Situation: A CEO is concerned about long term trends versus short term volatility. While the business has done well over time, short term volatility has made it difficult to project both personnel needs and cost. As the company expands geographically these issues are becoming more critical. Which is more important – long or short term?

Advice from the CEOs:

• Does the company find that capabilities are not fully understood until they get into development? In this case, is the problem with variables of schedule, budget or capability more important?
  • Going forward, evaluate each of these variables to determine which is having the greatest effect, positive and negative, on project performance and profitability.
  • If the problem is time constraints in the project planning phase, assure that sufficient time for project iterations is allowed in both the schedule and budget. It may be that the clients are not sure of what they want until they see a model, and that several iterations are required to assure that clients’ needs are satisfied. Plan and bid for this.
• If fixed costs impact margins during dips between active projects, assure that enough fixed cost coverage is built into project bids to cover dips.
• For geographically remote offices is the company’s issue a question of volume or resource cost or is it a pricing issue?
  • If it’s a pricing issue to stay market competitive focus initial activity where this issue is minimized. As market presence expands, add additional capabilities in phases according to the ability to cover costs profitably.
  • If it’s a resource cost issue use the same solution, adding resources according ability to cover costs profitably.
• Build the company’s sales and marketing structure in phases while expanding into new markets. If sales compensation is base plus commission, vary commissions paid according to resource rates negotiated. This will tie sales incentives to negotiated resource rates and will help to assure that costs are covered.
• Dealing with short term issues effectively will improve long term planning and profitability.

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