How To Make Projects Profitable

Project managers are always under pressure to improve, as clients demand more for less, employers look to improve margins and competition remains fierce. Yet many still operate well below peak performance


Research by Forrester and Deltek reveals a quarter of project-based firms fail to push average billable employee utilisation over 50 per cent. Only one firm in three achieves employee utilisation higher than 70 per cent.*

This failure is painful. The survey shows capacity management is the single biggest issue for project-based firms. So how can project managers improve?

VISIBILITY IN DELIVERY

 It starts with getting a clear overview of what staff are doing. Managers need to know at any given moment who they can recruit to work on a project. In addition to availability, it is vital to have insight into the skills of every employee. For example, if a project requires frequent interaction with French clients, it will be necessary to know which workers speak French to a competent level.

Gathering this information is notoriously hard. For international companies there is an added difficulty as a silo mentality between branches is common.

Dysfunction occurs when suitable candidates are overlooked, leading to delays or to the expensive recruitment of freelancers and contractors.

A specialist solution, purpose built for the needs of a project-based business, can offer the necessary level of visibility. Managers gain the ability to create teams, review skillsets and allocate work.

Project managers need to stay alert as work progresses, keeping track of budget, scope, schedule and estimate to complete (ETC). For example, it may be necessary to issue a change request, reposition staff or reschedule projects. Old-fashioned tools, such as spreadsheets, e-mail and Gantt charts, are too unreliable to achieve the level of control required to optimise project margins. There are more comprehensive tools out there, which provide granularity throughout the delivery process, and visibility over all dimensions of people, projects and process.

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KEEP A COMMERCIAL FOCUS

 During the lifetime of a project, the manager needs to track under or overprovisioning of resources. If staff costs are too high, an investigation can be launched to see why, and actions agreed to mitigate before it is too late and a serious project margin issue occurs.

A potential loss-making venture can be turned around when alerts about ETC and scope overruns are delivered in real time. Under-resourced projects can be identified either as next week’s issue or a welcome opportunity to outperform the forecast margin.

Managers will find strong support from the finance department in this drive and it is a full team effort. After all, reliable revenue and income projections are only possible with regular updates from project teams. If a project is pulling in freelancers to cover scheduling clashes, this will impact on cash flow and margin. A good project management system will be able to supply performance updates to the finance departments to ensure there are no sudden shocks to margin in the short term or cash flow in the long term.

WINNING FROM THE OUTSET

 One of the biggest potential gains is at the contract bidding stage. Forrester and Deltek research reveals 61 per cent of firms experience a win rate of less than 50 per cent.* Every failed bid is painful in terms of morale, effort, time and cash. And, as experienced project managers know all too well, winning projects with overly optimistic financials is potentially an even bigger trauma.

The solution is to bid with a far deeper knowledge of your capabilities. This comes from conducting forensic studies of previous projects. Too many firms don’t do this and 58 per cent say lack of granular project history is a contributory factor to poor win rate.*

A specialist project management solution will consolidate historical project data to deliver foresight for future bids. It should record what resources were needed during the lifetime of each project, what skills were required, how headcount fluctuated and how the finances stacked up. Armed with this information, the bid team will have the knowledge to know which projects to go after and can prepare a proposal with a new level of accuracy. Gone is the gut-feel approach to resourcing, costing and scheduling. You can focus on only those projects which you have a realistic chance of winning and will deliver the margins you need to maintain a profitable business.

By working with Deltek to change working practices, engineering consultancy COWI raised profit margins from 1.7 per cent to 5.5 per cent in a fiercely competitive industry

THINK BIG

The latest aid in the search for elevated performance is big data. Algorithms sift through vast quantities of diverse information to throw up unexpected insights. Big data methods have the power to transform the ways projects are managed.

Transport for London (TfL) uses Deltek to scrutinise its project management with big data techniques. Neil Davidson of Deltek explains: “TfL uses our software to run scheduled analytics on their project plans. What used to take hours of analysis, checking the quality of a complex project schedule, can now be done in seconds. They tell us it’s cut their total time for this work by up to 95 per cent. Which means they can spend time pro-actively working on how to improve project management rather than doing the mundane tasks.”

The big data process goes even further. Deltek possesses anonymised data from hundreds of thousands of other projects. It can compare a client’s project to this library. Mr Davidson says: “Hundreds of our clients benchmark their projects using this technique and it gives them a quality score. Our software tells them the percentage likelihood that each project has of succeeding and then provides the actions they could take to improve the project’s chance of success.”

THE BOTTOM LINE

With the right technology, project managers can make a huge contribution to the bottom line. For example, engineering consultancy COWI runs more than 17,000 projects at any given moment. With more than 6,000 employees active on five continents, it is a world leader in its field. By working with Deltek to change working practices, COWI raised profit margins from 1.7 per cent to 5.5 per cent in a fiercely competitive industry for margins.

So yes, project managers need to improve. Fortunately, there is ample opportunity for them to up their game and manage projects to an optimal commercial and quality standard. All they need is the right partner and better access to the information they need to do their job.

For more information visit Deltek.co.uk

@Deltek_UK

@neildavidsonuk

 *Fragmented Processes Jeopardize Project Firm Buoyancy, Forrester Consulting, commissioned by Deltek September 2014