Monday, February 11, 2013

Time To Cut The "Principals Tax"

Most principals, especially in large firms, have a personal utilization target. There's nothing wrong with that. Contributing to projects provides an opportunity for valuable mentoring and keeps the principal grounded in the reality of what is happening in the real world of doing projects (which, after all, is the raison d' ĂȘtre for all of our firms). But too many principals achieve their personal utilization targets by simply spreading their hours to all their project managers' projects – a.k.a., the Principals Tax. Here are just some of the problems this creates:
• PMs lose the feeling of accountability when they can't control charges to their projects.
• Team members lose motivation to provide real value for the hours they charge.
• Clients lose confidence in the firm when they see high-priced hours on their invoices, yet see with no apparent benefit to them.
• Much of the time charged can't be invoiced or collected because these hours force the project over budget.

If the "Principal Tax" is alive and well at your firm, it's time to clean the slate and get rid of this nefarious practice. I suggest your principals provide a "Bill of Rights" to your project managers – in writing. Here are some suggested tenets: • Whenever possible, the proposed PM for a new project will be intimately involved in developing the scope, budget and schedule.

• Principal involvement will be built into the scope, schedule and budget during the initial planning stage.

• Whenever a principals charges for activities beyond those in the original plan, the PM will be advised in writing of the specific activity performed and value provided to the project.

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