The Cost of Rework Due to Misalignment

Rework is such a pain and such a waste of resources. It costs you time, energy and emotional distress. Nobody likes to clean up their mistakes or somebody else’s mistake. It is even more painful when we have to ask a customer for forgiveness for disappointing them by missing deadlines. 

Yes. It is painful. Have you experienced the pain of rework? For most of us, that would be a “yes” multiple times. Ouch! To add salt to the injury, don’t forget about the opportunity costs due to rework. Most of us only total up the cost of the mistake. We seldom pause to calculate the total cost of rework that includes opportunities lost and client relationships burned.

Rework is the result of poor execution. If you can have great execution and minimize waste and rework, it will be a competitive edge. And it will boost your bottom line profits. 

Let’s calculate the cost of rework from lack of alignment

Start by picking a project that required rework. Use the guidelines below and plug in your own numbers. Some cost items might not apply to your specific case. If so, consider yourself lucky and skip those items:

Project Name : _________________

A. Time: What is the cost of time wasted?

• Wasted time = time spent on work that is now discarded:
• Number of Hours x Rate (What is your time worth?)
• Rework time = Additional time spent to redo or correct the mistake
• Number of Hours x Rate (What is your time worth?)
• Total for (A): _________

B. Delay Cost: What was the cost of the project being delayed?

• Penalty for being late: __________
• For fixed price projects, calculate your reduced profitability
• Cost of slippage per day = $ _______
• Profit reduced = Cost of slippage per day x Number of days
• Customer visits to repair relationships 
• Cost of Travel: $_________
• Time spent = Number of Hours x Rate (What is your time worth?)
• Total for (B) ________

C. Opportunity Cost: What was the cost of missed opportunities due to rework?

• Projects that resources should have been working on for additional revenue: $ ___________
• Projects that could have been won based on the successful delivery of this project: $___________
• Customer referrals lost:  $ ________
• Total for (C) __________

D. Additional Costs: Hey Patrick, you missed a couple of my items.

OK, list them as well: 

• Anything we missed list (D): $________

Total cost of rework, also known as waste (A + B + C + D) = $ ___________

Now that I have your attention, let's talk about what causes rework waste. Here are the usual suspects: 

• The project was not clearly defined. We did not understand the objective and did not take the time to visualize what a successful outcome would look like.
• We had unclear roles and expectations for the people involved.

• We did not have the right people and skills for the job to start with.

• We thought certain people were available to work on this project, only to find out later that they were busy on other jobs.

• We got stuck on a problem this delayed the entire project.

How do you avoid rework? The answer is simple, but the practice of the answer is very hard. 

• We need to get aligned at the start of the project on what success looks like.
• We need to have clarity on roles and expected results for all involved.
• We need to be accountable to the critical milestones and deadlines, and we need to understand the consequences of missing each deadline.
• Then, we need to stay aligned when things change throughout the life of this project.