Boston's Big Dig, the largest highway project in U.S. history, was originally projected to cost about $2 billion. The price now is over $14 billion. I don't know why they're over budget, but I do know that there has been intense pressure to hold costs down. Maybe part of their problem is the pressure to reduce costs.
Since the need to cut costs suggests that earlier estimates were off, why do we believe the new estimates? They're usually made under extreme time pressure, and with obvious bias. They might even be worse than the estimates they replace.
Yet, we do it and we do it again. Whenever we cut budgets, we risk cutting too much. And then we must deal with a hard truth: if we cut too much, the project will likely cost even more than if we hadn't cut at all.
When we cut too much, new mechanisms — many invisible — kick in, and all are beyond the control of project management. Uncontrolled processes lead to uncontrolled costs, and that's why cutting too much raises costs. Some examples:
- Responding to the call for cuts, people re-estimate their work, knowing that only the "right answers" can save their pieces of the project. Unaware, they bias their estimates. Overruns are inevitable.
- When we charge time to one project and work on another, or when we "borrow" equipment, we're bootlegging. It's widespread, and it's completely off the books.
- Excessive budget
which is hard
- If we believe that we won't gain approval for additional staff, we might be tempted to keep some people we have, even when we don't really need them, because we doubt that we can get them back when we do need them again. So when money is tight, we find some people sitting around.
- Bingeing and purging
- When an organization goes through a sequence of "freezes," it inevitably goes through a matching sequence of thaws. During thaws we grab whatever we can. Often, this grab goes beyond satisfying backlogged needs, and becomes a true binge. Like squirrels burying acorns, we acquire what we can whether we need it or not.
- When budgets are tight, we sometimes defer addressing problems. For example, if a project is late, we shorten testing. This defers discovery of problems, often until after the product ships, when resolving the problems is even more expensive. The project cost is reduced, but the cost to the enterprise climbs dramatically.
One symptom of resource starvation is the urge to make every effort "count" towards the ultimate deliverable. For a discussion of the downside of this approach, see "Trying to Do It Right the First Time Isn't Always Best," Point Lookout for March 14, 2007.
Projects never go
quite as planned. We expect that, but we don't expect disaster. How can we get better at spotting disaster when there's still time to prevent it? How to Spot a Troubled Project Before the Trouble Starts is filled with tips for executives, senior managers, managers of project managers, and sponsors of projects in project-oriented organizations. It helps readers learn the subtle cues that indicate that a project is at risk for wreckage in time to do something about it. It's an ebook, but it's about 15% larger than "Who Moved My Cheese?" Just USD 19.95. Order Now! .
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More articles on Project Management:
- Declaring Condition Red
- High-performance teams have customary ways of working together that suit them, their organizations,
and their work. But when emergencies happen, operating in business-as-usual mode damages teams —
and the relationships between their people — permanently. To avoid this, train for emergencies.
- Guidelines for Sharing "Resources"
- Often, team members belong to several different teams. The leaders of teams whose members have divided
responsibilities must sometimes contend with each other for the efforts and energies of the people they
share. Here are some suggestions for sharing people effectively.
- On the Risk of Undetected Issues: I
- In complex projects, things might have gone wrong long before we notice them. Noticing them as early
as possible — and addressing them — is almost always advantageous. How can we reduce the
incidence of undetected issues?
- How We Waste Time: II
- We're all pretty good at wasting time. We're also fairly certain we know when we're doing it. But we're
much better at it than we know. Here's Part II of a little catalog of time wasters, emphasizing those
that are outside — or mostly outside — our awareness.
- More Obstacles to Finding the Reasons Why
- Retrospectives — also known as lessons learned exercises or after-action reviews — sometimes
miss important insights. Here are some additions to our growing catalog of obstacles to learning.
See also Project Management for more related articles.
Forthcoming issues of Point Lookout
- Coming July 18: High Falutin' Goofy Talk: III
- Workplace speech and writing sometimes strays into the land of pretentious but overused business phrases, which I like to call high falutin' goofy talk. We use these phrases with perhaps less thought than they deserve, because they can be trite or can evoke indecorous images. Here's Part III of a collection of phrases and images to avoid. Available here and by RSS on July 18.
- And on July 25: Exploiting Functional Fixedness: II
- A cognitive bias called functional fixedness causes difficulty in recognizing new uses for familiar things. It also makes for difficulty in recognizing devious uses of everyday behaviors. Here's Part II of a catalog of deviousness based on functional fixedness. Available here and by RSS on July 25.
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- On 14 December 1911, four men led by Roald
Amundsen reached the South Pole. Thirty-five days later, Robert F. Scott and four others followed. Amundsen
had won the race to the pole. Amundsen's party returned to base on 26 January 1912. Scott's party perished.
As historical drama, why this happened is interesting enough. Lessons abound. Among the more important
lessons are those that demonstrate the power of the agile approach to project management and product
development. Read more about this program. Here's
a date for this program:
- Ohio National Insurance, 1 Financial Way, Blue Ash, OH: July
Monthly Meeting, Cincinnati
chapter of the International Institute of Business Analysis. Register now.
- Ohio National Insurance, 1 Financial Way, Blue Ash, OH: July 17, Monthly Meeting, Cincinnati chapter of the International Institute of Business Analysis. Register now.
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- Your stuff is brilliant! Thank you!
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- A sort of Dr. Phil for Management!
- …extremely accurate, inspiring and applicable to day-to-day … invaluable.