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 =
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Poor project sponsorship |
Symptoms =
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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.
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Cost =
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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.
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Cause =
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Poor scope management |
Symptoms =
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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.
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Cost =
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Higher labor or material costs because effort is spent on unnecessary activities.
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Cause =
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Poor risk management |
Symptoms =
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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.
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Cost =
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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.
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Cause =
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Absence of vision |
Symptoms =
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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.
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Cost =
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Higher labor charges because project team are less productive.
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Cause =
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Absence of transparent, cooperative culture |
Symptoms =
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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.
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Cost =
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Unnecessary work, reduced productivity, continued costs after the project finishes,
for example as in the case study above.
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Cause =
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Lack of customer focus |
Symptoms =
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A lack of appreciation of what quality standards the customer has. End product
lacks features that the customer expected.
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Cost =
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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.
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