Wednesday, August 10, 2011

The PM's Role in Project Profitability – Part 2

In Part 1 of this two-part series, we established what should be obvious to all experienced project personnel – that overall responsibility for the profitability of any project is ultimately the project manager’s. I also began to look at what I consider to be the key actionable steps that the project manager can take to help ensure project profitability. Part 1 covered the first two of my top five. Those first two actions were:

  • Meticulously manage scope
  • Frequent and purposeful revision of the project schedule

In this final segment, we’ll examine three more steps: careful management of project resources, involving the team in managing the budget, and reviewing the budget with management and the client. Let’s look at each of these in more detail.

Manage resources carefully

A good team of project resources may very well be your key to project success. Indeed, finding – and keeping engaged – the best and most relevant skill sets for the project solution at hand can mean the difference between a successful deployment and a project gone horribly wrong. But the project manager who can’t skillfully manage those talented and high-priced resources and keep them focused on the assigned tasks is destined to deliver a final solution that is neither profitable nor on time.

See, talented technical resources have egos. They know they can do this or they’re certain they can do that. And they are certain the can do it fast. When working with client project team members closely on key functionality of the project, they may be inclined to gold plate functionality or even add new functionality that “shouldn’t take much time” even though it’s not part of the agreed upon scope of the project. Those ‘small details’ add up and in the end you can find yourself giving away a pile of extra hours (dollars) of development time that you never counted on.

The key for the project manager is to use project management software and keep the project schedule in front of the team members, remind them weekly – daily if necessary – what key tasks they are to be focused on and remind them not to add functionality. Educate them in the change order process and make sure they come to you if the customer is asking for more than we’re supposed to provide. That’s called extra functionality and if you work it right, it’s also called project profitability.

Engage the team in budget management activities

The project manager who sits down regularly with the project resources to review the budget status and budget forecast is much more likely to keep the project budget on track than the project manager who does not make his team aware of the financial aspects of the engagement.

Project resources are required to account for their time and charge their time to the projects they are working on. That’s how your project gets hours charged to it. All project resources have ‘grey hours’. Those are the hours that they know they worked in a given week but can’t remember specifically what they did or which project they did it for. It’s often about 10% of their time, maybe more. If they overcharge hours to your project – meaning if they add their ‘grey hours’ to the engagement you’re managing – that can mean your project is getting 10% extra hours….and dollars….charged to it each week by each resource. Don’t be the project manager who is perceived as the one who doesn’t watch the project budget closely and you won’t be on the receiving end of those ‘grey hours.’

Review the budget with senior management and the client

Finally, regularly review the project budget with your senior management and with the client. This is helpful for two reasons:

  • Educating the allies. The onus is still on you as the project manager to deliver a profitable project. However, by educating your senior leadership and your client along the way in the health of the project budget you’ve now gained two allies interested in helping right the project budget should it start to go wrong. Both of these parties are stakeholders in the success of the project. Keeping them informed early and often means they’ll be aware along with you when the project budget starts to become unhealthy – and not just when it’s already too late to fix.
  • Forcing accountability. If you have educated the client and your senior management as to the status of the project then there’s really no undoing that. You’ve now forced accountability of yourself to them and there’s no turning back. This can be a good thing. Managing multiple projects isn’t that easy, but it’s usually a fact of life for most project managers. Keeping yourself accountable for key areas of the project - like the budget in this case - is helpful and will keep you focused and not inclined to cut corners.

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