Understand These Three Estimating Concepts

Understand These Three Estimating Concepts

Estimate in Phases

One of the most difficult aspects of planning projects is the estimating process. It can be hard to know exactly what work will be needed in the distant future. It can be difficult to define and estimate work that will be done three months from now. It's harder to estimate six months in the future. Nine months is even harder. There is more and more estimating uncertainty associated with work that is farther and farther out in the future.

A good approach for larger projects is to break the work into a series of smaller projects, each of which can be planned, estimated and managed separately with a much higher likelihood of success. From an estimating perspective, the closest project can be estimated more precisely, with the subsequent projects estimated with a higher level of uncertainty. When one project completes, the next project can be estimated with a higher degree of confidence, with estimates refined for the remaining projects. This technique also provides checkpoints at the end of each project so that the entire initiative can be revalidated based on current estimates to ensure that it is still viable and worth continuing.

Estimate Fixed Costs and Variable Costs

You may hear the terms fixed and variable cost when you are estimating the cost of a project. Variable costs are those that change relative to how many units are being used. An obvious variable cost on a project is contract labor. The more hours you use from a contactor, the more the cost to the project. The cost of contract labor is variable depending on the number of hours worked.

Fixed costs are those that are basically the same for the project regardless of the resources being used. For instance, if you were building a house, the cost of the lot would be fixed and would not change based on the size of the house you built. Similarly, if you outsource part of a project to a third party for a fixed price, it becomes a fixed cost to the project as well. Even if the work takes longer or shorter than estimated, your project cost should still be the agreed upon fixed cost.

Estimate Time-Constrained and Resource-Constrained Activities

Activities can be classified as time or resource-constrained based on whether the duration can change if more resources are applied. An activity is resource-constrained if the duration changes based on the number of resources applied. For instance, you might estimate that it will take 80 hours for one person to build a roof on top of a house. If the person worked forty hours per week, it would take two weeks to complete the job. If you applied two people to the job, the effort is still be 200 total effort hours, but the job would only take one week to complete.

On the other hand, if an activity is time-constrained, the duration remains the same regardless of the number of resources applied. For example, lets say one person attends a three-day class. If you send two people to the class, the class does not get shorter; it still takes three days. Likewise, the time it takes for concrete to dry, or to mail a letter, is not impacted by the number of people involved. They just take a certain amount of time. If you find that applying resources has no impact on the project duration (or very little impact), then the activity is time-constrained.

Structure of organisations

Structure of organisations

Organisations are structured in radically different ways ranging from relatively fixed structures with positions, rules, and established chains of communication to dynamic structures in which people belong to teams that are continually being formed and reformed for the duration of a project.

Typical ways of organising people are:

1. By function - dividing the organisation up into groups with similar specialisms e.g. marketing, finance and accounts, human resources, etc.

2. By product - grouping people together according to the product they make. For example, BIC has three main divisions - pens, lighters, and razors.

3. By process - grouping people together according to the processes that they are carrying out. For example retailing organisations like Argos and Travis Perkins will group employees according to whether they are involved in packing and display or customer service.

4. By geographical area - most large companies are widely dispersed. Companies like BIC, Gillette, Kellogg's, etc have European and North American divisions.

 A further way of organising organisations, which is very popular today, is in a matrix pattern. A matrix is often two dimensional but can have more dimensions. In a matrix system an employee can be in two or more structures at the same time - e.g. a team in lighter production, and a team in marketing at the same time. Matrix structures allow considerable flexibility because employees can shift to different teams within the overall matrix structure.

Organisations can also be highly centralised or largely decentralised. In a highly centralised structure control will be tight from the centre or Head Office of the organisation. In contrast, in a decentralised organisation power will be passed down to the various project managers and teams.

Organisation and control

People are organised in different ways in different organisations depending on factors such as:

• the size of the organisation
• culture of the organisation (typical pattern of doing things in the organisation)
• nature of the industry
• managers preferred structures etc.

A basic distinction can be made between tall hierarchical organisations, and flatter teamwork structured organisations.

A tall organisation will have several layers of command:

In contrast team structures will be based on cells of team members working together, often belonging to several project teams which form and reform as projects start and finish.

The term span of control is the number of people that an individual manages or controls. In tall hierarchical organisations an individual employee may have a wide span of control. In contrast in a teamwork structure the span of control may be narrow or may not exist at all.