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26 Oct 2016

PRINCE2 Risk Management

Posted by PRINCE2 Canada. Comments Off on PRINCE2 Risk Management

PRINCE2 risk managementPRINCE2 Risk Management

In a project is risk inevitable?  It’s a question that I always ask at the beginning of the PRINCE2 risk session on the course.  Of course the answer to this is yes.  PRINCE2 describes uncertainty as a characteristic of a project.  Well in PRINCE2 uncertainty = risk.

The PRINCE2 risk theme describes a risk as “an uncertain event or set of events that, should it occur will have an effect on the achievement of objectives”.  Quite simply a PRINCE2 risk is something that you have identified that may happen and could have an impact on what you are trying to achieve.

Threat or Opportunity

It is said that the Chinese character for risk has 2 parts. One for danger and the other for opportunity.  Well the PRINCE2 risk theme also describes a risk as a threat or an opportunity.  When I first read this I thought that’s not right.  “A risk is something that if it happens will  harm my project not enhance it!”  But look at the description above again.  It does make sense.  It’s an uncertain event that could have a negative or positive impact on your project.

PRINCE2 Risk Theme

So if risk is a part of project life the key is to accept that and make sure you have a good procedure in place to identify, assess and control it.  This is where the PRINCE2 risk management theme comes in.  It tells you that you must prepare a Risk Management Approach (it gives you a description for one in the PRINCE2 manual) where you will document your procedures for controlling risk.

Not only that the PRINCE2 risk theme gives you a risk management procedure.  It has 5 steps to follow.  It is pretty much just commons sense but that’s what PRINCE2 is good at. Common sense.

PRINCE2 Risk Management Procedure

Step 1 – Identify

The PRINCE2 risk management procedure says first of all you need to identify the context of your project.  What are the specific objectives that are at risk and to prepare your Risk Management Approach.

You then need to identify the risks to your project.  Both threats and opportunities.  Once identified they should be recorded in the Risk Register.

Step 2 – Assess

The PRINCE2 risk management procedure then says that for each risk identified you need to estimate the probability, impact and proximity.  This will allow you to decide what risks are the ones you are going to keep more of an eye on.

You also need to think of the overall risk exposure of the project.  So you should also assess the net effect of all risks in the project.

Step 3 – Plan

The PRINCE2 risk management procedure then says you need to plan your response.  It gives you a number of response categories to think about.  Such as avoid the risk, reduce the risk, transfer the risk etc.  The PRINCE2 manual provides you with definitions and examples of these.

Step 4 – Implement

Well you have planned your response so the PRINCE2 risk management procedure now says you need to carry it out.  So the next step is to implement your action.

To help with this PRINCE2 identifies a couple of roles that need to be allocated.  The Risk Owner and the Risk Actionee.  The Risk owner would be a named individual who would be responsible for monitoring and controlling the risk whereas the Risk Actionee would be responsible for carrying out the response.  Now in reality it is most likely the same person that performs both roles but it can be different people.

Now these 4 steps – Identify, Assess, Plan and Implement happen in sequential order. The 5th step should happen continually. That step is…

Step 5 – Communicate

Communication is vital in project management and when managing risk.  You will need to communicate risks to other members of the team or to other stakeholders.  PRINCE2 gives you many ways of communicating about these risks through the set of management products it offers.  These can be used in the PRINCE2 risk management procedure to make sure you communicate effectively.

So risk is inevitable.  But as you can see from above PRINCE2 gives you the tools to be prepared.

 

20 Sep 2016

Initiating a PRINCE2 Project – Don’t Just Do It

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Initiating a PRINCE2 Project – DON’T Just Do It

When you initiate your project you may be tempted – or pressured – to ‘get on with it.’  You must resist the ‘Just do it’ method and take the time to scope and plan your project properly.  It is absolutely essential to set aside sufficient time to properly define and plan your project as this will pay dividends when you come to deliver it.

This is the purpose of the Initiating a Project process in PRINCE2.   Initiation is the second of the PRINCE2 Processes and the Initiation Stage is always Stage 1 in a PRINCE2 project.  The purpose of a successful Initiation is to answer to key questions such as:

  • Why are we doing this project?PRINCE2 Initiation Stage
  • What is it we have to deliver and to what quality?
  • How long will it take?
  • Who needs to be involved?
  • How are we going to monitor and control the project?

In my experience as a PRINCE2 Project Manager, the projects which answer and, most importantly, document, these questions at the start are much more likely to succeed than those which ‘just do it’ as they go along.

Failing to put the time in up front can often leave your project exposed to a considerable number of risks.  No guarantees can be made that even a project which goes through a good Initiation Stage will be successful but it certainly provides a much better environment for successful delivery rather than relying on the ‘just do it’ approach.

How to Initiate a PRINCE2 project

Key elements to Initiating the Project include:

  • Scoping and planning the project to a reasonable level of detail
  • Ensuring that an acceptable PRINCE2 Business Case exists for the project and this is supported by a good understanding of the potential risks
  • Understanding the quality aspects required to be met in project deliver
  • Identifying the appropriate controls that will be used in the project
  • Carrying out an appropriate Stakeholder analysis
  • Setting up the structures in which we will capture the project information.

There is no doubt that stepping through each of these can take time but it is well worth the investment as each of these can have a significant impact on your Project Plan and Business Case.  Our objective during the PRINCE2 Initiating a Project process should be to deliver the project in a controlled environment. The Initiation stage should be the point at which these controls are considered and agreed.  This is a key point in the project when the approach to PRINCE2 Themes, including Quality, Risk, Change and Progress control should all be defined so we can understand the impact on our project of each of these areas.  We shouldn’t wait until we need them before we tailor them to the individual Project environment.

We need to ensure that we scope our project properly.  Using PRINCE2’s Product Based Planning technique to prepare our Project Plan gives us a great tool to achieve this.  It is important to define this before the project starts otherwise we leave our project exposed to uncontrolled changes in scope.  Risk can have a major impact on the successful delivery of the project and understanding the risks involved and planning contingency measures in the initiation stage can reduce our project’s exposure to failure . Managing risk consumes resource and time therefore we need to identify these.  Stakeholders can have a significant impact on project delivery and properly engaging with Stakeholders effectively consumes resources and time. Our PRINCE2 Project Plan needs to reflect the effort which this communication and issue management will take.

Time invested in initiating your project can pay real dividends during the course of its delivery – it should never be underestimated. PRINCE2 provides a great description of what happens when you initiate your project.  PRINCE2 resources or training events will step you through each activity of the Initiation process and provide templates and checklists to make it a success.  It is well worthwhile utilizing this as it will support you in the effective delivery of your project.

So, don’t ‘Just Do It’ – Initiate It instead!

About the Guest Author

Alvin Gardiner MBA is a PRINCE2 Approved Trainer, Practitioner and Registered Consultant.  Alvin is the UK Prize Winner for the best use of PRINCE2 following his work to introduce structured project and program management at the Registers of Scotland Land Registry.  Alvin regularly lectures in PRINCE2 in Canada and is also a Management of Portfolios Approved Trainer

23 Aug 2016

Best Management Practice – an Introduction

Posted by Paul Atkin. Comments Off on Best Management Practice – an Introduction

Best Management Practice – an Introduction

Many Canadian Project Managers know about the PRINCE2 methodology but few are aware that it is part of group of well established best practices for Portfolio, Program and Project Management (PPM).  Best Management Practice standards include:

MoP – Management of Portfolios, MSP – Managing Successful Programs, PRINCE2 – Project Management Methodology, MoR – Management of Risk

Each standard is based on a common PPM Glossary so you only need to become familiar with the terminology once. Most standards are not new. They’ve been through several refreshes so you benefit from mature guidance which has been developed from successful best practice around the world. All standards are free to use and include ready to use templates, processes and how-to steps that can be put to immediate use.

Training by specialist Accredited Organizations is available and Foundation and Practitioner certifications are common to MoP, PRINCE2 and MoR.

MoP – Are we doing the right projects and programs?

At the Portfolio level, MoP is based on 5 flexible Principles along with Portfolio Definition and Delivery cycles to help organizations align programs and projects with corporate strategy. MoP supports successful business change by making sure that benefits delivered by programs and projects are aligned to strategic objectives.

MSP – co-ordinating projects and delivering transformational change

MSP recognizes 3 types of program in the journey from old to new ways of working. Programs may be:

  • Vision led – which is top down and focuses on strategic opportunities requiring a radical transformation of the business
  • Emergent – often the bringing together of a previously uncoordinated initiatives which may be better managed together
  • Compliance – the ‘must do’ programs where avoidance or failure would have negative consequences

MSP recognizes that a program is more than a sum of its parts and consists of many diverse stakeholders. MSP concentrates on the benefits that must be achieved for the organization and its governance model includes roles to both run the program and integrate new products, services and change with business as usual.

A Transformational Flow is used to describe the program journey from identifying and defining the program through to managing tranches, delivering new capabilities and realizing benefits.

MoR – Managing Risk from top to bottom

Risks – uncertain events – are common to all levels of PPM and operational management. MoR provides established guidance to manage risk both to ensure survival and provide competitive advantage in dealing with inevitable uncertainty.

Risk management is one way an organization establishes internal control and demonstrates good corporate governance and MoR’s systematic approach will help achieve compliance with standards such as Basel II or Sarbanes-Oxley.

MoR uses a number of enabler including appropriate context, stakeholder engagement and a supportive risk management culture to achieve measurable value in risk management based on a “prevention not cure” approach. This approach is delivered using a series of described strategies, policies, reports, plans and records. The MoR process itself is based on an Identify – Assess – Plan – Implement – Embed/Review cycle with a constant theme of Communication.

MoR is popular in the Canadian Health sector where organizations committed to PRINCE2 have taken MoR to improve both risk management and their maturity in using Best Management Practice standards

15 Jul 2016

That’s not what we want! Gaining Quality Requirements in PRINCE2

Posted by Paul Atkin. Comments Off on That’s not what we want! Gaining Quality Requirements in PRINCE2

That’s not what we want!  Gaining Quality Requirements in PRINCE2

This is a statement that gets made far too often in a project. How often do we fail to define what the customer actually wants? Or, in some cases, don’t even really ask them! Tire_Swing without PRINCE2

So how does PRINCE2 deal with this?  Well, one of the first things we do in a PRINCE2 project is to ask the customer what their quality expectations for the project are.  In PRINCE2, it is the Senior User’s responsibility to provide this information.  These would then be documented in the Project’s Product Description document.

If your project is to build your dream house. Some quality expectations might be:

“I want a big house”, “I want a nice view” or “It must meet current building regulations for safety” etc.

While that sets the scene, if it is all the information we have about quality we will have problems when it comes to creating the products.  In this case, what I consider a “big” house may not be what the customer actually wants.   But it is a good start and, to be fair, you can’t expect a customer to tell you “I want my new property to meet Planning Regulation XYZ Version 3.5”   So the next step is to take the Customer’s Quality Expectations and make them into measurable acceptance criteria

PRINCE2’s Acceptance Criteria

Acceptance Criteria are a list of measurable criteria that needs to be met to make the project acceptable to the customer.  They are documented in the Project Product Description and should be prioritized

If the customer wants a big house. How many bedrooms do they want, how many bathrooms etc?

During the Closing a Project process the Acceptance Criteria are checked and successful completion is the PRINCE2 answer to “are we done yet?”

So when do we ask these questions?

Well the Project Manager captures the Customers Quality Expectations from the Senior Users during the pre-project Starting up a Project process. During the Initiation Stage as more is known about the project these will be refined.

Of course, once the Customer’s Quality Expectation and Quality Criteria have been agreed we shouldn’t then just forget about them.  At the end of every stage we should go back to the customer and check that their expectations are the same and that the Acceptance Criteria are still relevant. Otherwise we will get to the end of the project, hand the product over and the customer could still say “that’s not what we want”.

Requests to change the Customer Quality Expectations or Acceptance Criteria must go through change control to examine the impact of the changes requested, the impact on the Business Case, timescales, costs, scope, quality and the risk profile of the project.  We take all this into account before making a decision as what to do next.  This allows us to keep control of the project (PRojects IN Controlled Environments) but at the same time allowing us to meet the quality requirements of the customer.

15 Jun 2016

PRINCE2 Exams – if in doubt, go for B

Posted by Paul Atkin. Comments Off on PRINCE2 Exams – if in doubt, go for B

PRINCE2 Exams – if in doubt, go for B

PRINCE2 Foundation or Practitioner certification on your CV is a very handy thing to have. More and more that is the main reason for students being in a PRINCE2 Training course.  “I need the qualification to get my next contract or move into my next role” is what I am being told.

So that means all the help students can get to help them pass both exams – Foundation and Practitioner is invaluable.

Here are some of my top trainer tips.

Read The Question

Probably the most important bit of advice I can give. In a PRINCE2 exam one word can make a difference to the right answer so you really need to focus on the question. As you are reading the question highlight the key words.

For the Practitioner exam also look for what information it is telling you to use. Does it say referring to the Project Scenario or Additional Information or both? Also how many answers do you need to give? If it says 2, give 2 – otherwise you have lost the mark.

If in doubt, go for B

There is no negative marking in either PRINCE2 exams so if you don’t know an answer – guess!  Not a really technical bit of advice but what have you got to lose? The answer is nothing. If you don’t know, at least get something down – “If in doubt go for B” – I tell students. You may just get lucky and if that is the difference between passing and failing I am sure you will be quite happy.

Practitioner Exam – 2 minutes a question, no more!

One of the biggest challenges for students taking the Practitioner is TIME. It sounds great when you are told it is open book but the reality is you don’t have the time to spend looking for things when you don’t know where to find them. I tell students they need to be aiming to spend 2 minutes per question.  Don’t spend more than this, even if it is a ‘good’ question for you – all questions carry equal marks.

Your PRINCE2 manual is your best friend

Knowing your way round the manual can be the biggest help or, as you can see from above, the biggest hindrance. There is nothing worse when proctoring a Practitioner exam when you see a student spending about 10 minutes trying to find an answer worth 1 mark. All I am thinking at that point is “put the book down – go for B!”

So get to know your manual – it can be tabbed to the sections and you can also make notes in it. So get it set up so you can find the answer quickly.

Hopefully this might help you in the exam – Good Luck!

25 May 2016

Project Governance by the Prince

Posted by Paul Atkin. Comments Off on Project Governance by the Prince

The Organization Theme and Governance by the Prince

“It ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things.”

Any modern project manager will sympathise with these sentiments yet they were written 500 years ago by Nicolo Machiavelli in his self-help book for Italian rulers;  The Prince.

Machiavellis Prince

Prince version 1. The original Project Manager’s guide?

Written after Machiavelli’s, arrest, torture and banishment from Florence (aka ‘a negative project review’), this ‘Prince’ is his attempt to please his sponsor; the Duke, Lorenzo de’ Medici, by explaining how rulers should focus on getting things done, whatever the cost or methods employed.

At this point you may be thinking ‘how little have things changed.’

Machiavelli wrote more about modern project management than he probably knew!  Today’s projects, whether in Canada, Italy or somewhere else, usually have lesser penalties for failure – but the stakeholders can be just as demanding as the Medici – and are probably more numerous.  Today, to govern effectively, a project manager must recognize the different competing interests which can affect or influence the project and work out how to get them round the same table and working together.

PRINCE version 2 achieves this goal perfectly with its Organization Theme, which is closely linked to the Principle of Defined Roles and Responsibilities.

PRINCE2’s Organization Theme starts by defining that the project has 3 primary stakeholder interests.

  1. Business – think of this as our ‘Prince’ – representing the interests of the organization and requiring a project which provides value for money and benefits to the corporate body.
  2. Users – those who will use the products of the project
  3. Suppliers – those who create the products of the project

In this context, Machiavelli nailed it when he wrote; “A prince ought to have two fears, one from within, on account of his subjects (the Users?) the other from without, on account of external powers (the Suppliers?)(The Prince)

These interests are then represented on the PRINCE2 Project Board, which is made up of the following roles:

  1. Executive – representing the business interest
  2. Senior User – representing the user interest
  3. Senior Supplier – representing the supplier interest

This means that all the 3 interests are included and involved in the governing body of a PRINCE2 project.  Or, as Machiavelli himself put it:

“…when there is combined under the same constitution a prince, a nobility, and the power of the people, then these three powers will watch and keep each other reciprocally in check” (Discourses on Livy)

BTW, Machiavelli did _not_ say “keep your friends close but your enemies closer.”  That was Michael Corleone

In a PRINCE2 project there should only be 1 Executive but there can be more than 1 Senior User or Senior Supplier although it is advisable not to have too many as this may turn the Project Board into a talking shop rather than getting decisions made quickly.

The other roles within the PRINCE2 Project Management Team structure are:

  • Project Assurance – Provides the Project Board with a second opinion and advises and guides the other members of the team. Project Assurance is the responsibility of the Project Board although the may delegate it to other individuals.
  • Project Manager – Runs the project on behalf of the Project Board on a daily basis. There can be only 1 Project Manager in a PRINCE2 project.
  • Change Authority – This is an optional role. Making decisions on change is the responsibility if the Project Board but they may delegate some of that authority to other individuals. These individuals would then make up the role of the Change Authority.
  • Project Support – The function that provides administrative support tot the project. This may be separate individuals or if the organization has a Project Support Office. If either of these are not available the role will be performed by the Project Manager.
  • Team Manager – Manages the work of the specialist teams creating the projects products. If we do not have separate Team Managers the Project Manager will fulfil the role. There can be any number of Team Managers in a PRINCE2 project.

PRINCE2 provides template role descriptions for all these individuals and training courses give you the chance to practice creating project teams.  And no blood needs to be spilt!

Prince Writer Machiavelli

Nicolo Machiavelli 1469 – 1527.

18 Apr 2016

PRINCE2 or PMBOK?

Posted by Paul Atkin. Comments Off on PRINCE2 or PMBOK?

Is the wrong question to ask…

PRINCE2 and the PMI’s PMBOK are complementary, not competitors.

PRINCE2 is a project management methodology – it is what a project manager should do. It is made up of processes, principles and themes that step you through the project from conception to close

PMI’s Project Management Body of Knowledge (PMBOK) – is the knowledge of the project management profession. It is what a project manager should know.

So PRINCE2 and PMP are complementary: PRINCE2, for example, is strong on the business case, processes and governance while PMBOK covers area such procurement and HR which PRINCE2 does not.  Complete PMs will benefit from both the knowledge (PMBOK) and practice (PRINCE2) of our profession.

It would be wrong to suggest that one is ‘better’ than the other – that’s asking the wrong question. Think of PRINCE2 and the PMBOK as tools available to the project managers – sometimes one is a better fit than the other, but we keep them all in our bag for the day when we need them.

21 Mar 2016

The Punch Drunk Project Manager

Posted by Paul Atkin. Comments Off on The Punch Drunk Project Manager

The Punch Drunk Project Manager

Punch Drunk project manager

Is this you? It’s certainly me, on too many days.  ‘Stuff’ just seems to pour in – to-dos go red in my inbox, issues arise, send/receive brings another wave of information.  Just another day in the life of a project manager.

Some of it essential – check how the team is going, get the report done, deal with the urgent issue etc.  But it’s not under control.  The main thing for me is interruptions – I get going on a task and, after 20 minutes or so, start to approach ‘the zone’, the productive place where I can really focus.  And then the interruption – ‘this isn’t working’, ‘can you speak to John’ or another 10 emails arrive.  I deal with it and go back – but the focus has gone.  It will take time to get back to the state of concentration.  And then the interruption, and repeat…

I know, I should multi-task.  But I can’t.  Human beings can’t.  Nor can computers – if you get down into the mechanics of how a PC works it doesn’t multi-task; it just swaps things in and out of the processor so fast that it looks like multi-tasking.  For us mere humans, the task-swapping is what kills you – you can’t go from email, to crisis, to lunch and back again without feeling that you’ve just done 10 rounds with a heavyweight champion.

What’s the answer? Well it’s broader than project management but a great benefit of PRINCE2 is that is very systematized.  Processes and activities are laid out to a degree of detail that makes it easy to follow.  Each activity tells you what to do, when and which documents to update.  And it’s the same document set and activities every project.  Granted, you have to tailor and adapt to the size and scale of each project, but 80% of it is the same.

Ever wondered why the military learn drills and procedures by rote? In the chaos of a war zone you need to do the right things automatically, you need to keep momentum and focus on the desired outcome.  How different is that from projects you have been involved in?

Remember what PRINCE2 stands for

It’s Projects in Controlled Environments.  The PRINCE2 method has been around long enough to have an action for every possible project situation.  Whatever happens – costs go up, costs go down, issues arise, risks happen; the PRINCE2 system says ‘do this, update that, speak to this person.’ You don’t need a unique solution every time – just follow the PRINCE2 procedures you learned and you’ll stay in control.

Some years ago my project was part of a large IT change program in a financial services company.  My project was generally going OK, and then something happened.  It was one of those ‘out of the blue’ things that no-one imagined, but it was potentially serious.  The program manager was good, but under pressure from above.  She passed it on.  I remember hearing “this is your project, you need to get this sorted out – what are you going to do about it?’

At that point I had no idea.  It had just been brought to my attention and it needed dealing with.  I gave the out of the PRINCE2 book answer: “well, I’m going to log it as a Project Issue in the Issue Register.  After that, I’ll do an impact analysis and see how it affects the business case, project plan and any risks we’ve got open.  Once I’ve done that I’ll work out if it’s in Tolerance and, if it is, I’ll deal with it.  If not, I’ll have an Exception Report on your desk by tomorrow morning.” To which the answer was “Oh, OK Paul, it sounds like you know what you’re doing, I’ll let you get on…”

Fantastic.  Don’t need to think; just do. Crisis happens, but it’s under control.   This stuff works and I have confidence in a well proven system and I can use it to get back on track.  Which is great news for project managers.

1 Mar 2016

The PRINCE2 Project Board

Posted by PRINCE2 Canada. Comments Off on The PRINCE2 Project Board

The PRINCE2 Project Board

Having trained thousands of people on project management courses there is one topic that comes up regularly – the buy in and involvement of senior management (or lack 0f)!  This is where the Project Board comes in.

All organizations want to deliver projects successfully.  One of the ways to do this is to get the right people involved in the decision making.  To do this you need to consider:

· Accountability

· Stakeholder representation

This is where PRINCE2 offers an organization structure so they can be considered fully.

Accountability

PRINCE2 identifies the role of the Project Executive.  This is the person accountable for the delivery of the project.

Appointing a project manager is simply not enough to turn a project into a success.  Appointing an effective Project Executive can make the difference between success and failure for a project.

The Executive is responsible for directing the project.  The ‘Executive’ is the ultimate decision maker and owner of the Business Case.  As such they will be responsible for ensuring that the project meets its objectives and delivers the means by which the expected benefits can be achieved.  Five key aspects that the Executive should focus on:

· The Business Case drives the project – the projects standard for success

· Involving stakeholders in project direction – well focused stakeholder involvement helps to secure support for the project

· Breaking the project into manageable chunks – tuning the selection of project stages to meet the need for decision making

· Management by Exception – Optimum control with limited effort

· Focus on products – know what you are going to get – start at the end

Stakeholder Representation

PRINCE2 also recognizes that there are three key Stakeholder groups which need to be represented – The Business, User and Supplier.  It is important that these roles are represented at Project Board level to ensure that the right decisions are made and the correct direction is set for the project.

Involvement of right senior people in the governance of the project is critical to its success.  How many times have projects failed because of lack of senior management involvement or buy in.  PRINCE2 looks to the Project Board to fulfil this.

Responsibility for the successful delivery of the project will mean that the Executive will need to ensure the appointment of the appropriate Senior User(s) and Senior Supplier(s) onto their Board.  This will be needed to support effective governance of the project.  By selecting the right people, the Executive will ensure that the Project Board represents the interests of the project:

· Business (Benefits and Value for Money),

· User (those who will use the products), and

· Supplier (those who will deliver the products).

As the Business representative the Executive has ultimate responsibility for the project governance supported by the Senior User and Senior Supplier.  PRINCE2 describes in detail what these roles are and how they should be carried out. Ensuring that the correct people are appointed to these roles is critical and ultimately can help achieve successful project delivery.

20 Jan 2016

Projects – at what cost?

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Projects – at what cost?

Why do we do projects? In the majority of cases, it is surely to deliver benefits, whether these are financial, say through efficiency savings, or passed on to our customers through improved service delivery.

Looking back on projects carried out in the past, how often have we painted a rosier picture than is actually the case by understating the costs to the organization and overstating the benefits? How many times have we actually compared what we intended to deliver against what was actually delivered and what the true cost was?

An area of good project management practice is in ensuring that your organization is in control of what resource is being utilized and what the true financial impact.

A common practice is to term the cost of a project as the budget that it has been allocated. Of course, we all have financial constraints and many projects have to plan to deliver within a ‘no more money under any circumstances’ environment. Such constraints impact on the quality of the deliverables and therefore the benefits.

Many projects do not even have an earmarked budget, they simply dip into several different cost centres, with various Departments absorbing the costs, as and when an expense arises. Tracking the true cost of these projects becomes almost impossible, especially where subject to audit

What should be included within the project costs? One of the major expenses that many organizations still do not consider is: –

Resource Costs

All projects will have identified staff resource applied to them, ranging from perhaps an individual Project Manager (full or part-time), reporting to a Project Executive to full-blown governance structures involving User Groups, Configuration Librarian, Project Support (through a PMO) and several full-time project posts.

The removal of a member of staff from their normal job to work on a project represents a project cost. It is of course not always that simple and different organizations may wish to look at how they apportion these costs in different ways. This assessment is often linked with how the organization manages its finances at a high level. When creating an approach to calculating project cost, involvement of the Finance Department is essential.

For example, some organizations may only consider the secondment of a member of staff onto a project as a project expense where the post from which the project team member has been removed has required to be back-filled. Others may only consider adding resource time to a project cost where the project team member’s allocated time to the project exceeds a certain percentage of their overall employment time.

Another major area of costs that is often overlooked when calculating the total project cost, and, when comparing against the benefits, is: –

Training

If a project has been created to deliver a new system (almost always involving ICT these days!) for carrying out a specific task that your organization has responsibility for and this new system is predicted to result in efficiency savings, then as well as the capital costs involved, it is very important that the organization consider the impact of training costs.

A new IT system can potentially involve the re-training of large numbers of staff. Even at a couple of hours per head, these costs can be significant and should be offset against the financial benefits identified of operating the new system.

There are of course several other headings under which costs require to be captured. When putting together your stakeholder engagement and communication plans, what costs may be involved in publications, printing and hospitality? Are the project team to be located into one office? If so, what are the hardware / software requirements and office furniture needs? What is the likely extent of travel requirements for the project team including, say, benchmarking, where you wish to visit a similar organization that is perhaps located in another part of the country. These are just some of the areas you need to think about.

As an organization, you may wish to create a standardized approach to costing projects in order that direct comparisons can be made at Business Change level. Identifying what is Capital and what is Revenue costs allows forward planning of yearly budget requirements and breaking each project budget down into phases (again, often in line with Finance Department) provides even greater control and transparency of predicted spend.

The cost of any project should be forecast in as much detail as possible during the Initiation Stage of the project and these costs should be included within the Business Case presented within the Project Initiation Documentation.

It may be that a project is estimated to deliver financial savings of, say, $50k, but if the project costs $40k, is it worth the risk and how accurate is the estimated $40k? Perhaps in reality the project is costing the organization $60k and the actual benefit realized may only result in $45k of savings. Familiar??

Alternatively, a project may cost $200k, a big commitment in any circumstances, but is predicted to deliver savings of $5 million. Estimated project costs based around a sound method of calculation allows the senior management (or Business Change Board) to make informed decisions on committing large sums of money to projects and to decide which projects should receive the green light to proceed.

Once a project has been shown the green light to enter into Controlled Progress or Delivery, actual spend should be recorded and this can be compared against predicted spend. This will assist the Project Manager in identifying or predicting when the project is looking like it will exceed the financial tolerance set within the PID and therefore kick-start the Exception Process.

About the Guest Author

Alvin Gardiner MBA is a PRINCE2 Approved Trainer, Practitioner and Registered Consultant.  Alvin is the UK Prize Winner for the best use of PRINCE2 following his work to introduce structured project and program management at the Registers of Scotland Land Registry.  Alvin regularly lectures in PRINCE2 in Canada and is also a Management of Portfolios Approved Trainer