What Great Looks Like – Cost Management in Program Management
Over the next few weeks, I shall share a series of posts entitled “What Great looks like – Cost Management in Program Management”
I have developed these thoughts and am sharing them here to contribute to the growing body of best practice, in Project, Program and Portfolio Management.
The Series:
- Best Practices for Developing a Program Budget
- Identifying and Managing Program Costs
- Strategies for Reducing Program Costs
- Effective Cost Estimation Techniques for Program Management
- The Role of Risk Management in Program Cost Control
- Cost Leadership Strategies for Program Management
- The Benefits of Implementing a Cost Management Plan
- Techniques for Managing Vendor and Contractor Costs in Programs
- The Impact of Changes on Program Costs
- Balancing Cost and Quality in Program Management
- Leveraging Technology for Efficient Program Cost Management
Like many of you, I have toiled, bled, and cried over managing projects. Early in my career, as I reflect, pit took some time before I decided ‘there has to be a better way’ and ‘I am not the pioneer here, how can I learn from others before me’. It is with this that I share this with you.
Before diving in deep on the topic, please check out my note on What a Project Manager is. Really!
What does GOOD Cost Management Look Like?
Cost management is a critical aspect of program management, and it plays a crucial role in determining the success or failure of a program.
Program management involves overseeing a group of related projects to achieve a common goal, and cost management is an integral part of this process.
The Brass Tax – A simple frame
At its core, cost management involves identifying, estimating, budgeting, and controlling program costs to ensure that they stay within budget and do not exceed available resources.
Effective cost management is essential to program success for several reasons:
Resource Allocation:
Cost management allows program managers to allocate resources efficiently and effectively. By understanding the cost implications of various program components, program managers can make informed decisions about how to allocate resources to different aspects of the program. This ensures that resources are used in the most effective and efficient way possible.
Budget Control
Cost management helps program managers to control program costs within the budget constraints. Without effective cost management, program costs can quickly spiral out of control, leading to overspending and the potential failure of the program. By monitoring costs closely and making adjustments as necessary, program managers can ensure that costs stay within budget limits.
Risk Management:
Cost management is also crucial to program risk management. Effective cost management ensures that potential cost risks are identified and managed before they become a problem. This allows program managers to proactively address cost issues before they escalate into larger problems that could jeopardize the success of the program.
Performance Management
Cost management can also help program managers to monitor program performance effectively. By tracking program costs against budget, program managers can quickly identify areas where performance is lagging and take corrective action to get the program back on track.
So what does Great look like
Cost Excellence in Program Management can also help program managers to build credibility with stakeholders. When stakeholders see that program costs are being managed effectively, they are more likely to have confidence in the program and its leadership.
So, how can program managers ensure that cost management is effective?
One key is to establish a comprehensive cost management plan that outlines the program’s cost management strategy, tools, and techniques. The plan should include:
- A methodology for estimating costs accurately
- A detailed breakdown of program costs, including all components and activities
- A budget that is aligned with program goals and objectives
- A system for monitoring costs against budget regularly
- Processes for managing cost risks, mitigating incidences of overruns and responding, in the event of cost overruns
Comprehensive Cost Management Plan
By striving for Cost Excellence in Program Management, and following a comprehensive cost management plan, program managers can ensure that cost management is integrated into all aspects of program management. This approach can help to prevent cost overruns, improve program performance, and ultimately ensure the success of the program. After all, it is incumbent on the Project manager to Measure what Matters.
Key Take Aways
Cost management is a critical component of program management that cannot be overlooked.
Cost Excellence in Program Management is essential to resource allocation, budget control, risk management, and performance management. Program managers must establish a comprehensive cost management plan that outlines their cost management strategy, tools, and techniques, to ensure that cost management is integrated into all aspects of program management. By doing so, program managers can ensure that their programs are successful and achieve their goals and objectives within the available resources.
Best Practice Cost Management Plans
Best Practice Cost Management Plans stretch these concepts further and integrate a risk-based planning process that articulates the range of outcomes (cases) as a very helpful tool to persuade stakeholders of the pitfalls of not performing to the plans. These include further exploration of :
Strategic Alignment:
Great cost management and program management practices are aligned with the strategic goals and objectives of the organization. This requires a clear understanding of the organization’s mission, vision, and goals and a willingness to align program activities with these objectives.
Resource Allocation:
Great cost management and program management practices involve effective resource allocation. This means identifying the most critical program components and allocating resources accordingly. It also requires a willingness to make difficult trade-offs and prioritize activities that are most likely to contribute to program success.
Risk Management:
Great cost management and program management practices involve effective risk management. This means identifying potential cost risks and developing contingency plans to manage these risks effectively. It also requires a willingness to be proactive in identifying and addressing cost risks before they become problems.
Monitoring and Control:
Great cost management and program management practices involve effective monitoring and control. This means having systems in place to track program costs, identify cost overruns, and make adjustments as necessary. It also requires a willingness to be transparent about program costs and to communicate cost information clearly to stakeholders.
Continuous Improvement:
Cost Excellence in Program Management practices involve continuous improvement. This means learning from past program experiences and using this knowledge to improve future program outcomes. It also requires a willingness to be flexible and adaptable and to change program activities as necessary.
Best Practice Summary
By understanding these differentiators and referencing the work of leading thinkers in the field, program managers can develop effective cost management and program management practices that set their programs apart from the rest.
Who are the best thinkers and resources for Cost Excellence in Program Management
My reflections and thoughts are distilled from the best thinkers and associations in cost management and program management:
Harold Kerzner:
Dr. Harold Kerzner is a senior executive in the field of project management, and he is widely regarded as one of the most influential thinkers in the field. He has authored numerous books on project and program management, including “Project Management: A Systems Approach to Planning, Scheduling, and Controlling,” which is widely considered a classic in the field.
A Guide to the Project Management Body of Knowledge (PMBOK® Guide):
This guide is published by the Project Management Institute (PMI) and is the standard reference for project and program management best practices. The guide outlines the fundamentals of cost management and provides detailed guidance on best practices for managing costs in programs.
The Association for Project Management (APM):
The APM is a UK-based professional organization that promotes the development of project and program management as a profession. The organization provides guidance on best practices in cost management, as well as resources and training for professionals in the field.
The Australian Institute Project Management Institute (AIPM):
The AIPM is an Australian-based professional organization that promotes the development of project and program management as a profession. The organization provides guidance on best practices in cost management, as well as resources and training for professionals in the field.
Michael Porter:
Michael Porter is a leading authority on business strategy and competitive advantage. His work on cost leadership and differentiation strategies has direct relevance to program management and cost management. By understanding Porter’s concepts, program managers can develop effective strategies for managing costs and achieving competitive advantage
