Organizational Management

Action 1: Organizational Overhead Cost in Organizational Management refer to the budget optimization exercise in the previous module. Work with your project team to update all resource costs using the overhead percentage rate to produce a fully absorbed budget. Re-create the three scenarios from the original budget optimization exercise using the overhead cost percentages.

Use the overhead allocation for internal employees only. Identify any outside contractors used in the project, and for these, do not allocate overhead cost. Make note of this in your documentation.

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Action 2: Create a two-page budget summary that summarizes the total project budget including overhead, the management reserve percentage, and finally, the mark-up required for the final project offer to the client. Although Wendy has referred to a 10% mark-up, consider what additional amount may be added given the likelihood of price reduction due to negotiation.

Document the sales price for all three project budgets created in the optimization exercise (original, delay with lower cost, expedited with higher cost). Brainstorm within your project team to envision scenarios that could lead to expenses charged to the management reserve. Identify such scenarios and associated costs. Comment on the amount of the overall reserve budget in terms of its ability to cover contingencies.

Action 3: Inflating a budget projection has ethical implications in Organizational Management. Given that the cost estimates are never fully known—is Reginald’s proposed action reasonable given the PMI Code of Ethics? Consider this issue and summarize your thoughts for and against inflating the budget in order to ensure that an original profit target is achieved. Discuss the implications with respect top the code of ethics and suggest how the team should move forward with the budget estimates and profit target

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