Platt Perspective on Business and Technology

Projects, project management and careers – 14: budgets

Posted in career development, job search and career development by Timothy Platt on September 27, 2012

This is my fourteenth installment in a series on projects and project management as a career path (see my Guide to Effective Job Search and Career Development – 2, postings 250-262 for Parts 1-13.) And my goal for this installment is to discuss project finances and making projects and in-house project management cost-effective for a business.

As a starting point for this, I would recommend considering the alternatives. Your business is considering carrying out a project in-house as one option. And for purposes of this discussion I simply assume that other options involving third party outside providers can be on the table, as the decision on how to proceed in meeting this need is not significantly constrained by due diligence concerns over confidential or proprietary information or security – factors that would constrain and even exclude outsourcing or similar approaches.

• You could seek out an acceptable off the shelf or partly customized-version of a product already on the market. With this, you and your business do not have to take on the expenses or deal with any scheduling dislocations that might come from building and testing a full project deliverable in-house. But even with a customizable and carefully customized version, a third party, off the shelf solution might not be a perfect match to what you and your business would ideally achieve for meeting your business’ specific needs. What are the costs, here and now and long-term for any such mismatch? Do you have to adjust resources or processes already in place to accommodate those differences between what you would ideally get, and from in-house development and what you would get more off the shelf from an outside provider?
• You could have this work done custom for your business as a project outsourced to a third party provider. And if doing this in-house would require a significant build-out of resource infrastructure with acquisition of expensive resources that would not be needed on an ongoing, cost-effective basis after this project, this might be the more cost-effective approach, and certainly if the third party provider you would turn to has large amounts of relevant experience and would not have to go through learning curves to meet your specific needs.
• Or you could carry out this project in-house – I exclude from consideration here the option and expenses of simply doing without and assume that whatever approach would be pursued, this project or an outside-sourced alternative is necessary.

As a costs consideration baseline, you should carry out this project in-house if the aggregate expenses of doing so are less than those of your alternatives. And the point of the above exercise is to at least gain a general working sense as to what cost-effective budget parameters would be for carrying out a project in-house, where some costs and potential costs can only be determined as ranges and certainly for your non-project options. And with that, I assume in-house project development makes sense and that it is going to be actively pursued. So now let’s consider project budgets in a bit more detail. And I begin here by posing some basic questions:

• How much of this project under consideration can be carried out as for overall expense, using resources already in place and where costs have already been covered and amortized where needed within ongoing operations?
• How much expense will be left after these operational expenditures are accounted for, arising novel to the project itself, and what type of schedule would these expenses be due on?
• And what parts and how much of these expenses would be for resources that would only be needed and used for this project, and how much would be reused and folded into ongoing and more operational use? Single use disposables would certainly fall into the first of these two categories, as would some specialty equipment that might or might not be retained for longer term use. But depending on the business and its goals and requirements moving forward, much of the longer term usable equipment and other resources acquired for a project might be used and even initially selected for the project for dual use beyond this project itself. This becomes important here depending on how accounting and bookkeeping assigns expenses.

Having set up a basic framework for more detailed discussion, I turn to a more line item consideration of a project and its budget and by noting the most important budget determination and analysis tool available to a project manager:

• When you first plan out a project you in most cases, and certainly for a project of any complexity will probably map it out for what has to be done and in what order and with what task dependencies (see Part11: international and trans-national projects 4).
• This process also provides a roadmap for determining what resources are needed and when and that means mapping out and scheduling due dates that you need to have them by, when you and your team are going to be ready to use them.
• And actually scheduling and receiving the resources you need has its own complexities and I will discuss them in my next series installment. So for purpose of this posting I simply take the great leap of faith that resources needed, approved and purchased or acquired from in-house are all going to be available when needed. And I note that when you know the What and When of all of this, you can determine costs on a per item basis and that collectively comprises your line by line project budget.
• Note that some businesses fold what might be considered at least some strictly-project expenses into overall budgets as if operational expenses, and that some businesses in effect sell resources already at hand to projects and add those costs to their budgets as a means of tracking true overall project expenses. It is important to know how expenses are categorized, divided and aggregated as general practice within the business, when developing budget needs and determining overall and line by line anticipated expenses.

I am, as just noted above, going to turn to consider resource purchasing and acquisition in my next series installment. Meanwhile, you can find this and related postings at my Guide to Effective Job Search and Career Development – 2. I have also posted extensively on jobs and careers-related topics in my first Guide directory page on Job Search and Career Development.

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