Analogous estimating will improve the time and cost estimates for your project. First, let’s talk about why estimates are often inaccurate and useless to the project’s decision-makers. That’s because project managers frequently estimate cost and duration by “plucking numbers out of the sky.” Or they provide estimates that have no basis in reality but are what the project sponsor wants to hear.
For these project managers, it’s hard to change their well deserved reputation that they “can’t estimate worth a lick.” These PM’s make their initial estimates at the beginning of a project when they know very little about it. Usually the project manager has never done a project like the new one so the uncertainty is high. In fact, it’s very possible that no one in the organization has ever done a project exactly like this one. However, the executives need decision-making data about how long it will take and how much it will cost to decide whether the project’s worth doing.
Watch a project manager develop and then present project estimates using analogous estimating.
The project manager can often find out how long the executives want the project to take and how much they want it to cost. But the executives may not know the difference between a good, accurate estimate and the numbers they want. They plucked the numbers out of the sky and often bully the project manager into estimating the cost and duration to match those numbers.
Unfortunately, the executives don’t treat those numbers as values they rammed down the project manager’s throat. Instead they treat them as the project manager’s solemn commitment to the cost and duration of the project. The numbers they plucked from the sky are not based on the amount of work required for the deliverables to be produced. They don’t even reflect the size of the project team that will do the work.
This estimating cycle is what causes 70% of the projects in some organizations to finish late and over budget. This high failure rate undermines the credibility of project managers and makes it nearly impossible for the organization to launch strategic initiatives. But there is an answer.
Analogous Estimating: A Better Way to Estimate Costs and Time
Analogous estimating doesn’t provide a perfect solution but it is accurate and based on data instead of wishes and hopes. It also has the potential to substantially increase the organization’s project success rate from 30% to above 60%. And you can easily implement it.
The solution is relatively simple. The organization needs to keep track of the hours of work that each team member works on a project each week. It also needs to track the costs incurred to get the project done. In as little as 3 months, the organization will have a good start on a database for estimating new projects. This data gives you the best possible tracking on project progress and is the basis for analogous estimating.
Analogous Estimating: How It Works
Obviously, the new projects are not identical to the completed projects. Nevertheless, some of the tasks and some of the deliverables in the new projects are going to be similar to tasks and deliverables in the old ones. Project managers may have to look through a number of previously completed projects to find tasks and/or deliverables that are roughly similar to those in their new projects.
The longer the organization builds these archives of its project work and cost data, the more valuable it will be. After a year or two, it becomes relatively easy for project managers to find similar deliverables and tasks in the archives. These are the analogous deliverables they will use in their estimating process. Then the project manager and sponsor make adjustments to the historic, analogous data to reflect the differences between the old project and the new one.
An Example of Analogous Estimating
As an example, let’s say a new project requires a training session for the employees who will work on the new procedures and processes the project produces. The project manager could review the number of work hours used to create the training class curriculum in a previous project. They might also look at the actual classroom time used on the previous project. Then the project manager would consider the differences in complexity, scale, scope and focus between the old and new projects. The project manager would ask the Human Resources trainers to compare the two training efforts and they are told the new one is 20% more difficult and will take 20% more time than the old one.
Then the project manager would adjust the historic data for their project. Getting input from the people who will do the work is very valuable. It lets the project manager present data on the work and cost of deliverables that has a solid basis in reality. It’s certainly possible to debate the size of the adjustment factor. But you are still discussing the actual amount of work for a training class based on a previous project. That is much better than using data plucked from the sky.
You can use the analogous estimating technique at any level of the project. You can use it to develop initial estimates when a project is first discussed or initiated. You can also use it when you’re making estimates of the work and duration of the individual team members’ tasks and of the project as a whole.
How To Do Analogous Estimating
- You identify previously completed projects with archived data on work and cost by task and major deliverable. In organizations with mature project management processes, like established consulting or engineering firms, there may be a number of similar projects.
- On projects larger than the very smallest, you should include team members, stakeholders and the sponsor in examining the previous projects. They will help develop factors for adjusting the work and cost data.
- You should guide the group to consensus on the adjustment factor. Then use this as the basis for the business case and the work and cost estimates.
Analogous Estimating: Use Historical Data With Adjustments
Let’s look at some examples.
- Historic project- training for 30 reps: 50 hours of preparation and 16 hours delivery
- New project – 20% less preparation time, same 16 hours delivery time
- Analogous estimate – 40 hours preparation + 16 hours delivery = 50 hours of work
Analogous Estimating Summary
Analogous estimating is not perfect by any stretch of the imagination. However, it is much better than using pretend numbers that are politically attractive at the beginning of the project but disastrous at the end. It’s inexpensive to implement analogous estimating. It merely requires every project manager to use automated scheduling software to plan and track projects. The software makes project managers more efficient gives the organization the hours of work and the cost of each of the major and supporting project deliverables. That’s all the data that future project managers require for their analogous estimating.
You can learn more about analogous estimating techniques in our online project management courses. You work privately with a expert project manager. You control the schedule and pace and have as many phone calls and live video conferences as you wish. Take a look at the courses in your specialty. Which is the best Estimation Technique?
At the beginning of your course, when you and Dick talk to design your program and what you want to learn, you will select case studies that fit the kind of projects you want to manage. Chose you course and then select the which specialty case study from business, or marketing, or construction, or healthcare, or consulting. That way your case studies and project plans, schedules and presentations will fit your desired specialty.