The Importance and Value of Project Management

Transcription

1 The Importance and Value of Project Management For Enterprises and Institutions Russell D. Archibald, PMP 6/16/2004 1

2 Presentation Outline 1. Project Management in Industry and Government 2. Advantages and Importance of Modern Project Management 3. Cost versus Value of Project Management 4. Requirements to Achieve the Benefits 5. Conclusions 6/16/2004 2

3 1. PM in Industry & Government Projects Exist in all organizations Are vehicles for strategic growth Produce a wide variety of results: New products, systems, and services New facilities (buildings, plants, hospitals, other) New organizations, events, & other 6/16/2004 3

4 Project Characteristics Start and end points Complex effort, many diverse tasks Produce specified results within an established schedule and budget Require the efforts of diverse specialists Demand modern project management practices for successful execution 6/16/2004 4

5 A Project is a Process The difference between a project and its product A project is the process of creating a new end result: the product Principles of project management apply to all categories of projects Major differences exist in their life cycle models and detailed management methods 6/16/2004 5

6 Why Such Rapid Spread of PM? Current wide understanding that Projects exist in all human organizations Great benefits are derived from applying modern project management: Systematically conceiving, selecting, defining, planning, authorizing and executing projects Linking strategic growth to projects through project portfolio management 6/16/2004 6

7 Rapid Spread of Project Management PMI: 1990: 8,500 members, mostly in U.S.A. 2004: 130,000 members in 39 countries Others: IPMA: 30 national PM associations Numerous other engineering & professional associations around the world 6/16/2004 7

8 PMI Communications PMNetwork Magazine (monthly) PMI Today Newsletter (monthly) Project Management Journal (quarterly) All available via Internet 445,255 visitors to PMI web site in February 2004 alone: 6/16/2004 8

9 Diversity of Projects: 23 PMI Specific Interest Groups/SIGS Aerospace/Defense Automation Automotive E-business Environmental Financial Services Government Healthcare Hospitality Events Information Systems Info Tech n gy/telecom Int n l Development Manufacturing New Product Develop. Oil/Gas/Petrochemical Pharmaceutical Retail Service & Outsourcing Utility Industry Plus 4 others 6/16/2004 9

10 Recommended Project Categories 1. Aerospace/Defense 2. Business & Organizational Change Projects 3. Communication Systems Projects 4. Event Projects 5. Facilities Projects 6. Information Systems 7. International Development 8. Media & Entertainment 9. Product/Service Development 10. Research & Dev. 6/16/

11 Sub-Categories Are Required One example: 2. Business & Organization Change Projects: 1. Acquisition/merger 2. Management process improvement 3. New business venture 4. Organization re-structuring 5. Legal proceeding 6. Other:? 6/16/

12 Example: Category 5. Facilities Projects Subcategories: 1. Facility decommissioning 2. Facility demolition 3. Facility maintenance & modification 4. Facility design/procure/construct 1.Civil 2.Energy 3.Environmental 4.Industrial 5.Commercial 6.Residential 7.Ships 8.Other: 5. Other:? 6/16/

13 Needed: Global Project Classification System A Global System for Categorizing Projects: The Need for, Recommended Approach to, and Uses of the System, Russell Archibald, Brasilia, Dec Download at (go to author>recent papers ) 6/16/

14 Effective Project Management is Important to All Organizations Failures in project selection, risk analysis, & conceptual planning: Expenditure of scarce resources on projects doomed to failure Exposure to unacceptable financial, technological, and competitive risks 6/16/

15 Failures in Project Planning & Execution Expected profits become losses New products too late Capital facilities completed too late Information systems projects exceeding their planned cost and schedule 5 out of 6 IS projects failed to meet targets Nearly 50% were canceled before completion 6/16/

16 Project-Driven & Project- Dependent Organizations Project-Driven: Primary business is delivering projects Examples: Design/construction, software development, telecommunication systems, consultants & professional services Project-Dependent: All others projects support their primary lines of business 6/16/

17 Presentation Outline 1. Project Management in Industry and Government 2. Advantages and Importance of Modern Project Management 3. Cost versus Value of Project Management 4. Requirements to Achieve the Benefits 5. Conclusions 6/16/

18 2.Advantages & Importance of Modern Project Management Good PM produces substantial increase in success of every project: Strategically valid projects are selected Selected projects are completed on schedule and within budget 6/16/

19 Basic Reasons for Success Projects selected only when they support organization s strategic goals Commitments are made only to achievable technical, cost & time goals Responsibilities are well defined Every project is planned and controlled Project teams work together with commitment to goals 6/16/

20 Triad of Project Management Practices 1. Assignment of integrative project responsibilities 2. Application of integrative and predictive project planning and control methods and systems 3. Effective team working 6/16/

21 Advantages of Assigning Integrative Responsibilities Accountability in one person: the Project Manager Other key integrative responsibilities as well Decisions made for the good of the overall organization Every project is well planned and controlled Teams work together with commitment with leadership of the Project Manager 6/16/

22 Advantages of Integrated Project Planning & Control All functional tasks planned & controlled to meet overall needs of the project Resources are allocated properly, effects of priorities are known Early identification of potential problems (delays, overruns, etc.) enables timely corrective actions 6/16/

23 Advantages of Effective Team-Working Creative collaboration of diverse skills needed for each project Strong team commitment to each project and its objectives Developing as a team agreed plans, schedules and budgets Achieving outstanding team performance on each project 6/16/

24 Goals of Project Portfolio Management 1. Maximization of value 2. Balance 3. Strategic alignment 6/16/

25 Benefits of Project Portfolio Management One company (SmithKline Beechman): New portfolio 30% more valuable Marginal return on additional project investment tripled: From 5:1 to 15:1 Led to 50% increase in development spending 6/16/

26 Presentation Outline 1. Project Management in Industry and Government 2. Advantages and Importance of Modern Project Management 3. Cost versus Value of Project Management 4. Requirements to Achieve the Benefits 5. Conclusions 6/16/

27 3. Cost Versus Value of Project Management Sources of PM costs Magnitude of PM costs Measuring PM return on investment/roi Value of PM: Beyond ROI 6/16/

28 Sources of PM Costs People (salary plus overhead) PM Software (Acquisition and maintenance) PM Planning, Computing and Communications (PCs & ISP*) PM Travel, Training, Consultants Project Portfolio Management 1. Portfolio Steering Group. 2. Support staff (if required.) Supported by PMO. Supported by PMO. Minimal PM travel. Consultant (?) Project Management Office (PMO) 1. PMO Director. 2. Support staff. Acquire & maintain PM software for total organization. Acquire/administer Intranet/Internet/Web server and support for PM discipline. Acquire PCs. Training Consultant for PMO startup Program/Project Office (PO) (for each program or project). Costs are included in direct project budget. 1. Program or Project Manager. 2. Planning & control staff. Tailor & use PM SW for each project s needs. Use PCs. Use Intranet/Internet/Web as required. Enter data as required for project planning and control. Project start-up Training Travel Consultant (?) All affected functions 1. Managers. 2. Functional project leaders. 3. Work package leaders. Supported by PMO and all project offices & project managers. Provide > planning inputs > progress info > time sheets. PM Training as required.

29 Magnitude of PM Costs 80% of 20 companies spend less than 10% of project cost on PM Range: 0.3% to 15% of total project cost Salaries and burden are largest single item Others: SW licensing, consulting, training costs 6/16/

30 Measuring PM Return on Investment Knutson s 4 measurement plateaus: 1. Comprehension & Acceptance 2. Application: Frequency, accuracy 3. Influence on the Business: Results 4. Return on Investment/ROI: Return on direct costs 6/16/

31 Measuring Results of PM 1. PM exists & is being applied 2. Customer more satisfied 3. Planning accuracy improved 4. Project monitoring improved 5. Collecting and using lessons learned 6. Documenting change of scope and receiving payment for changes 6/16/

32 Value of PM: Beyond ROI ROI not a good indication of PM value Broader view needed, i.e. balanced scorecard approach 100 PM practitioners surveyed: 94% say PM adds value 5%: little value 1%: not valuable 6/16/

33 Areas of Significant Improvement from PM Application Financial measures Customer measures Project/process measures Learning and growth measures All size organizations in all industries reported such improvements 6/16/

34 What Should Organizations Expect from Implementing PM? 50% improvement in project/process execution 54% improvement in financial performance 36% in customer satisfaction 30% in employee satisfaction -- as noted by companies surveyed 6/16/

35 Presentation Outline 1. Project Management in Industry and Government 2. Advantages and Importance of Modern Project Management 3. Cost versus Value of Project Management 4. Requirements to Achieve the Benefits 5. Conclusions 6/16/

36 4. Requirements to Achieve the Benefits Create organizational culture for PM Introduce and improve PM practices, systems and tools Train involved persons at all levels 6/16/

37 PM Organizational Culture PM roles and responsibilities Project responsibilities overlay traditional functional ones Project versus functional direction Open communication Share information, anticipate problems 6/16/

38 Introduce PM Practices, Systems & Tools Management projects Need careful planning Need assistance from qualified practitioners/consultants Evolutionary process PM maturity models are useful 6/16/

39 PM Training Requirements Extensive training needed At all levels Top level: general principles Program and project managers PM planning and control specialists Many qualified trainers available Many university courses available 6/16/

40 PM Training is Big Business PMI: 900 Registered Education Providers 60,000 students per year 18 graduate & undergraduate certification programs in the U. S. Many on-line courses 6/16/

41 PM Certification Programs PMI: Two levels PMP CAPM IPMA: Four levels A: Certified Programme Director/CPD B: Certificated Project Manager/CPM C: Registered PM Professional/RPMP D: PM Fachman/Fachfrau/PMF 6/16/

42 5. Conclusions All enterprises realize growth strategies through execution of projects Managing growth prudently requires managing projects effectively Application of PM principles, practices systems and tools is of great importance to every enterprise & institution in today s competitive world 6/16/

43 Conclusions (Cont d) When properly applied, project management will produce great benefits and value These benefits include improved: Financial returns Customer & employee satisfaction, and Project selection and execution 6/16/

44 Conclusions (Cont d) PM discipline is not a separate management profession PM is a core competency required for all executives The art and science of PM will continue to evolve with close linkage to strategic management 6/16/

45 Thank You for Listening Questions? Comments? Contact me: 6/16/