Vox published a report from Jay Angoff, a former Obama administration official who is now at a law firm. The Angoff report examines the federal cost of the health exchange websites and then calculates the cost per enrollee in each state. The headline is deliberately enticing: “Hawaii’s Obamacare cost nearly $24,000 per enrollee.”

There are two problems with the Angoff’s analysis, one major and one minor but still significant:

1. The report takes the $2.7B cost of the federal website and divides it equally between the 36 states that used the federal website.
2. The report does not include state spending or spending by non-government groups.

Major Flaw: Federal Spending is Allocated by State

The Vox article does not mention the math where the $2.7B federal price tag is divided equally by 36 states ($75M per state). This is a significant omission. This assumption is explained in the report:

Administrative costs are allocated 1/36 to each of the 36 states, regardless of population, because the technology necessary to operate the Exchange is substantially similar in each state regardless of its population. To the extent that non-technology costs are higher in larger states, this allocation overstates cost-per-enrollee in smaller states and understates it in larger states.

No, no, no! This is a poor assumption! I would not allocate the cost equally to each state. That would be like taking an F-22 fighter jet and allocating its cost by state. After all, the technology to operate it is the same in every state!

I took the analysis and revised it by two methods. First, it would be better to allocate cost by enrollee. This makes sense as the enrollees should “pay” for the site. The second run-through, I calculated cost by population which is a sensible way to allocate costs on something that is theoretically available to all. It may be best to allocate costs by the number of taxpayers per state but that gets a bit complicated.

The spreadsheet here shows the states that were included in the federal website, sorted by the cost per enrollee as in the Angoff report, then followed by two columns: 1) cost by enrollee if the costs were allocated by enrollee and not state and 2) cost per enrollee if the costs were allocated by population.
As you can see, there is a massive difference in the numbers. Because of Angoff’s methodology of dividing costs by state, the “most expensive” enrollees are all from states with small populations.

Below is my entire analysis. As a side note, I’m depressed impressed surprised about the amount of federal money that some states (Hawaii, New Mexico) were able to obtain.

Minor Flaw: Lack of State Spending in the Analysis

The report also suffers by lack of state spending and lack of spending data from non-government groups. While it may be difficult, or impossible, to get spending from non-government groups, state spending is easier to obtain. As an example, Maryland received $171 Million in federal dollars but added an additional $20M of its own money. The report underestimates Maryland’s cost by 15% – and Maryland’s costs are born solely by Maryland’s taxpayers (not equally by county if the report chose to make the same assumption as above).

Overall, the Angoff report is fatally flawed by making a poor decision to allocate federal costs by state and not including state spending. To its credit, Vox noted the missing data but it did not mention the assumption that grossly distorts the spending data for the health exchanges.

There is an excellent research article in MITSloan’s Management Review on the Pitfalls of Project Status Reporting. The article starts with recounting the launch of the federal health exchange healthcare.gov where many of the stakeholders thought the project was on track right before go-live. (I recently wrote about the Oregon health exchange where the project manager said two weeks before launch: “Bottom line: We are on track to launch.” The Oregon site never launched and after six months, Oregon abandoned the effort and is joining the federal site.)

The point of the article is that leaders can be surprised when IT projects run into trouble. The authors go through five “inconvenient truths.”

1. Executives can’t rely on project staff and other employees to accurately report project status information and to speak up when they see problems. Their research shows that PMs write biased status reports 60% of the time and the bias is twice as likely to be positive as negative. For obvious reasons, PMs feel that personal success is related to project success so they are incentivized to paint a brighter picture. This tendency to hide bad news increases in organizational cultures that are not receptive to bad news and where the PM may feel personally responsible for the bad news (as opposed to, say, a contractor being responsible).
2. A variety of reasons can cause people to misreport about project status; individual personality traits, work climate and cultural norms can all play a role. Within traits, the authors cite risk-takers and optimists as more likely to misreport status. A work climate that is based on professional rules of conduct is less likely to produce misreporting. And collective cultural norms, such as those found in the Far East ( as opposed to individualistic cultures such as the U.S.), are more likely to produce misreporting.
3. An aggressive audit team can’t counter the effects of project status misreporting and withholding of information by project staff. Basically, it is possible for PMs and project teams to hide information from auditors, which is no surprise. Project teams do this when there is distrust of the auditors. This lack of trust also impacts internal reporting structures. If a PM does not trust the senior executive they report to, they are more likely to misreport.
4. Putting a senior executive in charge of a project may increase misreporting. The greater the power distance between the person giving the status and the person receiving the status, the greater likelihood of misreporting.
5. Executives often ignore bad news if they receive it. The authors found that in many cases, issues were identified and elevated to executives who had the power to resolve them but the executives did not act. Partially because the pressure on executives for the project to be successful can be the same, or greater, as the pressure on PMs. This is what happened in the Maryland health exchange project. The QA auditor wrote to the Executive Director two weeks before launch warning her of eight serious risks of going-live. The Executive Director downplayed the risks and the project continued towards its disastrous launch.

The article includes recommendations for each inconvenient truth and three useful attachments: 1) a survey to determine your risk of misreporting, 2) the cycle of mistrust that occurs between teams and auditors and 3) a list of common misreporting tactics (including selective highlighting and redefining deliverables).

Project (and portfolio) status reporting is a must-have for project-based organizations. This article provides valuable insight on how to make it effective.

An excellent article, the best in PM this year!

 

I analyzed the PMI Salary Survey results. The eighth edition was released in 2013. I wanted to analyze the change in PM salaries over time. I have surveys from 2000, 2009, 2011 and 2013. I wish I had surveys from other years but the internet has failed me (PMI, too) and I can’t find them.

At first, I looked at the median salary for all PMs in the U.S. over time.

That makes sense – salaries have gone up. But median salary is too broad. Next, I looked at median salary by years of project management experience. The Survey says this is a bigger factor on salary than years of overall experience.

Again, salaries have increased over the last 13 years.

Or have they?

As the chart title says, this is not adjusted for inflation. Even though inflation has been low, averaging less than 2.5% over the last 13 years, it still adds up. Here is the data adjusted for inflation (showing salaries in 2013 dollars).

Yikes! It shows that salaries have decreased over time, or, at best, remained flat! How is this possible?

I have two theories. First, perhaps salaries from 2000 are artificially high due to the dot-com craze. PMI just happened to survey PMs when they were receiving outlandish salaries. Second, perhaps the job title of PM has been adopted by many more people that are dragging the salaries down.

PM Salaries in 2000 Were Boosted by the Dot-Com Craze

While this phenomenon was true – I got a ridiculous salary offer in 2000 – I don’t think it was wide-spread and it didn’t last long. PMI surveys PMs across the U.S. – I doubt salaries increased much in Dubuque due to the dot-com craze. I don’t think there would be a large spike in salaries.

Plus, salaries tend to be sticky. Once you get a raise, you tend to keep it even if your company does worse in the future. If salaries really did go up significantly, I’d expect to see that impact for….ever. Again, that was true in my case. I got a large salary in 2000 and I continued to make more money after that with every subsequent job.

Conversely, maybe the salaries of 2009, 2011 and 2013 are artificially low due to economic issues.

Waiter, Actor, Project Manager

There’s a joke in Hollywood that every waiter or waitress is an actor. Perhaps the same thing is happening to PMs. Maybe the definition of PM expanded so much in the 2000s that there are many, many more types of PMs. The 2000 survey may have been weighted towards technical PMs – computer science, IT, aerospace and Defense, construction. Technical PMs in these industries make more money than other types of PMs. The later surveys may have included more PMs that managed marketing or investor relations projects. Or perhaps, these PMs are more accurately called business analysts. And, maybe, these types of PMs earn less.

The New Normal?

Or maybe, PM salaries have truly gone down. The U.S. Census Bureau shows that median household income went down about 2% between 2000 and 2010. My favorite economics blogger, Tyler Cowen, has written on The Great Stagnation. We PMs are not immune.

My colleague at the Stevens Institute of Technology, Thomas Lechler, did research on creating business value through projects. The paper, The Mindset for Creating Project Value, is available for free for PMI members at www.pmi.org. He argues the PMs should shift their mindset from the triple constraint to creating business value.

Here is Dr. Lechler’s hypothesis: projects measure success against the triple constraint: scope, schedule and cost. If a project did what it was supposed to do, on time and on budget, then it was a success. Business, however, don’t measure success this way. They are looking for other things such as increasing revenue, decreasing expenses, increasing customer satisfaction, and serving more people (for a charity, perhaps). It’s easy to imagine situations where these different definitions of success conflict. Microsoft’s Kin cell phone may have been a project success but it tanked in the marketplace. Apple’s iPhone could have failed each of the three project success measures but nobody cares because it created massive value for the organization.

Dr. Lechler compares PMs with a triple constraint mindset vs. a project value mindset. PMs with a triple constraint mindset will naturally force a project to its baseline. They want to achieve project success. PMs with a project value mindset are more likely to identify and pursue project changes that may negatively impact the project but ultimately benefit the organization. Interesting data and I encourage you to read it.

I must stress that it is critical that businesses select projects wisely and that PMs know the strategic business goals for the project. Usually, the PM is in the best position to know if a project is going to achieve business value.

Despite the headline, a PM should not ignore the triple constraint. But PMs must remember that projects are undertaken to achieve a goal and the goal is more may be important than the triple constraint.

Everyone multitasks. You switch from email to a project schedule to a requirements document within minutes, or seconds. You (and everyone else) brings their laptop to a meeting so they can crank out emails. Everyone multitasks, but most people aren’t good at it. Research from the University of Utah (here) shows that less than 3% of the population can multitask with no decline in performance.

To a degree, PMs know that people are bad at multitasking. We would rather have one person 100% of the time on our project instead of five people 20% of the time (assuming equal talents). Then we know what they are working on at all times.

There are certain tasks that don’t suffer if you do them poorly. Many of the tasks that PMs do, such as tracking task completion and issue tracking, don’t require a high level of performance. But you should be worried about your job if all you do is menial tasks that can be easily done while multitasking. Some of the problems that need solving are hard and require full attention. If you aren’t working on the hard problems, then you may not providing value to your organization. You are paid a lot and you should be spending a significant percentage of your time solving hard problems.

It’s clear that people should complete one task at a time. You and your team.