Budgeting

This strategy is based on collecting the judgments and experiences of top and middle managers, and available past data concerning similar activities. These managers estimate overall project cost as well as the costs of the major subprojects that comprise it. These cost estimates are then given to lower-level managers, who are expected to continue the breakdown into budget estimates for the specific tasks and work packages that comprise the subprojects. This process continues to the lowest level.

The process parallels the hierarchical planning process described in the last chapter. The budget, like the project, is broken down into successively finer detail, starting from the top, or most aggregated level following the WBS. It is presumed that lower-level managers will argue for more funds if the budget allocation they have been granted is, in their judgment, insufficient for the tasks assigned However, this presumption is often incorrect. Instead of reasoned debate, argument sometimes ensues, or simply sullen silence. When senior managers insist on maintaining their budgetary positions—based on "considerable past experience"—|u-nior managers feel forced to accept what they perceive to be insufficient allocations to achieve the objectives to which they must commit.

Discussions between the authors and a large number of managers support the contention that lower-level managers often treat the entire budgeting process as if it were a zero-sum game, a game in which any individual's gain is another individual's loss. Competition among junior managers is often quite intense.

The advantage of this top-down process is that aggregate budgets can often be developed quite accurately, though a few individual elements may be significantly in error. Not only are budgets stable as a percent of total allocation, the statistical distribution of the budgets is also stable, making for high predictability (12|. Another advantage of the top-down process is that small yet costly tasks need not be individually identified, nor need it be feared that some small but important aspect has been overlooked. The experience and judgment of the executive is presumed automatically to factor all such elements into the overall estimate.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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