Managing the Owner’s risk

Today Mr. Renjith invited me for an informal discussion across a cup of garam chai. The first restaurant we planned was under renovation, as if they are gearing up for the post pandemic era. On the way to the next restaurant in Kochi city, we spotted many closed shops which could not survive the impact of the pandemic. It resembled a graveyard of small businesses. For a moment I thought about the owners. As an unpleasant coincidence, Renjith who attended my project management workshop (PMP) around ten years back wanted to discuss about a project to convert his property into a residential villa project. A property development company approached him and proposed a professional association with him to start this project. He wants to know the key risks of such a project and ways of managing them?.

High level risks to the land owner of the real estate development project

  1. There is a possibility of real estate prices shooting up in another 2 to 3 years time because there is a major road expansion project happening nearby. Budgets are already approved by the central government. This is a very positive risk. If the owner can leverage it, he can maximize the profits from the project.
  2. The revenue from the project or the benefits to Renjith must be much higher than the land cost before development. After taking the risk of starting this project, if the returns are not substantially higher than the land cost, then it is better not to do the project.
  3. If there are delays in getting approvals, the project can get delayed. That means, in reality there is a possibility of the projects real start date getting postponed resulting in a longer project duration than anticipated.
  4. If the project do not complete on time, the responsibility of answering the buyers concerns may get transferred to Renjith, the owner.
  5. Actual demand can be lower than the anticipated demand. On the contrary, the actual demand can be much higher than the anticipated demand as well.
  6. Exit criteria from the project in the unlikely event of either party unable to continue with the project is not clear
  7. The last but not least question is ‘How will you invest the money obtained from the project in the best possible way, which will provide better returns than holding the property for some more time.

These are just high level risks to the land owner of the real estate development project.

The key aspect of risk management to the land owner lies in the contract type selection. The possible types of contracts in this scenario are;

  • Outright sale of the land to the builder : In this case, the risk to the land owner is the least, provided he has another project ready to invest the money out of this project than just depositing it in the bank. The positive risk of land prices appreciating cannot be factored into this.
  • Variable pricing of the land : This is a good choice. Since this is not a standard practice, the modus operandi must be worked out in this case.
  • Per unit pricing : This is also a good option where the builder and land owner shares the revenue from the sale of each housing unit in the project. Again the details must be worked out.
  • Joint venture : This is applicable only if the land owner is willing to enter into the project as a full fledged partner of the project.

Choosing the right contract type is key here. Other actions to mitigate the risks are;

  • Credibility check of the developers and marketers
  • Appointing a consultant for project approvals to speed up the project initiation
  • Alternatives analysis
  • Value assessment
  • Learn lessons from past similar projects
  • Request for proposals, RFI so that the owner can learn from them
  • Adoption of agile project based cadence till the actual start with all approvals and drawings in place.

In a nutshell aggressive risk management during the pre-project phases, till the contract is inked with the contractors is important to maximize value to the owner in construction projects.

High performance team building with Tuckman Ladder

Post pandemic, the team building challenges are different due to the fact that we all learned to work differently. Most of the organizations have flexible working policies which is a blend of work from home and work from office. Organizations have started leveraging contract workers or gig workers to accomplish their goals faster and more cost effectively. All these poses the need for innovation in the team building concepts. Tuckman ladder helps us to understand the team formation stages in a structured manner and helps to develop appropriate strategies for team development.

Tuckman ladder comprises of;

Forming Stage

Forming stage represents the stage in which the team members gets into the team for the first time. In projects, team formation and team building starts from the initiation phase and continues till the completion of execution phase. Since new team members are coming from different cultural and project backgrounds, it is important to establish the ground rules. The project vision, project charter and the team charter are of great help during this stage. These artifacts helps to lay the foundation for effective team building and team work. During the forming state of the team, the manager or leader’s primary objective must be to make the team comfortable. It is a great opportunity to leverage on servant leadership. You as a manager or leader helps the team to settle down quickly. During the forming stage, the manager or leader must wear the hat of a facilitator and counselor.

Storming Stage

Since the team members are coming from different cultural backgrounds, immediately after the forming stage, one can expect a storming stage. During the storming stage, the team members try to establish themselves resulting in power struggles. This is very normal. During the storming stage, the manager or the leader must monitor and control dysfunctional behaviors and must wear the hat of a moderator. One should play the role of a moderator here. Establishing ground rules for effective teaming helps to manage the storming stage effectively.

Norming Stage

Once the team passes through the forming and storming stages successfully, then they get into the ‘Norming Stage. During the norming stage, the team members understands their roles, responsibilities and the acceptable norms within the team (ground rules) and the goals to be accomplished very clearly. During the norming stage the manager or leader must play the role of a facilitator. The self organizing team concepts will help a lot for high performance team building during this stage.

Performing Stage

At the end of successful forming, storming and norming stages, the team arrives at the performing stage. They are ready to start the real work in a productive manner. Very often, this is the most difficult stage for a leader or manager. You picked up the team members, and transformed them into a high performance team with appropriate team building exercises. All of a sudden, they started performing well, even without your guidance. You become a kind of redundant there. This is the time one must put in extra effort in not to interfere with the team unnecessarily and interrupt their work.

Adjourning Stage

As we all know every game has a final match and after the hour of glory, the team will get adjourned. This is very true for projects as well, because projects are temporary in nature. As a manager or leader this stage is very crucial and it is very important to protect the good will generated while working together. This aspect becomes more important during these post covid work culture or the post pandemic work culture as more and more project teams are relying on contract workers or the gig workers more and more. If you are able to maintain the good will even after the project closure, it will become easier to avail great talents quickly in the future projects as well.

If teams work together for longer times as in manufacturing, all these stages will automatically happen over a period of time. In projects with tighter deadlines one do not have that kind a luxury. When majority of the teams are in the performing stage, if we add new team members then it can disrupt the teaming again. This is the reason why projects get delayed further when more members are added to a late project.

The manager or the leader must be able to drive the team through these stages very quickly in order to be productive fast. This is where the charisma and the creativity of the leaders and managers makes a big difference. We all play the game well to win, if we are playing against a common enemy. If the leader can identify and project the common enemy in the form of an opportunity or risk, half the job is done.

Five ways to build high performance teams

Maslow’s hierarchy of needs

Have you encountered situations when fresh team members reactions about anything strategic was very discouraging?. I had to…not just from the freshers but from even middle level managers. They were unable to resonate with strategy and strategic thinking. I even thought that there is something wrong with my ideas. Then I came across the Maslow’s hierarchy of needs which helped me to relate better with the stakeholders of my project, which includeed the project team as well. Apart from Ken Blanchard’s situational leadership model, Maslow’s hierarchy of needs also help to fine tune the leadership style.

Let us delve deep into Maslow’s hierarchy of needs.

As shown in the diagram, the Maslow’s hierarchy comprises of;

  • Basic needs
    • Physiological needs
    • Safety needs
  • Psychological needs
    • Belonging and love needs
    • Esteem needs
  • Self fulfillment needs
    • Doing what they really want to do

Freshers in a team will be operating within the basic needs. What is really appealing to them would be more money, hygiene factors, job security and safety etc. Mostly, those in the middle management positions will be at the ‘Psychological needs’ level. At this level, monetary benefits may not matter that much. Prestige, accomplishment and deep bonding with others are key. The senior managers operates at the self actualization level.

Based on these motivators, leaders can adopt styles to get the best out of the stakeholders.

Situational Leadership

The fundamental principle of the situational leadership model is that there is no single “best” style of leadership. Project teams or project stakeholders belong to various experience levels and attitudes. Hence, there is no single style managers and leaders can adopt that will be effective across team members. These models helps to tailor one’s leadership style to cater to the needs of the individuals and teams.

One cannot have a one for all kind of leadership style for all team members in the team as they fall on to the various levels of Maslow’s hierarchy of needs. Based on their capability and maturity the leader has to change his leadership style. The basic principle of situational leadership is this. Based on the maturity level and the capability of the team members, the leader resorts to any one of the following styles of;

  • Telling or Directing
  • Selling or Coaching
  • Participating or Supporting
  • Delegating

This is a model created by Paul Hersey and Ken Blanchard.

Situational Leadership emerged as one of a related group of two-factor theories of leadership.

These theories are based on two main variables of task and relationship.

Effective leadership is task-relevant, and the most successful leaders are those who adapt their leadership style. They adapt their leadership style to the performance readiness (ability and willingness) of the individual or group they are attempting to lead or influence.

Ken Blanchard’s Situational Leadership II measures project team member development using competence and commitment as two parameters.

Ken Blanchard's situational leadership model Explained
Ken Blanchard’s situational leadership