The document discusses the pros and cons of in-house versus outsourced project management. It provides discussion points on pros like security, familiarity with company procedures, and commitment for in-house management, while outsourced management allows access to world-class capabilities and reduces operating costs. Cons of in-house management include limited experience and fluctuating workloads, while outsourced risks sensitive information and lack of investment in human resources. Testimonials from companies discuss benefits of both approaches when communication and collaboration are strong.

1. In-House vs. Outsource SPECS 2011 PROJECT MANAGEMENT ALTERNATIVES

2. SESSION GOALS RAISE AWARENESS DEFINE CHOICES STIMULATE CONVERSATION INFORM A CONCLUSION Our goal is to raise your level of awareness and encourage robust discussion regarding the PROS and CONS of In-House vs. Outsource Project Management. The end result is to allow for an informed conclusion relative to what best suits your business needs.

3. Discussion Points 1 2 3 4 5 PROS for In-House Project Management Security and Control – seems to be an ongoing challenge for companies as many do not want to take any risks whatsoever. If this is the case, the best remedy is to keep all services In-House. Familiarity with Company Procedures – benefit of being in close proximity to the decision makers and brand managers affords a better understanding of company culture, prototype desires and financial models for each design type. Foresight/Context – better visibility to upcoming sites and projects. Familiarity with overall portfolio and life cycle stage of each site. Program Evolution – ability to make necessary revisions quickly in order to support evolving corporate and program needs. Commitment – potential exists for Internal PM to possess a level of commitment derived from being a company employee with more “skin in the game.”

4. Discussion Points CONS for In-House Project Management Limited Experience – may not have experienced or qualified In-House employees readily available. Headcount/Costs – overhead for new hires can be costly while the overall project load may not warrant additional headcount. Fluctuating Workload Volume – departmental workload demands tend to vary extensively from year to year rendering it difficult to forecast & retain a baseline staff. Knowledge Stagnation – established Internal teams may become stagnant in regard to fresh thinking, creativity, and new design technologies. 1 2 3 4

5. Discussion Points PROS for Outsource Project Management Geographic Location – outsource providers may be situated closer to a project than if they were located at Corporate Headquarters. Freedom to “move about the country” as needed. Gain Access to World-Class Capabilities – using specialists in their given fields who are particularly efficient and productive serves to maintain certain key aspects of a businesses’ developmental plan. Improve Company Focus – frees businesses to focus on broader corporate aspects including strategizing and concentrating on internal functions. Limited Resources – insufficient internal resources available to complete the volume of work that needs to be accomplished. 1 2 3 4 5 Reduce and Control Operating Costs – greater flexibility to increase or decrease services based upon fluctuating project load. Eliminates hiring, training and overhead costs relative to a new hire employee.

6. Discussion Points CONS for Outsource Project Management Sensitive Information – the risk of compromising sensitive company information can be high, depending on the nature of project. Human Resources – since the outsource provider is not an employee and without an investment from the human resource perspective, it may be easier to walk away. Training – should the outsource model be exclusively utilized, a suitable, experienced internal team may never be developed. Costs – excessive capital may quickly erode if there is any type of misunderstanding or poor management at the start of the project. 1 2 3 4 5 Internal Resource Management – commitment first to the available internal resource, even if external resources are regularly used. Senior Management must have buy-in to the outsource business model.

7. Outsource PM Considerations

8. Financial Comparison

9. “ The biggest advantage of the In-House PM Model is the daily and consistent Brand exposure that the Internal PM team experiences by being a part of the Company. With this Brand knowledge, the PMs are able to make informed decisions on their projects that is in the Brand's best interest. Additionally, the communication and relationships that are developed from the daily interaction are extremely valuable in facilitating the projects. When questions or issues arise regarding design, real estate or operational issues, it is very easy for In-House PMs to meet face to face with the appropriate business partners. This frequency and style of interaction and partnership is typically not experienced in the outsourced model.” Jeff Michna Former Director of Construction Fossil

10. “ One of the most critical factors in evaluating the Outsourcing Project Management Model is understanding your program’s needs and how to best communicate them to the consultant. Successful programs treat the outsourced consultant as a trusted collaborative partner. The consultant is no different than an employee and requires the same level of trust, authority, responsibility, and communication.” “ The consultant must maintain the highest levels of integrity in supporting the best interests of the client. The client’s schedule, processes, budgets and standards are paramount. Interaction with all players involved in the process both within and outside the organization is equally as important and necessary for an outsourced consultant as it is for an in-house resource. The combination of all parts creates success for everyone involved.” Kevin Townson President The Townson Company

11. “ The Nike Factory Store Program currently utilizes the Outsource Project Management model which consists of (5) companies. Each Principal of these companies manages their respective Nike projects from inception through store opening. We have been fortunate to enjoy the highest quality of team players with a broad and varied range of industry knowledge and service. Their responsibilities are extensive: from initial scope development site visits, leading the communications with Nike Operations, informing and managing the design process, to daily management of construction and the eventual turnover process.” We have several workshops and collaborative training sessions throughout the year for the Outsource Project Management Team. This has resulted in an effort on each individuals part to collaborate together as one unified team to find solutions, all the while keeping Nike’s best interest in the forefront. This Outsource Project Management model is scalable based upon fluctuating work loads. Certain benefits can be attained within the cost models of internal head count related to employee benefit packages." Ken Kosinski Program Manager Nike Factory Stores