I have seen the transition from print to digital in various organisations, and all the practices which kind of make sense for print, but are disastrous in a digital setting.
In this article I'm going to discuss project budgets, and one undesirable behaviour which can manifest in your organisation.
Project Budgets
It should go without saying that projects should be profitable. That's business!In a traditional agency, chunks of money are ring-fenced to pay for people, and materials. The revenue needs to be higher than the cost (obviously).
The Budget Statement:
ALL projects must be profitable
As part of this, common thinking is that the combined wages of workers on the project should be low enough so that the project remains profitable. This might mean using mid-weight or junior workers rather than seniors or contractors. That makes sense right?
In the following examples, I will be talking about contractors as they cost a lot more than internal staff, so the effects on decision making are more pronounced. However, the concepts also apply to internal staff due to wage differences of skill levels.
Project Contractors
It is extremely common to hire contractors for the duration of a project. These may be copywriters, designers, project managers etc. Basically whatever the project needs.There are cases where the project budget is relatively small, which means contractors are not affordable within the project budget. Therefore internal staff are assigned as they are cheaper. This principal applies also when choosing a mid-weight or a junior over a senior, as the senior has a higher wage. This makes total sense right?
So some projects simply do not have budget for contractors. Refer back to the Budget Statement, that ALL projects must be profitable.
On a side note: There are various problems regarding reliability, quality, and consistency of contractors, but that is a topic for another time.
Budget Thinking That Hinders Success
Imagine 2 available designers:- Agnes - An in house senior designer, who is top notch
- Barry - A contract designer with far less experience than Agnes, who costs the team/organisation more than Agnes because he is a contractor
- Project A
- High profile
- Requires a top notch senior designer
- Has a high budget (can afford a contractor).
- Project B
- Low profile
- Can have acceptable results with a someone less experienced
- Has a low budget (cannot afford a contractor).
- Project A
- Can afford Barry, even though he is not as good as Agnes
- Reluctantly assign to Barry
- Project B
- Unable afford Barry
- We must assign it to Agnes to stay within budget
Obvious Risk
In the previous example, I hope you have noticed that putting Barry (with less experience) on the high profile Project A is highly risky. You could end up delivering something below par which can result in losing the client entirely.But you were forced to stay within budget! The budget forced you to deliver low quality for your client. This is very sad and disappointing.
This is an interchangeable resource fallacy. People are not interchangeable due to various reasons. This may be skills, experience, knowledge, velocity. I can't count the times where the wrong people have been put onto projects.
Note: I'm not talking about errors such as wrong event dates. I'm talking about quality of work.
Can you think of any projects/clients who have suffered due to this type of budgeting?
The Optimal Solution Breaks The Rules
In the example (above), we saw that putting the wrong person on a project can lead to poor results for the client. The client may even decide to leave you.Breaking The Project Budget
If you only consider the success of both projects, then you are probably thinking that the solution is obvious:- Project A
- Assigned to Agnes
- Will be a success
- Will be profitable
- Project B
- Assigned to Barry
- Will be a success
- Will not be profitable
This solution breaks the rule that "ALL projects must be profitable", however the solution ensures that both projects are a success. If both projects are successful then the net result to the team/organisation is the same!
The Cheeky Solution
It is worth mentioning that there is a solution which gets around the budget constraint. Basically all you need to do is cook the books.On paper:
- Project A
- Assigned to Barry - However Agnes is REALLY doing the work
- Will be a success
- Will be profitable
- Project B
- Assigned to Agnes - However Barry is REALLY doing the work
- Will be a success
- Will be profitable
Ideally you shouldn't need to do this, but it is a workaround which I'm sure many teams/organisations will do. However this essentially means that you are lying.
Another Solution
If you take a more holistic view of the team/organisation finances, you will see that the cost and revenue (in the above solutions) is exactly the same. Therefore the net profit across both projects is the same.Consider your staff (mix of fulltime and contracts) as a single pool. Now you have an average wage cost, and you can budget accordingly. Sound simple? That's because it is!
By taking a more holistic view of your organisation (not just projects in isolation), there is higher chance that the you will be more successful and profitable in the long term. This in turn improves profitability.
Project Problems In A Digital World
As we saw above, a poor resourcing decision can lead to poor results, and even loss of clients. When you translate this to digital projects, these problems are amplified, made more frequent, and even more reputation damaging.
Let me explain...
Some print projects can get away with being below par. Often an ugly design can still arguably be used - Yes this is an over simplification, but I hope you get what I'm saying.
A crashing website is of absolutely no value, no matter how many lines of code were used to build it. When a website is made badly, it can be unstable, crash, and even loose money.
Does anyone remember the TSB crisis of 2018? https://www.theguardian.com/business/2018/jun/06/timeline-of-trouble-how-the-tsb-it-meltdown-unfolded
Final Thoughts
I hope I have convinced you that project budgets do not work in the way you hope they do. When constrained by the edict that "ALL projects must be profitable", then the organisation will likely develop habits of making sub-optimal choices, which can be devastating.Often, it is not just as simple as resourcing according to budget. The right person may cost more. However, if the alternative is the risk of a failed project, then shuffling people around is the only option. This of course can break the rule that "ALL projects must be profitable". You may decide to cook the books to say that a contractor is on the project that can afford it. You won't be the first to actually do this.
You may even decide that it is acceptable "on paper" that some of your projects will be unprofitable, so that all the projects can succeed. Another solution is to consider your staff (a mix of fulltime and contractors) as a pool. This means you have an average cost per head, and you can now budget accordingly.
I hope I have given you food for thought. Take a step back, and start looking at project success across your team/organisation, not just projects in isolation. Take a more wholistic view of profit across the team/organisation, not just individual project profit.
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