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The Hidden cost of poor project management

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. We believe in adding value to our key contacts by sharing ideas, news and market updates we feel could be helpful to your daily business practices. Hope those can bring you fresh insight and new perspectives .

THE HIDDEN COST OF POOR PROJECT MANAGEMENT

How much really does your project cost you ..?? Have you realised it ? What do you think is the actual cost of project?

These core questions needs to be analysed and understood . There wil be two kinds of costs as below

DIRECT COSTS,  INDIRECT COSTS Materials and all tangibles: software, hardware , labour costs ..Building, utility costs, annual company auditing charges ...

or

HIDDEN COSTS

We will focus on this piece (Hidden costs) which is the main crux of unknown cost to projects .We will analyse the core causes, its symptoms a

Causes and Symptoms of Hidden Costs

1) 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/programed strategy; business case unclear.

COST-> Sub-optimal decisions mean labor 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.


2) CAUSE -> Poor scope management

  SYMPTOMS -> 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 labor or material costs because effort is spent on unnecessary activities.

 

3) 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.


4) 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 labor charges because project team are less productive.


5) 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..


6) 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 labor and/or material costs.


Conclusion:
A project might have been priced at USD 500k. Assuming it will have: good project management, good sponsorship, cohesive team, etc. Perhaps the project could be delivered for USD 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, 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. We believe in adding value to our key contacts by sharing ideas, news and market updates we feel could be helpful to your daily business practices. Hope those can bring you fresh insight and new perspectives .

 

Comments

Good article to read.
I would like to propose the following

1. If we try to put ranking of the causes then in my view 'cause 5' makes top of the rank.

2. In my experience when there is a lack of transparency will affect primarily on meeting customer's minimum requirements.

3. Undue pressure on the Project managers to input the resources (as our sales team might have committed on many promises without verifying with the sponsors/PMs) and get the work delivered will lead to hidden cost on productivity as training costs (internal/external) go up.

Hi, thank you for this article I agree with you that hidden costs are often unaccounted they often go unnoticed. you clearly explained the cause of poor project management and hidden cost it is a very useful article I will surely keep this as a reference while managing any project

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