Adjusting To Budget Changes in Projects

Of the three causes to budget changes (errors in estimations, new information obtained, and new mandates), I believe firstly that identifying them early on and addressing these as risks to be mitigated is important.  For example, errors in estimation are simply the result of not properly judging the cost benefit analysis of research v. resources that created those estimates.  Thomas Sowell argues for a balance between perfect knowledge and enough knowledge to make an informed decision in his book Knowledge and Decisions–an economic classic!

To address the risk of new information it’s important to have processes to gather the right amount of information early in planning but also as the project moves along.  Good news doesn’t get better with time.  Good PM needs to involve information updates regarding items that may change the project’s scope, risk, or budget.  It’s a good practice to leverage technology to assist (google alerts, twitter etc.) and generally employ folks whose hobbies closely match their professional work.  These hobbyist employees will be watching for new information because it is their passion.  The trick is creating an environment where they’re willing to share what they learn.

With regards to new mandates one of the keys to surviving this is to move as much of an operation to an environment where mandates becomes unlikely.  This is one reason why jobs move overseas.  It’s not simply the cost of labor, it’s the cost of uncertainty for doing business.  Dodd-Frank’s uncertainty to the financial market is huge and a key component of it (the CFPB) was declared unconstitutional.  The entire financial system hinges on being regulated, and the current system for regulation just got labeled as defunct.  How’s that for uncertainty?

If trying to prevent the changes prior to project execution is impossible then I would simply work through the same problem solving steps I’ve used for most of the things I’ve managed.  Identify the problem, define the problem, identify potential solutions, evaluate potential solutions, and execute a final solution.  In this process one trick is to select a solution that has maneuver room as more information evolves during the length of the project.

These changes aren’t exclusive to one another.  Mandates can require new information for example when BPAs got labeled as bad Nalgene had to retool their formula and research new material.

In the end my plan is to minimize the risk of change early on or deal with it using a proven formula.

A Triangulated Marriage: Project Scope, Schedule, and Budget

  In project management there is an interdependent relationship between project scope, schedule and budget.  This relationship is best demonstrated as a triad (below).  A quick look at each of these areas will easily show their interdependence on one another in relation to project management.

    Projects often emerge in an organization to close the gap between the current situation and some unachieved organizational goal.  The goal could be a specific product, service, or internal improvement.  A project’s scope is the concise statement of the effort to achieve that goal.  It articulates the work that needs to be done.  Some examples include, construct a building, install new servers, implement new customer service program, and improve human resource management system.  Marchewka correctly adds that the scope should also include “what will not be part of the project’s scope” (Marchewka, 2015).  In order for the triad model to work there must be clearly defined boundaries.  So too with the project.  In order for the project to take shape it must have a clearly defined boundary between what it is and what it isn’t.

    The budget on any particular project is the apportioning of resources aligned to accomplish the stated project scope.  These resources include finances, available equipment, available manpower, and time.  As the scope increases the budget also necessarily needs to increase.  While this brief increasing example is based upon the scope the scope could also be based upon the availability of resources identified in the budget.  Projects have been and continue to be scaled back based upon budget limitations.

    It has long been understood that time is money.  Mathematically speaking money would also be equated with time (if Time=Money then Money=Time).  Scheduling in project management involves calculating the project’s required efforts with regards to time and overlaying those efforts on a common calendar in an efficient sequence.  An increase of project scope will result in an increase in the length of the project’s schedule.  An increase of the project’s budget can facilitate an increase in the project’s schedule.  An inefficient schedule will lengthen the time required to complete the assignment, cost more money, and increase the project’s scope by forcing the project to incorporate the inefficiencies as part of its efforts.  Down-time would have to be listed as one of the tasks performed during the project.

    IT projects are no exception to the interdependence of this triad.  Cyber has become a buzzword in recent years in part due to the massive breaches at Sony (Schneier, 2014) and Target.  Autopsies of these breaches provide a wealth of circumstantial evidence that both companies were constrained in their solutions by the available budget, scope, and schedule given to accomplish their tasks (Radichel, 2014).  It appears that full information security measures that would have protected the companies from their breaches were not a part of the project scope due to budgeting or scheduling constraints.  It is the responsibility of a project manager to leverage their experience to employ the proper balance of these three areas to move their company towards its unachieved organizational goal.

    In conclusion.  The triad relationship between scope, budget, and scheduling affects all projects and especially those in the IT field.  A decrease or increase in one area will necessitate a respective decrease or increase in the other areas.  A project manager’s role is to find and communicate the right balance between these areas to move the organization towards its unachieved goal.  Failure to employ the right balance in the IT field can lead to major issues as illustrated by Target’s 2013 breach and Sony’s breaches.