Project Management and Improvements in Cost Performance - Essay Example

Management Project Management and Cost Performance Appropriate planning of cost is a vital step in the process of project management. The entire lifecycle of the project is based on an effective management of cost. Cost planning gives foundation to the project and helps to control the whole process in an effective way so that measured actions are taken. Evaluations regarding the cost estimation are reported in every step for identifying the requirements of the project. Forecasting is an important part of cost planning. An estimation of the approximate cost and the time of completion of project deliverables are done in order to forecast outcomes related to the project. Proper planning of cost and control of time is necessary for an effective project management. Project management essentially depends on these two factors. In many cases of project management, it can be seen that cost performance on project often becomes poor. It becomes imperative to study the causes of such poor performance, as cost planning forms the base of project management (Munns and Bjeirmi, 1996). Possible Causes It has been seen that, projects mainly fail to meet the desired targets. Cost performance and estimation will be affected if project lack proper planning. There are several areas in project management which needs close attention. Lack of proper attention to cost planning would lead to overrun of cost and wastage of time. There are various causes that lead to poor cost performance. This study attempts to discuss the causes in details in order to identify ways to improve on the process of cost planning. There is an existence of an ineffective link between the strategies and the ways of implementing them. The organisations most often fail to define their mission statement properly. There is a lack of vision within the organization. The objectives of the organization do not capture the essentialities of the business operations. The projects that are taken up by the organization do not have proper cost estimation, and strategies related to budgeting are not done appropriately in most cases. Thus, there is poor cost performance as there is lack of planning at every stage. The strategies that are drafted cannot be ultimately implemented properly as proper individuals are not recruited for carrying on such operations. The employees do not have proper idea about their responsibility in the organization. Work is not delegated appropriately. Thus, the employees fail to relate themselves with the goals and objectives of the organization they are working for. They also do not have motivation that would help them to enhance their performance. They fail to understand their worth in the organization and how the achievement of organizational goals would lead to their personal growth in the long run. Success of a project is entirely dependent on the employees who have been assigned to handle different areas of the project. If the employees are not directed properly, planning would suffer at every stage. Cost performance will as a result drastically fall. This would be an outcome of inappropriate utilization of resources by the employees due to the absence of proper cost and expenditure planning by the organization (Atkinson, Crawford and Ward, 2006). The process of project management is sometimes based on unsound assumptions. Assumptions about various project heads are often based on irrational assumptions that do not reflect the actual goals of the project. In such cases, cost performance also suffers due to the absence of proper idea about the operations related to the successful completion of the projects. The requirements of the projects are also not clearly defined in various cases which lead to a failure in proper planning of cost. The baseline of cost is not planned according to the credibility reports. Cost performance is affected as a result of poor integration in the various areas of the project. Sometimes, a series of plans are drafted one after the other without proper identification of resources. Cost performance will certainly be poor if there are flaws in the forecasting procedures. There will be mismatch in the actual and the predicted outcomes. Cost estimation will also not be proper eventually. Aggressive strategies are often taken to ensure success of projects. Such program schedules can be harmful in the long run as it would have a negative influence on the cost structure of the project. There is also failure in replication of the desired outcome. Cost planning has to be modified in such conditions. Poor performance of cost is also associated with lack of proper funding for the project. Drying of investments is one of the major setbacks that a project faces during its entire life cycle. It is imperative to identify the causes of poor cost performance in order to improve the performance of a project. The causes can be associated with delays in the operations or activities which are directed towards the estimation of cost at every stage. There are various factors that lead to delays in project. It is necessary to understand the characteristics of the project and designate appropriate roles to the team players of the project. This is not done properly in most cases. There has to be a proper estimation of the availability of resources that can be procured internally or externally. Failing to meet these requirements would lead to delays in project. Cost performance will be affected as a result (Atkinson, 1999). The severity of the causes for poor cost performance also needs to be determined. Research in the field has suggested that the factors that cause poor performance are related to the clients, contracts that guide the project, resources and raw materials, issues that are associated with project procurement and external environment. The relationship of the team leaders within the team is also an important criterion that influences the cost performance. Ineffective communication within the team also negatively influence cost performance. Thus, based on the above causes of poor cost performance, it becomes necessary to identify ways to overcome such drawbacks. Understanding the severity and cause of such problems is essential in order to form recommendations that would ensure that cost performance improves during the process of project management (Baloi and Price, 2003). Improvements in cost performance The process of project management would be effective if strategies are made to enhance cost performance. This can be done through proper management, characterization and segmentation of risks that are associated with the project. Cost performance would increase as resources would be utilization of resources. The outcomes from the project can be forecasted well, if there is a proper planning related to cost structure of the project. Improved performance will be ensured if technical complexities in the project are handled with utmost care, and designs are drafted according to project specifications and requirements. Cost performance can also be improved if there is a proper understanding of the supply market and government and regulatory requirements are not very strict in nature (Kerzner, 2002). Cost performance is guided by the integration in the different areas of project management. It is imperative to set proper targets to achieve various project deliverables and accordingly, provide incentives for meeting such targets. This would help to avoid delays in business operations. Cost performance can be improved if priorities are identified and focus is given to areas which need special attention. As a result, estimation would be done properly. The risks associated with the project needs to be identified and managed accordingly. The forecasted results would be more meaningful if the probabilistic estimation of cost is risk adjusted. This would ensure that the cost requirements are appropriately distributed across the different areas of the project (Kaplan, 1998). Cost performance can be improved by several ways. Consolidation of infrastructure related to Information Technology is one such ways of enhancing cost performance. The overall cost associated to this sector has to be managed effectively. The overhead cost associated with Information Technology sometimes becomes a burden to the project (Reyck, et al, 2005). Strategies should be made to ensure that, redundant network costs are eliminated and applications are standardized to suit the overall needs of the project. Operating expenses will reduce if the information technology operations of the project are designed according to the specific requirements of the project. Cost Performance can also be improved by managing the operations related to supply chains effectively. There has to be a reduction in procurement cost and the supply chains has to be restructured in order to identify the major issues that lead to poor cost performance. There are many organizations who have applied processes like Lean Six Sigma which would help to extract costs from its supply chain. This would certainly improve the cost performance and thus, help in proper project management and control (Bowersox, Closs and Cooper, 2002). Cost Performance is also related to the usage of the resources during the operations of a project. Energy resources are expensive in nature and managing such resources is effectively essential to ensure an improvement in cost performance. It is important for the organizations to understand the value of the resources and rationalize accordingly. It has been discussed earlier that, consolidation in Information Technology can help to reduce costs. This is also indirectly linked with proper utilization of energy resources. Cost performance can be improved by making a shared platform for services for different areas of the project. There is also need to identify the major issues that leads to poor cost performance. This can be done, if there is a proper integration between the different project heads and a shared platform is maintained. Solutions to the issues of poor cost performance also included involvement of an advanced team of business analytics to eliminate improper expenditures. The magnitude of the problems would govern the level of analysis required in the project. Forecasting would be rational in case, if proper attention is given to analysis of information. There is also a need to develop mechanisms that would help to detect improper usage of capital during the management of project. Auditors should be appointed to monitor the inappropriate channelling of funds across the projects (Kerzner, 2013). Cost performance can be effectively done by organizing, controlling, monitoring and planning work across the different project areas. It is essential to maintain the appropriate cost target of the project. This would be done if the progress of work is done according to the forecasted outcomes. There has to be a correlation in technical achievements with the operational activities. Thus, to ensure an effective project management and control, it is essential to improve cost performance and this can be done through proper evaluation of the performance of the project (Cooke-Davies, 2002). Reference List Atkinson, R., 1999. Project management: cost, time and quality, two best guesses and a phenomenon, it’s time to accept other success criteria. International journal of project management, 17(6), pp. 337-342. Atkinson, R., Crawford, L. and Ward, S., 2006. Fundamental uncertainties in projects and the scope of project management. International journal of project management, 24(8), pp. 687-698. Baloi, D. and Price, A. D., 2003. Modelling global risk factors affecting construction cost performance. International Journal of Project Management, 21(4), pp. 261-269. Bowersox, D. J., Closs, D. J. and Cooper, M. B., 2002. Supply chain logistics management (Vol. 2). New York: McGraw-Hill. Cooke-Davies, T., 2002. The “real” success factors on projects. International journal of project management, 20(3), pp. 185-190. Kaplan, R. S., 1998. Cost & effect: Using integrated cost systems to drive profitability and performance. Harvard: Harvard Business Press. Kerzner, H. R., 2002. Strategic planning for project management using a project management maturity model. New Jersey: John Wiley & Sons. Kerzner, H. R., 2013. Project management: a systems approach to planning, scheduling, and controlling. New Jersey: John Wiley & Sons. Munns, A. K. and Bjeirmi, B. F., 1996. The role of project management in achieving project success. International journal of project management, 14(2), pp. 81-87. Reyck, B. D., Grushka-Cockayne, Y., Lockett, M., Calderini, S. R., Moura, M. and Sloper, A., 2005. The impact of project portfolio management on information technology projects. International Journal of Project Management, 23(7), pp. 524-537. Read More