Effort estimation in project management
These are the most common methods
Effort estimation is probably one of the most common tasks of a project manager, but not one of the easiest. Thanks to many uncertainties, it is difficult to say how much effort will be required for a task, and it often turns out differently than expected. Well-known examples of faulty effort estimation are the Elbe Philharmonic Hall in Hamburg or Berlin's BER airport. While the estimation can still be made relatively accurately for similar projects, the situation is completely different for new kinds of projects. However, miscalculations are not only dangerous for large projects, but can also cause small projects to fail.
What is an effort estimate?
An effort estimate is used to determine the likely effort of a project. It also helps to assess the feasibilityof a project and thus make a decision for or against a project. Important parts of this are capacity, resource, time and cost planning A procedure for estimating effort should be simple to perform, user-friendly and as accurate as possible.
Why are effort estimates needed?
Effort estimations are usually imprecise and can be very flawed. Nevertheless, at least a rough effort estimate is important for a project, for example to set and apply for the project budget as well as to define an approximate time frame for the project.
>>Our experience shows that in practice it makes sense to carry out the effort estimation only up to a certain level of detail, but to review and adjust it regularly.<<
Walter Epple, Senior Consultant
Estimation methods
In order to obtain the most accurate estimate possible, different estimation methods can be used. For example, estimation methods differ in agileand classic project management. It is important that the effort estimation does not only take place at the beginning of a project, but is continuously updated, as this makes the estimation more and more accurate for the further course of the project.
1. Top-Down
In the top-down approach, the client makes a rough estimate at the beginning of a project, which the project team is then expected to use as a guide. This method is therefore based on the client’s experience and is very easy to implement. However, the estimates are usually very inaccurate, since the client cannot keep track of every necessary step.
2. Bottom-Up
The bottom-up approach is more complex and provides more meaningful insights than the top-down method. In this approach, individual work steps are evaluated, and their estimated duration and required resources are determined. This makes the method more accurate. However, those in charge may tend to plan for duration and costs somewhat more generously from the outset, which can lead to an inaccurate assessment of the project.
3. Expert Estimate
As a project manager, you usually aren’t equally knowledgeable about every topic relevant to the project. Therefore, you can seek an estimate from someone who is an expert in the respective field and can thus accurately assess the effort required for a task.
Our tip: When using expert estimation, it’s a good idea to consult several experts and then calculate the average of their estimates. To improve the quality of the estimate, one of the experts should, if possible, be involved in the project.
Other variations of expert estimation include:
- PERT Three-Point Estimation
In this method, three values are estimated based on experience: an optimistic value, a pessimistic value, and a most likely value. The expected value is then calculated from these values. Since this is a very simple and quick method, it is particularly well-suited for early project phases. - Delphi Method
The Delphi method is based on a bottom-up approach. However, it involves consulting multiple experts to make the estimate. These experts do not discuss the matter beforehand and submit their estimates anonymously. If the results differ significantly, they discuss the matter to reach a consensus. The estimates are then re-evaluated and discussed. In this way, the estimate is relatively accurate, but the process requires the involvement of several experts over an extended period of time. - Planning Poker
Planning Poker is similar to the Delphi method. Experts submit blindly estimated estimates. However, if these estimates differ significantly, there is no subsequent discussion. Instead, the experts with the highest and lowest estimates explain their reasons for their respective decisions. Then, all experts submit new estimates until a consensus is reached.
4. Analogy Method
In the analogy method, effort estimates are derived from similar projects that have already been completed.
A variation of this is the relational method:
The relational method is also based on empirical data from similar projects. However, it additionally defines fixed guidelines and factors that are incorporated into the calculation. These include, for example, specific product requirements or employee experience.
5. Multiplication Method
In the multiplication method, task packages are created and performed multiple times. The total effort is then calculated by multiplying the number of packages by their estimated effort. This method is therefore particularly suitable when individual tasks in a project are repeated frequently.
6. Weighting Method
This method determines which factors influence a project and to what extent. The total effort is then calculated using the various weightings.
7. Percentage Method
The percentage method uses the current actual effort for a project as the basis for calculating the effort for subsequent phases. Alternatively, the effort estimated for a project phase using another method can also be used as the basis for the calculation. This makes the method applicable at an early stage.
8. Algorithmic Estimation Methods
Algorithmic estimation methods are often not used until later phases of a project, as their application requires detailed knowledge of the project. These methods include:
- Function Point
- Data Point
- Object Point
- Cocomo (Constructive Cost Model)
Selecting the appropriate estimation method
Which estimation method is used depends on the one hand on the current progress of the project, but on the other hand also on the time available as well as on available experts. Therefore, the choice of a suitable estimation method should always be made individually. For early, rough estimates, the analogy, relation and percentage methods are suitable. The weighting and multiplication methods, on the other hand, are more suitable if the influencing factors of a project are precisely known. If appropriate experts are available, an expert estimate can be made at any time. Depending on the method used, however, it is more time-consuming to carry out. Algorithmic methods are particularly suitable in later project phases, as they require detailed knowledge.
Conclusion
Effort estimates are time-consuming, often imprecise and mostly dependent on experience. Nevertheless, they are needed to be able to estimate at least roughly how complex a project will be and how much time its implementation will take. In this way, it is also possible to check during the implementation of the project whether the tasks will be completed according to plan or whether the project will exceed the planned effort.
A project management software keeps track of all tasks of a project - regardless of whether you plan classically with a Gantt chart or use a Kanban board. You can assign a planned effort to these tasks and record the efforts already made during the implementation of the project. With a plan-actual comparison or anearned value analysis,you can quickly determine whether the planned effort has been exceeded and in this way make a forecast about the further course of the project. This makes your estimates more accurate during the implementation of the project.
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