Financial Management

You’ve asked:
How can we instil a culture of financial responsibility?

Financial Management 101:  Firm owners must ensure that the firm has adequate operating capital. The options are: loan it money, borrow money, and/or build up retained profits. The last option is obviously best, leading to the awareness that their second obligation is to harness all the energies of the firm to ensure that projects are profitable.

Most design firm owners understand that how they work directly affects project profitability – but most employees don’t. Hence the question posed above: How can we ‘instil’ that sense of responsibility? A generation ago, it wasn’t an important question. Staff worked hard, did what they were told, and fees were high enough to allow a lot of rework and scope creep.

Financial management 201:  All that’s changed! Fees are tight, modest levels of rework and scope creep can destroy profits, and today’s generation of  design graduates are independent and have high expectations.

These changes, taken together, mean that there is only one way to answer the question: It is to involve project managers in scoping work and establishing fees. Unless they are involved with “writing the deal”, they simply can’t own responsibility for delivering it.

 

In PSMJ’s Project Management Essentials program, participants learn that they have the ability to manage the profitability of their projects, they learn what tools to use, and how to use them. They see, in doing this, that they also play a defining role in the overall profitability (or lack of it) of the practice.

That new awareness is very powerful, energising knowledge. Your PMs start to see that not only are they the “face of the firm”, they are the drivers of its success. It answers the question, in spades.

For related information, see:

  • Harry Nicolas’ page on Human Resources.
  • The 5 pages under the Projects heading.
  • Maximizing Engineering Firm Profits: Profit Fundamentals (Brian P. Flynn)
  • The Value Pricing Imperative for Design Firms (Frank A. Stasiowski)

Book Now