- “You’re Welcome” In standard
Here’s a common scenario: You are in your post-project wrap up meeting. The team finished the project under budget and within the allotted hours. The client is satisfied with the work and everyone on the team starts congratulating themselves on a “job well done.”
Except no one mentions that the project took 3 months longer than expected.
I’d argue there is one more metric to be added to a project’s success rate: project velocity. Project velocity is the speed in which you complete projects within the given timeframe and are free to tackle the next one.
Where service businesses delude themselves is in thinking that the most important thing that matters when it comes to measuring the success of a job (aside from client satisfaction) is if it came in at– or under– budget. That’s the way we’ve been programmed, and that’s the way we’ve traditionally measured and incentivized our teams.
That measurement falls short in a big way, and probably OVERSTATES the profitability of job.
That’s because there are other not-so-obvious impacts on your business when a project runs long. We know– a project that runs past its estimated completion date can be due to a lot of different things: delays by your staff, changes in scope, delays from the client. You name it. We understand.
Regardless of the reason for the delays, it is important to understand that there are a lot of ways your business is impacted when project velocity slows down, and focusing on keeping projects moving is important.
Here how slow projects impact your firm:
- Admin time goes up: While you are waiting for a client to get back to you or the project gets held up for some reason, people don’t have jobs to allocate their time to. Most of the time it goes to Administrative, or in other words, non-billable time.
- Creates a log-jam: When you have a perfectly scheduled project, you know when you should be able to tackle the next project, thus keeping the staff fully utilized. When a project runs long, it becomes a scheduling and workload nightmare. You need to fit in new projects around the unforeseen old project overruns and you may need to hire expensive subcontractors to complete the work on new projects because your staff is trying to juggle both the old and the new. It gets expensive.
- Reduces annual revenue- You know you’ll be able to bill for the entire job regardless how long it takes, but have you factored in how delays are going to impact what you expected to bill in revenue this year? If you have created a budget for the year (you have, haven’t you?) you probably made some assumptions on what you could spend given the anticipated revenue. If that revenue isn’t going to come in as expected, you will probably need to adjust your spending.
- Kills cash flow— While you are waiting to meet that next milestone in order to bill, you are carrying costs of overhead and payroll expenses that aren’t in sync with your billing cycles. Not being able to bill in a timely manner (and then of course, waiting for payment) can cause significant cash flow issues.
- Allows for alternative motives— No one in an organization is going to admit they don’t have enough to do. Slow projects could be a sign of self-preservation on the part of the staff, whether deliberately slowing down projects or not being aggressive enough in moving them along.
- Creates hidden incremental project management costs— These are the nickel and dimes you don’t really see: The project stays on your project plan, gets discussed in all project planning meetings, and you spend 5 or 10 minutes here and there following up with the client, discussing the project, and maintaining it in your systems. None of this time really gets put against the project, but it is a cost nonetheless, whether in dollars or in effort.
In the end, projects can be held up for any number of reasons. Project velocity is probably the most under-appreciated metric in a service business that uses job budgets and targeted profit margins. If you start measuring project velocity, you’ll start to understand a few things: 1.) You’ll know if your expectations and timeline are reasonable. 2.) You’ll start to uncover issues as to why a project isn’t moving along as planned and 3.) You’ll communicate clearly to the team that moving projects along quickly is important to the health of the business.
How will you incorporate project velocity into your project metrics?