Projects can be the lifeblood of an organization’s success. It’s important that these projects are treated as such. More and more PMO’s are moving towards a regulated project health-check model where boilerplate criteria for the projects, regardless of scope, are completed and evaluated on a regular basis. Beyond the obvious areas of Budget and Schedule, this post will focus on other fundamental components of producing a solid project health check.
Some might assume that when someone mentions a projects profitability, they are asking for where the budget is at. Profitability and Budget (while very loosely coupled) are definitely their own separate metrics for measuring a project. As I said before, projects can be the lifeblood of an organization’s success and the key driver to that is the profitability of these projects – how much money is the organization making by doing this work? Key factors into checking profitability include what it’s currently costing you to execute this project. This is where some (ok, a lot) of organizations tend to become very guarded with information as the ‘costs’ very often refer to the remuneration of the staff working on the project. Organizations don’t want to publish salaries of employees and as such this information is very sensitive, however vital to calculating how much profit the organization is making on this project. Margins can be easily calculated once this information is available and C-suite executives can very quickly relate to a project’s impact on a P&L statement. While the profitability may not be an indicator of true project ‘health’ (just because you’re making money on it doesn’t mean the project is a success) but if your project is not meeting margin expectations or worse yet, not making money at all, it may be flagged at the leadership level to evaluate the feasibility to continue with the project.
Most consulting firms rely on a staff of consultants and keeping them busy (or ‘utilized’) is a key metric to keeping the revenue machine churning. By understanding what resources are needed (or conversely not needed) on a project, it allows the organization to look at the project portfolio holistically and determine where best to allocate resources to ensure project success but also a high utilization rate. Quite often these utilization rates are measured against pre-determined metric expectations and as such, projects that have a lot of staff assigned who may not be fully utilized can be flagged quickly and resources allocated more properly. Often times the resource needs of a project can fluctuate quite a bit from week to week. Unexpected roadblocks or delays can negatively impact the resourcing needs however if these issues are communicated and managed collectively, they can be mitigated by way of identifying other projects or initiatives that require similar skillsets and alternate plans made to ensure high utilization of the staff.
These are just two components (again, besides the obvious) of a comprehensive project health check. Remember, these health checks are focused on the delivering organization, not the client – that’s what project status reports are for. Check back for another post coming soon that will discuss other components to a great project health check.