The Value of Project Management

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The Value of Project Management

• Emasoft, 2006

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Presentation Outline

• Background information on project management
• Ways to measure the value of project management
• Examples of project management in different
  organizations
• Question and answer session

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What is a Project?

• A project is a temporary endeavor undertaken to
  accomplish a unique product or service (PMBOK
  Guide 2000, p. 4)
• Attributes of projects
• unique purpose
• temporary
• require resources, often from various areas
• should have a primary sponsor and/or customer
• involve uncertainty

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Recent Project Statistics

• The U.S. spends 2.3 trillion on projects every
  year, an amount equal to one-quarter of the
  nations gross domestic product
• More than sixteen million people regard project
  management as their profession on average, a
  project manager earns more than 82,000 per year
• IT Project Managers are still in great demand and
  earn over 95,000/year on average (Ziv, 2002)

PMI, The PMI Project Management Fact Book,
Second Edition, 2001
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What is Project Management?

• Project management is the application of
  knowledge, skills, tools, and techniques to
  project activities in order to meet project
  requirements (PMI, Project Management Body of
  Knowledge (PMBOK Guide), 2000, p. 6)
• In addition to meeting project requirements, its
  also important to satisfy key stakeholders and
  make sure the results of the project benefit the
  organization
• Project management should be a strategic as well
  as a tactical tool

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Project Management Framework
Schwalbe, Kathy. Information Technology Project
Management, Third Edition, 2004
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Project Management Tools and Techniques

• Project management tools and techniques assist
  project managers and their teams in various
  aspects of project management
• Some specific ones include
• Business cases, project charters, scope
  statements, and work breakdown structures (scope
  management)
• Gantt charts, network diagrams, critical path
  analysis, critical chain scheduling (time
  management)
• Cost estimates, project portfolio management, and
  earned value management (cost management)
• See following charts for many more examples (all
  from Schwalbe text, 2004)

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Sample Gantt Chart
Work Breakdown Structure (WBS)
The WBS is on the left, and each tasks start and
finish date are shown on the right using a
calendar timescale. Early Gantt charts, first
used in 1917, were drawn by hand.
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Sample Network Diagram
Each box is a project task from the WBS. Arrows
show dependencies between tasks. The bolded tasks
are on the critical path. If any tasks on the
critical path take longer than planned, the whole
project will slip unless something is done.
Network diagrams were first used in 1958.
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Sample Earned Value Chart
Many PM experts recommend using earned value
management to help track and manage projects.
Assumes a good WBS, schedule, and cost
information as well as entering actuals.
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Sample Enterprise PM Tool
In recent years, organizations are taking
advantage of software to help manage their
projects throughout the enterprise.
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BUTPMs Cant Neglect Business and Leadership
Skills

• In addition to using appropriate PM tools and
  techniques, PMs must use
• Business skills financial analysis,
  problem-solving, decision-making
• Leadership skills negotiation, team-building
• Communication skills listening, speaking,
  writing, presenting

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Dont OveremphasizeUsing PM Software

• You cant use PM software well if you dont
  understand fundamental PM concepts
• A fool with a tool is still just a fool

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Common PM Tools and Techniques by Knowledge Area
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Common PM Tools and Techniques by Knowledge Area
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Hard Part About PM

• Because every project is unique, project
  managers and their teams must have a good
  understanding of what tools and techniques are
  available before they can make the more difficult
  decisions of which ones to use on their projects
  and how to implement them.

Schwalbe, Kathy, Project Management Techniques,
The Internet Encyclopedia, Volume 3 (2004), p. 108
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Ways to Measure Value

• Agreement on general benefits
• Improved project performance/results
• ROI of project management
• PM maturity levels
• Competitive advantage

Price is what you pay. Value is what you
get. Warren Buffet
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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)

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Improved Project Performance

• Project success is often based on meeting project
  scope, time, and cost goals
• The Standish Groups CHAOS studies are well known
  for documenting IT project success rates and cost
  of failures

PM Network, July 2003, p. 16
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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)

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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
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What the Winners Do

• Recent research findings show that companies that
  excel in project delivery capability
• Build an integrated project management toolbox
  (use standard/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
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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
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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)
• Project management maturity is strongly
  correlated with more predictable project schedule
  and cost performance (i.e. .08 schedule
  performance index variation vs. .16)
• Good project management companies have lower
  direct costs than poor project management
  companies (6-7 vs. 11-20)

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

• Over 94 of senior project management
  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
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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
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Project Management Maturity Models

• Similar to maturity models for improving software
  like the Capability Maturity Model (CMM)
• 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
• ESIs five levels are called ad hoc, consistent,
  integrated, comprehensive, and optimizing
• PMIs Organizational Project Management Maturity
  Model (OPM3) released their model in 2004

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Berkeley Project Management Process Maturity Model
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Sample PMM Assessment Questions
www.ibbsconsulting.com
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Project Management Maturity by Knowledge Area and
Industry
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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
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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
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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

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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
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Meeting Goals With Good Project Management

• St. Marys National Health Service (NHS) in
  London was facing a huge deficit, problems in
  staffing, and long outpatient waiting times
• They focused on meeting specific goals by getting
  the right resources in the right places at the
  right times (basic PM concepts) and went from a
  one star to a three star rating by their trust

Williams, Monica, Healthy Returns, PM
Network, February 2002
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Examples of How Good Project Management Adds
Value at Your Organization?Question Answer
Session