Chapter 13. Manage the Hot Costs

Six Sigma is a process improvement discipline that’s been used by such companies as Motorola, GTE, and Ford Motors to streamline efficiencies and control costs. The program focuses on measuring performance and then using those measures as a basis for process refinement. Six Sigma calls this “data-driven decision making.” The PMI’s PMBOK, another improvement framework, places a similar emphasis on project management’s use of performance and progress data as a way to shape future activity. These data-driven approaches to project management add an extra layer of rigor to the discipline, yet many shops forgo them. Instead, they rely on qualitative management to see them through, whereby experience, intuition, and judgment become the arbiters for decision making. Valuable as these attributes are, they tend to drive action based on perception rather than on fact. Because perception and fact often can lie quite some distance apart, the reliability of qualitative management is hard to bank on. Yet many IT projects are run this way, in accordance with the personal insights of project management and team members. Such “soft” decision making opens the risk for perceived value and performance levels to differ greatly from what’s actually happening.

One of the reasons Hollywood projects tend to come in on time, on budget, and to spec is that production teams rarely rely on qualitative management techniques. When a movie’s in production, every aspect of that production is regularly measured. Crew times are clocked; purchases are tallied; the number of script pages shot each day is recorded, as is the amount of film exposed. The detail even goes down to ordering a stapler. Every day these “hot costs” are summarized and presented to the producers. The producers compare them against budget and schedule figures to determine the current status of the shoot. The hot costs indicate if things are on track or off track; if the numbers show that they’re off, it’s a cue for the producers to confer with their colleagues and find a way to get back on track. That’s good project management at work. This chapter looks a little further into the use of hot costs and how the same idea can be applied to technology projects as a way to control progress and enhance performance.