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The Value of Project Management

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Title: The Value of Project Management


1
The Value of Project Management
  • Presented February 25, 2004
  • by
  • Kathy Schwalbe, Ph.D, PMP

2
Presentation Outline
  • Background information on project management
  • Ways to measure the value of project management
  • Examples of project management in health care
    organizations
  • Question and answer session

3
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

4
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
5
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

6
Project Management Framework
Schwalbe, Kathy. Information Technology Project
Management, Third Edition, 2004
7
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)

8
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.
9
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.
10
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.
11
Sample Enterprise PM Tool
In recent years, organizations are taking
advantage of software to help manage their
projects throughout the enterprise.
12
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

13
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

14
Common PM Tools and Techniques by Knowledge Area
15
Common PM Tools and Techniques by Knowledge Area
16
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
17
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
18
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)

19
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
20
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)

21
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
22
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
23
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
24
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)
25
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
26
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
27
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

28
Berkeley Project Management Process Maturity Model
29
Sample PMM Assessment Questions
www.ibbsconsulting.com
30
Project Management Maturity by Knowledge Area and
Industry
31
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
32
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
33
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

34
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
35
Successful Examples of Applying PM in Healthcare
Organizations
  • Theory of Constraints aids in scheduling
  • Focusing on meeting goals with good PM helps
    organizations meet demands under budget
    constraints
  • Good project managers are critical to successful
    drug launches

36
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 used TOC to
    improve 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
37
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
38
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
39
Examples of How Good Project Management Adds
Value at Your Organization?Question Answer
Session
Feel free to contact me at schwalbe_at_augsburg.edu
Visit my Web site at www.kathyschwalbe.com
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