What are the steps for estimating?
Each business will have a slightly different approach to how to do project estimating, and your PMO will likely have a methodology that you are expected to use. For budget estimating, it maybe the corporate Finance department that sets out how estimates are supposed to be calculated.
However, back in the real world, I meet lots of project managers who don’t have the benefit of a fully-documented helpful process for how to do estimating, so in this article I’ll look at the 4 steps for working out your estimates to give you a headstart!
What is an estimate?
First, it’s worth us defining what an estimate is.
An estimate is a quantitative assessment of a likely outcome.
You will find far more detailed definitions of estimates elsewhere, I’m sure, but that does for me.
On projects you have to do quite a lot of estimating, for example:
- For task duration
- For task effort
- For expenditure
- For benefits.
Let’s look now at the 4 steps of project estimating. Again: if you have your own corporate methodology to follow, use that or you risk getting into trouble with the PMO! But in the absence of anything else, this 4-step approach is as good as any for getting the basics right.
Step 1: Plan to Estimate
The first thing to do is make a plan. As with so many project management techniques and processes, you need a clear idea of what you are supposed to be doing before you actually do it. This step is where you establish your estimating plan.
That sounds far grander than it really is. It isn’t a lot of work, and once you’ve estimated a couple of projects you’ll find you can do this step almost automatically, with very little effort.
- What techniques you are going to use to do the estimating (it’s also good to know why you are using those techniques so you can justify that you chose the best approach for the job)
- Who is going to contribute to putting the estimates together.
You’ll also need any other documentation about estimating approaches or corporate or PMO standards that you have to adhere to. This all provides input into how you are going to create your estimates and helps you come up with a solid plan for how to approach the task of estimating.
Step 2: Create the Estimate
This is where you create your estimate. Basically, you use the techniques that you identified in your planning step to come up with your estimates. Work with your team to think about the resources, budget and time that you need. Use the tools you identified, and the guidance from your company to create the estimates.
I’d suggest you don’t do this by yourself, how tempting it might be. Hopefully the techniques you identified in Step 1 will recognise that it’s better to work collaboratively for estimating. Different opinions make a difference and you’ll get a better quality estimate – hopefully you chose to use techniques that take advantage of this!
Step 3: Manage Estimating
Here we manage the estimates. You’ve input your estimates into your budget or schedule and you are using them on the project.
However, you want to make sure that they are maintained and managed as the project progresses. This means you could be revising them appropriately as the team do the work, making sure they still accurately reflect what you think is needed on the project.
The most common way to do this is to compare your estimates to your actual figures as you go, and then tweak the upcoming budget figures, schedule or resource allocation appropriately to take account of what you are learning about progress on the project so far.
Step 4: Improve Estimating
This is where you apply continuous improvement principles to the way you work out your estimates. You could argue that this is an optional step – it doesn’t help you manage your current process – but I don’t think it’s too much to ask that you do this on all projects, all of the time.
You’ve learned from your experiences on this project, so take those lessons and look at how you can improve estimating on your future projects.
Calibrate your models, tweak your techniques and do any other changes necessary as a result of what you have learned on this project. This may mean you have to feed information and your experiences back to the PMO or Finance team so that they can take your feedback into account and make the required changes (or not). Still, even if you aren’t in control of the templates and models you use, it is good practice to try to help your company improve its processes where you can.
Those are the 4 high level steps for creating an estimate. See? It wasn’t so bad. Personally I think the planning stage is the hardest, because it involves thinking instead of just diving in. The rest of the process is all about using the tools you decided on and then working with them throughout the life cycle of the project.