The Money Files

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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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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

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)

Brushing Up On The Basics

Categories: research, risk

I’ve spent a lot of time going through the PwC Global PPM Survey recently and there are lots of things in there that project managers can take away. The most important message – and this won’t come as a surprise – is that “the PM community needs to brush up on the basics.”

They give some statistics to support that:

  • Almost 40% of project managers do not believe there is clear accountability within a programme to make decisions and enable delivery.
  • Almost a third of project managers do not have schedules that align both programmes and projects i.e. the programme level schedule does not integrate with the project schedules.
  • Risk and issue management is not being carried out effectively. Only 77% of issues are managed “in a timely manner” and only 72% of project managers report that risk management is carried out through the life of the programme.

That last statistic troubles me, because risk management is not a one-off activity. You can’t set up a risk log (on my other blog I have a free risk register template) and expect it to manage itself or expect the project’s environment to remain static to the point that no other risks manifest themselves during the life cycle. Risk management has to be a regular, ongoing activity.

Getting the project management basics right

The survey says:

“PMs can improve their performance in getting the basics right and help Executive Teams deliver programmes of change. Many of the improvements that can be made are basic PPM processes and should be part and parcel of every programme but are frequently not done well or are not done consistently.”

This is what I consider the basics.

First, set your objectives. Have a clear goal and a line of sight to that goal. Everything is easier when you have total clarity about what you are trying to achieve because every decision you make supports the journey to get there. (It also makes it easier to do point 3 below.)

Second, regularly measure progress. Apparently this is not always done in all programmes, although why you would invest in a programme of work and then not bother to check anyone is actually working on it is beyond me.

Third, have a process to manage changes. According to PwC’s maturity assessments, almost half of programmes don’t have established processes for managing change.

Fourth, build in time to reflect. You can’t do a good job when you and the team are stressed and under pressure. You need a moment to catch your breath, consider alternative solutions, work out what’s round the corner (be it positive or negative) and review lessons learned so you don’t make the same mistakes over and over again.

Fifth, manage your risks. Risks that aren’t managed cost you money. Risks that aren’t exploited miss you opportunities. Everyone needs a Plan B because you can never be too prepared, especially when you have a lot of time and money tied up in delivering transformational change.

All of these are basics, but they don’t need to be unwieldy or fully documented to be done well. The most important thing is talking about them. As the survey authors write:

“Whilst reviewing a risk register or ensuring a benefits tracker is up to date need to happen, what is most important is that the conversation around a particular risk is had with the right people to drive mitigating action.”

What other project management practices do you consider to be ‘the basics?’ Let me know in the comments below.

Posted on: June 24, 2015 03:54 AM | Permalink | Comments (8)

Career trends: the picture from 2014

Categories: research, salaries

Did you get a new job in 2014? Or are you hoping to get one next year? ESI have released a new report that looks at career trends over the last 12 months.

Starting salaries

As this in the inaugural report, ESI don’t have historical trend data on starting salaries. Even so, their assessment is interesting. In US Dollars, they report starting salaries as:

  • Graduate entry level: $38,957
  • Small project: $53,291
  • Moderate project: $64,768
  • Large, highly integrated project: $74,264

Note to self: put together justification for pay rise to present to my manager.

Getting the big money

The study found that if you want to be ‘proficient’ and earn the big bucks, you need to start off with 2 years on small projects, 5 years on medium sized projects and then 7 years on large, complex projects. That’s a career trajectory of 14 years! I hope that it doesn’t take the new project managers on my team that long to become a valuable, proficient project manager.

Note to self: plot out the career plans of the project managers in my team so they can see how they are advancing on to larger projects

Earn more with training

Just 5 days of training a year can make you a better project manager, and in turn, lead to a higher salary, the report says.

  • On small, low risk projects a week’s training can advance your career by 5 months
  • On moderate, medium risk projects, a week’s training can advance your career by 9 months
  • On large, highly integrated projects, a week’s training can advance your career by 13 months.

Targeted training can accelerate your ability to take on more complex and larger projects, jumping you ahead of your peers.

Note to self: find a course and get training booked for 2015.

Experienced PMs are in demand

Let’s say that you’ve done your time, you’ve advanced with training and you are now an experienced, proficient project manager. How hard is it to get a job?

Not very hard, according to the ESI study.

They report that it is difficult to find suitable, skilled project managers at all levels but it’s really, really hard when you want someone capable of managing a big, complex project.

  • 36% of respondents found it hard to find staff for small, low risk projects
  • 67% of respondents found it hard to find staff for moderate, medium risk projects
  • 88% of staff of respondents found it hard to find staff for large, highly integrated projects.

So there should be plenty of opportunities around for people at the experienced end of the scale, if you are able to take the time to seek them out.

Note to self:  update CV for all those great opportunities!

What are your career goals for the next 12 months? Share your thoughts in the comments below.

Posted on: December 12, 2014 06:43 AM | Permalink | Comments (0)

3 Types of Complexity

Categories: events, leadership, pmi, research

At PMI’s Synergy conference at the end of last year, Stephen Carver gave a well-received presentation which included some information about the different types of complexity, as perceived by the brains at Cranfield.

He talked about what success looks like on projects and said that the level of complexity faced is part of whether a project is deemed to be a success or not. The 3 types of complexity he identified are:

  • Structural
  • Emergent
  • Socio-political.

Let’s look at each of those in turn.

Structural complexity

This is the ‘easiest’ level of complexity and it involves the scale of the work on the project. A project is structurally complex when it has many stakeholders, workstreams or other elements. There is a lot for the project manager to manage and control, with many variables.

Emergent complexity

This is where the project is changing around you, for example increases to the price of steel in a construction project or stakeholders who were not identified at the outset suddenly needing to be included. It encompasses projects where there are a number of unforeseen issues or where the situation is unknowable, for example where there is a great deal of novelty perhaps in the technical set up or the way the commercials are being managed.

Socio-political complexity

This is where the project suffers from hidden agendas and lots of politics. There is little transparency and at the worst end of the scale maybe even sabotage. There are conflicting priorities and resistance. Cultural IQ becomes really important for the project manager along with being able to adequately manage the people involved and creating a shared understanding of objectives and the project’s vision in order to align agendas effectively.

Stephen said that most training courses cover dealing with structural complexity but in a survey of 246 project managers who were asked which of these 3 areas they found most challenging, socio-political complexity came out on top.

Which is hardly a surprise.

“Projects,” he said, “are deeply emotional things.” Whether the Millennium Dome, for example, was seen as a success or failure is down to your point of view and the passage of time: rebadged as the O2, it’s now a very successful arena and venue. The Sydney Opera House, Concord and Terminal 5 at Heathrow were other examples he gave of projects where the definition of success was difficult to pin down and would mean different things to different people.

“If you don’t do anything, you won’t make any mistakes,” he added. “We do a lot so we are bound to make mistakes.” Unfortunately, on complex projects these mistakes tend to be in the socio-political arena and they can be very hard to undo. Not setting up proper workstream reporting, for example, might give you a structural problem at the start of your project but it’s easy enough to address that sort of complexity and put it right. Dealing with damaged egos or senior stakeholders who each think the project is going to address their own pet issue is a far harder situation to deal with.

He didn’t give any pointers as far as I can remember about being able to deal with socio-political complexity, although I imagine that a 45 minute presentation about project success was never going to have much time to touch on what project managers can do differently (better) in order to address these challenges.

What tips do you have for managing projects with this type of complexity? Is it just good stakeholder management or are there other things that you can do to deal with it successfully? Share your thoughts in the comments below.

Posted on: January 08, 2014 12:44 PM | Permalink | Comments (2)

Are project forecasters “fools or liars”?

Categories: forecasting, research

Oxford University“The majority of forecasters are fools or liars,” says Professor Bent Flyvbjerg from the BT Centre for Major Programme Management, at the Sa?d Business School, University of Oxford, in a new paper on inaccurate estimates for major projects.

The paper, published in the International Journal of Project Management, sees Professor Flyvbjerg criticising the way that forecasts for projects are put together. He says they are inaccurate and provide poor material from which to make decisions about cost and benefits.

“Estimates are commonly poor predictors of the actual value and viability of projects, and cannot be trusted as the basis for informed decision-making,” he says. “These forecasts frequently misinform decision makers on projects instead of informing them. Some of the inaccuracy comes from genuine forecasting mistakes arising from over-optimism, but some estimates are deliberately misleading, designed to secure financial or political support for a project.”

You probably know of examples of where a project manager has padded estimates for one reason or another, by Prof. Flyvberg is pretty scathing about forecasting methods and the people who use them.

“Many forecasts are garbage and can be shown to be worse than garbage,” he is quoted as saying in a press release from the university. “These reports give the client, investors and others the impression that they are being informed about future demand, or the costs involved in a major project, when they are being misinformed. Instead of reducing risk, reports like this increase risk by systematically misleading decision-makers and investors about the real risks involved.”

What’s the answer?

Prof. Flyvbjerg says that the answer is for everyone to be a bit better at not putting up with this (I paraphrase). For example, he recommends that clients should ask for their money back when they receive reports which later prove to be significantly inaccurate and misleading. He even goes as far as saying that they could demand compensation (some contracts must have a clause for this in anyway). His most radical idea is that in some cases criminal action would be justified. “Merely firing the forecaster may be letting them off too easily,” he says. “Some forecasts are so grossly misrepresented and have such dire consequences that we need to consider suing them for the losses incurred as a result. In a few cases where forecasters foreseeably produce deceptive forecasts, criminal penalties may be warranted.”

Personally, I can’t see many project managers ending up in court because of poor scheduling, but as this has come from the Centre for Major Programme Management, Prof. Flyvbjerg is really talking about complex, mega projects.

When we say ‘everyone’, Prof. Flyvberg includes the professional bodies in that too. He calls on them to use their codes of ethics to penalise and possibly exclude members who produce unethical forecasts. “This needs to be debated openly within the relevant professional organisations,” he says. “Malpractice in project management should be taken as seriously as malpractice in other professions like medicine and law.” How many project managers genuinely produce unethical forecasts and how many are just incompetent? I think it would be hard to decide if someone was acting in good faith and to the best of their abilities or whether they were deliberately altering estimates for political gain.

A better way of forecasting

As you would hope from someone who is so outspoken about this, Prof. Flyvberg has all the answers. His answer is to turn to his own work and in this IJPM paper he sets out the case for quality control and due diligence to be applied to the evaluation of front-end forecasts. Unfortunately, I think his answer only works for massive projects and not for the type of forecasting and estimating most project managers do on their projects.

“Recent research has developed the concepts, tools and guidance on incentives that could help curb both delusional and deceptive forecasts,” he says. “Whether forecasters are unwittingly or deliberately under-estimating the costs, completion times, and risks of projects, and over-estimating their benefits, we need to have a systematic basis for evaluating their findings in order to make informed investment decisions. Given the high cost of major infrastructure projects, the irreversibility of decisions, and the limited availability of resources, this is clearly critical for both public sector and private sector projects. Significantly more accurate forecasts can be produced by looking at the evidence available from previous similar projects which have been already completed – what I call, taking an ‘outside view’. This seems so simple, but in practice it is transformative and leads to much more accurate forecasting.”

In other words, take large data sets or statistically relevant data for projects in your sector, apply due diligence, estimate from the basis of past experience and critically evaluate the forecasts. You’ve spotted it – the big downside to this estimating approach is that you need large, validated data sets to draw benchmark data from previous, relevant, projects. If your PMO has been up and running for years and has gathered all this, and you never do any projects which innovate or deliver something new in a way you haven’t done before, then you could make use of this technique.

If you don’t have all that data to hand, then this method of forecasting will not scale from mega projects and programmes to the humble projects that you and I work on. While using historical data is great and we should all look to the past to better predict the future, we would be wrong to expect this model to work for all projects.

Posted on: December 19, 2012 04:45 PM | Permalink | Comments (4)
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