When is Granting Fast-Track Status Appropriate?


Time is always a critical constraint in delivering project results.  Once approved, management would like to have them as soon as possible. And since many projects take too much time moving through the approval process, the impatience expressed to finish the project is quite understandable.

Not that the pressure to complete a project quickly is the same in all industries. Consumer electronics such as cell phones, fashion accessories such as women’s shoes, and software releases such as an internet browser are just a few examples of how the competitive marketplace keeps pressure on product development and correspondingly on the projects that deliver these new products.  If they take too long, market share and revenue are likely to suffer. But there are other industries in which fast-track status is much less urgent. Examples include education, government, utilities and health care.

Sometimes the urgency to speed a project to completion is not motivated by market conditions. Sometimes it comes from corporate headquarters, new laws, or regulatory agencies. For example, payroll programs must be revised before a new law for withholding takes effect. And it is hard to forget the rush to modify software before the calendar turned to the year 2000.  

The Risks of Fast-Track

We all know that fast-track status can be risky.  For example, investigation into the Columbia Shuttle disaster exposed a NASA strategy that was driven by its slogan, Better, Faster, Cheaper.  What the Columbia Accident Investigation Board found was that management had created a culture that emphasized getting the job done over the safety of the crew. As a result seven astronauts perished when their spacecraft disintegrated upon reentry into the earth’s atmosphere.

But there are other circumstances where the risk is reasonable and rushing a project to completion makes good sense.

Most projects at Google, for example, are fast-track. The emphasis is on getting innovative ideas from the drawing board and into the hands of users as quickly as possible. But the emphasis on speed, however, does have its downside and often leads to software glitches discovered only after the software is released. However, the benefit of being first-to-market apparently outweighs the problems brought on by speed.  And these problems can be resolved when a new release is made available. So the problems may be short-lived.

Not all Projects Can be Fast-Track

Not all projects need to be rushed to completion. Because granting fast track status can be costly, most organizations can afford to have only a few fast-track projects in the project portfolio at any one time. Indeed, if all projects were fast track, then none would be.  When, then, is it appropriated to grant fast-track status to a project?

Fast-Track Strategies

Speeding a project to completion can be accomplished in many ways. One is to add resources to critical activities or, in the case of many high-tech companies, expect the project team to put in long hours and long weeks. Another is to schedule activities in parallel rather than in sequence.  Parallel activities, however, usually increase project risk and require additional coordination since they are somewhat dependent on other activities along the critical path. And because they are undertaken at the same time, parallel activities often require additional rework when activities are integrated.

When Is Fast-Track Status Appropriate?

In most cases granting fast-track status must be an economic decision. The added cost associated with speeding the project to completion must be offset by greater revenues or lower costs.

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Here is one way to look at the problem. If a project is to be completed in what we might call its “normal time” it will incur normal project costs (N). To complete the project earlier, additional resources must be used and additional costs must be incurred (S). These are the costs necessary, for example, to shorten critical activities and improve coordination.  However, early completion often involves higher product or service quality risks (R). That is, the faster the project is completed the greater the risks of project disappointment or even project failure. Offsetting these higher costs would be the benefits of greater market share, higher revenues or lower costs (C).  In other words, the extra costs to complete the project should lead to visible benefits to the bottom line of the P&L statement.

The total cost to complete a project early can be expressed in the following way
Total  Cost = N + S + R - C
Where:
N=  Normal project cost
S= Direct costs to shorten project life cycle
R=Expected cost incurred because risk is higher and problems may occur in meeting quality standards.
C= Expected bottom line contribution attributed to an early completion

Using this framework it makes no sense to rush a project to completion when:
•    Direct costs associated with shortening the life cycle are relatively high (S),
•    Expected costs of failing to meet quality standards are relatively high (R), and
•    Bottom line contribution attributed to an early completion is relatively modest (C).

On the other hand it would make sense to consider rushing a project to completion when:
•    Direct costs associated with shortening the life cycle are relatively low (S),
•    Expected costs of failing to meet quality standards are relatively low (R), and
•    Bottom line contribution attributed to an early completion is relatively high (C).

Putting the Framework to Use

When determining whether or not to grant fast-track status to a project, it can be helpful to compute the rate of return associated with completing the project in a shorter time. Follow these steps.
•    Estimate the direct costs to shorten the life cycle (S).
•    Estimate the expected costs of failing to meet quality standards (R).
•    Estimate the bottom line advantage for early completion of the project (C).
•    Calculate C - R - S. This represents the net bottom line advantage for early completion.
•    Divide C - R - S by S.
•    This number roughly measures the return achieved by “investing” in fast track status. The larger the number the better.
•    Choose those projects with highest “investment” returns.

Here is a simple example. A project has been approved with a completion date of June 15th, but the marketing department requests that the date be moved up to April 15th.  Shortening the project cycle by two months will cost $50(000). This represents S. As a consequence of a shorter cycle time, project risk will increase. The expected cost of this risk increase is $30(000). This represents R.  The marketing department estimates that if this date is met, then the advantage in revenues and market share will be $125(000). This represents C.  Computing C - R - S we get 125(000) - 30(000) - 50(000) = 45(000). This represents the net bottom line advantage for speeding the project to completion. Dividing 45(000) by 50(000), the additional cost to expedite the project, gives a return of 90 percent.

This calculation is somewhat rough and ignores revenue and expense flows over time (time value of money), but it is a reasonable back-of the-envelope exercise that at least focuses attention on the issues that need be discussed when making fast-track decisions.

In addition to the fact that this is a rough approximation, project sponsors, especially when they are also project “champions,” may be too optimistic with their estimates. They may overestimate the advantages of early project completion times, underestimate the costs to fast-track a project, and underestimate the costs should the fast-track project fall short of its quality objectives. So the calculations, as is true in any modeling process, are only as good as the estimates.

The Last Word

Indeed these calculations are a bit academic, and I don’t expect many project managers to collect the data, make the appropriate estimates, and do the arithmetic. But the purpose behind the development of this framework is to provide insight into how these opposing costs behave and to emphasize that granting fast-track status is an economic-market decision.