Why Cost Control is a People Issue

Cost control is a project management fundamentalMy very first article in this 52-week series showed some startling statistics for our industry:

      • more than 40% of IT projects go over budget,
      • fully half were not completed on time,
      • about 30% did not meet the original project goals, and
      • one in seven are never completed. (Project Management Institute 2017, 5)

In this year-long series of articles, I discuss why I believe much of this failure (and it is failure; what other industry would put up with such dismal success statistics?) is the result of our single-minded focus on process and technology at the expense of the people aspects of project management.

According to Project Management Institute (PMI), the primary cause for project failure of the strategic initiatives of the organizations that were surveyed was “a lack of clearly defined objectives and milestones” (11-12). No amount of process or technology prowess can fix that.

This article deals with controlling costs. In my experience as a Project Manager, cost was always paramount. The statistics noted at the beginning of this article are primarily related to cost. Every process improvement initiated by the firms I worked for were directly related to cost control. (Note the deliberate use of the term “process improvement”.) Looking back, we always looked for ways to improve our processes in order to improve our success statistics.

I was curious to determine if there were others that supported my premise that cost control is not just a process issue. So, I researched a number of articles on the subject of Control Costs. The articles typically restated the PMBOK® Guide (Project Management Institute, 2017, p.257-270). Many included the requirement to apply Earned Value Analysis, variance analysis, trend analysis, forecasting, and financial analyses. I was left with the impression that to properly affect excellent cost control, I just needed to master equations such as EAC = AC + [(BAC-EV) / (CPI x SPI)]. (And yes, my tongue is firmly in my cheek.)

My premise is that cost control is primarily a people issue. It is tied directly to the other managing and controlling activities of performing integrated change control, validating and controlling scope, controlling schedule, controlling quality, controlling resources, monitoring communications, and monitoring risks – all of which, I argue, are first and foremost influenced by the people associated with the project.

Very few of these articles I read even broached the subject of avoiding cost overruns in the first place. I believe that cost control begins during project initiation, striving to avoid “a lack of clearly defined objectives and milestones,” as referenced in the PMI article. I believe that the people aspects of project management are an important focus to help prevent many of the cost control issues typically seen on IT projects.

An excerpt from one scholarly paper did catch my attention, however. The following quote is from Professor Brent Flyvbjerg, Said Business School, University of Oxford: “The root cause of cost overrun, according to behavioral science, is the well-documented fact that planners and managers keep underestimating scope changes and complexity in project after project” (emphasis mine) (White 2018).

I surmise from his observation that IT management’s unbridled optimism that everything will go well on the project is the most relevant factor in dealing with cost control.

According to behavioral science. Not process. Not technology. People. People’s behavior.

I am in no way denigrating the need for the various analytical methods cited earlier. Or the processes that surround them. These methods are excellent gauges of a project’s status using cost control measures. When used consistently they provide the Project Manager with indications of where to make adjustments in the directing and managing of project work to keep the project on track.

However, what I am advocating for, and what I have been advocating for in these many articles, is to get the fundamentals right beginning with the early planning activities. The project team must work with their client to define the scope well. Ample time must be built into the project schedule to collect and detail the system requirements. The client team and stakeholders must be actively engaged throughout.

These are the people aspects of project management that will help ensure more successful projects. Cost control will be a secondary concern as the project proceeds according to schedule and budget.

Footnotes

Project Management Institute. PMI’s Pulse of the Profession 2017 – 9th Global Project Management Survey – Success Rates Rise. Newton Square, PA: PMI Publications, 2017, Print.

Project Management Institute. A Guide to the Project Management Body of Knowledge (PMBOK® Guide) – Sixth Edition. Newton Square, PA: PMI Publications, 2017, Print.

White, Mark (2018, September 27). “Addressing Five Key Questions to Avoid Project Cost Overruns.” https://www.ecosys.net/blog/addressing-five-key-questions-to-avoid-project-cost-overruns/


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