Most of us learn about scope creep and gold plating the hard way.

Maybe it’s a home remodel, and the project manager agrees to “just” add another sconce in the bathroom, which leads to a costly electrical repair and fifteen hours of work. Or an enthusiastic developer builds a close relationship with the client, and unbeknownst to anyone else, writes extra code that leads to hours of additional testing, developing and re-work.

Like a thick, enveloping fog, the aftereffects of scope creep and gold plating are upon us before we even know it.

Projects, oftentimes, commence with a wealth of assumptions and miscommunications. And it’s only in the execution that these become apparent. And so change is a part of every project, regardless. Scope management monitors changes, and ensures they don’t lead to re-work and free labor. A change management system is key to reducing scope creep and gold plating in a project.

In this post, we’ll look at the impacts of scope creep and gold plating, and explore how to mitigate them with a change management plan.

Scope Creep vs Gold Plating

Scope creep and gold plating are similar in that they both are unmonitored changes in a project. They differ, however, in their causes and effects.

What Is Scope Creep?

Scope creep is an additional requirement, requested by the client, that is not included in the initial scope agreement. It may not affect the budget or the timeline.

Generally, as the name suggests, scope creep starts small but can grow much bigger. For example, the initial requirement may be to add some additional text to a webpage. Then, step by step, it increases to a new layout for the whole website.

Scope creep does not follow a change process. It’s an unauthorized and undocumented increase in the project’s scope.

What Causes Scope Creep?

Generally speaking, people are on the lookout for scope creep, as it creates tangles in a project. However, it almost always occurs anyway. Here are its three principal causes.

1. Poor Project Planning

Oftentimes, a project expands and changes because the scope was never clearly defined in the first place.

If the scope document fails to capture the requirements from every stakeholder, or describes each requirement vaguely, this usually means that the project will morph and change during the execution phase.

At other times, a project commences before the planning is complete. The procurement summary or work breakdown structure hasn’t been written, and so it’s unclear just how many resources a project requires. This creates inaccurate estimates that require updating during execution.

2. An Unsupervised Team

Scope creep also occurs when a project manager fails to keep abreast of the team and its interaction with the client. Sometimes a side relationship develops between the client and a team member, creating a channel for the client to solicit additional work without following proper change protocol.

3. A Client Likes What She Sees

Finally, scope creep can be a vote of confidence from the client. It means she likes the work she’s seen so far in the project, and wants more of the same.

What Is Gold Plating?

Gold plating is the addition of a feature to a project that is not requested by the customer, and is not in the original scope document. It’s intentionally added by the team and doesn’t follow any change procedure or protocol.

Gold-plating generally seeks to “spruce up” a project. For example, if the project is to paint a fence, the painter may decide to add a latch. When the client sees the final fence, he may or may not be pleased with the latch, as it wasn’t something he requested, nor was it part of the initial agreement.

What Causes Gold Plating?

Generally speaking, a team works to fulfill the requirements outlined in the original scope document, and doesn’t color outside of these lines. So why then does gold-plating occur? There are two principal causes of it.

1. Compensation for Poor Performance

Oftentimes, when a team underperforms with a deliverable, it seeks to make up for the deficiency. Sometimes, the team erroneously thinks that adding a little extra to the project will smooth things over, or “gold-plate,” the situation.

2. A “Meet and Exceed Expectations” Mindset

Every project manager and team wants to build a strong reputation and to have returning clients. This drive to excel oftentimes results in overwrought efforts, including the addition of new requirements to the project.

It’s like ordering something in a restaurant and the waiter bringing you a complimentary side and salad, with the hope to receive a good online review. As anyone can see, sometimes this method works, and at other times, it backfires.

What Is the Difference Between Scope Creep and Gold Plating?

Scope creep and gold plating both are undocumented changes within projects, but they differ slightly from each other. Here are two key distinctions.

1. Gold plating is an undocumented change that is not requested by the customer. It’s initiated by the team, and oftentimes is performed without the customer even knowing. Scope creep, on the other hand, is an additional requirement the customer wants to add to the project.
2. The motivations and causes behind scope creep and gold plating are different. Scope creep is usually caused by misunderstandings and poor project planning. Gold plating, on the other hand, is usually an effort to stroke the customer. It’s an extra that’s intended to win favor or smooth things over.

What Are the Dangers of Scope Creep and Gold Plating?

Both scope creep and gold plating impact a project negatively, and in similar ways.

1. Unplanned Risks

An additional requirement adds new risks to the project. For example, if the project is a home remodel and the additional work is an unplanned light fixture, this opens the project up to the risk of electrical problems.
This additional risk was never addressed at the beginning of a project, and so there is no plan in place for mitigating or avoiding it. It may lead to additional work and expenses.

2. No Documentation

A paper trail is always helpful, particularly in a long project. It keeps people on the same page with respect to expectations. However, gold plating and scope creep don’t use proper change management processes, and so they have no paper trail. This easily leads to major miscommunications.

How to Prevent Scope Creep and Gold Plating?

To a certain extent, changes in a project are guaranteed. Even with the best laid plans, things come up, unforeseen events occur and people change their mind. At the same time, there are several steps that a project manager can take to minimize changes in projects.

1. Write a Thorough Project Plan

The best way to rein in project changes is to have a clear understanding of the project at the beginning. A long one-on-one with the client helps to outline all of the requirements, eliminate misunderstandings and clear up assumptions.
The planning stage is also the time to educate the clients about the process, and outline the work and schedule with a work breakdown structure and a resource schedule.

Finally, a thorough scope document ensures that everyone is on the same page.

2. Supervise the Team

Close communication with the team also minimizes gold-plating and scope creep. A daily scrum meeting keeps everyone abreast of client requests and any proposed changes. It also allows the project manager to monitor the team, and ensure they’re focused exclusively on fulfilling requirements.

3. Have a Change Control Process

A simple change process that everyone understands ensures that nothing occurs without the entire team knowing about it. It also serves to minimize project risks and maintain a good paper trail.

Although change is always part of a project, these steps help to mitigate change and scope creep.

A Successful Change Management Plan

Eliminating undocumented changes in a project requires a change management plan. A process that documents changes and communicates them to the team keeps all the team’s efforts in alignment.

Let’s look at the benefits of a change management plan, and the four steps it includes.

Benefits of a Change Management Plan

A good change management plan keeps processes smooth during project execution. There isn’t any scope creep or gold plating when everyone understands what is expected, and knows the correct procedures for making a change.

It also minimizes waste, as the team only works on those activities that add value to the client.

Four Steps of a Change Management Plan

Although everyone participates in making changes, change management is the responsibility of the project manager. These are the four steps the project manager oversees.

1. Change Request

The first step identifies the request and the reason. This step can be initiated by any member of the team, or by suggestions or feedback from the client.

A suggested change may be a recovery plan, intended to get the team back on schedule. Or else, the change may be to modify a deliverable that performs poorly in testing.

It entails identifying the “what” of the change, and the “why.” This stage also documents how things need to change.

2. Change Analysis

Next, everyone on the team gathers to discuss the implications of the change. Particular feedback is sought from those with the most knowledge and those who are most affected by the change.

This stage considers the impact of the change on the budget, timeline and scope, as well as any new risks the change might introduce to the project.

It also considers alternatives to the change, perhaps to increase resources and crash activities instead.

3. Change Approval

If the project manager believes that the change is workable, then it is written up and approved, and assigned an effective date.

4. Change Implementation

The project manager oversees the change to be sure that the team is in alignment. He or she communicates the change to everyone and completes the documentation. The change is integrated into the project plan, and the resources are redistributed to accommodate it.

These are the principal steps to a change management plan. Managing scope creep and change requires discipline. This process makes the difference between a team that reacts to changes, and one that follows a plan.

These steps can look a lot different depending on the nature of the project and the team. The critical step is to determine a change management process at the beginning of a project, and communicate the processes to the entire team.

You know the feeling. You’re in charge of several projects at work, and things are starting to slip through the cracks. The team is getting bogged down in details, progress is stalling, and you’re starting to feel the pressure.

What you need is a way to keep your team on track and focused on the bigger picture. That’s where Enterprise project management (EPM) comes in.

EPM is all about making sure that your team is working together efficiently towards a common goal. It’s the art of keeping everyone aligned and on the same page, so that you can avoid costly mistakes and deliver your projects on time and on budget.

In this article, we’ll explore the importance of EPM and how it can benefit your business.

What is EPM?

In a nutshell, EPM is all about managing several projects at scale. It’s the process of coordinating and managing multiple projects in a way that helps businesses achieve their goals.

What makes it stand out from everyday project management is its focus. Instead of thinking about each project as its own entity, EPM looks at the big picture and considers how all of the projects can work together to achieve the company’s objectives.

This might seem like a small change, but it can make a world of difference in the way projects are managed and executed.

An Example of EPM at Work

Imagine you’re managing 3 projects: one to launch a new product, one to increase sales in existing markets, and one to open a new market.

If you’re thinking about each project individually, you might end up with 3 very different plans that don’t take into account the company’s overall goals. But if you’re thinking about the projects as part of an enterprise, you can see how they all fit together to achieve the company’s objectives.

Here’s the thing, in everyone of those projects you have some overlap in goals and some commonality in processes.

You’ll probably need to do some market research for all 3 projects, and you’ll need to develop a sales plan. These projects probably need copywriters, graphics designers, and web developers. By thinking about the projects as part of an enterprise, you can start to see how they all fit together and where there are opportunities for synergy.

Think about it like this: if you’re trying to put together a jigsaw puzzle, it’s much easier to do if you have a clear idea of what the final picture is supposed to look like.

The same is true for managing projects. Having a clear goal in mind will make it much easier to coordinate all of the different moving parts and ensure that everyone is working towards the same goal.

To put it blunt, projects serve two masters 1) the business and its needs and wants and 2) the customer or client and their needs and wants.

EPM is all about creating a process that considers impact to both.

As you can see, enterprise project management is not your ordinary project management. It’s a more holistic and coordinated approach that takes into account the big picture.

And while it might seem like a lot of work, the benefits might make it worth it. Let’s take a look at some of the benefits of EPM.

Benefits…

Enterprise project management is extremely beneficial because it:

• Aligns everyone on the businesses objectives
• Optimizes resources resources across the board
• Improves visibility into the project’s progress
• Provides actionable insights for decision making purposes
• Improved coordination between team members

Here’s a more detailed breakdown…

Alignment

First, it helps ensure that all projects are aligned with the company’s overall objectives. This alignment is key to ensuring that the projects are working together to achieve the company’s goals, rather than working against each other.

Optimized

Second, EPM helps to optimize resources across all projects. This optimization is possible because EPM takes into account the interdependencies between projects.

By understanding how the projects are interconnected, you can make sure that resources are being used in the most efficient way possible. This helps to save time and money, which is always a good thing.

Improved Visibility

Third, EPM provides improved visibility into all of the projects. This is important because it allows managers to identify risks and issues early on. It also allows for better decision making because all of the relevant information is readily available. This improved visibility leads to improved project outcomes.

Actionable Insights

Fourth, EPM provides actionable insights that can be used to improve future projects. These insights are possible because EPM generates a lot of data.

This data can be used to identify trends and patterns. These trends and patterns can then be used to improve future projects.

For example, if you notice that a particular type of project is always behind schedule, you can take steps to avoid that in the future. Or if you notice that a certain type of resource is always in high demand, you can make sure to have more of that resource on hand for future projects.

In short, EPM provides the data that you need to make informed decisions about future projects.

Improved Coordination

Finally, EPM leads to improved coordination between all of the different projects. This improved coordination is possible because EPM provides a centralized repository for all project information.

This repository can be used to track dependencies, milestones, and deadlines. It can also be used to store contact information for all of the different project stakeholders.

Having this information in one place makes it much easier to coordinate the projects.

What about small businesses?

As you can probably see, EPM is extremely beneficial for businesses and especially large companies that have a lot of moving parts. But what about small businesses?

The short answer is that EPM can be beneficial for small businesses, but it’s not essential. Small businesses have different needs than large businesses. They often don’t have the same resources, and they often don’t have the same number of projects going on at the same time.

However, EPM can still be helpful for small businesses. If you have a small business, you might want to consider using EPM if you find yourself in any of the following situations:

• When you have multiple projects underway and you need help coordinating them
• When you need help aligning your projects with your company’s overall objectives
• When you want to optimize your resources across all of your projects
• When you need better visibility into your projects
• When you want actionable insights that can help improve future projects

The Seven Elements of EPM

According to the Project Management Institute (PMI), there are seven elements of EPM:

1. Risk Analysis
2. Structured Estimating
3. Project Reviews
4. PM Coaching
5. Escalated Issue Management
6. Time Accounting
7. Information System

These elements form a sort of blueprint for how EPM processes should be implemented. Note that in principle there is a lot of overlap between EPM and normal project management processes. But remember, EPM is designed for centralized management of multiple projects.

Let’s briefly look at each one.

1. Risk Analysis

Here’s the thing about projects: they always come with some degree of risk. There’s always the possibility that something will go wrong. And if you have several projects underway at the same time, the risks can start to pile up. That’s why risk analysis is such an important part of EPM.

You’ll probably notice that reoccurring risks will start to emerge as you analyze your projects. For example, you might find that a certain type of project is always behind schedule. By identifying these risks, you can take steps to mitigate them in the future.

2. Structured Estimating

One of the challenges of managing multiple projects is that each project has its own unique estimating process. This can make it difficult to compare apples to apples when you’re trying to figure out which project is most important.

That’s where structured estimating comes in. Structured estimating is a way of creating a standardized estimating process that can be applied to all projects. This makes it much easier to compare projects and to prioritize them.

3. Project Reviews

The PMI states that there are four types of reviews: project commitment, project initiation, project delivery, and project closure. The main purpose is to check on progress, quality, and risks. This serves an important tool for maintaining culture and standards throughout the organization.

Having a review template for all projects is an excellent way to maintain consistency and ensure that all key points are covered. Color coding by impact and urgency lets you quickly identify which areas need attention first.

For example red could be applied to items that need to be escalated immediately, while yellow could be used for items that need to be addressed but are not urgent.

4. PM Coaching

As the name suggests, PM coaching is all about providing support and guidance to project managers. Now, this might sound like a luxury, but it’s actually quite important. Direction from a more experienced project manager can be invaluable for keeping projects on track. Plus, it can help prevent problems before they occur.

This raises the question: who should be a coach? The answer is that it depends on the organization. In some cases, it might make sense to have a central coaching team. Just be sure to choose a coach who is familiar with your organization’s culture and values.

5. Escalated Issue Management

There’s a range of issues that can arise during a project. Some of them can be resolved quickly and easily. Others might require more time and effort.

And then there are the truly difficult issues that just won’t go away no matter what you do. These are the types of issues that need to be prioritized and escalated. For example, an issue might be escalated if it is:

• Time-sensitive
• Impacting multiple projects
• Going to cause a delay in the project
• Likely to result in a loss of money

Having the executive team involved in issue management can be very helpful. They can provide the resources and support that are needed to resolve difficult issues.

6. Time Accounting

Measuring time as accurately as possible is critical for project management. After all, time is money. If a project is taking longer than expected, it can impact the bottom line. But imagine if several projects are behind schedule. That can have a serious impact on the organization.

That’s why time accounting is so important. Time accounting is the process of tracking and measuring the time that is spent on each project. This information can be used to:

• Identify which projects are behind schedule
• Determine which projects are over budget
• See where time is being wasted
• Make decisions about how to allocate resources

7. Information System

At the foundation of every project is data. This data is used to make decisions, track progress, and measure success.

An information system is a way of collecting, storing, and sharing data. There are many different types of information systems, but they all have one thing in common: they make it easier to manage projects.

There are four types of reports that are commonly used in EPM:

• Project progress
• Resource utilization
• Project activity
• Resource usage

As too many project managers have learned, the “just” request is the kiss of death.

“Can you just do me a quick favor?”

“Can you just make a small change here?”

Because no request is ever “just.” You agree to change the font on a webpage or retouch some trim on a remodel and next, you’re adjusting the entire website, or re-painting an entire wall. And before you know it, you’re engaged in a timely and expensive side-project where nothing is documented and none of the time is billable.

As a project manager, your aim is to identify what your client wants, and deliver it. It’s that simple.

But without vigilant scope management, the process goes more like this: You present the final deliverable, and the client says something is missing. So you go back to look at the scope statement and change orders, but the language is vague and mushy. Or there aren’t any documents at all. It’s a huge mess and nobody wants to clean it up.

No doubt about it, scope management is hard. It’s not easy to capture all of the requirements, to bend and flow through a project as the expectations change. As any project manager can attest, it’s one of the hardest aspects of managing a project.

But not managing scope isn’t an option.

That’s why a plan is required. And a plan is only as good as the tools, processes and documents that make it up.

That is what this post is about. It’s going to cover how to manage scope in project management, so that you can deliver a project that’s brilliant and scintillating…without scribbling outside the lines.

The Six Processes in Scope Management

Scope is as fundamental to a project as the budget and timeline. The Project Management Glossary defines it as: “Everything a project is supposed to accomplish in order to be deemed successful.”

Scope management is a responsibility that begins at Stage 1 and continues all the way until the client signs off for the final deliverable. Here are the six key stages to successfully managing scope from the beginning of a project to the end.

Step 1: Determine How to Manage Scope

There’s more than one way to skin a cat, and there’s more than one way to manage scope.

From how to collect requirements, to what to include in the scope statement, to how to process change orders, it’s important to get your bearings at the start.

These processes needn’t be developed from scratch with each go-around. Once a reliable system is developed, it can be utilized on projects again and again.

Step 2: Collect Requirement From the Customer

A project’s requirements directly determine its scope. Essentially, they summarize everything that’s needed to bring a project to completion.

And so making every effort to gather requirements thoroughly ensures that the project’s scope is accurately understood from the start. In order for this process to run smoothly, some project managers even have a requirement management plan.

Determine the requirements by communicating with the customer and key stakeholders.

Sometimes, a MoSCoW meeting with all stakeholders helps to quickly identify

a project’s high requirements and exclusions. At other times, a workshop for writing user stories is the solution.

Whatever the method, the objective is to include the contribution of every stakeholder, and capture a complete summary of the project’s requirements from the start.

Step 3: Define Scope

Once all the requirements are gathered, it’s time to define the scope. This entails decomposing each requirement and identifying all the steps needed to complete it. It means asking questions around who needs to be hired, and what equipment and materials are needed.

This is the stage for writing the project scope statement, which spells out all of the project’s assumptions, constraints, and exclusions. This statement is covered in more detail later in this post.

Step 4: Create a Work Breakdown Structure

A work breakdown structure (WBS) is a visual representation of all the work needed to meet a project’s requirements. It’s hierarchical, and lists the project objective at the top, then breaks the work into increasingly smaller packages at levels 2, 3 and 4.

To create a WBS, place the central deliverables into the second tier, and decompose them into smaller work packages, until it’s possible to make accurate estimates around the resources required for each.

Although a WBS isn’t chronological, it’s an excellent visual representation of a project’s entire work package.

This step marks the end of the planning stages for scope management. The additional two processes monitor and control scope throughout the project.

Step 5: Customer Evaluates Deliverables

Throughout a project, the customer inspects and reviews work, and signs off if the deliverable meets expectations.

Presenting the client with deliverables every two to three weeks allows the team to receive feedback and to understand if the project is on track.

At times, it’s necessary for a team to change direction in order to meet the client’s needs. Ongoing communication with the client makes it easier to pivot. If the team instead waits and presents deliverables at the end of a project, it may be too late to make changes.

When a scope document has clearly outlined requirements, it’s easy to tell if the change is a defect or a change request.

Step 6: Monitor Scope

Communicate with the team, ideally in daily scrum meetings, to monitor work and ensure that everyone is working toward fulfilling requirements.

Monitoring scope looks out for signs of gold-plating, which is the addition of non-authorized “extras” added onto requirements. It also prevents scope creep by encouraging the use of correct procedures when making changes to scope.

These are the central processes to managing scope throughout a project. Many of the processes occur in the planning stage, as a clear understanding of requirements and scope from the start allows a project to run smoothly.

The Project Scope Statement

The project scope statement creates a narrative around a project. It defines what the project will produce, and how. It’s completed as a final step in the planning process, after requirements have been gathered.

The Project Management Glossary defines a project scope statement as a statement that “details what a project is meant to achieve and describes the deliverables expected. It forms the basis of measurable objectives by which the success of a project will be assessed. Project scope statements are typically part of project plans.”

The scope statement, ultimately, is for the customer. It’s important to write it in a language that all the stakeholders understand, so overly technical jargon isn’t necessary. A sign off from the client indicates that everyone is on the same page.

A scope document provides a project with several key benefits. First of all, it makes scope adjustments easier later on. Secondly, it creates a paper trail for easy reference, should any confusion arise. Finally, it provides critical input for creating the work breakdown structure, the risk management plan, and the procurement document.

Let’s look at the seven key sections of a scope statement.

1. Justification of a Project

The justification for the project clarifies the business purpose a project seeks to solve.

For example, if the project is to build an online store for a retail outlet, the justification would say how the online store aims to generate additional sales for the company, and serve as a marketing platform for its brick and mortar location.

2. Scope

This is the portion of the scope statement that needs the most care and attention.

Defining the scope means summarizing all of the characteristics, traits or functionality that need to be produced. It combines the requirements of all of the stakeholders, and additionally breaks down all the steps required in meeting each requirement.

3. Acceptance Criteria

The acceptance criteria outlines what the final product must look like. It clarifies the number of defects a final deliverable can have, and is an opportunity to provide a realistic description of what the final product is expected to do.

4. Deliverables

The deliverables section summarizes everything that’s handed onto the client, whether tangible or intangible.

It may include scope and schedule documents such as the work breakdown structure and the project schedule.

It also outlines the project deliverables. If the project is to design a website, then this section breaks down every page to be included in the site, along with its functionality.

5. Project Exclusions

This section clarifies what won’t be included in the final deliverable.
Oftentimes, stakeholders are in disagreement over the requirements to include in a project. This section of the scope document clarifies all of the agreements that stakeholders come to before executing the project.

It precludes a scenario where a team creates false expectations. Rather, it clearly states any criteria that the project won’t meet.

6. Constraints

This section outlines any key constraints in a project, most especially the budget and the timeline.

Depending on the nature of the project, it also includes any condition that might impact the completion of a project, such as weather or resource scarcity.

7. Assumptions

This section states any assumptions around the completion of a project. For example, in a construction project, an assumption may be that the team is able to obtain the permits necessary to begin the project.

These seven sections cover the central areas of a scope document. Although the document may cover your back, it’s more of an agreement than a contract. The client signs off on it to ensure that the team and client are on the same page.

Once you’ve created a successful framework for a scope document, it’s easy to use over and over again.

Three Tips to Manage Change in Projects

Although increasing scope “as a favor” isn’t really a favor at all, the compulsion to add little extras creeps up nevertheless.

The practice of gold-plating seeks to remedy deficiencies in deliverables by augmenting the project somewhere else. But ultimately this leads to a dangerous area where scope increases without any documentation. It exposes the project to unplanned risk, and increases the budget and timeline as well.

At the same time, changes will occur in every project, guaranteed. It’s even a good thing, some would argue. This is the philosophy behind the agile principle that welcomes change, even late in development. It’s not a sign that the project manager hasn’t done his or her job, or that the scope statement isn’t comprehensive.

Rather, in order to deliver on the client’s requests, project managers will almost always pivot away from the initial requirements. But these changes are clearly communicated and documented.

The decision to make changes is entirely in the realm of the client. The project manager’s job is to monitor the change to everyone’s satisfaction. To this end, here are three tips to managing change in projects.

1. Communicate With the Team

New team members may not appreciate the danger of doing small favors for the client. Keep steady ongoing daily communication with the team to ensure everyone is on track to fulfill requirements, and nothing else.

2. Ask the Five Questions

When the client comes to you with a change request, ask questions to understand the who, what, where, when and why behind the request. This clarifies the purpose of the change.

With a full understanding of the change, it’s possible to write a change order and increase the scope.

3. Have a System in Place

Many changes to scope are pretty minor. And so it’s not necessary to follow a complicated change process every time. However, every change must be documented, as it impacts other aspects of the project, including the timeline and the budget.

When you have an easy system at hand, it increases the likelihood that everyone follows the protocol around scope increase. A long process that no one understands may well mean that you’ll have some scope creep on your hands.

You won’t regret having everything documented. At any point, the client may approach with a concern about the deliverable, and this way you can point to a written statement clarifying all of the changes they requested, along with the reason.

Scope creep is like a weed. It starts out very small, but it spreads quickly and then it’s too late to stop. These steps ensure that change is managed and scope increase is documented.

The Line You Don’t Cross

As many project managers have learned the hard way, when anyone asks if you’d “just” do a little something extra for them, you Just. Say. No.

Uncontrolled scope cream benefits no one. Just like the name suggests, it can come out of nowhere, but before you know it you’re dealing with a mess.

However, scope change isn’t bad in itself. It actually occurs in almost every project. Scope management is the process of ensuring that scope is clarified accurately at the beginning, then carefully monitored through a project. It stops scope creep before it even starts.

Although scope management is one of the hardest skills for project managers, fortunately there’s several tools at hand to help. Once you discover the templates and methods that work for you, it won’t be a problem at all!

As a PM, you’re tasked with getting the job done on time and within budget. So, how do you assess whether things are on the right track? One of the most popular approaches is to calculate BCWP. In this article, we’ll explain what that is, why BCWP is important, and how you can calculate BCWP to track project progress.

What Is BCWP in Project Management?

BCWP stands for budgeted cost of work performed. Also known as Earned Value (EV), BCWP determines how much of the project budget should have been spent based on the amount of work that’s been done to date. This helps project managers determine whether a project is running over or under budget.

While BCWP can be calculated while a project’s in progress or once it’s complete, it offers project managers the most value when the calculation is done periodically during the project. Then if the project is running over budget, the project manager can proactively take corrective measures to cut costs so the project still remains within budget.

Key Metrics in Earned Value Management

Earned value management is a PM methodology that’s used to measure project progress against a baseline plan. To do this, it relies on the following key metrics:

• Planned Value (PV) – Also referred to as budgeted cost of work scheduled (BCWS), planned value is the amount you budgeted for work scheduled up to a certain date.
• Earned Value (EV) – Earned value or BCWP is the amount you should have spent based on the percentage of work that’s already been performed. So, if you completed 25% of the work in a $100,000 project, the BCWP would be $25,000.
• Actual Cost – This is the cost of the work that’s been completed to date. It’s also known as actual cost of work performed or ACWP.
• Cost Variance – Cost variance is calculated by subtracting the work’s actual cost from the budgeted cost of work performed (BCWP). This calculation is used to determine how much a project is over or under budget.
• Cost Performance Index – This metric expresses cost variance as a percentage. To get this calculation, you simply divide the budgeted cost of work performed (BCWP) by the actual cost of work performed (ACWP).
• Schedule Variance – Schedule variance indicates whether a project is behind or ahead of schedule. It’s calculated by subtracting budgeted cost of work scheduled (BCWS) from budgeted cost of work performed (BCWP).
• Schedule Variance Index – This metric is used to express schedule variance as a percentage. To calculate it, you simply divide budgeted cost of work performed (BCWP) by budgeted cost of work scheduled (BCWS).

An Example of BCWP and Earned Value Metrics

To better understand how these metrics help PMs evaluate project performance, let’s take a look at an example.

Say, for instance, you have a project that’s scheduled to be completed in 6 months at a cost of $100,000. In your project management plan, you’ve determined that the amount of money you’ll spend and the amount of work your team will get done is consistent, month after month.

At this point, it’s the 3-month mark, and 40% of the work has been completed.

• You’re at the halfway point of the project, and you budgeted $50,000 for work up to this date. So, $50,000 is the budgeted cost of work scheduled (BCWS).
  BCWS = % Complete (Planned) x Task Budget
• However, the team’s only completed 40% of the project, so the budgeted cost of the work performed is $40,000.
  BCWP = % Complete (Actual) x Task Budget
• Let’s say that your costs for the work performed by the halfway point are only $35,000. This figure would be the actual cost, also known as the actual cost of work performed (ACWP).
• You’ve completed $40,000 worth of work, but it only cost you $35,000, so your cost variance is $5,000.
  Cost Variance = BCWP – ACWP
• Your cost performance index is 1.14, meaning that you’ve used 14% less of your budget than expected. When the CPI is below 1, the project has exceeded its budget.
  Cost Performance Index = BCWP ÷ ACWP
• You budgeted $50,000 for the project up to this point but your team only performed the equivalent of $40,000 worth of work. Your schedule variance is $-10,000. This is a negative number, which means your project’s behind schedule.
  Schedule Variance = BCWP – BCWS
• You planned to have 50% of the project completed by now, but in reality, only 40% is finished, so your schedule variance index is .8, meaning your team’s only completed 80% of the work it should have finished by this point.
  Schedule Variance Index = BCWP ÷ BCWS

• One final helpful formula is Estimate at Completion (EAC). EAC lets you determine the expected total cost of your project based on the most recent figures. To obtain it, you’d simply divide your entire project budget by the CPI.

  So, in this case, we’d divide $100,000 by 1.14, which would give us $87,719. So, at this rate, our project is expected to come in $12,281 under budget.

  If, however, you’d calculated the project to come in over budget, you’d want to determine which steps you could take to make up the budget shortfall.

  Estimate at Completion = Project Budget ÷ CPI

What are the Benefits of BCWP and Earned Value Management?

There are several reasons project managers rely on earned value management, such as:

• Earned value management makes it easier to track project progress. One benefit of earned value management is that it allows PMs to track the success of a project while it’s going on — so project managers aren’t forced to wait until the end of a project or to rely on field data. Because PMs have a baseline for each phase of the project, they can evaluate how well the project is doing while it’s in progress.

• Earned value management helps PMs create better estimates. A time-phased budget pinpoints how much money the PM expects to spend during each phase of the project. This is the baseline the PM will compare actual costs against.

  By making this comparison, a PM can see which phases of the project met budget expectations and which didn’t. This data makes it easier for PMs to plan better for future projects by creating more accurate estimates.

• Earned value management improves cost control. Because BCWP and other earned value metrics use budgeting benchmarks for each phase of the project, project managers can track project costs on an ongoing basis, rather than waiting to perform that analysis once the project concludes.

  Because PMs are closely tracking costs, they can quickly spot budget overruns and pivot accordingly, for instance, by cutting inessential work. As a result, earned value management makes it easier to keep project costs under control.

What are the Limitations of BCWP and Earned Value Management?

• The baseline budget may be inaccurate. Earned value management measures project progress against the project baseline. If the baseline budget is wildly inaccurate to begin with, earned value management doesn’t offer PMs a whole lot of value.
• Earned value management provides a limited perspective. Although earned value management is useful for determining how well a project is meeting its budgeting and scheduling goals, it doesn’t tell the whole story. For example, should deviations from the baseline occur, EVM doesn’t explain why they happened — which means the PM will need to do further digging.
• For the biggest benefits, earned value management needs to be performed consistently. Earned value management tracks project progress against a baseline, so PMs can take corrective measures should the project deviate from that baseline. However, if a PM doesn’t perform calculations often enough, the project may be too far off course for them to take any meaningful corrective measures.

• Earned value management calculations don’t tell you anything about the quality of a project. It’s great when a project is finished on-time and under budget. However, those aren’t the only criteria that projects are judged on. Stakeholders also expect their projects to meet certain quality standards.

  For example, a project could meet all of its budgeting and scheduling goals according to earned value management calculations, yet the work be performed in such a haphazard manner as to make those calculations meaningless.

What if you were hired for a job, and it turned out the workload varied wildly from week to week. One week, you might have to put in 70 hours of hard, manual labor. Then next week, you’d mostly stand around and do nothing. In the following week, you’d be back to working 70 hours again.

Most people won’t put up with a lopsided schedule like this. Before long, they quit.

Project managers get this. Nearly every resource used in a project, from labor to equipment to materials, has a capacity or limitation.

In order to work within these constraints, they scrutinize and arrange projects to ensure that resources are distributed prudently and efficiently. Two techniques used for resource allocation are known as leveling and smoothing.

Understanding how these techniques work and where to apply them is an integral step to planning a project.

If you’re curious about the difference between resource leveling and resource smoothing, then read on. In this post we’ll define each of these terms and look at where they fall into a project planning schedule.

Definitions & Examples

When you’re first assigned a big project, the key information you receive is the objective, timeline and budget. From this, it’s possible to sketch out the project in general terms, using the critical path method.

Upon closer inspection of the sequence of tasks, however, it may become apparent that the plan simply won’t work. The labor may not be evenly distributed, or maybe resources won’t be available when they need to be. This is where leveling and smoothing come in.

Before defining these two terms, it’s necessary first to clarify everything that falls under the category of resources, and to explain how resource allocation functions in a project.

Resource

A resource may be either a person or a supply. Resources fall into three distinct categories:

1. Labor. This includes hourly workers, subcontractors and salaried employees within a company.
2. Equipment. This includes everything that’s required to complete a project. In a construction project for example, a backhoe and a dump truck are both pieces of equipment needed to excavate the foundation.
3. Materials. This includes anything that remains within a project upon its completion. In a construction project, this includes the wood used to frame a building, and the concrete used in its foundation.

Resource Allocation

Resource allocation means assigning the required resources to each activity. This goes further than simply assigning labor, materials and equipment. It also entails identifying the amount of materials needed, and how long it’s expected to take to complete.

With these clarifications, let’s now define resource leveling and smoothing.

A Definition of Resource Leveling

Here is how the Project Management Glossary defines resource leveling: “A technique that involves amending the project schedule to keep resource use below a set limit. It is used when it is important to impose limits on resource use. Resource leveling can affect a project’s critical path”

Leveling is necessary when the demand for a resource exceeds the supply. This oftentimes occurs when two activities on the network diagram are scheduled in parallel, and both require the same resource.

For example, let’s say that Activity A and Activity B are both scheduled on a Monday, and each require the same person to work eight hours. This clearly won’t work. Leveling out the schedule requires adjusting the network diagram so that activities A and B are in sequence, rather than parallel. (An alternative to this dilemma might be to hire additional labor, which is known as crashing.)

As you can see, leveling focuses on activities on the critical path, and results in extending a project’s schedule.

Resource leveling solves scarcity issues, which affect pretty much every resource used in a project. Generally speaking, the same piece of equipment cannot be used on two activities at the same time, individuals cannot work over a certain number of hours each day, and certain materials can be difficult to obtain at certain times of the year.

A Definition of Smoothing

Here is how the Project Management Glossary defines resource smoothing: “A technique that makes use of float when allocating resources so as not to affect total project duration. It is used when project time constraints are important. Resource leveling does not affect a project’s critical path.”

Float is an activity’s wiggle room, essentially. Smoothing adjusts the start and finish times of non-critical activities.

Resource smoothing does not extend a schedule, that is to say. Rather, when resources aren’t utilized proportionally, it re-distributes them to create a more even distribution throughout a project.

For example, if you hire someone for 30 hours of work, and initially it was scheduled over two days, smoothing re-distributes the work over four or five days.

Smoothing doesn’t work in every scenario, but when it does, it’s a useful way to ensure work is performed moderately and consistently.

The Process for Using Resource Leveling and Smoothing

Before applying resource leveling and smoothing, it’s necessary to first know the sequence of a project, and any hard dependencies between tasks. Additionally, resources must be allocated to each activity.
These four steps show where to use leveling and smoothing within project planning.

1. Create a Critical Path: First, establish a preliminary critical path, knowing that it may be adjusted upon further scrutiny.
2. Allocate Resources: Next, allocate resources to each activity. Determine the labor, equipment and materials required for each activity, as well as the time or amount for each.
3. Use Resource Leveling: This is where you take a hard look at the critical path and any resource limitations, to identify areas where resources exceed capacity. Applying the leveling technique may cause the critical path to increase.
4. Use Resource Smoothing: In this final stage, identify activities with float. Rearrange resources to create a more prudent distribution. The critical path isn’t affected by smoothing.

Once leveling and smoothing have been applied to a network diagram, you can be sure that all the resources are reliably distributed.

Resource Leveling vs Smoothing: Compare and Contrast

Although leveling and smoothing are both resource allocation techniques, each serves a distinct purpose and impacts a project differently.

• The impact on the schedule: Resource leveling extends a project’s deadline. Resource smoothing only adjusts activities with float, so the end date remains the same.
• The impact on the network diagram: Resource leveling impacts the critical path. Resource smoothing only adjusts non-critical activities; it redistributes resources without affecting the critical path.
• The placement in project planning: Resource leveling is a technique that’s applied after a preliminary critical path is established. It’s a step that finalizes the critical path. Resource smoothing occurs after resource leveling is complete, and when the critical path is firm.

As you can see, each technique impacts a project slightly differently. One handy visual to distinguish leveling versus smoothing is to imagine a home remodel. Leveling is like knocking out a wall to expand a room, in order to make more space. Smoothing is about rearranging the items in the newly expanded room.

Have you ever sat through a company goal-setting session and come out feeling less motivated that you did going in?

Maybe you came up with a list of personal goals that looked something like this:

• Network more.
• Be a better communicator.
• Stop going over budget all the time.

When you shared the goals, everyone approved. They seemed to demonstrate a commitment to succeed as a project manager.

Except they’re the exact same goals you set the previous year. And even though you may have attended some networking events, and read a book about listening skills, you feel as though you haven’t made any significant progress toward achieving any of them.

It’s discouraging to set goals that lead to nothing but dead ends, stagnation and zero growth.

If they never worked in the past, then how can you muster the motivation to try again? Aren’t goals supposed to enable growth and advancement? To shine a path to innovation and possibility?

The truth is, they can do all of these things. The secret lies in how the goal is written in the first place.

Are you aspiring to level up your project manager career, build a team and improve output? Then this is your guide to creating SMART goals to get you there.

The Skinny on SMART Goals

“SMART” is a goal setting process that provides a framework for creating goals that generate momentum and drive results. The process emphasizes specificity and metrics. The name is an acronym for: Specific, Measurable, Achievable, Relevant and Time-Bound.

How does this process work, exactly? Let’s break down each of the five parts.

Specific

The first step to a SMART goal is specificity. This means being crystal clear around what is to be accomplished. It sounds pretty basic, yet this characteristic is oftentimes omitted from goals, making them worthless and ineffective. It’s impossible to achieve something that’s unclear or undefined.

Being specific means answering these key questions:

• What needs to be accomplished?
• Who is involved?
• Where does the work take place?
• What are the limitations on the work?

This fist step means clearing away ambiguity by fleshing out all the details around the goal.

Measurable

This is about setting metrics to determine when a goal has been achieved. Depending on the nature of the goal, the metric may be a number, a percentage, a measurement of time or a dollar amount.

For example, a team may have the goal to increase gross sales. A measurement to clarify this goal might be: increase gross sales by 15% over the previous year’s sales. Or a team might have a goal to increase rapport. A measurable goal for this might be to spend the fifteen minutes before every meeting in casual catch-up conversation.

Metrics boost momentum. They provide something specific to aspire to, and allow a team to identify when a goal has been achieved, or how close they are.
If a goal isn’t measurable, this is a sign that it needs to be revised.

Achievable

Goals are all about stretching and aspiring. This step, however, is about taking a reality check and figuring out if the goal really is possible.

An unrealistic goal is a set-up for discouragement and burnout.

Taking a close look at the company’s constraints around budget, resources and time helps to determine a realistic and achievable goal.

Relevant

This step should probably be first, as it’s about clarifying the “why” of a goal. This means identifying the benefits a goal brings to the organization, the client, the team or the individual.

In order to determine if a goal is relevant, list the benefits created by the achievement of the goal. Next, align these benefits to the client’s requests or the company’s mission statement to see if they align.

Projects rarely follow a linear path, and having clarity around the “why” makes it possible to adapt, twist, pivot and turn, yet still remain on track to achieve the goal.

Time-Bound

This goal is similar to measurable; it means placing a goal within a time-frame. You may have a goal to read Vanity Fair, but you don’t want it to take seven years. This step further sharpens the goal to clarify just when it’s slated to come over the finish line.

A due date gives everyone clarity about what they need to do, and when they need to do it. It’s about efficiency, conserving resources and saving time.

One way to determine a reasonable time frame for a project is the critical path method. Once the critical path is determined, a project manager can incorporate efficiency tactics like crashing and fast tracking to ensure the team reaches the goal by the scheduled date.

Benefits of SMART Goals

These five criteria allow a team to create a realistic goal that achieves growth. SMART goals benefit a team in several key ways:

Increase Value

SMART goals are focused on creating benefits for the client and the team.

Motivate

Whereas a vague goal can zap a team’s energy, a SMART goal stretches people to expand their skill sets and grow.

With a goal like “make more money,” a team doesn’t even know what it’s set out to achieve, nor how to achieve it. A goal with a clear finish line, however, provides the team something specific to work toward, as well as the drive to get there.

Improve Processes

A SMART goal measures results. This makes it easy to identify processes and behaviors that work, and those that don’t. Once a team comes up with a winning formula for improving output, it’s able to use it again in other projects.

With this explanation, let’s now take a look at some examples of SMART goals that allow a project to soar!

8 Examples of SMART Goals for Project Managers

Ready to level up in your career? Here are eight examples of common goals for a project manager. First, we’ll look at a weak goal then reframe it using the SMART formula.

1. Improve Communication Skills

Projects are made up of so many moving people and parts that strong communication skills are a must. This is particularly the case with remote teams, as communication breaks down so easily without person-to-person interaction.

Setting a goal around communication may entail sitting down with the team and pinpointing what isn’t working. Listening to feedback identifies areas to improve, whether it’s a new meeting agenda or improved status reports.

2. Eliminate Scope Creep

Scope creep feels like an inevitability in every project. There’s always add-ons and adjustments, and before long the project manager is writing change orders. Can it be eliminated entirely?

3. Increase Team Collaboration

Teams that like and support one another produce better deliverables. Yet building a team with strong rapport is no small feat.

4. Reduce Project Risks

Some project managers would just as soon deal with issues as they transpire. Others know from experience that anticipating risks and issues ultimately saves time, money and resources.

5. Stay in Budget

This goal is kind of a no-brainer; it’s at the top of the list for any project manager.

6. Improve Quality of Deliverables

Without a system for quality control, it’s so easy for embarrassing gaffes and slip-ups to end up in the final deliverable.

7. Build Professional Contacts

Project management can be isolating. Rubbing shoulders with other people who have earned their stripes in the field provides an outlet to learn from others and air concerns.

8. Find New Opportunities to Expand Skill Set

As we all know, doing is the fastest way to learn. Growing as a project manager means finding opportunities to stretch skills and lead new teams.

These examples demonstrate how to shape realistic objectives that improve both a working environment and a professional career.

Have you ever promised someone you’ll meet them for dinner at 7:00, and a little voice inside your head knows it’ll be a close call?

Suppose it’s a Saturday, and you have a pile of errands to run: change the oil, get gas, buy groceries, drop your coat at the dry cleaner, turn in library books and visit your mother-in-law.

Even if you’ve done all these things a thousand times and know how long each should take, a variety of factors could throw you off. Maybe you’ll hit a traffic jam or run into long lines at the store, and leave your friend waiting alone at a dinner table, sipping a glass of ice water.

A complex project runs up against this same sort of conundrum. There’s always pressure to commit to a budget and a completion date. But when the project consists of hundreds of complex tasks, it’s a real challenge determining these values.

The Monte Carlo analysis is a project management technique for handling this sort of complexity. Don’t be fooled by the title: it’s not about trickery and sleight of hand. Rather, it’s a robust mathematical equation that carefully considers data from similar projects to provide estimates for the project at hand.

If you’re looking to minimize risk in your projects, then Monte Carlo may be just the solution. But applying it is a bit of a challenge. Let’s look at the ins and outs of the Monte Carlo analysis, and see where it fits into a risk management plan.

The History of the Monte Carlo Analysis

Monte Carlo is a resort in the micro state Monaco, located at the base of the Maritime Alps. It established casinos in the 1860s, and, with the addition of an opera house and sporting club over the next 50 years, became a luxury destination with picturesque villas overlooking the Mediterranean Ocean.

The resort has become synonymous with gambling, and two card games bear its namesake: a game of solitaire and three-card Monte, which uses three face-down cards and usually involves sleight of hand.

In the 1930s, Stanislam Unam, a scientist working in Los Alamos as a part of Manhattan Project, reflected on the probabilities in a game of solitaire. His reflections developed into the equations that became the basis for the method, which he assigned the code name “Monte Carlo,” as it was a favorite gambling destination of his uncle.

Over the following decades, several mathematicians honed the method into the simulation that’s used today.

A Definition of the Monte Carlo Analysis

A Monte Carlo analysis or simulation is part of a risk management plan. It’s used primarily to create estimates around a project’s duration and its cost.

Here is how the Project Management Glossary defines it: “Monte Carlo simulation is a computer-based technique that performs probabilistic forecasting of possible outcomes to facilitate decision making. For each possible decision — from the most high-risk to the most conservative — a Monte Carlo simulation provides decision makers with a range of possible outcomes and the likelihood that each will occur.”

The Monte Carlo analysis is highly mathematical, and provides a range for a project’s duration or cost, as well as probabilities for each outcome.

The method is fairly complex and isn’t always necessary for a project. However, in certain instances it can effectively pinpoint a project’s probable cost and duration.

Let’s look at the four steps to take in order to apply this simulation in a project.

The Four Steps to Run the Simulation

When a project consists of many complicated tasks, the Monte Carlo method helps to determine both its completion date and cost. Here are the steps for using the method on a project.

1. Determine the Critical Path

The first step is to sequence all of the project’s tasks and determine the critical path. Those tasks on the critical path are the focus of the Monte Carlo Method.

2. Estimate Each Activity on the Critical Path

Next, carefully consider the risks and uncertainties surrounding each critical activity, and determine a range of estimates for the duration or cost of each. Additionally, assign a probability to each value on this range.

For example, if an activity takes one, two, or three hours, determine the likelihood of each value. If it’s most likely to take two hours, this value is assigned the highest probability.

In order to determine these values with precision, it’s essential to have extensive experience in the specific task at hand. Speculating about the duration or costs of unfamiliar tasks can lead to inaccuracies, rendering the analysis useless.

3. Enter Estimates into the Monte Carlo Equation

As a final step, enter these values (time or cost plus probability) into a Monte Carlo equation. As this equation is complex, it’s necessary to do this using software; it cannot be calculated by hand.

The simulation then calculates a distribution for the duration or cost for the entire project, and assigns probabilities to each outcome.

4. Forecast the Project’s Duration or Cost

Using the distributions provided by the simulation, it’s possible to come up with a solid estimate for the project’s cost or duration.

Most values cluster around the predicted schedule or cost, and the 70-80% probability range yields a value that the project is likely to either smash or go below.

With these steps in mind, let’s look at an example for how this works.

Example of a Monte Carlo Analysis

Whether estimating a project’s cost or its duration, the Monte Carlo analysis works almost identically. Let’s look at how to build a distribution for the project of installing a kitchen backslash. These are the various durations for twenty previous installations:

2 installations: 1 hour or less
10 installations: 1 to 1.5 hours
5 installations: 1.5 to 2 hours
3 installations: 2 to 2.5 hours

In these twenty examples, the second value occurs the most frequently; in ten out of twenty times, the installation took between 1 and 1.5 hours. As ten is half of twenty, a project manager is 50% certain that an upcoming installation takes the same amount of time.

Suppose a project manager wants to have 85% certainty around the time estimate for the backsplash installation. With 20 samples, 85% represents 17 samples, which is the sum of the first 3 values. He or she can assign an estimate of two hours to the installations and be 85% certain of its accuracy. Being 100% certain means assigning the highest estimate of 2.5 hours.

Note that this is a simple project consisting of only one task. A kitchen remodel normally includes many, many more tasks, including installing counters, cupboards, a refrigerator and a stove. Calculating the duration for a complex project with multiple tasks requires using software with a Monte Carlo simulation.

Calculating cost uses the same process, except the estimated values are cost and probability rather than time and probability.

In summary, when estimating both cost and schedule, the Monte Carlo Method entails breaking the project down into individual activities, and assigning a range of values with corresponding probabilities for each.

Strengths & Weaknesses of the Simulation

Monte Carlo provides answers to pressing project questions, no doubt about it. In addition to providing estimates around cost and timeline, it also allows project managers to identify how much cushion they have around a slated budget and schedule.

But is Monte Carlo a solid method? Can a project manager lean in on the results from these calculations?

In order to use the process effectively, it’s necessary to understand both its strengths and its weaknesses. Let’s look at the strengths first.

Strengths

Provides Objective Analysis

The Monte Carlo analysis considers all of the activities on a critical path, giving them equal weight. This is very difficult to do on our own. Rather, it’s easy to have a myopic fixation on one activity and overlook others.

Provides Flexibility

The Monte Carlo simulation provides project managers with a range, given the inputs. A project manager can change the data to discover other ranges. Playing around with the calculated values and identifying various ranges helps to eliminate risk, as the project manager understands what he or she is getting into under various scenarios.

Weaknesses

Requires Lots of Data

The values in a Monte Carlo simulation are the most reliable when they’re taken from previous experience. To obtain these values, it’s necessary to have performed a similar project many times before.

If a team is doing a task for the very first time, or has only done it a few times, it’s impossible to come up with accurate ranges for the time or cost.

The principle “Garbage in, Garbage Out” applies here. If the numbers going into a Monte Carlo simulation are inaccurate, then the values that come out won’t be reliable.

Does Not Consider Correlation Between Tasks

Monte Carlo ignores something that’s clear to any project manager: tasks are correlated, and many tasks are similarly affected by the same uncertainties.

Take a construction project that’s heavily influenced by the weather. A snowstorm would severely impact the initial task of laying the foundation. The upcoming task of framing the house would be similarly delayed by this same snowstorm.

However, a Monte Carlo simulation doesn’t take this into account. It considers each task individually, and doesn’t consider the impact of one event on all the tasks collectively.

Requires a Huge Time Commitment

A Monte Carlo simulation entails looking at each individual task, and creating an estimate. In a project with several dozen tasks, coming up with these values takes some time. This is time dubiously spent, given that many of the inputs may not be accurate.

In conclusion, a Monte Carlo analysis can be a helpful part of a risk management plan. But it shouldn’t be used exclusively, but rather in combination with other methods and techniques.