Metrics: Determining Costs and Profits, Part 1

Break out the pizzas and Thai food, the project's complete and on time!
There were a few tense minutes when you weren't certain you had enough
staff to do the work, but in the end, to your delight, you had more
than enough.

Before you order the works in toppings though, you may want to go over
the figures again to see whether the celebration is still affordable or
if you need to start whittling on the budget again. Yup, budget. Costs
and profit margins. Proper allocation of staff. Economic use of
manpower (even in our P.C. vocabulary).

Analysis of the Project Costs
Sitting in the planning meeting, hearing an idea, and saying, "Yes,
that's a great idea. Let's do it.", is one thing. It's quite another to
brainstorm, analyze, and then strategically choose which options are
the best, determine whether the resources are available to do the
project, and identify those resources. Most importantly, part of that
analytic period involves determining the project's costs compared with
the projected profits. And this is just the tip of the iceberg when it
comes to performance measurement and projection.

The parameters will change with each project. Not only that, the people
and departments involved will morph as differing issues and
deliverables arise. Information and knowledge sharing matters will
change, but a central repository is necessary so that past performance
can be scrutinized and compared, lessons can be learned, and resources
can be properly deployed.

Management Tools
Initially, staying on top of whom and what is available and what it is
costing to use those resources was simply a matter of setting up an
Excel spreadsheet and updating it daily. Not anymore. Technology has
evolved. Time constraints and volume of information have taken a
quantum leap into overdrive. Surely someone has developed models and
tools that busy managers can use to capture the necessary information
and use it to make decisions.

While looking about for some of those models and tools, I found a white
paper, "Cisco Internet Business Roadmap: Financial Management Solution
Guide" (http://216.239.37.100/search?
q=cache:jm1_vbtfeVQC:www.cisco.com/warp/public/779/smbiz/iroadmap/sitewi
de_assets/images/fm.pdf+deployment,+costs,+profits,+measures&hl=en),
that explains the importance of performance measurement in relation to
controlling and allocating costs while maximizing profits. Okay, in all
modesty, it is entirely possible that others have considered the same
issues and even worked out the solutions quite a bit before me.

The Right Fit
The next issue is finding these great tools and determining the right
one for your organization's needs. Well, quite a number of these
applications are available. While they all deliver the same ultimate
measurements, they have differences worth noting. We'll consider those
factors and some issues you may want to consider in choosing the right
one for next time.

But before you pick up the phone to order the celebration lunch for the
department, check your email. The CFO may have just sent you a message
saying something about how expensive that project was and, more
importantly, that costs to consumers will rise while third quarter
profits will drop (which means you may need to lay off more people)
unless you do a better job of managing your resources.

» posted by ITworld staff

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