Monday 7 February 2022

Project management in the company: pros and cons

In different companies, the project is understood as different initiatives. Some allocate activities to projects whose budget exceeds a specific amount, others consider only a certain type of activity, for example, the opening of a store, to be a project. We decided to find out from the participants of the "round table" what they mean by the concept of "project".

Chief Financial Officer: A project is an activity aimed at obtaining a certain result in the foreseeable future, for example, the construction of a new plant or a change of office. Within this definition, the process of continuous improvement of current activities is not a project. In addition, the project should have a fixed deadline and budget. It can also be said that the property of the project that separates it from the current activity is uniqueness. The project should be planned more carefully than the current activity, since the risk of the project due to its uniqueness is obviously higher. At the same time, the degree of uniqueness of the project may be different: for example, the opening of shops on different streets - separate unique projects.

Financial Officer: I would like to add that the concept of "project result" is also quite conditional. For example, in a vineyard planting project, the result may be the removal of the first harvest, the release of vineyards to their design capacity, and a full return on investment.

For different types of projects, the level of detail of project activities, the depth and frequency of risk assessment should be different. Thus, the process of forming a medium-term plan in our company is carried out according to the rules of project management, but for this project a budget is not drawn up, risks are not weighed. For the project, for example, the construction of treatment facilities, a separate budget is drawn up, a plan for the implementation of work, the effectiveness of investments and risks are evaluated.

Accountant: If a company has the opportunity to invest, then we consider it as a project. If the company's employees see and understand the goal, but the way to achieve it consists of several steps and can change, there is a need for teamwork – this is the project. There is a need to collect information from specialists or consultants, the formation of previously unused work schemes or adaptation of old ones, the creation of new business procedures, that is, there is a need for a creative approach to solving the problem.

Chief Financial Officer: When defining the concept of "project", in my opinion, it is necessary to be guided by several criteria. For example, I would single out urgency (if an action needs to be completed by a certain date, it applies to projects), output, and budget.

The company's readiness to switch to the project system

There are industries in which the project organization of work is the only acceptable, for example, consulting. The participants of the "round table" tried to name companies that are not related to such industries, for which project management is relevant, as well as the stage at which it makes sense to allocate certain types of activities to project activities. Director: The first to switch to project management in US were large companies: Yukos, NIKoil, etc. In recent years, more and more medium-sized companies with a turnover of less than $ 100,000. The U.S. is striving for the same system. First of all, this is due to the desire of management to more clearly understand the results of the business. According to estimates found in the literature, the project management system gives up to 20% of the increase in business value. This figure is obtained taking into account how much money the average company loses due to errors in planning and inefficient use of resources.

Chief Financial Officer: It seems to me that it is necessary to move to the project system gradually. Immediately start working in a schedule, when one executor reports to several project managers, is difficult both from an organizational and psychological point of view, since this requires a high level of management. Since the fully project management system is a kind of extreme, it is difficult for me at the moment to imagine such a situation in our company, although individual projects are conducted in parallel with the current activities.

Director: Project management is a different work culture and a different psychology, and the transition to it can last for years. Let me give an example of the Sukhoi Design Bureau. In 1999, new managers came to the management of the company, who wanted to see the result of the work of employees and the company as a whole. The first principle of the transformation was the introduction of project management - business of creating aircraft is considered to be design in its pure form, and the activities for the implementation of aircraft construction projects had to be systematized. As a project management system in this case, a set of measures is understood, systematizing the current activities of the organization.

The first step was the creation of a unified project management procedure, described in the relevant regulations. Then the company was reorganized and clear powers of employees and entire departments within the framework of projects were defined, a project coordination department was created, which strictly followed the regulations in its work. And only at the last stage an information system was proposed and implemented, which is now used as a tool for scheduling and monitoring the work on the project. By 2003, the system went into commercial operation.

In the process of work, the concept of the company's transition to a project management system changed. At first, it was called -Development of the main activities  and determined the direction of the company's movement. After the understanding of the effectiveness of the implemented system came, the concept was reformulated and aimed at deepening project management, describing the criteria for evaluating project activities. Thus, in order to move to project management according to all the rules, it is necessary to achieve a certain level of maturity of the company. The International Institute of Project Management has even developed a special methodology for determining the company's readiness to implement project management and setting the directions for the initial work on building such a system - where to start and what to expect in the near future, so as not to be disappointed in the results of the implementation.

Cost of project management

The participants of the "round table" determined what the cost of setting up a project management system consists of.

Chief Financial Officer: We considered the option of a complete transition to a project management system, but decided that it would take about two years and cost a decent amount. As a result, an intermediate option was chosen: most of the current activities are conducted as usual, and individual undertakings are considered and managed as projects.

Financial Officer: Project management at Dionysus Club covers part of the processes that are allocated for non-system accounting

These are planning and budgeting, planting vineyards, developing and bringing to market new products and other projects. Determining the methodology for working with these projects is a natural process: most of our top managers have management skills and tools, since project management is included in the mandatory program of all training courses for business administrators. To structure corporate knowledge in the field of project management and determine the internal conceptual apparatus, we had to spend about $ 5,000. USA for a seminar - training for the staff of the head office.

Accountant: Our company specifically trained only IT department employees who perform the functions of IT project managers – they underwent relevant internships in France. The rest of the employees are trained in the process of work, as their activities are regulated by the rules of project management established in internal company documents.

There are certain strategies that allow us to optimize the cost of implementing a project management system. To do this, a competence center is created within the company, consisting of people who constantly work within the framework of projects, where knowledge about project management in the company is accumulated, methods are developed. It also includes specialists of the consulting company. Then the experience of the competence center is replicated throughout the enterprise, this can be done by employees. True, with this method of work, the transition to project management may take longer than with the participation of consultants, but it will cost less.

The second way to optimize costs is to use start-up consulting. It is carried out in key divisions of the company by a team of consultants and is designed mainly to move the formulation of project management "from the dead point". This way went, for example, OKB "Sukhoi". After a series of events, an active group was formed in the company, which was further engaged in improving the existing system. A year later, the group gained some experience and faced a number of problems. Then again a team of consultants was invited, who worked out the situation and helped to identify directions for further development. Such cyclical activities can achieve significant results, but are more expensive than the first option.

If we talk about money, the specific amount depends to a greater extent on the scale of the company and the cost of the information system that will support project management, that is, project planning, budget, database of implemented projects, etc. The cost of setting the methodology, training personnel can range from 20-30 thousand to 200-300 thousand dollars. UNITED STATES. Software can also be of different levels - from Excel to Microsoft Project or specialized systems that cost about $ 5,000. US dollars for five licenses.

The Problem of Dual Subordination

When introducing a project management system in an enterprise with a linear management structure, there is often a transition to matrix management, when each employee simultaneously reports to the heads of the structural unit and the project. This method causes many problems associated with the unclear prioritization of the tasks facing the staff.

Chief Financial Officer: At a certain point, we faced a similar situation. At first, immediate supervisors constantly postponed the implementation of project tasks to the last moment, so that employees first of all solved current tasks. Then we issued an internal order with the following content. If the head of a related unit (project) gives an instruction to an employee who does not directly report to him, then there are two possible scenarios. Either the employee agrees to perform this task under his own responsibility, but not to the detriment of the current work, or sends it to the immediate supervisor, and the bosses agree on priorities among themselves.

Of course, at first, employees preferred to shift the responsibility for decision-making to managers. But after some time, the situation stabilized, and more than half of such issues began to be resolved in the current mode.

In addition, a system of mutual motivation was established for service departments, in particular the IT service, when the bonus of the head of the IT department was set by the heads of other departments, that is, his "internal customers". So we managed to partially solve the problem of the quality of work. At first, the premiums were cut, after a few months – no more, and the complaints disappeared.

There are three types of matrix structure: weak, rigid and balanced. With a weak matrix, the power is concentrated mainly in the immediate supervisor, so the project connections are weak. A rigid matrix, on the contrary, requires maximum efficiency in the project. Oleg's company attempts to create a balanced matrix, when line and project managers try to find and establish the principles of interaction. If such principles are set correctly, they subsequently begin to work automatically.

Accountant: The management adjusts the goals and objectives of the current activities of managers taking into account the projects. For example, in 2004, I was given six or seven goals that were physically impossible to achieve at the same time. After determining the priorities, it turned out that my participation in two projects (the construction of a plant and the creation of information systems for financial management) was vital. The third goal is the current work as a leader. Thus, to achieve the remaining goals, other employees were allocated.

As for ordinary workers, their employment in projects is determined by agreement of the heads of departments. The time required to participate in the project is determined on the basis of the experience gained in the company.

Control of project costs

Another pressing issue is how to control project costs, especially indirect ones, such as the time spent by employees on the implementation of the project.

Chief Financial Officer: The costs of the project are controlled based on their compliance with the planned level. Stricter controls would be costly. For example, if the project includes the purchase of a monitor for $ 120. But the employee will buy it for 100, and put 20 in his pocket, it is unlikely that this should be controlled on purpose.

As for the time of employees, one of the options may be the distribution of staff time costs and, as a result, salary costs according to some drivers. We took a slightly different path. When planning the costs of a project, each employee involved in the project independently estimates what percentage of working time he will devote to the implementation of the project. The document is then agreed with the management and signed by both parties. In practice, if the project is new, it takes several times more time. When the project is repeated several times, the accuracy of planning increases.

When solving the problem of project control, it is necessary to determine two things: the method and the level of control. After that, the problem of inspections is solved by itself.

Results of the round table

In conclusion, the participants of the round table summed up the discussion.

Director: The success of project management, like any system, depends on its correct application by a particular company. I would not unequivocally recommend project management to everyone, but I believe that the introduction of this system can contribute to a significant increase in the efficiency of the company.

Financial Officer: Before implementing a project management system, you need to ask yourself for what purposes it is necessary.

This will greatly simplify the definition of which activities to attribute to the project, how and at what level to control it.

Accountant: When working within the framework of project management, it is necessary to observe the measure: sometimes even in our company there is a situation when there are more projects than people who are able to execute them, and there is a decentralization of management, which can lead to failures. For example, the actions of various departments are uncoordinated and, for example, the legal service joins the project too late, or the premises are built, but the entrances to it are not. Therefore, for successful work, project management must be strictly centralized.

Chief Financial Officer: I would like to emphasize the importance of automating the project management system, as this allows to reduce the degree of influence of the human factor on the planning and implementation of projects, to increase manageability. I also believe that any new undertaking in the company should be implemented within the framework of the project - this gives more guarantees that the intended result will be achieved.

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