As one of the Project Controls Experts at Cleopatra Enterprise, Stephanie Ritchie sees a lot of common mistakes in the project cost management field.
Characteristics of proactive project managers?
They are people who focus their efforts and attention on the long-term as opposed to responding to what’s happening in the present moment. However, even though this golden rule may seem obvious, it is one of the most difficult to put into practice. It is even one of the major causes of cost overruns.
In many cases, also in my experience, project managers find themselves playing the role of a firefighter. They put our spot fires as they arise. Because everyone is already time-poor, no one really has the opportunity to explore all the options and find the right solution.
Why proactivity is key to project sucess
Without a proactive approach, tasks are often delayed, unexpected expenses arise, and the project becomes vulnerable to further risks. Therefore, it is very important to act proactively and have a plan in place to deal with situations like this. Proactive management allows project teams to address these issues before they escalate, leading to better control and successful project delivery.
How can you avoid being reactive in project cost management?
By incorporating the following 4 things throughout your entire project lifecycle:
1. Building a robust estimate
A robust estimate is an estimate that is detailed, precise, and incorporates lessons learned from past projects. Such estimates allow you to better predict and respond to events in a project. Once the estimate is complete it is of utmost importance that you align your cost estimate and budget.
2. Aligning your cost estimate and budget through standardized breakdown structures
You should be able to seamlessly translate your cost estimates to your budget, without having to restructure your estimate. To do this, you should ensure your budget items and breakdown structures are aligned. This alignment helps you to prevent any discrepancies between the estimating and cost control teams. Once this is done, then it is important to ensure you monitor your project properly.
3. Monitoring Earned Value Management and Cost Variances
With a dedicated earned value management tool, you can track and compare cost performance (CPI) and schedule performance (SPI). This means you can identify any discrepancies between planned and actual performance, and communicate them within the project team. It also helps you act upon these variances to ensure the project continues in the direction you want to head.
For a deeper dive into Earned Value Management (EVM) and how it enhances project control, check out our detailed EVM guide.
4. Identifying key project KPIs for cost control
There is a fine line between the Key Performance Index and general metrics. It is important that you define which metrics are the ‘key’ indicators. Which ones must really be tracked and used to identify if something needs attention. This allows the project team to proactively address potential cost overruns. Keep in mind that aligning the key KPIs with project processes is also essential. Ensure from an early stage that these are clearly understood throughout the team.
Do you want more information about how to be proactive, or want to speak to an expert? Feel free to contact us.
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