Capacity without appropriate capability often leads to poor performance – 100% effort, but real achievement stuck at 50%.

Given these two less than perfect solutions, which is the better approach? In the past organisations have tended to give priority to one or the other – thereby guaranteeing sub-optimal performance. More successful companies have addressed this false dichotomy – it is possible to have the right capability and the right capacity – it’s just that a one-size-fits-all solution simply will not work.

Capability and capacity issues were among the principal drivers for the surge of outsourcing seen in the ‘90s. Appealing, but (as it turned out) not compelling, arguments were made about the ability of large groups of specialists to form self-enhancing communities of practice to drive up capability. Meanwhile, the statistics of large numbers would take care of the peaks and troughs of demand – thus satisfying the capacity problem.

A related concern is that the ‘leaching’ of intellectual property (IP; that increasingly highly valued commodity – which must include the knowledge held by internal resource) has proved very hard to limit, with the associated reduction in distinction between, and specific value proposition of, competitor companies.

A further linked trend was the introduction of ‘contractorisation’; reducing permanent headcount and replacing with, usually long-term, contractors. The implied flexibility, the matching of capacity with demand, and indeed the selection of the appropriate skills without the costs of training has proved largely illusory. While attractive in terms of matching numbers to demand, it has turned out not to resolve the challenges of capability or capacity.

Once again the loss of IP – or rather the failure to retain IP – has become a very serious issue. The problem is so serious that some organisations have begun a concerted effort to ‘decontractorise’, which means exactly what it says – with long term contractors being faced with stark choices of ‘join (and accept the salary reduction) or leave’! But there are other issues, not least of which are the difficulty in the performance management of contractors and the level of personal development investment made by contractors is often lower than that carried out by organisations.

So what does work? What are successful organisations doing?

They are addressing the capability problem by staged and structured investment in their staff, especially those identified as ‘key’, because they are, or will be, owners of essential IP. ‘Will’, because rather than hiring only experienced, trained, (and so skilled) individuals, successful organisations are placing 30% of investment in developing people. Their capacity problem, however, is being dealt with in rather more interesting ways. Firstly by hiring – usually through managed-service providers – and secondly by managing the demand.

This second approach is particularly apparent in well-run project-based organisations. The financial pressure over the past few years has challenged the way investment is made in projects with the result that enterprise-wide project portfolio management has become a valued activity. By applying the principles derived from financial portfolio management and concepts of value in a more rigorous way, the demand for projects is being addressed, and with it, capacity.

The questions their Boards are addressing today are not just about the desirability, but also the do-ability of change, and that is defined in terms of capacity and capability, no longer just in terms of pounds and pence.

The most effective solution is as it always was – a blend.

Contractor skills and expertise and internal development can usefully be brought together. For larger organisations this blend is formed through the development of professions or academies or by simply establishing communities of professionals who share a common goal.

But in each it is clear that the most successful form of capability development isn’t about providing training courses. It has been proven that a blend of knowledge transfer (often via courses and e-learning) for the less experienced, followed by ‘application-based’ learning to enhance and broaden expertise and experience, is the most effective approach.

It is the latter of these approaches that is becoming increasingly valued and valuable within organisations. It also provides an ideal opportunity to gain increased value from contractor resources through ‘live’ knowledge and skills transfers – acting as expert coaches and providing support to the community.

So what are the critical steps towards a successful solution?

1. Establish what exactly are the core competences of your organisation
2. Invest in those people possessing the core competences: and own them
3. Don’t outsource the management of core capabilities: grow it
4. Introduce performance management against published criteria for contract staff and involve those responsible for its implementation
5. Be ruthless in the selection and culling of ‘projects’: use public and published criteria in the management and control of project portfolios
   and
6. Make the best possible use of your contractors in order to enhance your internal capability!

1. The only thing a project leaves behind; projects are by definition temporary entities. The team will disband, the sponsor and project manager move on and the project itself will be nothing more than a file-note in the PMO library. The legacy is the tangible output that the project generated; its product set
2. Easier to manage than tasks; it is often not possible to tell the real status of a task, even with the most honest and diligent reporting. By looking at the extent of the completeness of a product (because of its physical nature) it is far easier and quicker to get an accurate view of progress
3. The power of visualisation; a joint understanding of theoretical concepts can be difficult to achieve; this is why people use analogies all the time. Products are very much easier to visualize – to see in your ‘mind’s eye’ – than activities, allowing people to reach and share a joint understanding much more quickly
4. Perfect source for milestones; why place a milestone at the end of an activity? If the output of the process is unsatisfactory then you will have to repeat the activity, so it hasn’t really finished and the milestone hasn’t been met. Base the milestone, instead, on the output….otherwise known as the product!
5. Easy to decompose; once the primary level product has been decided upon it is a relatively simple process to establish the sub-products. A house has foundations, walls and a roof; walls have vertical surfaces, windows and doors and so on. This ability to quickly decompose a product allows the selection of appropriate management points and highlights areas of particular risk very early in the project.
6. Tangible and therefore easy to monitor; because a product has, in all instances, a physical presence it is easy to establish if it is present or not. And, if a product is too big, late in the lifecycle or inappropriate as a monitoring point, you can simply select a product or combination of products at a level or two lower in the decomposition.
7. Unarguable evidence of progress; giving you the ability to demonstrate to your client (and your suppliers to you) what has been achieved so far for the time and money expended.
8. The answer to the client’s requirements; and therefore good for stakeholder engagement, management and expectation setting
9. Necessary to satisfy your critical success factors (CSFs); not only are products the key to benefits, but without appropriate products the CSFs are also unattainable. Remember, if you don’t achieve your CSFs then you have failed. Products allow you to place appropriate focus and emphasis
10. Ease of communication; akin to visualization, being able to clearly describe and itemise the deliverable set facilitates effective communication. It allows a straightforward explanation of what is in and what is out of scope of the project – because the product set is the scope.
11. The scope of the project; is often a problem because people interpret it in different ways. The user sees scope as the functionality that they need and have articulated in the requirements; the supplier, conversely, will see the scope as the work (activities) that they will have to undertake. The point at which these two unite is in the products – this is why they exactly define the scope
12. Highlight risks; as soon as people start to visualise or understand the level of complexity inherent in the products or their dependencies they start to understand the risks. At its simplest this may simply be a question of looking at a product definition and thinking “we’ve never done one of these before, I bet it’s tricky!” At a more sophisticated level the way in which the product breakdown structure is populated will tell you plenty about risk.
13. Clarifies dependencies; product flow diagrams (clearly impossible without an appreciation of the product set) give the earliest indication of the dependencies within and beyond a project. These are vital, later on in the planning process, to understanding the dependency network and critical path – if you can’t infer these, and you don’t fully understand your product flow diagram, you will have little control of your schedule.

Well there’s a ‘baker’s dozen’ of reasons for focusing on products – the key to effective project management. The question is which do you find most important? Please contribute to the debate and let us know your views

Things to consider

1. Is the organisational value of the change clear?  Have the benefits, costs and risks been fully reviewed and validated by all who will contribute?
2. Have the implications of operating the change been made explicit to those expected to own the change within business-as-usual?
3. Identify challenges, threats and risks that may prevent realisation of the benefits in day-to-day operations and set out a strategy to address them.
4. Ensure that changes to roles, accountabilities, reporting and performance management are understood and agreed at all levels within the business.
5. Make sure that the required on-going support for the change products is in place.

Such problems arise from a lack of emphasis on the adoption of the change products (deliverables) by the business to make the required impacts in operations.  The business context for change includes the skills and personal motivation of individuals, as well as organisational elements such as work structures and business priorities.  These factors are crucial to success in making change happen.  Attention to change readiness issues early in the change journey, and careful transition planning as part of adoption, will have a considerable influence on whether a newly introduced practice is sustained or decays into disuse.

Things to consider

1. Is the change initiative addressing the hearts and minds of the adopters of the change?
2. Is the business involved – from the beginning – in designing the change?
3. Do you have a transition plan to identify the support required to the line in adopting the change – and are there specific measures for the success of the transition?
4. Include in the modelling of the operating level of the business change what is to be:
   • started (e.g. new processes and behaviours)
   • stopped (e.g. old procedures and old habits that are no longer needed)
   • modified (e.g. changes to the current routines)

This will allow individual receivers, as well as groups, to identify the impacts on them and adapt their working practices accordingly.

An organisational-wide change arises from the sum of all the individuals’ change behaviours – and there lies a challenge. There is generally not a single, completely shared change journey, but multiple transformations, and so there is no single motivation or change process that will work.

It has been said that running a programme is like herding cats; shepherding individuals and groups and pushing them forward is difficult.  Of course, if you want the cats to behave ‘rationally’, the best way is to put ‘treats’ where you want them to go, and wait.  What then count as ‘treats’ for those who need to change?

Things to consider

1. Have you identified what counts as ‘achievement‘ in the vision of the new world and any ‘natural’ rewards in the outcomes?
2. Has the change initiative developed sign-post Key Performance Indicators (KPIs) for use during the transition period?
3. Have you modelled rewards in terms of pay, promotion and praise (non-financial reward? (Each ‘p’ has a major contribution to play in developing and embedding behaviours)
4. Are the value systems of the groups that are to change identified and understood?

And are you considering

1. linking jobs and roles to recognisably valuable outcomes
2. replacing the KPIs for the change with operational ones after the transition – defining a profile over time that recognises the occurrence of learning?
3. involving the adopters in the design of any new processes.