A few weeks ago, the City of Chicago announced that the southern half of its most heavily trafficked subway route will close for five months in the spring of 2013 for renovations. The aptly named Red Line is the Second City’s main artery–pumping employees, students and tourists across the metropolis from far north of Wrigley Field to just shy of the Indiana border–so it comes as little surprise that the statement was met with an uproar. After two public hearings and a collective outcry from the affected commuters and small businesses, the City of Chicago has every intention of following through with the original plan, in hopes that the results will diminish the short-term transportation inconvenience.
Chicago’s dilemma mirrors a type of difficult decision many companies have faced. When a long-term improvement project or overhaul is needed that will inevitably impact a company’s operations, how do managers decide whether to shut down completely to expedite the change, or to maintain some level of operations in hopes of appeasing the apple cart?
The availability of a broad spectrum of potential solutions (including varying degrees of “maintaining” operations, depending on how a project is rolled out) often complicates the decision–each option accessorized with its own potential risks and benefits. There are, however, certain points to keep in mind that can help guide organizations toward the option that is best for their particular situation.
It seems fairly intuitive that companies would want to consider the financial impact of a particular option: how will your operating income or cash flow suffer from either shutting down or dragging out the project? Certainly, analyzing the future monetary effect of such a decision is very important, and every effort should be made to quantify costs as accurately as possible. But a decision based on project dollars alone would fail to consider a variety of other factors which, if not addressed, could have far more drastic effects on the long-term financial well-being of a business than those costs or revenue losses that are directly linked to the project itself.
For starters, any financial model is inherently laden with assumptions–often, assumptions that things will go well or “as planned”. While it may be relatively easy to predict that a firm will spend x amount of money on a project, while sacrificing y amount of revenue dollars over a defined period, when you factor in missteps, the tasks that don’t go according to plan, and the unexpected outcomes (e.g., unbudgeted costs) that result–it becomes clear that the decision isn’t so black and white.
Take Boston’s Big Dig as the quintessential example of a project that was slated to transform the city–but was plagued by schedule overruns, design flaws, and basic failure to execute. The disruptions caused by the project were initially justified as “temporary inconveniences,” which would be far outweighed by the benefits of the end product. But when the dust finally settled, the project took nearly a decade longer than planned, and incurred a budget overage many orders of magnitude above what was originally estimated.
The Big Dig is a particularly egregious example of the perfect storm of errors, where so much went wrong in virtually every phase of the project; it’s a case that clearly highlights the importance of vigilant upfront planning and due diligence, and one can only hope that the planners of the Red Line improvement project have taken a few of these lessons to heart. But beyond careful scrutiny of the execution plan and the financial impact of the project itself, what other factors should come into play as companies attempt to accurately assess the risks and benefits of a particular course of action?
To a large extent, the factors should be determined based on an understanding of the organizational, industry and market dynamics of the system that you’re working in, and being able to identify the various stakeholders who have potential to impact the outcome of your project–especially those who might like to see it fail. Although these stakeholders will vary widely depending upon a given company’s situation, knowing who your key stakeholders are and engaging their interests in the process can go a long way toward helping you make the right choices. By no means does this dictate that a consensus agreement be made (in fact, that’s neither likely nor practical), but projects of this magnitude are incrementally more successful when external and internal stakeholders are active participants in the planning phase.
From an internal, organizational perspective, this entails recruiting the support of many levels of employees whose workload or income would be affected by a major overhaul program. Avoiding the trap of allowing the decision to be exclusively c-suite-driven and, instead, inviting resistance as a part of healthy upfront planning dialogue will help to ensure that you’ve done your part to identify any potential blind spots.
It’s also important to keep in mind that maintaining employee morale throughout your project will be a huge driver of your success–another key reason why engaging the interests of your employees in your decision process is critical. In the end, not everyone may agree with the final decision, but garnering enough internal buy-in for it will ultimately instill organizational confidence in the chosen path forward.
Addressing the interests of external stakeholders (i.e., customers and other outside players) is a bit more complicated. While securing “buy-in” from public transportation customers may be impractical, there are other stakeholder-driven considerations that apply in certain industries–particularly in the public sector. Consider the healthcare industry. We don’t need to actually engage with patients to know that the ability for hospitals to deliver uninterrupted care is non-negotiable. This is an industry imperative, and thus, concern for safety will inevitably trump all other factors in the decision making process. In environments where a single point of failure can have disastrous effects, risk mitigation is paramount–often necessitating a lengthier transformation process.
In the private sector, supply chain industries provide an illustrative example when it comes to calculating the costs and benefits of replacing or updating a workplace system. Within these complex webs, companies are forced to recognize how their decisions to cease normal functioning (be it a complete halt or minimized output) will help or hinder other interconnected parts. What will the impact be on stakeholders that are key links in the chain? Can the company shrink the window of off-air time or avoid vulnerabilities that often arise when trying to execute too many things at once? For Chicago, this meant realizing how subway riders would be affected by closures, and (to an extent) creating alternatives during the five month down time (the Transport Authority will offer extended bus routes and free transfers to other metro lines).
In addition to organizational and industry dynamics, market dynamics should also play a role in informing your decision. Consider a situation in which a company’s customer base is capable of turning to one or more competitors during a period of reduced operations. In this scenario, it’s critical that the decision-making process incorporates a solid customer retention strategy. Decisions that are characterized by this dynamic are often the hardest ones to make, as many businesses undergo transformative initiatives in order to gain competitive advantage–but if the initiative itself causes enough disruption to erode your existing customer loyalty, then the expected gain won’t be realized.
Similarly, as sentiments expressed in various news sources can influence market perceptions and behaviors, it’s important that the potential impact of a company’s actions on other external stakeholders is also considered–especially if the project has any risk of negative public relations exposure. The need for such consideration will vary depending on your business size and prominence–with larger, more notable companies having more reputation management at stake.
Of course, in the public sector, where alternative, competitive service options aren’t typically at play, incentives to change course due to public outcries of inconveniences aren’t nearly as strong. Despite the Red Line fracas playing out in local papers and TV, plans to renovate are still intact, and it is wholly expected that after the shut-down, displaced customers will return again, ready to ride once the line resumes its operations.
Inevitably, certain employees, customers and other stakeholders will be disgruntled by your decision. The key is in identifying which stakeholders you need to have on your side in order to be successful. Involving these stakeholders upfront will allow you to integrate their interests into your decision process and begin strategizing ways to diffuse any opposing sentiments and quell external fears. Large-scale transformation projects will invariably encounter stumbles, but a well-informed planning process will consider the risk of various outcomes and accommodate for these risks accordingly.
Sweeping change doesn’t happen overnight. From small domestic companies to large, global enterprises, business transformations take time–whether they’re executed in isolation from everyday operations or in the midst of routine work. Choosing the approach that will prove most effective for your company requires careful consideration that goes beyond calculating basic project financials to considering the variety of other dynamics that can contribute to the success or failure of your chosen route. Not every overhaul you propose is one that will displace masses of public transportation dependents, but each deserves its own realistic planning, foresight, and a little compassion.
Liz Larsen is Director of Consulting Services at Navint Partners, wherein she oversees the delivery of services relating to large-scale business change, including Technology Selection and Deployment, Change Management Leadership, Project Management, Process Optimization, Business Intelligence, Outsourcing Advisory, Project Turnarounds, and Supply Chain Management. She has been in the management and technology consulting industry for 15 years, and has assumed project leadership responsibilities in a wide range of settings, from start-up to established corporate environments.
Liz received her undergraduate degree with High Honors from Dartmouth College, and has just completed her MBA from the MIT Sloan School of Management, where she was a member of its inaugural Executive MBA class. She resides in the suburbs of Boston, MA, with her husband of 13 years, and 5-year old boy/girl twins.
[Image: Flickr user Clark Maxwell]