Project Management in Practice

Beyond the alphabet soup of PRINCE2, MSP, MoP, PMBOK, ITIL, Agile

Category Archives: Monitoring

What can accounting and finance teach project and program management?


what-can-accounting-and-finance-teach-us-about-project-program-managementNearly two decades ago I took one accounting paper and did just enough studying to pass it. I was studying for an IT degree at the time and only did the paper as it was a compulsory one. Wheels have now turned enough for me to come back to doing an MBA and by coincidence, starting back with accounting as my first paper. Today though my attitude is different. I can see use of quite a few accounting principles in managing projects, programs and portfolios – be it the IT domain or any other.

What is a project?

Neither of the two main project management bodies have very similar definitions of project.

… a temporary organization that is created for the purpose of delivering one or more business products according to an agreed business case – PRINCE2

… temporary in that it has defined beginning and end in time, defined scope and resources … unique that it is not a routine operation – PMI

What is the shortcoming in both definitions? Both are approaching the project from the point of view of those that are charged to deliver the outputs. Project teams do not undertake projects because they think it is a good idea. Where is the customer in all of this? It can be argued that the mention of the business case in the PRINCE2 definition means it now represents what the customer gets out of it. None of these are as clear as the accounting definition of project

an investment that increases the wealth of the owners.

You can define the terms owner and wealth to what is appropriate in your context. But this definition is the most focused one that I have found anywhere. If anyone was unclear as to the outcome they should be delivering, this leaves no room for doubt.

Is this project/program worth investing in?

Business cases for projects contain all manner of justifications. Accounting and finance provide the mechanisms for relative comparison. Whether justification is based on additional cashflows, reduced expenditure, or increased efficiency accounting provides mechanisms to objectively compare them. Key strength of accounting is it takes into account the time value of money too. A dollar earned today is much more valuable than a dollar earned sometime in future. The concept of Net Present Value (NPV) provides a way to compare cashflows that are invaluable tools for such comparison. Accounting also has very clear formulas to calculate break even points given different amounts of fixed and variable costs. Many business cases fail to address these fundamentals. It should be mandatory for those involved in preparing and evaluating business cases to have understanding of these concepts.

How is it going?

Accounting is full of metrics. Whether you are measuring efficiency, turnover, income, cash conversion cycle (how long before you lay money out for raw materials to when you get paid for it), what a share or bond should be worth etc. The closest project management comes in a traditional sense is earned value management (EVM) and more recently the burn down charts in some of the agile practices. Some service management organizations are better at it. They do measure mean time to failure and restore among other operational metrics. Singular focus on analysis and improvement on these is something project management can learn from.

How do I report?

I have seen and prepared all manner of project reports. If I don’t see another Red Amber Green report, I don’t think my life will miss much. While these reports are useful in getting our eyes focus on likely areas of problems they are pretty useless in contextualizing what the problem is. This is where accounting leads just about any profession. Generally accepted accounting principles (GAAP) mandates interpretations of exactly how reporting is undertaken. I am somewhat generalizing to make a point about standardization of reporting.

Does that mean accounting and finance have it all over project management? Not quite. The two are totally different disciplines. You can equally play the accounting system as the likes of Enron, Fanny Mae and Freddy Mac would attest to. The key is to take the strengths of other professions and make ours even stronger. As I go through some other papers I feel there may be a few more posts coming titled what can ” ” teach …

What parallels with other professions can you see?

Image credit: lewisaccountingandtaxservice.com

Enhanced by Zemanta

Building PMO metrics


The Christmas and New Year is always a good time to take some time off the hurly burly of daily grind and reflect on how things are going. Towards the end of the year I did some work on what metrics would help us run our PMO more efficiently. Metrics are always difficult to establish, especially as they only tell a story once you have a baseline to measure against. This is probably a heavy topic for the first post of the year. Apologies for that.

Building-PMO-Metrics

While I see a pressing need for making decisions on evidence, I am also cautious against spurious interpretations of metrics, which can easily happen if taken out of context. You only have to look at statistics driven sports such as baseball or cricket where fans and officials will take diametrically opposing views of players or tactics using different statistics. Numbers are just that. What you interpret from them is what gives them meaning.

The first task was to explore what type of metrics would be useful for our business. I work for a IT professional services firm. It has unique challenges from other types of businesses. I did some research on what other similar organisations are doing. I found this compilation from OpenAir and excellent resource. There are three articles in this and the first one by Thomas Loh is by far the best. This was an excellent start. The key is not to go chasing every metric under the sun, but the ones that you need to measure. That is even more crucial when your PMO is lean and you are in the process of building its maturity. Capturing metrics and analysing them takes effort and time. You cannot afford to be spending either frivolously.

The standard metrics of utilisation, profitability, billing rate etc are quite easy to measure after the effect. We were looking at getting at least one forward looking metric that can help validate our decision making. We decided to invest in our effort in an area that is most challenging for a services business like ours – that is the pull between resource and demand.

Resource-vs-DemandIn services business you either have too much work or too many people. It is crucial to have a good handle of this to maximise profitability. The cycle of winning new business always takes time. If you have left your efforts to bring in new work too late, you will inevitably have periods of low revenue. Unlike products which you can sell at a later time and recoup some revenue, if not all, lost consulting time cannot be archived and sold. That is effectively lost.

To ensure an optimum work pipeline, we can use the charge rate to either stick to our margins, because work is plentiful or use discounting effectively to be more competitive than usual in tough market times. We want to be making a decision on them at the correct times (i.e., not stick to higher margins when market is tough or give away margins when not necessary). We are looking at using Backlog (total value of contracts yet to be executed) as a forward measurement for that.

The aim is to look at recording the backlog value three months out and updating the actuals at the end of the month. As we currently do not have a baseline, I do not expect us to be able to use this effectively in the next year. However, once we have built a picture, we should be able to predict with some confidence what it means to be at a certain point in our backlog and what that is likely to mean in terms of likely actual income.

Because we are looking at it three months out, we’re likely to have enough time to win new business to fill up the pipeline if it is looking less than promising. If pipeline is strong, we know we do not need to compromise on margins. There is likely a follow up on this topic this time next year on how this measurement plays out. Hopefully my challenge is not unique to me and the process is helpful for others to reflect on.

I am keen to understand what predictive measurements you have successfully implemented.

Image credit: communicationstuff.com

Enhanced by Zemanta

Have Project Management tools kept pace with time?


I have recently been looking at optimising the way we manage projects. One thing this has led me to think is whether some of the project management tools have kept pace with the way people work today. I am not looking to re-invent the wheel. Neither am I wanting to be lazy. I am after a way to effectively manage delivery by utilising all my resources to the best of their capability.

Projects have been undertaken since humans first realised they could organise themselves into a unit to achieve mighty things. Even before the discipline of project management was a recognised one, we managed to build the pyramids, the Great Wall and the Taj Mahal to name a few. Does that mean it is a profession that exists for no purpose? That is not true. Many of these projects were run by autocratic rulers who had no regard for human life. All three of the projects I mentioned cost the lives of thousands of workers. Fear for life was a successful motivator even as recently as a few decades ago in the communist Soviet Union.

As we have realised fear alone cannot achieve good outcomes, we have put in effort into devising methods to manage projects in a predictable manner. We have many methodologies – most of them very mature. But it seems applications have not matured to the same extent that methodologies have. It still amazes me how many organisations still manage projects by using Microsoft Excel. The next most widely used application I have seen is Microsoft Project. That however has seen no useful upgrade between the mid 1990s, when it first came out and 2010.

Microsoft has realised the folly of that approach and has been concentrating on their enterprise offering of Project Server. I have previously posted about using Project Server and utilising it to identify resource gaps. Having used it for a few years, I have come to the conclusion that it takes considerable effort to keep updated. Unless you have a PMO with enough resources to stay on it, it is nearly impossible to use effectively. Interestingly, LiquidPlanner has taken a different tack to managing projects by accommodating uncertainty through a high and low effort estimate. That is a very useful method if one is using it to manage product development. However, I was unable to find a way to use any sort of baseline that would allow me to track how the overall project is going compared to the original plan.

I have been trying to think what would make a project management tool stand out from the rest. I want to get away from managing in a hierarchical manner Project Managers have traditionally operated in. I want to ensure that the people working in projects I manage have the ability to raise risks and issues with a minimum of administration effort. I want to know the status of projects as close to real time as possible, but not have to chase up for updates continuously. That only serves to annoy technical people, and is a complete waste of my time.

This is the age of social media. People are used to collaborating in all aspects of their life. Being connected is not a bad thing. The project management discipline can benefit from this constant connectivity. If done well, it can provide early visibility of risks and issues, provide a platform to share ideas, sharing knowledge and lessons learned. Having a mobile presence is a must to achieve this. Some of the Agile product management tools have done well in this respect. Another complicated factor is the need to integrate the output from this with billing or ERP systems used by the organisation – in our case SAP Business One.

My search is yielding mixed success. I have been looking closely at two products – WorkFlowMax and AtTask. Both seem to fulfill most of what I am after. I am keen to hear from you if you have tried something similar. What has your experience been? Have you found any products to be good in the areas I am looking for?

Managing Projects Better

When projects go too well


As a Project Manager, I strive to ensure my projects go really well. Experience tells me that all projects will go through some difficult periods during its execution. Projects are inherently risky and not all risks, influences and impacts can be predicted in advance. That and years of experience delivering projects has made me weary about a project going too well.

Ignorance is bliss. However, when exposed the results are seldom pretty. There are many reasons why a project may appear to be going better than what is the reality. The project team may have a different world view than that of the customer. This is a very common scenario, especially in the old days of long waterfall software development projects. The advent of the Agile methodologies has come about through a desire to remove this expectation barrier through short iterations where the customer has the opportunity for feedback. That alone, however does not guarantee success.

Many times, it is much easier at the start of the project because the pressure of deadlines is not so immediate. A day’s delay here and there does not seem to pose a great danger. There seems plenty of opportunity to make up for any lost time. However, as the project progresses, this becomes less and less possible. Unless the project is planned with enormous slack, in my experience it is impossible. The student syndrome is well and truly entrenched in project teams. If someone is given more time than is needed for a particular task, they relax too much early on and only put the foot down when they think they are nearing the critical path.

In the context of a supplier delivering products of services to a customer, the early days of projects are much easier. All parties begin with the intention of getting to the end goal in a one team approach. However, the business pressures are different on the supplier and customer. Therefore, even with the best wishes, a one team approach is very difficult to sustain over a long period. Equally, when the discussion is about benefits and approaches, it is a much easier conversation to have. As soon as the conversations move towards billing for costs from the supplier side, or project assurance or performance measurement from the customer side, discussions are inevitably more difficult.

Work cultures and how individuals behave during uncertainty also play a major role in project success. Some people have the tendency to not ask for help and hope they will be able to persevere through any difficulty they are having. They consider asking for help as a sign of failure. This can lead to drastic consequences, despite well meaning people. Bringing to attention any risks or issues to late in the piece will guarantee it cannot be successfully navigated through. There is no substitute to knowing your people.

The biggest mistake I see made when projects go well early is project teams sometimes get too comfortable and stop doing the basics correctly – keeping tabs on scope, documenting decisions, communicating effectively, enforcing change control etc. People are by nature reluctant to rock a boat they consider is sailing well. If you always hear everything is going well do not be content. Do some project management by simply walking around and getting the pulse of the team. Having a good handle on whether status reports reflect reality is a must. If there are issues, it is much better to know them early.

Do not relax when projects start well. You are under less pressure and should take the opportunity to compile good project management artifacts. If things turn sour, these are what will help navigate a course.

Image Credit: The New Zealand Railways Magazine

%d bloggers like this: