The Cost of Under-Estimation

OK, so everyone agrees they want to avoid underestimating the time, effort and money it takes to meet their goals. But how exactly can you do that?

Well, the first step is merely to know that if you are human, you are quite likely underestimating everything.

The second step is to develop systems to counter-balance this very human tendency. Here’s one that we like. It’s pretty simple and it doesn't have to take long (in fact, it’s better when you do this quickly, so set a strict time limit). Here it is:

 
  1. Hold review of all project timelines and cost/revenue projections with the broadest possible team. (You want a diversity of views of the project, not just the bosses.)
  2. Ask: Given what we know today, are these estimates still reasonable and valid? 
  3. Ask: Do we want to make any changes going forward? 
  4. Set a strict time limit on this review of 5-10 minutes per project (this will force crisp discussion and avoid arguments over details). It is a check-in, not a re-examination of the entire project.
  5. Repeat regularly (weekly, monthly, quarterly, depending on the pace of your projects).

You can super-charge this by tracking your initial estimates and then the changes you make, so you can see the variance between those first estimates and delivered reality. After a while, you should be able to spot some patterns and create a constant to add to estimates upfront and arrive at more realistic timelines and costs.