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value of pm

value of pm

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Published by: fakhro on May 29, 2008
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ENIOREXECUTIVESWANTTOKNOWONE
thing about any project managementimprovement initiative: "What's the value?" Today more than ever, everydollar invested must be justified, and any initiative must deliver positiveand tangible results. The good news is that tangible metrics on project manage-ment value can be established by asking the right questions and developing anappropriate measurement system. Even better news is that the Center forBusiness Practices (CBP), the research arm of PM Solutions, has conductedindustry-wide studies using a balanced family of measures that document thevalue of project management to organizations. In those studies, 97% of therespondents say project management adds value to their organizations. Byimplementing project management improvement initiatives, organizations haveon average returned the following value:
 © 2002 Project Management Solutions, Inc. All rights reserved.
W H I T E
P A P E R
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PM Solutions White Paper Series
Phone: 610.853.3679
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www.pmsolutions.com
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Fax: 610.853.0527
The Value of Project Management
Validating the positive impacts ofproject management on organizations
S
For all types of organizations [1]:
27% return on investment18% improvement in customer satisfaction25% improvement in time to market50% improvement in the number of projectscompleted30% improvement in project budget per-formance34% improvement in project schedule per-formance39% improvement in project requirementsperformance24% improvement in project risk31% decrease in the number of process errors43% decrease in the number of defects34% decrease in the number of scopechanges40% improvement in employee satisfaction75% improvement in employee productivity32% improvement in employee motivation
For IT organizations [2]:
28% return on investment38% improvement in customer satisfaction37% improvement in aligning projects tostrategic business goals22% improvement in time to market33% improvement in time and budget todate32% improvement in schedule performance32% improvement in quality26% improvement in labor hours perform-ance24% improvement in cost performance23% improvement in staff productivity38% improvement in schedule estimating33% improvement in cost/hours estimating13% improvement in defect rate estimating
nnnnnnnnnnnnnnnnnnnnnnnnnnn
 
 © 2002 Project Management Solutions, Inc.All rights reserved.
The Value of Project Management
2
PM Solutions White Paper Series
 W 
HATISAPROJECTMANAGEMENTIMPROVEMENTINITIATIVE
?
The CBP surveyed senior practitioners with knowledge of their organiza-tions' project management practices and business results. The resultsshowed improvements to the organization correlated to the implementa-tion of project management initiatives. Organizational initiatives includedimplementing a project office, a project management methodology, projectmanagement software, integrating project management into key companyprocesses, training staff in project management tools and techniques, anddeploying a development program for project staff. The survey revealedthat most companies strategically rely on multiple, coordinated projectmanagement improvement initiatives rather than just one or two. Over70% of the organizations implemented three or more initiatives within thepast three years.
H
OWWEMEASURETHEVALUEOFPROJECTMANAGEMENT
Previous industry research measured the value of project management interms of efficiency (time, cost, scope) and finance, and was generally limit-ed to a specific project return on investment. Today, however, there arebroader valuation practices that extend to the organization as a whole, andthat lend a much clearer, accurate, and useful view of the effects of imple-menting project management in organizations. What should you measure to determine the benefits of implementing aproject management improvement initiative? In the past, and in some casestoday as well, the measure most often used is return on investment. ROI isa measure of profitability computed by dividing the amount of operatingincome earned by the average investment in operating assets required toearn the income. ROI measures how effectively assets are used to earnincome. Financial measures alone, however, don't present a clear picture of the value. They are too unreliable as either a clear gauge of success or aclear sign of the future measures. Unlike financial measures, most opera-tional measures are leading indicators. When they improve, improvementin the financial measures follow, albeit often indirectly, and with a time lag.To drive success, financial measures must be supplemented with opera-tional ones. Many, if not most, Fortune 1000 organizations are taking abalanced scorecard approach to measure and manage their organizations.The balanced scorecard approach is a multidimensional performance-meas-urement system designed by Robert Kaplan and David Norton that pro-vides a clear prescription as to what companies should measure in order to'balance' the financial perspective.
 
 © 2002 Project Management Solutions, Inc.All rights reserved.
The Value of Project Management
3
PM Solutions White Paper Series
Research has shown that creating value for stakeholders is the key to orga-nizational success. Companies that focus on their shareholders, customers,and employees outperform firms that do not. Since deriving advantagethrough stakeholders drives strategic success, the best way to create meas-ures is to look at which key stakeholder groups most help drive the strate-gy and devise measures to fit these groups.So, what metrics should you use to determine the benefits of project man-agement to your organization? Simple financial measurements are notenough. A balanced scorecard approach is needed to get an overall pictureof the health of your organization and its project management practices. Abalanced scorecard can evolve into a powerful system for executing strate-gy. The measures help to define the strategy, communicate it to the organi-zation, and direct its implementation at every rung of the hierarchy, fromthe corporate level to the individual. They also keep everyone's effortsaligned, because they link strategy to budgets, to resource-allocation sys-tems, and to compensation programs. Demonstrating how project manage-ment initiatives measure up using this balanced scorecard is critical to anybusiness justification for a project management investment.
A
BOUTTHERESEARCHSTUDIES
The Value of Project Management Study
The CBP surveyed senior practitioners with knowledge of their organiza-tions' project management practices business results.
Conducted July 2002; Responses from 65 organizations
Responses to the survey were almost all significantly positive, for allmeasures, all industries, and all size organizations - project managementdefinitely adds value to organizations.Implementation of project management is new to most organizations-within the last four years.69% of respondents implemented three or more project managementinitiatives.
The Value of Project Management in IT Organizations Study
The CBP surveyed senior practitioners with knowledge of their IT organi-zations' project management practices and business results.
Conducted September 2001; Responses from 43 IT organizations
Responses to the survey were almost all significantly positive, for allmeasures, all industries, and all size organizations - project managementdefinitely adds value to IT organizations. A large percentage of respondents (41.9%) represented Fortune 1000organizations.
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