This is the second article in the series about what not to do. The person suggesting this article asked for examples of things that might help you save yourself from yourself. Please send me your examples and stories of things not to do. Your confidentiality will be protected unless you want credit for the idea. Sharing this experience, especially with younger executives is one of the best ways to serve the industry. I have an outline of a third article and depending upon response, I could probably keep this going for a while since like a consultant friend of mine used to say, “One idiot can keep three consultants busy forever.”
Ben Franklin’s adage goes, “Failing to plan is planning to fail.” I have found this profound simple statement to be true time and again.
After being appointed interim CFO in a hospital, I learned that there was a major construction project under way. The project and the rate at which the hospital was burning money on the project did not make sense to me. To make a long, complicated story short, no one could produce a feasibility study to support the project’s value proposition or pro-forma analysis to support the project’s underlying financing. When no one could produce a sources and uses of funds analysis, I spent a couple of weeks creating my own from scratch. When I was finished, it was clear that the project was underfunded by over $20 million and the hospital did not have sufficient reserves to cover the shortfall. When this information was provided to the Board, after they recovered from the shock and horror, they decided to stop the project that would have resulted in a problem with the bonds used to finance the project by drawing reserves below bond covenant minimum requirements triggering a technical default. The entire organization was oblivious to this looming disaster.
Ole Abe said that, “You should spend twice as much time sharpening your axe as you spend cutting with it.” The implication of this admonition is obvious to anyone that has ever cut wood with an axe. Still and yet, executives let distractions and competition for their time lead them to allow ill-conceived initiatives to go forward then they are surprised when the projects blow up on them. If you want to entertain yourself, pick any executive out at a cocktail party and ask them if they have ever seen a project go bad. The war stories you will hear are spectacular. Better yet, ask the ‘expert’ if they have ever seen a peer do something stupid. Apparently, they have not heard or have disregarded the advice of Einstein, “Doing the same thing and expecting a different outcome is the beginning of insanity.”
Oh boy! The easy part of a project is the planing and approval. The hard part is execution. There are a lot of challenges with project execution. One is that other unanticipated confounding priorities arise in the organization that bleed capacity from the organization’s leadership to remain focused on a critical project. Another commonly seen problem with project execution is the loss of key leaders during the course of the project. All too frequently, critical assumptions underlying the project’s rationalization are proven inaccurate or incomplete once execution begins. Sometimes, a project’s success is largely dependent upon one person and if that person leaves or is incapacitated, the entire project goes into jeopardy.
To some degree, a project is analogous to a marriage. In order for it to succeed, more than 100% commitment is required from all sides. Every effort you make to manage your risk can be thwarted by uncontrollable changes in your business partner(s). There is no guarantee that the people that sold a deal and made commitments on behalf of your business partner will be around to honor those commitments. If they made commitments that were not in the contract, they may not be allowed to honor them. More than once before a project was completed, I have found myself dealing with an entirely different cast of characters. What about a business partner that gets acquired during implementation and none of the commitments made before the acquisition are honored? A business failure or overcommitment by a business partner can move into your life like bad in-laws. This is why business partner selection is so important. Too often, a decision maker will chose a business partner based on cost alone and in the process buy himself a set of problems that turn out to be exponentially more expensive than the most expensive option that was under consideration at the time the decision was made.
A project does not have to fail to become a disaster. Delays in a project can be as damaging. I do not know of a delayed project that resulted in a better outcome. Sometimes, delays cause cascading problems. Take a construction project for example where the electrical contractor is contracted to start on a date certain and the project is not far along enough for them to begin work. This kind of a delay can rapidly spread throughout an organization and create enough problems to overwhelm the ability of the leadership team to address them. This is the reason you were required to study PERT in school. How often do you see it applied in practice?
If a mistake is to be made in project management, it should be biased in favor of overcompensation for potential problems. I am regularly criticized for being too conservative and too hard on pro-forma analysis assumptions. Never the less, time after time I see projected revenues and time lines being overstated and projected expenses understated.
Waiting too long to intervene
I have watched executives demur from engaging an issue in hopes that it would go away. I have rarely seen this strategy work. More often than not, a problem in an organization will get worse the longer intervention is delayed. There are a lot of reasons that this occurs not the least of which is that addressing operational problems most often involves dealing with a personnel problem. I do not know many executives that enjoy taking on a personnel problem. Vince Lombardi said, “Hope is not a strategy.” Failing or refusing to intervene can allow a problem to become exponentially more damaging until it reaches the point that the organization’s financial statements are impacted. Time and again as an interim, I have been asked, why it was going to take so long and cost so much to address a problem? I have seen ten or more interim executives committed to address what had been allowed to become a major business problem on more than one occasion. My answer to this question is always the same. Cutting costs after an organization finally decides to address a problem only prolongs the time and cost necessary for the mitigation. All too frequently, organizations create a problem by under-resourcing an area or initiative. When this leads to a melt-down, the leaders charged with the mitigation are frequently frustrated by the cost and time associated with fixing the resulting mess. Sometimes, I have to tell them for their future reference that the cost associated with keeping a process or function under control is always a small fraction of the time and resources necessary to straighten it out after it goes catawaumpus. Every executive I know can relate one or more horror stories to prove this point. More often than not, the fiasco is related to an I/T implementation where the costs and operational consequences associated with a failed project can exceed the original budgeted cost of the project.
Fire fighters are known for over-commiting resources to a fire. This strategy is designed to err on the side of having more resource than is needed to address the fire as opposed to running the risk that a growing fire will overwhelm the resources that are available on site. Once, I asked an interim CEO how it was going relatively early into his engagement in a very troubled large hospital. His answer that I have never forgotten was, “The platform is on fire.” A platform is like a ship. When it catches fire, getting off is rarely an option. You must fight the fire where it is and failure is not an option. Remember the USS Forestall? Skimping on resources when dealing with a problem like this can lead to figurative death in the form of an unplanned career transition. A business problem is analogous to a fire in the organization. If you are going to make a mistake addressing a problem, your personal risk will be much lower if you respond aggressively to a problem and err on the side of over-commiting resources until the problem is resolved and the situation stabalized. The alternative is a potential conflagration.
Non-evidence based decisions
The mantra of UAB’s Doctorate of Administration in Health Sciences program is, “Evidence based practice in Healthcare Administration.” I have commented before on what appears to be a paradox in healthcare. On the clinical side, most of what is done is based on evidence gained from objective, peer reviewed research. The purpose of the research is to yield better outcomes and safer facilities for patient care. In the administrative suites of too many healthcare organizations, decisions are routinely made based on seat-of-the-pants hunches, historical precedent, little or no analysis, ridiculous assumptions, no assumptions, flawed analysis, systematic ignorance or reckless disregard of applicable evidence and research. More often than not, harried administrators do not even bother to see if any applicable research is available to help them make better decisions. In other cases, decisions are made for political expediency or to appease Dr. Huff-and-Puff. I got into trouble in a Catholic hospital for suggesting the leadership team’s decision making ranged from magic eight ball to Ouija board. I now keep a magic eight ball on my desk as a reminder to not fall into this trap. It is funny to have younger people ask me what the magic eight ball is. They’re not old enough in some cases to have ever heard of the magic eight ball and they are fascinated to see how it works. It is a wonder some organizations get along as well as they do.