I was recently talking to someone who used to work at Amazon. I was telling him we were trying to institute backwards planning – basically setting the target date and budget and having the teams work to fit their project into that.

He asked me how else one might do that and I told him that at most companies, the project manager asks everyone to provide input into how long and how much money the project would take and then they add it up. He replied, “that sounds like a terrible way to do it – everyone will be padding their timelines and budget.” And yes, he’s right.

It’s always a challenge to know how long something shuld take. In some industries, they use benchmarking – for example the number of hours it takes to assemble a car. In other cases, people will bid out projects internally vs externally–to get the work, the internal team has to be competitive with the outside bids.

I saw an example of this when I was at a previous company. The toxicologist was using a German CRO to perform tox studies, and the CRO was charging over a million dollars. I asked her if she realized how much the same studies would cost in US or China. She said, “I have no idea, I’ve only used this CRO.” At the time, a US CRO would have charge about $4-5M and Chinese one would have charged about $1-2M. Her boss clearly had no idea how much those studies should cost, because neither did she.

How can you avoid that? It’s not that people are trying to waste money or time. It’s that they often believe that it is impossible to do something faster or cheaper.