If anything draws more negative attention to a project than a missed deadline, it’s a missed budget. As common as they are in today’s business environment (a recent PMI study reported that companies waste more than 120 million dollars for every billon in project spending), blown budgets are viewed just as harshly as ever. A project that goes over budget, whether by a couple hundred dollars or a few thousand, can have a lasting effect on the reputation and career of the project manager and other leaders who were supposed to be steering the ship.
Some projects exceed their budgets because the budgets were unrealistic in the first place, often due to shortcomings in the sales or procurement process. Other projects take a budgetary hit due to surprises that pop up once the work is underway. With a little advance planning and attention to detail, project managers can prevent many of these surprises in the first place, and can minimize the budgetary damage from those that can’t be avoided.
Changes in Requirements
Few projects make it from beginning to end without at least a few changes to their scope or requirements. Changes may be needed because the requirements were not adequately described at the beginning of the project, or because a customer’s business needs change after the project has begun. In either case, the project manager can protect the project budget by following the established process for change orders, ensuring that additional funds will be available to address the additional requirements.
Another common challenge to project budget management comes in the form of a request to move the deadline for certain tasks or for the project as a whole. Shortened timelines can require a project manager to bring in additional employees (or external contractors, an even more expensive option), which can blow the budget in remarkable fashion. Pushing deliverables into the future can also create a budget hit, especially if it means that the project must keep resources allocated for a longer time than originally planned.
Lack of Resources
Within larger organizations, project teams grow and shrink constantly, as employees or contractors roll on and off projects to complete specific tasks. Project plans are built with the expectation that certain resources will be available at certain points in each project, and if a critical employee or team is unavailable, the result can be disastrous. In these situations, the only alternatives are to bring in external help or to postpone other project activities, either of which can blow the project management budget.
Budget-busting surprises don’t always originate within the project itself. Changes to a customer’s leadership team, company-wide events like mergers or acquisitions, and even environmental factors like blizzards or hurricanes can throw a project off schedule and off budget.
Lack of Visibility into Projects and Portfolios
The quick-paced and constantly changing world of project management can make it difficult for PMs to gain visibility into project and portfolio health. If there’s no effective way to ensure projects are healthy and on track, teams within the organization can waste time working on the wrong things, doubling up on the same task, or receiving poor reporting and guidance from executives. When combined, the above can quickly turn a project from being on track to success into a complete budgetary failure.
Even when a significant change comes out of the blue, however, it doesn’t have to wreak havoc on your budget. Successful organizations (and successful project managers) prepare contingency plans ahead of time that outline the steps a project team should take to minimize the impact of unavoidable disruptions. Fortunately, Clarizen’s project management solutions can help organizations in a wide range of industries manage their projects and their budgets with ease. View a product tour today!