Project time collection
by Gregory C. Hunt, PMP
As ORGANIZATIONS DECENTRALIZE and globalize they are rapidly adopting project management practices. Among the technologies being fielded are activity-centric project planning and control tools. Unfortunately, while these tools are yielding the activity-based plans we need for our project work, cost collection systems often continue to spew out costs by organizational element, not by project activity. This is especially common for those systems reporting labor costs. Yet, labor is one of the most controllable of project costs and its careful management can often mean the difference between profit and loss for the project.
The solution for many projects and enterprises is to implement new labor time collection and costing systems centered around projects and their activities.
The System. In appearance, project time collection and costing systems are quite simple. They usually consist of a form called a timesheet, which may be electronic or on paper. Employees enter project activities and the time worked on them on this form. Following established business rules, costs are calculated from the time entries and posted to the project cost records. Although simple in form, establishing the required business rules, processes, and structure requires careful consideration. The following describes some of the more important decisions and actions required:
■ Determine the reporting period or cycle. How often is labor time collected? Typically it is weekly biweekly, semi-monthly or monthly. Status “through” dates and timesheet “update complete” dates should be published. For accurate performance metrics, the labor “status through” date should be set to coincide with the date through which physical progress is assessed and schedule status determined. For example, if activity percent-complete status is entered each week into the schedule as of Sunday, then the reporting period for timekeeping should be weekly Monday through Sunday.
■ Determine the pay categories. Pay categories are assigned to charges based on pay condition definitions. Common pay categories include regular, overtime, holiday, sick, jury, and vacation.
■ Determine the pay conditions. Tests, called pay conditions, are used to classify hours into pay categories. For example, hours that meet the condition that they were worked on a Sunday may be assigned to the overtime pay category.
■ Determine the pay rules. These are business rules used to calculate rates based on pay categories. They usually involve the application of a rate multiplier. For example, pay for hours in the category overtime may be calculated as 1.5 times the regular rate.
■ Determine the selection criteria for applications of pay rules. Pay rules may be selectively assigned to certain employees, organizations, or projects. For example, the overtime pay rule may apply to hourly and professional employees but not to managers.
■ Determine the units to which time will be collected and the minimum fraction increment. This is usually hours with a minimum increment of 15 or 30 minutes. However, it may be days, weeks, or some other measure for some employees. If there is a direct interface to a project management planning and performance assessment system, then it is usually best to collect actual labor quantities in the same units as planned.
■ Establish the regular per unit pay rates. This is often a politically charged subject, especially if one wants to achieve ultimate accuracy by using the rate actually paid the employee. Most organizations use composite rates based on the average rate for groups of employees, e.g., $40/hour for all programmers.
■ Determine rules for application of overhead and adjust rates accordingly. Overheads are indirect administrative costs which, ideally, are charged back to the project. This is usually achieved by factoring overhead into the labor rate. For example, if the direct cost of a systems analyst is $60/hour, the rate may be set at $80/hour to include $20 of overhead.
■ Identify timekeepers. Timekeepers will need to be identified and classified so that their hours can be related to resources in the project plan. For example, if Sue Brown is a identified as a labor resource in the project plan, then a timekeeper must be identified as Sue Brown in order to relate Sue's actual hours to the plan. Timekeepers may be assigned other classifications such as organization codes for sort, select, summarization, and timesheet approval reasons.
■ Establish business data controls. Security profiles will need to be established and assigned to timekeepers. For example, a general timekeeper may be restricted from gaining access to other people's time entry data, viewing or changing costing rates, changing history, or adding an activity to a timesheet for a project or activity to which the timekeeper wasn't assigned.
■ Assign pay categories to timekeepers. Not all pay categories will apply to all timekeepers. For example, the project manager may be assigned the regular pay category but not the overtime pay category.
■ Determine statusing requirements, including required approvals. Time entries may carry a status such as billable, complete, or approved. Employees may be allowed to assign status to a time entry, or this may be restricted; for example, only the group manager may approve the group's timesheets.
■ Establish reports. Detailed and summary reports by employee, organization, and project will probably be required. You will need to determine the structure and content of these reports, as well as their frequency and method of access.
■ Establish connections with other systems. Determine what other systems the data will be required to interface with and the method to be employed. You will probably want to interface the system with your project management/metrics software and your payroll system. If you use contract personnel, you may also want to tie the system to accounts payable, using the approved timesheet as the mechanism by which payment is authorized. Most commercial timekeeping software packages have built-in interfaces to popular project management and payroll software systems and generic data export tools for use in connecting with other systems.
Providing Additional Value. In a project environment, the timekeeping system may provide additional value by using business rules and additional data collection fields to obtain additional critical status information. For example, the first charge to an activity could, by business rule, be posted as the start date for the activity. The employee may have the opportunity to enter percent complete, revise his or her estimate to complete or update remaining duration, any of which might, by business rule, update the activity status. The employee may also be able to enter explanatory notes. Such features can greatly reduce the data-gathering burden placed on the project manager but should not entirely remove the project manager from regular status discussions with project team members.
Implementing the System. Once the business rules and system structure are in place, you face the more difficult task of integrating the system into the workplace culture. While a well-designed automated system will typically take the average employee less that 10 minutes a week to update, getting them to do it can be difficult. The reason could be that they fear, probably correctly, that the system will tie them to available work. What happens if there are no activities on the timesheet? A second reason may be that they are uncomfortable with the accountability and exposure the system forces on them. The following can help with the transition:
■ Implement the system for both project and nonproject work. Better targeted, activity-centric cost collection is not just needed by project managers. Operations managers are under tremendous pressure to identify and remove the source of excess costs in their processes. Making the implementation an enterprisewide effort can reduce costs through sharing of system development and implementation expenses, and can help reinforce the fact that the change is really driven by structural changes affecting the company as a whole.
■ Put someone in charge of the system. This person should have sufficient authority to enforce the process yet be sensitive to the needs of the project managers and the timekeepers.
■ Implement a pilot project. This is the best way to gauge how the full roll-out will go and to correct problems while the impact is not too great. Build support from those on the pilot team so that they serve as cheerleaders during the full implementation.
■ Train the employees. Train them in how to use the system, but don't quit there. Make sure they understand the timesheet update cycle and exactly what is expected of them. Provide written reference materials. Explain the pressures on the new organization, why the move is necessary, and how better labor accounting can actually help the company control fluctuations in the workforce.
■ Tie the system to the payroll. There is no better way to get the direct-hire employees to use the system than to make it the system by which they get paid. For time-and-material contract employees, you may make the system the mechanism by which payment to them is authorized.
■ Publish exception reports. Only a minor help in getting people to use the system, you can publish a report, distributed to all employees by e-mail, showing those employees who did and did not submit 40+ hours of time on their timesheets each week.
EFFECTIVE PROJECT CONTROL requires that we know how much project activities and resources are costing our projects—in units and costs. Only then can we determine whether we are really achieving positive earned value. Only if we know our labor costs can we compute our labor productivity (units/hour) and, by comparing it with benchmarks, alternate processes and different resources, find the path that leads to improvement. And only with an effective project timekeeping system can we be confident that those labor resources drawing from the project funds are accountable to the project in accordance with the project plan. ■
Gregory C. Hunt, PMP, is a senior project management consultant with Evans Technology in Atlanta, Ga. He has 12 years of reengineering, IT and project management experience, specializing in enterprise project management solutions. He is a member of the Georgia PMI Chapter.
PM Network • November 1997