Copyright to Francis Hooke, © 2013 Quality Project Delivery Ltd. All rights reserved.
Originally published as a blog on qualityprojectdelivery October 2013 and adapted for publication here April 2014.

Editor's Note | Introduction | A Case Study 
The REAL Financial Position | Direct and Indirect Costs 
Causes and Symptoms of Hidden Costs | Conclusion | Postscript

Causes and Symptoms of Hidden Costs

The classic definitions of direct and indirect costs are fine. However, I propose that we think more carefully about our hidden costs, especially those that arise due to poor project management. Below are some causes, symptoms and costs of poor project management. I believe these are good examples of how hidden costs arise. These examples are from my own experience and research. I have included the examples that I believe have the most impact and that are most prevalent.

Cause = 

Poor project sponsorship

Symptoms = 

The project fails to make the correct strategic decisions, or struggles to make decisions at all; required resources are not forthcoming; there is a lack of congruency with wider corporate/program strategy; and the business case is not clear.

Cost = 

Sub-optimal decisions mean labor and materials are spent on unbeneficial activities; lack of resources or decision making ability may put the project into a 'holding pattern' where costs are incurred with little progress.
 

Cause = 

Poor scope management

Symptoms = 

Absence of scope management documentation and/or process leads to confusion amongst project team as to what is in scope or out of scope consequently leading to scope creep.

Cost = 

Higher labor or material costs because effort is spent on unnecessary activities.
 

Cause = 

Poor risk management

Symptoms = 

Without a risk management strategy and/or governance process project team members will be unwilling to take accountability for their decisions because their decision making is not being properly appraised. This will manifest itself as a lack of decisiveness and unwillingness to commit to a course of action.

Cost = 

Excessive time is spent trying to make decisions, leading to reduced productivity and higher labor charges. If incorrect decisions are made, expensive consequences can follow.
 

Cause = 

Absence of vision

Symptoms = 

Without a vision the project team will struggle to unify their effort towards delivering the end product. Symptoms include missing or incomplete project plan, and/or documentation; confusion amongst the project team - time spent trying to figure out what needs to be done, and time spent complaining about the project.

Cost = 

Higher labor charges because project team are less productive.
 

Cause = 

Absence of transparent, cooperative culture

Symptoms = 

Various communication issues, unwillingness to resolve issues, team silos develop, information is withheld (e.g. burying hidden costs), dominance of certain individuals and views of others ignored. A lack of trust, inflexibility, split agendas across the project team - users, suppliers and business. Conflict generally.

Cost = 

Unnecessary work, reduced productivity, continued costs after the project finishes, for example as in the case study above.
 

Cause = 

Lack of customer focus

Symptoms = 

A lack of appreciation of what quality standards the customer has. End product lacks features that the customer expected.

Cost = 

Customer has received poor value for money, and/or is forced to do more work to compensate. For example, if a system automates half a process rather than the whole process, the customer will have to continue to support the process by hand. Therefore the customer incurs additional labor and/or material costs instead of overall savings.
 

Direct and Indirect Costs  Direct and Indirect Costs

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