Cost – do we focus on it too much?

linked chainI’m looking for some insight from all of you on a point that’s been bothering me lately. On many recent projects, “time to market” has been defined, and rightly so, as the top priority (I still use the triple constraints as a key organizing/prioritization guide). Given the competitive pressures and the related shortened product life, it makes sense that bringing a product or service to market early (or at least not late) equals big money — not only as a direct incremental contribution, but also enhancing the firm’s competitive situation in general (e.g. Apple obsoleted its own iPod Mini with the Nano even though the Mini was its best unit seller, setting the bar higher for its competition).

So far, it makes sense. Naturally, if one constraint is set to the highest priority, it follows that others will be lower. Going back to the triple constraint framework, what should be next in priority – resource (cost/budget/people) or scope (deliverables/features/quality)? If time to market really is #1, then when “push comes to shove,” either we’re choosing to have more flexibility in increasing our resources, and/or decreasing the scope.

Here’s my concern: I see managers often making plans as though minimizing resources is still the top priority. As a consequence, there is an attempt to keep resources fully utilized (often over-utilized) and allocated and scheduled tightly over several projects. As a further consequence, the schedules go to pieces pretty quickly (totally predictable either by invoking Murphy, or queuing theory), more pressure is applied to already stressed resources (typically human beings), and eventually we don’t get what we set out to achieve.

What I find interesting is that I see the above situation mostly in established companies with official project management processes. Many startups I’ve seen seem to “get” the time to market priority. Are they working with a different paradigm that doesn’t apply to established firms? Maybe the difference is in the value of the project output — if the value of the output is high, we should have the leeway to apply more resources. Let’s say the output of the project is supposed to result in a product that has a projected profit margin of $1.5 M per year. That translates into about $120K per month, and about $5K per day. So, it seems to me that a project could afford to increase it’s resource requirement by up to $5K per day for every day the schedule is accelerated. Or put another way, this project has about a $5K per day discretionary fund to keep the project from going late.

I’ve been wondering whether our “traditional” PM approach may tend to bias our priorities toward cost control. If we were running a factory we know that running a machine at more than about 85% capacity will often result in backups and schedule delays unless it’s dedicated to a single product. Yet, I often see projects schedule the people as if there’s no additional load imposed for switching tasks and that any surge in “demand” for the person (inevitable in a normal environment) is supposed to be absorbed by the person (which, if nominally scheduled at 100%+, often leads to burnout and its consequences).

One of the interesting aspects of the adaptive PM techniques is the idea that one coordinates resources via frequent communication rather than through date schedules (or maybe it’s more accurate to say that the schedules are treated as flexible guides subject to frequent modification based on what’s actually happening). This kind of coordination is difficult, if not impossible, to do if the resources are not committed to the project. Isn’t it common sense that we can’t have valuable resources on “standby” just in case they can be utilized at a different time than in the original plan? Well, some organizations, at least for some projects, have come to the conclusion that “common sense” doesn’t apply and create dedicated project teams.

So, what do y’all think about this? Are there some opportunities being missed by an over-focus on cost/resource control? Is there something to be gained even if raw efficiencies are reduced? I think so, but I’m willing to admit I’m biased.

Share

Leave a Comment

Your email address will not be published. Required fields are marked *

*

Scroll to Top