The Value of Project Management and a Simple Tool to Start Reaping Its Benefits

1
The Value of Project Management and a Simple Tool
to Start Reaping Its Benefits

• Kathy Schwalbe, Ph.D., PMP
• May 19, 2005

2
Presentation Outline

• What is project management?
• Recent statistics
• Ways to measure the value of project management
• Using templates to improve project management
• Lots of resources

3
What Is Project Management?

• Project management is the application of
  knowledge, skills, tools and techniques to
  project activities to meet project requirements
  (PMBOK Guide 2004, p. 8)

4
Project Management Framework
This figure and others are from my book,
Information Technology Project Management,
Fourth Edition
5
Standish Group Statistics
The Standish Group, Latest Standish Group CHAOS
Report Shows Project Success Rates Have Improved
by 50, (March 25, 2003)
6
Some Interesting Statistics

• The U.S. spends 2.3 trillion on projects every
  year, or one-quarter of its gross domestic
  product, and the global percentage is similar
  (PMI Project Management Fact Book, 2001)
• In 2003, the average senior project manager in
  the U.S. earned almost 90,000 per year, and the
  average Project Manage Office (PMO) Director
  earned more than the average Chief Information
  Officer (118,633 vs. 103,925) (PMI Project
  Management Salary Survey, 2003)

7
Top Information Technology Skills
Percentage of Respondents
Information Technology (IT) Skill
Cosgrove, Lorraine. January 2004 IT Staffing
Update, CIO Research Reports, (February 3, 2004).
8
Growth in PMP Certification, 1993-2004
9
Ways to Measure Project Management Value

• Agreement on general benefits
• Improved project performance/results
• ROI of project management
• PM maturity levels
• Competitive advantage
• What the winners do/best practices

10
General Benefits of Project Management

• Better control of financial, physical, and human
  resources
• Improved customer relations
• Shorter development times
• Lower costs
• Higher quality and increased reliability
• Improved productivity
• Better internal coordination
• Higher worker morale (less stress)

11
Improved Project Performance

• Project success is often based on meeting
  project scope, time, and cost goals

The Standish Group, Latest Standish Group CHAOS
Report Shows Project Success Rates Have Improved
by 50, (March 25, 2003)
12
Why the Improvements?

• "The reasons for the increase in successful
  projects vary. First, the average cost of a
  project has been more than cut in half. Better
  tools have been created to monitor and control
  progress and better skilled project managers with
  better management processes are being used. The
  fact that there are processes is significant in
  itself.
• The Standish Group, "CHAOS 2001 A Recipe
  for Success" (2001)

13
What Helps Projects Succeed?

• Executive support
• User involvement
• Experienced project manager
• Clear business objectives
• Minimized scope
• Standard software infrastructure
• Firm basic requirements
• Formal methodology
• Reliable estimates

The Standish Group, "CHAOS 2001 A Recipe for
Success" (2001)
14
Improvements to Key IT Project Metrics Due to
Project Management
Value of Project Management in IT Organizations
survey,Center for Business Practices, 2002,
cited in PM Network, July 2003, p. 16
15
Findings From 5-Year Study on Quantifying the
Value of PM

• Companies with more mature project management
  practices have better project performance (on
  time and budget vs. 40 over time and 20 over
  cost targets)
• PM maturity is strongly correlated with more
  predictable project schedule and cost performance
  (i.e. .08 schedule performance index variation
  vs. .16)
• Good PM companies have lower direct costs than
  poor PM companies (6-7 vs. 11-20)

Ibbs, William and Justin Reginato, Quantifying
the Value of Project Management, PMI (2002)
16
Project Management ROI

• Over 94 of senior PM professionals say that
  implementing PM added value to their
  organizations
• Formula to predict increased company ROI based on
  increased PMM level
• Determine cost to improve PMM level, improvement
  in cost performance index (CPI), then calculate
  PM ROI using profit margins and projected annual
  revenues

Ibbs, William, The Value of Project
Management Continuing the Search for PMs ROI,
PDS 02 Conference Proceedings,
PMI-ISSIG http//www.ce.berkeley.edu/pmroi/PMROI2
0PMI20Presentation20Feb2001.pdf
17
PM ROI Example

• Company initially has PMM of 2.3, CPI of .71,
  profit margin of 5 , 10 M projected annual
  revenues
• Company improves PMM to 3.1, CPI to .94, profit
  margin to 6.6 at a cost of 400,000
• PM ROI (6.6-5.0)X10,000,000 40
• 400,000

Ibbs, William, Managing Chaotic Projects
Improving your PM/ROI (http//www.ce.berkeley.edu
/pmroi/ PMROI20PMI20Presentation20Feb2001.pdf)
18
Project Management Maturity Models

• Similar to maturity models for improving software
  like the Capability Maturity Model (CMM or now
  CMMI)
• Several PM firms have their own maturity models,
  most using levels 1-5
• The International Institute for Learning, Inc.
  calls the five levels common language, common
  processes, singular methodology, benchmarking,
  and continuous improvement
• PMIs Organizational Project Management Maturity
  Model (OPM3) released their model in 2004

19
Berkeley Project Management Process Maturity Model
20
Sample PMM Assessment Questions
www.ibbsconsulting.com
21
Project Management Maturity by Knowledge Area and
Industry
22
Feedback from Bill Ibbs

• We've benchmarked a couple healthcare
  organizationswhat I can say is that the IT PM
  capability of those organizations was poor,
  especially in terms of initiating projects.  We
  helped one of those companies save several
  million dollars over a 2 year period by helping
  them focus better on the projects they launched.
• Wall Street reports that the healthcare industry
  in general is gearing up to spend even more
  on IT in the next couple years than they have in
  the past.  So there's a lot at stake.

From e-mail correspondence Feb. 2, 2004
23
Other Research Suggests That PM Maturity Models
Only Measure Explicit Knowledge

• Explicit knowledge know what, can be put into
  IT, a digital or discrete process that can be
  codified and transmitted in formal, systematic
  language (Nonaka 1994)
• Tacit knowledge know how, in ones experience
  hard to replicate and can be transferred
  indirectly though time consuming socialization
  processes (Kaplan et al 2001)

Jugdev and Thomas, Blueprint for Value
Creation Developing and Sustaining a Project
Management Competitive Advantage Through the
Resource Based View, Proceedings of PMI Research
Conference, 2002
24
Need to Make PM a Strategic Asset (Just Like IT)

• Many executives view project management as having
  worth at the operational and tactical rather than
  strategic level
• Resource Based View (RBV) frameworks emphasize
  how firms create value and profits from their
  internal resources and focus on strategic assets
• RBV is relevant to project management because it
  emphasizes intellectual capital

25
Research Based View Model
Need to combine know what with know how to make
PM a strategic asset!
Jugdev, Kam, presented at PMI Research
Conference, July 2002
26
Successful Examples of Applying PM in Healthcare
Organizations

• Theory of Constraints aids in scheduling
• Good project managers are critical to successful
  drug launches

27
Applying the Theory of Constraints (TOC) in
Health Care

• TOC is a form of systems thinking that suggests
  that any complex system at any point in time
  often has only one aspect or constraint that
  limits its ability to achieve more of its goal.
  Need to exploit constraint and adjust scheduling
  and resource usage
• A USAF base decreased waiting time for primary
  care appointments from 17 days to 4.5 at no
  additional cost
• Radcliff Infirmary in Oxford, England improved
  waiting times for neurosurgery and ophthalmology
  (noted a 100 reduction in elective cancellations
  and increases in throughput of over 16 at no
  additional cost)

Breen, Anne, Tracey Burton-Houle, and David C.
Aron, Applying the Theory of Con- straints in
HealthCare Part 1 The Philosophy, Quality
Management in Health Care, (Vol 10, Number 3),
Spring 2002, www.goldratt.com/for-cause/applyingto
cinhcpt1fco.htm
28
Pharmaceutical Project Managers Are a Breed Apart

• Significant investments in drug development
  projects (12 years and 800M on average), the
  magnitude of risks in the development cycle, and
  extensive involvement of senor management makes
  it especially tough being a PM in this industry
• I know of no pharmaceutical company today
  attempting drug development without a project
  manager to oversee it (Luis Cabassa, PMP,
  Genetech Inc.)

Pappas, Lorna, The Right Prescription, PM
Network, October 2002
29
What the Winners Do

• Companies that excel in project delivery
  capability
• Build an integrated project management toolbox
  (use standard and advanced PM tools, lots of
  templates)
• Grow competent project leaders, emphasizing
  business and soft skills
• Develop streamlined, consistent project delivery
  processes
• Install a sound but comprehensive set of project
  performance metrics

Milosevic, Dragan, Portland State University,
Delivering Projects What the Winners Do, PMI
Conference Proceedings, November 2001
30
Using a Standardized Project Management Approach

• Research found that a consistent
  (one-size-fits-all) managerial approach may be
  essential to the successful standardization of
  certain aspects of project management, and a
  contingency approach is needed for certain
  aspects, too
• Low standardization with a sufficient amount of
  variation is the more appropriate approach

Milosevic and Pantanakul, The Impact of
Standardized Project Management New Product
Development Projects versus Software Development
Projects, Proceedings of PMI Research Conference
2002
31
What Are Templates?

• Templates are documents or files that provide an
  outline or format for creating documentation
• Many professionals dont like to write or ask
  others how to do simple things, and no one
  likes to reinvent the wheel
• Templates make it easier to prepare common
  project documents and use standard tools and
  techniques
• Its important to tailor templates to unique
  project and organizational needs

32
Sample Templates

• Information Technology Project Management, Fourth
  Edition, includes
• 38 templates used in the book
• information for accessing 333 free templates from
  other sources
• You can access all of these template files for
  free from www.kathyschwalbe.com

33
www.kathyschwalbe.com
34
Template Files
35
Breakeven Template
36
Business Case Financials Template
37
(No Transcript)
38
(No Transcript)
39
Gantt Chart Template
40
(No Transcript)
41
(No Transcript)
42
Student Project Results Free Template
Distribution byProcess Group and Knowledge Area
43
Students Top Ten Free Template Sites
44
Kathys Observations on Templates

• In early 2003 I added templates to my Web site
  for project proposals, team contracts, and scope
  statements, and the quality of student projects
  improved tremendously
• People like to have more guidance on expectations
  and formats for various project documents, and
  they want the actual files to make their jobs
  easier
• Be sure the templates are useful and not just
  bureaucratic paperwork, and be sure people use
  them properly

45
Resources

• The text book Web site for my third edition is
  available for free at www.course.com/mis/schwalbe
• Fourth edition Web site is password protected
  (need to buy the book!) includes guide to using
  Project 2002 and 2003, interactive test
  questions, updated lecture slides, links to
  hundreds of references, etc.
• Lots of info from my site

46
Questions?
Feel free to use templates, teaching ideas,
etc. from my Web site at www.kathyschwalbe.com. Co
ntact me at schwalbe_at_augsburg.edu.