Resource management is strongly linked to productivity and also to project success. Getting it right can help a project manager when it comes to delivering a project that meets customer expectations but is also an essential part of a project team’s risk management strategy.
- What is resource management?
- The importance of cost management in resource management
- Methods for project estimation
- Managing project costs – some tips
- What if resources change significantly during a project?
- Approaches to resource scheduling
- Approaches to optimise resource allocation
For those who are involved in project management, it is essential to learn the vital skills that are associated with resource management. This is how project managers are able to make sure that they have the best resources possible in order to successfully complete a project. However, effective resource management also includes making sure that the resources available do not go to waste at any point during the project.
What exactly is resource management, though? And, which techniques can you utilise to make the management of your resources more efficient? This guide has all the information that you need to know.
Understanding what resource management actually is plays an essential part in knowing how to use this vital process for the best advantage in your projects.
Resources refer to anything that an organisation may require in order to successfully complete a task or a project. This is not just the physical supplies like parts and materials that may be needed but also the members of the project team with their range of skill sets, the software that might be required and the time that is needed.
Resource management, therefore, refers to how a project manager plans, manages and budgets these particular resources. Forecasting is also necessary in terms of working out how much of a particular resource may be required for upcoming projects and tasks as well.
When it comes to the different elements that make up a project, cost management is one of the most important considerations. Running out of money part way through a project can cause serious implications for the outcome of the project. It is the responsibility of the project manager to manage the costs of the project, including any scope for cost estimations and budgets. These are the financial boundaries that will have been put in place during the budgeting process, and it is important to make sure spending is controlled.
Project costs are covered during most project management training courses and there are different techniques that a project manager can use to help with effective budgeting and make it easier to stay within budget limits.
Common budgeting mistakes
- Providing single data point estimates rather than range estimates
- Offering estimates under pressure, for example, in project meetings
- Dividing tasks into more than one resource
- Once there are changes in the scope, not adjusting any estimates
- Failing to create a contingency plan
- Assigning resources with more than 80% utilisation
- Beginning the project with a set amount of money, and then forcing the costs of the project to fit this
- Not understanding what is needed to finish a project
These are all factors that can result in inaccurate cost estimations. When senior management force the costs for a project into an amount of money that has already been set aside, this can be a serious mistake; but one that is made all too often. To be realistic, you need to estimate the true costs of your project, and if the money being allocated doesn’t add up to a similar amount, then you need to negotiate with the project stakeholders to either increase the budget or reduce the project scope.
Estimating projects isn’t easy. There are so many factors that come into play, and it is only when a project is finished that you will know the true cost. Before you start to use any method, you will need to define the scope of the project and your work breakdown structure, ensure that all activities are sequenced, and estimate resources for activities and the duration. This will help you cost up the project accurately.
- Bottom-up estimating – this means aggregating singular estimates for each task within the Work Breakdown Structure. Calculations are made for every activity. One of the most common methods, this one provides a good level of accuracy. Because it used estimates, however, you need to ensure that are precise.
- Resource cost rates estimating – resources are a necessity in any project. This type of method allows for the deciphering of full costs over all resources.
- Analogous estimation – this method involves making estimates from a similar project to calculate the costs for a new one. The similarities and issues should help to make a fairly accurate estimate.
Managing project costs – some tips
Of course, creating accurate estimates is one thing, but then you need to be able to stay on track with these estimates. This can be difficult, especially for leading-edge projects where there are few, if any, similar past projects from which lessons could have been learnt. It is the responsibility of the project manager, however, to closely monitor costs and ensure that the project does not go over budget. Here are some suggestions on how you can manage the costs of your project successfully.
Whilst an extension to the project may initially seem like a bad idea, it may actually be a good solution to help deliver to customer expectations – albeit later than planned. Talk to those involved in the project if the costs are building up, and even if they have been determined to stay on schedule with a fixed end date for the project, they might be willing to move the deadline if there are additional costs involved, or deliver in phases. Delivering a project over a longer period of time may even have financial benefits. These might be spreading the cost or doing more of the work in-house. Being fully transparent with all the stakeholders involved and honestly discussing the negative implications of trying to stick to fixed costs and/or deadlines can ultimately result in a better outcome.
Make sure that the resources that you have in place for your project are the correct ones. If you have invested well in the resource planning and management stages, then there should be no need to spend more money correcting issues along the way or drafting in more people, or people with different skills, to the team. You should also ensure that the available resources are allocated effectively (whether that’s time, money or people) and are working to deliver the best outcome for the project.
Make sure that you read your contracts with suppliers and external partners carefully, including all the small print. Failure to do so can lead to paying more money for services you do not need or which you can do in-house.
Good project management software is worth its weight in gold for keeping a check on finances and tracking the allocation of your resources. Look for something that is flexible, robust and easy to use. You will need to be able to manage recurring expenses and also provide a money trail. You should also be able to use this software to schedule any regular payments to help manage the budget.
Whilst you may not be responsible for all of the deliverables on a project, good negotiation skills are still important. The relationship between the project manager and vendors, third-party suppliers and maybe contractors is an important one when it comes to cost management, and there is often room for negotiation. As the project manager, you do have power when it comes to negotiations so consider asking for discounts, particularly if you are buying services or goods in bulk. Providing a testimonial or case study if you are the first business to use a supplier’s product can often result in a price reduction.
Give careful consideration to pricing structure. There are usually areas where cutting costs is possible. This might be through a payment structure with phased payments.
Ensure that any adjustments are recorded by making amendments to your forecasts on a regular basis. Changes may occur as a result of estimates being higher or lower than forecasts or because this relates to running costs that are higher or lower.
Cost metrics should be calculated, and you should ensure that you update them at the end of each reporting period. Compare how much money you expected to spend and how much you have spent. Incorporate cost metrics into your project reports.
It may seem obvious but actual costs should be recorded. You need to check the actual amount of money that you have accounted for at the end of each month. Compare this amount to your budget and make sure you record it for your reports.,
These steps should help to give you a much better understanding of how best to estimate your project costs and the factors you should need to consider. Budgeting should always be done at the beginning of the project process. However, there are several things you should do even before you start this. These first steps include defining the scope of your project and ensuring all of the activities are sequenced. Once you have these in place, you can begin the work on estimating the costs of your project effectively.
In the best-case scenario, whilst there may be some minor resource changes during a project, they shouldn’t be too significant. Minor changes are, of course, easy to deal with and often will have little to no tangible effect on your project, budget or even your timeframes. The problems that can occur can often take place as a result of significant changes. These are the ones that require a contingency plan in order to make sure that they have the minimum effect on costs and timescales.
Significant changes in your resources can take a number of forms.
Reasons resources change
For example, if a key team member, someone who has a particularly unique skill set, leaves for another role, then you may not be able to cover these skills within your existing team. This might be resolved by contracting in someone with the relevant skills, which often comes at a greater price. Or, it may mean advertising for a new team member which can take time and can impact the timeframes of your project.
A supplier might go out of business, leaving you to source a new supplier who may cost more or not be able to supply the necessary products as quickly.
When your resources change significantly at the beginning of a project, the impact will not be as significant as it could be later on in the project. However, it will have implications that will need to be resolved in order for the project to run as smoothly and efficiently as possible and as close to its original cost estimates and timescales as possible. Communicating these issues with stakeholders is essential. Timescales that may have appeared fixed may have more flexibility, and the same with budgets, particularly if your project is close to completion and the budget has almost been spent. Spending a little more to complete it could ultimately be the best decision.
Approaches to resource scheduling
Resource smoothing is a process that can be used to resolve any over allocation issues without affecting the project end date. The project manager can use any free float available on a task and reallocate existing resources to different tasks by using some of the free float (for example extending a task by a week). This will reduce the free float on a task but the project end date will not be impacted.
Resource levelling is the process used to move resources to a different task when the relevant resources are not available. For example if 3 software developers are required for a 2 week period (6 man weeks) but only 2 developers are available then the project manager can level resources by allocating 2 developers over 3 weeks – this will, of course, delay the end date of the task. This process is used when no free float is available but could impact the project delivery date because certain tasks will be delayed.
Approaches to optimise resource allocation
There are 3 main approaches to consider when optimising the resource allocation for a project if levelling and smoothing still leave a demand for additional resources.
Hire additional resources
Hiring additional resources to complete tasks and meet the project end date requires approval from the project sponsor because of the additional resource cost. This would not have been factored in to the original project budget and would most likely cause the project to overspend. Another implication of hiring new resources is that they would have to complete an induction process which will have an impact on the project schedule.
Change the phasing of the project
Another approach the project manager can take is to change the phasing of the project to optimise the resource allocation. This means some work will be deferred to a later stage and again the project manager will need approval from the stakeholders. An example would be to deliver a product with only the essential functionality and defer “nice-to-have” features to a future date.
The project manager can look for areas where existing resources can be optimised – for instance by sending team members for additional training to broaden their skill set. This assumes there is time in the project schedule to spend upskilling people and that approval could be obtained for the cost of doing this. The benefit of more highly skilled team members would, of course, be carried forward to future projects, which itself could mitigate current cost and time implications.