Project Management's Enemy Number One: The Money Monster

Photo courtesy of Proof Positive

Cash. Currency. Dinero. Mula. Capital. 

Regardless of which term you use, it's all the same thing: MONEY. It's valuable and very highly coveted. To some, it's easy to obtain, for others, it eludes them very easily. With regards to Project Management, money is a very value resource, a necessity in some cases, that is required for a project manager and his or her team to successfully complete an assigned project.

It's a commonly known fact that it's rare, if not impossible, to perfectly guesstimate a budget for a project. This is usually the case for long term, large scale projects. The mistakes that project managers make when it comes to the cost estimation of the overall project varies. Sometimes, project manager can be too optimistic. Other times, the project manager may fail to account for certain aspects of a project that may involve cost. And, very frequently, known unknowns come into play and unexpectedly deplete project funding. Although project cost management can be detoured by a diverse list of factors out of the project manager's control (government, organizational leadership, economical), there are steps that a project manager can take to minimize the risk of a cost overrun on a given project. Some cost overrun avoidance techniques that are often over looked or rushed are planning, change management, communication management, and procurement management.   

1. PLAN, PLAN, PLAN

Most importantly (and a common theme in any of my written work concerning project management) project planning is a necessary step.  As previously mentioned, it's near impossible to predict an exact budget for a project. With that said, project planning over all is still any project manager's biggest defense against cost overruns. Considering the amount of effort that goes into a GOOD project management plan prior to the actual development of a cost management plan (scope, activity list, product/task duration), there usually adequate information to build a bottom up cost baseline. 

2. Reduce Scope Creep

Scope creep is a concept that is all too familiar in any industry. In order to stay within the planned project budget, it is necessary for every project manager to ensure that a change control management plan is in place. Often times, after a project has started, customers and clients begin to ask for functionality and features that were not originally planned. Although sometimes changes can be incorporated, as the project manager, it is important to ensure that additions of unplanned features and functions are well documented and that they are in direct relation to the completion of the desired end product. Although this may put project managers in a tough position, it is necessary to educate all project stakeholders on why scope creep can be dangerous to project timelines, budgets, and overall success.

3. Communication Is Key

Regardless of the size of the project, the size of a team, or the number of stakeholders, it is important to remember that communication is important for the success of a project. Although some project managers may believe that communication is low on the totem pole as it concerns cost overruns, communication failures have been proven to be points of failure for projects since project management has been a subject for consideration. Effective communication can help avoid delays, can help the project team address issues (both foreseen and unforeseen), and clarify any misunderstandings, miscommunication, et cetera, that generally occur when a group of people work together. Communication among a project team and project stakeholders can facilitate conflict avoidance and can help the project manager better monitor and manage the progress of the project. It is ultimately up to the project manager to communicate up the chain and down the chain to ensure that everyone involved has the same understanding and are working to achieve the same goals with regards to the project.

4. Check Your (Procured) Resources

Procurement management is a beast all of it's own. Although procurement management can be time consuming, especially for large projects, it is necessary that project managers take as much time as needed to make sure that all contracts with vendors, contractors, or third-party organizations are thorough and detailed. This step, of course, circles back to planning. Appropriate procurement CANNOT occur if the project is not planned accordingly. Contracts are set in place to very clearly spell out every aspect of work to be performed by the product or service "seller", as well as pricing and payment terms. Any contract or procurement that fails to consider any aspect of the project may result in a required change to the contract, a contract dispute, and could quite possibly open opportunities to unethical business practices by the "seller" (google 'cost plus percentage of cost contract type'). All of these outcomes use more resources, which ultimately impact the project budget. 

Although there are a MILLION things that project managers can do to reduce the risks of costs overruns, not all of them are obvious. When considering any project resources (time, money, people, systems, equipment), it is necessary to think about ALL aspects of the project. One project management area is not more important than another because they should all come together seamlessly to lead to a successful project.

DISCLAIMER: Time, money, and opportunity are things you can't get back.