“You make money when you buy,” said Alex Michaels, a real estate investor who flips one house a year. “You need a team, and you need a plan,” he added. “You need a good understanding of what needs to be done, and when, and a really good understanding of what can go wrong, because something always goes wrong. Best case,” he said, “hope for nine months, and plan for a year.”

This is project management 101: a plan, including critical path, risk analyses, and timeline.

Flipping a house is a “temporary endeavors undertaken to create unique product, service, or result,” a project, per PMI's definition. Flipping homes generally requires renovating kitchens, bathrooms, often requires new roofing and siding. Even relatively simple projects that only require painting and flooring benefit from budgets, risk analyses, and plans. There are critical paths to be considered – you want to sheetrock and paint the walls after running new wiring and installing installation, and before laying new flooring or new carpeting because you don't want to splatter paint on the floors or the carpets. Whole house renovations are major undertakings that can cost $100,000 or more and take nine months to a year, or longer.

Done right, it drives change, creating value.

Done wrong; Zillow lost $420  in three months.

Or, as Zillow CEO Richard Barton said, as reported in the NY Times , Our algorithm had “not produced predictable results.”

“Zillow announced it would temporarily stop buying new homes. At the time, it blamed a lack of workers to fix up and sell the [18,000} houses it had bought. But on Tuesday, [November 2, 2021,] Barton said using its algorithm to buy and sell houses had not produced predictable profits.”

“Zillow Offers lost more than $420 million in the three months ending in September [, 2021], roughly the same amount that the company had earned in total during the prior 12 months.”

Zillow's market capitalization collapsed to approximately 25% of its value, from roughly $60 Billion to roughly $15 Billion. Its stock price plummeted from $208.11 per share to $52.57. As noted in the Times, Barton blamed a lack of workers to fix up the homes and he blamed the algorithm. Zillow's Board appears to have agreed. Barton was paid $636,626 in salary and $7,798,200 in stock options.

In hindsight the reasons are obvious:

Zillow believed it could buy, renovate, and sell homes within three (3) months. As anyone who has ever purchased a house, condo, or co-op knows, while it could take three (3) months from the time a contract is signed to close the deal, the seller also needs time to clean up, renovate, stage, and market a home. An optimistic sales assumption is six (6) months, but as noted, a realistic assumption is nine months to a year.

If Zillow's algorithm was based on this fundamental assumption that a home sells the day it is put on the market, then it was not simply that “the algorithm did not produce predictable profits,” as Barton said, but rather that the algorithm which cost Zillow shareholders $420 million in cash and $45 Billion in market capitalization in three months as they wrote off the purchase of 18,000 homes was based on assumptions that were absolutely, unbelievably, and staggeringly incorrect.

Even assuming that the only renovation a home needs is a new paint job, new flooring and new carpeting, a realistic assessment would be that the home requires one week for these cosmetic renovations, one week to stage, to be listed, advertised, two weeks on the market, and then three months to close. That is a four-month scenario, and it's a best-case scenario. Add another month to close and another four weeks on the market to sell, and you're looking at six months, not four, for simple cosmetic renovations. The taxes and interest expenses are now twice as high as “Zillow's Algorithm.”  Factor in that Zillow was looking at foreclosed real estate – which likely will need more than a paint job – and they should have estimated nine months to one year, which is the time it takes my friend Alex to flip homes.

When the home needs extensive renovations, renovations that requires permits, then the flipper needs to add months into his or her calculations. If the project needs new windows, then it's one week to get permits, one week to get the windows installed, one or two weeks to get the property re-inspected. These impact the critical path. The flipper needs to wait for the inspections to be passed in order to move on to the next step. The plumbing and electrical has to be planned, completed, and inspected before the carpentry; and then the walls should be painted before the flooring is laid. These are detailed in Table 1, Zillow's Apparent Assumptions.

Table 1: Zillow's Assumptions v Reality

A key principle of Project Management is that we need to tell the sponsors and stakeholders what they need to know, not what they want to hear. However, the project sponsors need a realistic understanding of what they are doing. They need to understand likely costs, realistic time frames, and probable risk. Table 2 shows appliances and components like HVAC systems. Table 3 shows typical renovation costs.

Table 2: Large Systems

Table 3: Typical Costs

Zillow forecast a profit of 5% per project. Simply put, for every $1.0 Million they invested, they assumed that they would net $1.05 million. As noted, Zillow also assumed that they could flip each property in 3 months. Thus, they believed that could use the same $1.0 M four times each year and generate $50,000 in profit four times each year, a total of $200,000 on each $1.0 M invested. This would be an annual return of 20%. But $50,000 in profit on $1.0 M twice per year is $10,000. And once per year; it's $5,000.

Looking deeper, if the project takes six months, on average, rather than three months, then Zillow's mortgage interest and taxes double, cutting into their margin. If it takes a year, then the taxes and interest costs increase by 400% over the forecast.

The Project Manager is obligated to communicate realistic assumptions to the sponsors and stakeholders. And the sponsors, whether they are the CEOs and Boards of Directors of companies worth $60 Billion or CEOs and boards of companies worth $1 million, should demand to be told what they need to know, not what they want to hear. They must live in the real world, must understand real constraints. While they drive change, creating value, creating new realities, they are subject to the same laws of physics and economics as their customers and their competitors. If the best project managers are “Alpha Project Managers,” then Barton and his team at Zillow are “Alpha Project Mis-Managers.”

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Chapter member Larry Furman, MBA, PMP, continues his exploration of Project Management in the real world. He can be reached at “Larry@FurmanGroup.net”.

Stephen Gandel, New York Times, Nov. 2, 2021, “Zillow, facing big losses, quits flipping houses and will lay off a quarter of its staff,” https://www.nytimes.com/2021/11/02/business/zillow-q3-earnings-home-flipping-ibuying.html

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PMI defines a project as “a temporary endeavor undertaken to create a unique product, service, or result.” Projects drive change, move the enterprise from one state to another, create value. While professional project managers focus on business, commercial, or government enterprises, projects are also undertaken outside of work. Home renovations, Thanksgiving dinners, New Year's Eve and birthday parties, weddings, and other celebrations are projects with sponsors, stakeholders, risks, budgets, lessons learned, and firm end dates.

Birthday Parties and Weddings

Simple birthday parties for children may have a budget of around $50 and feature pizza, soda, and cake for a dozen children. Planning for the birthday party may be as simple as a few conversations about date, time, location, activities, menu, and decorations. The menu may be pizza, cake, water, milk, soda, and coffee for adults. Wedding celebrations are carefully planned events for 100 to 500 or more guests and budgets of $50,000, $500,000, or more.

These events are part of people's personal lives, not their work lives. While planned in detail, weddings tend not to be structured like projects. There is no WBS, there are no formal risk management plans, stakeholder engagement plans, or communications plans. Planning for weddings begins with date, time, and venue. There are other details: music, the photographer, flowers, the rings, the vows, and of course, the guests of honor, the dresses, tuxedos. The “Project” completes on the wedding day. Estimated costs are detailed in Table 1.

Table 1, estimated costs for wedding with 125 guests

Of course, the gowns and tuxedos may be more expensive, or less, and the number of guests may be higher or lower. And this estimate includes costs for rings, which can easily rise to $5,000 or $25,000, depending on whether the rings are gold or platinum, color, size, and clarity of the stone and wealth of the couple.

Table 2 lists core elements of the dependency chart for a wedding.

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Table 2 - Dependency Chart

To convert the dependency chart to a Gantt chart, the planner needs to add in information regarding item durations. It could take 3 months to shop for a dress and another 3 months for the dress to arrive. Venues may be booked 18 months to 2 years in advance. Most of the items are dependent on the decision of the couple to get married. However, some things are dependent on the venue, and the guests' responses to the invitations. And the venue is, at least in part dependent on the date.

Obviously, nothing should be left to the last minute, but some items, such as planning the menu, take much less time than others, such as shopping for a wedding dress. Other items, such as recommending a hotel for out-of-town guests, are not critical, but are a nice gesture.

Given the importance of questions concerning date, venue, and expense, it is logical to hire a project manager, albeit one who calls himself or herself a wedding planner.

Interview Questions for the Wedding Planner (Project Manager)

Describe your experience in planning weddings.

How much time should we allocate to things like shopping for and buying the wedding dress, the bride's and groom's mom's dresses, bridesmaids' dresses, etc.?

How closely do you work with the venue to make sure things go smoothly? And have you worked with this particular venue recently?

What about flowers? Who orders them? When?

What about the menu? How is the menu planned?

What do you do if the Best Man misplaces the rings? And how do you make sure he doesn't?

How do we handle DJ's, Bar Tenders, Wait Staff, or guests who may act in very inappropriate manner?

There will be a lot of phone calls, text messages, and emails. Most communications, except those regarding financial considerations, are likely to be informal. The planners and the bride, groom, and other sponsors are likely to be in close communications with each other and other stakeholders. And as the wedding day draws near, there are likely to be daily scrums, particularly between the bride, groom, and planner.

While project management will help weddings go smoothly, one or two issue, while potentially expensive, will not stop the event. The wedding will take place with or without all of the desired flowers, with a substitute DJ, without a key member of the band, even without a Best Man, Maid of Honor, Flower Girl, or Ring Bearer. The bride’s father may escort her down the aisle, but if he can't then someone else, generally a father figure, will. No one will notice if the venue can't get wild Chinook, Coho, or Sockeye salmon from the Pacific and is forced to use farm raised Atlantic salmon, Arctic Char, or another entree. And if the bride or groom stumbles while reciting her or his vows; that's because they are nervous, or excited, and human. Even if one or both of the rings are forgotten or lost, others can be substituted at the last minute.

But a key principle of Project Management is that we need to tell the sponsors and stakeholders what they need to know, not what they want to hear. The sponsors need to know what the wedding is likely to cost so they can budget for it.

The planners need to communicate and the sponsors need to understand dependencies and critical path. For example, they need to determine the guest list and probable guest count before they sign a contract for a venue. They and the venue need to understand that some people will not make it. Obviously, the couple need to decide on and buy rings in advance. The sponsors also need a realistic understanding of likely costs, time frames, and risk.

The obvious risks today, in early 2022, are associated with COVID-19. Some weddings originally scheduled for 2020 and 2021 have been postponed. Those that have taken place have had fewer guests. One trend has been for large parties to be replaced with intimate family events of bride, groom, parents, siblings, and an officiant, with a larger celebration to follow in 2022 or 2023.  A subsequent trend may be an increase in “destination weddings,” where the couple, immediate family, and close friends go to a beautiful exotic destination.

Weddings, like home renovations and other events in our personal lives, are time bound, have a budget, sponsors, stakeholders, and, most importantly, are temporary endeavors undertaken to create a unique product, service, or result. They meet PMI's definition of projects. Given the financial considerations and their importance in our lives, it makes sense to use the tools, techniques, and disciplines of modern project management, and leverage the expertise of professional project managers, i.e., wedding planners, to ensure that they run smoothly.

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Chapter member Larry Furman, MBA, PMP, continues his exploration of Project Management. With this article he looks closely at how the use of insights and discipline of project management can help plan weddings and other events in our personal lives. While he was the major sponsor, he was only tangentially involved in the planning of his daughter's recent wedding; that was left in the capable hands of the couple and their wedding planner. He can be reached at “Larry@FurmanGroup.net”.

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The PMINJ Corporate Outreach Team formed the Corporate Advisory Board (CAB) last year to provide an industry-focused perspective on PMINJs goals, programs and other services. The CAB currently consists of six members, representing NJ-based health care, financial service, construction material and utility companies. CAB meetings focus on topics outlined in the PMINJ Strategic Plan, soliciting industry recommendations on how to achieve chapter goals while preparing project managers to meet related industry challenges.

In 2021, the CAB focused primarily on Diversity, Equity, and Inclusion (DEI) initiatives, a top chapter goal. Meeting agendas included review of planned chapter initiatives and collected input and recommendations from CAB member companies. In particular, there was a discussion of metrics companies are using to assess program effectiveness. Chapter leadership learned that DEI metrics are a significant industry challenge, but that such metrics can be developed and must be directly tied to specific goals. Metrics must be periodically re-assessed to confirm they are accurate and are measure progress to achieving organizational goals. This topic will be revisited throughout 2022, providing status updates on measures the chapter has implemented.

The first CAB meeting of 2022 was held on January 25, focusing on development opportunities for young professionals. The discussion started with a review of current chapter programs, including monthly meetings, PMP prep classes, the Symposium and other programs. CAB members provided constructive feedback on these programs, including some current and past practices within their organizations. The outreach team took away two topics for further evaluation – virtual Lunch & Learns and expanded mentoring programs.

For the next CAB meeting the team is exploring the opportunity to hold an in-person meeting co-located with a future chapter event.

The Corporate Outreach Team is actively seeking additional CAB members. Nominees should be senior-level leaders in their organization with responsibilities that include project management, such as ownership of a Project Management Office, or lead a function where project management plays a significant role, such as New Product Development or IT. CAB members are not required to be PMI or PMINJ members. Please submit the name of senior leaders you feel may be a good fit by sending an email to CorporateAdvBoard-PM@pminj.org .

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