Project Constraints: Cost - Working with a Budget
What Happens When Budgets Fall Apart?
Project managers who view themselves as stewards of their teams’ fiscal responsibilities often fall back on budgets to justify holding firm to changes of scope or adjustments to timelines. However, cost constraints frequently cause managers to revisit task lists and deadlines. Cost overruns offer easy targets for administrators who see projects spiraling out of control, which is why many project management professionals put a lot of energy into staying under budget. Unexpected changes to the constraints themselves are harder to control, requiring both experience and insight from team leaders.
Challenge #1: Lack of Accountability
Working without cost as a project constraint might sound like an ideal situation for some project managers. However, a blank check for a team initiative often results in a lack of accountability for team members and their leaders. When “money is no object,” team members tend to buy their way out of problems instead of focusing on creative solutions. In most cases, oversight from stakeholders usually arrives very late in the project process and often takes a very negative tone toward the relative return on investment. To prevent this kind of situation, project managers must hold themselves accountable to initial budgets, even if higher level managers don’t show the same restraint.
Challenge #2: Cost Centers as Commodities
As companies of all sizes try to cut costs, “job costing” has become a way to gauge the value of internal human resources in the same way that accountants would track the costs of independent contractors. Unfortunately, in some organizations, job costing allows department heads to set flexible rates for their team members that don’t always scale on the same cycles as projects. As a result, project managers can suddenly find themselves with cross-departmental teams that actually cost more than they did when original budgets were estimated. Strong project leaders can often find ways to offset rising personnel costs by developing their own profit centers. Sharing research and development tasks with other projects, increasing the book value of a team’s output, and outsourcing some team functions to less expensive contractors can help leaders keep costs in check.
Challenge #3: Unexpected Budget Cuts
Of course, the worst possible scenarios for project managers include rounds of sudden budget cuts. A strong project statement with a scope that includes “need to have” and “nice to have” goals can act as a buffer in this kind of situation. Many project managers tasked with keeping projects on track during cost containment try to identify and eliminate non-critical physical resources before looking at staff cuts. Some leaders find temporary success by asking team members to cover the duties of positions that have been left unfilled through attrition. In the worst cases, some internal job duties may be outsourced to independent contractors. While nobody enjoys making these difficult decisions, strong leaders find ways to meet project goals, even when suffering through budget cuts.
This post is part of the series: Working with Project Constraints
In this five-part series, we examine three classic project constraints encountered by project management professionals, along with ways to turn them into strategic advantages.
