PM Station

Choosing the Right tool for Continuous Improvement  Part # 1

Continuous improvement is a mindset whereby organization strive to be looking for better ways to do things – historically it has been applied to manufacturing but it has spread widely to almost every process in the organization from making the products to ship it faster with more efficient cheaper way to maintenance to provide better approach to MRO and asset management, Project Management,  no matter what end deliverable of the organization tangible, intangible products, all services, educational, training, consultancy firms etc., all need continuous improvement

More organization started to realize the importance of adopting this philosophy and to be successful we have to consider following points.

1. Improvements have to be in small changes, not major paradigm because most people having denial towards new big changes and frightened to lose their comfort zone.
2. Ideas come from employees / Team members as they are more close to the problems, get them more involved and buying into it, this employee engagement lead to next point
3. Employees take ownership and are accountable for improvement; quantify the value of engagement with transparency for accountability.
4. Incremental improvements are typically inexpensive to implement and it will not have much of resistance as compare to big changes.
5. Improvements are reflective; it is important to have constant feedback to control and monitor the improvement with visibility transparent to employee / organization and to maintain team collaboration.
6. Improvement is measurable and potentially repeatable; the impact of change must be measured to determine if the change can be applied successfully to other problems, proving positive ROI helps organization aligned around ongoing process of improvement making it part of company culture                                                                    To implement a continuous Improvement Mode                           will be in next Blog

• Use proper measurable, reasonable KPI to monitor performance
• Use project Dashboard to quickly communicate project progress
• Apply different style of leadership according to each scenario
• Enhance adaptive life cycles, agile method for change driven, be more open to new conceptual ideas and new technologies
• The amount of time for optimum utilization of skills /resources available needs to be more efficient mostly I have seen mangers spending more time chasing inventory parts of the project’s BOM/BOQ whereas the focus should be to project’s overall safety, quality, and efficiency
• Doing Successful delegation among the team can spare time for PM to focus on other more important aspects
• The training budget and programs should not be compromised, it pays to invest in project’s team to enhance the technical and interpersonal skills
• Improve overall schedule control as it is the key to not exceed project finish time
• Improve cost control and minimize extra spending to remain around cost baseline
• Project manager acting as project controller to ensure smooth successful finish
• Use relevant tools like RCA, FMEA, 7QC, Eisenhower’s Urgent/Important Principle to prioritize action plan for time management
• Facilitate workshop whenever needed to bring team to brainstorming and solve rising problems within.
• Avoid unnecessary escalation and if you have to present a problem to higher management present different options of solutions along with.
• Manage by stages and review at end of each stage continuous plan and monitor
• Maintain project team using five stages of Tuckman ladder model which is Forming, Storming, Norming, Performing and Adjourning even if assumed that the team is already been formed / acquired but needs to keep team members plugged in the same organization because frequent turnover is not a good sign notably after spending on specialized training
• Applying the five psychological theories like Hertzberg’s Two factor, Maslow’s Hierarchy of Needs, Hawthorne Effect, Expectancy Theory and Three Dimensional Theory of Attribution as per situation of different scenario, check the overall strategy and policy of your organization management style if using the McGregor theory of X & Y
• Continue provide and encourage team to provide bright ideas for continuous improvements for project’s optimization.
• Avoid Halo effects when promoting team member to ensure balanced transition
• Eliminate biased approach, eliminate waste and think LEAN and be LEAN
• Archive all lessons learnt for future reference.
• Finally remember you don’t have to apply all tips all time, it’s the art of PM to tailor tools and techniques to suit each requirements.

Please feel free to add more tips below

We always talk about soft skills and leadership, negotiation, communication but how much managerial accounting that PM should know? Let us see the difference between both fields

Accounting field

1. Financial accounting                                        2. Managerial Accounting

 A. General Accounting                                                 A. Cost Accounting

 B. Tax Accounting                                                        B. Budgeting & Planning

 C. External/ Internal Auditor                                           C. Internal Auditor

 D. Consultant                                                                D. Consultant

Most common action would be Recording – Estimating – Organizing – Summarizing

Now let me give briefing of both fields:-

(Financial Accounting)

Reports to outside the organization (Owners, Lenders, Tax authorities, Regulators) Emphasis on summaries of financial consequences of past activities, objectivity and verifiability of Data, precision are emphasised, preparation of data for entire organization is required, MUST FOLLOW GAAP ( Generally Accepted Accounting Principles) as mandatory for external reports.

Hence, as Project Manager you do not need to follow (GAAP), or (AcSB) Accounting Standard Board which has adopted the (IFRSs) International Financial Reporting Standards but what falls under 2nd field that PM should have to know is

(Managerial Accounting)

Reports to those inside the organization for

Planning – Directing and Motivating – Controlling – Performance evaluation

Emphasis on decision effecting the future and relevance

Focus on timeline and non-monetary data, prepare detailed segment reports regarding departments, products, customers, and employees.no need to follow GAAP, not mandatory

Therefore, it is prudent that PM understand basic accounting, capital cost v/s Expenditures, Relevant cost; sunk cost – opportunity cost – out of pocket cost, cash flows, salvage value / cost, variance cost, Planning, estimating, budgeting.

The PM also needs to understand Project Analysis Financial Techniques like following;-

1. ROI: return on investment (accounting)
2. Payback period = Investment / Annual costs
3. NPV: Net Present Value (DCF) discounted cash flow: time value of money
4. IRR: Internal Rate of Return(DCF)

IRR: the interest rate that makes present value of cash inflows = present value of outflows. In other words the rate of return that makes Net Present Value equal zero.

Hence Hurdle rate is discounted rate – represents the minimum acceptable rate of return most organization choose hurdle rate typically based on their management context:

Traditional – Weighted average cost of capital (WACC)

Competitive – at a threshold higher than WACC to reflect required return

Cash strapped – High level to ensure only projects with quick returns are approved – at best it is set at highest borrowing rate for the organization

Risk level – High hurdle for high risk projects and lower hurdle (WACC) for lower risk projects.

Remember projects with negative NPV will not be approved,  must be zero or even better with positive value.