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2 Ways Organisations can do more with less: PMO Tips
The papers are full of falling stock markets, rising debt and a looming recession. It may be time to look at ways of being more efficient. Having worked in both the public and private sectors, there are two easy ways that all organisations can save money.
Step 1: Consultant and Contractor Costs
Some companies where I have worked are good at monitoring their costs including the day rate of contractors and consultants. In reality, there are only a few organisations that monitor these costs and act on the data.
One of the reasons why organisations do not manage their contractor and consultant costs effectively is that the data is hard to analyse and is often in disparate systems. Timesheets are often not collated by the buying organisation.
Many contractors will complete timesheets, via agencies, but the key difference is that the timesheet data resides in disparate agency or consultancy systems.
"It is therefore hard for the organisations to mine this data to see the individual rates of contractors and consultants."
A company that we recently worked with insisted that all contractors entered data into our pm3time timesheet system. They owned the data and could do simple searches to find out:
- Who are the highest paid contractors?
- Who are the highest billing contractors over a given time period?
- Who are the contractors that have been working the longest?
- Which companies have billed the most during a given time period.
To answer these questions when the data is in separate timesheet systems, and not owned by the buying organisation, is difficult as you cannot easily analyse the data; you may not even have access to the data that you need.
So if you do have a timesheet system like PM3time that is used to capture time booked and rates which is ‘owned’ by the buying or commissioning organisation, you can analyse the data and take the following steps to save money: renegotiation and convert contractors to permanent.
Renegotiate with agencies or contractors who have the highest day rates or who have been at your organisation a long time so have the highest bills per given period. You can then negotiate with the contractor or agency to reduce the rate or replace him or her with a contractor with similar skills but a lower rate.
We find that when confronted with the data showing how much has been billed or that rate are high comparatively, rate cuts quickly follow.
In many organisations, some contractors have been there longer than the permanent staff. Again, using data from a timesheet system that shows a contractor has been in situ for years, rate cuts or a conversion to employment are not too hard to effect.
Without the data from timesheets, it is easy for a contractor to keep being extended. Assuming that the contractor costs more than a permanent staff member, money can be saved by converting the contractor to the payroll or replacing him or her with a contractor on a reduced rate.
The data can also show that one particular company or organisation has a lot of contractors compared to other agencies. Armed with this volume information, you can negotiate with the agency to reduce their margin due to the volume that they have. Most agencies faced with high volume and a reduced margin, or no volume, will usually negotiate and reduce their rates.
STEP 2: Buy Consultancies for Value rather than Brand.
We have all probably heard the saying, “No one ever got fired for buying IBM’. This philosophy is about buying a big brand and if anything did go wrong, your job would be safe as you bought a big brand so it wasn’t your fault.
Of course, buying a big brand can be a very expensive proposition compared to other companies. Today it still may be IBM but there are a number of other big consultancies that can replace IBM in this saying.
Rather than buying a big brand, it would pay organisations to look for other comparable or smaller organisations that can offer a similar service; usually at a vastly reduced price.
A few years ago, we did some consultancy work for one of the UK’s most iconic retailer. They explained to me that they had a policy of trying to employ Small Medium Enterprises (SMEs). This retailer knew that they were a very important customer to these relatively small organisations, and consequently they got great service, whereas with the larger firms they were just another client.
There will always be occasions where the organisations needs a very large organisation to service a particular need but there are many other opportunities that an SME could service.
In many cases, SMEs should be considered for consulting / contracting work as they can deliver a good service but cost a lot less than the big boys. It also does not always follow that the big firms will always do a good job!
I am a firm believer that there are significant cost savings that can be made by following the 2 steps that I’ve outlined above. Key to the cost reduction in step 1, is the ability to have the data which you can analyse and then negotiate.
In step 2, what is needed is a change in culture away from, picking a very large firm with a big brand and towards some SMEs that can deliver the same value but at a fraction of the cost.
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About the author
David Walton - I am David Walton, Programme, Project and Portfolio Management specialist and director of Bestoutcome here in the UK. We make the PMO tools PM3, PM3time and PM3NHS, the only PMO tools designed by practitioners for practitioners.