Download Good Tool, Bad Fit: Why Project Management

Good Tool, Bad Fit: Why Project Management
Software Fails to Meet Project Managers’ Needs
Richard Hayden
Senior Vice President, Marketing & Product Management, Unanet
Adapting basic project management software for a professional services
environment requires two significant changes: accommodating a host of new
metrics, and ensuring those new metrics are synchronized with the traditional,
accessible to all, and transparent.
Conventional project management software is designed to meet your every
need — unless you work in professional services. Traditional project
management software doesn't quite fit for these poor souls. The world's a
bowl of soup, and you've only got a fork. So you do what any of us do when
given the wrong tools for the job. You improvise. You substitute. You build
around the problem with spreadsheets. And soon, the whole system becomes
so sprawling and convoluted, you spend most of the day just trying to hold the
disparate pieces together and connect the dots.
What did professional services firms ever do to deserve this fate, and is there
any chance for salvation?
What's the Difference, Really?
First, we need to understand what makes professional services projects so
very different from the engineering, IT, and construction projects that most
Project Management software systems (and traditional tools like Gantt charts,
for that matter) are designed to accommodate.
The short answer is that a professional services organization’s primary
revenue driver is billable labor – a variable that’s inherently more intangible
than physical assets, due to its fleeting nature, the inconstancy of billing rates
by project and customer, and fluctuations in resource utilization and
productivity, all of which impact profit margins.
The result is that the information needs of professional services project
managers and services department leaders (namely, detailed data on realtime performance variability for customers, projects, tasks, and people) are
divorced from the information needs of the finance department (namely,
cumulative data on fiscal periods and entire departments). Furthermore,
finance’s view is often through the rear view mirror, while project managers
and resource managers must be forward-looking, and react in a more timely
manner to change.
And without a software solution to accommodate both parties, fractures
inevitably form in the ways that various stakeholders enter, track, and share
project details – which breeds confusion, lack of transparency, and
unnecessary administrative overhead.
Adapting basic project management software for a professional services
environment requires two significant changes: accommodating a host of new
metrics, and ensuring those new metrics are synchronized with the traditional,
accessible to all, and transparent.
The Missing Metrics
While professional services firms (and their individual needs and operations)
are characteristically diverse, certain aspects of the project management
challenge are fairly consistent across organizations of this type. With those
consistencies in mind, project management software catering to professional
services environments should, at the very least, accommodate (and integrate)
the following requirements and related metrics:
> Revenue by Contract Type (for instance, time and materials, firm fixed
price, cost plus with various fees, or a combination of all three): Can you
calculate what revenues a project earns, when, and under what constraints?
What are the fees? What are the caps? Can you calculate this by customer,
department, project manager, project, project type/product etc.?
> Contracted Backlog: Do you know how much work remains on the project
and whether you’re on track to meet the budget? This metric should be
calculated not just for existing contracts, but also for projects you hope to win,
taking into account win probability.
> Indirect Costs & Rates: Which show how fringe benefits, overhead, G&A
and other service/support centers impact total (fully burdened) project costs,
and a comparison between projected rates and actual rates. Additionally,
future planned rates can be used for longer-term business forecasting.
> Project Margin: It’s common to calculate gross margin, i.e. revenue minus
direct costs, but do you know net margin or actual project profit taking into
account indirect costs that should be attributed to the project such as fringe
benefits, overhead, general & administrative costs, or other support services?
> Revenue/head: This can be a key metric for professional services
organizations, especially over time to see how process improvement efforts
impact performance.
> People Utilization: Which shows if your staffing levels are aligned with
your current and forecasted workload. You want to look at both direct (billable)
and indirect projects, and whether utilization metrics for individual employees,
or departments, are meeting, exceeding, or falling short of their utilization
goals. Another factor that may be highlighted is whether unnecessary use is
being made of sub-contractors, thereby lowering staff utilization.
Understanding the impact of future opportunities on resource utilization and
availability, taking into account the probability of winning the work, is essential
to see the true picture.
> Customer Accounts Receivable Balances and Days Sales Outstanding:
Which identify the time taken to receive invoice payment and convert those
receivable balances into cash. Providing this insight to project managers who
are closest to the customer can be invaluable in accelerating payments and
improving cash flow.
> Contract Win Rate: Which allows evaluation of your firm’s business
development function and what types of projects are successfully bid.
> Project Issues and Risks: Which identify projects that may not meet
contract terms, may fail to deliver on customer expectations, or incur losses
for the business.
> Customer Relations: A non-quantitative view of recent customer activity
such as notes, emails, comments from collaboration efforts, comments
entered on timesheets, and other indications of the current state of customer
interactions and relations can be valuable in addition to financial metrics or
measures of project cost and schedule performance.
When project management software fails to accommodate (or to facilitate the
sharing of) these metrics, professional services stakeholders find or build
auxiliary systems to fill the gaps, thereby creating a tangled mix of poorly
integrated solutions, each housing critical silos of project data.
And without a complete, coherent picture of the organization, it’s practically
impossible to manage projects (or company finances) intelligently or
strategically.
Services Software Salvation
Professional services firms shouldn’t have to settle for tools that don’t quite fit.
No, it’s high time for Project Management software providers to meet the
specific needs of professional services organizations head-on.
Beyond simply adding metrics, this means uniting project and people
management with financial management in a single, unified system – built to
support the needs of executives, project managers, operations, and financial
teams alike.
And this sort of unification isn’t just valuable to professional services firms.
Rather, project-centric organizations of all shapes and sizes stand to benefit
from the integrated, comprehensive management of the entire project
lifecycle. (After all, frustrations with manual system handoffs, process delays,
and inaccurate data are hardly confined to the professional services industry.)
The hope is that with the right software, managers can spend less time
worrying about the effectiveness and accuracy of day-to-day transactions, and
more time working on transforming and growing their business as a whole.
That’s the power of unified projects, people, and financials — a perfect
software fit.