Fool the Guesser – Applying Reference Class Forecasting at the State Fair

August 21, 2014 · Filed Under Estimating, General · Comment 

credit: tmnews.com

My favorite thing to do at the state fair is eating smoked turkey legs. I normally do this while walking around the various booths and barkers listening to pitches for the newest ShamWow® or Veg-o-Matic®. This year I found myself standing in front of a large red and white weighing scale.

“Guess your age, guess your weight – or you win a prize, How about you sir – you’re a handsome young fellow,” shouted the colorful bald headed barker.

I declined, but found myself sitting on a nearby bench – turkey in hand –enjoying the fellow estimator.   For a mere five-dollars he would promise to guess your age within two years, your birth month within three months or your weight within two pounds – or you won your choice of many wonderful prizes.   I watched numerous people walk away with soft fuzzy animals, but amazingly the “Guesser” was close to 80-85% accurate. “How does he do that,” I asked myself.

Naturally, I quietly tried to spontaneously guess the weights and ages myself, but I was not nearly as accurate as the “Guesser.” This reminded me of the countless high level or Rough Order Magnitude (ROM) cost estimates I’ve witnessed with an even worse record using spontaneous guessing.  At one organization, their guess was an over/under ratio of an amazing +100%/-300%. They were taking millions of dollars away from other potential projects “just in case.”

I watched the “Guesser” and was surprised at how much time he spent talking with the “rube.” I couldn’t understand why he didn’t just guess right or wrong and then move them along – after all – they were paying five-dollars for a prize that cost under a buck.   It was a pure profit deal. Turns out, he really wanted to get it right! Like all estimators, we want to think we are pretty good at our jobs.   So he took his time and applied Reference Class Forecasting, although he had a different name for it.

In 2002 Daniel Kahnemann shared the Nobel Prize for Economics “for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty.”1 A few years ago I read his best-selling book, Thinking Fast and Slow.2 In this text Kanhemann describes how planning typically falls into one of two perspectives – an Inside View and an Outside View.

Those that prepare estimates using an “Inside View” quickly focus on specific circumstances and search for evidence using their own experiences (“Expert Judgment?”). This is a significant contributor to what he calls a “Planning Fallacy” (a bad estimate). For example, I am responsible for cooking the holiday turkey every year. I‘ve done this for many years when I lived in Florida that I simply used the same time and temperature when I moved high up into the Blue Mountains. My “Inside View” made my cooking time and temperature estimate woefully optimistic. Dinner was late!

What I should have done was use an “Outside View.” Kahnemann explains that preparing an estimate using an Outside View requires the estimator to use a reference class; some empirical evidence from a similar activity. This use of the Outside View has become known as “Reference Class Forecasting.” For an IT estimate, this Outside View may take the form of a large/international database with plans and outcomes from a myriad of projects – provided they can provide statistical information about the likely outcome. The selection of a reference class is simple: (paraphrased from Thinking Fast and Slow):

  1. Identify an appropriate reference class (IT projects, painting a house, building a race car, etc.).
  2. Obtain the statistics of the reference class (in terms of number of servers, square meters of walls, go-cart or formula-one race car). Statistics are used to generate a baseline estimate.
  3. Use specific information about the case to adjust the baseline prediction, if there are particular reasons to expect an optimistic bias to be more or less pronounced in this project than in others of the same type.

In applying Reference Class Forecasting at the state fair I started to understand how the “Guesser” was so good. He was using his internal database – built from countless years on the job, and selected the proper class for the individual he was attempting to keep from a prize. I started to do the same. Instead of quickly looking at the face or girth I considered other factors, braces, athletic wear, color of hair (for men), jewelry, companions, age-spots, and so on and so forth. In a very short period of time I was getting nearly as close, and a few times, even more accurate estimates than the Guesser.

Unfortunately, the “Inside View” is generally the first choice selected when making an estimate. There is ample evidence3 that reveals that most estimators (of anything) are overly optimistic of their capabilities and hence make bad estimates – in other words they are comfortable with their “Inside View.” The “Guesser” was unknowingly using an “Outside View” with each person he sized up. He considered his vast mental database of classes, selected the proper category, and challenged any biases (i.e., a woman with an apparently young man does not mean she’s a young woman).

With my turkey leg long gone I took the opportunity to ask the “Guesser” a few questions. He told me he had been on the carnival and state fair circuit for over twenty years and had easily guessed the age or weight of over ten-thousand people.

When I asked him his secret he answered, “Like I said – I’ve been doing this for over twenty years and easily over 10,000 people. Ya learn how to make your hunches.”

That is quite a reference database he has up in that bald head and I have a hunch I’ll use an Outside View when I’m roasting turkey at altitude.

 

David W. DeWitt
Director of Software and IT Consulting, Galorath Incorporated

 

  1. Daniel Kahneman – Facts, http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2002/kahneman-facts.html
  2. Daniel Kahneman (25 October 2011). Thinking, Fast and Slow. Macmillan. ISBN 978-1-4299-6935-2.
  3. Optimism: The Enemy Of Successful Acquisitions, Dan Galorath on Estimating, http://www.galorath.com/wp/optimism-the-enemy-of-successful-acquisitions.php

Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.




Sizing With Lines of Code Deja Vu

August 14, 2014 · Filed Under General · Comment 
HTML code

Some HTML Lines of Code

Lines of code has been a viable method of software sizing (if one is careful) for decades.  Functional sizes and other sizing methods such as object points, web pages, and on and on are also viable.  However, there was some  debate on LinkedIn recently.  Someone asked for advice saying they were required to use Lines of code…what should they do… Here are my replies:

We have a lot of customers that use SLOC for software sizing very successfully as well. We provide some tools / methods and recommend others.

Here is a very high level summary of software sizing  from my book on the topic.

Here is a pretty old but still valid briefing on software sizing .

Have a method of calculating an “effective size” that factors new vs reuse vs generated code, etc.

Estimate a range (least, likely, most). If your models do not allow the entry of a range, there are formulas to convert to a point and probability.

Have a consistent written set of counting rules.

Here is another example of a written software sizing definition of XML lines .

For counting the sizes of existing systems use the USC unified SLOC code counter.

TO estimate the size of another system the SEER estimate by comparison does an excellent job of relative sizing (sizing a system based on comparing to existing system sizes)

Sizing a range from multiple size estimates: Galorath personnel teach a technique that estimates size in several ways that chooses the east, likely, and most from several sources. (no easy way to put a picture of this in linkedin. I will try to point to something on my blog soon. This technique is especially valuable when there is a rigorous review of SLOC and when people are generally skeptical of SLOC estimates.

Have a size growth estimating approach. We have ranges I can send you if you like.

I could go on and on….

A couple additional points:

1. When I see a line (SLOC) count or estimate the first question is “what is a line?” We can normalize any definition to one we prefer. But as Capers pointed out sometimes (too often) the answer is “we don’t know” those need to go back to the drawing board.

2. Each language has different productivity in terms of how many lines it takes to build the required functionality. You can use actuals from one language to estimate another but you should adjust the sizes. Using a model like SEER this can be done automatically.

3. Estimating effort from multiple languages is completely doable by decomposing the system problem into components based on language or using a blended productivity. Galorath have ratios for different languages that can be made available if requested via email

I agree with Don that there are MANY sizing metrics that can work. We use everything from SLOC to Function Points, to Cosmic, to use case points and on and on and are able to get viable estimates.

The best size metric is the one the organization can provide and understand. Even better is there is a published standard behind it.

Dr. Vu Nguyen also pointed out an interesting paper on on sizing with lines of code

The entire linkeding conversation is here

Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.




You Can Never Eliminate Risk Without Eliminating Innovation As Well

August 8, 2014 · Filed Under General · Comment 

Innovation WayFrank Kendall [Under Secretary of Defense for Acquisition, Technology and Logistics (AT&L)] has provided excitement and motivation to the DoD community with his statements on weapons systems acquisition:

“If you’re going to do things for the first time, it’s probably going to take you longer than you thought and it’s probably going to be harder than you thought…and some of the things you try aren’t going to work,” Kendall said. “I think we have to accept that.”

Today, Kendall feels, “we’re not taking enough risk. That doesn’t mean we should take risk wildly or stupidly… You have to manage it, you have to understand it, you have to deal with it…”

How exciting to hear these words, the same mantra we use with SEER.  Make decisions based on realities and probabilities.  Try some things.  If well planned innovation fails, make it “fail forward,” feeding the next iteration of innovation.  And do all this in a controlled way. Planning and estimation and risk analysis are key components.  And continue innovating while implementing better buying practices.  Mr. Kendall also promised an update to the better buying practices.  He spoke of incremental improvement.

 

Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.




Overpromised and Underdelivered: A Little Foresight and Realistic Expectations Would Have Gone a Long Way to Prevent Disaster

August 6, 2014 · Filed Under General · Comment 

Project plan with Risk AnallysisisAs I read this blog in Infoworld today: IT Projects Over promised and Under-delivered: A Little Foresight and Realistic Expectations Would Have Gone a Long Way, my mind went to the hundreds of examples where I have seen this in my career.

I recalled my very first estimate, as a recently promoted software manager.  I was working on my MBA at the time.  It was a small 4 terminal cluster: hardware and software being developed in parallel.  I did my best to prepare a realistic estimate.  I was previously a good developer myself and knew the team that would do the work.  I used risk analysis, critical path analysis, and a host of techniques the best I could.  A paper tape calculator and flowcharting template were my tools.  When I was all done my answer was “37 weeks and 4 people.”  That was my most likely estimate.

The division head looked at my estimate.  He immediately exclaimed I had overestimated by a third.  I was amazed at the vision of this leader: being able to so quickly determine my error.  Then he started telling me how to cut the estimate.  I don’t remember all the recommendations.  But I remember one.  He said, “You assumed people are only working 8 hours per day.  Go back and assume they are working 12 hours.  “I can’t,” I exclaimed.  “Those other 4 hours are my risk contingency.”

The project was killed because of my estimate. I was devastated.  Years later, when SEER was available, I tried to estimate that project.  I had severely underestimated the effort.

Knowing what I know now, I had an estimation bias. I was assuming things would go too well in my 1976 estimate. And with my “inspired leadership” we would catch issues before they festered. Additionally, the division head  attempted to enforce strategic mis-estimation.  That was a lose-lose.

However, since the company didn’t embark on a project that I assume didn’t have sufficient business value, that really was a win.

Now, nearly 40 years later, I see projects still falling into the same traps: over-optimistic manual estimates, based on desires rather than reality. Overpromised and underdelivered can be mitigated.  That is why we built SEER.

One large organization told me they saved over a BILLION dollars last year by making the best decisions based on SEER estimates of schedule, cost & risk.  They were able to kill projects that didn’t show business value and manage those they did choose to successful completion.

Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.




Can You Really Trust Your Project Plan to Tell You the Truth, Even If You’re Already Knee-Deep in the Project?

June 13, 2014 · Filed Under Project Management, Risk · Comment 

Find Renewed Confidence In Your Project by Implementing the Best Project Estimation Software

So you dove head first into a new project that seemed to be an excellent next step for your business. You and your team had a tremendous amount of enthusiasm for the project at the start, but just a basic idea of your production costs, labor, materials, tooling, set-up, and rework numbers. Now that you are knee-deep in the project, your team and the stakeholders’ enthusiasm for the project is rapidly waning because you are not hitting the numbers you expected, and unanticipated problems seem to be cropping up left and right.

best project estimation software

What to do? Perhaps the answer is a new project estimation system. But even when you identify the best project estimation software for your industry, can you depend on its output to give you feedback that’s valid?
The answer is yes, the best project estimation software will give you honest and thorough answers about your project. You might be at a point of panic because you know you’re already months into a project, or you might still be just considering the feasibility of the project, two different emotional states that the software is immune to – all it knows to do is weigh inputs and history, and report back impartially.

Here are four big reasons why now is a good time to consider employing project planning software:
1. It Helps You Build a Complete Picture of the Project

The best project estimation software available allows you to build an entire manufacturing project plan from templates, or from scratch. Its user-friendly interface allows for quick and easy entry of information regarding every single detail of the project, including progress already made, if applicable. It asks intuitive questions to help you consider possible alternative materials, tooling, manpower, and more to plan for the best possible outcomes.

 

2. It Serves as Your Virtual Expert

A built-in and constantly updated library of industry-specific knowledge will help you anticipate more potential stumbling blocks that could come your way, which will help you to plan accordingly for continued successful progress. Sector-specific models derived from extensive project histories, behavioral models, and metrics give you the opportunity to make unlimited hypothetical trade-offs to analyze endless scenarios in order to pinpoint the best plan of action to ensure good outcomes for the project. Pop-up windows ask intuitive questions to guide you through the process of defining the project’s scope, complexity, and technologies. Software at this level should pose questions that may bring topics, options, or potential problems to light that your team never even considered.

 

3. Its Cost Analysis Capabilities Makes Budgeting a Breeze

Top-notch project estimation software takes into consideration costs already incurred, and runs it against the project’s full budget. It can quickly and accurately generate labor and machine cost rates for use in determining facilities costs on a global scale. It contains a regularly updated, comprehensive database which includes worldwide labor cost data, default technology costs, average costs for many regions (including low-cost centers), default labor costs, and regional currencies to make your budgeting tasks so much easier. The best project estimation software on the market right now makes it easy to produce accurate figures and estimates, and to actually meet those numbers with a solid management plan.

 

4. It Offers a Variety of Reporting Options

Customizable charts, graphs, and reports allow you to visually present project outcomes and alternatives, as well as work-in-progress. Analyzing these reports can help you identify weak points in your current manufacturing systems and assets, and determine better alternatives to improve quality and output. You may run numerous simulations and generate reports for each scenario to compare outcomes and decide on the best assets and systems for your project. The effects of your improvements will be evident when you compare reports from before and after the change over to new planning software. Your new project estimation software should also allow users to export all of this information to other software programs for even wider reporting capabilities.
To tell you the truth about a project’s status or feasibility, regardless of what stage of the project you are in, the best project estimation software combines traditional project estimating software and cost estimating software solutions into one seamless package. Learning the truth about your project may sting a little, but in the end, you need to know all of your viable options – and you want to give your stakeholders the best, most accurate information possible. The best project estimation software can tell you the optimal way to complete the project, or whether the project should be scrapped.

 

Want to get a live demo of what our clients say is the best project estimation software they’ve ever used? Click here or call 310-414-3222 in the U.S. or +44 (0) 207 788 9042 internationally.

Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.




Managing and Eliminating Estimation Bias

thinking manI have been studying the art and science of estimating for many decades now.  Some of the observations I have made include:

  1. Most people don’t like to estimate
  2. Most people don’t know how to estimate
  3. Those that estimate are almost always wildly optimistic
  4. Viable estimates can make projects successful, outsourcing more cost effective, and help businesses make the most informed decisions

That is why models like SEER are essential to organizations, providing the tempering with that outside view of reality that is recommended by Daniel Kahneman.  Dr. Kehnaman received a Nobel prize for his work in estimation bias and strategic mis-estimation.   This briefing covering estimation bias reviews some of the work of Dr. Kehnaman and others in helping stomp out bad estimates.  I believe this is scheduled to be a webinar in the near future.  Stand by.  Here is the presentation: Managing and Reducing Estimation Bias and Strategic Estimation

Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.




The Changing Role of IT

May 27, 2014 · Filed Under General · Comment 

photodune-6668875-thinking-hard-xsThe IT department traditionally waited for the rest of the organization to direct it and tell it what to do. In the past, its success was often characterized by its ability to keep the email system up and running all the time, and more recently, by making sure the right security processes were in place. While its role continues to be about systems and services, it’s now expanding outside the four walls of the organization. It used to be the technology gatekeeper, and now it has evolved to service broker that must respond with agility to the increasing demands from the business.

Because technology is changing so rapidly, CIOs have to be able to respond just as quickly. Today’s success is now measured by the operational efficiencies IT can deliver and its overall impact to the bottom line.

The IT Department’s Role in Idea Generation

In the past, the rest of the organization brought ideas to the IT department and now we need that IT department to have its own ideas. The biggest reason the IT department needs to take a stronger role in idea generation is simply because of the impact of consumer technology. And when consumers start responding by using applications on multiple hand-held devices and interacting anytime anywhere, companies need to anticipate how to respond.

Emerging technologies like online commerce, mobile access, big data collection and social media have all made their impact on the IT department. Smart devices and on-demand services have prompted us to take our consumer attitudes to work and insist that our organizations be able to respond just as quickly to our desires for real-time information.

In-House IT or Outsource

And don’t forget, your IT organization is NOT the only game in town anymore. Now because of full IT outsourcing and business process outsourcing, there’s often a choice between what application services the business will run itself or subscribe to a service run by someone else.

Because of these pressures, many CIOs are now trying to figure out how to change the way they operate and function more as a service provider to their stakeholders. They’re trying to figure out how to improve their productivity to deliver benefit to the bottom line and how to deliver answers to questions not yet asked.

In order to positively impact the bottom line, the IT department has to understand how to spend its resources as strategically as possible. And that’s what Total Administrative Services Corporation (TASC), one the nation’s largest privately held third-party benefits administrators, set out to do. Karl Richards, the CIO at TASC, wanted to know how to measure his team’s output and what would help him deliver a competitive advantage. You can read how Richards is using SEER for Software to plan and make mission critical decisions to service his organization.

Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.




Exactly How Many Cupcakes Will You Need? Cost Benefit Analysis Makes the Party

May 20, 2014 · Filed Under General · Comment 

Vanilla Cupcake with SprinklesHow can cost benefit analysis help you plan for staffing?

If you’ve planned a child’s birthday party in the past decade or so, you already know why running a cost benefit analysis is critical for running a project effectively and efficiently.

Here’s what usually happens: You send out invitations, ask for RSVPs, and then hear nothing. Without knowing exactly – or even vaguely – how many guests will show up, you resort to making wild guesses about how many cupcakes, how many goody bags, and how big a bounce house you’ll need.

You know you’ll guess wrong.

The only question is whether you’ll err on the side that leaves you with an enormous box of brightly-colored cupcakes to take to your office Monday – or on the side where you’re scrounging through your kitchen’s junk drawer to find something, anything, that could go into a party favor bag.

It’s the same when you need to staff a project.

How many people do you need? Should you rely on in-house personnel? Should you outsource? What should you expect it to cost should you go that route?

Most of the time, there’s simply not enough information available about the project at the time when these decisions need to be made. Many projects prove to be moving targets, and almost all of them grow more complicated and urgent as they take shape.

The decision about whether to outsource isn’t as simple as determining who’s going to do the work. The saying about “the devil you know versus the devil you don’t” might have come about by someone in your predicament.

You may already know you’re going to run into challenges by keeping a project in-house.

Additional training will most definitely be needed, and then there’s the high probability that your new project’s demands will exceed the capacity of the team?  And do you have team members with all the necessary skills available when needed? Plus, what happens if you max out your in-house personnel on this project and something else comes up that they alone are uniquely qualified to handle? What if you burn them out on this project, in an attempt to keep expenses down, and end up incurring even greater expenses by having to re-hire and re-train replacements?

Outsourcing has its own pros and cons too.

It really depends on the project. You’ve had success before with outsourcing, but how is this project similar, and how is it different? Will you be able find outsourced workers with the right skills when needed? Should you outsource all of it or just certain pieces? Who will manage the out-sourced process?

Run the numbers. Find out for sure. Staff with confidence.

A detailed cost/benefit analysis can help you determine whether it’s more advantageous to your organization to keep a particular project in-house, or to outsource it. Using software that features a reliable knowledge base built on project histories in your industry, you can estimate personnel needs and costs, even if the details of the project are in flux. You can evaluate bids placed by your outsourcers to ensure you’ve both made the same assumptions so you’re comparing apples and apples.

SEER’s cost estimation software can help you determine which way to go with your next project – or even a project you’re right in the middle of, if you’ve run into a snag that’s threatening the whole project. Not only can you get a clear indication of whether you should keep a project in-house or outsource, you’ll also gain tremendous clarity about the other variables of your project.

The best way to find out for sure whether SEER can help you see significant savings in your staffing while ensuring you’ve got the resources needed for success on your next project is to request a demonstration. Simply click here and schedule yours now.

Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.




How to Shun Public Mortification by Setting Realistic Project Expectations

May 15, 2014 · Filed Under Estimating, Project Management, Risk · Comment 
Dollarphotoclub_58650737

The key is to set realistic expectations.

Use these tips to avoid project estimation disasters.

Grossly over-budget. Famously broken. Publicly acclaimed as sketchy. Most certainly this is not how any sane software developer, project manager, or estimator wants their next project to be classified. In the face of sky-high hopes, tremendous political pressure, and a nation waiting to see how the pieces all fall into place, perhaps one of the first ways many projects veer off-track is in a failure to assess and set realistic expectations.

Whether you’ll report to an internal client, a buyer you’ve hotly pursued, or even an entire nation, learning to manage expectations in advance is a critical skill that can preserve a delicate relationship.

Here are 7 tips to help you provide confident assurance that your customer or stakeholders’ needs will be met.

1.    Know your limits, or risk overstepping them.
What is your bandwidth? How much time can you allot to the project with your existing resources? What stream of preexisting obligations, snags, and demands might overflow the banks and flood this new project before it even starts?

2.    Balance promises with reality.
While the adage “under-promise and over-deliver” has its share of pitfalls in that doing so in the extreme guarantees your competitor will win the project by being on-target with promises and delivery, it is still better than its opposite, where you make lavish promises and paltry deliveries.

3.    Disclose limits beforehand to prevent trouble escalation.
Most project obstacles rear their heads with some measure of predictability. The sound of the train precedes its arrival with at least a bit of warning. Rather than pretending the path ahead is irreversibly smooth, be upfront with your end customer about potential pitfalls before the project begins. This helps you avoid wasting time in damage-control mode later when one of these blockades pops up.

4.    Allow for wiggle room.
When possible in your negotiations, adopt the time urgency of your customer while also demonstrating your understanding of the need for the project to be done right. The phrase “Done Fast, Done Cheap, Done Right… Choose Two” is simplistic but true. In most projects, one of these goals must be sacrificed in order to deliver the other two. Disappointment can be avoided when time, budget, and quality realities are transparent from the start.

5.    Keep the lines open.
Sometimes a project reaches a fork in the road with no clear indicator of which way to turn. Uncertainty can freeze progress in its tracks, and can be made worse when there’s a sense the team “should have known” the answer to the perplexing dilemma and rather than coming clean with it to the customer, they send a hurried scout down each path to see which way to go. Don’t allow uncertainty to cause your project to come to a grinding halt. Before the project begins, explore various “what-ifs”, alternatives and trade-offs – this will keep forward momentum safe and ease potential constriction of communication lines.

6.    In the loop is always preferable to in the dark.
It’s a sure bet your customer has someone breathing down their collective necks as impatiently as a first-grader on a long car drive. “Are we there YET?” is the constant refrain, and it needs to be answered with a credible answer to avoid small-scale rioting. If the timeline morphs mid-project, prompt and honest communication is the best policy. Agreeing to making this sort of update if needed affords your customers the intel needed to manage expectations and communicate intelligently.

7.    Present projections backed by history.
Every project you undertake is both unique and yet based on precedent. Ideally, your organization documents processes, timelines, and the progression of projects. This enables you to learn from history, to plan well for new opportunities, and to more firmly tether promises made by the sales department with the realities of operations. The documentation process yields information that can be aggregated into a sort of internal knowledge base that can be used to create and sanity-check estimates for future projects.

While humans are naturally wired to be optimistic, the hope that everything will go as planned must often be tempered with caution – especially when setting expectations with stakeholders. With realistic expectations in place from the start, before any promises are made, the likelihood of thrilling your customers is much higher – and the risk of a crash and burn disaster in the public eye shrinks.

Aggregating historical project data to create realistic expectations bears its own set of challenges, especially in the absence of access to directly-relevant prior history. SEER project estimation software features continually updated industry-specific knowledge bases which allow users to glean reliable insights from other projects as they plan for their own.

For more information on how project estimation software could be your secret weapon, download our whitepaper “On Time, On Schedule, and a Huge Success”.

Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.




Clarity Builds Confidence, Boosts Speed in Project Estimation and Bidding

May 13, 2014 · Filed Under General · Comment 

Dollarphotoclub_60812231

 

Project estimation disasters make you even less popular than the weatherman.

 

You’ve seen it play out a dozen times this past winter:

A weather forecaster broadcasts warnings of an impending snowpocalypse.

Hordes of shoppers strip local grocery store shelves of bread and milk.

School kids start listening for the announcement that their school is closed.

Teachers breathe a sigh of relief in getting an unexpected reprieve from grading – at least for a day.

Parents start their back-up plan for either getting childcare while they go to work, or working from home with kids coming and going, asking for hot cocoa, asking for help putting boots on, taking them off.

We wake up the next day, brace for an early morning snow shoveling exercise, raise the blinds, and see… nothing. Nary a flake. Not even a dusting. Certainly not a blizzard.

It’s happened frequently enough that some weathercasters now have viewers who count on them being wrong. Their credibility, rightfully or not, is shot. Some say the odds of an accurate forecast are better if you just stick your head out of a window and take a guess.

Unfortunately, the same thing often happens in project estimation and management.

Well, minus the boots and bread, anyway.

When projects go violently off-track, credibility suffers. It happens when the price tag on a project skyrockets so high that the initial ‘firm’ budget looks laughable. It happens when a project’s delivery is delayed and delayed and delayed – to the point it’s reminiscent of Tom Hanks’ nemesis in “The Money Pit” who kept promising, “Two weeks…. Two weeks.”

The challenge is, it really can be hard to see the future.

How do you make a reasonably accurate estimate for a project you’ve never done before? Or that nobody’s ever done before, for that matter?

How do you estimate a moving target? You know, the sort of project that could serve as a dictionary definition of “scope creep”.

How do you defend an unpopular estimate in the face of pressure from stakeholders? They want it fast, cheap, and excellent. You know only two of those are possible – and you can’t believe they don’t understand that, but don’t have any way to back up your sane numbers.

Watching a project careen toward disaster is doubly horrifying. First, of course, there’s the impending failure and likely nightmarish fallout that follows.

But there’s also a second horrifying moment – when you realize that, either,

a.)  This is what you thought might happen, but you couldn’t serve as a persuasive voice of reason to prevent the crash and burn that’s
coming.

Or,

b.)  You never saw it coming.

Rack up enough of these failures, and you become as credible as the weather forecaster. People learn to pad or slash your estimates. They also learn to allot a significant cushion of time needed to finalize bids and proposals because of all the adjustments they’ll need to make to accommodate the inaccuracy they begin to count as inevitable.

But what if the weather forecaster nailed it next time, and the time after that, and the time after that?

Of course, something would have to happen first to change how the forecast was made. Maybe the tools were better. Maybe prediction models evolved. Whatever it was, the forecasts’ reliability began to soar. Viewers knew they needed to bring umbrellas when rain was predicted, schedule golf outings when sunshine was called for, and kids knew if no snow was predicted, they’d better get that homework done.

It’s the same in project estimation.

Accurate estimates breed confidence. No longer is everyone driving with feet simultaneously on the gas pedal and brake, bracing for a painful impact. Projects go as planned, or if they veer a little to the left or right, the variance is detected early enough to correct.

Estimators’ credibility soars to the point that everyone knows the time and money predicted to go into a project is very close to what it will turn out to be. Nobody pads the estimates anymore. Nobody slashes them, either. Stakeholders know they’re getting the straight scoop rather than just being told what they want to hear by a team that doesn’t know how to defend an uncomfortable “No” position in the face of unreasonable demands.

The sales team gets in on this new wave of opportunity, too. The clarity of dead-on estimates makes the company more competitive, more agile. They create and deliver more accurate bids than ever, and certainly more than their competitors – plus their bids are defendable, reasonable, credible.

Clarity breeds credibility, opportunity, and success.

SEER doesn’t make software for meteorologists, unfortunately. But if you’re tasked with project estimation, verifying “should cost” figures, or monitoring projects susceptible to project creep, we may be able to help you.

Click here to learn how TASC, a third-party benefits administrator, uses SEER to deliver improved productivity and cost savings.

Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.




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