1. DO YOU KNOW YOUR PER-PERSON, PER-PROJECT PROFITABILITY?
Change is good. In the last fifty years or so,
the world changed dramatically, and the
economy went along with it. We have now
shifted from a system of primarily physical
production to a knowledge worker
economy in which the individual is a
company’s greatest asset. Each person has
value to the organization; consequently,
that value must be accounted for and
maximized in order to be successful.
Since our entire system has changed, it is
only natural that our methods of project accounting and strategy must change
as well. Many companies today, however, have not yet grasped just how they
can improve their processes to accommodate this new way of doing business.
In a knowledge economy, most, if not all, work is done with information. In
such an environment, managers must treat employees as volunteers, because
that is essentially what they are. The well-being and happiness of both
employees and customers are crucial to the business’s success, which is why it
is called a “people” business.
The most effective managers know that accounting for the effort, cost and
profitability of each person and/or project is the best way to succeed, and
doing so is not as hard as one might think. The process that will take you from
where you probably are right now—the state we affectionately term
“chaos”—to a prosperous state of order is called the P5 continuumTM (Per-
Person, Per-Project Profitability).
The Path to Profitability
Chaos
Most businesses begin at this stage, in which you don’t have the information
you need about projects and employees that will help you make informed

2. decisions about the future of your business. In this stage, it is difficult to
replicate successes with any type of consistency and projects are often
abandoned in crisis. Over-commitment is common as well.
Transition: Most of your employees are tracking most of their time
In this stage, you attempt to get a basic idea of how hours are spent within
your company. Have most of your employees give an approximation of direct
costs on a per-project basis in order to track project labor hours on all
projects. Make sure that this information is visible to management.
Structure: Direct costs are known
Dig a little deeper by having all personnel track their hourly rate and expenses
on all projects. In step 2 you proved the value of the data. Here we make our
knowledge complete.
System: Now you know total cost on a per-project basis as well as total
cost on a per-person-per-project basis
Allocate indirect and partially indirect costs such as electricity, office supplies,
or tasks that are too small to measure on a per-customer basis. Give very
relevant and tightly defined per-project and per-person cost visibility.
Order: Revenue integration
Connect all of this data with revenue by integrating your project accounting
system with a financial or ERP system, CRM tools, or another back office
system. This enables you to reach project tracking nirvana by obtaining per-
project per-person profitability.
It is not necessary to follow the process all the way through to ‘order’ in order
to realize benefits; you will begin to realize them as soon as you start, no
matter where you stop along the path. The further along you go, however, the
better off your company will be. This method will give you the strategic
insight necessary for success. After all, if you don’t know which of your
projects are profitable and which are not, you will always find yourself at risk
of losing money and wasting employee time. As the world and economy

3. continue to change and grow, it is imperative for businesses to make the
appropriate adjustments to their time management and accounting methods.
Reference URL: http://journyx.com/node/2123