Learnings from my Experience

Couple weeks back, I was reading an autobiography of Richard Branson 'Screw it..Let's do it', such an inspirational story, it's worth own it. His instictive approach to solve many challenges is a great wisdom to know.

This book provoked me to write some of my own learnings during my professional career

1. Trust is very important, but we must instigate a mechanism to audit for confirmation. We are in a real world where 'everything can be trusted-nothing can be trusted', the only disparity is a process or mechanism to be established to confirm the Trust.

'Trust alone is a blunder', you should 'Trust, but Verify'

2. Team without goals, Leader without empowerment, Management without vision, Organization without ethics - A sure way to disaster
I have seen/been told during my career as how these traits decipher to a great debacle

3. Fail to understand the business, most of the technical folks concentrate too much on technicality of the program but fail to understand the business need. What happens if a programmer write a software not knowing the business implication? Mr Platt is a computer science instructor from Harvard University extention school, says, the programs won't just fit for the use. Almost 70% of the projects don't meet the needs of the business at the first time, an independent survey unveils

4. Open communication - project teams and project leads need to keep the communication open with all the stakeholders (sponsor, designers, end users, project team, integration team etc.). The open communication will ensures the stakeholder needs carried in a project, else almost always the project gets derail in terms of cost and time

5. Conflict of interest - I have seen many cases where supervisor fails to draw a line between personal and business interests with the team members, in most of the cases these raise a red flag and may lead to a strain on the healthy relationships, it will have vivid impact on the project outome.

more to come...

Sameer Penakalapati

Financial Management for Project Managers

You may be wondering as why a project manager should have a knowledge about financial management, the reason, you should be in a position to make a decision to go with the project/approach or not depending on the economic value of a project outcome.

Let us say in a overly simplified example, you are managing a project with an expected revenue of a product/service is $100 but your total cost of the project is $105, will you do it? Of course not!

But in reality, it may not be this simple, you (project managers) should know some of common accounting standards to measure the project outcome with the project cost. Here are some of the key financial indicators you should be aware of.

1. Return On Investment (ROI)

• It is a concept for quantifying the value of an investment. In a simplest terms, it is the net profit of an investment divided by the net worth of the assets invested.
• It is often an investment that companies must make in advance of any return.
• In almost all the cases, you will be asked to produce a business case for any investment with some sort of measurable return

2. Net Present Value (NPV)

• It compares the value of a dollar (or any currency) today to the value of that same dollar in the future, taking inflation and returns into account
• For example, a businessman want to buy a retails store, first he should cacluate the future cash flows that store would generate and discount those cashflows into one lump-some amount as a present value, let us say $100,000. If the owner of the store willing to accept an offer at or less than $100,000 (NPV) the you should buy it else should not buy the store
• In simple terms, NPV is positive, the investment on a project is good else you should look for other better opportunities

3. Internal Rate of Return (IRR)

• The rate (interest rate) at which the project inflows (revenues) and project outflows (costs) are equal.
• You can think of IRR as the rate of growth a projected is expected to generate
• In a simple terms, you have two projects to choose from, Project A with an IRR of 25% and Project B with an IRR of 40%, opt a project always with higher IRR, in this case Project B

4. Payback Period

• Time taken to recover the cost of an investment
• In a mathamatical terms, Cost of Project divided by Annual Cash Flows
• For example, if a project costs $10,000 and is expected to return $2,000 annually, the payback period will be $10,000/$2,000, or five years
• In a simple terms, if Project A with payback period is 6 months and Project B with a payback period is 12 months, you should pick a project with less payback period, in this case Project A

5. Benefit-Cost Analysis

• It is a way of evaluating all of the potential costs and revenues that may be generated if the project is completed
• For example, prior taking on a new project, prudent managers will conduct a cost-benefit analysis. Let us say, benefit-cost analysis of Project A is 2.5 and Project B is 1.5, you should choose higher benefit-cost project, in this case Project A

6. Working Capital

• It is calculated as 'Current assets minus current liabilities'
• Also, It is the amount of money available to invest by a company

7. Discounted Cash Flow (DCF)

• A valuation method used to estimate the attractiveness of an investment opportunity
• Converting the future earnings to today's money
• In simple terms, the time value of money

8. Depreciation

• Assets lose value over time is called depreciation
• Two types: Straight line depreciation, Accelerated depreciation
• Straight line depreciation: The same amount of depreciation taken each year. For example, if you buy a car for $10,000 with a life time of 5 years then you take $2,000 as a depreciation each year
• Accelerated depreciation: It depreciates faster than straight line

more to come...stay tuned

Sameer Penakalapati