Time Is a Cost Even When Nobody Says How Much

“ ‘Wait’ is a heavy load!”

– Old Bajan proverb



In my recent post, “Project Managers Should Revel in Time Analysis!”, I wrote:

“By far the biggest impact of time is to the project sponsor or customer – the person or persons who are funding the investment in expectation of reaping its value, yet often must wait months or years for its completion. This is the person who should be stipulating the value of time right up front, in the contract or the business case of the project charter.”

A former student recently sent me an illustrative quote from page 26 of the 2009 book Reengineering the Corporation by Michael Hammer and James Champy:

A company in the pension business recently developed a service to take advantage of a quirk in the tax laws and interest rates. Its anticipated market life was exactly three months. Coming to this market late by just thirty days would have cut the company’s selling time for the service by a third… The point is that not only have product and service life cycles diminished, but so has the time available to develop new products and introduce them. Today, companies must move fast or they won’t be moving at all.”

But what if the sponsor/customer does not understand the full implications of the project being an investment that is greatly impacted by the cost of time? Or has failed to identify this particular project as an enabler project whose full value will be impacted by the cost of delaying other projects? Or simply does not understand how to incorporate the cost of time in a contract or charter, relying on the hackneyed metaphor of a deadline that is far more likely to have negative than positive impacts due to:

  • Parkinson’s Law, which can cause the team to focus on “just-in-time” delivery (and thus often deliver late due to emergent events) even if it could have been delivered far sooner.
  • Debased scope (especially quality), because it seems less painful to cut scope “invisibly” than to miss a calendar commitment. (In the US, the 2013 rollout of the Healthcare.gov website was a classic example of this.)
  • The Principal-agent Problem, which can cause a contractor organization (which may have myriad other concerns including more lucrative contracts or limited cash flow) to pursue its own benefit to the detriment of the customer’s.
  • The lack of urgency on internal projects in many organizations, often caused by the arbitrariness of deadlines and the sense that: “Hey, everyone’s always late!”

Scope, cost and time are the currencies in which the project manager works. The value of the scope is why the project is funded and the cost of the project, in the form of resource usage, often has a whole finance department to help track it.

But the value/cost of time is almost always left as an externality: not estimated, unplanned, untracked, and not used as a quantified basis in project decision-making. Yet the project team has the knowledge and techniques, through critical path analysis and resource scheduling (especially with the CPM innovations critical path drag and drag cost), to greatly enhance this aspect of the customer’s value. Depriving the project manager of this knowledge is the equivalent of tying one hand behind her back, reducing her impact on the project’s expected profit and incapacitating her ability to demonstrate the value she can add. The effect is to reduce the project manager to an automaton marching blindly to a scope/budget/deadline cadence rather than an investment manager employing her knowledge and skills to maximize the value to her customer. And other than a little oil in the knee-joints every week, automatons get neither appreciation nor salary!

So what should the project manager do if deprived of this information? My recommendation:

  1. Do some back-of-the-envelope calculation of what the minimum value/cost of time on the project could be.
  2. Forward those calculations in a memo to the sponsor/customer and anyone else whose perspective on the subject would be valuable, explaining the conservative rationale of the numbers and why an even more accurate figure would help in seeking opportunities to maximize the project’s value by supporting schedule compression decisions.

If the customer confirms that either the initial estimates are accurate or (as will often be the case) that the value/cost of time is even greater, the project manager should urge amendments to the charter or contract incorporating time-based incentives to the team/contractor for earlier completion. (“We’ll be using these to seek time-saving opportunities that you indicate are worth a lot to you, and to the offset additional costs that such schedule acceleration would likely incur.”)

Such contractual inclusions would only reflect a percentage of the value to the customer and, of course, would only occur in the event of actual early delivery. So why would the sponsor/customer ever want to reject them? It becomes a win-win for all, with an amended contract that reduces the potential for moral hazard in the principal-agent problem by better aligning customer and contractor benefits.

The result is almost always a more satisfied customer, and a project manager whose added value can be clearly quantified.

All this is discussed even more comprehensively in my book Managing Projects as Investments: Earned Value to Business Value. In my next blog post, I will explore ways to develop those “conservative estimates” of the value/cost of time when the project manager has not been given that information.

Fraternally in project management,

Steve the Bajan

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