Sources of Resource Risk

(Excerpt from chapter 5 of Identifying and Managing Project Risk, © 2003 by Tom Kendrick. AMACOM)

Resource risks represent less than one-third of the records in the PERIL database. There are three categories of resource risk: people, outsourcing, and money. People risks arise within the project team. Outsourcing risks are due to the use of people and services outside the project team to perform critical project work. The third category, money, is something of an anomaly in the data, as very few of the problems reported were primarily about funding. Money is, however, a key factor in many of the people and outsourcing problems, and the effect of insufficient funding on projects has substantial impact on a project in many other ways. The summary shows:

Resource Risks Count Cumulative
Impact (Weeks)
Average Impact
People 45 194 4.3
Outsourcing 17 109 6.9
Money 2 58 29.0

The root causes of people and outsourcing risk are further characterized by type, and a Pareto chart of overall impact by type of risk is summarized in Figure 5-1. Although risks related to internal staffing dominate the resource risk data, the single most damaging factor is delay associated with outsourced work.

Figure 5-1: Resource risks in the PERIL database

People risks

Risks related to people represent the most numerous resource risks, comprising over two-thirds of the incidents. Availability of people was the primary issue, with four subcategories:

  • Staff leaving the project permanently
  • Staff leaving the project temporarily
  • Staff joining the project late
  • Queuing issues involving people not dedicated to the project

There were a few risks associated with conflict among staff members, and some related to motivation.

Losing people midproject, permanently or temporarily, was the most common people risk, with permanent loss leading to an average slip of more than five weeks and temporary loss causing a typical slip of just over two weeks. The reasons for permanent staff loss included resignations, reassignments to other work or different projects, and staffing cutbacks. Discovering these risks in advance is difficult, but good record-keeping and trend analysis are useful in setting realistic project expectations. The total impact due to permanent staff loss dominated the people risks. Although its overall impact was lower, temporary loss of project staff was the most common people-related risk. The most frequently reported reason for short-term staff loss was a customer problem (a "hot site") related to the deliverable from an earlier project. Other reasons for short-term staff loss included illness, earthquakes, travel nightmares, and organizational reorganization.

There were also a number of projects that missed the deadline at the end because required staff was not available at the beginning. Staff joining the project late had a number of root causes, but the most common was a situation described by one project leader as the "rolling sledgehammer." Whenever a prior project is late, some, perhaps even all, of the staff for the new project is still busy working to complete it. As a consequence, the next project gets a ragged start, with key people beginning their contributions to the new project only after they break free of the older one. Even when these people do become available, there can be additional delay. Staff members coming from a late project are often exhausted from the bulge of work and long hours typical of a project that runs beyond its deadline. The "rolling sledgehammer" creates a cycle that self-perpetuates and is very difficult to break. Each late project causes the projects that follow to be late.

Other reasons delaying engagement of project staff include scarcity of certain skills, which is the root cause of the fourth risk related to people availability: queuing. Specialized expertise is often expensive, and it is common for businesses to minimize the cost of these skills by investing as little as possible. Most technical projects rely on at least some special expertise that they share with other projects, such as system architects needed at the start, testing personnel needed at the end, and other specialists needed throughout the project. If an expert happens to be free when a project is ready for him or her to start work, there is no problem. If the expert has activities for five other projects queued up already when your project activity needs attention, your activity will enter the queue and any following work will slip while the queued activity waits. Queuing analysis is well understood, and it is used to optimize manufacturing, engineering, system design, computer networks, and many other business systems. Any system subject to queues requires some excess capacity to maximize throughput. Optimizing project resources based only on cost drives out any spare capacity and causes project delay.

Thorough planning and credible scheduling of the work well in advance will reveal some of the most serious potential exposures regarding people. Histogram analysis of resource requirements may also provide insight into staffing exposures a project will face, but unless analysis of project resources is credibly integrated with comprehensive resource data for other projects and all the non-project demands within the business, the results will not be very useful. Aligning staffing capacity with project requirements requires ongoing attention. One significant root cause for understaffed projects is little or no use of project planning information to make or revise project selection decisions at the organization level, triggering the "too many projects" problem. Retrospective analysis of projects over time is also a powerful way to detect and measure the consequences of inadequate staffing, especially when the problems are chronic.

Other people-related risks in the PERIL database involve conflict, where two simultaneous projects had essentially the same objective and each interfered with the progress of the other. Low motivation also contributed to delay on several long projects. Falling morale is one risk (among many) for lengthy projects.

Outsourcing risks

Outsourcing accounts for more than a quarter of the resource risks. Though the frequency in the PERIL database is lower than for people risks, the impact of outsourcing risk was nearly six and a half weeks, well above the database average. The risks related to outsourcing are similar to the people risks: delays, late starts, and turnover.

Delays, such as when a supplier fails to complete assigned work on schedule, are the most common outsourcing risk and represent the largest total impact for the projects in the PERIL database. Delays result from queuing problems and other people availability issues, but often a precise cause is not known. Outsourced work is generally done somewhere else, so the project team may not be able to observe it and assess the cause of problems. Compounding the impact of late delivery is the added element of surprise; the problem may be invisible until the day of the default, when it is too late to do much about it. Lateness of the deliverable was exacerbated in several examples in the PERIL database by work that did not meet stated specifications and caused even more delay.

Late starts are also fairly common with outsourced work. Contracts need to be negotiated, approved, and signed, all processes that can be very time consuming. Beginning a new, complex relationship with outside people you have never worked with before can require more time than is expected. For projects with particularly unusual needs, just locating an appropriate supplier may cause significant delays.

The third risk, turnover, can also lead to project delay due to the ongoing need to redo training, conduct additional project plan and specification reviews, and rebuild working relationships.

Outsourcing risks are detected through planning processes, and through careful analysis and thorough understanding of all the terms of the contract. Both the project team and the outsourcing partner must understand the terms and conditions of the contract, especially the scope of work and the business relationship.

Money risks

The third category, money, is not very common in the PERIL database. The two data points include the single largest delay in the database (for a project that was subject to such severe funding cut backs that it was nearly a year late), so the average for this subcategory, 29 weeks, is skewed. As with any other resource needed by a project, however, if there are limits on money that create bottlenecks, the result will be impeded progress and project delay.