Combo Follow-Up

Multiple projects obscuring results? Don’t give up on follow-up!

What’s the #1 complaint I hear from CEOs and CFOs about follow-up? Pinpointing the impacts of any one individual project when multiple initiatives are occurring simultaneously. So companies track cost and schedule variances, then begrudgingly move on.

Expect More
Perfect isolation of individual impacts may be out of reach, but there is still valuable information to improve future decisions.

For example, I was assessing a business’s follow-up practices where four independent projects, each designed to increase capacity, had been completed at a combined cost of several million dollars.  Follow-up proved all budget and schedule variances were acceptable. And what about any additional capacity realized? Pinpointing individual impacts was impossible, so that was that. The CEO didn’t like it, but impossible is impossible.

Expensive Lessons
At my request, the company reanalyzed the capacity impacts as if these had been approved as a single project.

Combined, the original proposals promised a combined capacity increase of twenty-six percent. So, for example, if the facility originally had a production capacity of 100 widgets per month, capacity should now be 126 widgets per month.

What was the actual improvement? Only 117 widgets per month. (Uh-oh)

Certainly disappointing but trying to allocate results would be pointless. Yet a critical lesson was salvaged.

Each project business case had calculated capacity increases off the 100 widget base, but that is a flawed practice. After one project is approved, subsequent projects should have to use the prior project’s end-point as their starting point.

Imagine each initiative promises a six widget per month increase. After the first project (taking capacity from 100 to 106) is approved, the next project should use 106 as its starting point and confirm it can elevate capacity to 112 (and so on). By the time the fourth project was up for review, it would have to result in 124 widgets per month.

Avoidable Waste
Here’s the punch line: There was a known capacity bottleneck of 117 widgets per month. If the fourth project’s proposal had been clear about their 124 widgets end-point, the COO could have stopped that initiative and saved the company over a million dollars. What would insights like that be worth at your firm?

The key point is that we can’t let imperfect information discourage us from tracking benefits. The world is getting more complex and the rate of change is ever increasing, but companies striving to be best in class will continue to hunt down new techniques to up their game.

© 2012 Verax Point

About Dave Wittenberg

I am all about equipping business teams to enjoy greater payoffs on their biggest bets. I bring a unique combination of evaluation expertise and behavioral insights developed over the course of more than 300 major strategic initiatives. Applying a highly effective, disciplined framework, teams unleash their full capabilities to generate better solutions, wring out hidden waste, and deliver superior returns. Specialties: Investment Evaluation, Decision Excellence, Strategic Analysis, Mergers and Acquisitions, Investor Relations, Leadership Development, Education & Training
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