Estimating take up far too much time and are, as my 3-year old says about everything right now, ‘a bit boring’. I have no idea where he picked that up from. Don’t judge me!
I digress. We need to do estimates. And if you are one of those strange people who LOVE doing estimates, then skip this article and go and read this one instead!
Take a deep breath, and think for a moment about why we bother to do estimates. In his book, Project Management for Humans, which is soon to be released, Brett Harned provides 4 reasons why estimates are important for people on the team.
1. Estimates help you cost the project
“Estimates are based on a level of effort and times,” Brett writes. “Typically, the cost of a project is based on the time spent on a project. Your estimate helps calculate a rough determination of that cost and sometimes whether or not the project is worth the investment.”
A giant estimate normally comes with a giant price tag, and that might mean you don’t go ahead with the project. Or you scale down the scope significantly so you still get some benefit and don’t have to spend half your annual budget on this one project.
Either way, knowing how long things are going to take gives you valuable information to make informed decisions about your project and whether or not it should go ahead in the current form.
2. Estimates help you staff the project
Estimates are created around specific tasks and the skills required to complete those tasks.
Your estimate therefore gives you clues about who you need to do the work. And in turn, that gives you a good idea about how long the work will take.
For example, a senior developer might take a week to complete a task, but your apprentice developer would take a month, and need someone else working alongside them to help check the work and support them during the coding. Knowing this you can then decide what’s more important: having the work done quickly or upskilling the apprentice. Or maybe you won’t have a choice, if the skilled developer is working on something else and isn’t available.
Either way, estimating the work and thinking of who is involved in doing it will give you invaluable information for your plan.
3. Estimates help you plan dependencies
If you know how long a task will take you can better plan for the impact it is going to have on other tasks or on other projects. The duration of a task can help you schedule the next set of tasks, or tell another project manager when they’ll be able to start work on their project (or task).
For example, if you are tying up your senior developer for 4 weeks, in a business that only has one developer with those skills, the next project to use that person will have to wait until they are free. That’s a dependency on that skilled person.
You have a number of options to deal with that dependency including changing the project priorities so the other project gets the resource before you if that project is ‘more important’, buying in external skilled resource if you want to do both at the same time, or even having someone else with less ability work on it so you can at least make a start. But you need to know that you have a problem with resourcing and dependencies before you can start to come up with solutions to address it.
Here’s an introduction to dependencies and constraints on projects. Even knowing that your project doesn’t have dependencies on any other work is a big help with your planning because it frees you up to get on with things safe in the knowledge that your team isn’t messing anything up for anyone else. (Of course, that might change if a new project is approved – so don’t take it for granted.)
4. Estimating creates agreement and buy in
“Working with a team can often be a challenge, particularly when no one is in agreement on the project,” Brett writes. “Working together to produce an estimate can be a great way to pull the team together to talk about staffing, responsibilities, process, and timing. And guess what, that all helps produce a solid estimate.”
I covered this in my book too, Shortcuts to Success: Project Management in the Real World. I highly recommend that you share all your budget information with your team, from the moment you start to work on estimates through to the budget spreadsheet and forecast rates.
Working together will help you gain collective responsibility for the dates and scope of the work. You can hold each other accountable and no one can turn around and say that they weren’t aware of the deadlines or their responsibilities. That’s huge, especially on projects with tight deadlines and remote teams.
So, estimates benefit you and your team in lots of ways, and they are a part of your project to just get on with, get done and then start using. They can feel like the start of the real detailed work, the prelude to the fun part of building, but they help set you up for success and a smooth delivery. What do you feel about estimates? Let us know in the comments below!
In this video I look at 3 common reasons for going over budget, and point out some quick things you can do to put them right.
In this video I talk about the 5 project costs you might have forgotten to account for in your budget.
For more details, this article has more about the costs you might have overlooked.
Project budgeting is one of the harder parts of managing projects, because the consequences of getting it wrong are significant. People tend to be more forgiving when it comes to delivering a little bit late or having to take shortcuts on the scope. But ask for more money or spend too much? That provokes strong reactions from project stakeholders!
I’ve made a short animated video about 3 of the more common budgeting mistakes that you might come across on your project: consider them things to watch out for.
Here are 5 common project budget problems and how to fix them. If you’ve got other suggestions for dealing with these situations, please let everyone know in the comments below!
1. Contract Expenditure is Overrunning
You’ll notice this hopefully before it causes a big overspend on your project. Your company has entered into an agreement with a supplier and now the bills are starting to rack up. This could happen if your agreement is on a time and materials basis, or a fixed price plus extra costs for changes to scope.
How to fix it: Find out why the costs are overrunning. Is it because your team is putting through too many change requests, which is hitting a contract clause that lets the supplier charge more? Or is something else at play? Whatever the cause, pin it down and work from there. Involve the supplier as well, so that they know that you can’t afford, or choose not to afford, to put up with those costs going forward. You may end up renegotiating the whole thing, but better to do that early than to put up with overspends for too long.
2. Resource Expenditure is Overrunning
When you have to pay for internal or external resources, the costs can soon mount up. It’s not difficult to find yourself with spiralling resource costs, even if they are just wooden dollars being moved between departments.
The most likely causes are poor estimating and too many change requests.
How to fix it: It’s often hard to drill down into the detail of where a resource is spending time, especially if you don’t have a timesheet application. If you don’t record time, then start doing that first! It will really help you improve your estimates over the longer term.
Short term, you need to sit down with your team and reforecast the whole project. If you then can’t afford to do all the work that you’ve planned out, you need a frank conversation with your project sponsor about what can be taken out of scope for this phase.
3. Managing Risks is Costing More
In fact, the common problem here is when you didn’t budget anything for project risk management. Then a risk pops up and you’d like to do something about it and can’t because there’s no money allocated for risk mitigation or to exploit a positive risk.
How to fix it: It’s too late to go back and ask for a risk budget now… or is it? You might find your sponsor open to that kind of conversation, and it certainly doesn’t hurt to ask.
If you don’t have additional money available then you have to adjust your activities accordingly. Perhaps your project board could accept a higher level of risk for that element, or they would be prepared to compromise on something else. Put together a proposal that explains the risks, the costs and the benefits along with some options so that they have choices.
4. You Can’t Access Management Reserves
Ah, the mythical management reserve. This hits project managers who have sponsors that are poor at following through on their promises. The sponsor says that there is some kind of ‘contingency’ or ‘management reserve’ that can be spent at their discretion if required, say, in the event of an unplanned project disaster.
Said disaster happens and suddenly they don’t have authority to access those funds, or another project has used them, or you need to write a business case to access them…
How to fix it: You will struggle to fix this one in advance but your best bet is to make sure that you have full confidence that any pot of money that is being held outside your official project budget does actually exist and is there for you. Of course, the best thing to do will be to manage the project so you don’t need to tap into additional reserves.
5. You Can’t Track Expenditure
This happens when other people are spending your project budget and not letting you know where it is going. The first you hear about resources being acquired or a deal being signed is when the invoice gets passed to you from Finance with a big question mark written on it.
When this happens you can’t accurately keep track of what is being spent, and whether it is being spent on the right things.
How to fix it: Sort out the process for spending money. Make it clear to the project team (even those people who are more senior than you) that purchase orders have to go through you for tracking, even if you don’t have the authority to actually sign them. Let the Finance team know as well so that they can be copying you in on requests and making sure that the process is adhered to. They have no interest in receiving invoices that can’t be paid or getting the company into debt with inappropriate suppliers so they will be on your side!