Estimate Project Costs Across Three Main Categories

Estimate Project Costs Across Three Main Categories

Once you understand the work of the project you can estimate the resources that will be required to complete the work. Knowing the resources allows you to estimate the costs of the resources to the project. There are three main areas where costs come into play.

Labor costs

The cost of labor is derived by looking at the effort hours of each resource and multiplying by the hourly (or daily) cost of each resource. In many companies, estimated labor costs for internal employees are assumed to be zero, since their costs are already accounted for in a departmental budget. This does not imply there is no cost. Rather, it assumes there are no incremental costs over and above what the company is already paying for.

If you are using external contract or consulting resources, their costs always need to be estimated and budgeted. You have to determine the type of external resources you need and the hourly rate of the resources and how many hours you need. If you are not sure of the actual resource cost, you need to make some assumptions based on the general type of resource. For instance, there may be a standard hourly cost for accounting contractors or programming contractors.

Non-labor costs

Non-labor expenses include all resource costs not directly related to salary and human contractor costs. Some of these costs, like training and team-building expenses, are related to people. However, they are still considered non-labor since they are not related to employee salary or contractor hours. Non-labor costs include:

  • Hardware and software
  • Travel expenses
  • Training 
  • Facilities
  • Equipment
  • Material and supplies
  • Depreciation
  • … more

Each project manager must be aware of the accounting rules in his own company to make sure the labor and non-labor costs are allocated correctly.

Outsourced costs

This is a third category of costs. For practical purposes this is considered non-labor costs. However, it is a cost that is provided to you by a vendor to complete some pre-specified piece of work. As a project manager, you don’t need to determine resources and the costs of resources. This is the vendor’s responsibility. You just need to understand the scope of work to be completed and the cost of that work. In some projects, especially construction and engineering, the vast majority of the work may be outsourced to vendors. On those projects it is important to provide clear scope of work feedback to the vendors and then aggregate that costs of all vendors to come up with final project cost estimates.  

Document all assumptions

Don’t forget. You will never have all the information you need with 100% certainty. Therefore, it is important to document all the assumptions you are making along with the estimate. If you change your assumptions, it is likely to change your estimates.

Four Planning Techniques to Save Time on Your Project

Four Planning Techniques to Save Time on Your Project

“Planning” is a very general term. When you say you are planning a project, you are really validating scope, creating a Charter, estimating, creating a schedule, and more. Here are four techniques to use when you plan your projects. They may take a little longer in the planning process, but will save you much more time over the life of the project.Use Multiple Estimating Techniques if Possible

An important part of planning is being able to accurately estimate the work activities. Estimates of effort hours will, in turn, drive the cost and duration estimates. There are a number of techniques that can be used to estimate work – analogy, expert opinion, PERT, modeling and more. If possible, try to use two or more techniques for the estimate. If the estimates from multiple techniques are close, you will have more confidence in your numbers. If the estimates are far apart, you can look at the reasons and determine whether one technique may be more accurate than another.

Plan at Least One-Phase Ahead

Doesn’t it seem that most problems that are encountered on a project tend to surface later rather than earlier? In fact, some project managers purposely hurry through planning because they think they will catch any mistakes and fix them as the project progresses. 

Unfortunately, the longer it takes for errors to be caught, the more time-consuming and expensive it is to fix them. Try to prepare for each phase of the project at least one phase in advance. For instance, fully planning the work will save time in the analysis phase. Getting the analysis work right the first time will make the design phase go more smoothly. In general, smart time investments early will more than make up for itself in future phases.

Create a Short-Term Schedule to Guide the Planning Processes

The process of planning the work may take a long time and may be very complicated. Therefore, the work should not be unorganized – for the same reasons that you are building the schedule for the project to begin with. Immediately after being assigned, the project manager should create a short-term schedule to cover the initial planning activities. For example, if the planning work is expected to take four weeks, you need a preliminary schedule that covers at least four, if not five or six weeks. This preliminary schedule covers all of the organizing and up-front planning activities until the formal project schedule is completed to guide the remainder of the project.

Establish the Triple Constraint when the Planning is Completed

At the end of the planning process you should have an agreement with your sponsor on the scope of work, the cost and duration that are needed to complete the work. These three items form a concept called the “triple constraint”. The key aspect of the triple constraint is that if one of the three items change, at least one, if not both, of the other items need to change as well. For example, if the scope changes, normally budget and schedule change as well. If the timeline is reduced, it may require a decrease in scope and/or an increase in cost.

Gain More Performance Feedback with a 360 Degree Review

Gain More Performance Feedback with a 360 Degree Review

Performance reviews can be a stressful time for staff – and managers. It takes a great deal of thought and care to give honest and thorough performance feedback

. If you have to deal with negative performance, the anxiety level can be off the scale. Because performance feedback is difficult, many, if not most, performance reviews are shallow at best.

One of the major criticisms of the review process is that managers cannot see how a person performs on the job – especially if the employee works on projects with different project managers.

A 360 degree review provides more realistic perceptions of performance

One way to be as fair as possible with employees is to ensure that performance feedback is not totally based on the manager’s perception. The manager should also seek feedback from other people that the employee works with on a daily basis. This is called a 360 degree review process. Typically this includes feedback from the rest of their team (peers) and relevant stakeholders. If the employee is also a manager (functional manager or project manager), feedback is also sought from their direct reports.

The main purpose is to help the reviewee

The 360 degree feedback is a way to help the manager get a more balanced view of the employee’s performance. However, the ultimate value of this process is realized by the person being reviewed. The employee should see the review process as an opportunity to get an outside perception of his strengths and areas where he can improve. Ultimately the employee should take a personal interest in the review process to ensure that he can grow professionally and provide more and more value to the organization.

The 360 degree review process provides more input to the employee. Not only do you have performance input from your manager, but you have feedback from stakeholders, team members, and direct reports as well. This feedback is invaluable to see how others view you, your skill level and your performance level.

Review Three Techniques to Create a Work Breakdown Structure

Review Three Techniques to Create a Work Breakdown Structure

The Work Breakdown Structure (WBS) is the first step to create a schedule. The WBS helps break the project work into smaller pieces that help more easily understand the work. Here are three techniques that can help you understand the WBS for your project.

1. Understand the difference between detail and summary activities

If you look at a WBS activity and determine that it needs to be broken down to another level, the original activity becomes known as a “summary” level. A summary activity represents a logical roll-up of the activities that are under it. On the other hand “detailed” activities are those that have not been broken down further. Once the detailed activities are under the summary activity are completed, the summary activity is also considered to be completed.

2. The top-level of the WBS can be the hardest to define

Sometimes people have a hard time getting a WBS started because they are not sure what to put at the very top and they are uncertain about how to break the work down from there. There are a number of options for defining the WBS at level 1 (under the top level 0).

  • It might make sense to place the major project deliverables directly at level 1, and break the deliverables into smaller components on the next level, if necessary.
  • Another option for level 1 is to describe the organizations that will be involved, such as Sales, Marketing, IT, etc. The next level should describe the deliverables that each organization will produce. 
  • A third option is to look at level 1 in terms of the project life cycle; for instance analysis, design, construct, etc. If that is the best logical way to look at level 1, then level 2 should describe the deliverables produced in each life cycle stage.

Although there are many ways that the WBS can be started, ultimately you want to uncover deliverables.

2. Identify top-level structure first, then deliverables, and then activities

After the top level (or maybe level 2), you start by writing the names of the major deliverables on Post-it notes – one deliverable per note. The deliverables are placed within the organization structure defined at level 1 – by organization, by phase, etc. If any of the deliverables are very large, you can create a lower level under that deliverable that describe the deliverable at a lower level. This lower level is a “work package”. In general two levels should be enough to describe the deliverables and the work packages that make up the deliverable. A very complex deliverable might need three levels.

At this point you have a deliverable-based WBS. You can break the work down further into the detailed activities that are needed to actually build the deliverables. If you go to this kevel you have an activity-based WBS.

Goals, Strategies and Objectives Explained

Goals, Strategies and Objectives Explained

The definition of goals, strategies and objectives can vary from company to company. Here is the TenStep definition. I think it is a good one.  

Business Goals

TenStep does not use the term “project goals”. Goals are set at the organization level – not the project level. Objectives are at the project level.

Goals are high-level statements that describe what are organization is trying to focus on for the next three to five years. They are vague (on purpose) and they are direction-setting. Because the goal is at a high-level, it will take many projects over a long period of time to achieve the goal. The goal should reference the business benefit in terms of cost, speed and/or quality. (We call this “better, faster, cheaper”.)

Goals are vague, but not too vague. If you can measure the achievement of your goal in one year (i.e. 25% revenue increase by the end of the year), it is written at too low a level and is more of an objective. If your goal is not achievable through any combination of projects, it is probably written at too high a level. Perhaps it is more of a vision.

Business Strategies

Business goals tell you what is important. Strategies tell you how you are going to achieve the goals. There may be many ways to achieve your business goals. Your organization’s strategies are a high-level set of directives that articulate how the organization will achieve the goals, and ultimately move toward its long-term vision. Strategies are more inwardly focused and usually try to leverage internal capabilities. For example, many organizations want to get better at project management. Getting better at project management will not directly align to a “better, faster, cheaper” goal. It is more of a “how” so it better aligns to strategy. Your organization could have a strategy to execute projects more effectively and a project management initiative can align to this strategy. 

(By the way, your company’s Strategic Plan likely includes both goals and strategy statements.)

Project Objectives

Objectives are concrete statements that describe the things the project is trying to achieve. An objective should be written at level that it can be evaluated at the conclusion of a project to see whether it was achieved. A well-worded objective can be Specific, Measurable, Attainable, Realistic and Time-bound (SMART). SMART is a technique for wording the objective. An objective does not absolutely have to be SMART to be valid.

Objectives are important because they show an agreement between the project manager and the project sponsor on the main purpose of the project. The objectives should be written in a way that they are understandable by all of the project stakeholders. Objectives are also valuable since they provide alignment to organization goals and strategies. The project objectives should align to your organization goals or strategies. 

Project Management Templates Building Teams

Build Teams with Project Management Templates

So you’re a Project Manager on a new project and you want to build a high performing team using project management templates? Excellent, this is a great goal to strive for.

But it’s not easy, especially in the project environment which has its own challenges. To do it, take these tips for…

Building high performing teams

What exactly is a high performing team? It’s “a team that exceeds the goals you set, by working hard and smart, as a group, not individuals.”

Whether you’re in IT, construction, engineering or another industry, building a high performing team is critical to success. You can do it in just 5 steps…

1) Planning

Before you hire your first person, you need to document what it is that your team have to achieve and by when. You also need to create specific Job descriptions that set out your expectations for each role and how you’ll measure their performance.

Don’t stop there. Think about the team culture you want to build, the dynamics of your team and how they should work together. Only with a personal vision for how your team will perform, will you be able to meet that goal.

2) Recruiting

Recruitment is harder than it looks. It’s easy to recruit the wrong person, and it’s even easier to build a team that don’t perform well. A candidate should only be recruited if they fit the job description, align with your personal vision for how the team will work together and they want to work in a culture that depicts your vision.

Take your time. Be swayed by your gut feel. Recruit “like-minded people”. Introduce them to high performing staff you know of and get their feedback. Be choosy. Recruit the best. If you have to pay top dollar for top performer, it will often cost less in the long run, than a cheap resource who doesn’t perform.

3) Culture Creation

If you’ve hired “like-minded people” then they will all like each other, and that’s a great start. Get them working together on tasks. Constantly change the people you peer up, so that people get to know others in the team.

If your ideal culture is “performance through achievement” then shout out loud about each team success. And if you want “performance through happy customers” then strengthen the relationship between the team and your customers. Get them socializing. Try team sports.

4) Self Motivation

A happy motivated team will always out-perform an unhappy unmotivated one. And it starts with you! Are you happy and motivated? Get on track personally by working out, relaxing after hours, de-stress and set personal goals. Your motivation will rub off on your team.

Then when you’re ready, focus on motivating your team. Use team building and group rallying exercises to get them pumped. Tell them how proud you are to work with them. Help them understand why the goals are important and how every team member contributes to them.

5) Recognition & Reward

People only respond positively to positive behavior. So you need to constantly recognize achievement when it’s due. Tell the team about an individuals success. Make them feel proud. Spread the love—don’t focus on one team or person too frequently.

And reward them when it’s due. Reward them unexpectedly as people will appreciate it all the more. Meals to restaurants, tickets to the super-bowl. These things mean a lot to staff when they didn’t expect it!

And there you are. If you plan for success, recruit a great team, build a positive culture and recognize achievement, then you’ll build a healthy project team and boost your chances of success!

And if you want your team to perform even better, download the Project Management Templates Kit now to save time completing projects.

The Customer May Not Know Enough to Completely Define the Project

Sometimes the project manager places too high an expectation on the amount of foresight and vision that customers and sponsors have. In many cases, the project manager will go to the customer looking for answers to help define the project and the customer will not have all of the information needed. This happens all the time and it does not mean that the customer does not know what they are doing. In many cases, especially for large projects, the customer has a vision of what the end results will be, but cannot yet articulate this vision into concrete objectives, deliverables and scope.

There are three approaches for when you don’t know very much information on the nature of the project.


Increase Estimating Range Based on Uncertainty

Based on having less than complete information, the  project manager may feel the need to guess on the details. This is not a good solution. It is better to state up-front everything that you know, as well as everything that you do not know. If you are asked to come up with estimated effort, cost and duration, you will need to provide a high and low range based on the uncertainty remaining. On a normal project, for instance, you might estimate the work within +/- 10%. On a project with a lot of uncertainty, the estimating range might be +/- 50%.


Break the Work into Smaller Projects

Another good alternative is simply to break the work down into a series of smaller projects based on what you know at the time. Even if the final results cannot be clearly defined, there should be some amount of work that is well defined, which will, in turn lead to the information needed for the final solution. You can define a project to cover as far as you can comfortably see today. Then define and plan subsequent projects to cover the remaining work as more details are known.  For instance, you could create a project that gathered business requirements, and then use the results of that project to define a second project to build the final deliverables.


Uncover the Details as the Project Progresses

If you are not allowed to break the project into smaller pieces, you should at least know enough that you can plan the work for the first 90 days. In this third approach, you plan the short-term work in more detail, and leave the longer term effort more undefined. Each month you should redefine and plan the remaining work. As you uncover more and more information, you can plan the remaining work at a more detailed level. As you uncover more details, you can refine your estimates and work with the sponsor to make sure it is still okay to continue.

This last approach uses an Agile philosophy. Agile projects are generally exploratory. The details of the project are uncovered as the project progresses. (There are many more differences in Agile projects, but this philosophy is one.) In a traditional project management model this would also be known as ‘progressive elaboration’ – which also means more details are uncovered as the project progresses.

Proper Timesheet Management

Four Responsibilities of Executives on Projects

A Primer on Processes and Templates

Recipes for cooking are a beautiful thing. A recipe tells you the ingredients and how much of each you should include in whatever you are making. It then describes what you need to do to these ingredients in order to make a dish that is not only edible, but tasty as well. It’s great that someone else has already spent the time in putting together a recipe to follow that nearly guarantees success each time.
To a certain extent we use recipes in our profession as project managers. The recipes we follow are the processes and templates that guide our projects to success each time. How can you put a process together and make the most of templates? Consider the following:
A Primer on Processes and Templates

Start with Phases

To put a process together, a good starting place is defining the major phases in which a project must go through. Think about how a project moves through your organization, and document those major steps. For example, a simplified software development approach would include the following phases: Planning, Design, Development, Testing, and Implementation. These phases are the framework in which you begin filling in details about the process.

Move on to the Outputs
The next area to concentrate on is the outputs, or end results, from each of these major phases. Ask yourself what tangible deliverable needs to be complete by the time you finish the Planning, Design, or Development phases. Focus on tangible results, or something you can see, touch, perform an action on, or feel. For example, the Planning stage is going to be filled with meetings and conversations that by themselves do nothing to move the project forward. However, the approved Business Requirements Document is an invaluable output that can propel the project forward to the next Phase of Design.

Back up to Inputs

Now that you have the tangible end results (or deliverables) of each phase defined, ask yourself what needs to be present at the beginning of each phase to create such results. Continuing with our example above, the output of the Development phase would be software functionality that can be tested. In order to accomplish this, the engineering team will need High Level and Low Level design specifications as Input. This will allow them to know not just what they are going to build, but more importantly, how they are going to build it.

Establish Conversion Activity

You now have the Inputs and the Outputs for each of the phases of your process. The final step is to determine what needs to be done to convert the Inputs to Outputs. Think about it this way…what has to be done to change the gooey mess of runny batter into a cake? You need to bake the cake. There’s your conversion activity. Likewise, what do you need to do to convert software that is ready to be tested to software that is production ready? You need to create test plans, execute test plans, and document the results.

What About Templates?

Templates are incredibly useful for all areas of process you create. You can use templates for your inputs (i.e. Business Requirements Document), your Outputs (i.e. an approved User Acceptance document from the customer) and all points in between. Create templates that will provide consistency and make it easy to transition from one phase to the next with confidence.

One word of caution when it comes to process and templates…don’t overdo it! Create just enough process and documentation around your project to float the boat. It can be tempting to have a process or template in place for every little thing. Resist that urge. Remember, too much of a good thing can ruin a good thing. Stick to the recipe and you’ll be able to guarantee consistent results time and time again!

Manage Political Problems as Issues

The larger your project gets, the more you will find that the issues you encounter are political in nature. “Politics” is all about interacting with people and influencing them to get things done. This can be a good thing, a bad thing, or a neutral thing, depending on the tactics people use. Let’s consider some examples of how utilizing political skills might be good, but can also be bad.

  • You are able to move your ideas forward in the organization and get people to act on them (good), by currying favor, suppressing other opposing ideas and taking credit for the ideas of your staff (bad).
  • You have an ability to reach consensus on complex matters with a number of different stakeholders (good),by working behind the scenes with people in power, making deals and destroying people who don’t get on board (bad).
  • You receive funding for projects that are important to you and to your organization (good), by misrepresenting the costs and benefits, and by going around the existing funding processes (bad).

The point of the examples is to show that influencing people and getting things done in a company is a good thing and “office politics” can have good connotations or bad.

Dealing with office politics is not a standard project management process. However, once the politics start to impact the project adversely, the situation should be identified as an issue, since it is a problem whose resolution is outside the control of the project team. You can’t utilize a checklist to resolve political issues. Political problems are people-related and situational. What works for one person in one situation may not work for another person in the same situation because people, and their reactions, are different. Identifying the problem as an issue will bring visibility to the situation and hopefully get the proper people involved in the resolution. Keep three things in mind to manage a political issue.

  • Try to recognize situations and events where politics are most likely to be involved. This could include decision points, competition for budget and resources, and setting project direction and priorities.
  • Deal with people openly and honestly. When you provide an opinion or recommendation, express the pros and cons to provide a balanced view to other parties. Make sure you distinguish the facts from your opinions so the other parties know the difference.
  • If you feel uncomfortable with what you are asked to do, get your sponsor or your functional manager involved. They tend to have more political savvy and positional authority, and they should be able to provide advice and cover for you.

If you feel good about what you are doing, how you are influencing and how you are getting things done, then you are probably handling office politics the right way. If you feel guilty about how you are treating people and if you have second thoughts about the methods you are using to get things done, you are probably practicing the dark side of office politics.