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.
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 . Order Now! .
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.
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More articles on Project Management:
- The True Costs of Cost-Cutting
- The metaphor "trimming the fat" rests on the belief that some parts of the organization are
expendable, and we can remove them with little impact on the remainder. Ah, if only things actually
worked that way...
- Communication Traps for Virtual Teams: II
- Communication can be problematic for any team, especially under pressure. But virtual teams face challenges
that are less common in face-to-face teams. Here's Part II of a little catalog with some recommendations.
- Why Scope Expands: I
- Scope creep is depressingly familiar. Its anti-partner, spontaneous and stealthy scope contraction,
has no accepted name, and is rarely seen. Why?
- Down in the Weeds: I
- When someone says, "I think we're down in the weeds," a common meaning is that we're focusing
on inappropriate — and possibly irrelevant — details. How does this happen and what can
we do about it?
- Missing the Obvious: I
- At times, when the unexpected occurs, we recognize with hindsight that the unexpected could have been
expected. How do we miss the obvious? What's happening when we do?
See also Project Management for more related articles.
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