We all know and understand that all projects are not always successful. There will always be projects and initiatives that will not have an expected positive result.
Chapter five discusses in detail about estimating project times and costs. It discusses how it is important to understand the timeline for a project and understand the costs involved prior to heading into the project for it to be successful.
I work in an environment where the clients want tier 1 quality work but they only have budget for tier 3. Often I hear the frustration from our sales staff that they had to decline a project at work because the expectations the client had, we could not meet with the budget they were playing with.
One would think that the client should know and understand the budget based on market rates. However in the real world that is not the case. The client wants the quality of the top company but will use the price estimates from a company that does not specialize in it.
For example, my company, Production Resource Group for many years partnered with NFL in providing the audio, video and lighting for the Superbowl halftime events. The relationship between NFL and PRG had been really good as both sides were happy with the output. In 2013, due to some budget constraints, NFL did not want to spend as much on the halftime show but expected a similar product as previous years. After months of discussion back and forth, PRG determined they were going to decline the project as it was not possible for us to put on a high quality event with the given budget and PRG refused to provide a low quality output as PRG prides itself in the final product produced.
End result of the project was that 20 minutes after the halftime show ended the Superdome stadium where the Superbowl was being held, lost power. When PRG goes into large project such as these, they often use the top companies in the industry to partner with. Such as a power provider we use cost much more than what the budget allowed for. Because the NFL went with multiple vendors to provide the audio, video and lighting for the halftime show, instead of PRG who is an all-in-one shop, there was a miscommunication between the vendors which resulted in a power loss.
Chapter 5 talks about Strategic Misrepresentation where promoters underestimate the cost of a project and overestimate the project benefits in order to win approval. This is likely the case that could have happened in this situation where the NFL was satisfied with the promises made by the vendors not realizing the consequences.
My question for everyone is that, when is the quality given a higher preference over cost? Every day at work, all of us get opportunities to make decisions with this dilemma. How do you determine whether to go with a proven partner vs. going with a new comer to save cost?
Superbowl Power Outage Article – http://www.huffingtonpost.com/2013/02/03/super-bowl-power-outage-superdome-ravens-49ers_n_2612757.html
17 thoughts on “Budget or quality? Or can we have both?”
I deal with this all the time too. I am constantly asked to put together a top level event, but given a budget that allows much less than that. We get creative, or show a proposal for what that budget would provide. Usually, people cough up the extra money to get what they really want. It is difficult though – champagne dreams on a Coors Light budget.
Budget or quality is a common issue that we are faced with in my line of work too. It is often that we are assigned a budget followed up by increase in scope and everyone expects great quality. In order to deal with something like this, we basically prioritize the work in order to meet the budget and have good quality product. However, if it is not possible to prioritize and descope the work, we often ask for increase in the budget if the deliverables are critical. At that point, it is up to the leadership to provide direction in terms of priority and budget.
I think it is a balancing act where you have to pick the vendor that offers the most value for your dollar; an acceptable level of quality for the project at hand at the lowest cost. In the example you provided, there is no second chance so quality would weigh more heavily in the decision than cost. Soemthing where the stakes were not so high (or where you could switch vendors easily) might have a different equation.
We face the same types of challenges at the end of project life cycle when we much choose to keep the official hand off date or delay the project. If we have had delays that eat up our contingency, often the QA time is cut in order to keep the date. This has proven to be less than ideal as we have gone to the field with more known defects than we had planned. Furthermore, some “critical” defects were not found as a result of cutting this time. So, we have ended up sending patches to the field. Since many of our customers do not have/allow online access in their offices, we often have to duplicate physical copies of this patch. This duplication cost is a mere drop in the bucket when compared to pulling resources from the next project and spending more time on sustaining. It also costs us goodwill will customers. I would say that there is a balance between cost and quality. Quality will never be perfect, but should be prioritized in most instances.
I liked you insight to the power loss during the 2013 Super Bowl. I believe in the case of the Super Bowl, the NFL should have not tried to reduce costs related to their half time show. This was a case where quality may have been more important than the budget, due to the amount of people who watch.. It surprises me that they would have reduced that budget. It is well known how sponsors pay top dollar for commercial time, due to the exposure they receive. I would think the half time show performance would have the same mentality. However, I do think there are instances where cost might trump quality, but generally not when the end customer or consumer could potentially have a negative impact.
I see that this topic has garnered many responses already because it is a common situation that we all face. In particular, your example of the 2013 Super Bowl reminded me of a previous class that discussed “firing clients”. I think the best answer to your question is that as professionals, we should have the foresight to scope a job and adhere to guidelines set forth by a statement of work or other such document. Pressure to deviate from that plan, whether internal or external, should make us reconsider the reason why we provide our services. In your example, the value placed on reputation and perceived risk outweighed the profit and possible entry of a competitor – just as a project manager should keep their priorities in line.
Popular post! In my experience you get what you pay for, but if you cut corners on cost early on in the project there’s usually no amount of money that can make it right. About a year ago we had a choice to pay a small company ~$15k to develop a piece of automation equipment for a customer project or to pay a well known, large organization $125k to develop a much more sophisticated piece of equipment for the same project. We went with the $15k option. Long story short we have since spent nearly $100k in hard costs and do not have a production ready machine. Last week we had to cut a check for $150k to the large organization and have to wait another 8 weeks to be production ready. Our decision to go with an unproven supplier to save on cost nearly killed the whole project and destroyed our first year margins.
I run into a similar situation in the freight world. Freight costs are currently rising, due to many industry factors (increased manufacturing, driver shortages, etc) and the rates will not be going down anytime soon. Some customers have done the industry research and understand this phenomenon. My company is trying to offer more value-added services to go along with our freight, such as lane consolidation and engineering, in order to add more value while keeping our rates steady.
Very interesting to find out PRG’s involvement, or lack thereof, in the 2013 Superbowl power outage. It is always a difficult toss up between quality and cost. From a marketing stand point, many producers have built in different tiers in their product lines. Apple came out with the iphone 5 as their base model, 5S which is faster and offers bigger and newer specs, but more expensive, and the 5C as their lower tier product with cheaper parts and slower processors, but is much more affordable. The Gap company does the same with banana republic and old navy. From a product offering aspect, I find that to be the most conclusive and considerable option. From a consumer’s point of view, budget is always one of the most influential factors. The considerations to go over budget depends on the how critical the desired results are to the given scenario.
I think this is an issue a majority of us deal with on a regular basis. The difficult part of any project is providing quality results on a limited budget as that will always be main concern of the end user. These days in the business world, there are so many options and vendors when it comes to platforms, contractors, or applications that its very possible to get the entire scope of a project complete within a restricted budget if the project manager knows what resources he/she has and knows how to properly monitor and utilize them.
I like your first hand account of dealing with the NFL. I find it comical that they wanted to cut costs considering the league is an absolute cash cow.
In my business relationships are cherished and valued over any cost savings. We try to maintain relationships with all our vendors and rarely question costs, as we know it is going to get done the way we want it.
Our situation is probably much different than most companies, where penny pinching is the norm, but there is some major value in relationships. If it gets done correctly the first time, it may actually save money over having to re-do it.
This sounds like an opportunity for a priority matrix. In my opinion, your sales team has an opportunity to save some business. By working with your prospective customers, you can find out what their definition of quality looks like. There may be some middle ground there.
As Damion mentioned, you get what you pay for. I work for a company that is always more on the expensive side and clients always complain of that fact. It is unfortunate but the majority of clients have a top concern of budget first with quality well below that. There are the select few clients with room in the budget that are in fact looking for a quality deliverable. It is interesting that PRG has the ability to turn down work for that fact. I applaud them for doing so but they are in a very unique position that almost no other companies are in. It doesn’t matter how well our company performs, they would never turn down work. No matter the budget we will figure out how to complete the task. There needs to be a balance between budget and quality for most, but most importantly the client needs to not lose sight of quality. If they do, it would almost be impossible to deliver quality. When this occurs within our company a very clear line of communication is opened. The client needs to know and understand what to expect as far as a lower quality deliverable.
It really depends on the project or the product that is being created. A company like Cardinal Health may get involved in a project of creating hundreds of thousands of medical supplies and equipment for a customer. Usually there is a bid out on the product itself and who can deliver it the cheapest but at the highest quality. If Cardinal Health fails to deliver on their quality promise the results could be a large amount of lawsuits and bad publicity. So to them quality almost becomes an imperative issue no matter the cost.
Now in regards to your scenario I understand the NFL going with the cheaper option and trying to save money, but to them they probably didn’t fully think out what quality they were sacrificing until it was too late. They were promised this or that and the company they went with didn’t deliver. Although the NFL looked foolish I’m sure they recouped quite a bit of money spent on that project.
To begin with, I think you provided a very good example of quality vs. quantity. These 2 dynamics are always in play, and they get adjusted as needed throughout the project. I think the answer to the question is based back on the scope of the project and expected deliverables. The scope may provide some flexibility where you can balance these two dynamics, but other times like in your example its just not worth it. Sometimes I think companies can be too focused on being pleasing to others that they forget the potential outcomes from the project (failures or successes).
To begin with, I think you provided a very good example of quality vs. quantity. These 2 dynamics are always in play, and they get adjusted as needed throughout the project. I think the answer to the question is based back on the scope of the project and expected deliverable. The scope may provide some flexibility where you can balance these two dynamics, but other times like in your example its just not worth it. Sometimes I think companies can be too focused on being pleasing to others that they forget the potential outcomes from the project (failures or successes).
Interesting post. In manufacturing, we deal with the tradeoff between cost and quality on a daily basis. In general the way we make the decision is based on the impact to our customer and end product. We have very high quality standards typically, so provided the supplier can meet our minimum standards, we then look at price and quantity of defects and determine if we can accept the product. It is a complicated decision though, and often we find that if we go with the cheaper supplier, even though they meet the minimum specifications required, there are subtle minute differences in their materials that cause manufacturing problems for us. So we do a total cost analysis and try to be as real as possible with our expectations. If at the end of the analysis it looks like our end product will not be adversely impacted, we may consider going with the cheaper product. If we think the new product may cause any damage to our brand reputation, however, we are fiercely protective and will not sacrifice quality for cost. Like I mentioned, its a complicated decision!