The Money Files

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A blog that looks at all aspects of project and program finances from budgets and accounting to getting a pay rise and managing contracts.

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The Different Types of Project Resources [Video]

5 Common Approaches for Performance Measurement

5 Non-Financial Project Benefits

7 Contract Terms You Should Know

Thoughts on Benefits Realization Management [and Book Review]

The Different Types of Project Resources [Video]

Categories: resources, video

In this video I talk about the different types of project resources that you'll encounter on your project. 'Resources' isn't just an unfriendly way to talk about people!
Posted on: April 26, 2017 11:59 PM | Permalink | Comments (0)

5 Common Approaches for Performance Measurement

How do you track the performance of your project? Here are 5 ways that you can do it.

1. Fixed Formula

This is pretty easy. Assign a fixed percentage when the work starts. Then make it up to 100% by allocating the rest when the task finishes.

The Pareto principle is a good one to use if you don’t know how to split your task percentages. Assign 20% complete to the job when it starts, and the remaining 80% when your team member reports the work complete (because at that point it’s 100% complete).

It’s simple to work out but it’s not terribly accurate. It’s only good for small pieces of work and short tasks where it would be too difficult or not worth it to work out percent complete across a couple of days. It can also be used where the task is no longer than a week long. If you are updating your project plan once a week, and the task is no longer than a week long, the task is either started or finished so the 20/80 split (or 50/50 or whatever you think is appropriate) works out pretty well.

2. Weighted Milestones

When you’ve got plenty of milestones along the way, you can work out project performance by tracking how many you’ve hit.

In other words, you can pre-assign progress (percent complete) to certain milestones or parts of tasks. When you hit Milestone 1 you can say the project is 15% complete, at Milestone 2 it goes up to 20%, at Milestone 3 you’re 65% complete and so on. Until your final milestone at project completion where your project (or task) gets updated to be 100% complete.

This is also a way to split payments to vendors – many contracts have a schedule of payments linked to the achievement of key milestones. Your budget could be weighted in the same way as how you track performance.

3. Percentage Complete

We’ve talked about % complete already, but this version of it is just based on the project manager’s guess best professional judgement. They update the schedule or tracker weekly (or whenever it’s appropriate) with their take on project performance by assigning a percent complete.

This isn’t hugely accurate either – although it depends on the project manager. It takes experience to be able to pick a percentage out of the air and have it reflect reality. Generally, project management tools can help with this by playing back to you the % complete of your project schedule, so at least in that case you should have something underpinning the number you give.

4. Percentage Complete with Gates

This is similar to weighted milestones but instead of waiting to hit the ‘gate’ point, you can report any percentage complete up to the approved limit for that milestone.

For example, when you hit Milestone 1 you can say the project is 15% complete, as we saw above. With weighted milestones, until that point the project would be 0% complete. With gates, you can set a % complete every day if you like, working up to 15% at the point of hitting the gate (the target milestone date or achievement).

It’s like a blend of using your professional judgement but being constrained to not say you are too far ahead because you can only ever hit a certain percent complete through the nature of where you are on the project.

It sounds complicated to explain but this is my favourite approach for measuring project performance.

5. Level of Effort

Finally, you can track effort against the elapsed time. Alternatively, you can track against some other task or work package on the plan. For example, ‘Complete Testing Documentation’ might be linked to ‘Complete Testing’ and the two activities progress in parallel.

You’d track performance for ‘Complete Testing’ and then, as you know that testing documents are being updated as you go, apply the same % complete to ‘Complete Testing Documentation.’

Which one(s) of these do you use? And which do you avoid? Do you use these as standalone techniques or do they link to your Earned Value Management activities? Let us know in the comments below!

Posted on: April 23, 2017 11:59 PM | Permalink | Comments (3)

5 Non-Financial Project Benefits

I know that business cases are essential for projects (not convinced that they are right for you? Watch this video on the 3 reasons why you should think again). But often they aren’t reasonable because the focus is on financial return.

If your project is generating a ton of revenue and tangible financial benefits, then writing the business case is easy.

But how do you justify your project if you aren’t creating an impact on the bottom line?

Here are 5 reasons why your project could still be worth it, even if it’s hard to link these benefits directly to cash.

1. Satisfied Stakeholders

Oh yes, happy stakeholders are definitely a reason to do projects. Measuring satisfaction through surveys and engagement is a way to show that your project has made a difference. You can also follow this through in your post-implementation reviews.

Of course, we don’t do projects just to make our colleagues happy. This benefit makes the most difference when your stakeholders are external clients and people who can give you more cash through contracts or further assignments.

2. Better Communication

Sometimes projects are kicked off to improve team collaboration. Such as launching a new project management team tool or process improvements through the PMO that make it easier to get projects done.

Collaboration and smoother handoffs between staff should make everyone more efficient which in turn generates more revenue, but an uptick in productivity really difficult to quantify.

3. Happier End Users

So you’ve satisfied your clients and stakeholders on the project. What about those people who are going to end up using the product?

Happy customers spend more money – at least, it’s logical to assume that’s the case. But if your project just increases satisfaction levels, that’s pretty good too. Let the extra cash from their continued custom flow into the business later.

End users can also be internal staff. Many businesses kick off projects to improve software products, launch new tools and streamline interfaces between systems to make life easier for employees. These don’t generate cash for the business but they do increase productivity (assuming they work). This can help you get more done with less, which overall has an impact on the P&L.

Finally, there’s a benefit to staff retention too because it’s expensive to keep hiring staff. If they have the tools they need to do the job that helps reinforce the decision that it’s good to stay at your firm.

4. Increased Brand Awareness

Unless you work for a huge multinational household name, there are probably more people in the world who don’t know about your product than people who do.

In fact, there are probably huge amounts of people who don’t know the ‘multinational household name’ brands either.

So companies spend a fair amount of money on brand awareness and projects to raise their profile and improve their corporate image.

These projects might not be naturally tied to increasing revenue, although you’d assume that the more people who know about your products the more will buy them.

However, sometimes you just want to do an awareness campaign to set out your stall and show your company values – this is particularly the case in terms of social and environmental responsibility. While it’s commercially-minded to think that this will bring more, loyal customers in future, it often isn’t the initial goal of the project.

Green initiatives, carbon management and community and education projects such as supporting charities fall into this category.

5. Better Safety in the Workplace

These projects are linked to cost avoidance, and that can be a powerful driver for getting a business case approved. They don’t make money, because staying safe at work is kind of what everyone expects. No one wants to go to work in an unsafe environment. Safety levels are a hygiene factor.

However, not being safe at work is a huge potential cost to employers. And not only through the cost of litigation should an accident happen, or the hit on the share price should the market find out that the business isn’t running according to regulation – the human cost of injury is devastating to the team, and what responsible businesses strive to avoid.

These kinds of projects introduce new regulation, supportive policies or reinforce practices that are designed to keep everyone safe.

These justifications go beyond the simple way of looking at return on capital invested. Even if your project does have tangible financial returns, you can make an even stronger case for your project if you include non-financial benefits in your business case too.

And of course, if you aren’t generating a cash return for your company, that’s not to say that you won’t get your project approved: these are very solid reasons for investing in new initiatives.

Posted on: April 18, 2017 11:59 PM | Permalink | Comments (9)

7 Contract Terms You Should Know

Categories: contracts

Project procurement is full of jargon – it can seem like a totally different language at times. Here are 7 contract terms that you should know.

1. Waiver

A waiver is where you voluntarily surrender an option under the contract. It’s a concession. You ‘let the supplier off’ the term because it suits neither of you to carry it out. This could be, for example, in the situation where enforcing a contract clause or requirement would turn out to be prohibitively expensive for both parties, or is no longer needed.

2. Warranty

This is another way of explaining a guarantee. It’s where you need assurance from your supplier that the terms of the contract are going to happen. Warranties tend to be limited by time, so it would be unusual to get one that lasted a lifetime. Just like with your dishwasher at home, your supplier will probably provide a warranty period.

Warranties are contractual – it’s not a best-endeavours guarantee. As a result, if the contract isn’t delivered as you expect you can call on the warranty and get compensation.

Warranties are a good negotiating point for developing the contract. You could work with both parties to get an extended warranty added into the contract if you felt it would be worth it.

3. Claim

A claim is a request for compensation. It has to take place according to the terms of the contract, so your contract should specify how you can make a claim and what sorts of claims are going to be appropriate under this agreement. In other words, it’s a type of dispute that you can resolve through negotiation together.

Claims administration is the process of reviewing and agreeing on claims. You’re discussing whether you (or the supplier) has a valid point. If you do, you’ll use the change control process to potentially amend the contract as necessary to allow the claim to be met.

4. Breach

You might also hear this referred to as a default. When there’s a contract breach it means that a requirement of the contract has not been met.

In severe cases (a material breach), the party who didn’t do the breach can be released from the contract. This often relates to non-payment of fees or if the party can be shown to have broken some kind of significant contractual term. If that applies to you, the other party can walk away. You have no further hold over them and the contract is broken.

Typically this results in some kind of financial compensation and if your business was the one who caused the material breach, the other party could apply for punitive damages or fines. These can cover loss of earnings from the contract or other losses.

5. Performance Bond

Performance bonds are a way to ensure your business doesn’t suffer if your supplier doesn’t do what they promised. These can be appropriate if your project is at significant risks from the vendor failing to deliver.

They work like this: a pot of money is put aside to compensate you in case the vendor fails to achieve the terms of the contract. If they can’t deliver, you get the cash instead.

These can be hard to set up because they are particularly valuable when working with small or volatile organisations which probably don’t have the cash to lock away until the contract is completed.

6. Force Majeure

This is a contract clause you will see all over the place, from your household insurance policy to software contracts.

It simply means that if things happen that are beyond the control of the contracting parties (in particular, the party supplying the services or goods) then they don’t have to compensate you – they can be released from their contractual obligations.

Examples of things that are beyond their reasonable control are extreme weather like floods, wars, terrorist attacks, hijacking and crime.

7. Change Control

OK, you’re probably very familiar with change control systems. They apply to contracts too.

Any changes to the contract need to be managed professionally and with input from both sides. Everything is normally documented within the contract, at least at high level. Sometimes the detailed change process or a change form is included as an appendix or schedule to the main contract.

Pay attention to what contract change terms apply to your contract as they can vary.

Contracts should have a glossary or definition of terms, and that can help you unpick all the unfamiliar language. Always get a lawyer to read over a contract before you sign it and make sure that everyone knows what they are getting into. Contracts support both parties, but only if you agree to terms that work for you both from the beginning!

Posted on: April 14, 2017 08:56 AM | Permalink | Comments (9)

Thoughts on Benefits Realization Management [and Book Review]

Categories: benefits

Quote

I’ve been thinking a lot about benefits recently. It was the feature of a week of discussion questions in my Facebook group, and I’m leaning more and more towards benefits being something that the project manager has to get involved with. This idea that we deliver the outputs and then the permanent organisation magics up the benefits is feeling more and more like old style thinking.

So I was delighted to get a copy of Benefits Realization Management: Strategic Value from Portfolios, Programs and Projects, from Carlos Eduardo Martins Serra even though I was a bit daunted by the length of it.

I shouldn’t have worried.

Despite looking pretty boring on the outside (I was holding it with the title obscured and a colleague said he thought it looked like a modern-day book about religion), inside is hugely practical.

Every few pages it feels like there is a table or diagram succinctly explaining a concept. Here's my interpretation of how to close the value gap by using benefits to jump you to where you need to be.

There are templates galore when you get later in the book. There’s a giant appendix on how to use the guidance, which means that what you read about you can actually do something with. The whole thing has been designed to be intensely useful. The templates are repeated in another appendix (with chapter references) so you don’t have to keep flicking back and forward or marking the pages to find the one you want.

The book starts with the ‘strategic alignment’ angle that is so crucial to project management right now, but quickly moves into a discussion of project success and how value is created in the business. That’s all tied back to benefits.

Part 2 is where you start to get into the author’s model for the management of benefits. The Enterprise Benefits Realisation Management process is explained simply. I liked the fact that there is adequate focus on the people responsible for benefits realisation: for all I said at the beginning about project managers taking a more active role in benefits, I’m aware that we can’t (and shouldn’t) do it all.

Essentially this part is a flexible framework for translating business strategy drivers into benefits and then planning how to get them and making it happen. This is a huge part of project governance – we don’t do projects for fun, we do them to get the benefits!

The book also includes a couple of case studies: a few more might have been nice but to be honest I was reading it more interested in what I could do in my projects rather than much caring about what other people did. Your own context is always more valuable, I think, when the guidance is so clear about how to implement benefits realisation management that I was always thinking about what it meant for me.

The exception to that is the worked example in Appendix C which is a (fake) case study but it takes you through all the relevant templates as they would be completed for that organisation. This is helpful because you can see what is supposed to go into each section and plan what you are going to say for your projects.

Each chapter ends with review questions. I didn’t think these added much. If you are a student and want to check your understanding, great – do them. The answers are at the back so you can check your work. But if you are a professional, reading it because you want to do benefits realisation more effectively in your organisations, then I doubt you’ll spend much more time on these than a cursory glance as you turn the page.

In summary, I enjoyed it more than I expected and I think it will become a desk reference for me on how to manage project benefits. Recommended.

Benefits Realization Management is published by CRC Press.

Posted on: March 23, 2017 07:59 AM | Permalink | Comments (9)
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