Implementing business systems in project-driven organizations
This paper presents a roadmap for project-driven organizations to leverage technology to facilitate change and improve performance. By reviewing common challenges, best practices and case summaries related to business system implementation, practical insights are provided for effective adoption of management tools.
Project-driven organizations are businesses structured around the pursuit, planning, and delivery of projects. Many professional services firms are project-driven, including architecture and engineering design firms, as well as management and technology consultancies. Project-driven organizations can also be embedded within larger companies, such as the information technology departments, engineering groups, and research and development centers that exist as part of their parent company’s overall operations.
Most project-driven organizations are highly collaborative and intellectually-oriented businesses, whose main value proposition is the expertise and knowledge they can provide their clients. Their business practices span the entire range of interactions found in today’s workplace, including transactional, transformational and tacit activities (Beardsley, Johnson & Manyika, 2006) (Exhibit 1).
With the continued emergence and evolution of business systems that help automate and facilitate these types of interactions, project-driven organizations face a myriad of decisions and challenges as they look to effectively leverage technology to improve business performance. Spanning the project lifecycle – from proposal and sales management, to project and resource management, to finance and accounting, and to business intelligence and knowledge management – there are countless business systems that are either commercially available or candidates for custom development.
This paper offers a roadmap for project-driven organizations that are looking to implement business systems in a thoughtful, proven manner. The observations and recommendations detailed herein are based on experiences gained by working with professional services firms that function as project-driven organizations, with a focus on helping these firms automate their transactional activities and advance their transformational activities.
A key asset of a professional services firm is the intellectual capital, or knowledge and expertise of its staff, which it leverages to sell and deliver services to clients. As a byproduct, the culture in many such firms is technically-focused and collegial as the cultivation and dissemination of intellectual capital contributes to competitive advantage and success in the marketplace.
This type of culture, while well-founded and well-intentioned, leads to challenges for many project-driven organizations as they look to develop their project management discipline and ensure that projects are managed not only to standards of technical quality but also to meet business considerations. As members of the consulting staff are placed into project management roles, they are often operating in an environment that prioritizes technical innovation and excellence over adherence to project scope, schedule and budget commitments.
Many professional services firms continue to struggle and strive for a more holistic perspective and approach to project management, one that effectively addresses the balancing act between scope, schedule, budget and quality. Part of this struggle stems from placing technically-focused personnel in project management roles without properly developing their project management knowledge and skill-set. What results is a team of project managers who view the transactional elements of project management to be outside of their job responsibilities, which in turn impedes a firm’s ability to effectively monitor and control schedule and financial performance across its project portfolio.
Project-driven professional services firms rely on their project management and accounting functions to jointly facilitate several key processes including project initiation, revenue recognition, billing and collections. For many firms, these processes are marked by inefficient, unstructured collaboration between project managers and project accountants due to misaligned roles, responsibilities and tools. Some firms look to address these challenges with new business systems, but those firms that view technology as a solution unto itself often find their improvement efforts to be futile – they fail to understand that technology is only one component of the overall solution, which encompasses people, process and technology.
In Leading Change and a follow-on Harvard Business Review article, John Kotter outlines 8 key steps for implementing lasting transformations in an organization2. In steps 6 and 7, Kotter highlights the importance of “planning for and creating short-term wins”, then “consolidating improvements and producing still more change”. These insights underscore how effective change involves iterative efforts, spanning multiple cycles of assessment, planning and implementation.
Implementing business systems can be a unique and valuable change agent for an organization, if done incrementally and iteratively. Thinking back to the different levels of interactions that occur in a project-driven organization – transactional, transformational and tacit – this progression also serves as a basis on which complementary business systems can be introduced in an organization to drive both short-term and lasting benefits (see Exhibit 2).
The core accounting and financial management function (or “back office”) provides a solid foundation for the introduction of business systems into a project-driven organization, particularly in a professional services setting. Deploy a back office system – one that automates core financial processing and reporting, project revenue and billing management, and time and expense entry and posting – to establish a central facilitator and repository of transactional activities that can then be leveraged in subsequent areas of focus.
Once core back office functions are automated, focus on information delivery to operations personnel. Define key performance indicators by which projects, staff members and operating units will be measured. This sets the stage for the implementation of role-based web portals that deliver real-time, on-line performance measurements and analysis, tailored to the project, resource and operations managers in the organization. In turn, deploying the portals provides a valuable opportunity to communicate and reinforce current operating standards and expectations through role-based training and development programs.
As Jim Collins indicated in Good to Great (2001), one of the keys to organizational transformation is establishing a culture of discipline that is marked by a consistent framework within which people have responsibility and freedom to operate3. Business systems can help maintain and evolve this framework, particularly after enabling the delivery of relevant, timely information to operations personnel and helping them focus on their areas of accountability. At this stage, leverage technology and role-based education to improve and mature key firm-wide processes such as project planning, resource scheduling, earned value management, billing and collections.
In addition to the case for progressive change just outlined, it is instructive to examine how other project-driven organizations have leveraged business systems as part of their efforts to drive change and improve performance. The following case summaries of five project-driven professional services firms underscore how these firms maintained a holistic focus on people, process and technology as they achieved organizational transformation. They also highlight key themes of accountability, education, controls and standards that these firms targeted to effectively harness their business systems.
Case Summary #1: Establishing Accountability
To establish clearer accountability for financial performance within its operating units, this firm implemented portals for each level of its operations management structure. The CEO, CFO and COO then established a monthly meeting with all Group Managers in the firm, and viewed the operations management portals in the meeting as a basis for identifying positive results and negative results, and establishing action items with clear responsibility for execution and resolution.
By deploying operations management portals and consistently leveraging them to review performance and take action, this firm was able to facilitate a more proactive, collaborative relationship between their operations and accounting teams. In preparation for the monthly meeting, Group Managers would review the performance of their operating units and make sure that their project and resource managers had provided the necessary information on project status to facilitate timely, accurate revenue recognition and invoicing. This led to an improvement in the firm’s collections process, thereby reducing the time in which outstanding invoices were paid by clients.
Furthermore, as the firm’s executives worked with the Group Managers to analyze projects in trouble, they were able to identify and address opportunities for improvement in proposal, estimating and negotiation practices during the sales process, and also drive project financial management standards throughout the firm.
Case Summary #2: Continual Education
As this firm implemented a new project accounting business system, it focused on engaging its project, resource and operations managers during the implementation with two separate rounds of focused project financial management training. Each round of training was role-based and process-focused, enabling participants to understand the underlying theory and importance of project financial management as well as how to interact with the new business system to perform their tasks. In the first year after implementing the system, the firm provided three additional rounds of operations-focused training to reinforce the initial training, and developed an ongoing training curriculum for new and existing managers.
With this dedication to training during and after implementation, this firm was able to position, configure and deploy its core transactional business system as a project financial management system that was embraced by operations personnel from the outset. Project, resource and operations managers were introduced to project financial management concepts and best practices along with the features of the new system, and consistent, knowledgeable system usage was reinforced and institutionalized through continuing
After a thorough assessment of its project delivery practices, this firm education within the firm.
Case Summary #3: Project Controls Support concluded that enabling more disciplined project planning would help it reduce project risk and increase project profitability. The firm then selected and implemented an enterprise project and resource scheduling system across all of its operating units. In conjunction with this business system implementation, the firm created a new project controls position in each of its operating units to provide project managers with local, in-house subject matter experts to help them maintain their project plans.
As a result, the firm was able to institute a new level of project planning discipline, which in turn enabled more proactive project and resource management throughout the organization. With visibility into forecasted project variances and overruns, project managers were better equipped to engage clients and project teams to assess and implement corrective action earlier in the project lifecycle.
The new scheduling system also enabled maintenance of all project schedules in a centralized database and the consolidation of all resource assignments across the project portfolio. This provided a basis for the generation and delivery of graphical, online resource utilization forecasts to operations managers to facilitate their analysis of resource supply and demand as part of the firm’s ongoing resource planning efforts.
Case Summary #4: Project Controls Support
In a second example of project controls support, this firm was in the process of implementing a new project financial management system and recognized that its corporate accounting function wasn’t structured to facilitate the necessary level of collaboration between project managers and accountants. In response, the firm divided accounting responsibilities between finance controllers – who focused on corporate financial processing and reporting – and operations controllers – who focused on project financial processing, including project initiation, revenue and billing. Underneath the operations controllers, the firm placed regional controllers and project accountants, who provided direct, localized support to project managers.
With this targeted re-organization of corporate accounting, project managers were empowered to drive project financial management in the new system without losing focus on their technical work. Operations staff and accounting staff began working together in close collaboration and, with the tiered organization of operations controller teams, a clear escalation path for project-related financial issues and needs was established.
Case Summary #5: Project management Standards
This final example is of a firm that had completed the implementation of a project management business system but was not realizing the intended value of the system as project management practices continued to be inconsistent and immature. To address this, the firm established a Project Advisory Council that was chaired by the firm’s CEO, CFO, COO and National Director of Projects.
On a monthly basis, the Project Advisory Council would select a project, and call in the project manager, office manager and region manager responsible for the project. The project’s status and plan for completion was then reviewed and discussed in a frank manner, according to a standard format. For those projects deemed to be in trouble, the National Director of Projects was deployed to help the project management team take corrective action.
As the Project Advisory Council began to hold its monthly meetings, it became evident that project management teams had limited understanding of how to report or address project financial performance. But over time, as the Council maintained the standards by which it measured project performance and status, project financial management acumen and ownership improved throughout the entire operational chain-of-command. Eventually, the firm’s project management teams started to proactively engage the Council and seek its guidance while planning particularly strategic or risky projects.
Before implementing a business system, it is imperative to take a step back and think holistically about organizational structure and business processes. Business system implementation often presents a valuable opportunity to realign roles and responsibilities, as well as mature and progress standards and practices. Resist “band-aid” implementation approaches by identifying and addressing core issues in an incremental, iterative manner that addresses people, processes and technology in tandem.
From a people perspective, position and enable project management personnel as owners and drivers of project performance, including financial performance. This may entail providing dedicated project controls support in order to help project managers stay focused on the technical aspects of project delivery as well. Consider establishing separate management and technical career paths, and invest in continual project management training and development for personnel on management paths.
From a process perspective, define and communicate key performance indicators by which projects, staff members and operating units will be consistently measured. Organizations should then establish and enforce accountability for these measures, starting at the most senior levels of the organization. Deploying mature standards and processes is also important as organizations look to establish a framework by which their people can operate.
From a technology perspective, implement business systems in stages, starting with a core transactional system for project financial management. Deploy complementary capabilities and business systems around this core, always being sure to engage all impacted users, operating units and business practices along the way. After completing each implementation stage, enforce usage expectations through regular reviews of project, resource and operations performance that bring together managers across the organization.
In sum, as project-driven organizations look to improve performance, business systems can be an effective change agent if implemented correctly. However organizational change cannot be achieved by technology alone, as this paper has underscored through a survey of common challenges, best practices and case summaries.
Beardsley, S., Johnson, B. and Manyika, J. (2006), Competitive advantage from better interactions. The McKinsey Quarterly [Electronic Version] Retrieved on January 2, 2007 from http://www.mckinseyquarterly.com/article_page.aspx?ar=1767.
Collins, J. (2001) Good to Great. HarperCollins: New York, NY.
Kotter, J. (2007, January), Leading Change: Why Transformation Efforts Fail. Harvard Business Review [Electronic Version] Retrieved on March 9, 2007 from http://www.dpcsig.org/Docs/Leading%20Change_Why%20Transformation%20Efforts%20Fail.pdf.
© 2007, John Mathew
Originally published as a part of 2007 PMI Global Congress Proceedings – Atlanta