Niche Tips for Niche People

How much really does

your project cost you ..?

DIRECT COSTS INDIRECT

COSTS

Materials and all tangibles:

software, hardware , labour

costs .. Building, utility costs,

annual company

auditing charges …

or HIDDEN COSTS

Causes and Symptoms of Hidden Costs

CAUSE = Poor project sponsorship SYMPTOMS = The project fails to make the correct strategic decisions, or struggles to make decisions at all; required resources are not forthcoming; lack of congruency with wider corporate/programme strategy; business case unclear. COST = Sub-optimal decisions mean labour and materials are spent on unbeneficial activities; lack of resources or decision making ability may put project into a ‘holding pattern’ where costs are incurred with little progress.

CAUSE = Poor scope management SYMPROMS = Absence of scope management documentation and/or process leads to confusion amongst project team regarding what is in or out of scope leading to scope creep. COST = Higher labour or material costs because effort is spent on unnecessary activities.

THE HIDDEN COST OF POOR PROJECT MANAGEMENT

CAUSE = Poor risk management SYMPTOMS = Without a risk management strategy and/or governance process project team members will be unwilling to take accountability for their decisions because their decision making is not being properly appraised. This will manifest as a lack of decisiveness and unwillingness to commit to a course of action. COST = Excessive time is spent trying to make decisions, leading to reduced productivity and higher labour charges. If incorrect decisions are made expensive consequences can follow.

CAUSE = Absence of vision SYMPTOMS = Without a vision the project team will struggle to unify their effort towards delivering the end product. Symptoms include missing or incomplete project plan, and/or documentation; confusion amongst the project team – time spend trying to figure out what needs to be done, and time spent complaining about the project. COST = Higher labour charges because project team are less productive.

CAUSE = Absence of transparent, cooperative culture SYMPTOMS = Various communication issues, unwillingness to resolve issues, team silos develop, information is withheld (e.g. burying hidden costs), dominance of certain individuals and views of others ignored. A lack of trust, inflexibility, split agendas across the project team – users, suppliers and business. Conflict. COST = Unnecessary work, reduced productivity, continued costs after the project finishes..

CAUSE = Lack of customer focus SYMPTOMS = A lack of appreciation of what quality standards the customer has. End product lacks features that the customer expected. COST = Customer has received poor value for money, and/or is forced to do more work to compensate. For example, if a system automates half a process rather than the whole process, the customer will have to continue to support the process by hand. Therefore customer incurs labour and/or material costs.

Conclusion:

A project might have been priced at £500k. Assuming it will have: good project management, good sponsorship, cohesive team, etc. Perhaps the project could be delivered for £500k, provided all these things were in place.

In reality, many projects overrun, under-deliver or exceed their budget. In part, because hidden costs are not accounted for from the start.

Explicitly accounting for hidden costs will force a review of project timelines to include the fact that, for example, a team might not be as productive as expected. If a team are less productive we can’t get away from the fact that it will take them longer to get through the same amount of work. Alternatively, the scope or quality will be reduced to hit the deadline.

Because hidden costs are often unaccounted they often go unnoticed. Hidden costs can be material. Without them the complete picture of project costs does not exist, and therefore a P&L assessment of the project is flawed.

Hidden costs are often social, emotional and human. It’s much easier to price up how many iron girders are needed in a construction project than how many team meetings might be needed to ensure everyone understands the vision.

These costs are difficult to quantify, but that doesn’t mean we shouldn’t try. Even if we really can’t quantify hidden costs we can at least ask ourselves whether we have a problem with them, and then we will be more likely to do something about managing those hidden costs.

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Pleasent read

The Niche Team

Niche solutions to niche problems

www.nicheitrecruitment.com | deni@nicheitrecruitment.com

Office +971 436 41 203 Mobile +971 529 259 001

London, Dubai, Sao Paulo

HDS Business Centre, JLT, PO box:487282, Dubai – UAE

Denitza Harizanova

Partner