Monday 24 January 2022

Resource histograms are the key to cost management

What is a resource histogram?

I still remember being thrilled to be entrusted with my work gradually, and when my boss asked me if I was going to manage resources (people)", I was thrilled to be so great that I managed people. At that time, I thought that resource management was just allotting the man-hours needed for people. I think every company has a workforce plan and is considering what kind of people they need in their departments and teams.

In the same way, project management requires planning to deploy the right people at the right time for the project. Just as a company cannot survive without generating profits, projects need to be profitable, so lean plans are required to avoid free man-hours. The resource histogram is used to plan how people's resources are put into projects.

By showing the amount of resources required for time on the X axis and the Y axis, you can intuitively understand how much resources (personnel, resources, etc.) are required as the project changes in time.

It is also called a stack table in the sense of piling up resources.

1: resource histogram (stack table)

In the actual project site, we do not use a rough resource histogram (stack table) as shown in this figure. The term "resource" is the same, but unlike things (resources), people (personnel) have different productivity, capacity, cost, and load situation, so it is more common to think about resources by focusing more specifically on the contrast between processes and individuals.

For example, let's think like Figure 2. First, estimate the amount of work for each process, such as "(1) resources required by process". The schedule of each process is drawn, and the time when the work is carried out, and the amount of work required are located. Here, we use man-hours as the unit of work volume, and consider the labor force as 1.0 people per person per month. Next, based on this monthly resource, "(2) Drop to actual resource by person in charge".

Apply each process to real personnel to plan when resources are expected to be invested. In the example of Figure 2, it is necessary to secure 1.7 people per month who can define and design requirements in April. Of course, it is not enough for everyone to fit the number, and since it will be done with people with the ability suitable for the process, we will proceed by planning resources for a total of 1.7 people per month, leader Mr. A and SE B.

2: planning and allocating resources


planning resources in project management means planning when and when people are needed and setting up staff assignments.

create resource histograms with tools

The PM calls this personnel planning feature a "resource histogram" and plans resources based on a schedule, as shown in Figure 3. By planning the effort for each process in the estimate and drawing a schedule for each process in the Gantt chart , you can see how many resources are needed in which period. Based on that plan, you will enter a future resource plan. Each resource has a unit price table by rank (or a unit price for subcontractors), so entering a man-hours plan determines the cost of labor costs for the entire project. Figure 3 creates a sample for agile development.

In addition to waterfall-type development as shown in Figure 2, agile development does not change the flow of planning at what time and with what resources to carry out projects and how much project costs are required.


how projects are costing

So, can you calculate the project budget by multiplying the unit price and man-hours paid per person? Learn about the concept of standard costing calculated from project resources.

1. The cost of running a project is an indirect cost that does not directly concern the project in the company.

For example, floor rent and electricity, labor expenses for management departments and managers to support the personnel of development projects, labor expenses for clerical work, and operating expenses for acquiring projects. Since such costs are the costs that are incurred to support the sales of the project, each project needs to take that cost into account and make a profit. To help you see at a glance how much to add, the cost must be prorated and allocated to the project on a certain basis. As a sample, let's consider the project cost of system company S with five employees.

In this system company S, as shown in Fig. 4, projects X and Y are in operation this month. Mr. A is in charge of Project X.

・ Mr. B and Mr. C will be in charge of Project Y.
・ Mr. C also performs maintenance of development sharing servers in addition to Project Y.
・ We do not develop, but Mr. D will do paperwork for the company and the entire project.
・ Various expenses such as rent and electricity will be incurred.
・ You will also incur labor costs for sales E who will acquire the next development project.

4: consider the cost of the project across the company

  • Mr. A, Mr. B, and Mr. C's labor costs will be the cost of projects X and Y. ・ We believe that a part of Mr. C's labor expenses are common expenses made for Projects X and Y.
  • We consider other expenses such as rent and electricity as common expenses, and prorated them in the number of construction hours spent on projects X and Y.
  • The labor expenses of Mr. Clerical Work D and Sales E are once summarized as SG&e;D expenses, and are prorated in the number of construction hours spent on projects X and Y.
  • For accounting, you include common expenses in the cost of the project, but not the SG&A expenses in the cost of the project.

In other words, the cost of Project X is 820,000 yen and Project Y is 980,000 yen, which is the cost when calculating gross margin. On the other hand, in order to properly manage profits, it is necessary to understand how much SG&A expenses will be borne for each project.

In that case, Project X is 1,220,000 yen (direct cost 500,000 yen + common cost allocation 320,000 yen + SG&A expenses allotment 400,000 yen), project Y is 1,880,000 yen (direct cost 500,000 yen + common cost allotment 480,000 yen + SG&A expenses allotment 600,000 yen) is the last line of profitability. This line is the cost of calculating operating income.

how to budget for the execution of a project

The above is how cost actuals are calculated. Since the amount of common expenses and SG&A expenses must be closed monthly, however, in order to set a project execution budget, it is necessary to estimate how much common expenses and SG&A expenses will be allocated every month. So we'll use the resource histogram.

The method of setting up standard costs by taking into account common costs (planned) and SG&A expenses (planned) is also taken into account the cost per person (direct cost). The amount of common and SG&A expenses set is based on past performance.

For example, if the common cost per month is 3 million yen and the development staff (other than the office and general manager) is 10 people, the common cost burden per person is 300,000 yen. Similarly, if the SG&A expenses per month are 10 million yen and the development staff (other than the president, sales, management department, etc.) is 40 people, the SG&A expenses burden per person is 250,000 yen. If the direct cost of the person with employee rank A is 500,000 yen, if you assign this person per month with a resource histogram, (direct cost 500,000 yen + common cost burden 300,000 yen + SG&A expenses burden 250,000 yen) will be the standard cost.

Since common and SG&A expenses are shaken every month, it is an operation that determines the standard cost by looking for such calculations on average for the past six months or one year.

rewashing common and sg&a expenses (standard and actual costs)

the common and sg&a expenses are determined by the monthly processing. for example, in figure 4, the total number of man-hours spent directly on the project is 2.5 people per month. if the common cost was 800,000 yen and the sg&;a expenses were 1 million yen, the following results will be charged if the common cost and sg&; management expenses are divided into man-hours for 2.5 people per month. ・ common expenses = 800,000 yen / 2.5 people per month = 320,000 yen / per person ・
sg&a expenses = 1 million yen / 2.5 people month = 400,000 yen / month

5: project cost from standard cost

The actual value (actual cost) obtained in this way may be rewashed against the planned cost. The subject of the replacement is direct cost, common cost, and SG&A expenses. It is the company's policy whether to wash at actual cost every month. For example, in the case of SI, the common cost is a cost, so it is replaced, but SG&A expenses are not rewashed "because it is no longer the responsibility of departments and projects". In addition, direct costs are set for each employee rank, and since the difference from the actual salary is not large, it is left at the standard cost. Of course, the actual cost variance from the appointment is accounted for. It is only a policy of whether to feed back to profitable management on a project-by-project basis.

In addition to whether or not replacement can be carried out, the company's rules determine the granularity of standard costs, common costs, and proration methods for SG&e;A expenses.

Although it is not the current company, I discovered that when I was a newcomer, I found that the names of newcomers were printed in a row on the copy machine print, and the unit price was written next to it. I was surprised that the unit price was more than three times the salary I was getting. I don't remember whether the unit price contained common and SG&A expenses, but labor expenses include money separate from so-called salaries such as retirement benefit expenses and welfare expenses. Seriously, every time I look at the standard cost, the cost consciousness increases, and I remember the first intention of working people that "I have to work according to the unit price". While working with PM, you often encounter idyllic companies that only manage man-hours.

However, I am often happy to hear that the company's cost awareness has increased as a result of implementing PM and thoroughly managing the execution budget. Projects can be successful only with good profits, so I think that accurate cost management based on resources, not don't be a bowl, is essential.

Ultimately think about the interests of the department or company

You're not in a position to write great things, but even if the resources for each project are fine, it doesn't necessarily benefit the company as a whole. When I think that there were people who were very busy, I often hear situations in the system industry where there are free people who are left unattended, and newcomers are not allowed to be on projects because it is only difficult projects. I think there are various reasons, but one of them is that you can't grasp the resources of all employees at once.

When you look at it not only within the project, but within the department, and across the enterprise, you can see how the resources you have are deployed. It is important for CMOs and department heads to constantly monitor this situation. For easy monitoring, it is necessary to display the resource status of the entire company based on the resource histogram registered in each project.

By centrally managing the load status by resource (person) rather than on a project-by-project basis, resources can be effectively deployed. At SI, as shown on the screen in Figure 6, the load performance and future forecasts for each resource (person) are visible.

I know that members are managing their load situation, so I feel that the work that is decided is turned in a virtuous cycle to quickly make a resource plan so that it does not seem to be free.

6: understanding the resource status of departments and the entire company by the status of development member assignments

PM and resource histograms

PM attaches importance to resource histograms as a key to workforce management and cost management. Taking advantage of the integrated system, Gantt charts, man-hours entry, member management, execution budgets, costing, and other functions are linked around resource histograms, so you can create and manage efficient and consistent resource histograms.  

In addition, the department and company aggregate resource histogram information for each project to understand the status of employees' resources. It is a feature that is quite useful in each company because there were voices such as "The maintain was difficult because I was doing it in Excel so far" and "There was no way to see who planned to operate next month and how much".  

Resource management in system development is mainly about people. Therefore, resource histograms are the linchpin of cost management.

However, you may feel that simple monetary calculations do not fit. I feel that productivity varies depending on the relationship with people, such as "I want to work with Mr. A with high technology" and "I want to make mr. B, a newcomer, alone". 


We are working resource histogram-oriented cost management while thinking that we should not forget that we can achieve results beyond the resource plan by thanking the members who can work together.

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