attitude that every project sponsor or portfolio manager should have?

There are several reasons it may be impossible to resolve Cobb’s Paradox, to succeed in the Gershon Challenge and to achieve APM’s 2020 vision: All projects are risky with uncertainty built into each and every one. Although the degree of this risk may vary, the zero-risk project does not exist and the probability of success for any project is always less than 100%.

Most projects include unmanageable risk. Of course, we aim to manage risk in our projects, but risk management can never be completely effective, and each project will carry some residual risk. As a result, some unmanageable risks will occur on every project, challenging our ability to meet schedules, budgets or performance requirements. On some projects, the effect of unmanaged risk will be so significant that these projects will fail.

Risk management is not always done well. Even though we have been managing risk on projects for centuries, there are still weaknesses in the way we carry this out on many projects. Ineffective risk management leaves our projects exposed to unacceptable levels of risk, and causes failure.

Project charters often omit risk thresholds. When project sponsors commission projects, they should define risk thresholds against each objective in the project charter or business case. This allows the project team to know how much risk is acceptable in their project, and provides the target for risk management. However, if project sponsors do not understand their risk appetite, they will not set risk thresholds – meaning the project manager will be unable to manage risk effectively.

Projects should exist in a risk-balanced portfolio. The concept of risk efficiency should be built into the project portfolio, with a balance between risk and reward. This will typically include some high-risk/high-reward projects, which may fail to deliver the expected value.

Innovation is built on failure. For research, development or high innovation projects, failure is an expected and natural part of the process. Thomas Edison failed many times before he invented a working light bulb, and creative organisations should expect to do the same.

Failure to learn: We often don’t take lessons from past failures for future projects. We repeat our mistakes and fail again for the same reasons. Cobb was wrong: we don’t always know why our project has failed and therefore we can’t always learn how to prevent the same type of failure happening in future and, consequently, we fail again.

How should project-based organisations respond to the challenges laid down by Cobb, Gershon and APM? Should we accept unrealistic targets and be branded as failures if some of our projects do not succeed?

Those of us in the project management community should help our stakeholders understand that no project is without risk, and project failure is always a possibility. Similarly, we need to make sure our risk processes are fully effective so that we can minimise the chances of failure.

Despite our best efforts, it seems Cobb’s Paradox cannot be resolved, the Gershon Challenge is unrealistic, and the APM 2020 vision may be unachievable.

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Issue 29


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