Significance of Cost Management in Organizations

Introduction

• The Objective of the research is to find out how organizations can carry out any type of projects within specified cost, how project cost management can help organizations in carrying out projects within set costs. Project cost management is an important aspect of managing any project because it can help an organization to use the resources effectively and efficiently which will result into maximization of profits.

• Organizations can face losses even though they are undertaking different kinds of projects. Why does this happen? There is a possibility that these organizations are not able to manage or undertake a project within given cost and if an organization cannot undertake the project within given cost then it is not able to earn expected revenues from a certain project and thus can never be in a profitable condition. The background variable of the research is the project cost management because to counter such situation it is the better option (Kerzner, 2009, 629)

• Taking into consideration the project cost management in the organizations, it will benefit all the organizations implementing any types of projects to successfully complete the action within agreed cost/budget and another thing to be considered is that project cost management can predict future expenses and costs which will arise during the project. Doing so organizations can work accordingly towards expected revenue controlling the increase of sudden overheads. (Shtub, Bard and Globerson, 2018, 487)

• This research according to me is new and unique because till now the research has been done on project management as a whole but cost management being one of the integral part of project management, if the organizations focus slightly more on cost management then it may get easy for them to understand why are they not able to meet the expected revenues from the business as a whole.

Research Question

• Why it is essential for an organization to implement Cost Management?
•  I want to find out that even after getting proper opportunities or big projects why some organizations can’t take this opportunity to expand themselves? Why are they only a profitable company on paper and not in the real working life? Why can’t organizations be in profits even when they undertake big projects? This proposed research study will portray why and how organizations should use project cost management to handle the projects within given cost/budget to reach the mark of expected revenues or to be in a profitable situation not only on paper but also in real working Environment.

Literature Review

• In the words of Dr. T.D Jainendrakumar, author of the journal  Article “Project cost management for project managers” points out that project cost management includes the process involved in estimating budgets and controlling costs so that projects can be completed within the provided budget to make this happen projects must be well defined and should have accurate cost estimates and a realistic budget (Jainendrakumar, 2015)

• Hanid, Siriwardena, Koskela author of Journal Article “big issues in Cost Management” points out that project cost management can be considered as some set of techniques which are very important for controlling and improving companies projects to achieve cost effectiveness which leads to a profitable company. (Hanid, Siriwardena and Koskela,)

• In  Jennifer Bridges words the best way to see how crucial project cost management is when managing a project is by performing a thought experiment. The author says that project cost management sets a baseline for the project costs. Setting a baseline can help an organization to track the project without going over budget and this will further help to reach the mark of desired revenues. (Bridges, 2018)

• As stated by Harold Kerzner in the book “Project Management A systematic approach to planning, scheduling and controlling” Project cost control is essential to almost every type of company whether big or small. According to the Author small companies have less sophisticated control techniques where as large company has the luxury to spread losses (if any) to several other projects so to avoid such losses project cost management plays a vital role. (Kerzner, 2009)

Methodology

• Primary data – The primary data would be collected by interviewing managers (managing several projects) from different organizations. The interview would be about how does cost management helps in profit maximization of the firm.

• Research strategy used will be Qualitative sampling. The people will be approached during this research will be the managers who will be handling projects because they will be familiar with how the project is being carried out, is the project carried out within given budget and is the specific project contributing to profit maximization

• Companies contacted during this research would be small and medium sized companies carrying out various projects in different fields, because these are the companies who gets affected the most when some projects are over budget and these are the companies who may not be following the project cost management by which they won’t be reaching the expected profits.

• Qualitative methods will be used during the research process because I want to find out how a project can be completed within specified budget using the project cost management and for this, I would intend to use textual format rather than numerical data.

• The area of the research would be any small or medium sized organizations carrying various types of projects. It won’t be limited to any one industry or sector because this problem of not completing the project within the given budget or cost can be faced by any organization no matter in which sector it is working.

Contextualising the proposal

• The proposed research is unique because it will be beneficial to small and medium sized organizations who lack to seize the profits even though they have opportunities or openings for profitable projects. Many small-scale organizations are not able to carry out lengthy projects within the given cost or budget and there is always some last minute add on for the projects which curtail the rising profits from the very project and if this continues for further 3 or 4 projects then it becomes very hard for the small-scale organizations to survive or to undertake big projects.

Research Limitations

• Time to carry out this proposed research can be a limiting factor

• The data collected from the organizations through spreading the questionnaire can be personal in nature because of the involvement of daily working managers who won’t give out much of an organization, so how much time and interest will they be giving to fill out the questionnaire can be a limitation

Bibliography

• Bridges, J. (2018) The Basics of Project Cost Management, ProjectManager.com. Available at: https://www.projectmanager.com/training/basics-project-cost-management (Accessed: 6 November 2018).
• Hanid, M., Siriwardena, M. and Koskela, L ‘What are the big issues in cost management?’, p. 10.
• Jainendrakumar, T. D. (2015) ‘Project Cost management for Project Managers based on PMBOK’, p. 13.
• Kerzner, H. (2009) Project Management a system approach to planning scheduling and controlling. 10th Edition. John Wiley & Sons.
• Shtub, A., Bard, J. and Globerson, S. (2018) Project Management Processes, Methodologies and Economics. Second Edition. Pearson Prentice Hall.