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In 2008, Emerson Project Management received a contract for FEED work on a large oil project at Sakhalin Island in Russia’s Far East, which was later converted into a detail engineering contract. The detail engineering on the project would be led by the company’s offices in Calgary, Alberta, with much of the work handled by the Global Engineering Center (GEC) in Pune, India, where more staffing was available and labor rates were considerably lower.
But there can be a number of challenges with this approach, particularly on such a large project, with about 100,000 engineering hours plus equipment. While the GEC (the “back office”) had lower hourly costs than the Calgary “front office,” experience with previous projects had shown there tended to be issues due to delayed responses to quality of inputs and difficulty in managing work load surges due to late inputs and changes by the client that resulted in rework, increases in costs greater than forecasted, reduced customer satisfaction, etc.
The company developed a new project structure to greatly reduce overheads/costs, improve productivity and project quality, manage schedule objectives, and increase profitability.
Managing the ‘old way’
In the past, the company had set up a dual project team structure – one in the front office and another in the back office – with work divided into “work packs,” each with its own schedule and assigned number of hours. The work packs were handled like semi-independent contracts and reworked as needed. Work packs could be as small as 20 engineering man hours but averaged approximately 200 hours. This method provided accountability: It transferred ownership of each work pack from front office to back office in a standardized way, and it gave some useful granularity to progress measurement.
The method had drawbacks, however. A 100,000-hour project, for example, can consist of about 400 work packs – a definite challenge to manage. Since each work pack was treated as an independent set of tasks, the back office could never get a larger view of the project and where each work pack fit. There was no room for creativity because no time was allotted for it. There was, in consequence, little value added. It also required internal testing at both the Pune and Calgary locations because of the nature of workflow processes; assigning interface managers to keep track of everything; and delegating responsibilities to the front office that should have been handled in the back office, causing delays in information exchange.
The old process made overall management much more difficult, increasing overhead costs between 15% and 25% while also making it more difficult for a project to be competitive.
The ‘one team’ model
The company wanted to develop a project execution model that fully utilized the GEC and would allow it to be competitive, to be able to deliver value to customers (quality on time), to be consistent across engineering centers and across projects, and to be profitable.
The “one team” model is built around the idea of organizing a project as if there were no separate front office and back office teams, integrating both as if they were located in the same place. With today’s wealth of communication methods, such an approach is not only feasible, it has been shown to work and to provide many advantages.
The first step was to set up the project organization without regard to geography. Members were assigned based on their strengths, not on their locations, with carefully defined responsibilities. Most of the key people who in the past might have been called on only on a part-time basis now multitask, which allows the company to employ them for a full 40-hour week. It also contributes to their individual growth by giving them experience in multiple areas.
The organization should have enough flexibility that if one team member departs for any reason, another is ready to step in.
Work packs were replaced with simple work instructions. Since each person involved knows where each piece of the project fits into the whole, not only are tasks better understood, but it is possible for people to go the extra mile and suggest improvements where they see them.
Once the basics of the organization were in place, it was time to get everyone onboard and to build the level of trust that would be needed. In order to allow people to develop the personal relationships that are vital to that trust, the company set up two review meetings at the GEC. Both two-week meetings with one of Emerson’s biggest global accounts helped the GEC team understand the project deliverables and expectations as well as build positive relations.
The client had initially thought all the team members would be located in Calgary, but moving 30 to 35 people from India to Canada and acquiring visas for all of them would have been impractical. It also would have been impossible to hire that many people with the necessary skills locally. To help make the case that combining the two offices would be the best way to go, the company brought the client to the review meetings in Pune. Under the traditional plan, only the front-office people would ever get the chance to meet with the client, but this time the back-office people in the GEC did as well. This was probably the first time a client from the Canada Engineering Center had been to the GEC in Pune.
These meetings went a long way toward helping everyone understand the different aspects of the project, to get to know all the people involved, and to build trust.
Challenges faced, benefits realized
Implementing this plan was not without its challenges as Emerson was moving into unexplored territory and there were obstacles for leadership and individual team members alike.
The challenges for the leadership began with deciding how to effectively structure the teams and their tasks and assign clearly defined roles. Then came establishing workable communication patterns; dealing with conflict identification and resolution; ensuring timely decision-making, team building, common mission, and goal settings; and recognizing and overcoming cross-cultural differences.
Challenges for the individual team members included overcoming communication barriers, dealing with multiple reporting relationships, and adjusting for significant time zone differences.
The new approach has had benefits for the project as a whole, for the GEC in Pune, for Emerson, and for the client.
The overall project has benefited in several ways. If the project had been done in the traditional way, the hourly rate for engineering would have been about 30% to 33% higher, but this was reduced by virtue of combining the two offices. With a project that involved 100,000 hours of engineering over 18 months at a bid price of $20 million, the difference in hourly engineering costs accounted for a savings of approximately 30% to 33% for the entire project. More specifically, the elimination of work packs and the labor to manage them saved as much as 25% in overhead.
All this falls directly to the bottom line for the client, with greater gross profits, and for Emerson, with improved productivity due to less movement of people; improved motivation and feelings of ownership; and better utilization of people, who no longer have to wait for work pack clarification and answers to queries. The ability to retain team members and use them full-time also helps. And, because the team is responsible for the quality of the overall project rather than just that of individual work packs, project quality has improved.
Another significant project benefit came from better scheduling. There were a number of lengthy customer delays in providing inputs and multiple late-minute changes, but the flexibility provided by the new organization made it possible to keep the project on track regardless.
There have been significant benefits to the GEC in Pune as well, both for the organization and for the individuals . The GEC engineering leads do not have to spend time on managing work packs and can instead concentrate on project engineering and being process area leads. The opportunity for them to take over as overall project leads irrespective of location; their direct exposure to project dynamics; and the establishment of equal opportunity for GEC leads to demonstrate their capabilities, initiatives, and leadership help them in personal development and skills enhancement. And at lower levels, the absence of rework and the opportunity for value creation and suggestions has helped in employee retention.
For the organization, the elimination of forecasting issues and direct integration and communication with GEC management has helped in schedule/resource management, as has the new-found flexibility in personnel assignments.
This project has taught us a number of lessons that can help guide anyone planning a similar venture in the future. The first is to foster a culture in which team members concentrate not on where they are located or the organization to which they belong but on the project. Even though team members may be geographically dispersed, they should be treated as if they were co-located. Establish team objectives at the start and communicate frequently. Use the available tools to make communications seamless and access to information as simple as possible while protecting against data loss. Use remote login (remote desk top connection) for daily work reviews. Replace work packs with simple work instructions that:
Include back office team members in design, not just implementation, and in reviews with the client (either Via LiveMeeting or friend-to-friend computer networks); and
Remind everyone that they are part of the project team. Look for opportunities to socialize. Get used to time differences: adjust and compromise as necessary. Finally: Communicate, communicate, communicate.