Defining the Value of Project Management
The PMI study, ‘Researching the Value of Project Management’ [download the summary] has clearly demonstrated the value of effective project management but was unable to quantify a specific ‘Return On Investment’ (ROI). The primary reasons for this were: organisations do not measure business results from project management and they do not measure the costs of PM implementations. Consequently, they are unable to calculate a financial ROI for their investment. But ROI is only one measure of ‘value’.
The ‘Researching the Value of Project Management’ study employed a ‘multi-methods’ approach to collect and analyse data from 65 case studies involving 418 project descriptions from organisations of all sizes, types and structures spread around the world. Of these, 95% of the case study organisations realised a range of valuable improvements including:
- Improvements in decision making
- Enhancement of communication and collaboration
- Improvements in effective work cultures
- Alignment of practices, terminology and values within the organisation
- Overall effectiveness of the organisation and its management approach
- Improved transparency, clarity of structure, roles and accountability.
The types of value realised by the organisations included:
- Revenue increases
- Greater market share
- Increased Competitive advantage
- Customer retention
- Increased customer share (more engagements per customer)
- Reduced write-offs and rework
- Cost savings
Given projects account for 21% of the world GDP or 1/5th of the world’s value generation improving the efficiency of the process of PM delivery should be a valuable wealth generating activity. The
One Size does not ‘fit all’
One of the key findings of the study was that understanding the organisational context and selecting the ‘right project management’ processes to implement are essential for value realization.
The context of the organisation, its geographical location and industry dictate the type of PM implementation that will be most effective. Fitting the correct PM implementation to the needs of the organisation was repeatedly demonstrated in the case studies as critical for delivering value. Unfortunately, there is no simple formula where implementing ‘x’ amount or type of PM will deliver ‘y’ amount or type of value. Each organisation is unique as are its PM needs.
Three of the factors that determine the appropriate ‘fit’ between PM processes and the organisation identified in the study are:
- Maturity. Even minor improvements in PM resulted in value realisation in some organizations. Values associated with internal efficiencies and productivity dramatically increased in more mature organisations.
- Culture. National, organisational and even the PM culture of the organisation affects value realisation. Understanding the culture is a contributing element to the correct fit of PM implementation.
- Sustainability. Once implemented, ongoing value realisation needs to be sustained by nurturing the PM processes. Even the organisational fit of the PM implementation should be regularly assessed and changes made as appropriate. Overzealous/bureaucratic PM practices can actually destroy value.
One option to determine the current levels of maturity and capability in an organisation and then plan the optimum improvement strategy for the organisations current situation is to conduct an OPM3 analysis this was discussed in the first blog in this short series, Waking up the C Suite.
For more on OPM3 see: http://www.mosaicprojects.com.au/OPM3.html
To buy ‘Researching the Value of Project Management’ visit the PMI MarketPlace
Waking up the C Suite
PMI are launching an on-going marketing campaign surrounding the release of its Value of Project Management research study. This groundbreaking study has clearly demonstrated the link between implementing good project management practice and a solid ROI [download the Research Overview]. PMI’s campaign through 2009 is designed to get C level executives and Boards of Management to recognise and support project management in their organisations by making a compelling case for project management’s ability to positively influence bottom-line drivers.
Increasing the awareness of the value of project management among the top organisational decision-makers is the vital first step in enabling organisations to introduce the capabilities they need to achieve well executed projects (as identified by OPM3 ProductSuite). Only when executives are actively thinking about, evaluating and seeking to improve their organisation’s project management practices, that the value of well executed project, program and portfolio management can be fully realised.
Many organisations may already feel they have implemented effective project management processes and have an array of project, program and portfolio managers on staff. However, without an impartial measurement of their actual capabilities there is a high probability things are not as ‘rosy’ as senior management would like to think. There are several reasons for this:
- Taking a ‘top down’ view: Human nature tends towards optimism; experiments have shown most people feel they are ‘above average’ in any given situation. In the absence of effective benchmarking and an empirical measurement system some of the ideas in ‘prospect theory’ are likely to take over and senior management would ‘expect’ their business to be ‘above average’.
- From the opposite direction, it would require a very open culture to allow middle and junior managers to honestly inform their seniors ‘we are not very good’. In most organisations if this message is heard the messenger would be blamed.
As a consequence it is easy for senior management ‘think’ their business is in good shape and middle management is encouraged to support this view if they wish to preserve their position. The antidote is hard data and benchmarking but the only way this type of assessment can be introduced successfully is from the very top. The CEO and governing board must lead the initiative to assess the real situation with a view to investing in appropriate improvements. To achieve this, the organization has to effectively assess its current level of maturity against an appropriate ‘maturity model’. Maturity models are not new, CMMI has been around in the systems engineering space for nearly 20 years and there are several newer models focused on project management.
PMI’s OPM3 (Organizational Project Management Maturity Model) offers a unique set of benefits including a focus on all levels of project governance from portfolio alignment through program management to project management. It also provides a benchmarking capability and an improvement planning capability that can be focused on the areas of ‘improvement’ that will deliver the maximum benefit to the organisation. In short, OPM3 is complete, comprehensive and customisable, particularly is the OPM3 ProductSuite is used.
The value of using OPM3 is not in the assessment; it is in the planned improvements to the organisations processes. Most organisations have a range of ‘low hanging fruits’ that are easy to pick for quick wins (and this is important). It is also true that the payback from increasing levels of maturity may reduce as the organisation’s maturity levels increase. However, as with the quality movement (TQM) the ultimate level in an OPM3 improvement process is the ability of the organisation to continually improve. This is an essential medium term objective, because if an organisation is not continually improving it will be going backwards compared to its competition. If you are not continually improving they will be with the inevitable consequences to your ‘bottom line’ over time (just ask General Motors!).
In my experience, the critical success factors for any organisational improvement initiative are:
- Firstly top level support from the CEO and governing board (it is impossible to initiate an effective OPM3 initiative at the middle management levels).
- Secondly the willingness to invest in improvements; over 95% of the cost of any initiative will be in developing and implementing the improved processes to achieve the desired benefits – doing the OPM3 assessment is the easy bit.
- Thirdly understanding real culture change takes time, investing in an OPM3 initiative can, and should, deliver quick wins but the real benefits come from the changed attitudes and culture within the organisation and this takes several years to really bed down. And until the culture of the organisation has changed, the CEO needs to keep focused on driving the improvements needed to make the organisation successful.
The second part of this blog will provide an overview of the value proposition proved by PMI in its report Researching the Value of Project Management.
If a project’s client cannot ask for what it needs, the project team is highly unlikely to deliver what’s wanted! A key element in effective project stakeholder management has to be asking enough questions to ensure everyone understands what the project is to deliver.
On Thursday 20th November 2008, I was privileged to attend the launch of a new report, ‘Scope for Improvement 2008’, focusing on the issues of scope definition in major Australian construction projects. The total value of projects surveyed was approximately AU$60 billion with an average project value of AU$360 million.
The 2008 survey has shown a slight deterioration from the initial 2006 survey, in the overall performance of the industry in developing adequate project scoping documents. The 2008 findings also show inadequate scope specification is now an endemic problem in Australia with a growing trail of budget blowouts, delays and disputes.
The worry is the construction and engineering industries are generally seen as being far more mature in their project management practices then most other sectors of the project management industry and Australia has one of the more advanced industries world-wide. The key findings from the report, outlined below, are a salient lesson for anyone involved in defining the scope for a project:
Key Findings and Recommendations of the report:
The present situation:
- There is a high prevalence of deficient scoping in Australian construction and infrastructure projects with over 50% of projects being inadequately scoped prior to going to market.
- Scoping inadequacies are being discovered far too late with 64% of deficiencies only being discovered during execution.
- The consequences of poor scoping are significant: 61% of project experienced cost overruns, 58% delays and 30% contractual disputes.
The main factors contributing to poor scoping:
- Lack of experienced and sufficiently competent personnel with 83% of projects reporting adverse effects. This is to an extent explainable by the construction boom of the last few years but compensating factors such as increased time and/or contingencies do not seem to have been allowed.
- Insufficient time to prepare the scope documents.
- Inadequate definition of project objectives by the principal resulting in subsequent changes to the scope and corrections to the scope documents.
- Lack of consultation with end users, insufficient clarity of objectives and a lack of understanding of why the project is required and the benefits the project will produce.
- Insufficient research to understand the environment the project will be executed within.
Practical steps for successful scoping:
- Industry needs to think and act differently.
- Clearly identify project objectives.
- Identify and bring together all relevant stakeholders and end users for the project and maintain their involvement in the scope definition process.
- Set realistic timeframes and budgets for developing the scope requirements (and the overall project).
- Interface the proposed project with related projects and existing infrastructure.
- Identify and establish a core project team early.
- Empower a project leader with appropriate and clear authority and accountability.
- Clearly describe the project objective and requirements once identified.
- Choose the right approach for scope description (performance criteria, detailed specification, etc) and choose the right contract delivery model that aligns with the scope – risk needs to be properly apportioned.
- Check the overall contract package for consistency.
- Involve the tenderers / project management team in getting the scope documents right.
- Capture the value from a successful bid in the final contract.
- Resolve scoping issues and disputes under a contract.
The research was conducted by partners at Blake Dawson with support from the Australian Constructors Association and Infrastructure Partnerships Australia. A full copy of the report can be downloaded from http://www.mosaicprojects.com.au/Resources.html#Construction
A recent paper by Graeme Thomas and Walter Fernandez of the Australian National University*, has explored the dimensions of project ‘success’. Based on the findings of their in-depth survey of 36 Australian companies the researchers suggest:
There are at least three different criteria for success that can operate independently:
- Project Management Success
- Technical Success
- Business Success
Project management success includes the ‘iron triangle’ of time, cost and quality (measured by meeting the specification) plus ‘stakeholder satisfaction’ including sponsors, steering committees, the project team, clients and others.
Technical success includes elements of stakeholder satisfaction (primarily associated with satisfied customers) and extends into the areas of integration, requirements met, and system use. Essentially this is a ‘capability focus’; technical success means the project deliverable could work in the way it was intended and was useable.
Business success focuses on the delivery of the intended benefits, including meeting business objectives and the continued operation of the business through the implementation or change over. Business success is value focused and is only measurable some time after the project has been completed.
Interestingly, the study demonstrated that creating a clear definition of ‘success’ during the early phases of a project contributes to achieving a successful outcome. The act of defining success and measuring success in a consistent way becomes a ‘self fulfilling prophecy’ provided it is supported by an improvement driven culture (ie not a blame driven culture).
Understanding what is really important in achieving a successful outcome helps the project team work with its clients and sponsors in an open and effective way that maximises ‘success’ for the organisation. This is a value focused approach that allows informed decisions to be made based on what really matters rather than basing all decisions on the simplistic criteria of time and cost.
However, achieving the type of culture needed to allow a broad definition of success requires the involvement of Boards and top level management in the process. Everyone needs to recognise the limitations of ‘project management success’ and shift the focus to ‘project success’ (ie the realisation of benefits to create value for the organisation). This is a business focus and only the business can actually realise the benefits by using the project deliverables effectively. Without effective ‘top management support’ (TMS) the overall achievement of real success is unlikely because the key decisions needed to optimise value in the business are unlikely to be made without TMS involvement.
*International Journal of Project Management 26 (2008) 733 – 724
We are pleased to announce PMI has accepted our new 2 day Communication Workshop, The Science and Art of Communicating Effectively for presentation immediately after the 2009 Asia Pacific Global Congress in Kuala Lumpur, Malaysia. For more on the Congress scheduled for 9 – 11 February 2009 see: http://congresses.pmi.org/AsiaPacific2008/nextyearscongress.cfm
Our communication workshop is focused on helping participants learn how to craft an effective communication strategy to support the successful delivery of their projects and programs. The workshop is designed to provide project and program managers with the skills needed to create effective messages that are focused:
- On the right people
- At the right time and carry
- The right information in the right format
Participants will learn how to craft an effective communication strategy to support the successful delivery of their projects and programs, with a particular emphasis on the subtle art of ‘managing upwards’. This is critical because your project will only be considered successful if its key stakeholders perceive the project’s outcome as a success and these perceptions of success or failure are heavily influenced by the effectiveness of the project’s communications, and relationships, with its stakeholder community.
This Two Day workshop provides a framework to:
- Identify and prioritise stakeholders using the Stakeholder Circle® methodology
- Understand the stakeholder’s ‘stake’ in the project and ‘mutuality’
- Design effective communications, particularly for senior managers
- Understand the importance of business and social networks for conveying messages
- Develop techniques for reaching ‘hard to reach’ stakeholders
- Develop an understanding of your personality and how this impacts your ability to communicate effectively
- Develop techniques for communicating for effect in difficult circumstances
- Structure and implement an effective communication plan, and finally
- Monitor the effectiveness of their communications.
We are looking forward to seeing you in KL next year.
The PMBOK® Guide—Fourth Edition is scheduled for publication on 31st December 2008. The 4th Edition continues to reflect the evolving knowledge within the profession of project management and, like previous editions, represents generally recognised good practice in the profession.
When an update to a standard, such as the PMBOK® Guide—Fourth Edition, is released PMI’s credential exams are also updated, however, because the PMI standards are only one reference in the full project management body of knowledge and new PMP questions are continually being produced, tested, and then used to replace older questions on a periodic schedule, a sudden change in the examination will not occur.
Whilst we estimate only a small percentage of examination questions will require updates to directly address actual changes in the standards, the PMP® examination will be based on the existing standards through to 30th June 2009 and then on the new standards from 1st July 2009.
As we move into 2009, this will require PMP candidates to decide between a ‘quick hit’ studying an existing course and planning to take the exam prior to 30th June, or a more long term view based on studying an updated course and planning an exam date after 1st July.
Mosaic and other PMI accredited R.E.P.s already have access to the 4th Edition and will be updating their PMP course materials over then next few months. Given our particular mix of courses ranging from 5 day intensive through to our self-paced Mentored Email™ course which takes most students around 3 to 4 months to complete we are planning to have both courses ‘live’ through the first part of 2009. If you are planning on taking your PMP exam make sure you ask your trainer about the version of the course they are offering (PMBOK® Guide 3rd or 4th Edition?) -v- the date you are planning to sit your exam.
Changes in the PMBOK® Guide—Fourth Edition
The Fourth Edition reflects a focus on improved consistency and clarity. Great consideration was given by the project teams developing the standard to remove redundant information and add clarifying statements where needed. Terminology was updated only to present process names consistently in a verb-noun format. The major differences between the Third Edition and the Fourth Edition are summarised below:
- All process names are in a verb-noun format
- Enterprise Environmental Factors were more clearly defined to avoid confusion with Organizational Process Assets.
- A standard approach for discussing requested changes, preventive actions, corrective actions and defect repairs was employed.
- The processes decreased from 44 to 42. Two processes were deleted, two processes were added and 6 processes were reconfigured into 4 processes in the procurement Knowledge Area. Despite these changes, the underlying actions were generally moved or consolidated rather than added or deleted.
- To provide clarity a distinction was made between the project management plan and project documents used to manage the project.
- The distinction between the information in the Project Charter and the Project Scope Statement was clarified.
- The process flow diagrams at the beginning of chapters 4-12 have been deleted and replaced with data flow diagrams.
- A data flow diagram for each process has been created.
- A new appendix was added that addresses key interpersonal skills that a project manager utilizes when managing a project.
- The triple constraint which is mentioned in the introduction of the PMBOK® Guide —Third Edition has been expanded to include other potential constraints including: quality, resources and risk. Since each project is unique it is possible some projects may not be affected by all potential constraints.
- The role and importance of ‘stakeholders’ has been recognised along with a shift from the impossible idea of ‘controlling’ stakeholders to a more realistic objective of ‘managing’ stakeholders. Given our long standing interest in Stakeholder Management, we find this last change particularly pleasing.
Watch this space, as more information comes to hand concerning the PMI Standards updates (PMBOK® Guide plus the Program, Portfolio and OPM3 standards) and the associated PMI Credential updates we will keep you informed.
Improving Portfolio, Program and Project (PPP) management will improve the success of an organisation. But only if the organisation will allow the improvements to be effective – the drive for improved maturity has to come from the top!
PMI are about to launch new versions of their standards for Portfolio, Program and Project management, and importantly their Organizational Project Management Maturity Model® (OPM3®). The new OPM3 standard incorporates the other three updates and takes on an interestingly new flavour:
- The weight given to ‘Organisation Enablers’ in the OPM3 standard has increased in recognition of the critical role the culture and capability of the ‘organisation’ has in allowing its projects to be executed effectively.
- The Standard for Portfolio Management – Second Edition has its focus on ‘selecting the right work to do’ (alignment) and introduces a focus on ‘Governance’ and ‘Portfolio Risk Management’. These changes place an emphasis on effective investment and risk management and an increased focus on delivering results from the organisation’s projects and programs.
- The Standard for Program Management – Second Edition has clearly differentiated the role of program management from project management.
- The PMBOK® Guide Fourth Edition’s biggest change is the increased focus on the importance of Stakeholders (including senior managers) in the successful execution of a project. The ‘iron triangle’ is no longer seen as sufficient.
The consequence of this major round of upgrades is to move the OPM3 construct towards a focus on the alignment of an organisations PPP efforts with its strategic objectives to achieve desirable ‘organisational development’. The OPM3 maturity model is ‘maturing’ into a very useful organisational asset. For more on OPM3 see: www.mosaicprojects.com.au/OPM3.html
Having been involved in a range of major ‘culture change’ initiatives and undertaken OPM3 ProductSuite assessments for major businesses, the importance of top level management support to this type of initiative cannot be over stated, it’s critical!
Over the next few weeks this blog will cover the changes to the key PMI standards and its key credentials. In the meantime:
Mosaic’s Dr Lynda Bourne is currently in Rome, Italy for the 22nd IPMA World Congress to present her paper ‘Developing Stakeholder Management Maturity in a Traditional Business – An International Case Study’. The paper focuses on the ‘project within a project’ to develop and deliver a new stakeholder management mindset based on our Stakeholder Circle® methodology and the challenges of instilling a culture change in a global transport business.
Her paper was well received but for a congress themed ‘projects to run’ the organisation of the event is woeful. The congress is a relatively small and expensive event with only around 400 delegates and even with this small number, the organisation is severely lacking.
The ‘insiders’ on the various IPMA committees and their VIP friends are insulated from the general confusion and whisked from one VIP enclave to the next never stopping to mix with the rest of the speakers and delegates (so much for democracy). And whilst there are a number of very interesting papers in the program, the allocation of ‘easy to find’ main rooms -v- well hidden side room seems to be based on who you are in the ‘old boys club’ rather then the merits of the paper. Added to this 9 parallel presentations and only 400 people means there are many presenters speaking to ‘audiences’ of around 10 people.
For the rest, everything runs late, catering is inadequate (if you are more than a few minutes late for lunch don’t bother, the food is gone), transport is not properly organised, and the cooled wine is warm and the ‘hot’ food cold by the time people get to taste it. It reminds one of the old saying about ‘couldn’t organize a booze up in a brewery’.
The only highlight of the organisation so far has been the wonderful music provided at the first two gala events. The Italian traditions of Grand Opera and wonderful music are alive and well. For more on the IPMA Congress see http://www.ipmaroma2008.it/
No great improvement – communications are another failing of the organisers, you only find out about the shuttle busses between some of the hotels and the quite hard to get to convention centre by accident (and when its too late to be useful). Helpfully the busses stop before the final evening event leaving the option of a walk in the dark or not going.
Overall this has been a very disappointing event – very expensive, poorly organised and highly segregated. We are not likely to bother attending another IPMA event for many years to come.
An on-line April 2008 survey by ESI (reported PM Forum, see: http://www.pmforum.org/blogs/press/2008/08/satisfaction-among-project-management.html) looked at purchaser’s satisfaction with project management and business analysis software tools. Only 1.2% of the 270 respondents felt their software purchase had exceeded expectations and another 9.3% felt the software had met all of their requirements.
According to the respondents, the key ingredient missing from most sales was integrated training (71%) and software specific training (36.6%). But on its own, training is not going to solve the problem. “The survey findings do not indicate project management and business analysis software is deficient, but rather that too often, the maturity of the organization and the skill level of its people are not effectively aligned for the tools to deliver their maximum ROI.”
Project management software only supports a project management methodology. But to paraphrase Bill Gates, ‘if you have and efficient system, automating the system will magnify the benefits, if the system is deficient, automation will magnify the problems’. We would suggest integrated training to align people’s skills and knowledge with an effective methodology, supported by effective project management software, is only 10% of the battle. Doing your projects ‘right’ is important but choosing the ‘right projects to do’ is far more important and this links to the capability of the organisation to exploit the ‘output’ created by the project to achieve its desired ‘outcomes’ (the value chain).
The quest for an effective ROI, that delivers business benefits (ie, real value to the organisation), lies in other areas including:
- Effective portfolio management to select the right projects to do.
- Effective program and business change management to achieve the maximum value from the project deliverables. This is a business managment issue, not a project managment issue!
- Effective organisation enablers that support the efficient execution of project work.
These objectives require two key elements:
- Effective Governance of the overall project delivery process. The ‘Governance of Project Management’ is an area of emerging importance in the overall governance of an organisation. For a range of papers on this topic visit: http://www.mosaicprojects.com.au/Resources_Papers.html#Governance
- A commitment to improving the overall maturity of an organisations Portfolio, Program and Project Management capabilities. To be effective, the commitment has to be lead by the CEO.
Some of the key tools to assist in the quest for enhanced maturity include:
All of these standards are being upgraded at the end of 2008 and show major improvements over earlier versions. Watch this space for more information…
Earned Schedule (ES) is emerging as a valuable tool in the overall management of projects. In our view, the ES methodology provides a valuable adjunct to, and a useful sanity check of, the ‘critical path’ (CPM) schedule developed for a project, for very little effort – provided the project has implemented Earned Value Management (EVM).
Using the same data as EVM, ES ‘scales’ the remaining duration of the project based on the volume of work accomplished to date compared to the planned volume, as measured by SPI(t). SPI(t) has the potential to predict future slippages that the CPM schedule may not be indicating.
CPM schedules have two major flaws inherent in the methodology:
a. CPM assumes all future work will be accomplished as planned. There is no ‘scaling function’ for the performance of future work similar to the EVM calculations of EAC = BAC/CPI for cost.
b. CPM schedules do not show critical path slippage if ‘float’ is being consumed. The ‘bow wave’ of delayed work eventually becomes critical (usually with disastrous consequences) but there may not be pre-warning. (for more on scheduling see: http://www.mosaicprojects.com.au/Planning.html)
Research by Henderson and Zwikael has demonstrated that CPI and SPI(t) are closely correlated at a summary level across a range of commercial projects. This and other research suggests ES will provide a valuable management insight to help the successful delivery of projects, but whilst this debate needs to be finalised it will ultimately be determined in the marketplace.
The Earned Schedule tools are freely available from http://www.earnedschedule.com together with published papers and links to other sites.