When you’re doing a project there are three things this could mean – two of them are very useful and important, and the third one is EXTREMELY DANGEROUS!
Let me explain
1. MONEY
1 – We have spent 54k on the work we’ve done so far, and it should have cost us 50k
Maybe it took a bit longer, as in more hours worked. Or maybe the prices / costs were higher. But either way, we are over budget. Now just to be clear, this work could be more than we expected to have done by now, or (more likely!) less than we expected to have done by now, but regardless of progress, the work we have actually done, did it cost more or less than expected? This is known as cost performance, and is very important to track since it can be used to forecast the most important number: the final cost.
In our example, say the final cost is supposed to be 100, and we’re at 54 instead of 50, so we can forecast that the final cost is going to be either 104 (if our problems are behind us now) or 108 (if they are likely to continue to the same degree in the second half).
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2. TIME
2 – We have taken 54 weeks to do the work we’ve done so far, and it should have taken us 50.
This means that regardless of costs, which might also be over or under or might be bang on, we’re just going a bit slowly. This could well have cost implications, for example if a team of programmers have taken 54 weeks to finish the first half of the project instead of 50, then we have spent an extra 4 weeks of wages/money/cost to get here. But I’ll come back to that in a minute, because maybe they just had 4 weeks off and the cost ISN’T over. The only thing we know for sure is that we are running behind, so the finish date will either be 104 (if our problems are behind us now) or 108 (if they are likely to continue to the same degree in the second half). This is known as schedule performance.
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3. MIXTURE!!
Now the dangerous one!!!
3 – We have spent 54k up till today and we expected to only have spent 50k up till today.
This is the commonest of the three statements, and it’s very dangerous, because it is based on a messy mixture of time and money. We can’t tell what it really means!!
It could be that we’ve done what should have, but have overspent on it.
It could be that we have done more than we expected in the time, so our spend rate is perfect but we’ve done more and we are now ahead.
Or it could be any other combination of time and money, e.g. we have done very little, but very expensively, so it looks roughly OK. Or we have done loads, very cheaply, so it looks normal but it is actually brilliant (this one never happens!). The commonest is a bit overspent AND a bit behind, with the overspend being slightly worse than the lateness, so it adds up to having spent a bit more than we expected so far – looks a little bad, but is actually very bad,
This third one tells you nothing (except cashflow). It doesn’t allow you to forecast either finish date or final cost at completion. Never use it!!!
Always split it out into cost performance AND schedule performance – the first two – and then you’ll know when you’re going to finish and what it’ll cost when you do.
And also if you know where your problems lie you can then think about what you can do to fix them. Because fixing lateness is totally different to fixing overspend.
What do YOU measure in your projects?
Onwards and upwards!
