In my last article I went into some detail regarding controlling in simpler projects. Before I dive further in to the uses of earned value and work breakdown structures, which will become even more detailed, I felt I would touch upon a subject that was a bit broader.
Though I have never been confronted with the question directly, I have felt it looming a few times, especially in the mind of more technically minded project managers; why do we need controlling?
I am not talking about the mandatory financial and economical controls and functions, such as handling invoices, monthly reporting, doing the annual report etc. Rather I am thinking about the controlling of projects or activities. How does it add value to the business?
I have always perceived finance as a service provider. The interesting part is that it is a service provider for two very different recipients. One is the management, and the other is typically the executing organisation, such as a project organisation. Therefore, some of the controlling you are providing is directly for the benefit of the management, and some of the controlling is directly for the benefit of the project organisation (and indirectly for the management). Generally speaking, the justification for the existence of a controller is to have a person that has sufficient knowledge to look at the activities in the business, and put it in a financial context. Of course such areas as knowing which internal controls to implement, and to analyse the trends are also vital parts of being a controller.
Getting back to the question at hand, the first part of the controlling function, servicing the management, is the most straight-forward to justify. Through his, or her, expertise, the controller enables the management to have a reliable overview of the portfolio of activities, and hopefully to provide early warning if something is deviating significantly from expectations. These two functions are vital for the management of any company with more than just a handful of employees, and for the same reason, management normally has a fair understanding of the need for controlling.
Even though I do not feel the same understanding from the executing organisation, who often express exasperation over the need to deliver reporting and answer questions from the financial organisation, I feel that there are just as many benefits for them to be reaped as there are for the management.
The most simple example I can think of, is merely the act of delivering feedback, and helping the organisation to reiterate in case of inconsistencies. An example of the effect of this is readily at hand. At one time I served as the facilitator for the budget process where a portfolio owner invited the technical organisation to a full day workshop to brainstorm new ideas and rate these ideas on importance vs. risk.
The ideas generated were placed in a matrix by the project managers with risk on x-axis and importance on the y-axis. As was to be expected, an over-abundance of the ideas were rated as low risk and high importance. After taking a 15 minute break, the portfolio owner and I discussed all the rated ideas with the assembled staff, merely helping them to understand their ideas in relation to the other ideas and the existing infrastructure. The before and after of the process can be seen by the two pictures below:
As can quite clearly be seen, there was a definite progression from categorising almost everything as low risk projects to accepting that some of the projects were actually associated with considerable risks.
This not only helped in regards to being more cautious as to which projects to start, but also made sure that the project managers themselves were aware of the increased risk, and included a higher contingency in their initial budgets. This in turn led to a far smoother execution of the projects, since the projects were not under-budgeted.
Another example of benefits for the executing organisation include early warning indicators. If these are reported back to the project manager on a regular basis, they allow him to take corrective measures, or flag it to management earlier than would otherwise have been the case. This allows the project manager to keep his budget on track, and either deliver on the project goals, or to obtain sanctioning to deviate from the plan (either on cost, schedule or scope).
The examples of benefits continue on, such as increased overview of the project, helping the PM to clarify and communicate the weighing between schedule and budget, to identify scope creep and much much more. If you have any objections, or examples of where controlling has yielded a clear cut benefit in your organisation, you are more than welcome to share in the comments, since I love such stories.
In my next article I shall return to earned value, for an in-depth look at projects with low or medium complexity.
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