Is your project budget red?
From the The Money Files Blog
by Elizabeth Harrin
A blog that looks at all aspects of project and program finances from budgets, estimating and accounting to getting a pay rise and managing contracts.
Written by Elizabeth Harrin from RebelsGuideToPM.com.
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Date
As part of your project status reporting you probably include metrics. You might even have a project dashboard that calculates the metrics from an enterprise PM tool and displays them for you. Project metrics are things like resources consumed and estimate to complete. Some metrics mean more to stakeholders than others. Personally, I am not a fan of percent complete for tasks, for example.
As least one of your project metrics should relate to your budget – assuming you have the responsibility for tracking how much the project is spending. There are a number of different ways to track the budget, for example:
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Earned value management metrics
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Variance to forecast
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Percent of total budget spent
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Budgeted estimate at completion
Again, project stakeholders will respond better to some measures than others. It depends who they are, what they want, what they need to do their jobs and what their previous experience is. A project sponsor with a finance background is likely to want a far greater degree of visibility of your budget than someone whose main focus is quality. Your job is to find out what they want and provide it.
It really doesn’t matter what the metric is that you use, provided it fulfils two criteria:
1. It must make sense to the people who are using it
2. It must have clear boundaries defined so that you all know what ‘red’ means.
There is no point in having Red, Amber, Green (RAG) or any other categorisation method (click here for a Gantthead discussion on how to categorise projects) if no one knows what the different categories mean.
Set thresholds. Define what the tolerance levels are for each metric and publish them. Then stick to them. Your budget RAG status could look like this:
Green: within +/-1% of budget
Amber: within +/- 5% of budget
Red: over +/-6% of budget
Choose figures that make sense to you: 1% of a £5m is not very much in the grand scheme of things so you could probably agree different tolerances with your project sponsor. As long as you are clear about what ‘Red’ means, everyone will be operating from the same information and your metrics will be meaningful.
How do you define Red?
Posted on: February 16, 2012 03:11 PM |
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