WBS and Project Budgets
Recently, I was in a conversation with a project manager whose organization had just made a radical alteration to their manner of handling work breakdown structure. There is a connection between the work breakdown structure and the financial tracking for the project. Ideally, there is an immediate connection between the WBS and the expenditures for the individual WBS element.
We have written about the WBS and demonstrated the use of tools such as WBS Planner in past blog posts. We demonstrated how the WBS is the breakdown of the activities for a portion and ultimately for the entire project – at least by the phase in the life cycle.
However, that is not end of the usefulness of the WBS. Besides being able to assign specific individuals for specific activities as the WBS identifies, this breakdown facilitates estimating activities as well. Having the person responsible for the work to be involved in the estimating process helps with commitment to those estimates, after all, it is their estimate. As such, the WBS serves as a road map and baseline for the work from which the actual work and future changes will be assessed and perhaps integrated.
Still, we have not concluded the list of benefits from the WBS! One of the biggest benefits comes during the time of the monitor and control process group of the project. Each WBS item represents a work item or collection of work items that have been estimated (an educated guess). The juxtaposition of this estimate with the specific WBS item makes tracking the actual performance to achieve that specific WBS element, against what was projected possible. This in turn, enables discussions around what is the root cause and what would we need to do to improve the performance or how much it will take to actually meet the WBS element objective. These predictions are not possible if we do not connect budget to specific WBS elements. Now let us consider the manner in which this organization wishes to connect the WBS with the budget for the project. Affixing the budget for the project at the highest levels of the WBS structure, will then require manual pouring over the expenses to determine what specific area of the project is having difficulty staying within the cost constraints of project.
It may seem like more work to connect the WBS lower level breakdown components to the budget, but that is not necessarily true. Determining the true reason for budget failure or cost over-runs then becomes a manual process to ascertain what part or parts of the project is creating the over-run. Additionally, without the discrete elements in the WBS, we do not material that can be easily developed into a time phased budget for the project.