The Cost of Poor Project Management Is Too Large to Calculate but It’s Worth Trying

At the Engineering Management Institute (EMI), AEC firms will call us in to help them develop custom project management programs that serve to develop their Project Managers sustainably over multiple years. We start with an in-depth analysis of their current PMs and their PM efforts through surveys and interviews. We don’t just interview PMs — we interview their team members, their managers, accounting team members, the CFO, and more. We want to understand the full picture so that the program (and tools) we design and deliver will work.

Through my experience working with our clients and doing this investigative work, it has become clear to me that poor project management is probably the most debilitating problem that prevents AEC firms from sustainable growth. The challenge with this statement is that it’s not always easy to see the damage that is done by poor project management.

I’d like to share with you the true costs of poor project management that I’ve seen in helping to design and deliver AEC PM programs, and in parentheses after each one, I provide the way that this cost can be measured.

#1 Project Variances & Write-offs ($): This is the one cost of poor project management that is very measurable. A firm can easily run reports to see project variances and write-offs, which are a clear indicator of poor project management. One of our clients hired us with a clear goal of reducing annual write-offs from $5 million to $3 million, and we’re on the right track to help them achieve that goal.

#2 Low-Quality Project Work (Documents/Feedback/Construction Issues): The goal of an AEC firm is to earn a profit, but to do so, the firms must put out high-quality projects, or else they won’t get more projects and they won’t grow. We often see poor project management result in poor-quality project plans and specifications, which can lead to frustrated clients, construction errors, and worse, injuries resulting in lawsuits.

#3 Stress (Resignations): When projects are run smoothly, team members (and the PMs) can operate in a state of low (or lower) stress, providing a healthier work environment. At EMI, we have invested in a task management system that is very streamlined, so that whenever we start a certain type of project, we can create the project in the system and assign our tasks to different team members. We can then hold a kick-off meeting and get everyone on the same page from day one. Don’t underestimate the importance of streamlined project management, and the impact it has on your team.

#4 Loss of Talented Team Members (Resignations): Project managers are also people leaders, and if they are good at only scope, schedule, and budget and not communication and delegation, they may scare away some of your best employees. This is why at EMI, when we build PM programs, they MUST include people leadership skill development in the curricula as well.

#5 Poor Client Relationships (Repeat Clients): All of the above result in poor client relationships, which you likely know is the lifeline of any AEC firm. Without repeat clients, your firm is going nowhere, fast.

#6 Less Repeat Business ($): Poor client relationships, low-quality work, and talented team members leaving your firm all lead to a lack of repeat business. This is crippling, as most of our clients report that 70% (or more) of their business is repeat.

#7 Negative Reputation Impacts ($): Lastly, many of the items listed above will tarnish your reputation in the industry. Word travels fast, and your poor PM efforts will not only lead to less repeat work, but talented professionals will want to avoid your firm.

For all of these reasons, developing project managers is the best investment for every AEC organization (public or private). We see many firms looking to grow through acquisition. Here’s a recommendation: Make sure your PM processes are airtight — before you acquire a firm — or else you might have two firms with poor practices coming together, and that truly is a recipe for disaster.

So, next time you think, “Wow, our variances are high, we might want to improve our PM efforts to cut down on our write-offs,” please understand that your poor PM efforts may be doing much more damage than that.

I hope you enjoyed this month's AEC Leadership Pulse. If you are interested in discussing how you can improve your project management efforts or have any other learning and development needs, please message me on LinkedIn or call me at 800.920.4007.

Anthony Fasano, P.E. | President & CEO | Engineering Management Institute

Helping AEC professionals become better managers and leaders.