In retrospect, we are always smarter. If a project exceeded the budget, it is easy to identify the causes afterwards. And everybody wonders: why did the project manager let it happen?
The key to the answer is “project monitoring”. If the causes for extra cost are known before the project (and many of them are), they can be managed.
Project monitoring takes efforts? – Sure, but it’s the job of a project manager. Project monitoring will cost money? – Of course.
Continue to read if you want to find out why project monitoring will actually save you money.
What Causes Extra Cost In Projects?
Manpower is a major cost driver for many projects. Delays mean extra efforts, extra work, extra manpower. Another major cost driver is hardware, which tends to become more expensive due to inflation. Contract penalties may also lead to an excess of a project budget.
Non-conformance of the project result with the contractual requirements can cause two impacts on a project budget: They can be repaired – that causes extra cost (similar to delays). Or they can be compensated, if the project customer can accept them or repair is not possible any more.
I observe a temporal dimension on the impact of non-conformances. The sooner a non-conformance is detected, the more probable it is that it can be repaired. And – the cheaper a repair will be.
Small changes may have unforeseen impact on the overall project schedule. But they can also have a direct impact on the budget: a small change in a complex system may cause expensive side-effects.
I found an excellent post about this challenge that also gives some approaches how to handle changes.
The risk of extra cost can be reduced by implementing a structured change process. But how can you prevent these “tiny” changes one of your project team members decides to implement because the result will be “so much better”?
Complexity can create a number of unforeseen problems. Finding solutions for these problems will either take extra time or extra resources. Both will cost money.
In complex projects without any doubt there are many more challenges to be mastered. Isn’t it possible that some of the challenges are not important for the project success? Here are some of my ideas how to handle project complexity.
Naivety and Ignorance
I strongly believe that every project manager is aware of the causes for extra cost. But honestly, aren’t we all lazy sometimes? We know the risks but we don’t observe (naivety – “nothing will happen”). We see the signs but we don’t act (ignorance – “someone will solve that”). And beyond that, some other priority task might make us lose the overview in project monitoring.
If you read the causes above, there is not much more to say about the causes for extra cost by suppliers: they can cause delays and non-conformances (a change is a non-conformance, too, from that perspective), they can be overwhelmed by project complexity or ignorant towards signs of trouble.
Why Project Monitoring Saves Money
I already have used the term “project monitoring” quite a lot. What is project monitoring? For me, it means the monitoring of the status and progress of a project and its activities. Here are some items that contribute to the causes of extra cost, and why they should be monitored:
- Risks – Risks are assessed in the beginning of a project, at a stage where the project itself is still vague. Over a project life cycle, risks may increase or fade away; new risks may occur. Measures may become ineffective. New measures might be necessary, that could not be imagined during the original risk assessment.
- Schedule – In the beginning of a project, there is always a neat and accurate bar chart. Behind its activities, there are assumptions. Which could prove to be wrong, due to many reasons. Filling the bar chart with actual dates at a later stage, a project manager may be torn between rejoicing to high heaven and plunging to depths of despair. It all depends on the resulting shift of the end date.
- Cost – It is always a cheerful feeling, when the project budget is assigned to the project manager. So much money to play. And it is always surprising to observe the speed at which the same budget shrinks. If the project results emerge with the corresponding speed and quality, everything should be fine. Better be sure about it.
- Conformity – Conformity with the requirements is the key to successful acceptance. There are many causes for deviations: misinterpretation of requirements, carelessness, feature creep (a “better solution”) – just to name a few. Identified early, deviations can be repaired easily. Coming up during final acceptance, they tend to be a pain in the neck.
- Suppliers – It sounds so convenient. Sign a contract with a supplier, and you get rid of a challenge. Of course, a good reason why you contract suppliers is because they are good in their fields of expertise. But as a project manager, you are in the line of fire if a supplier generates extra cost.
I believe that is a sufficient number of good reasons for project monitoring. There are many more things to monitor in a project, which ones would you add?
The Potential for Saving
There are different approaches to visualize the evolution of “cost of change” and “influence” over the project duration. All of them deliver the same message. The earlier you are in your project, the more influence you have to change something – at less expenses.
There is a small catch. You can only use that influence to save money when you identify there is actually a problem.
From that perspective, do you agree that project monitoring has the potential to save you money?
Who Can Do Project Monitoring?
Project monitoring is the responsibility of the project manager. And this is a real challenge. I plotted a graph that visualizes my perception of project management workload over the project duration. It is my perception, there is no science behind that line.
That means, the workload of the project manager is quite at the upper limit when there is the best time for corrections. I am not worried here, a significant share of this workload is actually spent for project monitoring. Isn’t it?
Personally, I often perceive that “problem solving” and “monitoring” are difficult to do in parallel. For the first task, my brain needs to dig deep into details. For the latter one, it is better to stay on the surface – even better to hover. How do you deal with this balancing act?
In case you agree and you one day realize that you run into trouble, who can support you with project monitoring?
- Project Management Office – Many companies do have a project management office with qualified staff exactly for that purpose: to keep projects on track. Don’t be shy and ask for support or consultancy.
- Project Team Role – If the project is large and it is already obvious that you will not be capable of doing all project management tasks alone, define a role and assign the project monitoring to a member of your project team. The extra staff cost will pay out at the end!
- Interim Support – If you don’t have the need or budget for a dedicated project monitoring position, consider temporary support for the peak hours. Think about hiring an external consultant (oh, is that me?).
What is your experience in project monitoring?
Please post your comments right after. Also do not hesitate to contact me.