The great debate for project managers....is padding an estimate bad? In my new book, I say that padding is one of the worst things that you can do because it proves that you do not believe your own estimates!
As part of a new series of blog posts, I will be responding to questions that have been sent me in response to the book Stop Playing Games! The first question that I received was, "Padding is for known and unknown risks and events in the future. Why do you say padding is bad?"
Padding is actually not for known and unknown risks. It is actually a blanket percentage that a project manager will put on top of their estimates just to cover them from blowing their budget. It generally isn't scientific or have any thought pattern behind it other than lumping a generic percentage on top. This practice has been around for ages. We have conditioned our executives by doing this practice. They have learned that they can cut 10-20% of the budget without consequence. They are aware of the padding and are accustomed to chopping off a generic percentage. Thus, the game is played. Can you out add a generic percentage that your sponsor will cut?
This generally all occurs without too much conversation as well. This game is played and is played in silence. To combat this, there should be an honest conversation. The project manager should be honest in their estimates and use risk and risk information to plan for a true contingency. This is not padding, but a practice known as contingency planning. Once the contingency is planned and the reasons for it are documented, present that to the sponsor. When they try to remove a generic percentage, challenge them with the planned contingency and explain why it is there.
Having an honest conversation and talking about risk versus padding can lead to a true budget fostered in trust between the sponsor and project manager. That is a fantastic place to start!