Understanding the industry and Decision Making
Mohammad Javed
PMP?, EPC Project Management (Plants, Pipeline, Pump stations, Marine, Oil and Gas), Infrastructure Project Management
#WorkFlow, #CashFlow, and #Operational Excelence
Consider a company faces challenging times due to losses from a few major projects, it may still be generating profits from other projects or have the potential to do so by expediting workflow and project completion times. However, management may choose to halt the workflow of profitable projects while keeping the same workforce and overhead costs. This situation often occurs when few decision-makers in management are unaware of the industry in which they operate and are ignorant of the nature of the work.
Let us consider two organizations that follow different approaches, which we will refer to as Case 1 and Case 2, and imagine the possible outcomes.
Case 1: Ineffective Management Response
a. Incoming cash flow has slowed or stopped due to the halt in workflow.
b. Overhead costs remain unchanged, resulting more negative cash flow.
c. Negative cash flow begins to increase due to reduced inflow.
d. The company will struggle to retain its skilled workforce (human assets) due to a lack of new projects (since bidding was stopped by management).
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e. The outcome is certain—the organization will soon run dry of cash.
Case 2: Effective Management Response
a. Incoming cash flow will continue due to active workflows.
b. Profitable projects will be completed more quickly.
c. Long-term overhead costs will decrease as a result of accelerated project completion.
d. Increased positive cash flow will result from the swift completion of small projects.
e. The skilled workforce will remain with the organization.
f. Conclusion: The organization’s cash flow will begin to replenish.
Major project losses can far exceed the profits from multiple smaller projects, necessitating an urgent response. An emergency rescue team should be formed, incorporating experts from all relevant disciplines, to undertake a time-bound recovery mission. First, a thorough analysis of the project's profit and loss forecast is essential to understand its viability. The end goals of the project must be clearly defined, and any underperforming personnel should be reassigned or removed to improve efficiency. It's crucial to segregate the problems and conduct a focused investigation to track the project's trajectory. Engaging efficient team members and recognizing their contributions with monetary incentives can help mitigate losses. Additionally, project cash flow and physical progress must be aligned to ensure smooth operations. All options should be explored, including the possibility of exiting the project swiftly if necessary.
Project HSE Manager at Metito | OSHJ Approved OSH Practitioner | Ensuring Safety Compliance and Environmental Stewardship
5 个月The difference between Case 1 and Case 2 really shows how important management’s decisions are during tough times. Choosing an approach like Case 2 isn’t just about fixing the immediate problem—it’s about setting the company up for future success. What stands out in Case 2 is how it focuses on empowering employees and encouraging them to be part of the improvement process. This keeps morale high and helps retain skilled workers, which are just as valuable as financial resources in navigating difficult periods. Another key factor is communication—making sure all departments and teams are aligned with the same goals of operational excellence and cash flow. This alignment helps the company execute its strategy more smoothly. ??
ACWA Power | Project Development | Water, Wastewater, Biosolids and Solid Waste Management
5 个月Well said! Cash flow is the backbone of any EPC business.