Estimates, Forecasts, Projections

In the project management world, there are some misuses of the terms estimates, forecasts, and projections to the point where people are often using them interchangeably. I noticed in more projects and project related articles that my fellow project managers are tending to do the same. I started reviewing industry articles and researching where I felt these were properly used and defined and as such I wanted to create a short set of definitions.

Estimates

• An Estimate is a value determined using similar conditions or criteria. It is typically based on preexisting populations of sample data and models.
  • Estimates can be about the past, present, or future.
    • Past – Approximate age of a tree by counting its rings.
    • Present – Number of vehicles on the Capital Beltway at 4:30 PM on a Friday based on spot counting.
    • Future – Number of people that will purchase a particular piece of modern technology based upon presales, or past sales.

• Estimates tend to be precise.
  • We can use indicators and standardized measurement tools to determine values.
  • They are based on previous experience.
• An estimate is a statistic and is repeatable using models or guidelines.
  • A mechanic can give you an accurate estimate on repairing your vehicle based upon information gathered by thousands of mechanics repairing a similar system, on a similar vehicle.

An estimate is not a guess; it is a value based on experience and knowledge.

Forecasts

• Forecasts are more speculative but have a higher level of confidence as they are based on previous events or cycles.
  • Meteorological scientists use forecasting as a significant method of prediction.
• These are typically expressed in levels of percentage, “There is a 30% chance of snow next week over the forecast area.”
• In a forecast, the assumptions represent expectations of actual future events.
  • Sales forecasts
  • Revenue growth
  • Weather forecasts
  • And one of my favorites, agricultural commodities

A forecast is not mathematical but is a prediction of some event in the future.

Projections

• Projections indicate what future values could occur for the indicated values assuming the patterns they are based upon do not change.
  • Company revenue can be projected based on current growth or sales.
  • Election results can be projected based on the early returns and percentages of votes.

A prediction says something about the future.

A few final words

One of my favorite quotes regarding project managers is as follows:

“In short, they’re a bit like a referee at a sporting event: Do a good job, and nobody notices; make a mistake, and the finger pointing begins.”

Andrew Longman, The Rational Project Manager: A Thinking Team’s Guide to Getting Work Done

As true as this may seem at times, understanding your terms through the eyes of being a project manager is important. When providing an estimate to your customers, stand by your value and experience. Push the team to meet forecasted goals as set in your project plans, and finally, only make projected outcomes when all information needed is in hand.

If you have any questions about this post, feel free to contact me jchamberlain@ktlsolutions.com.