A Russian spy, Ivan Petroff, infiltrated the white House disguised as a rat exterminator and stole a top-secret document. Three people witnessed Ivan Petroff inside the White House. Whose description of the spy is most probable?
a) White House bartended Mick Mousy described the exterminator as a big guy in a black suite.
b) White House taxi driver Mohamed Toscanini described the exterminator as a big guy in a black suit and sunglasses.
c) White House secret service agent Bert Bigneck described the exterminator as a big guy in a black suit and sunglasses, who spoke with a Russian accent.
This is how Project Think: Why Good Managers Make Poor Project Choices begins. A series of questions designed to test your decision making and uncover biases. I’ll tell you what the right answer is at the end.
Project Think, by Lev Virine and Michael Trumper, is a thought-provoking book. They include lots of examples of failed projects and poor judgement on projects and unpick why that might have happened. They talk about three types of mental error that lead to mistakes on projects:
All of these result in a lack of analysis of the facts – basically jumping to conclusions and failure to see the real situation on a project.
Sometimes, the authors say, intuition is enough. But often, you need to take that out of the equation and go with analysis.
It’s a well-researched book that I found fascinating, but it’s a shame that there a number of typographical errors in it: a missing full stop here, a misspelling of an author’s name there. The editor could have done a better job at making sure those little points were sorted out, although I’m going through the same stages for my new book at the moment and I know that it’s not easy.
The book aims to take a different view of project risk by talking about the risks that we, as project managers, sponsors and team members, introduce into a project through poor judgment and lack of analysis. Are those on your risk register? Thought not.
So what do they recommend instead? The authors talk about a number of ways that you can try to reduce your personal biases and make better decisions. While ultimately their aim is to make you more aware that those biases are there, so you can more critically analyse your own thought processes when it comes to making decisions, they also offer a number of suggestions.
They talk about ‘choice engineering’ which means not mandating one process for everything. For example, on a small project you might choose to follow a particular path or use a particular template. By allowing people to apply their judgement (or use a set of criteria to identify the suitability of their project) you can help them use the right tools for the job.
They also talk about ‘adaptive management’. This is basically using iterative processes and continuous process improvement combined with a number of other ways of working such as:
Back To The Spy…
As for the Russian spy, the most probably description is (a). The authors point out that the more general the description, the more likely it is to be accurate. They also explain that the representativeness heuristic can lead to a number of mistakes in decision making, not least because it clouds your judgement. What this means is that people “make judgements about probabilities and risks based on the category that this object, person, or process represents.” In other words, you are programmed to believe the secret service agent, despite the fact that the chances of the suit, sunglasses and accent coming together at the same time is less probable than the other two descriptions.
The book is a challenge for open-mindedness and well worth a read. It will make you question how you come to conclusions on your project and the biases inherent in your decision making. While alone that won’t promise you better project results, it should go some way to making sure that your projects have a better chance of success because you are taking away the risk of poorly-formed decisions.
This is an extract from the draft of the second edition of Social Media for Project Managers by Elizabeth Harrin and published by PMI. Consider it a sneak preview for when the book comes out!
The normal approach is to define your strategy, research what you need to do in order to achieve that (both in terms of cultural and non-technical changes and software/infrastructure investment) and then prepare a business case to secure the investment. When the business case has been approved you then go into more detail and fully scope the projects or programs required to deliver on that investment.
However, a full financial business case doesn’t always stack up for collaboration tools for many reasons including:
In short, the intangibility and unpredictability of knowledge work makes it hard to quantify anything reliably. Project work by its nature is non-repetitive, and if you have deployed your collaboration tool at the beginning of a project you may not have sufficient experience with that team and on that project to estimate, for example, the length of time tasks are taking with any degree of accuracy. Without that baseline you cannot definitely say that your software has improved the delivery time for tasks. For that reason, many organisations choose not to measure efficiency in a quantitative manner. Instead, companies often rely on employee surveys that in turn rely on subjective responses around whether a tool has made it easier to work together. Make an educated guess based on anecdotal evidence and feedback from the project team.
To give another example, it is difficult to quantitatively measure the positive impact on enabling online communications. How much more useful are project workspaces than a phone call? Bloggers in the public online space often use the amount of comments and social shares received on a blog post as a measure of popularity, interest, engagement with their readers and so on. This is not a reliable measure in a workplace setting: a discussion post may have a couple of comments before you step in and facilitate a face-to-face meeting on the topic, or the commentators pick up the phone to each other to get to the bottom of the finer points. The amount of conversation going on is not necessarily a reflection on the quality of those conversations, so again this is a difficult thing to measure.
The inability to clearly define and measure what you want to achieve will make many project managers uncomfortable (and may force them to choose irrelevant or subjective measures for success). After all, the project charter should include enough detail about scope and acceptance criteria to ensure that the relevant people can sign off the project’s products as complete and fit for purpose. You wouldn’t embark on a project without knowing what ‘finished’ looks like, and knowing who would agree that the work has been completed to the required quality.
However, do you measure how well you wrote the Project Charter or how effective your quality reviews were? Probably not, outside a general feeling that it was a good, comprehensive document or that the meeting participants got what they needed from the review. Collaboration tools are a project support system much like email or conference calls – and would you measure the success of those on a monthly basis? Success criteria are useful, but they do not have to be statistically measurable. Consider the implementation of digital team tools as another option for your project management toolkit. You can measure it with the same judgment calls that you do for the other processes in your methodology.
Don’t struggle with a full financial business case unless you really need one to get your investment approved.
If a full financial business case won’t stack up, or your leadership doesn’t require one, then prepare a short options appraisal instead. Review the solutions available to you, using any identified in your strategy document and any others that have come about as part of your general research into delivering the strategy. An options appraisal includes:
Present this to your decision makers and start the discussion to secure the investment in your collaboration tool.
Alternatively, consider asking for approval at this point only for the analysis phase or a small pilot. This would give you a mandate to go ahead and research the market and how the tools might benefit your teams, while not asking for a financial commitment at this point.
I’m not the world’s greatest when it comes to numbers so when I started getting more involved with project financials I decided it would be a good idea to read up on the subject. I bought Project Management Accounting a few years ago now and it has become my go to book for understanding project budgets. It’s by Kevin R. Callahan, Gary S. Stetz and Lynne M. Brooks. My copy actually still looks pretty new, as I don’t get it out to read very often – it’s the kind of book that is useful at certain points in a project and then goes back on the shelf.
Here are my takeaways from it.
Financial understanding brings seniority and gravity
“Senior project managers have their roots in many different areas of expertise, but the great majority do not come of out finance or accounting,” write the authors. That’s true, and it means that for many of us there is a huge hole in our knowledge of how the mechanics work around paying for projects and accounting for the returns.
The authors think that once you’ve gained experience and proficiency in project management skills, you’ll benefit from learning more about the numbers. They write:
“After years of managing larger and more complex projects, senior project managers often aspire to making greater contributions to their organisations. One way to do this is by gaining expertise in fiancé and accounting, thereby enabling them to view the organisation from a different perspective and to make a greater contribution to it.”
I agree: I think it’s hard to really make a strategic difference, even on smaller projects, unless you understand the fundamentals of how cash moves around the business and how your company makes money. It’s one of the reasons that I’ve tailored this blog to be mainly about the financial topics relating to project management. If we want to – as an industry, as a profession – move the perception of project management to the next level then we have to be taken seriously and be seen to operate a senior levels. Seniority in many companies often goes hand in hand with the ability to handle budgets.
Get involved in the financial decisions
I particularly like the fact that it advocates for project managers to get involved in financial decisions. The authors write:
“[Early during the project’s conception], often project managers are not part of the decision-making process. In many cases, it is because the project manager is not believed to have the business experience necessary to make such decisions. However, using the project management and business tools [discussed in the book] a project manager can guide the decision process to avoid making costly mistakes. It will not always be easy for project managers to have input into important financial decisions, but without some knowledge of how finance and strategy work, they will have no input at all.”
I think this is a really important point, because the shift in project management is towards project managers taking on a greater responsibility for leadership in the early stages. It’s no longer just a delivery job (thankfully) and includes elements of business change and strategy. So you need to have the vocabulary and skills to take part in discussions at that level.
Boost your network
One of the things discussed in Chapter 6 is the role of the financial manager. Do you know who the financial manager is for your project? It’s not an accountant. The authors point out that the role of finance is to “develop benchmarks as a guide to managers”.
A financial manager is someone who can create a good balance sheet, the optimal one for the company at this point in time. That can involve advising on which projects to take on, which to stop and providing input into business cases. They also work on financial documentation such as budgets, and income and balance sheet statements.
Your project, especially if it is sizeable, will need someone in this financial management role as well as potentially another person to handle the invoices and make payments from the bank. Those latter functions are normally handled by the Accounts Payable team and you’ll have standard corporate processes for doing those. Advising you on your project takes a trusted financial ‘adviser’ in an internal role, so build your network and consult the company org charts so you know who to turn to.
I’ve only pulled out a few key points from this book and added my thoughts but I hope you can see that it’s a useful shelf reference for project managers looking to move into more senior positions or those generally wanting to understand more about how money moves around in the company. I’d recommend it.
Book referred to in this article: Project Management Accounting, Kevin R. Callahan, Gary S. Stetz and Lynne M. Brooks. Wiley, 2007. The image is of the 2nd edition. I am quoting from my copy, which is the first edition.
It’s easy (kind of) to plan the project financial provision and contracts when you’ve got lots of time and plenty of opportunity to research the market. But what about when you are up against it? That’s when you might rush into a decision and only find out afterwards that it’s not the right approach.
Stephen Wearne and Keith White-Hunt have reviewed 12 urgent and unplanned projects (from dealing with local flooding to the 9/11 pile removal project) in their book Managing the Urgent and Unexpected. As you can imagine, the cost implications for each were unique to the situation, but there are some lessons that we can take away from those major pieces of work. Here’s what I can summarise:
“In all the cases of employing contractors for construction work, the terms of the contract chosen were those already approved by the sponsors.”
In other words, even when a new contractor is required, go for contract terms that your management team is familiar with. This isn’t the time to be trying to ask for waivers to the rules or to get round procedures. If you want to be fast, make the decision easy.
“Contractor and consultant teams already employed for longer-term programmes were switched to the urgent and unexpected work under cost-plus payment terms.”
Make the most of the people you already have working for you. Divert them on to the priority projects and update your contracts accordingly. If you can, add the new work into an existing contract – several of the projects in the book did this under cost-reimbursable terms.
“In the 9/11 pile removal case the contracts were made orally, for later confirmation.”
When you’re working in a real emergency, you might not have the time to draw up legally binding paperwork. When you know that you need to get started, get started on the basis of a gentleman’s agreement. You need to have confidence in the supplier to do this, so if the situation itself doesn’t bind you together somehow, work with suppliers that have a similar outlook and values to you.
“Terms adapted from previous contracts for emergency repair of a city stadium were used.”
Reuse, reuse, reuse! Don’t start from scratch. Get your contracted work up and running more quickly by adapting documentation that you already have.
“Contractors previously shown trust when employed on normal projects were reported as responding particularly well to these unexpected demands.”
For example, they made their best staff available and supported the projects through all-hours working. The lesson here is that the more of a partnership approach you take, and the better the working relationships with the suppliers you use, the more they will help you step up when you need it. That applies outside of a crisis as well – good working relationships with all your project stakeholders will help you move projects forward in non-emergency times as well.
The overall message from the book is that when you are dealing with an emergency, you need to cut out the bureaucracy and get going. Actually, this is what you should be doing on all projects: simplification is a good thing where you can do it. In the case of an urgent project, it’s essential.
The book mentioned in this article is:
Wearne, S. and K. White-Hunt. (2014). Managing the Urgent and Unexpected. Farham: Gower.
Cesar Abeid has a new book out, called Project Management for You, and it’s a step by step guide to everything you need to get started with managing a project. You may feel that you have enough experience to not need a beginners guide to project management, and you may be right. Still, it doesn’t hurt to refresh ourselves on the basics every so often, and that’s never more true that on topics relating to project budgets. Because if you mess up your project’s finances it is very difficult to recover your credibility and the lost cash!
Here’s what Cesar has to say about project estimating for budgets.
Estimating a Work Package
Cesar breaks down estimating the cost of a work package into three areas: people, tools and materials.
People: “Estimate how many hours/days will be required by the person responsible for the work package, and calculate how much that will cost,” he writes. This, he says, is the best way to go if you are paying your team members for their time and they are billing you in hours or days. If you plan to pay them a flat rate for the task, then he points out you’ll need a quote to use as a estimate.
Tools: Think about the tools you need to complete the work package. “This determination will include actual tools, equipment, and software that you might have to purchase to enable your team to do the work,” he writes. Many of these you may already have but you might need additional tools in order to deliver this particular project.
Materials: If tools are what you need to do the project management, materials are what you need to do the work. Small projects, digital projects and other types of project may have very little here. “If you are building a deck or a garage, then materials might be the largest part of your estimate,” Cesar writes.
These three mini-estimates make up the components of the budget estimate for your work package. Add them up and that’s the total cost for the work package.
Estimating Your Project
“Once you have the estimate for each work package, add them up,” Cesar writes. “The resulting number will be the cost estimate for your project.”
This isn’t rocket science but you’d be surprised how often elements get left out. Check that you’ve included all your work packages in your overall estimate.
Then check your workings the other way. If it’s a budget item that you know needs to be spent but there is no work package that goes along side it, should you be creating a work package to cover that element? If not, how are you going to track and monitor that expenditure as the project goes along? Don’t make it easy to trip yourself up later.
Work with Ranges
I am a big fan of working with ranges because they help set expectations for project stakeholders and provide you with a bit of leeway. Cesar says the same. He advises estimating twice for each element. The first estimate is based on the best case scenario (say, $100) and the second on the worst case (say, $200). Together they give you a range of financial confidence (the task will cost between $100 and $200).
It can be difficult to convince your sponsor to understand ranges. There’s a good range (ha ha!) of comments on this article about how challenging it can be to talk to your project sponsors about why this way of thinking is beneficial when it comes to project finances. Sponsors like hard, precise numbers and with many projects that have an uncertain outcome that isn’t as easy as they’d like.
Plan with Confidence
Cesar concludes by saying that your estimating gives you the data you need to plan with confidence. If you’ve done the same for duration estimates as well you are in a good position to know how long your project will take and what you need to pay for it. With this information, you can make decisions about tasks and expenditure as well as the people you need to involve.
“If you can estimate your cost and time based on the requirements of your project, the constraints that are present, and the resources available to you, you can plan with confidence and make promises that you know you can deliver on.”
How do you plan with confidence? Let me know your tips for estimating and planning in the comments below.
Cesar Abeid’s book, Project Management for You, is available in print and ebook. Find out more on Cesar’s website.