Ask any CEO, CFO or COO what the number one reason is that they’re losing sleep at night. It’s money.
Everybody in your services firm is working hard for clients and pulling all-nighters to meet deadlines. Yet you’re not making a profit. Projects are bleeding money.
What’s going wrong?
Too often, the issue lies with your work breakdown structure. Your teams aren’t getting a clear picture of the project as a whole, financial agreements and all. So they’re overspending, over-delivering and blowing the budget time and time again.
How do you fix it?
- Revisit your work breakdown structure (WBS) to ensure that deliverables and financial details are crystal-clear
- Communicate the work breakdown structure to every team member working on the project
In the quest to prevent work from going off-task and off-budget, a clear work breakdown structure and financial transparency instituted at the service delivery level matter greatly. Erase confusion about what the project teams are delivering and for what kind of budget, and you’ll have higher quality projects with fewer mistakes and–finally–better margins.
We’re going to talk about what kind of internal organization and infrastructure you need to make that happen. We’ll cover:
- Why services businesses need a WBS
- How to structure internally to have an accurate WBS
- How to create a WBS
What is the purpose of the work breakdown structure in services businesses?
The work breakdown structure in project management is a powerful reference tool that, as the name implies, breaks the work of the project down in terms of scope. It creates a road map from objectives to outcomes. The project is divided up into project deliverables, from which all work-related activities branch out and budgets are derived.
As a visual diagram of the project’s scope, the work breakdown structure achieves several major things for professional services organizations:
- Helping project managers direct service delivery teams
- Keeping projects within budget (and avoiding scope creep)
- Helping your teams deliver services in a smooth, predictable fashion
By clarifying exactly what you’re doing for the customer, the work breakdown structure helps you honor your commitments while staying profitable.
You can easily distinguish when work is straying from the original commitment and avoid sinking hours of non-billable time for incorrect or unnecessary work into the project. You’ll deliver the services promised, when they were promised. No more, no less.
How detailed should a WBS be?
What you’re doing for the customer and how much it will cost–your commitment in time, money and resources–should be crystal clear. Lay out how many hours project-related activities will take, who will perform them and at what cost and sales rates. Breaking the budget down per activity helps to safeguard your margins as it will be clear how much budget each team member has to work with.
Without an unambiguous view of these items, your projects will bleed money as they sink in ever-shifting parameters.
The importance of transparency
You may always be thinking about the profitability of your company’s projects. But if your project teams aren’t, too, that’s a big problem.
While it may be technically true that the burden of overseeing the financial health of the company and its projects belongs to the executives, the reality is that everyone absolutely must consider the broader picture to make projects profitable. Information silos create single-minded employees and contractors.
If your teams are solely focused on tasks, they’re not considering whether the work they’re doing is part of the original commitment to the customer–the agreed-upon work for an agreed-upon price or estimate. Consequently, the project will bleed money as services are over-delivered and people unwittingly blow their personal budgets.
The remedy? Make the work breakdown structure and the financial data contained therein transparent and available to all. In fact, do more–make sure everybody has read the work breakdown structure and knows how to actively reference it at any time. Employees can’t do much about, much less care about, what isn’t part of their purview.
Get everyone’s mind on the money and you’ve got more than a collection of workers. You have a team of stakeholders invested in and responsible for the success of the projects they’re part of.
Creating equal players with budget data
Your project managers’ lives are going to be hell if the teams don’t know what they’re doing. Handing down individual tasks to workers who have no idea what the project structure and budget are pretty much guarantees that they’ll need to be directed and corrected ad infinitum. And the kicker is, this still won’t protect your margins.
You want your teams to produce results for the customers while also being mindful of maintaining their personal budgets, which come from the work breakdown structure. They should be checking their work against the work breakdown structure and asking questions like, “If I work on this task for ten hours, will I be able to complete the rest of my tasks within the remaining hours allotted to me?” They’ll see how much budget they have to work with and correctly manage their own time.
With access to a work breakdown structure that details the personal budgets of their colleagues, team members are afforded the flexibility to instigate vital changes that can save the overall budget when unforeseen circumstances arise.
As an example, consider a situation in which Team Member A recognizes that their twenty-hour personal budget isn’t going to cut it to complete their work:
- Team Member A sees that a colleague, Team Member B, has completed the majority of their work in half of their own allotted time.
- Team Member A approaches Team Member B to discuss swapping hours
- The colleagues present a plan to the project manager to balance their personal budgets
Without access to this budget information, one person would have lost time doing a lot of work that couldn’t be invoiced, and the other likely would have left money on the table because the time couldn’t be spent.
Does every project need a WBS?
In a word, yes. You need the bones before you can start putting the meat on them. You need the structure that captures your commitment to the customer before you build out a project.
Without a clear work breakdown structure, you’ll likely end up with dissatisfied customers because their expectations will invariably diverge from yours. You’ll end up doing work they didn’t sign off on and producing results they didn’t ask for. You’re asking for precarious financial conditions that will leave one or both parties poorer.
The question is, why wouldn’t you use a work breakdown structure to plan every project? It’s pivotal for ensuring quality work and profitability while preserving relationships with your customers–which will encourage repeat business and contribute to profitability in the long term.
If creating a work breakdown structure is somewhat daunting of a task, you can actually use templates to put much of it on autopilot. More on that below.
How to structure internally to create a clear and accurate WBS
It’s one thing to write a work breakdown structure. It’s another thing to get it to work for your organization. For that, you’ll need the right system in place.
- Ditching spreadsheets and getting organized
- Coaching inexperienced team members
Get organized with templates
As a software services company, we have a knee-jerk reaction to professional services organizations creating work breakdown structures in disjointed spreadsheets. This is the situation we see many new VOGSY users coming from, and predictably, they’re getting different pictures and different outcomes for the same types of projects. In essence, their spreadsheet systems are sowing disorganization and unpredictable results, which means unpredictable income.
We’re more than halfway through 2020. Technology has evolved to the point where manual drudgery is all but replaceable with automation. It’s time to replace the disconnected, non-collaborative spreadsheets with automation and interactivity.
Templates that help to automate the creation of a project’s deliverables, activities, budget and margin facilitate more predictable income by virtue of the fact that they standardize your projects. This is huge because for many services businesses, certain projects tend to recur. Repeatability of your projects will nurture similar results as you’ll know the structure, budget and resource planning required.
Start coaching your project teams
Let’s face it. Your team is scared of money.
“I’m just a designer. I don’t care/need to know about the financial stuff.”
This is not what you want to hear from a team member. Most would prefer not to touch the financial stuff with a ten-foot pole, so you need “super users”–they could be the CFO, COO, senior project managers or back-office administrators–in your organization to help them get their hands dirty.
It’s everyone’s responsibility to monitor their personal budget, but they should feel comfortable engaging in conversations about outcomes, finances and their roles in the broader scope of the project. An experienced advisor can help.
Coaching your teams on working within the correct project structure will also help to ensure that they don’t create their own individual work breakdown structures. If this happens, you’ll have trouble overseeing your entire portfolio of projects and gleaning insights into profitability by comparing projects’ performance.
How to create a work breakdown structure
A straight line is the fastest and most efficient path from starting to end point. Building the work breakdown structure directly into your team’s workflow leveraging your professional services automation (PSA) software is that straight line. The work breakdown structure becomes second nature to your whole team, not to mention fast, reliable, accurate and fully trackable. It becomes, in a word, easy.
If you don’t use a PSA tool, this is an excellent example of why you need one. Only PSA software is designed specifically to automate, facilitate and maximize services firms’ project management, resourcing and daily operations. (Side note: To varying degrees, PSAs can also handle financial processes, including business expense tracking and invoicing–always take advantage of product demos to learn if a PSA hits all the marks for your business.)
A work breakdown structure example using PSA software
In VOGSY, defining and disseminating the work breakdown structure take place inside of one quote-to-cash service delivery system everyone in your company uses to plan, track and execute projects in real time. It’s transformed from an isolated document into a living, breathing work, enabling you to compare estimated with actual hours, budgets and margins as the project progresses.
Here’s the VOGSY quote-to-cash workflow:
- In the statement of work phase, you’ll create the work breakdown structure, defining all deliverables, activities and price estimates in an opportunity project. Or, you can simply choose project deliverable templates, which contain all activities and their associated costs from previous projects. This will save time and enhance predictable outcomes.
- If the quote is accepted, the opportunity project automatically becomes an active project your team can begin staffing.
- Once the project has been planned out, the work begins. Because all team members are actively using the work breakdown structure as they check their assignments, everyone knows what they should be working on, when, and within what budget and time frame.
- Team members record time as they work, which automatically updates VOGSY’s budget spend and margin indicators and auto-populates invoices to be sent directly from VOGSY.
Gradually, the reality of your project takes shape. Are you getting the results you wanted at the start of the project? How are the margins evolving? Is your team doing too much? VOGSY guides you to the answers as the project unfolds, enabling project managers to work with team members on catching and resolving those elusive budget issues eating into profits.
The bottom line
At some point or another, every professional services organization sees budgetary inefficiencies leaching money from projects. When the project’s work breakdown structure and financials are not shared with the entire project team, they’re more or less helpless to do anything to address their parts in the systemic overdelivery issue.
Transparency in your software and workflows is the key to making it work. Knowledge is power. Integrating the creation and dissemination of a work breakdown structure into the project teams’ workflows via PSA software gives everyone the information they need to manage their time effectively. Empower your teams to think like executives–to look at the bigger picture–and make good decisions, and they’ll become your greatest allies in ending money leaks and bringing home higher profits.