Profitability on the projects we manage is always in question. It seems like it’s a daily fight to keep costs in check, keep tasks on track, and keep profitability on the project in line with expectations. Often we are only looking at a 20-30% profit margin. On a $100,000 revenue project, that means $70,000 – $80,000 in costs are already expected. It’s easy to see how some poor scope management can leak that away in a matter of days leaving the project manager wondering how he ended up coming in with zero profit on a project that he thought went well.
Resource management always has to play a key role in project profitability. Why? Because our project resources are often the most expensive expenses on the project. These are highly skilled individuals and they are often being charged against the project at rates of $100, $150 or even $200 per hour. One can see that inaccurate time charges, wasted or unproductive resource time, and poor task oversight can quickly lead to a project going way out of control and over budget.
In order to keep the project budget on track, the resource time well-mapped out, and their efforts reined in, the project manager must follow three key processes as described below:
Onboard project team members only as needed. One key aspect of managing your project resources for the goal of maximum project profitability is the concept of only bringing resource on to the project as they are needed. Most resources in professional services organizations are required to charge their time somewhere. If you have idle resource assigned to your project you can be assured that some of their ‘down’ time is directly hitting your precious project budget.
When the project manager and business analyst are working closely with the customer team to finalize project requirements during the planning phase, there’s no need to have the technical lead already assigned to the project with little, if any, need for work. Plan out when resources will come on the project and look for ‘down’ times when they can be released for other work. That way you can both maximize their productivity on your project tasks and minimize needless charges to your project budget.
Manage tasks and assignments through PM software. It probably goes without saying that mapping out the project and resource assignments with project management software is critical to the project. But that information needs to go well beyond just the project manager’s eyes. The customer will want to see it as well, but if the project team also has constant insight into the overall project view and tasks as well as how and where their efforts fit in, they’ll have more ownership of those tasks. Keep them informed and focused on their tasks, give them revised schedules every week showing current assignments and task completion percentages, and hold them accountable to that information as part of your weekly status reporting and meetings. Team members who see where they fit into the overall plan and are consistently aware of your expectations of them will be more focused and more productive. And your project will be more profitable for it.
Use internal team meetings to stay on top of assigned tasks. Weekly internal project team meetings are necessary and are a good idea for two key reasons: 1) it’s a chance for the project manager to get the latest and greatest status information in preparation for a formal status meeting with the customer and 2) it’s an opportunity for status checks on tasks that have been assigned to the project team. Accountability is critical as most project team members are likely assigned to other concurrent projects in the organization. These internal discussions keep the team focused on your project’s priorities and help keep everyone productive. And productive team members who are being held to a high level of accountability for their efforts will help your project budget stay on track.
Summary / call for input
Profitability is something that is expected, but hard to control and maintain. Careful management of our valuable project team resources is one way to get there. What are your tips for managing the team to best protect project profitability? Please share your thoughts and discuss.