The Cost of Project Management

In this podcast, Ricardo explains where the costs related to project management should be registered. He points that, according to surveys, the costs of project management range from 0.5% to 2% of the project total costs, and that, even though many people consider 1% to be expensive, when any error arises from the lack of an adequate management, the correcting costs are much higher than just 1%.

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Episode transcript

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Hello everybody welcome to the five minutes PM podcast today, like to discuss with you The Cost of Project Management the project management than the PMO. Cost I don't want to discuss only about the Valley. I recorded a podcast talking about value proposition, but now I'd like to discuss much more how I can insert this Cost into the Project. Everybody knows. And I discuss that. Usually the project management costs it.

If we check the liter, we will see that the project management cost it's something, the thing from 0.5% to 2%, this is a reasonable approach. Ah, with the cost of the Project increasing this person today will reduce for short that a small project will require maybe 2% are even more in an extremely large project. They will not require a 0.5%.

Maybe that will require point a to 0.1%. But if we want to make a guess and an estimate, it's something around 1%, it's something roughly around 1% and only let me make a comment. It's so interesting because we are talking about an expense of 1% in a lot of people think, Oh, project management is so expensive. It's so hard. And when things go wrong, they never go wrong by 1%.

I don't know. A single project that fail in the reason was OK. The cost was 1% above the budget. When things go wrong, they go wrong by 20, by 30, by 40, by 50 buy 100% and not buy 1%. It's so interesting to check that, but right, return back to our discussion. How do I insert this 1%? Let me explain the three ways in LA make some comments.

The first one is to include than the WBS short one phase called project management. So I have the work, the work, and one phase provate Management. So let's suppose that I'm building a home. So I have roof, I have garden, I have walls, I have electricity and I have project management. And inside this phase, I put the work's that I will be doing to relate that to the project management.

So this is basically the first step and the Cost resources that I need for project management. I wouldn't cert on this face easily and sharp. Second way of doing this. It's not to create this, but as a person, maybe one or maybe two, or the person that the company is a greased to do in all tasks, and this will be related to project management.

So let's suppose that the direct cost of my Project its $100 and then I will put $2 more for project management. And that is we'll not make any kind of specific control over the project management Cost this will be like an overhead Cost in the third one is the one that I like most. And the one that I use all the time, I don't include anything in the WBS charge. And I don't add that too.

Or 1% what I do. I create not a project. There is more sharp in the project is not to build the house, but the project is to manage the building of the house. And then I prepare a very light WBS chart with all in the planning phases and all process that I need to do to help the beauty in the cows. So look, I build a very small project that there is more, very easy, but I never include like planning meetings, committee, review board meetings in the product oriented WBS I do in the night or so I have something like two WBS to scaffold.

One is the scale of that is the case target of our project. And the second one is that the scaffold that I have for my planning process, when it's time to review the risk register, when it's time to check the budget, remember the project does not exist without the product. So the reason is to deliver the product or service and not to deliver the plan. It's different when they built all the PMO in Fort.

I strongly, we ask you to do this in the nodder spreadsheet, in the, not a project plan, very small light. I'm not asking you to do a double effort focus, one WBS it's for the project. The other one is for the people in the project management of the PMO and the who will handle this product. This project is that be project or the stakeholders of this project are the pros, a planning team.

This is a tool to help them to help the project manager and the team to deliver the project. And this Cost will be the cost of that. WPS the cost of that scalpel, the cost of that resources. And if I have maybe multiple projects, it will be much easier than project management, a phase in our project or doing an estimate of two or 3%. And that 3%, two are tasks because maybe one Project it's only half when the other one is five doing this, I will be much more sharp.

I will show the results of the PMO and I will have much more in what about The Cost of Project Management I hope you enjoy this podcast and see you next week with another five minutes PM. Podcast thank you.

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