We have talked about various aspects of moving from IC to EM or establishing you as an EM in previous articles under this newsletter series. Every journey towards success starts with a roadmap, then how can you miss to define a roadmap in your project management journey. Unlike Google Maps, where you just need to put your destination and voila it’s available; here you have to draw your map on your own using lines of well defined budgets and colours of clear understanding of the resources required to reach your destination. Today, I will transfer the equipment you need to navigate the crucial steps of project planning. Let’s start with?
Definition and Importance of Budgets
A budget is a financial blueprint of money that outlines the expected expenditure and income from the project. Missing any aspects will imbalance your planning. Budget helps you to translate your project into numbers that help in taking informed decisions throughout the life cycle of the project.
Role of budgets in project success,
- Providing a financial roadmap: A clear budget helps you stay on track and identify potential overruns before they derail your progress.
- Promoting resource allocation: A budget guides you to effectively decide how to allocate resources, manpower and materials.
- Identifying risks: Budget helps us to anticipate potential financial challenges and allows implementing potential risk management strategies.
Components of a Budget
To craft an accurate budget, you should know the components involved in it and when we are talking about the costs, so it too is all about costs.
- Fixed vs. variable costs: Fixed costs remain constant throughout the project like salaries of employees, licenses required for their systems. While variable costs of projects fluctuate with project activities like infrastructure costs on adding/removing testing environments, making any sales live (POD expansion costs for serving on same or better speeds)
- Direct vs. indirect costs: Direct costs have been taken care of, by every planner but most of them miss to plan for indirect costs involved in the projects. Direct costs are directly attributed to the projects like number of resources and their salary, raw materials like systems involved etc. But indirect costs involved like sudden hiring for some subject matter expert or office supplies and AC bills approvals for working over weekends just in case timelines are being delayed. Coffee, lunches and dinners in that case too come under indirect costs.
Budget Planning
Budget planning has started from the day you have been planning for the efforts for yourself as an IC. Here you will get an enlarged version of those skills but in a different format, there you were looking for your hours but now you have to be involved with money too.
- Define project scope and goals: First task is to get a well defined project scope from the product owners. Because only on a well defined scope you can set a foundation of a good budget by estimating resources needed and cost associated with them.
- Historical Data Analysis: If you have experience with similar projects your historical data will help you as a benchmark to create better budgets. If you have not, collect the historic data by talking to people who have done something similar.
- Break Down the Project: You must have heard the T-shirt sizing analysis of scrum management technique, similarly break down the project into various manageable and deliverable phases. That allows you to estimate the costs and allocate the resources correctly at every stage of the project.
- Phase Wise Cost Estimation: Estimate the costs associated with each phase, do research if needed. A detailed estimation provides you room to tweak including personnel, materials, equipments and other expenses.
- Allocate contingency funds: Take a buffer in your budget by 5-10% to allow including unexpected expenses. You might not get immediate sanction for that extension.
- Review and refine: Once a draft budget is ready, review it with project team members to ensure accuracy and alignment with project goals before taking it to stakeholders.
Identifying Resources
Financial resources planning is just a part of project planning, let me share other important aspects that requires your careful consideration during project planning -?
- Human Resources: Create your team of people who will execute the project, including ground level team members, consultants and specialists.
- Physical resources: Equipment, materials, licenses and physical assets necessary to complete the project.
- Informational resources: Data, documents and other information required to guide project decisions.
Principles of Effective Resource Allocation
By now you have planned a lot and started execution but execution can not be done without correct resource allocation. These are two guiding principles for resource allocation will help you.
- Prioritising tasks and projects: Using 80/20 principle, figure out critical tasks that contribute most significantly to the project then allocate resources to them on highest priority.
- Balancing short-term needs with long-term goals: There will come short term requests for immediate deadlines but managing them by derailing the long term goals of organisation or project will put you in trouble, so never ignore the long term goals. Allocate resources strategically to ensure progress towards both short-term and long term objectives.
Let’s discuss the techniques for better resource allocation -?
- Resource levelling: This is the technique to evenly distribute the workload across teams so that no one feels overburdened. Remember, avoiding any resource overloading otherwise that could lead to a delay due to bottleneck.
- Resource smoothing: Distributing the similar resources to every vertical to make them independent from other teams will help to minimise the fluctuations in project deliverables throughout the project life cycle.
- Critical Path Method (CPM): CPM is a scheduling technique that identifies the minimum time required to complete a project. It helps prioritise tasks and resource allocation based on their criticality to the project schedule. For example A (2 days), B (1 day) and C (3 days) are sequential tasks C is dependent on B and B is dependent on A, meaning it will require a minimum 6 days to complete.
Tools and Techniques for Budget Management
There are several tools available in the market, some are paid while some are free you can choose any based on your budget and requirements. Here are a few -?
- Spreadsheets: Simple yet powerful, spreadsheets can be used to create and track your project budget.
- Specialised budgeting software: Many software programs offer advanced budgeting functionalities, such as forecasting and cost tracking features. Zoho, Xero, Azure, JIRA and Atriangle are a few of them.
By mastering the art of budgeting and resource allocation, you equip yourself to navigate your project journey with control and confidence.
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