Point Lookout: a free weekly publication of Chaco Canyon Consulting
Volume 1, Issue 12;   March 21, 2001: The Cheapest Way to Run a Project Is with Enough Resources

The Cheapest Way to Run a Project Is with Enough Resources

by

Cost reduction is so common that nearly every project plan today should include budget and schedule for several rounds of reductions. Whenever we cut costs, we risk cutting too much, so it pays to ask, "If we do cut too much, what are the consequences?"

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.

The Leonard P. Zakim Bunker Hill Bridge

The Leonard P. Zakim Bunker Hill Bridge, part of Boston's Big Dig, while it was still under construction. Defects directly traceable to budget cuts led to numerous problems in the project's tunnels, and probably are tied to the death of one tunnel user. Photo courtesy the Big Dig.

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:

Wishing
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.
Bootlegging
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.
Hoarding
Excessive budget
cuts encourage
"underground" behavior,
which is hard
to control
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.
Deferring
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.

Find out if any of this stuff is happening in your organization. If it's increasing, perhaps you're trying to run projects with budgets that are too small. Go to top Top  Next issue: The Slippery Slope That Isn't  Next Issue

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.

How to Spot a Troubled Project Before the Trouble StartsProjects 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! .

Your comments are welcome

Would you like to see your comments posted here? rbrenJKzIuHOPlDEtlLRyner@ChacQgktAluCFDdNEuOfoCanyon.comSend me your comments by email, or by Web form.

About Point Lookout

Thank you for reading this article. I hope you enjoyed it and found it useful, and that you'll consider recommending it to a friend.

Point Lookout is a free weekly email newsletter. Browse the archive of past issues. Subscribe for free.

Support Point Lookout by joining the Friends of Point Lookout, as an individual or as an organization.

Do you face a complex interpersonal situation? Send it in, anonymously if you like, and I'll give you my two cents.

Related articles

More articles on Project Management:

Hurricane Warning flagsDeclaring 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.
Vortex cores about an F18 fighter jetGuidelines 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.
The damaged Apollo 13 Service Module, as seen from the command moduleOn 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?
An apple and a skyscraper full of windowsHow 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.
Lt. Gen. Donald Kutyna, Ret., when he was Commander of the U.S. Space CommandMore 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

Children playing a computer gameComing 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.
Office equipment — or is it office toys?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.

Coaching services

I offer email and telephone coaching at both corporate and individual rates. Contact Rick for details at rbrenZqzUDxHGEXONdsthner@ChacITlOwxDuWLNYcOwqoCanyon.com or (650) 787-6475, or toll-free in the continental US at (866) 378-5470.

Get the ebook!

Past issues of Point Lookout are available in six ebooks:

Reprinting this article

Are you a writer, editor or publisher on deadline? Are you looking for an article that will get people talking and get compliments flying your way? You can have 500 words in your inbox in one hour. License any article from this Web site. More info

Public seminars

The Race to the South Pole: The Power of Agile Development
On 14The Race to the Pole: An Application of Agile Development 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:

The Power Affect: How We Express Our Personal Power
Many The Power Affect: How We Express Personal Powerpeople who possess real organizational power have a characteristic demeanor. It's the way they project their presence. I call this the power affect. Some people — call them power pretenders — adopt the power affect well before they attain significant organizational power. Unfortunately for their colleagues, and for their organizations, power pretenders can attain organizational power out of proportion to their merit or abilities. Understanding the power affect is therefore important for anyone who aims to attain power, or anyone who works with power pretenders. Read more about this program.

Follow Rick

Send email or subscribe to one of my newsletters Follow me at LinkedIn Follow me at Twitter, or share a tweet Follow me at Google+ or share a post Subscribe to RSS feeds Subscribe to RSS feeds
The message of Point Lookout is unique. Help get the message out. Please donate to help keep Point Lookout available for free to everyone.
101 Tips for Managing ConflictFed up with tense, explosive meetings? Are you the target of a bully? Learn how to make peace with conflict.
Reader Comments About My Newsletter
A sampling:
  • Your stuff is brilliant! Thank you!
  • You and Scott Adams both secretly work here, right?
  • I really enjoy my weekly newsletters. I appreciate the quick read.
  • A sort of Dr. Phil for Management!
  • …extremely accurate, inspiring and applicable to day-to-day … invaluable.
  • More
52 Tips for Leaders of Project-Oriented OrganizationsAre your project teams plagued by turnover, burnout, and high defect rates? Turn your culture around.
Ebooks, booklets and tip books on project management, conflict, writing email, effective meetings and more.
Comprehensive collection of all e-books and e-bookletsSave a bundle and even more important save time! Order the Combo Package and download all ebooks and tips books at once.