Month: December 2009

Towards more realistic project costing…

I’ve been involved and associated with a number of astronomical projects now that have depended on some level of external funding. One almost universal feature of these projects has been a pitched price tag that is known to be too low by those pitching it. The justification is usually something along the lines of “they’ll never fund us for the whole amount at once, so we have to ask for less now, then more later.” Sometimes there’s a competition involved and people feel a low bid is their best chance to get the project. This sort of behavior has never made sense to me. It seems wrong and ultimately ineffective for a number or reasons.

First off, the people with the funding have seen this all before. They’ve seen lots of projects, bigger and smaller than yours and usually know what’s going on. They didn’t get to positions of power and high finance by being duped by used car salesmen. Wouldn’t a much more impressive approach be something like:

Yes, our project price is a bit more than we originally expected. And we could stand here and tell you it will cost only X, pretending that it was true and that we met our budget goal.   But if we do that, we all know that we would inevitably be back later, after you’ve already invested heavily in this project, and we’ll explain what unexpected things have happened to our project beyond our control and how we now need Y more to actually finish the project. We could do that, and you’d likely end up spending more that way than if we just presented our risk tree, explained our contingency, reviewed our functional de-scope options, and you funded us for our real cost of X now, confident that we’ll stay on budget.

As a project manager, which approach would you feel better about? As a funder, which pitch would you rather hear?

Secondly, I think astronomy has suffered as an institution at the national levels for unrealistic price tags. National funding agencies don’t want to have to keep going back to the coffers for more money to finish a project they’ve already committed to. They want to allocate the money once, then see the project complete within that allotment. Going back with additional requests for finding is like setting yourself up for double jeopardy. As administrations and bureaucracies change, the commitment to your project may have also changed.    Burned once, twice, three times by project overruns, they are less likely to fund the next when there are so many other things out there asking for money. What’s happened to the particle physics community experimental support in the US since the collapse of the SSC, for example?

Third, this same situation as at the national level occurs at all levels of projects and funders. To make a hypothetical example: Gemini is less likely to get money to build new instruments if most of what they build goes over budget. Similarly, Gemini’s contractors are less likely to get the next contract if they were found to underbid a previous project. (Remember, astronomy is a business.)

The Thirty Meter Telescope. Surely a project that cannot succeed without realistic pricing and strict cost controls.

Besides a thorough and honest evaluation of costs at the start, I think contingency planning is the key to making a project successful and on budget. There are three kinds of critical contingency for a typical project. The most obvious of which is cost contingency. What if something ends up costing more than expected? What if something breaks? What if something you thought would work doesn’t? One traditional way to deal with this kind of contingency is to apply some factor to the overall project cost and budget that amount for cost contingency. Yes, that’s better than nothing, but there are always some parts of the project that are more risky than others.   Project aspects that rely on new, un-proven technology should carry a higher risk factor than aspects that are replicas of something that has been done before, for example. The one contingency fits all rule of thumb is nice, but not really very realistic.

Then there is schedule contingency. Ordered parts take longer to get delivered than expected. Design work or assembly and integration tasks take longer than expected. Here again, time must be added to the project schedule (hopefully following a similar rigorous analysis as for the cost contingency above) to account for these risks. And since time is money in terms of paying people’s time and efforts, this schedule contingency carries a cost burden as well.

Finally, there is functional contingency. Functional contingency refers to certain aspects/requirements of a project that can be de-scoped or eliminated in order to stay on time or on budget. This type of contingency is perhaps the hardest one to use because in order to have a beneficial cost and schedule effect, it must be used early in the project – at a time when the inevitable down-stream consequences of a late, or over budget component of the project seem distant and fuzzy. The natural temptation is often to use cost or schedule contingency first, but doing so potentially leaves you at the end of a project having spent your cost and schedule contingency, with all the functional contingency unable to be used because the design decisions have already been cast in stone and integrated into the project design. Your only choice at this point is to go back and ask for more money. Just what we’re trying to avoid.

If astronomy and astronomy institutions are going to be able to continue to grow and pursue new projects and new opportunities,we must take project budget and schedule management more seriously. We can not rely on the “we’re this close to completion; you can’t stop the tap now” arguments to carry us through to the next level.

Scot fondly remembered a departed colleague while assembling these thoughts. He was a very accomplished project manager and provided many valuable and interesting insights to pursue. Alas, he left this world too early. As one colleague put it: Steve completed his life on budget and ahead of schedule. Steve Varlese- you are missed.

30 December 09
Gemini without the UK

Well, I guess it’s more or less official now. The UK appears to be pulling out of Gemini at the end of 2012. The more or less final announcement can be found on the the STFC web site, here (scroll down to Attachment A and look at projects to be funded: Gemini (until end 2012)). That combined with the recent Gemini Board announcements make it pretty clear – Gemini will be operating without the UK come 2013.

Besides the expertise and history Gemini loses with the UK’s departure, it is set to lose 25% of its funding as well. While a new partner may be found, Gemini will have to prepare a plan and budget to proceed with 25% less starting 2013. The question is now, what’s the best way to do that. The Gemini Board Resolution 2009.B.17 instructs the observatory to prepare an operations with a 7-10% reduction in funding phased into place during the period 2011-2013. Presumably, that effort is meant to be a head start in case no additional partner is found and the observatory is forced to accept a 25% reduction in 2013.

Starting the austerity measures now seems a reasonably prudent thing to do, but is it really? What is the best way to operate and plan in this new environment? How can Gemini best position itself to not only survive the coming lean years, but thrive and prosper again when they’re over? The conservative approach, and one that greatly reduces the risk of forced layoffs – which is not a bad thing indeed, is to cut now so we can cut less later.

One might also, however, consider ways to use our current full funding to its maximum advantage to prepare us to best take the 25% hit later, if indeed we have to. Can we prepare ourselves better to take a 25% hit in 3 years by spending all our budget now? Or is it better to prepare for a 15% cut in three years, by saving up money by taking a 10% cut now? To answer these questions, I think we have to look at my earlier question – what is the best way to set Gemini up to prosper after this is all over?

First, we have to clearly find ways to be more efficient. Gemini’s three largest expenses (in order, I believe) are salaries, electricity, and travel. We clearly can’t make cuts in the 10-25% range without reducing the salary expense. So, we need to learn to operate with fewer people. One way to reach this goal is to concentrate our efforts until 2013 on improving efficiency. Gemini has a history of trying to do too many things – so many that there was a time when everyone knew their projects wouldn’t all get done so they just did either what they wanted to most, or whatever they got bugged about most. We now have a very comprehensive observatory project planning process that helps us produce a yearly work plan that has projects that are well-discussed and resourced so that the projects we approve are matched by the resources we have. Our resource-balancing is not yet perfect, but the part of the process I want to review here is the selection of projects.

Each division determines what it considers its “Operations and Maintenance (O&M)” projects and these projects are then resourced and inserted first into the observatory-wide plan. With the remaining available resources, new projects can be proposed by either the division with the resources, or often by other divisions who need cross-divisional resources for their projects. Each division prioritizes their own projects in rank order. Through discussions and negotiations between divisions, all the observatory projects are merged together until our most used resources start to fill up.

This process works pretty well on the surface, but in a time of dwindling resources, there are (at least) two major shortcomings in it. 1) As an group of very dedicated and ambitious people, the new projects proposed tend to be an expansion of our current capabilities, not a tidying-up of something we currently do, but perhaps not as efficiently or as completely as we could. And 2), the O&M activities do not really get reviewed outside of each division, if then. There is no opportunity to look at what we are doing now and ask ourselves if should really continue to do them.

In a time of dwindling resources, I think Gemini needs to work hard to address both of these shortcomings, starting with our recently-approved (but before the UK announcement) 2010 plan. We need to first look at our new projects and ask ourselves if at the end of the year, we will be more efficient than at the beginning. It’s time to stop trying to do everything and start perfecting what we do, so we can do it later with fewer resources. A quarter FTE we save by a project this year, is a quarter FTE we have available EVERY year hereafter for additional projects. Spending some time now to make sure we can perform our current operations with fewer FTEs in the future will put us in good shape to survive our coming decline in available staff.

The type of project planning we wish to avoid!

Second, we need to review what we are doing now, especially that which we consider O&M, our un-questioned set of annual tasks and allocated resources. Everybody would like to do more for less, but that’s not usually possible without a concerted effort leading up to it. There must certainly be things we do now that consume a lot of resources for little gain – at least compared to other projects that use the same amount of resources. We are going to have to cut what we are doing somehow, so best to take a close look now and work on eliminating high-effort, low-reward tasks. In reality, there won’t be a whole lot of low-hanging fruit here, so this process will take some time and careful analysis. But again, time spent re-evaluating what we do (and how we do it) that saves time later, will pay off ever after. Completing these two tasks successfully will not only help us survive the coming downturn, but come out at the end (hopefully with a new partner or two in tow) ready to turn it back on and do some really exciting things.

So, linking this discussion back to reducing salaries, I’m still in a bit of a quandary. In one version of a perfect world, we would be fully-staffed now, no one would leave, and as we work our system and find ways to operate with fewer FTEs, we get rid of people, hence salary, and work our way down to our coming decreased operating budget. In another perfect world, we would look at the resources we need in order to make ourselves more efficient and hire them now, perhaps releasing them, and the FTEs they reduced, at the end. Reality, though, doesn’t work either of these ways: we have currently-open positions, people will leave on their own accord, and it’s inefficient (let alone a bit disconcerting) to hire people knowing they’re going to have be let go in two years or less. I imagine, though, once we go through our O&M tasks and have some ideas of the gains (or reductions, really) to be made there, and have exchanged our new-capability 2010 projects for efficiency-improvement projects, we’ll have a pretty good idea of where the FTE-load improvements will be made, and can thus plan our hiring and redundancies accordingly. If we know the effort required in one area of the Observatory will be less at the end of our efficiency improvements, we know some positions we may not need to fill when a vacancy naturally occurs, for example. We can also use this information to know what positions we want to make sure are filled and what positions we need to start cutting. And we might find we need to increase one type of resource now, in order to complete our efficiency improvements for later. It all starts, though, with re-evaluating our 2010 tasks and concentrating on efficiency improvements and exploring where we can get by with doing a little less with the least amount of impact.

Scot reiterates here that these are just his opinions and do not imply anything about what others at Gemini think or do. He is, of course, doing his best to ensure that everyone else at Gemini is converted to his point of view!

20 December 09
Climbing the Corporate Ladder

I read a Harvard Business Review article a while back with a plot that made an impression on me. It was a plot of career success versus time. There were three curves plotted and all three started out with a nice linear increase in success with time that eventually began to flatten. After the flattening, one curve resumed its upward slope, one remained flat, and the other reversed its course and began decreasing with time.

The point of the accompanying article was that as people climb the proverbial corporate ladder, they inevitably get to a point where what they used to do no longer works for them. The ones that succeed after this point are the ones that can expand themselves and learn new techniques, approaches, and skills that they didn’t have before. The ones that get frustrated and refuse to change, believing that what has served them so well in the past must inevitably be good for them in the future, top out their ladder climb at this flat spot and often ultimately end up sliding back down.

When you’re stuck in a bind, you don’t get out of it by doing more of what you always do. Doing what you always do is what got you into that bind. You have to do something new.

The HBR take on the ladder climb was that if you refuse to change, you will fail. If, however, you open yourself up to change, and learn new ways, you can and will succeed through the next phase of the climb.

I’m reminded of this article because I’ve just finished reading, “First, Break all the Rules” by Marcus Buckingham and Curt Coffman (a book I really enjoyed and recommend reading). In their book, Buckingham and Coffman make a separation between talents, which are our more-or-less hard-wired ways of thinking and being, and skills which are sets of knowledge and techniques which can be learned. They argue that new talents can not be learned. The best you can hope for is to become aware of the talents you don’t have and maybe work on them enough to make the behavior consciously possible, but never a natural part of who you are.

They used this concept to explain the “Peter Principle”, where traditional corporate culture promotes people up the corporate ladder to their point of incompetence, where they either remain, or begin their slide back down – in other words, the HBR plot. The reason for people’s eventual inability to succeed when blindly climbing the corporate ladder is that the skills, knowledge, and most importantly, talents that are needed on the next rung up the ladder may not be the same as those that are needed at the rung below. The talents necessary to build a good widget are not the same as those needed to manage or train others to build good widgets. A person may have both sets of talents, but that’s just chance – there is no reason to expect any given individual to have the talents needed for each rung on the ladder.

Whereas the HBR article talked about people needing to learn new skills and techniques to survive their career flat spot, Buckingham and Coffman say only people with the right built-in talents necessary for the post flat-spot phase of their career path will continue to excel. It is partially about learning new skills and techniques, but mostly about having the right talents to do the next job. It’s not about dedicating yourself and getting new training, although some of that can of course be helpful. Rather, it’s about having, then drawing upon, the new talents that your new role requires. Don’t climb to that next rung, the authors warn, unless you have the talents to succeed there.

So, what does this say about astronomy? Well, I think the issues here are pretty generic, but may be compounded in astronomy. Typically, there is only one career path into an astronomy career – a lengthy academic trek to obtain the necessary license-to-practice PhD. (A similar situation exists for other related technical fields in astronomy.) People who succeed in this path will undoubtedly share some certain talents – talents that helped them through classwork and allowed them to produce some meaningful bit of new science, resulting in their degree and first job, etc. Pretty much all astronomers, to have succeeded to this stage, will have these talents. They will have others as well, certainly, but these, they all will have in common.

In the “real” world, managers can arise from within an organization from several different paths – some trained as widget makers, some as widget designers, others in business and administration, for example. We don’t have that same kind of kind variety in astronomy; we pretty much have one entry path and therefore we have to do a better job of selecting our managers and leaders – finding, nurturing, and promoting those with not only the talents that allowed them to excel in their technical fields, but with the talents necessary for management as well. Sending an astronomer with no management experience, but innate management talents, to management training classes will give them some skills necessary to effectively use their management talents. Sending another without the proper talents to the same classes will be unlikely to produce an effective manager. Management training for some people will never result in making them excellent managers. Passable, maybe, but not excellent.

We like to think that we can teach ourselves to do anything if we try hard enough. Having achieved technical expertise in our fields, we often view ourselves and our colleagues as living proof of this theory. Yet, it isn’t at all obvious to me that the talents and inner drive we each drew upon to succeed through our academic and technical careers would have been equally sufficient at leading us each through management and corporate careers. Hard work may not always be enough.

The first step in providing better management in astronomy, I believe, is to recognize this situation: not only do many of us lack the skills and training for effective management, but we may also lack the required talents – something much harder to develop after the fact. Armed with this awareness, we can do a better job of recognizing, rewarding, and developing those with management talents the same way we do with those with specific technical talents, and provide an alternate career path in astronomy that rewards management talents as much as the traditional path rewards our technical and teaching talents.

Scot wonders which HBR curve represents his career so far, but suspects, due to the impression the original article made on him, that he is somewhere near the flat spot – setting up for the next phase.

9 December 09

Month: December 2009

Towards more realistic project costing…

Gemini without the UK

Climbing the Corporate Ladder