What happens when an investment project is implemented through the creation of a temporary working group within a company that has an operational business. For example, shopping. Everything is done, but it is done last. The head of the legal Department has been informed that his Department is committed to providing support to the project team in resolving legal issues.

Yes, it provides. But not in time. Its specialists are busy with current Affairs, and only when there is a free minute, then…

The money in the accounts. Tomorrow we have to pay designers, power engineers, for concrete and equipment. And today the terms of payment to suppliers have come, despite the fact that the product is still in circulation.. Well, let’s get it out for a couple of days, then close it down. Just think, two days! Then it all turns into a snowball.

By the way, in most cases, this is the fault of the owner. Overlapping the project budget to address current operational issues is usually his idea. About four years ago, some of my friends decided to buy an old feed mill, rebuild it as an Elevator and organize oil and fat production there. Despite the fact that the topic is specialized, there is a grain trading company and an oil mill, which filled enough cones.

I developed a business plan for them, opened a credit line, and got the missing staff to implement the project. Money, resources, opportunities-everything seems to be in full size. Despite the sufficient qualification of the project team members, they did not meet the schedules catastrophically, they received cash gaps, and the problems that accumulated in a snowball led to the fact that birch trees are still growing on the roof of the abandoned plant.

The owner of a fairly well-known audit company has long had a dream to implement a project for the production of wood fuel pellets. At the initial stage, while I was doing it myself, everything was fine. Delegated to the staff through the creation of a working group – everything was delayed, and as a result it fell down. Friends have been selling petroleum products for many years. The territory on which the Interdistrict oil depot was located at the time of stagnation caught the eye. It is clear that everything was cut for scrap a long time ago, but there is a private railway line, engineering infrastructure, and most importantly, land in which you do not need to change the conditions of intended use.

They bought out the auction, invited the project Manager, carried out pre-project work, calculated the estimate, calendar schedules, made a project passport, allocated resources, ordered the staff to love and favor the new project Manager, and left for the seas (or where do the owners of oil companies go?). Did you build a tank farm in time? Figushki.

In each case, the project Manager had problems with the administrative staff (or, as it is sometimes called, the back office). All due to the fact that the project team was formed within the operating company.

Usually, there is no sabotage in the direct sense. These are just attempts by every line Manager to do a good job. The very good intentions that line the road to hell. As it turned out, it is not enough to put together a project team of employees, load them with unusual, uninteresting and incomprehensible tasks, describe everything with regulations, protocols, and calm down. Project managers (who are often attracted from the outside, because the operating personnel do not have the proper qualifications) are entrusted with the financial resources of the project, but the labor and material resources are still at the disposal of line managers. The same chief accountant, head of the personnel Department and administrative Director (head of the farm in our opinion).

Conflicts arise as a result of a far-fetched shortage of material and labor resources. The fact is that each line Manager is primarily responsible for the operational activities of the company. Any new project that is not directly related to the current operating activities, employees seem to be a sort of whim of shareholders.

The Executive Director of a company that sells Chinese-made bulbulizers is only concerned about the salary and bonuses for the year. He doesn’t care about what the owners in parallel to build a pot-Smoking private plant. The line Manager’s planning horizon is a maximum of one year. Next , we’ll either look at it or look for a new job.

Their coordinate system does not fit such a long time before the launch of a new production in operation, and even more so, the payback period. And multi-million dollar estimates are completely confusing. They can not be blamed for this, because everyone is engaged in their own business. But the difference in thinking between project and process management is almost always striking.

Due to the fact that the project prospects for line managers are vague, and their shirt is closer to the body, they try to save the expense of the material and labor resources entrusted to them for the project, without particularly worrying about its results. After all, they are not responsible for the project, but for ensuring that operational processes do not suffer.

Within one company and one corporate environment, operational managers always have a stronger position than the project Manager, since the survival of the company today has a clear priority over what will appear sometime soon. It is impossible to eliminate the conflict between the process and project management systems, so that there are not invented by theorists from management consulting.

There are two options for the development of events to ensure that both the wolves were fed, and the sheep are safe:

Option one – permanent manual management of the organization within which the project is being implemented by the top management, performing the functions of an arbitrator over the actions of the opposing parties – the operational and project ones. In fact, the game is played with two hands while maintaining control over the balance.

Option two-the actual withdrawal of the project from the company (a separate office, a separate legal entity, a separate staff). With this approach, the involvement of the main operating company’s staff can only occur sporadically (for example, accounting, budgeting, or legal support).

Temporary dotted squares on the block diagram of the company’s organizational structure look beautiful and convincing only on paper. Although management theorists and would-be teachers of MBA schools for some reason think differently.

About the closed circle of Amateurs in the investment business

If you sum up all the money that was stupidly buried by failed investors in the Ukrainian land, you will probably get several hundred billion dollars. Only around Kiev are empty huge tracts of land that investors once bought, hoping for “maybe”.

Maybe you can remove strategic easements. Maybe change the destination. Perhaps build, and then legalize.
Maybe start building, and then look for the missing funding.
Maybe buy a controlling stake in the plant, without conducting a preliminary examination.
Maybe start production, and then think about where to hire staff and how to solve the problem with transport logistics… Well, and so on.
Calculation on “maybe” and unprofessionalism of performers is guaranteed to kill almost any investment project. Many investment projects that are being implemented in Ukraine do not reach the planned performance indicators, or even are frozen at all, not because of the unfavorable external environment. The main problem has always been, is and will be the human factor.

People tend to make mistakes, but the cost of such mistakes can be incommensurable. Moreover, the investor pays for them, while the top management of the project simply goes to look for a new job or another investor.

Ignorance of the subject, ignoring legal norms, negligence, and even banal theft. The price of this on the part of the investor is literally millions of euros buried in the ground. On the part of the project Manager, the only loss is most often an entry in the work book of their own volition.

Partially anticipating potential problems can be done by introducing controls such as:

board of Directors;
Audit commission;
Meo.
Sometimes it is also possible to outsource the duplication of expertise in the legal, construction, technological or other issues. However, it often happens that:

the lawyer is not competent in marketing
the chief engineer is not good at land law
the marketer does not understand much about technological processes
the financier will not understand the rationale for the marketing budget
the security chief may miss a tricky rollback scheme
Thus, specialized specialists who are responsible for monitoring the implementation of the project within their functionality may not see the overall picture. Of course, the introduction of such controls can partially prevent the occurrence of many problems. But everyone makes mistakes. How can we secure investment capital to the maximum?

In addition to the management bodies, you need advisors who are working on the project, whose level of competence allows you to quickly identify any potential problems. Moreover, not to give any hypothetical advice, but actually duplicate the work of the main project team.

Such specialists must have a long-term successful practice of implementing investment projects in various sectors of the economy. Their practical experience should be expressed not only in a professional approach to highly specialized issues, but also in the ability to solve non-standard tasks at the intersection of industries.

Looking for such professionals in the labor market is probably useless, based on the fact that such people, as a rule, are not looking for work. So, we need to look for consultants involved. And this is where the fun begins. Problem of choice.

Consulting companies got divorced, that of flea Beetles on. That, however, is not surprising. After all, who can-he does, who can not-he teaches. And we have never had a deficit with those who do not know how, despite the fact that even common phrases for their business proposals are copied from each other. It became interesting to know what kind of term to call the direction of advisers who are working on an investment project, let’s say, helicopter view, whose competence allows, without missing anything, to take into account absolutely all possible factors without exception.

And here after all

and financial analysis,
and marketing,
and land, construction, corporate, labor law,
and geodesy,
and design of capital construction,
and production engineering,
and engineering networks,
and installation,
and all sorts of expertise, approvals, permits,
certification,
and transport logistics,
and personnel,
and production regulations,
.. there are still a good thousand nuances (there is not enough space to paint).
What should I call it? Probably project consulting. What else?

I googled for companies that specify the provision of project consulting services on their websites. The results are amazing. In the top of Google for issuing just a masterpiece.

“The purpose of the Project consulting service is to reduce or eliminate legal risks and create safe legal conditions for the organization and existence of the business.”

A certain IT company understands the term “project consulting” as an aid in evaluating and selecting software (i.e., making a difficult choice between MSP and Primavera). PR experts attached the definition “expanding the sphere of international influence”to the term after a hyphen. (What’s not intergalactic? It’s cooler!)

For some reason, marketers believe that marketing analysis of real estate projects is the main and final component in any project. Under-developers, who in 2008 were guaranteed to be dismissed from their positions as Junior couriers of construction companies, believe that when they are engaged in project consulting, they analyze the best use of the territory and develop the concept of a real estate object.

And some social trainers (with HR and psychological bias) are sure that the whole point is in the business processes of the human resource management system.

And so on.

Each cricket praises its own pole, not seeing the overall picture and not even knowing about its existence. At the same time, they come to the company from the position of “more intelligent and experienced” and most often, in order not to lose a client, give advice that they have just invented. In General, there are always Eskimos who will develop guidelines for the inhabitants of the Congo behavior in the midst of the heat.

In fact, the very concept of consulting as an activity is, unfortunately, discredited by numerous Amateurs, for whom incomprehensibility is not a hindrance. Perhaps even the licensing Institute would be useful here, since the market is not able to settle such an abundance of foam on its own.

Andrew Stadnik
Investment and project company BFM Group Ukraine