Effort – renierbotha ltd

Striking the Balance Between Accuracy and Realism

To ensure commercial awareness, accurate effort estimates are crucial for project planning and execution. However, treating these estimates as strict deadlines can lead to unrealistic expectations and project failures. Instead, they should be used as targets, guiding the project towards completion while allowing flexibility. In this blog post, we will delve into the importance of accurate estimates, various estimation methods, and the significance of the KPI of forecast vs. actuals. We’ll also discuss why estimates should be seen as targets rather than deadlines and explore ways to improve estimation accuracy. Finally, we’ll examine the value to businesses in getting these aspects right.

The Importance of Accurate Estimates

Accurate effort estimates are foundational to successful project management. They help in:

Resource Allocation: Properly estimated efforts ensure that the right amount of resources—time, money, and manpower—are allocated to the project.
Budget Planning: Accurate estimates prevent cost overruns by aligning the budget with the project’s scope and timeline.
Stakeholder Communication: Clear estimates foster transparent communication with stakeholders, setting realistic expectations and building trust.
Risk Management: By understanding the effort involved, potential risks can be identified and mitigated early in the project lifecycle.

Estimation Methods

Several methods are used to estimate project efforts, each with its strengths and weaknesses:

Expert Judgement: Involves consulting with experienced team members or industry experts to make educated guesses. It’s quick but can be biased and subjective.
Analogous Estimation: Uses historical data from similar projects as a reference. It’s useful for quick estimates but may not account for project-specific nuances.
Parametric Estimation: Applies statistical models based on historical data and project variables. It’s more accurate but requires extensive data.
Bottom-Up Estimation: Breaks down the project into smaller tasks, estimates each, and aggregates them. It’s detailed and accurate but time-consuming.
Three-Point Estimation: Calculates optimistic, pessimistic, and most likely estimates to provide a range. This method accounts for uncertainty but requires careful analysis.
Agile Poker (Planning Poker): This collaborative estimation technique is widely used in Agile development. Team members use a deck of cards with numbers representing the complexity of tasks. Each member selects a card anonymously, and the team discusses discrepancies before converging on an estimate. This method promotes team consensus and leverages collective intelligence.

The Significance of Forecast vs. Actuals

The KPI of forecast vs. actuals measures the accuracy of estimates by comparing predicted efforts with actual efforts expended. This metric is significant because:

Performance Tracking: It helps track the performance of estimation practices over time, highlighting areas for improvement.
Continuous Improvement: By analysing discrepancies between forecasts and actuals, teams can refine their estimation processes.
Accountability: It holds project managers and teams accountable for their estimates, fostering a culture of precision and reliability.
Stakeholder Confidence: Consistently meeting forecasted targets builds stakeholder confidence and supports long-term project planning.

Deadlines vs. Targets: The Right Perspective

While deadlines are essential for maintaining project momentum and ensuring timely delivery, treating effort estimates as strict deadlines can be problematic:

Inherent Uncertainty: Estimates are inherently uncertain and subject to change due to unforeseen circumstances.
Flexibility: Viewing estimates as targets rather than rigid deadlines allows for flexibility, accommodating changes and adjustments without compromising project quality.
Realistic Expectations: Setting targets based on estimates helps in setting realistic expectations with stakeholders, reducing stress and pressure on the team.

Improving Estimation Accuracy

To improve the accuracy of estimates and align them more closely with project deadlines, consider the following methods:

Historical Data Analysis: Use data from previous projects to inform current estimates, identifying patterns and common pitfalls.
Regular Reviews: Conduct regular reviews and updates of estimates throughout the project lifecycle to account for changes and new information.
Collaboration: Involve the entire team in the estimation process to leverage diverse perspectives and expertise.
Training: Invest in training team members on estimation techniques and tools to enhance their skills and confidence.
Use of Tools: Utilise estimation tools and software that can provide data-driven insights and improve estimation accuracy.

The Value to Business

Getting estimates and deadlines right provides immense value to businesses:

Efficiency: Accurate estimates lead to better resource management and efficient project execution.
Cost Savings: Reducing the risk of budget overruns and delays results in significant cost savings.
Competitive Advantage: Reliable project delivery enhances the company’s reputation and competitiveness in the market.
Employee Morale: Realistic targets and manageable deadlines contribute to higher employee satisfaction and productivity.
Stakeholder Trust: Consistently delivering projects on time and within budget strengthens stakeholder trust and long-term relationships.

Conclusion

Effort estimates play a critical role in technology project management, but they should be treated as targets rather than strict deadlines. By using accurate estimation methods and regularly comparing forecasts with actuals, businesses can improve their project planning and execution. This approach not only enhances efficiency and cost savings but also builds stakeholder trust and supports sustainable business growth. Investing in improving estimation accuracy is a strategic move that pays dividends in the long run, ensuring successful project outcomes and a competitive edge in the technology landscape.

Also Read – The Art of IT Effort Estimation

Why Estimate at all?

Estimation is an essential part of any project methodology. Estimation is used for a number of purposes:

To justify the project enabling the costs to be compared with the anticipated benefits and to enable informed comparisons to be made between different technical or functional options.
To enforce the discipline needed to make the project succeed.
To secure the resources required to successfully deliver the project.
To ensure that the support impact of the project is fully understood.
To inform and improve the software development process.

What is estimation and why is it so important

Projects are planned and managed within scope, time, and cost constraints. These constraints are referred to as the Project Management Triangle. Each side represents a constraint. One side of the triangle cannot be changed without impacting the others. The time constraint refers to the amount of time available to complete a project. The cost constraint refers to the budgeted amount available for the project. The scope constraint refers to what must be done to produce the project’s end result.

These three constraints are often competing constraints: increased scope typically means increased time and increased cost, a tight time constraint could mean increased costs and reduced scope, and a tight budget could mean increased time and reduced scope.

What are the challenges

Lack of communication between…a…b…c
Lack of training in basic knowledge and techniques of estimation
Inability to do estimations based on – cost – time – scope
Project failure through time over runs and faulty estimation

Where are we going wrong?

Every day, project managers and business leaders make decisions based on estimates of the dynamics of the project management triangle.
Since each decision can determine whether a project succeeds or fails, accurate estimates are critical.
Projects launched without a rigorous initial estimate are five times more probable of experiencing delays and cancellations.
Even projects with sound initial estimates are doomed if they are not guided by informed decisions within the constraints of the triangle.
If you are working under a fixed budget (cost constraint), then an inaccurate estimate of the number of product features you can produce (scope) within a fixed period of time (schedule) will doom your project.
Inaccurate estimates across your projects de-optimize your portfolio.
Estimates are always questioned when estimates are given with knowledge – no estimation template is being used

How can we improve?

Outsource the project estimation function to an outside qualified consultant for each project to be able to gain viable and realistic project estimations that can be achieved.
Education of in-house project managers and technical leads so that we are able to collectively able to provide clear methodologies on how to estimate accurately.

This can be done through an onsite workshop/course – onsite is cost effective as company will pay one block fee for the attendees instead of delegates going offsite and attending a workshop where individual fees are applicable.

My personal recommendation is option B – as this option will allow us to retain skills in house to be able to produce accurate estimates

What are the long term benefits

Well crafted estimate creates many benefits:

alignment between business objectives and technical estimates
more informed business decision making
reliable project delivery dates
improved communication between management and the project team
controlled project costs, and
satisfied customers

Conclusion

The UK is facing ever tightening economic restraints. This means the quality of work is now, more than ever, of the utmost importance. To stay competitive in a shrinking marketplace, this company cannot afford to get a reputation in the industry for non-performance and bringing in projects over budget and outside estimated time frames. Credibility is the basis on which we build our reputation. In the eyes of clients credibility = successful projects. For us the success of all projects rest on the correct and precise estimation from the start of a project based on best practices, realistic expectations and transparency.

Tag: Effort

Striking the Balance: Using Technology Effort Estimates as Targets, Not Deadlines