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Crisis Project Management in Troubled Times…Like NOW! Paul Allen, CEO / Project Executive Project Executive Group – Houston Your Performance Multiplier.

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Presentation on theme: "Crisis Project Management in Troubled Times…Like NOW! Paul Allen, CEO / Project Executive Project Executive Group – Houston Your Performance Multiplier."— Presentation transcript:

1 Crisis Project Management in Troubled Times…Like NOW! Paul Allen, CEO / Project Executive Project Executive Group – Houston Your Performance Multiplier February 2009

2 Paul Allen Paul Allen, former Adjunct Professor of Management at the Jones Graduate School of Management - Rice University, taught strategic project development in MBA and Executive Education Programs including: advanced project management, corporate renewal & restructuring, decision analysis and structured project finance. Allen is co-founder: PMI Risk Management SIG and the PMI Automation Systems SIG where he is also the Chair. Additionally, he is a member of PMI Troubled Projects SIG and PMI Houston chapter. He serves as PMIH PMP Prep Risk Management Instructor and has for nearly a decade. He is a former member of the Turnaround Management Association (TMA) and the Society of Naval Architects & Marine Engineers (SNAME). Allen is CEO/Project Executive of the Project Executive Group, a Houston- based global professional services and training firm, and has over thirty years of project development, financing and training experience. PMI Houston Presentation Feb 2009 2

3 This isn’t my FIRST RODEO…IT’S MY 6 th ! 1.1973-75 – NYS (Oil Price) 2.1981-82 – NYS (% Interest) 3.1985-87 – Hou (Oil Price) 4.1999-00 – Hou (Oil Price) 5.2001-03 – Hou (9/11,$$$) Enter Sarbanes-Oxley & WAR! 6 TH - 2008-? - Houston Ouch! THAT HURTS! Experience Teaches Lessons Ike & Economy – This one’s the BULL! Where’s the Rider? PMI Houston Presentation Feb 2009 3

4 Doing a Good Job? The Right INTERNAL Politics? The Right EXTERNAL Politics & Client-Relations? Continuous Improvement Education, Skill Sets & Certifications PMI Houston Presentation Feb 2009 4 + ++

5 You MUST Sharpen the Saw to Survive! Sharpen the Saw means preserving and enhancing the greatest asset you have – YOU! It means having a balanced program for self- renewal in the four areas of your life: physical, social/emotional, mental, and spiritual. Covey’s well-known book: The 7 Habits of Highly Effective People Habit 7: Sharpen the Saw PMI Houston Presentation Feb 2009 5

6 2007 - times were good, Houston, BUT… Sustainable breakthrough performance requires a laser-sharp focus on strategy execution. – The evidence is overwhelming: Strategy execution is the #1 concern of CEOs worldwide. (Source: The Conference Board, 2007 CEO Challenge) Only 12% of companies successfully execute their strategy. (Source: Balanced Scorecard Collaborative & Cognos joint study, 2006) Strategies are EXECUTED through Projects! YOU! As a PM, you must… Optimize NPV – Eliminate Failure – Deliver Results – NO Excuses PMI Houston Presentation Feb 2009 6

7 New Strategies MUST be successful! Today… You’re betting your company! An 88% FAILURE RATE in Execution is NOT ACCEPTABLE! Strategies are executed through projects. NO Failures allowed Strategy (Project) Execution MUST succeed for survival! Project Failures comes from any or combination thereof: – Failure to LEARN – Failure to ANTICIPATE – Failure to ADAPT PMI Houston Presentation Feb 2009 7

8 What’s going on now - 2009 vs. 1929? Causes and Effects of the Great Depression Most historians believe that a combination of factors was responsible. The most common factors included: uneven distribution of income 2.excessive use of credit 3.overproduction of consumer goods 4.a weak farm economy 5.speculation & margin buying in the stock market 6.restrictive government policies, such as high tariffs, and economic problems left from World War I 8.Soup Kitchens became a permanent fixture for years! Does any of the above sound familiar? Think about it! PMI Houston Presentation Feb 2009 8

9 Black Thursday – October, 1929: FACTS The Great Depression in the United States, began on "Black Thursday" with the Wall Street crash of October, 1929 and rapidly spread worldwide. The market crash marked the beginning of a decade of high unemployment, poverty, low profits, deflation, plunging farm incomes, and lost opportunities for economic growth and personal advancement. Although its causes are still uncertain, the basic cause was a sudden loss of confidence in the economic future. The usual explanations include numerous factors, especially high consumer debt, ill-regulated markets that permitted malfeasance by banks and investors, cutbacks in foreign trade, lack of high-growth new industries, and growing wealth inequality, all interacting to create a downward economic spiral of reduced spending, falling confidence, and lowered production. Source: Wikipedia PMI Houston Presentation Feb 2009 9

10 Black Monday – October, 1987: FACTS The mid-1980s were a time of strong economic optimism. From August 1982 to its peak in August 1987, the Dow Jones Industrial Average (DJIA) grew from 776 to 2722. The rise in market indices for the 19 largest markets in the world averaged 296 percent during this period. The average number of shares traded on the NYSE had risen from 65 million shares to 181 million shares. The crash on October 19, 1987, a date that is also known as Black Monday, was the climactic culmination of a market decline that had begun five days before on October 14th. The DJIA fell 3.81 percent on October 14, followed by another 4.60 percent drop on Friday October 16th. On Black Monday, the Dow Jones Industrials Average plummeted 508 points, losing 22.6% of its value in one day. Source: Wikipedia PMI Houston Presentation Feb 2009 10

11 Crash of 2008 – September 2008: FACTS On September 16, failures of large financial institutions in the United States, due primarily to exposure to securities of packaged subprime loans and credit default swaps issued to insure these loans and their issuers, rapidly evolved into a global crisis resulting in a number of bank failures in Europe and sharp reductions in the value of equities (stock) and commodities worldwide. In the United States, 15 banks failed in 2008, while several others were rescued through government intervention or acquisitions by other banks. On October 11, 2008, the head of the International Monetary Fund (IMF) warned the world financial system was teetering on "brink of systemic meltdown“. The economic crisis caused countries to temporarily close their markets. On October 8, the Indonesian stock market halted trading after a 10% one day drop. The Times of London: "the meltdown being dubbed Crash of 2008.” Source: Wikipedia PMI Houston Presentation Feb 2009 11

12 Subprime Mortgage Crisis: FACTS The subprime mortgage crisis is an ongoing financial crisis triggered by a dramatic rise in mortgage delinquencies and foreclosures in the United States, with major adverse consequences for banks and financial markets around the globe. The crisis, which has its roots in the closing years of the 20th century (Clinton Presidency), became apparent in 2007 and has exposed pervasive weaknesses in financial industry regulation and the global financial system. No mention of the ARMs that accelerated this! Many USA mortgages issued in recent years were made to subprime borrowers, defined as those with lesser ability to repay the loan based on various criteria. When USA house prices began to decline in 2006-07, mortgage delinquencies soared, and securities backed with subprime mortgages, widely held by financial firms, lost most of their value. RESULT - a large decline in the capital of many banks and USA government sponsored enterprises, tightening credit around the world. Source: Wikipedia PMI Houston Presentation Feb 2009 12

13 Mexico City Opens the 1 st of 300 Planned Soup Kitchens! – Jan 2009 Unemployment and food prices are on the rise, prompting the municipality to set up a feeding network. Officials hope to dish out 65,000 free or inexpensive meals a day. Mexico City - With her modest earnings as a seamstress and her grown children out of work, Esperanza Jose is like thousands of Mexicans finding it harder to make ends meet. And so she decided to take advantage of the city government's new soup kitchen, the first of 300 planned by March. "The truth is that there are a lot of people that now don't have jobs, and so if they're offering this, we should make the most of it," said Jose, 63. "Many people are embarrassed to come; but, well, we come with dignity." As Mexico slips into the profound economic crisis circling the globe, unemployment is rising along with food prices. Inflation is running about 8% annually, but some basic "family basket" items such as cooking oil and rice are going up about 200% a year, said Cesar Cravioto, head of the city's Institute of Social Assistance. PMI Houston Presentation Feb 2009 13

14 Soup Kitchens in NY – Website Helps! Source: AP - January 2, 2008 New Yorkers interested in helping out at soup kitchens and food pantries can now go online to search for volunteer opportunities. The New York City Coalition Against Hunger launched a Web site yesterday that allows people to search by neighborhood or nearby subway lines for a program that best suits them. PMI Houston Presentation Feb 2009 14

15 Soup Kitchens in LA Source: Daily Herald – January 25, 2009 Soup kitchens, which provide hot meals, and food pantries, which offer groceries mostly to families, are the backbone of the current nonprofit food system. Most are in the hearts of cities and rely primarily on individual donations of food or bulk supplies from large food banks. They also need money for overhead, all of which leaves them vulnerable during economic downturns such as the current one, nonprofit leaders say. Operating soup kitchens during traditional business hours shuts out a large group of hungry people. About 30 percent of households headed by single mothers reported going without food at least occasionally in 2007, almost four times the rate for single people, according to Feeding America, an umbrella group for 200 food banks nationwide. PMI Houston Presentation Feb 2009 15

16 WTO Chief warns - looming political unrest BERLIN (AFP) – The global economic crisis could trigger political unrest equal to that seen during the 1930s, the head of the World Trade Organization (WTO) said in a German newspaper interview Saturday. (February 7, 2009) "The crisis today is spreading even faster (than the Great Depression) and affects more countries at the same time," Pascal Lamy told the Die Welt newspaper. Source: Internet Yahoo News PMI Houston Presentation Feb 2009 16

17 What Does History Teach Us? The initial effects of the stock market crash were not felt immediately by most Americans, but forces were triggered that would impact all social classes over the next decade, and it would take a world war to finally bring the United States out of the "Great Depression." The SOLUTION was NOT government intervention! PMI Houston Presentation Feb 2009 17

18 Who Says Intervention Won’t Work? MONDAY, JANUARY 12, 2009 Marc Faber: “I Think it Might Be Far Worse [Than the Great Depression] Precisely Because of the Interventions” by the Government PhD Economist Marc Faber writes: Economic conditions may turn out to be far worse than in previous recessions, including the Great Depression at the beginning of the 1930s. Everybody seems to think that, thanks to the government's monetary and fiscal interventions, this recession will come nowhere near the 1930s slump. However, I think it might be far worse – and precisely because of the interventions. Source: George Washington’s Blog PMI Houston Presentation Feb 2009 18

19 Effect of the Depression N. America Source: Wikipedia PMI Houston Presentation Feb 2009 19

20 Will they go to California again? The Grapes of Wrath is a novel published in 1939 and written by John Steinbeck, who was awarded the Pulitzer Prize and the Nobel Prize for Literature. Set during the Great Depression, the novel focuses on a poor family of sharecroppers, the Joads, driven from their home by drought, economic hardship, and changes in the agriculture industry. In a nearly hopeless situation, they set out for California's Central Valley along with thousands in search of land, jobs, and dignity. This film was the most popular left-leaning, socialistic-themed film of pre-World War II Hollywood. Henry Fonda In Grapes of Wrath - 1940 Source: Wikipedia PMI Houston Presentation Feb 2009 20

21 Rosie the Riveter is a cultural icon of the United States, representing the six million women who entered the workforce for the first time during World War II, many of whom worked in the manufacturing plants that produced munitions and materiel. These women took the places of the male workers who were absent fighting in the Pacific and European theaters. Source: Wikipedia PMI Houston Presentation Feb 2009 21 Will we see Rosy the Riveter again?

22 According to Colman's Rosie the Riveter, there was also, very briefly, a "Wendy the Welder" based on Janet Doyle, a worker at the Kaiser Richmond Liberty Shipyards in California. A real-life "Rosie" working on the A-31 Vengeance bomber in Nashville, Tennessee (1943) Source: Wikipedia PMI Houston Presentation Feb 2009 22 Or Wendy the Welder again?

23 Great Depression-WWII Timeline FACTS Sources: T.H. Watkins, The Great Depression: America in the 1930s (New York: Little, Brown and Company, 1993) Kevin Phillips, Boiling Point (New York: HarperCollins, 1993) Kevin Phillips, The Politics of Rich and Poor (New York: Random House, 1990) The 1995 Grolier Encyclopedia (Entries: New Deal, Depression of the 30s, Roosevelt, Coolidge.) The Encyclopedia Brittanica Online (Entries: New Deal, Great Depression.) Donald Barlett and James Steele, America: What Went Wrong? (Kansas City: Andrews and McMeel, 1992) Donald Barlett and James Steele, America: Who Really Pays the Taxes? (New York: Simon & Schuster, 1994) James MacGregor Fox, Roosevelt: The Lion and the Fox (New York: Konecky and Konecky, 1956) Elaine Schwartz, Econ 101½ (New York: Avon Books, 1995) Peter Pugh and Chris Garratt, Introducing Keynes (Cambridge, England: Icon Books, Ltd., 1993) PMI Houston Presentation Feb 2009 23

24 1929 - Automobile sales decline 1/3 – 9 months before crash. 1930 - GNP falls 9.4 %. Unemployment climbs - 3.2 to 8.7 %. 1931 - GNP falls another 8.5 %; unemployment rises - 15.9 %. 1932 10,000 banks have failed since 1929 (40 % of 1929 total). GNP has also fallen 31 % since 1929. Over 13 million Americans have lost their jobs since 1929. Top tax rate is raised from 25 to 63 % 1933 free fall of GNP significantly slowed; dips only 2.1 % this year. Unemployment rises slightly - 24.9 % PMI Houston Presentation Feb 2009 24 Great Depression-WWII Timeline FACTS

25 1934 Economy turns: GNP rises 7.7 %, unemployment falls - 21.7 %. A long road to recovery begins. Sweden becomes first nation to recover fully - It has followed a policy of Keynesian deficit spending. 1935 Economic recovery continues: the GNP grows another 8.1 %, and unemployment falls - 20.1 % 1936 Top tax rate raised - 79 %. GNP grows a record 14.1 %; unemployment falls - 16.9 % Germany becomes second nation to recover fully - through heavy deficit spending in preparation for war. PMI Houston Presentation Feb 2009 25 Great Depression-WWII Timeline FACTS

26 1937 Economists attribute economic growth so far to heavy government spending that is somewhat deficit. Roosevelt, however, fears an unbalanced budget and cuts spending for 1937. That summer, the nation plunges into another recession. Despite this, the yearly GNP rises 5.0 percent, and unemployment falls - 14.3 %. 1938 The year-long recession makes itself felt: the GNP falls 4.5 percent, and unemployment rises - 19.0 %. Britain becomes the third nation to recover - as it begins deficit spending in preparation for war. PMI Houston Presentation Feb 2009 26 Great Depression-WWII Timeline FACTS

27 1939 GNP rises 7.9 percent; unemployment falls - 17.2 %. The United States will begin emerging from the Depression as it borrows and spends $1 billion to build its armed forces. From 1939 to 1941, when the Japanese attack Pearl Harbor, U.S. manufacturing will have shot up a phenomenal 50 %! The Depression is ending worldwide as nations prepare for the coming hostilities. World War II starts with Hitler's invasion of Poland. PMI Houston Presentation Feb 2009 27 Great Depression-WWII Timeline FACTS

28 1945 Although the war is the largest tragedy in human history, the United States emerges as the world's only economic superpower. Deficit spending has resulted in a national debt 123 % the size of the GDP. By contrast, in 1994, the $4.7 trillion national debt will be only 70 % of the GDP! The top tax rate is 91 %. It will stay at least 88 % until 1963, when it is lowered to 70 %. During this time, America will experience the greatest economic boom it has ever known. REALLY? Let’s take a look: – at the FIVE Recessions from 1945 to 1963, and – the rest. PMI Houston Presentation Feb 2009 28 Great Depression-WWII Timeline FACTS

29 Recessions Since the Great Depression 1.Recession of (1945) Duration: 8 months 2.Recession of (1948 - 1949) Duration: 11 months 3.Post-Korean War Recession (1953 - 1954) - The Recession of 1953 was a demand-driven recession due to poor government policies and high interest rates. Duration: 10 months 4.Recession of (1957 - 1958) Duration: 8 months 5.Recession of (1960 - 1961) Duration: 10 months 6.Bond Inversion of (1965 - 1967) no recession materialized 7.Recession of (1969 - 1970) Duration: 11 months 8.1973 oil crisis (1973 - 1975) - a quadrupling of oil prices by OPEC coupled with high government spending due to the Vietnam War leads to stagflation in the United States. Duration: 16 months 9.1979 energy crisis - 1979 until 1980, the Iranian Revolution sharply increases the price of oil 10.Recession of (1981 - 1982) Duration: 16 months 11.Early 1980s recession - 1982 and 1983, caused by tight monetary policy in the U.S. to control inflation and sharp correction to overproduction of the previous decade which had been masked by inflation 12.Great Commodities Depression - 1980 to 2000, general recession in commodity prices (OIL PRICES FELL) 13.Late 1980s recession - 1988 to 1992, collapse of junk bonds and a sharp stock crash in the United States leads to a recession in much of the West 14.Japanese recession - 1991 to present, collapse of a real estate bubble and more fundamental problems halts Japan’s once astronomical growth 15.Asian financial crisis - 1997, a collapse of Thai currency inflicts damage on many of the economies of Asia 16.Early 2000s recession - 2001 to 2003: the collapse of the Dot Com Bubble, September 11th attacks and accounting scandals contribute to a relatively mild contraction in the North American economy. PMI Houston Presentation Feb 2009 29

30 1981 - Congress enacts largest tax cut in history, $750 billion over 6 yrs. Oct. 22, 1986 – Pres. Reagan signed Tax Reform Act of 1986. Top tax rate on individual income was lowered - 50% to 28%, the lowest it had been since 1916 Followed by yearly tradition of new tax acts - began 1986, Aug. 10, 1993, Pres. Clinton signed Revenue Reconciliation Act of 1993 Pres. George W. Bush signed a series of tax cuts. Largest was the Economic Growth and Tax Relief Reconciliation Act of 2001 - estimated to save taxpayers $1.3 trillion over ten years, making it the third largest tax cut since World War II. The Bush tax cut created a new lowest rate, 10% for first several thousand dollars earned. Cut the top four tax rates (28% to 25%; 31% to 28%; 36% to 33%; and 39.6% to 35%). THIS IS ALL GOING TO CHANGE…BE READY FOR IT! PMI Houston Presentation Feb 2009 30 History of Taxes – 1981-Now…

31 UK recession: It's now official The UK is officially in recession. Confirmation came this morning when figures published by the Office for National Statistics showed the economy shrank by 1.5 % in the final three months of last year. By Angela Monaghan - Last Updated: 2:48PM GMT 23 Jan 2009 Source: Wikipedia PMI Houston Presentation Feb 2009 31 What About NOW? - UK in 2009!

32 What About NOW in the U.S.? Wikipedia – Late 2000’s Recession 2008 - a recession throughout the industrialized world was suggested by several important indicators of economic downturn. [1] Contributors: high oil prices, high food prices, and a substantial credit crisis leading to the drastic bankruptcy of large and well established investment banks as well as commercial banks in many nations around the world. This crisis has led to increased unemployment, and other signs of contemporaneous economic downturns in major economies of the world. December 2008 - National Bureau of Economic Research (NBER), private, nonprofit research organization, declared that the United States had been in recession since December 2007, - several economists expressed concern - there is no end in sight for the downturn. This crisis has been called the Second Great Depression by some observers, and the Great Recession by others. Source: Wikipedia PMI Houston Presentation Feb 2009 32

33 Feb 2009 PMI Houston Presentation33 Top Stories Stocks Move Higher After Yesterday's Plunge - AP A day after a steep selloff on Wall Street, investors are looking for bargains but are still very cautious about the banking industry and the overall economy. The gains aren't surprising after stocks tumbled more than 4 % on Tuesday (Feb10th). Bankers to appear before dubious Congress- AP Negotiations intensify on final stimulus plan- AP Trade deficit drops to $39.9B; lowest in 6 years- AP World stocks fall on skepticism over US bank plan- AP Oil stays below $38 on bailout skepticism- AP Cuomo blasts Merrill executives on bonus plan- AP Toll Brothers 1Q home building revenue drops- AP GE Energy gets $1B Saudi Electricity contract- AP Bank of England says Britain in 'deep recession'- AP What About Feb 11th – Yahoo Finance

34 Do We Have Your Attention? Do we agree we’re in troubled times? WHAT MUST we as project managers DO during this time? What DECISIONS MUST we make to deal with this? How CAN we instill a TRUE Sense of Urgency in what we do? PMI Houston Presentation Feb 2009 34

35 What Actions Must Be Taken By PMs? Some Suggested Quick “Pareto” Answers ACT as if every day, you are going out of business! – Maybe you are! PROTECT your Risk-Based Fully-Integrated Master Schedules & Budgets ALL THE TIME! – At the Project Executive Group, we instill a true sense of urgency in everything we do. We fully recognize and respect the time value of money and optimization of the NPV. Contact us for immediate assistance when a SENSE of URGENCY is important to you AND when TIME is of the ESSENCE in delivering RESULTS. – We GUARANTEE our work. DO IT RIGHT THE FIRST TIME! TAKE OWNERSHIP – Behave as the CEO of the project investment! PROTECT the Buffers – Go into Crisis mode if you lose a day or $ of buffer! PMI Houston Presentation Feb 2009 35

36 Wake Up Call for Project Management Pros! ELIMINATE – Complacency and – the False Sense of Urgency in your projects and your company! EXCEL in – Learning – Anticipating and – Adapting to a climate impacting your project and company. PMI Houston Presentation Feb 2009 36 A “MUST Do!”

37 What problems do PMs need to address? 1.Complacency can no longer be tolerated! – The dictionary says complacency is “a feeling of contentment or self satisfaction, especially when coupled with an unawareness of danger or trouble – Two Key Words: feeling and self – Almost always, complacent individuals do not view themselves as complacent. They see themselves as behaving quite rationally, given the circumstances. Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 37

38 Resistant to New Ideas? - YOU cannot afford to be TODAY! PMI Houston Presentation Feb 2009 38

39 The odds are overwhelming that complacency is around you! Where does complacency come from? – Complacency is almost always the product of success or perceived success. Complacency can live on long after great success has disappeared. Perceptions DO NOT have to be accurate! Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 39

40 The Complacent How do they think? – The complacent virtually never think they are complacent. “I’m doing what’s right.” “Sometimes it isn’t easy, but I know what to do and I do it – or if I can’t entirely do it, the problem is created over there (in that department, by my boss, by competitors that don’t play fair, etc.).” – The BLAME GAME! A “non-productive” exercise! – Fix the problem, not the blame! Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 40

41 The Complacent What do they feel? – At a very basic, gut level, the complacent are content with the status quo. Sometimes they cling to what exists because they are afraid, often irrationally afraid, of the personal consequences of change. Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 41

42 The Complacent How do they behave? – The best way to identify the complacent is by what they do instead of what they say (though words can be revealing). – The complacent do not alertly look for new opportunities or hazards facing their organization. They pay much more attention to what is happening internally than externally. They tend to move at thirty miles an hour even when fifty is clearly needed to succeed. They rarely initiate or truly lead. Most of all, they do what has worked for them in the past. – IS THIS YOU? Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 42

43 WHO can be complacent? The assembly line worker, you, me, our bosses, anybody! PMI Houston Presentation Feb 2009 43

44 What is the other problem now? 2.False Sense of Urgency – False sense of urgency is a condition that is very different from complacency. While complacency embraces the status quo, false urgency is filled with energy. While complacency is built on feeling that the status quo is basically fine, false urgency is built on a platform of anxiety and anger. Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 44

45 What are the issues now? Anxiety and Anger – Anxiety and anger drive behavior that can be highly energetic – which is why people mistake false for true urgency. – The energy from anger and anxiety can easily create activity, not productivity, and sometimes very destructive activity. Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 45

46 The odds are overwhelming that false urgency is around you! Where does it come from? – False urgency is almost always the product of failures, or some form of intense pressure that is put on a group. How do people think? – Those with a false sense of urgency do not think that all is well. They may think that the situation they are in is a mess. They may think their boss is applying ridiculous pressures on them. Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 46

47 False Urgency What do they feel? – Those with a false sense of urgency tend to be very anxious, angry, frustrated and tired. Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 47

48 False Urgency How do they behave? – They behave in ways that can easily be mistaken for people with a real sense of urgency because they are very active. – But with a false sense of urgency, the action is more activity than productivity. It’s frenectic! It is more mindless running to protect themselves or attack others than purposive focus on critical problems and opportunities. Run-run, meet-meet, talk-talk, defend-defend, and go home exhausted. – IS THIS YOU? Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 48

49 WHO can behave with a false sense of urgency? The assembly line worker, you, me, our bosses, anybody! PMI Houston Presentation Feb 2009 49

50 URGENCY It all starts with a true sense of urgency! – A sense of urgency – The guiding team – Visions & strategies – Communication – Empowerment – Short-term wins – Never letting up – Making change stick Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 50

51 The Problem: Lack of a True Sense of Urgency The BIG Reason that a true sense of urgency is rare is that it’s NOT a natural state of affairs. Must be “created and recreated” in organizations – Surviving Older organizations have more complacency – Suffering Organizations can still have “business as usual” – Anxiety-filled activities can be mistaken as true urgency – Poor capacity to deal with continuous change, even today – Urgency tends to collapse after a few successes. Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 51

52 The GOOD News A Changing World offers not only many hazards but wonderful opportunities. Such is the very nature of shifting contexts. To capitalize on the opportunities requires any number of skills and resources. But it all begins with a high enough sense of urgency among a large enough group of people. Get that right and you can produce results that you very much want and the world needs! Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 52

53 DO YOU ACT with a SENSE of URGENCY? PMI Houston Presentation Feb 2009 53

54 HOW ABOUT NOW? PMI Houston Presentation Feb 2009 54

55 Sorry…TOO LATE! Picture: Bay St. Louis “Katrina’s” 30’ storm surge PMI Houston Presentation Feb 2009 55

56 Look for RED Flags – Flag # 1 Instead of saying, “We have to deal with this as fast as possible both to stop the slide and to position ourselves for the future, “ and then behaving that way, the executive committee asked the chief strategy officer to talk to respected consulting companies and solicit proposals from them. Four months later, after receiving and evaluating those proposals, the committee selected a consultant to do an analysis of the business and to recommend changes. Nine months after that, the consultants produced a draft of a new strategy for the enterprise. Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 56

57 Wrong: Unacceptable Behavior OR Rule 1: Don’t Put your head In the sand! PMI Houston Presentation Feb 2009 57

58 Look for RED Flags – Flag # 2 THIRTEEN MONTHS after the PROBLEM was known… After studying the consultant’s report, the CEO, with help from his aides, created a task force of carefully chosen people to roll out the strategy and put the company back on firm footing. Out of the top ten people in the firm, two were on the task force. The CEO was not! Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 58 (Strategy Execution: Remember 88% Failure Rate?)

59 Wrong: Lack of Fiduciary Understanding CEO lacks Understanding of his / her Fiduciary Responsibility! The fiduciary duty is a legal relationship of confidence or trust between two or more parties, most commonly a fiduciary or trustee and a principal or beneficiary. One party, for example a corporate trust company or the trust department of a bank, holds a fiduciary relation or acts in a fiduciary capacity to another, such as one whose funds entrusted for investment. In a fiduciary relation one person justifiably reposes confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires one to act at all times for the sole benefit and interests of another, with loyalty to those interests. There is a Duty of Loyalty AND a Duty of Care. It’s not here! PMI Houston Presentation Feb 2009 59

60 Look for RED Flags – Flag # 3 The members of the Task Force had difficulty coordinating calendars to set up their first meeting. Four weeks after they were charged with their tasks, they met for the first time. At least 14 MONTHS after the problem was known! Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 60

61 Wrong: Lack of Crisis Mgt Skills The Task Force Does NOT Understand Crisis Management Crisis management = Clear Your Calendar…we have a crisis! – A crisis is a major, unpredictable event that threatens to harm an organization and its stakeholders. Although crisis events are unpredictable, they are not unexpected (Coombs, 1999). – Crises can affect all segments of society – businesses, churches, educational institutions, families, non-profits and the government and are caused by a wide range of reasons. – Although the definitions can vary greatly, three elements are common to most definitions of crisis: 1.a threat to the organization 2.the element of surprise, and 3.a short decision time (Seeger, Sellnow & Ulmer, 1998). PMI Houston Presentation Feb 2009 61

62 Look for RED Flags – Flag # 4 At that first meeting, the discussion of how to implement the new strategy slid back and forth into a discussion of what exactly the strategy was and whether it was the right one. The Results – nothing! No one came out and said, – “We are floundering and we don’t have the time to do so.” – “I’m not sure I understand the one-hundred page document from the consultants, and you have to help immediately or I am useless on this committee.” – “Why am I on this committee?” or “What power games!” Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 62

63 No one took charge & Made It Happen The practice of crisis management involves attempts to eliminate technological failure as well as the development of formal communication systems to avoid or to manage crisis situations (Barton, 2001), and is a discipline within the broader context of management. (Risk Management) Crisis management consists of skills and techniques required to assess, understand, and cope with any serious situation, especially from the moment it first occurs to the point that recovery procedures start. Source: A Sense of Urgency – J. Kotter Wrong: No One Took Charge & Led The Rudderless Ship of State PMI Houston Presentation Feb 2009 63 Crisis management consists of methods used to respond to both the reality and perception of crises.

64 Look for RED Flags – Flag # 5 No decision was made at the first task force meeting except that it must have another meeting. People were asked to pull out their appointment books. Not everyone had his or hers. After hemming, hawing and negotiating, the members set a time in four weeks to meet again. Two people did not say so, but they knew that would have to miss the meeting because of prior commitments. At Least 15 MONTHS after the problem was known! Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 64

65 Different Meetings Need Different Conversations Different kinds of meetings require different conversations. If you're not clear - then your meeting probably won't achieve a clear outcome. Some meetings are built around a "conversation for possibility." The group acknowledges that it has come together to generate ideas, not to make decisions. The goal is to maximize creativity. Other meetings are built around a "conversation for opportunity." The goal is not to reach a final decision but to narrow down a field of ideas or options. There are meetings that are built around a "conversation for action." The goal is to decide, to commit: "We want to leave this room with our three investment priorities for 2000.“ NONE for Info…do it via e-mail or Memo! Unless everyone understands distinctions, you run into familiar problems. If you call a meeting, make it clear to people what kind of conversation they're going to have, and then impose a certain amount of discipline. Wrong: Not Understanding Purpose PMI Houston Presentation Feb 2009

66 Look for RED Flags – Flag # 6 Between the first and second meetings, very little happened except behind the scenes chatter about why those on the task force were selected and why the specific consulting firm was chosen. Among some people, conversations began about who was to blame for the firm’s eroding position. No one acted on these conversations. They only complained! Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 66

67 Wrong: When Hemorrhaging, Urgency! Company Turnaround Cash Management Rescuer OR Grave Dancer CASH is usually the problem. Project Turnaround Time Management Usurper OR PM Team Developer TIME is usually the problem. Feb 2009 PMI Houston Presentation67

68 Turnaround: Outcomes, Phases, Timelines Company TurnaroundProject Turnaround Feb 2009 PMI Houston Presentation68 Possible Outcomes 1.Bankruptcy: 11,etc., even 7 2.Turnaround, no bankruptcy, with management change 3.Turnaround, no bankruptcy, no management change 4.Disposal of the company Phases 1.Analyze the Situation – days 2.Triage – Immediate – days 3.Develop/Implement Plan - weeks 4.Restructuring – months 5.Stability – over time as needed Possible Outcomes 1.Adjustment to the project 2.Alignment to the project 3.Stop-gap measures 4.Partial salvage 5.Complete salvage 6.Abandonment Timeline (Overlapping Phases) Triage – 24-72 hours - MAX Crisis Plan/Begin Execute < 2 weeks Stabilization – 30-60 Days Maintenance – as needed YOU have a 2-WEEK Honeymoon!

69 Look for RED Flags – Flag # 7 At the second meeting, a sub-task force was created for “communication of the new strategy.” Discussing who should be on this committee took up most of the meeting. One person asked, with a look of pure exasperation, “But what exactly do we have to communicate?” The Task Force ran out of time before this issue received much attention. Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 69

70 The process of strategic restructuring involves uncertainty, and a realignment of the structure and management of an organization. The reaction to even the potential of change is resistance. Five tips should help negotiate transition with Employees: First: Do No Harm Second: Be aware of the impact and not the intention Third: Be prepared Fourth: Keep your focus forward. You as the leader had better believe it, and it had better be true. Fifth: Communicate, Communicate, And Communicate Source: A Sense of Urgency – J. Kotter Communicate, Communicate, Communicate! PMI Houston Presentation Feb 2009 70

71 Look for RED Flags – Flag # 8 SIX MONTHS after the second task force meeting, margins and market share continued to slip. Some improvement had been made in technological development, but not much, and certainly not as a result of any actions by the Task Force. A frustrated CEO began to meet with the task force head more regularly, sought advise from another consultant, and spent an increasing amount of time preparing how to explain all this to his board of directors. THIS IS at least 21 MONTHS after the problem was known! Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 71

72 No company plans to fail or to find its way into difficult situations - but it happens all the time. Over the years, a range of companies facing the need to turn things around have evolved. Sometimes it was on its own and was not economic environment driven, i.e. recession, depression. The paths that they traveled to reach such a desperate condition were varied but the best ways out had a lot in common. Times of corporate distress present special and strategic challenges to management, the board of directors, shareholders, employees and the sources of financial resources so critical to a company’s success. At the extreme, a company may be in either bankruptcy or nearing bankruptcy. Most often, there is a great deal of uncertainty arising from one or a number of problems - with bankruptcy only the last option. IF the turnaround strategy is not QUICKLY formulated and implemented, it usually spells the end for many organizations…bankruptcy, 11 or 7. Source: A Sense of Urgency – J. Kotter Wrong: CEO, Consultant, & TF Leader ! PMI Houston Presentation Feb 2009 72

73 Turnarounds – the Top 3 Problems Management, Management, Management The Wrong CEO The Wrong Board Poor Strategic Choices Poor Execution Inadequate Controls Insufficient Resourcing Revenues Are Trending Downward Inaccurate Sales Projections High Operating Costs Unsuccessful R&D Projects Becoming Uncompetitive Excessive Debt Burden The first key to any corporate renewal plan is an accurate assessment of the root causes of the crisis. ACTION is a Requirement…Fence Sitting is deadly! Separate the symptoms from those causes – identify root cause of crisis. Then figure out which of these causes lay towards the epicenter of the crisis and which are merely symptoms of those causes. Here are a few causes / symptoms: PMI Houston Presentation Feb 2009 73

74 The Scenario The problems throughout this Scenario relate to – too much complacency, – too much false urgency, – too little true urgency. Top Team Members should have – Had a greater sense of urgency – Focused on strategic issues…not relied on a consultant – Never waited nine months for a draft consultant report – Found time to meet as priority. CLEAR your calendar! – With a true sense of urgency…it would be different! Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 74

75 Captain…Your Ship is Sinking! PMI Houston Presentation Feb 2009 75

76 The Scenario Outcome In this case the firm was hurt, careers were damaged, a number of customers could not achieve their plans without the projects they had been promised, and stockholders lost, on average, about 35% of their investment. It was a lose-lose situation. In the short-term, the only winner was the firm’s number one competitor. YOU Be Pro-Active…make sure you are a WINNER! PM is managing CHANGE. Be a Change Leader NOW! Source: A Sense of Urgency – J. Kotter PMI Houston Presentation Feb 2009 76

77 The Decision PPT Presentations: 1.Convey information, or… 2.Get a decision – THIS IS WHAT THIS ONE IS! Are you ready to MAKE the Decision to instill a True Sense of Urgency into your organization starting first thing tomorrow? A simple decision tree might help… – Calculate the Expected Monetary Value (EMV) – using “take no action” vs. “take action and instill a True Sense.” – You might be very surprised at the outcome of this exercise – Can you truly afford not to do this TODAY? I don’t think so! COMMIT NOW to a Sense of Urgency in what you do! PMI Houston Presentation Feb 2009 77

78 PMI Houston – PEG Collaboration IN ADDITION…Sharpen the Saw! Advanced Project Management Program Eric Jenett, PMP#1, APM & PMP Re-certification Program Starts March 9 th – ten evening sessions (6-9PM) REGISTER on PMI Houston website. Venue: PEG Offices Advanced Project Risk Management Workshop Two-Day Intensive Project Risk Management First Workshop – Mar 11-12 (8:30AM – 4:00PM) REGISTER on PMI Houston website. Venue: PEG Offices PMI Houston Presentation Feb 2009 78

79 Thank You! Project Executive Group Your Performance Multiplier - 10260 Westheimer, Suite 250 - Houston, TX 77042 Sterling Bank Building - Beltway 8 & Westheimer

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