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Viewing Posts by Michael Hatfield
Scrutinizing Project Conventions
| Within the realm of project management--or any other complex system, for that matter--accurately identifying failure is difficult to the extreme. There are simply too many parameters to isolate, which makes writing about management a precarious proposition. Oh, there are certainly those cases where a project manager insists that no cost or schedule management systems be used, and it doesn't take long to drive that project into the ground. But in most other areas the link between act and consequence is not nearly so stark. Renowned psychologist, B.F. Skinner, wrote that a variable rate of reinforcement virtually guarantees a behavior will continue. If that is so--and I believe it to be--then it follows that a practitioner who has experienced success using a particular technical approach may be inclined employ that approach over and over--even when it fails over half the time. That same practitioner might also be inclined to join with like-minded project managers to advance a new model or structure for success. Their assertions may be correct and insightful universally, in some specific environs, or completely off base. I entitled this post "Part 1" because I intend to take a close look at some conventions that may have been adapted in that spirit and without the scrutiny of an iconoclastic wise guy such as me. Next up: Does risk management really help bring in projects faster, cheaper or with higher quality? See relevant research from Project Management Journal® as reported in PMI Community Post: Avoiding Project Failure by Managing Organizational Culture |
A True Rival to EVM?
| Glen B. Alleman was kind enough to respond to one of my recent posts, taking exception to my assertion that a simple, calculated estimate at completion (EAC) is probably the most powerful underused tool at the project manager's disposal. He laid out a scenario where a varied time-phased budget (Budgeted Cost of Work Scheduled, or BCWS) would introduce a sufficient level of error into the calculated EAC so as to significantly reduce its effectiveness. I must disagree, if, for no other reason, than the time-phased budget isn't part of the calculation. As I discussed in that earlier post, the classic cost performance index divided into the budget at completion formula can be algebraically simplified to dividing cumulative actuals by the estimated percent complete. With those two data points, remarkably accurate management information can be gleaned and used to avoid project catastrophe. To support my argument, I would like to ask: What other options are out there? What other methods can rival the simple earned value management (EVM) version? After suffering through semesters and semesters of accounting, and semesters and semesters of finance, I can say with a fair degree of certainty that there's nothing in the accountant's toolbox that can even come close to the accuracy of the simple EVM method. As counter-intuitive as this may sound, the person who has been through a 40-hour EVM class is in a far superior position to relay accurate at-completion project costs than is the accountant, who, of course, needed years and years of post-secondary education. I intend to speak on this at the EVM World 2009 conference being put on by the PMI College of Performance Management this week. If you're in attendance, look me up. Otherwise, leave a comment. I'll see it, I promise. |
The Simple Definition of Value
Categories:
Researching the Value of Project Management
Categories: Researching the Value of Project Management
| A lot of energy has been spent investigating the "value" of project management. My question is: value to whom? Doesn't it all boil down to what the projects' decision-makers do with their project management information? Imagine a project manager who pays a very small amount for a very advanced cost and schedule control system, and the system reliably produces accurate information in a timely manner. If that project manager ignores that output, and instead acts out of impulse, then the value of the project management information system is zero. And, to be blunt, no amount of eat-your-peas hectoring from our side of the debate will lead such a project manager to have an epiphany and turn away from his or her nefarious ways. Conversely, a project manager who pays a great deal for a system that barely reports projected costs at completion and forecasts completion dates, but uses that information to avoid a massive overrun or delay, has an extremely valuable system. Not to abrogate the debate, but, in my opinion, the value of project management is like the macro-economists say: It's what somebody's willing to pay for it. |
Easy EAC Calculation
| Experts on the assassination of U.S. President John F. Kennedy have come to a couple of conclusions: 1) the Warren Commission got it right and 2) many people have a hard time accepting that such a monumental, history-changing act wasn't the result of a massive, expensive, difficult-to-execute conspiracy. So, when I started writing about how earned value management systems (EVMS) can accurately predict the future with some simple calculations, I received some responses that expressed varying levels of incredulity. It simply goes against intuition that an information element as important as at-completion project costs could quickly and easily fall out of an EVMS. But since I've already firmly ensconced myself at the end of this limb, let me take it a step further: The estimate at completion (EAC)--the brass ring of management information systems--can be calculated without a baseline, a work breakdown structure or a formal change-control process--none of what we've been told are essential parts of an acceptable EVMS. None. Nada. Zilch. Now, I'm well-aware that the previous sentence is the metaphorical equivalent of pulling the pin on a grenade and rolling onto the floor of a conference room full of EVMS experts, but I can explain. The traditional formula for calculating an EAC (EAC = BAC/CPI) can be algebraically reduced to dividing cumulative actual costs by cumulative percent complete. That's right, we're talking two date elements, easily collected. And the resulting information is far, far more accurate than anything that the general ledger can produce. It's also much more accurate (and faster and easier) than re-estimating the remaining work and adding that to cumulative actual costs. In fact, it's so much more accurate, faster and easier than any competing information stream, that I'm frankly flummoxed that the calculated EAC isn't the centerpiece of EVMS use everywhere. I can't wait to see the responses to this one. |
Predicting the Future
| My earlier post, Our Biggest Unused Weapon, posited that the ability of even a basic earned value management system (EVMS) to predict when a project will be complete and how much it will cost at completion is unparalleled in the management information system world. But I also argued it was being under-used by most practitioners. William Goelkel, PMP, responded with: "EVM can lead us to make bad decisions, or forecasts, when the standard against which we measure everything is the plan we baselined at the point in the project's life cycle when we were most ignorant of its requirements." And "I'm not convinced a calculated EAC [estimate at completion] as you described is always useful." I'd like to further my arguments to the contrary while responding to Mr. Goelkel's thoughtful comment. Mr. Goelkel's main example concerns software projects, where "goals change and our understanding of the users' needs evolves." Either this understanding evolution is captured formally and introduced into the baseline, or it is not. If it is, then there's no problem. If it is not, then we have scope creep, the most pernicious attribute of managing projects. Even so, EVMS have a remarkable ability to predict the future, even when the baseline has been turned to rubber. Say you had a US$100,000 project, but "evolving" customer expectations will end up costing the contractor double that, or US$200,000. At the point that the project should be half-done (cumulative budget = US$50,000, and actual costs are at the same level) the task leader assesses that she is only 25 percent done. The calculated EAC will instantly indicate the real EAC of US$200,000, allowing for either elimination of the scope creep or a request for more money. For a more real-world example, try to find a project that (impishly) has a "Project Managers' EAC" column right next to the calculated EAC in their cost performance reports. Ninety-nine times out of 100, the project manager's version is lower than the calculated one and less accurate. It's like clockwork. In my next post, I'd like to tackle how project management trends in the software world--like scrum or Agile--are actually attempts to accommodate the rampant scope creep that so often afflicts those projects. For now, I'd like to hear what other EV practitioners have to say. I'd also like to thank William Goelkel for this discussion. |