Identification of the main components and phases of the project will include; scope of work to be undertaken, time required for the work to complete and cost to be incurred in producing the deliverables this enhances the manager’s ability to understand the project in detail and how it is to be managed to successful completion. And the following tools and techniques can be employed by the project manager as an effective tool and technique that will give the highest efficiency and effectiveness in managing the project within budget.
The work breakdown structure
Scope definition involves identifying the major task required to produce the project deliverables and meet the objective defined. For example, whereas the final project deliverables may be a new car, there is a whole set of in process deliverables that must be prepared and approved appropriately. Some examples are process documents, requirement documents, technical specification, training plan etc….
Defining the scope of the project is very important step as is the foundation on which the schedule, cost estimate, budget and resource plans are built. Poor scope definition leads to loss of control of the project scope which can lead to cost overruns.
In-order to manage well the scope of the project, the project manager can use work breakdown structure as the main tool and other tools such as brainstorming, stakeholder analysis etc.
The WBS is the most effective tool a project manager can use to ensure that all work scope is planned. The WBS is a tree structure which decomposes the entire project into a logical structure of task, and activities that are tied to deliverables and to assign responsibilities. All planning and estimate efforts are organized to the WBS developed for the project.
Stakeholder analysis
The first step in stakeholder analysis is to identify who the stakeholders are. They are all the people who are affected by the project, have influence or power over the project, or have an interest in its successful or unsuccessful conclusion. In a project stakeholders can be the staff, the project manager, the technical team, or some experts or users. Before starting the project, it’s mandatory that the project manager take the time to work the scope of the project with the stakeholders and users to make sure there is a shared understanding of what is included in or excluded from the project.
Brainstorming
Brainstorming is to let ideas flow, without judgment so that everything is on the table for consideration. The purpose of brainstorming is to externalize authentic and complete ideas and facilitate innovative thinking for improving and automating business processes with staff, users, and other stakeholders. Therefore the most important thing for the project manager have to remember when defining the project scope is to create a detailed project specification using the WBS and make sure that all staff, users and stakeholders the same definition of the scope before beginning work.
Time management
Often times project managers are not given the opportunity to plan because most of the time the projects are started before the project scope has been clearly defined. They also see planning as a waste of time because they belief that time is better spent doing something (seeing results) rather than planning (seeing ideas). However planning is an important process as it is on this basis that an appropriate budget can be established and managed.
During the planning process, the project manager will detail the project in terms of its outcome, team members’ roles and responsibilities, schedules, resources, scope and costs. At the end of this phase, the project manager will produce a project management plan, which is a document that details how the project will be executed, monitored and controlled, and closed. Such a document also contains a refined project scope, and is used as the project baseline.
Time management in relation to cost management has two main components:
- Planning: is the process that defines the actions and activities, the time and cost target, and the performance milestones that will result in achieving objectives. Usually managers underestimate the amount of time needed and / or forget to take into account unexpected events or unscheduled high priority work.
- Scheduling: is the process that converts the project work plan into a road map which if followed, will assure timely project completion within budget.
Activity based costing (ABC) as a tool for managing cost of activities
Most project managers don’t only exceeds their budget before the completion of the project because they turn out to be bigger than originally estimated. Managers often blow out the budget because the estimates were badly managed. As a result the profitability analyses are not well quantified because the estimates of future return was not accurate.
Accurate estimate here is very important for the project manager as they are frequently required for three principle reasons: 1) is to well-define the cost/ budget of the project; 2) is to justify the project, it enables the cost to be compared with the anticipated benefit; and 3) is to evaluate and control the actual cost vs. estimated and take corrective actions when needed to make the project succeed.
Applying activity based costing to the project; the project manager understands the cost and maximizes project resources. Combined with the earned value management, projects can be tracked and controlled effectively in terms of time and budget.
Activity based costing (ABC) is a budgeting and analysis process that evaluate overhead and operating expenses by linking the cost to customers, services and products. It allows projects to see which product or services are profitable or losing money. ABC can be used as a tool for determining the actual cost of project, for budgeting and for planning.
The first step is to establish the activities of the project, once they are established the parts of each activity that cost money must be determined. Next the data is collected and input to the application. From there the project manager can determine what changes need to be made to give the project optimal profitability. This is called activity based management: is the process of using Activity based costing (ABC) to how efficiently activities are performed and how to manage them. Going through this process enables the project manager exactly what a project costs as ABC/M reveals what the true cost are/ were and the amount of resources required to complete related project task. The bottom line is greater accuracy and greater control over all the factors that make up the costs and can result into efficiency and effectiveness of completing the project within budget.
Earned value management (EVM)
The earned value management technique is a valuable tool to measure a project’s progress, focus its completion date and final cost and provide schedule and budget variances along the way.
EVM provides consistent indicators to evaluate and compare projects and give an objective measurement of how much work has been accomplished. It lets the project manager combine schedule performance and cost performance to answer the question: “what did we get for the money we spent?”
Using EVM process, project manager can easily compare the planned amount of work with what has actually been completed, to determine if cost, schedule, and work accomplished are progressing as planned. It forces the project manager to plan, budget and schedule the work in a time-phased plan.
Figure above shows: Monitoring the earned value using the S-curve
The principle of ABC and EVM technique provide the project manager with an innovative cost and performance measurement system, allowing productivity improvements and therefore can enhance project profitability and performance.
Quality management
Many projects trade time for quality in delivering results and don’t meet the quality objectives. Quality management cannot guarantee project success but it certainly provides a force against failure. The goal of effective quality management is to set realistic project and process quality objectives, define actionable quality expectations, ensure minimal product defects and eliminate rework which could push the project beyond its budget. In short, quality management is designed to help deliver the best project results within established constraints and boundaries.
Several process improvement methodologies such as total quality management, quality circles and statistical process control can be applied but the six-sigma appears as the most relevant one. The fundamental objective of the six-sigma (i.e. implementation of a measurement based strategy to propel process improvement and reduce variation) is accomplished by means of two important strategies that could be very useful to the Project manager: 1) DMAIC (Define, Measure, Analyze, Improve and Control) or 2) DMADV (Define, Measure, Analyze, Design and Verify).
Several processes in a project may be repetitive, in this instances, the project manager can improve the performance of the process by DMAIC methodology, which is an improvement system for existing processes or products.
The project manager can however use DMADV methodology to improve processes which involve creativity and can also be used to design or redesign a new product. The six-sigma offers strong tools like Quality Function Deployment, Failure Mode Effect Analysis, Design of Experiments and other ways to convert high level voice of the project users into measurable critical to quality criteria which can be an effective way of ensuring project success within budget.
In conclusion, if I was appointed to head a big project in my district/ organization, the various ways and means I would use to manage cost so that the project is completed successfully within the budget includes those use of total cost management techniques and methodologies as discussed above.
Throughout the project’s executing phases, total cost management tools can also be employed as a means of balancing a projects scope, time, expectations of quality and budget- and not just time and cost alone. The approach can be summarized as the following three steps: 1) define the scope, the time, the level of quality desired and the budget; 2) ensure that the scope, time, quality and budget are aligned; and 3) monitor and manage the balance of these four components throughout the life of the project.
It must be noted that, the projects variables, scope, time to produce desired results, cost to complete and quality grade of the products are interconnected and cannot change without a corresponding, balancing change on one or more variables. Agreements must be reached within the project organization on the balance between them, since without agreement to the balance there cannot be a reasonable commitment to achieving the projects goals.
Figure 2: Tetrad- Tradeoff Principle – Four Objectives or Constraints
Source: Max Wideman – The Tetrad Tradeoff Principle
It’s essential that project managers when initiating their projects should anticipate problems coming ahead, using total cost control techniques and methods can offer project managers many potential benefits regarding planning, control, budgeting and performance management and can provide the manager conceptual framework for effective means and ways of their projects to successful completion within budgets.
Regardless of your experience as a project manager, projects will consistently challenge your ability to use your knowledge, skills, and techniques at hand. In this regards, the following are some of the challenges the project manager may face in the process of ensuring that the cost of the project is managed and the project is guided to successful completion and within budget.
Project change control: - Project managers often identify dealing with changes and project creep as one of the most (if not the most) challenging problems that a project manager has to face. The very nature of projects makes change inevitable. Changes often impact the project’s budget and schedule (and sometimes the outcome).
The Responsibility vs. Authority Trap: - Firmly embedded in project management folklore is this one: the responsibility you’ve been given is not commensurate with the authority (or formal power) you believe you need to accomplish the mission. The size of the gap between responsibility and authority will partially depend upon the structure of your organization. If you’re in a purely functional organization - and in many cases, a matrix organization - you should not expect to be granted very much formal authority. The gap between responsibility and authority will be quite wide. To compensate for your perceived lack of formal authority, you’ll have to rely upon expert power (respect you can garner through superior knowledge or capability) or referent power (often accessed by practicing an excellent leadership style). You’ll also need to rely heavily upon your ability to influence and persuade.
Imposition of Unrealistic Targets–Of course, there are absolute deadlines for any project such as regulatory compliance or marketing events, but many dates are tied to factors unrelated to a project’s scope (i.e., end of quarter, budget cycle, Staff’s vacation etc). The project manager may lament the fact that he/she is assigned and given deadlines.
Perpetual Emphasis on Function: If you’re managing a project in a functionally oriented organization, one of the more difficult challenges that you’ll face is getting team members to overcome their inherent tendency to think and act in terms of optimizing their own discipline, technical field, or department. It’s important to recognize that this phenomenon is fueled by three powerful influences. First, by definition, projects are temporary, but functions live on. In other words, a person often considers his or her work group to be home; the project is just a passing state of existence. Second, unless contemplating a formal career change to project management, a person considers his or her discipline or area of expertise as the work focus. This means that he or she will likely be committed to ensuring the well-being of that area. This strong loyalty could, for example, give rise to counterproductive situations, such as team members using your project funds to advance their discipline - perhaps in excess of what customer requirements dictate. Finally, there’s the power of the paycheck. Simply stated, most people tend to pledge allegiance to the source of their paycheck. For most people in most organizations, that’s their work group or functional department, not you.
Scope changes – One of the rules of project management is that change is inevitable. What does not have to be inevitable is uncontrolled change, also known as scope creep. Changes that can pose serious challenge to the manager and may lead the cost of activities/ project to overshoot includes: external events e.g. change in government regulation; an error or omission in defining the actual scope of a project e.g. failure to include an important feature of a product during the planning stage.
Management of risk – Many project plans have a list of risks, but no further analysis or planning happens unless triggered by an adverse event during project execution.
Insufficient team skills – To quote a colleague, “Availability is not a skill.” Unfortunately, the busiest people also tend to be the most highly skilled. Finding out that a team member is incompetent can be very difficult since most incompetent people do not know that they are incompetent.
Customers and end users are not engaged during the project – Project teams become so focused on internal deliverables, deadlines, and processes that external stakeholders are not given input during critical phases. Planning status meetings that will be attended by customers and end users keeps them informed. Using these meetings as forums for information gathering will help ensure that the final product will meet the expectations of all your important stakeholders.
Vision and goals are not well-defined– Goals of a project (and the business needs being fulfilled) are not always clearly defined. Communicating these vague goals to the project participants becomes an impossible task. Overcoming vagueness is particularly difficult when the project manager has also been given unclear instruction.
Ineffective communication – Thanks to technology advancement, there is no shortage of information flow. The problem is that we do not provide the right information to the right people, partly because our organizations do not cultivate good communication and partly because we don’t know what and who are “right.”
Unrealistic datelines: For projects that do not have “absolute” time constraints, there are ways to manage the schedule. First, manage the stress of the project deadline and the project issues with creative planning, alternatives analysis, and communication of reality to the project stakeholders. Then, determine what deadlines are tied to higher-level objectives, and establish links to schedules of other projects in the organization.
Scope change control: The project manager should analyze each request and then communicate the impact of each change and the alternatives, if any exist. You can’t eliminate change, but you can make your stakeholders understand how the change affects the schedule, cost, scope, and quality of the project.
Management of risk: Once a project team has defined the risks, team members can attempt to determine the probability and impact of the occurrence for each risk. At that point, they can either act to avoid the risk through alternatives analysis, reduce the probability and/or impact with mitigation strategies, or plan a response to the risk event after it happens.
Insufficient team skills: First, do not blame the worker, who is probably trying to do what’s right. Chances are he or she was not given the proper training or direction to be effective in his or her position. Second, starting with the project manager role, document the core set of skills needed to accomplish the expected workload and honestly compare each person’s skills against your list. Using this assessment of the team, project managers can guide the team toward competency with training, cross-training, additional resources, external advisors, and other methods to close the skills gap.
vision and goals are not well defined: Here are some possibilities to see that it does not hamper project implementation. Determine which parts of a project are not understood by the team and other project participants and ask them for feedback or note feedback and questions that come up. Check the project documentation as prepared and tighten up the stated objectives and goals. Each project is, ideally, tied into the direction, strategic goals, and vision for the whole organization, as part of the portfolio of projects for the organization.
There are an infinite number of reasons why projects are challenged, but the solutions always seem to come back to one thing: good communication, which brings us to . . .
Ineffective communication: To solve this, determine the communication, “whom,” “what,” “when,” and “how,” for each project. Find (or create) some templates for agendas, minutes, reports, and plans, and reuse them on every project. The outcome of each project is unique, but good communication should become a habit.
Project change control: - To cope with changes use a formal change control procedure as follows:
- When a project staff asks you for a change that will potentially impact the project, insist that the requestor submit the change request in writing using a change request template.
- Review the impact of the change on the project in terms of cost, schedule, performance and outcome. Review also what will happen if you do not implement the change.
- Accept or reject the change – depending on the importance of the change, you can involve the project team members and/or the project sponsor in making the decision. If the change has been rejected, inform the requestor and all concerned parties.
- If the change has been accepted, document it, and update the project plan to take into account the change’s impact on the project’s schedule, budget and outcome.
- Communicate the accepted change and its impact to the requestor and all concerned parties (include the change in the next project review meeting).
REFERENCES
PMBOK ®GUIDE 2004
Max Wideman – The Tetrad Tradeoff Principle – available from
Gary A Gack (2003)- Using Earned Value To Keep Control of Large Projects
Rachel Manktelow, “Stakeholders Analysis & Stakeholder Management”-Available at
