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Steps to Project Planning - Project Budget, Documentation, and Effective Communication Strategy

This is the second leg of my article on project planning. In the previous article, we discussed the work, how to break it down into smaller tasks, and develop a grand project plan above it. Here, will discuss the following aspects of the project planning;

  • Budgeting process

  • Identifying and planning for risks

  • Documentation

  • Developing an effective communication strategy

Staircase to outside

Content of the Article

Project Budget

A project budget is the estimated monetary resources needed to achieve the project's goals and objectives. You break the budget down by milestones.

A forecast for your project budget is a cost estimate or a prediction over a period of time.

Budget creation takes place in the initiation phase of the project. The budgeting process usually happens in conjunction with the scheduling process.

Most projects are created to

  • Improve workforce productivity

  • Increase revenue

  • Attempt to save costs within an organization

A project manager must show the requested amount of money was used, to secure enough budget for future projects.

Project managers must take into account the following aspects of project budget consideration;

  • Understanding stakeholder needs

  • Budgeting for surprise expenses

  • Maintaining adaptability

  • Reviewing and re-forecasting throughout the entire project

Tax papers put on the table

Different types and aspects of project budgeting are listed below to provide an understanding of the concepts;

  • Resource cost rates i.e. the cost of a resource

  • Reserve analysis is a method to check for remaining project resources

  • A contingency budget is the money that is included to cover potentially unforeseen events that aren't accounted for in a cost estimate.

  • The cost of quality refers to all of the costs that are incurred to prevent issues with products, processes, or tasks

    • Prevention costs

    • Appraisal costs

    • Internal failure costs

    • External failure costs

Project budgeting best practices

The following is a list of the best practices that can be employed to provide the best possible budgets;

  • Reference historical data

  • Utilize the team, mentors, or manager

  • Time-phase the budget

  • Check, check, and double-check

Types of costs

The following lists the different types of costs attached to the project in summary;

Direct costs

  • Wages and salaries of employees and contractors

  • Materials costs

  • Equipment rental costs

  • Software licenses

  • Project-related travel and transportation costs

  • Staff training

Indirect costs

  • Administrative costs

  • Utilities

  • Insurance

  • General office equipment

  • Security

measuring of coins vs food

With the above inputs develop a baseline budget and perform a reserve analysis. Further, the project manager will use techniques like 'research' considering the below-stated points;

  • Historical data

  • Leveraging experts

  • Bottom-up approach

    • Estimate the cost of each item

    • Add those estimates together

    • Add contingency and Tax

    • Seek overall approval from key stakeholders.

  • Confirming accuracy

  • Setting your baseline

    • Buffer & Reserves

    • Planned Cost Vs Actual Cost

Maintain the Budget

Monitoring the budget is crucial for a project manager to enforce accountability in terms of spending.

Milestones are a great opportunity to re-review the budget to identify if anything needs to be reset or revisited throughout the project.

Fixed contracts are usually paid for when certain milestones are reached, whereas time and materials contracts are usually paid for monthly based on the hours worked and other fees associated with the work, like travel and meals.

Cost Control

Cost control is a practice where a project manager identifies factors that might impact their budget and then creates effective actions to minimize variances.

  • Accept that budget misses will happen.

  • Establish a sign-off plan and inform stakeholders of any expense changes that occur.

  • Manage changes as they’re made.

  • Adequately account for, adapt, and manage the budget with that risk in mind.

Budgeting challenges

The following list of the salient points that pose a challenge when we are budgeting;

  • Budget pre-allocation

  • Inaccurately calculating TCO - Total cost of ownership

  • Scope creep

A bunch of books

Budgeting Terms

The following is the list of relevant budgeting terms that need to be understood to start with the financial planning;

  • Cash Flow - It is the inflow and outflow of cash on the project

  • CAPEX (capital expenses) are an organization's major, long-term, upfront expenses, such as buildings, equipment, and vehicles.

  • OPEX (operating expenses) are the short-term expenses that are required for the day-to-day tasks involved in running the company, such as wages, rent, and utilities.

  • Contingency reserves are funds added to the estimated project cost to cover identified risks. These are also referred to as buffers.

  • Management reserves are used to cover the costs of unidentified risks typically in percentage 5-10%.

Understanding the procurement

Procurement means obtaining all of the materials, services, and supplies required to complete the project. Vendors are individuals or businesses that provide essential goods and services.

To have a better understanding of the procurement, the following needs to be considered;

  • Sourcing vendors

  • Getting quotes for their work

  • Deciphering which vendors will best fulfill the needs

  • Negotiating their contracts, setting deadlines for them

  • Evaluating performance

  • Ensuring payments are made

Procurement Process

The following list the process to set the procurement on track;

  • Initiating: Planning what you need to meet your project goals

  • Selecting: Deciding which suppliers and vendors to use

  • Contract writing: Developing, reviewing, and signing contracts

  • Controlling: Making payments, maintaining relationships, and ensuring quality

  • Completing: Measuring the success

An office glass wall consists of notes

Agile procurement management

Agile is an important concept and management style in the modern era of executing the project. It's the hallmark of doing things with minimal waste and parallel execution. The following is a brief note on the agile way of procurement;

  • Collaborative, with both the project team and the end supplier than traditional approaches.

  • There is a heavy emphasis on the relationship between these parties.

  • The whole project team plays a larger role in identifying what needs to be procured.

  • The contract is a living document

In comparison to traditional procurement management which has the following listed features;

  • Focus on standard contracts with clear terms and deliverables.

  • The project manager may be responsible for end-to-end procurement instead of the entire team providing input.

  • The contracts may feature lengthy and extensive documentation that includes fixed requirements and comprehensive details of the services and deliverables.

Procurement Documentation

The following list of the major types of documents used in the project for its seamless execution;

  • NDA - Non-Disclosure Agreement: The purpose of an NDA is to keep confidential information within the organization.

  • Request for proposal (RFP) - A document that outlines the details and requirements of an organization's project to be passed on to vendors

  • A statement of work (SOW) - is a document that lays out the products and services a vendor or contractor will provide for the organization.

The following roles help in drafting the above-stated documents;

  • Subject Matter Experts (SME)

  • Legal Advisor

Ethics in Procurement

Ethics plays an important role while partnering with vendors.

An ethical trap is an ethical dilemma that causes us to make a certain decision without regard for our ethical principles.

A brick pieces with I am good written on it

Project Management Institute (PMI) states the code of ethics as the values that drive ethical conduct in the project management profession. Below are the listed values;

  • Honesty

  • Responsibility

  • Respect

  • Fairness

Some unethical issues or risks are

  • Bribery or Corruption

  • Sole-supplier sourcing

  • Interaction with state-owned entities

Avoiding ethical traps

To avoid these ethical dilemmas, the following list can be taken into consideration when dealing with procurement;

  • Understand the legal requirements for the procurements

  • Stick to the ethical codes

  • Test your ethics

    • Shame: Would you be ashamed if someone knew what you did?

    • Community: Would you want your friends to know the decision you made?

    • Legal: Would you face legal action if you took this action?

    • Situation: Would your actions be justified in this situation?

    • Consequence: Would a negative outcome be worth your actions?

Risk Management

A risk is a potential event that can occur and can impact your project.

A board with danger zone written on it

An issue is a known or real problem that can affect the ability to complete a task.

Risk management is the process of identifying and evaluating potential risks and issues that could impact a project.

Risk management is a crucial part of the planning process and deals with the following insights;

  • Understanding of what could go wrong with your project.

  • Who do you need to consult about the risk?

  • How the potential risk could be mitigated?

If you don't plan ahead, you may put your project at risk of not meeting its project goal, timelines, or success criteria. Additionally, by failing to plan for risks, you also fail to think through the many different ways that your project could pivot and still meet its goals. Risks can affect projects in a variety of ways that are difficult to foresee.

When these moments arise, it is important to keep calm, figure out the root cause of the problem, and come up with a solution.

Phases of risk management

  1. Identify the risk.

  2. Analyze the risk.

  3. Evaluate the risk.

  4. Treat the risk.

  5. Monitor and control the risk.

When identifying risks, it is important to also consider the good things that could happen, which are considered opportunities. An opportunity is a potential positive outcome of a risk. As a project manager, you should always be on the lookout for potential opportunities when developing the risk management plan.

Brainstorming the risks

Cause-and-effect diagrams show the possible causes of an event or risk.

A risk register is a table or chart that contains a list of risks.

Risk assessment is the stage of risk management where the qualities of risk are estimated or measured. A probability and impact matrix is a tool used to prioritize project risks.

Probability and impact matrix

Impact refers to the damage a risk could cause if it occurs. Impact is also determined on a scale of high, medium, and low. Probability is the likelihood that a risk will occur.

Inherent risk is the measure of a risk calculated by its probability and impact.

Risk appetite refers to the willingness of an organization to accept the possible outcomes of a risk.

Fishbone Diagram

Fishbone diagrams help the team brainstorm potential causes of a problem or risk and sort them into useful categories. These categories show the areas that you should focus on to mitigate that risk. Fishbone diagrams are also very helpful in finding the root cause of a problem.

A root cause is the initial cause of a situation that introduces a problem or risk. The purpose of using fishbone diagrams in risk management is to identify the root cause of a potential problem for a project or program.

The steps to create a fishbone diagram are:

  • Define the problem

  • Identify the categories

  • Brainstorm the causes

  • Analyze the causes

A sample fishbone diagram

Types of Risks

  • Time risks refer to the possibility that project tasks will take longer than anticipated to complete.

  • Budget risk refers to the possibility that the cost of a project will increase due to poor planning or expanding the project scope.

  • Scope risk refers to the possibility that a project won't produce the results outlined in the project goals.

External risks, we're referring to risks that result from factors outside of the company that you have little to no control over.

Single point of failure is a risk that has the potential to be catastrophic and halt work across a project.

Dependency is a relationship between two project tasks, where the start or completion of one depends on the start or completion of the other. Because dependencies are the links that connect one project task to another, they are often a huge source of risk to a project.

If you don't plan for dependencies, you might risk and impact your budget schedule or project outcome.

Internal dependencies refer to dependencies within the project that you and your team have control over. External dependencies are dependencies that you have no control over.

Risk Mitigation Strategies

Using mitigation strategies to manage single-point-of-failure risks as

  • Avoid - This strategy seeks to sidestep—or avoid—the situation as a whole.

  • Minimize - Mitigating risk involves trying to minimize the catastrophic effects that it could have on the project.

  • Transfer - The strategy of transferring that is to shift the responsibility of handling the risk to someone else.

  • Accept - Accept the risk as the normal cost of doing business.

    • Active acceptance of risk usually means setting aside extra funds to pay your way out of trouble.

    • Passive acceptance of risk is the “do nothing” approach.

Types of Dependencies

There are four types of task dependencies:

  • Finish to Start (FS) - In this type of relationship between two tasks, Task A must be completed before Task B can start.

  • Finish to Finish (FF) - In this model, Task A must finish before Task B can finish.

  • Start to Start (SS) - In this model, Task A can’t begin until Task B begins.

  • Start to Finish (SF) - In this model, Task A must begin before Task B can be completed

Dependency graphs - As a project manager, you will use these dependencies to visually represent the flow of work during your project.

A reference dependencies chart from smartsheet

A decision tree is a flowchart that helps visualize the wider impact of a decision on the rest of your project.

An example of a decision flow diagram

Risk Management Plan

A risk management plan is a living document that contains information regarding high-level risks and the mitigation plan for each of those risks.

Risk management evolves throughout the project, the plan should be updated regularly to add newly identified risks, remove risks that are no longer relevant, and include any changes in the mitigation plans.

The stakeholders need to be aware of the risks facing a project, because if you don't tell your stakeholders about important risks, they may be less equipped to help you if an issue does arise. Unpleasant surprises like these can erode that trust in you as a leader of the project.

You should consider the severity of the identified risk. It is important to communicate early and often with stakeholders about medium- and high-level risks. For low-level risks, something as simple as an email might suffice.

Old age telephone hanging in the wall

Effective Communication Plan

Communication is the flow of information. It includes everything that's shared, how it's shared, and with whom.

Good effective communication should be;

  • Clear

  • Honest

  • Relevant

  • Frequent

Type of communication

  • Meetings

  • Emails

  • Phone calls

  • Written documents

  • Formal presentations

Communication is not a one-time event; it needs to happen throughout the entire life cycle of the project—from the project team, stakeholders, and the project manager.

Tips for effective communication

As the project manager, it is important to develop a communication plan for the duration of the project.

  • Recognize and understand individual differences

  • Brainstorm and craft the appropriate message

  • Deliver your message

  • Obtain feedback and incorporate that feedback going forward

A communication plan organizes and documents the process, types, and expectations of communication for the project, which comprises the following essential parts;

  • What needs to be communicated

  • Who needs to communicate

  • When communication needs to happen

  • Why and how to communicate

  • Where the information communicated is stored.

Creating a communication plan helps;

  • Improve the overall effectiveness of communication

  • Keeps people engaged and motivated

  • Gets stakeholders involved in effective conversations

Everyone absorbs information differently; what works best for you doesn't always work best for others.

The following states the modes of information process:

  • Visual

  • Listening

  • Reading and Analysis

  • Talking with others

After having the relevant communication plan, feedback for the communication plan is an important aspect that shouldn't be overlooked. Remember the following points;

  • What is working

  • What is not working

  • Where can improvements be made

Creating the communication plan

The following states the communication plan;

1. Identify

  • Project stakeholders:

    • Have you created a RACI chart or stakeholder map of all your stakeholders?

    • Who is your audience?

    • Who will need to be informed at different points during the project life cycle?

  • Communication frequency and method:

    • When and how often should you check in with your stakeholders?

    • What methods of communication do they prefer?

    • How much detail does each stakeholder need?

  • Goals:

    • What is the goal of your communication?

    • Do you need a response?

    • Are you trying to encourage engagement or simply providing an update?

  • Barriers:

    • Are there any time zone limitations?

    • Language barriers?

    • Do some stakeholders require time to reply or respond (e.g., an executive)?

    • Are there any privacy or internet access issues?

2. Document and develop

  • Add a column for notes.

  • Use formatting to highlight any key details in the plan.

  • Ensure that the team can access your document.

  • Test your plan.

3. Check-in

  • Anonymous survey forms

  • Polls or open feedback sessions during team meetings

  • One-on-one conversations and check-ins with key stakeholders

A table full of documents


Documentation storage and sharing is very important. Having plans in one place makes communication quicker, easier, and more streamlined. Documenting and organizing plans also provides visibility and accountability.

Having up-to-date plans will help ensure there's no room for misinterpretation or miscommunication.

If someone isn't a core part of the project team, you might not want them to have full access to all of the meeting notes. Instead, summarize the relevant information into a status report for those who need to stay informed of final outcomes but don't need all background information.

The big benefit to setting up your project plans and centralizing them in one place: is continuity.

It's always useful to store guides, manuals, meeting notes, plans, and processes all in a centralized place and clearly labeled. The project manager should also want to make sure the people in relevant roles are granted access to those documents. So even if you're not present, the project can carry on.

Knowledge Management

If someone needs to review this project for making decisions or planning similar projects, they should be able to easily access the information they need. With all the required input into consideration;

  • Determine what kind of information to share with whom and when.

  • Protect sensitive data from unauthorized view.

  • Only share information on a need-to-know basis.

  • It's the project manager's job to present the right information at the right time to the right people.

Remember to take special care with personally identifiable information or PII. It is anything that possibly reveals someone's identity, like a screen name, password, phone number, e-mail address, first or last name, or anything like that.

As a project manager, your goal is to have all of your project resources documented and linked in a way where you or anyone on the project can access what they need quickly.

To further read related articles please check the links below;

Source & Reference


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