1. Critical Chain Project Management: An Introduction Robert Richards, Ph.D. Project Manager Stottler Henke Associates, Inc.

2. Presentation Outline Motivation & Background Problem [What to Change] Localized Risk Management –Task Level Insurance Policy –Student Syndrome –Parkinson’s Law –Multi-tasking Solution [What to Change to] Governing Principle - Global Risk Management –Project Level Protection –Systems Perspective –Execution Control 2 Richards@StottlerHenke.com

3. Motivation < 45% of all projects finish on schedule or before < 17% software projects completed on-time / on-budget. IT related projects 23%+ of projects will be canceled before they ever get completed. Further results indicate 50%+ of projects cost > 150% original estimates Ref: www.it-cortex.com/Stat_Failure_Rate.htm www.pqa.net/ProdServices/ccpm/W05002001.html Richards@StottlerHenke.com 3

4. Results: Switching to Critical Chain Lucent Technologies Outside Plant Fiber Optic Cable Business Unit reduced its product introduction interval by 50%, improved on-time delivery, and increased the organization's capacity to develop products. Seagate Brings 1 st 15,000 rpm disc drive to market ahead of its competition, causing all competition to pull out of the market. (circa 2000). Lord Corporation Capacity has increased, cycle time improved, and operating expense remained the same. Richards@StottlerHenke.com 4

5. Are You A Responsible Person? 5 Richards@StottlerHenke.com Activity Start Completion Start Completion When asked for task estimate or What do you supply? How often is the "Three Point Estimation” used? How do you work when assigned to a task? What do you assume is supplied? asking for one:

6. Three-point Estimation of Task Times 6 In three-point estimation, three figures are per task, based on prior experience or best guesses a = the best-case estimate m = the most likely estimate b = the worst-case estimate Do most projects ask for these three? Which of the estimates is closest to the estimate most people report when asked? Likeliness Hours PERT Most Likely Opt. Pess. Beta distribution 5 10 15 2025 UNCERTAINTY

7. Background Triple Constraints [Binding Commitments] 1. Time/Schedule [Minimize] 2. Cost Budget [Minimize] 3. Content / Scope [Maximize] 7 Scope ScheduleBudget

8. Background Murphy’s Law [Disruption Event] Number of unknowns Range of possibilities Frequency of repetition Complexity [Amplification factor] Degree of integration required Number of dimensions to be integrated Speed of execution 8

9. Presentation Outline Background Governing Principle or Paradigm Shift Triple Constraints Complexity Murphy’s Law Problem [What to Change] Localized Risk Management –Task Level Insurance Policy –Student Syndrome –Parkinson’s Law Solution [What to Change to] Global Risk Management –Project Level Protection –Systems Perspective –Execution Control 9 Richards@StottlerHenke.com

10. Problem: Localized Risk Management Strategy 1. Task level insurance policy ** How safe is safe enough?** 2. Student Syndrome 1. Parkinson's Law Self-fulfilling prophecy [good estimating?] 2. Multi-tasking [absence of priorities] 10 Richards@StottlerHenke.com 50% confidence 90% confidence 10% confidence completing Start

11. Problem: Localized Risk Management Multi-tasking / task switching has overhead causing more delays to spread across all projects. One Resource, Four Tasks, from Four Different Projects 11 Richards@StottlerHenke.com

12. Presentation Outline Background Governing Principle or Paradigm Shift Triple Constraints Complexity Murphy’s Law Problem [What to Change] Localized Risk Management –Task Level Insurance Policy –Student Syndrome –Parkinson’s Law Solution [What to Change to] Global Risk Management –Project Level Protection –Systems Perspective –Execution Control 12 Richards@StottlerHenke.com

13. Solution Governing Principle Behind CCPM is: Aggregation of risk… Benefits: Lower overall protection needed Higher degree of “coverage” achieved Leading to lower incidence of “failure” 13 Richards@StottlerHenke.com

14. Solution: Global Approach to Risk Management 1. Planning 1. Project Level vs. Task Level Protection 2. Systems Perspective for Multiple Projects Pipeline projects with overlapping resources 2. Execution Control 1. Promote and encourage team culture 2. Controlled work queues 3. No multi-tasking work rules 4. No batch processing work rules 5. Task assignment prioritization 6. Management by Exception 14 Richards@StottlerHenke.com

15. Critical Chain Planning Process 1. Traditional Plan 2. Safety Excluded 3. Resource Leveled 4. Critical Chain Marked From Task to Project Protection 15 144 hours 72 hours 84 hours Richards@StottlerHenke.com 15

16. Critical Chain Planning Process 1. Traditional Plan 2. Safety Excluded 3. Resource Leveled 4. Critical Chain Marked in Yellow From Task to Project Protection 144 Hours 72 Hours 84 Hours 16 Richards@StottlerHenke.com

17. Aggregation Principle The Concept of Risk Pooling: Can someone explain why this works? Health Care Example: Larger pool = Lower cost 17 Richards@StottlerHenke.com 17

18. Aggregation Principle Insurance is designed to work by spreading costs across a large number of people. Premiums are based on the average costs for the people in an insured group. This risk-spreading function helps make insurance reasonably affordable for most people. http://www.insurance.wa.gov/legislative/factsheets/PoolingRiskReducingCost.asp 18 Richards@StottlerHenke.com

19. Critical Chain Planning Aggregation Principle [where did some of the safety go?]: 1.Pooled protection provides more coverage 2.Location is just as important as amount 3.Sizing Rule of Thumb  Buffer is ½ of preceding chain PB = Project Buffer FB = Feeding Buffer Compared to 144 hours traditional 19 132 hours Richards@StottlerHenke.com

20. Critical Chain Planning 20 Proj_Buf = Project Buffer FB = Feeding Buffer Schedule shown in Aurora 132 hours compared to 144 hours in traditional schedule Richards@StottlerHenke.com

21. Critical Chain in Execution 21 Schedule Before Execution Starts Richards@StottlerHenke.com

22. 22 “AS OF DATE” T1 & T7 finish on time Critical Chain in Execution Schedule Before Execution Starts

23. Richards@StottlerHenke.com23 T8 experiences increase in Scope or Delay First portion of delay absorbed by gap between T3 & T4 = Original T8 duration “AS OF DATE” Critical Chain in Execution Schedule Before Execution Starts

24. Critical Chain in Execution 24 Schedule Before Execution Starts Rest of delay impacts the project buffer 132 hours Richards@StottlerHenke.com = Original T8 duration “AS OF DATE” = project buffer impact T9 T10 FB T11 T11 also affected due to resource constraint E.g., So as of the “As of Date” project may be  7% Complete with 30% Buffer Consumed

25. Critical Chain in Execution 25 Schedule Before Execution Starts T1 & T7 finish on time T8 experiences increase in Scope or Delay First portion of delay absorbed by gap between T3 & T4 Rest of delay impacts the project buffer T11 also affected due to resource constraint E.g., So as of the “As of Date” project may be  7% Complete with 30% Buffer Consumed Richards@StottlerHenke.com = Original T8 duration = time absorbed by project buffer T9 T10 FB T11 “AS OF DATE”

26. Perspective on Buffers Not “rear view mirror watching” Predictive/Preventative/Leading Indicator Mechanism to Promote and encourage Team Work Collaboration / Communication Incentive Mechanism Measuring device – Neutral, Normalized Metrics Real-time Risk Meter Encourages a holistic/goal oriented perspective 26 Richards@StottlerHenke.com 26

27. NOTES * Tipping point also reminded me about what we were taught in psychology and sociology classes. * Human Behavior is greatly affected by their CONTEXT / environment. This is not obvious because people are actually very good at controlling their context. There have been many presentations at this and virtually every other project management related conference, about how team members should perform and how project managers should deal with human relationships to make projects successful. HOWEVER, most of the time we are trying to change human behavior withOUT changing the context. * Critical PATH project management creates a CONTEXT for people to perform in * Critical CHAIN project management creates a very different CONTEXT for people to perform in * Critical Chain is a context that promotes the type of behaviors that are needed for effective teams E.g., “Avoid Blaming & Complaining” * Critical Chain  When things go bad, not meeting commitments  team rushes to help NOT blame So incentive to hide problems, & look for scapegoats is greatly reduced. 27

28. Critical Chain Priority Metric Project Status Trend Chart or “Fever” Chart 28 Richards@StottlerHenke.com 28

29. Critical Chain Priority Metric Project Status Trend Chart or “Fever” Chart 29 Richards@StottlerHenke.com 29

30. Results (2) Harris Corporation: construction of its $250 million wafer fabrication plant – 3 days ahead of 13 month schedule (original plan was for 18 months & 4% over budget at the start of the project.) Balfour Beatty Civil engineering projects ahead of schedule and under budget. FMC Energy Systems Sub sea systems on-time performance went from 90%. Phillips US Navy Richards@StottlerHenke.com 30

31. Multi-Project System Systems Perspective for Multiple Projects 1.Should load for multiple projects be considered jointly? –Obviously 2.Why? –Prevent System Overload/Multi-tasking 3.How? –By taking a Systems Perspective 31 Richards@StottlerHenke.com

32. 32 Finite Capacity Pipeline Ingredients: 1.CC Plans [shorter] 2.Strategic Pacing Mechanism 3.Strict Priority Scheme 4.Rate Limit Policy/Guidelines Due Dates Are Derived Creating a Multi-Project Schedule Richards@StottlerHenke.com

33. 33 0 % Buffer Consumed 100 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | % Critical Chain Completed 0 100 1009 1010 10071008100610051003100410021001 By Portfolio of Projects In Execution, Buffer Status Drives Priority Decisions, not Project Importance Multi-Project Execution Control Pipeline Status Snap Shot Richards@StottlerHenke.com

34. The Upshot… Benefits 1. Operational Coherence – Stability 2. 20% Shorter Cycle-Times – Speed 3. On-time Performance – Reliability 4. More throughput – Growth Challenges: 1. Simple but not easy to grasp – too simple? 2.Requires a change in mindset 3.Takes 120 days for typical 100 person team 4.We don’t need that much improvement 34 Richards@StottlerHenke.com

35. 35 Questions ??? Robert Richards Ph.D., Stottler Henke Associates, Inc. 650 465-9511 Mobile Richards@StottlerHenke.com