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The "True Cost" Phantom in Project Cost Tracking

I want to know if I should wear a coat when I go out the door on an unpredictable spring morning. The temperature from the weather app on my phone isn't going to match exactly the temperature just outside my front door, but it will be close enough to make the decision. If the question at hand is whether or not I should wear a coat, it would be a costly mistake to set up an elaborate system of thermometers around my property to try increase the precision of my measurement of the temperature. The added expense wouldn't yield any better decisions about whether to wear a coat, so why bother?

We are interested in tracking the relative costs of the various projects we undertake in our organization. We must admit up front that we will never be able to measure the precise cost of each of our projects. Consider the following things you could include in the "true cost" measurement of a project. Where will you draw the line?

  • An engineer reads an article on the bus that gives her a great idea for the project. Bill the time of the bus ride to the project?
  • A secretary (not formally part of the project) orders pizza for a project team for a lunch meeting. Is her time free for the project or should she bill it?
  • A developer stays late to patch a critical error in a system and misses the beginning of a child's soccer game. Is missed family time--and the potential decrease in employee satisfaction--a cost of the project?
  • A developer runs some code that inadvertently maxes out the processor on a server in the data center for a few hours. Do we count the cost of the increased electricity and cooling costs in the data center?
The "true cost" of a project is a pointless fiction since "true cost" is a phantom we can't possible hope to perfectly quantify. It will always have a subjective element to it.

Measuring the cost of a project is a backward-looking metric. We only care about the cost insofar as it helps us make future decisions. When we are trying to give the university administration information about whether to add a new module to PeopleSoft, will it matter whether the cost of implementing the SharePoint upgrade last year was $30,000 or $50,000? Of course not. No project is exactly like the last one. Even if we could measure precisely the last project (which we can't) it wouldn't help us know exactly the cost of future projects. 

We don't pay the football coach based on the number of hours he spends drilling the team. We pay him based on the winning record he can produce. We don't really care about the inputs. We care about outputs. 

Does the the trustees of the university care about how many hours it takes us to complete a project? I doubt it. They won't think we're being dishonest with them if we can't provide a precise tally of hours we spent on a project. They care about the value we are producing for BYU and the value that BYU can in turn produce for the world.

Let's step from from our goal to track the "true cost" of a project. And let's go even further. Let's stop tracking our inputs and instead experiment with ways we can track our outputs. 

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