The Money Files

A blog that looks at all aspects of project and program finances from budgets and accounting to getting a pay rise and managing contracts.

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8 Expert Interviews To Improve Your Projects

20 Project Cost Management Terms You Need To Know

The Future of Your PMO is Safe…

6 Tools for Project Cost Control [Video]

5 Barriers to Effective Benefits Realisation Management

8 Expert Interviews To Improve Your Projects

Categories: interviews

Over the years I have interviewed some great project management experts on this blog. Today I want to round up eight of my favourite expert interviews. They are all packed with tips to help you manage the difficult times on your projects. Enjoy!

Jason Westland on budget management processes

“Projects with a high level of risk require more contingency funding. Having said that, some parts of the project may be riskier than others, so consider whether you add contingency to the overall budget pot or to particular tasks or phases. You could, of course, do both, if you are particularly risk adverse.”

Read Jason's interview.

Kevin Baker on improving project management culture

“Unified Planning takes the schedule status and the cost status at work package level and then aggregates this up to give the overall picture at total project level, that is the status for the complete aircraft development.”

Read Kevin's interview.

Wilhelm Kross on risk management

“Making trade-offs, designing short-term compromises, implementing short-term work-arounds and the like, are typical management challenges that seem to be ignored.”

Read Wilhelm's interview.

And there's another part of my conversation with him here.

Eric Winquist on reusing requirements

“Organizations that centrally manage requirements respond to change faster and catch errors earlier because they are leveraging requirements that have already been developed and tested.”

Read Eric's interview.

Chris Bell on Enterprise Risk Management

“ERM is a scalable, holistic approach to risk management that consolidates and organizes risk information from across the organization into one location so that it may be used for improved decision making. By embracing ERM and creating a risk management culture, organizations can drive business performance, innovation and growth, while protecting company reputation and shareholder value.”

Read Chris' interview.

Jon Swain on project management tools

“With everything in one place, senior management can see up-to-date project performance data across the whole organization allowing them to better manage their project portfolios. They can proactively choose which projects to select, prioritize projects particularly with competing or scarce resources, understand the interactions between projects and tie all of these decisions directly back to the company's strategy and goals.”

Read Jon's interview.

Todd Williams on cost audits

“When you are determining the cost of internal resources, you need to determine they are performing to expected goals. Are they spending time on non-project tasks or inefficiently getting toward deliverables? They may be salaried and simply billed to your project.  In this case you need to be diligent ensuring hours (which translate to money) are spent on completing their work and that these hours are in compliance with industry standards. If time gets excessive you have a problem.”

Read Todd's interview.

Rob Prinzo on securing funding for your projects

“Robust budgeting starts with comprehensive requirements. I recommend starting by making a list of all your projects, categorizing the projects based on: size, business function, type, level of funding, effort and organizational impact. Next, determine the dependencies with other projects, funding, resources and business decisions.  Once you have your list, categories and dependencies you can start to determine the projected costs for the projects.”

Read Rob's interview.

Posted on: August 25, 2015 04:17 AM | Permalink | Comments (1)

20 Project Cost Management Terms You Need To Know

Categories: cost management

There is a lot of jargon around project cost management – personally I think it is one of the areas of project management most laden with new terms to learn. Here are 20 budgeting and financial management terms that you need to know.

1. Forecast/Reforecast

Predicting future expenditure based on what has happened in the past or what you know about. Reforecasting is when you take your last forecast and tweak it now that you have new information.

2. Contingency

Contingency is the provision you make for anything you don’t know enough about yet within your budget. It is supposed to address a particular risk, like the fact you haven’t got full cost estimates for the delivery piece of work that you’ll be doing. It is often added on to the budget as 10% of the total budget amount before tax in order to give you a cushion if something unexpected happens.

3. Management Reserve

Like contingency but different. It’s a pot of money put aside to deal with the unexpected impact of problems arising from missing deadlines or other objectives.

More on the differences between contingency and management reserves.

4. Tolerance

A range within which you can deliver your project without having to go back and ask for your sponsor’s approval. This is helpful because a project will never cost exactly what you have budgeted. Let’s say your detailed estimate is £1503.23. Your tolerance on that piece of work could be the range £1500 to 1550 because you and your sponsor acknowledge that within that range the difference is insignificant and no further approvals are required.

5. Capital

Money to be spent on capital assets e.g. physical things like a printer for the office.

6. Operating Expense

Money to be spent on items that keep the project running e.g. paying for a contractor.

7. Actual

The actual amount of money spent on a task, activity, phase or project. People talk about ‘Actuals’ in comparison to ‘forecasts’.

Use like this: “We forecasted $100 but the actual was $76.”

8. Accrual

I could write a lot about how I’ve been caught out with accruals in the past. Accruals are an accounting procedure where the expenditure is recognised when it is incurred, even if you don’t yet have the goods and regardless of when the money leaves the bank. Most important at the end of an accounting period so you don’t forget to let the finance team that you have received the goods but not yet had the invoice.

9. Budget

The amount of money you have to deliver your project.

10. Charging

The way you account for expenses incurred on your project.

Use like this: “We’ll be charging 25 hours for the work done in August.”

11. Estimate

A guess at how much an item or task will cost. It should be the most educated guess possible as the impact of getting it wrong can be significant! There are estimating techniques to help take the guesswork out of calculating estimates.

12. Sunk Cost

Costs already incurred on your project that you can’t get back. Most relevant when talking about whether or not you should close down a project. You won’t be able to recoup the sunk costs if a project is closed.

13. Opportunity Cost

Often used as a way of selecting which project to do. It works out the return that would have been earned if you went ahead with one activity over another. For example, if you choose to do Project A and not Project B, and Project B offered a return of €60k, then your opportunity cost is €60k.

14. Cost Benefit Analysis

A way of working out how much benefit you get for your investment. Cost Benefit Analysis is a tool used in project selection. It gives you information about whether the project is financially viable and whether it is worth pursuing or not. It’s a simple calculation that looks at whether the benefit you are going to get outweighs the cost of getting it.

15. Payback Period

The payback period of a project helps you understand whether you get a return quickly enough for the project to be worth doing. Find out more in this video: Understanding Payback Period

16. ROI

ROI stands for return on investment. It’s a way of calculating whether a project is worth doing or not. This video explains more: ROI Explained: A Video

17. Cost Aggregation

Basically just adding up all the individual costs on your projects to work out the overall cost of doing something.

18. Accuracy

Your level of accuracy will be specified in your cost management plan. It relates to what rounding is used in your estimates. An accurate measure is one very close to the actual measure.

19. Precision

Precision is different from accuracy. The level of precision you are going for will also be specified in your project cost management plan. Precision means that when you look at a range of figures they are close to each other.

Use like this: “Precision range for this budget item is +/-1%.”

Actually, if you’ve got a great way to explain the difference between accuracy and precision then let me know in the comments below, because it is tricky to get your head around.

20.  EMV

Finally, EMV. This video explains what expected monetary value is all about.

What did I leave out? Leave your additional essential cost management terms in the comments below!

Posted on: August 19, 2015 07:56 AM | Permalink | Comments (10)

The Future of Your PMO is Safe…

Categories: PMO, research

…At least, that’s what a survey by ESI would have you believe.

The funding for PMOs has historically been a bit iffy. That’s not a technical term, by the way. PMOs have struggled to prove their value and there is a cyclic effect when times are hard in business: PMOs start to lose their funding and get scaled back or cut completely. That, according to ESI, is finally changing.

The study of over 900 respondents held earlier this year reports that 49% of PMOs are funded as a corporate overhead. Even the word ‘overhead’ doesn’t do the PMO any favours. I know PMOs aren’t exactly revenue generating but they should be a governance and cost control centre rather than a bottomless black hole of overheads. In fact, where a project is done for a client, and a PMO is part of the deal, 40% of them are funded by the project. So you could argue that the PMO is a revenue centre in those situations. However, the study does not make it clear whether those costs are passed to the client or not. I digress…

Corporate i.e. central funding is a good thing for PMOs. ESI believes that corporately-funded PMOs have a far greater opportunity to mature and to provide a wider range of benefits and services both to projects and the business as a whole.

Funding increases on the way

Enterprise PMOs are optimistic. The report concludes that around 30% of enterprise PMOs thought they would be seeing increased funding in the next financial year, so they must think they are doing a good enough job, growing enough and gaining enough recognition to be worth the extra investment. The ESI pundits report that enterprise PMOs typically have a wider influence and higher visibility than those PMOs set up to support an individual project or programme.

PMOs that are supporting individual initiatives are less optimistic about their future and their funding. This is hardly surprising: if your department has been set up to support a project and then that project finishes, your future is uncertain. You can foresee the end of the project from Day 1 so it is no shock that project level PMOs are a bit more reticent about their future.

The challenge of resource management

Another interesting statistic from the ESI study is that resource management is perceived to be the thing that the PMO is worst at by the people who actually do the job.

About half of respondents reported that their PMO has been ‘very ineffective’, ‘ineffective’ or ‘neither effective nor ineffective’ at resource management across projects and programmes.

This is a shame (and a surprise). I thought one of the main benefits of a PMO was to handle resource management and make sure that the right people were working on the right projects at the right time. They certainly have the tools and the remit to do that, if they want. Resource management is tough because it’s probably the part of project planning that deals with the vagaries of your people more than any other. There are just so many variables and things that might change. Keeping track of who is doing what when is more than a full-time job and relies heavily on the support and input from the team members themselves. Plus more and more of what project managers do is knowledge work which makes it very difficult to estimate. This is going to continue to be a challenge for project managers and PMOs.

Another resourcing point flagged by the study is the lack of access to team members trained in Agile working practices. More and more teams are adopting Agile but the training and change management aspects of embedding this in the organisation seem to be lagging behind.

And the challenge of recognition

The survey invited participants to say what other people thought the PMO struggled with as well as giving their own assessment. Inability to effectively manage resources was not something that made the top list of reasons why people challenged the PMO.

The main reason for ‘challenging’ (for which I would read ‘complaining about’) the PMO was about the value that it added to the organisation. In other words, people saying that it didn’t add any value to the business. That’s not really a surprise. Executives have struggled to see the value of the PMO for some time and it’s only when you have a programme of quick wins and a high profile about the work that you do that the value of a PMO is clear. And even then you won’t always win over the detractors. There will always be someone who says project managers should just get on with it.

PMOs provide a valuable role within a company and the regular ESI studies show the changing landscape of the global PMO. It will be interesting to see if we are still hearing the same complaints and complements about PMOs in a few years.

Posted on: August 13, 2015 09:34 AM | Permalink | Comments (4)

6 Tools for Project Cost Control [Video]

Categories: cost management, video

In this video I discuss the 6 tools and techniques related to project cost control.

Posted on: August 03, 2015 06:33 AM | Permalink | Comments (0)

5 Barriers to Effective Benefits Realisation Management

Categories: benefits

I’ve written before about Carlos Serra’s great presentation at PMI EMEA this year. In this final article about my thoughts around what he discussed, I’d like to highlight the barriers he flagged that prevent organisations from effectively carrying out benefits realisation management.

1. Low levels of competence

First up, one of the major barriers to effectively measuring and achieving benefits is lack of skill. Project managers that don’t know how to do this won’t do it. Simple.

Qualifications and credentials can help, but I think you would also benefit from coaching or a PMO manager who could guide you through the processes, especially the first time you do it. It starts with a robust business case that explains what the benefits are and then carries on to go through processes to identify how they are going to be measured and then actually measuring them. It’s quite an involved process so without prior experience or a lot of support it’s no wonder that people struggle.

I’m not sure of any qualifications that particularly address the detailed processes of benefits realisation management, but I’m sure there are some.

2. Out-of-date culture

A culture that ranks projects on their project management performance (i.e. did we hit the budget and deadline?) instead of their overall contribution to business strategy is one that doesn’t value benefits management. Ideally, the business culture should evaluate projects on their outcomes, not their output, but that requires a change of mindset and a longer term vision – or an awareness, at least, of the longer term.

I feel it is hard to change culture, especially at the top, but at least if you are aware that success is being measured in ways that don’t tangibly relate to benefits then you can work accordingly.

3. Lack of integration

Integration across all areas of the business helps: no one gets much done in an organisation that is riddled with silos. For example, in the area of benefits management you’d want to be able to link the processes of:

  • Portfolio management
  • Governance
  • Operations, and
  • Change management

with benefits so that you can track them through the whole project life cycle and the whole business from conception to delivery and beyond.

Integration at this level requires a degree of maturity that I don’t see very often. If you don’t feel that you have the business integration across the whole piece that would successfully lead to good benefits realisation, then I would recommend you start with what you can influence and see what difference that makes.

4. Poor processes

Poor processes are a barrier to getting most things done and benefits management is no exception. When there is a gap in the process for managing benefits then you’ll find things fall down through the holes.

Carlos pointed out in his presentation that one of the common areas for poor processes is in businesses that provide products and services to external customers. I can see why it is harder perhaps to track benefits in companies like that, but if you want to make sure that your project management division is achieving company-wide benefits, it should be an end-to-end process, even if the end is external.

Setting up robust processes must take time: I imagine a fair amount of time as it requires a deep level of organisation maturity, at least in that area if not in all areas of managing projects and project selection.

5. Lack of leadership

This one comes up time and time again, doesn’t it? If benefits management is not taken seriously at the highest levels in the organisation, then the lowly project manager (or even quite a senior project manager) doesn’t have a chance at being able to adopt good practices on his or her projects.

Benefits realisation needs to be led from the top, with a focus on a suitable culture, mature processes and a corporate overview that stresses that projects are done because of the outcomes that the business receives.

I really enjoyed learning more about benefits from Carlos. I hope you did too!

And find Carlos’s blog online here:

Posted on: July 22, 2015 09:35 AM | Permalink | Comments (6)

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