Project Profitability: Staffing issues and project managers

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    By Howard Birnberg

     In times of high workloads, project managers often have insufficient staff to complete all required tasks. Firms are finding qualified technical staff (and project managers) increasingly difficult to hire, placing ever greater demands on the time of current project managers. And, unfortunately, the leadership of most engineering and architectural firms often exclude or minimize the role of project managers in planning the utilization of existing staff. Senior managers and marketers make promises and commitments to clients and potential clients without sufficient input from those actually responsible for completing the work. There are solutions to staffing issues; however, first a caution regarding responsibility and authority:

    Responsibility and authority

    One of the most difficult concepts for firm and project managers to implement is the equality of responsibility and authority. In many organizations, project, marketing, and financial managers are assigned significant levels of responsibility. They are expected to meet budgets, deadlines, and targets, often without adequate authority to implement their decisions or to meet the needs of their tasks. This is particularly true of facility managers, whose input is often ignored when new or redeveloped facilities are planned.

    A common complaint in many small and midsized design firms is that middle managers fail to take responsibility and initiative for their assignments. Often, this occurs either because responsibilities are not clearly defined or because responsibilities are delegated while authority is not.

    Where authority is delegated, the residual right to override middle management decisions may remain with design firm senior management. This problem is particularly apparent in firms where the founding principals or partners are still active and are accustomed to making all decisions. These entrepreneurs often feel the need to be highly involved in marketing, project decisions, and client meetings. As a result, they may inadvertently or by habit discourage the taking of responsibility.

    Delegating responsibility

    Effectively delegating responsibility requires several steps:

    Step 1 — Clarify and define exactly what each individual’s responsibilities include. This requires writing a position description and developing a detailed outline of specific task assignments.

    Step 2 — Train individuals in the use of tools and techniques necessary to meet their responsibilities. Some employees fail to assume responsibilities because they lack the necessary skills. This might be in a technical area, but more often it is due to lack of experience in communication skills, organizational techniques, or management of people.

    Step 3 — Allow individuals the opportunity to do tasks their own way. Unfortunately, some senior managers who have been doing a task a particular way have difficulty allowing subordinates to learn through their own errors or to develop their own way of doing things.

    Step 4 — Use restraint in supervising the work of subordinates. Senior managers should teach, not dictate. They must also learn to encourage those with specific responsibilities to find their own solutions wherever possible. Second-guessing is a sure way to destroy a subordinate’s decision-making ability. As a result, he or she will fail to take responsibility for assignments.

    Step 5 — Delegate sufficient authority to perform the assignment. In general, to adequately perform tasks requires at least rough equality of responsibility and authority. Any significant imbalance in this equation will seriously handicap decision-making ability.

    Cross training

    Design and facilities organizations must provide cross training for all staff members. There are three primary benefits to cross training:

    Benefit 1 — Staff develops the necessary skills in the event of turnover, vacations, illness, etc. It is vital to maintain continuity of service. Cross-trained staff can more easily maintain your standards.

    Benefit 2 — Expanding workloads will require additional trained staff and project managers to service new and existing projects and facilities.

    Benefit 3 — Cross training allows everyone to better perform their job. Understanding why information must be in a particular form, how work is to be completed, and other team members’ information requirements all help to improve everyone’s performance.

    Mentoring programs

    One of the most effective devices to train and develop aspiring project managers (or any staff for that matter) is through a mentoring program. This device will likely achieve the fastest development of key staff and will enhance the performance of all who participate. Younger staff gain the benefit of the experience and wisdom of older hands and the more senior individuals are exposed to new ideas and techniques.

    While mentoring seems to be a win/win situation for all involved, it is not always embraced in design and owner/client organizations. Depending on how extensively the program is developed, there can be sizable costs for staff time, administration, training fees, lost billable time, and many other items. Older staff may resist mentoring newcomers for fear of job security. Senior management may ask, “Why pay the higher salary of the older staff when the younger individuals can do almost the same (or the same) job?” Personality conflict can also be an issue if the assigned mentor is unable to achieve a good working relationship with the individual to be mentored.

    In some situations, firms are strongly in favor of establishing mentoring programs; however, younger staff fails to appreciate the benefits of the program or the opportunity being presented to them. A number of years ago, as the chair of the Chicago AIA chapter Practice Management Committee, I helped to establish a mentoring program. A chief goal of the program was to match up architectural practitioners in Chicago with fourth-, fifth-, and sixth-year architecture students at the local architectural schools. Practitioners were grouped by their specialty such as design, technical areas, computer technology, and management, and students could select from their area of interest. Many practicing architects were enthusiastic about the program and readily signed up. Despite heavy promotion at the three local architecture schools, very few students applied for mentors. Sadly, this was a lost opportunity to learn a great deal about their chosen profession from those with real-world experience.

    Personnel planning

    Effective project management requires tight control over personnel levels and use and requires regular input from project managers. The room for error is even less in small design firms as the loss or gain on a single project can result in great over- or under-staffing, and thus seriously impact firm profitability. Clearly, hiring and firing staff as levels of work rise and fall seriously affects productivity and requires the constant training of new people. Maintaining staff at a planned level requires not only a consistent marketing effort, but also necessitates regular forecasting of present and future workloads.

    Personnel planning is not an exact science. The key to its success is the regular discipline of preparing summary plans. A computer spreadsheet is not essential but can help store and manipulate data. Human judgment is the most important element of an effective plan. The input to the plan should come primarily from those actually responsible for running projects — the project manager. However, one individual must be responsible for assembling the data in final form. The plan should be prepared at least weekly and reviewed and modified as needed. If the firm primarily handles very small projects, it may need to prepare a plan more frequently. It is not sufficient to mentally perform this planning exercise since this does not permit a look far enough ahead to systematically and objectively examine workload.

    Leveling workload

    Tied to forecasting personnel requirements is the need to level the workload for the available staff. This can be accomplished in several ways:

    Work overtime— Although this is the obvious solution to short-term work increases, it can be counterproductive in the long run. Studies have shown that generally working 20 percent or more overtime for a sustained period (two weeks or more) can result in a significant drop in productivity. This will often negate any gains achieved by working more hours.

    Improve staff productivity — A highly productive and motivated staff can readily deal with short-term work increases. A good working environment using appropriate computer technology can often greatly enhance productivity or allow the examination of additional options. In addition, keeping staff motivated by providing bonuses and other incentives as well as keeping them informed can be very important.

    Control the timing of discretionary time off — A regular staff planning process can help predict workload bulges and slack periods, allowing appropriate scheduling of discretionary time. Vacations can be scheduled for slow periods and discretionary sick leave (e.g., for elective surgery) can be anticipated and matched to workload.

    Hire/fire short-term staff — Many firms hire some staff on a project or other short-term basis. This avoids the damaging psychology of the regular hire/fire approach by allowing short-term staff to plan ahead and seek other, permanent employment while still drawing a regular salary. Some senior staff people who have left other firms prefer this approach in that they can seek their desired position while still working, even if it is at a reduced salary. Small firms often gain a great deal from having this expertise available for even a short while.

    Farm out work to other firms — During very busy periods, it may be possible to shift some work to other non-competing or friendly firms. This may be particularly true for working drawings, and is often advantageous for firms with temporary increases in work or where the additional staff cannot be located or hired in time.

    Find alternative activities for staff — When a firm’s workload temporarily declines and it wishes to keep the staff together, alternatives are available. For example, many firms find marketing activities for their staff to perform. This might include preparation of graphic materials, writing newspaper or magazine articles, and performing research. Alternatively, staff can be loaned to other firms that are busy or they may assist these busy firms by performing the work in your office.

    Use contract staff — The next section discusses this concept in detail.

    The key to maintaining a firm’s financial health is to control labor costs, and this requires a regular process of personnel planning. The plan is the basis by which a firm can take prompt action to increase or decrease needed staff.

    Contract staffing

    The National Society of Professional Engineers (NSPE) publication, Engineering Times (February 2000) in an editorial during a prior economic boom noted: “Gone are the days when engineers would march straight from the graduation podium to their first job and stay for 30 years. Many of today’s engineers need more than one professional home to slake their thirst for experience. Some are even hooking up with temporary staffing agencies to increase their marketability and gain exposure to a greater variety of challenging engineering projects.”

    While no hard statistics exist for measuring the number of engineers going the contract staffing route, anecdotal evidence indicates the trend is increasing, particularly for baby boomers retiring, but not ready to sit home and mow the grass. Not only are engineers becoming contract staff in growing numbers, so are architects, owner/client staff, and many others in the construction industry.

    What exactly does contract staffing mean? For employers, it means not having employees on your payroll. For contractors, it means independence or self-employment, with both the positive and negative aspects that entails. The advantages and disadvantages of contract staffing differ whether you are the contractor or the employer.

    Benefits for contract staff — Anyone who has ever been self-employed understands the risks and benefits of independence. You are responsible for your own health insurance, long-term disability insurance, taxes, and record keeping. One of the most difficult issues for many self-employed contractors to deal with is the insecurity of not having a permanent job. Of course, anyone in this industry who has been through one of our periodic construction recessions/depressions understands how permanent traditional employment is. The young engineer who has been laid off two or three times in a few years soon learns that lifetime employment is highly unlikely. Even more difficult is the role of the older individual who has a more expensive lifestyle or income requirements and expects a higher salary and fringe benefits commensurate with his or her experience. I recall receiving a telephone call from a 60-year-old architect who neither could afford nor wanted to retire and was looking for contract work because he was unable to find permanent employment.

    Independent contractors must always be alert for work opportunities. After the project on which they are working is completed, they may be out of a job. If workload in their employer’s firm declines, they may need to find another employer. Admittedly, this may be true for anyone working in our industry.

    Despite the drawbacks, being an independent contractor has benefits. You can use your freelance status to hop from job to job or project to project in order to gain experience, travel to and work in new locations, and try out different opportunities. Contractors are often paid more per hour than employees as employers do not have to pay the traditional 25 to 40 percent in fringe benefits and can therefore afford to pay higher hourly rates to independents. Those with special skills may be able to work for the highest bidder and set their own rates.

    Self-employment allows tax deductions not normally available to employees such as home office space, supplies, equipment and auto leases, and other business expenses. Obviously, you need to confirm these deductions with your own accountant and it will vary based on your particular circumstances. While you may have to pay for your own health and related insurance, you may be covered under your spouse’s policy and you may not have been taking advantage of coverage while you were a traditional employee.

    Contractors may also have more freedom during the business day and week. You may be able to set your own hours or days of the week to work. Employees rarely have that option.

    Retired individuals look at contract work as an opportunity to remain active, keep their skills up-to-date, and earn additional income. A few years back, I met a former Michigan Department of Transportation (DOT) engineer who had retired to Arizona and became bored with the inactivity and went back to work on a contract basis with a local county DOT.

    Young people often look at contract work as an opportunity to see if they like a particular aspect of their chosen career, experience a variety of roles, or to find out if they like working for a particular firm before accepting a permanent position.

    Benefits for employers — Some of the benefits to contractors can also be disadvantages to employers. Contract staff can leave and go to the highest bidder. They may choose to depart at inopportune times, leaving you without a key player on your project team. Of course, the same may happen with traditional staff. Your ability to supervise, direct, or discipline contractors may be limited as they are not your employees. The U.S. IRS may also rule that if they are under your direction and control they may be considered employees subject to all appropriate withholdings. You must be careful to understand the rules related to independent contractors.

    The advantages of using contractors far outweigh any negatives. If you need to train some of your less-experienced staff, but cannot afford nor want to commit long-term to an experienced senior individual, then an independent contractor may be the answer. Employers with a temporary, short-term workload surge can retain contractors to meet this need. If a particular skill is needed for a project, retaining a contractor with this experience may be the best solution.

    Contract staff levels can be reduced quickly if workload temporarily or permanently declines. Fringe benefit costs can be greatly cut. Your firm does not need to supply health insurance, disability, or other voluntary benefits. Mandatory/statutory benefits such as unemployment insurance, workers’ compensation, and the employer’s portion of FICA (Social Security) are not required for contract staff. These individuals do not participate in your profit sharing, 401k, or bonus programs. However, you may need to increase or enhance your general liability policy when you have contract staff regularly on your premises.

    Some owner/client firms are moving toward contract staff for their facilities managers; others are completely outsourcing the function altogether. In some cases, these individuals are former employees who were offered the choice of becoming contractors or face dismissal. Obviously, many accept contract status and perform the same job as before, often at a higher base rate, but without fringe benefits.

    The use of contract staff (and outsourcing) will continue to grow throughout the construction industry. As Engineering Times noted: “Contract engineers help companies better manage the ebb and flow of project-related work and bring in appropriate specialists who may not be available among the core staff for a specific project. Lower recruiting costs and the advantages of having a flexible segment of employees are also reasons for engineering companies to use contingent labor.”


    Howard Birnberg is executive director of the Association for Project Managers (www.apminfo.com) and lead consultant for the APM subsidiary, Project Management Consultants. He may be reached at 312-664-2300 or hbirnberg@gmail.com.