If you win the trifecta in horse racing, you win BIG! It’s also true in business.
About 30 years ago, I worked with a graphic design company near Aspen, Colorado. By most standards, they were very successful. Their loyal, repeat clients loved them; they had excellent revenue and top-line growth; the team loved working there; and they had a large backlog of work. However, they struggled to be profitable.
I’ve seen similar scenarios many times in entrepreneurial service firms, including professional service firms such as engineering, architecture, and IT. I’ve also seen it in service firms that acquire business through a bidding process and are paid a set project price, such as construction, landscaping, or catering.
Why do firms with lots of work and loyal, repeat clients so often struggle to be profitable?
Many factors may contribute to this, but the big differentiator is that profitable companies are laser-focused on what I call the project management trifecta™. This trifecta measures projects’ bottom-line metrics and creates clear accountability for project leaders, who are accountable for three things that make up the trifecta. Deliver the project or product:
- On time.
- On budget.
- At or slightly above clients’ expected quality & meeting the standards.
I realized that the designers for my graphic design client in Aspen were true artists at heart but were creating business graphics, which was less sophisticated artwork. They spent more time than allocated to take their work quality way above what the client expected, and likely wouldn’t even notice.
This either put significant stress on the team to deliver projects on time or caused projects to be late. The company was often so over budget that there was no profit, or worse, they lost money. (You can’t design a Ferrari when somebody’s paying you for a Chevrolet sedan design!)
In most small and midsize companies, team members who lead projects—project managers (PMs) are a prime example—usually have little to no financial training. One famous engineering firm recognized the importance of their PMs learning how to manage project financials. They taught them basic financial concepts and then worked with them to create project accountability for the trifecta metrics.
The results were astounding. The company reversed their financial performance, taking profitability from (-6%) to (+14%) net and continued around that level.
As I wrote this article, I wondered what an AI perspective would be. So I asked Pi.ai, “What are the most important success metrics for a project manager?” The answer came back: “A few metrics are considered crucial for measuring a project manager’s success. The first is on-time delivery, or the ability to complete projects within the given time frame. The second is on-budget delivery, which refers to the ability to complete projects within the approved budget. The third is customer satisfaction, which looks at how happy the stakeholders are with the project and the project manager’s work. Finally, there’s quality of delivery, which looks at how well the project meets the requirements.”
So often the key to improving profitability (and who doesn’t want that?) is to provide simple financial training to the folks in charge of projects and hold them accountable for the trifecta metrics. The project management trifecta is the project’s triple bottom line.
The post, The Project Management Trifecta Can Pay Off Big first appeared on TCNorth.com.
