Why it Costs More to Manage a Project than it Does to Complete the Work

Why it Costs More to Manage a Project than it Does to Complete the Work

Every project has overheads: Project Managers, Scrum Masters, and in larger companies, PMOs and other Service Delivery support teams. But when does these costs and efforts stop aiding the project and start to cripple it? What percentage of the budget is suitable to allocate to costs with governance, compliance, procedure, and administration? Unfortunately, in many organizations, the burden of costs from the “non-productive” personnel are greater than the cost from the people actually doing the work.

In the construction world, they call the associated costs not directly attributable to building as “soft costs”: ·      Hard costs: 

Construction labor, construction materials, Softs costs: Management, architectural fees, inspections, permits, site studies, etc. As a rule of thumb, the soft costs will be about 10% on a large project, and 20% on a standard residential project. The client may have costs administering their side, and that will add to the overall costs. In IT there are also soft costs and hard costs, and the bigger and more mature the organization, the more soft costs are introduced:

• Hard costs: Development, testing, business analysis, system analysis, Infrastructure, etc.
• Softs costs: Project management, program management, project accounting, PMO,compliance (change control, architecture, service delivery, security, etc.), governance, reporting, procedures, documentation, administration, etc.

The danger of the soft costs, is that they are drags on the success on the project, and many of them are chronic liabilities that cannot be dialed back. Once you set up a governance framework, even if the work slows down, the costs with administration still need paid every month – so even if your hard costs are variable, your soft 

costs are not.

I started researching to find out what are the acceptable percentages for the “soft costs” in IT projects. But I haven’t been able to find any definitive metrics on what would be acceptable. Over the years at my clients, I have seen very different situations, and so I have gauged what are the soft costs at different organizations. Where does your organization fit?

The Author : Stuart Hamilton

About :

To structure the delivery of complex, large-scale transformational projects while managing and coaching multidisciplinary and matrixed teams. Day 1 assistance to develop strategy, roadmap, and execution plan, then execute and manage the implementation.