You're Not Overservicing, You're Underscoping

If your internal teams are continually raising the red flag about projects that are “over estimate,” this is almost always a misdiagnosis of the problem. The vast majority of agency assignments haven’t been properly scoped.

The foundation of the problem is the way “scope” is defined in the first place. What is “scope?” Based on hallway conversations in most agencies, it’s clear that most firms define scope as hours. When a project exceeds its estimated hours, it is deemed “out of scope.” But is it truly out of scope? It’s entirely possible for an assignment to have used 90% of its estimated hours, yet be only 10% completed.

Managing what really matters

This misdefinition of scope creates a flurry of completely unnecessary and ineffective conversations between agency professionals and with clients. When a project manager walks into the office of an art director to inform her that she only has 2.5 hours left to work on a project, has that conversation really accomplished anything? No. The art director will take whatever time is necessary to complete her part of the project effectively.

It’s for this reason that my colleagues and I teach the concept that agencies should do their cost accounting in advance. A project will be a financial success only if it has been scoped and priced properly. Once a project has begun, the ship has sailed. No amount of tracking and reconciling hours will change what happens as the project works its way through the system.

Properly defining scope

Merely estimating hours is not only a sloppy and inaccurate way of defining scope, it’s also exceptionally lazy. Effective scope definition takes some effort and discussions with the client. My friend and colleague Ed Kless, who teaches project management to professionals around the world, defines scope as the following:

1. Objectives

2. Constraints

3. Risks

4. Project Structure

5. Role Definitions

6. Joint Accountabilities

7. Phases and Milestones

8. Deliverables

9. Assumptions

10. Functional Requirements

11. Change Control Process

12. Approval Process

Effectively answering the above questions is real scope definition. Instead of obsessively tracking hours spent, agency teams should instead be monitoring work completed. If and when significant elements of the scope are changed (especially deliverables and due dates), a change order should be issued, triggering a change in the price of the project.

Based on surveys our firm has done with agencies of all types and sizes, it’s clear that very few firms have a proper process for capturing the value of changes in scope. While most firms indicate that around 20% of projects experience changes in scope, these same firms estimate that they invoice for this additional work only about 5% of the time.

Everyone is busy, but not everyone is productive

By putting the emphasis on time defined as meeting deadlines instead of tracking hours, you transform the organization away from a culture of utilization to a culture of accountability. In accountable organizations, the question asked isn’t whether or not your teams are busy (they are almost always busy) but rather what is the highest priority work? If the priority work is clearly defined and due dates are clearly set, why can’t the team be accountable for getting it done? If the team can get it done and one team member is not fully utilized during that particular phase of work, does it really matter? With the right pricing, ROI will be delivered independently of the utilization. Curiously, the more an organization focuses on utilization, the less accountable it becomes. (Not a desirable environment for a professional services firm.)

The goal of an effective professional services organization is to get its teams centered on the idea that they’re in the business of delivering outputs and outcomes, not inputs. Inputs (hours, efforts, activities, individual tasks) are only a means, not an end. We’re not interested in micro-managing an individual’s hours or tasks; we’re only concerned with whether or not they are delivering the intended output or outcome, on time and in a quality way.

Responsibility for scope compliance: this time it’s personal

While it’s useful for timeline purposes to break down large projects into individual component tasks (called WBS or Work Breakdown Structure in project management circles), it should not be the project manager’s responsibility to manage the project at the level of individual tasks. Not only is this an ineffective use of the project manager’s time, it also undermines the culture of accountability we want to create in the organization. Once teams are clear on the needed outputs or intended outcomes and have committed to a timeframe, it’s up to them to manage their individual component tasks in a way that will allow them to deliver a quality output on the date it was promised.