This episode of the Project Management Podcast focuses on improving project business skills. Cornelius Fichtner interviews Martin Bernerborg and Oliver Leymond from the Project Business Foundation to define project business, discuss its impact on required project manager skills, and introduce the Project Business Study Book.
The podcast opens with Cornelius Fichtner introducing episode 461 on project business, defining it initially as a company structuring its core operations around projects. He introduces his guests, Martin Bernerborg and Oliver Leymond from the Project Business Foundation (projectbusiness.org). Martin explains the foundation's mission: to provide project managers with the specialized knowledge and skills needed for project business, particularly for projects involving multiple organizations working together as profit centers. He details his own experience learning these skills through trial and error, highlighting the lack of resources dedicated to this area of project management. Oliver provides a concise definition differentiating project business (profit center projects for paying customers) from internal projects (cost centers), emphasizing the increased complexity of managing multiple organizations, contractors, and subcontractors within project business. The discussion then transitions to the Project Business Study Book, a free resource created by the foundation to address this knowledge gap.
Introduction (0:00-0:28): Cornelius Fichtner welcomes listeners to the Project Management Podcast, episode 461, focusing on project business skills.
Defining Project Business (0:28-1:21): Cornelius offers an initial definition of project business, then introduces Martin Bernerborg and Oliver Leymond from the Project Business Foundation. The need for a clearer definition and specialized skills for managing project business is highlighted.
The Project Business Foundation (1:21-3:32): Martin explains the foundation's formation, its purpose (addressing the skills gap in project business management), and his role as CEO. He emphasizes the practical, hands-on experience driving the foundation's approach, contrasting it with the theoretical. The collaborative effort with Oliver is underscored.
Project Business: A Quick Recap (3:32-4:23): Oliver gives a brief overview of project business from a project manager's perspective, contrasting it with managing non-project business projects within a 90-second timeframe.
Project Business Defined (Concisely) (4:23-5:52): Oliver provides a concise differentiation between internal projects (cost centers) and project business projects (profit centers), emphasizing the involvement of multiple organizations, buyers and sellers, and complex networks of contractors. The unique complexities of project business are reiterated, and the foundation's unique role is established.
Audience Questions Introduced (15:00-15:44): Cornelius explains the process for audience members to submit questions via the chat function. He then introduces a question from Frank Saladis about necessary legal and business management knowledge for project managers.
Legal Knowledge for Project Managers (15:44-17:12): Martin uses the analogy of driving a car to illustrate the necessary level of legal knowledge. Project managers don't need to be lawyers but should possess sufficient knowledge to avoid legal pitfalls; they need to understand how their decisions can lead to legal issues, emphasizing the importance of proper documentation.
Business Acumen for Project Managers (17:12-18:20): Martin continues by stressing the business knowledge needed to avoid damaging client relationships, emphasizing partnership and collaborative approaches. He reiterates that while not requiring deep expertise, a basic understanding is vital to prevent significant mistakes that could have costly repercussions.
Contractual Importance in Project Business (18:20-19:17): Oliver emphasizes the critical role of contracts in project business management; they are 'the law.' He contrasts this with internal projects where legal considerations are less prominent, highlighting the need for project managers to understand the contract's contents.
Customer-Contractor Interface (19:17-21:10): The discussion shifts to the importance of a clear understanding of expectations between the customer and contractor. A case example highlights the potential consequences for a project manager lacking contract knowledge. Oliver adds that project business management focuses on inter-organizational interfaces and the potential for harmony versus conflict.
Project Business Management (PBM) vs Project Management Professional (PMP) (21:10-21:57): A listener question clarifies the difference between PBM (a specialized project management discipline) and PMP (a PMI certification). The discussion then moves to PMI's reaction to the Project Business Foundation and their collaboration.
Collaboration with PMI (21:57-22:41): Martin describes the positive and collaborative relationship between the Project Business Foundation and PMI, emphasizing their joint projects and mutual support.
According to the transcript, the players and their roles in a project business are:
Buyer: The customer organization. Their role involves business development, contract negotiation, and ultimately receiving the deliverables and managing payments. They are involved before the contract is signed and after it's completed.
Seller: This is a complex group, often including:
Project Manager(s): Multiple project managers may be involved, including one on the buyer's side, one on the prime contractor's side, and potentially others for subcontractors. Freelancers also often act as their own project managers.
Project Sponsor(s): Sponsors exist on both the buyer's and seller's sides, providing authorization, oversight, and accountability for the project managers.
Other Organizational Units: Various departments within the buyer's and seller's organizations are involved, including corporate management, sales, purchasing, and legal. Project Business Management Offices (PBMOS) may exist to manage the profitability of project portfolios.
Based on the transcript, a project manager in a project business context needs several types of knowledge:
Basic Legal Knowledge: Sufficient understanding of legal principles and implications to make sound decisions and avoid legal pitfalls. This isn't about being a lawyer but about understanding how actions can lead to legal problems and the importance of documentation.
Business Acumen: Understanding of business principles, including profitability, financial management, and the dynamics of business partnerships. This involves knowing how to manage a profit center and how decisions impact the financial well-being of the involved organizations.
Contract Management: Deep understanding of the contract's details and its legal implications. This is particularly vital since the contract serves as the governing legal document in project business.
Interpersonal & Inter-Organizational Relationship Management: Strong skills in building and maintaining positive relationships with various stakeholders across different organizations. This includes trust-building, conflict resolution, and effective communication.
Stakeholder Management (expanded): This builds on traditional stakeholder management by extending the scope to a wider and more complex network of individuals and entities across multiple organizations.
Risk Management (contextualized): Understanding the inherent risks in project business and the ability to mitigate them.
The podcast emphasizes that while deep expertise in each of these areas isn't necessary, a foundational understanding is crucial for successful project management within a project business environment. The level of knowledge required is comparable to that needed by a driving instructor, who doesn't have to be a lawyer but still needs to teach safe and legal driving practices.
The customer-contractor interface, as discussed in the podcast, refers to the interactions, relationships, and processes between the customer (buyer) organization and the contractor (seller) organization(s) involved in a project business project. It encompasses multiple layers:
Contractual Layer: This is the formal agreement outlining the project scope, deliverables, timelines, payment terms, and responsibilities of each party. It forms the legal foundation of the relationship.
Inter-organizational Layer: This covers the communication, coordination, and collaboration between the organizations involved. This includes how information is shared, decisions are made, and problems are resolved. The efficiency and effectiveness of this layer significantly influence project success.
Interpersonal Layer: This includes the relationships and interactions between individuals within the customer and contractor organizations. Trust, communication styles, and personal dynamics all play a significant role in this layer.
The success of a project business heavily relies on the smooth functioning of this interface. Conflicts or misunderstandings at any of these levels can easily lead to project delays, cost overruns, and strained relationships. The podcast emphasizes that managing this interface effectively is a key skill for successful project business managers, and requires understanding the contractual agreements, navigating inter-organizational dynamics, and building strong interpersonal relationships.
The podcast clarifies the difference between PBM and PMP as follows:
PBM (Project Business Management): This is a discipline within project management. It's a specialized approach focused on managing projects that are designed to be profitable for the organization(s) involved. It emphasizes the unique complexities arising from the involvement of multiple organizations, buyers, and sellers in a collaborative business relationship.
PMP (Project Management Professional): This is a certification offered by the Project Management Institute (PMI). It signifies a certain level of competency in general project management principles and practices, irrespective of whether those projects are within a project-based business model or a traditional organizational structure.
In short, PBM is a specialized area of practice within project management, while PMP is a widely recognized credential demonstrating proficiency in general project management. A PMP-certified project manager could manage project business projects, but the PMP certification itself doesn't specifically address the specialized skills and knowledge required for the unique challenges of project business.
Yes, the discussion touches upon agency law, although not explicitly named. Frank Saladis mentions the importance of a project manager in the United States being aware that they act as an "agency" of their company, highlighting the implications of fiduciary responsibility. This is later expanded upon when discussing the complexities of international projects and the differing legal frameworks involved. The conversation doesn't explicitly define agency law, but the context clearly indicates that the speakers understand and acknowledge its relevance to the legal responsibilities and potential liabilities of project managers within project business environments, particularly within the context of contractual obligations and risk management.
The role of the project sponsor, as described in the podcast, is multifaceted and crucial, particularly within the complex context of project business:
Authorization and Accountability: The sponsor authorizes the project manager to perform their duties and holds them accountable for the project's results. This is especially important in project business because of the multi-organizational nature and potential financial risks.
Oversight: The sponsor provides high-level oversight and guidance to ensure the project aligns with strategic objectives. Their role includes monitoring progress, addressing major issues, and ensuring the project remains within budget and scope.
Resource Allocation: In many situations, the sponsor helps to secure necessary resources for the project. This can include budget approvals, personnel assignments, and access to relevant information and decision-makers within the organization.
Risk Mitigation: Sponsors play a role in identifying and mitigating potential risks to the project. This might involve providing strategic guidance to the project manager on addressing contractual, legal, or financial uncertainties.
Conflict Resolution: In situations where conflicts arise between different stakeholders within the project, a sponsor's intervention can be crucial in facilitating a resolution.
The podcast emphasizes that the role of the project sponsor is significant and often under-addressed within the project business context. Ideally, sponsors exist on both the customer and contractor sides to ensure effective oversight and communication across all participating organizations. The discussion also suggests that the sponsor should ensure the project manager has sufficient awareness of legal processes and potential contractual risks.
The podcast highlights several key commercial factors within Project Business:
Profitability: Project business is fundamentally about making money. Project managers need to understand and manage the financial aspects of the project, ensuring it generates a profit for the contractor organization(s). This includes managing costs, revenue, and margins.
Cash Flow: Maintaining a healthy cash flow is critical, particularly in the context of multiple organizations and complex payment schedules. Managing the flow of funds between the customer and the various contractors is essential.
Solvency and Liquidity: Ensuring the financial health of the contractor organization is crucial, as project failures can easily lead to insolvency. Project managers need to be aware of and manage potential financial risks to the organization's solvency.
Contractual Negotiations and Management: Understanding and managing the contractual terms related to payments and deliverables is key. Project managers need to ensure the contracts are clear, fair, and protect the interests of their organizations.
Pricing Strategies: Developing appropriate pricing models for the services provided by the contractor is important. This needs to be done in a way that secures a profitable contract while being competitive and attractive to customers.
Business Acumen: Project managers in project business require a significant degree of business awareness and acumen. This encompasses understanding market conditions, competitor analysis, and the ability to make sound business decisions that influence profitability.
These commercial factors are not typically the primary focus in traditional, internal projects. The podcast emphasizes that effective management of these commercial aspects is essential for success in project business and requires specialized knowledge and skills beyond traditional project management competencies.
The podcast concludes that the project manager ultimately bears the responsibility for managing all interpersonal relationships within a project, regardless of whether it's an internal project or a project business project. While other stakeholders and organizational units play important roles, the project manager is the central figure responsible for fostering collaboration, resolving conflicts, and building trust among all involved parties. This responsibility is significantly amplified in project business due to the increased complexity of managing relationships across multiple organizations and stakeholders. The podcast emphasizes that the project manager needs the necessary skills and knowledge to effectively navigate these complex interpersonal dynamics, including a strong understanding of the organizational culture and communication styles prevalent within each participating entity.
While not explicitly a central theme of the initial study book, the podcast indicates that Corporate Social Responsibility (CSR), along with sustainability, profitability, and philanthropy, are considered important factors within the broader scope of Project Business Management (PBM) and are implicitly addressed through the foundation's code of conduct. The speakers acknowledge that these are developing areas of focus within PMI and that the Project Business Foundation is working to align its approach with the evolving understanding of these factors within the project management community. Therefore, although not fully developed in the study book at this point, it’s implied that CSR principles will become an increasingly important aspect of PBM in the future.
While the Project Business Study Book itself does not include case studies at this stage of its development, the podcast mentions that the authors are working towards incorporating them in future iterations. The difficulty in obtaining permissions to use real-world examples and the sensitivity of proprietary information are highlighted as factors delaying their inclusion. However, the speakers mention that they do share anecdotes and stories illustrating specific aspects of project business management in other publications (such as Oliver's articles for PM World Journal), serving a similar purpose to case studies.
The speakers offer these top tips for project managers seeking success in project business:
Martin Bernerborg (CEO of the Project Business Foundation): Stay close to the Project Business Foundation and utilize its resources (glossary, study book, interview series, open hours). He views the foundation as a central hub for knowledge and networking within the field of project business management.
Oliver Leymond (President of the Project Business Foundation): Focus on building and improving your skills, particularly in business and legal knowledge. He emphasizes that while traditional project management skills are important, project business requires additional expertise. He also highlights that becoming a highly sought-after project manager requires demonstrating confidence and competence in handling the financial aspects of the projects and instilling confidence in clients that their income source is in good hands.
