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Scott Seal

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The Pitfalls of Project Management Planning for Project-based Firms

Posted by Scott Seal on Wed, Oct 14, 2015 @ 12:00 PM

Project Planning Blog GraphicCongratulations! Your firm just won the largest project in its history and it’s time to celebrate, or is it? Unfortunately, winning the big project doesn’t guarantee success and big profits. For project-based firms, project management is synonymous with profit management, but many projects start in the red making it nearly impossible to make a profit. Here’s a look at some common pitfalls project-based firms face before they ever start a project.

Accurate Job Costing

If you have been on a proposal team, you know the feeling of relief that overcomes you once you finally submit the proposal. Weeks of working long hours reading and writing exhilarating technical content and attending meeting after meeting. All this work and time exhausted by several people when in reality, your final price is the biggest factor in winning. But, can your firm deliver the project on the proposed budget?

Accurate job costing requires accurate information, and most firms believe they have the right systems for their business model. Excel sheets and the time clock work, but these systems don’t communicate very well. Even more, consider the unreported overhead time to reconcile these systems and the mistakes made during this process.

“If it works, don’t fix it” doesn’t always apply, and information in more than one system doesn’t work when trying to maximize profit. When it comes to job costing, you already have to worry about inaccurate estimates from suppliers. These are costs you can’t control, so be sure to take control of your internal cost monitoring to create profitable bids you can deliver.

Establishing Key Performance Indicators

Key Performance Indicators (KPIs) are various quantifiable measurements used for determining the success of the project. The KPIs establish a guide to the project and are used as the basis for critical decision-making. More importantly, not executing on a specific KPI can affect the project’s profitability for your firm and your client’s satisfaction.

Here’s where some project-based firms struggle. In many cases, several of the KPIs are destined for failure before the project starts. The problem is that defining KPIs is truly challenging and your clients usually lack experience with the process. All too often, this results in KPIs that are unrealistic and unmeasurable.

Establishing realistic KPIs is the first step to managing the profit of a project. As the project manager, it’s in your best interest to have a strong role in creating the KPIs. Good project KPIs have values that can be accurately measured and clearly reported on. Further, they need to be understood and agreed to by all parties. To learn more about project KPIs, click here.

Risk Management

Projects are full of unforeseen obstacles and predicting these is not always possible, but this doesn’t mean your firm can’t minimize the impacts. They just need to have a formal risk management strategy. Although this might be a time consuming process, it’s a necessary process required to protect your profit.    

A study by Info-Tech Research Group found that organizations with a formal risk management strategy are more than half as likely to have project management success than those with a reactive approach. To put it another way, having a risk management strategy before the project gets started is critical to the project’s success and profitability.

A risk management strategy starts with identifying common risks such as unrealistic schedules and requirements that fail to align with the strategy of the project. Once these risks are identified, evaluate the impact each risk will have on the project. From there, make a contingency plan that has a pre-planned response to the unexpected event.       

Become a Profit Manager

Don’t start your next project in the red. Project management starts with project planning, and not having the right systems and processes in place can hinder the success of the project. If your firm is falling into any of these pitfalls, consider the changes that you can make to become an effective profit manager.  

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Topics: Project Management, Building Business, Professional Services

Management of Change Series: The Executive Perspective

Posted by Scott Seal on Thu, Oct 16, 2014 @ 09:19 AM
management of change exec

You are the leader of a company.  People look to you for establishing goals, creating direction and for driving the company’s success.  When looking at managing change, your perspective is from 5,000 feet … but with all the responsibility of the minutiae.   This second installment in our Management of Change series focuses on how you, the executive, must navigate your employees through the rough waters of change to the calm seas of success.  Here are the important steps.

1. Establishing goals

In order to effectively manage change, an important first exercise is a goal setting session with the entire leadership team.  Unfortunately, we hear too often, “I know it’s important, but we don’t have time for goal setting meetings with all the other meetings we already have.”

Without goals, though, here is what you’re doing.  Let’s say you want to take a vacation.  Great, now book your flight(s), reserve a hotel room, and schedule some activities.  But wait – where are you going?  Is your hotel room in the same place as where your flight landed?  How much is this trip going to cost?  Are the activities in the same area as your hotel?   In your personal life, of course you know all the answers to these questions, because you already had your goal, your destination in mind and your family buy-in before making decisions and actually spending money.  But do you lead your company with this same clarity of purpose?  Do you have clear and specific goals and the consensus of the management team before making decisions and sending money?  Too many, regrettably, do not. 

It is time consuming and difficult, but absolutely necessary to establish clear goals that also have the buy-in of every member of your leadership team

2. Creating direction

Now that you know where you’re going, how are you going to get there? As we discussed in our first piece, “change management requires a structured approach for lasting benefits”, that structured approach is the direction, the roadmap that the executives of companies need to create in order to reach company goals. 

Of course, you know all this already; you spend hours of your valuable time in seemingly endless business planning sessions.  But this is a bit different.  When looking at change, you are not just trying to reach a goal, like higher profitability or increased revenue, but you’re working to reach a goal of minimizing any negative impacts change might bring.  Change is usually required most often as a result of

  • External forces like politics, environment, or technology

     OR

  • Internal requirements like a major reorganization or change on offerings

Another thing you are already quite aware of … change is hard.  It effects not only your established company processes but, more importantly, the people in your organization. 

Process Changes

When change impacts your processes, every area in your organization is impacted:  Finance impacts HR which impacts Marketing which impacts IT which impacts … well, you get the picture:  Your company is an interrelated amalgamation of interactive expertise.  Although executives often speak in department silos – “Let’s work with Finance on that new report” – we all know that the report depends on information from every other department in the company which means that “new report” is not just Finance’s responsibility but every department’s responsibility.  And why?  Defined as a series of actions or steps taken in order to achieve a particular end, process is what drives your company’s every day activities which ultimately lead to the achievement of your company goals. 

People Changes

But there’s more.  While change impacts your processes, it’s the people in your organization who are actually running those processes, and it’s the people who struggle with change (yes, even you executives are people who struggle with change too).  Peter Drucker, Wikipedia tells us, “whose writings contributed to the philosophical and practical foundations of the modern business corporation, says that ‘We now accept the fact that learning is a lifelong process of keeping abreast of change.  And the most pressing task is to teach people how to learn.’” Change is indeed a hard and necessary evil but can be abated with training which is the next most important part of company-wide user adoption of change.

3. Drive Company Success through Powerful Tools

dashboardSo what are the tools to allow you to be an effective, involved leader of the management of change process?  Quite simply, an executive dashboard in a technology solution from a company like Full Sail Partners who can customize software for your change management project.  Dashboards, like the one pictured here, can allow executives to get a snapshot of activities taking place during the change process ensuring that you have a pulse on your project.  

Bottom line

As the executive, you have many roles – not the least of which is company change agent.  A tremendously important role necessary to allow your company to continue to flourish in the wake of ever-changing internal and external environs.  The leadership team must clearly define goals and create a clear plan for reaching those goals keeping in mind:

a) The impact of the changes in process and the people who are required to do them

b) The tools and the allies, like Full Sail Partners, Inc., that you have access to which will help manage your change. 

Now is the time for company executives, like you, to accept the challenge of change! 

 

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Topics: Building Business

What Do Soccer and ERP Consulting Have in Common?

Posted by Scott Seal on Thu, Aug 14, 2014 @ 12:00 PM

crazysoccerHere in the United States, our sports zealots perform crazy antics like going shirtless in freezing weather or painting their faces in support of their teams.  But it’s more than the individual antics; the real difference is in the scale of extremism that soccer fans exhibit – a literal global exuberance all in support of their beloved sport.  But wait, isn’t this an article on ERP Consulting? 

Well, believe it or not, soccer and ERP consulting have quite a lot in common: 

  • They both strive to achieve a very specific GOAL.
  • They require coordination among the various efforts of serious talent to make it all happen.
  • True fans are enthusiastic about the team winning.

Breaking it down: Are Soccer and ERP Consulting that Similar?

ERP

First, let’s talk about and define ERP.  Enterprise Resource Planning (ERP) is the name given to the compilation of software products and/or modules.  According to “Could Your Firm Benefit From an Enterprise Resource Planning Solution

The original Enterprise Resource Planning (ERP) solutions, introduced in the 1990s, were primarily designed for and used by manufacturers. Today, ERP solutions have evolved and serve as a tool to manage the project life cycle for professional services firms. These include firms involved in IT services, architectural and engineering, design and planning, system integration, and management consulting, to name a few.
Furthermore, according to CIO.com’s “ERP Definition and Solutions"
ERP’s must serve “the needs of people in finance as well as it does the people in human resources [and other departments which typically have their] own computer system optimized for the particular ways that the department does its work. But ERP combines them all together into a single, integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other.” 

This sharing and communicating of information is all geared toward one, single purpose – achieving business goals. 

Putting them together

Next, let’s get back to one of my favorite subjects, soccer.  Soccer is a game requiring the coordination of individual players, each with their own proficiency; sometimes it involves players from different nationalities, or differences in a position focus like a goalie or halfback or a variations in specific skillsets like juggling or dribbling the ball. The players rely on the communicating and sharing of information during a game to one single, purpose – putting the ball into the net for a GOAL, a win.

So, like the soccer team with different players, ERP consulting requires synchronization of dissimilar needs, processes, and indeed functions of the software of different departments, so that the business can achieve its business GOALS, its win.

It takes the right coach to win

ERP ConsultingIn soccer, while the right players, good equipment, and positive fan support are unquestionably important parts of the team’s success, the keystone to an effective soccer team is, in fact, the coach.  The coach’s job is to balance each player’s strengths against the combined team’s goal of winning.

The coach in ERP is the ERP Consultant.  Having the right individual department software is important, but the keystone to implementing a system, evaluating business processes, and bringing all that information together in a meaningful way is the ERP Consultant.  This person, like the coach, has to balance all the individual parts, i.e. departmental needs, in order to reach the business GOALS of the entire organization. 

How to find the right ERP Consultant

Choosing the right ERP Coach, er, Consultant is your important first step.  This person can help you determine the scope of your ERP project – including costs, size, structure, business process evaluation, and ERP goals as well as help you research and find the right ERP solution for your business.  Full Sail Partners, Inc., for example, specializes in identifying the critical resources to create a faster, more efficient, and cohesive business infrastructure for professional services firms looking at ERP solutions.  Ultimately, you need a consultant who

  • listens to you
  • knows your industry
  • understands needs beyond the tool
  • understands your company culture, and
  • knows the ERP industry.

Don’t get a red card

redcardChoosing the wrong ERP consultant or software solution can lead to significant issues penalizing you in dollars, time and public relations.  Following are only two examples of many instances of what happens when ERP implementations fail:

… Knight Capital, [a financial services firm,] recently lost over $400 million in a matter of minutes because of a glitch in its trading software — trading software that wasn’t fully tested and properly deployed prior to production. In addition to the immediate impact of lost cash and profits, the software failure also caused the company’s stock to drop 68-percent the day following the glitch. 

SAP and AxonCity of San DiegoThe city of San Diego, CA terminated its software implementation contract with services provider, Axon, citing “systematically deficient project management practices” and a project that was running $11 million over budget.

But be aware, an ERP Consultant cannot entirely save you from these “red card” losses.  Like the soccer coach, their real purpose is more about setting realistic expectations and sound goals, as well as offering their expertise for avoiding potential issues before they occur.   

In the end

Although analogous in many ways, the reality is that soccer is purely a game to most of us while ERP consultants help you achieve your GOAL – a more efficiently run business resulting in greater success for all your employees.  Calling Full Sail Partners as your ERP consulting expert is your first step in achieving your WIN.  

And while going shirtless in below freezing weather or being painted the colors of your favorite ERP vendor is one way to show your support, it’s not necessary.  But then again…a Full Sail Partners logo on my chest would make me stand out in the crowd. 

 

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Topics: Building Business, Technology Solutions, ERP

Do You Have the Correct Project Collaboration Tools in Place?

Posted by Scott Seal on Wed, Feb 26, 2014 @ 11:30 AM

Project Collaboration ToolsThe weather this winter has played havoc with the daily lives of millions of individuals, as well as countless businesses. 

One industry that has felt the impact in a unique way is that of professional services firms. These firms rely heavily on collaboration among their team members to manage and work on their projects. Unless they were already prepared to allow employees to work remotely, when the bad weather hit, many of them had to simply shut down until employees could once again manage to get to the office. 

Fortunately, technology is offering better and better project collaboration tools that allow team members to work together no matter where they’re located. But that’s just the tip of the snowdrift, so to speak. These solutions also make life easier for individual project managers and team members, increase the amount of creative collaboration among members of the team, and ultimately result in better projects. What’s more, they allow firms to easily include clients based in other locations, helping to maintain and build communication when meeting face-to-face isn’t an option. 

Let’s look at some of the key capabilities that effective project collaboration tools enable within a firm.

  • Communicate with anyone, anywhere, anytime. The most essential capability is making sure all the people involved on a project are able to effectively communicate and collaborate with each other. Any given project can include various employees and teams within the firm, as well as assorted external individuals, such as client representatives, consultants, and attorneys. A group this diverse often presents challenges in terms of finding communication channels and applications software that everyone can access and use — whether from their desktops, laptops, tablets, or smartphones.
  • Organizing the work. A second major function of effective project collaboration tools is to manage the tasks that are involved in each particular project. This function allows the project manager to use a central, intuitive resource to manage the many individual deadlines that are typically managed through email and Excel spreadsheets to complete milestones.
  • Streamlining document management. A third major function that effective collaboration tools address is that of document-sharing. Using a tool such as Kona, for example, allows you to share documents that your entire team (including external members) can view. As a result, instead of searching through dozens of emails to find the documents you need, you and your team have a centralized location. In addition, users have the option of uploading files directly to Kona or using other file-sharing solutions, like Dropbox, Google Docs, or SharePoint.
  • A better view across projects. An effective project collaboration tool allows project managers to have a view across all the projects they are managing. As a result, they not only have insight into the specific tasks, conversations and files for the current project, but can also view upcoming tasks and new conversations and files in one widely-accessible environment. 

Better collaboration, better results

For firms in the professional services space, project collaboration tools offer a wide array of functionalities that can help improve not only the interactions of a given project’s team, but ultimately, the quality of the ideas and solutions the firm delivers to the client. An added benefit of technology-enabled collaboration is that it can help create a better experience for the clients involved — and that can help a firm differentiate itself from its competition.

Deltek Kona, Social Collaboration

Topics: Collaboration Software Tool, Project Management, Professional Services

Difference Between Project Backlog and Project Forecasting?

Posted by Scott Seal on Wed, Nov 06, 2013 @ 11:28 AM

Project Backlog, Project ForecastingProject Backlog and Project Forecasting are two of the major components that predict current and future profitability of a firm. As firms begin to put together financial budgets for future years they are often looking at these two in conjunction between project backlog and project forecasting. Typically there are two different processes for forecasting future revenue:

  1. Project Managers forecast work-under-contract, as part of backlog. This contracted work not performed is the most accurate indicator of short-term revenue. Additionally a firm’s backlog (the difference between contracted work and the work completed to date) reflects past marketing success and current project managers’ ability to balance resources against project workload. How successful a firm is in managing this backlog often determines whether profits are either realized or squandered.
  2. The Marketing group forecasts less-probable opportunities as part of our Project Forecast. Unlike the project backlog, the Project Forecasting discounts project opportunities to reflect uncertainty the project will be put under contract. When reviewed together, these two provide a very good picture of future revenues and upcoming workload.

Benefits of Project Backlog and Project Forecasting

A solid Project Backlog and Project Forecasting process helps manage this balance in the following ways:

    • Provides project managers tools for resource planning, scheduling, and deliverable management.
    • Provides a solid basis for marketing decisions. If your backlog forecast is lower than anticipated then increase your marketing campaigns engine. If your backlog forecast is higher than anticipated then add resources or become more selective about your marketing campaigns.
    • Provides validation of firms’ revenue projections to confirm the accuracy of your corporate financial planning efforts.

The project backlog and project forecasting process need not be complicated; it needs only to provide a standard tool for company-wide project planning and review. Use the following three steps to initiate a project backlog and project forecasting process.

1. Prepare a weekly ‘bottom-up’ forecast by project manager.

    • Each project manager compile a project backlog forecast that identifies active projects under backlog and opportunity forecast that exceed say a 60% probability.
    • Assign team member resources, and then resource loads (using an hours forecast) each project for the next six-to-eight weeks.

There are several benefits of these project manager forecasts which include:

    • Provides the project manager an opportunity to balance resources, identify gaps in workload, and plan for downtime (i.e. vacation, holiday, training, etc.).
    • Provides structure for reviewing project milestones, progress, and budgets.
    • Provides revenue forecast by pairing the forecasted hours with billing rates.

2. Management aggregate review

Once weekly project backlog forecasts are completed, management then can compile and review these aggregated forecasts. This step often provides insight into the following areas:

    • Possibilities of resource sharing between teams or service areas.
    • Provides glimpse at future  revenue projections
    • Identify potential budget problems.
    • Comparison of projected backlog revenues against corporate revenue goals.

3. Comparison to actual utilization.

Finally, we review weekly utilization from timesheets to ensure that forecasting matches reality. These reviews provide a critical feedback loop to improve your project forecasting process.

By following a sound process of project backlog and project forecasting tracking your firm can increase project management effectiveness, make better decisions about marketing expenditures, and improve and validate your corporate revenue planning efforts. These benefits will drastically improve profitability. 

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Topics: Project Management, Accounting, Professional Services

Why Cash Flow Planning is Essential for Growth

Posted by Scott Seal on Wed, Oct 30, 2013 @ 08:32 AM

cash flow planning, cash flow planFor most professional services firms, planning for growth is a natural part of business. There are different strategies for doing so, and choosing the best one depends on your ultimate growth objectives. But whatever your goals, understanding how your growth plan affects your cash flow plan is essential to achieving the results you seek.

The way you grow affects cash flow planning.

Organic growth. There are a number of ways to grow one’s business organically. For example, in a generally healthy economy, your firm could continue doing “business as usual” (i.e., not increase your marketing or business development activity) and still experience significant growth from the improving economy. This type of growth is typically slow-paced; you can keep up with the increased demand either by using existing staff or gradually “ramping up” your staffing to meet the growth curve.

A somewhat more aggressive growth plan might be to expand your client base in the same market niche and geographic area where you’re already doing business. In such a scenario, you are typically increasing your marketing and business development outreach to generate business. As this outreach occurs, you may experience rapid growth that requires you to have staff immediately available to meet the increased client demands.

Strategic growth. Alternatively, you might be planning to significantly expand your service offerings or target market. For example, an engineering firm might add a new service line, or expand into another geographic market. In such cases, you could expect to take on additional marketing and staffing expenses, along with expenses for market research (please do not skip this step), software and equipment and possibly even new office space. These added expenses occur up front, well before you bring dollar one through the door. 

Expect a time lag before reaching ROI.

The fundamental point to keep in mind is that your cash flow will take a hit, probably at least for 90 days for increased staffing costs, and longer for marketing costs. The reason for this is the unavoidable lag between when you begin investing in expansion, and when you actually start reaping the benefit.

Here’s the general reason for the time lag. Once you decide to expand, there are several types of expenses you’ll incur at the beginning of your growth effort — investments that will not bear fruit immediately. For example, there are costs to hire and train new employees, with probably 60 days before they’re doing billable work. Even if you’re very efficient and bill on day 61, then the earliest you should expect payment for their work will be another 30 days, making it a minimum total of 90 days where cash is going out, but no additional revenue is coming in.  

How to meet the demand: sub-consultants vs. salaried staff.

In general, hiring consultants requires less of a cash investment than full- or part-time staff, as they typically will not get paid until you get paid (Paid When Paid, or PWP). This advantage may be offset, however, by the fact that consultants can also be more challenging to manage and they have their own clients (and potentially conflicting commitments as well). Additionally, you still have to invest manager time to assign and manage the sub-consultants’ performance.

On the other hand, while full- or part-time staff may be more costly to hire, they will likely gain institutional and process knowledge as they work, which should make them increasingly valuable to your company. Additionally, they are typically focused on the company’s needs and requirements; you can control their priorities.

Tracking cash flow and return.

The other part of cash flow planning during a growth period (or at any time, for that matter) is monitoring your expenditures and results (hopefully in the form of additional revenue). As with any plan, it’s essential to have an idea of the effort you need to expend, and what results you expect from that effort. Even if your plan is “business as usual” because of an improving market, you should understand what results you expect from the improving market. If you are increasing your marketing effort in your existing market, you should know what you expect from that effort in the form of additional leads, opportunities, clients and, of course, revenue. Without the increased revenue, what is the justification of the increased marketing effort (and assumed increased cost)?

There are a number of approaches for tracking results, ranging from one-off spreadsheets to purpose-built ERP solutions.

In our experience, one of the most effective strategies is to find a solution that accomplishes several key functions at once. Deltek Vision, for example, is a purpose-built ERP solution that provides a unified platform for connecting the front and back office functions — providing up-to-the-minute insight into cash flow planning, as well as accounts receivable, billability and utilization statistics, and much more. It even includes integrated solutions for automating major parts of your processes for customer relationship management, proposal development and tracking.

Watch the details, but don’t neglect the big picture.

Keep in mind that the timeframes for generating ROI mentioned in this article are generalizations. In fact, they’re based on an ideal scenario that assumes making good hires, efficiently training and integrating them, finding a receptive market … and getting paid on time.

Naturally, as the fine print often says, actual results may vary. This makes it even more important to build-in expectations that cash flow will take a significant hit for at least a few months before you start reaping the rewards of you investment.

Growth is rarely painless or easy — but knowing what to expect is far better than wading into a growth plan without knowing when it will start paying off.

 

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Topics: Accounting, Building Business, Professional Services

The Business Benchmarking Process: 4 Key Steps

Posted by Scott Seal on Wed, Jul 31, 2013 @ 08:35 AM

Business Benchmarking ProcessThe business benchmarking process can be a powerful tool to help any organization make better decisions, run a tighter operation, and better position itself in the marketplace. For the best effect, it pays to use an approach that boils down to four key steps. 

1. Learn from others. If you’re new to benchmarking, it may be helpful to explore how other organizations do benchmarking, and see how your organization compares. Fortunately, there are many industry experts and organizations that share information about their benchmarking process. Some of our favorites are:

Of course, there are enormous numbers of additional companies and organizations that benchmark as well, so you may want to explore further. 

2. Decide what’s important for you. The first step is to choose meaningful measurements to use as your standards or benchmarks. Key performance indicators (KPIs) in the form of financial and project-related statistics can provide meaningful insights into company performance, beginning with how your own company has performed over time. For most professional services firms, there are a variety of KPIs that can be helpful in giving an accurate reading on the organization’s financial and operational health. Some of the most widely used are:

  • Accounts Receivable
  • Average Collection Period 
  • Chargeable Ratio
  • Chargeable Ratio times Net Multiplier
  • Current Ratio
  • Debt to Equity Ratio
  • Employee Realization
  • Employee Utilization
  • Estimate at Completion (EAC)
  • Estimated to Complete (ETC)
  • Net Multiplier
  • Net Revenue per Technical Staff
  • Net Revenue per Total Staff
  • Overhead before Discretionary Distributions
  • Profit on Net Revenues before Taxes and Distributions
  • Return on Owners’ Equity

Consider which of these metrics truly measure success for your organization, and establish corresponding benchmarks. These can be based on your firm’s historical performance, industry surveys, standards specifically designed for the type of work, your firm’s general philosophy, or a combination of factors. When choosing which organizations against which to benchmark your organization, consider such factors as industry, geography, and size; the more similar they are to you, the more relevant and valid their metrics will be. 

3. Track the data. Once you’ve established which metrics to track, and corresponding benchmarks against which to gauge your firm’s performance, the next step is to start tracking. There are a variety of approaches for doing so, from one-off spreadsheets and workarounds (not recommended) to software packages, including accounting solutions that specifically track financial statistics and project management products that specialize in tracking data on individual projects.

A better alternative, however, is a purpose-built ERP such as Deltek Vision, which connects and organizes data from both the front office (i.e., project) function as well as the back office (accounting). This solution can provide a firm with up-to-the minute, comprehensive visibility into all the metrics listed above. Just as importantly, it serves to optimize oversight of the firm’s projects and staff, and automates a wide variety of essentially manual processes — including Customer Relationship Management (CRM), business development and more. 

Whether you use a combination of software programs or a comprehensive solution like Deltek Vision, the key is to collect metrics on an ongoing basis. 

4. Make data-driven decisions. The last part of the business benchmarking process basically closes the loop. It involves making sure the right data is getting to the people who need to see it in a timely fashion, and that there is a management commitment to using data to make decisions. 

For example, schedule-based metrics can help management determine not only if a project is currently on budget, but if it will finish within the overall budget as well. If the EAC is greater than the overall budget, management may choose to either reduce future expenditures or accept that the project will be over budget, and determine where the slippage occurred (such as failure to send out additional services contracts). Of course, this is just one example; management will have a variety of options and decisions to make, based on the specific metric that is underperforming, and how wide the deviation is from the desired benchmark. 

One of the keys to success in this part of the benchmarking process is ensuring that management has access to all the metrics they need at any given time. There are manual ways to gather and present this information to management, but automated KPI dashboards, one of the customizable features in Deltek Vision, are a much more efficient way to do so. 

The time to start is now

Whatever road you take to identifying and tracking your firm’s benchmarking information, the process will pay dividends as your firm gains a more relevant and up-to-date picture of its performance. Just as significantly, it allows the firm to be proactive rather than reactive in addressing underlying issues before they turn into major problems — thus increasing the probability of project and financial success.  

 

Deltek AE Clarity Report

Topics: Tips, Accounting, Building Business, Professional Services

4 Ways to Improve Employee Utilization

Posted by Scott Seal on Wed, Jun 19, 2013 @ 08:36 AM

improve employee utilizationIn the recent AE Clarity Report issued by Deltek, the average employee utilization rate was reported as 59.8%. Firms are often confronted with how they can improve employee utilization to create a positive impact on the firm’s bottom line, all while keeping employee morale in mind. To improve employee utilization in both the short term and long term, focus on these four key areas:

  1. Realistic Utilization Target: Firms that set realistic employee utilization targets tend to have higher morale as the goals for target utilization are viewed as attainable by their staff. These realistic targets allow for staff to focus on other, non-production (yet still important) initiatives for the firm, such as business development, staff development, and team building. Firms that allow employees time to focus on these areas will greatly increase employee productivity in the long run through increased employee and team efficiencies, as well as reduced staff turnover.
  2. Proper Resource Allocation: With proper resource allocation, firms can realize a dramatic impact on employee utilization. Appropriate resources should be aligned prior to project initiation based on level and expertise for each task. With proper resources aligned with the tasks, tasks can be performed in a timely manner with the appropriate labor costs incurred against the budget. Proper resource allocation will also help keep your employee realization in alignment with employee utilization, resulting in hours worked actually being billed.
  3. Managing Client Expectations: Balancing resources allows employees to meet client expectations. Through managing the initial tasks and client expectations, firms are able to quickly identify tasks that were not part of the original scope of work. By identifying these tasks up front and notifying the client quickly, you can better manage client expectations and properly keep resources aligned. As a result, you will maintain a good client relationship with realistic expectations, while keeping your employee realization in alignment with your employee utilization.
  4. Real-time Visibility: With any metric such as employee utilization, real-time visibility is critical to properly setting expectations for both the employee and the firm, not to mention serving as a real-time way to measure and track results against the goal. ERPs, such as Deltek Vision, offer you this capability to maintain, measure, and track such key metrics as employee utilization instantly as soon as time is entered into a daily timesheet. This real-time visibility gives your firm insight and the opportunity to influence the final results to ensure resources are properly aligned, client expectations are managed, and employee utilizations maintained.

To improve employee utilization, firms must also keep in mind other areas that require attention. The 2013 Deltek AE Clarity Report identified that improving productivity and streamlining processes result in higher profits for professional services firms. Employee utilization is only part of the equation. Interested in learning more?

See how your firm can benefit from improving your project management processes by viewing our webinar: Get the Work Done! Tackling Project Management to Improve the Bottom Line

Topics: Project Management, Tips, ERP

Measuring Employee Productivity and Profitability with Software

Posted by Scott Seal on Wed, May 15, 2013 @ 08:28 AM

PRODUCTIVITY ARTICLE2Of all the metrics that professional services firms can track, two of the most important are utilization and realization.  These are different, but related ways of measuring employee productivity and profitability. Both can be measured with a high degree of accuracy — and made visible to management — using software.

A quick jargon review

Utilization measures the hours charged to a client’s project compared to the total available hours (usually 40 hours per week). For example, if an employees’ expected work week is 40 hours and the employee achieves 35 hours of client chargeable work then their utilization rate is 87.5%.

Utilization is not necessarily within an employee’s control: for example, an employee might be working on an important internal project that can’t be billed. Because of the many variables that affect utilization, the longer the period over which it’s tracked — say, over the course of a year — the more useful it is in evaluating performance against employee and company goals.

The second metric, realization, refers to the actual revenue based on employees’ hours charged and billed to clients compared to what they should have generated from their utilization achieved. It’s a measure of their profitability, and a metric that provides valuable insight into how well a company is able to translate hours worked on projects into revenue. In a perfect world utilization and realization will be equal, but this is rarely the case.  Realization can also help in compensation and promotion reviews, staffing decisions, project and unit pricing and assessing the health of the company itself.

The impact of measuring employee productivity and profitability can be enhanced further by a commitment to Earned Value Management (EVM), a project management technique for objectively measuring project performance and progress. Together, these techniques help a firm gain a clear, objective view of employee and project performance, identify where resources are over- and under-utilized, and optimize workforce utilization and profitability.

Software solutions

There are a number of software solutions for measuring employee productivity and profitability. Some focus specifically on project and resource management, while others provide these functions as part of larger, more integrated solutions. 

For example, Deltek Vision can provide a firm with comprehensive visibility into its organization, efficient oversight of its projects and people, and efficient automation of processes. Most significantly, it allows the firm to be proactive rather than reactive in addressing resource management issues, thus increasing the probability of project success. On a more tactical level, the product’s Employee Realization feature allows a user to track and report on realization values, compare utilization vs. realization, optimize staff utilization, minimize scheduling conflict, and substantially reduce the potential for missed milestones. 

Whatever approach an organization uses in measuring employee productivity and profitability, doing so requires a sustained effort and commitment on the part of management. Handled correctly, however, the payoff is immense: instant visibility into resource commitments across an entire organization, and granular awareness of who is available (and when) with the skills needed to satisfy projects’ technical requirements.

Topics: Project Management, ERP, Professional Services

10 Most Common Resource Management Problems

Posted by Scott Seal on Wed, May 01, 2013 @ 08:32 AM

Every professional services firm works to distinguish itself by the creativity, effectiveness and execution of its services. But more often than not, the reality is that these firms tend to succeed or fail based on how effectively they overcome the most common resource management problems.  

  1. Resource Management, Resource Management Problems, ERP, Deltek VisionMissed project deliverables and deadlines — Getting the work done on time sounds simple, but it’s not. It’s a complex balancing act involving creativity, quality control, resource management and much more. If you don’t have sound processes in place, all the best thinking in the world won’t mean a thing.
  2. Ineffective documentation on billable hours — What creative person wants to hear that their success might rely in part on basic accounting skills? For professional services firms, effectively managing billable hours is one of the biggest factors in profitability, and thus, lasting success.
  3. Lack of project resource visibility — A firm’s management needs to be able to quickly understand what projects are underway for which clients. Essentials include progress on milestones, technical issues and how, when and where resources have been allocated.
  4. Assigning the wrong people to teams — Each project requires a team with the right insights, talents and other qualities. As Deltek’s Bob Stalilonis observes, “In an industry where the workforce is one of its greatest assets, staffing processes can be either a boost to profitability or a thorn in the side.”
  5. Accounting and project management disconnect — Using several different tracking systems for key financial and project data can waste time, cause frustration, and increase the likelihood of data-related errors. Also, managers are less able to quickly respond to cost, scheduling or resource issues.
  6. Inefficient cash forecasting — Some firms are good at this, and others, not so much. It’s a complicated discipline (involving such areas as accounts payable and receivable, taxes, regulatory compliance and more), and without resource allocation to a timeline, there’s no way to forecast cash from projects.
  7. One-off spreadsheets and workarounds — Not all solutions are created equal or, for that matter, shared equally with the right people. Too often, spreadsheets and other workarounds exist in silos across a firm, leading to duplicated efforts, incomplete solutions, missed opportunities and unprofitable projects.
  8. Under-informed decision-making — Resource management problems always involve information in one form or another. Whether the information regards projects, teams, or human and other resources, it adds up to a large dataset that management must have at their fingertips before making any big decisions.
  9. Failure to meet financial reporting standards — Depending on their market, professional services firms often need to comply with various EVM (Earned Value Management) reporting regulations. It may not be rocket science, but failing to ensure metric reporting compliance can result in firms not getting reimbursed on contracts.
  10. Missed opportunities in business capture — Organizing and managing the work of business development teams is a complex, high-stakes process. Firms that find an effective way to do so tend to not only optimize their ROI and profitability, but also ensure just-in-time hiring or business development.

Of course, this list is really just a starting point — and depending on your firm, there are probably some resource management problems that may not belong in the top ten, or others that should appear right at the top of list. 

But whatever the core problems you face, and whether you manage them with in-house staff using ERP software and other solutions, or outsource them altogether, they must be addressed. Nothing can sink a firm deeper, or faster, than failing to properly handle these basic resource management problems. 

Topics: Project Management, ERP, Professional Services