|STEPS TO ASSOCIATE PRICING PRACTICE WITH PROJECT MANAGEMENT|
|Define the scope of work for your team|
|Identify your resources up front|
|Create detailed instructions for every phase|
|Watch for the scope creep|
|Practice risk management|
|Plan for the future|
However, all the steps leading you to this point (if properly executed) should mean that you won’t have to choose between doing things properly and making a profit.
Of course, value pricing doesn’t mean you no longer need to monitor costs. In fact, quite the opposite is true. What benefit is gained through pricing based on value if the profits are lost through inefficient work? One of the most important benefits of pricing based on value is that it gives you a powerful incentive to provide the agreed-upon service as efficiently as possible. Ultimately, better pricing practices combined with better project management leads to increased profitability.
How can you effectively associate pricing practices with project management? Here are eight steps that can lead you in the right direction.
You should already have a scope of work (SOW) and a fixed price agreement (FPA) with the client, but that SOW will need additional details for everyone on the survey team. Don’t fall into the trap of treating every survey the same. Researchers and field crews need to know the expected end result in order to best support that result. Asking your field crews about the topographic data required by the FPA while you are preparing to deliver the map to the client is bad timing.
What resources are available for the project? How can they best be applied? If you’re charging an hourly rate, you probably can’t afford to unilaterally implement more efficient technologies. I know of a surveyor who signed a contract to do all the survey work associated with a new industrial park at a fixed hourly rate and then bought a robotic total station. Financially, it was a disaster. He couldn’t change his rate because it was fixed by the contract. He was doing the work 40 percent faster and at a higher cost than before, but the client gained all of the benefit. Value pricing frees you to explore and implement new equipment and techniques for each project. Don’t get stuck thinking that something has to be done the same way it always has.
Each person working on a project needs detailed instructions for their phase of the job. Field crews need to know ahead of time if they’re responsible both for locating the utility poles and assessing the height of the lines above the ground at the lowest point. These details will change from project to project, so you can’t create one all-inclusive list that applies to every job. Although certain items, such as those required by law, will always be included, other items will depend on the needs of the client.
Along with understanding what work is required, each team member needs a schedule. When will the work be completed? What happens if there are delays? Unexpected obstacles do sometimes occur, but you should never take a nonchalant attitude when it comes to meeting deadlines.
Should the budget play a role in work schedules? Traditionally it has. But exercise great caution here. You do not want to fall into the trap of letting the cost accounting people drive the process. In the past, surveyors have had to keep close track of how much time was spent on various tasks because that was how the company got paid. Once we divorce our time from the charge to the client, everything changes. When the client is no longer concerned about how much your time is costing him, you become able to track other items that are important to the success of the project.
Removing the time element changes every aspect of the work, not just how we invoice. When the client’s focus (their value) and our company focus (time and costs) is at odds, we can be trapped. If the client cares about and will pay to ensure that we wear a particular color shirt, we need to pay attention.
“No battle plan survives contact with the enemy.” This quote, widely attributed to German field marshal Helmuth von Moltke the Elder (Oct. 26, 1800 d. Apr. 24, 1891), is not only true of war but of most professional projects as well. In the past, if a client asked for additional services, we simply added the additional time to the invoice. Now that we charge for value, asking for additional services is also asking for additional value. But remember, we promised at the start to not charge for any product or service unless the client explicitly agreed first. Any change in scope requires a modification of the agreement—yes, a change order. (In fact, change orders are so important that they will be the focus of the next column in this series.)
Every job brings its own risk. Some types of risk are easy to identify. You should have identified those and priced accordingly earlier in the process. Other types of risk arise during the course of the work. Good project managers develop the ability to catch these risks early. The sooner they are caught, the easier they are to manage.
As you manage projects, watch for ways to add value. Remember that you are no longer being paid for your time; you are being paid to provide value. Seize that as an opportunity to learn and apply new techniques, new technologies and new knowledge. Not every client will want to take advantage of all the services you offer, but that does not mean you shouldn’t offer these items. There is an endless number of things you can do to add value. (See “Step 3: Develop Service and Pricing Options,” POB October 2012.) You just have to conceive of the extra-value service or item and add it to the list of options you create for your clients.
Someone once asked hockey legend Wayne Gretzky about the secret to his success. For those who may not be familiar with the name, Gretzky is the single most dominant athlete any professional sport has ever seen. His secret? “Skate to where the puck will be.” Sounds easy, doesn’t it?
You probably won’t become a great athlete just by thinking ahead, but you can become a much better manager by keeping your eyes on the big picture. Much of your day is likely spent dealing with what is happening and what has happened. But don’t forget to set aside time to think about and work to create what will happen. If you can manage your daily commitments while skating to where the puck will be, you too can be a star.
|What is Project Management?|
According to the Project Management Institute, project management is a temporary group activity designed to produce a unique product, service or result.
A project is temporary in that it has a defined beginning and end in time, and therefore defined scope and resources.
A project is unique in that it is not a routine operation but a specific set of operations designed to accomplish a singular goal. A project team often includes people who don’t usually work together.