Controlling in an imperfect environment

The companies I have been in, have rarely had an organisation that followed the textbook rules for implementing projects. The larger the company, the more formal the project organisation, but even in an organisation that implemented projects with a budget of tens of millions of dollars, I have run into some fundamental challenges. This could be lack of a proper WBS structure, lack of detailed budgets or purely technical project managers, with little understanding of project management theories.

Whatever the reasons, the consequences are the same; the lessons from formalised economic education, and controlling theories, normally assume a more or less perfect world. When faced with the harsh realities, I have often had to find out how I could maximize my controlling within the existing organisational structures. Some changes can be implemented relatively easily, such as asking for monthly forecasts or having the PM deliver a monthly percentage of completion for the project. Other changes are require longer periods to implement, and often need to be anchored at a management level. This could be the inclusion of contingency in budgets, to deliver more detailed budgets, the use of weighted milestones or a WBS structure.

If we reach back and look at some of the input I mentioned in my articles on soft and hard data, I will list an overview of what I have typically found to be useful in even simple project organisations:

There is a lot of controlling to be done on the basis of these, but in the interest of sparing you from reading ten pages of calculations, and their merits in controlling, I will only show those that has most often yielded positive results.

If this is less than one, then it is an indication that the project is in danger of a budget overrun.

I typically do not raise this as a red flag before it reaches 0.85 in the earlier stages of the project (i.e. POC less than 50%).

If this is higher than one, it means that the project will have to spend more per month than it has previously done. Like all other indicators, this in itself is not a problem, but it should prompt further investigation, as it suggests that the project schedule is slipping. This is one of the most common inconsistencies I have seen in PM reporting; the schedule is slipping, but the project manager has an (unrealistic) expectation of being able to catch up, by working a bit harder. This a typical consequence of best-case planning, and definitely somewhere I focus a lot. Normally this will also be reflect if we look at the current year exclusively:

If we use the above formula as an indication of whether the forecast (and schedule) for the current year is slipping, I have normally found it as a good indication of whether the entire project faces the same problems.

Finally I would like to include two softer indicators, that have, none the less, proved quite useful for me:

1. If the anticipated end date is moved further into the future, then you should expect tan increase in the AFC. Maintaining a project organisation is associated with continuous cost, and open projects have a tendency to attract costs.
2. If the time remaining is less than 15% of total project duration, I would expect ETC to be less than 10% of the AFC. The reason for this is that projects typically follow an S-curve, and at the end of the curve the rise in accumulated costs is significantly slower than earlier in the project.

If any of the two indicators above 'trip', then I wouldn't raise it as a red flag, but more likely I would contact the PM and present him with my data, and see if there is an explanation for it.

If any of you have any experience with, or ideas on, implementing changes in an existing PM organisation or on other focus areas for controlling, I would be very interested in hearing about them.

My next article will be more generic, and in it I will try to discuss some of the general merits of controlling. I will, as per usual, put it in the context of experiences, in this case where there has been a clear (and positive) effect of controlling.