Disable de Sirens — But Put Out de Critical Path Fires, Too!

I share, with many others of the anglophone Caribbean culture, a propensity for exaggerated over-the-top hyperbole. And no, I’m not being redundant – any one, or even two, of those three terms would often be insufficient to describe the extended lengths to which we will sometimes go to draw attention to the point we’re trying to make.

As an illustration, there is the old story of the Bajan visiting London who is trying to describe the wonders of his home isle.

“In Barbados, we have mountains of sugar, rivers of rum, and fish that fly!”

To which, of course, the Englishman replies: “I might believe in the mountains of sugar and the rivers of rum, but I’m damned if I’ll believe in fish that fly!”

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So in my previous article, “Whaddya Do When the Critical Path Changes?”, I resorted to a little (for a Bajan!) hyperbole. I wrote that when the critical path changes, “sirens should wail.” And I was, quite properly, taken to task by a couple of people, including Shelley Horowitz in the Comments following that article, for suggesting the need for a state of alarm or danger due to such a change. And the criticism is quite correct. A half century spent in US cities, where sirens are an everyday occurrence, has perhaps combined with my West Indian exaggerations to dull me to the fact that, for many people in the world, sirens really do represent danger and appropriate panic: fire, tornadoes, tsunamis…

So I am taking this opportunity first to apologize, and then to explain in greater depth exactly what I meant.

The exact sentence in that previous article was:

“What should happen immediately is that sirens should wail, warning the project manager that Activity H, with a value-added of just 20% of $350K, or $70K, now has a negative NVA due to the fact that it now also has drag of 2 days and thus drag cost of $50K.”

So let’s eliminate the need for sirens. What I was suggesting is that a change in critical path during project execution can have a major impact on the future project plan. Work that made sense to perform in a certain way may now be a significant drag (!) on our project investment, requiring new analysis.

Figure 4 full network diagram after slippage

Notice, the key event as described in the quoted sentence above is NOT that the critical path changed — it is that this change caused specific activities to now have a negative impact on the project’s expected value! The project would now be better off without the optional Activity H, because its true cost is now greater than its value-added. And this is a potential hazard any time that the critical path changes.

But the problem is that such an event, as described in the linked article, would most probably not even be recognized. Or if it were, it would only be after a great deal of “manual” analysis. Even on a schedule of 100 activities (never mind a medium-sized project of 2000+ activities!), the chance of the scheduler or project manager noticing that one or more activities are suddenly costing more than they are worth is vanishingly small. Why? Because few of the techniques that would allow such a negative anomaly to be noticed are being used:

  1. Projects are not being defined as investments, so that expected monetary value (EMV, or NPV or ROI or any other investment value term you like) and its changes are not being incorporated into the PM software and tracked and optimized either upfront or during performance. The vast majority of commercial software packages do not provide a project-level field for attaching quantified investment value to a project, nor the functionality to manage and track changes that might affect it.
  2. The value-added of specific work packages is not being estimated and assembled into a value breakdown structure (VBS), so that in the diagram from the previous article the value-added of Activity H would be unknown.
  3. The value/cost of time, which usually has significant impact on project EMV, is not being estimated or tracked on most projects, and certainly not in the software. This in turn makes it impossible to compute either the drag cost or the true cost of an activity.
  4. Even on that small minority of projects where the value/cost of time is estimated, critical path drag and drag cost are not being computed. This means that the true cost of Activity H, and the fact that the slippage it is now making the net value-added (NVA) of Activity H negative, is therefore completely unknowable!

Notwithstanding my previous remark, what should happen when such an event occurs is not wailing sirens. Rather, the user’s PM software (MS Project, Primavera, or whatever) should take the info that was entered up front regarding the VBS and the value/cost of time, compute the new drag, drag cost and true cost totals for each new activity on the new CP and kick out an exception report, calling attention to Activity H, perhaps by highlighting it in red (preferably, fire engine red!). And now the team/PM can reassess and amend the plan.

But first, the team has to recognize the issue. And currently, none of that can happen because with the exception of one software package (Spider Project), none of the others (not MS Project, not Primavera, not Asta, not PlanView, not Safron, NONE!) is even computing critical path drag, far less supporting a VBS or drag cost, true cost, and net value-added computation! (And they should, because every project has a critical path, and critical path items have drag and drag cost!)

And that’s why projects are being performed all the time that generate less expected project profit (EPP) than they might because they include work whose true cost after a critical path change outweighs the value that it adds.

If you want to learn more about assembling a VBS and the other techniques mentioned above, they are explored in much greater detail in the new (2015) edition of my first book, Total Project Control: A Practitioner’s Guide to Managing Projects as Investments.

Again, thank so much to those who criticized my “siren” hyperbole and for making it clear that I need to post another article pointing out the implications (and cures!) listed above.

Fraternally in project management,

Steve the Bajan

“Whaddya do when the critical path changes?”

The title of this blog post may, alas, be a surprise to some less experienced project managers. “What – you mean the critical path might change?” Not only might it change, but if you did a good job of schedule optimization during your upfront planning, it very likely will change!

That’s because time is money and project value is usually increased by a shorter project schedule. The optimization process is usually one of iteratively squeezing critical path drag out of the longest path through fast tracking and added resources, thereby reducing float on the other paths. With less float, it often doesn’t take much delay for a secondary path to become critical, even though the entire project duration is still a lot shorter than it would have been without optimization, and the project will be more profitable.

But when a secondary path becomes critical, lots of important things change. Not only do activities that had drag now have float, but activities that had float now have drag! And drag cost! The basis for our critical path analysis is altered, and should require examination and re-evaluation of all our critical path activities, constraints and resources.

Let’s start by looking at a simple project network diagram as shown in Figure 1:

Figure 1 The VBS with Network

This diagram may contain info which some readers are not familiar with seeing in a project schedule. First, it includes the output of our value breakdown structure (VBS). As you can see, each box contains a letter, either M or O.

  • M stands for Mandatory and means that the activity must be performed as part of the project or the project will have no value. The value-added of all mandatory activities is equal to the project’s expected monetary value (EMV). Since the information at the top of the figure says that the project will have an expected value of $400K if completed on Day 55, and since the current schedule is 55 days, all mandatory activities have a value-added of $400K.
  • O stands for optional. These are activities that add value, but the project would have value even if they were excluded. All projects have such activities, and it is important both to recognize them and to estimate the value they are adding to the project. In Figure 1, Activities C, D, E and H are all optional, with value-addeds estimated to be 50%, 40%, 80% and 20%, respectively, of the project’s value.

In Figure 2 below, I have computed the drag, drag cost and true cost (TC) (TC = drag cost plus budget) for all the activities. If you want, do those calculations for practice before you look at Figure 2.

Figure 2 The VBS with drag drag cost and true cost

Notice that the planned true cost of activities that are not on the critical path is equal to their budgets, as they have no drag and thus zero drag cost.

With both the value-added and the true cost of each activity computed in Figure 2, we can now compute the net value-added (NVA) (NVA = value-added minus true cost) of each activity and ensure that each is worth performing. This is displayed in Figure 3.

Figure 3 Full network diagram including value addeds

As shown in Figure 3, all the activities have a positive NVA. The lowest NVA is Activity H, which has a value-added of only 20% of the project’s EMV, or $80K, but a TC equal to its budget of only $30K, for a net value-added of $50K.

Okay, so all is hunky-dory and we start the project with this plan. And then things start to happen. To be precise, Activity C, planned to take 13 days and finish at the end of Day 23, takes an extra 7 days and does not finish until the end of Day 30. As shown in Figure 4, this can change everything that’s important!

Figure 4 full network diagram after slippage

Suddenly, the critical path has changed and now goes through Activities F, H and I. Additionally, the project’s planned duration has slipped by two days, with a delay cost of $50K per day. As a result, the project’s EMV has slipped to $350K and the value of each activity, both mandatory and optional, has slipped accordingly.

What should happen immediately is that sirens should wail, warning the project manager that Activity H, with a value-added of just 20% of $350K, or $70K, now has a negative NVA due to the fact that it now also has drag of 2 days and thus drag cost of $50K. Its true cost is $80K, $10K less than the value it is adding. Either figure out a way to change the schedule (adding resources or changing the network logic) or jettison Activity I – the project will generate $10K more expected profit without it!

Two final points:

  1. $10,000 may not seem like much – but this is just an example. Projects are being performed every week that include work which, for the same reason as shown here, costs millions of dollars more than its worth.
  2. The only way to identify when this is happening is to have all the Total Project Control (TPC) data for both activity value-added and drag cost estimated and computed.

Fraternally in project management,

Steve the Bajan

The Benefits of Recognizing Projects as Investments: “And yet, it moves!”

One of the great afflictions of mankind throughout history has been the stubborn refusal of certain figures who see themselves as ”authorities” to alter their views in light of new ideas and evidence.

In the 17th and18th centuries, combustion was explained as the escape of a substance called phlogiston from a material. This theory was staunchly defended even after it was shown that magnesium gained mass when it burned. Finally, Antoine-Laurent Lavoisier proved conclusively that combustion was the combining of a material with oxygen. This new explanation led to giant steps forward in both physics and chemistry.

Galileo

Some of the most stubborn ideas are those that come with the imprimatur of sacred scripture. Thus the heliocentrism ideas of Copernicus, Kepler and Galileo were banned by the Vatican as conflicting with the Bible and the teachings of the Council of Trent. Galileo was threatened with burning as a heretic, placed under house arrest, and left only able to mutter about our planet: “Eppur si muove.”

Yesterday I had a discussion on a LinkedIn group in which I tried to explain that, in fact, all projects are investments and that recognizing them as such could have great benefit both for the development of better management techniques and metrics and for the greater esteem for our discipline. Alas, I ran into an individual who refused to accept any definitions or techniques beyond the pages of the Fifth Edition of the PMBOK® Guide.

Make no mistake – I regard the Guide as a very valuable book. But both I and PMI also regard it as a guide, and not as the entire body of knowledge of project management! It is also an evolving document, or there would be no need for new editions.

There are techniques and tools and metrics and, yes, definitions that are being used within our discipline that have not yet made it into the PMBOK® Guide. Undoubtedly many will some year. Critical path drag is an example – every project, however scheduled, has a longest path of activities and other delaying factors, and the amount that each item on that path delays completion is its drag. And drag is always there, and has been since the pharaohs’ projects, whether we and our software compute it or not! And this metric is enormously helpful whenever we are seeking places to compress our schedule! (Many clients have employed me over the years to use this technique to recover schedule.)

So what about the definition of a project that I use in my books?

“A project is an investment in work to create a product, service or result.”

First, is there anyone (apart from the gentleman from the LinkedIn group) who would argue that projects are not investments?

  • Investment: “1 The action or process of investing money for profit or material result;.. 1.2 An act of devoting time, effort, or energy to a particular undertaking with the expectation of a worthwhile result.”

http://www.oxforddictionaries.com/us/definition/american_english/investment

I believe we would all agree that every project is undertaken only if its probability-weighted value is expected to be greater than the cost (i.e., the invested amount). If we need a definition for value, the very first definition from the same source seems applicable:

Value: “1 The regard that something is held to deserve; the importance, worth, or usefulness of something”

http://www.oxforddictionaries.com/us/definition/american_english/value

A project’s value may be:

  • Revenues from a new product or service;
  • Future cost savings;
  • The opportunity to keep a plant open instead of being forced by the government to close it;
  • Avoiding fines;
  • Garnering votes;
  • Prosecuting criminals;
  • Saving lives; or
  • Any other of dozens of efforts intended to create a valuable result.

So every project is definitely an investment. But what might be the benefits of staring to recognize them as such?

  1. Project management would start to focus on the quantified aspects of those things that impact the value of the investment: the Golden Triangle of the integrated value/cost of scope, time and resource usage.
  2. Project managers would work harder to align the scope of the project with the benefits wanted by the sponsor/customer through the collaborative development and implementation of a value breakdown structure (VBS) and other techniques. (The failure to actually deliver the benefits for which a project is undertaken is a big issue in many circles, and this would help to solve the problem.)
  3. The value/cost of time on a project, which is currently almost always left as an unquantified externality and therefore rarely managed in terms of its actual impact on the investment, would suddenly be recognized for its importance. Many scheduling techniques that experienced PMs have mastered, like critical path analysis and resource leveling, would therefore suddenly be fully appreciated.
  4. Both drag cost and the true cost of work could be easily computed, meaning that activities on the critical path would be evaluated not only on the basis of their resource costs, but also their drag costs in terms of how much their drags are reducing the value of the investment. (True cost = resource costs plus drag cost.)
  5. Decisions across the Golden Triangle would be quantified in terms of investment value. Should we employ an additional resource costing $10,000 on a critical path activity? Well, will it reduce the drag cost by more than $10,000? Or would we be better off jettisoning that activity because its true cost will be greater than its value-added?
  6. We will be able to track each project during performance not just on the basis of earned value cost and schedule metrics, but on the basis of investment metrics: the expected project profit (EPP) of the project as tracked through the DIPP and the DIPP Progress Index.

All of these are just a sample of the benefits that would accrue if we start dealing with projects as investments. I believe that practitioners would rapidly develop new metrics and techniques to do an even better job of measuring and ensuring greater project investment value.

But perhaps the most important benefit would be for our profession: the value of project managers and project management techniques and contributions would become clearly measurable in value/cost terms. Instead of being looked upon as “overhead on cost centers” project managers would become valuable contributors to the organization’s bottom line.

Surely this would only help PMI to market its ideas and techniques to senior managers who know little about projects, but who care a great deal about investments!

Fraternally in project management,

Steve the Bajan

What is the most important metric of critical path analysis?

For starters, let’s make an important distinction: there is a difference between CPM scheduling and critical path analysis.

  • CPM is a technique for developing a project schedule by estimating the duration of each activity and then sequencing them in the logical order in which they can occur.
  • Critical path analysis is the process of analyzing any schedule, no matter how it was originally developed – traditional CPM, resource-leveled critical path, CCPM, agile, or darts at a dartboard – in order to make improvements.

If the duration of the project is significant, then it is always important to perform critical path analysis, because every project’s duration will be exactly equal to its actual longest path, or what in the construction industry is referred to as its as-built critical path (ABCP). That path may include activities, constraints, resource bottlenecks, sprints, stumbles, dropped batons, rework, or any other type of delay. But the analysis of those delaying factors should always be a prime concern of the scheduler and project team.

And although there is certainly value to be gained through a post mortem process, mightn’t there be even more value in doing it while the patient is still alive?

Why is critical path analysis so important? Because:

  1. On the vast majority of project investments, expected value/ROI is impacted by completion date. Earlier completion usually leads to:
  • Greater total value;
  • Faster generation of that value; and
  • Elimination of the risk of later completion!
  1. If there is value in shortening the project duration, that can only be accomplished by reducing the length of the longest path.

So what is the most important metric of critical path analysis? It’s certainly not float, either total or free. Float is a measure of the extra time you’ve got, and is (almost always!) on activities that are, specifically, off the critical path.

If critical path analysis is intended to increase the value of the project investment by shortening the schedule (perhaps up front, perhaps after slippage), then the most important metric is surely one that applies to the longest path! It’s the one that will help the project team to identify how much time each critical path activity, constraint, resource bottleneck, sprint, stumble, dropped baton, rework, or other delaying factor is currently adding to the remaining project duration! It’s the one that, when changes are made to pull in the longest path thus making another path longest, will identify how much time each item on the new CP is delaying completion! And when you make changes on that new CP and are now constrained by yet another longest path, will quantify the delays that its items are causing!

That metric is critical path drag, and I maintain that it is, by far, the second most important (critical?) metric in critical path analysis. Why only the second most important? Because the most important is drag cost, i.e., by how much is the drag of a critical path item reducing your project’s expected value. That is the most important metric because that’s the one that will allow the project team to optimize the project investment (the ultimate goal of every project!) by justifying the cost of resources by $X to reduce the drag cost by $2X! But of course you can’t get drag cost until you’ve first computed drag.

Let me make one point clear: Steve Devaux did not invent drag! Drag is always there, and has always been there – on the items (activities, etc.) on the longest path of every project, going back to the building of the pyramids and before! We can compute it or we can ignore it – but it’s still there! All that I did is figure out the rules for computing it as I helped my consulting clients compress their schedules. How did I figure it out when others hadn’t? Because as an engineer in one of my corporate classes said to me about five years ago: “Y’know, Steve, you have an amazing grasp of the glaringly obvious.” And critical path drag and its value as a metric is glaringly obvious!

So why is critical path analysis, for the most part, not being performed? Because the project management community, more than half a century after the initial principles of CPM were published, 16 years after the first edition of my Total Project Control book came out, six years after Bill Duncan’s article “Scheduling Is a Drag” appeared at ProjectsatWork.com, three years after Defense AT&L Magazine published “The Drag Efficient: The Missing Quantification of Time on the Critical Path”, five years after Spider Project released a software version that computes critical path drag, and two years after I presented this webinar for PMI’s Scheduling Community of Practice, remains blissfully unaware of the key enabling metrics.

So I conclude with four questions:

  1. Despite the fact that so many people pay lip service to critical path analysis, why would anyone perform it on a network of 1000+ activities when their software does not support the metrics that make it valuable and simple?
  2. Why would project management professionals perform such analysis when the supporting metrics are not in PMI’s PMBOK® Guide, nor in its Scheduling Standard, nor in any of IPMA’s published methodologies?
  3. Why do software companies and project management professional organizations not support/publicize the metrics that enable this analytical tool that is fundamental to the discipline of project management?
  4. Why do slipping project schedules so seldom recover?

If you want to learn how to compute drag and drag cost manually, check out the exercises (with answers) on under the EXERCISE tab at the top of the page.

Fraternally in project management,

Steve the Bajan

How to Use the VBS and Critical Path Drag to Ensure Maximum Project/Program Benefits

In recent articles, I have written about the value breakdown structure (VBS) and tried to show the benefits it offers to both program and project. One of the most important of these is the ability to align the business benefits that the sponsor/customer/program manager wants to the products and work that will create those benefits.

The VBS may be created for projects within a program or for work packages and/or activities within a project. Once the upper levels of the plan (i.e., the major summary elements of the work breakdown structure) have been conceived, communication between the sponsor/customer/program manager and the project manager/team should start, ensuring that the planned elements will in fact create the desired benefits as well as prioritizing the elements.

The initial stage of prioritization is between mandatory and optional work.

  • Mandatory work is that which must be performed or else the project/program will have no value. The value-added of mandatory work is therefore equal to the expected monetary value (EMV) of the entire project/program.
  • Optional work will add value to the project/program, sometimes great value – but the rest of the work would have value even without this particular item. The value-added of optional work is therefore equal to the difference in EMV of the entire project/program with and without this particular product or work item.

Ultimately, it is the optional work that can provide “wriggle room” when the project is being performed – but also can cause lots of mischief, either by being omitted when it shouldn’t be or included when it should be omitted. In other words, optional work often requires decision-making. This is one reason why the MoSCoW method, which simply separates optional work into Should, Could, and Won’t categories, is insufficiently granular. If we are deciding whether or not to invest in a specific element of work, we need a monetary estimate of both its value and its cost.

In the last article, we defined the concept of the true cost of work (TCW) in a program or project:

  • If a work item is on the critical path, its true cost is the sum of its resource costs and its drag cost, the latter being the value/cost of the time that the work item’s duration is adding to the critical path.
  • If an activity is off the critical path, its drag and drag cost are both zero, so that its TCW is only the cost of its resources.

This important distinction means that one can have a situation where a valuable (“Should”) work item ought to be omitted in favor of a low value-added (“Could”) work item, if:

  • The Could item is off the critical path with a value-added of $40,000 and a resource budget of $20,000; and
  • The Should item is on the critical path with a value added of $200,000, but with a resource budget of $30,000 and drag of three weeks at a drag cost of $60,000 per week.

Remember: chances are that the sponsor/customer/program manager will not know the details of the work, in terms of schedule and cost, two levels down from them. That is why this example is crucial in demonstrating how important it is that the project manager/team, who should know such details:

  1. Understand the desired benefits of the work;
  2. Understand how the components/work items are aligned with those benefits;
  3. Understand the relative priorities of those components/work items in monetized value-added terms (i.e., the VBS);
  4. Understand the monetized value/cost of time on the project/program;
  5. Perform critical path analysis up front and periodically during execution, including
  6. Computation of critical path drag and drag cost; and
  7. Ensure that no work is costing more than the value it is adding.

The sponsor/customer/program manager will not have this information; only the project manager and team will. Therefore it is of utmost importance that the sponsor/customer/program manager ensures that the project manager and team have the information, knowledge and skills (each as enumerated above) to ensure that the desired benefits are generated without wasted effort and money.

Unfortunately, what percentage of sponsors/customers/program managers know how to do this?

In my next blog article, I plan to show how to use the VBS information in combination with schedule data in a network diagram that includes critical path drag, drag cost, and true cost to determine when an optional activity goes from value-added to value-subtracted.

Fraternally in project management,

Steve the Bajan

What is the True Cost of an Activity’s Work? Is It Worth It?

I have been delighted that my recent blogs about aligning the program and the project, the sponsor and the project team, have gotten a very positive response. In particular, the value breakdown structure (VBS), as a tool for accomplishing this, seems to have been very well received. So this article explores the next step, how to combine the VBS with other new investment-based techniques and metrics, to ensure that project effort and money are not being frittered away on low value products and work.

It is no revelation to the business community that projects are being completed every day that fail to generate the intended benefits. Many of these can be categorized, from an investment viewpoint, as “losses” – they cost more than they turn out to be worth.

The same principal that says that such project investments are losses also says to me that, on every calendar day and throughout the world, there will be a substantial number of projects completed that include work that costs significantly more than it is worth. No, I have not conducted a study to see if such is the case (although I think that it would be a very fruitful topic for research!). Rather, I deduce this from the fact that the following important steps in measuring both value and cost on projects are simply not being done:

  • Most projects never bother to create a value breakdown structure (VBS) and so have not even a guesstimate of what the value is of any optional scope;
  • Most projects do not bother to estimate the value/cost of time;
  • Many projects (and programs!) fail to perform even rudimentary critical path schedule analysis; and
  • Even on those projects that do perform critical path analysis, they rarely compute critical path drag and drag cost up front, and almost never re-calculate it during project performance. Such re-calculation is especially crucial when the critical path changes during execution.

If all of the above techniques are not used on a project (or program), then it is very likely that the effort will include products and work that cost more than the value they add.

My recent blog articles have discussed the essence of the first of the above points, the value breakdown structure (VBS). This is a tool for prioritizing project work packages and activities by estimating their relative importance and value. Some project components (like both the left wing AND the right wing on an airplane) are mandatory: the project cannot be completed without both of them. Other components are optional, included not because they are essential but for the value they are expected to add. If you have not yet read this blog article on the VBS, I urge you to do so now and then return to the rest of this article.

The True Cost of Work (TCW)

If would-be project sponsors could simply buy the exact product they want and have it immediately delivered and ready for use, they would elect to do so almost every time. In fact, they would usually even be willing to pay a significant premium for an off-the-shelf product that precisely meets their needs rather than funding a project to create it.

Why? Because (1) there are many more risks in creating the product than in buying something that has already been made and quality-checked, and (2) the time that it takes to create something you want almost always has a cost, and sometimes a great deal of cost!

Time is money, wrote Benjamin Franklin, and it is rarely more definitively so than when the sponsor/customer has to wait for project completion. But how much money is time worth on a given project? How much would the sponsor be willing to pay for each week earlier that they would be able to deploy the desired product?

Occasionally, it’s worth very little. Rarely, it might even be worth less if delivered early because its internal systems will start to run down and/or become obsolete. But such situations are so unusual that, when such is the case, it is crucial that the project manager and team know that this project is one of those “exceptions”! (And, by the way, it is almost always due to the fact that the specific project is part of a program but not on the program’s critical path!)

In the vast majority of cases, the value/cost of time on projects ranges from moderate to, yes, vast!

  • Our intended new product can generate no value until it’s deployed.
  • Our new product is an enabler and other revenue generators need it.
  • Competitors enter the market and make our product a “me-too”.
  • Market windows are missed.
  • Market share is lost.
  • We lose weeks in implementing a tool that will result in weekly cost reduction.
  • And sometimes humans die because of the delay.

Yet, sad to say, projects are initiated with arbitrarily-chosen “deadlines” and without any attempt to quantify the value/cost of being earlier (or, indeed, later!) than that target date.

So if an earlier deployment of a product would be worth $40,000 per week to a potential sponsor/customer, surely we can see that they would be delighted to consider an off-the-shelf product that costs $2M rather than execute a 30-week project with a $1.5M budget to create a similar product. All else being equal, the project approach would have a true cost of work (TCW) of $1.5M + (30 * $40,000) = $2.7M.

The TCW is the overhead-burdened cost of resource usage plus the value/cost of the time we lose in waiting for the work to be completed. If the work is serial in nature (i.e., one activity only, or simply one activity after another), it is easy to measure the time we must wait and “charge” each activity’s duration with the cost of that time.

But what if the work comprises a project that is part of a program that has other projects occurring in parallel? Or, onion-like, if the work is an activity in a project and it has other activities occurring in parallel?

As project managers understand, the determining factor of the duration of every project (and program!) is the work, constraints, re-work, dropped batons, and other delays that comprise the longest path, i.e., the as-built critical path (ABCP)! Activities and other delaying factors that are not on the critical path (even if with only one day of float!) are not delaying completion, and in TPC (i.e., Total Project Control) terms have zero drag – and thus zero drag cost! Therefore the true cost of work that is not on the critical path (either of the program or of the project) is simply the cost of resource usage.

But the TCW for each item of critical path work is the sum of its drag cost plus its resource usage costs. Thus comes the importance of computing these on every project and program, because without that computation, you really don’t know what each item of work is costing! And if the true cost of a work package, activity or project is greater than the value that it is adding (per the value breakdown structure), we should either figure out a way to reduce its true cost (perhaps by electing to use the DRED) or jettison it from the project (or program)!

In my next article, I will talk more about how work with negative value-added (value-subtracted?) often arises. But meanwhile, you might want to take a look at this article on drag (published here in Portuguese by Peter Mello) and perhaps at the drag cost and true cost exercises on the main page. (Or just read my two new books, Managing Projects as Investments: Earned Value to Business Value or the second edition of Total Project Control).

Fraternally in project management,

Steve the Bajan

Ten Amendments to the Current Practice of Project Management

I believe that project management is, in many ways, failing in what should be its purpose: to provide a valuable return to the investor(s) who provide the resources/money for the project effort and who hope to reap the benefits. But I don’t happen to feel that we need a whole new methodology. The basic tools in our toolbox (WBS, critical path analysis, resource leveling, activity-based resource assignments, earned value tracking) are wonderful techniques, and are being efficiently applied by many project managers.But in many other cases, projects are generating much less value than they should.

I do believe that some of the tools, as valuable as they are, need what I’d call “amendments”: sharpening, enhancing or re-shaping for wider utilization – such as the routine incorporation of the drag metric as a standard part of critical path analysis. But the major flaws, I believe, are not so much in the tools as in how they are being misunderstood and misapplied.

I‘ve been thinking for some time about preparing a list of “Amendments to Current Project Management Methods”. Below is a pretty barebones outline, without getting into a huge amount of explanation (because I just wrote a 255-page book that pretty much provides that!), which lays out some of the techniques and modifications that I feel would significantly improve the way we do projects.

This list will probably evolve over the months ahead (and I’m certainly willing to entertain other suggestions), but the Ten Amendments below ain’t bad for a start:

  1. Get agreement from everyone (team members to senior management and customers) that projects are investments.
  2. Get them to agree that investments should be undertaken for the value they are expected to generate.
  3. Get them to understand that the value/benefit they expect from the project will be based on its scope (mostly product scope) and that therefore the specifics of the product scope should designed with those benefits in mind. [This should lead to the creation of a value breakdown structure (VBS)].
  4. Get them to agree that the results of all investments are not guaranteed, but rather involve estimates, uncertainty and risk. Explain that “deadlines” and fixed cost caps (“budgets”) are arbitrary strictures that are far more likely to cause negative behaviors (e.g., Parkinson’s Law, or secretively cutting quality to meet deadline/budget, or simply taking unwarranted risks when pushed for time/cost adherence) than to have magically made an accurate prediction of what the project would really require. Suggest instead getting the organization used to the terms “target date” and “target cost”.
  5. Get everyone to agree that, the vast majority of the time, project delivery date has a big impact, positive or negative, on the expected value of that scope. This should lead NOT to a deadline, but to an estimate of the value/cost of each unit of time earlier OR later than the target date. And this quantified estimate should be a part of the initiation documentation of every project! And any contract for a project should include clauses establishing incentives (positive and negative) for schedule performance, aligning as much as possible the potential benefits to customer and contractor.
  6. Show everyone how, with the expected value of scope, the value/cost of time, and resource usage all quantified in monetary terms, the three sides of the “Iron Triangle” are now all integrated and monetized so that it has become the Golden Triangle. Any variance in any side will have a quantified impact on the integrated value of the project as measured by expected project profit (EPP) and the DIPP. Show how this now provides a single metric against which project performance can be tracked, with better performance being measured not just in schedule or cost terms, but in what should matter to everyone and particularly to those funding the project: investment value, or ROI, or expected project profit!
  7. Ensure that everyone understands that every project, no matter how it is scheduled, will be precisely as long as its longest path of activities, logical constraints, resource constraints, delays, rework, sprints, and stumbles! And therefore no matter how it has been scheduled, critical path analysis that includes drag, drag cost, and true cost (TC = drag cost plus resource costs) computation must be performed, seeking opportunities to reduce drag costs and thus accelerating the schedule where greater project profit can be generated. Everyone should also understand that the value/cost of time on enabler projects (i.e., those that enable other projects to generate value) go through a multiplier effect, and thus identify such enabler projects and their elevated value/cost of time.
  8. Ensure that both time-limited and resource-limited resource leveling is performed on each project, and on all projects (and especially prospective new projects!), within the portfolio of a multiproject organization. The data regarding the cost of delays caused by insufficient availability of each specific type of resource should be analyzed on an organizational basis at least quarterly, with Pareto charts assembled to identify and quantify the project delay costs to the organization of resource insufficiencies on the critical paths, and to improve efficient levels of staffing for each resource type and functional department.
  9. Ensure that everyone understands that earned value is not about project value, but about project cost, i.e., resource usage! The term has been the source of persistent confusion. Even to a contractor, project value almost always includes value drivers that are not part of the price/budget. On a medium sized project in an organization without robust financial tools, earned value planning and tracking can be performed adequately on the basis of planned and actual labor hours. (Indeed, CPI-Labor should be an important metric in any EVM system.) Everyone also should know that earned value is inadequate for schedule tracking, at least in the way it is customarily applied, and can lead to incentives for out-of-sequence and noncritical work. Schedule must be tracked through critical path tracking and/or by developing a separate earned value baseline for schedule tracking that takes into account the critical path by being scheduled on the late dates.
  10. Ensure that project postmortems are performed on all significant projects (not just on those that went badly!) and that the as-built critical path (ABCP) is presented as one of the key artifacts for lessons learned, particularly in identifying causes of project delay with their quantified costs. And that every postmortem sets a future date on which the data on the mature final product can be analyzed with greater knowledge and objectivity so that current assessments of quality, durability, and value (including revenues/savings) can be updated.

Okay, so at least that’s a start. And I think implementing these would make a huge difference. So anyone have additional suggestions?

Fraternally in project management,

Steve the Bajan