The Program Managers’ Lie Detector

 

Both the main strength and biggest weakness of project management information systems has to do with the assessment of the activities’/tasks’/projects’ percent complete. This figure is central to both the Critical Path and Earned Value methodologies, methodologies that enable management to have a remarkably clear and accurate view of how long any particular project will last, and how much it will cost at completion.

Savvy project managers know this. They also know that it’s no fun to show up to the program manager’s project review meeting with duration and cost calculations that indicate that their project is looking at coming in over-budget and late. So, what’s the easiest way out of having to offer up potentially embarrassing admissions of incompetence, poor performance, or just plain bad luck? Inflate the percent complete figures you give your Project Controllers, of course!

This course of action, as dishonest as it is, has several appeals. Besides the aforementioned avoidance of explaining your mistakes, you also delay any comeuppance you would otherwise receive for poor performance – the proverbial kicking of the can down the road. Also, when you do finally have to account for the problems that wrecked your project, you can always deflect some of the blame towards the very project management information systems you are attempting to thwart. I mean, c’mon, the project’s baselines were approved! Representatives from the project team attending every program management meeting! If this project management stuff was all that, how is it that it missed these problems for such a long time?

Of course, this tactic is nothing new, hence the old saw that all projects proceed on-time and on-budget until they hit the 90% point, and then stay at the 90% point forever. And that’s the real frustration of the whole project review cycle: inevitably, had the problems that ruined the project been known about early on, they could have been addressed and probably corrected before they got so big as to endanger or ruin the whole shebang.

But, human nature being what it is, the use of the tactic of overclaiming progress will probably be with us forever.

Or will it?

Consider the traditional formula for calculating at-completion costs, that of dividing the total budget by the Cost Performance Index. This can be algebraically solved to dividing cumulative actual costs by the percent complete. The reason that this is the go-to formula for calculating at-completion costs is that it’s both simple and amazingly accurate – to within 10% on activities past the 20% complete point. The Cost Performance Index tends to be rather stable, rarely varying more than 10% -- which is why its use in calculating at-completion costs is so reliable.

Enter the CPI’s mirror image, the To Complete Performance Index. It is calculated

TCPI = Work Remaining / Budget Remaining

Or

TCPI = (BAC – EVcum) / (EAC – Actuals)

…where BAC is the Budget at Completion, EVcum is the cumulative Earned Value amount, the EAC is the offered Estimate at Completion, and Actuals are the actual costs. Now, let’s say a program manager is presented by one of her project managers with the following:

·         $1M in total budget (BAC)

·         At this point in the project, the project was budgeted to have spent $550K

·         $500K claimed as earned (EV)

·         $600K in total actual costs (AC), according to the General Ledger. And, the kicker …

·         He claims he will complete on-time, on-budget.

Before breezily accepting these claims, let’s do a little lie-detector calculating, shall we? The proffered estimate at completion (EAC) is $1M, right? However, if we calculate this EAC, we get … $1.2M! This projects cumulative CPI is sitting at a lowly 0.83. In order to achieve the stated on-budget delivery, that performance would have to jump all the way to 1.25, an unbelievable 41% improvement in performance!

This program manager would be perfectly justified in channeling her inner Ricky Ricardo, when telling this PM “You have some ‘splainin to do.”