The simulation cost system is a system that uses the principle of structure management assumption orientation to uniformly convert the manpower, time and funds of the project itself into simulation costs, and conduct quantitative performance appraisal of the project.
A perverse 80/20 principle
Recently, a small software company in Guangdong went bankrupt due to a "surprise" foreign investment project. After several setbacks, the company signed a major project with a foreign company, thinking that it would get out of the predicament. Unexpectedly, the project was habitually delayed, and the defendant went to court and went bankrupt and liquidated due to the judgment of huge compensation.
A consulting firm once conducted a survey and the results showed that the proportion of project delays was as high as 81%, which means that only 19% of the projects were basically completed on time. This is a very perverse 80/20 principle! And it has not been solved for a long time, and it is even considered to be a "normal range" because of "habituation", which also exposes the fatal vulnerability of most domestic IT companies in project management!
The conclusion of the survey shows that the enterprise's project operation and management ability is the decisive factor of project benefit. Enterprise Online China (www.eolcn.net) is one of the companies that can better grasp the project operation by virtue of the innovative project management mechanism - "simulation cost system".
'Structure management' leads to project delays
"Structural management" aims at optimizing performance, decomposes the internal components of the system quantitatively and structurally, and transforms the decomposed management elements into three dimensions of monetary capital, human capital, and time capital, and then uses assumption-oriented thinking, according to Systematic and structured management based on the principle of balance. Structural management tools are one of the best tools for studying and coordinating the inter-conversion of various costs.
● The reason for the negative performance of most projects is that the structural transformation between time cost and labor cost is neglected.
In the operation of IT projects, labor costs are often the largest cost component. Therefore, poor control of labor costs often turns benefit projects into "negative performance projects". When many project managers make project cost budgets, they always ignore the most important cost associated with labor cost - time cost.
● The "project commission" system and the process of "result feedback" are the institutional roots of "negative performance projects".
At present, in the operation of IT projects, the "project commission" system is generally popular. For example, for a project of 1 million yuan, the project team's commission varies from 2% to 10% after completion, but whether the project is completed in one month or half a year is completely different in cost. The fatal disadvantage of the project commission system is that there is no assessment. Time cost, some companies do not let development team members know the project goals due to financial principles. In this way, employees do not know the real impact of day-to-day work results and effort on performance. When the project operation is nearing the end, when the main management personnel estimate that there is no benefit, they will complain and criticize the developers, and may even cancel the originally agreed commission due to the lack of benefit, which greatly reduces the morale of the team and makes the operation of the next project Create a vicious circle. But publicizing goals can sometimes create management problems. For example, when a company receives a project of 1 million yuan, because it is profitable, employees privately negotiate with customers to contract the project at half price. Whether or not to disclose key financial indicators often makes some companies in a dilemma.
From the perspective of financial management, labor costs and time costs are variable costs, which can be controlled by management means. This is a guideline. "Simulated costing" is an innovative management tool to practice this principle.
eliminate negative performance
1. Simulation cost assessment system
After the three elements of structural management, namely monetary capital, human capital and time capital are quantified (that is, human capital is quantified as "quantity and quality"; capital capital is quantified as "cost and profit"; time capital is quantified as "distance and efficiency"), Conversion and conversion can be performed between each element. The simulation cost system is to use the principle of structure management assumption orientation, first set a "simulation cost" as a standard measurement value, and then uniformly convert the "three elements of structure management" of the project itself into a simulation cost, and conduct quantitative performance appraisal of the project system. .
Second, the project practice application method
● Project process assessment
1 Hypothesis-oriented: Assuming that after the various cost elements of the comprehensive company are apportioned, the average monthly apportionment of the company’s comprehensive cost by technology developers is 10,000 yuan, and the model is established based on 10,000 yuan (hereinafter referred to as the “standard amount”).
2 Calculate the standard amount of the project: when the project is undertaken, it will be converted into the standard amount according to the project contract amount. For example, assuming that the amount of the contracted project is 100,000 yuan, it is 10 standard quantities. Under normal circumstances, 1 person-time < October to complete the project, 2 person-time < May to complete the project... In simulation, the project is profitable .
3 Cost calculation: From the time of signing the contract, the project manager will convert the contract project into the planned cost according to the time schedule made by the work plan after the preliminary analysis of the project demand development, the designation of the project leader, the formation of the project team, and the assignment of tasks. , and evaluate the project team according to the planned cost.
4 Cost assessment: Calculate the actual execution cost according to the project working time and input labor cost. A project whose actual execution cost is greater than the planned cost is a "negative performance project". Projects whose actual execution cost is less than the "planned cost". For the "performance increase project".
5 Process control: The characteristics of the simulation cost system are not only to let employees know the project simulation objectives and performance goals from the beginning, that is, the project members clearly define "how many people and how much time to complete the project" from the beginning, but also pay attention to process control. The method of process control is basically the same as the usual method of project management. It is necessary to fill in the execution form, for example, the assessment "I failed to complete the work of the day as planned, did you notify the relevant personnel in advance?" and so on. The difference is that in the work form In , two items were added: project simulation cost target setting and process record; HR department's project execution result will affect employee salary, title, and position, etc. That is to say, employees are assessed on a project-by-project basis, not on a year-end basis.
● Project process adjustment
1 Because there are uncertain risk factors in any project, in the simulation cost system, it is stipulated that the project manager has the right to exercise the right to add "planned cost" during the project execution process. For projects below 10 standard quantities, the additional ratio cannot exceed 15 %; for projects with more than 10 standard quantities, the additional ratio cannot exceed 20%; additional simulation costs exceeding 20% are regarded as the responsibility of the project manager and a review report must be made.
2 The review report must list the reasons for the error, the responsible person, the additional planned cost, and the implementation plan.
3 After the customer signs for receipt, the project team summarizes the project and archives it. Usually, there is a later feedback modification. The actual execution cost must be converted according to the time and manpower invested in the modification. But less than 5% of the standard amount can be used as after-sales service work, no additional.
The principle of process adjustment makes the simulation costing focus on 80% of management issues, rather than 20% of objective causes and other risk factors. For the project team, they also feel that they are being assessed fairly and fairly.
● Project evaluation and incentive
Our experiments based on the structural management model show that in the composition of "human capital", adding structural compensation incentives will greatly improve efficiency, reduce the investment of time capital, and form a leverage effect.
In enterprise management, the benefit mechanism is always the basis of all driving forces and the core of all management systems. The simulation cost system has the following provisions in the relevant supporting system:
1 Use the evaluation results of each project as one of the basis for year-end dividends. As a medium-term incentive factor, the amount of dividends that employees receive is not determined by how many projects they participate in, but how many “performance-enhancing projects” they participate in.
2 Change the previous implementation system of "project commission", and distribute bonuses according to project assessment. If the project execution result is a "negative performance project", the project will not issue any bonus; if the execution result is a "performance-increasing project", the project bonus will be issued according to certain standards.
3 In general, the company's salary system will require annual/semi-annual salary increases. The simulation cost system sets the corresponding clauses to be linked to this regulation: whether to raise the salary according to the number of "performance-increasing projects" in each year, the difficulty rating of the project, and the different extent of the salary increase, such as employees with negative performance in all projects, No salary increase, and may be demoted or fired.
In this way, under the integration of the simulated cost system, the structure of the benefit mechanism has been transformed into a performance-centered mechanism. Driven by the benefit mechanism that prioritizes benefits, human capital has exerted the greatest initiative effect, and project management has been effectively implemented.
● Project execution results
Taking "Enterprise Online China www.eolcn.net" as an example, the simulation cost system was used for project management, the first project was implemented, and the efficiency was increased by 30%; after supporting adjustment and improvement, the second project was implemented, only delayed by 2 days; the third project was implemented, which became a performance-enhancing project, which rewarded the entire project team. While being motivated, employees have developed good execution habits and experience, improved morale, and had a good driving effect on future projects.