Fargo Foods
Fargo Foods is a $2 billion a year international food manufacturer with canning facilities in twenty-two countries. Fargo products include meats, poultry, fish, vegetables, vitamins, and cat and dog foods. Fargo Foods has enjoyed a 12.5 percent growth rate each of the past eight years primarily due to the low overhead rates in the foreign companies.
During the past five years, Fargo had spent a large portion of retained earnings on capital equipment projects in order to increase productivity without increasing labor. An average of three new production plants have been constructed in each of the last five years. In addition, almost every plant has undergone major modifications each year in order to increase productivity.
In 2000, the president of Fargo Foods implemented formal project management for all construction projects using a matrix. By 2004, it became obvious that the matrix was not operating effectively or efficiently. In December 2004, the author consulted for Fargo Foods by interviewing several of the key managers and a multitude of functional personnel. What follows are the several key questions and responses addressed to Fargo Foods:
Q. Give me an example of one of your projects.
A. “The project begins with an idea. The idea can originate anywhere in the company. The planning group picks up the idea and determines the feasibility. The planning group then works ‘informally’ with the various line organizations to determine rough estimates for time and cost. The results are then fed back to the planning group and to the top management planning and steering committees. If top management decides to undertake the project, then top management selects the project manager and we’re off and running.”
Q. Do you have any problems with this arrangement?
A. “You bet! Our executives have the tendency of equating rough estimates as detailed budgets and rough schedules as detailed schedules. Then, they want to know why the line managers won’t commit their best resources. We almost always end up with cost overruns and schedule slippages. To make matters even worse, the project managers do not appear to be dedicated to the projects. I really can’t blame them. After all, they’re not involved in planning the project, laying out the schedule, and establishing the budget. I don’t see how any project manager can become dedicated to a plan in which the project manager has no input and may not even know the assumptions or considerations that were included. Recently, some of our more experienced project managers have taken a stand on this and are virtually refusing to accept a project assignment unless they can do their own detailed planning at the beginning of the project in order to verify the constraints established by the planning group. If the project managers come up with different costs and schedules (and you know that they will), the planning group feels that they have just gotten slapped in the face. If the costs and schedules are the same, then the planning group runs upstairs to top management asserting that the project managers are wasting money by continuously wanting to replan.”
Q. Do you feel that replanning is necessary?
A. “Definitely! The planning group begins their planning with a very crude statement of work, expecting our line managers (the true experts) to read in between the lines and fill in the details. The project managers develop a detailed statement of work and a work breakdown structure, thus minimizing the chance that anything would fall through the crack. Another reason for replanning is that the ground rules have changed between the time that the project was originally adopted by the planning group and the time that the project begins implementation. Another possibility, of course, is that technology may have changed or people can be smarter now and can perform at a higher position on the learning curve.”
Q. Do you have any problems with executive meddling?
A. “Not during the project, but initially. Sometimes executives want to keep the end date fixed but take their time in approving the project. As a result, the project manager may find himself a month or two behind scheduling before he even begins the project. The second problem is when the executive decides to arbitrarily change the end date milestone but keep the front-end milestone fixed. On one of our projects it was necessary to complete the project in half the time. Our line managers worked like dogs to get the job done. On the next project, the same thing happened, and, once again, the line managers came to the rescue. Now, management feels that line managers cannot make good estimates and that they (the executives) can arbitrarily change the milestones on any project. I wish that they would realize what they’re doing to us. When we put forth all of our efforts on one project, then all of the other projects suffer. I don’t think our executives realize this.”
Q. Do you have any problems selecting good project managers and project engineers?
A. “We made a terrible mistake for several years by selecting our best technical experts as the project managers. Today, our project managers are doers, not managers. The project managers do not appear to have any confidence in our line people and often try to do all of the work themselves. Functional employees are taking technical direction from the project managers and project engineers instead of the line managers. I’ve heard one functional employee say, ‘Here come those project managers again to beat me up. Why can’t they leave me alone and let me do my job?’ Our line employees now feel that this is the way that project management is supposed to work. Somehow, I don’t think so.”
Q. Do you have any problems with the line manager-project manager interface?
A. “Our project managers are technical experts and therefore feel qualified to do all of the engineering estimates without consulting with the line managers. Sometimes this occurs because not enough time or money is allocated for proper estimating. This is understandable. But when the project managers have enough time and money and refuse to get off their ivory towers and talk to the line managers, then the line managers will always find fault with the project manager’s estimate even if it is correct. Sometimes I just can’t feel any sympathy for the project managers. There is one special case that I should mention. Many of our project managers do the estimating themselves but have courtesy enough to ask the line manager for his blessing. I’ve seen line managers who were so loaded with work that they look the estimate over for two seconds and say, ‘It looks fine to me. Let’s do it.’ Then when the cost overrun appears, the project manager gets blamed.”
Q. Where are your project engineers located in the organization?
A. “We’re having trouble deciding that. Our project engineers are primarily responsible for coordinating the design efforts (i.e., electrical, civil, HVAC, etc). The design manager wants these people reporting to him if they are responsible for coordinating efforts in his shop. The design manager wants control of these people even if they have their name changed to assistant project managers. The project managers, on the other hand, want the project engineers to report to them with the argument that they must be dedicated to the project and must be willing to complete the effort within time, cost, and performance. Furthermore, the project managers argue that project engineers will be more likely to get the job done within the constraints if they are not under the pressure of being evaluated by the design manager. If I were the design manager, I would be a little reluctant to let someone from outside of my shop integrate activities that utilize the resources under my control. But I guess this gets back to interpersonal skills and the attitudes of the people. I do not want to see a brick wall set up between project management and design.”
Q. I understand that you’ve created a new estimating group. Why was that done?
A. “In the past we have had several different types of estimates such as first guess, detailed, 10 percent complete, etc. Our project managers are usually the first people at the job site and give a shoot-from-the-hip estimate. Our line managers do estimating as do some of our executives and functional employees. Because we’re in a relatively slowly changing environment, we should have well-established standards, and the estimating department can maintain uniformity in our estimating policies. Since most of our work is approved based on first-guess estimates, the question is, ‘Who should give the first-guess estimate?’ Should it be the estimator, who does not understand the processes but knows the estimating criteria, or the project engineer, who understands the processes but does not know the estimates, or the project manager, who is an expert in project management? Right now, we are not sure where to place the estimating group. The vice president of engineering has three operating groups beneath him-project management, design, and procurement. We’re contemplating putting estimating under procurement, but I’m not sure how this will work.”
Q. How can we resolve these problems that you’ve mentioned?
A. “I wish I knew!”
Question:
1. Should planning groups plan projects?
2. Why are rough estimates and costs considered as detailed estimates and costs?
3. Should a project manager have the right to refuse an assignment because he was not invited to participate in the project plan?
4. What are the major problems with promoting the best technical experts to project management?
5. Should project managers be permitted to give first guess estimates to a customer?
