Are you the project manager of a new project, tasked to set project budget?
When it comes to setting out a budget for your project, is your involvement limited due to the operational set up?
Do you have the desire to learn more about cost management? Then maybe, just maybe, I can provide you with few things a to do.
Starting to budget is not an easy task, but it is not impossible either. In project management, organisational process assets and historic data are key to any project. In many cases, we do not reinvent the wheel. PMBOK Guide also detailed the processes of cost management with the tools and techniques in a clear manner. But if this is your first time, applying all the processes could feel a bit cumbersome.
So here are few things that I would recommend you try doing:
1. Tap into the company’s historic projects.
Try to find a project that classifies similar to a project you are currently working on. How was the project cost reported on? Was there an initial budget provided clearly? Or was the project reported on only from a time progress and percentage completion only.
Why should you look for this data?
Understanding historic data helps you determine the depth of information available which you can replicate for your project. It also helps you understand the aptitude of the company’s stakeholders.
2. Start reporting on the labour hours contributing to the project.
If you are working in an organisation that is not giving you access to projects budgets and finances, do not leave it there. Not doing anything about it would turn your role into more of a day to day operations, rather than managing a project.
You can do this in 2 different ways:
- If you have access to the pay of each of the project team members, start tracking the actual time they are spending on the tasks given to them within the project. A healthy way to do so is to keep the metric hourly. Of course this depends on how deep you go into your Work Breakdown Structure (WBS). If your project teams are not working full time on one project, then breaking down their contributions to hours would help you allocate correct hours / cost worth of work for each different project.
- If you do not have access to the project teams’ pay, and it is clear that you are not in a position to access them, then maybe this approach can help. Work with HR to establish a baseline of different levels of employees who will work on a project. From the entry level all the way to the executive level. Take all of those generic salaries and establish an average of the hourly cost. The context of your organisation along with the nature of project contribution from each seniority will help you determine whether you average all salaries, or whether you have 2 times specialist time and 1 time executive time to obtain the average cost of one hour.
This cost of one hour becomes the standard in the project. You continue to ask your project team members to track their time and you introduce the cost of hours to them and you start reporting on the progress in the £/$ sign.
It is very important that you track and report on some sort of monetary value of the project work that is taking place. This will help you in your analysis on the benefit realisation of the progress of the project. But even if the benefit realisation is a far off approach or step to perform, reporting on the actual cost of the work done helps engage your team members and puts things in perspective.
Let us say that the cost of 1 hour for this project is averaged to be £100. You are close to achieving one milestone of the project and you have got strict deadline of release in 4 days; 4 days of 8 hours worth of work per each day. If one of your project team members was late 1 hour, you would need to help them recognise the impact of the wastage.
“You are late 1 hour” vs “We have just lost £100 worth of work”.
Always be careful that helping them recognise their contribution is not aimed to make them feel guilty, or some sort of a punishment. Helping teams recognise the monetary value of the work they are doing and contributing to a certain project would always help improve their engagement levels. So use it as a positive leverage.
If you are not privy to your project cost, how do you track and report on the actual cost and earned value throughout your project?
3 thoughts on “Value for money: To budget or not to budget?”
Very informative. Along with large projects, it can also help smaller businesses and shops in managing their day to day costs. Thanks for the amazing article.
LikeLiked by 1 person
Thanks for stopping by & reading it. I am glad you found it beneficial 👍
LikeLiked by 1 person