The Project Management For Profit System

Can somebody please just tell me what the score is?

Several decades ago, while coaching my son and his friends in a first-year t-ball league, I had a very eye-opening experience. During the first game of the season, one of my precocious young charges came up to me and asked what the score was. I gently explained that in this league, we didn’t need to keep track of the score. Our goal was to teach the skills of the game, not to track wins and losses. The lad looked me straight in the eye and said disdainfully, “Well that’s just stupid. How are we supposed to know how to play the game if we don’t even know what the score is?!” His disgust was palpable as he turned away and trudged back to his spot on the bench. I was instantly just a little irritated, but not for the reasons that you may think. In fact, I was irritated because I agreed whole-heartily with my young (and somewhat obnoxious) tormentor. He was right…We should be keeping score! At this point I’m thinking “Well that’s another glorious lowlight for volunteer coaches everywhere…”

Shortly thereafter, I glanced over at my team and noticed that they were keeping track of the score themselves, using sticks on the dugout floor. Wow. These kids were bound and determined to know the score of the game, even if all of us well-meaning adults wouldn’t keep track of it for them. If I remember correctly, we won that game 6 sticks to 3…Not that I was keeping score or anything.

The takeaway lesson for me that day was this: No matter what age you are, no matter what task it is that you’re undertaking, in order to perform at your most effective levels you must know what the score is. Whether we admit it or not, the truth is that whatever game we’re participating in, the score dictates our basic human behaviors. Instinctually we all act differently whether we’re ahead or behind “late in the fourth quarter” of any venture, be it sporting, business, or just life in general. Our operational strategies automatically adjust and adapt to meet the needs dictated by our position on the scoreboard.

In this aspect, Project Management is no different than any other game. In order to know exactly how to manage the project; what to watch closely; what not to worry over; what to panic over; etc…..we must know what the score is at any given time. And the score in the project management game always has dollar signs in front of the numbers. Any time that we don’t know where we stand (or worse yet, have a falsely-inflated view of where we stand), our chances of winning the game decrease dramatically. As that 5 year-old ball player once chastised me, “How are we supposed to know how to play the game if we don’t even know what the score is?” If a project manger can use that score to help him consistently play at the most effective levels, his chances of winning the game with successful projects that net windfall profits increase exponentially.

But the problem is, very few project-based companies can actually tell you where they stand on the financial scoreboard at any given time. Very few project managers really know what the financial score is on their projects until they are long-completed. Unfortunately, this is an all too common tale that I’ve lived through personally time and time again.

After nearly two decades of project management experience in a variety of industries, I came to work at Setpoint as a contract project manager in early 2004. From day one I could see that the “Setpoint way” of tracking project financial progress was like nothing I’d ever seen or experienced. I was amazed (and at first, just a little skeptical) when Setpoint project managers were able to consistently calculate their project earnings in nearly real time. In my previous business experiences, this level of financial tracking was not only unheard of, but in fact, I’m quite sure it would have been laughed off as impossible if anyone had been silly enough to even bring up the possibility.

I quickly realized that by keeping close track of just a few critical project financial metrics, I too could pull off this near-magical feat of financial score-keeping that the Setpoint system facilitated. Being a numbers geek at heart, I not only accepted this new system, I embraced it to the utmost degree. Suddenly I was able to make decisions regarding my projects with a complete and thorough understanding of the financial impact that each choice would have on my project’s budget. And not some vague theoretical understanding of the financial impact. No, I could now put a solid dollar figure to every action, nearly every time.

My teams were now able to adapt operational strategies throughout the life of the project, with every financial impact measured and reported weekly. Now a strategy was not necessarily successful just because it solved an operational issue, it had to be financially effective, in order to be considered a success. My project strategies evolved based on this wonderful new financial enlightenment. Suddenly our weekly goals were measured with more than just a task list and a calendar.

I’ve always been a big believer in the age-old adage that says “Knowledge is power”. And the financial knowledge that we were able to generate and track with the Setpoint system was so powerful, it certainly played a huge part in establishing the solid financial foundation of Setpoint that lives on to this day. Without the precise and regular tracking that we’ve completed on every project every week, there’s a good chance that Setpoint may have fallen by the wayside years ago, a tragic victim of good-projects-gone-bad, like so many of our competitors over the years have done. The nasty truth of project-based businesses is this: You usually don’t get many ‘bad projects’ in a row before you get crushed. If things get out of control on several projects at once, you may find yourself in the express line to the business graveyard.

In the past two decades we’ve shared the fundamentals of the Setpoint system with many companies, including a number of our strategic business partners. Over time the management team at Setpoint realized that this system could be helpful to many companies that deal with similar challenges in monitoring and influencing a project’s financial success. And thus was born the ‘Profit Management for Profit’ (PMFP) system.

With the PMFP system, we’ve dissected the metrics and methods of the Setpoint system and reassembled them in a manner that nearly any small business can utilize to accurately track the financial success of their efforts. In our book Profit Management For Profit (Harvard Business Press June 26, 2012), we provide not only the metrics and equations needed to use the PMFP system, but also the philosophical and cultural aspects of the system that are so critical to it’s successful implementation in any business culture. What’s your current philosophy on project financial tracking? Are you able to announce the real-time financial score on your projects at the drop of a hat? Maybe you already think you know the score, or maybe you don’t even care what the score is. But if you and your company really do realize how critical the score is to the success of your efforts, then maybe some of the PMFP methods can help you.

The bottom line? You’d better have a very good method to consistently and accurately track the financial score of your efforts. If you don’t, you may be in trouble and not even know it. Because after all, how are we supposed to know how to play the game if we don’t even know what the score is?

Find out more about the PMFP system at: www.pm4profit.com

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