Why it Costs More to Manage a Project than it Does to Complete the Work.
Stuart Hamilton
I develop operational and strategic frameworks to manage large Cloud Infrastructure Platforms.
Every project has overheads: Project Managers, Scrum Masters, and in larger companies, PMOs and other Service Delivery support teams. But when does these costs and efforts stop aiding the project and start to cripple it? What percentage of the budget is suitable to allocate to costs with governance, compliance, procedure, and administration? Unfortunately, in many organizations, the burden of costs from the “non-productive” personnel are greater than the cost from the people actually doing the work.
In the construction world, they call the associated costs not directly attributable to building as “soft costs”:
· Hard costs: Construction labor, construction materials,
· Softs costs: Management, architectural fees, inspections, permits, site studies, etc.
As a rule of thumb, the soft costs will be about 10% on a large project, and 20% on a standard residential project. The client may have costs administering their side, and that will add to the overall costs.
In IT there are also soft costs and hard costs, and the bigger and more mature the organization, the more soft costs are introduced:
· Hard costs: Development, testing, business analysis, system analysis, Infrastructure, etc.
· Softs costs: Project management, program management, project accounting, PMO, compliance (change control, architecture, service delivery, security, etc.), governance, reporting, procedures, documentation, administration, etc.
The danger of the soft costs, is that they are drags on the success on the project, and many of them are chronic liabilities that cannot be dialed back. Once you set up a governance framework, even if the work slows down, the costs with administration still need paid every month – so even if your hard costs are variable, your soft costs are not.
I started researching to find out what are the acceptable percentages for the “soft costs” in IT projects. But I haven’t been able to find any definitive metrics on what would be acceptable. Over the years at my clients, I have seen very different situations, and so I have gauged what are the soft costs at different organizations. Where does your organization fit?
Lead Service Architect Operational Service Management at Defence Digital
6 年Concur but it is not just the cost of the overhead that is an issue. Often they demand more attention than add value. Net result is distracted PM's and stagnation. Momentum is key but can't be achieved while energy is focused on satisfying the demands of overheads rather than delivering. That situation is all to common in large organisations and needs fighting.
Retired
6 年I used to get very frustrated at the number of people I had to deal with who seemed to do nothing productive and actually obstructed people doing real work. I call these people Ladder Shakers. Google it for the story.
Visualizer. Storyteller. Creator.
6 年Very true. Many times PMO costs add up to almost 20% - 25% of total project cost.
Office@Home - Founder and Key Account Project Manager, officeathome.com.pl
6 年PM is not a skill, it is a state of mind ;)
Nice post and great food for thought. The soft costs are tough to balance and manage such that you are able to remain relatively nimble but in control. One item I’d suggest to add to the mix is “what’s the cost of no control?” In many instances it can be catastrophic and hurt the overall business in many areas (Eg missed product launches, late fees, overage cost, and more common today “penalties and fines for missed dates or deliverables”). Often project offices (PMO’s) and the related project management elements are created and implemented because of problems with late projects or to help manage the extraordinary efforts needed to manage a fast growing entity. The challenge is to ensure regular review of the PMO and in the absence of a PMO the various project management elements. Sometimes they are significantly under resourced and other times not as efficient or effective. Done right a PMO is invaluable. Some of the soft costs mentioned like compliance, engineering change, traceability, etc. are must haves because of industry standards, country regulations, etc. The challenge here is how to manage and streamline methods and processes and resources required to cover these. Internal vs external resources or hybrid?