12 principles of estimation best practice

Estimating is a key skill in ERP implementation projects. It’s vital to get a clear sight of how much your project is going to cost and how long it will take but what are the best practices for this vital skill?

Magne Jorgensen produced the top 12 estimating best practices and I’ve taken these and added in some of my real world experience and suggestions as to how you can manage the process.

(1) evaluate estimation accuracy, but avoid high evaluation pressure – Studies have shown that giving people a bonus or basing their appraisals on a good estimation track record actually decreases their ability and accuracy. Treat the estimation process as a collaborative effort and you’ll get better accuracy and a happier, more committed team.

(2) avoid conflicting estimation goals – It seems an obvious one but telling your analyst that you need a supremely accurate cost and then telling them that it mustn’t come in over X will make their work less reliable. Go for accuracy and not political expediency.

Thomsett (1996) gives an excellent example in his ‘software estimation game’

Boss: Hi, Mary. How long do you think it will take
to add some customer enquiry screens to the Aardvark
System?
Mary: Gee . . . I guess about six weeks or so.
Boss: WHAAT?!!!! That long?!!! You’re joking, right?
Mary: Oh! Sorry. It could be done perhaps in four
weeks . . .

We’ve all been there right?

(3) ask the estimators to justify and criticize their estimates – Very often a firm will have a culture of perfection and not being able to admit mistakes. In a project environment this is often disastrous. The truth is that any cost prediction will have shortcomings. Ask your estimator what these are and then take a view as to whether you mitigate or look for more information.

(4) avoid irrelevant and unreliable estimation information – Sometimes people include information in their estimate that is unreliable purely because they have nothing better to go on. The truth is you are better off understanding that there is no data rather than basing a decision on something that could be misleading.

(5) use documented data from previous development tasks – If you’ve done work in the area before, or even if you had a project in the company that wasn’t the same you can still use the lessons learned documentation to inform your estimates for the new project. You did do a lessons learned document didn’t you?

(6) find estimation experts with relevant domain background and good estimation records – Music to my ears. Get in an expert even if it is only to help with estimation. Studies show that experience of the software you are putting in is great but across a number of different platforms is even better.

(7) Estimate top-down and bottom-up, independently of each other – Don’t let the golden idea of how long a project should take affect the bottom up process of analysing out how long each task will take. Do both completely separately and you’ll get a much clearer view of the likely cost/time implications.

(8) use estimation checklists – if your software provider or partner has a checklist then so much the better but if not then sit down at the start of the analysis phase and think about all the bases you want to cover. You can add things in along the way if you forget something but make sure by the time you get to the point of choosing your software that you have covered everything in your original list.

(9) combine estimates from different experts and estimation strategies – Two heads are better than one or put another way you want the most expertise from as many different areas and with as many different points of view as you can. Get them all together then aggregate to give you an overall view.

(10) assess the uncertainty of the estimate – The only thing you can be certain about is that there is a certain level of uncertainty (with thanks to Rowan Atkinson). Estimates are only a guide but what you can do is put numbers around key points of your forecast to give you an idea as to how risky the project is.

(11) provide feedback on estimation accuracy and development task relations – this goes to points 5 and 6. If you want to identify who in your organisation is a particularly good analyst of projects then you also need to be developing them. Feedback is a vital component in this. Similarly feedback into a lessons learned document the results of your estimate versus the actual costs. You are keeping a lessons learned document right?

(12) provide estimation training opportunities – as above really. Good experienced estimators have been shown to be much more useful than a statistical model but they have to come from somewhere so start getting people involved in projects. if you are paying an outside consultant to come in and do this for you then make sure you allocate an internal person to shadow them, learn and develop the skills for in-house use.

Using these best practices when producing your project estimates will help give you the confidence that you are on the right lines and produce a better outcome.

If you’d like some external help with producing a cost estimate for your project then please do contact us -we’d be happy to help

References:
Jorgensen. M., 2004. A review of studies on expert estimation of software development effort. Journal of Systems and Software, 70(1–2), pp. 37-60.
Thomsett, R., 1996. Double Dummy Spit and other estimating games.American Programmer 9 (6), 16–22.

Isango8 - providing project management and accounting support for SMEs in the South and South West

What should be in the board pack?

A Board of Directors has a series of responsibilities that can only be discharged properly by having access to the right information – but how do you decide what should be in the board pack?

One of the difficulties of sitting on a board, especially if you are a Non Executive Director (or NED) is that the focus needs to change from the day to day running of the company to a more strategic and oversight role. This is where many NEDs suffer because it’s a natural reaction, especially if you have many years experience in a managerial capacity to want lots of in depth material. It’s a reaction that can prove counter-productive because lots of detail can lead to a loss of focus on the job directors are there to do.

So how do you decide what needs to be included in the board pack?

This is almost like a ‘piece of string’ question because companies are all different. Larger companies may have more onerous reporting requirements and a bigger board but there are some general rules of thumb that can help.

Executive Summary – and it really should be a summary. It’s sponsored by the MD whose aim should be to give the board an overall high level view of what has happened since the last board. It’s the entree if you like to the more meaty reports from the leaders in the functional areas. Of course often the MD feels they are the most important person in the room and will try and write a novel but that’s not the point of the exercise. It really is only the precursor to the main event. Keep it to a side of A4 if possible.

KPIs – this again should be a high level report based around the key drivers of the business. The KPIs themselves should be chosen well in advance by the board and should be a result of their understanding of how the business runs and what they key drivers are. A really well designed KPI report will include around half a dozen metrics that will encapsulate exactly how the business is doing and will again fit on one side of A4. In an ideal world each of the functional departments will have a KPI that they will report on in subsequent sections so that the whole pack forms a pyramid.

Finance – Above all the board are the keepers of the shareholders’ money so a finance report is a key component of a board pack. Remember though that your FD is a numbers man/lady and they’ll want to include information down to a low level. They really should only give you the information one level down from the KPI’s and then use this as a method of stimulating questions because it’s the discussion in a board where the real value lies.

Marketing – for any company the driver to success has to be an effective and active marketing department. For companies that practice a customer focused methodology then it’s crucial as marketing will influence everything from product development right through to after sales servicing. Of course marketers are fantastic salespeople and will love to tell you everything in great detail. Again they need to be focused on providing a level of information appropriate for strategic discussion and not how many hits the website has had.

Operations – This is probably the area where companies will differ the most but of course it is also the engine room of the business. This report needs to be all about how the firm goes about it’s work. What’s working well and what not so. What does the company need to do differently and what investment needs to be made to make things better?

Compliance – often firms need to report out to an external body such as OFSTED, CSCI etc. It’s important that these bodies are given comfort that their concerns are given prominence at board level but also that the firm internally considers matters of compliance all year round and not just at reporting time. Again this needs to be at a high level and could take a similar form to the risk register.

Risk/Audit – The Directors are custodians of the firm so they need to be mindful of risks that may turn up in the future, assess these and mitigate where required. A comprehensive and updated risk register is the key here and again forms the spur to discussion. Similarly they need to plan an audit and work on the findings and the level of information will naturally change just before and after an audit.

Projects/special reports – there are points throughout the year where something may be happening that requires The Directors attention. It may be the findings of the remuneration committee or a large company wide project that is occurring but whatever it is the board need a good high level overview of how things are progressing.

PESTLE – this really goes to the heart of what the board are there to do. It doesn’t need to take the form of the ubiquitous PESTLE (Political,Economic,Sociological,Technological, Legal and Environmental) format but there needs to be an appreciation of the firm’s place in the world and the external factors that could affect it. After all if The Directors don’t understand where the rocks are how will they steer the ship?

It’s also really important to think about how this information will be consumed and used. SME NEDs often only get one day a month paid and will be expected to attend a meeting for half a day. The pack needs to be light enough that it can be read and understood within an hour or so. It needs to strike a balance between enough detail for good understanding but not too much that it takes an age to read because trust me – people won’t read it. Remember also that we are all different. I hate paper information, some people love it so be prepared to provide it in whatever way is most comfortable for your individual Directors.

Consistency is important as time spent looking for where the latest sales figures are will put people off but also mean that they have less time to actually understand the numbers. Keep a consistent format and style for each report each month and make sure that the pack is distributed at the same time every month so that the directors know when to expect it.

The aim of the board pack is to educate and inform but also to stimulate debate. As a general rule of thumb one quarter of the meeting should be given over to presentation of the reports for each area and three quarters should be allowed for discussion because as started earlier this is where the real value is added. The overriding message has to be focus,focus,focus.

Although there is no ‘standard’ board pack, following the guidelines above should get you most of the way towards a good level of content for your company to make the most of it’s Board of Directors’ talents.

Isango8 specialise in information presentation. If you’d like us to help you reformat your board pack and identify your KPIs then please get in touch for an informal chat and we can tell you how we can help.

 

Isango8 - providing project management and accounting support for SMEs in the South and South West

The top 5 signs that your project might be going wrong

As a non executive director you’ll probably have oversight of a number of projects during your tenure but how can you tell if things are going awry when you are remote from the project team? These are my top 5 signs that things might be going wrong.

One of the great things about being a non executive director is that you have the opportunity to take a detached higher level view. This gives you a chance to spot things that look out of place when someone much closer and more invested in the project may not be able to see the signs.

There’s an old saying that ‘there’s nothing new in the world’ and in the universe of projects that’s especially true. One thing that shines out from the reams and reams of literature on implementations is the consistency of the type of problems that projects face. The good news is that NEDs can use that consistency to spot when their firm may be facing issues.

There are really only 3 ways in which a project can be classed a failure – the system is late,  over budget and it’s not to the specification required. Here I present my top 5 ways to spot if any of these is on the horizon.

5 – High spending very early on. Projects, especially those that need infrastructure will incur higher costs early on for things like servers, cabling etc. but staff costs should generally be higher towards the end when you are entering the testing/training phase. If your project has used up a very high proportion of its budget or the spending is not matching the project cash flow predictions then it’s time to ask questions because it may well end up using up all of the money when it’s too late to turn back. Make sure a ‘Cost to complete’ is included in the project reports that the board should be getting regularly from the project team.

4 – Things mysteriously disappear from the schedule. I have honestly seen software houses just leave things out of a project report because they decided it was too difficult to deliver. They hoped that if they didn’t mention it then people would forget that they’d asked for it in the first place! Good organisation is the key here. Make sure that when you receive project reports they include all aspects of the proposed implementation and that the risk register is kept up to date.

3 – Missing early deadlines. Through the life of the project there will be mini deadlines that crop up. Producing a system for a ‘look and feel’ demonstration system for instance. It’s usually a sign of how the company providing the goods does business and it’s folly to think that this leopard will change it’s spots halfway through a project. If your provider starts to miss early deadlines then you need to start exercising the firm’s authority and exert proper control over targets.

2 – The project sponsor goes AWOL. One of the key critical success factors cited in the literature is full high level back up from the project sponsor. Unfortunately they are generally very busy people and often, although the project is the focus of their attention on day one, by the time they get halfway through your sponsor will have moved on to more pressing matters. The difficulty is that this is the point at which their input is most needed. As a NED the sponsor is also your direct link to the project so get them to focus. If something else is taking them away then reassign the task.

1 – Lack of clear direction. This is my absolute number 1 priority for any project big or small. The great thing for a NED is that this can be seen right from day 1. If you read the project description and there is no clear and unequivocal statement of what actually will be achieved by investing the firms money then your project will fail. This is also the point where a good NED can add the most value. Challenge (in a constructive way obviously) all the way to the point where the contract is signed. Make sure that the proposed system is properly and completely planned and scoped so that everyone has a clear sight of what the company want to achieve. If you don’t then you can expect trouble!

Above all my advice is to trust your intuition. If something doesn’t sound right, if the project manager becomes evasive or people begin to stare at their feet when budgets or schedules are on the agenda then it may be time to dig a little deeper!

 

Isango8 - providing project management and accounting support for SMEs in the South and South West

Who’s who on a project

There are number of people on a project team that are vital to success - just like a football team playing without a goalkeeper if you leave one of these people out then you risk a failed project!

The Sponsor - Sometimes called 'The project owner' they take ultimate responsibility for the project. They will often kick it off, will present the business case to the board and provide the regular updates. Their job is to remove roadblocks, provide motivation and be the champion for the entire scheme. They set the tone and a good project sponsor is worth their weight in gold.

The Project Manager - An experienced project manager will be the person who plans and runs the project. They will help build the team and continue to provide controls over the budget and work packages on a say to day basis. They enact the sponsor and steering group's decisions an provide feedback and feedforward throughout the teams.

The Specialist - You'll need specialists in functional areas on your project teams. People like finance, operations, HR, payroll are all vital to getting the full picture to ensure that your system is correctly set up.

The Independent Consultant - Someone who has experience from prior projects and different industries. They can bring best practice information to the table and also stay on the side of the company by giving totally independent and unbiased advice.

The Software Consultant - Provided by the vendor company they bring the in depth knowledge of the project and information regarding specific requirements of the software. They will also provide the link between the project and the vendor company.

The Tester - Typically the project will employ people at all levels throughout the organisation and in all departments to make sure that the test system provided does what it says on the tin. They can also be utilised to spread communication to the wider user community about how the project is going,

The Stakeholder - People often think that stakeholders are just people in senior positions but that couldn't be further from the truth. A stakeholder is anyone that has any contact or interest in the system you are putting in. A stakeholder will usually be board members who may not use the system but will want to see a good return on investment, Staff members who will want a system that is easy to use, managers who will want to ensure that controls and reporting are robust, suppliers and clients who may well integrate with the system electronically through order placement and payment services and anyone else who comes into contact with your new software. Each company will have its own stakeholder list and it is always a good idea to think about how you will communicate with them before during and after the project.

If you need help with building your project team or you need an independent consultant or specialist then Call us now and we can talk over the options

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