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John Mathew

John Mathew


John Mathew is BST Global's Product Director of Project Pursuit and Delivery. He is also a member of the BST Global Executive Management Team. John and his team manage a portfolio of business applications that facilitate sales, project, and operations management. John joined BST Global in 2001 as a Product Manager. In 2004, he was named Product Director, initially leading Project and Resource Management and then Business Development and Marketing, as well. John has spearheaded the inception of several BST Global products including eResource, Opportunity Management, Mobile Timesheet, and the Enterprise Sync for Microsoft Outlook Calendars and Contacts.

An Introduction to Earned Value Management

John Mathew
JohnMathew
Product Director
BST Global
Is the project on track? The question is simple, asked every day by design consultancies and their clients. The answer, however, can be hard to come by. All too often, project complexity, disparate project management systems, disconnected internal processes, or some unfortunate combination of these factors can cloud a project manager’s ability to clearly view the status of a project. Measuring performance has been a long-standing challenge for many project-driven organizations. So, for an institutional issue, I offer an institutional solution: Earned Value Management (EVM). First developed by the U.S. Department of Defense (DoD) in the 1960s, EVM is a technique for objectively measuring project performance from both financial and scheduling perspectives. Built on top of the “project management triangle” (also known as the triple constraint), EVM leverages measurements of scope, time, and cost to assess progress and forecast where a project is headed. The EVM technique helps ensure that the job is completed on time, within budget, and according to specifications. More specifically, the DoD notes that project managers use EVM to: Quantify and measure project performance, Provide a warning system for departure from a baseline, Minimize risks associated with cost and schedule deviations, and Forecast final costs and schedule outcomes. Since the development of this technique, EVM has been tested and proven on thousands of defense contracts, and is now employed across a multitude of industries around the world – from construction to information technology to manufacturing – to better track and steer projects. A number of design consultancies have also begun incorporating EVM into their project management methodology to get clearer, timelier insight into project status. However, the technique still represents unexplored territory for many architecture and engineering firms – especially those without an enterprise project management software solution. Over the next few weeks, we will take a practical look at the business value of incorporating EVM into your organization’s project delivery approach. We’ll be discussing the core EVM metrics professional services organizations should monitor, how to implement the technique within your firm, and ways to leverage technology throughout the process. In the mean time, what questions do you have about Earned Value Management? Ask us in a comment below! Author’s Note: This is the first article in a four-post series on the use of Earned Value Management in professional services organizations.

Basic Earned Value Management Metrics for Design Consultancies

John Mathew
JohnMathew
Product Director
BST Global
“We’re on schedule, but it looks like we’re going to exceed our budget." "We’re running a bit behind, but we’re going to come in under budget.” For design consultancies, providing updates like these is essential to managing expectations while delivering project-driven professional services. If you want to make this more of a reality in your organization – it’s all about Earned Value Management (EVM). EVM is built on three metrics: Planned Value, Earned Value, and Actual Cost. Think of these metrics in terms of your project budget and schedule. Planned Value represents how you expect to earn your project budget over the duration of the project. Earned Value represents what you actually earn as the project progresses. Actual Cost represents what you spend to do project work throughout the project. At first glance, these terms might seem pretty straightforward, but let’s translate them into even more meaningful terms for a professional services firm. 1. Planned Value = Planned Revenue Planned Value provides the baseline for tracking project performance in EVM, representing the value a project is expected to deliver over its duration. In the context of consulting projects, Planned Value represents the revenue a project is expected to earn through completion, adding up to the overall project fee or budget. In other words, Planned Value is Planned Revenue. Planned Revenue may be expressed as an overall figure for an entire project, or it can be divided across a project’s work breakdown structure (WBS). Additionally, Planned Revenue can be spread across time periods (e.g. weeks or months), to represent the timing of when a project is expected to earn revenue based on anticipated completion of project deliverables. 2. Earned Value = Earned Revenue The second metric of EVM is Earned Value. For design consultancies, this is more aptly termed Earned Revenue, as the metric represents the revenue a project earns as work is performed and milestones are achieved. There are multiple ways to earn revenue on a project. Revenue may be earned when the project team charges hours or expenses to the project. Hours charged on a timesheet may be converted into revenue via contracted labor multipliers or bill rate schedules. Expense charges – like travel, printing, or subcontractor expenses – may be converted into revenue via contracted expense multipliers or unit pricing rate schedules. Revenue may also be earned as project managers assess percent complete across the project WBS. These assessments are often done a monthly basis, and often stem from progress to-date and how much work remains. Regardless of how it’s calculated, Earned Revenue is often governed by Planned Revenue, which in turn is tied to contract terms. For instance, if the contract dictates a lump sum or fixed fee, Earned Revenue cannot exceed this amount. A similar limit applies for projects that have cost plus (i.e. time and materials) contracts up to a predetermined maximum amount. 3. Actual Cost = Actual Effort The final core EVM metric, Actual Cost, is the market (or retail) value of cost a project incurs as work is performed. This metric provides consultancies with a way to compare how much effort has been expended on a project in relation to the Planned Revenue and Earned Revenue on the project. As such, in a professional services context, this metric is better termed Actual Effort. In many ways, Actual Effort accrues on a project similar to the way Earned Revenue accrues. Actual Effort is the result of labor or expense charges being posted to a project, with these charges being converted into Actual Effort via contracted labor and expense pricing terms. However, there are two significant differences between Actual Effort and Earned Revenue. First, Actual Effort cannot be calculated or adjusted by percent complete assessments – Actual Effort is purely a function of the labor or expense charges posted to the project. Second, Actual Effort is not bound by Planned Revenue. As your team continues to work on a project, Actual Effort continues to accrue, even if Earned Revenue is capped by Planned Revenue limits. Another way to understand Actual Effort comes from its relationship to Direct Cost. While Direct Cost represents the cost to a consultancy for services delivered, Actual Effort represents the market value of services delivered. And while some consultancies may incorporate Direct Cost into their project management methodology to measure project multipliers or other margin-based metrics, Direct Cost is not core to EVM. Closing Thoughts In order to leverage EVM effectively, a design consultancy must translate EVM’s three core metrics to fit the unique way professional services projects are contracted and delivered. With this understanding, a firm can take the next step of defining additional metrics and thresholds that leverage these core metrics – enabling better insight into project status and helpful early warning indicators of project issues. I’ll discuss this next step in the third post of this EVM series. In the meantime, please share your EVM questions and/or experiences in a comment below! Author’s Note: This is the second article in a four-post series on the use of Earned Value Management in professional services organizations.

Advanced Earned Value Management Metrics for Design Consultancies

John Mathew
JohnMathew
Product Director
BST Global
Ben Franklin’s proverbial words “time is money” have special meaning for design consultancies, as successful delivery of professional services involves navigating the intersection of project schedules and project finances. Earned Value Management (EVM) provides direction at this intersection by offering a variety of metrics to assess project health and drive project performance. Let’s build on EVM’s three basic metrics and explore nine financial and scheduling metrics that your consultancy can leverage today.   Financial Metrics 1. Budget Variance As the difference between Earned Revenue and Actual Effort on a project, this metric compares how much money has been spent to how much revenue has been earned and provides insight into whether the project is under-budget (positive value) or over-budget (negative value). 2. Effort Performance Index This ratio of Earned Revenue to Actual Effort measures how efficiently a project is earning revenue compared to expenditure. An index less than one indicates an over-budget condition. 3. Effort at Completion Dividing Planned Revenue by the Effort Performance Index provides a projection of how much money will be spent at project completion. 4. Budget Variance at Completion The difference between Planned Revenue and Effort at Completion projects where a project will end up in comparison to its overall budget.   Scheduling Metrics 5. Schedule Variance The number of time periods (e.g. days, weeks, or months) between the current time period and when Planned Revenue matches the current Earned Value position, this offers an assessment of whether a project is ahead of schedule (i.e. Earned Value ahead of Planned Value) or behind schedule. 6. Schedule Performance Index The ratio of Earned Revenue at a point in time to the Planned Revenue at the same point provides a normalized assessment of whether a project is ahead of schedule (greater than one) or behind (less than one). 7. Planned Duration This metric indicates the number of time periods a project is expected to span. 8. Duration at Completion Dividing the Planned Duration by the Schedule Performance Index will give you a projection of how many time periods will have elapsed at project completion. 9. Schedule Variance at Completion The difference between Duration at Completion and Planned Duration, this is a projection of whether the project will complete ahead or behind schedule.   Closing Thoughts Different consultancies have different needs, including which combination of financial and/or schedule metrics are useful. As you identify the mix of metrics for your firm, consider goals and variance thresholds for each selected metric. For example, if Effort Performance Index is important, define the upper and lower limits that dictate whether a project needs further focus and attention. By defining these thresholds, you can start to establish how EVM will fit into your firm’s project management methodology. In my next post, I’ll share tips on harnessing the metrics outlined above, in conjunction with process and technology, to implement EVM in a design consultancy. Author’s Note: This is the third article in a four-post series on the use of Earned Value Management in professional services organizations.

Implementing Earned Value Management in a Design Consultancy

John Mathew
JohnMathew
Product Director
BST Global
Earned Value Management (EVM) is a technique well-suited for professional services organizations, yet many design consultancies struggle to harness it. However, through thoughtful use of process and technology, your consultancy can make EVM stick – and enjoy improved project delivery. To help you succeed in this, here are five process and technology tips for implementing EVM in your consultancy:   1. Establish a project work breakdown structure.  A key component to EVM is establishing a work breakdown structure (WBS) for every project. Consider establishing WBS standards for the different types of projects you deliver, aligning with project deliverables. To best support EVM, a project WBS should go down to the level that Planned Revenue, Earned Revenue, and Actual Effort will be tracked.   2. Establish a project schedule.  To utilize EVM to track schedule performance, you need to establish project schedules. These schedules should reflect WBS sequencing, and how resources will be utilized to deliver the project. Additionally, these schedules should be divided into time periods (e.g. months, weeks, days) at a granular enough level for tracking schedule performance.   3. Calculate and baseline Planned Revenue.  After establishing the project WBS, determine Planned Revenue across the WBS. An integrated project management and accounting system with the right combination of project-centric capabilities can help you achieve this. To support EVM, a system should capture project labor and expense pricing terms, and leverage these terms along with a project resource plan to calculate Planned Revenue. At a minimum, Planned Revenue needs to be established by WBS element, in order to utilize EVM to track project financial performance. If tracking project schedule performance is also an objective, then Planned Revenue should also be forecasted across the same time periods by which the project schedule is established.   4. Track Earned Revenue and Actual Effort.  Once project execution begins, track Earned Revenue and Actual Effort as labor and expense charges are posted to the project WBS. Here too, a project-based business system can assist, if it tracks these metrics in conjunction with timesheets, expense reports, and other project charges.   5. Track project performance and adjust Earned Revenue.  As Earned Revenue and Actual Effort accrue on a project, use additional EVM metrics to assess financial and schedule performance and determine when corrective action is necessary. In conjunction with this analysis, Project Managers may need to adjust Earned Revenue in alignment with project progress. An EVM-enabled business system supports this by allowing project managers to update the physical percent complete of an entire project or specific elements of the project WBS. This percent complete assessment is then used to adjust the Earned Revenue via the following equation:   Earned Revenue = Planned Revenue x Physical Percent Complete   By following these tips, EVM can play a central role in driving better project delivery in your firm. By understanding how traditional EVM metrics apply to your business model, and incorporating these metrics into your project management processes and systems, your firm can take significant steps towards better financial and schedule performance across its project portfolio. Author’s Note: This is the fourth article in a four-post series on the use of Earned Value Management in professional services organizations.

A Case for Progressive Technology Change

John Mathew
JohnMathew
Product Director
BST Global
Intellectual capital is a key asset of a professional services firm. It encompasses the knowledge and expertise of the firm’s staff, and is central to selling and delivering services. As a byproduct, many consultancies have a technically focused and collegial culture, as building and sharing intellectual capital contributes to competitive advantage and success. While well founded and well intentioned, this kind of culture creates challenges for many project-driven consultancies as they look to develop their project management discipline and ensure projects are managed to standards of technical quality and commercial viability. As staff members take on project management roles, they are often operating in an environment that prioritizes technical innovation and excellence over adherence to project scope, schedule, and budget commitments. And so, a common project management challenge for professional services is managing the tension between scope, schedule, budget, and quality. Compounding this challenge is a tendency to place technical experts in project management roles, without developing their project management skills. This can lead to project managers who view the commercial and transactional aspects of project management as someone else’s job, which in turn impedes a firm’s ability to monitor and control project schedule and financial performance. Facing this dynamic, project-driven consultancies rely on their project management and accounting functions to jointly facilitate several key processes, including project initiation, revenue recognition, billing, and collections. Some firms also look to address these challenges with business systems. But those firms that view technology as a solution unto itself often find their improvement efforts futile – they fail to understand that technology is only one component of the overall solution, which really encompasses people, process, and technology. Implementing business systems can be a unique and valuable change agent for a firm, if done incrementally and iteratively. With the different levels of interactions that occur across the project lifecycle – transactional, transformational, and tacit – this progression also serves as a basis for phasing business system capabilities into an organization, in the following manner: 1. Establish a foundation of project controls. The core accounting and financial management function (or “back office”) provides a solid foundation for the introduction of business systems into a project-driven consultancy. Deploying a back office system – one that automates core financial processing and reporting, project revenue and billing management, and time and expense entry and posting – establishes a central facilitator and repository of transactional activities that can then be leveraged to drive additional project delivery improvements. 2. Create firm-wide project and operations visibility. Once core back office functions are automated, firms should focus on information delivery to operations personnel. Begin by defining key performance indicators by which projects, staff members, and operating units will be measured. This sets the stage for role-based dashboards that deliver real-time, online performance measurements and analysis, tailored to the project, resource, and operations managers in the organization. In turn, deploying dashboards provides a valuable opportunity to communicate and reinforce current operating standards and expectations through role-based training and development programs. 3. Evolve project delivery processes and tools. As Jim Collins indicated in Good to Great, one of the keys to organizational transformation is establishing a culture of discipline that is marked by a consistent framework within which people have responsibility and freedom to operate. Business systems can help evolve and sustain this framework, particularly after enabling the delivery of relevant, timely information to operations personnel that helps them focus on their areas of accountability. At this stage, many firms are in a position to improve and mature other key project delivery processes, such as project planning, resource scheduling, earned value management, collaboration, and work management. With the continued emergence and evolution of business systems that help automate and facilitate processes, project-driven consultancies face a myriad of decisions and challenges as they look to effectively leverage technology to improve business performance. Spanning the project lifecycle – from business development and marketing to project and resource management to finance and accounting – there are countless business systems that firms can choose to deploy. But before implementing a business system, take a step back and think holistically about your organizational structure and business processes. Business system implementation often presents a valuable opportunity to realign roles and responsibilities, as well as progress and mature standards and practices.  Resist “band-aid” implementation approaches; and instead identify and focus on core issues in an incremental, iterative manner that holistically addresses people, process, and technology. Where’s the low-hanging fruit in your organization, ready for the picking and ready to be that next step on the path of progressive transformation?

Going Glocal: Authentically Melding a Global Brand With Local Resources

John Mathew
JohnMathew
Product Director
BST Global
Nearly 50% of architecture and engineering CEOs plan to increase their international expansion over the next 5 years, according to EFCG. Are you ready? To help you succeed in the international marketplace, we’re kicking off a series of blog posts about glocalization best practices and recommendations for effectively doing business internationally. Follow along with us to learn how to strategically leverage your resources and fuel your international growth. GLOCAL DEFINED So, this word glocal.  It is a decidedly English play on words to describe a much broader, global strategy that spans languages, borders, and markets.  In fact, the roots of this term glocal come from the Japanese word dochakuka, which can be translated as “global localization”.  Multi-national companies like Sony and McDonalds are often cited examples of going glocal, as they have tuned their advertising, branding, and offerings to the local markets they engage around the world. The Harvard Business Review has written about glocalization, stating glocal organizations have “global scale on technology, production and organization…but communication, distribution and selling customized to local consumer tastes.”  McKinsey offers a similar definition, describing glocal organizations as “multinational companies and local businesses developing business models specifically for local conditions.” To put it more succinctly, being glocal means thinking globally while acting locally. Here at BST Global, we get to work with architecture and engineering (A/E) consultancies around the world, and see firsthand how many firms are expanding globally or are getting ready to do so.  From our perspective, the firms that find success are those that figure out how to meld their global brand and expertise with a local touch and approach. Later on in this blog series, I’m going to share more detailed insight on what we see successful firms doing, but first I’d like to start with the more fundamental question: What is driving A/E firms to expand globally and embrace glocal strategies? The answer lies in some trends that are shaping the world and the A/E industry. GLOBAL A/E: GLOCAL A/E Noted New York Times journalist and Harvard lecturer, Thomas Friedman, in his bestselling book The World is Flat, describes today’s world as one that’s becoming a level playing field for commerce.  But according to renowned statistician Hans Rosling, in his study of 200 countries over 200 years, this wasn’t always the case. Looking back about 200 years, we see a world where every corner was facing a short lifespan and low income – that is, being sick and poor was the norm.  Fast forward to almost 70 years ago, and we see that after the Industrial Revolution, the Great Depression, and two world wars, the Americas, Australia and Europe have pulled away from the rest of the world towards a healthier, more prosperous standard of living.  And then coming up to present time, we see Africa and Asia making huge strides in their lifespan and income. Despite the many disparities that exist in the world today, the last 200 years have shown remarkable progress in closing the gap between “the west and the rest”.  We live in a converging world, where average lifespan and average income are increasing in all corners, with particularly rapid growth - and therefore opportunity - in Africa and Asia. Looking ahead, we can expect a continued shift to the east and south.  Global economic power will continue moving to rapid-growth countries like China, India, Sub-Saharan Africa, the Middle East and North Africa.  Indeed, these markets will become increasingly important venues for conducting global business. And to go along with this, the competition for talent will grow increasingly fierce. Studies show that 60% of the new jobs resulting from this shift east and south will require specialized skills.  But only 20% of the population will possess these skills. Furthermore, by 2025, the global South may become the major source of technical talent in the global economy. All the while, companies can take heart that increased worker mobility and technological advances are improving cross-border collaboration, and therefore the ability to leverage in-house talent on a global scale.  Ultimately, though, it’s predicted that greater workforce diversity will provide competitive advantage in the converging global marketplace, so being able to recruit and retain local talent is an important consideration as firms expand internationally. Against this backdrop of macro-trends that are impacting life and business in general, let’s look at some trends that are more specific to the architecture and engineering industry.  From an infrastructure perspective, there are some remarkable things happening. It’s anticipated that the world’s overall gross domestic product (or GDP) is growing to the tune of possibly doubling by 2030, with the highest economic growth expected in the Asia-Pacific region.  One impact of this growth is that the current transport infrastructure capacity will not meet 2030 demand – which means lots of work for firms who can help design and build this infrastructure. Looking at where in the world this work will be, the Asia-Pac region is the largest transport infrastructure market by far, projected to increase from 557 billion dollars a year to nearly 900 billion dollars a year in 2025. Also of note is that sub-Saharan Africa is expected to have the fastest transport infrastructure investment growth rate, at over 11% - representing another area of opportunity for A/E consultancies. An even more industry-specific data point comes from an EFCG 2015 survey of engineering CEO’s.  A portion of this survey focused on evaluating the most opportune markets in the world.  Each CEO respondent was asked to rate each world market in terms of growth and profitability.  Only four markets came out with an overall positive rating, with the US leading the way and Asia and the Middle East coming in second and third respectively as the fastest growing and most profitable markets for engineering firms.  This presence of Asia and the Middle East in the top 4 markets offers an industry-specific corroboration of that shift east and south we looked at earlier.  Indeed, the ongoing shift in global economic power is impacting the A/E industry. Another interesting finding of this same survey speaks to how the A/E industry has already been impacted by the shift of economic power and opportunity.  In the year 2000, there were 41 firms with greater than 100 million dollars in annual revenue that participated in the survey.  In 2015, only 15 of these firms still were in existence – in other words, 67% of the largest firms that participated in the survey 16 years ago are no longer around today.  The main reason for this?  In short, acquisition – most of the firms that are no longer around were acquired by other firms looking to increase their global reach and specialization, and better serve their emerging markets. So the data shows that we live in a converging world, and that there’s a shift in economic power and opportunity towards the global East and South.  We see that the global transport infrastructure market, as one leading indicator for the A/E industry, is pointing towards Asia-Pac and sub-Saharan Africa.  And engineering CEO’s are bullish on Asia and the Middle East, while the engineering industry continues to consolidate as firms look to tap into the growing opportunities around the world. Has your firm started exploring international expansion? Share your experiences in a comment below. Author’s Note: This is the first in a series on glocalization as it relates to the architecture, engineering, and environmental consulting industry.  

Should We Go Glocal?

John Mathew
JohnMathew
Product Director
BST Global
Entering a new international market is not a decision you make overnight. It requires significant research, planning, and change. Is your firm prepared? To help you succeed in the international marketplace, we’re kicking off a series of blog posts about glocalization best practices and recommendations for effectively doing business internationally. Continue to follow along with us to learn how to strategically leverage your resources and fuel your international growth. Should we go glocal? You may be wondering if it’s time for your firm to go glocal, or perhaps know it’s time but want to gain additional insight before taking your first steps.  Or you might already be part of a firm that’s gone glocal, and are looking to make some course corrections. Where ever you might be on this spectrum, I’d like to share some insights we’ve gained at BST by working with hundreds of consulting firms like yours around the world.  I’ve grouped these insights into two categories – the common considerations that most firms take into account before expanding internationally (that I will address in this post), and then the common afterthoughts that a number of firms only consider after expanding and wish they had contemplated sooner (that I will cover in subsequent posts). common considerations Legal In 1977, the United States passed the Foreign Corrupt Practices Act – or FCPA – which made it illegal for companies to influence anyone with personal payments or rewards.  Further amended in 1988 and then 1998, the FCPA applies to U.S. businesses as well as non-U.S. businesses that trade securities in the U.S.  It also applies to U.S. nationals, as well as foreign nationals that are in the U.S. at the time of a corrupt act. Then, in 2010, the United Kingdom passed the Bribery Act 2010, which raised the bar on the FCPA and is now considered to be one of the toughest pieces of anti-corruption legislation in the world.  In sum, the U.S. FCPA and the U.K. Bribery Act, and other similar laws around the world, have helped drive legal considerations top of mind for design consultancies that are looking to expand their business into new parts of the world.  And beyond these anti-corruption laws, we find that globally-minded firms are focused on understanding and complying with any local legal requirements in a new market, be they statutory or regulatory requirements. Safety Beyond legal considerations, most firms carefully assess the safety of doing business in a target market, taking into account the local socio-political climate and carefully considering whether it will be safe for employees to work there.  And even in stable markets, firms commonly take the time to assess the weather, terrain and other physical conditions that can contribute to a hazardous work environment, and factor that into their market entry decision. Culture Culture is another common consideration of firms looking to go glocal – including an assessment of the business culture in the target market and the compatibility of a firm’s internal culture in that target market.  There are times that a firm will need to adjust its culture in order to better serve a new market, and attract and keep local talent. Brand A fourth common consideration is brand.  As firms look to expand their footprint, they will often look at their brand and assess its fit, differentiation, and reception in their target markets.  Sometimes branding needs to evolve in order to represent a more global practice or connect to a particular market. All told, legal, safety, culture, and brand considerations are 4 vital components of going glocal.   Any globally-minded consultancy should take the time needed to thoughtfully address each of these in their strategy. In my next post, I’ll dig deeper on what we see as common afterthoughts when going glocal – that is, the things that growing firms often wish they had understood and taken on earlier. Do you have any successes or lessons learned while planning an international expansion related to the considerations above? Please share your experiences in a comment below. Author’s Note: This is the second article in a series on glocalization as it relates to the architecture, engineering, and environmental consulting industry.  

Going Glocal: Scaling the Operation

John Mathew
JohnMathew
Product Director
BST Global
As firms expand globally, one of the things they can overlook is the need to scale their operating structure and practices to accommodate doing business in a new part of the world. Don’t let this happen to you! Earlier, I shared some common considerations firms take into account before expanding internationally. Let’s build on those concepts and dive deeper into some common afterthoughts that many firms recognize after expanding and wish they had contemplated sooner. Today, I’d like to examine scaling the operation. Later in this series, I’ll discuss three other major afterthoughts: managing human capital, becoming one studio, and making money. Common Afterthought: Scaling the Operation Some important aspects of scaling your operations may not be top of mind as you look to grow your global footprint. After the fact, two things in particular can become evident– the need to add a new company and the need to setup a new currency – but with some additional planning, you can be ready in advance. Do you need to add a new company? Doing business in a foreign market can warrant a separate balance sheet.  This may be due to local legal requirements, but even if not required by the law, your firm may still want a separate balance sheet for its new business venture if you want to isolate liability and risk from your main operating company.  In order to have a new, separate balance sheet, you need to add a new company to your internal operating structure.  This company will need its own chart of accounts, which may mirror the chart of accounts of an existing company, or perhaps be an abbreviated chart of accounts if you are creating a holding company. In some cases, you may decide to leverage some accounts across your internal companies, such as tax accounts, and in all cases you’ll want to think about inter-company accounts to monitor the transactions between your internal companies and tie them out.  Beyond a chart of accounts for the new company, you’ll also want to think about how this company will be organized into cost centers, which may be departments or offices or other operating units. As you setup both accounts and cost centers for your new company, consider an overall mapping structure to bring together accounts and cost centers across all of your companies so that you can get firm-wide visibility into financial performance. Furthermore, for some firms, adding a company is a catalyst for evolving and reorganizing their profit and loss statement. Do you need to add a new currency? In addition to assessing whether or not a new company is necessary, doing business in a foreign market requires an assessment of whether a new currency needs to be incorporated into your firm’s operating practices.  The need for an additional currency is primarily driven by one of four things: 1) a project contract that requires billing a client in a new currency, 2) the need to pay vendors in a new currency, 3) the need to pay employees in a new currency or 4) a financial reporting requirement in a new currency.  If none of these drivers are relevant, you’re in luck – you don’t need to add a currency.  But if any are true, then you need to go about making that currency a part of how you do business. As you go about adding a currency, think about how the currency is going to be used – whether it be in financial reports, project status and invoices, and/or individual financial transactions.  This will have a bearing on how you want to maintain exchange rates in relation to this new currency – for example, if you’re using the currency for financial reporting only, then you may just need month-end exchange rates, but if you’re using the currency for posting transactions, then you may want more frequent exchange rates. Additionally, if you are going to use your new currency in association with projects and invoices, you may need to think about establishing new rate schedules in this currency, depending on the associated project contracts. All told, adding a company or a currency to your firm’s operating structure requires careful thought and execution.  For most firms, these are rare endeavors, so I suggest enlisting the help of an expert when you’re thinking about doing either and make sure you get it right. Do you have any real-world examples surrounding this common afterthought? Tell us more in a comment below! Author’s Note: This is the third article in a series on glocalization as it relates to the architecture, engineering, and environmental consulting industry.  

Going Glocal: Managing Human Capital

John Mathew
JohnMathew
Product Director
BST Global
“Companies have long had difficulty maximizing the visibility and mobility of their best people.  Managers can struggle to find the right person for a specific project, and talented workers can’t always see opportunities that might help them grow professionally and develop their expertise.” --McKinsey This task can be especially challenging for firms that are expanding operations and market reach. For the next step of our Going Glocal blog series, I’d like to explore another common afterthought post international expansion—managing human capital—and offer some tips for planning ahead. Common Afterthought: Managing Human Capital As professional services firms, one of your most important assets is the knowledge and expertise of your staff.  But keeping tabs on this knowledge and expertise, and effectively leveraging it to pursue and deliver work, is a challenge for many firms.  An already difficult challenge is made even tougher when existing staff become more dispersed and new staff is added. How can you better prepare for this challenge? Go Digital: One key to addressing this challenge is to find ways to digitize your talent pool.  How can you capture and store your employees’ qualifications in an electronic manner, so that their education, registrations, skills and project experience are readily accessible when you’re looking for the right expertise to position in a new market? Human capital management can greatly assist here, particularly when integrated with the marketing, project, and resource management functions of your core business systems.  Having employee qualifications available to the folks in your firm who are pursuing, scheduling and delivering work can greatly improve their ability to leverage talent even as the firm expands. Develop Cultural Skills: Beyond technology, it’s also important to think about other ways to develop staff as the firm looks to enter new markets.  If a new market means a new culture for the firm to understand, look for ways to grow cultural awareness amongst your staff, as well as build skills related to working with different cultures and being on diverse and dispersed project teams.  There also may be a need to grow your staff’s language skills, and perhaps add or develop multi-lingual staff. Uncover Leaders: As you develop your staff and better understand their qualifications, be on the lookout for leaders that you might tap to seed an office in your new market.  While an essential part of going glocal is leveraging talent local to a market, you will certainly want to ensure that there are experienced staff in your new market that are well-connected throughout your firm and well-versed in your firm’s operating practices and methodologies. Find Balance: Going into a new market often causes firms to think about adding staff.  For most firms this becomes a discussion of build vs. buy – that is, should we grow our staff organically via recruiting, hiring and development, or should we grow via acquisition of another firm who is already operating in the new market?  A growth-oriented firm might consider a balanced approach, leveraging recruiting, hiring and development to nurture long-term retention, while using acquisition to strategically open up new markets in an accelerated manner. Effectively managing human capital is essential to going glocal. But whether or not you are thinking about expanding your firm’s footprint, it’s always a good idea to look for ways to better leverage your talent.  After all, as a consultancy, your human capital drives your expertise and your brand, which in turn help you grow your staff and your reach. Have you had success with any of these techniques? Tell us more in a comment below! Author’s Note: This is the fourth article in a series on glocalization as it relates to the architecture, engineering, and environmental consulting industry.  

Going Glocal: Becoming One Studio

John Mathew
JohnMathew
Product Director
BST Global
In a design consultancy, you’re constantly focusing on who’s staffed, and who has availability – it’s core to life in professional services. And when you look to expand your operations, effectively managing resources becomes even more important. Are you prepared? All professional services firms manage their resources in some form or fashion. It may be done in a thoughtful, disciplined manner, or completely ad hoc and perhaps even as an afterthought. As you think about expanding your operations, know that this will cause you to lean further on your current resource management practices. And for many firms, going glocal also sparks a recognition that becoming a more integrated global practice – or, becoming “one studio” as some firms coin it – is a key strategy for better sharing work and resources across geographic boundaries and ultimately better serving clients in all markets. Let’s examine this concept as part of our continued series on global expansion. Common Afterthought: Becoming One Studio A building block for an integrated practice is a resource management discipline that goes beyond a loose, ad hoc process. To get there, there’s a three step process that I’ve seen successful firms follow: Target One Operating Unit: Choose an office, department, or studio in your firm that has an appetite for change and is looking to make resource management improvements. Focus on its active projects—those currently underway—plan them through completion, and implement an integrated project staffing and utilization management process and system in that unit. Also consider including the scheduling of leave or vacation time, so that this unit achieves basic visibility into staff assignments and availability. Extend to Additional Units: Once you’ve achieved success within one operating unit, bring in additional operating units that work on projects with your first unit, so that you can begin to extend your resource management practices to better facilitate sharing of staff across units. You may also consider including additional projects, such as potential projects and non-chargeable endeavors. This will provide full visibility into staff availability spanning both active and proposed projects, as well as vacation and other types of non-chargeable time. Integrate Earned Value Management: Now, you will have a collection of operating units that are benefitting from your new resource management framework, forming an impetus to get the rest of the firm onboard.  Consider integrating earned value management into your resource management process. This will build on the project planning discipline established in Steps 1 and 2.  Also consider leveraging your resource management system to provide resource and revenue forecasts across the firm, as you now have quality staffing plans to leverage for much better operational visibility. This three step approach can be significantly aided by an industry-focused business system, and it’s also a process that can be adjusted to align with your firm’s specific needs and appetite for change.  If you’ve struggled in the past with establishing a resource management discipline, know there’s a proven way to get traction and move towards the goal of becoming one studio. Has your firm successfully evolved resource management efforts and made progress towards a more integrated practice? Tell us more in a comment below! Author’s Note: This is the fifth article in a series on glocalization as it relates to the architecture, engineering, and environmental consulting industry.  

Going Glocal: Making Money

John Mathew
JohnMathew
Product Director
BST Global
Ultimately, going glocal for a design consultancy isn’t just about expanding reach and impact – it’s about delivering positive results to the bottom line. Achieving profitability in a foreign market can be quite a challenge for firms who don’t have prior experience doing business abroad. Entering a new market often requires a different operating paradigm, but inexperienced firms can overlook this and end up impeding their return on investment. Let’s examine one last common afterthought as part of our Going Glocal blog series: making money. Common Afterthought: Making Money When consultancies are expanding internationally for the first time, it can be tempting to count on an effective collections process as the key to making money. But in reality, financial success in a new market requires a more holistic approach that considers the entire project lifecycle, beginning with how projects are initiated. Below are some tips to help you get started: Review Contractual Terms: Review how contracts are written for projects in a new market, and consider terms that can help mitigate risk. For example, look at leveraging fee types that share risk with clients and seek to bill the project in a stable currency. In scenarios where volatile currencies can’t be avoided, you may want to look into a foreign exchange hedge to protect against exchange risk. Also, payment terms should be realistic and reflect the payment culture of the market you’re entering. Assess Project Setup: Look at how you internally resource and setup your projects for execution. When delivering a project in a new market, you may bring together multiple operating units to deliver the work, including organizations that you’ve just added in your new market and more experienced organizations that live elsewhere in the firm. Some firms hit a limitation with their internal business system, in that they can’t setup up a single project that spans multiple internal organizations. They then have to setup multiple internal projects to represent the single project they’ve contracted to deliver for their client. This adds administrative burden to project management, impedes visibility into overall project status, and can lead to otherwise avoidable schedule delays and budget overruns. If this is something you’re dealing with, consider switching to an industry-focused business system that accommodates multi-organization, and even multi-company projects. Distribute Budget Accountability: As you setup projects for a new market involving multiple internal organizations, give consideration to how these working organizations have responsibility for the overall budget on a project. Some firms will hold the lead organization on the project responsible for budget performance, while other firms look to distribute budget accountability to each organization performing work. By doing the latter, you are in a position to get better insight into where project variances might arise during delivery. This often occurs in specific working organizations that spend more than budgeted and need more attention to keep the project on track and profitable. Digitize Vendor Invoices: Projects in new markets can also bring about new cash cycle challenges. For example, as you engage subconsultants and other vendors to assist with a project, it can be difficult to keep track of their invoices – particularly when the project is happening in a location that may have a new office or no office at all. Look for ways to digitize your vendor invoice routing process, whereby invoices are scanned and electronically routed around for review, approval, and ultimately vendor payments. This way you can rest assured that vendor invoices don’t go unaccounted for and lead to surprise downstream costs on the project. Anticipate a Different Payment Culture: As I mentioned earlier, entering a new market can entail getting acclimated to a new payment culture – a culture that unfortunately may be longer and have more steps than your existing markets. For example, you may now have to send out a pro forma invoice to a client and get approval before sending out a final invoice. And, you may be expected to personally visit a client in order to receive payment. Understanding the payment culture of your new market is essential to managing expectations internally and externally, as well as sharpening the business case for cash cycle improvements. Automate, Automate, Automate: If you are facing lengthier payment cycles in a new market, one way to offset them is to further automate your internal billing and collections processes. Look at streamlining the process for generating internal pre-bills that go to project managers for their review before sending an invoice to a client. This can be supported by a business system that supports electronic pre-bills that can be edited and annotated online by project managers. Also look to implement a collections system that drives and captures collections activities in support of getting paid, so that there’s better transparency and accountability, and ultimately lower accounts receivable. Making money in new markets can be challenging, not only because of longer payment cycles in some geographies, but also because of internal inefficiencies and bottlenecks that are only exacerbated by more far-reaching projects and more distributed project teams. To successfully go glocal, you must take the time to look at how you structure your contracts and projects, and manage your cash cycle, and then make the necessary improvements. Do you have any financial lessons learned from an international expansion? Let us know in a comment below! Author’s Note: This is the sixth article in a series on glocalization as it relates to the architecture, engineering, and environmental consulting industry.  

Seller-Doers: AE On-The-Go

John Mathew
JohnMathew
Product Director
BST Global
Life in a design firm can be described in many ways – creative, demanding or collaborative might come to mind for many architecture and engineering (AE) professionals.  For those that deliver projects while also bringing in new work to their firms, mobile is an apt description for how they spend their days.  Can your business systems keep up? A recent study by the Society for Marketing Professional Services (SMPS) confirms that seller-doers are as important as ever to a consultancy’s success, and their business development efforts are on the rise.  According to SMPS, a majority of AE firms utilize the seller-doer model, while larger firms also employ full-time business developers.  In these scenarios, business developers typically focus on identifying and securing new clients while seller-doers look to cultivate existing client relationships.  All told, the amount of time that seller-doers spend on business development has grown over the past decade and is expected to continue over the next 10 years. This trend is driving AE firms to evolve their technology, and look to leverage tools that span the settings that their seller-doers work in and the various tasks they perform while on-the-go.  Working on projects, cultivating relationships and bringing in more work requires many AE professionals to spend time at their desks, at project sites, and in client offices. In my experience, I’ve found that design professionals often perform tasks and drive processes while moving between these settings.  Some common scenarios include: A client manager is visiting a client, meets someone new, and wants to quickly create a new contact in their business system – as a precursor to adding more details to the contact later in the day. During a project site visit, a project manager learns of some additional services that might be needed, and quickly logs a new opportunity for further follow-up and pursuit upon returning to the office. At the end of the week, a discipline lead needs to review and approve timesheets while away from the office so that his or her staff’s time can be posted and invoiced. Indeed, as AE practitioners navigate these types of scenarios, their contribution to business success is enhanced by their ability to work while on-the-go. All told, today’s design professionals are more mobile than ever, working in and out of their offices, both selling and doing.  Their business systems need to be mobile as well – in a broader sense than just mobile applications on a smartphone or tablet, though.  The new reality is that AE firms need business systems that span surfaces – including laptops, tablets and smartphones – and travel with their staff as they pursue and deliver projects. Has your firm implemented a mobile app or mobile-accessible web interface for your employees? Tell us some of your lessons learned in a comment below!

The Top 3 Concepts Every AEC Project Manager Should Know

John Mathew
JohnMathew
Product Director
BST Global
The range of concepts a Project Manager of professional services should know spans both technical and commercial aspects of project delivery. The commercial side tends to be the least understood, but is a key area to master in order to drive successful project outcomes. As a Project Manager, your focus is to manage and deliver projects that must not only meet client expectations, but must also meet internal expectations set by your firm’s financial, operational, and technical guidelines – no pressure, right? With this incredible amount of responsibility, comes a ton of project management concepts you constantly have to keep up with – which can get pretty time consuming, especially if you have a technical background and not much formal business training. Tapping into two decades of experience in the business of design, I’ve rounded up the top three concepts every Project Manager in the architecture, engineering, and environmental consulting (AEC) industry needs to know in order to drive their projects to commercial success. Create a Winnable Game Let’s start with the basics, which Project Managers across all industries must stay rooted in to be effective at their jobs. By definition, a project is a temporary endeavor that is meant to end. Or in other words, when a project never seems to have a finish line – it’s one that’s been poorly managed! Another fundamental aspect about projects is that they are inherently constrained. And that’s not only from a scheduling perspective: in fact, the concept of the Project Management Triangle shows how the scope, schedule, and budget of a project forms the boundaries around the quality that can be expected once it’s finished. In delivering projects, one of the essential responsibilities you have as a Project Manager is to set up a project for success by embracing these constraints. That means, to drive a project forward, you must constantly measure and balance the project’s scope, schedule, and budget performance. For example, you may find that you need to go back to the client with a change order to get some additional room in the budget. Or, you may need to look for ways to reallocate resources to remove bottlenecks and get the schedule back on track. Either way, you always need to stay on top of each constraint to make sure your project is in line to meet the expectations of all three – thus, creating a winnable game. work breakdown structureA deliverable-oriented, hierarchical composition of the work to be executed by the project team. Successful outcomes are not just determined during project delivery, though – they are also ensured in large part before the project even begins. Creating a winnable game starts with organizing your project scope in a thoughtful manner, which reflects the way the project will be executed and controlled. You must do this by creating a cohesive, well-developed work breakdown structure (WBS). To have a good WBS, you need to create tasks, as these are the building blocks for your WBS. Each task represents discrete items of work in an often-hierarchical manner, where parent tasks group together sets of related tasks, ultimately creating specific work packages. As a Project Manager, you want to develop a project WBS into these component work packages, so they can be tracked and managed in the context of the three essential boundaries. Breaking it down like this, and controlling each task with these boundaries in mind, is a critical step in setting your project up for success. Time is Money We’ve just focused on the scope element of the Project Management Triangle – now let’s explore the other two elements: schedule and budget. In a professional services environment, projects take on an added commercial dimension as time is not just figuratively, but literally, money. AEC firms make (or lose) money based on the time they spend delivering projects, so, the more effective you are with your project scheduling, the more efficient you will be in completing your projects. One of the most important ways to monitor the intersection of time and money on your projects is with Earned Value Management (EVM). As a Project Manager, you need to create performance metrics that determine the profitability of a project. And part of this is being able to proactively identify project trends and issues before they happen, so you can take corrective action. The core EVM metrics you need to track include the following: Planned Value: The amount of income a firm expects to earn for the work performed. In the context of projects, Planned Revenue is another way to express this metric, as it represents the revenue a project is expected to earn through completion. Earned Value: The amount of work executed against the budget that is reported as revenue. For AEC firms, this is more suitably termed Earned Revenue, as it represents the revenue a project earns as work is performed. Actual Cost: The market (or retail) value of cost a project incurs as work is performed. This metric allows consultancies to compare how much effort has been expended on a project in relation to the Planned Revenue and Earned Revenue on the project. S-Curve graphA model that displays cumulative EVM factors (planned value, earned value, and actual cost) plotted against time. This model describes the growth of one variable in terms of another variable over time. Once you’ve evaluated these, a great tool to use is the S-Curve graph. This model brings these metrics together and charts the path that your project has traveled, where it’s currently at, and where it’s heading. By using this model to display cumulative EVM factors against time, it provides a simple, yet insightful, visual that can help you optimize the trajectory of your projects. Harness EVM By understanding these EVM concepts, you have not only positioned yourself to gain more insight into the status of your projects, but you are also now better equipped to take quick action. percent completeThe progress of an activity or other element of the project structure plan. Expressed a as a percentage, the calculation is Earned Value divided by Budget. In addition to tracking this information, as a Project Manager, you should always be communicating with your project team to understand the progress of specific tasks, as this will give you a better idea of how far along a project is. When talking to your team, it’s important to collect the status of specific metrics to help you determine the health of a project and drive its performance. varianceA calculation of Earned Revenue minus Actual Effort. This calculates if the amount earned is greater or less than the effort expended to complete a task. To get started, you’ll want to take a look at percent complete. You will use this as a means of calculating an updated earned value (also known as revenue) position of your project. Once you have this value, you can then analyze current project performance from a financial perspective. There are two calculations you need to analyze this: project variance and being over, or under, budget. To assess variance, you’ll need to determine the difference between the project’s revenue position and the project’s effort position. Depending on what your result is for variance, you will be either over, on, or under budget. To be over budget means you have a negative variance, to be on budget means you have no variance, and to be under budget means you have a positive variance – these last two scenarios are what you want for your projects! You can also analyze the current project performance from a scheduling perspective by looking at the difference between a project’s revenue position and its planned revenue position at the same point in time. In this case, you can either be ahead, on, or behind schedule. To be ahead of schedule means your project’s revenue position is greater than its corresponding planned revenue position, and vice versa if your project is behind schedule. Beyond these ways to assess the current position of your project, you can leverage budget, effort, and revenue to forecast where your project is headed. Effort at CompletionThe estimated value of work expended to complete a task or project. To do this, you’ll need to calculate Effort at Completion (EAC) and Variance at Completion (VAC). The former is the amount of money you think you will spend by the end of a project, while the latter is how this compares to the project budget. Variance at CompletionThe difference between Planned Revenue and Effort at Completion forecasts where a project will end up in comparison to its overall budget. It’s important to consider both in tandem – having your EAC is only one piece of the picture, but by comparing it to your budget via VAC, you now have a complete look ahead into where your project is headed. As a Project Manager, you should be measuring and analyzing every one of these measurements. Each allows you to assess and improve on the three parts of the Project Management Triangle – which is the whole point. Meeting these expectations and keeping these values in check means you can deliver more high-quality projects with more successful outcomes. Conclusion Well, there you have it. These are the fundamental business concepts you need in today’s world of project management in the AEC industry. Keyword: fundamental. Meaning there are many – and I mean many – terms and concepts that Project Managers ought to know, so consider this just your starting point. And ideally you have a Project Accountant at your side, staying on top of related aspects of project success. And although you’ve reached the end of The Business of Design blog series, that doesn’t mean your journey should end. There’s still so much to learn! Get ready to expand your knowledge when you download The Ultimate ERP Glossary for AEC Firms. In this glossary, you’ll find a comprehensive list that goes well beyond project management terms. And by comprehensive, I'm talking about 150 AEC industry terms that cover the entire project lifecycle. So, to continue learning, click the link below and get your free copy today! DOWNLOAD GLOSSARY NOW