Improving Managerial Decision Making Quality using a Systematic Logical Model

1. Improving Managerial Decision Making Quality using a Systematic Logical Model Shimon Zeierman RAFAEL Advanced Defense Systems Ltd.

2. Introduction Quality management is reflected in the success of the managed task, whether it’s project management, company management, quality management itself or any other type of management. The success of a managed task us measured relative to the goals fixed for that task. A well established definition for task goals could invigorate its success. Decision making is a substantial part of managers’ activities while doing their job. Improvement in the quality of decision making will contribute to the improvement of the quality and the results of the management task. Decision making according to guidelines derived from a systematic logical model helps to achieve the improvement so longed for. The systematic logical model defines the primary managerial factors and the logical interrelations between them. The presentation will show the implementation of the method for improving management quality in the specific environment of project management.

3. The Primary Factors of Management Each managerial domain is characterized by several key factors that maintain interrelations between them. Each managerial domain possesses a specific definition yet we can notice some common features to all mangerial domains. Each managerial domain has three primary factors that characterize it and answer the three question: What? When? How much? What should happen? This is the primary factor, the first one, the one that expresses the motivation. The answer is: Definition of the product of the managed task. When will we need the task’s products? This is the secondary factor, the one that expresses the constraint. The answer is: Definition of the time allocated for the managed task. How much resources are needed in order to complete the task? This is the third factor, the one that expresses the shortage. The answer is: Definition of the resources allocated for the execution of the managed task.

4. Project Manager’s Mission is to Manage and Deliver: Specified Scope Performance Reliability QualityCost ... Primary Project Factors Allocated Time Delivery milestones schedule Allocated Budget Keep cost within planned budget

5. The Manager, The Customer and The Performing Organization Each managerial domain is an operative world which is connected to a customer that receives the products of the managed task and pays for it as well as to the performing organization that mediates between thecustomer and the manager, supplies the resources needed to perform the managerial task and expects profit in return to the usage of these resources. A project manager delivers products to thecustomer and works within the frame of the performing organization. A CEO of a commercial firm sells products to merchants and works within the instruction of his SVB. A manager of a public owned hospital supplies health to the citizen and works within the frame of the ministry of health. A technical manager in a project delivers products to the customer and works within the frame of the Project Management Office. The manager is responsible to coordinate his activities with the needs of the customer as well as with the needs of the performing organization.

6. Project Manager’s Mission is to Manage and Deliver: Specified Scope Performance Reliability QualityCost ... Primary Project Factors In accordance with Customer needs and Performing Organization goals Allocated Time Delivery milestones schedule Allocated Budget Keep cost within planned budget

7. Project Factors InterrelationsThe triple constraint Scope Time Budget

8. סדנת הצלחות וכשלונות בפרויקטים קורס למנהלי פרויקטים תע"ש, 24.5.09 הרצאה מאת שמעון זיירמן סגן למו"פ ופרויקטים מנהלת מערכות לחימה יבשתיות מנהל הגנה, חמח"ן, רפאל Project Factors Interrelationsa) The equivalence of value relation Scope Time Budget All three factors are equally important and are equally valued at project’s successfulcompletion

9. Project Factors Interrelationsb) The hierarchical relation Preface: The Organizational Hierarchy Leading the hierarchy: The customer, he who makes the buying decision. Following: The performing organization that adapts the product to the customer needs, invests resources and makes a decision concerning the organizational profit goal. The third: The manager, he is the one who accepts operational decisions to support and materialize the managerial goals.

10. Project Factors Interrelationsb) The hierarchical relation • Scope • Has to fit customer needs • Has primary influence on time and cost The customer makes project buy decisionThe performing organization sets profit goals • Time/Schedule • Has to be the right “Time To Market” • Has primary influence on cost • Budget/Cost • Has to be affordable to customer • Has primary influence on profit Scope=>Time=>Budget hierarchy is common to both customerand performing organization

11. How do we define project success? Project success is measured, according to the equivalence relation between the primary factors, at the end of the management period, and in relation to the managerial goals set for the specific managerial task. Successful management is the one that was completed while delivering the right product scope, under the right schedule and the right cost. Improving management quality and success is possible while exploiting the logic presented in the scheme of hierarchy between the primary factors of the managed task. This logic is exploited to set guidelines to quality decisions be managers, as will be shown later on. Before we do that, let us discuss the “right” managerial goals concept.

12. The concept of “right” in project goals The scope, schedule or cost are the “right” for the project when the following situation exists: Fit customer needs, he is the one that orders and pays for the product. Serve the goals of the performing organization. Feasible using best estimated made by project manager and his team. The hierarchy of stakeholders (The customer, the performing organization and the project manager) is setting preferences in the process of defining the “right” goals. “Right” is dynamic, alive and kicking, changes continuously with time from project kick-off to project completion: Definition of product scope may change or become clear with time. Project milestones schedule may be shortened or extended by stakeholders or by a default. Budget assigned may be changed during the execution period by stakeholders or by project actual track.

13. Ingredients of the Project Management Task Project management task is comprised of the following sub-tasks: Planning Build a plan that is aimed to reach all success goals i.e. being on spec, on time and on budget. Make decisions related to the design and planning of the project on the basis of goals being the "right" ones known at time of planning while making all provisions for changes and updates as long as they are required. Monitoring Monitor the planning goals and their “rightness” relative to customer needs, performing organization goals and new data revealed during project execution Monitor project and identify deviation from plan Corrective Actions Make decisions related to the redefinition of the “right” goals, if needed. Make decisions to update plans to adapt to new goals, if any, and to compensate for deviation from current goals.

14. Decisions – the primary parameter affecting project success Guidelines for decision making are based on the hierarchical relation between project factors: First priority will be given to achieving the "right" specification Decision should reflect top priority to reaching the “right” specification Adverse effect on schedule and cost should be taken care of with further decisions Second priority will be given to staying on the "right" schedule Decisions should reflect second priority given to staying on the "right" schedule (no spec compromised) Adverse effect on cost should be taken care of with further decisions Third priority will be given to the "right" cost Decisions to stay on the “right” cost should be taken (no spec or schedule compromised) Increasing efficiency of operations, exhausting cooperation with other projects conducted in the same performing organization, taking calculated risks etc. Last priority – when all other choices are fully exhausted Address the customer or the performing organization and ask for relief in specification, project milestones rescheduling or financial aid (budget increase or profitability decrease).

15. Examples for Dilemmas and Decisions A) The Specification Gap Dilemma A gap is observed in the actual vs. planned characteristic of product. How should the project manager react? Recommended Decision Immediate initiation of further development to close the gap. Re-plan project by making decisions aimed at closing schedule and cost deviation incurred. Example A component is found to be less reliable than planned during verification tests. The "right" reliability is discussed with the customer and it is agreed that the specified reliability is crucial to project success. The decision recommended is to replace the component with a more reliable design. Project plans are changed to reflect this decision. An effort is invested in finding ways to complete the project on time and to reduce cost overflow to minimum.

16. Examples for Dilemmas and Decisions B) The Time Dilemma Dilemma A way was found to close a deviation of schedule yet it requires an unexpected extra budget. How should the project manager react? Recommended Decision Approve extra expenditure and initiate schedule deviation closure Look for ways and make decisions that will lower the extra investment to minimum. Example Delivery schedule of a purchased item appears to push the project out of the "right" schedule. Extra payment to supplier can expedite delivery. The extra payment is significantly lower than the direct cost of delaying project delivery schedule. There are still some funds left in the project budget reserved for unexpected-unplanned activities. The decision is taken.

17. Summary The project task is to manage the building of a right product delivered to the customer at the right time and on the right budget, while leaving the performing organization with the right profit. Project , customer and performing organization environments are dynamically interacting, continuously redefining the “right” goals for the primary project factors. A hierarchical relation between primary project factors is suggested: Prioritization rule is defined, to be used by project managers while making programmatic decisions. Proposed scheme was successfully implemented in several projects. Scope Time Budget

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