Project Management Information Systems’ Fatal Quality Flaw

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Modelling Business Decisions and their Consequences

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The primary information systems that allow PMs to make, well, informed decisions are predicated on two methodologies: Earned Value for cost and Critical Path for schedule (anyone expecting me to include the risk management guys in this list hasn’t been reading this blog for very long). While many pieces of insight flow from these systems when they are operating properly (or even a little improperly – these systems have amazing self-correcting capabilities), their primary outputs deal with the ability to accurately forecast when your project will finish up, and how much it will cost when it does. Because of these capabilities, those PMs who eschew EVM or CPM rarely stay within the ranks of management for very long, being easily out-performed by their better-informed competitors.

However, like any other Management Information System (MIS), Critical Path and Earned Value are susceptible to what is colloquially known as the garbage-in, garbage-out phenomena. As my regular readers know, I maintain that all valid MISs have the same basic architecture, comprised of the following three steps:

  1. Data is gathered based on a certain discipline, e.g., accountants need a handle on all expenditures and incomes to make a general ledger work.
  2. The data is processed into information, based on some methodology. For (again) accountants, this involves properly identifying what place the transaction has in the ledger, and entering it as either a debit or a credit, and, at a set time, compute the totals of the entries and compare ledgers.
  3. The information is then delivered to decision-makers in a way that they can readily understand it. If a manager doesn’t know the difference between a balance sheet and a profit-and-loss statement, being fed information from the finest accounting system in the world loses much of its utility.

Based on this basic, three-step MIS architecture, any information system that messes up Step 1 is going to be vulnerable to the information delivered in Step 3 being inaccurate and, therefore, not actionable.

So, is there an aspect of PM that can have an influence on the quality of the data being collected for Earned Value or Critical Path analysis? Sadly, yes, and this aspect is captured in the old, cynical observation “All projects proceed on-time to the 95% complete point, and then stay at 95% complete forever.”

The percent complete parameter is central to both EVM and CPM. It’s how they produce all of their usable information. In the original Cost/Schedule Control System Criterion there were seven approved methods for collecting the percent complete figure:

  • Direct Units is the most objective. If your project is to make 100 widgets, and you need to know what your percent complete is, just go and count the completed widgets. This applies to square feet of concrete poured, or linear feet of pipes installed, or any other scope that can be directly measured.
  • Apportioned Units has to do with a proportional relationship with other, direct units. If each of your widgets needs two gonculators to make a complete unit, then measure the gonculator task on a two-to-one basis with the widgets.
  • For very short-term tasks, the 0 – 100 method is often used. You’re either completely done with the task, or you can’t claim any progress against it.
  • For tasks that should finish within two reporting cycles, the 50-50 method can be useful. You can claim either 50% complete, or 100% complete. No other percent complete figures may be used.
  • Weighted Milestones are a bit more subjective, but still highly useful. This is where the PM decides the percentage weight of interim milestones within the task, such as, in performing an analysis, the initial investigation is worth 15%, first draft of the report equals 40%, second draft is 65%, submission of the report to the customer is 85%, and customer approval is 100%.
  • Level-of-Effort is kind of cheating at the percent complete game. The amount claimed as having been accomplished is set equal to the cumulative amount of the time-phased budget. This technique is set aside for those activities that don’t really have tangible output, like (ironically) the project management task.
  • Okay, here’s the fatal percent complete technique, the Milestone Estimate. This is where you contact the Control Account Manager (CAM), and request an estimate of the percent complete as of the end of the reporting period. This is also known as the “liars’ method.”

If one of your CAMs is manifesting the behavior of passing along a percent complete that is known to be overstating progress in order to avoid the scrutiny that would otherwise come from honestly reporting a negative variance, then neither your EVM nor CPM will deliver accurate information about the impacted Control Accounts.

Fortunately, there are two effective fixes (and one hack) for this fatal MIS quality issue. First, minimize the number of Control Accounts or Work Packages that use the Milestone Estimate method. Level-of-Effort is routinely avoided, but even it doesn’t present the system-blasting capabilities of a mis-used ME technique. Second, only allow highly-trusted CAMs to be in charge of tasks being measured with the ME technique. And when I say “highly-trusted,” I do not mean “well-regarded.” I mean, if the CAM in question has ever indulged in that whole “projects proceed on schedule to 95%, and stay at 95% forever” business, they are removed from the trusted ranks forever. The hack I referred to is this: never allow any task to claim over 85% complete until it is completely done. I know, I know, this will introduce a few artificial negative cost and schedule variances in to some long-lived tasks.

But it will also give you, the PM, a usable warning when one of your Cost Account Managers have been gaming the Milestone Estimate method, and exploiting Project Management Information Systems’ fatal flaw.

 

Posted on: May 20, 2019 10:52 PM | Permalink

Comments (3)

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Good discussion, thanks for sharing

Great post Michael.

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