If You Want To Lose Profits Don’t    Follow An Established Project     Management Methodology                             ...
service company that contracts to do                  Why is it necessary for an organizationwork for its clients on engag...
Frustration builds on both sides when the                                                        direction of a project is...
assigned the job to develop a budget.                   chosen not to fund certain projectsWhen this happens that budget c...
effort equates to time and money—taken                  failure. Conversely, correctly followingdirectly from profits. Add...
same cannot be said by those who do not                 as the Chief Projects Officer. In thishave a methodology in place....
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If You Want To Earn More Profits Follow An Established Project Management Methodology

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If You Want To Earn More Profits Follow An Established Project Management Methodology

  1. 1. If You Want To Lose Profits Don’t Follow An Established Project Management Methodology Ed Kozak thought about extending your line ofAbout 5 years ago I had a offerings and providing other value- added services?” “Sure, I think aboutconversation with the head of a companywho bragged about how profitable the that all the time but for right now we’recompany was and that if he had done going to concentrate on what we’reeverything that was necessary in order to currently doing.” Three years after thatfollow a project management conversation the company was out ofmethodology he’d certainly be less business. Competition did enter theprofitable. To him, project management marketplace and they were no longer thewas an overhead tax he simply wasn’t only solutions provider. Their mainwilling to pay. “How much of your time competitor arose not from an industrygoes into fixing errors and rework?” I clone but rather from the very sameasked. “It doesn’t matter because we company who had been previouslyfactor that cost and time into our price recommending this company to itsand schedule and the client pays for it.” clients as part of an overall value-addedwas his response. Our conversation service. They had received enough griefcontinued. “How close do your projects from their clients over the company’scome to finishing on budget?” “I don’t take-it-or-leave-it attitude andknow but that doesn’t matter, either. All unwillingness to be a team player.I know is that we’re making moneyevery time we have an engagement— Poor customer service notwithstanding,lots of money.” “Haven’t you ever a project management methodology—missed a deadline?” “Sure, we miss something that is enforced from the topdeadlines all the time, but that schedule down and is used consistentlywe give our clients and the third-parties throughout the organization—certainlythat need that data is only an estimate. will have some upfront costs associatedOurs isn’t an exact science. Besides, with it. When used correctly, however,what can our clients do? Our company it can save an organization tens ofis unique; we’re the only ones around thousands to hundreds of thousands ofwho provide our service and they need dollars a year. Every productus. If they get angry it isn’t going to development company should choose tomatter because we’re not the type of implement project management—company that does repeat business. imagine the profits associated withOnce we’re done we don’t ever do work getting products out to market in lessfor that company again.” “So, you never time and with less rework. Every
  2. 2. service company that contracts to do Why is it necessary for an organizationwork for its clients on engagements of to have a consistent, repeatable projectone month or more should implement management process in place? Whatproject management—imagine hitting could be gained? First, any projectbudget, schedule, and quality goals and would be better defined. Planningthe client trust it builds, not to mention begins with a description of the businessthe long-term relationships and need (for internal projects). Thatrecommendations that follow suit. business need is transferred into aEvery hospital, bank, or other entity that detailed description of what the endrolls out internal software, hardware, or result of the project should be, how itother implementations should implement should look, and how it should operateproject management—imagine meeting (the minimum and maximum criteria foryour end-user requirements the first time acceptance) as well as a description ofwithout having to perform rework or re- what all of the deliverables must be. Alladdress design and/or functionality of these then are used to generate theelements. This is especially important in statement of work (SOW). A vaguethose places where contract project SOW can result in a project team thatmanagers are hired. Time and time wastes time and the organization’sagain in organizations where this is the money while they try to figure out whatcase it is typically someone in the they’re supposed to do. Oftentimes,company with insufficient project once they’ve decided what they’re goingmanagement knowledge—not the to do it won’t meet what the clientproject manager and not with any input wanted anyway. (I’m using the termfrom the project manager—who has “client” here to denote the end-user.created the schedule and budget. Generally speaking, the client can beUnfortunately, often it is that same someone within your organization, anperson (or panel) who has also internal client, or someone from outsidedetermined what the end product should your organization, an external client.)be without getting complete input from On other occasions, the project teamrepresentatives of all the end users. To might have a very good idea of whatsay that this may hamstring the project they’re going to perform but the clientmanager is an understatement. What it has other expectations. Anothertypically means is that the project is symptom of a vague SOW is the fact thatprobably doomed for failure before it’s it leaves the work to be done open toeven launched. Would a contract project interpretation by the client. This createsmanager who will be moving on to a a very unhappy client and unnecessarynew project at a different company once friction on the project whenhis contract is through with you be interpretations finally clash. When thewilling to jeopardize a handsome salary client is external, it can create biggerto tell you that? You can decide for problems when the project is deliveredyourself. and when final payment is due. Had both sides only possessed a formal document that outlined specifically whatOrganizational Benefits it was they were going to do that was signed off on by all of the people who needed the finished product.Establishing a Consistent Project Management Methodology – Why it Isn’t a Waste of Overhead 2Dollars© Successful Projects For Leaders. No portion of this document may be copied or distributed withoutthe expressed written consent of the author.
  3. 3. Frustration builds on both sides when the direction of a project is repeatedly changed. Memories are also short. When the budget has been used up and there is little or nothing to show for it,Control Your Project Scope someone at the client side may try to put the blame on you. Despite having goodA project management methodology also documentation, an unhappy client is alets the project manager maintain better vocal client and the negative word-of-project control. One way of ensuring mouth that can arise from such athis is to mandate that Board be situation can hurt your company. Aestablished to govern whether or not Change Control Board puts somecertain changes should be made to the hurdles in place to curtail such things. Aproject after it has started. Change Change Control Board should be acontrol, conducted by way of this requirement when the customer isChange Review Board, will help the internal to the company; a formal policyproject manager to manage scope and to manage changes preventsminimize something known as “scope Management from changing thecreep”, the unauthorized growth in direction of the project haphazardly.project scope that occurs whencustomers make small, seeminglyinsignificant requests for additional Plan Your Cost and Schedulework. It usually starts out with Estimates Correctlyseemingly harmless questions such as“As long as you’re doing that can’t you A project management methodologyjust add this one little thing?” greatly improves the schedule and costUnfortunately, one person on the team management of a project. This beginsmight get a dozen or so of these “small” with the generation of the Workrequests. Multiply that times five or ten Breakdown Structure (WBS). The WBSpeople on a team and they add up. Since is the backbone of any project since allnone of these extras were ever other aspects of project planning areconsidered to be part of the scope the derived from the WBS—identification ofcost of performing that work was never the critical path, the project schedule,estimated as part of the budget and resource loading, the project budget, andunless the team works extra hours off the risk identification. If someone has cutclock this extra work will overrun the corners and hasn’t fully developed thebudget and perhaps slip the schedule. WBS then the schedule and budgetChange control extends beyond scope estimate will be wrong, resourcecreep, however. Clients may decide to conflicts can occur, and there will bestart a project in one direction and insufficient data to identify and plan forchange their minds once the project has all of the things that could possibly gostarted. While it is true that it is the wrong on a project. Each of these willclient’s money and the client should be eat away at an organization’s profit.able to spend it as he or she sees fit, we Regarding the budget, this can behave an obligation to our clients not to exacerbated when someone with littlelet them haphazardly spend their money. experience estimating project budgets isEstablishing a Consistent Project Management Methodology – Why it Isn’t a Waste of Overhead 3Dollars© Successful Projects For Leaders. No portion of this document may be copied or distributed withoutthe expressed written consent of the author.
  4. 4. assigned the job to develop a budget. chosen not to fund certain projectsWhen this happens that budget can be because their respective ROIs would beoff by 100%. A formal project too low. Others might have seen theirmanagement process covers project proposals actually be moreestimating. competitively-priced or might haveControl Your Expenditures and chosen not to take on that certainSchedule contract, lest they lose money as a result. If cost and schedule were monitored as aSchedule and cost management doesn’t project management methodologyend at developing initial schedule and/or dictates costs could have been kept incost estimates. It continues throughout check and not allowed to skyrocket.the project and includes monitoring cost Projects could have finished on budgetexpenditures and schedule progress on a instead of 1 ½ or 2 times over budget.regular—usually monthly—basis and Organizations shouldn’t take a fatalisticschedule and cost control. Any schedule view of such budget variances. Thesevariances or variances between aren’t a natural “danger” of project workestimated and actual expenditures that and shouldn’t become the de factohave been identified through the standard at an organization.monitoring process should be corrected.Planning and execution of that correctiveaction is what is formally known as Minimize or Possibly Stop Reworkschedule and cost control. Formalproject management methodology Do your projects have qualityincludes the most objective and management plans? If your teams werecomplete way to track schedule progress following a corporate-wide projectand cost expenditures and offers a management methodology they would.number of formulas which a project Some organizations feel that qualitymanager can use to determine how much management is another drain on profitscorrective action to take as well as and would rather wait until a problemwhether the project is staying within arises, thereby warranting a fix. Notcontrol limits or trending out of control. having a quality management plan in place means more rework or unidentifiedMany projects that end up not meeting defects. How much must the project betheir deadlines and/or budgets weren’t delayed in order to go back to the sourceplanned properly or weren’t monitored of the defects in order to rework thingsproperly. The majority of those that or worse, how much time must be spentweren’t planned properly don’t simply trying to figure out where in thebecause there wasn’t any Corporate- development schedule the defects werewide methodology requirement that the entered once they finally do arise? Theproject managers must follow. The cost more rework is needed, the less likelyimplications here, not the costs the project will meet schedule deadlinesassociated with implementing a and cost estimates. How far back intomethodology, but rather, the costs of not the development process must the teamimplementing one, should not be go in order to correct the defects and re-overlooked. If estimates had been more perform all of the subsequentaccurate, some organizations might have downstream tasks? All of that wastedEstablishing a Consistent Project Management Methodology – Why it Isn’t a Waste of Overhead 4Dollars© Successful Projects For Leaders. No portion of this document may be copied or distributed withoutthe expressed written consent of the author.
  5. 5. effort equates to time and money—taken failure. Conversely, correctly followingdirectly from profits. Additional costs a project management methodologycan also stem from delayed or missed ensures that risk management planningwindows of opportunity, not only from is conducted on your project, turningthis project but from any other project threats and risks into manageablethat might be held up due to schedule possibilities and you’ll avoidand resource conflicts. A project unnecessary costs and schedule delays.management methodology would require Your project teams will be able to staythat quality is planned into the focused on critical path activities.development instead of relying simplyon inspection after the fact. That simple Other things that following a projectproject overhead cost can save management methodology improves ispotentially twice the original budget People Management to help you createestimate of the project and can shave a great teams and improve performance,significant amount of time off project Communications Management toschedule estimates that factor in time for properly manage client expectations andrework. meet their needs (and to minimize the rework costs incurred by not giving them what they wanted the first time), andBe Proactive About Uncertainty – Contract Management, to ensure thatCapitalize on Potential Opportunities you’re not accepting greater risk that youand Minimize Potential Threats should.How much effort do your project teamsdevote trying to anticipate projectproblems before the project starts? If The project management methodology is intertwined with the project lifecycle.potential problems are identified in a That is, as the project is beingcomprehensive manner then the team developed, aspects of the management ofcan also plan out ways to deal with those the project are being planned. As theproblems in advance in the advent they project is being executed, the projectdo arise. Along with risk identification management methodology ensures thatand risk response strategy development, all aspects of project execution are beingrisk management also includes risk monitored. Finally, as the project closes,analysis and risk monitoring and control. the project management methodologyTogether these represent a systematic ensures that lessons learned areprocess for identifying and dealing with documented and all other projectthose factors that some might call information is stored in its rightful place“gremlins” or “Murphy’s Law” to to serve as a resource for future projects.minimize or even eliminate their Although the oversight of projectimpacts. If projects at your organization management certainly requires someseem to be plagued by one problem after financial investment, the returns on thatanother chances are that risk investment from primary and secondarymanagement planning was ignored or project benefits will always mean thatnot given enough attention. Failure to the investment is a positive one. Theplan for risks leads to schedule slippage,cost escalation, and potentially projectEstablishing a Consistent Project Management Methodology – Why it Isn’t a Waste of Overhead 5Dollars© Successful Projects For Leaders. No portion of this document may be copied or distributed withoutthe expressed written consent of the author.
  6. 6. same cannot be said by those who do not as the Chief Projects Officer. In thishave a methodology in place. role, Successful Projects For Leaders only develops standards and practices directed at the effective execution of projects and the attainment of schedule, cost, scope, and quality objectives, butAbout the Author also communicates enterprise-level objectives to the respective projectEd Kozak, M.S., M.B.A., PMP is the groups in the most-appropriate way forPresident and CEO of Successful them to follow and communicatesProjects For Leaders, international project information to Management.experts in project management process This overcomes the problem common toimprovement. The staff of Successful many organizations that no connectionProjects For Leaders work with between Operations and project groupscompanies along three main points of exists and no structured, consistent, andfocus. First, they help companies meaningful flow of information betweenimprove their profitability by cutting these two groups occurs, allowingwasteful project costs (upwards to 50% Management to determine if efforts areor more) and improve their overall efficient and effective, if projects aremanagement of projects in order to still the best ones to support strategicreduce risk, schedule slippage, and objectives, whether there areunnecessary spending on product performance issues associated withrework. As a result their clients are able meeting objectives.to exert more control over their projects;improve target schedule performance; Ed is an accomplished professional withmonitor and control cost performance has over twenty-three years experiencebetter; increase their success at hitting as a consultant, manager, executive,budget estimates; improve quality and facilitator, and instructor that includessatisfaction; and recognize the project/program manager experience insubstantial financial benefits that come the private and Government sectorsalong with that. managing multi-year, multi-million dollar programs for his clients in fieldsSecond, Successful Projects For Leaders such as IT, healthcare, research,is hired as project turnaround experts development, and manufacturing. Heand is brought in on critical projects that brings his expertise to managementare in the midst of schedule, budget, teams in strategic planning, process re-and/or quality issues or projects that are engineering, program managementhaving continual setbacks. They analyze offices, and project management and is athe problems, set a new budget and frequent conference speaker.schedule, and work with the incumbentproject management team to bring themto completion.A third benefit that Successful ProjectsFor Leaders offers is their availability tobe out-sourced by Organizations to serveEstablishing a Consistent Project Management Methodology – Why it Isn’t a Waste of Overhead 6Dollars© Successful Projects For Leaders. No portion of this document may be copied or distributed withoutthe expressed written consent of the author.

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