Bill is a systems engineer who's just been given his first assignment as a project manager. He was handed a brief document that included the following information:
- Project Description: The two branch offices of the Schwartz Company will be linked to the home office, allowing all corporate users to share files and send e-mail.
- Project Deadline: Operational by the end of the second quarter
- Project Budget: $120,000
A case study with a lesson
This case study will illustrate why project planning is key to success—especially when sticking to a budget is one of your primary goals.
In this example, Bill’s first impulse was to dive in and begin calling vendors to get price quotes. His gut told him that he should easily be able to complete the project on time and under budget.
Fortunately, his manager was astute enough to stop him from making a common mistake—ignoring the importance of project planning. Bill’s boss convinced him to follow some basic project preparation guidelines:
- Identify the stakeholders: These are the people who will be impacted by the success or failure of the project.
- Identify the stakeholders’ objectives.
- Create an implementation plan.
Stakeholders and their objectives
The stakeholders for this project included:
- VP of finance
- Networking team leader
- Members of the IT department
- Networking team
- The current telecommunications provider
After meeting with representatives from each stakeholder group, Bill developed a list of objectives.
Notice from the list that most of the primary objectives are related to whether the project will work. The secondary objectives are most often related to the project’s performance and cost. However, in this project, cost factors appear on the list of both the primary and secondary objectives. The overall budget goal is a primary objective, because if this cost ceiling isn’t met, it will prevent approval of the project. The monthly maintenance cost is included as a secondary objective.
Some of these objectives may actually end up in conflict. For example, there may not be enough time after first quarter processing to properly install and test the system in time to be operational by the end of the second quarter. The 99.5 percent availability may not be possible in the context of a budget of $120,000.
A skilled project manager understands that there will often be conflicting objectives for a project. There is always some give-and-take in the process. If you know your stakeholders and their expectations, you are much more likely to develop a plan that meets most of the project requirements. It is also important to recognize that sometimes it is impossible to meet everyone’s expectations.
Renegotiate your plan
In this case, using these objectives, Bill was able to put together a Request for Proposal (RFP). He submitted the RFP to five vendors and received qualified responses from three. The three responses met all of the primary and secondary objectives except cost, which averaged $30,000 more than the budgeted amount.
Armed with that information, Bill sat down with the key stakeholders and negotiated changes in the objectives. The changes allowed him to decrease the projected cost of the project by $20,000. Although he was still $10,000 over initial budget, everyone agreed that the project should proceed.
If Bill had acted on his initial gut instinct, he would have either produced a result that was less than satisfactory, or he might have gone well over budget. This would have damaged his credibility as a project manager and, perhaps, undermined his self-confidence as well.
Having a solid project plan is more than half of the battle. Managing the project through successful completion will be the next challenge.
What’s the most expensive project you’ve ever managed? How did budget goals impact the outcome? What advice would you give to a manager facing a project with an unrealistic budget? Post a comment below or send us some mail to suggest other ideas.