AS A GOOD PROJECT MANAGER, you know that sooner or later you are going to have to adjust the plan. Something will take longer than expected, the budget won't be accurate, or you will need to add or subtract some features.
When you go to adjust the plan, where do you start? Is the schedule more important? Is cost the most important? Or is quality the driving factor? This kind of trade-off within the triple constraint is a critical one, and one that every project manager has to juggle on a regular basis throughout the lifetime of a project.
To work with your stakeholders, and to ensure that the entire project team has a good grasp of the priorities in dealing with this kind of trade-off, you need a simple tool that lets you discuss and quickly compare the relative value in changes in these three dimensions. The 10 percent value chart is that kind of a tool, as shown in Exhibit 1.
How Do You Make a 10 Percent Value Chart?
Basically, it's a simple process. Start by drawing an axis for the Stakeholder Value expressed in dollars. This is both good (positive values above the center) and bad (negative values below the center). Then fill in the three lines for plus and minus 10 percent variation in each of the triple constraint categories.
Take cost, for example. Your budget shows the project at $1,413,987. So ask the stakeholders what the impact would be if there were a cost overrun of $141,398. How much would it cost them if that happened? (Hint: Usually cost can be considered one for one! For example, if there is a cost overrun, it costs that much extra.) So a cost overrun usually is just that much “bad” or negative value.
Michael Barker, PMP, has over 20 years of experience in software development and computer networking. His cross-cultural experience includes eight years working in Japan, with five of those years as the only outsider in a Japanese company. He has been an internal consultant on a wide variety of projects. He has been working in Information Systems at MIT for five years, and is currently managing MIT's Educational Media Creation Center, a strategic project providing web-based multimedia technology for MIT's educational initiatives. He is also a certified trainer for Oak Associates.
John M. Nevison, PMP, is a founding partner with Oak Associates Inc. He has served as both an internal and an external management consultant to Fortune 100 companies. He is the author of six books and numerous articles on computing and project management. His works have been translated into Swedish, Italian, French, and Japanese. He is a past president of PMI's Mass Bay Chapter and a past chair of the Greater Boston Chapter of the Association of Computing Machinery.
Then check on a cost underrun of 10 percent ($141,398). How much is that worth to them? Is there any extra value in being seen as frugal?
Next, take features. This can be considered in terms of milestones or deliverables, or actual product features. Whatever measure works for your project, how much would it hurt if you had to settle for 10 percent fewer features than expected? What is the decrease in value that represents to the stakeholders?
Then check on added features. Suppose you could add 10 percent to the features? How much is that worth to your stakeholders?
Finally, consider schedule. If this is a one-year project, what impact is there if you deliver five weeks late? How much does it cost your stakeholders?
Suppose you manage to get done five weeks early? How much is that worth to the stakeholders? Are the values the same in both directions?
Put on a chart the values that your stakeholders provide, and then check again. Very often, having the six points on a graph together lets people see that the relative values aren't quite what they want them to be, and they will adjust one or more up or down. That “adjustment” is one of the key benefits of this approach, because learning what the relative priorities of these six values is will help you when you need to respond in a hurry, without consulting the stakeholders—and you'll know what the important part of the triple constraint really is to them. It's the longest line on the 10 percent value chart. You also know which part of the triple constraint they would be willing to sacrifice—it's the shortest line.
Why Use a 10 Percent Value Chart?
First, the 10 percent value chart lets the stakeholders and project team simply discuss and capture vital information about relative priorities in the triple constraint—schedule, performance, and cost. Getting that information from the stakeholders at an early stage in the project in a form that is easily understood avoids the common problem of making necessary adjustments based on assumptions about priorities that do not match the actual desires of the stakeholders.
Second, the 10 percent value chart helps to set expectations that there will be changes, and that you will adjust the plan and the execution based on rational, explicit trade-offs that have already been discussed well in advance. By setting that expectation, you can avoid surprising “naive” stakeholders who may believe that the magic of project planning somehow ensures that no changes will occur.
Exhibit 1. Example where schedule is most important, followed by features, and then cost.
Third, the 10 percent value chart is a communication tool. When one stakeholder says that schedule has high value and another insists that cost is important, putting actual figures on a 10 percent value chart and adjusting them until everyone agrees to the relative values provides a useful framework for making the discussion specific and measurable. When the project environment changes, adjusting the values in the 10 percent value chart can help everyone see the impact on the project.
Fourth, the 10 percent value chart helps quantify the relative importance of schedule, scope, and cost. While a simple priority ranking of schedule, scope, and cost may let you know which one to consider sacrificing when trade-offs are needed, the simple 1-2-3 ordering doesn't provide information about the relative importance of these—how much more important than cost is schedule? If you trade a 10 percent increase in cost for a 5 percent decrease in schedule, will the stakeholders be angry or happy? That relative importance is what the 10 percent value chart captures.
Different Types of 10 Percent Value Charts
Exhibit 1 is the kind of chart that is common for new product development in a competitive industry. Variation in the time to get to market has a large impact on the value of the project. Added features have some value, but the loss of 10 percent of the features has a larger impact. Finally, variations in cost are relatively unimportant. So when making trade-offs on this project, you should first consider increasing cost to speed up completion, and then look at reducing features.
An in-house development project might have a chart such as that in Exhibit 2. Here the schedule is relatively unimportant, but variations in the features have a high impact. Notice that the loss of features is somewhat more important than adding features. Also, because the budget for this project is being taken from in-house funds, variations in cost are more important than shifting schedule.
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Exhibit 2. Example where features are most important to stakeholders, and schedule is least important.
Exhibit 3 shows another version of the 10 percent value chart, with cost being extremely important. For instance, when one government agency went to firm-fixed-price contracts, it warned everyone that it would be tracking the history of cost performance very closely, and using that for evaluating future bids.
What these examples show is that the relative value of 10 percent variation in schedule, features, and cost differs, depending on the circumstances of the project. You should also pay attention to the difference between adding 10 percent and subtracting 10 percent—often there is a considerable difference in the value placed on these two kinds of variation.
When Do You Make and Use 10 Percent Value Charts?
To make a 10 percent value chart, the scope, schedule, and costs need to be fairly well developed. Much of project planning will be relatively complete when you make the first 10 percent value chart. You will have done your scope planning, scope definition, cost estimating, and schedule development first, and about the time you are putting together the project plan and looking forward to beginning execution and control, you can make a 10 percent value chart with your stakeholders. Creating the 10 percent value chart can be a good way to collect feedback on the project plan—if the stakeholders aren't sure what the value of the project is, they will be even less certain about what the value of variations is.
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Like any planning document, the 10 percent value chart may need to be updated when there are changes in the project environment, the stakeholders, the scope, and other areas of the project. These revised versions, and the discussion and negotiation that creates them, will help you understand stakeholder perceptions and expectations throughout the life of the project.
When do you use your 10 percent value charts? Basically, anytime during execution when you need to evaluate alternatives—to make a trade-off. While you may not always find the latest version of the 10 percent value chart for your project and literally plot the impacts of the alternatives, the information and understanding of stakeholder values that you gain in making a 10 percent value chart will help you evaluate the possibilities. Also, when you are explaining a decision, you should be able to point to the stakeholder values that you used to make the decision.
You can also use the 10 percent value chart as a tool for discussing stakeholder values with the project team. Especially with larger teams, it may not be appropriate for every team member to talk to all of the stakeholders, but it is critical for the team to understand the values that the stakeholders hold for schedule, features, and cost. The 10 percent value chart provides an explicit summary of those values that is easy to understand and discuss with the project team.
You should also use your 10 percent value charts at the very end of a project, when you are putting together the final project status report. At this point, you know the final cost, the final schedule, and the final scope that has been accomplished. With your 10 percent value charts, you can help the stakeholders evaluate the inevitable variations from the baseline in terms of the values that they placed on exactly these kinds of variations.
Exhibit 3. Example where cost is most important on a government project.
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Cautions
■ Don't be fooled by apparent precision. The strength of this method lies in the relative sizes, not in the mathematical precision. Especially if you use a computer program to generate the charts, remember that these are worksheets, with values that are only as good as the guesstimates on which they are based.
■ Allow for adjustment. While the relative values should remain fairly consistent, unless there are major shifts in the project environment, there may be adjustments. Sometimes the stakeholders will want to change the relative weights—let them! Remember that these are worksheets to reflect your discussion and negotiation about the priorities, not some unchanging rules.
■ Other criteria. For some projects, there may be other criteria that should be added or even replace one of the triple-constraint values. Make sure you understand why this criteria is important to your stakeholders and how it is going to be measured, then add a column and put down what plus and minus 10 percent variation in this criteria is worth.
■ Major discontinuities. Sometimes there is a discontinuity in value. For example, there is often a required minimum set of features to have a working product. If removing 10 percent of the features doesn't produce a working product, all the value may be lost. If the stakeholder value for a 10 percent variation is very great, check whether you have gone over this kind of discontinuity in value. Also, talk to the stakeholders about whether there is such a discontinuity just beyond the 10 percent variations you are charting—if an 11 percent variation in schedule “falls off” a cliff, you need to know it!
■ Risk-averse stakeholders. Sometimes when you start to discuss 10 percent variations, a stakeholder will become very upset and try to push you to commit to hitting the targets exactly. This is good, because you have exposed an unrealistic expectation early and can deal with it before it turns into a problem. One approach is to back off from the 10 percent level and discuss 5 percent or even 1 percent variations. You should do this to discover if the stakeholder is uncomfortable about the level of variation, or whether the problem is with the suggestion that there is any variation whatsoever. If it is the level, you will need to discuss reasonable variations for the kind of project—a construction project may have much lower expected variation than a software project, for example. If the problem is with the notion of any variation, you will need to discuss the relationship of planning and reality—reality always wins.
YOU HAVE YOUR PROJECT PLAN well in hand. You know the schedule, the cost, and the performance. You've talked to the stakeholders and developed 10 percent value charts, which you've gone over with the project team so that you all know what is important to the stakeholders in this project. Are you ready to chisel your plan in stone?
Of course not. But when the inevitable changes, modifications, and other shifts in the project occur, you've got your plan to keep you on track and 10 percent value charts to help you adjust when the need arises. You can also use your 10 percent value charts to discuss why certain trade-offs or alternative approaches are taken or avoided. ■
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