In any program, changes are inevitable. Whether it’s a change in scope, schedule, or resources, these changes can have a significant impact on program costs. As a project manager, it’s important to understand the principles and detailed practices of managing these changes to ensure that they do not derail your program (or any individual project within).
Series
Over the next few weeks, I shall share a series of posts entitled “What Great looks like – Cost Management in Program Management”
Here I explore the impact of changes on program costs and discuss some best practices for managing them.
The Impact of Changes on Program Costs
Changes can have a significant impact on program costs. Some of the most common impacts include:
Increased costs
Changes can lead to increased costs, such as additional labor, materials, or equipment. For example, if you add a new feature to a software program, it may require additional programming hours, resulting in increased labor costs. In Construction, this may be a late inclusion of a design change that has an impact on your authority’s approval, requiring re-design, change in the sequence of works and associated costs.
Delayed schedules
Changes can also lead to delayed schedules, which can result in increased costs due to additional labor and equipment rental costs. For example, if you change the location of a construction project, it may delay the delivery of materials and equipment, resulting in increased costs.
Reduced quality:
Changes can also lead to reduced quality, which can result in increased costs due to rework and additional labor. For example, if you change the design of a product, it may require additional testing and validation, resulting in increased labor costs. In construction, if you have already built elements of the build that are then subject to change, you need to demolish and rework – adding significant cost (an often forgotten fact and mismanaged by Contract Managers worldwide in my experience).
Best Practices for Managing Changes
To manage the impact of changes on program costs, it’s important to follow some best practices. Here are a few:
Develop a change management process:
Develop a process for managing changes, including how changes are identified, evaluated, approved, and implemented. This process should include clear guidelines for evaluating the impact of changes on program costs.
Communicate with stakeholders:
Communicate changes to stakeholders and explain the impact of these changes on program costs. This will help stakeholders understand the reasons for the changes and the potential impact on the program.
Prioritize changes:
Prioritize changes based on their impact on program costs and the program’s overall objectives. Some changes may be essential to achieving the program’s objectives, while others may not be as critical.
Monitor program costs:
Monitor program costs regularly to ensure that changes are not causing unexpected increases in program costs. Develop cost tracking tools that allow you to monitor costs by category, such as labor, materials, and equipment.
Re-evaluate the program plan:
If changes result in significant increases in program costs, re-evaluate the program plan to identify opportunities to reduce costs. This may involve revisiting the program’s objectives, scope, or schedule.
FEED the Project
Look out for my post on ‘Feeding the Project’. Disciplined Project Managers/Project Directors lament variations and change, and hence position the entire project with a narrative ‘No Variations’. Feeding the Project stands for “Front End Engineering & Design” to ensure that the clients specifications are ratified before works start, and then changes are avoided.
Key Take Aways
Prevention is better than cure! Managing the impact of changes on program costs is a critical skill for project managers. By understanding the impact of changes on program costs, following best practices for managing changes, and regularly monitoring program costs, project managers can ensure that changes do not derail their programs. As always, effective communication with stakeholders is key to managing changes successfully. By keeping stakeholders informed and engaged, project managers can ensure that changes are understood and accepted, minimizing the potential for unexpected cost increases.
Thought Leaders – Great additional reading
Here are a few thought leaders in the field and their relevant books or articles:
“Project Management: A Systems Approach to Planning, Scheduling, and Controlling” by Harold Kerzner: This book provides a comprehensive overview of project management, including managing changes to program costs. Kerzner emphasizes the importance of developing a change management plan and evaluating the impact of changes on program costs before implementing them.
“The Triple Constraint: How to Manage Projects with the Triple Constraint in Mind” by Joe Taylor: This article discusses the triple constraint of project management (scope, schedule, and cost) and how changes can impact each of these elements. Taylor provides examples of how to manage changes to program costs, such as prioritizing changes and communicating with stakeholders.
“Project Management Body of Knowledge (PMBOK)” Written by the Project Management Institute: This guidebook provides a framework for managing projects, including managing changes to program costs. The PMBOK emphasizes the importance of developing a change management plan, communicating changes to stakeholders, and monitoring program costs.
Great Program Managers vs Just OK project Managers
Great
What separates great from good in managing changes to program costs is a combination of factors. Great project managers have a deep understanding of the impact of changes on program costs and have developed detailed processes for managing changes. They prioritize changes based on their impact on program costs and communicate with stakeholders to ensure that everyone is on the same page. Great project managers also regularly monitor program costs and adjust the program plan as necessary to keep costs under control.
Good
Good project managers may have some knowledge of managing changes to program costs, but they may not have developed detailed processes for managing changes or regularly monitor program costs. They may also struggle with communicating changes to stakeholders or prioritizing changes based on their impact on program costs.
Overall, what separates great from good in managing changes to program costs is a combination of knowledge, processes, and communication skills. Great project managers are able to balance the impact of changes on program costs with the program’s overall objectives, resulting in successful program outcomes.
