PSGS 038: Expert Interview with Rich Maltzman

PSGS 039: Expert Interview with Stuart Easton - Strategic Alignment Really Matters!

Strategic Alignment

Today we are speaking with Stuart Easton he is the CEO of TransparentChoice and is a veteran of the software space. His back ground includes stints working on reporting and data analytics and he is passionate about improving business outcomes for his customers. Stuart lives in the UK and enjoys hiking, mountain biking and playing with his kids. This recording will be our 3rd discussion, and we have a lot to chat about, so let gets started.

   

 

Gerald:               Okay. Today we are speaking with Stuart Easton. He is the CEO of TransparentChoice and is a veteran in the software space. His background includes stints working on reporting and data analytics. He's passionate about improving business outcomes for his customers. Stuart lives in the UK and enjoys hiking, mountain biking, and playing with this kids. This recording will be our third discussion around the area of project, program, and portfolio management, and specifically today around AHP, analytic hierarchy processing.

                             So let's get started. We have a lot to chat about. So let's get started. We're going to be talking about strategic alignment. Stuart, good morning. How are you today?

Stuart:                 Good morning, Gerald. Third conversation and I'm still struggling to teach you the Queen's English. But we will get there, don't worry.

Gerald:               I'm going to work on that, eh? I'm not sure if that's Queen's English or Canadian.

                             All right. So we have a lot to talk about with our important topic, which is strategic alignment. PMI just put out a lot of really good data about that. Do you want to share that with us?

Stuart:                 Yeah. Sure. This data comes from the Pulse of the Profession, which is kind of PMI's benchmark annually report. It's about strategic alignment and the impact of that on project success. There are different ways of defining project success. Probably the most important one is about achieving business goals.

Gerald:               Okay.

Stuart:                 The really interesting thing was that projects that are aligned properly aligned with strategy. 57% more likely to achieve the business goals than projects that aren't. That's a huge difference.

Gerald:               Right.

Stuart:                 It turns out that even if you take different sort of metrics for measuring project success, the strategic impact still has a really ... Sorry, the strategic alignment has a really big impact. So for example, projects that are aligned at 50% more likely to finish on time. They're also 45% more likely to finish on budget. So somehow there's this sort of magical thing called strategic alignment that seems to have a really big impact on project success rates, and I think most PMOs kind of miss that. They think that it's something to do with appeasing the stakeholders and things like that, and yes, it is to do with that. It's to do with helping your stakeholders achieve their goals, but it's also about hardcore project success rates.

Gerald:               Right. Right. So if you think of the word strategic alignment and having projects that are strategically aligned, could you go in to talk a little bit more about specifically what is that?

Stuart:                 Yeah. See, this is what makes it so difficult, Gerald, thank you for asking the hard question first. I really appreciate that.

Gerald:               That's something Brian Tracey says is eat that frog, right?

Stuart:                 Yeah. Exactly. All right. Let's try to do a little bit of ribbeting then. So the difficult thing here is that if you ask different people in the organization what strategic alignment means, if you go to the CEO, you go to the CFO, you go to the head of your different divisions, every one of them is going to give you a different answer to the question, what is strategic alignment. Fundamentally, that's what makes this so difficult.

                             Let me tell you what strategic alignment is not. Strategic alignment is not just financial impact. So many people drive their portfolio based on net present value, return on investment, quantified savings from a project, things like that, and generally that is not strategic alignment. It could be one component of strategic alignment, but actually as an organization, you have a blend of things you're trying to achieve. We're trying to penetrate new markets. We're trying to increase staff retention. We're trying to attract new customers. These are all different parts of the strategy. If you think about strategic alignment, it's derived from the word strategy. So it starts with what's the strategy of the business. It's about aligning your activity to support that strategy.

Gerald:               Right. Right. It sounds like that a part of that exercise, and we'll get into talking about how do you do that, but it sounds like if you go that direction of really talking about and getting the organization focused around strategic alignment, that you're not just aligning "the organization" but you're aligning the individuals at the top and throughout the organization that's cascading throughout the organization to kind of focus and go in the same direction.

Stuart:                 Absolutely. I mean, it continues to amaze me how poorly aligned organizations typically are. So a large government owned organ- ... I'm not going to name them because it's kind of embarrassing. But a large government owned organization that we helped a little while ago, when they looked at their portfolio, they said that their activity was all aligned. 80% of their projects were tagged as mission critical, got to have type projects. So that's what the executive teams said so you'd think that means strategic alignment, right?

Gerald:               Right.

Stuart:                 But when we dug into it, we discovered that actually a third of their project portfolio, one third of the portfolio was obsolete. So this is really interesting. Even within the board room, within the guys and gals who picked the portfolio projects, there clearly wasn't alignment about what was important because a third of the portfolio was obsolete. Now if you come down a level or two in the organization, that problem just gets worse. It's not only they're not talking to each other in the same room, but people one or two levels below in the organization aren't even in the room for the conversation.

Gerald:               Right.

Stuart:                 So it's very difficult for those people without some kind of formalized structure. It's very difficult for those people to align their activities effectively behind the strategic goals of the organization.

Gerald:               Right. Right. Now you talk about a formalized structure, what should that formalized structure look like?

Stuart:                 That's a good question. So there's been research into this over decades. If you go to most sort of big engineering or business schools, they'll be somebody in operations research, as often where it sits, looking at this issue of how do you align your activities to your strategy, and very specifically, how do you select projects, how do you project prioritization and selection. So there's a recent study by a paper released by some researchers at the University of New South Wales that looking at that whole body of research. So decades worth of research. From that which mechanism, which methods of driving strategic alignment actually work. They came down to two, just two. One called DEA and one called AHP.

Gerald:               Okay.

Stuart:                 Within that, they kind of said ... They looked at the two and said those are the two that are most suitable, and the rest basically aren't suitable. So if you're in a room and you're doing this in whiteboards, just be really clear, the research says that doesn't work. If in you're in spreadsheets and you're just kind of banging in weighted criteria and doing all kinds of stuff, again, the research is pretty clear, that doesn't work very well.

Gerald:               Okay. Okay.

Stuart:                 So these two methods ... Where I'm most familiar with AHP.

Gerald:               Okay.

Stuart:                 When we started TransparentChoice five, six years ago, we looked at all the methods and we came to basically the same conclusion the guys in New South Wales came to that the AHP is the best one. Basically because it's got that academic rig up, but it's also usable. It's accessible.

Gerald:               Right.

Stuart:                 It all comes down to actually conceptually it's very simple. You collect a bunch of project requests. You define some business goals, which become the criteria that you use to evaluate the project requests. So that seems kind of logical and you can do that in a spreadsheet, but the key thing is that bit about strategic alignment where you define what's the strategy. You need to get everyone on to the same page and how you do that makes a difference. That's where AHP really kicks in. The process is called the analytic hierarchy process. That's what AHP stands for.

Gerald:               Okay.

Stuart:                 And it's a very structured way of comparing the different goals and drivers in a team setting. So you get your stakeholders involved in this process, and it's a method that was designed to reduce the amount of bias in the decisions, decision making bias, to overcome problems like bounded rationality, which is basically the fact that you can't hold all the variables in your head at once.

Gerald:               Right.

Stuart:                 So it helps overcome things like bounded rationality. It helps overcome sort of damaging group dynamics like group think and things like that.

Gerald:               Okay.

Stuart:                 Again, the important thing here is that this is something that is based on research and has been validated through ongoing, over decades, ongoing academic research. So it really is very, very strong and powerful technique.

Gerald:               Right. Right. And it also sounds like based on the rigor that goes into it that it could help eliminate pet projects through companies where someone wants to just get a project in because they think it's a nice project to do, but it doesn't really align to the strategy as well.

Stuart:                 Absolutely. A recent customer we had, they had a couple of pet projects or a number of pet projects that were in there that were consuming something like 20-25% of their resources. I mean, that's a significant chunk of resources. Over the previous three planning cycles, before we got involved, basically everyone else in the room, a part from the most senior person, tried to kill off those pet projects and failed. It wasn't a lack of data. It wasn't the lack of information. It was a lack of good, solid process to get a decision. So when they went through this process with TransparentChoice, they got to the end and they could really clearly see value on one dimension and the cost of another dimension. This nice group of a high value for money projects on the chart, and then this other group of really poor value for money projects, which were all these pet projects. So the guy who actually owned those projects was the sponsor. Instead of defending his projects, he was the one who put his hand up and killed them.

Gerald:               Wow.

Stuart:                 Which is pretty awesome. I mean, I was very excited to hear that one. Of course, that translates into millions of dollars in savings.

Gerald:               Right. Right. I'm sure because a lot of times companies will have either pet projects or what I call wild flower projects where they just kind of pop up all over the organization. You have these projects that pop up. They really are not one track. They don't go through any kind of board. There's no decision criteria in which they're decided. They just kind of come up. They consume resources, but by having some form of a gated process using AHP to filter the projects through, it seems like one, you get alignment not only just the strategy but you get the execute team, everybody on the same page of what the criteria actually even means. What your experience with that where you've gone through the process of getting everyone to even agree on the criteria, what have you seen that do for organizations?

Stuart:                 Well, it's quite transformational actually. So the customer I mentioned earlier with the pet projects, it was really interesting because they took the criteria. They went through this wonderful process and came up with this definition of what does strategy mean. What does a valuable project look like for this organization?

Gerald:               Mm-hmm (affirmative).

Stuart:                 And they took that to the mid-level managers in the organization, and it caused a near riot because the folks in the room were jumping up and down saying, "Hey. We've never seen this before. We had no idea that you wanted these things from us." The way people thought about their roles, and I'm talking about people in the middle of the organization, the real engine room of organizations. This is where most decisions actually get made. Most operational decisions actually get made in the middle, not at the top.

Gerald:               Right

Stuart:                 So if you can get those people aligned by sharing the strategic vision that comes out of this AHP process, then suddenly all the activity in the powerhouse of the organization is aligned with strategy, and that's transformational. So Bain and Co did some research into that kind of decision making empowerment. When you have really strong decision making culture, companies with that kind of culture are six percentage points stronger in terms of returns to shareholders. So not 6% but six percentage points on average than their peers. I mean, it's a huge impact, and it just all comes from this thing of strategically aligning your decision making to the direction that you want to go.

Gerald:               Got it.

Stuart:                 It's not hard to see where this comes from. If you look at ... Probably the most common thing I hear is, "Hey, we've got too many projects." When you got too many projects, what happens? Your resources get spread out.

Gerald:               Right.

Stuart:                 When they get spread out, everyone's under pressure. You start making mistakes then you got to go and fix your mistakes, which consumes even more resource. It's horrible.

Gerald:               Right. Then you have bad multitasking as well. A lot of people think they can multitask, but they really are wasting a lot of their time.

Stuart:                 Oh, multitasking is one of the easiest wins for any project organization. Just eliminate the multitasking.

Gerald:               Right.

Stuart:                 So if you can sort that problem and right size the portfolio and really be very clear about these are the 10 projects that are absolutely top priority. These are the 30 projects that are kind of mid-priority, and these ones, you know what, we'll get to them when we get to them down at the bottom. If you can do that and be really clear about that, then those top priority projects, they're going to get all the resources they need, and they are going to succeed.

Gerald:               Right. Right. Go ahead.

Stuart:                 Go ahead.

Gerald:               No, I was going to say one of the things that's critical about that too is when you do that, you're able to get the projects in the door and out of the door and deliver the outcome that you're looking for and the organization starts receiving the benefit of that project much faster than if you're trying to multitask and the six week project turns into a six months project. It doesn't get done until six months where you could've been receiving the benefits of that effort being done almost four months ago.

Stuart:                 That's a really important point actually, Gerald. So we started with a few statistics, right? 57% more likely to achieve business benefit, 45% more likely to land on budget, and 50% more likely to land on time. These are statistics that most PMOs, they're tracking this stuff.

Gerald:               Right.

Stuart:                 It's part of their scorecard. It's part of how they justify the existence of the PMO, but this is not about a scorecard. If you imagine you've got a portfolio of projects that's worth $100 million, just keep the math simple. So you got a portfolio that's $100 million, and let's say you're somewhere in the middle of kind of project overruns. So a really ... Again, these are PMI stats. A really top performing delivery organization will have roughly 10% of their projects will overrun. A poor performing one will have 75% of their projects will overrun. So let's say you're somewhere in the middle at 50%. So you got a $100 million project portfolio.

Gerald:               Okay.

Stuart:                 $50 million worth of those projects are going to overrun. Let's say that they only overrun by 20%. By my experience, when projects overrun, they overrun, right? They don't just overrun by 20%.

Gerald:               Right. Right.

Stuart:                 But let's just make that assumption. So your $50 million, we're going to overrun that by 2%. That's $10 million. That's $10 million of waste because your projects are running over. So it's not about your scorecard, Mr. PMO. I'm really sorry. This is real money. This is real waste when your project overruns.

Gerald:               Right. Plus if those projects were to bring in revenue. Let's say you finish that project and it's supposed to promise an x amount of revenue per month. For every month that that project is not delivered on time, that's revenue that is also been lost. So you have to add that number to the lost or the waste that's happened as well. So it's probably much larger than the $10 million on a $100 million portfolio that we're talking about.

Stuart:                 Absolutely right. You're completely right. I mean, it's really interesting because there's Peter Drucker, for those of you that don't know him, is kind of this God in the business academic research community. He said that there's nothing quite so useless as doing with great efficiency something that should not be done at all. That's at the heart of this whole thing. If you focus on the things that you should be doing, the things that are really going to move the organization forward, and just stop doing the stuff that doesn't support your corporate vision, then you're going to be far more successful. It's not about how many projects you deliver, it's about how much business value you deliver, and that's about alignment, it's not about activity. It's not about volume, it's about focus.

Gerald:               Exactly. Exactly. Well, Stuart, what trends do you see in the industry when it comes to AHP and some of the things that you've been doing with your customers?

Stuart:                 Well, it's really interesting. I was at a Gartner Summit not too long ago, a sort of PPM summit. I guess it was about a year ago now actually. They stood up and shared some numbers around project success rates and how they'd improved over the last decade in a half but basically plateaued now. So Gartner's conclusion from that was to keep improving project success rates, the next thing that you have to focus on is the portfolio level management. Its strategic alignment, prioritization, all that kind of good stuff.

Gerald:               Right.

Stuart:                 So there are historically two camps of tools that helping you do that. One is the invalid camp, right? So this is all these doing it on a whiteboard, doing it in a spreadsheet, and even the vast majority of PPM tools, they might have some really nice charts and everything in the project selection module, but those charts are not based on real decision science. They just made something up and the research says it just doesn't work. So you might have nice charts, but it doesn't really work. So there's that group, and then there's the group of sort of AHP based, real prioritization tools. That second group historically has been very expensive and very difficult to use. As a consequence, it's only been adopted in the mega-portfolios. You got a $500 million and up portfolio, people use it. But if you got a $10 million portfolio, in the past it's kind of been out of reach. So what we've done is made that much more affordable and more easier to use.

Gerald:               Okay.

Stuart:                 To enable that technology to come right down the stack. So I think our smallest customer's portfolio is probably less than $100,000.

Gerald:               Oh, wow.

Stuart:                 So we scale it right down to these small portfolios. Then there are other tools coming along that sort of pick up from there, and again, at a much lower cost than you've been able to do historically. Help you take those very focused projects that we spit out, that we help you select, and turn them into a master schedule much more quickly. So balancing the resources to ... Sorry, balancing projects to the resources that you have available and doing what if analysis on your resources and all that kind of good stuff. That technologies become much more usable and much more affordable as well. I think what that does as one big trend for the industry is it means that these portfolio management tools, the real ones not the fake ones where someone's just made up a methodology but the real decision science based tools, are now accessible for mere mortal PMOs, right? Not just the mega-portfolios.

Gerald:               Right. Right. Which is really, really good news and that's a great trend because I definitely have seen where a lot of the research organizations are saying that portfolio management is becoming the focus because a project management it's really saturated within some of the PMOs. It's about doing projects right once you get them, but if you're doing the projects right but you're doing the wrong projects, that doesn't help. So that portfolio management really ...

Stuart:                 Or trying to do too many projects.

Gerald:               Right.

Stuart:                 That doesn't ...

Gerald:               Doing too many projects at one time, but portfolio management is really about doing the right project and selecting the right projects, which enhances that strategical alignment and that collaboration that needs to happen at the top and in the middle that's so important.

Stuart:                 Absolutely.

Gerald:               Excellent.

Stuart:                 Coming back to the first kind of customer a spoke about where they had a third of the portfolio that was obsolete and 80% of the projects tagged as critical. When we finished with them, they had a really nicely ranked list of projects. They knew which was were important and which ones were less important. Just to sort of finish that off, what that meant for the team on the ground was that when they had a decision to make, when they had to make a resource allocation decision, they could make it instantly and correctly.

Gerald:               Right.

Stuart:                 They knew which projects needed the support, which ones were valuable, and which ones were not. It wasn't a matter of politics. It wasn't a matter of who shouted the loudest. It's the matter of strategic alignment and to me, that's what it's about. It's about delivering more better projects.

Gerald:               Excellent. Excellent. Well, Stuart, I have a class that I'm working on right now that I'm delivering here soon on a platform called Skill Share. It is about AHP. The title is going to be Making Effective Decisions Using AHP, and it's really going to provide a simplified framework for how to understand AHP and how to leverage AHP. There's a class project where students can come on and get a trial account of TransparentChoice and really leverage that platform and kind of kick the tires on it. Where else do you say people could go to learn about AHP?

Stuart:                 I would certainly go and find your course because you and I talked about that the other day a little bit, and it sounds like a really nice package and quite practical, quite hands on. That's always good. Our website has a lot of resources. We have tutorials and blogs, very specifically from the topic of this particular podcast. We have a lot of blogs about the importance of strategic alignment, how that's connected, to draw the connection between alignment and project success, and that material is really useful when you're trying to get people behind the idea of changing the way you do it today. Whether it's the executives or people lower down in the organization. So we've got e-books and all kinds of things on there that will help you tell the story internally about how improving strategic alignment will translate into better, more better projects.

Gerald:               Excellent. Excellent. Okay. So today we've been listening to Stuart Easton, the CEO of TransparentChoice. Stuart, if our listeners want to learn more about you, where should they go?

Stuart:                 Definitely head over to TransparentChoice.com. That's transparent as in a piece of glass and choice as in a decision. Dot com. As I say, on there you'll find a blog. We have some sort of free resources, free software that you can use. You're not going to be able to do too much useful with it if you have a reasonable sized portfolio, but you'll be able to get your hands on it and start to learn more about how this way of doing things can improve your environment. So I would go and play with that stuff and hands on is often a really good way to learn.

Gerald:               Excellent. Excellent. So that's our talk for today. So if you're looking for more expert insights, please go to PrincipleExecution.com and click on podcast. Stuart, thanks so much for talking to us today.

Stuart:                 Thank you, Gerald.

Gerald:               I look forward to our next conversation here in the future.

Stuart:                 Thanks very much.

Gerald:               Bye, bye.

 

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