Project Reserve: Eight Tips You Should Know
A key aspect leading to a successful project outcome is having adequate project reserve. Adequate project reserve also ensures a smoother, less stressful journey to the successful project outcome. Inadequate project reserve is rarely cited as a cause of project failure, but it is a contributing factor to the failure of many projects. Having adequate reserve is just common sense. Below are eight tips you should know about project reserve.
1. Make sure you have it. – Ask for project reserve. Use all your pervasive influence skills (Influence the Psychology of Persuasion, How to Get People To Do Stuff, Magic Words) to get the reserve. If you cannot get adequate reserve through influence of the proper channels, then sneak it in. Someone once told me “world class project management involves truth telling and promise keeping” and I agree. Unfortunately, in some organizations the leadership can’t handle the truth, or is afraid of the truth or wouldn’t know the truth if it was served on fine china right in front of them.
2. Build reserve into the baseline for high priority risks. – I have a client that makes the risk response costs for any risk with a likelihood of 75 percent or more part of the project baseline. So for high probability risks, the reserve is actually part of the project budget and they still have project reserve to cover the lower probability risks. This has served them well and stabilizes their cost and schedule baselines, providing less stress on the customer and when a high probability risks does not occur, the remaining mitigation funds are taken out of the project budget.
3. Don’t add reserve to every task or work package. – Reserve is best held separately from every task. If every task has reserve built in, then a lot of the work will appear to come in under budget or ahead of schedule making the project more difficult to manage because all your estimates will have built in errors. This also puts credibility with stakeholders at risk because they see a lot of poor estimates. Additionally, sometimes the work slows down or the costs increase to match the overinflated estimates for each task. Create schedule and cost buffers for reserve. If you are sneaking in project reserve use a couple of placeholder tasks near the end of the project to hide your reserve. (Yes, I learned this at NASA)
4. Never say how much reserve you have. – There should be a limited number of people who know how much reserve you have. If a lot of people know, someone will use it or a high-level leader will take it for something else or transfer it to another project
5. Try not to use reserve early. – This is especially true with schedule reserve. Using schedule reserve early steals that reserve from every task that follows it throughout the project. Projects can have multiple critical paths and the tighter resources get on a project the more critical and near critical paths are created, increasing the likelihood of missing the delivery date.
6. Calculate reserve in multiple ways. – You want to compare reserve estimates by assessing the risks of your project, by using whatever rules of thumb apply for your type of project be it construction or IT and most importantly by using the history of previous similar projects in your organization. I am astounded by the number of organizations that want to use a 5 percent reserve number when their projects have a delivery history of 25 percent overruns.
7. Make a show of using your reserve. – Sometimes you want to publicize the fact that you had to use reserve to cover something. Don’t just give reserve away, you may be able to use it as a bargaining chip for a favor to be named later. Additionally, demonstrate that you are going to make it painful if you must use reserve, especially when the reserve must be used because of inadequate planning or poor execution. As I always state, project managers must know how to take people to pain in a graceful way while being empathetic.
8. Track reserve use. – Maintain a history of reserve use throughout the project duration, comparing the amount of reserve left to the amount of work remaining. Remember reserve is like the battery in your mobile phone. It can appear to be going down slowly then suddenly, once it gets low, it falls off a cliff. Once your reserve gets less than 25 percent expect for it to decrease rapidly.
Great program and project managers know how to secure and make the most of their reserve. This is essential for successful delivery and customer satisfaction.
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