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Understanding Project Costs and Why They Went Up or Down

Understanding Project Costs and Why They Went Up or Down
By Preben Ormen

When we try to understand project costs and why they went up or down we invariably have to puzzle out the simultaneous effects of several variables. This can get quite complex, but at the heart of the matter is a very simple concept for project variance analysis.

Conceptually, costs are a function of quantities and rates (or prices). Pretty basic, yet still valid after all these years. When we analyse costs, we typically take something calculated now and compare that to some baseline. The baseline is usually the budget or plan numbers. Again, no surprise there.

It’s when we try to decide whether changes were more due to one factor than the other that things can get a little confusing. But cost accountants figured this out a good while back, so we don’t have to. As a matter of fact, they figured it out in so much detail that even that becomes a bit daunting, so let me pare this down to the bare essentials. Read the Complete Article

The Five Universal Project Checkpoints

The Five Universal Project Checkpoints
By Preben Ormen

I have been working in or alongside projects for over 35 years now and have certain notions about what projects are alike and how they differ.

One way all projects are more alike than different is in what I think of as the five universal project checkpoints.

I think of each checkpoint as a process whereby stuff gets done and then we are done so we can get on to the next piece of work.

After each checkpoint we should know we have our back clear so we can focus on the future and not worry about the past (well, OK, hopefully only as little as possible – we can never escape it entirely as we will be held accountable).

So without further ado, my Five Universal Project Checkpoints are as follows:

  1. Kick-off
  2. Requirements
  3. Design
  4. Build
  5. Commissioning

Kick-off

This checkpoint occurs when we conduct the kick-off (or start-up or initiation) meeting with the sponsor and the project team. Read the Complete Article

Project Management: Arbitrary Deadlines Can Be Your Friend

Project Management: Arbitrary Deadlines Can Be Your Friend
By Preben Ormen

A lot of projects are launched with plans based on essentially arbitrary deadlines. By arbitrary deadlines I mean the finish dates were set by decree, which may or may not have been accompanied by a rigorous feasibility analysis of the plan dates themselves. This may sound bad, but arbitrary deadlines can be your friend.

Quite often, the process is as simple as someone saying that, OK – I get we need this so have it in by X date. The X-date could be end of the year, end of the quarter or some other date that has meaning to the executive irrespective of what the project actually require. System implementations are commonly in this camp.

If you were to do a Monte Carlo simulation for such a project, you would find the plan has little or no theoretical chance of actually meeting the target. Read the Complete Article

Risk Perception Is Age Dependent

Risk Perception Is Age Dependent
By Preben Ormen

The age of a person influences the perception of risk. Stereotypically, and I believe there is a lot of truth in this, the younger you are, the fewer obstacles you see. We can call it the exuberance of youth, but the way it plays out is that a young person is a little more open to take risks and shrug off obstacles; sometimes for bad reasons and other times quite rightly so.

This is not a bad thing because it is not helpful to let us be overwhelmed by all the perceived obstacles, imagined or real. They won’t all materialize, just some. We wont have to deal with all of them. We just have to deal with the particular thing that occurs for us.

As we get older, we tend to forget that or we become more and more attuned to the fact that the picture is a little more nuanced than what we thought like at an earlier age. Read the Complete Article

Set Your Project Up for Success

Three Common Project Schedule Killers
By Preben Ormen

While there is risk, uncertainty, doubt and considerable unpredictability associated with many, if not most projects, there are things you can do up front to minimize the negative impacts. By thinking about the project in a certain way, you can set your project up for success at the beginning.

The way to think about the project is as combination of five parts with a sixth kicker. It goes like this:

  • Strategy
  • Structure
  • People
  • Process
  • Technology
  • Fun

Strategy

Strategy refers to the approach you select for your project. The easiest way to think about this is simply which methodology you will chose. Sometimes this is a given, but not always.You need to come to terms with strategy because it influences the way the organization, the project and you solve problems and deliver value.

Structure

Structure refers to formal and informal relationships between people and things – think of it as shapes and forms.. Read the Complete Article

The 9 Warning Signs of Bad Project Management

The 9 Warning Signs of Bad Project Management
By Preben Ormen

Some time ago, I started reading Henry Mintzberg’s book Managing (Berrett Kohler, San Francisco, CA, 2009). It was laid aside due to various distractions. In the meantime, I also picked up his predecessor opus called Managers not MBAs (Berrett Kohler, San Francisco, CA, 2004), which contains a lot of the foundational material developed further in Managing.

I am interested in Mintzberg’s work because he has examined the nature and essence of management – or managing, as he likes to call it. His opinions are controversial and not very complementary to either the general business press, most educational institutions that teach management in general and those that teach MBA programs in particular.

Mintzberg elaborates on the many faults of MBA programs and the graduates. At one point in the book he describes what he perceives as the general attitude of MBA graduates towards management. Read the Complete Article

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