Strategic Alignment
Capital project management is a critical skill in the oil and gas industry. Capital projects, when managed properly, further organizational strategies and create competitive advantage. When not managed properly, capital projects can lead to financial hardship, unrealistic demands on scarce human resources, and public relations nightmares. Before a capital project is launched, it is critical to ensure it is aligned to organizational strategies.
Project success requires strong connections between strategic planning and the selection process for the portfolio of capital projects. An effective strategic planning process leads to selection of an optimal portfolio of projects to execute organizational strategies. Selecting and managing capital projects as a portfolio may have advantages over selecting and managing them on a project-by-project basis. For example, a portfolio approach to capital projects may enable sharing resources (financial, human, equipment) more efficiently than possible on a project-by-project basis.
Planning
After projects have been selected, effective project planning becomes vital. Most projects fail in the planning phase. Failure may not manifest itself until later in the project when considerable money and resources have been wasted. It is critical to invest time and effort into proper planning before projects are formally kicked-off. Proper planning includes double-checking the project’s alignment to strategy and adjusting or killing projects that are not aligned. After projects are launched it is a good idea to put in place an “early warning” system to indicate when the project is veering away from the intended organizational goals. One technique for an effective early warning system is an ongoing project scope assessment meeting or report that shows how the scope is aligned to the intended strategy. If the project is veering away from the strategy then decisions should be made to get the project back on track or to kill the project. Nobody wants an on-time, on-budget project that does not to help the organization achieve its goals. Cutting a path through the forest in the wrong direction is of no use – even if it’s done quickly and inexpensively.
General Eisenhower said “plans are worthless, but planning is everything.” Expect things to change when project execution begins. Use the project plan to help you decide what to do when things change, which changes are most critical, and who needs to be notified. Project plans should include a timeline that identifies the “critical path.” The critical path is the set of activities that, when connected together, determine project duration. If a milestone on your critical path is delayed, it represents a risk to on-time completion. Action must be taken immediately to get the project back on track. However, if there are delays in areas that are not on the critical path then this may be of lesser concern.
Execution
Proper execution of capital projects is performed with The Balanced Approach. The Balanced Approach consists of three core skills: 1) technical project management expertise, 2) business acumen to ensure continual alignment between project scope and organizational strategy, and, 3) interpersonal skills and a “Sixth Sense” to lead people through the project and anticipate potential barriers and enablers to project success.
Of the three areas in The Balanced Approach, an overwhelming body of research shows that interpersonal skills are most correlated to project results. Therefore, leadership should ensure that project managers not only have the technical skills required to succeed, and a complete understanding of how the project will drive organizational strategies, but also intuition and a deep understanding of how to lead people through change.
Capital projects in the oil and gas industry reflect the classic tradeoff between risks and rewards. Risk of delays and budget overruns are constantly lurking and must be vigilantly managed. However, the rewards of a successful capital project can lead to years of positive returns.
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