In low-margin business environments that many energy sector companies experience there is a critical need to manage and drive profit. Consultancy firm Bain & Company, say that most work will become project-based by 2027. Planning for success in the early phase of energy project management is essential. Not only to meet deliverables in the short term but to set a precedent for a company’s reputation and to achieve long-term goals. Positive outcomes are dependent on planning and accurate and efficient critical decision-making. Lack of planning can lead to a loss of time, money and reputational damage, which can be costly. The current economic landscape is more competitive than ever before, with companies fighting for survival off the back of a global pandemic, so here are three tips on how to deliver best-in-class project management to ultimately drive profit:
Visibility of utilisation
Resource utilisation measures the effective use of each resource against availability, capacity and budget. Poor utilisation in a company erodes value faster than any other component. Deploying the correct software can increase the visibility of projects, oversee value eroding aspects, better manage fixed overheads and reduce costs. Tracking proposals, invoices, budgets and resources will better manage the lifecycle of projects turning purpose into profit. To truly drive profit successfully in a low margin environment such as energy sector project management, the key is to obtain real time visibility and the information to make accurate decisions.
By scaling up or down, businesses can achieve strategic goals and diversify the portfolio quicker, at a higher quality and maintain the all-important competitive edge. A 10% utilisation improvement in a company of 100 project workers with an assumed hourly cost of $80 can generate an annual saving of just under $1.5M by implementing a an efficient work management software solution.
According to IBM, 90% of executives scaling automation say it creates higher-value work. Using software to automate tasks will streamline workflows such as talent sourcing, proposals, timesheets and engagement. Businesses can increase profitability by using real-time information gained from automation, mitigating bottlenecks and making evidence-based and up-to-date decisions.
The adoption of software to automate these processes can drive tangible profit. Typically around 12 hours a week are spent in manual project management administration across project managers, cost controllers and project controllers. Using automated processes can reduce this time in half making significant annual savings for a company.
Knowledge is power, and digital reporting can pull data from integrated software to offer real-time analysis. Businesses can re-target efforts, review pricing models or highlight over or under-serving clients. Imagine a project leader analysing reports derived from the entire project lifecycle, noticing underbilled services or another which is proving costly. From this, the business can make an evidence-based decision to enhance project performance resulting in greater profits overall.
Another critical component to effective profit management in a project-based business environment is efficient project status reporting to the finance team. Siloed information systems and inaccuracies in shared and copied data can lead to an increase in a company’s debtors days, leading to a negative cash position.
The project management landscape is constantly evolving, and businesses must embrace the collaboration, resource and reporting tools available to remain agile, adjust margins and drive profitability.