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10 guidelines for estimating project effort

4/4/2011

17 Comments

 
Many projects start off on the wrong foot because the effort involved in delivering them has been underestimated. It is human nature to want to deliver something well and quickly, but underestimating the complexities of a project serves no one. As project managers it is our job to make sure that the team understands what the users want and how much it will cost to produce what they want. This is one of the cornerstones of being able to successfully deliver a project.

One of the prerequisites for producing a reasonable estimate is to have spent sufficient time analysing and understanding the requirements and the proposed solution. Carry out too little analysis and the estimated solution remains unclear and risky. Carry out too much analysis and the team will have spent too much time in discussions at the expense of actually starting and delivering the work. You need to carry out enough analysis that the team has uncovered all the risky areas of the problem domain and that a robust solution is emerging. At that stage the team should be able to quantify what is known about the solution and what is unknown.

To become better at estimating project effort, take into consideration the following guidelines;

1. Bear in mind that estimation is an ongoing activity which should take place regularly throughout the project. In the initial stage a high level estimate may be required in order to determine the feasibility of a project, whereas later, a more thorough analysis and estimate would take place, which is then gradually refined. Having said that, always resist the temptation to provide an estimate without having any detailed requirements or analysis to back it up. If senior management needs a quick indication of potential costs in connection with an initiative, provide them with a ‘best guess’ and make sure they don’t take it as an official estimate.

2. During the initation phase, when the users are communicating to you what they want and need, analyse all key requirements, break the effort into manageable pieces and demonstrate or prototype as much as you can. Use workshops to illustrate and talk the requirements and proposed solution through in detail with the team and customer and make sure you are all in agreement about what needs to be delivered and hence estimated. Carrying out proof of concepts and prototypes will help you validate the user’s requirements as well as the technical solution.

3. Involve experienced people in the analysis and estimation process and brainstorm with the people who are actually going to do the work. The more the better. Have different groups of people estimate the same thing and compare the outcomes. A big disparity between numbers point to uncertainties in the proposed solution. Ensure you add extra contingency to compensate or spend more time analysing the uncertain elements.

4.  All estimates carry an inherent degree of uncertainty, especially in the early stages of the project where there are more unknowns. It is crucial that you quantify the percentage of unknowns in your estimate and compensate with an equivalent level of contingency. Remember that relatively speaking, you will be much better off over-estimating the effort as this will give you a chance to come in under budget and thereby over-deliver.

5. Be careful not just to estimate the ‘sunny path’ scenario of a project. Unexpected things always come up and requirements are often more complex to implement than originally thought. Remind everyone to be pragmatic and realistic when providing estimates and ask people for best case and worst case numbers.

6. Make sure you factor in all phases and activities of the project, including analysis, design, build, unit testing, integration testing, performance testing, user testing, rework, configuration management, release, handover, post project support, training and documentation and project closedown. In some cases it may also be appropriate to set aside budget for change requests. Also include specific time for management activities such as project management, team management, technical management and test management if it is not already accounted for.

7. Research and experiment with different estimation tools and techniques. Ask around in the organisation to find out which tools other teams have used. Understanding how estimation tools work will generally improve your ability to estimate a project even if you end up not making use of them directly. Estimation tools will help you consider all the different aspects of the project and automatically add extra contingency the more inexperienced your team is and the more complex the solution domain and the technology is.

8. Estimate the effort in points or labour-hours as opposed to calendar time to cater for the fact that your team is never 100% effective. You can then apply a separate conversion factor to translate your estimated effort into calendar time. This will make it easier to track the accuracy of your estimates as you move through the project and also enable you to measure the effectiveness of your team. The translation of effort into calendar time is based on how many effective hours a team member can spend on project tasks per day. If your team spends 30% of an average day on meetings, answering queries, checking of emails and time wasting activities, you will need to add a conversion factor of 1.4 (1/70%).

9. Add a contingency factor to your estimate to cater for events which you cannot foresee, such as unexpected problems with the proposed solution or vendor or unexpectedly having to onboard new or more expensive project resources. Also bear in mind that labour rates and exchange rates may change as the project progresses.

10. Formally record your estimates and document how you arrived at them. Make the estimated scope and assumptions clear and also highlight what is out of scope. Not only will this put you in a better position to defend and adjust your numbers, it will also help you review and improve your estimation process going forward.

If you liked this post, you may also like:
Risk management is how adults manage projects!
8 Tips for Managing Project Costs
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your stakeholders

Top Tips for Gathering Requirements

17 Comments
Steve Hart link
21/4/2011 04:35:35

This is an excellent post. #8 and #10 particularly hit the mark for me. Estimating duration and effort are two different things, and they come together when creating the schedule. I also, recommend that people document their assumptions right in-line with creating the estimates and schedule. Then when you are creating the SOW and Project Management Plan you do not need to think "what were my assumptions?".

Steve

Reply
Rich Maltzman, PMP link
26/11/2011 19:21:59

Susanne - a terrific post. Thanks. I add to #5 the following: when we push back as project managers for a pessimistic and optimistic estimate in addition to the Most Likely one we were (most likely) given, not only do we get a better-quality estimate, we also find out what parameters drive this particular deliverable. I have personally used this method to save me money and time on a home improvement project. I won't bore you with the details but it involved asking for the rationale behind what "could cause" the estimate to be on the longer side.

Thanks again.

Rich

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24/1/2012 08:58:29

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27/3/2013 23:47:48

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16/5/2013 12:26:06

There is something about the estimation time and specially effort that I always get the wrong way, and obviously it deters my productivity and business plans every time. Its been a great reading, for sure these specific points are helping me out with past and repeated issues I have.

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15/7/2013 02:43:50

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Susanne Madsen link
1/4/2013 11:20:46

Thank you all for your comments. I really appreciate it.

Susanne

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Max
9/12/2013 03:06:39

Great post on estimating Susanne. Thanks for sharing. Its amazing how often these key points are overlooked or ignored.
I just wondered if you had anything to add on metrics or calibration? #3 touches on this because the experienced people bring their own metrics often in their head. However I find it useful to review the metrics - stated simply an example would be "why do we believe 2 person-days is the right estimate for this module? Where have we done this before and what did it take then? Show me please"

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Han Cheng link
18/4/2015 10:55:47

What are some estimation tools and techniques?

Reply
VJBaskar link
20/4/2017 08:30:23

Nice explanation, Thanks! In this mode, the objective is to create a schedule with costs that are used only as an estimate. The schedule will never be updated. Activities may have many resources assigned to them to develop an accurate cost estimate and include many items that would never be updated in the process of updating a schedule. Primavera P6 tool is really usefull to manage this process

Reply
jujbir singh
18/5/2017 02:10:21

How would you estimate a solution which is highly complex and never been done within an
organisation before?

Reply
Susanne link
3/6/2017 08:50:26

Good question! I'm not sure it can be accurately estimated. Perhaps the best approach would be to first embark on a discovery phase where you gain more clarity over the solution. You could prototype it and create a proof of concept. Only at that point would it make sense to create an estimate.

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Danish
13/6/2017 05:07:39

Amaziung post and really helpful.

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tirupathi link
4/5/2018 09:59:24

Needed to compose you a very little word to thank you yet again regarding the nice suggestions you’ve contributed here.

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