ASEM Blog

by Donald Kennedy, Ph.D

There are a lot of materials and even entire societies devoted to best practices around project management. However, there is less information for all the engineering managers who are responsible for managing these project managers. This article is aimed at helping the people who do not manage projects but manage the people who manage projects. This is the first installment of a summary of a presentation I gave somewhere that I recently found in a box while cleaning.

In most organizations I have worked at (and there are a lot of these) there would be regular meetings where more senior managers would require their project managers to attend and provide ongoing status reports on their work. These meetings require the project managers to take their focus off the execution of the work in progress and devote resources to building stories to explain what has happened and why any deviations are not the result of some character flaw of the project manager. At one such meeting when I was being grilled, I rattled off many excuses and mentioned a river that had flooded in the area. The executives had great interest in this excuse, in particular because it had been on the news. I then said that they should not consider that event as important since its effect was minimal, but the answer I received was that it was a perfect reason to explain why my project was behind schedule. The purpose of the exercise was to build stories, whether they would help this or future projects was not a priority.

If we think about creating value by our efforts, I cannot see how the above meetings can be the way to achieve optimal organizational performance. In the presentation I recently found, there was a list of actions that people who manage project managers can take to be better stewards of the resources under their control. I realize there are too many points to cover in a single post so I will provide these in serial form.

Action 1: Learn how to best manage technical people.

If you are not strong in managing people there is no way you will suddenly be good at managing the subset consisting of project managers. I will go out on a bit of a limb by saying the most common opinion by experts is that engineers do not get enough training early in their careers in subjects that create good managers. Papers presented at ASEM conferences in the 1990s suggest that one of the best first steps to being a good manager is to develop a desire to help people. Too many people in all fields go into management for the benefits that come with the higher pay, power, perks and prestige. As with many lists, if you fail to take the first step seriously, there is little point in going any further.

Action 2: Give the project manager the maximum amount of trust and authority within your organization.

At one company, the director would make their project managers apply for approvals for their projects in small steps. For example, an initial approval would be given to develop the design, perhaps $2 million. Then when the design was completed, there would be approvals required to procure long lead materials, say $4 million. Once the orders were placed, approvals were given for signing construction contacts, say $6 million. I hope you can see the inefficiency of dishing out approvals a bit at a time. Cancelling a project mid-execution almost always has a worse return on the dollar spent (zero) than spending the additional money required to complete it.

Action 3: Trust the project managers

If you do not trust your project managers the bad practice shown in Action 2 will be taken. If you cannot trust your project managers to complete a project, you better examine your selection process for who you assign these tasks. In one paper I presented at an ASEM conference, I showed from a sample of project managers that the final results of their completed projects over a few years suggested the outcomes were based mostly on luck, and not some talent each project manager had or lacked. This is very much supported by Deming’s statement that most performance evaluations are measuring the outcome of chance occurrences and are therefore a waste of effort. Since the world is complex, I also published an article showing how over 30 years, you might be able to see that one project manager was more skilled than another, but this comparison was very difficult to assess and these days it will be rare to find several project managers working at the same organization for any length of time. It is very common for materials devoted to project success to state that the project manager should have the authority to do the work. They know better than anyone what is needed and asking permission from people further removed is unlikely to add any value.

Click here for Part 2 on Managing Project Managers

About the Author

Dr. Donald Kennedy, Ph.D., P.Eng., IntPE, CPEM, FASEM is a long time contributor to the Practice Periodical and ASEM blog.

BLOG DISCLAIMER: The opinions, views and content presented in this online blog solely represent the original creator and has no association with ASEM activities, products or services. The content is made available to the community for educational and informational purposes only. All blog posts are created voluntarily and are not sold, but may be used, shared and distributed free of charge. The blogs are not academic pieces, and therefore do not go through a peer-review process, and are not fact-checked. All errors belong to the creators.

by Ayman Fahmi Naser, MSEM, Senior Projects Manager

Effective decisions are crucial as they dictate course of action that yields the intended outcomes. This is why the approach one employs when reaching decisions is significant.

By utilizing Choosing By Advantages (CBA), engineering managers are able to focus on what is critical: the benefits (differences in value) that each alternative may offer to stakeholders, and making a determination according to the overall significance of those benefits. By emphasizing the benefits for the end user, CBA links decision makers with their clients' conceptualizations of what they desire. By involving constructors, buildability is taken into account.

CBA is a framework and series of procedures devised by civil engineer, Jim Suhr, during his tenure at the US Forest Service. Its purpose is to empower individuals, organizations, and project teams to make decisions that are more efficient in nature.

Why implement CBA?

The primary objective of the CBA method is to assist decision makers in distinguishing between alternatives and comprehending the significance of those distinctions. CBA prevents double counting by basing decisions on the positive differences, or advantages, of alternatives rather than their disadvantages.

CBA establishes an auditable, open, collaborative and transparent decision-making process for design and project works, recognizing the complexity of the client systems that commission the majority of projects. CBA is capable of integrating subjective and objective data into a unified decision-making procedure.

Construction and design projects are becoming more intricate, rapid, and uncertain. Likewise, client systems are becoming more intricate. 'The client' is not a singular entity, but rather a dynamic and complex collection of individuals whose needs and expectations may fluctuate throughout the project's lifecycle. The presence of a transparent audit trail for decisions enables their reevaluation when required. A transparent delivery schedule enables all parties to comprehend the repercussions of modifying those decisions.

Human beings often exhibit a tendency to avoid excessive choice. A tendency exists in design to jump to conclusions prior to exploring all plausible alternatives; this is a technique for preventing decision overload. CBA provides a methodical approach for all parties involved to oversee the decision-making process when confronted with a substantial quantity of alternatives. It guarantees that the number of alternatives considered in the intricate decisions surrounding design for the built environment is not unnecessarily restricted.

What is CBA?

CBA is a method for determining the significance of beneficial differences (i.e., benefits) among alternatives. It contains fundamental definitions, models, principles, and procedures. The key principles are:

1. Decisions must be predicated on the relative significance of the advantageous distinctions among alternatives.
   
   
2. Decisions ought to be grounded in pertinent factual evidence.
   
   
3. Diverse categories of decisions necessitate distinct and effective approaches to decision making.
   
   
4. It is imperative that decision makers acquire knowledge and effectively employ sound methodologies for decision making.

As implied by principle 3, various approaches exist for various categories of decisions. These can vary in complexity from straightforward binary choices that have no impact on resources to numerous alternatives that each have their own set of resource implications. It is critical to distinguish resource requirements from other attributes, as the majority of stakeholders would be compelled to answer the question of what they would do with the resource if it were not being used in the decision under consideration. CBA evaluates the advantageous distinctions among non-resource attributes of alternatives prior to delving into resource considerations, thereby facilitating a clear exploration of potential trade-offs.

CBA prevents the errors that occur with unreliable approaches like Kepner-Tregoe, selecting based on benefits and drawbacks, employing weighting rating and calculating (WRC) systems that incorporate criteria weighting, factor weighting, and cost-benefit analysis.

How do we apply CBA?

Simple procedures are simple to master and, once ingrained, effortless to implement. Facilitation is beneficial when dealing with more intricate decisions, such as those encountered in the fields of design and construction projects. Additionally, providing training and mentoring to all attendees is crucial to prevent the meeting from becoming bogged down in discussions regarding processes that are addressed during the training. John Koga, Director of Process and Supply Chain Improvement at construction joint venture HerreroBoldt, remarked, "Without mentoring, very few individuals utilize CBA correctly. They revert to hazardous and improper practices that are no longer part of the CBA”.

CBA is comprised of five guiding phases

Stage I - Establishing the Stage: Determining the Issues at Hand, Specifying the Criteria for the Determination, and Determining the Audience.

Stage II - Innovation Stage: consists of distinguishing between alternatives in a visible and tangible manner.

Stage III - Decision-making Process: consists of enumerating the benefits of each alternative, determining the significance of each benefit, and selecting the alternative with the greatest number of benefits prior to evaluating the resource implications of the alternatives and formulating the preliminary decision.

Stage IV - Reconsideration Stage: entails scrutinizing the preliminary decision to ascertain its alignment with the intended objective, revising it as necessary, and subsequently finalizing the choice.

Stage V - Implementation Stage: entails carrying out the actions required to bring the decision to fruition.

How does CBA help EM's decide?

The Choosing By Advantages (CBA) tool is a framework for engineering managers' decision-making that has the potential to improve the process in numerous ways. CBA is a structured and methodical approach that assists decision-makers in comparing the merits of various alternatives. The utilization of the CBA tool improves engineering managers' decision-making process through the implementation of a methodical and transparent framework, stakeholder engagement, risk assessment, resource optimization, and encouragement of data-driven decision making. This may facilitate more effective and well-informed decision-making in the dynamic and complex field of engineering.

BLOG DISCLAIMER: The opinions, views and content presented in this online blog solely represent the original creator and has no association with ASEM activities, products or services. The content is made available to the community for educational and informational purposes only. All blog posts are created voluntarily and are not sold, but may be used, shared and distributed free of charge. The blogs are not academic pieces, and therefore do not go through a peer-review process, and are not fact-checked. All errors belong to the creators.

by Dr. Donald Kennedy, Ph.D., P.Eng., IntPE, CPEM, FASEM

Scope Management is a big part of project management success. A few decades ago, I went around trying to make money giving Tom Peters style presentations to big companies but charging around 1% of what Tom charges. I was able to get a few nibbles. One presentation I gave was called Don’s Rules of Thumb for Project Management Success. I could probably still find the material but I do remember one of the rules: Let Future Projects Pay Future Project Costs.

There is a lot of pressure when running a sizable project for various stakeholders to come forward with scope change requests for things they cannot currently get approved. There is often a fallacy they propose that says that since you are there anyway, it would not cost much to add this thing or dig this hole. The ideas often make sense from any sort of payback calculation but in my experience more often than not, unintended consequences show the extra work was basically a mistake. I know a few project managers who were grilled for exceeding the original budget even when they had all the proper paper work completed to add the scope to their job. The original budget is often fixed in the minds of the observers.

Scope Change Examples

Here are a few examples to illustrate this.

A) In one case, a Project Manager was doing some piping installation in a new building. A stakeholder came along and said there was a potential plan to change the use that would require installing some rather large valves where the main pipes entered and exited the building. The Project Manager (PM) spent a few $100,000 to extend the building to accommodate the proposed future valves. The PM was fired a short time later. A few years pass and the PM met the same stakeholder in a social setting. The PM asked about the piping change. The stakeholder was a bit annoyed and said that they had to spend a lot of money modifying the piping outside the building to accommodate the new valves. The former PM explained how there was room inside to complete the planned work, but since he was not there, the extra work was done. In this case the money was spent for the future work and was wasted.

B) In another case when I was the PM, another stakeholder wanted me to spend a few million dollars to install some infrastructure to test the facility after 5 years of use. Since 5 years is longer than I ever worked anywhere, I decided to put in some connections to allow the infrastructure to be connected in 5 years time and saved the few million dollars. After I had been fired, I went back in 5 years just to ask the stakeholder about the proposed infrastructure. He stated that the advances in electronic equipment had been unforeseen and if we had spent the millions, it would have been obsolete for what they wanted.

Of course, there will always be exceptions to a rule of thumb. But in general, this one has served me well.

About the Author

Dr. Donald Kennedy, Ph.D., P.Eng., IntPE, CPEM, FASEM is a regular contributor to the ASEM Practice Periodical. He has celebrated a lengthy career in heavy industrial operations and construction.

by Dr. Donald Kennedy, Ph.D., P.Eng., IntPE, CPEM, FASEM

I was reminded of Dr. Wyrick's comment recently when talking to ASEM Fellow, John Whittaker. He said that when he retired from his job as engineering management professor after a 30 year tenure, he began the process of cleaning out his office. Near the end of the task, he discovered a box of paper. It was all the data he had collected as part of his Ph.D. dissertation. It was all really good data that he had every intention of someday gleaning the useful tidbits from and producing information of benefit to all. Since it had sat in his office for 30 years without being touched, he surmised that the odds of ever doing anything with it were approximately nil. He ceremonially picked up the box and dumped it into the recycle bin.

At my very first job at a fabrication plant, we took extra effort to gather data on how long tasks really took. With such data, the idea was to improve our ability to fine tune our bidding and be able to assure profits while keeping margins razor thin. The methods of collecting the data was an ongoing source of conflict with the trades performing the work and some of these conflicts resulted in the departure of workers I felt were top performers in terms of productivity. I felt sad to see them leave and felt it was not for the betterment of the organization. The data continued to be collected until the firm went bankrupt and it also ended up in the recycle bin, unanalyzed.

In the year 2000, I was responsible for maintaining a detailed report on organizational performance including many key performance ratios. It was a sizable document that was originally produced in hard copy but was converted to an online version during my time at the company. When it was a hard copy “book,” I would hand distribute the “book” to the various stakeholders who expressed interest in receiving a copy. Once it was online, I produced a virtual version and deposited it in the assigned folder. As is common practice, I would use the previous month’s version as the template and then modify with the recent data. After a year, my supervisor asked me how much time I was spending on producing the report. I told him zero hours. He was shocked. I then showed him that the report I posted simply had the words “If anyone reads this please phone this number: [with whatever the number was].” I told him that since no one phoned, I did not feel it is worth my while producing a report no one looks at. I had realized this was happening when I went to update the previous month’s report and saw that the one I had completed the previous month had not saved and was a corrupt file. No one had mentioned it and even I had not looked at
it for a month.

A lesson from the ENRON fiasco, however, does demonstrate Tom Peters’ view that the value of reports is in their creation and not in the actual product produced. Forcing people to create reports also forces them to look at the underlying data. With ENRON, if anyone had been producing daily cash requirements reports, they would have noticed the company was headed to default in their payments on liabilities in a matter of weeks. As in all things management, the optimum is a balance between extremes.

Optimal performance comes from understanding what is required and what adds value. There is a lot of anticipation of what will be of benefit once the current panic is over and people have time to stop and look at things in more detail. After 40 years, I sort of think the panic is not going to end.

A decade or so ago, former ASEM president David Wyrick mused during a conference if there could be a paper written on the subject of all the data we collect with the good intentions of someday using it for optimizing some process or learning key details of a subject.

About the Author

Dr. Donald Kennedy, Ph.D., P.Eng., IntPE, CPEM, FASEM is a regular contributor to the ASEM Practice Periodical. He has celebrated more than 1 year in the manufacturing business following a lengthy, but turbulent, career in heavy industrial operations and construction.

by Donald Kennedy

The realized outcome is not always in line with the intent

I forget how many decades ago it became popular to talk about motivating people or organizations by letting them have ‘skin in the game.’ As with many high level principles, it is easy to present the idea in a way that appears to make a lot of sense. The basic concept is that a person will try harder to achieve a goal if they get to share the benefits of success and, likewise, suffer personally when the result fails to meet expectations. Because it sounds good, the policy is often adopted in negotiations with individuals as well as in contractual negotiations. But as with all things dealing with human behaviors, the realized outcomes are not always in line with the intent.
What if you own a hockey team

If you own a professional hockey team, you want to win games. Games are won by scoring more goals than the opposing team. One policy that would give players skin in the game would be to pay them $50,000 for every goal. A 50 goal scorer could make $2.5 million dollars. The unintended consequence of such a move might motivate a player to become what is sometimes called a “garbage man,” a player that parks themselves in front of the net waiting for a puck to come along to shoot into the net. This also means the player is not ready to go on defense if the opponents get possession. When all the players want to score as many goals as possible, as motivated by the financial benefit of doing so, no one is left to play defense. Since the overarching goal is to win games, the lack of a strong defense will result in a lot of goals scored against your team, and probably a failure to achieve the real desired outcome of wins.

The average CEO spends around 3 years in that job. I recall a few decades ago, a CEO in a tower near my home mentioned how his salary was $500k a year, whereas his friends at similar companies were making double his pay. During this time, the investment community looked at their professional management teams and decided (to use a term that simplifies the complex process) that by basing CEO pay on share performance, the CEOs would have skin in the game and therefore be better motivated to assure solid financial performance for the firm. Awarding stock options became a very common practice in CEO remuneration. The CEO is thus rewarded when the share price rises higher than some specified value. This is seen as giving them the desired skin in the game. The current successor of the CEO I mentioned above currently makes a bit more in salary than the predecessor, but the profits from personal stock options exceed $10 million a year. Shareholders sometimes say that this benefits them more than $10 million so the CEO pay is worth it, but yet again there are complications with outcomes. 

With the increase in incentives for CEOs came a shift in what corporations do with their profits. Fifty years ago, the profits were normally distributed as dividends. Since 1997 however, more profits have been spent on share buybacks than dividends. Buying stocks creates a short term boost to share prices allowing anyone with stock options to preferentially benefit over the common shareholder. CEOs are also incentivized to look at the short-term performance (a 3 year tenure) and may forgo long term benefits (maintenance budget cuts, for example) in favor of short term gain.

My Personal Experience with Construction Companies

Not too long ago, I worked for a construction company that engaged in a $100 million project. The organization that hired us insisted on payment terms that gave us skin in the game. This owner established high and low financial targets on a cost reimbursable contract - giving us, the contractor, the opportunity to benefit significantly from saving money and penalized us for exceeding the targets. Given the information provided, it appeared we had the potential to make more than we could have under a typical lump sum tendering process. The dangling of the incentives and the threat of awarding to another contractor, plus the need for us to have any work to keep the lights on motivated us to sign the deal. As the project progressed, many new situations developed that greatly hindered our ability to stay on budget. One example is the discovery of underground infrastructure, known to the owner at the time of signing, including some municipal sewer lines and utility corridors. The owner’s argument against allowing us some slack on the targets was that these were in the public record and therefore should have been considered in our base price. As the project progressed, it was clear that the owner had seen an opportunity to pass the risk on budget to the contractor by urging them (us) to have skin in the game.

The management world is full of examples of systems set up with good intentions that ultimately lead to the rewarding of behaviors that actually work against the intent. Many of my ASEM conference papers include examples of this. Management is complex and takes work to develop winning strategies.

About the Author

Dr. Donald Kennedy, Ph.D., P.Eng., IntPE, CPEM, FASEM is a regular contributor to the ASEM Practice Periodical. He has celebrated more than 1 year in the manufacturing business following a lengthy, but turbulent, career in heavy industrial operations and construction.

by Joshua J. Plenert, PE, MS, MBA

In the annals of history, certain tales stand out as powerful symbols of insight into human cognition and decision-making processes.  One such enigmatic story is that of Abraham Wald's Missing Bullet Holes.  This captivating account serves as a testament to the prevalence of groupthink—a phenomenon that has been widely studied and often wreaks havoc on rational decision-making within various organizational contexts.  From an organizational psychology perspective, exploring the intricacies of this story and its relationship with groupthink provides a unique opportunity to delve into the intricacies of human perception and cognitive biases.  Furthermore, by understanding the neuroscience behind groupthink, we can uncover strategies to mitigate its detrimental effects and foster more effective and innovative decision-making processes.

The Saga of the Missing Bullet Holes

During World War II, a challenge perplexed statisticians and military analysts: how to minimize aircraft losses due to enemy fire.  The solution seemed straightforward at first glance—analyze the bullet holes on returning aircraft and reinforce the areas that were most heavily hit.  However, Abraham Wald, a brilliant mathematician, took a different approach that would ultimately unveil a fundamental flaw in human reasoning.

Wald recognized that the data collected only represented the aircraft that survived their missions.  The aircraft that were shot down were not included in the analysis, as they were unable to return for inspection.  Consequently, Wald proposed an unconventional perspective—rather than reinforcing the areas with the most bullet holes; one should reinforce the areas with the fewest.  His rationale was rooted in the principle that the planes returning with holes in certain regions had managed to survive, suggesting that those areas were less critical to the aircraft's functionality.

Groupthink: The Hidden Catalyst

Wald's counterintuitive insight illustrates a critical aspect of groupthink—a psychological phenomenon in which cohesive and like-minded groups prioritize consensus and harmony over critical evaluation and dissent.  In the case of the missing bullet holes, the original approach to reinforce areas with the most damage could be likened to groupthink.  The analysts had developed a collective assumption that the surviving aircraft represented the entirety of the population, inadvertently overlooking the significance of the absent data.

Groupthink often stems from a desire for social conformity and a fear of disrupting group cohesion.  This can hinder diverse perspectives and innovative thinking, leading to flawed decision-making processes.  From an organizational psychology perspective, the tale of the missing bullet holes serves as a poignant reminder of the importance of fostering an environment that encourages open dialogue, dissent, and critical evaluation.

Neuroscience Insights: Unraveling the Brain's Role in Groupthink

Neuroscience has provided valuable insights into the mechanisms underlying groupthink.  The brain's architecture predisposes individuals to seek social acceptance and affiliation.  The anterior cingulate cortex, for instance, is responsible for processing social information and plays a crucial role in monitoring errors and conflicts.  In the context of groupthink, this brain region may inadvertently suppress dissenting opinions to maintain social harmony, leading to the uncritical acceptance of flawed ideas.

Moreover, the brain's reward system reinforces conformity and social validation.  When individuals conform to the group's opinions, they experience a sense of reward, triggering the release of dopamine.  This neurological reward mechanism can deter individuals from expressing opposing viewpoints, further exacerbating groupthink.

Mitigating Groupthink

To combat the pernicious effects of group think and encourage more effective decision-making, organizations can adopt several strategies rooted in organizational psychology and neuroscience:

Promote Psychological Safety: Establish an environment where team members feel safe expressing dissenting opinions without fear of retribution.  When individuals perceive that their contributions are valued and respected, they are more likely to voice alternative viewpoints.

Encourage Diversity: Cultivate diverse teams composed of individuals with varying backgrounds, perspectives, and expertise.  Diversity enhances cognitive flexibility and reduces the risk of homogenous thinking patterns that contribute to groupthink.

Designated Devil's Advocate: Assign the role of a "devil's advocate" in team discussions to systematically challenge prevailing opinions.  This approach can stimulate critical thinking and encourage the exploration of alternative solutions.

Conclusion

The story of Abraham Wald's Missing Bullet Holes is a testament to the enduring power of human cognition and the insidious influence of groupthink.  Through an organizational psychology lens, we have dissected the intricate relationship between this historical anecdote and the phenomenon of groupthink, shedding light on the pitfalls of consensus-driven decision-making.  By integrating insights from neuroscience, we have unraveled the brain's role in perpetuating groupthink and identified strategies to counteract its detrimental effects.

As we navigate the complex landscape of organizational decision-making, we must remain vigilant against the allure of groupthink.  By fostering an environment that embraces diverse perspectives, encourages dissent, and leverages the neuroscientific underpinnings of cognitive biases, we can pave the way for more innovative, informed, and effective choices, ensuring that the missing bullet holes of the past do not become the blind spots of our future.

About the Author

Joshua Plenert is highly passionate about the continuous improvement of organizations in the AEC industry.  He has held multiple technical, leadership, and consulting roles for over two decades in the AEC industry.  He holds a master’s degree in Structural Engineering and an MBA.  He has taught engineering, business management, and construction management courses at multiple universities, and he is the author of the groundbreaking new book, How We Go: Culture-Centric Leadership, High-Functioning Enterprise. 

by Donald Kennedy

Value, Like Good Wine, is Subjective

*Today’s piece is inspired by a sentence I read in Fakes, Frauds, and Flimflammery by Andreas Schroeder (1999).

First some background

Throughout history, economies revolved around establishing the economic value of goods and services. Money was invented to establish a proxy for value, to eliminate the need for bartering in terms of exchanging products between parties. Without money, there would be no buyer or seller, as each person would be exchanging something for something else, being both a buyer and a seller simultaneously. Money solved the problem of how to buy a loaf of bread when all you have to exchange is a cow. In a totally rational, transparent and free market system using currency to represent value, one could conclude that it would be impossible to engage in a profitable endeavor considering everything should be worth the same to everyone.

Value is in the eye

But thankfully, value truly is in the eye of the beholder. A person in a small house with three sofas will put a lower value in the third sofa than a person with a large house with zero sofas. I have an interesting example of value being very difficult to predict in many situations. During an ASEM conference, I stopped in at the St. Louis Art Museum. I was surprised to see so many paintings by Modigliani and how the museum seemed to be making a big deal of it. I knew Modigliani from Art History class, but he was not one of my favorites. Therefore I was shocked to see that 3 of the top 30 highest prices ever paid for a painting by this artist. Someone valued one of his works at $170 million.

The Story of "Emyr de Hory"

Elmyr de Hory lived from 1906 to 1976. He spent much of World War II in prisoner of war camps. Upon his release, he attempted to make a career as an expressionist artist who had studied with some of the more popular artists in Paris. The shaky economic conditions of a war torn Europe proved to offer few customers willing to see value in his creations. De Hory slowly turned to reproducing works and passing them as originals. De Hory did not make very much money forging masterpieces, but unsuspecting art dealers got rich trading in his work. De Hory was good enough that one expert specializing in Raoul Dufy paintings became so familiar with De Hory’s hand that he began rejecting the authentic paintings as fakes.

De Hory was eventually exposed for producing forged works. One dealer, Joseph Faulkner traded many of the forgeries and tracked down a victim who paid a considerable sum for a Modigliani that proved to be a fake. Faulkner offered a full refund to the customer. Some people would value a forgery as worthless and feel cheated. However, this customer did not see it that way. Their rationale was that they had ten years of enjoyment proudly displaying this painting to guests. Some words did not make the painting look any different. The value he placed on the painting somewhat increased by learning the true story behind his possession. The customer simply requested Faulkner certify on the back of the painting that it was an authentic de Hory forgery, which Faulkner readily agreed to do so.

Quick Conclusion

The value of something can be difficult to predict. Finding the difference in value between parties drives the economy.

About the Author

After spending decades in heavy industrial construction, long time contributor Dr. Donald Kennedy, CPEM FASEM continues to work in manufacturing for the foreseeable future.

by Donald Kennedy, Ph.D., P.Eng., IntPE, CPEM, FASEM

We have probably all heard about the sunk cost fallacy. To recap and refresh memories, the common understanding is that proper economic evaluations look at the return of money to be spent and to not get hung up on the past.

My Professional Experience with Sunk Cost

Some companies I have worked for will look at a few billion dollars they invested in something and use that to justify spending a few more hundred million to keep that business line going.  They view the hundred million dollars as the investment to make the billion not be a failure. Of course, the proper way to analyze the situation is to look at what return you will get for investing that hundred million. If you cannot get $20 million a year in return, it might not be worth doing. The billion is spent and gone and should not be worked into the decision making of future cash flows.

My Personal Experience with Sunk Cost

Searching for the term “sunk cost” I did not find the flip side, however. I encounter that fallacy enough times as well. Around 2000, I bought a dishwasher for around $400. It repeatedly gave problems after the warranty ran out and I even rigged a bent nail into the door latch to make it work at all. After a few seals, vents and springs broke and motors seized,meaning the cost to repair was more than the cost of a new one. I bought a different brand for $800 that had a door latch that looked more robust. 

It worked well for a number of years and I was happy with my purchase. Then it stopped working with an error message on the panel. Searching the internet, I discovered a fix that involved taking out of its cubby, tipping it 45 degrees, and putting it back. There would be a puddle on the floor to clean up, but it worked for a while. After a few years, the rate of having to tip it became frequent and then it would not work at all. I spent $250 on a repair call and it worked for a short while. Then I spent $350 on another repair and it worked for a while. At this point the repair person definitely narrowed down the root issue and it would cost $250 to do that repair and the machine should work fine for years. 

Now if I followed the sunk cost fallacy, I could say that if I spend another $250 that will bring the total spent on repairs to $850 which is more than a new machine. However, I reasoned that I will spend $250 and save having to buy a new machine. I went with the final repair and it has worked well for 2 years with no signs of problems.

So What?

Software expenditures at companies often fall to the sunk cost fallacy. The implementation of a system may run into the tens of millions. To get additional functionality once it is up and running may cost another $300,000. I saw managers say that $30 million is enough and cancel all further modifications. Or a company builds a $1 Billion facility that does not perform as planned. The fixes run into tens of millions to tweak, similar to my dishwasher. Instead of looking at the investment to fix, in the case of the employer I worked at, the management said $1 Billion was enough and they did not want to be continually tied to that investment and be budgeting for solutions to performance issues. They decided to liquidate the facility and take a one time hit.

It is counterintuitive to think that large investment decisions can be tied to the emotions and egos of the people making the calls. But management would be easy if there were no people involved, wouldn’t it?

PS: At the time of writing, his dishwasher is functioning within spec.!

About the Author

Dr. Donald Kennedy, Ph.D., P.Eng., IntPE, CPEM, FASEM is a long time contributor to the Practice Periodical. After spending a few decades in the world of heavy industrial construction and operations, Dr. Kennedy finds himself celebrating a one year work anniversary in the world of ERP driven operations and assembly line style manufacturing.

By Phillip Power

Risk assessments are a common requirement in many industries today. But what’s not common is an understanding of who owns risk assessments, when they are needed, and how to perform them. In this brief article, I hope to help answer some of these questions and provide useful insights along the way.

So, You Need a Risk Assessment?

Risk assessments are rarely done proactively; even proactive risk assessments are usually being done to satisfy a regulatory requirement, such as ISO 9001 or 21CFR. They can spring from just about anywhere:  process failures, customer complaints, audit findings- you name it. Companies oftentimes underestimate how frequently risk assessments need to be completed and, because of that, struggle when they start rolling in. I propose a few useful recommendations to roles and responsibilities to help with this adjustment later on. 

Who Owns the Risk Assessment?

All too often, a risk assessment begins with an argument on who should own it. If you ask Quality, it should be Operations, because they are familiar with the processes. If you ask Operations, it should be Quality because they are the group reminding everyone it’s a regulatory requirement. Who usually ends up winning out is the party that writes the procedure on risk management; since it’s a rare day someone from Operations volunteers to write a Quality procedure, to the victor go the spoils. But is this effective management? In my opinion, just as it is true that everyone owns quality, with Quality a bit more than everyone else, so too with risk assessments. Quality is responsible for ensuring they are completed (it is a requirement after all) but that does not absolve them from taking part in them. Risk assessments must be a multi-disciplinary approach where people from various departments include their perspective and expertise. By design, not everyone within a company shares the same vested interests. A risk to one person may seem insignificant to another, but it is only by combining a spectrum of knowledge and experience that you begin to assess the full risk.

Does a Risk Assessment Need a Leader?

While risk assessments can belong to any department, I don’t necessarily think anyone should lead one. It takes a strong leader to manage a risk assessment team, preferably one with a solid understanding of risk analysis and decision making. Not every member of the team will understand how the assessment comes together. For example, the difference between a severity rating of 3 and 5 can be the difference between wearing gloves or a hazmat suit. Developing people from within each department to lead risk assessments should be a priority of every company that is required to have a risk management system. Companies can create their own training materials, but I think the most economical solution is to provide the resources for select employees to study the Engineering Management Handbook and take the CPEM exam. This will give the employees an industry-recognized credential in return for their willingness to take on the additional responsibility, as well as giving them the tools they need to professionals in risk management.

Who to Pick for The Team?

Most people don’t associate risk assessments with teamwork but it’s a critical factor in determining how well and how quickly a risk assessment can be completed. Risk assessment teams are often groups of people who are not in the same team to begin with and haven’t had time to develop the same kind of relationship as they would with people whom they regularly work with. People may be unfamiliar with each other’s personalities and management styles. On top of all of that, everyone is being asked to provide their input and come to a consensus on somewhat subjective tasks. This is one of the reasons a strong leader is imperative. The leader’s role is not to determine the risk so much as to steer discussion and be a moderator when things get heated. If you haven’t been on a risk assessment team, you might be surprised at how passionately some people defend their opinions. There is not enough time in a risk assessment to go through the five stages of team development so the leader is often left with a poorly formed team stuck in the storming phase. Input should be weighed in proportion to the expertise of the team member providing it; oftentimes, the leader is not the subject matter expert.

What Risk Assessment Tool Should I Use?

There are several tools available for risk assessments; the key is selecting the right one. A mistake I have observed is to prescribe a single risk assessment form that everyone must follow. This inevitably makes the form an improper tool for most jobs, thereby discouraging its use and, consequently, the use of risk assessments altogether. If the people performing the risk assessment are nott trained well enough to select an appropriate risk assessment tool, don’t expect the risk assessments they complete to be of much help. The tool can be as simple as a gap analysis or as complex as a failure mode effects analysis (FMEA), depending on the nature of what is being assessed. Once the appropriate risk assessment tool is selected, walk everyone on the team through how it works and what input is expected of them. This is often the most frustrating part of risk assessments:  getting consensus. At the end of the day, you can only put in a single number or category for a risk. How probable is it that a failure will occur again on a scale of 1-5? Should the failure occur, how severe are the consequences on a scale of 1-5? These are highly subjective questions, even when the scale is well defined, and everyone’s perspective will be different. Healthy debate is encouraged but it’s important that no one person dominates the discussion. Everyone must feel comfortable sharing their opinion and disagreeing with the consensus. One suggestion to help with this is to have everyone write down their assessments at the beginning of the exercise without anyone discussing them openly. Then each person shares their risk numbers or categories with the team one at a time. This helps prevent a strong personality from biasing input.

Am I Done Yet?

Once the team has come to a consensus on the ratings and categories, a process that can take several meetings, it’s the job of the leader to polish up the assessment and submit it to the appropriate location, typically controlled and attached to an investigation. It’s important that, wherever the risk assessment ends up being stored, it is linked and accessible. It is not uncommon for multiple risk assessments to be completed for the same risk because no one could find the previous assessment- sometimes there is no one left who even knows it exists. As the risk assessment leader for your department, you will be grateful if this was done for you by others and others will thank you when you do it for them!

About the Author

Phillip Power, CPEM is a Pharmaceutical Technical Specialist for Zoetis, the world’s leading animal health company. In this role, Phillip manages investigations and CAPAs, operational improvement projects, and risk assessments to ensure the market has access to the highest quality medicines for companion animals and livestock. He earned his B.Sc. in Chemical Engineering and his M.E. in Engineering Management from the University of Nebraska- Lincoln. Phillip lives in Lincoln, Nebraska, with his wife and two sons.

[This post by: Woodrow W. Winchester, III, PhD, CPEM, ASEM’s Diversity, Equity, and Inclusion (DE/I) Director]

February is National Black History Month.  Orchestrated by historian Carter G. Woodson, National Black History Month (Black History Month) is an annual celebration of achievements by Black Americans and an opportunity to recognize the central role of Blacks in U.S. history.  Not only is it a time to celebrate and commemorate the past; but, for me, Black History Month represents a call to action to imagine and build, though a Black-centric lens, a more inclusive, equitable, and just society for all.  From righting infrastructural wrongs such as Baltimore’s Highway to Nowhere to addressing facial recognition bias to tackling racism and biases embedded in medical technologies, the urgency of this call for us, as engineering leaders, is growing.  It is critical that engineers think and act inclusively and equitably.  And, as I detail in the newly launched ASEM Engineering Handbook, 3^rd Edition, “this way of being for the engineer is core to advancing a technological future that is considerate to the full diversity of humanity.”  

The theme for Black History Month this year is “Black Resistance”; elucidating how “African Americans have resisted historic and ongoing oppression—in many forms—from America’s earliest days into the 21st century.”  And, as illustrated in the beforementioned examples, these many forms include oppression enabled by and through engineered systems (see Algorithms of Oppression by Safiya Noble).  Thankfully, the works and efforts of a new generation of Black changemaking engineers such as Drs. Tahira Reid Smith,  K. Renee Horton, Yvette E. Pearson, Logan D. A. Williams, Jessica Rush Leeker, and James Holly, Jr. exemplify how Black Americans are not only confronting and dismantling “engineered oppression” but blazing new pathways in catalyzing and conceiving more inclusive, equitable and just approaches to technological design, deployment, and management.  The future is truly bright and ASEM is stepping up.

From (1) our flagship webinar series that explored DE/I in technical management and technological development contexts (of particular relevance to Black History Month, be sure to check out both the Black in Robotics and the Race Matters in Engineering and Technology webinars) to (2) the inclusion of a chapter in the Engineering Management Handbook, 3^rd Edition on DE/I in Technological Development and Technical Management, to (3) the creation of a new Directorship to lead DE/I efforts and initiatives, ASEM is bolstering its commitment to advocating and amplifying anti-oppressive voices and perspectives in engineering.  While work is happening, more is needed.  Please join us.  A roundtable is being proposed for IAC 2023 to define a DE/I roadmap for ASEM.  To participate or for additional information and/or questions about ASEM’s DE/I efforts, please contact me, Woodrow W. Winchester, III, at woodrow.winchesteriii@utexas.edu. 

As James Baldwin states in his New York Times essay, As Much Truth As One Can Bear, “not everything that is faced can be changed, but nothing can be changed until it is faced.”

Woodrow W. Winchester, III, PhD, CPEM

Some additional DE/I resources related to Black History Month

1. Black in Engineering Initiative
2. Black in Robotics
3. National Society of Black Engineers (NSBE)
4. US Black Engineer
5. Engineering While Black
6. Diversity in Engineering: Celebrating Black History Month With Ted Colbert
7. Hidden Curriculum: An Image Holder of Engineering
8. Do you See Me?  Hypervisible Invisibility #EngineeringWhileBlack
9. Diversity and STEM: Women, Minorities, and Persons with Disabilities
10. Online Ethics Center for Engineering and Science