Estimates, Schedules, Assumptions and Risks

"Though life is made up of mere bubbles, 'Tis better than many aver, For while we've a whole lot of troubles, The most of them never occur.”
                                                                                                - Nixon Waterman

With this post I conclude the series on scheduling and estimating that started with the basics of scheduling.  I hope that this series has successfully drilled into you that offering an informal estimate, without including all of the elements for success and properly qualifying the estimate with assumptions or risks, is an eventual path to damaging your credibility and the credibility of the PM profession.  Estimates should almost universally be presented as ranges with statistical probabilities.  (It’s a real disgrace that our tools generally don’t provide this capability.)

Estimates should always include estimating assumptions.  This is not a CYA point, but rather the estimating assumptions further clarify the scope and scope boundaries, establishing basis for (project) change control.  Change Management is a topic that I haven’t developed yet and is a good one for a future series.  Stay tuned for that one.

A well-formed schedule takes work to produce.   When done well it has a rational basis and a foundation in science.  And despite all that, it is still subject to failure.  That is no excuse, though, for us not to do the work that our profession calls for.  In fact, it is the reason that we should be as rigorous as possible in our duties.

Starting with my next post, I’m going to cover a few miscellaneous topics for a few posts before starting a new series.

What estimating and scheduling issues do you experience that I have not addressed in this series?

© 2013 Chuck Morton.  All Rights Reserved.

Estimate Confidence Buffers, Risk Buffers and Management Reserve

"If confusion is the first step to knowledge, I must be a genius.”
                                                                                                - Larry Leissner

We’re nearing the conclusion of this series that started with the basics of scheduling.  I want to tie up a few loose ends, maybe clarify some inaccuracies and address some confusion I may have introduced.

As I developed this series on scheduling, leading up to the previous post on estimate buffers, I hopefully offered convincing arguments for including appropriate buffers.  In this post, I want to compare and contrast various types of buffers that are common.

I think the discussion I offered on risk buffers is consistent with other authors and industry practices, so I won’t belabor that discussion.  I will point out that risk buffers are included in the project (time and cost) budget and are managed by the Project Manager.

Literature and practices for improving estimate confidence are much rarer.  Therefore, there may be some stakeholder pushback for including these buffers in the schedule.  However, you can demonstrate through logic, reason, science and ethics that, in order to have a realistic schedule, these buffers, like the risk buffers, must be included in the schedule.  Like risk buffers, these confidence buffers are included in the project budget and are managed by the Project Manager.

However, you don’t want to “double count” your risks.  Let’s say you do a lot of similar projects.  For these, there will probably be a common pool of risks that are included.  However, if your estimates are based on historical results and sometimes these risks occur, then there is the potential that your Pessimistic estimates will already account for those risks.  You will need to adjust either the estimates or the risk buffers so they are in the schedule only once.

In contrast to the confidence and risk buffers, some PMs Pad their estimates.  Some project managers, after over-running the project schedule a few times, learn that their estimates are never sufficient and start adding arbitrary amounts.  “We go over by 20% every time, so I’ll just start adding 20% to the schedule.”  This may sound logical on the surface, but is actually bad for their credibility and for the PM profession.  (Look for more discussion on this topic in a future discussion of The Toyota Way.)  Stakeholders learn that the PM is padding and, in response, start cutting the budget or otherwise compensating.  Pad is Bad.

In contrast, neither confidence buffers nor risk buffers are arbitrary.  Hopefully, if you’ve followed the discussion this far, the reasonable, logical and scientific justification for including these in the project are thoroughly explained and documented.

One last buffer that is sometimes seen in large, third-party project contracts is Management Reserve.  Management Reserve is separate from and distinctly different than estimate confidence buffers, risk buffers or pad.  Management Reserve is contingency funds allocated for use by the contract owner (sponsor).  These funds are not part of the project budget and are not available to the Project Manager except after approved project change control to authorize allocation to the project.

I hope this series has been interesting and informative for you.  One last remaining post and then we can move on to new topics.

Was this discussion scheduling and estimating clear and thorough?  Is there anything I missed that you would like me to address or anything that is still not clear that I should expand on?

© 2013 Chuck Morton.  All Rights Reserved.

Estimates & Buffers

“A clever person turns great troubles into little ones and little ones into none at all.”

- Chinese Proverb

If you’ve been following the series on the well-formed schedule and the subsequent series of posts, you are aware that from the WBS you create estimates and iteratively refine those estimates by, for example, improving the probability of success and compensating for risk.  One of the PM challenges is how to balance motivating task owners, setting appropriate stakeholder expectations, reporting honestly and doing all of this in a forthright and ethical manner.

To demonstrate, let’s use our example task from Risk Buffers – An Example.  You might estimate that your Most Likely time for the commute is 30 minutes and the Optimistic time is 20 minutes.  However, the Expected (Mean) time might be calculated as 35 minutes (this is the 50% probability of success, where you’re as likely be early as late).  If you toss in one standard deviation to get to a 65% probability of success or two standard deviations to get to a 95% probability of success, the estimate could balloon to 45 or 55 minutes.  On top of this, then, you add those risk buffers, which might add 10-15 more minutes to the estimate.

Let’s take a look at this from your perspective with several of the stakeholders to examine the conflicts.  First, with the task owner:  Physics and Theory X management say that if you put that high estimate on the task, the task owner will take all of it.  In order to motivate the task owner, it is necessary to use, for example, either Most Likely or Expected.  In fact, I’ve managed projects in organizations that insisted that I use the Optimistic estimate and “stay on those team members” or they would just slack off.

Now looking at this from the perspective of your relationship with the project owner or sponsor, if you fill the schedule with fully bloated tasks (“What do you mean it’ll take 65 minutes to drive to the office!  I know full well it only takes 30 minutes.), you’ll lose all credibility.  However, if you use only Optimistic (!) or even Most Likely or Expected estimates, the end (date or cost) is not realistic and you’ve set yourself up for failure (as documented in The Schedule – Probability of Success). 

Some stakeholders want to know when it will really be done and how much it will really cost.  And they want to have realistic progress updates on these realistic completion values.  If you are not using fully weighted estimates, your reporting to these stakeholders will not be accurate.

Finally, another stakeholder that you have to true to is yourself (and the PM community).  How you address these conflicts must be ethical.

The conflict then is how to have individual task estimates that are under-weighted, but have the overall project estimate include the probability of success and risk adjustments.  The solution, of course, is to have “tasks” in the schedule that represent these estimating and risk buffers.  So let’s say you create these buffers and put them all at the end of the schedule.  This also creates reporting problems because there will be the appearance, at the start of the project, of a large gap between the end of the last deliverable and the end of the project.  It will appear as you progress and report completion of deliverables that you are (most likely) late on all of the deliverables.

At a minimum then, you need to distribute these buffers into each deliverable, spreading them over the life of the project.  You, as project manager, own these buffers and you have to deplete them as you go, continually reassessing much has been consumed by actual task overage and underage.

Since these buffers are included in the project (cost and time) budget, they cannot be arbitrarily reduced, eliminated, increased or created except through formal project change control.  They can (depending on the rigor of project change control) be moved between deliverables, but this should be documented.

Before closing I want to mention that the book Critical Chain by Elihayu M. Goldratt describes a formulaic approach to determine the appropriate amount and placement of the buffers.  This approach has been successfully used in many organizations and should be considered as an alternative to the custom and complex approach to buffers I’ve presented.  Further, he goes in to much more detail on the operational practices.

In my next post I’ll conclude this series on buffers and then we can move on to some new topics.

What challenges have you had convincing stakeholders to use realistic schedules?  Do you get pushback that you are just padding your estimates?  How do you handle it?

© 2013 Chuck Morton.  All Rights Reserved.

Risk Buffers – An Example

“President Bush has said that the economy is growing, that there are jobs out there. But you know, it's a long commute to China to get those jobs.”
                                                                                                - Tom Daschle

In The Schedule – Risk Buffers, the concluding post of a series on developing the well-formed schedule, I glossed over the complexity and details of planning project risk buffers.  I’d like to revisit the topic in more depth over the next few posts.

However, before I go into the complexities, I would like to present a very simple example, one I hope everyone can relate to, to demonstrate the concepts.  You are probably quite familiar with your commute:  you’ve driven it many times and you know what time you have to leave to generally get to work on time.  Even so, most commuters are occasionally surprised by unexpected traffic conditions – weather, wrecks, and road work, for example.  To demonstrate how to determine risk buffers, this exercise will touch on four of the six PMBoK Project Risk Management processes:  Identify Risks, Perform Qualitative Risk Analysis, Perform Quantitative Risk Analysis, and Plan Risk Responses.

For this example “project” we’ll only have one task:  Drive to work.  My next post will focus on identifying risks, so I won’t dwell on that step here.  For this exercise, let’s say you have these risks:

1.       There could be rain
2.       There could be snow or ice
3.       Ice could be so bad that your office closes for the day
4.       You are low on gas and need to refill before you can make it all the way to work
5.       There could be a wreck that causes a slow down
6.       There could be road work that causes a slow down
7.       There could be road work that causes a detour

(Do you see anything noteworthy about “risks” three and four?  I’ll have more to say about these in my next post.)

Something that is often missed or glossed over is dealing with Opportunities (the opposite of risk threats).  If your task is estimated to a 50% probability, there is as equal a chance of it coming in early as there is it coming in late, so you need to factor in and exploit (or enhance, share or accept) the opportunities.  For example:

8.       Traffic could be very light
9.       There could be a wreck in a location that causes your commute to be lighter than normal
10.   All the traffic lights could hit perfect for you today

The next step is to qualitatively assess the risks.  The objective of this step is to determine those risks you are going to seriously pay attention to – those that you will quantify, determine the risk response, and monitor.  It is generally done by assigning subjective Low, Medium and High values to probability (the likelihood that the risk event will occur) and impact (how the project is affected if the risk event occurs).  For example, if it’s August, the likelihood of snow or ice (risk #2) is Low.  From this analysis you generally then disregard the Low-Low risks (though note that these values can change over time, so you must periodically re-asses your risks).

The list is now winnowed down to the select risks that will receive attention.  Determine a specific (time, money or both) cost to the project for each remaining risk (including opportunities) if it occurs.

Most of what I read at this point talks about mitigating the risks, but there’s a lot more to risk response than just mitigation.  For example, add tasks to the project (such as check the weather or turn on the radio to get a traffic update).  In addition, risk responses can be transfer (ask a colleague to be there for you in case you can’t get there in time), avoid (reschedule to another day when it won’t rain) or accept (add the time and cost to the schedule).

Finally, and where this has all been leading up to, is to add a risk buffer to the project as part of the risk response.  For example, if there is a 25% chance that a risk will occur that will add twenty minutes to the commute, then you would add a five minute risk buffer to the project (in our example, you would plan to leave five minutes earlier).  You would sum the values for each appropriate risk and opportunity and add a buffer for the total amount.

With this step, you have again increased the probability of getting to the office on time – er, that is, of completing your project on schedule.

I’ll be delving deeper into risks over the next few posts using this example to demonstrate the concepts.  What about risks – threats and opportunities – would you like to understand better?

© 2013 Chuck Morton.  All Rights Reserved.

The Schedule – Resource Leveling

“Happy people plan actions, they don’t plan results.”

                                                                                                                - Dennis Wholey

We are nearing the end of the series on scheduling basics.  We have taken the WBS, added the dependency chain, estimated the effort and assigned resources.  The next step to completing the well-formed schedule is to level the resource assignments.  This is done to:

• Prevent over allocation of a resource within the project
• Prevent over allocation of a resource across enterprise assignments
• Accommodate non-productive time and absences

First, let’s assume the project is in an organization following best practices.  In that case, all team members record all of their time each cycle to specific project tasks and to operations, administrative, absence, and other non-project activities.  Your project management software integrates with these time records (or time is entered directly into the software, such as Sharepoint wih MS Project EPM, Clarity or Primavera).  In this case, you already have all of the elements in place to just “push the button” on your project management software to resource level the schedule.  You will then want to review and fine tune the results.

On the other hand, if you do not have the luxury of these conditions, you have more work.  For example, you will have to tune and adjust using heuristics to get the right productivity factor so that you don’t over allocate resources within the project;  and it will be much harder to track other assignments and activities to prevent over-allocation across enterprise activities.

In either case, this step will be repeated regularly over the life of the project.  Rescheduling and replanning are regular activities in the Project Manager’s Cycle.

In my next post, we’ll conclude this series of posts on the basics of creating the well-formed schedule by discussing risk buffers.

If you are not in a “best practice” environment, what steps do you follow to produce a resource-leveled schedule?

The Project Manager’s Cycle – Negotiate with Resource Managers

“Rainey, are you aware of any recent changes with Mani?” Don was having lunch with Rainey, the Analysis and Design Manager and Mani’s resource manager.  “She’s missed a couple of deadlines, which is unusual for her, and one of the business contacts mentioned she’s been ‘testy’ in some of the meetings.  I’m concerned.”  Rainey, after a thoughtful pause, replied “Have you asked her about it?”  “No,” Don answered, “not yet.  I will talk to her this afternoon; since we were here, I just thought I’d see if you had any background.”

Up to now in my series on The Project Manager’s Cycle we’ve primarily been working with numbers and reports, with little communication outside the project team.  This is the first activity where we start coordinating with project stakeholders.  This activity assumes a matrix organization, where you have temporarily and/or partially borrowed resources from department managers in order to staff the project.  If you own the resources – that is, they report directly to you as their line manager – then you can skip this activity.

This activity takes as input the results of the previous two activities:  replanning the schedule and reviewing team member progress and productivity.  As a result of those activities, there may be changes to the planned utilization of team members or concerns about their performance or productivity that you need to discuss with their managers.

For each project team member, prepare a schedule that shows their expected allocation by week for the next several weeks.  Depending on the organization and the resource manager’s planning cycle, this may be as short as 3-4 weeks;  other managers may require three months or a full schedule showing the allocation as long as the resource is needed.

You may also want to provide the information by task with completion dates, depending on the detail that the resource manager wants to see.  You can use your scheduling tool’s Gantt chart feature or populate a spreadsheet.

Provide these reports to the resource managers and, where appropriate, schedule to meet with them, especially if there are performance or productivity concerns.  Review the report, productivity, progress, and any changes you’ve noted from prior weeks.

But don’t expect the resource managers to just accept your plan.  They may actually have assignments, priorities, and expectations for these same resources, which, of course, may require some negotiation on your part and the possibility that you are back to replanning the schedule.

When you have performance or productivity problems with a project team member, do you talk to the team member first or to their resource manager?  Why?

The Project Manager’s Cycle – Reschedule/Replan

“What do you mean ‘You’re going to be gone for four weeks starting next month?,’” asked Alice, after picking up the phone on one of the rare occasions she was actually at her desk and listening to Ravi explain his new vacation plans.  “But … well, you didn’t know.  I just found out that Infrastructure is slipping their schedule so we’re going to need you until the end of the month after all.”

Now we transition from initiation activities to planning and design within The Project Manager’s Cycle. 

If it hasn’t been done already, all the team member updates from the metric validation and the task validation need to be posted to the project schedule, including closing completed tasks, updating effort estimates, and opening tasks ready to start.  Your perfect plan from last week is now corrupted from just one week of actual results – new end dates, team members who are now over allocated,  team members who won’t be available as previously planned due to conflicts or newly planned absences, newly exposed issues, political maneuvering, prioritization conflicts, team member conflicts, and stakeholder conflicts.

Now you, the project manager, apply intelligence to scheduling, adjusting start dates, shuffling tasks, balancing resource allocations, and drawing on schedule buffers as needed.  Sure, your scheduling tool “auto schedules” and probably has an option to load-balance resources.  However, the rule engines for these are notorious for making obscene messes of your schedule.  Depending on the need to maintain the original target dates and prevent slippage, you may need to consider adding resources, overloading resources (OT), reducing scope, and crashing the schedule.

As a further part of this activity, you will also address event-driven activities, such as unplanned/dynamic impacts, deliverable acceptances, reprioritization, issues, problems, commitments, and the other conflicts mentioned above.  This may involve adding project tasks, reassessing resource assignments and allocations, changing task estimates and getting team members to re-estimate their task assignments.

The end result is a new draft schedule that you have to validate and “socialize,” which transitions us to the next activity in The Project Manager’s Cycle and sets the stage for my next post.

Unlike most of the other activities in The Project Manager’s Cycle, rescheduling and replanning is not something that is done and then completes.  Rather, every thing you as the PM does has the potential to expose a need to adjust the schedule;  adjusting the schedule has the potential to expose the need to further adjust the schedule or to take some action that will … well, it’s called The Project Manager’s Cycle for a reason.  This keeps happening ever and forever for the life of the project.    You are constantly restarting this activity.  Plan on it.

How do you live with yourself when you have the perfect project plan?