3 pains of spin-off projects


by Cezar Babes

Not long ago, I completed a project that was part of a spin-off program. While the experience was tremendously valuable for my project management career, I acknowledge that it is not an experience for everyone, especially due to the level of political pressure and stress caused by the urgency of activities. Such projects require exceptional resilience, or as we say, thick skin.  Firstly, what is a spin-off? A spin-off is the transformation of a division of a company into a standalone company. Famous examples include the separation of Kraft Foods Group from Mondelez International in 2012 and PayPal from eBay in 2015. Throughout this article, we will refer to this concept using the term “separation.”  You may wonder what I mean by “politics”? “Politics,” to a large extent, is an ongoing power struggle and a series of strategic actions, much like chess, where different groups and individuals influence, negotiate, and manipulate project objectives.  Both my project and the projects of my colleagues faced various bizarre situations, rooted in the following three issues: 
  1. Tendency to Change Things “On the Fly” 
During a separation, the parent company wants to quickly rid itself of the separated part by replicating the operational structure and governance. For example, it prefers to “clone” a service, including infrastructure and organizational structure, with all existing problems, rather than giving the new entity the opportunity to create its own solution, free of these issues. This creates tensions between the managements of the two entities.  The solutions are somewhat simple and boil down to using standard project management processes and tools: 
  • Apply Change Management to the scope, budget, and schedule rigorously. This means recording, analyzing, authorizing, implementing, and documenting change results. 
  • Apply risk management, including recording, classifying, assessing, and treating risks resulting from changes. 
  • Document, assess, and closely monitor decisions made. 
  • Use Agile methods to reduce the impact of changes on the project’s three constraints (Scope, Budget, and Time). 
  1. New (and Old) Bosses 
When a new commercial entity is formed, it is highly likely that some (if not the majority) of the bosses in the new entity are former employees of the parent company. Some may even have unrealized ambitions; likely due to the rigidity of the system they worked in in their former role. Worse, others are given the authority they lacked in the parent company, probably for valid reasons such as a lack of adequate competence or even behavioral issues. This, again, generates bizarre situations, especially in relation to project objectives.  A few simple solutions come to our aid to ensure that the project will not deviate (too much) from its initial objectives, and if it does, it does so after a detailed analysis and proper authorizations: 
  • If not already done, a stakeholder analysis will help understand their motivations and adapt communication based on their interest and impact on the project. 
  • A re-analysis of project objectives with new and old leaders will be necessary: 
  • Necessary changes will be managed through the Change Management process mentioned above. 
  1. Shrewd Suppliers and Nepotism 
Another issue is the predatory practices of some suppliers who take advantage of chaos to sign lucrative contracts without offering proportional value in return. Worse, some new leaders bring in suppliers they worked with before without ensuring they are suitable for the challenges of the new company.  What we can do to mitigate the impact of such situations are as follows: 
  • Use tenders whose results are analyzed by at least two neutral entities. 
  • Examine potential conflicts of interest for suppliers brought in by new leaders (relatives, neighbors, old friends, etc. – these things are easily found out if desired). 
  • Include in contracts clauses that allow termination in case of poor performance. 
Project management of separations is, in its own way, an art and requires a meticulous and adapted approach. These projects are rich in advanced leadership lessons and many growth opportunities, but if you embark on such a project, hold on tight, as rough seas are anticipated.