Using qualitative and quantitative risk analysis is not that hard

There are two forms of risk analysis: quantitative and qualitative. Both methods can be applied to almost every choice we make. When some people hear these terms, they get scared. They think of complex formula's, and hours of research. I will briefly define each, give two examples of when I used both methods to determine risk of a personal undertaking, and I will also provide my opinions, and findings of each.

Quantitative risk analysis takes a scientific approach to problem solving, and attempts to gain an explanation of how something is conceived, created, exactly why something works the way it works, and what the results could occur. In financial terms this scientific approach is through financial analysis using probabilities, and statistical observations. For example: An organization might look at the numeric probability that if X happens the outcomes of event X can result in Y and Z and that these outputs have a calculated probability of occurring. I read in a blog that a quantitative risk analysis. These probabilities allocate a score to a particular risk, and are used to judge if a certain risk is worth assuming or not.

Qualitative risk analysis has more to do with a social science view of a risk instead of a pure scientific view. When a qualitative method is used a person is looking to increase their understanding of a certain area instead of a numeric explanation for it. Often, qualitative risk analysis is used in specific social arenas, and so produce a personal interpretation that if X happens, what the results could be socially, not scientifically.

My first example of when I used both quantitative, and qualitative risk analysis happened a few years ago when gas prices jumped from $2.00 a gallon to $17.00 a gallon. Ok, I admit gas did not jump that high, but I think you get my point. At the time I owned a 2006, fully loaded with some customized options, GMC Yukon Denali. I am not talking about the small ones they sell now, but the big ones. I was paying $680 a month for the lease payment, $250 a month in gas, and $140 a month for insurance.

My lease was about to expire at the same time gas was around $4.00 a gallon. Being this was my 9th SUV in 6 years I wanted another one of course. The first thing I did was I looked at all the other SUV's in that class, compared options, terms of financing, and insurance rates. I was performing quantitative risk analysis.

I created budgets, timelines, and so on all with the purpose of creating numeric data on why I could afford a new SUV. Please notice I said why I could afford an SUV not if I could.

My quantitative research made it clear that from a purely scientific, and numerical standpoint, I could not afford a brand new, get out of my way I am doing 90 on the expressway, gas slugging, SUV.

Then I began to use the qualitative risk analysis method. I looked beyond just the numeric evidence. One reason I could not afford a new SUV was for the fact that the industry I had been involved in for 14 years was being decimated. The chances of that part to the economy getting worse was glaringly evident so my future earnings potential was bleak, and there was no way it could ever be as high as it once was. I was becoming accustomed to making less money, and knew that I had less stress to my life as a result of not having so many financial pressures. I was also aware of the negative environmental impact such a machine has, and I wanted to change that. Maybe I am just getting old, but I definitely had a self-paradigm  shift in morality, and ethical approach to life.

I made the decision to give up my nice white road warrior, and drive a second truck I owned  forever. The meet my need of no truck payment; it dropped my gas bill by about 50%, and reduced my car insurance $100 a month. Not only, that I was helping to save the environment by not driving a vehicle that only got 10 miles to the gallon because I used to speed around everywhere I went. Granted, the truck I drive now only gets 16 miles to a gallon but that still means I reduced by gas bill by 50ish percent a month which I said previously.

Overall it was a win-win outcome. I satisfied my analytical side, or quantitative analysis, of relying on numerical evidence, and I used that quantitative analysis to support my new found social, or qualitative analysis. Risk determined, decision made based on the propensity for risk, and problem solved.

My second example is based on my first example because as we should know that just because we solve one problem does not mean there might be another issue involving that same initial issue.

During the Summer of last year, I decided it was time to get a new car. I did comparison shopping again based on the same quantitative analysis that I had done a few years earlier. The only difference this time being I was looking at mid-sized  sedan. Once again, I compared options, terms of financing, and insurance rates by performing quantitative risk analysis. As I had done before I created budgets, timelines, and the like, all with the purpose of creating numeric data on why I could afford a new Sedan. I was doing this to provide the evidence I needed to "pull the trigger" on buying a new vehicle. Sounds familiar doesn't it?

The quantitative analysis looked good. Sure things would be a little tight, but it could be done, and I accepted the level of risk that was involved with such a venture. Then something unforeseen happened. The day my vehicle was being delivered from Chicago my car dealer called me and said that GM was raising their lease rates from 2.9% to 8.9%. I was absolutely stunned. I knew she was being upfront and honest because there is no way she could have ever gotten anything by or tired of get anything by me or my family. If you think, I am particular about these types of things, I am nothing in comparison to my parents. I could  plug in the fresh lease rates into my calculations, and knew without a hint of uncertainty that I was no longer willing to take the future financial risk caused by these new lease rates.

This new found quantitative risk analysis led me straight to qualitative risk analysis. I stepped back, and looked at the whole picture. I examined what a new vehicle would mean to me personally from my social perspective. I could afford the new car sure, but I would once again be responsible for a sizeable car expense that I did not need. I examined my wants versus needs. I determined that I wanted a new car, but that I did not need it. I knew I could use that $600 a month more I would spend on a new car for other things. Clothes, trips, and new technology toys (I am a computer geek at heart). These other things I could spend the money on were easy to control. If I did not want to take the risk of buying a new laptop, I did not have too where as a new car would have a payment due no matter what.

I am EXTREMELY glad that my quantitative and qualitative risk analysis abilities have shown be the way. My analysis has allowed me to remain much more stress free. I have been able to do more things when I wanted, and I have not had to worry about the outcome of my actions. Again, a win-win for me.

Credibility and competence in a project manager.

I define credibility as the belief's others have in someone else to get the job done in an efficient and effective manner. In my everyday life, people gain credibility with me by getting the job done properly. I do not necessarily mean in a formal employee, employer relationship but can be as simple as taking out the trash, picking up a gallon of milk at the grocery store, arriving on time to a family function, or doing an excellent job painting a bedroom. To me, someone is credible when they say something, and I know it will be done correctly not just technically but on time, and within quality. I will have the feeling what they say is true, and is in the best interest of everyone directly or indirectly involved.

Examples of skills I believe a person needs to be credible are but not limited to:

• Passionate about what they do

• Do what they do using Covey’s definition of effectiveness

• Are authentic about themselves and others

• Are ethical in all of their actions

• Treat others with respect

• Do what they say they are going to do

• Do not back stab

• Straight forward

• Are competent

My definition of creditability in everyday life also applies to what I believe defines creditability in a project manager. I have had managers that were credible, and others that were… not so incredible. What was the difference? The difference is my belief about the ability of the project manager to get the job done in a manner in which they planned to use tools, methods, and techniques they said they were going to use at the beginning of the project. I am not saying a manager has to stick to their plan 100% but when changes have been made the team was kept informed of what was going on and why.

To me, a credible project manager during change keeps control over their emotions, and that of their team. To me, credibility is also defined by a person being competent in their position.

A manager can have all the credibility around the world, but they must be competent in what they do. I could not begin to tell you how many people I have seen in a position of authority who were very credible but who lacked competence or who were very competent but had no credibility.

Ferraro (p. 103-104) mentions the PMI’s Project Management Competency Development Framework has three major parts: Project Management Knowledge, Project Management Performance, and Personal Competence. I believe a credible project manager is defined by the third part of PMI’s framework of personal competence. Personal competence is the personality characteristics of persons'  ability to get their job done. Excellent personality characteristics are great, but a project manager must also have a solid project management knowledge background, and an ability to perform that makes them a complete leader.

In my experience, I have seen a lot of managers that are extremely well versed in the knowledge of what needs to be done. These people have demonstrated they can successfully manage a project or activities properly. These same managers might not have built credibility with me if they did not also show me personal competencies. Ferraro (p. 105) states “The use of processes, people, and systems to improve organizational project management performance is also being addressed.” Ferraro is writing about an organization's maturity level, and I believe the same holds true for an individual’s maturity level.

Examples of skills I believe a person needs to be competent are but not limited to:

• A understand of how to get from point A to point B.

• Knowledge of how to get from point A to point B.

• The technical skills required to complete a project or activity.

• Ability to focus upon the end goal and not get off track.

• Able to improve processes, people, and systems during a project or activity to improve operational efficiencies.

• Forward thinkers. They are able to see into the future so to speak.

• Are creative.

• Have the courage to make the tough decisions.
Ferraro, J. (2008). The Strategic Project Leader. Mastering Service-Based Project Leadership. Boca Raton: FL. Taylor & Francis Group.

What is the value of creativity in project leadership? How to balance discipline and process with creativity.

The value of creativity in project leadership should not be underestimated. Creativity is important for many reasons.

First creativity in project leadership is important because creativity is part of Maslow's hierarchy - self-actualization  (p. 72). Maslow state's self-actualization is "What a man can be, he must be. This need we may call self-actualization…It refers to the desire for self-fulfillment, namely, to the tendency for him to become actualized in what he is potentially. This tendency might be phrased as the desire to become more and more what one is, to become everything that one is capable of becoming ( Maslow, A. H. (1943). A Theory of Human Motivation, Psychological Review 50, 370-96.)." Maslow tells us that individuals who have self-actualization possess certain abilities that can be related to a proper leader. Examples include but are not limited to:

1. Having a realistic understanding of their abilities which they are in.

2. Look forward to solving problems around them by helping others.

3. Finding solutions for a problem in their environment.

4. Are able to conform to rules and regulations.

5. Be spontaneous in their internal, and external behavior.

4. Are open and sometimes unconventional.

5. Desire to improve their own potential.

8. Be aware of their environment.

View life with appreciation, and enjoy all experiences, and are inspired to grow.

as an individual based upon these experiences.

The above examples show why creativity is very important to leadership. Ferraro (p. 218) states creativity is an "active leadership trait." To me this means a leader cannot lead effectively, unless they are creative.

When a leader is creative they can make "boring, or repetitive (Ferraro, p. 283)" tasks tolerable, and help workers be more productive, and feel a sense of pride in performing their functions. Workers who have a sense of pride in what they do have less fear of failing in their functions, and lack of fear create a positive "culture and team ( (Ferraro, p. 214).

Lack of fear empowers more creativity, and trust of self, and other's increases. When more trust is built within a team, the team unit performs at a higher level. A team operating at a higher level of efficiency "discovers" unique value in each project by focusing beyond constraints and creating service experiences for customers ( (Ferraro, p. 213).

"A leader is the face of the creative process ( (Ferraro, p. 213)." When a leader is creative, a new culture is formed that improves team members, team efficiencies, and ultimately increases customer satisfaction.

Using my creativity and self-actualization combined with discipline, and process would better serve my sponsors, stakeholders, team members, and customers by creating the comfort of a structured environment, but at the same time foresting a trusting, open culture where people are free to express self without the fear of ridicule.

Having discipline and process while at the same time being inventive I would begin to change the overall culture within an organization one piece at a time. Everyone in a imaginative environment begins to feel more empowered, and takes leadership in their functions which in turn makes an organization more effective and efficient.

Being disciplined, and understanding processes while being creative to at the same time would allow me to build a bridge between the needs of a project, team members, and management. This would allow me to have a better chance of obtaining the resources such as capital, personnel, and time needed to execute my project and in turn enhance my chances of completing successful projects.

Ferraro, J. 2008. The Strategic Project Leader: Mastering Service-Based Project Leadership. Taylor & Francis Group. Boca Raton:FL.

How out of touch can someone in authority be?

Have you ever known someone who has had zero emotional intelligence? I mean none, zero, zip, nada? I have. How can this be you ask?

Let me take you on what seems to a mystical journey because it is impossible to imagine someone with no emotional intelligence. Covey tells us not to speak behind someone's back, that we should speak as if they are in the room, and 99% of the time I agree with his statement. For this person, I will make an exception, and speak my mind but no names will be used to protect the not so innocent.

I had finished taking the summer off after I obtained my BA, and there I was in person with the Vice President of an entire company. Not some area VP or human resources person. This wasn't a small company. In the banking field, it was the 7th largest bank in the United States at that time.

I was welcomed, asked to have a seat, and we began. He really cut to the case by telling me he was the person who be making the decision if I was hired or not. I would be either hired on the spot or thanked for coming, and sent on my merry way.

The typical banter was tossed about: What could I bring to the position? Was I willing to work late and weekends? Why did I think I had what it took to succeed and so on? He told me people either produced, or they were fired. It was as simple as that.

During the interview, an important phone call came in which he had to take. Guess what? He began swearing while I was sitting across from him. One of the comments went something like “If he can’t get it done tell him his f#$king ass is fired. “

After he hung up the telephone, he offered me the position of Manager Trainee. Of course, I accepted. After all I was across from the Vice President of one of the divisions of the top 20 banks in the world. How could I say no? I would start in two weeks.

After three years in this environment, I decided to get out. To quote Brain Tracy "If you to sail your ship in a different direction, you must turn one degree at a time." In this care I turned 180 degrees at one time. What this experience taught me was better social awareness, and what to NOT do in realtionship management.

Did this person have self-awareness? Maybe, if he believed he could manage himself. Did he exhibit self-management?  Doubtful. Did he have social awareness? Clearly, no. Was he able to interact in relationship management? If you consider leading by intimidation, then yes.

His approach was not a balance of carrots and sticks but 5% carrots and 95% sticks. Hopefully, he has read or listened to some Dr. Dyer, the Dalia Lama, or Brain Tracey since then. I look at this time as a growing experience, and though this example is extreme, it shows how out of touch someone can be.