Since then I’ve gotten questions on the difference between the two and why there is such a big difference. I thought I had covered the difference but let’s do it yet again.

So starting from the basic hourly rates, let’s look at what is built into each of the rates and what is considered extra. Remember that for both rates you will be dividing the amount per year by the number of hours.

First off, an individual can easily move from employee to freelance contractor and back again. So the rates need to balance out.

Both employee and contractor need to start from the same salary amount. Otherwise people will only accept one or the other. For ease of calculation let’s say that amount is $100,000.

The second element is benefits. Benefits are extra items which are paid by the employer for the employee. Examples are pension plans ( including 401K, RRSP and other contributions), group insurance and additional (non-government health plans). With employees these amounts are extra to the hourly rate (and the salary). (By the way, if you cut the benefits you’ll need to increase the salary to stay in the market). With a contractor this amount must be built into the rate as they pay for their own benefits.

The third element of cost are the employment taxes. These are company portions of amounts which are mandated by the government. For example, government pension (CPP/QPP in Canada & Social Security in the U.S.) are taxes paid by both the employee and employer.  Unemployment insurance (EI in Canada), Workers Compensation and public health programs (e.g. OHIP in Ontario) are three other costs. These are paid seperately for an employee by the employer. However, the costs must be built into the rate for a contractor. It is the contractor who will be paying those costs.

The denominator (i.e. the hours) also shows a similar difference between Employee and Contractor.

The basic number of work hours in a year is the same for both.

From that is deducted three types of labour.

The first is vacation and statutory holidays. An employee continues to be paid for that time. So their rate doesn’t need adjustment for those days. On the other hand, a contractor does not get paid for those days and their rate needs to be adjusted to provide for vacation and statutory holiday pay.

The second is personal time off. Neither hourly employees nor contractors get paid for this time. So both rates need to be adjusted to provide for this.

The third time adjustment is for “non-billable” time. This is time which the contractor spends but cannot bill for. In the case of an employee, this is always a zero amount. However, a contractor needs to provide for this time in his or her rate as they can’t bill for it (thus non-billable).

As you can see, in order to pay employees (salaried or hourly) and contractors the same amount the rate per hour needs to be radically different. (Contractor rate is roughly double hourly employee rates in order to give the same salary amount).

There are two additional elements that the freelance contractor needs to include in his or her rate. The first is the cost of running his or her business (i.e. the overheads) and the second is the profit or return for accepting the risks associated with running a business. Although I’ve ignored those amounts in my calculations, it is important not to discount them. They can represent quite sizeable necessary adjustments to the rates for contractors.

Oh, joy!

And of course, you really don’t know what a project sponsor is and what they do. So now, you have to figure out your role in the project.

Or maybe you’re a hand-off type of project sponsor and your new project manager has started asking you to be involved.  So now, you’re wondering why you should be bothered. And you’re probably resenting the time commitment you are being asked to provide.

In other words — why should you be involved?

In this article, I’m going to discuss that very question. Why should the project sponsor be involved in the project planning process?  And how much involvement is actually required?

First of all, you need to understand your role in the project governance process. There are three major players and one minor player at the project planning table. Management needs to be represented because they own the project. It’s theirs. They pay for it. They’re responsible for it. The second major player is the customer. They’re the ones most affected by the project. They determine the requirements. The third major player is the supplier. These are the individuals or department representatives who will actually be delivering the project. The fourth player is seldom represented directly. These are the non-customer stakeholders. These are the people who will be affected by the project.

Three groups represent management for the project: the sponsor, the steering committee and the project manager. The steering committee is an approvals group. Their responsibility is to review the progress of the project and to approve major changes. The sponsor is the manager given the responsibility for the project. They own the project. However, they are typically very busy executives. And typically, they manage operations or operate at the strategic level. So they are given an avatar to deal with daily issues. This is the project manager — a specialist in managing projects rather than operations or strategy.

In short, the sponsor is the owner of the project.

The sponsor will be ultimately responsible for the project. Your duties as sponsor, include assigning the players, approving changes (or forwarding them to the steering committee), communicating upwards and to the steering committee, and providing political support.

The first and last duties are the most important during the planning stage of the project.

Your first responsibility is going to be to assign your representative and give them their marching orders.  You need to give them the information they are going to need to succeed. They need to know the why of the project, the limits of the project, the purpose of the project and the criteria for success. In short, although the project manager may produce the physical charter, you are the one writing it.

Your next responsibility is to assign his or her project team. Typically, this is done in two stages. The first is an informal assignment — usually by the individual’s regular manager. The second stage consists of a kick-off meeting for the project team. Your responsibility is to expand on the assignment. Basically, you need to repeat the charter for the team members. In most cases, you’ll actually just support your project manager while they do the presentation of the charter. However, only you can communicate the level of support that management is prepared to give the project.

The importance of the third responsibility cannot be overestimated. Your responsibility is to politically support your project manager. Typically, a project manager has little or no authority on their own. People being what they are, there will almost always be one or two team members who want to dominate the show. You need to lend your authority to your representative — the project manager. By doing so during the planning process, you can help to avoid later issues.

Projects exist to change your company. They can be strategic in nature. Their focus can be on moving the company from where it is to where it needs to be. Or they can be operational and focused on enhancing and retaining value in an asset.

A specialist manager called a project manager leads projects. Yes, I did say specialist. However, unlike the rest of the specialists on the team, their specialty is building, managing and disbanding cross-functional teams. Their specialty is in building a team across the silos within your organization.

A single individual can accomplish some simple projects. But a project of any size will often require teams made up of people from different areas of your business. Their nature involves building a team across the silos.

As sponsor, you are a key member of the team. Your involvement can help the project manager to accomplish his or her task. Or it can make the task impossible to accomplish. You can smooth the waters or stir-up trouble. Here are 5 tips to help you be a better project sponsor and participate in the management of the project:

1. Be sure your project manager understands what you want
Projects are unique. That’s one of the characteristics that define them. That’s what makes them so difficult to accomplish. That’s what makes them so likely to fail. One of your key duties as project sponsor is to ensure that your project manager understands what you expect. Not only does your project manager need to know what is to be done. But they also need to know what is important to you and how they will be judged successful.
2. Support Your Project
You’re busy. Your project manager gets that. However, project managers seldom have authority on their own. They need to borrow your authority. There are key points where you must not only support your project but you must be seen to support the project. One of those key points is in the planning process. Especially in the initial meeting for planning.
3. Projects Are Not Operations
Why can’t you just use one of your operations managers to manage your project? Why use a specialist? The answer is that managing a project requires different skills and a different attitude than operations. That extends to you as well. For example, most operations departments spend to a limit. That limit could be budget based or output based. If you want to restrict your spending in a certain area — or challenge the manager –, you simply reduce the budget by 5%. However, projects have an inflexible, four-way chain of constraint involving time, cost, quality and scope. Reducing costs by 10% means that you need to increase time or reduce the scope of the project. Arbitrary reductions typically have unexpectedly severe results.
4. Support Your Project Manager
Your project manager is a key element in your project warning system. Projects fail. Failure can be minor, major or critical. It’s part of what projects are. Failure is inevitable. It’s what a person does when failure occurs that matters. Your project manager needs to trust you in order to share when a failure is near. And they need to know that you will help them take the necessary steps to minimize the effect. That trust begins during the planning process when the team is forming.
5. It’s Your Project
Ultimately, you as project sponsor need to recognize that you own the project. Your project manager is there as your representative. They are your avatar on the project. They give you the freedom to focus on more important and less day-to-day management tasks. But it’s still your project. You need to know what is happening. You need to be involved. Because the responsibility for the project is yours.

But what is a PMO?

The simplest answer comes from expanding the letters of the acronym PMO into a set of words. A PMO is a Project Management Office. But of course, that doesn’t really explain what a PMO is or why an organization or business might want one.

There are as many different types of PMOs as there are companies. The structure, purpose and organizational level of a PMO will change depending on the needs of the organization. And of course, the opinions of the management.

All PMOs have one thing in common. They are focused on the skill set or profession of project management. Project management as a profession, is a set of skills focused on projects rather than operations. This might seem a minor matter but in fact, there are basic philosophical differences. For example, an operational manager focuses on keeping a team engaged and performing. A project manager focuses on building a team, overcoming existing silos and then disbanding the team. An operational manager uses scheduling to manage the flow of work through a fixed process. Or in assigning individuals to work periods. A project manager on the other hand, focuses on identifying tasks, estimating their duration and then organizing them in an efficient manner.

However, beyond the common focus on project management, what is a PMO?

The answer is that it depends.

There are four sets of duties that a PMO might engage in. However, how far the PMO engages in these duties, and at what level is what distinguishes the various PMO types. These duties are:

1. Standardization of Reporting
2. Standardization of Processes
3. Management of the project portfolio
4. Management of the project support staff

One of the first tasks that a PMO may take on is standardization of reporting. Management generally prefers forms and documents that they can recognize and so quickly skim. Standardizing project reporting makes for an immediate and visible return. However, this may vary from simply identifying what reports a project manager must provide to upper management up to and including auditing and providing those reports.

Similarly, standardization of project management practices is the most important task a PMO can take on. In fact, there are several processes which should be standardized before any project is undertaken. However, this standardization can run anywhere from providing training up to and including setting and enforcing standards.

Every organization and every part of an organization maintains a portfolio of projects. Who is responsible for administering and managing that portfolio can vary. The PMO may be given the responsibility. Or management may retain responsibility. Of course, the option is also that no one takes responsibility.

Every organization maintains project managers. The question is whether they are trained or accidental. And also who they report to. One option is to centralize management of the project managers. The PMO is the obvious answer to this. It is this fact that most determines the reporting level of the PMO.

How many times have you heard that phrase?

Well when it comes to the project management game, risk and risk management is more than just part of the game. It’s the part that keeps you up at night. At least it does, if you’re not doing it right. That’s why risk management is so important to project managers. And why so much time is spent identifying the potentials and their effects. And so much time is spent making plans for things that might happen — and might not.

So how do you identify major risks present in your project?

First off, let’s correct some terminology. You don’t identify major risks. You identify major risk events. Risk is another word for probability or uncertainty. Specifically, it means that the event is not a certainty. You don’t know that it won’t happen, but equally you don’t know that it won’t happen.

This uncertainty means that as a seer you are faced with a difficulty. When do you spend money to avoid or encourage what may not happen? It’s hard enough predicting what you need to do.  Predicting what you might have to do and then predicting what you should do because of that, can get a little mind-bending. Especially when you realize that disruption can be positive or negative.  Having a new release with all your custom enhancements is extremely disruptive to an implementation plan. Especially when it happens in the middle of your customization efforts.

In this article, I’m going to focus on the 5 major ways to identify major risk events in your project.

1. Past History

Every time you work on a project, you should be reviewing the lessons learned. This includes a list of the risks encountered. Of course, occasionally you will encounter projects that neither you nor your organization have encountered before. That’s when you need to rely on others’ experience. Google can point you to risk event lists prepared by others. Project management texts also often contain risk lists. Consultants can also be a source of risk lists.

2. Work Breakdown Review

I originally called this brainstorming. Brainstorming is a technique of generating ideas and then reviewing them afterwards. It is one of the most popular methods of identifying major risk events. However, even if you’re not using brainstorming, there is one common thread. You are starting from the work breakdown structure or list of tasks and identifying where things could occur.

3.  Ishikawa Analysis

Dr. Kaoru Ishikawa was a Japanese professor and quality management innovator. He is most remembered for his fishbone diagram. Quality and Project Management use this technique to assist in cause and effect analysis. A cause and effect analysis begins by identifying the possible sources of problems and opportunities. It then progresses to identifying the possible risk events. The result is a logical list of risk events. This is unlike a work breakdown review, which begins from the tasks and uses random idea generation.  Each method tends to fill in the risk events the other misses.

4. Ask around

So far, we’ve talked about formal techniques based on history or analysis. However, there is another possible source of ideas. Ask your sponsor and stakeholders. Often, people who are involved in the identification of the project can provide a different viewpoint. Both this viewpoint and the fact they often are less rigorous, can provide a unique list. This may spot major risk events not visible using analytical techniques.

5. Stumble Upon the Risks

This is also known as the “Keep Your Eyes Open” method. As we work through a project, the fog of war disappears. As a result, uncertain or risk events also appear with greater clarity.  One source that no project manager can afford to ignore is the team working on the project. I’m talking about the actual producing team not the managing team. Their feedback and observations on potential risk events is critical. It must be included in every team meeting.

But what is project management?

How does it differ from any other type of management? What makes it special? How will it affect me as an entrepreneur and business leader? Why do people care?

In this article, I’m going to explain what project management is and why it is different from regular management.  I’m going to use strategic project management to illustrate the differences. The same argument exists for operational projects but there are less grey areas.

At its simplest, project management is the collection of tools, and system design and people skills necessary to lead, support, guide and control temporary endeavors.  However, while that definition is both accurate and complete, you really need to take it to the next level in order to understand how it is different from normal management.

First off, let’s correct a 200-year-old mistake. Traditionally, business thinkers have explained the structure of management by referring to the old military structure of strategic, tactical and administration.  Strategic groups put the business in the right place, tactics dealt with the customer and competition, and administration was focused on doing the stuff that wasn’t really important. Unfortunately, that description of the Napoleonic army was wrong in 1812 and it was still wrong in 2012. Since this is a business article and not a lesson in history, I’m not going to go into the details of why.

However, there is a better view of the organization. It is based on the time view of the parts. Again, there are three groups within an organization.

There is a strategic group. Their function is to think in terms of the future of the organization. Effectively, they navigate and steer the organization. They look for large changes and major improvements.  We seldom call this management. Normally, it is referred to as planning.

At the other end of the spectrum is the operations group. They depend on doing the same things, in the same way, repeatedly. Their focus, if you will, is on today and the past. At most, they will initiate incremental improvement. When we talk of management, we are usually thinking of this group.

Bridging the gap is the project group. Their focus is on shifting the operations group so that it follows the direction set by the strategic group. Their focus is neither on the future nor the past but rather on change. Their activities are temporary. They appear and disappear as goals shift.

These temporary activities are called projects. And their management requires a different set of skills than operational management.

First off, an operational manager needs to focus on his department’s activities. That means that he must be knowledgeable in the same subjects as his people. Industry and subject knowledge are most important. Tasks and systems are not as important since they seldom change. On the other hand, project management is a generic management profession. The focus is not on the subject of the project but rather on people, tasks and systems.

Second, an operational manager focuses on continuation. Typically, he or she will start with an existing team. They will focus on enhancing that team and gaining the most from that team. And with luck, will never have to participate in closing down that team. On the other hand, project management is focused on building a team, quickly forging that team, and then closing down the team. Because the team is temporary, maintaining it is more a matter of keeping it pointed in the right direction than in traditional management. Instead, the focus is on the beginning and end of a team.

A good illustration of this difference is the relationship of each with conflict.

An operational manager will frequently try to avoid or minimize conflict. Conflict is bad. It disrupts the team and causes wounds that may never heal. If conflict is inevitable, he or she will invoke management techniques that work to minimize the extent and depth of that conflict.

On the other hand, project management considers conflict inevitable and beneficial. Although project management seeks to limit the extremes, techniques exist to encourage conflict and the avoidance of group think. Additionally, the basic team model — forming, norming, performing and disbanding — incorporates conflict in its initial stages as an inevitable part of team building.

But how?

After all, innovative thinking is a pretty nebulous concept to try to encourage. However, it is possible to promote creativity within your business or organization. It is also possible to promote innovation if you understand the parts that turn creativity into innovation.

In this article, I’m going to share five tips for promoting innovative thinking in your business.

1. Reward Try

Periodically, you’ll hear the tip “Reward Failure” given as an innovative tip. It’s probably the most popular one in fact. But the truth is you don’t want to encourage failure. Failure is an inevitable result. A negative one at that. What you want to encourage is trying new ideas and new business models. That means you need to accept failure. But you want to encourage the best effort possible.

2. Look Outside

It’s been said in many ways, that innovation always comes from outside.  Einstein for example said, “We can’t solve problems by using the same kind of thinking we used when we created them.” Using the same thinking leads to at best improvement. True innovation comes from using a fresh set of eyes on an old problem. It comes from applying a simple solution from one industry on another industry’s problems. The old adage of “If it wasn’t invented here, it’s no good” must be removed from your organization’s lexicon.

3. Don’t question, Test

One of the greatest enemies of creativity is time. Most organizations like to see some sort of preliminary analysis before money is spent. Unfortunately, this analysis takes time. Making the situation worse is the fact that innovation often involves the unknown. Rather than spend a great deal of time in analysis of ideas, try testing them in a small situation. Not only will you gather the information you need for analysis but also you’ll learn valuable lessons if you decide to proceed.

4. Build for fun not fear!

One of the fastest ways to discourage innovative thinking is to build an environment of fear. Failure is inevitable in a culture of innovation and if people learn to fear failure then they will quickly learn not to innovate. On the other hand, people who are having fun are fully engaged. Their minds are active and they will almost inevitably approach problems creatively.

5. Understand the 3 Organizational Structures

Innovation is the product of creativity and implementation. Most tips for promoting innovative thinking concentrate on the creativity. However, you also need to focus on implanting that creative idea. There are three parts to any well-functioning business. At the one end of the spectrum is the day-to-day operation. Its focus is on doing the same thing over and over. Change is the enemy of efficiency. At the other end is strategy. Its focus is on identifying change and trends that will affect the business. In essence, it is the creativity in innovation.  However, to change the operations appropriately — in other words, implement innovation — requires a specialized set of management skills. These skills are called project management. Your organization must have someone who is focused on gaining ideas — from outside the organization, from within the internal hierarchy and from outside the normal structure.  And it must have a group of managers who have the skills to bring change to your organization.

One of the most critical questions that needs to be answered is “Who should be on the project team?” In this VProz Inc. 3 slide presentation you’ll discover the six roles you need on every project you run.

One of the critical success factors for projects is having a professional project manager running your projects. But for many small and medium businesses, hiring a seperate full-time project manager is not a wise expenditure. Consulting project managers can be the solution. But when should you use a consultant? After all, you don’t want to pay their rates all the time. In this VProz Inc. 3 slide presentation you’ll discover when you should use a consultant.