Project teams preparing capital proposals often develop a misguided vision of success in their minds, and that is very, very expensive.
Have you ever made a co-worker cry? I did, but it was completely unintentional… and quite unexpected. I had just walked into a plant when the financial analyst rushed up to me. Brimming with tears, she blurted: “We did what you asked us to do and now we are being punished!” Before you jump to the conclusion that I enjoy punishing people and making them cry, let me explain.
The “we” she alluded to was her project team that was addressing a product quality issue. A week earlier, this team had created a very respectable solution of cutting-edge equipment upgrades with a multi-million dollar price tag. Together, we backed up, re-framed the question, and brainstormed. In less than a week the team developed a new solution that eliminated almost 80% of the capital cost with a new raw material strategy that required only minor equipment modifications. It completely solved the quality issue and saved the company millions of dollars. They had done great work but the analyst and her team felt they were being punished.
Same Planet, Different Worlds
Where was the disconnect between us? Why was I in high spirits and the analyst in despair? Fundamentally, it was in our two very different definitions of success. The analyst, her project team, and the entire factory defined success as getting approval for their original multi-million dollar, cutting-edge upgrade. That plan would have brought fame to their team and vaulted the plant to the top of the industry’s operating statistics. I defined success as discovering the best solution and making the right decision. The team had done exactly that, saving millions in capital in the process. They were my heroes… but the team felt persecuted.
This experience revealed an unconscious but potentially disastrous view of success held by many project teams. Watching the approval of their original idea slip through their fingers felt like failure. Admittedly, getting approval for big dollar projects certainly feels more like success. You get face-time with top management, a sense of pride working on something impressive, co-workers see you securing new, best-in-class equipment, and it looks great on the resume.
The Pressure To Do Something Big
Perhaps nowhere else is the desire to do big things more apparent than during acquisitions. Walking away very difficult, especially when working in the public eye. If you Googled™ “wal-mart russia acquisition” in December, your top hit was: “Wal-Mart retreats from Russia after failing to find acquisition.” “Retreats” and “failing” paint the Wal-Mart™ team as losers. In reality, however, it would have been much easier for Wal-Mart™ to give in to emotions, over-bid, and claim victory (a trap called “the winner’s curse”). Hats off to those who resist the pressure to over-bid and walk away!
Talking It Out
If the capital budget is tight, recalibrating your definition of “success” could save big, big bucks. First, talk with your project teams and come to a consensus that, during the study phase, “success” is making the right decision, not securing approval of the most glamorous solution. Second, senior management must reinforce this definition by going out of its way to recognize teams not just for big, spectacular projects, but also (perhaps more so) for those low and non-capital innovations that might have gone by unnoticed.
We cannot rely on a dictionary definition of success. Instead, instill a new vision of success, one that seeks the best use of capital and not fast approval of initial ideas – and reinforce it with proper recognition and rewards. The payoff? Energized teams that push past first impressions to continually pursue better solutions, drive down capital needs, and boost ROI – without the tears.