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Taking a closer look at the other side of project management.

I was reviewing an exposure draft of the summary chapter for a production line reconversion and expansion project when I sensed that something was missing. However, at the time I was unable to immediately place my finger on the missing element. And that bothered me. Placing the pages on my desk, I leaned back and mentally worked my way through the document.

The document was the final summary chapter for two plant changes within the firm. The first was a plant expansion and the second was the construction of a new facility. The organization had recognized that their sales group was being forced to accept backorders due to a lack of present plant capacity. Therefore, plans were being made to expand the capacity of the present production facilities and to build another plant at a site that was still being researched. This two-pronged approach would allow them to meet the present demand for their product in six to eight months and to develop an extensive production capacity in three or four years to prepare for the anticipated growth. During the interim period, provisions were being made to subcontract production of the unit until the initial plant expansion could be completed.

Preliminary discussions with the manufacturers of the production equipment indicated that equipment could be ready for an expanded plant facility in five months and that the equipment and machinery for a new plant would be available for delivery in 18 months.

To assist in the quick turnaround of a greenfield site, the organization planned to modify the plans of their present facility to allow for technological advances and their experience in manufacturing the present product. Their current plant was only six years old and had been designed with a high degree of flexibility to allow for anticipated changes in technology and manufacturing practices. However, management had been surprised by the immediate growth of their product and was therefore short of capacity at the present site. Extensive marketing surveys and analysis indicated that demand would increase or remain constant for another five or six years, within the domestic market. The international market offered a number of potential opportunities, and it was anticipated that it would surpass the domestic market in two years. The firm had experience in international marketing, delivery and service and felt that the expansion into this market could be accomplished with a low level of delays, and moderate marketing and financial risk.

The firm was protected in the short term by patents, but three competitors were presently introducing substitute products that would challenge them in the domestic market place. However, the organization felt that their early movement into the product and their record for delivery reliability and quality would enable them to maintain and increase their market share. Even with the short-term difficulties, they felt that they could hold onto this early-movers' advantage, especially in the international markets.

The organization's development group was working on an advanced version of the product that was being conservatively planned for introduction in 12 to 18 months. The changes in the improved model were significant and would allow the firm to have both models in production for several years with the newer version having an estimated marketing life of six to seven years.

Financing was available for both products, from a combination of internally generated cash flow and long-term mortgage loans. The firm's balance sheet was strong enough to allow the firm to raise money either through a bond issue or a new stock offering in the future, if they desired to replace the mortgage debt.

But these elements were not the ones that were bothering me. The chapter I had read was comprised of a number of summary sections, was well designed and written, and it provided the reader with an excellent summary of the overall project proposal.

The first section of the chapter contained a brief description of the product; the sales for the past several years for the firm and the market as a whole; and predicted domestic and international sales for the next five years. This was followed by an extensive operational analysis that included the current equipment and manufacturing process utilized, average unit and incremental cost summaries, and operating, quality and productivity statistics.

Comparative financial statements and performance projections for six years were included in the third section. One of the strongest elements in this section was the cash flow and debt repayment schedules, showing that, even under a number of adverse financial or operating situations, the firm would still be able to maintain their targeted financial and operational leverage ranges. A section was also included that discussed how these projections could be placed in jeopardy in the event of a prolonged financial recession or unanticipated market swing.

The fourth section included preliminary time lines for the remodeling of the present facilities and the new plant estimated potential work bottlenecks and a schedule of when the various pieces of equipment were to be delivered to the construction sites.

It was then that it dawned on me what was missing from the summary chapter: people!

The introduction to the chapter stated that personnel from the present plant would oversee the addition of the expansion and that the individual subcontractors would provide the manpower for the actual construction. Yet, to my surprise, the summary did not include a description of any additional personnel for either facility.

Picking up the telephone. I called the manager of the group who had written the planning document. After explaining my questions, I was assured that the issue had been evaluated and that somehow the section had not been included in the draft that I was reading.

A manager in the operations group had been named as the coordinator for the remodeling and other personnel would be assigned to the project as needed. These employees would operate on a matrix reporting structure during the course of their dual assignments. It was anticipated that only a few employees would be assigned to the conversion project for its entirety. However, during the course of the project, they would also continue their responsibilities in their original sections under the matrix management system.

The introduction of a matrix system was new to the organization. It had traditionally operated on a functional reporting basis with a minimum number of hierarchical layers within the firm. Even with the dual reporting system, it was believed that few, if any, problems would develop during the course of the reconstruction.

Staffing provisions for the new plant site were still being evaluated. Several employees were being considered for the manager of the new facility, but as yet a final decision had not been made. It was estimated that the more senior operating personnel would be assigned from the present facility or hired from outside the firm. Planning called for the new plant manager to be named within six months and their primary supporting staff to be assigned within a year. Once the new site was selected and its operating characteristics finalized, the employee base would be hired locally. Training would be completed at the new facility with some of the first hires being trained at the existing plant site. It was then that I started to become a bit concerned.

I had just completed reading a detailed analysis of the organization, its operating and competitive environment and detailed summary for the construction of a new plant and the expansion of an existing facility. The analysis included one of the more complete financial and operating statistical summaries that I had seen in a long time and clearly outlined the advantages, disadvantages and risks that the firm would face if they chose not to expand or to adopt the recommended plans. Yet, with all of their technical, marketing and financial expertise, they had either under-estimated or overlooked their primary asset or liability: their operating personnel.

Through the years the firm had established a strong work force and organizational culture. But here they were planning an expansion and a new plant and overlooking the softer side, the personnel issues. True, they had named a project manager for the reconstruction. which was probably their most pressing issue. However, in doing so, they had also made the decision to modify part of their present reporting structure to include a matrix format for those employees assigned to the project. There are specific advantages and disadvantages to this approach, yet in this organization, the introduction of a dual reporting structure may present potential problems.

For example, the formal and informal reporting accountabilities of an employee may be challenged when a time constraint occurs or special project is due in their primary department when a project or report is due to the matrix manager. In this case, the employee may be forced to choose between their regular boss and their primary boss, the project manager. With the significance of the plant expansion, this conflict may result in some hard feelings, missed deadlines and possibly delayed activities. Yet, without clear guidelines as to their specific reporting accountabilities and work priorities, it is left to the employee to resolve the issue and to their two managers to perhaps suffer any consequences or difficulties.

The delay in naming a new plant manager was also an interesting issue. Plans were already being made for the construction of the new facility without the assistance of the individual who would be responsible for its operation once it was completed. Additionally, a project manager had not been named for the new site. One way in which the issue may be resolved is to name the new plant manager as the project manager. Unfortunately, sometimes the level of expertise required to oversee the construction of a new facility is different than that of managing a plant start-up or an ongoing operation.

Additionally, the decision should be made to name the primary operating managers to assist in the final design and construction of the new facility. In this way, they become involved with the process and have a vested interest in ensuring that the construction is completed on time and within budget and that the initial start-up and operation of the plant proceed as smoothly as possible.

Fortunately, the organization recognized their error and broke the initial project into two segments: the expansion and the construction of the new facility. While the planning sections continued with their development of the final operating plans, changes were made in the reporting and staffing recommendations of the expansion project to eliminate the matrix experiment. It was believed that the risk was too great to undertake at this point in time.

A manager was named to be the project manager for the construction of the new facility with responsibility for the construction and the initial start-up operations. The key operating personnel were also selected and are working with the organization's staff specialists in completing the final design specifications and in the selection of the plant site. This change has resulted in a delay in the start date for the project, but the organization believes that the project can be completed within the initially designed time frame. But now, a large portion of the team has a vested interest in making the project succeed.

This is an isolated case that was easily corrected, but it nevertheless points out that we can become too involved with the technical issues associated with the design and development of a project. The technical and design issues associated with a project often present the more challenging questions, yet it is the softer side, the people issue, that may present the more challenging decision and operational risks or problems.

To overlook one side of the equation may increase the chances of failure, but to overemphasize one side over the other will definitely increase the chances of failure. The challenge and the key to success is to balance both sides during the entire project. in this way, at least the odds of a successful project are increased.

Richard M. Morris III is president of R.M. Morris & Associates, a management consulting firm in Dayton, Ohio. Morris received his M.B.A. from Portland State University and is involved in research and management control systems, planning and organizational analysis. He is a recent recipient of the IIE Publications Award and a senior member.
COPYRIGHT 1992 Institute of Industrial Engineers, Inc. (IIE)
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Title Annotation:Support Systems
Author:Morris, Richard M., III
Publication:Industrial Management
Date:Jul 1, 1992
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