“Companies may have too many
projects in the high-risk, low-reward
category, or conversely, too many low-risk, low-reward projects, which are
‘safer,’ but can threaten long-term survival through not being innovative
enough,” Mr. Wahl explains.
One project leader’s interpretation of
risk may be different from another’s,
though, so establishing a standardized
approach can help.
At German industrial giant
Siemens, every business unit in each
of the 190 countries the company
operates in relies on the same
approach to categorizing projects.
Dubbed PM@Siemens, the system
uses a two-digit code for each project:
a letter, ranging from A to F, indicating its significance to the company;
and a number, ranging from 0 to 3,
indicating its overall risk level.
many A0 projects in the portfolio
could indicate mounting risks—
especially in a downturn—while too
many F3 projects may signal a lack of
economic value when a recovery
begins.
As the global economy has slid into a
full-fledged recession, PM@Siemens
has been tweaked to reflect the new
realities the company faces. In late
February, for example, the company
introduced new stipulations to specify
the project governance requirements
applied to each category of project, Mr.
Hodgkins says.
“A category A project will have different requirements than a category F
project—for the first time making
explicit what is acceptable practice in
terms of risk management, contract
management, and the roles and
responsibilities of the people involved
hange the entire portfolio, we’d sooner
elected projects, always aiming to get
ofevery dollar. —Marisa Oldnall, PMP, Cancer Care Ontario, Toronto, Ontario, Canada
“An ‘A’ project might be very large
in terms of value and business volume,
and could typically be a large infrastructure project. A ‘0’ could indicate
a significant business risk or number
of risks, perhaps through the potential
for corruption,” explains Paul
Hodgkins, a Surrey, England-based
Siemens program executive. “While
an A0 project would need approval by
the Siemens main board in Germany,
an F3 project could be approved by a
local Siemens business unit without
further reference.”
Ultimately the categorization’s real
value stems from the fact that it gives
Siemens the ability to evaluate its
portfolio and adapt it to ongoing or
future conditions. For example, too
in the project during its lifetime,” he
explains.
FOLLOW THE MONEY
Rough economic times breed increased
scrutiny on the end-result, but it’s not
always so clear-cut which projects will
turn out to be the winners or losers.
After all, assumptions made in good
times may not hold true during tough
stretches down the road.
“Be careful when looking at the
ROI of projects where the stakeholder
is a part of the business that’s in trouble or where the sponsors may not be
around when the project is completed. They might not survive the full
five years over which the anticipated
ROI that you’re looking at has been
