Ideally your project moves out of Sales and into the actual engagement stage with expectations properly set and a solid timeline and budget in place. Ideally… But we all know that there can be bumps in the road and incorrectly documented or relayed expectations, requirements, etc.
Customer requirements and expectations may not be on par with the actual derived budget and that potentially major issue may rear it’s ugly head early on or it could even come up very late in the project causing major issues, work stoppages or project cancellation. It’s our job to avoid those events at all costs, but sometimes they do happen – and we have to react.
Delivery Team Funding Issues
There are several issues that can cause delivery team funding to hit the wall. Here are some examples:
- Development bug that takes longer than anticipated to complete
- Need to put more resources on a project to complete critical tasks
- Need to put higher priced resources on a project to work through issues
- Data handling and/or loading taking longer than planned
- Underestimated or misunderstood customer requirements
The key difference between delivery team funding issues and customer team funding issues is that they really have to just be worked through. What delivery organization – in their right mind – is going to just throw up their hands in the middle of an implementation and say, “we’re done…we’re not going to throw any more money at it?” I realize it’s happened…I’ve even experienced it myself, but it’s much rarer than the customer giving up and not deciding to spend any more on a project.
In reality, the delivery organization is more likely to eat the budget overrun in hopes of completing a successful implementation and retaining an important customer. Ultimately the amount of the budget overrun will play a role in the decision, but if the budget is being tracked along the way as it should be, then the delivery team has likely been strategizing for some time to lessen the overall financial drain while still working to keep the project going and the customer at least somewhat satisfied.
Customer Team Funding Issues
The more critical issue is when the funding problem is on the customer side. This can present itself in two forms:
- Project budget overruns have taken their toll on the customer funding and the delivery organization is not willing to eat more overage – meaning it’s now the customer’s problem
- Internal issues at the customer organization are affecting their ability to fund remaining portions of the project as originally planned
When the issue is customer funding, and if it’s big enough, the project is likely to be cancelled. However, if it’s only a few thousand dollars, then it may survive. Negotiations will start between the delivery organization and the customer organization and a deal may be worked out to spread the financial responsibility across both or the delivery organization may take the full load in order to keep the project going. But if the budget issue is large enough, then there is likely no other course the customer will take than to cancel the project.
Project Restart?
The outside possibility may remain that the customer will restart the project when funding increases or returns. If that is an option – and it very well may be (at least the delivery organization is likely to retain that hope for quite awhile), then the deliver organization is faced with a new dilemma…how to keep the project team relatively intact if the project may resume soon.
If there is a possibility that the project will resume, then discussions must happen quickly with the customer to determine what time frame within which that might occur. If a restart is a possibility, then it may be possible to make strategic assignments to other projects for the key project personnel can be made in order to keep them somewhat available if the project resumes.
Summary
Budget issues may be the single biggest problem that can occur on a project. If you’re out of money, you’re out of money. Throwing more resources at it won’t help – it will only make this particular problem even bigger. And either way, the project is still dead, and one or both organizations are embarrassed, experienced major failure and may have personnel issues to now deal with.
The best that can happen is to learn key lessons from whatever issues caused the budget issues. If it’s a poorly run project, then retraining or termination of certain personnel may be necessary. If it’s poor planning or a sales issue, then measures need to be taken to not repeat the same issues again. If it’s a delivery organization budget issue, it’s critical that the causes are reviewed, documented and understood so that history does not repeat itself.
I realize that most project engagements have the funding for the effort locked in from the moment the paperwork is signed and planning starts to get underway. It’s part of your project client’s budget for that year or however many years the project is planned to stretch through. And if it’s an internal project, the same is usually true – lots of planning and budget forecasting has already happened and the money is there to kickoff and execute the project.
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.
Project issues, challenges, mistakes…they happen. It’s a way of life. No project in the history of projects has ever gone perfectly throughout the engagement without bumps and issues along the way. As project managers, most of us are learning along the way – I know I am and I have about 25 years of experience managing projects. One thing I have learned is this…there are a few key things we must make sure that we – as project leaders – avoid repeating on our projects time and time again as they only lead to difficulty, confusion, customer frustration, and sometimes project meltdown. The list can be longer – much longer – but I’ve narrowed it down to these four key items:
We should want to take the time to analyze, assess, plan for and manage risk on the projects that we lead. The bottom line is…most of us really don’t. Or at least our customer’s don’t see the need to spend the time or our senior management, doesn’t…or we are just swamped and pushed to get the project running.
Timeliness. If there was one word to define project management with, that might be it. We have timelines, delivery deadlines, meetings, etc. Everything happens according to a schedule. There isn’t that much creative about it. There is, but it still involves a schedule and a timeline.
The key to an easier project management process…work smarter, not harder. It’s painful when we watch people around us making life or work harder than it needs to be just because they’re not using the processes or tools or help that is there before them. We see this in life, we see this all around us in the world, and we see it in work, too. Hopefully we don’t see it too much in ourselves, but I’m sure it happens.
Ever had that feeling of panic where you know you’re busy, you know there are things you should be doing, but you’re not sure what and in what order? Maybe you are so busy that you aren’t budgeting your money well. Or you have so many clients or potential clients that you’re missing scheduled calls or needing to postpone meetings at the last minute.