CEOs don’t need to worry about projects. Wrong!by David Walton (No Comments )
Just ask the CEO of Knight Capital whose recent software upgrade launched hundreds of trades resulting in a loss of $440 million. The company’s existence is threatened and today (7th August 2012) a consortium of four firms are preparing to inject £256 million into Knight Capital in an attempt to reverse the damage caused by a software glitch and ensure the company’s survival.
Some projects that go wrong can damage shareholder value or even threaten the existence of an organisation. These projects are not, of course, confined to the US. In the UK, a recent software upgrade at Royal Bank of Scotland caused nationwide problems with many customers being unable to pay staff or even withdraw money. RBS are rumoured to be putting aside a sum of £100 million to compensate customers.
I’d wager that if you’d have tried to get the CEO of Knight Capital or RBS involved in their respective projects, you would have got short shrift. And, understandably, it is not the CEO’s job to be involved in projects. The CEO must, however, be made aware of ‘value risks’ of any project, i.e. risks that can affect shareholder value. He or she can then at least ask the right questions to ensure risks are being adequately managed as, after all, the CEO’s job is to increase shareholder value NOT destroy it.
These two organisations probably have very expensive and complex project management tools that track hundreds of risks and issues on a project. This is clearly useful for the project team so that they can address issues and avoid or mitigate risks. These are what we call delivery risks and delivery issues. Some of these risk and issues are what we call ’value risks’ and ‘value issues’, i.e. they affect either the benefits of the programme or, in some cases, they affect the shareholder value of an organisation. It is these value risks and value issues to which the CEO’s attention should be drawn.
You can use our project and portfolio management tool, PM3, to separate out these different risks and issues so that the CEO is made aware of the value ones. However, having a process that separates these outs in almost a triage type fashion is really what is required. If this is done then some CEOs may sleep more easily in their beds!