THE IMPORTANCE AND VALUE OF PROJECT MANAGEMENT

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THE IMPORTANCE AND VALUE OF PROJECT MANAGEMENT
For Enterprises and Institutions Bogotá, 12/5-6/03
Russell D. Archibald Fellow, PMI APM/IPMA, PMP,
MSc
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Presentation Outline

• Project Management in Industry and Government
• Advantages and Importance of Modern Project
  Management
• Cost versus Value of Project Management
• Requirements to Achieve the Benefits
• Is PM a Profession? PM in the Next 5 Years
• Conclusions

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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

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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

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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

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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

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Rapid Spread of Project Management

• PMI
• 1990 8,500 members, mostly in U.S.A.
• 2003 115,000 members in 39 countries
• Others
• IPMA 30 national PM associations
• Numerous other engineering professional
  associations around the world

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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 Techngy/Telecom
• Intnl Development
• Manufacturing
• New Product Develop.
• Oil/Gas/Petrochemical
• Pharmaceutical
• Retail
• Service Outsourcing
• Utility Industry
• Plus 4 others

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Recommended Major Categories

• Aerospace/Defense
• Business Organizational Change Projects
• Communication Systems Projects
• Event Projects
• Facilities Projects

• Information Systems
• International Development
• Media Entertainment
• Product/Service Development
• Research Dev.

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Sub-Categories Are Required

• One example
• Business Organization Change Projects
• Acquisition/merger
• Management process improvement
• New business venture
• Organization re-structuring
• Legal proceeding
• Other ?

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ExampleCategory 5. Facilities Projects

• Subcategories
• Facility decommissioning
• Facility demolition
• Facility maintenance modification
• Facility design/procure/construct1.Civil
  2.Energy 3.Environmental 4.Industrial
  5.Commercial 6.Residential 7.Ships 8.Other
• Other ?

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Current Global Survey Will Test This Approach

• Global survey of project categories life cycles
  in progress
• Please go to
• http//ipmaglobalsurvey.com
• Download 11 page paper (Spanish English) and
  complete the online survey prior to Dec. 30
• Results will be reported to respondents

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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

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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

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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

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2.Advantages Importance of Modern Project
Management

• Substantial increase in success of every project
• Strategically valid projects are selected
• Selected projects are completed on schedule and
  within budget

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Basic Reasons for Success

• Projects selected only when they support
  organizations 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

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Triad of Project Management Practices

• Assignment of integrative project
  responsibilities
• Application of integrative and predictive project
  planning and control methods and systems
• Effective team working

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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

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Advantages of Project Integrated 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

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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

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Goals of Project Portfolio Management

• Maximization of value
• Balance
• Strategic alignment

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Benefits of Project Portfolio Management

• One company (SmithKline Beechman)
• New portfolio 30 more valuable
• Marginal return on additional project investment
  tripled
• From 51 to 151
• Led to 50 increase in development spending

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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

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Sources of PM Costs
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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

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Measuring PM Return on Investment

• Knutsons 4 measurement plateaus
• Comprehension Acceptance
• Application Frequency, accuracy
• Influence on the Business Results
• Return on Investment/ROI Return on direct costs

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Measuring Results of PM

• PM exists is being applied
• Customer more satisfied
• Planning accuracy improved
• Project monitoring improved
• Collecting and using lessons learned
• Documenting change of scope and receiving payment
  for changes

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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

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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

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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

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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

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PM Organizational Culture

• PM roles and responsibilities
• Project responsibilities overlay traditional
  functional ones
• Project versus functional direction
• Open communication
• Share information, anticipate problems

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Introduce PM Practices, Systems Tools

• Management projects
• Need careful planning
• Need assistance from qualified practitioners/consu
  ltants
• Evolutionary process
• PM maturity models are useful

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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

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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

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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

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5. Is PM a Profession?

• Many references to the PM profession
• No legal licensing exists in any country
• Not a profession but rather a management
  discipline
• A required core competency for every executive
  today
• Similar to financial management competency

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PM As a Core Competency

• Project management is a way of life for all
  professionals
• Roberto Morales
• Dean, National University of Engineering,
• Peru

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PM in Next Five Years

• Little change in the basics
• Major trends
• Greater linkage to strategic management through
  project portfolio management
• Total life cycle PM creation through to
  realization of final benefits
• Continued discovery of new areas of application

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PM in Next Five Years (Contd)

• PM will merge with other management disciplines
• 3 PM maturity models in broad use
• PM certification will be
• More focused on proven capabilities
• More focused on specific areas of application and
  specific project types
• Awarded at 3 or 4 levels

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PM in Next Five Years (Contd)

• PM capabilities will be a requirement for senior
  executive positions
• Government licensing in PM will not exist
• Project portfolio management will be widespread
• Project classification system will be widely used

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PM in Next Five Years (Contd)

• Catalog of project life cycles will
• Be widely used
• Enable total life cycle PM
• Will include final realization of project
  benefits
• PM will be used in essentially all areas of human
  endeavor

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PM in Next Five Years (Contd)

• Project planning control systems
• Fully integrated with corporate systems
• More specialized by project type
• Web enabled
• Use wireless connections to central servers
• PM software vendors will consolidate

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PM in Next Five Years (Contd)

• Project teams
• Virtual teams will regularly meet via Internet
  with video
• Most project managers will be trained in team
  building and leadership

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PM in Next Five Years (Contd)

• Applicability of PM around the world
• There will still be countries, regions, and
  cultures where the PM discipline is not
  appropriate or practical
• Central Africa, for example

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6. 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 todays competitive
  world

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Conclusions (Contd)

• 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

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Conclusions (Contd)

• 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

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Thank You for Listening

• Questions?
• Comments?
• Contact me
• archie_at_unisono.net.mx
• www.russarchibald.com