Hi, I m a junior Project Manager, even though I have several years of experience in Project Management. I have got the following questions, which is probably more philosophical.
Among other things, I am, as a project manager, expected to deliver project within budget. Yes I know, it is more complex than that, because I am actually expected to do a balanced tradeoffs between scope, time, cost, quality, customer satisfaction etc. However let us just look at budget.
In fact my manager has put it as my performance goal: deliver projects within budget, that is why I am asking.
When the team (which I am a part of) execute the project, we almost always do it the best way we can. It is reary possible to say, looking backwards, that we could have done something much better.
From the other side, when the budget for project is created at the presale stage, a lot of assumptions are often made, sometimes for political reasons, often not by the person, who will execute the project. Any way, creating a budget for project is an art of future prediction, which not everybody has.
In this context, requirement to implement a project in accordance to budget is understandable, but a bit conflicting. I have to implement project in accordance to current reality, not in accordance to some prediction done several years ago.
Yes, I have to keep the costs down
Yes, I have to balance priorities
Yes, I need to report to management, if there is a risk by the project are exceeding budget, time or any other constraint.
However just a blunt statement that I need to deliver project within budget I simply do not understand. From my side, a goal to make realistic budget prediction seems to be much for valid one.
Why is the opinion of my much more experienced colleagues?
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Mark Price PerryBusiness Driven PMO Evangelist| BOT InternationalOrlando, Fl, United States
Hi Evgeny, regarding your manager's expectation that projects be delivered within budget, it is hard to argue against that. However, as you mentioned, "...the budget for the project is created at the presale stage..", this leads me to believe that you don't have a performance expectation problem with your manager surrounding your management of projects, rather a sales problem. There is quite a bit that needs to take place between the initial high level budget established at the presale stage and the final, negotiated, contract statement of work for delivery of the solution. If your sales guys are closing business that commits your company's delivery team to an impossible budget, then that is a real problem and it will cause ontold problems with the project both internally and with the customer.
Whenever someone says, "You must deliver on budget," I always ask about their change control processes. Delivering on-budget is useful in many cases, but it is only possible if the schedule, quality, scope, and other project constraints are flexible.
I have worked in environments where budget is the #1 issue. We always watched and controlled budget carefully, to ensure that the project will end no more than 5% over the target budget. To do so, however, we sometimes cut features and work from our planned deliverables. We sometimes ran into unexpected problems, and we needed money and time to deal with them; when those issues came up, we cut other things to keep the budget under control.
As Mark comments, it is also possible for a pre-sale quote to be completely unrealistic. Make sure your boss understand the difference between pricing and budgeting. Just because someone in sales has sold the contract at a given price does not mean that the budget should be identical to the total contract value. Usually the budget should be less, to allow the company some profit. Sometimes the budget may be greater than the contract value, because this contract may be a loss-leader, designed to get more business in the future. (In some countries and some situations, loss leaders might be illegal and anti-competitive, so be careful about your local situation).
I hope these ideas help. Post more questions and ideas about your particular situation, and we may be able to help more. People can mean so many different things by "within budget"! Sometimes it just means that they need you to get authorization for a new budget before exceeding your previous one, while other times it means keeping to the original project budget no matter what. Saving Changes...
Rob MartinConsulting (Contract)| Microsoft (Thailand)Lam Luk Ka, Pathum Thani, Thailand
When developing your Project Charter, the Risks and assumptions must be well documented, thought out and priced. You are also going to have to make sure that the Change Process covers eventualities that will effect the schedule, cost or quality. With cost being a main value driver, then schedule or quality will have to suffer.
When faced with the unreasonable "Just do it under budget", you must use the standard Project Management protection valves (Change Control, Governance and your Risks and Assumptions) to make early inroads into unreasonable expectation.
Do not leave this too late.
Rob
"From the other side, when the budget for project is created at the presale stage, a lot of assumptions are often made, sometimes for political reasons, often not by the person, who will execute the project. Any way, creating a budget for project is an art of future prediction, which not everybody has. "
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to be successful as a company I think projectmanagers should be part of the selling team as well, especially in those cases where the company dictates delivery within budget.
So were any proj mgrs involved in closing the deal (e.g. effort estimation) ?
On the other hand there might be deals that are bought by proposing low budgets. On the other hand who is preventing you to do the math again and see what the actual effort is relevant to the project once the project is starting. Go back to your boss and show him your calculation and all the other items you have found (risks, assumptions etc).
The money budget (effort * tariff) is one, the effort budget in hours in another one. In case where sales did buy the contract with low figures and commercial discounts, you might want to be responsible for the hours budget you derived, only. You might want to negotiate that with your boss.
Good luck. Saving Changes...
Robert PennSr. Project ManagerAlexandria, Va, United States
In working much of my career for consulting companies, I have dealt with the issue of "bid to win, manage to profit", which seems to describe your situation. That is, the sales team bids a price based on competitive factors rather than focusing on the actual costs of performance. When placed in this situation, I found several ways to address budget issues.
The first is to make use of the change control process. Clients, whether internal or external, rarely know everything they want at the beginning of a project. As a result, when they request changes, you need to analyze the impact of the change and request additional funding to cover it. Budgets, just like schedules and project scope, need to be living documents that are updated as new needs are identified.
When you have a project where you need to staff the effort, you should carefully review the skill mix and adjust the staffing levels to maximize the effort of the people in your most expensive skill categories (keep them as busy as possible), while allowing any slack to be taken by less expensive people. Here in the US, this approach is commonly used in the medical profession to keep the doctor busy (and fully billable) at all times while lower paid staff handle the routine activities and any waiting.
Another staffing-oriented solution is to use internal or external consultants for tasks where you don't need the skills for the entire project. This requires some coordination to be sure you have them when you need them and don't pay for them when you aren't using them, but it allows you to bring in specialized support on a demand basis rather than for the entire project.
Process improvement is another area where you may be able to save costs by finding ways to do projects faster or at less cost. Look for ways to remove the slack in your processes by eliminating wait times. Parallel execution of activities may occasionally improve cycle time enough to save money, although it often spreads the cost across more people. However, if you have a fixed team that you pay for the duration of the project, saving time will also save money.
Finally, look at your options for giving on scope, schedule, or quality. You comment that in hindsight, your team always does its best on projects, which is both important and admirable, but sometimes, doing a project in the way that seems best to the team actually gives the client more than they expected or wanted. Removing "gold plated" requirements may enable your team to meet the budget and actually provide a more responsive solution to your customer. Saving Changes...
