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 Effective Engineering e-Newsletter – 11/21/2002

This is your bi-weekly e-Newsletter from Effective Engineering Consulting Services (www.effectiveeng.com).  If you would like to receive Effective Engineering e-newsletters as they are published, please send an email to e-newsletter@effectiveeng.com, and we will add you to our distribution list.

eN-021121:

Late Projects Kill Companies!
  By Tom Dennis – President, Effective Engineering  [ tdennis@effectiveeng.com ]

When most engineers start a project, they put together their best estimate of how long it should take to complete their part of the project.  They then pass that estimate along to their manager who then collects and consolidates similar estimates from other engineers regarding their portions of the overall project.  This may get passed through one or more levels of management until someone puts together a consolidated project plan.  A typical plan includes the overall structure of the project (requirements, planning, implementing, testing, documenting, phase reviews, costs, etc.), all of the separate pieces from the individual engineers and where they fit in to the overall plan, the relationships and dependencies among the various pieces, and typically some degree of contingency planning for the unknown.  This overall project plan then gets reviewed by all involved, modified as required, and ultimately gets signed-off as the “official project plan”. 

The high-level summary of this “officially blessed” project plan, with certain key milestones and schedule dates, is then used by senior management in the company to establish overall corporate plans and objectives.  It will drive marketing plans, sales plans, field support plans, financial plans and projections, budget assumptions, and much more.  It serves as a basis for significant future planning for the company.  

While individual engineers understand this conceptually, they generally don’t really understand the full implications of what they’ve signed up for.  Their typical view is “I’ve given you my schedule, and you’ve shown me how my part fits into the overall schedule; I’ll do everything in my power to deliver on this schedule, but if I run into unforeseen problems, it will just take more time than I thought”.  Another typical view of engineers is “I’ll do my part, but if Joe Blow (or QA, or Build Eng, or Tech Docs, or any other person/function I don’t control) doesn’t do his/her/their part, then it’s not my problem if the schedule gets delayed”.  They understand that the “project plan” and the “schedule” are important, but don’t understand just how important they really are to the overall corporate commitments.

When projects are delivered late, companies get killed!  They may get killed either figuratively (as in, “You’re killing us by being late; now our board is upset, the financial analysts are peeved, and our customers are downright rebellious.”), literally (as in, “Without this project now we can’t make our revenue targets, and therefore can’t meet our payroll, and now have to close and lock the doors to the company.”), or both.  

Company reputations get badly damaged (sometimes they get killed) when they don’t deliver on their commitments. 
First, it is critical that management be viewed as credible, reputable, and trustworthy by their customers, investors, shareholders, analysts, suppliers, and any others with a vested interest in the company.  When the company commits to deliver a product on a certain date, the company’s credibility is on the line.  Miss that date, and the company’s stakeholders lose trust.  Lose too much trust, and the company is dead.  
Second, many of the company’s customers base their plans and assumptions on the company meeting its commitment.  Now, if delivery is late, not only is the reputation of the company itself damaged, but the reputation of the company’s customers is also damaged to their stakeholders.  Customers must then decide whether to stick with the company and delay their commitments as well, or whether to find another company and take their business elsewhere. The same holds true for suppliers (who have based their projections on supplies to be delivered to the company), and other stakeholders.  While it is tough to build up a good reputation, it is easy to destroy one, and missing your commitments is a surefire way to do so.

Company finances also suffer (sometimes they can’t recover) when delivery commitments are not met.  A look at the graph at www.effectiveeng.com/the_problem.htm (also shown here) shows graphically the business impact of missing delivery commitments.  The red portions of this graph show the triple impact that occurs when a project is late.  
(1) Additional development costs are incurred, since more people must stay on a project longer. 
(2) The revenues that would have been gained from the time the product should have been delivered until it actually is delivered are lost forever. 
(3) Ongoing revenues are lost because some customers will choose to go elsewhere rather than wait for the company’s product.  

The net of this triple financial impact of late delivery may be minor, or it may be fatal.  In any case, it is intolerable.  

Every effort must be made to deliver on what has been committed!  And all must be held accountable.


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