Conclusion
If there are major takeaways from this discussion of how to manage project reserves, it would be that first, contingency reserves and management reserves are important concepts that anyone managing projects should understand. This includes understanding that realistic budgeting must allow for contingencies. Failure to address and plan for contingency and management reserves most certainly increase the risk that the project will not complete on time and on budget.
The second is that the way in which performance is reported must be driven by the needs of the audience. In particular these needs are centered on the types of decisions each must make. Executives make very different types of decisions compared to project managers. Thus, the way in which the data is accumulated and reported should be tailored to meet each audience or stakeholder's needs.
Simply stated, there is no "one size fits all" solution. Rather, it is incumbent upon project managers, mid-level managers, and senior executives to understand these concepts so they can mold them into policies that best serve the needs of each as well as the organization overall.
A final thought for PMI and PMBOK®
In order to help resolve the conflicts that occur between the dedicated volunteers who work to update the PMBOK® Guides every four years or so, and who also happen to represent different industries, I would offer the following suggestion. The PMBOK® Guide is promoted as a standard-indeed, it is an ANSI standard. Standards are often viewed as absolutes, or at least they are documents that are considered "good practices on most projects most of the time."
However, there is another category known as "best[13] practices". Best practices are techniques, processes or methodologies that are usually recognized as so-called "best" by peer organizations and/or by generally accepted subject matter experts. Where there are strong differences based on large bodies of consensus that differ between industries, I see no problem in documenting them and citing them as best practices as defined by particular industries or circumstances. After all, different industries may have different needs that justify such positions. Thus, what PMI might consider doing is to separate those things that should be treated as standards (universally applied) from those things that can be treated as best practices (optional).
An essential reason for generating a standard is to clarify concepts and unify
the professional discipline. Therefore, what must be avoided is the dilution of
standardized approaches with processes or descriptions that have no supporting
objective rationale other than being wedded to tradition. The examples of the
alphabet soup of terminology presented in this paper (refer back to Figure 2)
are cited as proof of this need.
Over the years, certain topics in the PMBOK® Guide have gone from clarity to ambiguity. This author presumes that this is due to strong positions being taken by differing constituencies, as evidenced by the topic discussed in this paper. Perhaps it is a desire to avoid alienating any group of stakeholders. But such an approach provides the practitioner with little help or guidance and PMI would do well to avoid falling into this trap.
13. Editor's Note: We think this would be better expressed as "recommended" practice, since "best" can always be changed for the better.
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Project Performance (Earned Value) Reporting