Beating the Odds

There are almost as many reasons for project failures as there are failed projects, but the success rate for business initiatives has been given a boost with the advent of project management. Most carriers no longer turn over business projects to IT professionals who know the technology but not the business. The importance of making projects successful can be seen in the amount of money carriers are spending on new projects. In its most recent survey of CIOs and CTOs, research group Celent found 31 percent of budgets for large carriers in 2006 was spent on new projects, with an even more impressive 42 percent spent by midtier carriers on projects.

The lack of a clear project strategy is an easy trap for companies to fall into when it comes to project planning, contends Norm Buckwalter, managing advisor, innovation and planning, with Accident Fund Insurance Company of America. "It's challenging for any organization to shift its focus from day-to-day tactical issues to long-term strategic goals for the company," he says. "All of us can get absorbed in tactical demands for our customers and our internal staff because these are tangible, important, and right in front of us."

When it comes to managing projects, the factors that affect cost and schedule are fairly common across most industries, comments David Seaver, managing director of the information technology practice for PRICE Systems, a consultant group that estimates and analyzes the effort, schedule, and cost of projects. "The things that impact the cost of IT don't change when you go from business area to business area, and they don't change that much when you go from COBOL technology to JAVA and browser based," he says. "They still are fairly consistent."

Accident Fund has been successful in separating the strategic from the tactical, Buckwalter believes, because the innovation and planning team he manages is focused on the development and execution of the strategic plan of the company. The enterprise project management office (PMO) is housed within the innovation and planning team, but Buckwalter points out his group doesn't manage every project in the company and doesn't want to. "The team is focused on successful implementation of those 40 to 50 key initiatives that are part of our 2010 strategy and beyond," he says. Decisions on which projects to helm don't always come down to dollars, though. Buckwalter notes risk and complexity can be just as important as finances, but he adds, the overriding driver is strategic–those projects that help Accident Fund pursue its national expansion and become easier to do business with. The executive staff supplies the vision for Accident Fund, explains Buckwalter. Once the vision has been formulated, it goes to the innovation and planning team to determine how the company converts it into reality.

Karen R.J. White, senior director consulting services in the project management practice for the consultancy PM Solutions, would love to see more of her clients bring the PMO into strategic planning. "It ensures projects the PMO undertakes have an alignment to corporate strategies, and if the alignment is not there, [the PMO] can ask the hard questions," she says.

Even when the CIO is part of the strategic planning, White finds the CIO and the PMO frequently are not totally aligned. "Sometimes the PMOs are seen as project administrative offices, not project management offices, and they are viewed as an extension of the organization's financial arm," she says. "All they are responsible for is cranking out status reports and just reporting on the projects."

Not every business can afford to dedicate internal staff to a PMO, however. At Gray Insurance Co., projects are not so complex the carrier needs to have a project management office, explains Carl Schneider, CIO.

What Schneider and his IT team battle in managing projects are the many ingrained processes within the company he and his staff are trying to change. "Part of what we're trying to do is turn IT into a utility," he says. "I really don't want people coming to me and asking how to run their businesses, because I'm not an expert in the insurance business. I'm trying to push the decision-making power out of my department and back into the [business] departments where the subject-matter experts exist. I want to provide the support and infrastructure and platform for those tools they need to get their job done. I want to focus on that and that only."

Accident Fund uses fewer vendors than one might think, given the number of initiatives going on, reports Buckwalter. Typically, projects are staffed and led by internal resources, but he adds, there are occasions the carrier looks to the vendor community not only for the best technical solution in the marketplace but also for the experience the carrier may not have. "We can use [the vendors] to overcome some of the short-term spikes we have in resource needs, but our goal most often is to learn to fish for ourselves," says Buckwalter. "We have some strong long-term vendor partnerships, but we see it as more cost-effective and, quite frankly, prudent to have that expertise under our own roof."

Seaver often finds vendor estimates on the length and complexity of projects to be optimistic and urges carriers to proceed with caution in such cases. "It's a best-case, sunshine type of approach to how much it is going to cost and how long it is going to take," he says. Vendors need to get their foot in the door to make the sale, and then it becomes a negotiation process. "That happens every place: small businesses, the federal government, big insurance companies," he observes. "Part of the problem [with such estimates] is vendors have blinders on because they have a generic approach and don't always know the business until they get involved and start to install and configure things. And then there always are surprises."

Accident Fund is a midsize company with a little more than $500 million in net premium earned. The company employs fewer than 1,000 people, indicates Buckwalter. With that size, the carrier wants its vendors to provide guidance and accountability. "We look for guidance in that as we continue to update our legacy systems, we have a great opportunity to reap the benefits of some service-oriented architecture so our telephony, our document management, and our core claims and policy systems can work together with the rest of our infrastructure," he says. "Any given vendor is bringing only a component to that overall solution. Accident Fund needs to own the whole pie. Each vendor is responsible for a slice of that pie, but we want to make sure we keep our pie from being part coconut cream pie, part apple pie, and part humble pie."

Occasionally carriers have to place their trust in vendors to assist in managing the project, but Schneider warns carriers ought to know their business needs and document those needs thoroughly. "[Business users] have to understand the difference between a want and a need," he says. "They must to be able to put together a document full of needs and wants that can be used as a litmus test for each of the different vendor packages." Included in the preparations are things such as the vendor's financials, site visits, and a trip to the vendor's corporate office to make sure it is a viable company, explains Schneider. Carriers also should worry about the size of the vendor. "Are we its largest customer? Its smallest customer? Or are we in its sweet spot?" he asks. "I'd want to be within one standard deviation of its average customer."

Vendor relationships vary as much as the solutions, according to White. "I've worked with companies in which the vendor just supplied the CD," she says. "Then there are vendors coming on site and doing the development with or for your team. These are two different types of vendors and two different types of relationships."

A project manager needs to understand the terms of the contract and actually be involved in the negotiation of that contract, continues White. Contract negotiation often takes place at a level above the project manager, yet she points out, the project manager is the one who has to live with the terms of the contract. Her advice is for project managers to read the terms closely, understand the language, and then meet with a counterpart from the vendor to explain the expectations for the project management team's performance. Simple items such as vacation time have to be spelled out. "I had one vendor that agreed to let its DBA go on a three-week vacation and then a one-week training session," says White. "You have to partner with the vendor and recognize the vendor is there to make money."

The innovation and planning team at Accident Fund facilitates the governance process and prioritization of the tactical projects for the carrier, indicates Buckwalter. "It's done this way so we can help provide some insight into the overall capacity of the company from a resource standpoint," he says. "We consciously try not to be too involved in most of these tactical projects. They are best led by the various business departments. Strategic projects for the enterprise are consciously separated."

Buckwalter finds similarities in strategic projects, whether those projects target technology, a merger/acquisition, organizational change management, or business process reengineering. "Strategic initiatives can be all those things," he asserts. "IT is involved in a big percentage of those projects, although the team could take on some projects that don't have a big IT component behind them."

Sponsorship from the top is the biggest reason for a project's success, according to Buckwalter, although he couples sponsorship with raising the bar for expectations for all team members. "We've been fortunate our senior management recognizes the value of the team and has offered us opportunities to prove our worth," he says.

The innovation and planning team reports to a vice president for planning, and this gives the department a seat at the table at the heart of all the strategic conversations, even those that are exploratory in nature. "I'm not saying we've been successful at everything, because that would be unrealistic for anyone," says Buckwalter. "But we do continue to demonstrate an ability to deliver on larger and more complex initiatives, and the team continues to morph itself over time to meet those challenges."

The innovation and planning team was made an independent group and is not part of Accident Fund's information systems organization. "We work an awful lot with the IS team and with a lot of the business units," says Buckwalter. "We are an enterprise resource that reports to executive staff. It's very atypical."

White believes it is rare to have the PMO operate within the strategic planning department as it does with Accident Fund. "To me, it's the right place for a corporate strategic project management office to exist," she says. "[The PMO has] the visibility into not just the projects that have IT associated with it but also business projects, such as establishing a new agency or an M&A project that has a much bigger venue than putting in a new application."

More enlightened carriers will look to such a model in the future, according to White. "If you take large carriers and realize the number of projects and initiatives they undertake over a year that have absolutely nothing to do with IT, wouldn't it be great if there were an organization that ensured all those projects were appropriately aligned with strategy and appropriately managed so if one of those initiatives would start to go astray, it would get the appropriate attention?" she asks.

Buckwalter believes much of the success of the team can be attributed to Accident Fund's CEO, Elizabeth Haar. "She's a big believer in the value of project management," he says. "A lot of times what we're looking at and researching truly is exploratory in nature. If the executive staff generates what looks to be a good idea, due diligence still has to be done." Part of the innovation and planning team's role is R&D, adds Buckwalter. "Some initiatives look like they have great business cases behind them, and other times we come back and report the timing might not be right for us," he says.

Trained project managers, often working within a project management office, have taken the lead role on initiatives with a clear eye on the strategy needed not just for a single project's success but for the enterprise as a whole. Still, Celent reports the biggest staffing need expressed by carriers is in the area of project management. Thirty-one percent of insurers surveyed cited a need for project managers compared with 21 percent that mentioned business analysts and 17 percent for software developers.

Whenever Buckwalter looks to expand the innovation and planning team, he assesses candidates on five key areas. "First and foremost, team members must be good communicators. We are involved in so many different things, so communication and coordination are a must."

Second, everyone on the team has to have a solid IT background because so many initiatives demand that skill set. Third, team members need to have a solid understanding of the business and the business processes that go on behind the scene.

The fourth talent is the ability to demonstrate great teamwork. Finally, the team members must be good leaders, states Buckwalter. "They need to be the kind of people who are comfortable in conflict, collaboration, and ambiguity, because all those things are normal in strategic projects," he says.

When looking for a project manager, White seeks similar traits: someone with leadership abilities who can communicate effectively with all levels of the insurance organization. She also targets people with the courage to make decisions with less than all of the information. Although this can be dangerous, she admits, "sometimes you can't wait to get all of the exact information. You have to go with your gut and make a decision." As an example, she mentions new software may not have been tested fully, but the vendor has a reputation for quality. "So, you take a calculated risk [the software] is good enough," says White. "Sometimes it is more important to get the software into production rather than wait for all the testing to take place." Another example might involve waiting for a fourth proposal from a vendor when the project team already has three proposals in hand that are all fairly close in price. "You just go with a decision on the three you have," she says. "Sometimes just making the decision is more important."

While Buckwalter often finds such abilities in candidates, those qualities also can be attached to a big ego, in his experience. "Eventually, big egos will break apart teamwork," he says. "Confidence and ego are two sides of the same coin. I've been lucky to assemble a team that's got those qualities but without the big ego. We're all pretty grounded in reality and have a lot of respect for each other."

White believes companies should look for people with an understanding of the business in addition to the technical knowledge so the project manager can understand the language of the business sponsors. "That talent is important, especially if you are in a project management office that doesn't have a business relationship manager," she says.

There remain organizations that have their lead systems analyst functioning as the project manager, a situation that White believes can be dangerous for a company. The conflict arises with the volume of knowledge and the functions those two separate roles must perform. "If you are busy dealing with an architect about the design of an application, you may not be paying attention to the fact some test cases that were supposed to have been done last week weren't done," White says.

Seaver believes the trend in business is for companies to have their own internal PMO. "The only exception I see is if it [involves] something out of the ordinary or trying to get familiar with a new technology, the company may outsource the PMO," he says. "[Companies] want to keep all capabilities internal. Where I see a lot of outsourcing [pertaining to projects] is with training and certification."

However, in White's view, outsourcing of project management can be an effective alternative for carriers facing critical projects for which the carrier lacks the capability to do the work internally. "Definitely outsource it and bring in people who have the expertise, and let them drive the project," she says.

In such cases, she recommends a carrier partner someone within its own staff as a deputy to the outsourcing company so the external organization is not the one telling the carrier's people what to do. "There are some large carriers that outsource certain project management functions," she says. "They outsource project control work very successfully. They retain the project management role–the decision-maker role–but they outsource the more scientific part of the job where the reports and the analysis are happening."

It is getting more difficult to find candidates with knowledge of project management as well as business and IT knowledge, White affirms. "Technology is changing so rapidly, it's difficult to stay abreast and be technically astute in everything," she says. It is equally difficult for the project manager to remain current on what is happening in the business field. "Having that understanding is important," she concludes. "To me, project managers in insurance have to be learning continually. They have to embrace knowledge."