Four core components must be in place, have credible values, be used to make decisions, be connected to the actual performance of the project in a closed loop feedback system for the project to have any hope of success.
Without a sequence of the work to be performed, some knowledge of how long it will take to perform each of those work elements, there is no way to know when the project will be complete.
There are many ways of discovering the work, its duration and the sequence of this work. The approach to answering these questions is dependent on the domain, value at risk, and the needs of the customer.
It is the needs of the customer that anchor the selection process, not the providers of services to those customers. This is a repeated theme here. Those providing the money to do the work have a vested interest in how the work is performed.
The value of the produced outcomes is dependent of knowing something about their cost. This is a fundamental principle of all business and is the same for project work.
If we have some notion of value, either through the customers opinion or through and actual business modeling process, we need to know the cost of producing that value.
Since all variables on projects are random varaibles, our cost estimating processes must be applied to reveal the could cost, will cost, should cost aspects of these deliverables.
One approach to cost estimating is Reference Class Forecasting. Other approaches can provide credible estimates including parametric modeling. Tools, processes, formal guidance are all available for estimating cost in nearly every business and technical domain.
Guessing is not estimating, ignoring the cost of performing the work is negligence, claiming costs can only be known at the end to the project is ignorance.
All risk comes from uncertainty
Risk management is how adults manage projects - Tim Lister
Unmanaged risk will not go away, it is always there. The management of risk starts with a list of risks, the risk register. This list states the probability of occurrence, the probability of impact, the cost to handle the risk, the residual probability of the risk once it is handled.
The risk management processes is explicit and follows a step-by-step process. Some development processes like agile can increase the visibility to the reduction of risk, but they are not risk management processes, just contributors to the risk reduction and handling processes.
All project variables are random variables, act accordingly.
Knowing the underlying probability distribution functions of the statistical processes driving these random variables is a critical success factor for all project.
Anyone seeking or suggesting there is certainty on projects has failed to pay attention in their High School statistics class.
Every cost, schedule, and technical performance parameter on every project has a probability distribution assigned to it. Without knowing or understanding that distribution, or that the distribution is present, will lead to unanticipated cost, schedule, and technical performance disappointment.
So Now What?
- We can't make decisions without knowing the cost of those decisions.
- We can't know those costs without making estimates. Waiting till the end is not a viable business process.
- All work we do is probabilistic in nature. We need margin to cover that work whose variances can't be reduce. We need risk buy down activity for those we can.
- Measures of Effectiveness and Measures of Performance are what the customer is most interested in at a planned cost for the value being delivered