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Question: Why Do Projects Cost More Than Expected?

There are a lot of possible reasons for this.  I’ll enumerate the reasons why I think projects cost more than expected, and then discuss the most probable ones.  Let me know what you think!  Got a few more reasons?

  1. Forgotten tasks
  2. Unknown tasks
  3. Customer expectations change
  4. Feature creep

My biggest issue is always ‘forgotten tasks’.  In my experience, forgotten tasks results in project cost overruns more often than any other reason.  People tend to throw out a cost before they have listed all the work involved.  Halfway down the road, they remember 25 – 50% more tasks.  That adds up!

Sometimes, one thing leads to another.  Tasks that you didn’t know about pop up.  What are you going to do when that happens?  You can’t just abandon the project.  You have to eat the extra work and absorb the cost overrun.

Once your customer gets a look at the product, he may have a few new ideas of his own.  He may see something he likes, and feel free suggest some additions.  Those add up too.  Just make sure he knows that he must absorb the additional project costs.  Otherwise, you’ll end up eating that too.

Feature creep happens when customers and developers like what they see and want a little more, and little more, and a little more.  Before you know it, there’s an extra 10% cost in the project.  Yikes!

–ray

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Computer Jobs Hit Record High

Last week CIO Insight reported that IT jobs had reached a record high (four million IT workers), and IT unemployment had fallen (2.3 percent).  That’s phenomenal!  See the link below.

 

http://www.cioinsight.com/c/a/Workplace/Computer-Jobs-Hit-Record-High/

 

Okay, great news, but why is IT spending down?  While I have no hard facts, I have my theories.  Bear with my madness while I explain.  Post a comment if you don’t agree!

1. It’s summertime.  IT spending falls when the temperature rises, and rises when it falls.  November, December, and January are traditionally big months.  June and July…  Well, they are another story.  🙁  People are out and about, and they don’t want to worry about buying stuff.  They’re too busy checking out the next vacation spot on the web.  Yikes.

 

2. Gas prices.  People bring their personal woes to work.  Got trouble filling your tank?  Then you won’t spend money at work either.  What, you say?  There’s no hard connection between the two.  No, but there is an indirect one.  If you’re worried about finances at home, you’ll worry at work as well.

 

3. Too many salaries.  Or, perhaps spending is down because there are too many mouths to feed.  That’s always a possibility, but I suspect it’s the other two reasons.  We’ve had other times with low unemployment, and high spending.

 

–ray

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Green is Just Plain Dumb

The ‘Green Fad’ really bothers me, especially in the IT biz.  CIO Insight had a big article in eWeek on ‘How to estimate energy efficiency.”  The upshot was that a single Intel server consumes 29 KWhs  (that’s 29 kilowatt hours of electricity) per week.  Yikes!  29,000 watts!  That’s a lot, right!!!  That’s what the article wants you to believe.  Until you think about it…

One kilowatt of electricity costs about 7 cents.  29 x .07 = $2.03 per week.  Huh?  Two dollars a week?  That’s all?  So what’s all the fuss about?

Check this out:  http://answers.yahoo.com/question/index?qid=20080624182135AAmXpHF

The article left out this little bit of information.  But it did say that all the data centers in the world consume $2.5 billion per year.  That big number is supposed to scare you.  As if you had to pay the full bill yourself.  You can handle $105 per year, but not $2.5 billion.  What are we going to do???

I say, focus on things that matter.  $2 per week doesn’t matter compared with the thousands of dollars per week we pay for salaries, advertising, operations, shrinkage, etc.  But we like to talk about the ‘cool’ things like ‘Green Initiatives.”  Bunk.

 

–ray

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Define: Project Milestone

Project Milestone: A marker in time, usually indicating a the completion of a project task.

 

Project milestones offer a place in time to stop and analyze your progress.  Have you completed the tasks you had planned?  Is your project on track?

Project milestones are normally project tasks with zero-duration work.  That is to say, no work is expected for such a task, except to stop and monitor your current progress.  They often display in a Gantt chart with a diamond shape to indicate that stopping point.

 


Milestone task from Standard Time

 

–ray

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How To: Use Master Projects

This post will discuss the simplicity of using master projects in MS Project.  The image below shows a master project with two subprojects under it.  Three MS Project MPP files are required to create the project below.  The master project file is independant of the individual subproject files.  Follow the steps below to create a master project with subprojects.  Notice the green icons next to Sub1 and Sub2.  They indicate the sub-files included in the main master mpp file.

 


Master project and two subprojects

 

To create a master project in MS Project:

  1. Create a new MS Project file named Sub1.mpp (see the example above)
  2. Add some tasks
  3. Create another mpp file named Sub2.cpp
  4. Add some tasks to it
  5. Create a third mpp file to act as the master project
  6. Click in the first row of the master project
  7. Choose Insert, Project…
  8. Choose Sub1.mpp
  9. Repeat steps 6 – 8 for the second subproject (the results should be similar to the image above)

 

–ray

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Define: Resource Utilization

Resource Utilization: Percentage of hours actually worked, when compared with possible working hours.

 

Formulas:
    Utilization = ActualWork / TotalHours
    EffectiveRate = ActualAmount / TotalHours

 

Standard Time® contains a resource utilization report that looks similar the to image below.  Notice the ‘Scheduled Hours’ value, and the ‘Actual Hours’ under it.  These number are used in the formula above to arrive at the ‘Utilization Percentage’ of 103.8%.  This person obviously worked an extra 1.5 hours.

The effective billing rate is related to these numbers as well.  In this case, the person worked on some high-value projects at caused his effective billing rate to be higher than normal.  That’s a good thing!

 

 

–ray

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Fortune Favors the Brave

Something in Bill Gate’s interview has been hanging with me (see quote below).  I suppose he always says this, whether they are making risky bets or not.  And I suppose Microsoft can make risky bets all the time.  They can afford to.

We’re making sure we take some risky bets.

 

What’s hanging with me is the effect that ricky moves have on small companies.  The first thing to understand is that risk produces reward, just like the Roman poet Virgil said in 19 BC.  “Fortune favors the brave.”  That’s nice to know.  Its a special promise, just for the brave.  Not for the weak and fearful.

But that fortune can take years to realize.  What do you do in the meantime?  After all, you don’t just get brave on isolated occasions, and magically watch the fortunes roll in.  You must stay brave all the time.  So that’s the second thing you should know.  Staying brave is harder than it looks – a lot less glamorous than one might imagine.  And it’s boring.

Yes, boring.  You slog along through thick and thin, excersing your braveness along the way.  Nobody is watching.  Nobody applauding.  You just fight for your vision, and hope you were right.  Only time will tell.

But how do you inject bravado into your project team?  How do you energize them to fight when everyone else says give up?  The answer is simple: be a bright light in a dark world.  People will naturally follow.  No coersion is necessary, just a strong, clear vision.

 

–ray

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Telecommuting: Got Motivation?

Over half (51%) of CIOs and top leaders dislike telecommuting.  See the CIO Insight article below.  If I were asked, I’d favor it… but only under certain circumstances.

http://blogs.cioinsight.com/parallax_view/content/workplace/most_employers_resist_telecommuting_1.html

 

I’ve telecommuted for the past 15 years, and it has worked great for me.  My next-door neighbor, Dean, is an IT manager, and he works from home three days a week.  With a 100-mile RT commute, that’s no surprise.  Personally, I wouldn’t work fifty miles from my work unless they paid me a lot of money!

But telecommuting doesn’t work for everybody.  Unfortunately, a lot of people suffer from a lack of self-motivation.  I personally don’t, except at about 4 PM on Friday afternoons.  Working from home can be a lonely proposition, especially if your family is away, or if you have no family.  What keeps the motor running?  Why work?  You have to be personally vested in your project team’s success.  You have to love it so much you’ll split rails to get your work done.  In our affluent society, that’s not normally the case.

Another problem: project teams can’t easily meet.  Yes, there’s telephone, email, and GotoMeeting, but are you using those tools?  Does your team meet regularly?  And if so, are you just a laptop screen on a conference room table?  Where’s the group dynamic?

I favor telecommuting when there are solid, measureable heads-down project goals, or when employees are financially vested in the project.

 

–ray

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Build vs. Buy

Every company needs specialty tools to make their company run – little things to help make things easier.  For example, a cabinet shop might need custom-built jigs.  An auto mechanic may build a few of his own tools for jobs he performs frequently.  High-tech companies certainly build plenty of in-house programs to manage information technology – databases, data entry, customer records, etc.

The question I’m posing is this: when is it right to build those custom tools in-house, or when should you go out and buy a suitable tool instead?  For instance, should an auto mechanic build his own 500 piece wrench set, or go down to Sears and buy them?  Should a tech company build a time tracking product from scratch, or license something like Standard Time®?

Since I’ve personally worked in consulting for a number of years (in another life), I’ve seen it all.  I’ve seen companies build products that were available off-the-shelf for 1/100th of the cost.  And, I’ve seen people shoehorn freeware code and products into commercial use.  Both were mistakes.

I tend to say that companies should only build products that are much more expensive to buy.  In other words, don’t try to write your own compiler – Microsoft does that just fine.  Another reason to build is when you have exotic business needs.  One last reason might be if you have time on your hands.  If you’re not making money serving customers, maybe you’ll have time to write and maintain a few necessary tools.  But that’s a dangerous position to be in.

In IT, we ignore such advice because we know we can build everything.  But I suppose the mechanic with a little metal-working and welding experience does the same thing.  🙂

What tools have you built, and regretted it?  Post a comment and let me know!

 

–ray

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Define: Actual Work

Actual Work: Hours collected in a timesheet or with a timer indicating the total project hours an employee has actually worked.

 

Collecting actual work in a product like Standard Time® in important.  It allows you to compare your original forecasts with the actual hours worked by employees.  This can lead to some valuable metrics, including percent complete and estimation variance.

Assuming your original estimates are close, percent complete will tell you how far along the project is.  This is obviously more valuable to project managers and executives who are slightly distanced from the day to day tasks.  In some cases this can be their only indicator of the project status.

Refining your estimations can also be valuable, especially if your company performs the same projects over and over again.  Only actual work can give you exact numbers, and that can lead to more profits.

–ray