PMs aren't accountable for margin
Your PMs are measured on schedule and on the client being happy. No role in the company is measured on the number at the bottom.
What gets measured gets managed. If margin belongs to the owner and schedule belongs to the PM, then one person is defending margin against every competing pressure on the job. Your PM approves the extra man and the rented pump without seeing what either does to the job. Once he sees the margin every month, those calls change, because now he owns something he can lose.
Three moves, in order
Step 08: Standards and accountability
Five hours a month of owner time, spent projecting the work.
Other problems step 08 solves
Other things that go wrong
What owners ask
Project manager margin accountability construction?
Your PMs are measured on schedule and on the client being happy. No role in the company is measured on the number at the bottom. What gets measured gets managed. If margin belongs to the owner and schedule belongs to the PM, then one person is defending margin against every competing pressure on the job. Your PM approves the extra man and the rented pump without seeing what either does to the job. Once he sees the margin every month, those calls change, because now he owns something he can lose.
Which part of the system fixes this?
The step is number 08, standards and accountability. Five hours a month of owner time, spent projecting the work. It's drawn from chapter 8 of CONTROL: The Construction Financial Operating System.
Is this normal for my trade?
Across the 48 trades that publish a figure, net profit at $1M–$5M averages 7% before taxes. If you're well under that and this page describes your month, the two are usually the same story. The published average tells you where the pack is, and your own job costing tells you where you are, which is the number that pays payroll.
Where do I start?
Give each PM the bid margin on their jobs and the current margin, monthly.
Can I fix this without touching anything else?
You can try, and it doesn't hold. Step 08 depends on step 03, overhead calculation and step 06, project management and step 07, monthly cadence. Install it ahead of those and it produces numbers the field won't trust, which is worse than the problem you started with.
Wrote CONTROL, the 8 step system behind these figures. More about the author.