It’s January: the time that we reflect on past achievements and future goals. So let’s take a moment to look back at how you did at work with your approaches to project cost management.
I know, I know… you followed your team’s methodology to the letter and did All The Things. But really – did you? I know that for me, with all the deadlines to hit and meetings, reports to prep and executives with unrealistic expectations… I didn’t do everything as well as I would have liked.
Let’s be a little bit honest here. Below, I’ve listed 10 things that you should be able to say that you did during 2018 that relate to how you should have handled your project finances. How many of these can you confidently say you did to the best of your ability?
1.I managed my project budget
It might seem odd to include this, but I still hear from project managers on an alarmingly regular basis, who say they don’t have any oversight or influence into the project budget. The financials are handled by other people. They only have to track and manage the project tasks.
This is wrong. So wrong, on so many levels. This attitude by management that implies project managers are not “good enough” to manage financial information undermines what we should be doing with the profession.
You should have access to the financial information relating to your project and you should be the person handling project finances. If you don’t do it personally, that could be because someone else in the project team does it, for example, if you are a project administrator and the project manager does it. Or you are the project manager and you have a project financial admin person on secondment from Finance who handles the tracking for you.
It should be someone on the immediate project team who you can talk to and who will tell you the truth about the numbers.
2.I set a project budget baseline
Did you set a baseline for project costs? A baseline is a snapshot in time that shows you the total of your project financials at a certain point.
It’s useful because you can use it to check how close you are to your original plans for spending.
3.I agreed a contingency amount with my sponsor
If you started a new project at some point in 2018, you should have had a conversation about contingency.
This is added to your budget (it’s part of your cost baseline). It’s a little cushion for emergencies, the amount of which you can make up based on your best guess or a standard % measure, or you can work it out more scientifically by looking at risks and calculating amount required to adequately address them.
Read more about the difference between management reserves and contingency reserves.
4.I tracked time
Project management time spent is an overhead for your project. You can work out the amount of time spent doing the managing if you track your time (as well as your team members). It’s tempting to log everything to a bucket task called ‘project management’ and book yourself at 100%. But that wouldn’t be accurate.
Try to track your own time a bit more realistically, splitting it down by work package, project stage, type of activity or something else.
It’s helpful to know how much effort it took to get a project off the ground, especially when you come to review benefits later. You can also include this information in the business case for future projects. It can help you better estimate the amount of management time required.
5.I celebrated success with my team
Hopefully you had something you could celebrate in 2018. And celebrating can be done on the cheap (read more about how to motivate your team with spending anything). But it’s nice to be able to reward your team with something that does cost money, however small.
Perhaps you took them out to lunch and the project paid. Or there was a launch event or something. Putting a small amount of money aside for celebrations is definitely a good thing.
6. I estimated accurately
Did you follow the estimating lifecycle?
While I’ve said in the title here: “I estimated…” I don’t actually mean you personally. I mean that you involved the right subject matter experts to get decent estimates. I mean that you used solid, robust estimating techniques to make good choices about how much your tasks were going to cost.
I hope you got support from your colleagues and created a budget built on estimates you could rely on.
7. I applied good governance
Governance for project budgets means you got approval to make changes, you understood and sought approval for spending management reserves and contingency funds as appropriate and you generally had good housekeeping for your financial records. Any changes that were made would most likely have downstream implications for other project documents, so hopefully you kept those up to date too.
8. I included financial data in project reports
Good governance can also cover proper reporting to your project board or steering committee.
I frequently talk to project managers who don’t put financial information into their project reports. I get it – it’s time consuming to update your financials (at least for me; we are between project management tools and have reverted to spreadsheets for budget management for now). But really, what exec isn’t interested in how much the project has spent to date and is forecasting to spend by completion?
Project financial information really should be in your monthly reports.
9. I worked with suppliers in a positive way
Hopefully, 2018 was not full of supplier disputes for you. Perhaps you formally closed some contracts. Perhaps you worked with your procurement teams to bring on board new suppliers. Perhaps there was a supplier selection exercise that you facilitated on behalf of your project customer.
There are lots of ways to work with suppliers – with any luck you built some positive working relationships that will carry you forward into 2019.
10. I had a risk budget and managed it
Risk budgets are a particular challenge for me. I don’t often have the luxury of time to properly work out what risk management actions should be taken and allocate the funding – at least not before we dive straight into the delivery.
However, if you can, calculating the risk budget is definitely worthwhile.
Can you say you hit all the points? And are you going to hit them again during 2019?
If some of these things weren’t on your personal achievements list, then that could be because they aren’t activities relevant to the role you are in, and that’s fine. However, I’d argue that most project managers should be able to say they did all of these. What else would you add? Let me know in the comments below!
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I'm not the best at making resolutions for the new year. Last year, for example, I vouched to spend more time on self-care and say no to too much work. That didn't work out so well.
Project managers sometimes ask me what I think they should be doing better or differently. We all seem to have the common goal of wanting to improve our skills and do better at our jobs. It's part of the challenge and the fun of project management - continuous improvement.
So this year I've put together a list of three simple things that you can easily do to improve your approach to project cost management. These resolutions will help you stay on top of your project budget and have more confidence dealing with the financial aspects of work.
They are easy to do. You just have to commit to do them.
Here they are:
I don't know about you, but my time tracking is still quite spotty. I have had two main projects this year. I work out my hours on a monthly basis, using the average length of a working day and then broadly how many days/half days I spent on each project, looking at the meetings I had.
This is not scientific at all.
Luckily, we are an internal team and don't bill our colleagues or clients for our time, so in the grand scheme of things it doesn't much matter. But if you work in an agency setting, time tracking becomes essential. Do it properly and encourage your team to do the same.
Monthly Budget Reviews
If you don't do these already, you should. Right now I'm reviewing the budget almost daily to make sure we get everything accounted for before year end. The busy times for you will depend on your company's year end and how you account for multi-year projects.
Check through the budget every month. It will make your reporting better too.
I don't really do this. I trust my colleagues to tell me the truth. I have no reason not to believe them when they tell me a task will take 72 days. But next year, I'm going to try to challenge appropriately. The question I'm going to use is: "What would it take to do it faster?"
That's not undermining their expertise. In fact, it's drawing it on even more. I'm asking for their expert input into how we could get the task done more quickly. I think this way of challenging could help us all get more delivered but with less conflict.
What are you going to try to do differently in 2019 to help your projects manage cost better? Or more generally? Do you set professional resolutions at all? Let me know in the comments!
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Data protection has been a hot topic this year because of GDPR coming into force in the EU earlier in 2018. Other countries are following – keeping customer, supplier and staff data confidential is so important. Data breaches have massive implications for projects and organisations.
As you know, much of this regular blog is all about budgeting and project financials, so I have come up with some ways to financially incentivise you to take data protection seriously on your projects – if you weren’t already.
Here are 5 ways that data protection can help you reduce the overall cost of your project.
1. Avoid Fines
Get your project requirements right and you are less likely to implement something that puts you at risk of regulatory fines.
Regulations vary from country to country but many jurisdictions have strict penalties and the potential for fines for data breaches. Thinking about data protection can protect your project from being the cause of a data breach and opening up the organisation to fines.
2. Preserve Your Reputation
Do you really want your project to be the reason the company makes the front page of the financial news? Data loss and breaches can cause significant reputational damage to companies.
Putting data protection at the heart of what you deliver on your project also has a positive effect. Consumers are more interested in data protection now than ever before (at least, that’s how it seems to me). So you may gain market share and more acceptance for your project because you’ve taken data concerns seriously.
3. Avoid Litigation
It isn’t just regulatory fines and regulatory bodies that may take action against your company. Members of the public (including staff) can also bring claims against your company due to data loss. After all, if your personal details were made public in a way that caused you loss or damaged your reputation, wouldn’t you want some justice for the situation?
If individuals are not interested in financial payouts for themselves, they may want to bring what they see as large corporations who haven’t acted fairly into the spotlight. The intention may be to damage the reputation of your firm through a court case, or simply to make sure that companies like yours take data protection seriously. A claim could be motivated by someone not wanting others to suffer the indiscretions that they themselves have been subject to.
4. Shine a Light on Problems
Experienced project managers know that fixing problems early in a project is the way to make changes cheaply. It’s more expensive to change a product the further along the project timeline it is. The more work that’s been done, the more needs to be undone, changed and done again.
Looking at data protection and privacy early on in the project helps you shine a light on things that might be an issue. For example, you can spot where, say, an IT project gathers information that might be intrusive to privacy, so you can rethink the data collected by the software. Or you could incorporate more security protocols to boost customer confidence in your software. Even small things, like training new staff recruited to work in your new shop, can be planned for and managed easier if the requirements are identified at the beginning of a project.
5. Improve Staff Morale and Loyalty
Data protection isn’t the most exciting of subjects, but staff see training as an investment in their careers. If you build data protection training into the way your project is deployed, or for your team members working on the project deliverables, you can influence their intention to stay with the company. Training and investing in people can improve staff morale.
In reality, I don’t think anyone is going to declare undying loyalty to your business just because you offered them data protection training as part of your project, but it contributes to the overall feeling that staff have about the business. Especially about the organisation’s commitment to staff development.
However, it’s also a way to improve staff retention. If you can give team members skills that they can use going forward, they are more likely to be useful to the business. Research by PwC shows that 74% of people are ready to learn new skills or completely retrain in order to remain employable – and I’m sure that data protection and data privacy are topics that are definitely going to be needed in the future.
So how do you build data protection into your project plan?
Incorporating Data Protection into Project Plans
Data protection considerations can be built into your project plans early. Make data protection and privacy implications part of the non-functional requirements for the project.
Use a Data Protection Impact Assessment (DPIA) document template to help you identify potential pitfalls in the project.
There’s more information about what needs to go in a DPIA and what it is for on the ICO website, along with a sample DPIA template (scroll down). The ICO is the UK data regulator. You may find that your own country’s data regulator/information commissioner has a template they would prefer you to use, or that is written in your language.
The point of a DPIA is to bring to the front of people’s minds the fact that personal data is a big part of your project. It helps you ask the right questions about the project and what it is going to deliver. Then you can make sure you are thinking about the right things for your requirements such as database security, minimising the amount of data collected, access rights and destruction policies and more.
Not sure what topics you should be thinking about? Here are 10 data protection considerations for your project to get you started off in the right direction.
Overall, data protection can be a costly issue for businesses, so it really does pay to get your privacy requirements set up correctly from the start. If you do this, you can avoid budget overruns and project delays because you’ll be getting data protection right first time.
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I know this is a topic I have returned to several times, but I feel really strongly that project budgeting shouldn’t be hard, and we should all learn from past experiences. In the infographic below, I share three really common budgeting mistakes that I see happen time and time again, especially with project manager who are managing project budgets for the first time.
I’m sure you can think of other errors that newbie budgeters might face. Why not leave a comment below and share some of your tips about what to look out for when creating a project budget for the first time?
For more on the tax issue, take a look at this article, which discusses common budgeting mistakes and especially the tax thing, in a bit more details.
Budget “overs” are a way of filling the gaps in your budgeting process and acting as a safety net for when things go wrong, right?
Management reserves and contingency reserves are two very specific types of “extra” money in your project budget. They both have distinct roles to play in helping the business achieve the deliverables in line with the forecasted expenditure.
In this infographic I summarise the differences between these two different types of funding. Personally, I think contingency reserves are the more useful as they are tied to a specific event so they help improve risk management as well. What do you think?
You can read more about some of the ideas on this infographic in this article.