The Money Files

A new European law about using contract workers comes into effect in the UK on 1 October 2011. If your project relies on temporary staff, freelance workers, or contractors, you may find that your project costs go up.

What is the new law about?

The Agency Workers Regulations entitles freelancers, consultants and other ‘agency’ staff to equal access to benefits and equal working conditions to those of permanent staff. That impacts everything from maternity pay to annual appraisals and the right to attend the Christmas party.

Employing a temporary worker on your project means that they will be entitled to information about job opportunities in the company, access to the canteen and to use the childcare facilities if these are provided by the company: basically, they are ‘equal’ to permanent employees. It is likely to take some time to establish how far this goes: will they be entitled to a car parking space, for example? Or luncheon vouchers? (Although I’m not sure if companies still give out luncheon vouchers!)

These benefits apply from the first day that the person takes a role with the company. There’s another level of benefit for contractors, though. This level kicks in after the person has been in post for 12 weeks. At this point they become entitled to the same basic working and employment conditions as a permanent staff member.

That means that contractors become entitled to the same working hours, rest breaks, equal pay, overtime payments and bonuses. They also become entitled to annual leave, with parity to what is on offer to the permanent staff. One quirk of the new law is that they can choose to take the time off or receive additional pay in lieu of the holiday time – not all companies offer permanent employees the opportunity to do this, instead opting for a ‘use it or lose it’ policy.

What is the impact on your project team?

Contractors:

Contractor rates are typically higher than permanent staff rates because contractors are currently not entitled to holiday pay, sickness absence pay or other benefits. With the introduction of the new law, you could have the opportunity to negotiate a reduction in contractor rates to take into effect the additional payments required for holiday entitlement.

Overall, costs for contractor staff could be higher, and you would be advised to review the provisions of the law and plan this into your budgets, especially if your project needs contractors on the team for over 12 weeks. You may even find it harder to get approval for temporary team members, because the terms of the new law make it less attractive to employee short term contractors.

Permanent staff:

Don’t forget the impact of all this on the permanent staff in your project team. Contractors are generally on high day rates – and now they are getting holiday pay? Managing the morale of your permanent team members when faced with high earning contractors could be tricky, so think about what you can do to address the balance. What else can you offer in terms of reward and recognition to support the permanent team members?

You may also find that permanent team members who have been thinking about contracting decide that this is the push they need to leave employment and set up on their own as a project management contractor.

What next?

First, find out if the rules apply to your company. Talk to your Human Resources department. This is the result of EU regulations, but even if you are working in a non-EU country, it could have an implication for your project if you have a European division. Normally, the rules of engagement in the hiring country apply so even if you are working elsewhere, team members based in the EU could be affected.
 
Second, find out if the rules apply to your contractors. In my company, The Otobos Group, I have a number of part-time staff – including an accountant and a virtual assistant. The Agency Workers Regulations do not apply to these people because I buy services from their companies, I do not have the individuals under my direct supervision on a day-to-day basis. There might be contractors or freelances to whom this applies, but given the cost, time and reputational damage that going to court incurs, it is best to be careful. This article is not meant to provide specific legal advice for your situation, so the best thing to do is to check now about how the new regulations will affect your project team!

September marks the beginning of budget season: when we are all trying to work out how much our projects will cost in 2012 and put in requests to the PMO and senior executives for what budget allocations should be made.

In this installment of my Ask the Experts feature, I spoke to Rob Prinzo, founder and CEO of The Prinzo Group, an innovative  knowledge firm that provides performance management expertise through project assurance solutions for enterprise  transformation  and technology projects. He is based in Georgia, and is the author of No Wishing Required: The Business Case for Project Assurance. We spoke about financial loss, why business cases are rejected and managing procurements.

Rob, lots of people are preparing business cases now for projects that will begin next year. Is this early stage the time when most projects are at risk of financial loss?

I have found that the following points in the project lifecycle are where the risk of financial loss is greatest. To prevent against financial loss and another failures, I recommend conducting a project health assessment at each of these crucial points.

1. During the strategy phase, before the business case is presented for approval and funding.
2. During the acquisition phase, towards the end of the vendor selection process, before vendors are finalized and negotiations begin.
3. During the planning phase after the initial drafts of the Project Charter, Detailed Project Plan and Change Management Plans have been developed.
4. During the design phase after the initial drafts of the System Design Documentation have been developed.
5. Towards the end of the development phase or the beginning of the Testing Phase.
6. Towards the end of the testing and training phase before the system cut-over.

You talked about vendor selection there. Procurement management is something project managers sometimes struggle with. What are your three top tips for making the procurement process as smooth as possible?

Make sure that you have defined all your requirements and dependencies. A lot of organizations get into the procurement process or make a purchase and soon realize that they have left something out. Make sure everybody is involved in requirements definition and validate the scope against lessons learned from past projects.

Develop a Request for Proposal. As simple as it sounds a lot of organizations skip this step. A RFP will provide structure to the process and help you compare apples to apples.

When possible engage vendors in a prototype exercise or conference room pilot. This will allow you to dive deeper into specific requirements for your organization and get a feel for what it is like to work with each vendor before making a commitment.

Working with the vendors in this type of prototype exercise will also give you a feel for how robust their estimates are, both financially and in terms of timescales. This is useful to know to feed into the project budget. What's your advice for making sure that project budgets are as robust as possible?

Robust budgeting starts with comprehensive requirements. I recommend starting by making a list of all your projects, categorizing the projects based on: size, business function, type, level of funding, effort and organizational impact. Next, determine the dependencies with other projects, funding, resources and business decisions.  Once you have your list, categories and dependencies you can start to determine the projected costs for the projects.

Great, thanks. So if you’ve done all of that and worked out the projected costs accurately, why do some business cases still get turned down?

I have seen Business Cases get turned down for the following reasons:

• Lack of funding – This happens often, especially in this economic environment.  As a project manager, if you feel that you have a large imminent project, but do not feel that the organization can fund it this year, consider breaking up the initiative into smaller projects or breakout the upfront requirements definition into separate project. This will help keep the project moving forward, reduce the overall project timeframe for the bulk of the work and spread the cost over a longer time period.
• Communicating Business Benefits. A lot of teams do not focus on the business benefits of doing a project or the consequence of not doing a project. Instead the team focuses on technical outcomes: we need to upgrade or move to a new technology platform without properly stating the business reasons and befits why this is necessary (streamlined process, integration, operating efficiency, etc.). Project Managers need to make sure that the business need, not the technology need, is clear.
• Timing – It may not be the right time for the organization to undertake a particular initiative. If the timing is not right, use the opportunity to educate decision makers on the project, get feedback and refine the business case for a more appropriate business cycle.

So if our projects don’t get funding for 2012 it’s not personal! Thanks, Rob.

You can follow Rob on Twitter: @RobPrinzo

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?