Project & Calculation Considerations For Innovative Ideas And Inefficiencies
June 4th 2019
As innovative ideas and existing inefficiencies are discovered in your organization, it may be time to
make a change. Before diving into the change, there are some necessary considerations. A team that has
a vested interest in the project is vital. There is no “right” tool or method to use for the project.
Some Project Considerations:
Determine the project roles people will perform and the responsibilities of each role
Determine how the team will approach the project
Templates and examples from other projects can be useful
(including digging through numerous and often obscure shared drives for the files
themselves, as well as determining which versions to use)
A work breakdown structure (WBS) should be created as the basis for a project schedule
Communicate to every team member what needs to be done and when it needs to be done
What is the team size required
Labor rate per hour
Number of business hours per week
Will there be any consulting fees
Cost of training that will need to be provided
Cost of other resources, such as hardware, software tools, etc.
Suggested Project Outcome Goals:
Cost reduction – An overall decrease of expense that falls to the bottom line.
If resources are eliminated, the project receives a cost reduction. These are reductions
should be measured by the amount of annualized cost eliminated from the business.
Increased capacity – Improve the productivity of a process, measured by calculating the
amount of expense retained to prevent future cost increases.
Cost avoidance – Responding to competitive pressures and changing environment or scenarios.
This benefit is the realistic cost avoided as a result of implementing a new process.
Revenue growth – An increase in revenue over a pre-defined period.
Retained revenue (profit) – Revenue from existing customers that is retained, measured by
calculating the value of existing business over a pre-defined period.
Improved investment income – The additional investment income earned due to accelerated cash
flow. The financial benefit is calculated by determining the net present value of the
accelerated cash flow over a pre-determined period.
Risk management – Projects that reduce company liability and risks in functional areas.
Benefits of these types of projects are measured by improvements in either reduced economic
capital or a lower cost of capital.
Other tools to consider in defining and breaking down work:
Gantt chart – Chart displays the work breakdown over time, as well as total duration
needed to complete tasks, and the percentage of the project completed.
Work breakdown structure (WBS) – A WBS defines and groups work elements within a project through
breaking the project down into smaller tasks.
Process map or process flow diagrams – Used to illustrate the project work as a sequence or
flow of steps, which can help ensure that all required work is accounted for.
Cost of Required Work For Project
There are variables to take into consideration when assigning costs required work of a project.
The costs and required work vary depending on the project. Some common factors to consider include:
Resources, including the type and quantity of workers needed
Hours required to perform the work
Wage rate per worker
Capital costs (i.e. equipment/hardware costs and software costs)
Factors to consider while estimating costs:
Labor = Number Of Business Days Required For The Effort X Business Hours Per Day X Average Labor Rate Per Hour
Vendor quotes for special services, such as assessment and consulting
Administrative expenses = Total Administration Work Hours X Labor Rate Per Hour
Training material and resources = Number Of Trainings X Average Hours Per Training X Number
Of People To Be Trained X Average Labor Rate
Resources (additional hardware, software, tools, etc.) = sum of all resource costs along with
related miscellaneous costs like installation and setup and training users
*Total cost of the effort is the sum of above costs
Labor Costs & Time Loss
When considering labor costs, automation savings, and time loss,
there are a couple of basic formulas to consider:
Hourly rate x labor hours = labor cost
Labor costs – automation cost savings = total cost savings
Time loss is time wasted on human-made errors or miscommunications.
They can add up in addition to the regular hourly pay or salaries your employees receive.
Other things that affect time loss include:
Illness or unexpected absence
Unproductive work hours (spent on social media, on the phone, etc.)
Time card exaggerations or poor time reporting
Project benefits have two forms, traceable and non-traceable.
Traceable can be calculated, and non-traceable are less defined.
Traceable benefits of the improvement can include:
Reduced waste = ((Total Size Of Waste Before Improvement) – (Total Size Of Waste After
Improvement) x Rate) / Size Of Waste
Reduced rework = (Total Rework Hours Before Improvement – Total Rework Hours After Improvement)
x Labor Rate Per Hour
Productivity gain = (Productivity After Improvement – Productivity Before Improvement) /
Productivity Before Improvement
Reduced cost of operations = (Cost Of Operation Before Improvement – Cost Of
Operation After Improvement) / Cost Of Operation After Improvement
Other tools to consider in defining and breaking down work:
Increase in customer satisfaction
Increase in revenue
Increase in market share
Key Performance Indicators
As with many management issues, it is often best to build a solution in stages.
Each stage must have clearly defined goals that can be accomplished, then move on to the next stage.
These defined goals are Key Performance Indicators (KPIs). Here are the steps to determine stages and
KPIs for a project:
Define the links between corporate goals and major operational perspectives.
Map these links to processes in each perspective area.
Define a set of near-term and medium-term metrics that drive new outcomes in each perspective.
Define specific gaps and dependencies across the organization that will need to occur to result in corporate success.
Implement the metrics as individual and group scores that are monitored to receive the strategic results.
Using the SMART test can assist in determining KPI Metrics:
S = Specific: Clear and focused to avoid misinterpretation
M = Measurable: Can be quantified and compared to other data
A = Attainable: Achievable, reasonable and credible under expected conditions
R = Realistic: Fits into the organization’s constraints and is cost effective
T = Timely: Doable within the time frame given
This simple test helps ensure that KPIs are clear.
Key performance indicators must be trendable, observable, reliable, measurable and specific.
Some examples of good KPIs surround:
Financial Project Calculations
Here are three essential calculations when considering a project and its costs. These are Return On
Investment (ROI), labor costs for ROI, and Net Present Value (NPV). Here is how to calculate each:
ROI = [(Financial Value – Project Cost) / Project Cost] x 100
TVDPresent – TVDProject
T = Time required for the process
V = Volume or quantity of units, transactions, people, etc. required
D = Dollars or cost required
Present = Current value
Project = Values a successful project will yield
Net Present Value (NPV) = Sum of benefits / (1 + r)n , where
r = rate of discount
n = period in years
Riley Moore (https://www.linkedin.com/in/rileyrm4tech)
Riley Moore, the 24-year old CEO at RM4Tech, the one and only completely family-owned family-run software
company, has used his mix of technical and business influences to bring his creative vision to life.
With the development of RM4Tech’s first solution, DirectSuggest the Suggestion Box Reimagined, he has become a
fresh face in the world of engagement and innovation. RM4Tech has also just released CrowdQuestion, Q& A The
Right Way. His passion to empower individuals to use their creativity and voice to make a difference in the
world is what drives him.
Riley's love for podcasting, mixed with his unrelenting drive to inspire
individuals to change the world through passion and hard-work, encouraged the creation of
The Moore You Know
Podcast. He hopes to impact the world through entrepreneurship and podcasting like those who inspired him.