Foundation of Successful Projects Begin and End With Client Profitability Rate (CPR)
My track record of successfully recovering programs with large multi-scale initiatives includes over 30 years of experience.
CPR and service providers
The client profitability rate (CPR) is the difference between the revenues earned and the costs associated with the customer relationship during a specified period of time. Service providers utilize the CPR to manage the balance between costs related to delivery of services and revenue paid from a client.
Service providers are the cornerstone of delivering on these revenues generating enterprise initiatives. The goal is always to complete the project to the client and organization’s satisfaction by providing quality work and an impactful solution.
Based on two major assumptions, integrators are to be highly skilled, and agree to a price model that provides a fair market return for a greater value. Too often though the latter becomes invalidated for several contributing CPR impacts.
CPR impacts
We will briefly examine the most common contributors to that impact CPR and discuss the actions needed to achieve recovery along with proactive guidelines for future client engagements.
Poor delivery management
The minimum for project delivery management to be successful is to have all of the following: vision of the project’s benefits with an owned business case; plan of the project outcomes by starting at the end and working backwards defining what, how, who and when; define all structures and artifacts of plans, along with processes, procedures and best practices; execute the plan with an agile mindset by constantly realigning through rapid trial and error with prototypes; work functional application components based on constant integration and deployment.
Team retention
An important contributor to profitability is the resources and their availability. If they are not available and more seasoned staff must be utilized, then profit margins may decline. Keep valuable teammates around by investing in them. Offer these talented individuals opportunities that enhance their performance, help gain unique education, and even give tools to succeed when they decide to leave the team. It is crucial to not only recruit and hire professionals with the right specialized skills, but also to retain the talent.
Lack or presence of project management culture
When there is no resource structure with the senior leadership sponsor and senior program managers, the project manager has no real authority due to a lack of enterprise support. A culture needs to be established between the executive leadership and the project manager in terms of hiring, onboarding, mentoring and coaching, which creates effective communication and trust.
Project Manager’s gap in financial skills
Another impact to profitability is the often-overlooked process of monitoring and controlling of billing and collecting by the project manager. This is related to the project manager’s comfortability level of discussing money with clients. Although it is well understood that it is the accountability of the project manager to understand and execute the correct billing and invoicing processes, invoices left unpaid add to decreasing the profitability of the project.
A great step to eliminate this gap is training the project management with center of excellence or competency. This can be defined in the building out of the project management culture. Setting project manager goals for certification, such as those provided through PMI® PMP® certification.
Ineffective management of resources
All team members are also stakeholders, so it can be assumed that if daily collaboration of project team members is failing then so is the overall stakeholder engagement. First, begin with the RAM (resource accountability matrix), each member is aligned with a specific role and accountabilities. Second, create phases consisting of tasks, events, and deliverables with resource names or roles, durations, dependencies, and start/end dates. Third, conduct daily standup meetings where each team member indicates what they accomplished on the task(s) from the previous day, what they plan on achieving on the task(s) for today, and any impediments to these task(s). If there are impediments, then what is needed by who and when in order to resolve.
Guidelines for service providers implementing CPR
The following guidelines provide proactive action to create a successful CPR.
Project management first
The project manager must participate in pricing the project and understand the level of profit expected from the project. With fixed price contracts, the risk is borne by the service provider, therefore, adding contingency for the unknowns is good practice. If the project goes exactly as planned, then the contingency can be utilized as an increase to profit. Another best practice is to build into the contract a discovery phase to flush-out detail with the client that supports the scope and requirements. As an alternative to fixed price, a time and material contract eliminates the need for a contingency fund.
Utilize project management principles
Establish stakeholder buy-in through ownership involvement and accountability. Create transparency by communicating upward, downward, and outward, often and consistently. Accomplish project team daily standups along with weekly walk-thru status meetings with stakeholders and the executive steering committee. These meetings will be based on results of management and monitoring of tasks, as well as the events and deliverables.
Build a project management competency
Make a difference by building a center of excellence with project management as a competency. Read more, here.
Utilize a proactive methodology
How to prevent project failure? By starting right from day one. Read more, here.
Decrease rework
Across each project phase these are the absolutes: Requirements – client signoff; Design – prototypes validated with requirements; Development build - unit testing based on the requirements and design that validates the functions; Functional testing - based on the grouping of requirements and design that validates the larger function sets; End to end system integrations testing - based on all requirements and design that validates all functions will work together; User acceptance testing - based on all requirements and design that validates the entire release end to end as a day in the life of; Defect resolution - that utilizes principles of six sigma (identify, analyze, root cause analysis, solution, revalidate) and aligns with testing based on a point where the team achieves the maximum effective level of quality.
Decrease change variation input
For each requested change, complete an impact analysis for the cost and schedule that is required. All accepted and approved changes determined by the change control board (CBC) should include a CPR fee cost.
Project management CPR success starts with the engagement proposal with the client
The project management must participate in developing a price structure for the project to adjust in accordance with the risk associated. Then developing a statement of work (SOW) that clearly defines the requirements, individual deliverables, and how the client defines success. Changes to the baseline SOW must include the same margins as the original pricing. Following continuous improvement methods, that make it increasingly more cost effective to implement the efforts, should be reviewed regularly. This helps identify the right level of coverage without diminishing returns. As always, success starts and concludes with a great team.
