Even the best-laid strategies will fail if the projects developed to deliver on them are not feasible. The foundation of any project’s success therefore lies in the ability to to quantify, with some level of accuracy, the cost of key strategic projects when they are still just ‘bright’ ideas.
First, let’s confirm why you want to have a project budget plan in place:
- Through estimations, your project budget plan can show your stakeholders exactly how much money the project requires from start to completion, and when that budget will need to be unlocked. This in turn will confirm if the project’s benefits are worth the costs.
- Every organisation must decide between competing projects, many of which are high priorities in terms of the business’s overall strategy. A well-calculated project budget is an extremely useful tool when it comes to prioritising projects and allocating funds.
- Project cost control is reliant on a well-planned budget. We’ve all seen projects spin out of control in terms of how much the cost and how long they take to complete. Accurate estimations will keep your team on track. In addition, over-spending on one project means less available funding for other projects, which has a knock-on effect across the business.
- Project budgets directly impact a business’s financial viability. Feasible estimates that are built with resource constraints top-of-mind will can ensure the company’s operating margin is maintained and the project delivered successfully.
How Agile has changed project cost estimations
The key to understanding estimates is that even though they will never be exactly correct (since no-one can predict the future – yet), they are extremely valuable tools for management.
The Agile framework has created a new dilemma amongst leadership teams about the need for project cost estimates. On the one hand, many Agile enthusiasts argue that estimates are difficult to produce and provide little value in an agile world that must agile and flexible. The realities of the Covid-19 pandemic would seem to support this theory. No project plans or budgets could have predicted the upheavals of 2020 and 2021.
And yet there is absolutely no doubt that organisations need to budget. It is impossible for business leaders to make informed decisions without budget estimates. The question then becomes, in an uncertain world, how do you create the most ‘certain’ estimates possible?
Best practice estimations in an uncertain world
Step one is recognising that even though Covid-19 was the extreme, the future is always uncertain. A good project budget is like any other budget – it is a well-thought out and stress-tested plan based on as many data points as possible. At Paracon, we have partnered with global group, Galorath to take the unpredictability out of estimations. Galorath’s proprietary SEER software leverages sophisticated modeling technology and thousands of project-applicable data-sets to accurately replicate real-world project outcomes quickly and with a high level of accuracy.
Next, good estimation practice requires breaking the project down into smaller pieces that can be estimated, both in terms of budget and delivery time. Remember, the purpose of estimates is to appropriately resource the project’s requirement. This can be achieved with much higher reliability if you are resourcing for each step of a project and can immediately see if the project is running over budget long before issues begin spiraling out of control.
It is also essential to focus on the organisation’s needs. This may sound obvious, but we have often been called in to assist with a project that has run over time and over budget, only to discover that it is not aligned with the company’s goals. The result could be that the project was under-funded to begin with and this has led to the business’s current – and costly – situation. An accurate up-front estimation could lead to a project being indefinitely shelved for a different project that is more valuable to the organization achieving its strategy.
Finally, maintain open communication with all project stakeholders and the leadership team. It is the stakeholders’ priorities that will determine if the project is correctly budgeted or if it needs adjustments in scope to align it with its core objectives. Understand these key objectives, stress-test them against organisation-wide initiatives and the overall strategy and draw on as many data points as possible to forecast the project’s benefits to business.
Learn to adapt and be flexible
As we know, there will always be unforeseen events that impact a project and its budget. In some cases you can estimate for these by including variables in your planning should a black swann event occur, but on the whole, keep a close watch on your project’s budget and be flexible enough to adapt to any change, internal or external.
This is where modeling technology such as SEER also plays a key role in keeping projects on track. If the parameters you were working with during your estimation cycle change, software can quickly and reliably determine how your budget will be impacted.
Visit Paracon by Adcorp today to find out more about how we can assist you!