If these attitudes are commonplace in your firm, goals need to be reevaluated and communicated as deeply as possible in the project teams. Wins and projects that don’t generate a profit should not be celebrated, they should be reviewed with financial leadership, principals, and project leadership as learning moments. Incentive structures need to be adjusted to prioritize profitability and real, honest utilization data. If you win a high-profile project but it doesn’t make a profit, that project was a net loss to the firm, full stop. If a project is estimated and managed poorly or was set up to not make a profit to begin with, you are setting up the next equivalent project to not make a profit either because you are working from incorrect internal information. Profit has to come first, and utilization has to be honest. Attempts to contain losses often create pressures internally to perform work without charging to job codes, incentivizing “free” or “hidden” work that creates burnout in staff and destroys your firm’s utilization and estimating data – making your entire operation less measurable, more imprecise, and less profitable. Creates a bad precedent for setting hours and fees later, because the data is flawed from the start, and the issues perpetuate and can snowball. Setting yourself up as the lowest bidder is not how you create a long-term consultatory relationship, nor is it the right way to position your brand to be perceived as high-quality and high-competency. Loss leader projects create tension within your project team and external partnerships as PMs struggle to keep costs in check and limit losses.
Decreasing Fees
Decreased Value & Quality
=
Rising Utilization
The balance required to raise utilization to counterbalance decreasing fees is nearly impossible. There are too many unknowns impacting project profitability, and utilization has a very real ceiling that directly impacts quality, innovation, and company culture. The balance required to raise utilization to counterbalance decreasing fees is nearly impossible. There are too many unknowns impacting project profitability, and utilization has a very real ceiling that directly impacts quality, innovation, and company culture.
24
Made with FlippingBook Annual report