At COR we have dedicated many words describing the vital importance of project managers, their key role for more efficient projects, and better quality deliverables. As well as talking about the importance of profitability and adjusting margins on the basis of a better understanding of the value of each billable hour. The importance of these two aspects of a business are not to be taken lightly. So, how do they interact with each other? Is profitability the main concern of a project manager? Should it? Let’s discuss it.
If we get down to the core aspects and definition of a project manager’s role, profitability is not at its center. Project managers take care of a project, from beginning to end, and the operational capability of every service is an ongoing responsibility, it does not end with each project.
But every organization is different, and many assign profit-related responsibilities to their PMs. Other than the practice of evaluating and applying a process to their project, a PM also has a vital role in maintaining their organization’s goals throughout each project. And a big goal for many businesses is improving margins.
An important part of project management work includes following a quality standard for deliverables, measuring KPIs, and writing status and final reports. So we can see that there’s a shared point where project management touches upon profitability analysis. But that type of responsibility is decided by higher levels.
If the business has an organized workflow that includes reporting and data analysis, then a PM working in that specific company wouldn’t be out of their depth when trying to improve the company’s overall numbers.
Let’s imagine that a PM usually leads several types of different services offered. While delivering reports they would notice if service A is underbilled. Or if service B is a technical difficulty for the team, and is being too costly for the business to keep on their offered services. If the company is data driven and makes knowledge-based decision making, then project managers are on the front line of information gathering and hold a very capable position, profit-wise. They create a filter between each project performance and the upper management, they are the ones that hold the most crucial information.
Project managers, by definition, perform certain key aspects of a company’s operation. Basically, they make a project plan, calculate a project budget and project schedule, survey, create timesheets and report on the project success. This is normally carried out with the help of a project management software that facilitates time tracking, templates for reporting, task assignment, and scheduling. Good project management tools are also augmented with AI and automate time-consuming tasks, or at least they should.
The project manager acts as the bond between upper management, stakeholders, or even C-level executives, and the project team that actually makes for a successful project. They check the project plan, make sure it’s OK, and maybe even pitch improvements. You can see how from the basic tasks a PM performs, ones you can double-check at the Project Management Institute web, they have a strategic position for improving their project profitability.
Many project-based industries are taking a step in the right direction by creating project management offices, a business area dedicated specifically for reporting, creating workflow guidelines, and operational processes for streamlining work. They use risk management and should prioritize projects on the basis of a strategic business plan.
Every business is different but every single one of them shares a goal, to make a reasonable profit from its services or products. Why should the same not ring true for individual projects? Finishing a project on schedule and within budget is the basic objective. So how can a Project manager tackle the data driven part of this endeavor?
Financial management is critical in order for a project to bring value to the organization, moreover if it is their primary business. There are several variables that need to be analyzed for correct budget management, and correct budgeting is a big requirement for profitability.
The first step is to gain information on how much the actual cost of every billable hour is. And if it’s a professional service business we are talking about, then the fastest and more accurate way of doing so is to implement time tracking. This will make estimating the project cost-effectively a reality.
When you know how much time each task takes you can then have an hour estimation for the project as a whole. Having a correct forecast will improve scheduling, on-time deliverables, it will help with the scope of work outline, and will avoid talent burnout. With this data, you can change orders for products, hire extra subcontractors if the scheduling need arises, or get a grip on cost management.
We strongly recommend using a project management software with AI functionality. Automation can help reduce human error via automated reporting. Some tools with estimation and time tracking can even calculate an entire project’s profitability margin. In order to maintain a good margin, a PM with this kind of data can even make reports, renegotiate key aspects of the project scope, and collaborate in a transparent way with the client. It’s a win-win situation, the project’s overall quality increases and you can assure client satisfaction.
Project managers are similar to knights in chess: not everyone knows how to use them but the experts, the critical thinkers, and strategists, know they hold the key for a better game. They link the basic operations with the ones in charge of large-scale decision-making. If they have more information and better data analysis, then the executives can make better choices.
The bottom line is that they see the day-to-day path towards profit, and they are in charge of making the best out of any situation. When thinking about why Project managers should care about profit, we wanted to remember our conversation with the famous David Sable. He proclaims that knowing the amount of resources used puts forth the possibility of recognizing the real profitability of every service provided. Who knows and manages each project’s resources? That’s right, Project Managers.
Making bad profit margins due to bad pricing is a direct hit to the all-around productivity of a business. It takes a toll on deliverables, quality of service, deadlines, team members’ work hours. Not taking care of profitability can stop the company from pursuing better projects, offering more valuable services, and taking better care of its employees.
At COR we are advocates for data and information-based decision making. We share this trait with Justin Thomas-Copeland, with whom we spoke about the importance of co-creating value with clients. In that conversation, Justin told us that at DDB they are “In the business of applying data, specifically in the business of creating a creative breakthrough and developing business with that information”. He is a strong believer in training creative staff on reading data, and that this endeavor has created new avenues for his agency.
Applying this same concept with project managers is a worthy thought. When each PM gains a new level of depth, a new way of thinking about projects and budgeting, it will elevate their work. Giving PMs a new appreciation for profitability analysis will only create new paths and more creative solutions. In other words, it will only make your business better.