The Ultimate Guide to Managing Scope Creep

Scope creep is the top threat to the success of your time-billing business. Read on to learn what triggers scope creep, how it impacts your firm's profitability, and how to prevent it from happening.
July 19, 2022
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15
min read

Your project is tracking, you’re meeting milestones, and new scope comes up. It wasn’t in the project plan, but it seems simple enough, so rather than flag the additional work requested, you figure you’ll just get it done. Before you know it, the work quickly adds days to your project and then days snowball into weeks. The project is now over your fee budget, your schedule is off-track, and your manager—and client—aren’t happy. Worse, the extra work is already done, and it’s too late to get proper approvals.

Sound familiar? This may seem like one of those things that occasionally happen on projects, but according to a study by the Project Management Institute, 49-68% of projects experience scope creep. Given that scope creep impacts the majority of projects, it’s important to manage scope creep to ensure every project is profitable.

What is scope creep?

Whether you call it a “scope of work,” “statement of work,” or “work breakdown structure,” or you simply provide detailed line items within a project proposal, a written project scope serves as the baseline for what's expected in your project deliverables. Scope creep occurs when a project’s scope changes beyond the original agreement.

What causes scope creep?

  • Additional work
  • Stakeholder delays
  • Budget reductions or increases
  • Fast-tracked or extended schedules
  • Other unanticipated changes

How does scope creep affect your business?

Scope creep, if not properly managed, can quickly chip away at your project’s profitability. But even more concerning is that, according to a Deltek report, “if ignored or mismanaged, scope creep could threaten the financial stability of the firm.”

When project timelines increase without scaled increases in budget, it quickly eats away your profit margins, making it appear you're falling further behind schedule. And perhaps the worst part is that you did a lot of charity work and didn’t even get credit, because the client wasn’t aware. Left unchecked, scope creep will drain time, money, and motivation, and negatively affect the client relationship.

How do you manage scope creep?

It’s essential that every A&E firm recognizes that scope inevitably creeps and an effective management process is integral to protecting the organization's financial health. Understanding the magnitude of the financial loss caused by scope creep should provide the motivation you need to give proper attention to improving your organization’s processes. Though inevitable, with the right process and tracking systems in place, scope creep is entirely manageable, and it’s one of the most significant ways you can improve the profitability of your organization.

During my 15 years as managing partner of the firm I founded, I wrote hundreds of proposals. In this article, I’ll outline some of the processes I put in place to help prevent scope creep, double profit margins, and enable the firm to make the Inc. 5000 five times over the last six years.

Clearly define project scope

As the foundation for your project, a clearly-defined project scope provides transparency to all collaborators. It creates client buy-in on project deliverables and serves as a point of reference when stakeholders attempt to change project priorities, deliverables, or execution, or if there’s a disagreement about the work. Everyone involved in the project should have a copy of the scope document and should refer to it throughout the project to keep everyone on the same page.

Optimize your scope documents

Improve your scope documents with each project, until you’ve patched all scope creep holes that cause projects to lose money. Project proposal templates allow you to refine scope as you continue to understand how money is lost due to scope creep on projects. While this process can take months or years depending on how much time you put in, this investment of time will prevent downstream consequences on projects, allowing you to you build an efficient, repeatable business model with a predictable profit—the ultimate goal of every business.

Analyze past projects

Only by closely looking at past projects that have exceeded your project budget can you understand scope creep. Start by speaking to everyone on the project team to carefully review the scope and review any additional work that came up. This list of additional unforeseen work will make up the exclusions section of your future proposals. Clearly detailing what’s not included is just as important as clearly defining your project scope.

Going forward, this assessment should occur on an ongoing basis during every project as well as at the completion of any project that loses money. I recommend establishing internal milestones within each phase of the project and slating time for the team to review these milestones together. You can introduce this new habit by attaching the review to a process that already occurs, like the final internal review before releasing work to a client. After doing this process for some time, you'll be able to patch any leaks in your scope documents, and tighten up your exclusions, ensuring the future profitability of your projects and the business.

Create and refine your additional services/change order process

Profit loss due to scope creep is rooted in poor process. Establishing a change order process will reduce instances of staff overlooking or forgetting to log additional services.

If you don’t yet have a process in place, it’s important to create one. I recommend starting simple. (The complexity and detail of the process can grow once established.) Create a table of four essential columns to track additional services:

  • Scope title
  • The date the additional service first arose
  • The date accepted
  • Who accepted it

You may also want to add a column to track the estimated additional workdays required so scheduling impact is clearly communicated.

Reference this process in your proposal (e.g., “Additional Services tracking document”) as well as on any invoices for additional services (e.g., “In accordance with the Additional Services tracking document,” so clients and stakeholders are on the same page as you and your team.

It’s good practice to avoid “nickel-and-diming” your clients, so you may want to set a minimum threshold of 5-10% of the contract cost for charging for additional services. Ideally, your initial contract should include a certain amount of expected changes (things so small that they’re not worth the invoicing paperwork) to avoid this. You can list this “built-in” additional scope on the Additional Services tracking document at “no charge.”

Anything outside of this “built-in” additional scope should be sent as a separate additional services proposal and require a signature to confirm everyone is on the same page. I recommend templating your proposal for additional services to speed up the process of getting that proposal over to your clients. (More on this recommendation in the technology section below.)

Get approval before doing the work

The main reason teams fail to track additional scope is because the process of getting approval on additional services can slow a project down and throw off schedules. This is why you must review scope regularly. It always creeps. Regardless, you can’t be afraid to slow things down momentarily to get the go-ahead. It’s imperative that—regardless of timelines—you get approval for additional services, including any costs or fees, before completing the work. Clients deserve a detailed explanation of the additional services and should have the right to refuse any additional services before incurring the cost of that additional work, even if the work is required or unavoidable. Ultimately, clients are significantly more likely to pay for additional services if they are justified, properly communicated, and most importantly, agreed upon prior to performing the work.

To expedite the approval process, consider including a contract provision that minor additional services can receive approval via email. However, as noted above, any substantial additional scope should receive a written proposal that's signed for clear communication.

Leverage technology

Using software is always the best way to speed up any process. If you only have a few standard proposals and additional services are fairly consistent, simply use Docusign or HelloSign. If you have several proposal templates, then use proposal software like PandaDoc (best for technical proposals) or Qwilr (best for visual proposals) to create and easily modify templates. These tools will help automate both the preparation of the proposals and the execution. Anyone will be able to quickly prepare and send proposals. As with most things in life, automating can require a significant upfront time investment, but will ultimately save time in the long run.

Account for extra work in project schedules

It’s important to add any extra time required to complete the additional services to the project schedules. Projects often fall into the trap of running over budget and incurring delays due to additional services. As noted above, you can add a column to the additional services table to provide for any additional time required. This will help manage everyone’s expectations on schedule, and managing expectations is everything in service businesses.

Get employee buy-in  

This last strategy is probably the one you want to push on first. After all, process changes are much more likely to stick when the team understands why they’re necessary and champions the changes. Maintaining a work culture in which employees understand the value of working within scope on each and every project will help enforce a standard of accountability, communication, and profitability. Educate everyone on the importance of tracking scope for:

  • Managing budget and schedule expectations, and
  • Recognizing the true amount of work that goes into a project—which is key to successfully bidding and profitably managing future projects.  

Help your team understand that scope creep is a large cause of late night and weekend work, schedule delays, and financial loss on projects. Not only does handling scope creep improve communication and prevent financial loss, but it helps control schedules to prevent late nights and weekends.

If they aren’t tracking additional services beyond your contract, they are effectively doing charity work. And the worst part of it is, it can be a thankless job, often going completely unnoticed. If you are going to give work away, you should at least get credit for it. The right process gives you the choice to do that. Only by tracking scope diligently can you manage a project on budget and maintain realistic project deadlines.

All employees should understand that they must surface additional services beyond contracted scope the minute it happens. A key first step is to train employees on how to respond when a client asks them to do something out of the project scope. Give them a templated response, so they’re empowered to manage requests and quickly process the additional work and any required approvals. They should refer to company policy, so it’s clear it's not a personal decision they control.

Ultimately, you must hold employees accountable to your policies. Implementing the aforementioned strategies weaves scope management into your company’s procedures. When that happens, it’s easier to train and uphold standards.

You have strategies for managing scope creep; now it’s time to implement them. Rome wasn’t built in a day, and you won’t be able to enact all of these best practices at one time. But, baby steps are still progress—and even small changes in managing scope can mean significant improvements to your firm’s profitability. So, commit to action. Get your team on board, start small, and keep it simple.

John Meyer

Founder, CEO
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