The Money Files

Today I wanted to share this infographic on the cost of unproductive meetings. I work virtually a lot of the time, but that doesn't generate half as many meetings as when I am physically in the office with my colleagues. Perhaps it's because when they see me they are keen to chat, or perhaps they forget I'm around to invite when I'm working out of the office.

When I attend meetings, and I'm sure you'll say the same, they often start with general chat or get derailed (obviously not the ones I'm chairing...!). When you add up the fact we spend around 7 days a month in meetings that's a lot of time wasted if you don't get the best out of your meetings. Have a look at the figures and I'll join you again at the bottom.

This infographic was put together by http://facilitationfirst.com/

I was surprised that only 73% of people confess to multi-tasking during meetings but we should also acknowledge that it isn't always a bad thing. I've been in a few meetings recently where someone asked a question and the group didn't have the data. A team manager Skype'd her colleague, got the response and shared the information with us so we could continue to debate that point. That's multi-tasking, but it's productive and useful and probably saved us from having a follow up meeting.

I'd also question that 50% of meetings are unnecessary. They might have the wrong people in the room, and if an exec says a meeting is unnecessary then they might simply mean that they personally didn't have to be there, not that the meeting shouldn't have happened at all.

We do need to make sure that project meetings involve the right group of people: senior enough to take ownership for decisions and move things forward but not so senior that it's too much detail for them and wastes their time (or lets them meddle in tasks that we'd rather they stayed out of).

So, what do you think about this data? Share your thoughts on meetings good and bad in the comments below. And is the answer better meeting management or just scrapping meetings altogether?

Olivier Lazar gave a presentation at the PMI Global Congress EMEA earlier this year and he talked briefly about how to construct your project budget. I wanted to share some of his ideas and some of my own here.

So, let’s look at the three components of a project budget.

1. The Budget at Completion (BAC)

This part of your overall project budget comes from the work breakdown structure and your estimating processes. (I’ve written a lot on this blog about estimating. Check out some of my videos on estimating terminology and processes here.)

2. Management Reserves

This is a pot of money put aside for use at management discretion. Typically you’ll get your sponsor to approve the spending from this allocation; it’s not a pot that you can dip into whenever you feel like it.

Olivier gave the example of a decision on a project that was made internally and that incurrs a cost that cannot be passed on to the client. On one of my recent projects – although an internal one, so we weren’t exactly billing the other department for our services – we did that. The change involved upgrading a system. There was no tangible benefit to the users of moving to a new infrastructure but it was part of the longer term IT roadmap. We couldn’t in good faith have passed this on, had it been an external client, as it wasn’t a change they requested or that we could ‘sell’ as having any user advantage. But it was still the right thing to do.

3. Risk Response Budget

The final section of your budget is made up of the money put aside to deal with risks if they happen. This allocation should cover the cost of putting your risk response plans into action. If a project risk has a response plan that is going to cost you £100k and a probability of 10% you would budget £10k in your risk response plan. Remember, the risk response plan is to deal with realised risks (i.e. the ones that become issues). You typically don’t put the whole amount for the risk response plan (in this case, £100k) in your budget because you are crossing your fingers that the risks won’t happen. Or at least, not all of them will happen, so you’ll have enough money to go round.

Any money is better than nothing, but the challenge here is that if this risk does actually happen it will still cost you £100k to respond to. You had better hope those other risks don’t materialise as you won’t have enough risk response funds to go around.

Those three elements make up the budget for your project. They don’t necessarily equal the price you would pitch your services at.

Create the selling price

Olivier expanded his point about budget construction to add a bit more about how you would calculate the selling price for the project, as an external contractor.

Add overheads

Overheads are things like heating, lighting, staff costs. They are the cost to you of doing the work and should include everything from mobile phone subscriptions to catered lunches.

Most companies I have had experience working with have had a fixed rate per employee that they add to budgets to give this figure. These are called ‘on costs’. They only relate to staff though (pension contributions, hiring costs etc). Make sure to add in any other overheads specific to this project that do not relate to people such as hiring meeting rooms.

Add margin

This is how much profit you expect to make on the project. If you are a business you aren’t doing it at cost. Otherwise you’d make no money on it at all and your shareholders won’t be happy. You’ll have to work out what is an acceptable margin to make on the project – 2%? 70%?

Adding these two additional lines gives you the price at which you would be willing to sell the project to the customer.

Olivier added these caveats:

• If you mis-estimate the tasks, the margin goes down.
• If you eat the margin then you may breakeven on the project – chalk it up as a lesson learned.
• If you eat all the margin and go into your overheads then the end result might be laying people off.

If you make people redundant and have no one to deliver your projects you’ll lose work and the ultimate situation is that you could go out of business.

That’s why estimating is important: without it you can’t keep your business profitable.

The same goes for internal project managers: you still need to know that your project is making the organisation something and adding value, not creating more cost for no benefit.

Read more about Olivier’s presentation in this article about using budgets to help manage project risk.

This article summarises four of the key terms that you'll come across when you start working with project estimates.

Bottom up estimating

This estimating term describes how you break down your project and estimate (as the name suggests) based on the smallest components.

Watch the video here: Bottom up estimating video

Parametric estimating

This term describes how you can use statistical and logical calculations to work out how long a project will take, based on what you know about the individual activities.

Watch the video here: Parametric estimating video

Analogous estimating

Analogous estimating relies on previous experience to calculate the estimate.

Watch the video here: Analogous estimating video

Three point estimating

Three point estimating is discussed in more detail in this article but the basic premise is that you use a formula to calculate your overall estimate. The formula is:

This calculation will leave you with a weighted estimate of the budget for the activity (although you could use it for scheduling time and work out your estimate in days). It will be weighted in favour of the most likely cost for that task, but it will also allow for the fact that things might go well – or not.

In this video I discuss some of the questions raised during my presentation at PMXPO this year.

For more on managing project budgets on the cheap, see this article on communicating on a budget.

At EVA20, London’s alternative project management conference which was held earlier this year, Sir Tim Laurence, Chair of the Major Projects Association, talked about the initiatives that are in place for improving major projects.

The MPA was set up 30 years ago to share experiences, knowledge and ideas about major projects – both things that were successful and ideas that had failed – with the objective of helping other project leaders to initiate and deliver better projects, avoiding the mistakes of the past.

Sir Tim talked about the four initiatives underway with the MPA at the moment.

A Procurement Routemap

The procurement routemap includes capability management and it’s aimed at setting up projects to succeed from the beginning. “No one sets out to fail on a major project,” said Sir Tim. He didn’t share the details of this but it’s a way of making sure contracts are effective and realistic enough to support major projects from the start.

Green Book Plus

The Treasury’s Green Book is the definitive guide for deciding which major projects should move forward but Sir Tim explained that it struggles with the largest initiatives. Planning and business cases need to be more realistic, more rounded and more honest. Green Book Plus is going to try to provide that framework.

This initiative supports the process of choosing which projects to do at a national level. It aims to make sure that politicians are better placed to judge which initiatives to do. Deciding on a major project, said Sir Tim, is not something that we are good at in the UK.

To give an example, there is currently an open decision on how best to extend the airport capability within London. Both Heathrow and Gatwick airports have expressed an interest at being the one that ‘wins’ the investment for expansion. In something I’ve never seen before, both airports are campaigning to the public with posters on public transport and in other ways too. This isn’t Britain’s Got Talent: the public don’t get to vote on which airport gets the extra runway. But savvy airport operators know that dangling the carrot of good jobs, infrastructure and expansion can influence the local community who in turn influence their elected representatives, who in turn… The information coming from the decision makers is not good enough, so a whole additional level of media and information has been put out there.

The Knowledge Hub  

Third, there is an initiative underway to capture key lessons. Lessons learned is something that major projects are not set up to do and the learnings are often not followed through, Sir Tim explained, citing Crossrail as an example.

We’ve tried this as a nation before. The APM’s involvement in creating the learning legacy from the 2012 Olympics was huge and hugely successful. I don’t know why that major investment in changing the culture of large projects to include the discipline of lessons learned and sharing best practice wasn’t continued after that event. If something like the good work and significant outpouring of lessons wasn’t enough to kick start a change in how we approach this area of project management, then I’m not sure that another initiative is going to have much success either.

But good luck to them, it’s certainly something that project management overall does not do well at and anything that keeps it at the forefront of people’s minds has to be a good thing.

Mentoring

A mentoring programme for senior leaders is important because often mentoring initiatives are offered at entry and mid-career points, without much support for the people at the top. Those individuals still benefit from an impartial, external point of view and the opportunity to bounce ideas around in a safe environment, which is essentially what mentoring is.

“Good judgement, good decision making, good strong, clear leadership,” summarised Sir Tim, going on to add that you can learn these skills. They are not innate and can improve with time. The benefit of developing skills like these is that we build more competent, successful leaders and share good practice. “When people are put in difficult situations the can trust their instincts and get things done,” he said.

The common theme amongst all these initiatives is that project initiation is important. Getting projects right from the start, whether that’s at the point of project selection, business case, choosing the leader or creating an environment for success based on the lessons from the past – it all makes a huge difference to the outcome. Let’s influence eventual project success by setting up projects correctly at the beginning. We can all do that, regardless of the size and scale of your project.