Cost Management | By Harley Lovegrove | minute read
Any project manager will tell you that the triple constraint is the most important part of managing any kind of project. Namely: scope, time and budget. This week, I have been mulling over the third constraint, budget. Why is it that so many large corporations, take their eye off the budget? For many large companies, over spending is not welcome but it is not a serious misdemeanour either, especially if the overspend has occurred in-house.
For whatever internal political reasons, it is still hard to come to terms with and understand how this comes about. Is it because so many companies have Hay Grade type rewarding systems? The kinds where staff are ranked and rewarded by the numbers of employees they have reporting to them, or indeed, how large their departmental budget is? If there is a link, then perhaps it is little wonder that budget is so often over-looked (assuming that their end of year assessments are allowed to sweep away the issues of overspend, after all maybe their boss is not so interested in reducing departmental budget either)?
As an interim manager, a relaxed attitude to budgets annoys me profusely. Mainly because I know that it is not good for the long-term of the business and also for the shareholders (who ultimately, I like to feel I report to). Of course running a massive project with hundreds of reports, with a seven or eight figure budget is great fun, but if you discover that it is just a game for the management team and big ego trip for you, then you get a sour feeling, that this is simply not right.
Working for small companies with cash constraints and limited resources maybe frustrating for a host of reasons, but their need for "value for money" and on time delivery is strong revision lesson for us all. I always think of all the things the business could do with the overspend money, especially when it could have been avoided.
The difficulty often lies in not being able to control the budget adequately. Whether it is an external supplier increasing prices, or internal departments dumping booked man-hours onto projects that are under budget, the result is often the same for the well performing project manager. Those around you are screwing up big time, while you carry the financial can. Even if the management team, say don't worry, it's only an internal budgetary issue, for a passionate interim manager, it really is a kick in the guts.
I feel it is the duty of all interim and project managers, no matter what project they are on, to take a serious interest in the spend rate, and to continually report back progress versus budget, no matter how unwelcome the news might be. This has the additional advantage of ensuring that if your budget gets dumped upon, near the end, you can demonstrate that all the way through the project you were on track. After all at the end of the project, the management team will remind you exactly how much the project cost and memories are very short when it comes to exactly why the project ended up 35% overspent.
The day after a party, it is usual to moan about the bill. What gets me is that it is often the good old interim, or project manager (whatever title he or she has) that is the easy target for blame.
Harley Lovegrove is a highly experienced Interim/Project Manager with over 20 years freelance experience. Ranging from interim CEO to Organisation Readiness and Change Management Lead for global organisations. In addition Harley has managed a variety of projects for both medium sized and global companies, ranging from highly complex technology implementations to serious change and strategic marketing projects. Harley's clients come from a wide variety of industries ranging from Petrochemical and Construction to Transport, Mobile Telecommunications, Software and Apparel.
Today Harley is the Managing Partner of The Bayard Partnership, an interim management group partnership with over 20 associates handling a wide variety of challenging assignments. In addition Harley is the CEO of RemotePass Technologies NV, and author of the book "Making a Difference" a pragmatic approach to interim management. He is also a frequent speaker at various corporate events and guest speaker for the world famous Vlerick Management School, Gent, and The Solvay Business School, Brussels. Harley run his own blog, Interim Manager's Forum