Food restriction. (Also for dinosaurs!)
Elephants or Dinosaurs?
I was doubting which mythical large animal to use to symbolize the big “HERO” projects that often rise in troubled times: driven by Senior Management, consuming a lot of resources, … and often far away from any cost control because they are “that important”. I picked dinosaurs because they refer to the past and unfortunately that is also kind of the image of my topic for today: project cost and change control is not the most sexy topic to score with. Yet so important. Today more than ever.
Every management team these last months has been focusing on the opportunities and risks of the current disruption in the market. For many of them the outcome is a new strategic program to boost new market potential, a decision to finally realize a digital transformation or to drastically reduce their cost structure. Quite often these big new programs are added to the portfolio without possibility to increase the global budget. Consequently, more competitiveness among project sponsors and an increased request towards PMO to control costs (of other sponsors of course…).
And just like with many PMO processes, you don’t just increase their maturity overnight. Cost management might very quickly move from “live and let live” towards a situation where every Portfolio Board member wants to challenge the expenditures of others. Quite often also a situation where you start seeing a division into two camps :
- The Dinosaur team, boosting the new HERO project forward and trying to push all PMO cost control aside: “This is important, don’t bother us”
- The Calimero team, trying to deliver their smaller projects as efficient as possible but getting frustrated about the unfairness of uncontrolled costs of the HERO project.
And when we talk about two camps, being in the middle often is risky business. Need some help ?
5 Tips to manage project costs, also and definitely those of your “HERO” projects
1. Chase those who 'cannot' estimate, not those who try
The word chasing in the title of this chapter might sound hard so sorry to all those who simply have a lot of problems with estimating. My message to all PMO/Portfolio Managers simply is to be very critical on every “We can’t estimate at this time”, definitely when it concerns a “dinosaur”, consuming all resources but still “discovering”.
- Anything can be estimated: any 'guesstimate' or rough-order-magnitude is better than driving blindly.
- Project sponsors should understand the principles of iterative estimating and tunneling: training project managers on estimating techniques is one thing, my biggest focus always goes to guiding project sponsors in learning to deal with estimates. They need to accept that estimates are fine-tuned step-by-step and that bullying a PM because his estimation during the initiation phase was 'wrong', is killing (and makes the whole estimating training for PM's a waste of money and time).
- Be supportive but strict: Being open to guesstimates for the whole project does not mean you cannot be more severe on the estimates for the short-term activities!
2. Total cost of ownership : a simple checklist/template will do the job!
Business cases still are a black or white concept: either you are haunted by an enormous excel-file (15 sheets, full of macro’s, the “life achievement” of your financial controlling department, …) … or you do nothing. There sure is an in-between: a simple checklist or template can avoid that cost estimations only include the one-off cost, only include external costs…. Simple but mandatory!
3.“Fixed price” is not the holy grail that will keep your nightmares away, it might become your biggest nightmare.
Very soon in my Project career I discovered the illusion of “Fixed price” projects : after some serious cost overruns, my employer had seen the light and started switching to fixed price contracts instead of Time & Material. Auwtch! Did that hurt! There is a very simple rule on fixed price contracts between two parties: the smartest one always wins! So if you have a problem with your project management maturity, fixed price should be avoided, not be seen as the solution!
4. Do not drive through the fog, put your headlights on :
After estimating & budgeting, it is time to start driving and to see the quality of what you did in steps 2 and 3. Still feel like you are driving through the fog? Then learn how to improve your basics and better track where exactly you are on your trip! Usage of a high-level work breakdown structure during estimating and budgeting and the SIMPLE application of Earned Value Management techniques will get you a long way. Very professional on every project, a must-have on every HERO project. Just do not get lost in details nobody cares about.
5. Cost reporting should be done by systems, not by expert Project Managers :
Being in project environments for almost 20 years now, I can tell you that one of the biggest frustrations of senior PM’s pops up when, while hired to lead a strategic project, they spend many hours or even days per month to copy, sum up, rephrase, … the actuals on their project. Often in different formats for different stakeholders. Did they really challenge my day rate up to the last EURO to employ me as a clerk?
- Do not rebuild your financial system/ERP into a scheduling system and vice versa: seen so often but a waste of money and time. Our advice: align one level of your WBS between your financial and scheduling application and build a light interface between both. We did it for many of our (also large) customers and it saves you a lot of money because you avoid customizing systems into something they weren’t built for.
- The project manager is still accountable for cost reporting: Our strong advice to use existing data to report digitally, not manually, does not at all relieve the PM from his accountability for his cost actuals. Some of the time he wins by no longer consolidating cost data manually, should go to the qualitative explanation and forecasting of his costs ! Now this is often the part that is missing because getting the figures already took so much time.
Getting your whole PM community to the next level in cost estimating, budgeting and control might take you some time. However if you are convinced you have a HERO project starting up in which cost control will be key, than call us to see how you can save a lot of money with some specific tips and tricks !