By Randy Lewis, CPCU
According to business author and management consultant Stephen Covey, Effective leadership is putting first things first. Effective management is discipline, carrying it out.” In other words, leadership requires its own discipline and a commitment to developing skills – such as the ability to manage time properly, communicate well, and listen – which often can be overlooked in such a technically driven field as civil engineering.
Few engineers would admit that they lack the discipline or technical know-how necessary for effective project management. After all, civil engineers essentially are in the business of project delivery, or getting things done. However, the leadership quality of some engineering firms could stand a little polishing.
Many project management tasks require skill sets that, unfortunately, many engineers do not receive from their technical training. While recognizing that professional liability claims typically have a fundamental, technical cause that provides a solid basis for a dispute, there are a number of non-technical factors that can exacerbate a disagreement. For this reason, many insurance companies are developing ways to train their engineering clients on what may be deemed the softer” side of project management. And as an integral part of their risk management strategy to help avoid insurance claims, many engineering firms are embarking on such training programs.
In fact, according to a recent claims study, the absence of non-technical skills – such as communication, customer relations, and conflict resolution – can create many costly missteps in the effective management of a project.
In a review of more than 24,000 closed claims and loss-prevention files from 1989 to 2003 that represent more than $1 billion in claim payments, XL Insurance, Hamilton, Bermuda, found that non-technical factors are the root cause of many insurance claims. For many engineers, the softer side of project management may take them a little out of their comfort zone. But, management practices can be as important as technical expertise in keeping a firm out of legal hot water.
Communication affects every aspect of a project, so exchanging ideas effectively could mean all the difference between resolving issues quickly and facing a lawsuit. In the claims analysis, communications – or lack of it – prove to be a significant factor in 27 percent of all cases. Communication-related problems primarily involve breakdowns in conveying project responsibilities and expectations, the lack of documenting changes, and the failure to establish procedures identifying and addressing issues and conflicts.
Consider the value of feedback; it plays a significant role in managing a project’s risks and a firm’s future risks. Yet, in a recent survey conducted by XL Insurance, less than 20 percent of project team members reported receiving feedback about their performance. Constructive criticism can encourage good behavior and result in a more motivated project team. But, if an employee does something wrong, a practical response is necessary to get workers back on track. Such feedback not only has immediate benefits, but also can ensure that a behavior is corrected and a mistake is not repeated on future projects.
Overall, communication is a big responsibility in project management, and so many issues hinge upon it. By adopting communication and responsibility matrices, firms can better coordinate the information flow among all key stakeholders, and simple tools can help the quality of information flow and minimize the risks associated with a communication breakdown.
Customer interaction is another area that requires effective communication skills. It is important for project managers to realize that even the smallest statement can make a big difference. Responsive communication also has a long-lasting effect, building a trust that can be advantageous should a problem arise. Likewise, smart and open communications with project owners have benefits. It is vital that project managers discuss potential problem areas and design changes at the earliest opportunity so that the team can work together successfully. Increases in the quality of the information flow also pays off in less rework, fewer requests for information during the construction phase, and fewer missed opportunities for a firm to uncover and take on additional services.
Project team capabilities Hiring the right people and keeping them in positions appropriate for their level of experience is imperative and has been a real challenge in the engineering industry. These problems were a significant factor in 24 percent of all claims that XL Insurance reviewed last year, and were concentrated in two areas – an unqualified design staff and an unqualified project manager. These issues should come as no surprise, given the industry-wide struggle to find, train, and retain qualified staff. It is important for engineering firms not only to encourage employees to achieve their potential, but also to help them do so. Creating competency requires an investment in training.
Client selection issues
Client selection challenges, a contributing factor in 16 percent of all reviewed insurance claims, occurs in three significant scenarios: working with a low-bid contractor, litigation, and working with a client that is unfamiliar with the project type or design process. Choosing clients and choosing what types of projects to take on must be incorporated into a firm’s everyday thinking. Certain projects (such as condominiums) and certain clients (such as developers) are higher-risk than others.
A firm should be aware of its clients’ track records and finances before accepting any assignment. Additionally, firms need to be careful in accepting projects that do not provide adequate fees for the services rendered, that restrict their scope of services to an unacceptable level, or that are outside of the firm’s area of expertise. Training in this area can help firms select appropriate clients, learn how to manage their expectations more effectively, improve billing practices, and deal with problems that can result from poor selection of clients or projects.
Negotiation and contract issues Paying attention to the potential liabilities of a new business deal does not start with the handshake that closes the deal. Carefully prepared contracts are an important risk management strategy for preventing financial losses, but too many firms enter into business transactions contractually unprepared. Control over a company’s potential liabilities is never greater than during the contract negotiation process. Exercising that control is an essential strategy for minimizing financial losses and damage to your reputation. Without the benefit of a solid contract, a firm loses control over how a dispute would be handled. Business quarrels can tie up a firm’s time, manpower, and financial resources; and the law will dictate how the dispute is handled. Regrettably, most project managers have had little or no contract review training. The end result can be a project manager leading a team to perform outside of the scope of work stipulated in the contract.
Improved profits, less risk
Project management training takes many forms and it is evident why.
In the design sector, training traditionally has concentrated on the events surrounding the management of projects. These events include the mechanics of handling the forms, finances, and internal tracking for projects. While this preparation is good for maintaining the basic skills of project management, it does little to increase the overall efficiency, quality, or profitability of the projects. That is where training to develop a project manager’s less technical skill set becomes increasingly important.
Project management is at the heart of the design business. It can provide the earnings engine that makes the entire enterprise thrive, or it can be the cause of the slow erosion of profits. As a business’s processes become more efficient, many engineering firms can capitalize on the increased efficiency by charging more for their services. Clients see this efficiency as an added value and are willing to pay for the perceived increase in level of service. Therefore, firms can reap profitability twice – once in internal efficiencies and again in increased fees.
Randy Lewis, CPCU, is manager of loss prevention and education for XL Insurance – Design Professional, which offers professional liability insurance programs for architects and engineers. Lewis can be contacted at 303-690-1473, or via e-mail at Randy.Lewis@xlgroup.com.