What tips do you have for estimating/budgeting?

Wednesday, November 2nd, 2011 by Robert Cravotta

Many years ago, during a visit to my doctor, he pointed out to me that I had visited him around the same time each year for the past few years for roughly the same symptoms – which were all stress related. It was at that moment when it finally dawned on me how stressful year-end budgeting activities were on me. It was also the moment when I understood how to focus my energy to minimize the amount of stress that this time of the year had on me by approaching the year-end budgeting activities from a different perspective.

I do not recall who I heard the expression “water off a duck’s back” from, but it probably has been a life saver for getting me successfully through many stressful events, including year-end budgeting. The expression brings images of ducks popping up to the surface of the water after diving under the water to eat. Remarkably, the water all rolls off the duck’s back and they are dry immediately after surfacing. I had a friend who had hair like that, but the expression “water off Paul’s head” is not quite as visually effective.

The stress of needing to take an accurate assessment of my project or department’s current condition coupled with having to project and negotiate for those resources we would need to accomplish our goals for the next planning period was much easier to handle if I could imagine the stress falling off me. Equally important in handling the extra stress of this time of year was realizing which goals were real and which goals were what we called management BHAGs (big hairy-a** goals).

My management at the time thought it was a good idea to purposefully create goals that they knew probably could not be attained in the hope that we might complete a significant portion of them with far fewer resources than we might otherwise expect to need. I’m not convinced that the BHAG approach works if you overuse it. If you have too many of them, or they are just too large of a leap, there is a huge temptation by the team to just write off the goal and internally adopt a more realistic goal anyway.

Going over earlier budgeting proposals and comparing them to what actually happened proved to be a helpful exercise. First, it provides a loose baseline for the new budget proposal. Second, it can provide a mechanism for improving your budgeting accuracy because you might notice a pattern in your budget versus actuals. For example, are the proposed budgets even close to the actuals? Are they too high or too low? Do the budgets/actuals trend in any direction? My experience showed that our tend line was fairly constant year over year, but that allocating a portion of the budget to acquiring and updating tools each year was an important part of keeping that cost line from trending upward as project complexities increased.

Do you know any useful tips to share about how to be more effective at estimating projects and performing planning and budgeting activities? Does any type of tool, including spreadsheets, prove especially useful in tracking past, present, and future projects and actuals? What are the types of information you find most valuable in developing a budget and schedule? How important is having a specific person, skill set, or tool set available to making projections that you can meet?

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One Response to “What tips do you have for estimating/budgeting?”

  1. Chris Hills says:

    This is not rocket science! The methods for this have been known for decades. However the problem usually is the stress of all the data entry, spreadsheets, checking and rechecking the formulea. However as the principals are well understood is Galorath produced the Seer tools to automate the process and remove much of the stress.

    see http://www.phaedsys.com/principals/galorath/index.html

    Whilst all tools are garbage in garbage out these tools will guide you to input the right data. Also as they are designed for this they are much faster than doing it by hand. So it gives you more time and more confidence in
    the accuracy again removing stress.

    The “more time” element lets you play with “what-if?” (more people, more time, other resources) so that not only do you have trhe answer you were asked to find, faster with a lot less stress you can also have looked at a range of options as well.

    With a little practice you find that your results are way better than manual systems One company says that it can now get +/- 5% on a complete jet aircraft project using these tools!!!

    The other very important point of these tools is you will expose the BHAG’s for what they are. When either there is not enough information to create a model or the numbers show that it is just not possible without a spare year between January and Febuary or some one doubleing the size of the resouirces…..

    This will stop precious resources being wasted on projects that will never work and therefore releaseing more reources to the projects that will work…. again reducing stress, time and COSTS! Yes these Seer tools have been shown to reduce costs to companies using them as they know, quite accuratly, exactley what recources a project will need.

    It all reduces costs, wasted resources, more imprtantly time and of course stress….

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