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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Developing a business case for online collaboration tools

Categories: books, business case

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:

  • The difficulties of measuring intangible results like ‘better collaboration’
  • The time it takes to baseline today’s results to compare future performance
  • It’s hard to define exactly what return on investment would look like
  • The lack of detailed time recording to see whether improvements have been made in productivity and speed of access to experts.

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.

The alternative to a financial business case

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:

  • Pros and cons for each option
  • Financial investment for each option
  • Timescales for implementing each option
  • Resource implications for each option
  • A recommendation, stating which option you want to go for.

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.

The second edition of Social Media for Project Managers by Elizabeth Harrin will be out next year.

Posted on: December 09, 2015 12:00 AM | Permalink | Comments (5)

How to Prioritise Projects When It’s Not About Money

Categories: business case

Prioritising projects is pretty easy when you can look at the business case and see which one is going to bring you the most return financially. Whether you’re looking at sales, profit, return on investment or some other cost benefit analysis the great thing about money is that it is tangible and numbers-led. So the comparisons are straightforward. Many execs would opt to work on the projects that bring in the most financial return with the least effort. Simple.

Why projects don’t use financial prioritisation

Organisations don’t use financial methods for prioritising for several reasons, including:

  • They don’t know how
  • There is no mechanism to measure costs or benefits
  • Budgets only include external costs, not resource time or internal costs
  • There’s no need to because projects are funded centrally so money “isn’t a problem”

In reality, projects don’t just deliver financial tangible returns. Some projects would struggle to put any money-related measures down on paper. They simply don’t compute that way.

In those situations it is a much harder job to compare projects and choose which ones to work on first. Prioritisation becomes more of a shouting match: the manager who shouts the loudest wins. You also risk priorities changing quickly because someone had lunch with someone else who is influential in deciding these things and suddenly your resources are pulled and given to another team.

Without clear prioritisation, it’s impossible to establish which project is the most important. Let’s look at ways that you can prioritise projects when it’s not about the money.

Other ways of prioritising

By the need to stay in work

The main category of project that I’ve worked on that does not have an easy monetary value is the ones that revolve around staying in business. Examples are:

  • Regulatory projects
  • Compliance projects
  • Legal projects
  • Projects to address a crisis
  • Projects to maintain the status quo e.g. moving from one software tool to another, maintaining infrastructure or networks etc
  • Projects to enhance the status quo slightly e.g. moving to a new version of software, upgrading telephony infrastructure

Projects that allow you to continue to operate should be considered high priority. However, they might not be urgent if you can put the work off a bit. So that’s a YES the project must be done but a NOT NECESSARILY NOW for the work schedule.

By the value added

If you can’t compute value in monetary terms, this categorisation of project becomes quite difficult to measure and therefore compare. Narrative is good: have the discussion and thrash it out but use objective questions to force ‘enthusiastic’ project sponsors to fully justify where the value will be added.

Typically you’ve got two choices:

  • Adding value to an existing asset/process/product e.g. new features into existing products, process improvements, staff satisfaction/engagement (as staff are an asset).
  • Creating new value e.g. launching a new product, introducing new working practices.

You can see that there is likely to be some overlap – is a new process adding value to existing team members or creating new value? – but I think you get the picture.

By easiness

Why not do the easy projects? They can fit in around the larger, more strategic pieces. To be able to prioritise the easy work and slot it in to the programme, you need to know how easy it is going to be. Subjectivity comes into play here as well, as you will have to take a relatively educated guess about what’s achievable for your business.

If you have done something similar before, you have clear goals, the skills are in-house and the risk profile is low, then that sounds straightforward enough for me.

These three prioritisation options gives you different ways to look at the portfolio of projects and align the work with strategic priorities. If it’s easy and adds value, do it. If it’s important to keep the business functioning, do it. If it looks really hard and you won’t get much value from it, ditch it. It’s not rocket science.

As with anything that is not based on numerical, statistical analysis, you have to be careful that people don’t game the system. Ideally you want to create a questionnaire that is completed by an objective party in consultation with the sponsor. Give each criteria a ranking and then calculate the overall total. Then you can put your projects in order and work on them as they reach the top.

Project prioritisation is something that you have to go back to regularly. The order you set for your team today won’t be the same in a few months as business priorities will have shifted. The NOT NECESSARILY NOW projects may be at the top of the list then.

I’d be interested to hear your thoughts when you have no way of using monetary criteria to prioritise projects. How do you do it?

Posted on: June 09, 2015 04:30 AM | Permalink | Comments (5)

3 Reasons Why Business Cases are Essential

Categories: business case, video

In this video I discuss the three reasons why you should write a business case for your project, even if you work in an organisation that doesn't normally pay much heed to that kind of paperwork.

Posted on: May 24, 2015 09:00 AM | Permalink | Comments (2)

How much do you cost your project?

Categories: business case

Have you ever sat in a meeting that has started late and wondered how much money it has cost the company to have all those subject matter experts sitting around doing nothing? If you haven’t, maybe you should. It would certainly encourage you to be more efficient in meetings!

Whether you do timesheets or not, or cross-charge your client or not, your time on a project has a financial cost. Let’s look at what that is made up of.

Direct costs

Recruitment costs related to hiring you in the first place: placing an ad, holding interviews, preparing materials

Direct costs are the tangible ones that related to your pay and benefits. They include:

  • Salary and ‘on’ costs such as national insurance and employers’ taxes
  • Benefits like pension contributions, healthcare, car allowance, childcare schemes, discounted gym memberships and so on
  • Cash benefits like a bonus
  • Your phone bill (assuming the device is funded by your employer and they don’t operate a Bring Your Own Device scheme).

All pretty clear so far.

Indirect costs

These are costs of turning up to work and are incurred by all employees. They are quite hard to work out and you might find some financial whizz in the business has done it but normally you wouldn’t know about these.

  • The cost of heating and lighting your workspace in the office
  • Tea, coffee, sugar, mugs (including breakages), spoons, the dishwasher, washing up liquid etc
  • Stationery like pens, printer paper, staples
  • Software licences for the applications you use
  • Hardware costs for your laptop, phone or tablet including keyboard, mouse, monitor, docking station, laptop bag, headset etc
  • Insurance both for you as an individual for example when you are travelling on company business and also for any expensive kit that you have.

Still with me?

Hidden costs

Then there are other costs that don’t appear on any balance sheet. These are the hidden costs of being an employee.

  • The cost of not being as productive or effective as you could or should (consciously like taking extra long tea breaks unconsciously or through other factors)
  • The cost of not tackling poor performance in your project team, such as failing to deal with conflicts that lead to low morale and lower performance
  • The cost of not being innovative. Who has time to factor in ‘innovation afternoons’ on a project? Lack of innovation (or the time to be innovative) can cost businesses a lot in terms of being first to market with a product or just generally working smarter
  • The cost of bureaucracy. Layers of bureaucracy on your project slow things down or add expensive admin loops.

How do you prove your worth?

OK, we can’t put a financial figure on the total of all of these but you can see that on any given day it could run to a substantial amount. On days where you work really hard and effectively from your home office (and therefore pay for your own heating, lighting and tea) and sort out a lingering personnel problem on the project team you would cost your company less than a day where all your meetings started late so there was a lot of sitting around in the office.

Regardless of the figure – and it really doesn’t matter what it is – the point is that your time on a project is worth something. How do you prove this to your manager?

No one is going to ask you at the end of the year whether you have contributed adequately to cover your ‘worth’. Your employment is not a profit and loss account. But it is a good idea to have some ideas prepared to make it clear to them that you are a valuable employee. That could be anything from taking part in external conferences to raise the company’s profile locally to gaining a credential to increase your confidence to delivering a project that generates millions of dollars of revenue.

I can’t tell you what the answer is but I do know that subconsciously employers do think about these things and do know who is a valuable employee and who is less of an asset to the team. They might not use pure financial terms to quantify your contribution, but they will be aware of what contribution you make and how that compares to others in the department.

Can you justify your contribution if asked?

I’d be interested to hear if you have ever worked out the cost of a slow-to-start meeting or if you have calculated your contribution in financial terms. Why not let us know what happened in the comments?

Posted on: August 26, 2014 11:41 AM | Permalink | Comments (0)

Project selection: 4 more soft benefits to consider

Categories: benefits, business case

Last time I looked at 4 soft benefits that go into project business cases and are a factor in project selection. They were:

  • Increased customer satisfaction
  • Improved brand awareness
  • Better staff morale
  • Improved processes.

Today I’ll look at another 4. You may be able to include these in your next project proposal alongside the financial measures and with any luck they will help get your project approved.

1. Increased user satisfaction

Customers are one thing, but it also pays to improve the experience for internal users. So if you are designing software for use in-house or for clients, improving their satisfaction with the product will be a significant project benefit.

Project selection should take this into account as (generally) happier users are more productive and are more likely to stick to the processes. If the products they are using are not easy to navigate, they will find ways around the processes in order to make their lives easier. This negates any benefits the software or process is designed to offer. In my experience, going outside the process means that data isn’t collected in a standard way so any measures are incorrect. Many user satisfaction improvements could be done to systems to improve data collection and make it less obtrusive for users – a better experience for them and a better standard of management information for others, so everyone benefits.

2. Improved corporate image

Improving brand awareness is one thing, but what if everyone thinks your brand doesn’t represent value for money? Or that it is not socially responsible? Some projects are designed to improve the image of your brand and while these won’t directly impact the bottom line they could result in more sales or a brand that is ‘worth’ more.

3. Increased safety

Safety measures at work normally cost money, so health and safety projects can find it difficult to justify the investment. But how do you put a price on the health and safety of workers? Projects that implement new measures or better processes that will help avoid accidents are essential in some cases.

And they do indirectly contribute financially: lower insurance premiums, fewer sick days so better staff productivity, better staff morale from knowing they are with a responsible employer and fewer court cases, one would hope. But putting a financial measure on this can be difficult: your finance department may have some models that will help, but otherwise it’s probably best to leave this as an intangible project benefit unless you can categorically link it to a financial figure.

4. Meeting regulation

As I mentioned in a footnote last time, sometimes projects are done for no financial benefit at all because change is required to meet new regulations. There isn’t much decision making involved in project selection when it comes to regulatory projects because you have to do them. You could make the link to financial benefits such as reduced risk of being fined by your industry watchdog, but in reality you are going to do the project anyway, so there isn’t any need to spend hours working out the financial figures – just get to work on the project!

Project selection processes differ from company to company depending on what your business considers important. For some it will be to make tactical changes, for others project choice will be limited by the resources available or by corporate strategy or by the technology available to support projects. All project selection should consider the chance that the project will be successful: there really is no point kicking off a piece of work that has very little chance to succeed as this is simply a waste of resources and time.

Selecting projects effectively, even if the business case is made up of ‘soft’ benefits, will ultimately benefit the firm financially as it means project teams will not be tied up working on initiatives that are wasteful, not a good fit for business strategy and that won’t contribute to the company. Pick your projects with care and use your project time wisely!

Posted on: April 21, 2014 06:48 AM | Permalink | Comments (0)

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