Effort-Duration-Money

Quick reference

• 00:04 Hello, I'm Ray Sheen.
• 00:05 I'd like to talk with you today about project estimates and
• 00:08 the relationship between the effort estimate, the duration estimate, and
• 00:12 the money estimate on your project tasks.
• 00:15 These estimates are related, and when you have one,
• 00:18 you can derive the other two using some basic assumptions about your project.
• 00:22 Let's start with the effort estimate.
• 00:24 I find it's often easier to obtain effort estimates from team members than
• 00:29 either durations or money.
• 00:31 They may not know their availability, or the appropriate labor rate to use, but
• 00:35 they can tell you that it will take them 20 hours of work to complete the task.
• 00:40 I normally estimate this effort in either hours or
• 00:43 days of effort, not in calendar days of time.
• 00:46 The danger with calendar days is that team members will make assumptions about
• 00:50 availability that isn't stated in their estimate.
• 00:53 For example, if someone tells you, it's going to take two weeks to do a task.
• 00:58 I don't know if that means there's 80 hours of work there, or
• 01:01 only ten hours of work, but they can't start it until next Thursday.
• 01:05 So I always asked for the estimate in terms of effort, not calendar days.
• 01:09 Effort estimates are strongly related to the definition of done for the task.
• 01:15 The expected quality level impacts the required effort.
• 01:18 If a team member gives you an estimate for
• 01:20 a task that is significantly different than that which you expect,
• 01:24 check the quality level in the team member's assumption.
• 01:27 One of you may have the wrong definition of done for that task.
• 01:31 It's better to have that discussion now,
• 01:33 rather than in the middle of working on the project.
• 01:36 Once I have the effort estimate, I'm ready to determine the duration estimate.
• 01:40 Effort and duration are linked through a series of questions.
• 01:44 If we have the effort estimate,
• 01:46 we can create the duration estimate by answering these questions.
• 01:49 Also, if we're on a schedule-driven project,
• 01:52 we can start with the duration estimate, and then by asking the same questions,
• 01:57 we can determine how much effort can be expended on a task.
• 02:00 So, let's look at the questions.
• 02:01 I'll start with the effort estimate.
• 02:03 The effort estimate is in hours or days of work.
• 02:07 Let's say that we have a task with 40 hours of work.
• 02:10 The first question is whether the task will be done by multiple people or
• 02:14 just one person.
• 02:15 If it's just one person, then an example of 40 hours of work would be a duration of
• 02:20 five days, assuming that person worked full time.
• 02:23 But if there were five people on that task full time,
• 02:26 the task might be completed in just one day.
• 02:29 Next, for the individuals assigned to the task, what percentage of their
• 02:34 time will they actually be working in a productive manner on this task?
• 02:39 If the five people could only spend one hour a day,
• 02:42 then this task is now stretched out to eight days to complete.
• 02:47 The final question is whether any portion of this activity requires time without
• 02:51 any effort.
• 02:52 The classic example is waiting for paint to dry.
• 02:55 It takes two days of duration, but
• 02:57 there's no effort required by the team members watching the paint dry.
• 03:02 After answering these questions, you can now translate an effort estimate on
• 03:07 a task into a duration estimate for that task.
• 03:10 When placing that estimate in the calendar,
• 03:12 I need to consider the normal work days and holidays of the individuals involved.
• 03:17 Based upon how the task relates to other tasks, determine the start date,
• 03:21 then count out the days to completion, allowing for weekends, holidays, and
• 03:26 any other scheduled downtime.
• 03:27 Let's switch our focus now from time to money.
• 03:31 You can also take the effort estimate for a task and
• 03:34 convert it into a money estimate.
• 03:36 Once again, we start with the effort estimate in terms of how many hours or
• 03:40 days of work are required to complete the task or activity.
• 03:43 Our example was 40 hours of work.
• 03:46 Determine the appropriate labor rate to use for each individual working on
• 03:50 the task and multiply their hours by the labor cost rate to determine their cost.
• 03:54 Don't ask individuals how much money they're being paid per hour or per day.
• 03:59 Use the average organizational rates, you can get them from your HR or
• 04:04 finance person.
• 04:05 If our labor estimate was $100 per hour,
• 04:08 then the estimate for the 40 hours of work would be $4,000.
• 04:13 Then add whatever appropriate overhead related activities should apply to
• 04:17 the personnel costs, things like training and travel.
• 04:21 Let's say that there is an overnight trip at a cost of $500.
• 04:25 Well, now the estimate is $4,500.
• 04:29 Finally, there may be some additional cost estimates for
• 04:32 tasks associated with things being purchased.
• 04:34 Ideally, there are bids or proposals for those, if not,
• 04:37 work with purchasing to create an estimate.
• 04:40 Add everything together to have a money estimate for your task.
• 04:44 So, for our example, we need to purchase $3,000 of test samples.
• 04:49 Now, the estimate is 7,500.
• 04:52 And, of course, if we started with a $7,500 cost estimate,
• 04:56 we could subtract out the purchase materials and
• 04:59 the special expenses to have the labor cost, then divide by our labor rate
• 05:03 to know how many hours of work can be accomplished on that task.
• 05:07 Effort, duration, and money, they are related.
• 05:10 Once we have one of those,
• 05:12 we can derive the other two with just a few assumptions about our resources.

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