032 – Project Management Thunderdome! Internal versus External Project Managers
Project Managers can be categorized as “internal” project managers, who deliver projects for stakeholders within their own organizations, or “external” project managers, who deliver projects to customers outside their organization. Although both are project managers, there are some important differences between the skill sets they use. But which is better? Which role fits you best? What skills are most important for each role?
Having both lived in both worlds, Kate and Kim take opposite sides of the debate and have a friendly discussion about which is best, internal project management or external project management. FIGHT!
Let us know what you think about the differences between Internal and External on our FB page at facebook.com/pmhappyhour.
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Organization Types [4:50]
Before we go much further, let’s talk a minute about organization types, because that can play a huge role in a PMs life. Pulling from the PMBOK, from a project perspective, organizations fall along a continuum. On one end you have a pure Functional organization – this is where line managers are the project bosses. Everyone reports to a line manager, and only their line manager. If there’s a project in the company, the boss gives them direction – there aren’t really any PMs, just maybe someone keeping track and coordinating a bit between the managers. On the opposite end of the extreme is a Project driven organization. This is where PM’s are all-powerful, and resources actually report up to their bosses.
Most organizations fall somewhere in between, in what we call “Matrix” organizations. It’s called a Matrix because a project team member has two bosses – their line manager and a project manager. In a weak matrix, their line manager is their boss, but the PM coordinates with them. In a strong matrix, the PM has as much or more influence over the employee’s day job than their line manager. A Balanced matrix is right in between these.
This is important to understand because the organizational structure is an Enterprise Environmental Factor which can really influence how you deliver a project -whether you are an Internal PM in that organization, or an external PM delivering to that organization.
PM Priorities [7:24]
Let’s start by talking about the typical priorities for internal versus external PMs. This is what
drives and motivates Project Managers in their day-to-day activities.
Internal PMs have the same priorities as any External PM. Unlike External PMs who can simply get to the end of the project and easily move on, if you’re an Internal PM and you screw up, it follows you. This hurts the Internal PMs’ profession so much more. They are also expected to immediately respond to demands and keep on evolving the business. Hence, often times they need to engage with an external PM.
External PMs are held accountable for delivering a product or a service to their customer. They are entrusted by their company to deliver that business, so they must deliver it profitably while maintaining customer satisfaction. For companies that do this, their success or failure as a business is the sum-total of the successes or failures of their projects. If the PMs fail, the business fails- so, no pressure.
Stakeholder Management [10:36]
Stakeholder management is a vital part of project management. This is where we see more apparent differences between Internal and External PMs.
The main stakeholder is the customer. If an Internal PM fails to manage their internal stakeholders, they fail. What can really differentiate a successful External PM – and successful project – is the ability to have a deeper contact with the client. Back to our conversation about organization types, if you are engaged with a Functional or Weak-Matrix organization, the PM or PC they assign you may not have a lot of push. So, you may try to expand your contact or engage with line managers directly. As an external PM, especially in a ‘consulting’ role, you can have more influence than an internal PM, which is a little weird.
Scope is (or should be!) easier for an External. The customer agrees to a Statement of Work, they sign the contract, and there you go.
But in REALITY, it’s seldom so clean. The SOW is usually high level and open to interpretation. Tensions can run high in that area when the customer thought they paid for “X” and the contract stipulates a lower-case X, but they actually wanted a capital X. This is important to get sorted out quickly, because if you don’t this until too late, it can get really ugly.
Internal PMs often face the problem of an unclear scope. Usually, they are asked to work on additional tasks and, sadly, they don’t have that same capacity to complain or refuse as the external PMs. You may want to listen to our episode on Scope Creep to get an idea on how to handle scopes.
Financial Management [23:22]
External PMs are typically accountable for the commercial delivery of a contract- and this can be a huge stressor. In some cases, you have to forecast, on a weekly basis, how much cost you will accrue, how much you will bill, and you are held accountable for any significant variance between what you forecast and your actual. So, not only do you have to make sure you are delivering a successful product to the customer, and can do it profitably, you have to get all your forecasts right.
Generally, External PMs are more involved in the commercial transactions which are a great benefit because they’re more engaged in reviewing the contract that may later lead to them creating it.
Internal PMs, on the other hand, are given a budget by the company’s finance department and are expected to work within the amount given to them.
Resource Management [29:25]
Let’s talk about resource management – getting and managing staff, and ultimately building a team. Managing resource for external PMs is easier than internal. You are generally a more productized organization if that’s your business, so your team is your team, and they are there to get stuff done. But be aware that resource utilization is a primary business metric for delivery companies, and they need to plan their projects accordingly. They may need to run multiple projects, so
scheduling commitments are important.
There can be real problems if a project schedule changes, because resource utilization can be planned out months in advance, with projects stacked one after the other. This means you may end up pulling resources off projects – which is very painful. Underperforming team members can also hurt you – so be on top of that and change them out
quickly if needed.
Project Change Control [38:28]
Project change control is a more technical approach to change management. It goes to the nitty-gritty of introducing and implementing a new process in the organization to ultimately increase its success rate.
What you need to look for when hiring … [41:52]
The right person should be excited about the company’s culture and products, and they should love building relationships.
The right person should have a sense of urgency; you can’t afford to be too patient, because you are being paid according to the time you spend.
You may be in trouble if…
You don’t know what kind of organization you are delivering to, or how it works
Principles for Success
Put your mind in the other PM’s shoes.