Apply top-down estimation using Matchware MindView

Andy Makar walks you through how to apply top-down estimation using a sample work breakdown structure developed in the Matchware MindView mind mapping tool.

In the PMBOK preparation course, there are various approaches to estimation, including top-down and bottom-up. In cases of strategic planning, uncertainty, or small project sizes, a top-down estimation approach is more applicable. For projects where budget and time are sensitive, a fixed-price contract is applied, or if the project stakeholders need greater detail, you should apply a bottom-up estimation approach.

I'll walk you through how to apply top-down estimation using a sample work breakdown structure (WBS) developed in the Matchware MindView Business edition mind-mapping tool. In my next TechRepublic tutorial, I'll show how to conduct a bottom-up estimation using MindView.

Allocate the project's costs

Within the top-down approach, you may use consensus from a pool of experts, parametric models, and apportion to allocate costs across a project. When you are conducting portfolio planning and estimating budgets for projects, analogous estimating is often applied by relying on a couple of project experts who have experience with similar projects. If the last PeopleSoft upgrade cost $1.5M, it serves to reason that the next PeopleSoft upgrade should be budgeted for $1.5M. However, once you have an estimate, you need to allocate the estimate to the specific pieces of the project.

Get your WBS

In this tutorial, you need to use your WBS to allocate the project costs across the WBS. For this example, I built a sample WBS using MindView for an ERP implementation (Figure A). Figure A

WBS software project (click the image to enlarge)

Let's assume the ERP package will support HR, Payroll, Benefits, and an Employee Self- Service Web portal. The implementation will have a number of interfaces, data conversion, and custom reporting, in addition to system-integration testing and launch activities. In an ERP implementation, there could be many other workstreams, but for illustrative purposes, I limited the workstreams to six high-level WBS deliverables.

After examining the WBS, it isn't immediately clear how much of the project budget each work stream should receive. At this point, you have only a high-level WBS defined, and you need to apportion the budget. Fortunately, last week you completed an analogous estimating session with your PMO to establish a high-level budget for the program based on the company's past experiences with this specific ERP package. The portfolio planner and VP of Human Resources have agreed to allocate $1.5M to the project. You need to determine how much budget each portion of the WBS should receive.

Step 1: Assign the project budget amount to the top-level node

1. Open MindView and open the sample WBS.mvdx file.

2. Click the ERP Implementation node.

3. Click the Calculation panel (Figure B).

4. In the Calculation panel, enter Project Budget for the first variable and enter the value 1,500,000. The variable Project Budget: 1,500,000 will display on the main project node.

5. Create a second variable called Budget Percent and assign it the value SUM. The SUM function will add up all the underlying nodes for the Budget Percent variable. (MindView assigns variables to all subnodes of a WBS.)

Figure B

Calculation panel (click the image to enlarge)

Step 2: Assign a budget percent variable to each node

1. Click the Implementation node.

2. Enter .4 for the Budget Percent Variable in the Calculation panel.

3. Click the Interfaces node.

4. Enter .1 for the Budget Percent Variable.

5. Click the Conversion node.

6. Enter .05 for the Budget Percent Variable.

7. Click the Reporting node.

8. Enter .10 for the Budget Percent Variable.

9. Click the Testing node.

10. Enter .10 for the Budget Percent Variable.

The WBS should have a Budget Percent for each major node, and the highest-level node should have a Budget Percent total of 1 (Figure C). Figure C

Allocated Budget Percent (click the image to enlarge)

You can continue adjusting the percentages or adding new nodes based on the deliverables in your WBS. Since the WBS is in a mind-map format, adding a new node for additional scope is easy to allocate. You could further detail each node into smaller deliverables and adjust each node's percentage as appropriate.

Step 3: Export to Excel

The next step is to export the data to Excel, so you can quickly calculate the budget lines for each work stream. Most organizations rely on a financial spreadsheet to track project costs, and by exporting to Excel, you can do further WHATIF analysis and adjust the financials as necessary. IT organizations often need to further split their budget lines by capital and expense line items for accounting purposes. By exporting to Excel, you can further manipulate the financials as needed for your company's template or budget report.

1. Click the green MindView icon in the upper left corner.

2. Select Export | Microsoft Excel | Quick Excel Export (Figure D).

3. Save the file.

Figure D

Export to Excel (click the image to enlarge)

Step 4: Enter a formula for the project budget

To calculate each budget line, you will need to add a simple calculation formula to each of the cells. Follow these steps:

1. Open the Excel extract.

2. Click cell E5 and enter the formula =$E$4*F5 (Figure E).

3. Click [Control]C to copy cell E5.

4. Highlight cells E6 to E59.

5. Click Edit | Paste Special | Formulas to copy the formula to each budget line.

Figure E

Budget-line formulas (click the image to enlarge)
Now you can reformat the budget lines and do further analysis by allocating your own capital or expense-line items or adjusting the percentage (Figure F). Figure F

Budget-line items (click the image to enlarge)

Top-down estimation benefits with MindView

The more you detail the WBS, the more granular you can get when you're assigning values. When conducting top-down estimation, you don't have the luxury of defining the WBS into detailed work packages.

The benefit of using the mind-mapping format is that if the scope changes or the team needs to quickly brainstorm a high-level WBS, the project budget can be calculated and allocated to each relevant deliverable. By using MindView to brainstorm scope, you can easily create a high-level WBS, assign budget percentages, and export the data to Excel to save time, as project scope can fluctuate in the early stages of a project.

Download the free trial of MindView, open the sample WBS.mvdx file, and get started with top-down estimation.

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