There is quite a bit of research demonstrating that many projects are not being executed well in many companies. The Standish group routinely reports percentages of over 50% for projects that are in some way being mismanaged.
What percentage of the last 100 projects in your company was completed on time, on budget, with high customer satisfaction? Were they all profitable? Which were the least profitable? How could you get them all to be more profitable?
Are you being paid to know the answers to all these questions?
It only takes one really badly managed project to end a career. Even if you still retain your job, your reputation can be irreparably damaged in ways that you may not understand until much later, because sometimes executives are unclear when speaking to middle management.
So, let me break it down like this: Imagine you have five hundred engineers working on various projects for 50 different customers over a one-year period. You’re their boss. You’d like to understand if there’s a way to improve productivity.
How could you double or triple profitability for this organization? What would that do to your career if you could?
How would you approach this problem?
You’d like to get an early warning when projects are going off the rails. You’d like to understand which customers and markets are more profitable than others. Some of the projects are booked at a fixed cost, some have milestones and some are billed hourly; but you know that sometimes your engineers will give free hours to customers who are very unhappy. In short, the situation is complicated and difficult to manage.
Your intuition tells you that some of these customers are very profitable and some of these customers are much less so. However, the reality is that you don’t have a very clear understanding of how many hours different employees are working on the projects for these different customers.
Our research shows us that when our customers measure labor hours worked on a per-project basis, they find that an average of 12% of their projects are broken, behind schedule, or otherwise not working correctly. I think this says that our customers are about four times smarter than your average Standish survey respondent.
The same research shows us that 55% of the time this problem can be corrected.
To put it more simply, out of every 100 engineers in your organization, it’s likely that 12 of them are wasting their time on broken projects. If you could fix half of those, you’ll get back the salaries of six engineers every year. For simplicity, let’s call that $600,000 a year.
What could your company do with an extra $600,000 a year? Perhaps they can give you a bonus since you found that money for them in the first place.
Additionally, once you tie revenue numbers from each customer into the project costs for that customer, you can calculate per-project per-customer profitability.
This information results in a deep and accurate understanding of which customers and markets you should choose not to participate in in the future. In other words, “Which customers should you kiss up to? Which customers should you fire?”
The answers to these questions can be worth an enormous amount of money for your company.
One company that I’m very familiar with increased revenue by 40%, ran off a competitor who didn’t understand their costs as well and increased its profitability by 300% using this methodology.
These are the sorts of results that are available to you if you choose to get serious about tracking project time for cost accounting in your organization.
Of course, nobody likes filling out a timesheet – which is half the battle towards realizing these kinds of results. It’s also a topic we know all too well: