Every company strives for profitability and every organization try their best to make money with minimum efforts but only few make it possible, I think there some areas which were not discussed today or maybe we are not pondering a very serious attention to this matter. To me business Administration, understanding of people management is one of my favorite subjects and I have done a lot of researches in this area. Although we are missing with development standards we are lacking in PMO however I have seen many companies making good profit with minimum resource set. For example a company is getting more 250 million out of 35 resources with a single product best seller for black berry phones. Similarly people making huge money with minimum resources just because they have right set of tools and techniques with proper business projection. To me for any organization, following things are most important in profitability,
Business Direction and Dimension:
Every organization must know why they are in business, are there here for money or not, if they are in business for money then they should try to conceive and develop those products and services which are a business need, developing complex solution with labor intensive efforts ultimately result in failure until is not sold reasonably. A properly working paper pin is more profitable than a luxury weekend ride.
This phenomenon sometimes become product myopia, we develop what we love to develop but we never care if it has customer, so develop something which is a need of customer.
Project and Organization profitability index:
We should be able to forecast what will we get by the end of project and what will be the net worth of any task that we are doing. Usually projects with high variance, due to lack of analysis and change control often fell in this problem. we put our best effort to make project happen but without profit or at breakeven levels.
This is happening in many projects around but nobody is willing to perform any project cost to profit ratio. These profitability ratios are also important at the end of fiscal years when we had a time for organization growth; each organization must maintain its cash inflow to facilitate its requirements. Ideally project profitability index should be calculated on monthly basis in IT projects and for organization it should be performed on quarterly basis, which can be a simple balance sheet or a detailed analysis of profit to cost ratio.
Effort vs. profitability ratio:
In any organization most of the people spend their time in working and mostly they put their best however some companies make really good business while others don’t. to me that is simply because when people don’t know if their work will really make a good business or not. To put this in example I would say if a developer is working for 5 hours on a php project will make far less amount of $ than a developer working for SharePoint project. So we should focus on the line of business for projects.
Furthermore if a task is billed for 3 hours actually takes 10 hours of developer then we are doing nothing. So we should either communicate that to client or we should make sure that these hours are ultimately sellable. This is also called as Cost / Benefit Analysis, an economic decision-making approach, used particularly in business for assessment of whether a proposed project is worth doing, or to choose between several alternative ones. It involves comparing the total expected costs of each option against the total expected benefits, to see whether the benefits outweigh the costs, and by how much.
Project to Resource ratio analysis:
Ongoing project Can Be divided in to two types of projects, project which are not delivered and project which are delivered and in support mode. For any project in support mode we need to make sure that we are putting minimum resources, rather increase in timelines. An increase in project resource will exceed the cost of support however a slow delivering support makes more money and client relationships. We need to perform some sort of analysis to make sure we are putting minimum amount of effort to make good money from support requests.
Role of QA to productivity:
QA plays a vital role in any organization however QA is the only department with maximum leisure if not utilized properly. QA team should be a part of project management developing project plan, QA team should be a part of analysis and requirement gathering and QA team must be a part of post deployment supports. That’s the only way to get maximum out of it. Otherwise QA should not me 20% or 1:5 ratio in any project.
Organizations confused in hiring spend a reasonable amount of money and resource in this process. Hiring a single person requires hours and hours of senior resources in interviewing and shortlisting of employees. To me there is should be an analysis of resource requirement and forecast. If we have clear forecast that we need a resource for at least a year then we should jump in to hiring otherwise resource relocation is best option in such conditions.
Every organization must have projection of its finances for at least 2 quarters, because if we don’t have that, then we should be ready for surprises. Simple project could be total number of current cash inflow + estimate cash inflow minus current cash outflow + expected cash outflow.
Forecasting the company's cash and financing needs is necessary to develop the company at the pace desired by the entrepreneurs and investors. One of the main issues confronting entrepreneurs almost daily is the issue of financing the company's activities. Correct forecasting of the company's financial needs in the short-, intermediate- and long-term involves an understanding of the management of transactions and a basic understanding of the concepts of revenues, expenses, and cash paid or received within them. Even for early stage companies, for which full-blown business plans may not even exist, no financial model and hence no forecasting regarding required capital can be prepared without making various assumptions with respect to the customer credit policy, the compensation policy, and other costs.
reason for this projection/financial plans.
First, the financial plan translates your company's goals into specific targets. It clearly defines what a successfully outcome entails. The plan isn't merely a prediction; it implies a commitment to making the targeted results happen and establishes milestones for gauging progress.
Second, the plan provides you with a vital feedback-and-control tool. Variances from projections provide early warning of problems. And when variances occur, the plan can provide a framework for determining the financial impact and the effects of various corrective actions.
Third, the plan can anticipate problems. If rapid growth creates a cash shortage due to investment in receivables and inventory, the forecast should show this. If next year's projections depend on certain milestones this year, the assumptions should spell this out.
Marketing and business developments
Many organization does not have a specialized marketing department/individuals which ultimately result in low business activity, marketing is a must part of any business, but many companies and top management thinks it’s as overhead rather growth.
Analysis and Estimations:
Everything which is done in any organization must be billable to make an organization growing. Usually organization does not consider estimated properly, a low estimated or wrong estimated project always ends up in variance, either in time or defiantly in budget. This is what happening we are not estimating properly or we are not capable enough to sell it. Estimations depend on analysis which means we are lacking in analysis of every project.
Client Perception Management:
Client perception management is a key to success in business. no comments because people already know what’s wrong with it.