Who’s Balancing Your Project Checkbook?

Approving a project is like writing a check: you are committing your organization’s resources to completing activities. Project management professionals all recognize the triple constraint of time, cost, and performance. However, they often fail to recognize that cost includes a human component. Multiply this across all of the people in your organization who are approving projects and ask, “Who is checking the bank balance to ensure we do not overdraw our people?”

Formal project approval processes tend to focus on financial capital and not human capital. All projects require human resources, which, like financial resources, become unavailable for other work when assigned to a project. Most organizations are disciplined about creating an annual capital budget and then checking it monthly for variances. Unfortunately they often fail to apply this discipline to managing how they spend their people on projects—the FTEs rather than the dollars needed to complete work.

What is needed is a better method to estimate resource-draw and to quickly highlight when there is a need to look more closely at specific projects. Too often the accuracy of project managers’ estimates for the work required to achieve the project objectives is flawed. People begin projects before gaining an adequate understanding of requirements and work needed. This work “estimate” is commonly underestimated by a factor of 50% or more.

Widening the resource gap are informal projects such as Lean and Six Sigma activities, that are mandated, financed and subjected to the same scrutiny and monitoring as formal projects. These activities often involve small, ad-hoc teams without accounting for the work-time involved. This is equivalent to giving the managers, superintendents, and supervisors a blank check drawn on an unreconciled account.

To defy the statistics and accurately estimate and monitor progress, we recommend breaking projects down into tasks that take no more than a week to complete. This is not 40 hours of work per person, as people rarely devote all of their time to one project. Instead it is work people can complete within a five-day period. This interval allows people to provide a directionally correct estimate of the hours needed within that week to complete that task. Sum up these more precise, subsets of hours and you have a better estimate of the human cost component of your projects.

Project approvals should require an accurate accounting of all costs. When project managers seek approval, their documentation of the triple constraint should include an estimate of the human cost; the person-hours needed to complete the work to deliver the expected performance within the desired time frame. This will allow managers to balance their project checkbook and avoid the conflict and failure of being overdrawn.

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