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Sunday, 10 April 2011 00:00

Project Acrimony: Project Management and Finance

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Few events start a project manager's day off worse than a yellow sticky note on his or her monitor saying, "The finance manager would like to talk to you." An email is equally as bad; however, the note at your desk means that someone actually hunted you down looking to talk about, you guessed it, finances. There must be some problem. Everyone knows the finance folks would never wander into project-land to invite you out for a friendly cup of coffee. You quickly review the project's finances. Everything seems in order. With a sigh, you contemplate whether you should walk over and see her or will a phone call be the least painful option? Yes, painful. Anytime the finance manager calls, there is going to be a lot of new work.

Let Project Managers Manage

The fellows in finance never come bearing gifts. I have yet to have a benevolent bean counter walk into my pint-sized cubicle claiming, "You have an extra $50,000 to complete the project." It is usually the quite the opposite. Mumbling arcane accounting argot, they want expenses cut, more reports, recategorization of costs, or the like. More work, with no offer to help.

To help, apply a trick I learned from rescuing projects, request an accounting resource be assigned to the project. Let this person parse the project, dissect the data, and run reports. Bill his or her time directly to the project making sure everyone is aware of the actual cost. This frees up the project manager's time to... well... manage! I have never seen a project go off track because a project manager did not know its earned value. I have seen failures because the project manager was managing the report and not the people. If the reports are of value to the project (a rarity, in my experience), they can be used to develop corrective actions. However, proactive management rarely relies on reports providing details from four or five weeks ago. By the time enough data available to generate a meaningful report, the problem is out of control. Projects cannot be managed by looking in the rearview mirror.

Meeting the Executive's Need

Capital versus expense, earned-value, and other arcane finance topics often poison the relationship between finance and the project. The primary reason is that there is little or no perceived value to the project. In most cases, there is none; they are for project executives. The finance team can best determine capital costs and earn-value calculations. Project executives need to look at each of these requirements, determine their value, who should be generating them, and streamlining processes to remove waste.

When significant financial reporting is required, the best option is to allocate a financial representative with the appropriate expertise to do that work and bill their time to the project. This allows executives to see the actual cost of these functions and requires that they justify the cost. Furthermore, this frees up the project manager's time to manage people rather than a series of reports. The net result is building a cooperative relationship between the project team and finance.

When the Project Manager is at Fault

There are times when the acrimony is an issue only the project manager can solve. Project managers must maintain objectivity. They are simply managing a conduit to provide a product within a given set of constraints—scope, schedule, and budget. If the project's budget needs to be cut or there are simply insufficient funds to accomplish what the customer wants, the project manager needs to push back on the project sponsor. The sponsor must acquire the appropriate funds or trim scope. The project manager and finance representative should be allies in this cause. Too often, the project manager takes on the role of trying to deliver the same functionality at a reduced cost. This approach, sounds accommodating and cooperative, but results in overextended projects that miss their financial and quality goals. The sponsor or customer needs to cut non-essential scope, supply more funds, or cancel the project.

Project Partners

The answer is making friends with finance. Partnering and having them do the esoteric accounting work for compliance and executive reporting. Remove yourself from the ever-changing world of accounting rules and focus on managing the people. For, just when you think you understand the world of GAAP, SEC, and FASB, your company will adopt IFRS and your world will change once again.

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