While most A&E firms expect their project managers (PMs) to deliver profitable projects, many have not put the appropriate measures in place to ensure that it happens. Accountability at the PM level is often vague and unstructured, which can lead to several different consequences – but not the ones we want!
Part of this issue has to do with the many responsibilities given to PMs, and a lack of true visibility into what they are really doing every day. This leads to PMs being given many tasks and little guidance as to how to be successful.
The other big challenge is measuring results. The majority of firms that we work with are not tracking individual performance, or worse, failing to implement consequences even if it is being measured. This has the unwanted effect of grouping good and poor performers together, and the less desired result of passive aggressive behavior on both the PM’s part and the firm’s leadership.
Common Practices that Undermine Profitability Goals
The following are practices that I often see in many A&E firms that undermine their ability to achieve profitability goals. If you recognize any of the following issues in your firm, they could be costing you a great deal of money! Lost Dollars can be found by ensuring that every project hits target profits. If you see any of these practices in your firm, they need to be addressed as soon as possible:
Project Manager Performance is Evaluated in an Annual Review
The annual review is a dreaded process in many firms. Even with top performers, many employees don’t feel adequately recognized, and feedback is often provided too late to make a difference to performance results. A more frequent process of project review can improve financial results and engage employees more in the process of improving their own performance.
All Project Managers are Given a Raise and / or Bonus Regardless of Performance
With the war for talent gaining intensity these days, many firms are afraid of “calling out” mediocre performance. This has the double negative outcome of dis-incentivizing both top performers who don’t see the benefit of going the extra mile, as well as not giving consequence to poor performers for failure to hit goals. Bonuses and raises need to be tied to financial results in order to impact behavior.
All of Our Offices Do Things Their Own Way
This is a common problem in firms that have remote offices, and especially when there has been an acquisition. Many offices take on their own culture, and create their own new processes – from proposals and estimating, to project budgeting and billing. This has the negative impact of making it difficult for leaders to compare one office to the other, determine what is working and not working, and share best practices between groups. It is critical to a profitable firm to get everyone following best practices and operating the same way.
We Never Fire Anyone
The combination of a family-oriented firm culture along with difficulty finding technical staff has created an environment where many firms tolerate poor performance. This leads to keeping PMs and staff that are actually hurting the profitability of the firm rather than contributing to it. The message that is being delivered to staff is that mediocre or poor performance is acceptable and the ultimate consequence – being terminated – is not a possibility. Without this consequence, it will be very difficult to change behavior or increase profitability.
We Do Not Have Metrics to Measure Our Project Managers
How you report on performance is a big indicator of how employees will perform. Many firms choose to measure profit centers, business units, offices, etc. rather than focus on individual results. Without metrics and financial targets, it is much more difficult to evaluate PM performance, and hold them accountable for results. Looking at project profit margins is the most effective way to compare PM performance and the first step to holding them accountable.
All of these flawed business practices add up to lost dollars. So what is the cost of ignoring or even rewarding mediocre or poor performance? It may be much larger than you imagine. On top of the measurable costs of project overruns, rework and scope creep, consider the intangible costs of frustrated staff, unhappy clients and failure to retain your best PMs. This can add up to thousands and even millions of dollars per year in some cases.
Focusing on and improving your firm’s performance management practices can have a huge impact on all of the key metrics you use to measure the health and results of your firm. Special attention should be given to creating a regular rhythm of feedback, establishing clear measures for individual performance and implementing meaningful consequences for attaining financial targets.
Cash is King Webinar
Managing Cash Flow in a Down Economy
Date: Wednesday, August 19th, 12:00pm ET
The average days to collect cash in the AEC industry is between 60 to 120 days. In this web training we will examine the complete project lifecycle to understand how cash flow can be increased when the economy is uncertain. Participants will gain valuable tips to improve cash flow by improving timesheet practices, reducing the billing cycle, and improving client relationships and collection practices.
More From the Find the Lost Dollars Blog...
I often hear people say that they are hoping we get back to normal. It feels like there is no normal anymore. Everything we used to take for granted has changed. Simple things like sitting at a restaurant and being served the food of your choice are now exciting, and...
The thing we all have in common right now is that it is difficult to predict the future. In my Monday AEC Crisis Roundtable meetings, the number one concern of A&E leaders right now is uncertainty. Without certainty it is challenging to develop strategy or plan...
Since this COVID-19 crisis started in March, I have been meeting with about 50 A&E leaders every Monday to discuss the new challenges they are facing in their businesses. I am thrilled at the level of participation, sharing and collaboration taking place in this...