How to fix megaprojects
Read the third article of our four-article series on megaprojects by Connor Butler, Billy Glennon, Chauncey Bell and Charles Spinosa.
It can be done
In the first two articles in this series, we explored the importance of megaprojects (capital projects costing more than $1 billion) and why they so often fail to be delivered on time, on budget and with all the promised benefits.
In this piece, we provide an overview of the fix. It’s a fix that all four of us have taken when we have guided successful megaproject teams. It works. And the insights that we share here also apply to large capital projects, particularly if they are of significant scale to you, your organization or community.
The fix comes in four segments: transformational leadership, transformational governance, the sharing of risk and rewards, and commitment-based management.
So how do you do it? How do you deliver your megaproject’s full benefits on time and on schedule? There are four key ingredients to making this work, and this first one involves taking a radically different approach to leadership. Only when that is in place can you turn to then addressing governance, risk and rewards, and commitment-based management.
1. Transformational leadership
The budget holder must take on the role of a strong, heroic leader fighting to change the way megaproject work is achieved, and developing leadership skills in partners. Megaprojects require mega-leadership. This first means being willing to take moral risks, then share authority and build each other up, sometimes even competitors, for the sake of the project. In simple terms, here are the steps required:
- The leader assembles the suppliers for approximately seven weeks of program development, including setting out the goals of the program, a date for the completion of negotiations for the Integrated Project Delivery Contract, a date for the completion of the initial plan and schedule, and milestones for agreements on costs.
- During the seven weeks, the leader and their associates lead workshops on the new way of working and negotiate the activities, deliverables and costs in light of this approach. The budget holder’s accountants work with the suppliers’ accountants to develop an understanding that what both parties agree fairly represents the real costs.
- In these working sessions, the leader and their associates stand fiercely against the patronizing, policing behaviors of their own budget-holding organization and against any petty gameplaying among suppliers. To achieve this stance, the leader will surround themselves with highly experienced financial experts (former CFOs, for instance) and at least one senior, experienced culture change expert.
- The leader listens carefully to all the complaints about past behavior on similar projects, and takes on the smaller complaints seriously: problems with water at breaks, cleaning the restrooms, parking, scheduling lunch etc. Instead of solving these, the leader puts the suppliers together in small teams and gives them authority to come up with the solutions. Thus, the suppliers, often competitors, begin to learn to take each other seriously as colleagues and take ownership as co-leaders. There are many wake-up moments when coaches call out gameplaying and people have to take their authority seriously, like early common-law jurors realizing that they are deciding on the life and death of their neighbors. As these teams work through small problems, more come their way, and they get better at forming consensus and taking their authority seriously.
2. Transformational governance
This begins by establishing a policy organization, modeled on a board of directors. At least half of its membership should consist of people outside the project execution teams. Include likely antagonists. Any compensation this group receives should be directly tied to the project hitting its goals.
Then establish a top-level, longest time-horizon meeting with the most senior decision makers from the budget holder and all relevant suppliers who lay out the major moves of the project in six-month segments over its full length.
Next, create a second-level, monthly time-horizon meeting with project managers from the budget holder and all relevant suppliers and departmental discipline specialists (like finance, real estate, engineering design, procurement, and so forth) to lay out the project over a six-month to monthly timeframe.
And then, you also need a third-level, weekly time-horizon meeting with area managers from the budget holder and all relevant suppliers and their reports to focus on weekly commitments.
Except for escalation, govern these meetings identically:
- Make decisions by consensus
If participants of one of the lower level meetings cannot come to agreement, they can escalate. Participants at the top level establish a rule that they must come to agreement in a certain amount of time and, if they do not, a resolution principle comes into play: ‘decision by majority, senior budget holder, or arbitrator’.
- Do things faster, cheaper or with added benefits
At each meeting, find a way to do things faster or cheaper or with a better-than-expected benefit at current costs and times. Simple progress is not good enough. Each participant looks for ways in which their teams could:
– Do something in parallel with others.
– Do work ahead of others (for instance, surveyors doing a technical piece of work as they conduct the survey).
– Do work for multiple others (as in getting permits for all the work that can be done over a certain period of time).
– Do work that another team is nominally responsible for but where that other team is, for one reason or another, unavailable.
We have used this kind of coordination to cut cycle times by 50% and more, and costs by 10% and more.
- Obtain approval for everything
Secure approval on every plan or change in plan, budget and change in budget from the group at the next smaller time horizon. It prevents overly optimistic estimates and ensures buy-in to plans, which otherwise often go ignored.
- Rotate the chair at each meeting
This keeps discussions freshened up.
- Coach for insights
Members of the higher-level bodies should coach members of lower-level bodies on how to succeed. Coached properly, they will provide considerable insight (as opposed to oversight).
3. The sharing of risks and rewards
The key points here are as follows:
- Award contracts to suppliers on the basis of experience and skill, not on the basis of projected cost.
- Only engage in agreeing contractual terms once the accountants on the budget holder and supplier sides believe they are seeing genuinely open costs and books.
- Use legal experts with experience in these kinds of agreements.
- Align all the parties to a common structure of goals such that all profits come out of savings made on the project as a whole, not individual parts.
- Create healthy incentives to reduce costs and innovate without jeopardizing shared rewards.
- Get real about managing risk. Accept that, in one way or another, the budget holder will pay when things go wrong. Set up the agreement so that suppliers make profits when things do not go wrong or when they make up for losses with savings elsewhere.
4. Commitment-Based Management™
Commitment-Based Management is modeled on the way agile, entrepreneurial start-up teams work1:
- All work is performed on the basis of a commitment of a performer to an internal or external customer, not individual professional judgements.
- All members of teams make commitments to each other for results for which the members are then responsible. In addition, all take on the additional commitment of supporting each other by picking up the ball if it is dropped.
- All team members listen for difference in what others say; they are trained against listening to hear what they expect.
- Each commitment is specific: requests are specific; negotiations clarify; questions are asked during execution; feedback is regularly given; clarifying insights never end as planning and work proceed. Each commitment has a precise standard of quality, time, and cost.
- Everyone on the project understands the local, global, and historical importance of the work being done and makes even small commitments in that light.
- Team members always decline requests that they cannot fulfill. They negotiate promises they can fulfill. There are no merely hopeful commitments.
- Operations meetings are focused on surprises that people encounter in trying to fulfill commitments. If there are no surprises, the work is not getting done.
- When some members of a team encounter unhappy surprises, they say so. They make adjustments as a team where other members try to make up for the surprise.
- Everyone manages his or her own mood and identifies others who have fallen into bad moods, coaching them out of it. The common bad moods to watch out for are resentment, arrogance, fear, and most importantly resignation, which happens when people feel overwhelmed. These moods are early warning indicators of deeper problems that must be met as a team.
This is a top-level overview of how our fix works. In the fourth and final article of this series, we’ll explain why it works.
If you are involved in a megaproject or smaller capital project, our thinking and insights can help you now.
Listen to our Megaprojects podcast series.
Contact the authors:
1 See Sull, D. & Spinosa, C. (2007). Promise-based Management: The Essence of Execution. Harvard Business Review; Winograd, T. & Flores, F. (1987). Understanding Computers and Cognition: A New Foundation for Design. New York, NY: Addison-Wesley.
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