Wednesday, July 27, 2011

The PM's Role in Project Profitability - Part 1

Who has overall responsibility for the profitability of a project? Sales? The VP of Marketing? The CEO? The project manager? The project team? Sales is responsible for making a deal on the project that is targeted to make money for the company. The VP of Marketing is responsible for staffing sales and account managers and business development to go out and find new sales opportunities and to create new business for the organization. The CEO has overall responsibility for the organization and it’s profitability. If it flounders for an extended period of time, it will be the CEO who resigns. But in terms of overall responsibility for the budget and profitability of the project….that’s the project manager.

So we’ve established that it’s the PM’s role to maintain the project budget and guard the overall profitability of the engagement. How does that happen? What can the project manager do to ensure project profitability? What actions can he take to help guide the project to an on budget delivery that means it met its financial goals and ultimately ended on a profitable note?

Meticulously manage scope

Most any project manager would tell you that a project’s financial health begins and ends with scope management. And the project manager who performs scope management the best wins…period. Much is said about scope creep, requirements definition and documentation, and ongoing management of new work on the project. But unless that line in the sand is drawn and the project manager adheres to it and gets his team to adhere to it, profits will be lost, unplanned work will happen to make a customer happy, and the project will mysteriously pull into the finish line 20% over budget.

It’s easy when our very skilled developers are working closely with subject matter experts on the customer side for them to incorporate ‘nice-to-haves’ that come up during meetings. The problem is, these ‘nice-to-haves’ aren’t actually part of the documented project requirements that the end solution is being built against. It is the project manager’s responsibility to educate his project team about the dangers of such activity. Five extra hours here, ten extra hours there, more testing time and suddenly you find the project several thousand dollars off the mark budget wise.

Only perform work that is documented by requirements and ensure that all other requested work is turned into change orders that are priced for the customer to review and decide whether or not to pay for. Change orders make the project more profitable by allowing the delivery organization to get paid for that work and they make the customer happy by getting work that they want added on actually documented, completed, tested, and part of the final solution.

Frequent and purposeful revision of the project schedule

If the project gets out of hand, profitability will likely go with it. Many project managers in matrix environments are managing several projects at once. With so much going on, it’s very easy to lose track of what tasks are happening when – also making it very difficult to keep the project team in check and hold them accountable to their project tasks that they are responsible for.

It’s definitely not enough to put the project schedule together and leave it alone. On some projects, PMs start with a detailed schedule produced from project management software and then they put it on a shelf. That can’t happen - it must be a living, breathing part of the project and it – along with the weekly status report – should drive the weekly formal project status meeting with the customer. A regularly distributed, up-to-date project schedule lets each team member know what tasks they should be working on and keeps the team focused on the work that should be happening. Meaning your time, effort and dollars are being spent on the important work – and helping to keep the project profitable.

In Part 2 of this two-part series, we’ll examine three more ways the project manager can help keep the project on track and profitable throughout it’s lifecycle.

Brought to you by

No comments: