PMI Proves the Value of Project Management (1)

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.

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4 responses to “PMI Proves the Value of Project Management (1)

  1. Nice writing. You are on my RSS reader now so I can read more from you down the road.

    Allen Taylor

  2. Patrick and Lynda,

    I wanted to add a footnote on the ROI statements for the study and OPM3. I think if you read the summary and the study, you will find that they did NOT prove a positive ROI for project management. They could not discuss ROI in a meaningful way at all in the study.

    Here is a quote from the summary, “They discovered that because organizations have implemented project management differently
    and they each have unique values, executives
    had trouble discussing their specific ROI using terms that would translate across the sample.”

    In short, they found many positive qualitative correlations with project management, but they found no quantitative measures of value.

    There is still tremendous amounts of value in the study. The qualitative values like executive satisfaction are important ones, and perhaps a future study will find quantitative values as well. Still, this study only shows “return on investment” in the non-financial sense — they found benefits to project management, but not a traditional, positive ROI.

    Also, the study did not use OPM3 as their maturity measurement system at all. They created a simplified maturity model that seems to bear little relation to OPM3. They created a stepwise maturity model so they could come up with a single overall rating for the organization, rather than the more complex, multi-dimensional ratings that OPM3 provide.

    I agree that OPM3 can be enormously beneficial, but the PMI study has only indirect relationship with OPM3, and certainly no strong statements about financial ROI.

    I hope this helps clarify.

    –Alex
    http://www.alexsbrown.com

  3. Hi Alex,

    Thank you for the clarification. My next post is intended to discuss the values Janice and Mark were able to prove in the study….. but I have more reading of the report to do first and the full report is far from ‘easy reading’.

    Whist you are correct in saying the research did not quantify a ROI value I believe any reasonable reading of the report clearly demonstrates there is a tangible value that will be returned to an organisation that implements the right improvements to their project management practices. In other words there is a positive ROI, if project management is ‘done better’ in the context of each organisation. The problem is ‘what’s right’ and ‘how much ROI’ will always be context sensitive.

    My personal view is that the best anyone can hope for in terms of a quantified valuation is a very general assessment. In this context I have completed two OPM3 ProductSuite assessments in businesses that are likely to agree to a re-assessment during 2009 and are tentatively in agreement to contribute to a ROI study. Both need the data for internal purposes.

    The challenge of establishing an actual ROI will still be difficult. Using OPM3 ProductSuite will provide an empirical measure of ‘project management capability’ both before and after the internal improvement project – ie, we can measure the improvement precisely. Also the costs of the ‘improvement projects’ are likely to be relatively easy to quantify. The difficulty is going to be estimating with a reasonable degree of rigour the benefits created by the improvements.

    The range of benefits include savings generated as a consequence of better decisions (ie how much money was ‘not lost’) as well as future benefits from projects not yet started as well as more tangible direct benefits from improved performance on current projects. Inevitably, there will be some very woolly data included in the assessment of the ‘benefits’ needed to generate the ROI calculations. This work has been done in the context of CMMI over the last 20 years; the challenge for the project management profession is to build a similar set of data for ‘project management’ and from a PMI perspective project management in the context of OPM3.

    Lynda

  4. Pingback: PMI Proves the Value of Project Management (2) « Mosaicproject’s Blog

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