Project Management Basics

By Shel Perkins

Project management is an area where the freedom of the creative process and the constraints of sound business procedures overlap. One is quite loose and visionary, while the other is more structured and driven by numbers. This article shares some thoughts about how to bring the two together.

Successful projects require detailed planning and advance preparation. Once a project begins, however, it's important to remain flexible. The work will never proceed exactly according to plan. In the midst of a project, decisions have to be made about a range of trade-offs, including issues of cost and quality. Smart decisions are well-informed ones, so every design firm needs a reliable system for tracking and analyzing project activity. This article discusses the preparation and use of progress reports and shares real-world strategies for managing client expectations and coping with project changes. Sometimes problems come up as well, so there is a discussion of the most common “red flags” and what you can do about them, along with some expert advice for keeping customer relationships on track.

Getting Started

Producing good design is only half of the battle. The work that you do also has to be on schedule, on budget, meet client expectations and produce a profit for your design firm. A good system for planning and tracking projects can make all of this easier. However, your project management system will only be as good as the people using it, so it's equally important to hire people with the right skill sets. If you have a small office and work primarily on small projects, the best approach is to hire for talent. Once employees are in place with the necessary design abilities, you can gradually develop their project management skills with on-the-job guidance and training. A different approach is taken by larger offices, where big projects are completed by multi-disciplinary teams. Large offices have the luxury of making separate hires for each necessary skill set, including project management. (This “all-star” team approach is one of the major benefits of being part of a larger firm.) The overall goal in project management, apart from supporting the development of great design, is to manage each project according to its planned budget and schedule so that it can be completed profitably. This means that each project must have a plan to begin with.

There are several steps involved in putting a solid plan together. You should start with some general preparation that is relevant to all of the client work that you do: map out your own preferred creative process, calculate standard billing rates that you can use in developing preliminary budgets, and research standard contract terms and conditions that are appropriate to the type of creative services that you provide.

Next, focus in on the specific project at hand: gather as much information as possible about the client and their business needs in order to clearly define the scope of work to be produced and to identify the resources that will be required. With this information in hand, you'll be ready to develop a comprehensive project schedule and budget. This internal planning should be done with a spreadsheet that will help you to determine the size of the team that will be required, estimate the number of hours that will be needed for each person, and plan any outside expenses that will be necessary. Remember to build in some leeway for yourself. As any seasoned professional will tell you, it's smart to “under promise and over deliver.” In practice this means that, even though you will define the scope of work as tightly as possible, your internal planning should also include a small contingency. It should not be more than 10%. This will give you some breathing room in case an aspect of the project turns out to be just a bit more complex than you expected. If no complications come up, the contingency will allow you to deliver just a bit more than you promise to the client in your written proposal. A small amount of extra work that the client is not expecting is not really “over delivery” if you have, in fact, allowed for it in your internal planning.

The last step in your advance preparation is to draft an agreement document to be signed by the client. For most design firms, this consists of a fixed-fee proposal with attached terms and conditions. This document locks in the scope of work and sets the client's expectations about the project's process and deliverables. (For a more detailed discussion of budget preparation and proposal development, please see the May 2004 issue of AIGA

Keeping Records

When the client approves the agreement document, work on the project begins. Your business challenges now are to effectively track and manage that work while it is being done. This requires a well thought-out project management system. Small firms tend to start with a manual system based on two separate files. The first is the creative file, where you will accumulate the various design elements as they are developed. The second is the business file, which will contain the project's legal and financial documentation. Physically, these two files will be large folders or three-ring binders. While the project is active, the creative file will sit on the desk of the person responsible for design of the project and for making sure that it is in alignment with the quality standards of the studio. The business file will sit on the desk of the person primarily responsible for project management issues, including budgets, schedules and logistics. In a small office, the designer and the project manager may often be one and the same person.

Inside the cover of the business file, some firms place a checklist of the necessary contents. The first items on the list will relate to your advance preparation:

  • Your internal planning worksheet and draft schedule
  • A copy of the formal proposal document that the client signed
  • A contact sheet for all members of the design and client team

This should include each person's name, job title, project role, telephone number, fax number, e-mail address, and a street address for physical deliveries. The contact sheet should be distributed to all participants at a project kick-off meeting that is held after the proposal has been signed.

The other contents of the business file will be items that are generated while the project is active:

  • A running tally of all time spent on the project
    In a small firm, this may be a manual summary. In a freelance business where only one project is active, it might be your actual daily timesheets. In a larger firm where everyone is working on multiple projects, this will be a weekly report from your project tracking software. (More about work-to-date progress reports below.) 
  • A running tally of all supplies that have been used and vendor expenses that have been incurred
  • Copies of any purchase orders that you have issued
    When advance commitments are made to vendors, such as an order placed with a printing company, you'll want to lock in the results of your negotiations by issuing a written purchase order. In the project's business file and on any progress reports, this is a reminder that certain portions of the budget have been committed to vendors. If the project is later cancelled, the vendors must be notified. In some instances, they might charge you a fee upon cancellation, such as the restocking fee that printers must charge for any paper that was special ordered. Be just as professional and respectful with your vendors as you are with your clients. Your vendors are a great source of expert advice. It's also likely that one day you'll be completely dependent on one of them to come through for you in a pinch. 
  • A copy of each invoice that has been sent to the client
    Add notes for yourself to indicate which ones have been paid. 

Over the course of the project, signed proofs from the design and production process will be collected as well. These might be included in the business file, but it's more likely that they'll be placed in the creative file for easier access by the rest of the design team.

Staff time that is posted to projects will be coming from daily timesheets. The layout of the timesheet will vary based on the preferences of the design firm and the project tracking software that is being used, but the basic elements will include: date of work, employee name, client name, project name or number, task being performed, amount of time spent (usually in 15-minute increments), an indication of whether the time is billable or non-billable, and perhaps some room for comments. Billable time will be the norm, but some non-billable time might be posted to client projects for such things as fixing studio mistakes or recreating lost files. (Staff members will also spend non-billable time on in-house projects and activities. For a more detailed discussion of billable and non-billable time, please see the August 2004 issue of AIGA Design:Business.)

As work on a project moves forward, many individual computer files will be generated. Be sure to put dates and version numbers on everything. If you don't, things can become very confusing. You would not want to lose track of any edits or corrections, or mistakenly release the wrong file to a vendor. To avoid these problems, use a simple and consistent naming convention for all files. You'll also need a good storage and backup procedure for your digital files so that everything can be found quickly and easily. If an important file does get lost and has to be recreated, it could significantly reduce your profitability.

Keep the overall size of the business file manageable. Do this by periodically weeding the folder or binder of any duplicate or out-of-date information. Don't throw anything away - just separate “reference” information that will be accessed often (such as the proposal, budget and schedule) from “archive” information (such as earlier versions and superceded documents) that can be stored somewhere else. When you're setting up your project tracking system, you also need to devise a simple “tickler system” to flag anything that will require a specific future action. A missed deadline or failure to follow through on an action item can cause major problems within the project itself, and can even endanger your entire relationship with the client.

Progress Reports

As you work on projects, get in the habit of preparing and reviewing progress reports at least once a week. Maintaining a running comparison of the estimated amounts to the actual amounts is vital for effective project management. Again, this means that each project must have a detailed plan to begin with. Use the same overall format for your original, internal estimate and for the running tally of actual activity. This will allow you to make comparisons easily and to see at a glance whether an item is over budget or under budget. This approach is often called “management by exception” because you are watching for things that don't match your original expectations.

The running totals for actual work performed must be as current as possible. This means that time spent on client projects must be recorded on a daily basis. All invoices received from vendors must be reviewed and posted on a daily basis as well. On a fast-moving project, a delay in getting current totals can cause big problems. If too much time or money is going into a project but you don't become aware of it until long after the fact, it will be too late for you to intervene and get things back on track. You have to catch problems early while you can still correct them. Keeping an eye on variances between estimated amounts and actual amounts will help you:

  • To become aware of any internal inefficiencies (such as too many creative directions being pursued or too many people being assigned to the creative team, which can cause you to burn through the project budget too quickly)
  • To make sure that the services being performed stay within the agreed-upon scope of work (this is vital when you are being compensated on a fixed-fee basis)
  • And to trigger prompt change orders when and if they become necessary (more about change orders below)

Your project management system must allow you to report on progress at varying levels of detail, depending on who will be receiving the information. The most detailed progress reports will be the internal updates used by the creative team and by the financial manager for the design firm. These need to be side-by-side comparisons of estimated and actual amounts. Team reports will start with the name of the client, the name of the project, the job number that has been assigned for studio tracking purposes, any control number that was issued by the client, the project's start date and target completion date, and a brief note about the current status (such as the next milestone or the next action that needs to be performed). Beyond this general information, there are many specific things that you'll want to know about the state of the project. The exact layout of a progress report varies from firm to firm, but the most common format is to include separate horizontal rows to identify the individual tasks and materials that were budgeted, followed by several columns with the amounts that you will be analyzing. (You might want to organize the tasks by phase so that you can include subtotals.) For each task, this is what you need to know:

  • The original estimate amounts that were approved by the client
  • Any subsequent change order amounts that were approved by the client
    Together these first two columns will represent the total that can be billed to the client for the project. 
  • Your internal studio budget
    When listing your internal information, you can decide whether you want to see the amounts at gross or at net (staff labor at payroll rates and vendor expenses without markups). It's best to show staff labor both in hours and in dollars, while outside purchases will only appear as dollars. 
  • Any purchase orders that you have already issued to your vendors
    These outside commitments are pending costs. When vendor bills are received, they must be matched to the purchase order for approval. If vendors have submitted progress billings, show the net amount that is remaining (the original total less the amounts that have already been billed to you). 
  • Running totals for the actual work that has been performed to date
    Again, these must be as current as possible. Look at labor both in hours and in dollars, calculated at standard billing rates. Outside materials and services should be listed at marked-up amounts. This is a useful approach because it shows you what the project could have been billed for if it had been negotiated on a time-and-materials basis. On a fixed-fee project, you will of course be billing the amounts specified in your contract, but this allows you to make an interesting comparison. 
  • A running total of all the invoices that you have issued to your client to date
    Usually this will include a deposit invoice plus a series of progress billings. 
  • A calculation of the current variance between what has been worked and what has been billed to the client
    Usually these will not be in sync - you'll see a positive balance if your billings have fallen behind the pace of the services actually performed, or a negative balance if progress billings have gotten slightly ahead of the work itself. 
  • The amount remaining on the client estimate (including change orders)
    These will be the future billings on the project. 
  • The amount remaining on your internal budget
    As the project moves forward, it's very important for you to keep an eye on the speed at which the budget is being used. This is often called the “burn rate.” You can be less formal about this on a small project, but on a fast-moving large project, it's wise to study it closely. One way of doing this is to prepare a chart of the budget amounts that have been used, either week-by-week or on a cumulative basis. Your actual activity will take place in fits and starts, but the estimate is commonly charted as a straight line. To do this, simply divide the approved total by the number of weeks in the schedule. Related to this, you should also keep in mind that the mathematical percentage of budget used might not match the team's perception of where they are in the overall creative process. 

Any project reports that are prepared for people outside the project team will be much less detailed. For example, summaries provided to studio management will usually show totals only. If there are any questions, it's always possible to drill down into the details. For the most part, all that is needed is a note about the current status of the work, the percentage of the budget that has been used, the percentage of the approved estimate that has already been billed, and the scheduled completion date.

On some projects, you may be asked to submit summaries to the client. Just remember that only gross amounts should appear on any reports that go to a client. Some client organizations will request progress reports and some will not. When they are requested, it may be just a formality for their accounting or purchasing department. On a fixed fee project, it's not a good idea to go into too much detail. Send a snapshot only. Providing unnecessary detail sometimes encourages the client to start nit-picking the numbers, which is not a productive exercise - it won't change the total billings for the project and it will shift attention away from the overall progress that is being made on the creative side. Sometimes all that is needed to meet the client's informational needs is to add a brief recap like this to the bottom of each new invoice: previous billings of $X, plus this invoice of $X, equals total billings to date of $XX.

Managing Changes

Successful designers learn to guide client expectations and effectively manage changes. No project will ever go completely according to plan. There will always be at least minor adjustments. If the changes remain within the overall scope that was previously agreed upon, they will not pose a problem. Some of these changes may originate on your side of the relationship-that is to say that they will involve things that are primarily within your control. The project team will be making a number of judgement calls that involve trade-offs between schedule and budget and perhaps quality. Every designer knows that, on some projects, it takes a little longer to come up with the best creative solution. For your own internal management purposes, you might be able to shift the budget around a bit between tasks or phases to accommodate this. Savings in one area can be applied to an overage somewhere else. Usually this is not apparent to the client. Occasionally you might also decide to put in a significant amount of additional design time. It's not unusual for a design firm to make a judgment call related to quality and consciously decide to put more labor into a project even though it will not be compensated. As a designer, you will always strive to produce the very highest quality of work possible. As a businessperson, make sure that you are making informed decisions, with a clear understanding of the costs and the impact on your company.

Changes that originate on the client side of the relationship will often involve additional work that is outside of the original scope, or in addition to the original set of deliverables. Such client alterations or additions should trigger a change order from the design firm. Prompt and consistent use of change orders can have a huge impact on the long-term success and profitability of your business. However, you will only be able to trigger a change order if the original scope of a project is very clearly defined in the first place. If the proposal document sent to the client was vague, you'll be facing an uphill battle when it comes to managing changes.

This is the essential information that should be included on your change order form:

  • The date of the request
  • The name of the client contact who made the request
  • A description of the specific change or additional work that was requested
  • The reason for the change
  • A description of the effects that the change will have on the project's schedule, resources, cost or quality
  • The effects that the change will have on the project's essential features or functionality
  • The names of the people who should be notified of the requested change (the stakeholders who will be most affected by it)
  • Two signature lines: “submitted by” and “accepted by”

You should also include these important notes:

  • A statement that the additional work will not be done unless the change order form is approved within a certain number of days
  • An explanation that each approved change order will be invoiced separately
  • A statement that the legal terms and conditions of the original contract will also apply to the additional work

To make your life easier, the process of generating a change order must be as simple as possible. Many design firms place a pad of pre-printed, multi-copy change order forms near the telephone at each team member's desk. Do not perform the additional work until the client has signed the change order. On a fixed-fee project, make sure that the client understands that this work will be billed in addition to the original contract total. Later, when you send a separate invoice for the change, attach a photocopy of the signed form.

In some instances, a change order will not be the right approach for you to take. If your client is making a large request for something “instead of” as opposed to something “in addition to,” it may be time to re-estimate. If a client initiates major changes to the overall specifications or scope of work part way through the project, it's usually simpler and less confusing just to close out the old paperwork. This will allow you to start fresh with new documents, including a new proposal from the design studio and a new purchase order or requisition from the client. Starting fresh will also help you to keep your own completed projects sorted into distinct categories. If you are using project tracking software that sorts out your business activity into job types, this re-estimated work may need to be identified as belonging to a different category. You wouldn't want to mix together jobs that actually produced different types of deliverables.

Common Problems

As any professional designer can tell you, there are many things that can go wrong over the course of a project, both internally and externally. Here are some “red flags” that indicate potential business problems, along with some thoughts about what you can do to prevent them:

An Incomplete Plan

A lack of comprehensive planning can lead to oversights and unpleasant surprises. If you leave out something that is small, you might be able to absorb the additional expense. However, if you leave out something large, it will require an embarrassing re-negotiation with the client.

Poor Organization of Resources

On a daily basis, make sure that there are no coordination or communication problems that could lead to misunderstandings or to a resource not being ready when needed.

Lack of Role Definition for Team Members

If there is confusion about who is doing what or who is responsible for what, it could lead to serious overlaps or gaps. Establish individual accountability for tasks and make it clear who has the authority to make decisions on any trade-offs.

Dependency on One Person

Make sure there is always cover in case of emergency or illness. On a daily basis, make sure that information is shared and progress is documented.

Scope Creep

This is the most common problem of all. As work is being done, people will always want to add things. A moving goal post will make success impossible. Stick to the original specifications as much as possible. When necessary, issue change orders or re-estimate.

Unclear Objectives

How will you know that the project is done and whether or not it has been successful? The most important things to be accomplished by the end of the project must be agreed upon in advance. Otherwise, you're setting yourself up for possible disputes in the closing days of the project. You may think that the work is complete and successful, but your client may be evaluating it in a completely different way.

Project Funding

Don't let yourself be taken by surprise - make sure that you know who holds the purse strings and whether or not they have made an adequate commitment to the project. A number of things might cause the funding for your project to dry up before it is completed: there may be a larger shift in the client's business strategy that makes the project unnecessary; poor financial performance might trigger general cost-cutting; the project might be put on hold or cancelled due to a merger or acquisition; or executive turnover may bring new priorities and competing relationships.

Staying on Track

Good project management includes providing outstanding customer service. Make sure that you maintain excellent client communication all through the process. Be proactive and professional about providing the client with updated information. Always be accessible and respond promptly to inquiries. Follow through on all commitments that you make. By providing both great design and great customer service, you will earn the confidence and respect of each of your clients. Your goal is to be regarded as a dependable ally and trusted advisor. The long-term success of your business will depend on your ability to convert one-off projects into ongoing, mutually beneficial relationships.