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Different ways to calculate the EAC (Estimate at Completion)
This formula is used when original estimation is met without any deviation. It
signifies that your project is going on good. You are maintaining the CPI and SPI
as 1 and you have to continue the project in the same way. It is always good for a
project manager if he or she is maintaining the CPI and SPI as 1 or even more
than 1.
This formula is used when the current deviation with the original estimation thought
to be different in the future. It is generally AC plus remaining value of the work to
perform.
This formula is used to calculate actual to date plus the remaining budget changed
based on the performance. It is simply used when we think that the current ratio is
typical as planned. We have to meet the schedule as decided earlier and we
calculate the EAC accordingly to meet that schedule.
Example 1: Abraham is the project manager for an ITES project. Suddenly, there is
some scope change request from the end customer and the higher management
asked project manager to give the new estimate of the total cost of the project with
this new implemented scope on the project. The project has already incurred an
amount of $250000 and has a CPI of 1.08. Project manager after discussing with
the team and all the stakeholders decided on some future investments like admin
cost as $60000, quality control cost as $25000, and miscellaneous cost as $11000.
What is the estimate at completion in this case?
In this example, the original estimates are poor because they are based on a
flawed approach. Therefore, you can calculate Estimate at Completion using the
formula from condition 1 here:
Example 2: Priya is the project manager for a KPO organization. She is managing
a large and complex project. In the mid-way of the project ongoing; the higher
management asked her for an updated estimate of the total cost of the project. At
the beginning of the project, the costs of the project were estimated at $150000 for
development, $170000 for design costs, and $120000 for quality control. The Cost
Performance Index of the project is 1.04. What is the Estimate at Completion at
this stage?
In this example, the CPI is not considered abnormal. Hence the formula using CPI
(condition 2) will be in use:
In this example, the CPI is considered abnormal. So you can calculate Estimate at
Completion using the formula from condition 3:
Example 4: Prem is working on a project. The CEO has told the shareholders that
the new system will be in place in six months, without discussing this first with the
PMO. At the start of the project, the costs of the project were estimated as
$150,000 for design, $700,000 for development, and $225,000 for quality
assurance. The project has spent $450,000 so far. The CPI for the project is 0.9
and the SPI is 0.8. The value of the work completed is $375,000. What is the
Estimate at Completion?
In this example, the CPI is considered abnormal. So you can calculate Estimate at
Completion using the formula from condition 4:
Mistakes can happen to both the beginners as well as the experienced project
managers. New project managers face project failures due to lack of experience
and effective management while experienced project managers face it as a result
of ignorance. For some or the other reason, project managers end up committing
some common project management mistakes resulting in adversities. The best
way to avoid these mistakes is by realizing the most frequent ones. Let’s have a
look at the top 10 project management mistakes that you need to avoid towards
successful project management.
1. Over Ambitious Commitment
This is one of the most common mistakes that not just project managers but every
professional commit at some point of their career. Committing over ambitiously is
nothing but giving a commitment on unrealistic achievement – be it in terms of
revenue earning or achieving deadline. As a project manager, you need to foresee
the scope of the project and your resource to achieve it and need to put things
practically in front of the stakeholders. Being over optimistic and holding on too
many assumptions might lead to greater adversities.
2. Lack of People Management
Most of the time, a project manager is assigned a project based on his or her
expertise in technology or the concerned product. But as a project manager, only
being a tech expert or a product expert is not enough; one needs to be an expert
in people management. A good technologist might not come out as good project
manager. After all at the end of the day, you need to manage a team of people
working towards a project completion. This is also the reason that PMBOK
recognizes human resource management as one of the 9 knowledge areas of
project management. Read our article on human resource planning for better
insights on the same.
3. Ignoring Trivial Problems
Ignoring trivial problems at times can land you in difficult situations. For example:
You have noticed that one of your team members is not handling work
professionally. You are ignoring his behavior and way of handling work for some
time. You are waiting for the performance review time to speak out. But that can
be too late. Your responsibility is to deliver the project successfully and finding any
problem even it is trivial should be tackled right away for no further discrepancies.
Ignoring problems will not make things work, on the contrary it might end up
resulting greater problems.
4. Lack of Communication
This is one of the most common project management mistakes. Here,
communication is referred with both stakeholders and team members; lack in
either way might result adversities. It is very important for the stakeholders to know
what is going on in the project and as a project manager; you need to
communicate it to them. On the other hand, communicating with team members
regularly is important to make the project work. Assigning tasks to respective
project manager does not complete your task and you need to go beyond that. So
that lack of communication does not result in various problems in project, the
necessity for daily standup meeting is ideally advised for effective project
management and clear communication.
5. Poor Time Management
Managing time at times can be very challenging while at other times very
frustrating. You need to complete a project within a set time and poor time
management and distribution might land you failing deadlines and unsuccessful
project delivery. The generous weeks that acted like comfortable cushions seem
evaporating as the project approaches to deadline. It is very easy to get side
tracked from time monitoring which leads to poor time management resulting in
failure in projects. Therefore, time management needs to be undertaken with
utmost importance by a project manager.
6. Lack of Cost Management
Careful budgeting is very important for every project as no one wants to face extra
costs and investments. Though a cost is estimated for an entire project, it is very
easy to get deviated from the budget if not managed properly. Proper distribution
of cost is required at the initial stage itself so that further extension in budget do
not take place. Various things might arise in the middle of the project that can
involve extra costs but it needs to be managed and controlled towards minimum
loss.
7. Inability to Adapt to Changes
Changes are very common for any project. One cannot expect to work in the same
flow with the same tasks till the project is completed. Different mishaps, events or
any other deviations might arise in the middle of projects and you need to be
prepared for all the changes. Lack of the ability to adapt to changes is the root
cause of many project failures. PRINCE2 certification defines early risk analysis
along with processes to control problems arising from unexpected reasons.
8. Misjudging User Expectations
Another common mistake project managers tend to make is misjudging user
expectations. One works in a project for the users and if after working on a project,
it is realized that the end product is not satisfactory from the users’ point of view, it
is not worth it. This occurs as a result of misjudging user expectations or lack of
enough research on audience expectations. A project manager needs to establish
the project outline and communicate to all the people involved so that feedback
can be implemented immediately rather than waiting till project completion.
9. Lack of Leadership
Project managers needs to be good leaders. They need to take the project and
team unity hand in hand. At times, some project managers ask the members to
take their respective tasks. This results out of over friendliness which is not healthy
for the project. At other times, some project managers assign tasks according with
strict terms to members. Both the cases are not ideal in project management. In
fact, project managers need to understand each of the team members and assign
them tasks which they are good at and will be useful for the project without
deviating their interest.
10. Inability to say “NO”
Many project managers find it difficult to say “NO” but it is always better to accept
the truth and give the same impression to the opposite person rather than
agreeing to unrealistic expectations. You need to understand the lines between
being competitive and unrealistic and agree to terms only that can be achieved by
your team.
These are the most common mistakes that project managers commit. PMP and
PRINCE2 are well-known approaches towards effective project management. To
know more on the same, explore Simplilearn’s PMP certification training courses
and PRINCE2 courses.