How to avoid excessive project costs by the closure of the project

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How to avoid excessive project costs by the closure of the project

By Anton Sirik

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How to avoid excessive project costs by the closure of the project

Operational excellence programs work hard, improving efficiency and reducing costs. Suddenly a problem strikes, costing millions. Actually, this can happen quite often and as a result is most likely to become part of the management culture.

This does not have to persist. Can you imagine each task of a project starting on time and finishing on time? Or think of the 10% budget for unforeseen…


Lean in projects, a good start brings you only halfway

Coaching Operational Excellence Programs is my work and also my passion. Today, I will talk about the initial start, because we make important choices in that phase. Sometimes the bottleneck is left out of scope because it is too sensitive. The jar with gold gets out of the picture. Let us examine how we can act differently.

Each project has a delay between cause and impact. It is an advantage, problems and uncertainties can be pushed forward and dealt with in due course. The disadvantage is that errors, once made, are more difficult to trace when the project proceeds. But the consequence may be high costs by the end of the project (cost of non-quality).

Sometimes it is a few major issues that get attention, and sometimes it is a number of small issues that surface unexpectedly. Or a combination. It can accumulate from 10 to 20% of the project value. Typically there is a budget for the unforeseen so that we actually accept this waste in advance. Imagine it can be reduced.

how to avoid excessive project costs

A natural response is to organize stage-gates or milestones; and risk assessment sessions. Do you recall the boring meetings with FMEA- or RCA-excel sheets on the beamer and a full audience? But are we removing the cause or repairing the error? It is an inspection rather than a control. And all we do is finding risks early, so that the costs are reduced. The costs identified this way are covered with the unforeseen budget? Or hidden in the normal project costs so that these costs remain invisible?

When talking to engineers, they know what I talk about. Time pressure is felt such that the last verification on Friday afternoon may not be performed full-heartedly. Or the experienced engineer is trusted without any check at all, and maybe this engineer has an uncomfortable weekend with gnawing uncertainty? Sometimes he will verify all calculations next Monday morning. But a number of bombs will be buried under the project surface. When time is allowed, it can be dismantled; or a lucky design change can extinguish the burning wick. Eventually, for this project ample small and larger bombs remain, causing setbacks in the end as always was the case. At the expense of sometimes safety, always money, and maybe reputation.

All of this is commonly known, strange that nobody seems to act – how come?

1) Time pressure is part of the reality because clients always need results faster than possible; resignation;

2) Engineers never finish a job, it can be improved forever; excuses;

3) And Costs of Non Quality are typical for the industry; and the same for all competitors.

My approach is simple, but not easy. Lean Basic Controls can help you to achieve:

1) Engineers finishing their tasks in time, with less corrections;

2) Milestone meetings and risk sessions generating less actions, and allowing time for complex issues;

3) Near delivery, less setbacks occur and the unforeseen budget is not spent.
This approach gives results faster than you would expect. It works by saving time rather than saving money. It is not easy because project leaders will be required to change their style.


By: Leo Monhemius
Posted: October 27, 2017, 9:52 am

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Anton Sirik

Proven success in Strategy Execution, Operational Excellence, Business Transformation, Digital Marketing @ i-nexus

i-nexus Strategy Execution Software helps Global 5000 organizations achieve more goals, faster with less effort

I am part of a leading Strategy Execution, Operational Excellence, and Business Transformation solutions provider, who have revolutionized how organizations get important things done

With i-nexus software you will get full visibility into the progress of your programs, comprehensive Hoshin functionality to support robust strategy execution and the ability to replicate the best project solutions. We support multiple performance management frameworks including:
Hoshin Planning/ Policy Deployment
Balanced Scorecard
Business Excellence Model

i-nexus helps:
Leaders of Operational Excellence programs ensure their improvement investment is aligned with the business goals and is delivering financial and non-financial benefits;
Executives and Business leaders utilize Hoshin Planning to cascade business goals to actionable priorities with X-matrices and drive on-going review with bowling charts;
Business Transformation Leaders and Heads of Enterprise Program Offices align their strategic initiatives with business objectives, drive execution of strategic programs and track the realization of benefits.