But, what is parametric estimation exactly, and more importantly, how do you put it into practice? <\/p>\n\n\n\n
Well, keep on reading, because in this blog post, we will:<\/p>\n\n\n\n
- \n
- Introduce you to the definition of parametric estimating (+ a parametric estimation example),<\/li>\n\n\n\n
- Let you in on the difference between parametric and analogous estimation,<\/li>\n\n\n\n
- Shed some light on the top benefits of using parametric estimation in project management, and<\/li>\n\n\n\n
- Guide you through the 4 steps to using parametric estimation in your projects so you\u2019ll know exactly what to do if you wish to start using this method right away.<\/li>\n<\/ul>\n\n\n\n
![\"Parametric](\"https:\/\/clockify.me\/blog\/wp-content\/uploads\/2023\/01\/Parametric-estimation-cover.png\")
<\/figure>\n\n\n\nWhat is parametric estimation?<\/h2>\n\n\n\n
Parametric estimation is one of the most accurate statistical methods for estimating the overall amount of: <\/p>\n\n\n\n
- \n
- Time, <\/li>\n\n\n\n
- Money, and <\/li>\n\n\n\n
- Resources needed for a specific project. <\/li>\n<\/ul>\n\n\n\n
According to PMBOK<\/a>, parametric estimation is “An estimating method in which an algorithm is used to calculate cost or duration based on historical data and project parameters.”<\/p>\n\n\n\n
So, only by combining statistical and historical data will a project manager be able to find a statistical correlation between the relevant variables and obtain the most accurate estimations regarding their current project. <\/p>\n\n\n\n
However, it\u2019s important to keep in mind that parametric estimation is usually used during the project planning phase, long before the actual project execution. <\/p>\n\n\n\n
But, in case you\u2019re still a bit baffled by this estimation method, let\u2019s take a closer look at how parametric estimating actually works. <\/p>\n\n\n\n
Parametric estimation example and formula<\/h3>\n\n\n\n
This is the formula you need to use for parametric estimation:<\/p>\n\n\n\n
E_parametric = (A_old \/ P_old) x P_curr <\/em><\/strong><\/p>\n\n\n\n
The parametric estimation formula above encompasses the following elements:<\/p>\n\n\n\n
- \n
- E_parametric <\/strong>is the parametric estimate,<\/strong><\/li>\n\n\n\n
- A_old <\/strong>is the historical amount of cost or time,<\/strong><\/li>\n\n\n\n
- P_old <\/strong>is the historical value of the parameter, and<\/li>\n\n\n\n
- P_curr <\/strong>is the value of the parameter in your future project.<\/li>\n<\/ul>\n\n\n\n
Now, let’s see how this calculation actually works.<\/p>\n\n\n\n
Let\u2019s say you want to predict how much time it will take for your designer to finish 20 illustrations. Before you get to the calculation, you\u2019ll first need to obtain all the historical values. <\/p>\n\n\n\n
So, your previous project involved 1 person in charge of designing 15 illustrations, and it took them 70 hours to finish everything. With that in mind, here\u2019s how your units would stack up:<\/p>\n\n\n\n
- \n
- A_old<\/strong>, the historical time of the past task is 70 hours,<\/strong> <\/li>\n\n\n\n
- P_old<\/strong>, the historical value of the parameter is 15 illustrations<\/strong>, and <\/li>\n\n\n\n
- P_curr<\/strong>, the value of the parameter in your future project is 20 illustrations<\/strong>.<\/li>\n<\/ul>\n\n\n\n
Now that you\u2019ve obtained this information, you can use it to arrive at the new estimate: <\/p>\n\n\n\n
E_parametric = <\/em><\/strong>(70 \/ 15) x 20<\/em><\/strong><\/p>\n\n\n\n
As seen in the formula above, first, you calculate the time needed to complete one illustration: <\/p>\n\n\n\n
70\/15 = 4,66<\/em><\/p>\n\n\n\n
Then, after you obtain the exact number of hours, you multiply this unit with the value of the parameter in the future project: <\/p>\n\n\n\n
4,66 hours x 20 <\/em><\/p>\n\n\n\n
Finally, you arrive at the parametric estimate, which is 93,3 in this case.<\/p>\n\n\n\n
All things considered, it\u2019s safe to say that your designer will finish 20 illustrations in 93,3 hours. <\/p>\n\n\n\n
Parametric estimating vs. analogous estimating<\/h3>\n\n\n\n
If you have ever stumbled across estimating methods in project management, you must have noticed that parametric estimating frequently goes hand in hand with analogous estimating. <\/p>\n\n\n\n
But why is that the case? Are they the same methods?<\/p>\n\n\n\n
Well, not exactly. <\/p>\n\n\n\n
Even though the analogous estimation requires you to use available data from your previous projects, as is the case with the parametric method, the two methods differ in terms of both their accuracy and scope<\/strong>. <\/p>\n\n\n\n
In other words, you\u2019ll arrive at an analogous estimate based on historical data, but you won\u2019t need to go into great detail as with the parametric estimation method. You just need to recall a past project of similar scope, take a look at that project\u2019s duration\/cost\/budget, and make your estimate based on analogy. <\/p>\n\n\n\n
So, in case you\u2019re about to initiate a project that involves your designer creating 20 illustrations, and you\u2019d like to find out exactly how long would the new project take, this is how you can predict your project\u2019s duration based on the analogous estimating method:<\/p>\n\n\n\n
Since you\u2019ve already been in charge of a similar project before, you know that the last time your designer took on a similar task they needed 70 hours to finish it. Based on this, you predict that your new project will take around 80 hours to complete, give or take. <\/em><\/p>\n\n\n\n
Parametric estimating, on the other hand, takes into account the difference between an old and a new project on a unit level. This means that instead of basing your prediction on similarities, you\u2019ll first need to calculate the number of hours it takes the designer to finish one illustration. Then, only after multiplying the product with the number of illustrations that need to be completed now, you\u2019ll obtain the time estimation you were looking for.<\/p>\n\n\n\n
Top benefits of using parametric estimation<\/h2>\n\n\n\n
Even though there\u2019s an array of project estimating methods you could use to keep your numbers in check, parametric estimating comes with a handful of perks that could change the way you make your project predictions.<\/p>\n\n\n\n
Let\u2019s go over some of the most common ones. <\/p>\n\n\n\n
\n\ud83d\udca1 Clockify Pro Tip<\/strong><\/p>\n\n\n\n
Predicting a project\u2019s outcome is almost always filled with uncertainty. Luckily, there is a process that can help obtain accurate information without all the stress. You can learn more about it here:<\/p>\n\n\n\n
- \n
- What is forecasting in project management?<\/a><\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n
Benefit #1: Parametric estimation helps you obtain accurate numbers<\/h3>\n\n\n\n
When compared to the other project management estimating methods, parametric estimation seems like a one-stop method for an accurate prediction. While other methods, such as PERT<\/a>, rely on what-ifs, parametric estimation helps predict: <\/p>\n\n\n\n
- \n
- The budget, <\/li>\n\n\n\n
- Resources, and <\/li>\n\n\n\n
- Your project\u2019s duration based on past data. <\/li>\n<\/ul>\n\n\n\n
Since the data you rely on is rock-hard evidence (it\u2019s how your project unfolded, after all), when you apply the parametric estimation formula, you should be able to predict each project aspect with precision. <\/p>\n\n\n\n
Also, to be able to take up the calculating process in the first place, you\u2019ll need to go over separate units of your previous projects, which helps increase the precision of your final estimate.<\/p>\n\n\n\n
Benefit #2: Parametric estimation leads you to set achievable goals<\/h3>\n\n\n\n
As soon as you\u2019re done with arriving at your final estimate, you\u2019ll be able to spot exactly where you\u2019ll need to make changes so that you can complete your key project deliverables. <\/p>\n\n\n\n
Sometimes, you\u2019ll be able to scale up your team capacity<\/a> or increase your budget. Other times, you\u2019ll need to take a slight turn from your desirable outcome. <\/p>\n\n\n\n
Whichever it is, relying on parametric estimation can help you set a project goal you and your team would actually be able to reach. <\/p>\n\n\n\n
The very method requires you to dig deeper into previous data for a more accurate estimate. So, the objectives you set would ultimately be more manageable since you\u2019ll see exactly which aspect of your project might be a stumbling block and tweak your goals accordingly. <\/p>\n\n\n\n
\n\ud83d\udca1 Clockify Pro Tip<\/strong><\/p>\n\n\n\n
Setting achievable goals is only half the battle. To make sure you\u2019re truly on the right path, you\u2019ll still need to keep track of them. Check out some of the best apps you can use to stay on top of your progress:<\/p>\n\n\n\n
- \n
- 12 Best goal tracker apps for 2022<\/a><\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n
Benefit #3: Parametric estimation helps you cut down on repetitive tasks<\/h3>\n\n\n\n
Although there are no two projects exactly alike, certain steps tend to repeat project in and project out. <\/p>\n\n\n\n
Take budgeting, for example. How many times did you have to map out the cost baseline during your project planning phase? And how many project planning phases have you gone through up until this point? <\/p>\n\n\n\n
If your answer consists of a number larger than 1, you must have noticed that sometimes you simply waste time<\/a> going over certain project aspects multiple times while planning. <\/p>\n\n\n\n
For example, your content team\u2019s workload consists of 20 articles per week, and this has remained unchanged throughout dozens of projects. <\/p>\n\n\n\n
So, instead of assessing each task individually time after time, you can simply rely on the parametric estimate you make once and re-use that information whenever you\u2019re about to estimate content production budget or duration.<\/p>\n\n\n\n
However, keep in mind that if certain changes regarding your content team\u2019s capacity, workload, or budget arise, you\u2019ll need to adjust your parameter values, too, a.k.a. redo your calculation using the same formula from above. <\/p>\n\n\n\n
4 Steps for using parametric estimation in project management<\/h2>\n\n\n\n
Now that we\u2019ve gone over all the details about the parametric estimating method, you might be wondering \u2014 but how exactly can I make the parametric estimation work?<\/em><\/p>\n\n\n\n
To make getting to the bottom of numbers as doable as possible, we\u2019ve broken down the parametric estimation execution into 4 simple steps. <\/p>\n\n\n\n
Let\u2019s take a look at each of them. <\/p>\n\n\n\n
Step #1: Find out which parts of a project are eligible for estimation<\/h3>\n\n\n\n
Before you even begin reviewing data from earlier projects, you\u2019ll need to determine exactly where you should use parametric estimation.<\/p>\n\n\n\n
In other words, you\u2019ll first need to take a look at your project and divide it into different stages. You can use the work breakdown structure<\/a> (WBS) for this purpose, and break the entire project down into smaller, more manageable chunks. <\/p>\n\n\n\n
Then, after you\u2019ve decided whether you\u2019d like to predict your project phase\u2019s budget, duration, resources, or all of the above, next comes the question of accuracy and data. <\/p>\n\n\n\n
Since the accuracy of your estimate goes hand in hand with the amount of the previous data available, before you even consider diving into the calculation, ask yourself these three big questions: <\/p>\n\n\n\n
- \n
- How precise should my estimate be?<\/li>\n\n\n\n
- How much data do I have at hand?<\/li>\n\n\n\n
- Is my parameter connected to historical values? <\/li>\n<\/ol>\n\n\n\n
So, let\u2019s say you\u2019re still looking for a way to accurately estimate how long your designer will be working on those 20 illustrations. This would mean you\u2019d wish to measure time. Since you have enough data from a similar project from before, you\u2019ll measure this parameter against the time it took them to finish 15 illustrations. <\/p>\n\n\n\n
But, in case you aren\u2019t quite satisfied with the responses you give to the questions mentioned above, you might want to reconsider using this method since it might not lead you to the most accurate predictions. <\/p>\n\n\n\n
Step #2: Obtain the historical data<\/h3>\n\n\n\n
After you\u2019ve selected the exact project phases you\u2019ll need to apply parametric estimation to, and decided on whether this method is right for you, now would be the time to actually get around to historical data. <\/p>\n\n\n\n
In case your team has been keeping track of all their project-related activities, you\u2019ll probably be able to obtain the most detailed information about your prior projects quickly. <\/p>\n\n\n
\n![\"Clockify](\"https:\/\/clockify.me\/blog\/wp-content\/uploads\/2023\/01\/Clockify-expense-tracking.png\")
In Clockify, you can track your project expenses and attach receipts in a matter of seconds<\/em><\/figcaption><\/figure>\n<\/div>\n\n\n For example, a time and expense tracking app<\/a> like Clockify by CAKE.com<\/a> can store your prior projects’ expense data and give you a helping hand whenever you need to estimate your future project\u2019s budget.\u00a0<\/p>\n\n\n\n
Still, in case you haven\u2019t exactly given that much attention to storing your project information, or you simply haven\u2019t worked on a similar project before, there are still ways for you to use the parametric estimating method.<\/p>\n\n\n\n
You can go over publicly available databases<\/a> for your industry and see how the data you obtain from there corresponds to your current project\u2019s parameters.<\/p>\n\n\n\n\n
\n\n Free time tracker<\/span>\nTime tracking software used by millions. Clockify by CAKE.com is a time tracker and timesheet app that lets you track work hours across projects.<\/p>\n\n
\n Sign up<\/a>\n\n Learn more<\/a>\n <\/div>\n <\/div>\n\n\n\n \n ![\"Illustration\"](\"https:\/\/clockify.me\/blog\/wp-content\/themes\/cake-blog\/theme\/images\/banners\/clockify\/features.png\")
\n <\/picture>\n <\/div>\n<\/div>\n \n\n\n\nStep #3: Check if your parameters are valid <\/h3>\n\n\n\n
After your historical data is all in place, the importance of question number 3 \u2014 whether your parameter is connected to historical values \u2014 comes to the surface. <\/p>\n\n\n\n
Now you\u2019ll need to assess your parameters and see how they relate to the historical data you\u2019ve obtained. <\/p>\n\n\n\n
For example, you might notice that the number of illustrations is somehow correlated to the time the designer needs to finish them. This means that you\u2019ll be able to include both the unit measurement (15 illustrations) and time (70 hours) in your calculation, multiply them with your parameter (20 illustrations), and obtain a valid parametric estimate. <\/p>\n\n\n\n
However, keep in mind that the example above is a simplified illustration of what parameter testing looks like in practice. In case you\u2019re dealing with a more complex project, you might even need to turn to data analysts and\/or statistical tools for assistance.<\/p>\n\n\n\n
Step #4: Calculate the parametric estimate<\/h3>\n\n\n\n
Now that you\u2019ve assessed the validity of your parameter, obtaining a parametric estimate becomes a matter of seconds.<\/p>\n\n\n\n
Simply put the formula into action by multiplying the units you\u2019ve obtained from the historical data, and dividing the product by your current parameter. <\/p>\n\n\n\n
To help you avoid unnecessary scrolling, we\u2019ll leave the parametric estimation formula here as well: <\/p>\n\n\n\n
E_parametric = (A_old \/ P_old) x P_curr<\/em><\/strong><\/p>\n\n\n\n
Wrapping up: Keep tabs on your projects and give parametric estimating a try<\/h2>\n\n\n\n
It’s no secret that project estimating takes time. <\/p>\n\n\n\n
However, the right project estimation method might just save you a couple of weeks in the long run. <\/p>\n\n\n\n
Parametric estimating, as a matter of fact, enables you to do just that. <\/p>\n\n\n\n
By nudging you to rethink your project goals and leading you to automate repetitive tasks, this project estimation method helps you make the most out of each minute later on during your project\u2019s execution phase. <\/p>\n\n\n\n
Still, to successfully put parametric estimating into action, you’ll need to pay close attention to each of your projects and be sure to document every process thoroughly.<\/p>\n\n\n\n
Then, with a large database and the parametric estimation formula at hand, nothing will stand in your way of getting the most precise project estimates. <\/p>\n\n\n\n
(Except for your variables not being correlated to your parameters, but that\u2019s nothing that a bit of statistics can\u2019t solve.)<\/p>\n\n\n\n
- 12 Best goal tracker apps for 2022<\/a><\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n
- P_old<\/strong>, the historical value of the parameter is 15 illustrations<\/strong>, and <\/li>\n\n\n\n
- A_old <\/strong>is the historical amount of cost or time,<\/strong><\/li>\n\n\n\n
- E_parametric <\/strong>is the parametric estimate,<\/strong><\/li>\n\n\n\n
![\"Illustration\"](\"https:\/\/clockify.me\/blog\/wp-content\/themes\/cake-blog\/theme\/images\/banners\/clockify\/features@2x.png)
\n <\/picture>\n <\/div>\n<\/div>\n \n\n\n\n