7 Reliable Ways to Improve Project Estimates

7 Reliable Ways to Improve Project Estimates
By Harry Hall

Once upon a time, I sat in the office of a CEO as he described ten years of late and grossly over-budget Information Technology projects. He was more frustrated than a New York Mets fan losing another New York Yankees game. He asked why IT continued to promise the moon, but could not get off the launching pad.

As I interviewed stakeholders within the organization, I quickly discovered a primary cause of the underperforming project portfolio—poor estimates driven by a lax attitude. IT would provide estimates with little project definition or analysis. What would IT do when they missed the promised implementation period? Like a spoiled kid failing college, they would ask for another semester, more toys, and more money. They always had an excuse: “The users never know what they want.”

Fixing this type of dysfunctional attitude and behavior is not easy. It starts with strong leadership to change the culture. Stakeholders must be educated, and teams held accountable to improve estimates. Management should reward and recognize teams and team members when improvements occur.

Why are estimates such a big deal? Estimates form the basis for our project schedule and our project budget. When we fail to render good estimates, we introduce additional uncertainty into our projects, programs, and portfolios.

There are different ways to improve the project estimates. These techniques can increase the probability that you will deliver projects as promised. Stakeholders will rely on you more as you make their dreams come true.

1. Define the work properly. One of the top reasons that project managers fail to estimate projects properly is due to the lack of project definition. Project teams fail to identify significant work packages and associated project activities. How can project managers help overcome this problem? Gain buy-in and better definition by engaging stakeholders in a Work Breakdown Structure (WBS) exercise.

2. Get the right people to give the estimates. Have the individuals who will perform the work, not the project manager or any other manager, provide the estimates. Ideally, each person has experience in performing the tasks and estimating the work.

3. Use the correct estimating techniques. Use analogous estimating for early estimates and provide a wide estimate range, not a single date. Complete the WBS and perform a bottom-up estimate later in the project. What can we do when estimating tasks we’ve never done before? Try the three-point estimate.

4. Provide progressive estimates. Like forecasting a hurricane and providing periodic updates, revise the estimates with tighter estimate ranges as you gain additional information. Include the designated times to revise estimates in the schedule management plan.

5. Track effort and duration. Tracking and comparing effort and duration to the estimated effort and duration allows team members to improve future estimates. Like a golfer tracking his driving distance, sand saves, and number of one-putts, serious project professionals track their statistics. They study their results and look for ways to save strokes in future rounds. You may not be a Bubba Watson, but you can improve your game!

6. Define contingency reserves. Identify risks in your project activities. Failure to identify risks at a work package or activity level can lead to activities taking longer and costing more than expected. For the significant risks, define contingency reserves for the project schedule and budget.

7. Define and validate assumptions. Wrong assumptions lead to poor estimates. Explore the validity of the assumptions. Are the assumptions accurate? Are they consistent with the facts? Are the assumptions complete?

You may not be able to apply all of these techniques immediately. Pick one or two that you can implement such as the WBS and defining contingency reserves. Gradually add other techniques to progressively improve your estimates and your project results.

Harry Hall, PMP, PMI-RMP, is the Director of Enterprise Risk Management at the Georgia Farm Bureau Mutual Insurance Company, one of the largest domestic insurance companies in the state of Georgia. You can read more from Harry on his blog.