The Federal Report on the BP Macondo well disaster that killed 11 workers and caused a catastrophic oil leak into the Gulf of Mexico was released last week, and the conclusions are ugly.

According to an article on the report from Business Insurance.com:

“The blowout at the Macondo well on April 20, 2010, was the result of a series of decisions that increased risk and a number of actions that failed to fully consider or mitigate those risks,” the report said.

The investigative panel “found no evidence that BP performed a formal risk assessment of critical operational decisions made in the days leading up to the blowout. BP’s failure to fully assess the risks associated with a number of operational decisions leading up to the blowout was a contributing cause of the Macondo blowout.”

The report also said cost- or time-saving decisions made by BP “without considering contingencies and mitigation” contributed to the disaster, as was the energy company’s “failure to ensure all risks associated with operations on the Deepwater Horizon were as low as reasonably practicable.”

Once again, failure to properly assess and mitigate risk has lead to a catastrophic disaster for the people killed and injured, for the environment, and for the business responsible.

From the nuclear reactor meltdowns at Fukushima, Japan to the Macondo well in the Gulf, we are seeing the dreadful results of failure to assess and mitigate known risks.

What is the next avoidable disaster that is going to hit? And will we have to read another report about the failure to manage catastrophic-risk as one of the causes?

One excellent way to control risk in your project portfolio  while maximizing value is by using Optsee® in your project portfolio management program. Click on the link to watch the short video Winning the Lottery of Project Portfolio Management by Using Real Optimization (9:30) to learn more.

If negotiators are too friendly with each other, they’re more likely to misbehave, including lying or acting against the interests of their employers.

That’s the conclusion researchers from the Wharton Business School and Emory University published in “The Dark Side of Rapport” in this month’s Journal of Management Science. After carefully studying both face-to-face and online negotiations between participants under different experimental conditions, they found that:

“Negotiators who have a high level of rapport are more likely to behave unethically than are negotiators who have a low level of rapport. We find this effect holds both when high rapport results from the way in which negotiations are conducted (face-to-face versus computer mediated) and also when rapport is established through a brief rapport-building exercise before negotiations begin.”

The motivation for behaving unethically in high rapport situations can stem from the desire to maintain the high rapport by avoiding honest discussions about points of impasse. The researchers also found that unethical behavior in high rapport negotiations could be reduced by simply reminding participants that:

“…you would also need to live with the legal, social, and professional consequences of any decisions you make during the negotiation. Your success in future negotiations, your continued employment with the client you represent, and your reputation in the local business community – including your ability to get other jobs – could all be affected by the decisions you make as a negotiator.”

This simple reminder did not lower the level of rapport between negotiators nor did it affect the positive outcomes of the negotiations (reported by the authors as “satisfaction with the negotiation, trust, and willingness to work in the future with the negotiation partner”), but it did reduce the level of unethical behavior in both high rapport and low rapport negotiations.

Is it surprising to you that all it takes is a reminder to the negotiators that their actions and reputations matter?

If you’re negotiating project selection in a project portfolio, one excellent way to maximize your portfolio value while controlling costs, risks, and resources is by using Optsee® in your project portfolio management program. Click on the link to watch the short video “Predicting Project Portfolio Value Using Simulations” to learn more.

It was reported yesterday that a so-called “rogue trader” lost $2 billion at UBS. A BBC correspondent reporting on the incident wrote:

“The disclosure that it was [the trader's] decision to inform his colleagues of his actions that set alarm bells ringing at UBS, rather than its own monitoring system, will add to concerns that investment banks simply aren’t capable of controlling the huge risks that their traders take.”

If huge investment banks can’t manage and control the risks that their traders take, how well do you think non-financial firms are controlling the risks that their managers take?

Not very well, I think.

And I am not even thinking about criminal behavior. I am thinking about the billions of dollars wasted every year by companies that fail to manage, monitor, and control risks associated with project spending.

It isn’t that it can’t be done or that it is too difficult; it isn’t that it costs too much; and it isn’t that there is no return on investment for doing it.

The fact is that most managers simply don’t want to make the effort to learn how to do it properly. So they settle for using best guesses or weak and meaningless systems that are often worse than guessing. They just roll the company’s dice over and over again without ever trying to understand the odds.

And then they wonder why so many promising projects fail, just as I am sure that USB shareholders are wondering how their company could lose $2 billion by “rogue trading.”

By the way, if those billions in “rogue trading” bets had been successful, do you think the trader would still have been arrested?

One excellent way to manage project portfolio risk is by using Optsee® to maximize portfolio value while controlling costs, project risks, portfolio risks, and resources. Click on the link to watch the short video “Predicting Project Portfolio Value Using Simulations” to learn more.

“Imagine life as a game in which you are juggling some five balls in the air. You name them – work, family, health, Friends and spirit and you’re keeping all of these in the Air.

You will soon understand that work is a rubber ball.

If you drop it, it will bounce back.

But the other four Balls – Family,Health , Friends and Spirit – are made of glass.

If you drop one of these; they will be irrevocably scuffed, marked, nicked, damaged or even shattered. They will never be the same. You must understand that and strive for balance in your life.”

From a very short speech delivered by Bryan Dyson, former Coca-Cola CEO

In a large study of mutual fund managers, researchers studied the relationship between a manager’s risk choices and their prior performance relative to their peers. They found that the relationship between a manager’s risk choices and prior performance, compensation, and job security was U-shaped. In other words, poorer performing managers with lower job security tended to make higher risk choices as did higher performing managers, whereas managers in the middle tended to make lower risk choices than the other two groups. The study was published in the April 2011 issue of Management Science.

Even though the performance of mutual fund money managers is easier to assess than other business or project managers, I think that this basic relationship between risk-taking and manager quality still applies. Good project managers know how to assess project risks and plan for contingencies when things don’t go as planned. They also know how to communicate expectations and lead well. Poor or inexperienced project managers don’t assess risks well, and therefore tend to over-promise and under-deliver on their projects, which leads to greater risk-taking as they try to catch-up.

In some ways, it is similar to gambling psychology where losing gamblers try to “make it all back” by taking higher risk bets whereas winning gamblers make higher risk bets based on their past successes and having more resources. The ones in the middle just keep placing small bets.

So, how do we teach inexperienced project managers to take risks in such a way that they stay off the left side of the “U” in the beginning and learn how to manage risks like great project managers as they move up the right side?

One excellent way to manage project portfolio risk is by using Optsee® to maximize portfolio value while controlling costs, project risks, portfolio risks, and resources. With our new project and portfolio management Trend Trackers, you can track all aspects of individual project and portfolio performances over time so that you can react quickly to changes and improve your estimates cost, ROI, timing and risk.

In a previous blog post, Business At Microsecond Speeds – How Fast Can You Go?, I wrote about how businesses can make faster and more profitable decisions by using business analytics in the same way that stock traders maximize their advantages using high-frequency trading algorithms.

Therefore, I was fascinated to read in a recent Wired article called Algorithms Take Control of Wall Street about how one of the first high-frequency stock trading algorithms was developed because the algorithms and approach were so similar to the technology we use in our project portfolio management software, Optsee^®:

“He then tried to determine the proper weighting of each characteristic, using a publicly available program from UC Berkeley called the differential evolution optimizer. Bradley started with random weightings—perhaps earnings growth would be given twice the weight of revenue growth, for example. Then the program looked at the best-performing stocks at a given point in time. It then picked 10 of those stocks at random and looked at historical data to see how well the weights predicted their actual performance. Next the computer would go back and do the same thing all over again—with a slightly different starting date or a different starting group of stocks. For each weighting, the test would be run thousands of times to get a thorough sense of how those stocks performed. Then the weighting would be changed and the whole process would run all over again. Eventually, Bradley’s team collected performance data for thousands of weightings.

Once this process was complete, Bradley collected the 10 best-performing weightings and ran them once again through the differential evolution optimizer. The optimizer then mated those weightings—combining them to create 100 or so offspring weightings. Those weightings were tested, and the 10 best were mated again to produce another 100 third-generation offspring. (The program also introduced occasional mutations and randomness, on the off chance that one of them might produce an accidental genius.) After dozens of generations, Bradley’s team discovered ideal weightings.”

By some estimates, these types of systems are responsible for as much as 70% of total trade volume and they’re used because they can find trading advantages from massive amounts of information that human beings can’t.

You can use these same kind of analytics to maximize the value and control the risks of your project portfolios when you use Optsee^®. Optsee^® lets you prioritize your project portfolios by testing them in thousands of models with just a few mouse clicks, and then you pick the best set by using a specially designed genetic or “evolutionary” optimizer, just like Bradley used.

And it is all easy to do in a single application that you can have on your desktop today. Just click here to sign-up for your 14-day free trial of Optsee^®.

If you were turned-off by a PPM software product that was too complex or didn’t give you an understandable result, then I’d encourage you click here to take a look at Optsee®, our project portfolio management tool. We have solved the problem of project selection by making it easy for ordinary business people to apply state-of-the art business analytics to project prioritization and portfolio optimization for results that are both understandable and defensible.

This morning, I attended a terrific breakfast seminar delivered by Ernie Dianastasis and sponsored by theDelaware Emerging Technology Center. Ernie is Managing Director of CAI, a global information technology (IT) consulting, integration and outsourcing services organization. Ernie founded CAI in 1981 and since then it has grown to over 2,800 employees with business units around the world.

Ernie’s talk was the last of four seminars on the topic of “Entrepreneurs Secrets of Success.” One thing that Ernie talked about was that he once calculated that there are 1,300 weeks between the ages of 50 and 75 years old. So he filled a bowl with 1,300 marbles, and now every Sunday night he takes one marble out of the bowl to remind himself of the importance of every single week.

Here are Ernie’s “10 Personal Rules for Success:”

1. Seek out a strong family culture

2. Invest in training, including time management, achievement, and negotiation

3. Epomonée kai Meyali Prosfée (Greek for “Patience and fortitude with lots of prayer”)

4. Surround yourself with your best friends (even if they don’t start out that way)

5. Learn the power of momentum

6. Plan, plan, plan… And when you’re done with that… Plan some more!!

7. Figure out the big picture (public, private, academic and non-profit)

8. Build great relationships-they trump everything else but performance

9. View your own life as a company with a Board of Directors

10. Never forget where you came from under any circumstances

If you were turned-off by a PPM software product that was too complex or didn’t give you an understandable result, then I’d encourage you click here to take a look at Optsee®, our project portfolio management tool. We have solved the problem of project selection by making it easy for ordinary business people to apply state-of-the art business analytics to project prioritization and portfolio optimization for results that are both understandable and defensible.

It depends on whom you ask.

And that is why the common practice of assigning business values to projects using simple categories such as “Excellent,” “Good,” “Fair,” and “Poor” is misleading and usually wrong.

Why?

First, in most cases where this is used, there is no explicit quantified value assigned to each term, and team members are not calibrated or trained on how to make the assignments. Thus, each person is on-their-own to interpret how to make the assignment, and they can erroneously assume that other team members are doing it the same way.

Second, the interpretation of relative value can change as people go down a list of projects. For example, if they start to think that they have assigned too many projects as “High” they will go back and start re-assigning some of the “High’s” to “Good.” So the internal cognitive scale changes in the middle of making the assignments, and therefore, the value assignment becomes dependent on something other than an actual intrinsic value.

Third, using these types of value assignments or even “on a scale of 1 to 10″ implies a straight-line relationship between the categories that is often not tested. Is a “Fair” project twice as valuable as a “Poor” project? Is a “Good” project three times as valuable as a “Poor” project?

Fourth, the categories often don’t capture meaningful differences between projects. For example, let’s say a team is using “Very High,” “High,” “Moderate,” and “Low” to assign project value. If a linear scale is assumed for projects valued between 0 and $1 million, “Low” means that a project value is between 0 and $200,000. Thus, this type of valuation essentially says that $200,000 and $0 are identical. Are they really?

Therefore, even though the results of using such methodology may appear to be valid and understandable, when you start to scratch the surface, they often aren’t.

If you were turned-off by a PPM software product that was too complex or didn’t give you an understandable result, then I’d encourage you click here to take a look at Optsee®, our project portfolio management tool. We have solved the problem of project selection by making it easy for ordinary business people to apply state-of-the art business analytics to project prioritization and portfolio optimization for results that are both understandable and defensible.

“The bigger things may age you, but it’s the little things that make you old.” W. Town Andrews

I remember a call from a friend of mine a few years ago who was working in a pharmaceutical plant that I had consulted for several  years earlier.

“George,” he said. “I have a problem. I was reviewing some documents, and I noticed that the copy I was looking at was different from the original document. When I checked the original, I found that the original data had been painted over with White-Out and a different number written over it.”

In the pharmaceutical industry, altering data is a big “no-no.” In general, when original data needs to be modified, the practice is to neatly draw a single line through the data so it remains legible, and then write the new data, your initials, the date, and the reason for the change, such as “writing error.” Not following this practice rigorously can lead to government actions ranging from FDA warning letters to criminal charges.

He took the document to the associate director who had made the alteration and she told him “not to worry about it.” He then took it to her supervisor, and was told that it was not going to be changed.

Now, this wasn’t a mission-critical document and it did not have any impact on the quality or safety of any shipping products. But it was against the company’s own written standard operating procedures and yet they didn’t fix it – they were going to ignore it.

My friend and I were both very surprised at this. Several years earlier, this never would have happened – this plant was known for best-in-class good manufacturing practices and regulatory compliance. But management had changed and a culture shift had also started.

A few years later, what had once been a thriving and productive facility was cited for numerous violations by the FDA and essentially shut down.

When I heard about this, I thought about the “broken window” theory in criminology, which comes from this example:

“Consider a building with a few broken windows. If the windows are not repaired, the tendency is for vandals to break a few more windows. Eventually, they may even break into the building, and if it’s unoccupied, perhaps become squatters or light fires inside.

Or consider a sidewalk. Some litter accumulates. Soon, more litter accumulates. Eventually, people even start leaving bags of trash from take-out restaurants there or breaking into cars.”

Maybe the altered document was the first “broken window.” Once it wasn’t fixed, it was easier to let the next infringement pass, and the next one after that, until the violations did begin to affect the quality of the products. But by then it was too late.

“Broken windows” can happen in all kinds of ways in any business. They can be things like unfixed software bugs, unanswered customer complaints, or disregarded safety practices. They are often cheap to fix, but also easy to ignore. And there’s usually someone who cares, like my friend, pointing them out.

Fix the “broken windows;” don’t ignore them.

What are the best uses of your company’s dollars and resources? Optsee^® can tell you. Optsee^® is a project portfolio management and budgeting optimization tool unlike any that you’ve ever seen. Click here to find out more

The power of your network isn’t just in its size. And it isn’t just in whom you know or in whom they know. The power of your network to change the world may come from just introducing two people in it to each other.

“I waited and thought, Will Bob say something? Sure enough, in that deep, serious tone of his, he said, ‘Well, you good people have all shared things that I am sure were very costly to you, and I am going to tell you something which may cost me my profession. I am a silent drinker, and I can’t stop.’”

“He said, ‘Henrietta, I don’t understand it. Nobody understands it.’ Now that was the state of the world when we were beginning. He said, ‘Some doctor had written a book about it, but he doesn’t understand it. I don’t like the stuff. I don’t want to drink.’ I said, ‘Well, Bob, that is what I have been guided about.’ And that was the beginning of our meetings, long before Bill ever came.”

“We admitted we were licked.

We got honest with ourselves.

We talked it over with another person.

We made amends to those we had harmed.

We tried to carry this message to others with no thought of reward.

We prayed to whatever God we thought there was.”