Back in December, Glen Alleman wrote a post on his Herding Cats blog about project management maturity. It was entitled “Knowing How Much a Project Costs is a Measure of PM Maturity”, and it was based on a conversation with a client about their IT projects. Some of Glen’s readers had also stated in previous comments that they did not track costs on IT projects, and Glen seemed surprised at the apparent commonality of the problem.
Let me begin by saying that I could not agree with Glen more. Not tracking project costs does demonstrate immaturity in project management. And I would say that not tracking costs is not only common, it is pervasive in IT organizations.
In my experience, IT typically estimates the non-labor costs, and approval of the project is based on those costs. Management of costs in PM-immature organizations is considered a responsibility of management – usually some IT director or the business sponsor – and not a responsibility of the project manager. Those organizations consider the labor of employees on the project to be sunk cost, so the labor costs are essentially ignored. That is, those IT people would have to be doing something anyway, so those costs are not estimated or tracked.
Interestingly, as soon as contract labor or the use of consultants is considered for a project, it is recognized as a project cost, and it is tracked. But again management of those costs is done by “management” – i.e., some director or VP – not the IT project manager.
Usually time tracking by IT staff is not implemented in PM-immature organizations until senior IT management finally realizes they don’t have a handle on how much IT labor is going into projects versus support. Time tracking is often implemented to help get a handle on resource capacity – especially support (of technology/systems) versus projects (generally as a category of work, not specifically).
Once time tracking is in place, senior managers may then recognize that they can have IT staff track time against specific projects. Usually the labor “demand” is first tracked in units of person-hours. When senior IT management sees that IT labor can be measured on projects, it will finally click that “that which can be measured can be managed” for their whole mix of IT projects. At that point, a PMO will typically be established (if it hasn’t already) with the instruction to track actual labor costs of every project and every support function.
But it is not until the IT organization begins to have project managers actually manage a budget of all costs, including the IT labor (and perhaps even non-IT labor) in dollars, that the organization begins moving toward higher maturity in its PM capability. The non-IT labor on projects, by the way, is the investment in the project through its active participation of business personnel in the project.
As a bottom-line take-away, I would certainly advise IT organizations to move toward project management maturity by managing all costs including labor costs. Managing costs improves the likelihood of project success. But, in reality, it seems that most IT organizations usually have to move through a learning curve (similar to the preceding sequence) to understand why they need to manage costs and do it at the project level. Once they have learned the need, they will usually shift the project cost management responsibility from departmental managers to the project managers. At that point, it suddenly makes sense.
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Great post!