Defined in simple terms, resources are the people, equipment, and material required to execute a project. Defined in accounting terms, resources are the elements of project direct costs. As such, resource pool attribution drives the ability to track activity-based project costs as well as material consumption. Project cost drives meaningful performance measures in the system that yields the data that can enhance business decision making. What are you in this for, anyway?
Resource cost tracking is always a hot topic of debate in project management forums. Generally, in discussions centering on the sensitive nature of cost data, the greatest concern is how to shield this from the eyes of contractors, resources, and project managers. I always ask, why on earth dump actual cost figures into a project management system?
I suggest to you, instead, that the cost representation in a Project Server implementation produce consistency in labor and material expense reporting so that the built-in indices in the system are relationally representative of actual cost, but the cost totals don’t necessarily equate to actual cost. Using true or near-true costs for materials isn’t, generally, as sensitive an issue as human resource cost, so approach this as you see fit. Consider attributing human resources by using a loaded labor rate or a fractionalized representation applied consistently across the pool. You might choose, for instance, to enter $1.00 for everyone’s pay rate. This would be enough to cause the earned value calculations in Project to calculate along with their indices, the Schedule Performance Index and the Cost Performance Index. Of course, the cost index isn’t true, and in this case it makes no differentiation between resources as to cost. You can enhance this approach by making $1.00 the mean cost and using $.75 and $1.25, respectively, to add three dimensions to resource cost. The point is, no matter what cost approach you use, as long as it’s consistent, you can use the percentages of cost produced by the system at any rollup level to infer actual cost from financial journal sources.
What you get for your effort is the ability to use Project Server’s built-in Earned Value Analysis (EVA) calculations, which include key performance indices that measure performance across your portfolio. If you agree that ultimately the value of an automated project management system is to deliver business intelligence, then you’ll want to leverage these standard indices rather than inventing your own.
Framing this in project management best practices terms, you choose the projects in your portfolio based on cost/benefit or return on investment (ROI) analysis. Then you continuously recalculate the value of your program and periodically review the profitability of the program based on performance as measured against standards. One such standard you can use is net present value (NPV). You use the output of Project Server to determine the current NPV of the individual projects, programs, and initiatives in your portfolio. It doesn’t matter if you also condition your NPV calculation with strategic weightings; what matters is that you measure and calculate consistently so that the output is reliable and accepted as a standard in your organization. You can build an NPV calculation in a project-level enterprise field that calculates NPV using system output and some additional input fields, and then display it in a continuously recalculated Project Center view.
Besides providing a cost basis for standardized project performance measures, the enterprise resource pool accommodates more prescient resource management needs, such as short-term and long-range staffing demand projections. A well-attributed pool also supports easier team building with tools that slice through large resource pools to identify resources with the skills, availability, and other user-specified characteristics for the job.