Project Management: Budget, Cost, and Scheduling Guide

Managing the Project

Project management has become so refined over the course of its development that the implementation of a project based on a solid project management foundation is actually more important than having any in-depth knowledge or expertise in a particular industry (Badiru & Adedeji, 2012).

The four most common team compositions are the purely functional project structure, the pure project organization, the cross-functional team, and the hybrid or matrix team (Field & Keller, 1998). Furthermore, there is a wide array of outsourcing and project partnering opportunities that can further complicate the network structure (Cleland & Ireland, 2006).

Team Structures and Scheduling

Establishing a schedule is more than likely one of the most important critical success factors of any modern project (Thomsett, 2010). Many project management software solutions, such as Microsoft Project, can be a project manager's most important asset in managing and tracking a project's progress (Biafore, 2010).

For simple projects with fewer than thirty activities, a mere list of activities may suffice. However, for more complex projects it is critical to utilize a network diagram in order to provide a visual representation of how the project's components are organized. A network diagram offers a quick and incredibly useful visual of how activities are related in terms of their relationships and interdependencies (Campbell, 2005).

Managing the Budget

One of the keys to developing meaningful objectives is to make sure they are SMART: specific, measurable, aggressive, realistic, and time-sensitive (Portney, 2010).

Not all projects go as planned. In fact, most projects face a wide array of problems or unpredicted events that delay the schedule significantly or push the project well over budget. In situations where these setbacks are extreme, it may become necessary to consider all of the project's expenditures a sunk cost and cancel the project altogether before it gets further out of control (Staw & Ross, 1987).

Most project managers collect data about the budget and compile it into a database — either as a stand-alone system or as part of a project management software suite. However, raw data alone does not represent meaningful information, and project managers must determine how to make that data useful to their specific job requirements (Drucker, 2005).

The budgeting process is largely dependent on human behavior, and many personalities can drive budgeting decisions irrespective of the actual financial data being applied (Steele & Albright, 2004).

The budgeting process is often thought of as a static process in which targets are set and remain unchanged. However, many options exist for flexible budgeting. These can be designed around either variable costs or production data for a selected activity index (Weygandt, Kimmel, & Kieso, 2008).

Managers are constantly confronted with conflicts that can have either a productive or counterproductive influence on a project's budget. Research indicates, however, that organizations can structure cooperative goals and develop constructive controversy skills to help their managers turn budget conflicts to their advantage (Etherington & Tjosvol, 2009).

There is also a wide range of financing sources that can be harnessed to fund projects, including traditional sources of capital as well as many creative alternatives (Anandarajah, Aseevatham, & Reid, 2005).

Project budgeting is a function of managerial planning and not merely a computational exercise (Hart, Wilson, & Keers, 2000). In fact, there has been a movement to streamline the budget process, and a group of pioneering Scandinavian companies have dispensed with formal budgeting altogether due to the lengthy and arduous process it typically involves (Neely, Bourne, & Adams, 2003).