Operational Management is Different than Project Management, or Some Portfolios Have Long Memories

I have been having a recurrent conversation lately, about a key difference between project and operational management.

The basic idea is that with operational management, unlike with project management, you have to live with your decisions forever.

Now, I’m not saying that project managers don’t have to live with decisions they make.  But, I am saying that they generally don’t have to live with them forever.  This is because project managers get periodic resets.  They get to start over on another project.  This is fundamentally unlike operational management.

If you’re an operational manager, you generally have to live with your decisions for a relatively long time.  Decisions made in month 1 reverberate through your operation in month 13, and you can still find traces (especially if it’s a personnel decision) in months 24 and 48 and so on.  You never get to hit reset unless you either refresh yourself (leave and go somewhere else, even if it’s in the same organization) or refresh your staff.

I call this phenomenon, “investment, or decision, memory.”

I’ll try to explain what I’m thinking in terms of the nature of IT Project Portfolio Management, a topic dear to my heart these days.  Here’s an extract from something I wrote a couple of years ago,

“Consider the history of IT investment governance and its current emphasis on financial securities tools (e.g. ROI, IRR and net present value) to guide selection and prioritization.  The past and current role of the CFO as IT investment controller encourages the use of tools which are fundamentally unsuitable for IT investment selections.

[Consider] the intrinsic differences between the financial securities for which these types of [analysis] tools were developed (e.g. liquid and quantifiable), and the IT investments to which they are being applied (e.g. illiquid, having an investment memory, and difficult to quantify).”

Now, I recognize that might be a little bit tough to wade through in its original form.  So here’s the translation,

IT Investment Portfolios (aka IT Project Portfolios) are fundamentally different than the Financial Portfolios on which they’re ostensibly modeled.  One big difference between them is that when you make an IT investment, the rest of your IT Portfolio (whether applications, infrastructure, services or whatever) remembers your investment in a way that a traditional Financial Portfolio never will.

This is because traditional Financial Portfolios can always return to cash, which is completely liquid and which retains no memory of what it used to be.  Cash by definition places no intrinsic constraints on future purchases.  You can trade it for anything.  Conversely, IT Portfolios always remember what they used to be (as anyone trying to migrate off a legacy system of any kind can confirm), and all past and present choices necessarily constrain future choices.

Why do I bring this up?  Well, because in this analogy, operational management is similar to IT Investment Management, and project management is similar to traditional Financial Portfolio Management.

This thought has some ramifications.

One of them is that you might not be good at both operational and project management.  I know that the two disciplines are usually considered to be very close cousins, but they truly do have some fundamentally different characteristics.  They therefore require different choices for success.

The choices you might legitimately make for efficiency on a project (say, replacing someone who’s OK, but not a stellar performer) won’t necessarily produce the same net effect in an operational environment.

Again as an example, it’s probably OK to burn out a project team to make the final stretch.  It may not be desirable, but if the outcome is positive (a product produced within the triple constraints), it’s generally acceptable.

However, you’d better not do the same thing with your operational team, because you’re going to need them on Monday.  From an operational perspective, the more appropriate action is probably to miss the schedule deadline in order to conserve the team’s strength and integrity.  Team vitality is more valuable than any individual deliverable.

I share this thought because it’s come up recurrently in some recent conversations.  I hope it’s useful for you.

If you want to read the document from which I extracted the earlier quote, I’ve attached it to this post.  You should be able to find it.  It’s one page and I think kind of interesting.  Let me know if you have trouble finding it.

From the land of my mind, this is Alex Chompff signing off.

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