Several months ago I published an article titled "Why Do Clients Prefer to Live in Denial?" that described a particular project situation yours truly found himself in certain number of years ago. Today I just wanted to revisit this case study from a slightly different perspective: rather than concentrating on what went wrong in that particular scenario, I would like to focus on the possible remedial action that could have been taken. At the end of the article I am going to provide you with several potential answers to my question and ask you to propose the best possible course of action.
So, without further ado here is the situation:
- You are a CEO of a smaller company A that signed a major deal with larger retail company B to supply them with a new trading platform
- The technical sales team assessed the situation at company B and came up with an approximate estimate of US1.5 million for the entire project
- The management of company B dismissed the estimate produced by the sales team and forced company A to accept a US$750,000 target
- Since your organization (company A) has been experiencing certain financial issues at the time, you yielded to that demand, but added an article to the contract stating that:
- Since the budget is smaller than expected, company B will assign a team of their employees to work full time on the deployment of the system together with a team of specialists from your organization
- Once the money (i.e. the $750K) runs out, company B will accept all the responsibilities remaining for fine-tuning the platform
Several months later once the project manager received a complete and accurate requirements document, he was able to produce a schedule and the resource requirements estimate. The final, detailed estimate turned out to be:
- Optimistic forecast - $1.4 million
- Most likely - $1.5 million
- Pessimistic - $1.7 million
Your project manager urges you to call the CEO of company B in order to explain the situation to him. He justifies this request by stressing that (a) Company B employees have zero chance of finishing the remaining 50% of work independently and (b) overall failure of the project would have long-term negative effects on the reputation of your organization and the cash flows of company B.
You are presented with the following choices:
- Option A: Pick up the phone and call the CEO of company B and attempt to reason with him by providing with different options for the successful implementation of this project.
- Pros: There is a chance to address the situation at hand and come to a mutually beneficial solution
- Cons: The CEO of company B is known for his "extravagance" and hot temper and there is a high degree of probability that he may cancel the deal altogether (and yes, he is capable of doing just that!)
- Option B: Unequivocally order your project manager not to rock the boat and proceed with the project as if nothing had happened.
- Pros: You make $750K at the end of the project and have no legal obligations to company B.
- Cons: You will be unable to produce a press release at the end of the project stating something to the effect of, "Small company A has just completed a successful implementation of its platform at a giant retailer B". Furthermore, the management of company B could conveniently forget about your early estimate of $1.5M and blame you for the project failure (remember the somewhat unstable CEO?). There is a definite reputational damage as well as a possibility of a court case, since company B has much deeper pockets than you.
- Option C: Walk away from this project altogether.
- Pros: This eliminates the long-term reputational impact and possible legal action in the future
- Cons: You lose $750K and a potential future client with deep pockets. There is still a possibility of legal action.
What course of action would you select if you were the CEO and the owner of company A? Please leave your comments below: (A), (B) or (C).
About the Author
Jamal Moustafaev, MBA, PMP – president and founder of Thinktank Consulting is an internationally acclaimed expert and speaker in the areas of project/portfolio management, scope definition, process improvement and corporate training. Jamal Moustafaev has done work for private-sector companies and government organizations in Canada, US, Asia, Europe and Middle East. Read Jamal’s Blog @ www.thinktankconsulting.ca
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Jamal is an author of two very popular books: Delivering Exceptional Project Results: A Practical Guide to Project Selection, Scoping, Estimation and Management and Project Scope Management: A Practical Guide to Requirements for Engineering, Product, Construction, IT and Enterprise Projects.