31 Mar
When would you say your estimation work ends? Do you consider it done once it’s on the proposal? Does your estimation go straight on the invoice, and you are ready to move on to the next project? While some estimators may complete their estimation and never look back, you may miss out on something valuable if you do this. Actually, two things.
Actuals
Can you tell me, accurately and without guessing, how good your estimates are, or have been in the past? Probably not. The only way to know this is to compare them against the actual values in the end.
Sometimes it’s not that easy to know how much it actually cost to deliver particular requirements. It’s even more difficult to know the actuals if the set of requirements was large to begin with.
It strongly depends on the company, as some businesses are not necessarily interested in the true performance of the estimator, so this isn’t something that is kept track of. Additionally, there aren’t any tools out there that can help you compare estimates vs actuals – or the ones that do exist are missing some key features. This means that in order to make such comparisons, you need to put in some manual labour.
And finally, these comparisons are hard simply because estimates often end up breaking up into different sets of tasks. It’s difficult to keep track of what tasks were related to what part of your estimation.
Nevertheless, it is possible to keep track of actuals and tie them with the original estimations. It requires self discipline and engagement. The benefit of having this information is extremely valuable, though often underrated.
These numbers, while interesting even on their own, give you powerful insights and control of the estimation process. In the long run, they’ll help you improve your project management, the relationship with your clients, and even the financial performance of the business.
Place for improvement
Bad estimates make your company lose money. Sure, there are some cases where the business is willing to lose money at the bidding stage to earn more in the long run from maintenance. Sometimes you might be trying to win a prestigious client. However, these are situations I try to avoid, and if you find yourself doing this, then your work on these estimates doesn’t matter anyway as the business/sales team will push the offer no matter what.
When your company’s profit relies on accuracy in the estimation process, storing historical data is something that you should really consider (if you are not doing it already). Reports and sets of comparisons will help you determine which modules are underestimated and let you adjust future estimations in these areas. You will also see what part of the team is struggling with delivery, and you can decide whether you should aid them with additional resources or perhaps change the way they work.
Such data gets rid of the guesswork. You can implement an improvement in either the estimation technique or how your team works and verify their performance against the estimated hours. This will give you a clear view of which of the modifications you’ve introduced are working. Just remember to introduce one change at a time!
Such reports will also help in the financial department. More accurate estimations can be used in the income forecast and allow the finance team to predict cash flow in a better way. Plus, finance people just love accuracy in numbers – it will be easier to speak with them in meetings.
Ultimately. I think the most important benefit that comes from this additional work is that the stress level related to submitting estimations will decrease. The more accurate the number, the lower the pressure on you and your team. By improving estimations, you make all stakeholders happy.
In conclusion
There is no “silver bullet” that can make it easy to log and store estimates and later compare them against the correlating actuals. The process depends on what PM tools you use, how you estimate, and a million other factors. But, regardless of the difficulty, it is still worth considering building such reports for future use. You’ll thank yourself later.
Piotr Pozniak is the co-founder of The Beaverhead, a business process optimisation company, and the brains behind The Estimation blog. Before establishing The Beaverhead, Piotr worked as a software developer creating high-end products for the aviation industry. He saw how enterprise software is built, what the challenges are and how it works, and he wanted to provide that quality to smaller businesses and entrepreneurs. Over the years, Piotr has worked towards becoming a software cost estimation expert, and today he shares his knowledge through The Estimation blog.
Piotr Pozniak