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Each month, Tom Mochal presents a set of project management tips and techniques for handling various aspects of planning and managing a project. Tom has over 23 years of IT experience. He has developed a comprehensive, scalable project management process called TenStep, which can be viewed at www.TenStep.com.
Just as the Project Manager may face scheduling difficulties, you may also find yourself trending overbudget. If you monitor costs regularly, you should know very quickly if you are trending over your budget. This control process is somewhat more difficult than managing the schedule, because there could be a variety of reasons why your financial information is not as good or as accurate. With scheduling, you know right away if you missed an end date. With the budget, you may not always know. There are a number of reasons for this.
You rarely spend money at a constant rate. So, you need to understand what you expected to spend during the period, as well as what you actually spent. In most companies, financial information comes in on a lag. For instance, you might not know the financial status for the previous month until second week of the following month. You may not recognize some expenses until you receive an invoice. In other cases, you may not have the expense hit the books until you pay an invoice, which may be much later. If your company uses purchase orders, your project may actually get hit with a project charge when the purchase order is generated, even if the actual invoice is not paid for weeks later. Depending on your budget, this may cause expenses to hit early, and may make it appear that you are trending overbudget, when really you are not. (The expenses are just hitting your budget earlier than you had planned.) All this means that you may not have the actual financial information you need in real time and this makes managing the budget a little more difficult.
In any case, although you may not always have the financial information at the optimum time, there are a number of techniques you can apply to try to rein in spending to get back within your budget.
Unpaid overtime work. This option takes advantage of the situation where your employee staff does not get paid for overtime. It is usually the first place to look, and a team will rally around overtime to get a project back on budget. However, this is usually not a good solution for very long.
Swap human resources. It may be possible to swap highly paid resources with ones that can do the work, but at a lower cost. In fact, if cost containment is more important then schedule, you may also be willing for the work to take a longer time, if it ultimately can be completed successfully at a reduced cost.
Eliminate or replace non-labor costs. Just as with people, it may be possible to utilize less costly materials, supplies or services than what was originally budgeted. For instance, can travelers stay at a discount hotel chain instead of more luxurious accommodations? Can team members utilize existing upgraded hardware instead of new machines? Can computer-based training, or team mentoring, be utilized instead of formal training? Can one person travel to the customer's location instead of two or three? In each of these cases, you are attempting to satisfy the original need, but by using a less-costly alternative.
Improve processes. There may be cost overruns caused by inefficient internal processes. Get team member feedback and look for ways that are within your team's internal control to streamline processes. If there are cost implications caused by external processes, try to negotiate changes to the processes on a going forward, or at least a temporary basis.
"Zero Tolerance" scope change. Work with the customer and team members to ensure that absolutely no unplanned work is being requested or worked on, even if it is just one hour. All energy should go into completing the core work that was agreed to. All approved changes to scope must also contain incremental budget.
Regain commitments. Work with team members to evaluate future work, re-validate estimates, and gain commitments to complete the remaining work within budget.
Use budget contingency. If the project is trending overbudget because of underestimating some of the work, start to dip into your estimating contingency, if you have one. .
Scale back work. If the budget is firm and you cannot get the remaining work completed within the budget, raise the situation as an issue. If no other options are found, work with the customer to reduce the scope and deliver less within the original budget. This will first require issues management, and then scope change management. Update the Project Definition, if necessary, and replan the project based on the new remaining workload.
