For externally chargeable projects, a budget is usually set as standard. However, I am observing an increasing number of internal projects where budgets are never set, on the basis that the project is decreed to be "beneficial" (although the exact benefits and targets themselves are often not defined to a detailed level).
I firmly believe that a budget should be set for all projects even if cost is not one of the main drivers even if it is a case of determining fixed costs and setting a resource budget. For example, if the planning shows that "x" number of heads are deemed necessary for deliver, then this should be tracked to at least ensure that the project is managing efficiently. Too often I am only noticing costs being reviewed at project closure when shock and dismay is then expressed at how much the internal resource cost has been!
Does anyone else experience this? Has anyone been able to influence their stakeholders into placing more focus on costs? How do you manage costs on internal initiatives?
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Hans RobbersSenior Director| SalesforceVlissingen, Netherlands
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Interesting topic. Projects need to have a cost estimation and tracking also internal once. The catch 22 here is that when you focus on cost there is a risk the proejct will be stopped.
Therefore I would argue for internal projects it is also a must have to develop a business case indicating the benefits of the internal project and the costs. This will also mitigate the second risk you loose your resources to other more important (internal) projects, or read projects which obtain management attention
An approved budget for either internal or external project must always be set as a standard, someone has to pay for the projects and all its related costs, it is not for free! As Hans said all projects should have a Business Case to justify the project, why the change whether be a new system, upgrades and so on. The cost of the project is usually charged back to the business who own the project and must have the funds available otherwise it is a no no. In addition the Project Manager estimates all the project costs submitted to get the budget approved. Good project management is about tracking and monitoring costs and must form part of the weekly\monthly reporting back to the stakeholders. If their is a deviation from the budget approved, it must be reported, discussed - there should never be any surprises. Saving Changes...
Yes, thank you, Vasoula & Hans. It is good to know that I am not alone!
However, have either of you come across business sponsors or stakeholders in the past who have had no interest in supporting this and have just advised the PM "to get on with it" even when the PM has tried to challenge this position? If so, how have you handled this?
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No I have never experienced a non-budget project. It does depend how the organisation does business and specifically whether Project Management is set-up within a formal framework with all its processes. In actual fact, the Finance department would not approve of any project to go ahead without the sponsoring and money in the pot. All the business departments within an organisation get a slice of the overall budget, it is down to them to forward plan for spending money for initiatives, projects, system changes, upgrades etc. It comes down to organisational policy, governance and process. Saving Changes...
Rosemary HancockProject Manager| GENEX Services Inc.Wayne, Pa, United States
I'm in the same boat. One way to create a budget is to identify the number of man hours required to get the job done. So the budget is based on your resources' time vs. actual money unless you can tie in values for each of your resources. For my situation, we have a boatload of projects in the queue and not enough resources. I'm in IT and our business counterparts believe all their projects are important and critical. I believe they are too, but now it's a manner of, where are we going to invest our resources? How much are we willing to invest or can we invest in the project right now? Okay, this has been on my mind the last few days and we've taken a stab at identifying all our projects in "man hours" vs. "calendar days." We're doing this also for projects still in the queue that have not started. So, each project is assigned # of man hours. There's more to it though...they need to understand how resources are allocated, but that's another topic. Anyway,good luck on identifying a budget. Hopefully this information helps. So much to do, so little time! Cheers! Saving Changes...
In my experience getting agreement in principle that we should know how much time - and therefore money - we spend on internal projects is the easy part.
Seeing through the time tracking / logging, realistic resource estimating and honest, final evaluation (particularly around options) is the hard part, unless organisations are experienced in charging for time and / or backcharging.
Particularly when introducing internal accounting for time, some of the conversations that may logically follow can be unsettling to staff. It's key to manage senior staff's understanding of the data they will begin to see, i.e. that until more projects do this sort of thing it's impossible to know whether £xxx amount / time internally is good value. Staff may deliberately underestimate time. E.g. "If I say how much time it's really going to take me to do this they may outsource this requirement because they think it's cheaper, so if I underestimate then we'll definitely do it in house and my job is safe... "
In my experience change management approach should be applied, and thorough testing and learning be done first, before making hard decisions based on potentially unsound data. Saving Changes...
Hans RobbersSenior Director| SalesforceVlissingen, Netherlands
My experience is when you focus on the cost you will lose the project. Over time the environment for the sponsor change and he will change his support. Reporting hours will not help you. In case the spo sor is not a cxo there might be a chance you van continue since the sponsor is uncertain what ways the wind blow but in the end you will loose the project.
Focus on the benefits and having the opportunity to tie the benefits to the new vision of the cxo will require an agile way of thinking but will enure survival of the project. As you can appreciate you must believe yourself in the added value of the project over other initiatives if you want to help the company forward. Saving Changes...
Hans RobbersSenior Director| SalesforceVlissingen, Netherlands
My experience is when you focus on the cost you will lose the project. Over time the environment for the sponsor change and he will change his support. Reporting hours will not help you. In case the spo sor is not a cxo there might be a chance you van continue since the sponsor is uncertain what ways the wind blow but in the end you will loose the project.
Focus on the benefits and having the opportunity to tie the benefits to the new vision of the cxo will require an agile way of thinking but will enure survival of the project. As you can appreciate you must believe yourself in the added value of the project over other initiatives if you want to help the company forward. Saving Changes...
Great topic and one I am very familiar with. The lack of internal resource costs being included in project budgets is a level of maturity indicator and also an indication that they do not run "that many" big projects.
The driver for total cost of ownership which is what we are really talking here about can be expensive and/or hard to measure when compared to the size of the project. Often the accounting department need this information when the project is big enough to consider capitalising and moving it off the P&L and onto the balance sheet for long term depreciation.
Another driver is capacity management when the number of approved projects (and their very shaky (if any) hours estimates) cannot be delivered with the number of internal resources available... and it looks like Rosemary is in this situation.
When this happens two things are required, the organisation needs some project portfolio management to help review and prioritise projects to ensure the important ones get the resources they need ahead of the less important ones and the second thing that happens is that the projects need to be properly sized and managed ensuring that the cross project dependencies on resources are actively managed - enter the PMO!
None of this is easy to implement in a low PM maturity organisation and it definitely needs the support of executive management. In this case starting at the top is definitely the way to go.
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