Business GrowthProcurement Sourcing

Project management – from drain to gain

By 30th March 2015 No Comments
Project Management

We often help businesses with their project management and project governance. As professionals in project management, reviewing the approach adopted to achieving goals (no project plans, no risk management, no issues log, no clear objectives) presents challenges. The key challenge is to help the business retain its enthusiasm for the project while adopting more robust project management approaches to achieving their goals.

In the recent past, we concluded an extended piece of work advising a start-up. Many of the people involved in what was in essence a large project (which is what every start-up is) did not have a background in project management. Many things went well but there is no doubt that things could have gone better for them if the organisation had a better approach to project management, project governance, communications and evidence-based risk management.

I have been reflecting on this experience since because I think project management can be misunderstood and therefore not really appreciated by a large range of people. Projects represent both an opportunity and a threat to businesses but the latter does not always get as much attention as it should.

Businesses often find project management a difficult, frustrating process. It is particularly difficult for smaller companies as they represent a strategic investment of time and effort but do not always get the attention and focus that this warrants.

  • Competent project managers can fail because they add little value or intellectual drive beyond pushing others to complete tasks. It is joyless, artless but efficient. It can deliver results but may not deliver what is actually wanted.
  • Great project managers can fail because of a lack of sponsor engagement. Often this can be down to the sponsor not fully understanding the project requirements or not wanting the project done at all.
  • Another common reason for projects failing is where they are added to a persons workload rather than treated with the importance they deserve in their own right. A good manager will know when there is capacity for minor tactical projects to be undertaken by somebody in a company with a bit of capacity. When projects are not thought of in strategic terms, they can be started and then dropped when things become busy because of this. If it is an add on to a persons job rather than their actual job, time and money get wasted.


Making projects strategic

In a business with a net margin of 5%, €20 of sales need to be generated to make €1 in profit. If a staff member costing €40,000 per year (all taxes, charges and allocations included) spends 25% of their time (equivalent to three months full-time engagement) on a project for the business, that €10,000 investment requires €200,000 in sales to cover the investment without eating into net profits (assuming all other things remain the same). This is before the benefits the project are meant to deliver are taken into account. This is how Toyota and General Electric think about project management. Every business, regardless of their size, should think about projects this way.

The mathematics of this are fairly straightforward, as the example above illustrates. Projects that lose their way do not get the same attention as a project where an outside contractor is engaged because sunk costs lost in payroll are not looked upon the same way as a hard bill from a contractor hitting the payables ledger.

The answer to this is to treat projects like the investments they are. A simple business case should always be done in advance of a project being undertaken in a business – if it is not worth this effort then it is not worth starting. The higher the associated cost, the more sophisticated the business case should be. Many unnecessary, cost generating projects are started every day for no strategically important reason.

If business owners and managers have a slate of projects that they want to undertake at the start of each year or quarter, they should think about each project in hard terms.

  • Will it generate revenue? If so, how?
  • Will it cut costs? If so, in what way and by when?

If it passes neither of these tests, it probably needs to pass a very high tertiary standard to be undertaken. Typically, a project that does not have a revenue or cost focus relates to things like customer sentiment or employee surveys in large companies. In smaller businesses, these can be integrated into the rhythm of the business more readily.


A rule of thumb

If a business owner or manager cannot see how a project will enhance revenue or reduce overheads, then it will likely increase cost without increasing the net value of the business. There are exceptions to every rule but smaller businesses need to ensure the vast majority of their investment in projects delivers increased sales and/or reduced costs. Projects should drive forward the overarching commercial strategy of the business.

This might sound obvious, but after years working on projects with organisations of all sizes, we are constantly surprised at the number of businesses that fail to do even the most basic level of due diligence before they start projects. The subsequent absence of strong project governance over the initiatives they undertake (which can lead to the projects being abandoned) can become inevitable if they are working informally and without a clear plan and business case.

In a future posting, I will visit the benefits of rigorously committing to post-project reviews – and what you can learn from undertaking post-project reviews.

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