Achieving consistent project profitability while maintaining strong client relationships is at the top of most firms’ goals and objectives. And, while there are certainly a number of variables that must be integrated to make this happen, asking your clients for feedback during the project plays a valuable role. I’ve identified two scenarios that are common in the A/E industry. Incorporating feedback into your project management process has been demonstrated to have a positive impact on both.

Reduce (or eliminate) Re-work

Streamlining the project delivery process is essential to creating project efficiencies that lead to increased profit on your job. But there are pitfalls to this approach unless you are getting regular project feedback from your clients. Let’s look at a scenario:

You have done projects for one of your best clients for more than 10 years. You have developed a delivery process that seems to be working for them and it eliminates the need for your team to reinvent the wheel each time. Enter the new client project manager. This individual has their own set of expectations regarding how this project will proceed. And, although you all believe you were aligned when you left the kick-off meeting, suddenly there are 10 pages of comments to your first major submittal. They don’t like the format, they feel you have left out critical information, and generally they are looking for you to fix the problem which will require some significant re-work on your team’s part.

How could project feedback have avoided this outcome? Firms that have integrated gathering feedback into their project management process understand the importance of requesting feedback after each milestone meeting or deliverable. In this scenario, a feedback request would have been sent after the initial meeting perhaps after the submission of the meeting minutes. This would give the project manager the opportunity to uncover gaps in expectations with this new project manager. Before his team began to move forward on the project, these gaps can be closed. In this scenario this would have meant deviating from the streamlined process at least a little, but that knowledge and flexibility would save many hours of re-work that kills a project budget.

Avoid Scope Creep

Scope creep is something most A/E firms understand all too well. You know what is needed to complete the project but the client is extremely cost conscious and asks you to remove several items to lower your fee. Depending upon the experience of the project manager involved, they may be able to complete the project to the client’s satisfaction. However, doing so will quite likely result in a lower profitability for your project. Let’s look at a scenario:

You have been asked to design a renovation for a commercial building for a new client. This type of work is your specialty. You know all of the elements that will be needed to meet your client’s expectations for a successful project. However, when the client asks you to remove about 5% – 10% of the scope so that your fee will fit into their budget, you agree because this is a client that you really want to work with and your staff is a little light on work at the moment as well. As the project progresses, you run into problems because of the scope you removed and the client ‘forgets’ they asked you to remove these items and asks you to do what is needed to complete the project. Rather than ask your client for an increase in fee, you just finish the project with the fee you have been given. This involves both you and your team working extra hours and your profit still takes a hit.

How could project feedback have avoided this outcome? Because this is a new client let’s assume that the opportunities to use feedback to avoid the fee reduction in the first place are limited. Requesting feedback from your client throughout the lifecycle of the project however, can play a significant role when the scope items you removed come back into play. Each time you send a feedback request to this client you are giving them the opportunity to let you know how well you efforts are matching their expectations. You are building the relationship with them that lets them know that you value your relationship with them and it is your goal to ensure the project outcome meets or exceeds their expectations. When the moment comes that the scope items you agreed to remove become essential to the project, this relationship will make the conversation to request additional fees more comfortable for both of you.

Interested in learning more about using project feedback to increase profits?
 

Your firm is committed to using client evaluation surveys to ensure project success. So what do you do when your client gives you all high marks and you just know it isn’t true?

Recently one of our clients shared a story with me in which she was faced with this situation. Megan had been working on a project for Dee for several months. During this time there were a lot of times – certainly more than typical – when Dee came back with comments like, ‘well, that is fine but…’ Megan continued to feel that as hard as she tried to meet Dee’s expectations, there was something that was just not adding up.

For a number of years, Megan’s firm had elected to use client evaluation surveys. As a result, and because Megan really wanted to create a successful project for Dee, she decided to send her a survey. The survey asked Dee to consider specific points in the project process. It gave her a chance to share her thoughts on how things were going. The goal of the survey was to hear what Dee felt was important and to allow Megan to uncover what processes Dee felt were working well and which ones might be adjusted to work a little more smoothly.

Much to her surprise, the survey came back with all top scores and the comment, “I just love working with Megan!”  

Since her purpose was not to receive accolades but to serve her client more successfully, Megan gave Dee a call. She told her she really appreciated her taking the time to complete the client evaluation survey but she was a little concerned with the high scores. She told Dee, “I really enjoy working with you as well but I just feel that there is some way in which I could be serving you better.” Dee told her that she gave her the high marks because she knew other people would be looking at the scores. She said she really did like working with Megan and didn’t want her to get into any trouble.

Megan thanked Dee and told her she really appreciated her thinking of her. She was quick to add, however, that she (and her firm) actually appreciate knowing what their clients are thinking even if the survey comes back saying that the client is not completely happy with something. She pointed out that the reason her firm uses client evaluation surveys is because they are committed to providing their clients with the best possible experience.

So how does the story end? Megan and Dee had an excellent conversation. They talked about the processes Megan was using on the project and agreed on a few minor adjustments that Dee felt would really work a little better for her. In the end, the client evaluation survey actually worked just as intended. Even though the high scores did not accurately reflect what was going on in the project at that time, it opened the door to an excellent conversation.
 

Each of your clients, like you, are individuals that have a unique definition for what a positive client service experience means to them. We can no longer treat everyone the same way – it just doesn’t work!  Sending client surveys gives your firm the opportunity to ask clients what that terrific experience looks like to them – each of them. It also gives you the chance to show that your firm is serious about their satisfaction and to build stronger relationships. As a result of the thousands of survey results and comments we’ve seen, we wanted to share with you the top 3 reasons clients want you to send them a client survey.

1. Ease or Dis-ease: Your clients want to be at ease in their relationship with you. They hired your firm in the first place because they believed you could provide them with something they needed. So what happens when something is not exactly right? We all know that tension we feel when some relationship we have is not flowing smoothly. Your clients feel the same way. When you send them a client survey and give them the chance to let you know that something could be a little better, it creates a greater sense of ease for them because you gave them a voice. 

2. Build Trust: Trust is a funny thing, it takes time to build and usually involves both positive (and negative) interactions. We all want to be seen as ‘an expert’ for our clients and sometimes may think this means that there are never any miss-steps or misunderstandings. Clients understand that nobody is perfect – what they are looking for is corrective action when something has not gone as expected. The interactions you have with your clients often have consequences you may not even be aware of – how they look to their team, their boss, maybe their clients. When you send a client survey and follow up in a timely manner, your clients grow in their trust that you will handle situations in a positive, professional manner. 

3. Creates Affirmation: Everybody wants to be appreciated and acknowledged. In fact it is such a basic human need, that we hear and read about client appreciation and satisfaction in a great many marketing materials. The reality is however, that more times than not, these are empty words and there are no actions behind the words.  When you send a client survey and follow up, your actions, not just your words, tell your client that you value them, their input, and their satisfaction. That is a very powerful message.

For firms in the project-driven Professional Services industry, managing a defined set of tactical project management metrics is key to meeting strategic objectives.

Although it might seem efficient to have a single indicator of project success that measures the firm’s profit growth — for example, project profitability — there are pitfalls with such an approach. A better solution is to measure across a finite and efficient set of indicators that together track whether the firm is meeting its objectives, whether the specific goal relates to market penetration, service offering penetration or key account growth.

Project Management Metrics — collectively known as the Project Management KPI — fall into six major categories. One way to remember these categories is to use the acronym TRACQS. 

Is your project on TRACQS?

Time - How is the project tracking against schedule plans?

Keeping projects on schedule increases profit growth by lowering overhead and increasing labor margins. For example, when a project is off schedule and staff is reallocated it increases overhead to readjust the schedule may reduce realized utilization.

Metric calculation: Schedule Performance Index (SPI) = Earned Value of the work performed ÷ Planned Value of the work performed (to date).

Resources – Are we within anticipated limits of staff-hours spent?

Using staff and labor multipliers as budgeted is essential to maintaining project margins. When evaluating which resources to use, it is sometimes argued to use a more skilled person that will use fewer hours than a less experienced person. The thought is the margin will ended up the same. However, when this decision is made business development and client relations to do the production work can result in the firm’s backlog and pipeline suffering.

Metric calculation: Total Hours variance for budget vs. spent AND Labor Multiplier
Budgeted versus Labor Multiplier Attained.

Actions – Do we have action items outstanding or past due?

It may seem obvious, but without a metric tracking action items (completed, missed, and planned), project performance cannot be corrected. Maintaining visibility and monitoring deliverables can increase client satisfaction and reduce inefficient cycles of “catching the project up”.

Metric calculation: Number of project collaboration tasks that are past due.

Cost – How are we doing against the budget?

Monitoring this project performance metric provides direct insight into a firm’s profit growth.

Metric calculation: Cost Performance Index (CPI) = Budgeted Cost of the work performed ÷ Actual Cost of the work performed.  

Quality – Does client feedback indicate project success, or the need for correction?

On a regular basis, survey clients about results and milestones, based on meeting the client’s expectations to the deliverables.  There is little to no change that can affect the project, if you wait until the end of the project to conduct a survey, there is little to no change that can affect the project. A satisfied client results in more work (client retention), reference-ability (more clients) which are essential to firm growth.  

Metric calculation: A rating greater than X means quality, and anything less requires attention.

Scope – Is the scope staying within budget? If not, do we have authorization for variances
of planned from baseline?

Clearly define an agreed upon scope, the client’s role or responsibilities, and qualifying what constitutes a change in scope is an essential first step. When the scope has changed, documenting “why” will allow for margins to remain intact for
client requested change orders and allow management to take corrective action when the scope creep is due to the firm’s lack of performance to the initial scope.

Metric calculation: Comparing where planned exceeds baseline, and ensuring that original scope plus authorizations equal or exceed the estimate at completion.

Clearly, a firm needs to have mechanisms in place to measure these project management metrics. Almost as important, however, is finding a way to indicate variance from expected (budgeted) results in an easy-to-reference graphical format — e.g., blue for good, red for bad. Doing so will ensure that staff, project managers, and executives are all on the same page for tracking firm growth and responding to any obstacles or problems that may appear.

In order to truly gain a holistic view of the organization, there are key financial ratios and indicators that project-based firms should focus upon at regular intervals. Some key project performance metrics need to be monitored on a real-time basis, or at least weekly, while others are more relevant on a monthly basis. Also, because firms must first win projects and engage in other activities that do not directly produce revenue, project-based firms should also regularly monitor firm-wide metrics.

We should not focus on a single metric but rather, should adopt a more comprehensive view and monitor a handful of key metrics. For example, firms might reach the target for their Net Effective Multiplier (NEM) and yet have too few revenue producing projects, too much overhead, and poor utilization rates.

Key Project Performance Metrics for Management

At a minimum, firms should monitor their Net Effective Multiplier (NEM) on a monthly basis. The NEM is calculated by dividing net services revenue by direct labor, which is the cost of labor charged to projects. Net service revenue is total revenue less direct cost (i.e., Direct and Reimbursable Consultants and Expenses).

Most firms would like to see a multiplier that is better than 3 times direct labor. In its recent AE Clarity Report for 2012, Deltek reported an average of 2.9 with top performing firms reporting 3.43.

One way higher performing firms achieve a better NEM is by assigning appropriate resources to their projects. More experienced resources are typically very productive, but their higher labor cost drives the NEM downward. Thus, it is important to assign the resources with the right level of expertise to complete the task at hand.

Some firms prefer to report and monitor the Realization Ratio in lieu of the NEM. The Realization Ratio is calculated by dividing net services revenue by direct labor at billing rates instead of cost rates. A target Realization Ratio would be greater than 1.

On at least a weekly basis, if not real-time, firms should monitor Project Estimate-to-Complete (ETC) and Estimate-at-Completion (EAC) values. ETC amounts are how much additional money must be spent from tomorrow through the end of the project to complete the work. EAC amounts are how much total money you expect to have spent at the end of the project. This is calculated as the job-to-date costs plus the estimate-to-complete costs. ETC amounts can be calculated simply by maintaining schedules. With a timeline defined, ETC amounts are simply future scheduled amounts at either cost or billing rates.

Best Practices Tips: To monitor ETC and EAC amounts in real-time, it’s a best practice to complete timesheets on a daily basis. Additionally, to establish a proper Project Work Breakdown Structure, subdivide a project into smaller more manageable components (e.g., phases and tasks) to maintain schedules and monitor these amounts. Ideally, EAC amounts will not exceed budgets but by monitoring these calculations weekly, firms are better able to keep projects on track and the work within scope. 

Key Firm-Wide Management Metrics

Firms should monitor their utilization and overhead rates on a monthly basis, at a minimum. The Utilization Rate is calculated by dividing the cost of labor charged to projects by the total labor cost of the firm. In the early referenced Deltek's 2012 AE Clarity Report, the average employee utilization rate was reported as 59.8%. Excluding vacation, holiday, and sick time it was 65.4%.

Firms can improve employee utilization by setting realistic utilization targets, properly allocating resources, managing client expectations, and having employees monitor their performance against their target, real-time, while completing timesheets each day. The Overhead Rate is calculated by dividing total overhead (before distributions) by total direct labor expense. Typically, bonuses are excluded from overhead for this calculation.

An interesting finding from Deltek’s AE Clarity Report was the average overhead rate for 2012 which was 161.6% with bonuses excluded and 175.7% with bonuses. Rates were not significantly different for higher performing firms suggesting they had achieved higher project profitability with better NEMs and better utilization rates.

The bottom line is that there is no magic bullet but rather a handful of key project performance metrics firms should monitor at regular intervals to maintain profitability. Does your firm have a global view of your firm metrics? Schedule a demo today to see how Deltek Vision is an ERP specifically designed to provide access to these key metrics and many more. 

Deltek Kona is a cloud-based social collaboration and productivity platform that empowers individuals and groups to connect, organize and get things done together. Through the use of collaborative spaces, users have the ability to coordinate, share, and schedule events or tasks with teams and groups.

Groups that use Kona vary from companies to individuals. Companies communicate with team members, internal and external, on company initiatives, proposals submissions, and the execution of projects every day.  Individuals involved in organizations and personal groups need a way to coordinate efforts among participants.  You may find yourself in both of these circles.  No matter if you are a company or individual, each find Kona brings the conversation, tasks assignments, and files needed to a centralized space.

Most companies and individuals are already accustom to viewing their calendar in Outlook (Entourage for Mac) or Google. The good news with Kona is you can integrate the Kona web calendar into other calendar applications.  For today's example we will walk you through viewing your Kona calendar in Microsoft Outlook 2013. This allows you to see the Kona calendar along with any calendars you have setup in Outlook to provide a quick visual of all of your Kona spaces. 

Step 1

Login to http://www.Kona.com

Step 2

Select the calendar by clicking on the Events tab

Step 3

Click on Calendar

Step 4

Select Share this Calendar from the drop down menu

Step 5

Select the link displayed in the window and copy it.

Step 6

Open outlook and switch to the calendar view. Notice the list of calendars displayed at the bottom left.

Step 7

Right click on Other Calendars and select Add Calendar, From Internet

Step 8

Paste the link from Kona in the New Internet Calendar Subscription box and click on OK.

Step 9

Notice the Kona Calendar is now displayed in the bottom left

Step 10

Multiple calendars can are displayed when additional calendars from the list are selected

Step 11

Click on the arrow beside a calendar to combine the view.

Step 12

Now the Calendars and all appointments are all displayed in a single calendar view

Making the Kona calendar viewable in Microsoft Outlook is a great way to boost productivity, social collaboration, and calendar management. You can use similar techniques to attach other Internet based calendars to Outlook as well. The attached calendar is read only and is not editable from Outlook. This is a slight draw back but the ability to see the Kona calendar without switching applications provides a quick and convenient planning in Outlook.

Interested in Kona? Contact us for a demo or to discuss how Kona can help you.

At the core of a project-based firm’s business is the need to monitor the progress of your projects. As Project Manager’s we are busy and we need quick, real-time information to help us steer our projects. Just as a dashboard in a boat identifies and provides feedback regarding the status of our voyage – the speed, the wind angle, the wind force, and the navigational direction – a dashboard can provide the same information about your project.

Specifically, a project KPI dashboard can examine some simple indicators that allow a project manager to gauge which project(s) need more attention.  They should be examined on a regular basis. 

What Project KPIs should I be looking at?

• Accounts Receivable - Overdue AR can be a warning sign for many problems including:  client dissatisfaction, overall project communication issues, and client insolvency (they can’t pay us if they have no money. . . should we be loaning them more money?).  Make sure your AR is in line with a Summary AR Dashboard Part and one for each individual project.  We recommend examining this Project KPI at least twice every billing cycle.

 Tip to Think About:  What is my outstanding AR?  Not only the amount, but how many days out is it? 

• Unbilled Labor – A large amount of unbilled labor is a serious risk not only to the project, but to general firm cash flow.  The company cannot get paid for it if it doesn’t get billed.  A Project Manager should monitor this Project KPI closely all the time, but especially after invoicing.  Make sure to avoid carrying large amounts of unbilled labor from billing cycle to billing cycle.

Tip to Think About:  How much labor is sitting on my project that has not been marked as billed?  In other words, have I been billing my project progress correctly?  

• Estimated to Complete (ETC) and/or Estimate at Completion (EAC) – These schedule based measures will help you determine not only if you are on budget, but if you will finish the project within the overall budget as well.  Compare the EAC to the overall budget and if it is greater, you may decide to either reduce future expenditures or accept the fact that you going to be over budget. 

 Tip to Think About:  How much more do I need to finish this Project?
 When over  budget, confirm that you didn’t forget to send out additional services  contracts. 

• Summary Key Performance Indicators - Above the project level, the measures are usually about Net Revenue, Utilization and Backlog.  By putting these Project KPIs on your Dashboard, you can improve your performance and make your boss look good too.

Tip to Think About:  What is your Boss being measured on?  How can you manage your   projects better with the use of Project KPIs to improve those Summary Key Performance   Indicators?

There may be other metrics your firm utilizes.  Share with us what you have on your project KPI dashboard.  Also, be sure to check out our past webinar: Get the Work Done.

Many of us are familiar with the idea of measurement improving outcome. Whether it’s Karl Pearson’s Law: “That which is measured improves” or the concept of losing weight by counting calories, we understand that measuring results is crucial to understanding how to improve results. 

But it’s not just the act of measuring – it’s measuring the RIGHT things and then utilizing what was learned from the results. When trying to improve the performance and evaluation of your team or team members, what should be measured (and how) become critical questions. 

Professional services organizations are beginning to follow the lead of other industries and explore areas such as Voice of the Customer (VOC), Client Experience Management (CEM), and Enterprise Feedback Management (EFM). And while 86% of organizations across all industries employ some form of customer/client feedback as part of their performance and evaluation strategy, only 5% of professional services firms do so. 

If you are planning to implement a feedback process, consider these three key steps to creating an effective performance and evaluation strategy powered by client feedback. 

1. Any measurement strategy should promote desired employee performance. Therefore, it’s important to measure things employees can control or greatly influence. If employees feel they are being held accountable for measurements beyond their sphere of control, they may reject the system, game the system, or lose hope. So when capturing client-centered metrics like feedback, don’t focus on the scores provided by clients. If you focus on feedback scores, rather than what employees do with scores, they may avoid feedback in the most critical situations. Instead, measure, monitor, and promote the successes of those who gather the most feedback, maintain the highest response rates, and follow-up most effectively to challenging feedback. 
    
2. Craft questions that measure improvable actions. Keep personalities out of your surveys. People don’t change quickly or easily. When faced with personal criticism, most people will reject the information. Instead, focus on the processes and practices of delivering the service. Processes are more easily documented, adjusted, and customized to a client. 
    
3. Measure early, measure often. Monitoring client expectations-the real source of success as a professional service organization-is just as critical as managing your income statement and balance sheet. You look at your financial reports every month, and carefully track progress over time – but when was the last time you looked at metrics from your clients’ perspective? How well are you doing for them? To maximize performance with clients, feedback cannot be a once a year (or once every five years) activity. Track constantly, during projects, when you have time to create better outcomes for your clients.

The most important way to measure staff performance in a professional service firm is from the clients’ perspective. It’s really the client’s perception of reality that matters most. To summarize, to best measure performance and evaluate it from the client’s perspective:  make it easy and comfortable for the client to offer their feedback, have questions focus how well the process worked for them, and ask them often throughout a project, not just at the end.

One of the most essential tools in project management is a Work Breakdown Structure, or WBS. The primary function of a WBS is to subdivide a project into more manageable components in terms of size, duration, and responsibility. By breaking a project down into smaller pieces it’s also easier to:

• Set measurable milestones for the project, and identify deliverables at the end of each phase that match up to the scope
• Allocate resources, complete scheduling and budgeting, manage procurement, maintain quality control, and manage risk
• Increase accountability by assigning individual responsibilities for each phase and task
• Know where you stand in terms of the total project (for example, are you 10% through the whole project, but 50% through the first phase?)

In short, the Work Breakdown Structure defines how you estimate, manage, and bill the project — and as a result, creating one should be priority one for every project.

Key design principles for an effective WBS

1. Account for 100% (no more, no less). One of the most important principles is that the WBS must include 100% of the work as defined by the project scope. It must also capture all internal, external, and interim deliverables, including project management, among the work to be completed. The rule applies at all levels within the hierarchy: the sum of the work at the most detailed level must equal 100% of the work represented by the combined total of the categories at the highest level. Another aspect of the rule is that the WBS should not include any work that is outside the actual scope of the project. 

2. Be mutually exclusive. There should be no overlap between two elements of a WBS in scope definition. Such an overlap could not only result in duplicated work or misunderstanding about responsibility and/or authority, but could also cause confusion in project cost accounting. One technique for avoiding this problem is to develop a WBS dictionary to clarify the differences between WBS elements and describe each in terms of milestones, deliverables, activities, scope, and other factors. 

3. Focus on outcomes, not actions. The best way to stick to the 100% rule is to define Work Breakdown Structure elements in terms of outcomes, as opposed to actions. This strategy ensures that the WBS is not overly prescriptive in terms of method, and therefore allows for more flexibility and creative thinking on the part of team members. In addition, a WBS that subdivides work by project phases (e.g. preliminary design phase, critical design phase, etc.) must clearly separate the phases by deliverables that define the entry and exit criteria (e.g. an approved preliminary or critical design review). 

4. Be detailed, but not too detailed. As useful as it is to divide work into smaller and more manageable elements, you also need to know when to stop. There are several ‘rules of thumb’ for determining appropriate activities or group of activities needed to produce a specific deliverable as defined by the WBS. The first is the “80 hour rule,” which cautions that no one activity or group of activities to produce a single deliverable should require more than 80 hours of effort. A second guideline is that no single activity or series of activities should take longer to complete than a reporting period. So, if your project team reports on its progress monthly, then no single activity or series of activities should be longer than one month long. 

5. Keep it simple. Creating three levels in your WBS hierarchy (e.g., Project, Phase and Task) should be enough. Avoid identifying labor or activity codes as WBS elements, even if you use them to describe labor detail on billing invoices or backup reports. In addition, it’s not necessary to make every phase balanced; just because one phase has a task doesn’t mean that all should.

Work Breakdown Structure: a blueprint for project management

When finished, a well-organized WBS resembles a flowchart in which every element is logically connected to another. The primary requirement or objective appears at the top, with increasingly specific elements appearing beneath it. The elements at the bottom of the diagram represent tasks and activities small enough to be easily understood and carried out. An effective WBS avoids redundancy, but at the same time, leaves out no critical elements. 

The bottom line is that a Work Breakdown Structure divides your project into distinct, manageable work elements. A WBS is useful to various groups within a company, including marketing, business development, accounting, and project management. A well-planned WBS is integral to successful project proposals, planning, scheduling, budgeting, and reporting.

Ready to learn more? Discover how an ERP system can benefit your firm by downloading our whitepaper.

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If your business designs and produces projects for external clients, you’re in what is referred to as a project-based firm. This category can include architecture, engineering and construction companies, consulting firms, advertising agencies and many others.

As different as these industries may be from one another, they share a core challenge of completing projects in ways that meet the client’s goals within existing constraints, while at the same time, delivering the desired profitability to their organizations.

There are many tools and methodologies that can help project managers at project-based firms track how successfully they deliver projects. But before managers can benefit from such tools and methodologies, it’s essential for them to understand four basic project management concepts, and how they interrelate.

1. Resources – The most critical resources that your organization manages are its human capital, which, depending on your needs and preferences, you might track as individuals, teams or both. Resources can also include equipment, services, supplies, and funds. A central goal in managing resources is ensuring the suitability of the specific resources, as well as availability, internal costs, etc.

2. Time – Managing time involves organizing and tracking tasks, activities, and schedules. It’s critical in helping to establish a workable plan and schedule, monitoring and reporting on progress, and ultimately, ensuring the profitability of the project. Key aspects include defining and sequencing activities, estimating needed resources and time requirements, and developing and managing to a defined schedule.

3. Cost – Effective cost management begins before the project even gets underway, by planning a budget with as much accuracy and specificity as possible. Cost management also requires developing contingencies for costs that are anticipated, but cannot yet be quantified with certainty. As the project moves forward, the manager tracks estimated vs. actual costs and the overall profitability of the project.

4. Scope – Managing a project’s scope begins with assessing its size, complexity, goals, and requirements. By having a clear understanding of the scope, the project manager is better able to create a viable estimate and schedule, assemble the appropriate resources, and ensure that the team meets its deadlines. Without a good handle on scope, the project can experience scope creep, which can lead to missed deadlines, cost overruns, and decreased profitability.

Taking a holistic view

It’s important to appreciate how each of these project management concepts affects, and is affected by, the others. The skillful project manager addresses them holistically, and makes adjustments in each as the project moves forward. To manage risk and ensure a quality project, managers need to not only understand these concepts, but also have in place the right tools and processes to control them — along with great organization and communication skills. 

Of course, it’s the rare project that goes exactly according to plan… which is why understanding these four project management concepts is so essential. When variances or setbacks arise in any one area, the effective project manager has mechanisms in place to recognize problems in time to make adjustments, and yet still meet the project goals for both the client and the firm.

Checkout more Project Management related articles.