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What to Do When Management Cuts Your Project Estimate

July 14, 2009 | Author: PM Hut | Filed under: Cost Estimating, Cost Management

What to Do When Management Cuts Your Project Estimate
By William R. Duncan

The first thing you have to do is find out why they are cutting. Most such management actions are created by one of the following misunderstandings:

  • Senior managers often fail to distinguish between an estimate and a price. A price is the monetary value charged for a product or service. (This is true even for an internal project where no money actually changes hands.) The determination of price is a business decision that is related to, but separate from the development of an estimate. In this regard, you have an important responsibility as project manager: to ensure that the estimate is accurate in order to facilitate a good pricing decision.
  • Your manager may view your estimate as a negotiating position. Some managers assume that you have “padded” your estimate to provide negotiating room. If their assumption is true, then their cuts are appropriate in order eliminate the padding. If your estimate is truly an estimate (an informed assessment), you should be able to demonstrate — clearly and unequivocally — that the suggested cuts will either reduce quality or simply increase the probability of an overrun.
  • Others may use the estimate as a motivational tool. Most good managers understand that a more difficult task (where the target is aggressive) can serve to motivate the project team. But even good managers often fail to appreciate that an impossible task (where the target is so aggressive that it is clearly impossible) is a powerful demotivator.

William R. Duncan is the principal of Project Management Partners of Lexington, MA USA. He currently chairs the Board of PMCert, the certification body of the American Society for Advancement of Project Management (asapm). He was the primary author of the original (1996) version of A Guide to the Project Management Body of Knowledge and was one of the founding members of the Global Alliance for Project Performance Standards (GAPPS) which has recently published a framework for performance-based competency standards for project managers.

© 2009 William R. Duncan - http://www.pmpartners.com/

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This entry was posted on Tuesday, July 14th, 2009 and is filed under Cost Estimating, Cost Management. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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