During this current economic decline, many of us are exposed to situations that are not necessarily what we signed on for in the beginning of our PM career.

Companies are forced to evaluate cost margins and that generally means project cutbacks. Our sponsors and/or customers have to choose which projects to keep and which to close.

Of the projects that survive the hit list, we as project managers are handed a budget reduction target to achieve. Typically this forces us to make tough decisions as cuts are generally derived from staff reductions. This is a major disruption to the project environment as there is among other things demise to social relations, a negative impact to motivation, and the staffs’ perception of the PM is altered. If the PM does not handle this situation correctly, instantly the staffs’ perception of the PM transforms from Dr. Jekyll to Mr. Hyde. This is what I am calling the Dr. Jekyll & Mr. Hyde syndrome.

So I ask the PMStudent community to share some of their experiences. Tell us about some of your good (Dr. Jekyll) & bad (Mr. Hyde) experience during the past few months. Share your insights on how a PM can best plan for and implement such an endeavor as a budget reduction exercise. Socialize on how a PM can control against the Dr. Jekyll and Mr. Hyde syndrome during these most uncertain times that lie ahead of us?

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As can be expected, much of the feedback pointed towards a cutback in new investment and thus projects.  Another significant portion of the comments discussed another inevitable trend in hard times…increased scrutiny of current projects and focus on the dollars.

Cutbacks

• North America – Although layoffs have occurred in the Canadian oil patch in recent weeks, the majority have been in the areas of field services and engineering as drilling rig counts have declined and major oil sands projects have been shelved or deferred. I have not yet heard of layoffs or contract cancellations affecting project managers or PM consultants. Granted, it’s still early in January and the price of oil continues to decline.However, it would appear that opportunities for PM positions, full time and contract, might be shrinking in number in the short term as companies rein in their spending projects and defend their budget resources. Government organizations are still hiring within their PMOs during this lull as they attempt to catch up with the industry after the past several years of rapid growth.
• Europe - due to insecure times, no new projects are started, so the pipeline may dry up, which will cause problems in Q2/Q3
• North America – Current projects uneffected, but projects in the planning stage(Customers planning stage) are slowing down while they sort our their corporate lifespan issues (auto industry).
• India - Due to the slow down in the economic scene, it is expected that quite a few projects could be slowed down by the customer and further investments could be delayed/ shelved in certain cases.
• North America – Working for an oil/gas company, the effects have been fairly stark. When projects were budgeted, it was assumed that oil would be at $60/barrel (this is when oil was $100+/barrel). Since now oil is well below that $60 mark, it has certainly impacted flexibility as far as resources are concerned. So where before we could bring together project members from across the world, we are now either using other means (video or tele conference) or in some instances decreasing the scope of the project and/or delaying the project.
• Asia - Multiple projects put on hold.
• North America – With capital funding cut back to virtually nothing in my industry (forest products), many projects have been stopped or start dates pushed out indefinitely, so PM’s here are lucky to have jobs.
• India - From my perspective, the biggest impact has not been the financial sector problems, but the dramatic drop in commodity prices. The majority of our clients are oil, gas mining and petrochemical, and they have shelved or at least put on hold about half their budgeted projects.I suspect there will be longer term problems, as the US stops outsourcing so much work and tries to put the people back home to work.

Financial Scrutiny

• India - focus on forecasting
• North America – Many companies reacted quickly and placed all projects on hold.  Since the first of the year, some have reviewed their finances, needs, and project lists and have started reviving needed projects.
• Latin America - More prioritization on which projects are executed, more scrutiny on costs, training, travel, resource cutbacks make it difficult to appropriately staff projects, more focus on support projects as opposed to innovation projects
• Europe - much more tight budget control, better prioritization between must-haves, nice to haves
• North America – More controls.
• Europe – The ‘return of the Business Case‘. All too often the returns of a project have been neglected or became less important during the project. Now a project has to ‘prove’ its viability. Furthermore new projects need a ROI within 6 to 9 months.

Photo attribution: skycaptaintwo

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Moving up through the categories, I’ll discuss three now:

• Project Manager Layoffs
• Project Staff Reductions
• Reduced PM rates.

Reading through the responses, may of them were not surprising. One thing I noted in a few posts was that some companies are shedding senior PMs and opting for less experienced ones. Of course I have no idea about the competencies involved…it is possible that a “senior PM” is simply someone who has been there a long time, but is not a performer. Although I wish that were the case, I know from past experience that sometimes companies do make the decision to start with the people with the highest salary, without stopping to consider the value proposition. If make business decisions that way it’s their loss and they probably won’t be around for much longer.

Project Manager Layoffs

• Europe – I work mainly as a project management contractor, in the public (government) sector. From the various job sites I use, I have seen a significant drop in the number of private sector companies asking for consultant project managers, but the number of public sector jobs out there seems to be remaining pretty stable. Of course, it remains to be seen if that remains the case after the new financial year.
• North America – major companies are announcing significant layoffs in ‘management’ positions, which always impacts PM positions. Several friends have been laid off in last quarter alone, all senior PMs.
• Australia – More unemployed project managers, reduced tolerance for ineffective project managers
• North America – Project management seems to be taking a beating right now. I know at least 4 project managers that have lost their jobs since the 1st of December. It looks like when companies are forced to let some people go that PMs are the first choice.

Reduced PM Rates

• North America – PM consulting rates lowered due to increase in supply vs demand
• Europe – More contractors available at short notice, prices 10% lower than this time last year

Project Staff Reductions

• North America – Companies asking people to play dual roles – i.e. PMO Director and PM, PM and Business Analyst, etc.
• North America – Less available human resources due to cutbacks & hiring freezes
• Latin America – resource cutbacks make it difficult to appropriately staff projects
• Asia – Engineering teams left to wonder where they’re going next. Layoffs usually affect non-eng positions first. But, hiring supportive positions is all but frozen.
• Europe – The impacts i have seen is in the human resources level, the contract of less qualified/experienced resources, based on a low payroll. Less cost percentage for resources, and less resources. Clients are looking for a low budget services, creating a need for more effort from less resources.The Quality is being degraded in the benefit of cost.

Image by gamillos via Flickr

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Status Quo

Ah, it is nice to hear that some people are not feeling any impacts due to economic recession. 8% of the respondents noted that they have not seen any impacts. Half of those were from the North America, other responses came from Australia, India, and Africa.

I noticed 2 similarities from what I could gather in this category:

• Diversified local economy and/or companies
• Companies who already have contractual commitments through 2009.

Selected responses

• North America – In our geographic area, I have not seen PM layoffs, downsizing, etc., in most industries. We are very lucky that we have such a diverse economy–health care, pharmaceuticals, education, construction, IT, engineering, etc. There have been some layoffs in the pharmaceutical industry, but I am told that they are not due to the current economic situation, but to normal business cycles in the pharma industry. So, compared with other areas, I think Philadelphia is in good shape.
• Africa – I am in a very small town in south Africa and at this stage there seems to be little to no real impact as yet. This may change as the impact gets through to South Africa in the first quarter of 2009. The government projects are still on going and in our case there is such a skills deficiency in project management that projects are canned not due to funds but due to limited skills.
• North America – The projects that have been in the pipeline for Financial Yr 2009 – we are still committed to completing those projects. For Fiscal 2010 – we will not find out until July 2009. For now I would say nothing much has changed; however, this could change at anytime. Especially if the downturn spiral continues.

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I recently conducted a survey asking for anecdotal stories about how the economy is currently impacting project management.  Sorry it’s been awhile!!  I would like to share the results with you.

The survey was 100% anonymous, and I even removed any identifying information that a few responders put into the answer. Note that this survey is NOT scientific in any way. It consisted of 2 questions, location and an open-ended one. The categories were created and assigned by me post-hoc after reading through the responses. These 8 categories seemed to emerge as I went through the data. Some are causes and some are effects….some of these are linked. For example, investment/project cutbacks may lead to PM layoffs, etc.

Over the course of this week I will walk through the categories with you, giving some examples of the responses received, and my take on them from the data and from my own personal experience.

Summary

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