‘The identification of risk and the implementation, by the project team, of risk

management techniques is essential for project success.’ Discuss.

Project Risk Management

The Association for Project Management defines PRM as the process and techniques which
enables effective management of risk associated with a project (APM, 2000).
Because every project is unique, dealing with risk in project may therefore be different from
situations. However, a general simple framework for risk management involve four (4) steps
which many different PRM tools and processes have revolve around. The four steps are:
1. Identification of risks
2. Quantification of risks
3. Planning for risks
4. Monitoring and control of risks
To manage project risk effectively requires all four steps and it is a continuous iterative process
of management. It is therefore carried out from time to time at each phase of the project and
whenever there is a deviation from the project plan. Risk management is perhaps the most
difficult side of project management. The project team must be able to recognise risks faced
and identify the root causes and trace these through the project to their consequences. In the
context of construction project, the use of risk management from the early stage of the project,
where major decisions are such as design and selection of construction method can be
influenced, is very essential.
Risk Management Process
Various risk management processes are described in the introduction chapter 1.0 above. In
this section, we present the risk management processes as described by the Australian
standards/New Zealand standards AS/NZS 4360:2004. The main elements of this process are:
a. Commination and consultation: it is a continuous process throughout the risk management
process. Communication and consultation with both external and internal stakeholders
appropriately at stage of the risk management process;
b. Establishing the context: internal, external and risk management context in which the rest
of the process will take place is establish. The risk evaluation criteria and definition of the
analysis structure is established;
c. Risk identification: the identification process should indicate where, when, why and how
and occurrence of an event could delay, prevent, degrade or enhance the achievement of the
objectives;
d. Risk analysis: this comprise identification and evaluation of existing controls. It also
includes determination and evaluation of likelihood, consequences and the level of risk. It is
vital that range of potential consequences and how they could occur are taken into
consideration;
e. Risk evaluation: this consist of comparison of estimated risk levels against pre-established
criteria. The balance between adverse outcomes and potential benefits is considered to
enables decisions to be made about the nature and extent of treatment required and priorities;
f. Risk treatment: it involves development and application of specific costeffective strategies
and action plans to reduce potential adverse cost and increase potential benefits;
g. Monitoring and review: the risk management process is an iteration process. It is therefore
important to continuously monitor and review the effectiveness of all the steps in the whole
risk management process. This is vital for continuous improvement and ensures changing
circumstances do not alter priorities.

The whole risk management process as described in AS/NZS 4360:2004 is shown in figure 2.
(Adopted from Williams et al., 2006)
The benefits of risk management in projects are huge. You can gain a lot of money if you deal
with uncertain project events in a proactive manner. The result will be that you minimise the
impact of project threats and seize the opportunities that occur. This allows you to deliver your
project on time, on budget and with the quality results that your project sponsor demands. Also,
your team members will be much happier if they do not enter a fire fighting mode needed to
repair the failures that could have been prevented.

This article gives you the ten golden rules to apply risk management successfully in your
project. They are based on personal experiences of the author who has been involved in projects
for over fifteen years. Also, the big pile of literature available on the subject has been condensed
in this article.

Rule 1: Make Risk Management Part of Your Project

The first rule is essential to the success of project risk management. If you don't truly embed
risk management in your project, you can not reap the full benefits of this approach. You can
encounter a number of faulty approaches in companies. Some projects use no approach
whatsoever to risk management. They are either ignorant, running their first project or they are
somehow confident that no risks will occur in their project (which of course will happen). Some
people blindly trust the project manager, especially if he or she looks like a battered army
veteran who has been in the trenches for the last two decades. Professional companies make
risk management part of their day to day operations and include it in project meetings and the
training of staff.

Rule 2: Identify Risks Early in Your Project

The first step in project risk management is to identify the risks that are present in your project.
This requires an open mindset that focuses on future scenarios that may occur. Two main
sources exist to identify risks, people and paper. People are your team members that each brings
along their personal experiences and expertise. Other people to talk to are experts outside your
project that have a track record of the type of project or work you are facing. They can reveal
some booby traps you will encounter or some golden opportunities that may not have crossed
your mind. Interviews and team sessions (risk brainstorming) are the common methods to
discover the risks people know. Paper is a different story. Projects tend to generate a significant
number of (electronic) documents that contain project risks. They may not always have that
name, but someone who reads carefully (between the lines) will find them. The project plan,
business case and resource planning are good starters. Other categories are old project plans,
your company Intranet and specialist websites.

Are you able to identify all project risks before they occur? Probably not. However if you
combine a number of different identification methods, you are likely to find the vast majority.
If you deal with them properly, you will have enough time left for the unexpected risks that
take place.

Rule 3: Communicate About Risks

Failed projects show that project managers in such projects were frequently unaware of the big
hammer that was about to hit them. The frightening finding was that frequently someone of the
project organisation actually did see the hammer, but didn't inform the project manager of its
existence. If you don't want this to happen in your project, you better pay attention to risk
communication.

A good approach is to consistently include risk communication in the tasks you carry out. If
you have a team meeting, make project risks part of the default agenda (and not the final item
on the list!) This shows risks are important to the project manager and gives team members
a natural moment to discuss them and report new ones.

Another important line of communication is that of the project manager and project sponsor or
principal. Focus your communication efforts on the big risks here and make sure you don't
surprise the boss or the customer! Also, take care that the sponsor makes decisions on the top
risks because usually some of them exceed the mandate of the project manager.

Rule 4: Consider Both Threats and Opportunities

Project risks have a negative connotation: they are the bad guys that can harm your project.
However, modern risk approaches also focus on positive risks, the project opportunities. These
are the uncertain events that are beneficial to your project and organisation. These good
guys make your project faster, better and more profitable.

Unfortunately, a lot of project teams struggle to cross the finish line, being overloaded with
work that needs to be done quickly. This creates a project dynamic where only negative risks
matter (if the team considers any risks at all). Make sure you create some time to deal with the
opportunities in your project, even if it is only half an hour. The chances are that you will see
a couple of opportunities with a high payoff that doesn't require a big investment of time or
resources.

Rule 5: Clarify Ownership Issues

Some project managers think they are done once they have created a list of risks. However,
this is only a starting point. The next step is to make clear who is responsible for what risk!
Someone has to feel the heat if a risk is not taken care of properly. The trick is simple: assign
a risk owner for each risk that you have found. The risk owner is the person in your team that
has the responsibility to optimise this risk for the project. The effects are really positive. At
first, people usually feel uncomfortable that they are actually responsible for certain risks, but
as time passes they will act and carry out tasks to decrease threats and enhance opportunities.

Ownership also exists on another level. If a project threat occurs, someone has to pay the bill.
This sounds logical, but it is an issue you have to address before a risk occurs. Especially if
different business units, departments and suppliers are involved in your project, it becomes
important who bears the consequences and has to empty his wallet. An important side effect of
clarifying the ownership of risk effects is that line managers start to pay attention to a project,
especially when a lot of money is at stake. The ownership issue is equally important to project
opportunities. Fights over (unexpected) revenues can become a long-term pastime of
management.
Rule 6: Prioritise Risks

A project manager once told me, I treat all risks equally. This makes project life really simple.
However, it doesn't deliver the best results possible. Some risks have a higher impact than
others. Therefore, you better spend your time on the risks that can cause the biggest losses and
gains. Check if you have any showstoppers that could derail your project. If so, these are your
number one priority. The other risks can be prioritised on gut feeling or, more objectively, on
a set of criteria. The criteria most project teams use is to consider the effects of a risk and the
likelihood that it will occur. Whatever prioritisation measure you use, use it consistently and
focus on the big risks.

Rule 7: Analyse Risks

Understanding the nature of a risk is a precondition for a good response. Therefore, take some
time to have a closer look at individual risks and don't jump to conclusions without knowing
what a risk is about.

Risk analysis occurs at different levels. If you want to understand a risk at an individual level,
it is most fruitful to think about the effects that it has and the causes that can make it happen.
Looking at the effects, you can describe what effects take place immediately after a risk occurs
and what effects happen as a result of the primary effects or because time elapses. A more
detailed analysis may show the order of magnitude effect in a certain effect category like costs,
lead time or product quality. Another angle to look at risks is to focus on the events that precede
a risk occurrence, the risk causes. List the different causes and the circumstances that decrease
or increase the likelihood.

Another level of risk analysis investigates the entire project. Each project manager needs to
answer the usual questions about the total budget needed or the date the project will finish. If
you take risks into account, you can do a simulation to show your project sponsor how likely
it is that you finish on a given date or within a certain time frame. A similar exercise can be
done for project costs.

The information you gather in a risk analysis will provide valuable insights into your project
and the necessary input to find effective responses to optimise the risks.

Rule 8: Plan and Implement Risk Responses

Implementing a risk response is the activity that actually adds value to your project. You
prevent a threat occurring or minimise negative effects. Execution is key here. The other rules
have helped you to map, prioritise and understand risks. This will help you to make a sound
risk response plan that focuses on the big wins.

If you deal with threats, you have three options, risk avoidance, risk minimisation and risk
acceptance. Avoiding risks means you organise your project in such a way that you don't
encounter a risk anymore. This could mean changing supplier or adopting a different
technology or, if you deal with a fatal risk, terminating a project. Spending more money on a
doomed project is a bad investment.
The biggest category of responses are the ones to minimise risks. You can try to prevent a risk
occurring by influencing the causes or decreasing the negative effects that could result. If you
have carried out rule 7 properly (risk analysis) you will have plenty of opportunities to
influence it. A final response is to accept a risk. This is a good choice if the effects on the
project are minimal or the possibilities to influence it prove to be very difficult, time-consuming
or relatively expensive. Just make sure that it is a conscious choice to accept a particular risk.

Responses to risk opportunities are the reverse of the ones for threats. They will focus on
seeking risks, maximising them or ignoring them (if opportunities prove to be too small).

Rule 9: Register Project Risks

This rule is about bookkeeping (however don't stop reading). Maintaining a risk log enables
you to view progress and make sure that you won't forget a risk or two. It is also a perfect
communication tool that informs your team members and stakeholders what is going on (rule
3).

A good risk log contains risk descriptions, clarifies ownership issues (rule 5) and enables you
to carry our some basic analyses with regard to causes and effects (rule 7). Most project
managers aren't fond of administrative tasks, but doing your bookkeeping with regards to risks
pays off, especially if the number of risks is large. Some project managers don't want to record
risks because they feel this makes it easier to blame them in case things go wrong. However,
the reverse is true. If you record project risks and the effective responses you have
implemented, you create a track record that no one can deny. Even if a risk happens that derails
the project. Doing projects is taking risks.

Rule 10: Track Risks and Associated Tasks

The risk register you have created as a result of rule 9, will help you to track risks and their
associated tasks. Tracking tasks is a day-to-day job for each project manager. Integrating risk
tasks into that daily routine is the easiest solution. Risk tasks may be carried out to identify or
analyse risks or to generate, select and implement responses.

Tracking risks differs from tracking tasks. It focuses on the current situation of risks. Which
risks are more likely to happen? Has the relative importance of risks changed? Answering these
questions will help to pay attention to the risks that matter most for your project value.

In Summary

The ten golden risk rules above give you guidelines on how to implement risk management
successfully in your project. However, keep in mind that you can always improve. Therefore,
rule number 11 would be to use the Japanese Kaizen approach: measure the effects of your risk
management efforts and continuously implement improvements to make it even better.

I wish you success with your project!

art of risk management. Risk is any unwanted event or situation that can lead to the failure of
your project. There are different types of risks such as social, political, cultural etc. Most of the
risks can be controlled by doing risk management.

Risk management is basically an approach in which we explore identify, analyze and mitigate
the risks that can affect our project. Risk management is an important part of project
management which if done efficiently leads to the success of your project. Risk management
is an action plan that consists of various steps which are done to ensure the removal of risk. If
you are dealing with uncontrollable risk then you may set such an action plan that can minimize
the effect of these risks as you cannot fully get rid of such risks.

Risk management is done by risk managers who are well aware of all the risks associated with
any particular business or project and different ways to mitigate them. As this is the age of
multitasking so, various organizations also expect project managers to be risk managers as
well. In fact, large numbers of project management institutions are offering risk management
courses for the project managers. The courses not only help you to know the types and nature
of project risks but also various techniques used to deal with these risks.

The risk mitigation technique to be used depends on nature of project risk faced by your team
so you must be very careful in developing an action plan for fighting against risks.

Risk management is an essence of project management. It increases the chances of your success
up to a great extent. Following are some of the benefits of developing and implementing an
efficient risk management plan while working on any project.

 Helps you to avoid any big disaster

 Enhances your revenues by saving your expenses
 Provides you mental satisfaction
 Ensures the successful completion of project
 Gives you competitive edge over others
 Increases the sense of responsibility and accountability
 Helps you to explore new opportunities
It is accepted that there are often many stakeholders in project. Identify some of the
internal and external stakeholders that may be found on a typical medium/ large
construction project and discuss how the project Manager can balance their needs with
the Client’s objectives.
For a project’s success, it is very important for PM to identify all stakeholders at the beginning
of the project and create a strategy to manage them. It will help you run the project with
minimum obstruction because the sooner you identify them, the sooner you can start
communication and involve them with your project. In this way, they will feel connected to the
project, can understand the benefit of your project, and will support you whenever you need it.

Your project is successful if all your stakeholders are happy.

It may happen that even though you have completed the project and all deliverables are
accepted by the client, the project is not successfully completed because some of your
stakeholders are not happy.

Therefore, it is very important for you to keep all your stakeholders satisfied if you want to
complete your project successfully.

Stakeholders
“A stakeholder is an individual, group, or organization who may affect, be affected by or
perceive itself to be affected by a decision, activity, or outcome of a project.”

Simply put, you can say that a stakeholder is a person, group of people or an organization that
has any kind of interest in your project or is affected by its outcome either directly or indirectly.
This may include your project team members, project sponsors, your organization members,
and people outside of your organization as well.

If the project is small, the stakeholder list may be small. However, if the project is large and
spread out in a large geographical area, you may have a huge number of stakeholders, which
may include communities or the general public.

All stakeholders are not equal. Every stakeholder has different requirements and expectations.
You should treat every stakeholder according to their requirements and expectations. Failing
to do so can jeopardize your project’s success.

If you know every stakeholder, their needs, expectations, and requirements, it will increase the
chance of the project’s success. If you miss any important stakeholder, you may face many
difficulties in the later stages of the project such as: delay in the project, cost overrun, and in
the most severe cases, the project may be terminated.

Type of Project Stakeholders

Project stakeholders can be grouped into two categories:
 1. Internal Stakeholders & 2. External Stakeholders
Internal Stakeholders
Internal stakeholders are internal to the organization. For example:

 A sponsor
 An internal customer or client (if the project arose due to an internal need of an
organization)
 A project team
 A program manager
 A portfolio manager
 Management
 Another group’s manager internal to the organization (e.g. functional manager, operational
manager, admin manager, etc.).
External Stakeholders
These stakeholders are external to the organization. For example:

 An external customer or client (if project arose due to a contract)

 An end user of project’s outcome
 A supplier
 Subcontractors
 The government
 Local communities
 The media
Stakeholders can be positive as well as negative.

A positive stakeholder sees the project’s positive side and is benefitted by its success. These
stakeholders help the project management team to successfully complete the project.

On the other hand, a negative stakeholder sees the negative outcome of the project and may be
negatively impacted by the project or its outcome. This type of stakeholder is less likely to help
your project be completed successfully.

It is important for you to identify your project stakeholders at a very early stage of the project.
You should also note down their details, requirements, expectations, power, and influence on
the project in the stakeholder register.

Some of these stakeholders will have a minimum interest or influence on the project. However,
you have to take care of them as well, because no one knows when they will become dominant
stakeholders and if the dominant stakeholders will become less influential.

Summary
Stakeholders are individuals who are impacted by your project or have any kind of interest in
it. Stakeholders can be internal, external, positive, negative, high power, low power, etc.
However, to complete your project successfully you have to manage all these stakeholders and
fulfil their expectations. If you fail to do so, your project may not be successfully completed.
Cultivating your client relationships is essential for growing your client base. Successful project
managers across the industry gain new clients by word of mouth. Building a strong reputation
in any field takes time, but with consistent effort and good follow through, you can be sure that
strong client connections will continue to pay off – even after your initial project is complete.
Here are some tips to keep in mind when building and maintaining positive client relationships.

Set up clear communication in the beginning of a project and maintain it throughout the
project
The client will have trust in you if you let him or her know what to expect throughout the
process. Even if you have been brought on board because you have an extremely specialized
skill set, you can make your client feel that he or she is part of the process with regular updates
and communication. Email is a great way to generate communication that does not intrude on
your client’s daily activities.

However, when an unexpected change arises or when you need to communicate a more
complicated message, a phone call is better than email. Listen to the concerns of the client and
respond in a clear, controlled, calm tone. Set up a follow-up time to call back if the subject
needs further attention. Always follow up after the problem is resolved, if not before.

Never make promises you cannot keep

If a client asks you a question about a product or service and you are not sure of the answer,
just tell him or her that you want to be sure you give the correct response. Set a time to get back
to him or her about the information that is needed. This is much more respectable than offering
your client a timeline, or service that you cannot provide. Aside from negatively affecting your
client relationship, it also puts unnecessary pressure on your team members who may not
choose to work with you again. After all, a team leader is only as effective as the team players.

Occasionally, despite best intentions, you will need to adjust an agreement, this usually
happens with time lines. There may be times when the weather doesn’t cooperate or a worker’s
strike affects your vendors. Having extra time built into a schedule will help, but the delay
might be larger than the allotted emergency time. In bigger delays, be sure to have clear
alternatives ready to discuss. Being honest and clear in your communication is always
important, but even more so when handling bad news.

Go above and beyond to assist and to appreciate your clients

As business settings become more and more tech-based, the human connection you provide
your clients becomes even more important and powerful. Strong project management
skills combined with people skills will leave your clients feeling satisfied. Perhaps in
conversation the client mentioned an unrelated problem and you have a contact who could
address it, then use that opportunity to build a stronger connection with the client.
If there are time saving strategies you can share, do so. If there are ways to finish the projected
before deadline and under budget, try to do that. Be empathetic to the client’s situation and
give your communication the human connection. Clients who feel the human connection with
a project manager are more likely to remember you, give you repeat business, and spread the
word about your services. Find some way, at least a personalized email note to let your clients
know that you appreciate them individually.

Maintain high professional standards at all times

In the current business climate where work and social worlds often collide, it is important to
remember that you never really know who you’ll encounter when you are out in social settings.
Complaining about a client in a public setting, or making other disparaging remarks about the
appearance or business practices of a client can come back to haunt you. Even if in the course
of your project with the client something goes very awry, you still need to maintain professional
tone, attitude, and response to the situation.

A good project manager handles a smooth project with skill and finesse; a great project
manager handles difficult projects with the skill and finesse that make them look nearly as
smooth as the easy ones. Usually it is your response to the actual delay, problem, or obstacle
that will leave the biggest impression on the client, not the actual difficulty itself.

Be sure to adhere to the highest professional standards when representing or meeting with
clients, and take the extra time to make sure your appearance is neat and organized. Even if
your client is always running late, be there on time. Avoid checking text messages or other
communication when you are in the presence of a client. Face to face time is highly valuable;
be sure your client feels that s/he has your undivided attention.

Committing to a strategy that regularly cultivates your professionalism and builds strong client
relationships is a key component to longevity in the project management field. Word of mouth
referrals build a reputation more quickly than perhaps any other marketing strategy especially
when considering today’s immediate nature of client satisfaction ratings on social media
websites. Intentionally building your client relationships is one way to secure your foothold in
the project management arena long after your current project has drawn to a close.

SMART goals are specific, measurable, achievable, relevant, and time-bound:

 Specific: Use specific details to clearly define your goal.

 Measurable: Decide what metric or milestone you’ll use to track success.

 Achievable: Make sure it’s a goal you can reasonably attain.

 Relevant: Tie your goal to your career path or role as a project manager.
 Time-bound: Set a deadline for reaching your goal.
‘Good planning and communication is the key to success in any project’. Critically
evaluate how good planning and communications are maintained and information is
circulated to all partied involved in the design stage of a complex project.
‘The Principal role of a project manager is to add value to a client’s business.’ Discuss.
A project manager is a person who has the overall responsibility for the successful initiation,
planning, design, execution, monitoring, controlling and closure of a project like Construction,
petrochemical, architecture, information technology and many different industries.
The project manager must have a combination of skills (soft and hard skills) including an ability
to ask penetrating questions, detect unstated assumptions and resolve conflicts, as well as more
general management skills.
Key among a project manager's duties is the recognition that risk directly impacts the likelihood
of success and that this risk must be both formally and informally measured throughout the
lifetime of a project.
Risks arise from uncertainty, and the successful project manager is the one who focuses on this
as their primary concern. Most of the issues that impact a project result in one way or another
from risk. A good project manager can lessen risk significantly, often by adhering to a policy
of open communication, ensuring every significant participant has an opportunity to express
opinions and concerns.
A project manager is a person who is responsible for making decisions, both large and small.
The project manager should make sure they control risk and minimise uncertainty. Every
decision the project manager makes must directly benefit their project.
Project managers use project management software, such as Microsoft Project, to organise their
tasks and workforce. These software packages allow project managers to produce reports and
charts in a few minutes, compared with the several hours it can take if they do it by hand.
1. They focus on customer needs
The single biggest factor for a project’s success is whether it delivers what the customer needs.
The tricky part is that when customers state their requirements, it may express what they want
rather than what they actually need. Highly successful project managers uncover the customer’s
true needs. They do that through enquiry and by learning about the client’s business. They are
not interested simply in delivering the requirements, but in adding real value.
2. They build a great team
The team is the project’s biggest asset, and highly successful managers know that. They nurture
it and want to understand each person’s strengths and motivators. To encourage the team they
don’t tell people what to do but coach them to find the right solutions and to make decisions
on their own. These project managers see themselves as enablers rather than micro-managers
and they remove blockages so that the team can get on with its work.
3. They delegate
Highly successful project managers have learnt that the way to add maximum value – and fully
leverage the team – is to delegate anything that can potentially be done by someone else. In
delegating, not only do they develop the team’s skill-set, they also free themselves up to focus
on the important, such as customer relationships, communication, leading and motivating the
team, de-risking the project and setting the vision. If they don’t attend to these important
activities, no one will.
4. They challenge the status quo
It is no longer enough to turn up for work and deliver a project the way we used to. Highly
successful project managers are mindful of how they can deliver change in better, cheaper and
faster ways. They challenge the status quo, assess what new technologies can be can employed,
which extra benefits can be delivered and how processes can be improved. They encourage
themselves – and the team – to think in new and unfamiliar patterns and ask questions such as
“why”, “how” and “what if”.
5. They have a strategic outlook
The most sustainable projects are those that add value, not just in the short term, but also in the
long term. It is not enough to deliver a project on time, to cost and to the expected quality –
although that’s a great start. The project also has to be strategically viable – meaning that it
must be sustainable over time – and it must have the desired effect on the organization’s
strategic business objectives. Project managers who are at the top of their game know that and
consistently operate at that level.
6. They strengthen buy-in to the project
Highly successful project managers build great relationships of trust with the project’s
stakeholders. In doing so, they focus their attention on those stakeholders who have the most
power and influence over the project – and especially those who are not supportive of the
initiative. By proactively listening to the stakeholders’ concerns and acting upon their feedback
they strengthen buy-in and commitment to the project. These project managers are proactive
and don’t shy away from initiating a difficult conversation.
7. They control risks, issues and changes to scope
A large part of successful delivery is keeping risks, issues and changes under control. Highly
successful project managers instill a risk-awareness culture in the team by consistently asking
people what they worry about, what is impeding their work what could potentially go wrong.
They also monitor changes – not because they are opposed to them – but because they need to
assess the impact on factors such as time, cost, quality and benefits if a requirement changes.
8. They deliver on their promises
It essential to successful delivery that managers are credible and that clients and stakeholders
trust them. Highly successful project managers do what they say they will – also when it comes
to chasing other people for the actions they take on. They set a good example and gain an
enormous amount of respect for being effective, timely and reliable. The fastest way to lose
credibility is to promise something you cannot keep.
Business outcomes are the result of projects and operational processes. When these are
managed well, there is greater likelihood of success - lower costs, greater number of
projects completed per period, higher quality products and satisfied stakeholders.
Probably, 90+% of Project managers in Project Times are convinced that project management
is valuable. Project managers know that consciously planning and controlling projects
contributes to successful outcomes. The value of PM is part of the project manager's job to
convince other stakeholders that PM is practical and that it adds value.

The Problem
A recent exchange highlights the issue:
A very senior executive, responsible for an organization with more than ten thousand
employees and multi-billion-dollar budgets, initiated the exploration of a business intelligence
tool.
She commented that PMO leadership was bureaucratic because they asked the exploration’s
point person to create a page-or-so write up about the effort and where it fit in the context of a
related ongoing program.
Executives, managers and performers at every level of the organization often view PM as a
bureaucratic process that gets in the way of progress. They do not value the conscious decision
making, transparency, clarity and planning that are at the foundation of PM.
PMI's 2016 Pulse of the Profession: The High Cost of Low Performance finds that
"Organizations that invest in project management waste 13 times less money because their
strategic initiatives are completed more successfully. We know project management is essential
for any organization’s success, yet the message is not being realized."
The above study finds that almost fifty percent of companies do not fully understand the value
of project management. This leads to an absence of effective project selection and performance
so that projects are not fully aligned with organizational strategies. It leads to a lack of
standardized practices and insufficient training and development for project managers, and that
leads to insufficient planning and poor performance.
Executives initiate projects by expressing a desire to get something done. The people reporting
to them all too often plunge ahead to meet a fuzzily defined objective without sufficient
planning and control. Some view formal project definition and planning as a waste of time.

The Impact: An Example

A senior executive expresses a strong desire to deliver a customer facing software application
within twelve months. If the next levels of lower management, driven by the desire to satisfy
the boss, order their staff to dive in and "just get it done.” They may be on the road to failure.
To hit the deadline, performance managers may do a surface job of defining requirements.
They may design a solution without engaging architects and designers or assessing alternatives.
The delivery team may be pulled off planned tasks and put to work on the project of the hour.
Expectations are likely to be unreasonable and go unmet. As the project becomes delayed or a
poor-quality product emerges, there are recriminations and a cycle of increasing lateness, cost
increases and growing quality issues caused by a rush to finish and get it right without having
a concrete sense about what "right" is.
This can be avoided if the organization respects the power of project management and has
made it an integral part of the culture. A healthy, non-bureaucratic, flexible PM process will
ensure that everyone pauses to step back sufficiently to assess the situation and make sure
everyone is on the same page.
In this example, someone would create a brief document that describes the project and a high-
level plan for what could be a 6 - 12-month initial project followed by additional projects to
iteratively add functionality.
An initial report back to the executive level would provide an expected start time and high-
level estimate based on the availability of the resources and experience with similar projects.
The impact of resources being reassigned from current projects nearing completion will be
assessed and the Executive Sponsor will be informed. A decision to move forward immediately
will weigh the loss associated with pulling people out of their current work against the real
need of quickly starting the new project.
This - the ability to make informed decisions - is the principle value of project management. A
healthy process need not take a huge amount of time. In fact, it can be consciously bypassed,
if that is the informed decision of executives.

How PM Adds Value

Project management adds value in several concrete ways. On the highest level, effective project
management brings together three important elements - technical skills in scheduling,
estimating, risk analysis and the other competencies specific to project management, leadership
skills and business knowledge. According to PMI, when organizations cultivate all three, 40
percent more projects are successful. When you as a manager personally bring these three
together you are more likely to succeed in satisfying your stakeholders and yourself.
Project management promotes an approach that recognizes cause and effect relationships and
the benefits of thinking out the way an outcome is to be achieved. It manages expectations by
confronting stakeholders with the realities of the complex nature of projects, the inability to
predict outcomes with 100% accuracy and the need to monitor and adjust as the project unfolds.
This adds up to a more realistic approach to getting the work done to satisfy the needs and
expectations of stakeholders.
Project resource management makes it clear that because of the learning curves and the effort
required to ramp down and up, it is costly to start and stop work on one task to jump to another
and then go back to the original. If a project must be stopped to transfer resources to another,
then at minimum wait for a place in the project that makes for a smooth transition. If there is a
choice between working your tasks serially or in parallel, you will find that doing them serially
to minimize multi-tasking is the better way to go.
Projects and tasks of any size are far more likely to be successful if you take the time and effort
to define objectives, roles and responsibilities; identify tasks, dependencies, and deliverables
and their acceptance criteria; estimate realistically and to manage expectations through
transparent communications across project life.
Selling PM
As a project manager or team lead you may or may not have the power to influence senior
executives to mandate project management professionalism from the top down. You may not
even have the power to influence your own boss. But, you do have the power to apply your
skills and knowledge in a way that uses project management principles in your work.
You can plan and, within your scope of control, engage others in planning and control. Putting
things in writing (without over doing it) will influence stakeholders to pay attention and say
whether they agree with your assessment of project objectives, roles and responsibilities,
constraints, dependencies, estimates, assumptions and risks. If they don't pay attention, you
have a guideline for yourself and your team and are ready to provide guidance and leadership
if the opportunity arises.
In general, thinking ahead, recapping and putting things in writing adds value on two levels: 1)
it gives you the opportunity to reflect on your own understanding of the work and 2) it promotes
accountability.
If you can't immediately convince others of the value of project management, take advantage
of it yourself and in your team or department.
Taking a grass roots approach, you can then influence others by making them aware of the
value to be gained by institutionalizing PM in a practical, non-bureaucratic way. Your projects
become a proof of concept and an example of effective project management.
The goal of every business is self-sufficient growth. This means the company itself runs
smoothly, and with enough skill, to create profit and a good reputation all on its own. But such
a goal comes with multiple challenges and obstacles. Entrepreneurship and business aren’t for
the faint of heart. As CEOs, founders and managers begin to traverse through the challenges of
creating a self-sufficient business model, a project manager becomes a needed position.
Through personal experience, and noting the makeup of many other successful businesses, I’ve
collected five reasons hiring a project manager is essential to the growth of any business.

1. Cut down response times.

For small businesses, having a project manager creates a link between clients and employees
and can eliminate long response times. When clients feel they have dedicated individuals
tasked with their concerns, they feel more trusting and satisfied with the company’s service.
The project manager relays the goals and performance to clients and business leaders in a
regularly scheduled report.

2. Help prioritizing tasks.

As project managers are in constant contact with clients, they are made of aware of client
concerns and needs first. Often, they will be the first point of contact when needs change or
something needs to be redirected. Because project managers are in charge of tracking and
organizing the priority of tasks and deadlines, they eliminate a stressor on employees who have
to focus on the tasks at hand. They even add reassurance to clients as the project moves forward.

3. Create a bridge between corporate functions.

Internal communication is as important as external communication. Having an individual

dedicated to the coordination of departmental communication forms a single operative bridge.
Rather than have employees dashing to an array of upper management types for different
concerns, the project manager is a unique individual aware of the needs of multiple projects
and can speed up the decision-making time. Project managers must make sure they have a solid
grasp of the work each department performs and know how they can be of the most assistance.

4. Optimize corporate processes.

Project managers are a balance between small details and the big picture. Such a balance helps
them understand the purpose and outcome of business processes. Because of this, project
managers can be tasked with eliminating the steps that hinder the company or boost the actions
that provide value. As the project manager controls the schedule, they have the opportunity to
examine milestones, failures, recurring tasks and more throughout the project lifecycle.
Optimization of corporate processes makes for smoother workflow in nearly all fields. A
project manager even anticipates and identifies risks and creates a risk response process to each
project. With someone dedicated to the prospect of danger, you save time trying to determine
the problem and move straight to crafting a solution.
5. Keeps track of open communication.

Because employees have a lot to do, whether it be mini-tasks within a project or fielding the
concerns of leads and clients, a project manager is tasked to make sure employees meet the
appropriate deadlines and prioritize the right tasks. To do this, project managers must keep
open lines of communication between all members of a project and ensure the correct messages
are set at the right times. Open forms of communication go as far as creating a connection
between employee and manager. This could mean helping with severe problems, pointing out
possible training when needed, or just being a listening ear for ideas and creative solutions. In
fast-moving industries, deadlines shouldn’t be missed, but what is most important is that an
organization is structured to support employees when they most need it.

When a company grows, the expectations and responsibilities of everyone inside grows along
with it. In many cases, the need to organize just what those changes are and how to optimize
the efficiency of the company becomes the biggest concern and obstacle. To eliminate those
stressors and to find the perfect fix, consider a hiring a project manager. From adjusting the
priorities of departments, ensuring the needs of clients, and even facilitating internal
communications, the roles of a project manager bring cohesiveness and structure to a growing
company. The hiring of a project manager could be the essential piece in protecting your
company from growing pains.
Abstract

A Guide to the Project Management Body of Knowledge (PMBOK® Guide) - Fifth Edition
(PMI, 2013) states, “through the effective use of portfolio, program, and project management,
organizations will possess the ability to employ reliable, established processes to meet strategic
objectives and obtain greater business value from their project investments.” In other words,
the whole purpose for project management (as well as portfolio and program management) is
to execute work that provides increased “value” to the business or customer. If an organization
does not realize increased business value as a result of sponsoring a project, then the project
will not (or should not) be pursued. Thus, the most important aspect of project management is
“delivering business value to the customer.” As a means to realize this aspect, a project
manager must foster a project environment that focuses on delivering the identified business
value.
This paper explores the necessity of identifying and ultimately delivering value to the customer
of the project. Although the author recognizes that some projects are humanitarian in nature
and deliver value that cannot be measured in business terms, this paper will focus on business-
related projects. Recognize, however, that a project (business-related or not) must always
deliver “value” to the customer; otherwise, that project should not be performed. For this
reason, consider the premise of this paper valid for all types of projects. Additionally, the author
recognizes that measuring business value is as unique as the organization; therefore, this paper
will not attempt to identify a specific technique for measuring increased business value that a
project produces.

Introduction

Every day thousands or maybe even hundreds of thousands of projects around the world
commence. Some projects are well conceived, and others start as a result of an offhand thought
and begin without careful consideration of whether or not the project should be executed at all.
A key aspect of portfolio and project management is choosing which projects the organization
should undertake. This process likely differs for each organization; however, to avoid making
the mistake of starting a project that should not see the light of day, project managers must
consider the value that will be delivered to the customer before beginning.
The ownership of envisioning and identifying the purpose of a project lies soundly outside the
bounds of the project. Thus, the responsibility of identifying the business value that will be
delivered as a result of executing the project also lies with the same group, usually management
or the project management office. Often project managers are not considered to be responsible
for the business value. This point of view is flawed and must be reconsidered to elevate the
project management profession. Project managers must be responsible for understanding the
vision of the project and for delivering the identified business value to the customer as a result
of executing the project.
Often we think that a project is successful if a quality scope is delivered on time and within
budget. Although those are important indicators, the true measurement of a project's success is
how well the project delivers business value. If value isn't delivered to the customer, then the
project is not successful. In some cases, the failure should be attributed to those chartering the
work because the project was of no value to the customer; thus, it should not have been started.
Other times, the project manager is responsible for the failure because he or she did not manage
the project in a way that it delivered the identified business value. For example, if a project is
delivered over budget, the expected business value is eroded by the additional costs. The same
could be said for delivering a project late or with poor quality. Additionally, a myriad of other
factors can impact the business value.
As business value is such a critical aspect of project management, let's turn our focus to
understanding what it is.

What Is Business Value?

“Business value” does not have a single, agreed-upon definition; however, examining several
sources that attempt to define what business value is can give us more insight into its meaning
and application.
According to BusinessDictionary.com, in order “to assess the value of the business or an
owner's interest in a company,” a “business valuation” is often performed (“Business
valuation,” n.d.). A business valuation is “the process of examining various economic factors
of a business using predetermined formulas” (“Business valuation,” n.d.). Third-party
accountants often perform these valuations using several different types of methods to identify
the value of the business. Each of these methods describes the business value in monetary
terms.
Wikipedia defines business value as “an informal term that includes all forms of value that
determine the health and well-being of the firm in the long run” (“Business value,” n.d., para
1). The definition continues, saying that “many of these forms of value are not directly
measured in monetary terms” (“Business value,” n.d., para 1).
In an article about business value and quality, Alan Koch states that “the ‘Business Value’ is
the net benefit that will be realized by the customer” of a project (Koch, 2011). Mr. Koch also
states that “a description of this expected Business Value should be included in a good Project
Charter” (Koch, 2011).
For the purpose of this paper and in the context of applying business value to project
management, let's consider the following definition: Business value is the net benefit that will
be realized by the customer of a project, and can be measured in either monetary or non-
monetary terms.

The Need for Adding or Increasing Business Value Creates Projects

The PMBOK® Guide indicates that a project is “undertaken to create a unique product, service,
or result” (PMI, 2013). In some cases, the products or services produced will be new offerings
to the customer and will inherently provide new value to the business. In other cases, existing
products or services will be modified in some way that will create new value for the customer
or business.
If a business becomes complacent and does not look to create new value for its customers, it is
likely that its competitors will begin to find ways to fill those needs. Eventually, the company
that does not continually innovate and fulfill the needs of its customers will become stale. This
failure to continue to add value for the client base will allow other companies to better fill those
needs and acquire more of the market share. Therefore, a company must always be looking to
add value for its customers or it will go out of business. Projects, therefore, become the lifeline
of a viable business.

Steps to Delivering Business Value

Since projects are the lifeline of a viable business, project managers have become integral to
the continued success of a company and business in general. Project managers must learn to
demand that the business value of a project is clearly defined and understood. Exhibit 1 depicts
the steps that a project manager should take to make sure that the project he or she leads delivers
business value.

Exhibit 1: Steps to delivering business value

1. Understand the vision.
The sponsor of the project should be able to identify his or her vision for the project. The vision
should include a high-level view of the scope of the project and, more importantly, the reason
the project was created. The vision is often identified as part of the project charter, but if not,
it is the responsibility of the project manager to obtain clarity. The project manager should sit
down with the sponsor and clearly document the vision. Once the vision is documented, the
most important thing the project manager can do is internalize the vision. The project manager
must believe in the purpose of the project and feel that it is worthy of the effort that will be
extended.
2. Be clear about the business value of the project.
Once the project manager has captured the vision of the project, an understanding of how that
vision translates into true business value is critical. Regardless of the method used to document
business value, it is critical for the organization to identify the value the project will deliver
and how it will be measured during the project. The business value should be stated in monetary
terms whenever possible, but as previously mentioned, there are often non-monetary benefits
that can be realized and identified.
If the project manager is does not believe in the intrinsic value of the project and understand
how it will be measured, he or she is going to have a difficult time moving to the next steps
and ultimately leading the project to success.
3. Evangelize the vision and business value to the project team.
A key function of a project manager is to motivate the project team. It is important for the
project team to believe in what they are doing. Thus, it is critical for the project manager to
evangelize the vision and business value of the project to the team members. The importance
of this is best described by the words of Antoine de Saint-Exupéry:
“If you want to build a ship, don't drum up the men to gather wood, divide the work, and give
orders. Instead, teach them to yearn for the vast and endless sea.”
If the project team can understand the vision and business value of the project, they will “yearn”
for the ability to deliver that business value to the customer. They will become much more
engaged in their work and even enthusiastic about delivering value to the customer.
4. Foster a team environment to effectively deliver value.
With the team fully behind the vision and business value that the project will deliver, it is the
responsibility of the project manager to foster an environment that will allow the team to deliver
efficiently. Just as in any sporting event, when a team gets to a point where everyone on the
team knows their responsibilities and trust within the team is prevalent, the team delivers great
results. The project manager must serve the team and remove any roadblocks in their way so
that team efficiency thrives. As a project manager fosters a project environment that focuses
on delivering value to the business, the project team will respond with motivation to succeed.
5. Measure the realization of the business value.
This step actually occurs throughout the project and often requires continued measurement
after the project is complete. The project manager is responsible for reporting on the progress
of a project, and a key aspect that should be reported on is the realization of business value as
deliverables are completed. Depending on the nature of the project, the final realization of the
increased value might not be measurable until sometime after the project has been completed.
When ongoing measurements are required, the organization should continue to measure the
increased value of the project's impact as long as those measurements are valid.

Summary

In the past, a project's success was measured based on its ability to deliver a quality scope on
time and within budget. Although these factors are important to consider and control as a
project progresses, they are not a true measurement of the success of a project. A project can
only be considered successful if it delivers the predetermined business value to the customer.
When businesses look at project success in this light, they will make better decisions about
which projects to execute, and project managers will focus on what is important as their teams
deliver value.
When a project manager is engaged in executing a project, he or she should consider the
following steps to better deliver business value.

1. Understand the vision.

 2. Be clear about the business value of the project.
3. Evangelize the vision and business value to the project team.
4. Foster a team environment to effectively deliver value.
5. Measure the realization of the business value.
When we, as project managers, focus on delivering business value as we deliver projects, our
discipline will become more and more valuable to the organizations we serve. Those
organizations will stay vibrant because they are delivering increased value to their customers,
and they will continue to look to project management as a critical aspect of growing their
bottom line.
As we focus on the customer, delivering business value will be the most important aspect of
project management.