The Money Files

In this short video, I introduce the concept of IRR: Internal Rate of Return.

Over at A Girl’s Guide to Project Management it’s Summer of Books month, which is an annual event focusing on project management book reviews and interviews with authors. I thought I’d spread the Summer of Books feeling to The Money Files as well, by taking a look at a book called The Wealthy Freelancer by Steve Slaunwhite, Pete Savage (pictured below) and Ed Gandia.

It doesn’t sound much like a project management book, but I know that many of you run your own project management consultancy or training firms – or have aspirations to do so. It also contains information that’s relevant to people not working freelance or as a contractor, so despite the title there’s some good stuff in it for everyone who wants to get the most out of their income.

For example, try this: write down the pay increase you want. Now add 50%. The higher number is very likely to be achievable. Whether you are negotiating prices with your clients or a pay rise with your boss, that’s the number to start at.

The authors also recommend promoting yourself at every opportunity, and suggest your email signature as a good place to start. “You don’t have to come up with anything complicated or fancy,” they write. It’s enough to list your services under your name. If you are employed, make sure your job title and PMP designation (or other certifications) are mentioned to show people that you value your professional standing.

The book is based around 12 ‘secrets’. Number 5 looks at how to get customers coming back to you time after time. If you work on a freelance basis, these will be your consulting clients. If you are employed, these will be the internal customers whom you deliver projects for. There are 5 tips in this section:

1. Be a joy to work with.
2. Be professional.
3. Deliver outstanding work.
4. Be flexible.
5. Thank clients frequently.

We all know that we should be pleasant and professional at work, but I’ve never thought of being ‘a joy’ before. “Don’t be unpleasant to work with by heaving an audible sigh when the client asks for minor revisions,” the authors write. “Make it your mission to be the person who delivers excellent work on every project, while making the entire process a treat for the client.”

How many of us do that? Project management processes can be difficult to understand and adhere to – I doubt many of our business stakeholders would say that working with a project manager is a “treat”. I hope that in your case, they do!

The other side of being ‘wealthy’ is having a fulfilled life and a good work/life balance. One of the chapters (Secret 9) focuses on this. It includes some productivity tips – nothing that you probably haven’t already come across in through GTD or in books like Make Every Second Count (Robert R. Bly).

However, the authors do discuss the interesting concept of incubation. When you have a difficult project to work on, or a complicated problem to solve, mentally label it ‘for incubation’ and file it away for a while. That could be a day, a week, or longer, but the important thing is that you have given your subconscious permission to mull over the idea without you actively participating in the thinking process. Put a note in your diary to come back to the problem in the future. Then, pull it out of the mental closet and see what you can do with it now. “Build incubation time into your project schedule,” the authors write. “Incubation can shave hours off the time it would normally take to get a project done.” When you come back to the idea, your incubation time should have given you the ability to see a possible answer or creative solution.

This book won’t tell you how to set up a business, but if you are considering becoming a project management contractor or running your own firm, this is a very useful book for starting out with the right attitude and with systems in place to support you as your enterprise grows. If you are not considering self-employment, there isn’t so much in it for you, but there are still some good points that are relevant to all projects and working with internal customers. However, I’d opt for another soft-skills, relationship-building, networking focused book instead, something like Stever Robbins’ book Get-It-Done Guy’s 9 Steps to Work Less and Do More, which also includes good tips about building relationships for productivity.

If you like the sound of The Wealthy Freelancer, you can get three chapters of the book free from the authors' website.

Being in control of a project budget is a big responsibility. There's tracking to do, dealing with suppliers, potentially time recording or approving timesheets, invoice tracking and reporting.

Once you have agreed a budget tolerance with the project sponsor, it's your responsibility to keep the project on track and make decisions about spending. Provided you are on track with your budget forecast - whether you use Earned Value Analysis or not - within reason how you spend the money to deliver the end product is up to you.

So how do you make those decisions?

The rule of thumb I apply is: would I make this spending decision if it was my money?

Let me give you an example.

Consider this: you are managing a software development project, which requires software and new hardware to be rolled out to 25 offices. Each office needs new computers, printers and scanners as well as the software. You have worked out a good estimate of how many pieces of hardware each office needs, and you are using this to guide you as you visit each office in turn.

You arrange to meet the manager of one of the offices and when you arrive you realise that he has taken on three new staff to support the growing needs of the business. They all need new computers and the office will need an extra printer as a result. None of this was originally in your estimates.

Should you buy the extra equipment required?

Let's assume:

• The budget is on track
• Buying the extra equipment won't push you over acceptable spending limits
• The equipment is genuinely necessary.

In that case, why wouldn't you buy the extra equipment?

OK, you could say that the new staff and the incremental growth at that office is out of scope. You could argue that the manager will have to locally fund any new equipment above and beyond what you had planned. But what's the point in that? If it was my money I'd decide it was the right thing to do for my project stakeholders and the project overall. So I'd do it.

Let's take another example.  Another software project. It's a really small project to launch a non-critical reporting system. The standard project plan includes some disaster recovery testing effort. The DR test environment and exercise will cost about £600 (as I said, small project).

Would I spend my money on that? No. On assessing the risk, I'd conclude that it was worth the financial saving (and the time) to not go ahead with that task.

Go through the approvals internally if you have to. Drop budget items in and out of scope with the proper internal control. But look at the budget as if it coming straight from your pocket and make your decisions informed on what that tells you.

Ask yourself: would you spend your own money on the project? If not, why are you doing it?

Does your project or program have a resource management strategy (RMS)? While they are mainly used in program management, you can also find an RMS useful in a project environment. This is especially the case if your project is not affiliated to a program and you have to work it out how to handle resources yourself.

An RMS sets out how the project or program will get and manage the resources it needs to achieve the change required – after all, projects are about delivering change and you need resources to do that. “Resources” is not just an unfriendly word to describe people. Resources can be:

• Money;
• Buildings;
• Equipment;
• Technology;
• Services, and of course;
• People.

The people element can include temporary staff, permanent staff, contractors or part-time employees.
 
An RMS helps you manage the approach to using these. Not convinced? Here are 7 reasons why you need a resource management strategy.
 
1. It describes how the human resources requirements will be managed. This includes internal and external resources. How will you keep their line manager informed? Will they be part of a matrix organisation and if so how will this work in practice? Will you have the people reporting directly to you instead?
 
2. It describes how you will manage the transfer of knowledge and skills back to operations when the project has finished. This part of the RMS can be an input into the training and communications strategies.
 
3. It defines the dispute resolution process for when resource conflicts happen. And they will! Having this documented in advance will help you deal with issues as they arise. You will already have plans for how to fix problems, for example, when resources are called on to business as usual work or other projects. Who will arbitrate? Will it be the program manager or a board member? Can you solve conflicts yourself or do you need someone else to look at the overall priorities of the project portfolio?
 
4. It sets out how you will resource business as usual activity when you are using project staff for your project. The company still needs to operate, even when project resourcing demands are high. The RMS acts as a prompt for discussions with line managers. You can use it as a basis to ensure that they have plans in place for when they need to resource the ongoing commitments for their departments.

5. It defines an approval process for getting people and money.Don’t underestimate this! It really does help to know in advance about how to get resources for your project. It will save a lot of time and negotiation if you have already talked to the process owners and other people involved and already have this written down.
 
6. It defines the accounting and financial reporting procedures for the project. An RMS can also be used to determine how you will get financial resources, how you will spend it and how you will monitor it.

7. It defines the procurement strategy. You might not need an entire procurement strategy for your project or program, so you may find that this section of the RMS just references your corporate procurement process. This explains how you go about buying things and what arrangements or contracts need to be in place.

Remember that resources are not just people! A resource management strategy can help you be a helicopter project manager and see the big picture for all the resource needs on your project or program.

Have you used one or got any tips? Let us know in the comments.