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Work Breakdown Structure Tasks

Dick Billows, PMP
Dick Billows, PMP
CEO 4pm.com
Dick’s Books on Amazon

The Work Breakdown Structure (WBS) tasks are the basis for the project manager’s assignments to the team members. They are used to estimate costs and the schedule (duration). It is also the framework for reporting the project’s status to the sponsor. The WBS is central to everything a project manager does and plays a major role in determining the project’s success. You build this network of tasks by breaking down the project scope and major deliverables. The Work Breakdown Structure (WBS) contains everything that the team must produce to deliver the project scope.  Main WBS Work Breakdown Structure Page

Work Breakdown Structure Tasks – Questions

People always have questions about how to build the Work Breakdown Structure (WBS). They often ask how big the WBS should be and how many tasks it should have. There is no magic number of tasks in a project. The number in your work breakdown structure depends on the capability of your team members. You need to consider a number of factors.

  • What is the correct duration for the assignments I’m going to make to my team?
  • How frequently do I want to receive status data and estimates to complete from my project team and vendors?
  • How often do I want to update the project schedule with current data?
  • How risky are the tasks in this project?

Work Breakdown Structure Tasks and Team Capabilities

As you can see from this list, you design the tasks in the Work Breakdown Structure to fit your management style and the capabilities of the project team members. In this article, we’ll consider the team member’s capabilities. If you have a project team made up of experienced professionals who have performed their tasks dozens of times, your work breakdown structure will have a small number of large tasks. The tasks will have longer durations because these experienced professionals can handle assignment durations of 7 to 21 days. you should give experienced professionals larger, more challenging assignments and the independence and decision-making freedom that go with it.

WBS Work Breakdown Structure

However, not every team is composed of project superstars. You’re going to have some people on your team who have some experience with projects and know their jobs but for whom a two-week assignment would be discouraging and maybe even intimidating. So for these people you’ll design task assignments that are about 5 to 7 day’s worth of work.  You’re still giving them responsibility for an important deliverable but you’ve broken it up into smaller pieces. That lets you track their work more frequently.  Frequent deliverables are a major factor in the accuracy of your status reports.  That’s because even before a deliverable is finished and accepted, your team members report how much work they’ve completed and how much work remains to be done.

Finally, you may have a team with new hires or people who have little experience with your company. Or they may have limited expertise in the technology of their task or no experience working on projects. With these people, you want to break the assignments into small pieces where they have a deliverable to produce every day or two. You would have a large work breakdown structure containing smaller tasks with short durations. That kind of Work Breakdown Structure works best with inexperienced people because you will be expecting several deliverables from them every week. This gives you the opportunity for frequent feedback on their work and coaching to improve their performance. With these newer team members, it is a valuable motivational technique to increase the size of their assignments as they demonstrate their ability to produce deliverables on time and within budget.

Designing your Work Breakdown Structure with these team member considerations also allocates your time properly. You don’t want or need to spend a much time reviewing the work of one of your experienced project superstars. That kind of micromanagement will irritate them and interfere with their feelings of independence and professionalism. That’s why you give them the biggest assignments with the longest duration. The people who need the most review of their deliverables will have the smaller assignments and shorter duration. That’s where you’ll spend most of your time.

Work Breakdown Structure Task Risks

The last consideration in the Work Breakdown Structure is the risk of each individual task. They can affect the risk of the project as a whole. If one or two of the high-level deliverables have a high risk of duration or cost overrun, you’ll break down those major deliverables into smaller pieces. Some examples are deliverables that have a high risk of changes in technology or the technology is uncertain and cost overruns are likely. When you break down those major deliverables into smaller pieces, you’ll get reports on them every day or two. That prevents big problems from surprising you when it’s too late to fix them.

You can learn how to create the Work Breakdown Structure in our online project management courses. We offer online project management courses in business, IT, construction, healthcare, and consulting. At the beginning of your course, you and your instructor will have a phone or video conference to design your program and what you want to learn. We make certain that your case studies, project plans, schedules and presentations fit your specialty. You can study whenever it fits your schedule and work at your own pace.

  1. 101 Project Management Basics
  2. 103 Advanced Project Management Tools
  3. 201 Managing Programs, Portfolios & Multiple Projects
  4. 203 Presentation and Negotiation Skills
  5. 304 Strategy & Tactics in Project management

 

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How To Do 3 Point Estimating

It is worth learning how to do 3 point estimating because it is the best technique for developing estimates with your project team members. It is called 3 point estimating because the team member provides their pessimistic, optimistic and best guess estimates for their deliverable. It is also called PERT which stands for Program Evaluation and Review Technique. This estimating technique is a best practice because it gives project managers three benefits:

  1. Increased accuracy over one-point estimates

    Dick Billows, PMP
    Dick Billows, PMP
    CEO 4pm.com
    Dick’s Books on Amazon
  2. Better commitment from the project team members because the estimate considers the risk in the assignment
  3. Useful information on the risks of each task.

3 Point Estimating is a 3-Step Process

1. First, you work with the team member assigned to each task and identify both the positive and negative risks involved in their task. Negative risks are the things that could make it take more time and positive risks are the things that could make it take less time.

2. Next you ask the team member to make three estimates. The first is a best guess (BG) which is the average amount of work the task might take if the team member performed it 100 times. The second estimate is the pessimistic (P) estimate which is the amount of work the task might take if the negative factors they identified do occur. The third estimate is the optimistic (O) estimate which is the amount of work the task might take if the positive risks they identified do occur.

3. Then you do some simple mathematics with the three estimates. You calculate the mean and standard deviation using the 3-point estimation formulas: (O + 4BG + P) ÷ 6= the weighted mean and P-O/6 = the standard deviation (used for calculating probabilities). The weighted mean estimate from the three estimates the team member gave you is the one you use for their task. It reflects the amount of risk in the task and the severity of the impact of the optimistic and pessimistic risks.

Teaching Your Team 3 Point Estimating

By having this discussion about the risks in the task, you give the team member an opportunity for input into the estimating process. You also go way beyond the game-playing that typically surrounds making an estimate using a single number. Typically, team members are thinking about that single number and padding it as much as they possibly can. They know from experience that the project manager will probably cut it arbitrarily. That’s clearly not the way to get good estimates.

When you use the 3 point estimating technique, you record all three estimates in the team member’s work3-point estimating package as well as the positive and negative risks that were identified. This clearly communicates to our team members and the project sponsor that the estimates are not 100% certain. There are risks you have considered that could affect the amount of time the task will take. This approach removes some of the team members’ uncertainty (and often fear) that is associated with the estimating process.

3 Point Estimating Accuracy

The 3 point estimating technique gives you better data because you’re explicitly considering risks. You learn about the risks of a task early in the process from the person who will be doing the work. That knowledge gives you the opportunity to take corrective actions before you start work on the project. That increases the likelihood of the good risks and decreases the likelihood of the bad risks.

As an example, if a team member says that on previous assignments involving a certain department in the company, the amount of work in the task increased substantially. That was because supervisors and managers from that department repeatedly failed to come to project planning meetings. Knowing that, you would take steps to encourage that department to attend the planning meetings. You might even involve the project sponsor to gain the department supervisors’ and managers’ commitment to attend the meetings. If you can reduce the likelihood of negative risks, you take a big step toward accurately estimating the work and improving our project’s duration.

To learn more estimating skills,  consider our online project management courses. You work privately with a expert project manager. You control the schedule and pace and have as many phone calls and live video conferences as you wish.  Take a look at the courses in your specialty at 4pm.com

 

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3 Point Estimating – PERT

Dick Billows, PMP
Dick Billows, PMP
CEO 4pm.com
Dick’s Books on Amazon

Estimating is tricky for project managers because the customer wants the project to be done quickly and cheaply. You want your team to be committed to the numbers because they are realistic and fair. On top of that, everyone is concerned with the risk that exists on any project. So the best estimating technique should give you accurate numbers and some assessment of the risk in the tasks and the project as a whole. The best approach is to quantify the estimate and the risk of not hitting it. We use the 3 point estimating technique, or PERT which comes from the NASA space program, to do this.

This process lets you estimate work and duration with the team members and hear about the risks they see on their assignments. It also lets you give project sponsors the opportunity to decide what level of risk they want to accept on the project. Then you can quantify the additional costs that would be incurred to reduce the risks to a lower level.

The 3 point estimating process or PERT, which stands for Project Evaluation and Review Technique, is a three-step process where you discuss the team member’s task and risks. This includes the good risks that could cause this task to take less work and the bad risks that could cause it to take more work. Second, you note these risks in a work package and discuss the approach to the task with the team member. Third, the team member makes three estimates: an optimistic estimate, a pessimistic estimate and a best guess estimate. You apply the formulas* (at the end of this article) to those three estimates to come up with the actual data that you will use in the project schedule.

Common Estimating & Risk Issues

There are two mindsets that often cause trouble in the estimating process:

  • Executives believe that projects have no risk
  • Team members think that padding their estimates will protect them from blame.

Both of these mindsets are false and they  get in the way of accurate estimatingThe 3 point estimating technique or PERT deals with both these mindsets. Three point estimating is a straightforward process for developing estimates using a little bit of statistics.  It gives you a tool to quantitatively communicate about the risk of a task’s estimate.  It lets you stop pretending that task #135 is going to finish in precisely 15 days or that the project will absolutely finish by August 30. It also lets you address the issue that most projects are launched with less than a 35% chance of finishing by their promised due date. Because no one talks about that issue, executives think the completion date is 100% guaranteed. They believe the completion date is only missed when someone goofs off.

As an example, the best project managers tell sponsors that a project has a 65% chance of finishing by Analogous EstimatingAugust 30. These PMs also explain what they can do to improve those odds to 75% or 90% and what it will cost. Those PMs manage the assignments of their project team members with an understanding that there is risk on each assignment. They use 3 point estimating, PERT, techniques to get accurate numbers and reflect the risk.

3 Point Estimating or PERT Process

The 3 point estimating process starts with a discussion with the team member about the risks in their task assignment. You discuss the bad risks that will make their task take more work and more time. You also discuss the good risks that will cause it to take less work and time. Why should you do this step? Because you need an estimating process that addresses the team member’s legitimate concern that bad things will happen on their assignment and they’ll be blamed for not meeting the completion date.

Let’s talk a little bit about risk. When you ask me how long it will take to read this newsletter, I might estimate five minutes. Am I guaranteeing you that no matter what happens you’ll be able to read the whole thing in five minutes? No. What I mean is that 5 minutes is my best guess. That means there is a 50% chance it will take you less than five minutes and a 50% chance it will take you more than five minutes.

But if you are my project manager and you ask me for a task estimate, I would be a little hesitant to give you an estimate with a 50% chance of an overrun. What I would rather give you is an estimate where I’m 90% confident that I can finish in that much time or less. As the project manager, you would probably regard that estimate as padded. As the team member, I feel more comfortable with a 90% estimate. Unfortunately, there is no consistency in the amount of padding your team members do.

You want your team members to leave the estimating process knowing that you considered the fact that things can go wrong on a task assignment. Using the three estimates enables you to do that. It’s better than
having a team member give you a single estimate and play the padding game about how certain that estimate is. The three estimates tell you the variability in the task.

3 Point Estimating: Best Guess, Optimistic and Pessimistic Estimates

With agreement on the risks in the task assignment, you go on to ask for the team member’s estimates of work and duration (time). As the name implies, 3 point estimating requires three estimates for each task. That sounds like it will take a lot of work but it takes a matter of minutes.  You and the team member develop an optimistic estimate, a pessimistic estimate and a best guess estimate for each task. In developing those three estimates, we get more accurate estimates from team members and assess the task’s degree of risk and the range of durations.

If your team member estimates that a task has a best guess estimate of 80 hours of work, that means that 50% of the time it will take more work and 50% of the time it will take less work.

Next, the optimistic work estimate is that it will take less work than the best guess.  It is not a perfect world estimate but you want an estimate that’s based on the good risks you identified coming to pass.  The optimistic estimate is low enough that the team member thinks they can get the task done for less than the optimistic estimate 20% of the time.  The task will require more work than the optimistic estimate 80% of the time.

The pessimistic estimate is that it will take more work than the best guess. It is not a “disaster” estimate but you want an estimate that’s based on the bad risks they identified coming to pass.  The pessimistic estimate is high enough that the team member thinks they can get the task done for less than the pessimistic estimate 80% of the time.  The task will require more work than the pessimistic estimate 20% of the time.

Now let’s dip our toe into the statistics and look at two tasks, Alpha and Beta, and the calculated work estimates you would use at three different levels of confidence.

You take the three estimates and use the following simple formulas to calculate the task’s work estimate for a certain level of confidence of finishing within the estimate.

Mean=(4*BG)+OE+PE/6.  The mean is 4 times the best guess + the optimistic guess + the pessimistic guess divided by 6.

SD=(PE-OE)/6.  The standard deviation is the pessimistic guess minus the optimistic guess divided by 6.

Probability level = work= Mean +(z-score for probability)*SD

For task Alpha you can be 80% confident with an 82.2 hour estimate. But task Beta, with optimistic and pessimistic estimates that are further from the best guess than Alpha, will require an 88.7 hour estimate to reach the 80% confidence level.

Using 3 Point Estimating or PERT 

All of the better project management software packages, such as Microsoft Project®, enable you to use 3 point , PERT, estimates and create a variety of reports that communicate the project’s risks. You can take estimates like those above and calculate the odds of finishing the entire project within various durations.  That information is a solid basis for a discussion with the sponsor about the tradeoffs between cost, scope, duration, risk and resources.

To learn these 3 point estimating or PERT techniques and the entire estimating process, consider our private, online courses where you work individually with your instructor. They are available by phone, video conference or e-mail whenever you have a question or need help on an assignment. We can also deliver a customized training program at your site for up to 25 people. Call us at 303-596-0000.

 

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What is Project Leadership? – Video

Dick Billows, PMP
Dick Billows, PMP
CEO 4pm.com
Dick’s Books on Amazon

What is project leadership? It consists of proven techniques that project managers use to:

  • set standards of behavior and performance
  • motivate the team members to high performance and
  • rally the team members when the project has problems to overcome.

These tasks are particularly challenging because most project managers are technically- oriented people with little experience or skill in motivating others. Another factor that makes project leadership difficult is that the project manager often has very little or no formal authority over the project team. The lack of formal organizational authority is the number one challenge to project leadership.

Project managers must tailor the interpersonal techniques they use to fit the personality of each team member and stakeholder with whom they work. That’s the only way project managers can make up for their lack of formal authority.  Once they have “typed” the person’s personality and selected the right techniques for dealing with them, they have won half the battle. Here is a video on Team Member Personality Types

Another technique of effective leadership is to apply the best practices in terms of how the project manager trains and treats their project team members. Watch this video of a PM dealing with a situation where a team member has been pulled off the project and assigned elsewhere. In the first video, you see the PM use a technique that does not fit the personality of the team member. The result is complete failure. Then watch an analysis and see the PM do it the right way, using the right technique for the team member. Leading Teams

Communicating with the team member who has a problem

You can learn all of these skills in our online project management basics course. We individually tailor this course for business, IT, construction, healthcare and consulting specialties.

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What is Project Management and How To Do It

Dick Billows, PMP
Dick Billows, PMP
CEO 4pm.com
Dick’s Books on Amazon

What is project management? It’s a process for producing a predefined result, called a deliverable, on time and within budget. A deliverable can be a highway, an office building, a computer software, a medical records system, a book, a full-length movie and many other things. A project has a specific start and finish date. It is not an on-going effort like managing the organization’s accounting department.

What is Project Management: It Involves Special Techniques

There are special techniques for managing projects and they start with creating a plan. The project plan is a document that details what the project is going to deliver (the scope). It is created by the person who wants the project done (the sponsor) and the person who will manage the effort (the project manager). It also defines what resources the project manager needs and how he/she will manage the people working on the project. The project manager meets with people affected by the project, called stakeholders, and learns what they require the project to produce. As the project manager breaks down the scope and requirements into smaller deliverables, they are developing a pyramid of clearly defined deliverables that lead from the smallest tasks up to the largest deliverables. At the top of the pyramid is the project scope. Good project managers focus on deliverables that are defined by metrics.  Here’s an example of a deliverable defined by a metric, “Design a payroll data entry screen with 25 data fields that allow payroll clerks to enter 65 payroll transaction per hour.”  A deliverable that is based on metrics has a number of very important benefits. First, when the project manager assigns deliverables to the project team members, they know exactly what is expected of them before they start work. They don’t have to guess or worry about failing on their assignment because the PM has defined what a good job is in measurable terms.  With that type of assignment, a team member can break it down more accurately and use their experience to plan their approach to their deliverable.

Second, using deliverables as the basis for the project lets the project manager and team members develop much more accurate estimates of the duration anWhat is a Project Managementd cost of each task. It also lets the PM determine how long the entire project will take and what it will cost. Another effective tool is the work package. The project manager should give each team member a work package which describes their deliverables and details the risks and other factors that will affect their assignment. Then PM and team member use that same work package to develop an estimate of the amount of work in their deliverable(s). This gives the team member something very much like a contract; it explains the expectations the team member must meet.

Third, managing a project that is built with deliverables gives the PM unambiguous checkpoints to measure how the project is doing versus the approved plan. Each deliverable has a crystal-clear and measurable definition of success so the project manager, sponsor and stakeholders don’t have to guess about the project’s progress. After the project plan is approved, the PM executes it by assigning work to the team members to ensure all the project deliverables get produced. As the team is working on their deliverables, the PM is monitoring their progress, controlling the project schedule, budget and scope and solving any problems. As part of this monitoring and controlling process, the project manager makes periodic status reports to the sponsor who initiated the project. During the executing phase, deliverables are reviewed and accepted as they are produced. The project stakeholders and sponsor examine what the team produced, compare it to the specifications and accept or reject the deliverables. The PM doesn’t wait until the end of the project for the stakeholders to review the deliverables. He/she does it as they are produced so they can identify and fix problems early.

Fourth, with measured deliverables as a basis for the project plan and schedule, the project manager can do a better job quantifying the impact of change requests. Using the example above, if the user wants to increase the number of fields on the payroll data entry screen from 25 to 30, the PM can use the metric along with project software and revised work estimates to quickly assess the impact of this change on the project budget and completion date.

After the last of the deliverables has been produced, the project manager closes the project by verifying with the sponsor that the project delivered what they wanted. The project manager will also archive all the data generated by the project so it can be used by other project managers in the future. That information will make it easier to plan similar projects.

What is Project Management: It’s Leading and Managing People

In addition to these planning and workflow management techniques, the project manager also has to lead, motivate and manage the project team. And they must build support from other executives in the organization for the project. Last but not least, the project manager has to “manage” the project sponsor who very often will outrank the project manager by several levels. Managing the sponsor requires a great deal of subtlety and tact if the project manager is to ensure that the sponsor plays their important role in defining the scope and controlling the project.

To learn more about how to use these tools and techniques, consider our online project management courses. You begin whenever you wish and work privately with Dick Billows, PMP, an expert project manager. You control the schedule and pace and have as many phone calls and live video conferences as you wish.

At the beginning, when you and Dick talk to design your program and what you want to learn, you will select case studies that fit the kind of projects you want to manage. Chose you course and then select the which specialty case study from business, or marketing,  or construction, or healthcare, or consulting.  That way your case studies, project plans, schedules and presentations will fit your desired specialty.

  1. 101 Project Management Basics
  2. 103 Advanced Project Management Tools
  3. 201 Managing Programs, Portfolios & Multiple Projects
  4. 203 Presentation and Negotiation Skills
  5. 304 Strategy & Tactics in Project management

 

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Dick Billows, PMP, GCA

Dick Billows, PMP, GCA

Dick has over 25 years of experience as a project manager and regional partner with the fourth largest international professional firm and a VP of a Fortune 500 company managing a portfolio of project across 14 states. He has managed projects and programs in all 50 states and a dozen foreign countries. Since starting 4PM.com, he has assisted over 300 organizations in improving their project results and trained hundreds of project managers.

Dick began his career in project management with an international consulting firm starting as a technical consultant and move up to project and then program management. He successfully managed performance improvement, cost reduction and systems development projects for clients across the United States and overseas for 12 years. He directed projects in the following industries: computer chips, aluminum extrusion, insurance, local and state government, food manufacturing, restaurant chains, international reservation systems, K-12 education, oil refining, law firms, hospitals, medical practices and construction contracting and sub-contracting in commercial, industrial and residential construction.  Dick’s system development projects include accounting systems, ERP, financial reporting, inventory control, scheduling, personnel management and claims processing.

He made partner at Grant Thornton International (the world’s fifth largest accounting and consulting firm) and later assumed responsibility for the entire regional portfolio of client consulting projects in the western United States. Im that role he was responsible for training and developing dozens of project managers who managed thousands of projects each year.

 

A Fortune 100 client hired me to manage a 14 state region with responsibility for a portfolio of new products, including new locations, advertising, marketing, research and development. MY division achieved over 40% growth in five consecutive years.

A team of project managers and I formed 4PM.com to provide project management training and consulting for PMs and clients around the world.

My current duties are implementing project methodologies for clients, training project managers and consulting with project sponsors and executives.

Dick teaches in-person seminars for corporate clients and also directs the 4PM.com project consulting practice, helping organizations manage strategic projects and implement 4PM’s Achievement-driven Project Management™ methodology in their organizations.

I hold an undergraduate degree in economics and statistics from Johns Hopkins University, an MBA from the University of Colorado and has done doctoral work in organizational behavior at the University of Colorado.

Dick is the author of 14 books and over 225 articles on project management. He has also written and directed over 50 short project management videos. In 1986, Dick formed 4PM.com where he and his fellow project managers assist organizations in improving their project management processes. They include: Siemens, Intel, Baker-Robbins, Citicorp, TCI, Kaiser Permanente, Sentry Safe, Reader’s Digest, Jones Intercable, US WEST, Norwest Bank and First Data Corporation as well as smaller organizations like Candy’s Tortilla Factory and Colorado Mountain Development. Dick has a BA in Economics and Statistics from Johns Hopkins University, an MBA from the University of Colorado and did three years of doctoral work in Organizational Behavior at the University of Colorado.

I have been managing projects for over 25 years and have assisted over 300 organizations in improving their project results. Along the way, I have written 14 books, over 325 articles and directed 36 short videos on project management. I’ve managed projects all over the world as well as managing portfolios of projects and trained 1000’s of project managers. I am president of 4PM.com and directs the firm’s consulting, in-person seminars and web-based individual training programs for professionals.

 

Dick’s books include:

  • Project Manager’s KnowledgeBase, 10th edition 2012
  • Managing Information Technology Projects, 6th edition, 2010
  • Advanced Project Management Techniques, 4th edition, 2011
  • Construction Project Management, 5th edition, 2012
  • Essentials of Project Management, 11th edition, 2011
  • Managing Healthcare Projects, 3rd edition, 2009
  • Program and Portfolio Management, 9th edition, 2011
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Order of Magnitude Estimates: How to Calculate & Present Them

Dick Billows, PMP
Dick Billows, PMP
CEO 4pm.com
Dick’s Books on Amazon

Order of Magnitude (OOM) Estimates are rough guesses made at the very beginning of the project. At this time not much is known about the project and everything can change as planning progresses. Order of magnitude estimates use historical project data with analogous mathematics. The numbers are calculated for the whole project, not for individual tasks or major deliverables.  They are usually expressed as a range, like “$150,000 – $200,00 cost and 125 – 160 days of duration.”  Executives dislike those ranges and immediately use only the lower (most optimistic) numbers.  But project managers should stick with the ranges in all their order of magnitude estimates because the range communicates the project’s uncertainty. Then they narrow the ranges as planning progresses and uncertainty declines.

Order of Magnitude Estimates: When To Use Them

Project managers use order of magnitude (OOM) estimates at the beginning of a project to give executives some data. During the initiation phase, executives need information about how much the project will cost and how long it will take. They use this data to decide if the project should go forward. They may also need to decide to integrate this project with other projects the organization is considering. This data is vital for decision-making purposes and cost-benefit decisions. Unfortunately, this is the time when the project manager knows the least about what the project will entail. He/she doesn’t know what deliverables have to be produced, or how much work those deliverables will require. They also have no idea how many team members will be available to do the work. So the project manager is in no position to provide precise estimates.

Order of magnitude estimatesThe absence of data, however, does not prevent executives from demanding precise figures on a new project’s time and cost. If we look at the initial estimating situation from their perspective, we can understand why. They must approve and become accountable for the expenditure of many hours of work and other organizational resources, including cash. From their perspective, it’s reasonable to require data about the new project’s business benefit and the amount of resources it will consume.

Unfortunately, many project managers fall victim to the executives’ pressure and give estimates that aren’t based on facts. Executives may say things like, “Use your project management experience to tell us how long this will take and what it will cost.  If you’re worth your salt as a project manager you ought to be able to tell us the duration and budget you’ll need.” This inevitably leads to blaming the project manager for finishing late and over budget.

Project management experience does not give you the ability to pull accurate initial estimates out of the sky. The one exception might be when you’re repeating the same project, like building new fast food stores in the same city. But when you don’t have data from similar completed projects, there is no way you can provide accurate data during the initiation phase.

Order of Magnitude Estimates: Better Than Commitments You Can’t Keep

Order of magnitude (OOM) estimates are the best tool for a project manager during the initiation phase.  With OOM estimates, the project manager is not providing a precise budget and completion date. He/she will be able to do that later on. Now the project manager provides data along with information about the degree of uncertainty of the estimates. Order of magnitude estimates take the form of a project manager saying, “I’m 80% certain that the cost will be between $50,000 and $100,000. I’m 70% certain that we can be finished between 100 and 150 days.”

We know that numbers like this will drive executives crazy. But accurate estimates are not possible. The best we can do at this point is give them an estimate that reflects the lack of information.  We do not give estimates with no factual basis. The only time we have 100% certainty of the cost or duration estimate is on the last day of the project. Project managers need to explain that the certainty of the estimates will improve as we proceed through detailed planning and execution. The estimates get more accurate as we learn more about the deliverables we have to produce, the amount of work it will take to produce them and the size of the project team available to do the work. Our estimates at initiation may have a range of -25 to +75%. As we begin detailed project planning that range narrows and when the plan is approved, we may have a range of uncertainty that is plus or – 15%. As execution of the project proceeds, the range of the estimates narrows all the way through closeout.

Order of Magnitude Estimates: How To Calculate Them

We’re going to express the order of magnitude estimates as a range to reflect the uncertainty. We usually use analogous estimating techniques to provide the raw data and then alter this historical data in two ways. First, we’ll adjust the historical data to reflect the differences between the current project we’re estimating and the completed project. We might gather people with known expertise and ask them to assess the differences in complexity, intensity and difficulty of the current project versus the historic one. They might come up with a 15% adjustment factor. This means the current project is 15% more difficult and will require that much additional time.

The second adjustment we would make is to apply our uncertainty percentages. As an example the -25% to +75% range we discussed above. So the numbers for the new DEF project versus the ABC historical project look like this:

Hours of Work

From the archives: ABC project actually took 10,400 hours of work

Adjustment factor: DEF project is +15% harder than ABC project

Estimate: DEF project requires 11,960 hours of work

Adjustment to reflect uncertainty:  -25 to +75 for DEF project

OOM: 8,970 to 20,930 hours of work range for DEF project

The project manager would present this information by saying something like this. “We’ve assembled our best experts and used actual data from the ABC project done two years ago. We asked our experts to look at the hours ABC took and reach consensus on the differences between the new DEF project and the ABC project. They concluded that the DEF project is 15% more difficult and would require that many more hours. Then I applied the uncertainty factors to reflect how little we know about the DEF project this early in the effort. The combination of those two data sources gives us the range of hours that you see above.”

When the executives complain about the lack of precision the project manager can say, “This is the best available information we have as of today. As we learn more during the planning effort, I will be able to provide you with increasingly precise numbers. But we will always be dealing with some uncertainty.”

When pressed by the executives for better data, the project manager can say, “I understand you want credible numbers. But at the present time I know so little about this project that trying to be more precise would be deceitful.”

At the beginning, when you and Dick talk to design your program and what you want to learn, you will select case studies that fit the kind of projects you want to manage. Chose you course and then select the which specialty case study from business, or marketing,  or construction, or healthcare, or consulting.  That way your case studies and project plans, schedules and presentations will fit your desired specialty.

  1. 101 Project Management Basics
  2. 103 Advanced Project Management Tools
  3. 201 Managing Programs, Portfolios & Multiple Projects
  4. 203 Presentation and Negotiation Skills
  5. 304 Strategy & Tactics in Project management

 

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Parametric Estimating

Dick Billows, PMP
Dick Billows, PMP
CEO 4pm.com
Dick’s Books on Amazon

Parametric estimating is one of the most accurate techniques for determining a project’s  duration and cost. Luckily, parametric estimating is fairly easy to implement. First, you define the specifications of each unit of the deliverable. Next you research published information, if available, about how many hours of work are required for each unit and the cost. For example, the units could be linear feet of wall surface to paint or customer interviews about their satisfaction with your company’s service. You can use these rates for estimating the duration and cost for the individual tasks/deliverables and the entire project.  Project Estimating Main Page

Parametric Estimating – Use Published Rates

Parametric estimating requires published rates. Let’s say you need to estimate the cost of building a high-rise office building. You might consult an estimating publication and find that the cost of building a six-story, pre-stressed concrete building with a luxurious finish for the offices, plus  many other specifications, would be $175 per square foot. You would select the appropriate rate and multiply it by the number of square feet of your building. That would give you the estimated cost.

You could also use parametric estimating if published rates were available to estimate the hours of work required to paint one of the offices. You would look up the specifications for an office with 12-foot ceilings. You might paint it with a latex paint after first putting down a primer. You would look up the rate in a published estimating book and find that each linear foot of wall in this office would require .25 hours of labor. If you had 2,000 linear feet, you would estimate the work at 500 hours (2,000 x .25 = 500). Parametric estimating is successful for often-repeated tasks, like building a six-story office building or painting office walls. Because these tasks are common and frequent, there is a lot of data available.  It is worthwhile for industry sources to compile and publish parametric estimating data.

parametric estimatingWhen compared to other estimating techniques, parametric estimates are more credible to executives than estimating techniques based on people’s judgments. Because the parametric rates come from sources published by large reputable organizations, the rates are seen as very reliable. The other half of the equation, the number of units you will produce, is also credible. You base the units on a planned count that you can compare to the actual count as you execute the project. The combination of these two features make parametric estimating seem to be rock solid.

Here’s another example. Let’s say you have 400 customer surveys to conduct and you will ask 35 yes/no questions during the interview. You find a published source that says the rate for a 30-40 yes/no question survey is 15 minutes per survey. Using this rate, you calculate the total work: 15 minutes x 400 = 600 minutes or 10 hours of work.

While parametric rates are readily available in the commercial and residential construction industries, that is not true everywhere. Parametric estimating is less successful with tasks that don’t produce tangible outputs. You can count the number of square feet in a building or the number of customer interviews you’re going to conduct. They are tangible. It’s much less accurate when you try to develop parametric rates for judgmental tasks with intangible outputs. For example, there may be rates for writing and editing pages for a financial report but these rates are much less accurate. Parametric rates are not available for projects in manufacturing, information systems, healthcare, marketing, human resource management and general operations. That’s because these projects are too varied to establish reliable rates.

Parametric Estimating – Do It Yourself

There is an option for projects where published parametric rates are not available. That option is to develop your own parametric rates. This is particularly important for tasks that are part of many of your projects. You have the database you need if your organization is doing a good job of archiving your projects’ planned and actual hours of work and costs. You can identify tasks that appear frequently in your organization’s projects.  What you are looking for are deliverables where the amount of work for each unit is relatively consistent. Writing computer code is not consistent because each line of code may require vastly different amounts of thought and creativity. But it may be possible to develop your own parametric rates for deliverables with tangible outputs. Customer service reps answering the top ten questions your customers ask has a relatively consistent amount of work per question. The unit cost of generating employee W-2 forms in your payroll system is usually consistent in terms of the sources of information each W-2 accesses. Writing a software manual where the units you count are the number of screen displays is another example.

Obviously, these homegrown parametric estimating databases are not going to cover all of the tasks in your projects. But they will cover some which saves you time and gives the estimates greater credibility. Remember that the key to developing those estimates is having historical data from completed projects. You must archive the information about how many hours of work various activities took and how many units they produced in those hours. When you use these homegrown parametric rates, you can significantly improve the accuracy and credibility of your cost and duration estimates with a relatively small time investment.

At the beginning, when you and Dick talk to design your program and what you want to learn, you will select case studies that fit the kind of projects you want to manage. Chose you course and then select the which specialty case study from business, or marketing,  or construction, or healthcare, or consulting.  That way your case studies and project plans, schedules and presentations will fit your desired specialty.

  1. 101 Project Management Basics
  2. 103 Advanced Project Management Tools
  3. 201 Managing Programs, Portfolios & Multiple Projects
  4. 203 Presentation and Negotiation Skills
  5. 304 Strategy & Tactics in Project management