Your project is tracking, and you’re hitting milestones, but then 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, then days snowball into weeks. The project is now over your fee budget, your schedule is off-track, and you're left to explain why the project is losing money. Worse, the extra work is already done, so it's too late to get proper approvals.
Sound familiar? Scope creep may seem like something that occasionally happens on projects, but according to a study by the Project Management Institute, 49-68% of projects experience it. Given that scope creep impacts the majority of projects, it’s important to monitor it closely 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," a written project scope serves as the baseline for what's expected of 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 and schedule, it quickly eats away at your profit margins and makes it seem like you're falling behind schedule. And perhaps the worst part is that you did charity work and didn’t even get credit because the client wasn’t aware. Left unmanaged, scope creep will drain time, money, and motivation, while negatively affecting the client relationship.
How do you manage scope creep?
Every time-billing company must recognize that scope inevitably creeps. 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 Fastest Growing Companies in America five times over the last six years.
9 Ways to Manage Scope Creep
1. Clearly define the 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.
2. 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 as well as any additional work that has come 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.
Fully understanding the required work that goes into a project is also key to successfully bidding and profitably managing future projects.
3. 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 build an efficient, repeatable business model with a predictable profit—the ultimate goal of every business.
4. Leverage technology for project proposals
Using the 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, use Docusign or HelloSign for projects. If you have several proposal templates, 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.
5. Create and refine your additional services/change order process
Profit loss due to scope creep is rooted in poor processes. Establishing a change order or additional services process will reduce instances of staff overlooking or forgetting to log additional work.
If you don’t yet have a process in place, it’s important to create one. Keep it as simple as possible—especially in the beginning. The complexity and detail of the process can grow once it's part of your workflow.
Start by tracking additional services. Make a table with four columns:
- 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 included additional scope in the tracking document at "no charge."
Send an additional services proposal and require a signature to confirm everyone is on the same page. Naturally, you should template this additional services proposal to speed up and better manage the process.
6. Get approval before doing the work
The main reason teams fail to track additional scope is that the process of getting approval on additional services can slow a project down. But don't be afraid to temporarily slow things down to get the go-ahead. It's essential 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 approve any additional services before incurring the cost of that additional work, even if the work is required or unavoidable. Ultimately, clients will 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.
7. 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 exceeding the schedule due to additional services. As noted above, you can add a column to your additional services table to account for any extra time required. This will help manage everyone's schedule expectations, and managing expectations is everything for service businesses.
8. Act fast
All employees should understand that they must surface additional services beyond the 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 outside of the project scope. Provide them with a templated email to use so they're empowered to manage requests and quickly process additional work and obtain any required approvals. They should be clear that it's a company policy, so that clients don't think it's a personal decision.
9. Get employee buy-in
While getting employee buy-in is the last strategy on my list, it's really the first step. After all, process changes are much more likely to stick when the team understands why they’re necessary and valuable, and then champions the changes. Maintaining a work culture in which employees understand the value of working within the scope of 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 as well as 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 significant cause of late night and weekend work, schedule delays, and financial loss on projects. Not only does properly handling scope creep improve communication and prevent financial loss, but it helps control schedules to prevent late-night and weekend work.
If they aren't tracking additional services beyond your contract, they are effectively working for free. The worst part of it is that it can be a thankless job, with work often going completely unnoticed. If you're 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.
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