Transcript for "Unlocking Project Performance ROI: Execute Efficiently":
Welcome back. This is episode three. I'm Richard McCullough. I'm a solution engineer at Deltek. As a reminder, episode one was about winning 1% more of the right work. Episode two was about getting 1% more from the capacity you're already paying for. And today, we are inside project delivery. And the question is, what would 1% more of project margin be worth? But I wanna start with a project that I think you'd all recognize, but as always, housekeeping first. So audio is through your computer. Please turn your volume up. There is no dial in for this webinar. Recordings will be available afterwards. If you wanna pop any questions in the q and a, I'll pick them up as we go along, or I will answer them after the after the session. Okay. So let's picture this. A project that went well, delivered on time, the client is delighted, and the team was proud of it. It might even have made it to your website. Then the finance team closed the project and the margin is several percentage points below, what was planned. Nothing catastrophic happened though. It was just a series of perfectly reasonable moments. You know? An an extra option was produced. A a late change was accommodated. A senior person was pulled in to rescue a deadline. A variation was discussed but never raised. Each was basically too small to escalate, but together, they they changed the economics of the project. And here's the uncomfortable bit. Your your proudest projects are often your least profitable because nobody wants to have the commercial conversations on the jobs everybody loves. An extreme example of this might be the Sydney Opera House, you know, one of the most celebrated buildings of the last century and it came in a thousand percent over budget. And nobody nobody remembers that part. Margin isn't lost at project close. Right? That's just when you find out. And today, I wanna put a number on finding out earlier. Quick context for any any new people joining us today. This is a four part webinar series, ten minutes an episode, one stage an episode, of the project life cycle. We ask the same question each time, what is a one percentage point improvement worth at this stage and how could you potentially get there? And previously, we've covered win and plan, and today, we're we're covering execute. So back to the, celebrated project I was just talking about. So let's put a kind of number on those perfectly reasonable moments. Right? The SPI benchmark says that the average professional services project overruns its planned effort by 10.7%. Now most of every fee pound is delivery cost. So when when effort runs over and nothing gets billed for it, the whole overrun comes straight out of margin. Across Rock Steady, our fictional firm that we've been using, and throughout this webinar series, they have a 7,700,000 annual project revenue. That's in the region of £500,000 of margin at risk every year, not from bad projects, from from good project delivery the way we've just described. And don't get me wrong, right, the best firms don't eliminate overruns. Client chain clients do change their mind, problems appear, good delivery needs flexibility and nobody is billing everything and nor should they. Right? But today's, ask is a bit more deliberately modest. Right? Against that 500,000 risk, we're gonna talk about what 1% of it is worth. So same firm that we've been talking about across the whole series, Rocksteady, ninety ninety person firms, 65 of those are fee earners running at a 66% utilization. They have 7,700,000 of annual project revenue and they deliver on a current average margin of 35%. Worth knowing the industry average is 37.7. So our model firm is is already slightly behind the pack. We'll I will talk about what high performers do as we as we come on as we move on through this webinar, so keep that in mind. So that one percentage point is worth, in in in this in their case, 77,000. That would move them from 35 to a 36% margin. Two percentage point increases would be a 154,003 would be 231,000. So taking them to a 38% margin. So Rocksteady would not only have just passed the industry average there, achieving 38%, and remember the strongest firms benchmark in the SPI report are delivering project margins around 44%. So it's not heroic transformation we're kind of talking about here for Rocksteady, But unlike new revenue, you don't have to win it. And unlike utilization, you don't have to plan it or or find any productive hours. This is money already inside your fees that you've signed that you're delivering, and we're just trying to, stop a little bit leaking out. So so where does it where does it leak? Well, margin tends to leak in in three places. Firstly, you know, when the scope changes and the feet didn't, you know, a new requirement arrives, the the team accommodated it, and the commercial conversation basically never caught up with the delivery conversation. Two, the resource, changed but the plan didn't. You know, more senior time was needed or more people were needed or simply took longer than the original kind of staffing plan or model assumed. And three, the the progress changed but the forecast didn't. You know, the project was clearly consuming budget faster than planned, but the expected final position sat unchanged until until next month's review. So none of these are kind of automatically bad management. Right? Sometimes absorbing work is the right thing. You know, it's about protecting a relationship, fixing an issue fast, or investing in a client with real future potential. So the problem isn't giving something away to client, it's it's doing it accidentally. And commercially, really, margin only leaves a project in two ways. Right? On purpose or or or unnoticed. So here's the thing. This isn't really a disciplined problem. You've already got project managers, your budget reports, and monthly reviews happening. The difference is when you find out and that's the whole thing, right? How early the signal arrives. If you find a project's missed its margin after it's closed, that's that's reporting. If you know where it's likely to finish while there's still time to do something about it, that's control. And the question that protects project margin isn't what happened, it's where does this finish if nothing changes. The firms at the top of the benchmark don't have better people. They see the movement sooner. So it's still small and they can actually act on it. And the SPI benchmark has measured exactly what that's worth and the gap between the overrun and everyone else is bigger than what you'd think. And I'm gonna I'm gonna put that number on a slide in a minute. But firstly, what do they what do they do differently? Well, it's simple. It's a loop. Three steps. They see it early. This means there's a live view of where the project's going to finish, not just what they've spent so far, and they choose deliberately. Is this a client change we can recover? Is it a delivery problem we should fix? Or is it an investment in a relationship we're happy to make? Those are the three difference. Those three things are different. Right? And and and most of the firms just bucket them into overruns. And that's worth thinking about, you know, for yourself. You know, can you tell them apart for the projects that you're running? And lastly, they they act on it when it's small. You know, a a a change request, a small a small scope reset, an early conversation with a client. Do those, while they're small. Otherwise, you absorb it on purpose because, you know, the relationship's worth it. And the two things this is not. Right? It is not about invoicing every hour. Like I said, it's not about turning project managers into full accountants. And not all outcomes are ultimately invoiced. What's changing here is that the commercial decision gets made by the right person consciously while it is still still a decision to be made. And this is in theory. You know, the SBI report shows the rest of the industry runs about 12% project overruns. The high performers, they're at 6.9%. That's a five percentage point difference between every project year after year and think of that, sorry, across every project year after year, that 5% between the top performers and the rest of the industry average. And what's different about them isn't like I said, about harder working PMs, is actually the the it's actually that plan, actual cost progress and approved changes are live in one connected view. So that where we will finish number updates as the project moves and it's not at month end. And remember, right, that the moments that where margin moves that that I discussed earlier, you the scope, the resources, and the progress. Right? When the signal arrives early, you can catch them while they are still conversations and not write offs. And if you if you joined us from episode one, you recognize that this is kind of an integration premium. Right? The information already exists in your business. The question is, is it connected in the moment the decision gets made? And as we move into an AI world, once that view is connected, I'm sure AI is gonna continuously predict where this project will finish. And whatever tools you are using, you know, that is the direction of travel, isn't it? You know, the signal is starting to arrive earlier and earlier. But what won't change, is who decides. You know, I think AI is gonna continue recommending and your leaders, and project leaders are gonna are gonna make the decision whether something gets built, absorbed, invested for for commercial judgment reasons. It's your team that makes that call, but they're gonna get to make it earlier, and ultimately cheaper. And that project we talked about right at the beginning, in a firm where the signal arrives early, it gets delivered on time, the client's still delighted and the team's still proud. The only difference is that finance knew where it would finish, so nobody got a a surprise when it was closed. So before you go, one thing to think about, you know, pull the last 10 closed projects and ask the question, how many finished within 1% of the margin they were planned at? Again, you know, that number could surprise you, and it might be where your 1% is hiding. And and if you want some help, putting the numbers together, a bit like I've said in the last ones, same offer applies. We've got a forty five minute working session, not not a product demo. Bring your numbers, your annual project revenue, your current project margin, your typical overruns, and we can build a live calculations with you, benchmark you against your peers, and the industry, and, leave you with a a business case that you could use with your numbers in it. Sorry. I lost something on my screen there. There we go. Yeah. So you should see a poll on your screen now. The team will come back to you with dates. If if you are interested, next time is the final episode where we will discuss what a 1% where the next 1% is hiding. Thank you for joining me today. Thanks.