Project Leaders: The Unsung CRO Heroes
I have always been impressed at how many skills a great project leader (also known as a project director, project manager, etc...) brings to the table. From my perspective, project leaders function as the CEO of their study and their leadership can make or break a project. Project leaders are expected to deliver on time and budget, complex, global, multi-year clinical trials that can cost upwards of tens of millions of dollars. (By the way, if you are reading this blog and are a strong project manager/director, please send your resume to Clinipace as we are always looking for great talent). I'd like to spend some time assessing the skills expected from project leaders and attempt to quantify the value that effective project management brings to a CRO.
Job Description Research
I figured the best source for desired project leader responsibilities/skills would be project director/project manager job descriptions taken from the websites of Clinipace, IQVIA, Syneos, PPD, Worldwide Clinical Trials, Covance, Parexel, Icon & Synteract. I categorized my findings into the following buckets: Leadership, Business Development, Communication, Financial Acumen & Project Management.
Leadership
Serves as the leader for the Study Management Team, with ultimate responsibility for the set-up, planning & coordination of clinical trials through to study closure.
Lead core project team and facilitate their ability to lead extended/complete project team
Provides tactical management and leadership to project teams
Business Development
Collaborates with Director, Clinical Operations, Project Management and Directors, Business Development in the development/presentation of capabilities/proposal defenses.
Supports the development of project proposals by participating as requested. Represents Project Management at professional, marketing and new business meetings.
Collaborate with business development to ensure proactive commercial aptitude while partnering with internal and external stakeholders to identify new avenues for growth and also contribute and particulate in Bid Defense Meetings.
Communication
Establishes and communicates team performance expectations and guidelines.
Acts as the primary liaison between the project team, sponsor/customers, service providers, project analysis and management.
Establish working relationships with client project teams which result in client satisfaction, operational excellence, and thereby increase repeat business.
Financial Acumen
Develops budget and expense review strategy; creates scope definition documents and creates proactive cost containment strategies and communicates with project team; regularly reviews budget/expenses with project team.
Accountable for budget across your assigned project(s) including financial performance targets and the control and minimizing of write-offs. Identifying out of scope activities and execute change orders.
Meet financial performance targets for the assigned projects and enthusiastically lead the change control process -- both internally and externally.
Solutions Provider
Initiate improvements regarding the efficiency and the quality of the work performed on assigned projects.
Work globally, with multi-functional leads to anticipate problems, find solutions and deliver results.
Recommend course of action regarding project issues/concerns.
Project Management
Delivering successful working relationships with clients, cross functional project planning, scheduling and implementation, defining project scope, resource requirements and deliverables, risk migration strategies, associated action plan and issue resolution.
Ensure client projects proceed on time, within budget and with quality.
Monitor project timeline and scope to ensure both remain on track. Initiate and implement appropriate actions.
So in summary, a successful project manager needs to be a great leader, financially astute, have the ability to sell, be a strong communicator and be good at project management. Not to mention also have strong therapeutic expertise, an ability to work in a global environment and be on call at all times. Sounds like we are all looking for a unicorn. However, they strong project leaders do exist and the two skills I have not mentioned they all seem to have are passion and drive. Top project leaders maintain the passion and drive to overcome obstacles and adversity for their sponsors.
Value Creation
I'll attempt to quantify the annual value of a great project manager. Keep in mind there are unlimited ways to demonstrate value - I'd love to hear feedback on additional areas I may not have included in my assessment.
Billable Hours
The easiest value driver s to calculate are the revenue and gross margin contributed. I made the following assumptions in the analysis below:
Used $127,500 as an average project manager salary from a comp survey we utilize at Clinipace. Keep in mind this amount can vary by geography, experience and specialty. Should just be used for example purposes only.
20% of salary added for taxes/benefits (fringe) and another 5% for additional administrative overhead (IT costs, phone, etc...)
80% utilization based off of 2,080 hours in a year. So a target of 1,664 billable hours in a year.
Hourly cost rate of $96.54 (Total annual cost / Target billable hours)
Bill rate of $193.09 - which is 2x the hourly cost rate, which results in a 50% variable margin %.
As you can see from the example below, a fully productive project leader could generate over $320,000 of revenue and $160,000 of variable margin.
Win Rate Improvement
Here is where we have to start doing some out of the box analytic thinking to determine "hidden" values. A 25% win rate is reasonable target win rate for most CROs. A key factor in developing a strong sponsor-CRO relationship is having experienced and effective operational teams (article by John Carlos Diaz, GeoSera Consulting) Since the project leader runs the show on the CRO side, I would say an effective project leader can help drive strong win rates. The below example is my attempt to calculate the potential cost savings difference between a 17% (subpar) and a 25% (good) win rate.
Assumptions:
Based on a few internal conversations, its reasonable to assume that it can take roughly 250 hours of internal time from identifying the opportunity, developing a proposal and competing at the bid defense. Participants in this process range from proposal writers, inside/external sales staff, clinical and executive staff.
Using a variety of internal rates, I concluded the whole process could cost roughly $20,000 ($19,700 in my example).
Add another $9,000 for bid defense travel costs and the total process could cost roughly $28,700. These costs can increase significantly for as study size increases.
I assumed the difference between a 17% and a 25% would be needed to compete in 2 additional bid processes.
The cost of 2 additional bid processes would be $57,400 (2 * $28,700).
A strong project leader (using my assumptions) could save or enable a CRO to better utilize $57,400 of internal costs. Also keep in mind that a strong project leader could also increase a CROs repeat business win rate % - which could lead to non-competitive opportunities.
Gross Margin Achievement
A project leader's key deliverable is delivering a project on budget for both the sponsor (customer) and the CRO (employer). Strong PLs will deliver while weaker PLs quite often will experience some margin erosion. This assumes that the project budget was correctly developed internally (a blog for another time).
Assumptions:
Study value of $5M with a duration of 36 months (3 years).
Annual revenue of $1,666,667
Assumed budgeted margin of 45% or $750,000 of annual margin
Every 1% of margin erosion would cost $16,667 annually
A little sensitivity analysis shows that 3% erosion would be $50,000, while 5% erosion would be $83,333. Keep in mind that is just annual impact, triple those amounts if the erosion happens over the full three years. You can see how this quickly lost margin can add up.
Savings Summary
Using my previous examples/assumptions, below is a summary of how much value and the potential investment return generated by a strong project leader. Total value of $428,700 after adding up the impacts of billable revenue, win rate improvement and margin achievement. Potential investment return of $268,050 (62.5%) after subtracting out internal project leader costs.
Wrapping Up
I left out another value add that is difficult to quantify: a CEO's ability to sleep comfortably at night knowing a strong project leader is on the case. All kidding aside, CROs are in the service delivery business - having strong project leaders with the skills and passion to go above and beyond for customers while also delivering from a financial perspective is PRICELESS! I know my list above isn't all inclusive, so I'd love to hear about other ways readers think that project leaders add value.
Jason Monteleone is CEO of Clinipace & President at Pivotal Financial Consulting, LLC. Clinipace is a global mid-size CRO with operations in the Americas, Europe and Asia-Pac serving small and mid-size pharma and biotech sponsors. Pivotal provides Divestiture Assistance, Acquisition Advisory Services and Strategic Planning to the Pharmaceutical Outsourcing Industry. Jason can be reached at jmonteleone@pvtfinance.com. Follow me on Twitter @JMPivotal. Sign up for Jason's latest blogs and updates at my www.pivotalfinancialconsulting.com.