Deep Dive Into Controlling Cost
| Project managers look inside the project to determine progress, measure variance, predict outcomes, report status and manage change. Earned Value (EV) is a quantitative technique to measure project performance against the project baseline. Through the use of EV analysis, one can detect and predict problems earlier, evaluate status, and report progress. There are two Earned Value performance indexes that are of particular value to project managers. First is the Cost Performance Index (CPI). CPI is the ratio of budgeted to actual costs for work performed. One can determine the relationship between estimated and actual costs. Second is the Schedule Performance Index (SPI). SPI is the ratio of work performed to work scheduled. SPI is an efficiency rating for work accomplished up to the time of the measurement.
First lets define some of the terms that are used in earned value analysis and explain what the results mean:
Planned Value (PV) - Answers what is the estimated value of the worked planned to be done.
Earned Value (EV) - Answers what is the estimated value of the worked actually to be done.
Actual Value (EV) - Answers what is the actual cost incurred for the worked accomplished.
Budget at Completion (BAC) - Answers what how much did we budget for the total project.
Estimate at Completion (EAC) - Answers what do we currently estimate the total project to cost.
Estimate to Completion (ETC) - Answers from current point how much more do we estimate it to cost to finish the project.
Variance at Completion (VAC) - Answers how much over or under budget do we estimate to be at the end of the project.
Now lets look at some of the financial calculations and understand what the results mean:
Formula for Cost Variance (CV) is: EV - AV
If the result is a Negative number that means that the project is over budget. If the result is a Positive number that means that the project is under budget.
Formula for Schedule Variance (SV) is: EV - PV
If the result is a Negative number that means that the project is behind schedule. If the result is a Positive number that means that the project is ahead of schedule.
Formula for Cost Performance Index (CPI) is: EV/AC
The result answers how much we are getting in turns of a $ worth of work out of every $1 spent. It answers whether the funds are or are not being used efficiently.
If the CPI is greater than one, the project is under budget, which means you are earning more than what you have spent If the CPI is less than one, the project is over budget, which means you are earning less than what you have spent. If the CPI is equal to one, earning and spending is equal, which means that the project is proceeding as per the planned spending.
Formula for Schedule Performance Index (SPI) is: EV/PV
The result answerers of how we are progressing at certain percentage of the rate originally planned. If the SPI is equal to one; the project is on schedule, the completed work is equal to the planned work. If the SPI is greater than one; the project is ahead of schedule, which means you have completed more work than planned. If the SPI is less than one, the project is behind schedule, which mean you have completed less work than planned work. If the SPI is equal to one; the project is on schedule, completed less work than planned work.
There are many formulas for Estimate at Completion (EAC):
The result answers as of now how much do we expect the total project to cost.
We use the following formula: BAC/CPI
If no variance from the BAC have occurred or continue at the same rate of spending
We use the following formula: AC + ETC
When original estimate was flowed. Actual plus a new estimate for remaining work.
We use the following formula: AC + (BAC - EV)
When current variance is thought to be different from the future. Actual to date plus remaining budget to perform.
We use the following formula: AC + (BAC - EV)/CPI
When current variance is through to be similar of the future. Actual to date plus remaining budget modified by performance.
Formula for Estimate to Complete (ETC) is: EAC - AC
The result answers how much more will the project cost.
Formula for Variance at Completion (VAC) is: BAC - EAC
The result answers how much over or under budget will we be at the end of the project.
Now take this knowledge and control your organizations project’s costs.
#CostManagement #ControllingCost |
Cost Management in a Nutshell
| Why Cost Management is Important? Cost Management is important because it:
You start cost management process in the planning phase of the project. Costs are approved by project owner and executive stakeholders in the project charter. As project is executed you monitored the expenses. At the close of the project you compare the actual costs to the estimated costs determined at the beginning of the project. Cost management is one of the triple constraint metrics that define a project: cost, scope and time.
Example of some of the fixed and variable costs, are shown in the diagram below:
What is Cost Management? The process of Cost Management is:
Cost Management Plan Cost Management Plan is a component of the overall project management plan. The better you are at cost precision and accuracy the better you’ll have control of your project costs. You control cost thresholds by knowing the cost variations and where you have wiggle room and where you don’t. Establish how the project performance will be measured in order to see if you’re meeting the goals and expectations of the project. Inputs into Cost Management Plan
Tools and Techniques in Cost Management Plan
Outputs of Cost Management Plan
Cost Planning As part of Cost Planning is you have to plan for resources. Resource planning is the process of determining future resource requirements for an organization or a scope of work. This involves the evaluation and planning of the use of the physical, human, financial, and informational resources required to complete work activities and their tasks. Resource planning begins in the scope and execution plan development process during which the work breakdown structure, tasks and execution strategy are developed. Resource estimating determines the activity’s resource quantities needed, such as hours, tools, materials. While schedule planning and development determines the work activities be performed. Resource planning takes the estimated resource quantities, evaluates resource availability and limitations considering project circumstances, and then iteratively optimizes how the available resources will be used in the activities over time.
Cost Estimation Cost Estimation is the process of quantifying the cost and price of the resources required by the project. The outputs of cost estimating are used as inputs for business planning, cost analysis, and decisions or for project cost and schedule control processes. The estimation of the time duration of activities must be considered concurrently with costs because costs are often dependent on time duration and resource requirements identified in cost estimating may affect the schedule. Iterative approaches are used because outcomes of a cost estimate often lead to changes in scope or plans. Estimating process can be viewed as part of the scope definition process because iterative trading off between cost and scope intertwine the processes. Inputs into Cost Estimation
Tools and Techniques of Cost Estimation
Outputs from Cost Estimation
Cost Budgeting Cost Budgeting is a sub-process within the cost estimating and is used for allocating the estimated cost of resources into cost accounts against which cost performance will be measured and assessed. Cost Budgeting forms the baseline for cost control.
Inputs into Cost Budgeting
Tools and Techniques of Cost Budgeting
Outputs from Cost Budgeting
Cost Control During Cost Control you measure the variances from the cost baseline and take necessary corrective action to achieve minimum costs. All of the changes to the cost baseline need to be recorded and the expected final total costs are continuously forecasted. When actual cost information becomes available you measure against the cost baseline to explain and determine what is causing the variance. Corrective action might need to be taken based on this analysis to avoid cost overruns.
Inputs into Cost Control
Tools and Techniques of Cost Control
Outputs from Cost Control
Now that you got the cost management is under your belt. You can be confident in managing your projects.
#CostManagement #ProjectControl #CostManagement Plan #CostPlanning #CostEstimation #CostBudgeting #CostControl |
Have You Ever Wondered How To Make Others Do What You Want To Do Without Having Authority Over Them? I Can Make You Do That – Because!
| Having people do certain things without having authority over them is difficult to say the least. One can use the Carrot and Stick approach. A Carrot and Stick approach is a traditional motivation theory that asserts, in motivating people to elicit desired behaviors, sometimes the rewards are given in the form of money, promotion, and any other financial or non-financial benefits and sometimes the punishments are exerted to push an individual towards the desired behavior. A better approach would be to use Because approach. Ellen Langer, a professor of psychology at Harvard, conducted a research in 1978 on the power of persuasion of the word "Because." Langer had people request to break in on a line of people waiting to use a busy copy machine on a college campus. In 1970′s people didn't have home computers nor printers. There were lines waiting to use a copy machine. The researchers had the people use three different, specifically worded requests to break in line:
Did the wording affect whether people let them break in line? You batcha. Here are the results:
Using the word “Because” and then giving a reason resulted in significantly more compliance. This was true even when the reason was not very compelling such as “Because I have to make copies". The researchers hypothesized that people go on automatic behavior as a form of a heuristic method of short-cut, and that hearing the word “Because” followed by a reason, no matter how poor it was, would cause them to comply. They repeated the experiment for a request to copy 20 pages rather than 5. In that case, only the “Because I’m in a rush” reason resulted in increased compliance. So, what does this all mean? When the stakes are low people will engage in automatic behavior. If your request is small, follow your request with the word "Because" and give a reason, any reason. However, if the stakes are high, then there could be more resistance, but still not too much.
Please let me know how this “Because” approach worked out for you. Because I asked nicely. #Because |
Organization’s Remote Work Environment - Are YOU Ready - For the Next Wave? (Part 3 of 3)
| In the Part 2 of this multi series article we have discussed:
We will conclude this article series with what it will take for organizations to Succeed in incorporating a permanent remote component into your organization’s work environment.
In the last 20 years, we've had six significant threats - SARS, MERS, Ebola, avian influenza and swine flu. Modelist and scientist don’t agree if the next wave of COVID-19 will be as deadly as this current outbreak. But most agree Coronavirus is not the last pandemic, BBC.com, 2020.
Organizations must be ready. I’ve created organizations Checklist for incorporating a remote component into work environment:
Scope: In Scope Technology tools selection and standardization of for remote employees. Workspace at Home equipment selection and standardization for remote employees. Management training on technology and communication. Remote employees training on technology and communication.
Out of Scope If telecommuting will continue once a vaccine is introduced and physical distancing and imposed quarantine are removed. If telecommuting will be employee’s personal choice. Whether staff feel confident about the safety of their work environment and the productivity that can be achieved either from home or from the workplace.
Financial Benefits Retention of top employees. Employer of choice for future employees. Retention of Clients or Members.
Cost Remote Technology. Equipment for Home Office. Management training on technology and communication. Employee training on technology and communication.
Success Metrics Your organization will be the Employer of Choice. Retention of employees. Organization’s KPIs at the same or above levels.
Create a Project Plan to identify the tasks, dependencies, duration, responsibilities and the scope. Include Tasks such as:
Measurable KPIs to Goals Align measurable key performance indicators (KPI's) tied to organization’s overall goals. This way you can more easily measure productivity and performance. Develop task-related processes such as setting clear goals and standards.
Communication, Communication, Communication Regularly communicate amongst all employees. This brings people together and fostering a sense of inclusion. Whether employee is on site of offsite regular contact helps build trust and confidence among team members. This provides ongoing opportunities for input and influence. Set expectations and accountability practices right from the get go. Manager must communicate and encourage their employees to take the needed brakes and not get burnout.
Establish Performance Standards Departmental leaders – you know what your department’s needs. Set benchmarks, sharing best practices, articulate standards by which your team’s performance will be evaluated.
Collaborative Mindset Foster an atmosphere of collaborative atmosphere in your team. Teams with collaborative mindset bring to the best of competition and cooperation, fostering respect for all team member with different interests, talents, and expertise. Focus on dynamic discussion of differences verses disagreement. It encouraging a focus on shared goals and mutual wins.
Team's Purpose Teams need to understand their reason for being. It allows teams and individuals in teams to ensure their focus is on delivering the right things to the right people at the right time in the right way. Team's Purpose is even more important for working remotely. Employees need to understand what specific results are expected, and how they contribute to the team as individuals and to the larger enterprise as a whole. Help telecommuters and other remote employees feel like they’re part of the team. Have a clear set of policies that brings telecommuting staff into key meetings. Periodically have remote team members come into the office. Make an extra effort to keeping telecommuters in the loop on company and department news, via corporate portal/emails. This is especially important if they spend a significant amount of time working off site.
Selecting the Right Technology Tools Microsoft Teams, Slack, Trillo, Google Hangouts and Skype for Business are some of the platforms that telecommuters can use to keep in touch throughout the day. And file-hosting services like SharePoint, OneDrive, or organization’s in-house portals can support collaboration and information sharing in real time. Technology like virtual desktops may replace bulky laptops and computers, enabling mobility inside and outside of an office building.
Creating the Right Workspace at Home Your facility department will play an important part in creating an ergonomic working space at home by selecting the right: desks, chairs, monitors, phones headsets.
Address Fairness for On Site Employees No one likes to be treated unfairly. Make sure that those who work on site are treated equitably. It can feel like a raw deal for the employees who are left to handle problems that can’t be performed remotely by telecommuting teammates. When it comes to job performance quality and deliverables, there should be no difference between the work an employee produces at the office or while they’re remote. Set equal standards for onsite and offsite employees with respect to office hours, responsiveness for emails and phone calls to external clients an internal stakeholder. Set core hours when all employees are required to be accessible. Create and update your Telecommuting Policy periodically. Over time, your guidelines need modification as technology progresses and the workplace practices continue to evolve, additional groups of employees can be offered remote work option.
Addressing the Legality Compliance and legal counsel should review any telecommuting programs to make sure the organization stays in compliance with employment laws. Some of the issues to consider include workers compensation and state overtime regulations, as well as the company property used offsite and individual responsibilities.
Training of Management According to Gallup, 2017, successful managers all stressed the importance of getting to know their employees as people and well as genuine caring for them as individuals. Training should include:
Managers Input Managers know which job functions are most suitable for remote work, and therefore, are in the best position to customize the program for their teams. Manager will decide whether all their staff working remotely, or a certain percentage of staff remote, or having staff work remote on specific days, or a hybrid between working in the office and at home. Questions that a manager might consider when evaluating whether a role is a good fit for remote work include: Is this position really right to independent work? Does the job require a lot communication that face time/videoconferencing alone can’t support effectively? Is there’s a negative impact, if any, on our teamwork, on our organizational culture, if few or all employees telecommuted regularly? In It's the Manager: Gallup, 2019, finds the quality of managers and team leaders is the single biggest factor in your organization's long-term success.
Managing of Telecommuters Managers must reiterate that remote workers keeping similar hours and maintaining similar levels of productivity. Telecommuting employees need to feel confident that their manager believes they will work as hard as they would in a regular office. If you as a manager unnecessarily checking in several times a day with your offsite workers just to “see how things are going,” those employees may feel like you don’t trust them.
Celebrate Successes Management should not just celebrate the end of the project but small wins as well. Feeling like a team means not just working together but being recognized for each members' sacrifices and accomplishments. Bringing your whole staff together at one location on occasion can help to build camaraderie and team spirit, while keeping social distancing in mind. If that’s not possible, try scheduling a videoconference on an annual basis using a platform like Microsoft Teams, GoTo Meeting or Zoom. |
Organization’s Remote Work Environment - Are YOU Ready - For the Next Wave? (Part 2 of 3)
| In the first part Organization’s Remote Work Environment - Are YOU Ready - For the Next Wave? (Part 1 of 3) we have discussed:
In this part we will discuss what needs to be Mitigated when incorporating a remote component into work environment.
Social Benefits Telecommuting can damage some of the social benefits of the traditional office. We as humans are social beings and need to be around people.
Miscommunication Leaders, Managers, Project Managers need team skills and effective leadership skills, or their virtual teams can become ineffective and dysfunctional.
Feeling of Being Left Out Offsite team feeling left out when the core onsite team have “clicks” and meet without including the offsite teammates. When having an onsite meeting make an effort of using telecommunication to include your offsite teammates.
Burnout Employees who telework may feel pressure to produce more output in order to be seen as valuable. Offsite employees work more in order to reduce the idea that they are doing less work than their onsite counterparts. Gallup, 2019, study found nearly 8 in 10 experience burnout on the job at least sometimes.
Not Feeling Safe Working on Site Employees may not feel safe coming to work because of the air born viruses. That is why buildings will need to incorporate Smart Technology. To reduce the spread of airborne disease building will need to incorporate smart components, and sensors are enabling spaces with a high degree of flexibility and adaptability. Health screening processes at entrances will need to be incorporated such as installing thermal imaging cameras to identify people with elevated temperatures. Buildings will need to incorporate heavier filtration for building’s HVAC systems to minimize air born particles. Buildings will also need to incorporate optimization of space use. Physical distancing of desks may need to be separated. Also, consideration should be taken at looking at shared spaces. Adherence to a strict cleaning regime between occupants would need to be incorporated. Meeting rooms will need to indicate maximum meeting occupants and remind people of physical distancing policies. Buildings will need to incorporate smart devices such as voice activated elevators, touchless devices and doorways.
Employees Well Being Organization’s will need to handle employees increased complaints such as: musculoskeletal pains, a decreased focus on diet and wellbeing including increased alcohol consumption, more cases of poor sleep and increased risk of exhaustion and increased mental health issues with people who worked from home, according to How Your Office Space Impacts Employee Well-Being, 2019. Mental and emotional support will need to be provided. Organization’s would also need to provide meditation rooms, to programs like mindfulness classes, to policies on flexible work hours.
Security Lack of secure policy and procedures result to customers/members Personal Information stollen. Rise in lawsuits and tarnished organization’s reputation. Organization’s already stretched IT would need to work overtime to mitigate these vulnerabilities.
In the final part of this series we will concentrate what organizations can do to incorporate a permanent remote component into work environment. |
