Often entrusted to run multimillion-dollar projects and serving as the link between the office and the field, project managers (PMs) are essentially depended on to run a small business. As PMs take on bigger projects, they are expected to have stronger financial skills. For example, a project that generates 10% gross profit but takes 10 months to collect payment can break even or hurt a company’s cash flow.

Are your PMs willing and able to act as your company’s agent in running a business to its full extent? This article offers guidance, best practices, and performance measurements to help CFOs hold PMs accountable for finances beyond the next billing cycle.

Ready, Willing & Able

An entrepreneur looking to start a business and grow it to over $1 million in revenue in the first year would be required to put a business plan together to secure funding. Yet, contractors hand $1 million jobs to a PM without requiring a plan, and very often, without business or financial training.

So, finding out if your PM is ready, willing, and able to fulfill the role is challenging, especially when your options are limited. A lot is learned as the PM acquires on-the-job training one job at a time.

The following scenarios may sound familiar:

Scenario 1

After 15 years in the field, a newly-minted PM is excited to put their title to work. You don’t have time to train them, so you hedge your risk by starting them out with managing small jobs and rely on their field experience to help them run the job.

Scenario 2

The Assistant PM who spent the past three summers interning as support for three different PMs is looking to be promoted to PM. They have a great attitude and you’re short on PMs, so you want to get them started now.

Scenario 3

A PM, who was a top performer in the field, has lost money on all of their jobs over the past two years as a PM. You’re not sure what to do with them.

Even though these three scenarios are very different, the root cause is the same: lack of a common pathway for PMs to turn their readiness into the ability to perform. In some cases, the ability is also limited to the individual’s willingness to learn and trust in the company’s structure as the company is trusting them with its money.

Measurements to Manage PMs, Projects & the Company

Independent of any individual PM, there are certain characteristics and outcomes by which to measure — and therefore manage — your PMs. Some of these are behavioral in how they manage resources and act as the company’s agent while others are strictly project metrics that can provide early indicators of management performance.

Consistency is critical; maintaining a standard review process with your PMs on their individual projects and their collective personal performance is important. The following are some examples for each, along with a process for tying them all together:

Behaviors

Although it seems like many of these behaviors may only apply to larger projects, remember, if you don’t hold all PMs responsible for the same behaviors independent of project size, then you risk handing them the business without requiring business management.

Conducting a Successful Project Startup

In general, there are five phases of project management: conception and initiation, project planning, project execution, performance/monitoring, and project close. Exhibit 1 presents a project management process that is specific to construction.

Whether or not your company has a formal process, a good PM should at least be:

• Managing project handoff from estimating (unless the PM estimated or won the project themself) to understand the assumptions and scope.
• Defining the project team based on skills needed and available.
• Reviewing the contract and highlighting key risk areas for the company and the project to company executives.
• Developing a financial plan for the project that sets a realistic strategy to achieve profitability and cash flow goals.
• Setting up a Single Point of Launch™ where the people, money, and material planning culminates in a physical event that communicates the plan to the project team and other key stakeholders.

Scope & Change Order Management

Projects change and expand (30%) throughout their life cycle,¹ and PMs do not always stay on top of change management, recognizing the volume and the impact of changes at 80% or more complete. The following questions can be used to measure PM behaviors:

• How up-to-date is their change order tracking/change log?
• How well and often do they provide an update to the customer about open questions and change orders?
• How frequently do they provide change order status updates to accounting, adjusting their contract and job cost?

If a PM is not on top of this data frequently, then they are likely not managing the changes.

Transparency With Data

PMs are infamous for horse trading² and experience success to an extent. However, a business operating with a barter system cannot survive long.

Two signals that go with horse trading are lack of transparency to the data available about the project and/or inconsistencies in the data between accounting and the project’s field operations. The latter is also an indicator of what is described in the next section for managing work vs. managing money.

A few behaviors to watch for include:

• Explaining the project status without the use of data from accounting and/or field operations
• Using offline, individually produced spreadsheets
• Lacking use of operational tools and processes (including excuses for why they can’t or don’t apply to a particular job)
• Using company money (overhead, indirect, procurement buyout) to cover project costs or losses

Customer Management

To the customer, PMs are the face of the company. Even if they are not salespeople, PMs take care of the customer. How often do they take the customer to lunch or out for a coffee to talk about upcoming jobs? How often do they close their projects with a guaranteed service contract or last look at the next job?

These behaviors can be monitored either in the background with data or with formal customer relationship management tools. PMs must be willing and able to transition their presence to one that represents the business, not just building.