Project Management Tool No. 1: The Work Breakdown Structure (WBS) Way to Better Project Effort Estimation & Budgeting

Here's a quick summary of the PMP®-standard project estimating process:

First and foremost, you need to lay out a network diagram known as a 'work breakdown structure' (WBS). The WBS is intended to define all discrete project tasks that require at least x hours of work to complete; the x figure can vary depending on size of project, desired accuracy of estimate, etc.

For an IT consultancy, for example, for which discrete amounts of hours must be accounted for and billed, you might want to make x = 8 hours for a granular WBS. However this value can and should be adjusted as desired, and generally the lowest level is set at 80 hours. Too much or too little detail in a WBS can actually diminish its usefulness and accuracy.

Here's how to develop your WBS and take the basic steps required to help you estimate how much time and money you'll need for your project:

1. Project Manager and/or other 'project leader'/experts develop(s) first-round WBS outlining main categories of work to be done, with as many tasks detailed as much as possible in that first-round draft.
2. PM meets with likely project team members, explains overall Goal and Objectives of project, and reviews first-draft WBS, adding more detailed tasks to it and revising others based on team member input. Once the WBS is further detailed, PM solicits team member input on effort estimates (time to finish each defined task). PM should solicit one time estimate for tasks that are relatively 'known' or well-defined; for more unknown tasks or ones that the team are less certain of estimating, solicit three time estimates (Optimistic, Most Likely, and Pessimistic), which will be used later to calculate a single time estimate (see Step 4). A well-organized 1-hour meeting with likely project team members should be sufficient to solicit both more specific tasks for the WBS and time estimates for all defined WBS tasks.
3. (Optional: Review WBS and initial time estimates with other PMs/project leaders and/or subject-matter experts to identify any missing elements and/or to refine estimates and tasks as necessary. If extensive revision on the WBS is done here, the PM will have to hold another meeting with likely project team members to solicit revised estimates for revised tasks and/or new estimates for new tasks.)
4. For 'uncertain/unknown' tasks, PM uses PERT formula to identify one most likely task time estimate (Optimistic + (4 x Most Likely) + Pessimistic)/6. PM now has a single time estimate for all defined project tasks. These estimates can be combined to estimate the entire effort necessary to execute on the project in terms of total number of man hours required. A well-done WBS also indicates likely expenses for equipment and materiel as well, which, when added to labor estimates, give you a better, more accurate project budget and baseline.

There you go, just four steps and you're on your way to better project planning! And in addition to having more accurate time estimates, the PM now also has the information necessary to diagram the project in terms of which tasks should/have to take place when (i.e., prototyping after requirements-gathering, development after development environment set-up). Once the project task precedence is diagrammed, early and late start and finish dates can be calculated, and the project's critical path can be identified.

If you do the WBS in Microsoft Project, you can use it to immediately generate Gantt charts that may be useful in internal or external sales efforts, in addition to setting up a range of tools for project progress tracking and reporting.

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