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.
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:
- 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.
- 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.
- Excessive budget
which is hard
- 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.
- 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.
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.
Projects 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! .
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More articles on Project Management:
- Risk Management Risk: II
- Risk Management Risk is the risk that a particular risk management plan is deficient. Here are some
guidelines for reducing risk management risk arising from risk interactions and change.
- Personnel-Sensitive Risks: II
- Personnel-sensitive risks are risks that are difficult to discuss openly. Open discussion could infringe
on someone's privacy, or lead to hurt feelings, or to toxic politics or toxic conflict. If we can't
discuss them openly, how can we deal with them?
- Ten Approaches to Managing Project Risks: III
- Project risk management strategies are numerous, but these ten strategies are among the most common.
Here are the last three of the ten strategies in this little catalog.
- Down in the Weeds: II
- To be �down in the weeds,� in one of its senses, is to be lost in discussion at a level of detail
inappropriate to the current situation. Here�s Part II of our exploration of methods for dealing with
this frustrating pattern so common in group discussions.
- How to Get Out of Firefighting Mode: I
- When new problems pop up one after the other, we describe our response as "firefighting."
We move from fire to fire, putting out flames. How can we end the madness?
See also Project Management for more related articles.
Forthcoming issues of Point Lookout
- Coming April 25: Narcissistic Behavior at Work: VI
- Narcissistic behavior at work distorts decisions, disrupts relationships, and generates toxic conflict. These consequences limit the ability of the organization to achieve its goals. In this part of our series we examine the effects of exploiting others for personal ends. Available here and by RSS on April 25.
- And on May 2: Narcissistic Behavior at Work: VII
- Narcissistic behavior at work prevents trusting relationships from developing. It also disrupts existing relationships, and generates toxic conflict. One class of behaviors that's especially threatening to relationships is disregard for the feelings of others. In this part of our series we examine the effects of that disregard. Available here and by RSS on May 2.
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