In this article I want to provide an overview of what I think the most useful form of project audit is, and why it’s of benefit to an organization to conduct periodic audits.
To some of you this may be a new concept; to others, you may have been subjected to (or performed) project audits already. Either way, it’s worth defining my view of an audit as it may be different from yours. To me, an audit is a review of different aspects of a project by an expert from outside of the project. Typically this will be a PMO function and may cover a number of different aspects--compliance, results, timeliness, etc.
You may have slightly different definitions within your organizations, but I am going to work from this one for this article. I’m deliberately avoiding things like one-off audits of a specific project which are usually focused more on the specific deliverables/challenges of that initiative, rather than on project management as a whole.
The best kind of audit By their nature, audits can look at a multitude of different aspects of a project, but I strongly feel that they deliver the best results when targeted appropriately. An audit that looks to ensure that every box is correctly completed on a status report is not going to do much to advance project management discipline, and it may set it back by alienating project managers.
Instead, an audit should focus on the process of project management, and the following questions are key:
Is each step in the process achieving its intended goals?
Are the tools and templates adequately supporting each step in the process?
Are the processes being complied with and are the standards being met?
Is management of the project consistent with other similar projects?
For a PMO that’s focused on improving the way that projects are executed, this should be sufficient. Anything more granular than this becomes an analysis of the details of the way that a PM manages and runs the risk of getting into issues of different project management styles.
The way that the audit is conducted is also important. Many of you will have been subjected to more formal audit processes where nameless people walk around saying nothing and making notes--it’s not a comfortable situation.
Far better is to make the audit a collaborative process. Have the auditor work with the project manager, and position the audit as a chance to improve the way that projects are handled across the entire organization (more on that later). Even the way that the questions are asked can make a huge difference. For example, “How easy do you find it to follow that template?” is likely to get a much more constructive (and ultimately helpful) response than “Why don’t you fill in this box?”
Maybe most important of all is the way that project managers see auditors. The natural reaction by most PMs is to see the auditor as “against” them, and I always try and turn that around. If I am auditing, I will start by meeting with the project manager to discuss the areas that are likely to be of focus, but in a way that makes the PM an integral part of the process. A question as simple as “What part of the process do you find the most frustrating?” is an easy way to try and identify areas of focus in a way that encourages the PM to be part of the process.
The audit process For an audit to be successful, you have to know how it is carried out. Is this simply going to be a series of questions and a review of documentation, or is there going to be a quantitative element as well? If you are looking at data, then what data points are going to be considered and what can they be compared against? There may be some value in knowing that the PM spends two hours a week updating the project plan, but there’s a lot more value in knowing what the numbers are from other projects to have something to compare against.
If the process is purely qualitative, then how will you ask questions: interviews, group discussions, questionnaires or a combination? How will you present the questions to the team? You need to get honest feedback rather than the answers that they think you want, but you also need to make sure that it’s not a confrontational relationship that could cause them to shut down completely.
There needs to be consistency in the way that audits are conducted. You need to be able to compare results across projects--both similar and different. The most meaningful results are not the data elements or findings from one particular project, but rather the trends that occur across projects.
Finally, you need to consider how many projects will be audited. It likely isn’t practical to audit every project (although it may be possible to capture data points on completed projects), but what is the correct mix of projects based on type, size, project manager, etc.? In some cases, you may want to audit the same project multiple times--especially if it’s a long-term initiative.
Analyzing the audit The most important part of a project audit is going to be interpreting results and acting accordingly. This is an area that can lead to mistakes, so care is needed. In some cases, trends will occur across audits--one particular template or process that just doesn’t seem to be working. That’s easy to address--you revisit the process and make adjustments to try and address the identified problems. Then you reassess after the changes have been made to see whether the expected improvements have occurred. Similarly, if a project manager is struggling with one particular aspect, it may signify a need for training of that individual--a quick lift in their skills that solves the problem permanently.
Not all audit findings are so clear-cut, however. Consider the project manager who isn’t following one aspect of the process. Is this simply a training issue, or is there something else going on? Is it possible that the PM in question has actually found a better way of doing things? It’s entirely possible that the outcome of this audit should be a change to the process to include the changes that the project manager made on their own initiative. That’s not to say that there shouldn’t also be some training for the PM on the right way to introduce process enhancements, but the auditor should never lose sight of the overall goals of the audit process--to improve the quality of project management within the organization.
Conclusion Audits should be an important part of the PMO’s governance of projects within an organization. They are a connection to what is actually happening on projects. While audits can be a “stick” that forces compliance with process, that’s not the real value they bring. Instead, they should be able to help identify areas that require focus to improve the way that projects should be managed. Far from being something to be feared, that’s something that project managers should embrace--after all, you all want a better way of managing projects.
In 1969, the Neiman Marcus catalog offered the first home PC, a stylish stand-up model called the Honeywell Kitchen Computer, priced at $10,600. The picture shows an aproned housewife caressing the machine, with this tag line: "If she can only cook as well as Honeywell can compute." That image should be on every cubicle in Silicon Valley; it's a testament both to what technologists get right and what they get badly wrong.
To their credit, they understood that Moore's law would bring computing within the reach of regular people. But they had no idea why anyone would want it. Despite countless brainstorming sessions and meetings on the subject, the only application the Honeywell team could think of for a home computer (aside from the perennial checkbook balancing) was recipe card management. So the Kitchen Computer was aimed at housewives and featured integrated counter space. Those housewives would, however, require a programming course (included in the price), since the only way to enter data was with binary toggle switches, and the machine's only display was binary lights. Needless to say, not a single Kitchen Computer is recorded as having sold.
Today, of course, we have computers in every home—and in every pocket and car and practically everywhere else. But one of the few things the average person doesn't use them for is managing recipe cards.
Don't blame Honeywell—blame the computing world of the 1960s. In those days, computers were expensive mainframes. Because processing power was so scarce and valuable, it was reserved for use by IT professionals, mostly working for big companies and the government. Engineers both built the computers and decided how to use them—no wonder they couldn't think of nonengineering applications.
But as the Kitchen Computer hinted, computers would soon get smaller and cheaper. This would take them out of the glass boxes of the mainframe world—and away from the IT establishment—and put them in the hands of consumers. And the real transformation would come when those regular folks found new ways to use computers, revealing their true potential.
All this was possible because Alan Kay, an engineer at Xerox's Palo Alto Research Center in the 1970s, understood what Moore's law was doing to the cost of computing. He decided to do what writer George Gilder calls "wasting transistors." Rather than reserve computing power for core information processing, Kay used outrageous amounts of it for frivolous stuff like drawing cartoons on the screen. Those cartoons—icons, windows, pointers, and animations—became the graphical user interface and eventually the Mac. By 1970s IT standards, Kay had "wasted" computing power. But in doing so he made computers simple enough for all of us to use. And then we changed the world by finding applications for them that the technologists had never dreamed of.
This is the power of waste. When scarce resources become abundant, smart people treat them differently, exploiting them rather than conserving them. It feels wrong, but done right it can change the world.
The problem is that abundant resources, like computing power, are too often treated as scarce. Consider another example: Wired's IT department used to send out occasional emails telling employees it was time to "delete unneeded files from the shared folders"—their way of saying they had run out of storage room on the servers. Because we're good corporate citizens, we all dutifully scanned through our files, deleting those we could live without. Perhaps you've done the same.
One day, after years of this ritual, I began to wonder just how much storage capacity we actually had. Turns out, not so much: 500 gigabytes. At the time, a terabyte of memory (1,000 gigabytes) cost about $130. I had recently purchased a standard Dell desktop PC for my family, which the kids used for playing videogames; it came with a terabyte internal hard drive. My children had twice as much storage as my entire staff.
Scarcity vs. Abundance Management
Scarcity
Abundance
Rules
Everything is forbidden unless it is permitted.
Everything is permitted unless it is forbidden.
Social model
Paternalism ("We know what's best")
Egalitarianism ("You know what's best")
Profit plan
Business model
We'll figure it out
Decision process
Top-down
Bottom-up
Organizational structure
Command and control
Out of control
How did this happen? The answer is simple: We had gotten stuck thinking that storage was expensive, when in fact it had become dirt cheap. We treated the abundant thing—hard drive capacity—as if it were scarce, and the scarce thing—people's time—as if it were abundant. The corporate bureaucracy had gotten the equation backward. (Let me hasten to add that my office quickly added a heap of storage, and those emails don't go out anymore!)
This happens all over the place. When your phone company tells you that your voicemail inbox is full, that's artificial scarcity—it costs less than a nickel to store 100 voice messages, and the average iPod could store more than 100,000 of them (voice messages are recorded at lower quality than music, so they take up less space). By forcing subscribers to spend time deleting voicemails, the phone companies were saving a little on storage costs by spending a lot of consumer time. They managed the scarcity they could measure (storage) but neglected to manage a much more critical scarcity (customer goodwill). No wonder phone companies are second only to cable TV companies in "most hated" rankings.
But the funny thing about waste is that it's all relative to your sense of scarcity. Our grandparents grew up in an age when a long-distance telephone call was an expensive luxury, to be scheduled and kept short. Even today, many find it hard to keep people of that generation on a long-distance call for very long—they still hear a meter ticking in their head and rush to finish. But our kids are growing up in an age when long distance is free on their cell phones. They'll happily chat for hours. From the perspective of 1950s telecom costs, that's incredibly wasteful. But today, when those costs have fallen to near zero, we don't give it a second thought. It doesn't feel like waste at all.
Nature Wastes Life
Our brains seem wired to resist waste, but we are relatively unique in nature for this. Mammals have the fewest offspring in the animal kingdom, and as a result we invest enormous time and care in protecting each one so that it can reach adulthood. The death of a single human is a tragedy, one that survivors sometimes never recover from, and we prize the individual life above all.
As a result, we have a very developed sense of the morality of waste. We feel bad about the unloved toy or the uneaten food. Sometimes this is for good reason, because we understand the greater social cost of profligacy, but often it's just because our mammalian brains are programmed that way.
However, the rest of nature doesn't work like that. A bluefin tuna can release 10 million fertilized eggs in a spawning season. Perhaps 10 of them will hatch and make it to adulthood. A million die for every one that survives.
But there's good reason for it. Nature wastes life in search of better life. It mutates DNA, creating failure after failure, in the hope that some new sequence will eventually out compete those that came before and the species will evolve. In other words, nature tests its creations by killing most of them quickly—the battle "red in tooth and claw" that determines reproductive advantage.
Nature is so wasteful because scattershot strategies are the best way to do what mathematicians refer to as fully exploring "the potential space." Imagine a desert with two pools of water separated by some distance. If you're a plant growing next to one of those pools, you can follow one of two different reproductive strategies. You can drop seeds near your roots, where there's a pretty good chance they'll find water. This is safe but soon leads to crowding. Or you can toss the seeds to the wind and let them float far away. This means that almost all will die, but it's the only way to find that second pool of water, where life can expand into a new niche, perhaps a richer one. The way to get from what the mathematicians call a local maximum to the global maximum is to explore a lot of fruitless minima along the way. It's wasteful, in a sense, but it can pay off in the end.
The science fiction writer Cory Doctorow calls this "thinking like a dandelion." He writes: "The disposition of each—or even most—of the seeds isn't the important thing, from a dandelion's point of view. The important thing is that every spring, every crack in every pavement is filled with dandelions. The dandelion doesn't want to nurse a single precious copy of itself in the hopes that it will leave the nest and carefully navigate its way to the optimum growing environment, there to perpetuate the line. The dandelion just wants to be sure that every single opportunity for reproduction is exploited!"
This is how to embrace waste. Seeds are too cheap to meter. It feels wrong, even alien, to throw so much away, but it's the right way to take advantage of abundance.
Making the World Safe for Cat Videos
Perhaps the best example of a glorious embrace of waste is YouTube. I often hear people complain that YouTube is no threat to television because it's "full of crap"—which is, I suppose, true. The problem is that no one agrees on what the crap is. You may be looking for funny cat videos and think my favorite soldering tutorials are of no interest. I want to see funny videogame stunts and couldn't care less about your cooking tutorials. And clips of our own charming family members are of course delightful to us and totally boring to everyone else. Crap is in the eye of the beholder.
Even the most popular YouTube clips may totally fail in the standard Hollywood definition of production quality, in that the video is low-resolution and badly lit, the sound quality awful, and the plots nonexistent. But none of that matters, because the most important thing is relevance. We'll always choose a "low-quality" video of something we actually want over a "high-quality" video of something we don't.
A few months ago it was time for my kids to choose how to spend the two hours of "screen time" they're allowed on weekends. I suggested Star Wars and gave them a choice: They could watch any of the six movies in hi-def on a huge projection screen with surround sound audio and popcorn. Or they could go on YouTube and watch stop-motion Lego animations of Star Wars scenes created by 9-year-olds. It was no contest—they raced for the computer.
It turns out that my kids, and many like them, aren't really that interested in Star Wars as created by George Lucas. They're more interested in Star Wars as created by their peers, never mind the shaky cameras and fingers in the frame. When I was growing up, there were many clever products designed to extend the Star Wars franchise to kids, from toys to lunch boxes, but as far as I know nobody thought of stop-motion Lego animation created by children.
The demand must always have been there, but it was invisible because no marketer thought to offer it. Once we had YouTube, and didn't need a marketer's permission to do things, that demand suddenly emerged. Collectively, we found a category that the marketers had missed.
All those random videos on YouTube are just dandelion seeds in search of fertile ground on which to land. In a sense, we're "wasting video" in search of better video, exploring the potential space of what the moving picture can be. YouTube is a vast collective experiment to invent the future of television, one thoughtless, wasteful upload at a time. Sooner or later, through YouTube and other sharing sites, every video that can be made will be made, and every person who can be a filmmaker will become one. Every possible niche will be explored. If you lower the costs of exploring a space, you can be more indiscriminate in how you do it.
Nobody is deciding whether a video is good enough to justify the scarce channel space it uses, because there is no scarce channel space. The cost of distribution is now low enough to round down to free. Today, it costs a content provider like Netflix about a nickel to stream a two-hour movie to one person. Next year it will be four cents. A year later it will likely be three. Which is why YouTube's founders decided to give it away. The result is messy and runs counter to every instinct of a television professional, but this is what abundance both requires and demands. If YouTube hadn't done it, someone else would have.
What this boils down to is the difference between abundance- and scarcity-based business models. If you're controlling a scarce resource, like the prime-time broadcast schedule, you have to be discriminating. There are real costs associated with those half-hour chunks of network time, and the penalty for failing to reach tens of millions of viewers with them is calculated in red ink and lost careers. No wonder TV executives fall back on sitcom formulas and celebrities—they're safe bets in an expensive game.
But if you're tapping into an abundant resource, you can afford to take chances, since the cost of failure is so low. Nobody gets fired when your YouTube video is viewed only by your mom.
For all YouTube's successes, however, it has so far failed to make any real money for Google. The company has not figured out how to match video ads with video content the way it matches text ads with text content.
The TV networks saw an opportunity in this failing and created a competing video service, Hulu. It offers mostly commercial video, most of it taken from TV, but it is as convenient and accessible as YouTube. Because the content is a known quantity, often the same thing advertisers are already buying on TV, they're happy to insert their commercials as pre-rolls, post-rolls, and even interruptions in the programming. It's free, of course, but unlike on YouTube, you're paying something in time and annoyance—just like on regular TV. However, if it's 30 Rock you want, and you want it now, in your browser, this is the simplest way you're going to get it.
The YouTube model is totally free—free to watch, free to upload your own video, free of interruptions. But it doesn't make money. Hulu is only free to watch, and you have to pay the good old-fashioned way, by watching ads you may or may not care about. Yet it generates healthy revenue. These two video outlets illustrate the tension between different variations on the free business model. Although consumers may prefer 100 percent free, a little artificial scarcity is the best way to make money.
Sound schizophrenic? That's the nature of the hybrid world we're entering, where scarcity and abundance exist side by side. We're good at scarcity thinking — it's the 20th-century organizational model. Now we have to get good at abundance thinking, too.
