Project Cost Management: Justifying Robust Cost
Introduction
In the ever-evolving world of project management, maintaining cost is crucial and being able to communicate cost requirements to stakeholders may be difficult, especially robust ones. A crucial part of project management is specifically cost management, in this blog we will dive into not only the implications of cost management, but also the art of persuading stakeholders to embrace the different project cost you may present to them, and equip with you with the tools, and strategies to better justify and get everyone on board with your project requirements.
The need for clear justification
As a project manager, you have most likely encountered a scenario where you clearly understand why the cost is robust, or expensive, but your stakeholder or project owner may not be fully convinced of this price. Understanding this issue is the first step to overcoming this. So, how do we go about persuading and convincing these stakeholders to understand this problem?
The role of cost management
Before diving into strategies and more specifics, we must understand the role cost management has in a project and the importance of this. Understanding budget and controlling budget is a crucial element of project management, when planning a project you also plan budgets and remaining under these is crucial to the success of your project, cost management will ensure this, cost management may also help with resource allocation and decision making, allowing project managers to better allocate resources, since cost management also provides data to help you accomplish these requirements.
Another important thing to mention is that budget planning will help your team plan for the future and mitigate any problems that may arise, a robust budget may help with this. Keeping budget in check will also ensure stability in the project, and planning a well structured budget creates a strong foundation for the project and remembering these foundational topics and basic cost management principles further ensure a projects success.
Return on investment (ROI)
Now the important question left to answer is how we must go about convincing someone to accept and go through with expensive project ideas. As mentioned before convincing a stakeholder to accept more robust project ideas is crucial to the success of your project, since if a owner believes your project could've been done for cheaper elsewhere or you are simply wasting their resources, this could create a negative relationship with the owner and even affect future project ideas. We will start off by talking about ROI, or return on investment, this essentially means that you must demonstrate that the cost of the project or product will be well worth spending the extra money. If this product will be used to generate money, maybe showing the investor the numbers your product may produce. This concept is the most crucial for successfully convincing a stakeholder to go through with said cost, since this presents a clear cost to benefit analysis and demonstrates more value to your project.
Reducing risk
Another key aspect one must consider as a project manager is the importance of risk reduction, as a project manager you must be able to explain how a well funded project can proactively mitigate many risk, financial or deadline requirements. Being able to show the chances of overruns, project failures, timeline failures and how a more robust budget may prevent some of these problems.
Aligning with organization goals
An important thing to consider is how you are presenting your project, does this truly align with the goals of the organization? if sow how are you showing this? Truly understanding what the stakeholders want and proving how a more flexible budget could better accomplish this goal and meet their requirements. It is important to demonstrate how the project aligns with the organizations objectives, and highlighting how these cost are necessary for the projects success and contributes to their company's overall success.
The importance of visual aids
The use of charts, graphs and other visual aids can provide support, when attempting to persuade the stakeholders, these visual representations often layout the cost to benefits or the importance of your budget in a more simple, yet effective manner, better representing your needs. When creating these visual aids, it is necessary to consider the importance of data, as well as labelling all this data correctly, since this data could break or make their decision.
Underfunding
When trying to convince someone to invest in your project, stressing the risk and negative consequences an underfunded project can bring is crucial, stakeholders must understand that the well funded project is absolutely necessary for the projects success. Cutting cost in the short term may lead to larger financial losses, going back to other sections, representing this information using graphs could help.
Use of real world examples
A final element you could use to further convince your stakeholders is to use real world examples, sometimes to illustrate the importance of something is to use real world examples, comparing how your project may compare to others or how you could improve upon existing projects. To do this you may be able to find other project similar to the one you are planning, researching costs and the success or failure of said costs, and being able to use this to better back up your own project. It is important to note, that a projects success isn't the only way of highlighting the importance of robust costs, if a project similar to yours failed due to underfunded project, then you must also show this and allow them to understand that this is a risk your project may fall under if your project isn't backed by a well though out, well funded project.
Conclusion
As project managers, we must understand the importance of cost management, and what this concept entails, one of the most important if not the most important factor of cost management is having the ability to convince stakeholders into funding your project, even if the cost may be robust, is key to your projects success. If a stakeholder doesn't understand the importance of your cost, then your project will never be funded, and being able to explain that these cost will benefit them, reduce risk, and will align with the organizations goals. The use of visual aids and using the correct data to explain this will greatly improve your chances of getting your project better funded.
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