The Money Files

How much do you really know about that supplier you are thinking of using on your project? They’ve sent you a quote, and you’ve got a nice glossy presentation with photos of their account managers, but what’s it really going to be like?

In this video I share some of the things I’ve found important when starting a relationship with a new third party – in fact, before the relationship even gets going it’s important to ask these questions.

If you prefer to read, there’s an article here on what to check before you sign on the dotted line: What you need to know about your supplier.

If you’re a video kind of person, and you want to hear my personal experience, then click Play on the video below! Let me know in the comments under the video what else you consider when you are assessing what organisations to partner with for project delivery. I’m sure you’ve got some great stories too!

According to recruitment company Robert Half, interim project managers are in high demand. For those of you who aren’t familiar with the term, interim is a bit like contract but generally longer term and more invested (contractors, feel free to call me out on that if you don’t agree!).

The Robert Half team asked 200 UK CFOs and Financial Directors about how they evaluate the success of an interim manager, and it isn’t all about the successful delivery of a project (although that comes in at 34%). I put this infographic together to explain how the survey respondents measure the success of one of their interim managers. They were allowed to respond to several answers, which is why the results don’t add up to 100%, and you can see the full survey results here.

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!

Last week I shared with you some questions and answers from my recent webinar on managing money on projects.  I wasn’t able to answer all the questions after the presentation, and those questions I didn’t get a chance to answer in person I am answering here.

Here’s another batch of Q&A.

Can you give a definition of "Consultancy"?  Is that research/consulting on tasks OR the hiring of outside resources to assist with the project tasks?

I think it’s both.  If you don’t have the skills amongst the permanent staff in your organization, you need to hire those skills in.  The people hired could be doing specialist tasks like research or technical consulting, or they could be an extra pair of hands to help you get the project done, like an extra project manager on a large program.  Either way, these are additional, external resources and that’s what I mean by ‘consultancy’.  Essentially, it is paying for people who are not permanent staff.

Do you ever find that being transparent with $$$ leads the funding away from your project and onto another "priority" thereby interjecting project risk?  Seems like the norm is to cloak the budget until successful completion and then release at completion with the rest of the resources.

I think this is very dependant on the culture of your organization.  Fortunately I have not worked anywhere where I have seen this happen, although I wouldn’t be surprised to learn it did go on in some organizations.  It is all to do with what the company thinks are its strategic priorities and unfortunately your project might not be one of them.  A strong PMO can help here, as well as a mature project management culture where people understand the value of not chopping and changing their minds about projects every five minutes.  Projects cost what they cost, and if the investment is worth it and you haven’t padded out the budget unnecessarily, you shouldn’t have to worry about sharing the figures.

If your project is no longer a strategic priority it seems sensible to me to divert the funds on to something else that will deliver great value for the organization.  If you are worried that your management team doesn’t have the foresight to do this which leads you to hiding your budget until the project is over, they all need to go on Sponsor training!

Do you consider utilities, rent, etc to be a project management cost or deliverable cost?

Utilities, rent and so on are project management costs.  Let’s recap the difference:

Project management costs are the costs of doing the business of project management e.g. paying for your team members, training including the costs of a trainer, room hire, refreshments, delegate transport and accommodation, hosting large meetings off-site and hiring equipment.

Project deliverable costs are expenditure directly related to what the project is going to deliver e.g. software, hardware, purchasing equipment, licensing and things like buying software and funding anything that will change as a result of your work like new stationery or user guides or paying for documents to be translated.  

Might training be considered a deliverable cost associated with quality assurance? What about testing resources?

Yes, I suppose they could be.  The purpose for me of categorizing costs in this way is simply to provide a starting point for preparing a comprehensive budget.  People often think about what they need to buy to deliver the deliverables – a new server, new office equipment, software licences etc – but they forget about the costs required to make it all happen.  These are what I call project management costs and are the overhead of running a project.  In real life it doesn’t matter at all if you categorise training as a deliverable cost or a project management cost – the important thing is that you have considered it and included the cost in your budget.

You can see the whole presentation online here, via a recording of the webinar.  I’ll have some more Q&A for you soon!