How confident are you with the project forecast?

As every project progresses through it's lifecycle, the team’s forecast will evolve. The forecast value may move up or down, however, the accuracy of the forecast should always increase. The basis for increasing accuracy is that all estimates are forecasts with some level of uncertainty and as the project progresses the unknowns/uncertainty will decrease. This holds for forecasting any of duration, work effort, or cost. There are two important concepts in the below figure:  1)      We see the team’s forecast (solid middle line) moves up and down as time progresses; and,  2)      the range in value between the High and Low Estimate decreases in steps at each phase.

A key action for the Project Manager is to communicate to all stakeholders that early estimates have higher uncertainty. As part of communication with management and finance stakeholders, I usually ask for a reserve to be added onto my estimates based on the higher uncertainty of estimates and potential negative impact of risks. This amount can be progressively reduced and “given back” as the project progresses over time. Some types of projects inherently have high uncertainty during initiation and planning. For example, integration of custom software. When faced with projects involving high level of unknown, the Project Manger should use “Three-Point Estimating”. This technique will include the full range of possible values of the estimate and

 reduces bias that can lead to a highly optimistic or pessimistic estimate.

I usually create custom fields within Microsoft Project 2010 to capture and calculate the three point estimates. The approach is also called PERT. The formula is PERT Estimate = (Optimistic Estimate + 4 X Most Likely Estimate + Pessimistic Estimate) / 6.  Other project teams that work on a high number of similar projects will develop good enterprise knowledge for making estimates. An example would be an energy and gas company that knows 2 resources can lay pipe at 20 metres per hour and the material cost is $150 dollars per foot. Estimates in these situations can be very accurate, from an early stage. A Project Manager may have little control of the level of uncertainty or risk when handed a new assignment. However, appropriate application of the concepts above will lead to successfully managing and quantifying estimates of duration, effort, and cost. 

Stephen Wise

www.IntegrationProfessionals.com

Two themes for Portfolio Agility

I have seen the future and it is agile. The agile I am talking about is not a tool, or methodology, or a movement. It is the outcome when Project Managers have discussions with Sponsors on how to go faster, or how to beat competitors, or how to win new business. Portfolio management is listing, prioritizing, selecting, and controlling business ideas/investments in the context of the top success drivers and constraints affecting the business. In my experience, many projects are handed to the Project Manager that have risks or budget or schedule issues that the PM can’t even quantify. Unfortunately, these very items are likely to be the root cause of missed expectations, budget overruns or schedule delays. Our challenge is to enter into an ongoing conversation to ensure the right investments are being made at the right time. We need to develop and design a new way of thinking to respond to the needs of the business. Here are two themes to help support this change: 1. Focus on enhancing the collaboration and communication between the person managing the work (Project Manager) and the person who wants the work done (Sponsor).

• Create visibility anytime and to any desired level of detail.
• Speed everything up so that we can see business benefits/failures faster.

2. Gain trust by eliminating multiple sources of data/truth by bringing data integrity into the project and program environment.

• Ensure culture is conducive to increased reporting.
• Communicate better about those things that people care about.

I first head the following from an industry research analyst, “We need better brakes … so we can go faster”. How true! By investing in portfolio management skills and tools to improve communication and data quality, the organizations we support will have improved agility to amplify successes and reallocate resources from underperforming projects.