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In this instalment of my occasional series interviewing project management experts, I spoke to Jason Westland (pictured), CEO of ProjectManager.com to get his advice on preparing good project budgets.
Jason, it seems like a very basic question, but tell us why it’s important to have a good budget prepared for your project.
A clear budget makes it possible to manage your project – without it you can’t even start to get things done. As a result, working out how much the project will cost should be one of your first tasks.
So, talking to your sponsor is a must?
Yes. It’s important for project managers to be able to have professional conversations about money, as you can’t afford to be shy about asking questions about hard cash.
Project sponsors sometimes already have an idea of what the budget should be, but you should do your own sums as well, if only to give yourself confidence that the sponsor has a realistic view of how much they will be spending over the lifecycle of the project. That will help you manage their expectations.
The project manager and the sponsor, then, work together on the budget. Who else gets involved?
You can’t prepare a budget by yourself. Think about who has the answers to some of your more complicated questions about costs, like how much the consultancy is going to be. Get your subject matter experts involved.
You can use your work breakdown structure or task list and get your team together to try to cost each element. Essentially, you should involve whomever you need in order to get realistic estimates.
You talked about consultancy costs. What other costs should you consider in your budget?
Well, you’ve talked about this yourself: there are two types of costs:
- the cost of delivering the product or outcome – deliverable costs
- the cost of running the project – project management costs
Yes, I remember writing about those.
To summarise, deliverable costs are related to producing your final deliverable or product, like hardware, software, licences and so on. Project management costs relate to temporary fees incurred from working on the project itself, like having to hire a separate office space, or a digger to lay cables, or a painter to decorate your new office.
There’s another type of cost isn’t there? The cost of shutting things down.
Yes, people often forget to include decommissioning fees. As projects involve change, things are different when the change has happened. And normally, the old way of working is left behind. The danger is that if you don’t take out the old way of doing things, staff members will continue to use that and your new implementation will be wasted. You can’t achieve the benefits of the change if they still insist on working in the old ways!
One way round this is to budget for decommissioning what was there before. That way people have to use the new deliverables. This could involve things like decommissioning old software, closing down user accounts, deleting training material from the intranet and so on. As well as it being a professional and tidy way to end the project, it stops people from slipping back into doing things the old way.
Thanks, Jason.
Next time I ask Jason about contingency and budget management processes.
About my interviewee
Jason Westland is CEO of ProjectManager.com, a software firm, and author of The Project Management Life Cycle.
Posted on: August 01, 2013 04:06 PM |
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