30 Jun Procurement Tip: Having to Trust Someone is an Indicator of Problems
Today’s procurement tip is on trust. Many people believe that trust is key to project success. Most managers believe that project functions (including communication, contracts, progress reporting and planning) depend on trust between the client and vendor. It seems natural that project delivery models would increase the need to trust and have stronger relationships to improve performance. However, when further examining the implications of trust, we have found trust is actually a root cause to why so many projects fail.
The Mind of an Expert
Before we look at trust, we need to understand the mind of an expert. Imagine for a moment that I am holding a water bottle in the air. If I were to run a test and release this water bottle 100 times, how many times would it stay floating in the air? This is not a trick question—it is as simple as the question seems. The answer is zero—the bottle would always fall. Without releasing the bottle even once, you knew the future. You could say that you are an expert in this situation. A key trait of an expert is that they understand the project, they see it simply, and they can predict the future [plan and mitigate risk]. Another key trait of an expert is that they can simplify the situation for others, so everyone without the vendors’ expertise can still understand and see into the future. If a vendor cannot do these things, they most likely are not an expert.
How Does Trust Lead to Project Failure?
To better understand trust, think of the water bottle example. Did you need trust or need a relationship with someone else to know that the bottle would fall? No! You didn’t need to rely on trust or relationships because you understood the situation and could see the future for yourself. In situations where you need to rely on trust or relationships, it indicates specific problems:
1. There is complexity, confusion, and a lack of transparency on the project.
You only have to trust when things are complex and confusing. Trust is never needed when you can understand the project and can see into the future for yourself. When you don’t understand the project, you will be forced to “believe” what you are told with no logical explanation and trust that the outcomes promised to you will be delivered. This way of working will lead to surprise change orders, missed expectations and legal disputes because the vendor you are trusting is most likely not an expert (see next point).
2. There is not an expert on the project.
If there was an expert on the project, the expert would understand the project, see it simply, and would make it simple so that everyone could understand. When everyone can understand the project and see into the future for themselves, there is no need for trust. Any vendor or person who requires you to trust them is most likely not an expert.
3. There is no accountability on the project.
Trust is only needed when no one can understand the project. You cannot track and measure what you do not understand. Without the ability to track and measure performance.
All of these problems with trust leads to a high-risk environment. Unknowingly as people choose to rely more and more on trust and relationships, they are promoting factors which lead to the poor performance they are trying to improve.
How to Avoid Relying on Trust
The best way to avoid trust is by identifying and utilizing experts who can make it simple. The client should not be required to have any expertise in what they are outsourcing. It is the vendor’s role as the expert to make their expertise, proposal, and project status simple and understandable. If the client is required to trust the vendor [the client can’t understand], there is a problem and the project should be reevaluated. This can be done in three core areas:
1. Prioritizing vendors in procurement based on expertise supported by project specific metrics.
Clients should use a process which gives experts the advantage. The process should only give credit to vendors who can provide claims with performance metrics that demonstrate previous success on projects similar to the client’s requirement. For example, in Table 1 you will see two different justifications of expertise for a vendor’s project manager (PM), (1) the traditional marketing method which is reliant on trust and (2) a metrics-based method which requires no trust. The traditional marketing method gives no real information as to how well the vendor will perform on the client’s project. The metric-based method shows the vendor’s capability and does not require the client to trust that the vendor is an expert.
Table 1: Comparison of Trust vs No Trust Responses
2. The Vendor’s Proposal and Plan is simple, complete, and understandable.
The vendor should provide a full detailed plan and scope of work before the contract is signed and any work is done. In addition, the vendor should provide a simplified plan and scope that all stakeholders can understand. A client should never sign a contract without a detailed and simplified plan that is understandable to all stakeholders. If a vendor is unable to do this, they should be dismissed from the project. Key components to a plan include:
- Performance metrics and deliverables.
- Detailed/milestone schedule which includes actions required by all stakeholders.
- Cost schedule.
- Key assumptions made by vendor.
3. Project reporting Allows All Stakeholder to Know the Project Status.
In the majority of projects, reporting should be done weekly. The report should be non-technical and simple enough that all stakeholders understand the project status [level of performance] and future actions that are required. Any deviations should be clearly explainable and assigned to the responsible party. If there are regular disputes or the reporting process is taking more than 10 minutes a week, it is most likely not being done properly. Each week key metrics that should be provided include:
- Cost and time deviation [with % caused by each party].
- Milestone schedule.
- Key updates to the project with potential risk.
- Nontechnical quality specific metrics.
What to do if You Currently Rely on Trust
The Best Value Approach is a procurement and project management process which does not rely on trust or relationships but instead identifies and utilizes expertise. The BVA incorporates all the methods discussed in this article and more to avoid the reliance on trust and increase predictive metrics which provide true transparency.
To learn more about the Best Value Approach and how this can be done see the following relevant resources:
Hartman, F. T. (2000). The role of TRUST in project management. Paper presented at PMI® Research Conference 2000: Project Management Research at the Turn of the Millennium, Paris, France. Newtown Square, PA: Project Management Institute.