Change and Risk are similar in the sense that they both deal with uncertainty. In other words, they are both unknowns, which may or may not occur, and they can both have negative and positive impacts on a project. So how do we distinguish them?
In the simplest of terms, “risks” can and usually are identified at the beginning of a project, as well as throughout the project, as soon as any potential new risks are identified. However, “change” is unanticipated and, therefore, poses its own unique set of challenges. Whereas a risk, which you identified early in the project cycle, can be addressed through some sort of strategic response (mitigation, transfer, etc.) and monitored through pre-determined triggers, a “change” will occur spontaneously and needs to be addressed as quickly and effectively as possible.
Does this mean that we are at the mercy of “changes” on a project? The short answer is “no.” We can establish mitigation measures for changes through both the contingency and management reserves for both time and cost, as well as develop an effective change control system for the project. However, what most project managers forget to do is have a clear and honest discussion with their clients and other stakeholders regarding the potential impacts, both negative and positive, on a project.
The discussion regarding “changes” with the client should include the following topics/factors:
- What is the acceptable level of change the stakeholders can tolerate in terms of cost and time, as well as in intangible factors? These intangible factors might include loss of business, the impact to reputation, personal interests and expectations, etc.
- Ensure that the key stakeholders participate in the development of the change management plan, such as priorities, tracking mechanisms, and reporting. For example, the change requests should not only reflect the typical key information, such as budget and schedule impacts, but also their priority based on the intangible factors listed above. In other words, even though the impact to time and cost might be small or negligible by most standards, it could still pose a threat to someone’s professional career or to the organization itself.
- The “No Change Orders” policy: my personal recommendation is to avoid these clauses in project contracts, whenever the project entails too many variables, such as in construction, large scale re-organizations or where there are sub-contractors or sub-consultants involved. In other words, whenever a project poses too many potential uncertainties, which are out of the project management team’s control. That said, if you cannot avoid these types of projects, see next item below.
- For “No Change Orders” projects you should, first of all, evaluate the potential impacts and risks to your organization, which can be negative or positive. A positive risk, for example, might be customer satisfaction if you are able to avoid any changes to the project, as well as a learning experience for your organization. Secondly, you should have an honest discussion with the client to establish what a “change” means to both parties. In other words, an “acceptable change” for you, as the performing organization, might be any deviation from the scope initiated by the client. However, a client might consider a scope change to be acceptable if it generates a budget increase of 1-5% of the overall budget. In other words, the client might want you to absorb small changes within your budget, whereas your organization might find that unacceptable.
Follow more of my articles on this web-page regarding changes and change management.
Mr. Romero-Lozano studied civil engineering and construction management in California. He is a registered professional engineer (PE) in California, holds the title of Diplom Ingenieur in Germany, is a certified sustainability professional LEED AP) from the United States Green Building Council (USGBC), and holds several certifications, such as project management professional (PMP) from the project management institute (PMI.) He is highly experienced in project, construction and facilities management in the automotive, manufacturing, pharmaceuticals, infrastructure and civil engineering industries.
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