Project Managers have a tough job, effectively managing all the moving pieces of a project. They have to coordinate product and service delivery, schedule deliverables in the context of product and resource availability, manage changes, and consistently deliver projects on-time and on budget. They’re typically asked to do this across multiple concurrent projects and ideally, then asked to cycle implementation lessons learned back into the quoting process.
I get tired just thinking about it.
When you talk to project managers about their strategies to consistently hit their project margins, two key topics typically come up:
1) Successful Project Management actually start in the Quoting phase: Most experienced Project Managers will tell you that the success or failure of their projects actually starts in the quoting phase. Project Manages typically want to capture the detailed Bill of Materials and Labor estimate associated with each quote version’s deliverable, while Sales people often want to “roll-up” that detail into summary information to make it easier for the customer to make a decision and harder for the customer to cross shop your quotes.
The challenge is, those are two competing objectives, and as multiple quote versions go out (with summarized information) it’s not unusual for the corresponding Bill of Materials and Labor estimate to become un-synced from the quote version that the customer ultimately decides on.
This often results in the Project manager exasperated response when the Sale person hands them a new order, “where did these numbers come from?”
Solution: In order to consistently hit your project target margins, the information that the sales team presented to the customer, with hidden model numbers, a single bulk price, or items grouped together with user-defined headings, all needs to link directly back to the Bill of Materials and Labor estimate for that quote version. This relationship MUST be maintained through the quote versioning process, where the original BOM and labor estimate are maintained for each quote version. Subsequently, no matter which quote version the customer goes with, there will always be a clean handoff between Sales and Order Fulfillment, and your Project Managers will have a fighting chance at consistently hitting their project target margins. Otherwise, you’ll just keep having that same unpleasant conversation between your PM’s and the Sales team regarding what was sold to the customer and what is actually deliverable at that price point.
2) Real-time visibility into Project cost against budget performance: Many Project Managers don’t even find out what their actual project costs and margins are until after the project has closed. That’s because they’re currently managing different aspects of the project in different disconnected software tools. Quotes/Project estimates are created in Word or Excel, service scheduling is done in Outlook, Project Management in Excel or MS Project, Time sheets are done manually or with a 3rd party solution, and procurement happens in the accounting system. Subsequently, it’s too difficult and time-consuming to consistently pull all the project cost information together on a real-time basis, as the project is being delivered. With project information that disconnected, when a project is 25% complete, it’s almost impossible for a PM to know, are they are 19% or 29% of their corresponding labor and materials budget. This often leads to the scenario where the PM get’s to 95% of their budget, but still, has 15% or more of the work left to complete.
Solution: In order to give your Project Managers a fighting chance at hitting their Project target margins consistently, you have to give them three things:
a) Real-time visibility into the detailed cost against the budget performance of their project, so that they know they’re off track BEFORE they get close the Project ceiling budget (and it’s too late to do anything about it).
b) Specific detailed feedback regarding “where” an overage came from. Was it from Design, Cabling, or Training? Only knowing that there is an overage without knowing where the overage came from does not allow the PM to take specific corrective action.
c) The ability to easily cycle detailed implementation lessons learned back into the quoting process. If the originally quoted estimate was based on 20 Design hours, 150 implementation hours and 15 training hours, the PM should know the over or under for each estimated hours type. Otherwise, we’re back to the definition of insanity, with sales people continuing to quote based on impossible to deliver on criteria. AND, if the PM team can cycle this kind of accurate feedback back into the quoting process, this may also provide their salespeople with the opportunity to quote more aggressively at acceptable margins.
At the end of the day, project management is a tough job. Lots of moving parts that often change without much notice. But with a few supporting tools and some better information, at least your project managers will have a fighting chance to consistently hit their target project margins.
Download the Labor Utilization Quick Start Guide to help identify and close labor utilization leaks in your projects.
