The Value of Project Management The Value of Project Management and a Simple Tool to Start and a Simple Tool to Start

Reaping Its BenefitsReaping Its Benefits

Kathy Schwalbe, Ph.D., PMPKathy Schwalbe, Ph.D., PMP

May 19, 2005May 19, 2005

Presentation OutlinePresentation Outline

What is project management?What is project management? Recent statisticsRecent statistics Ways to measure the value of Ways to measure the value of

project managementproject management Using templates to improve Using templates to improve

project managementproject management Lots of resourcesLots of resources

What Is Project Management?What Is Project Management?

Project management isProject management is “the “the application of knowledge, skills, application of knowledge, skills, tools and techniques to project tools and techniques to project activities to meet project activities to meet project requirements” (PMBOK requirements” (PMBOK ®® Guide Guide 2004, p. 8)2004, p. 8)

Project Management Project Management Framework*Framework*

*This figure and others are from my book, Information Technology Project Management, Fourth Edition

Standish Group Statistics*Standish Group Statistics*

Measure 1994 Data 2002 Data Result Successful projects 16% 34% Doubled Failed projects 31% 15% Halved Money wasted on challenged and failed projects

$140 B out of $250 B

$55 B out of $255 B

More than halved

*The Standish Group, “Latest Standish Group CHAOS Report Shows Project Success Rates Have Improved by 50%,” (March 25, 2003)

Some Interesting StatisticsSome Interesting Statistics The U.S. spends $2.3 trillion on The U.S. spends $2.3 trillion on

projects every year, or projects every year, or one-quarterone-quarter of of its gross domestic product, and the its gross domestic product, and the global percentage is similar (PMI global percentage is similar (PMI Project Management Fact Book, 2001)Project Management Fact Book, 2001)

In 2003, the average senior project In 2003, the average senior project manager in the U.S. earned almost manager in the U.S. earned almost $90,000 per year, and the average $90,000 per year, and the average Project Manage Office (PMO) Director Project Manage Office (PMO) Director earned earned moremore than the average Chief than the average Chief Information Officer ($118,633 vs. Information Officer ($118,633 vs. $103,925) (PMI Project Management $103,925) (PMI Project Management Salary Survey, 2003)Salary Survey, 2003)

Top Information Technology SkillsTop Information Technology Skills

60% 58%

42% 41%

0%

10%

20%

30%

40%

50%

60%

70%

Applicationdevelopment

Project management Databasemanagement

Networking

Cosgrove, Lorraine. “January 2004 IT Staffing Update,” CIO Research Reports, (February 3, 2004).

Information Technology (IT) Skill

Percentage ofRespondents

Growth in PMP Certification, Growth in PMP Certification, 1993-20041993-2004

1,000 1,900 2,800 4,400 6,41510,086

18,184

27,052

40,343

52,443

76,550

102,047

-

20,000

40,000

60,000

80,000

100,000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

# P

MP

s

Ways to Measure Project Ways to Measure Project Management ValueManagement Value

Agreement on general benefitsAgreement on general benefits Improved project Improved project

performance/resultsperformance/results ROI of project managementROI of project management PM maturity levelsPM maturity levels Competitive advantageCompetitive advantage What the winners do/best What the winners do/best

practicespractices

General Benefits of Project General Benefits of Project ManagementManagement Better control of financial, physical, Better control of financial, physical,

and human resourcesand human resources Improved customer relationsImproved customer relations Shorter development timesShorter development times Lower costsLower costs Higher quality and increased reliabilityHigher quality and increased reliability Improved productivityImproved productivity Better internal coordinationBetter internal coordination Higher worker morale (Higher worker morale (less stress)less stress)

Improved Project Performance*Improved Project Performance*

Project success is often based on meeting Project success is often based on meeting project scope, time, and cost goalsproject scope, time, and cost goals

Measure 1994 Data 2002 Data Result Successful projects 16% 34% Doubled Failed projects 31% 15% Halved Money wasted on challenged and failed projects

$140 B out of $250 B

$55 B out of $255 B

More than halved

*The Standish Group, “Latest Standish Group CHAOS Report Shows Project Success Rates Have Improved by 50%,” (March 25, 2003)

Why the Improvements?Why the Improvements?"The reasons for the increase in "The reasons for the increase in

successful projects vary. First, the successful projects vary. First, the average cost of a project has been average cost of a project has been more than cut in half. Better tools more than cut in half. Better tools have been created to monitor and have been created to monitor and control progress and control progress and better skilled better skilled project managers with better project managers with better management processes are being management processes are being used. The fact that there are used. The fact that there are processes is significant in itselfprocesses is significant in itself.“*.“*

*The Standish Group, "CHAOS 2001: A Recipe for *The Standish Group, "CHAOS 2001: A Recipe for Success" (2001)Success" (2001)

What Helps Projects What Helps Projects Succeed?*Succeed?*

1.1. Executive supportExecutive support2.2. User involvementUser involvement3.3. Experienced project managerExperienced project manager4.4. Clear business objectivesClear business objectives5.5. Minimized scopeMinimized scope6.6. Standard software infrastructureStandard software infrastructure7.7. Firm basic requirementsFirm basic requirements8.8. Formal methodologyFormal methodology9.9. Reliable estimatesReliable estimates

*The Standish Group, "CHAOS 2001: A Recipe for Success" (2001)

Improvements to Key IT Project Metrics Improvements to Key IT Project Metrics Due to Project Management*Due to Project Management*

38.6 37.6 3732.8 32.5 32.1 31.9

25.6 23.8 23 22.8 21.7

05

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*Value of Project Management in IT Organizations survey,Center for Business Practices, 2002, cited in PM Network, July 2003, p. 16

Findings From 5-Year Study on Findings From 5-Year Study on Quantifying the Value of PM*Quantifying the Value of PM*

Companies with more mature project Companies with more mature project management practices have management practices have better better project performanceproject performance (on time and (on time and budget vs. 40% over time and 20% over budget vs. 40% over time and 20% over cost targets)cost targets)

PM maturity is strongly correlated with PM maturity is strongly correlated with more predictable project schedule and more predictable project schedule and cost performancecost performance (i.e. .08 schedule (i.e. .08 schedule performance index variation vs. .16)performance index variation vs. .16)

Good PM companies have Good PM companies have lower direct lower direct costscosts than poor PM companies (6-7% vs. than poor PM companies (6-7% vs. 11-20%)11-20%)

*Ibbs, William and Justin Reginato, Quantifying the Value of Project Management, PMI (2002)

Project Management ROI*Project Management ROI*

Over 94% of senior PM professionals Over 94% of senior PM professionals say that implementing PM added value say that implementing PM added value to their organizationsto their organizations

Formula to predict increased company Formula to predict increased company ROI based on increased PMM levelROI based on increased PMM level Determine cost to improve PMM level, Determine cost to improve PMM level,

improvement in cost performance index improvement in cost performance index (CPI), then calculate PM ROI using profit (CPI), then calculate PM ROI using profit margins and projected annual revenuesmargins and projected annual revenues

*Ibbs, William, “The $$$ Value of Project Management: Continuing the Search for PM’s ROI,” PDS ’02 Conference Proceedings, PMI-ISSIGhttp://www.ce.berkeley.edu/pmroi/PMROI%20PMI%20Presentation%20Feb2001.pdf

PM ROI Example*PM ROI Example*

Company initially has PMM of 2.3, Company initially has PMM of 2.3, CPI of .71, profit margin of 5% , CPI of .71, profit margin of 5% , $10 M projected annual revenues$10 M projected annual revenues

Company improves PMM to 3.1, Company improves PMM to 3.1, CPI to .94, profit margin to 6.6% at CPI to .94, profit margin to 6.6% at a cost of $400,000a cost of $400,000

PM ROI = PM ROI = (6.6%-5.0%)X$10,000,000 = (6.6%-5.0%)X$10,000,000 = 40%40%

$400,000$400,000

*Ibbs, William, “Managing Chaotic Projects: Improving your PM/ROI” (http://www.ce.berkeley.edu/pmroi/ PMROI%20PMI%20Presentation%20Feb2001.pdf)

Project Management Maturity Project Management Maturity ModelsModels Similar to maturity models for improving Similar to maturity models for improving

software like the Capability Maturity software like the Capability Maturity Model (CMM or now CMMI)Model (CMM or now CMMI)

Several PM firms have their own Several PM firms have their own maturity models, most using levels 1-5maturity models, most using levels 1-5 The International Institute for Learning, Inc. The International Institute for Learning, Inc.

calls the five levels common language, calls the five levels common language, common processes, singular methodology, common processes, singular methodology, benchmarking, and continuous improvementbenchmarking, and continuous improvement

PMI’s Organizational Project Management PMI’s Organizational Project Management Maturity Model (OPM3) released their model Maturity Model (OPM3) released their model in 2004in 2004

Berkeley Project Management Berkeley Project Management Process Maturity ModelProcess Maturity Model

                                                                 

                                       

Sample PMM Assessment Questions*Sample PMM Assessment Questions*

*www.ibbsconsulting.com

Project Management Maturity Project Management Maturity by Knowledge Area and by Knowledge Area and IndustryIndustry

Feedback from Bill Ibbs*Feedback from Bill Ibbs* We've benchmarked a couple healthcare We've benchmarked a couple healthcare

organizations…what I can say is that the IT organizations…what I can say is that the IT PM capability of those organizations was PM capability of those organizations was poor, especially in terms of initiating poor, especially in terms of initiating projects.  projects.  We helped one of those We helped one of those companies save several million dollarscompanies save several million dollars over a 2 year period by helping them focus over a 2 year period by helping them focus better on the projects they launched.”better on the projects they launched.”

Wall Street reports that the healthcare Wall Street reports that the healthcare industry in general is gearing up to spend industry in general is gearing up to spend even more $$$ on IT in the next couple even more $$$ on IT in the next couple years than they have in the past.  So years than they have in the past.  So there's a lot at stakethere's a lot at stake.”.”

* From e-mail correspondence Feb. 2, 2004

Other Research Suggests That PM Other Research Suggests That PM Maturity Models Only Measure Explicit Maturity Models Only Measure Explicit Knowledge*Knowledge*

Explicit knowledge: “Explicit knowledge: “know whatknow what,” can ,” can be put into IT, a digital or discrete be put into IT, a digital or discrete process that can be codified and process that can be codified and transmitted in formal, systematic transmitted in formal, systematic language (Nonaka 1994)language (Nonaka 1994)

Tacit knowledge: “Tacit knowledge: “know howknow how”, in one’s ”, in one’s experience; hard to replicate and can be experience; hard to replicate and can be transferred indirectly though time transferred indirectly though time consuming socialization processes consuming socialization processes (Kaplan et al 2001)(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

Need to Make PM a Strategic Need to Make PM a Strategic Asset (Just Like IT)Asset (Just Like IT) Many executives view project Many executives view project

management as having worth at the management as having worth at the operational and tactical rather than operational and tactical rather than strategic levelstrategic level

Resource Based View (RBV) Resource Based View (RBV) frameworks emphasize how firms create frameworks emphasize how firms create value and profits from their internal value and profits from their internal resources and focus on strategic assetsresources and focus on strategic assets

RBV is relevant to project management RBV is relevant to project management because it emphasizes intellectual because it emphasizes intellectual capitalcapital

Research Based View Model*Research Based View Model*

high Social StrategicCapital Assets

Know HowPMMaturity

low Know What

low high

*Jugdev, Kam, presented at PMI Research Conference, July 2002

Need to combine know what with know how to make PM a strategic asset!

Successful Examples of Applying Successful Examples of Applying PM in Healthcare OrganizationsPM in Healthcare Organizations

Theory of Constraints aids in Theory of Constraints aids in schedulingscheduling

Good project managers are Good project managers are critical to successful drug critical to successful drug launcheslaunches

Applying the Theory of Constraints Applying the Theory of Constraints (TOC) in Health Care*(TOC) in Health Care*

TOC is a form of systems thinking that suggests that TOC is a form of systems thinking that suggests that any complex system at any point in time often has any complex system at any point in time often has only one aspect or constraint that limits its ability to only one aspect or constraint that limits its ability to achieve more of its goal. Need to exploit constraint achieve more of its goal. Need to exploit constraint and adjust scheduling and resource usageand adjust scheduling and resource usage A USAF base A USAF base decreased waiting timedecreased waiting time for primary for primary

care appointments from 17 days to 4.5 at no care appointments from 17 days to 4.5 at no additional costadditional cost

Radcliff Infirmary in Oxford, England improved Radcliff Infirmary in Oxford, England improved waiting times for neurosurgery and ophthalmology waiting times for neurosurgery and ophthalmology (noted a 100% reduction in elective cancellations (noted a 100% reduction in elective cancellations and increases in throughput of over 16% and increases in throughput of over 16% at no at no additional costadditional 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/applyingtocinhcpt1fco.htm

Pharmaceutical Project Pharmaceutical Project Managers Are a Breed Apart*Managers Are a Breed Apart* Significant investments in drug Significant investments in drug

development projects (12 years and development projects (12 years and $800M on average), the magnitude of $800M on average), the magnitude of risks in the development cycle, and risks in the development cycle, and extensive involvement of senor extensive involvement of senor management makes it especially tough management makes it especially tough being a PM in this industrybeing a PM in this industry

““I know of I know of nono pharmaceutical company pharmaceutical company today attempting drug development today attempting drug development without a project manager to oversee it” without a project manager to oversee it” (Luis Cabassa, PMP, Genetech Inc.)(Luis Cabassa, PMP, Genetech Inc.)

Pappas, Lorna, “The Right Prescription,” PM Network, October 2002

““What the Winners Do”*What the Winners Do”*

Companies that Companies that excel excel in project delivery in project delivery capability:capability: Build an integrated project Build an integrated project

management toolbox (use standard management toolbox (use standard and advanced PM tools, lots of and advanced PM tools, lots of templatestemplates))

Grow competent project Grow competent project leadersleaders, , emphasizing business and soft skillsemphasizing business and soft skills

Develop Develop streamlinedstreamlined, , consistentconsistent project delivery processesproject delivery processes

Install a sound but comprehensive set Install a sound but comprehensive set of project performance of project performance metricsmetrics

*Milosevic, Dragan, Portland State University, “Delivering Projects:What the Winners Do,” PMI Conference Proceedings, November 2001

Using a Standardized Project Using a Standardized Project Management Approach*Management Approach* Research found that a consistent Research found that a consistent

(one-size-fits-all) managerial (one-size-fits-all) managerial approach may be essential to the approach may be essential to the successful standardization of successful standardization of certain certain aspectsaspects of project management, and of project management, and a contingency approach is needed a contingency approach is needed for certain aspects, toofor certain aspects, too

Low standardizationLow standardization with a with a sufficient amount of variation is the sufficient amount of variation is the more appropriate approachmore 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

What Are Templates?What Are Templates? Templates are documents or files that Templates are documents or files that

provide an outline or format for creating provide an outline or format for creating documentationdocumentation

Many professionals don’t like to write or Many professionals don’t like to write or ask others how to do “simple” things, ask others how to do “simple” things, and no one likes to reinvent the wheeland no one likes to reinvent the wheel

Templates make it easier to prepare Templates make it easier to prepare common project documents and use common project documents and use standard tools and techniquesstandard tools and techniques

It’s important to tailor templates to It’s important to tailor templates to unique project and organizational needs unique project and organizational needs

Sample TemplatesSample Templates

Information Technology Project Information Technology Project Management, Fourth Edition, Management, Fourth Edition, includesincludes 38 templates used in the book38 templates used in the book information for accessing 333 free information for accessing 333 free

templates from other sourcestemplates from other sources You can access all of these You can access all of these

template files template files for freefor free from from www.kathyschwalbe.comwww.kathyschwalbe.com

www.kathyschwalbe.comwww.kathyschwalbe.com

Template FilesTemplate Files

Breakeven TemplateBreakeven Template

Created by: Date:

Discount rate 8%

Assume the project is completed in Year 0 Year0 1 2 3 Total

Costs 100 100 100 100Discount factor 1.00 0.93 0.86 0.79Discounted costs 100 93 86 79 358

Benefits 0 200 200 200Discount factor 1.00 0.93 0.86 0.79Discounted benefits 0 185 171 159 515

Discounted benefits - costs (100) 93 86 79 158 NPVCumulative benefits - costs (100) (7) 78 158

ROI 44%

AssumptionsEnter assumptions here

Payback before Year X

Note: Change the inputs, such as interest rate, number of years, costs, and benefits. Formulas are entered in the Excel file used to create this template. Be sure to double-check the formulas

Financial Analysis for Project Name

Business Case Financials TemplateBusiness Case Financials Template

Project Charter Project Title: Project Start Date: Projected Finish Date: Budget Information: Project Manager: Name, phone, e-mail Project Objectives: Approach:

Roles and Responsibilities

Role Name Organization/

Position

Contact Information

Sign-off: (Signatures of all above stakeholders. Can sign by their names in table above.) Comments: (Handwritten or typed comments from above stakeholders, if applicable)

Gantt Chart TemplateGantt Chart Template

Created by: Date:Criteria Weight Project 1 Project 2 Project 3 Project 4A 25% 90 90 50 20B 15% 70 90 50 20C 15% 50 90 50 20D 10% 25 90 50 70E 5% 20 20 50 90F 20% 50 70 50 50G 10% 20 50 50 90 Weighted Project Scores 100% 56 78.5 50 41.5

Weighted Decision Matrix for Project Name

Weighted Score by Project

0 20 40 60 80 100

Project 1

Project 2

Project 3

Project 4

Student Project Results: Free Student Project Results: Free Template Distribution byTemplate Distribution byProcess Group and Knowledge AreaProcess Group and Knowledge Area

KnowledgeKnowledge

AreaArea

Project Process GroupsProject Process Groups

TotalTotalInitiatingInitiating PlanningPlanning ExecutingExecuting ControllingControlling ClosingClosing

IntegrationIntegration 1515 77 3030 5252

ScopeScope 3535 2323 1212 7070

TimeTime 1010 88 1818

CostCost 1414 44 1818

QualityQuality 1111 1414 55 3030

Human ResourcesHuman Resources 1313 44 1717

CommunicationsCommunications 1212 1111 3535 1515 7373

RiskRisk 3838 1212 5050

ProcurementProcurement 44 11 00 55

TotalTotal 3535 140140 3737 106106 1515 333333

Students’ Top Ten Students’ Top Ten Free Template SitesFree Template Sites

Number of Free Number of Free TemplatesTemplates

Resource Name and URLResource Name and URL

2222Michigan Department of Information Technology:Michigan Department of Information Technology:http://www.michigan.gov/dit/0,1607,7-139-7321_18457-45013--,00.htmlhttp://www.michigan.gov/dit/0,1607,7-139-7321_18457-45013--,00.html

2828Minnesota Office of Technology:Minnesota Office of Technology:http://www.state.mn.us/cgi-bin/portal/mn/jsp/content.do?subchannel=-536879888&id=-8484&agency=OThttp://www.state.mn.us/cgi-bin/portal/mn/jsp/content.do?subchannel=-536879888&id=-8484&agency=OT

2323 New York State Office for Technology: New York State Office for Technology: http://www.oft.state.ny.us/pmmp/templates/index.htmhttp://www.oft.state.ny.us/pmmp/templates/index.htm

1212 Tasmanian State Government: Tasmanian State Government: http://www.projectmanagement.tas.gov.au/index.htmhttp://www.projectmanagement.tas.gov.au/index.htm

2828 U.S. Department of Energy: U.S. Department of Energy: http://cio.doe.gov/ITReform/sqse/pm_main.htmhttp://cio.doe.gov/ITReform/sqse/pm_main.htm

5252University of Waterloo Information Systems & Technology:University of Waterloo Information Systems & Technology:http://ist.uwaterloo.ca/projects/templates.htmlhttp://ist.uwaterloo.ca/projects/templates.html

1212 Method 123: Method 123: http://www.method123.comhttp://www.method123.com

1919 ProjectWare: ProjectWare: http://www.projectware.com.au/pw030.htmlhttp://www.projectware.com.au/pw030.html

1414State of Texas Department of Information Resources:State of Texas Department of Information Resources:http://www.dir.state.tx.us/eod/qa/template.htmhttp://www.dir.state.tx.us/eod/qa/template.htm

88 U.S. Defense Logistics Agency: U.S. Defense Logistics Agency: http://www.dsioj.dla.mil/spi/template/pm-tmp.htmhttp://www.dsioj.dla.mil/spi/template/pm-tmp.htm

Complete details are available from the Tempting Templates web site:Complete details are available from the Tempting Templates web site:http://webpages.charter.net/hafox/pm/docs/TemptingTemplatesPreliminaryReport.htmhttp://webpages.charter.net/hafox/pm/docs/TemptingTemplatesPreliminaryReport.htm

Kathy’s Observations on TemplatesKathy’s Observations on Templates In early 2003 I added templates to my In early 2003 I added templates to my

Web site for project proposals, team Web site for project proposals, team contracts, and scope statements, and contracts, and scope statements, and the quality of student projects improved the quality of student projects improved tremendously tremendously

People like to have more guidance on People like to have more guidance on expectations and formatsexpectations and formats for various for various project documents, and they want the project documents, and they want the actual files to make their jobs easieractual files to make their jobs easier

Be sure the templates are Be sure the templates are usefuluseful and and not just bureaucratic paperwork, and be not just bureaucratic paperwork, and be sure people use them properlysure people use them properly

ResourcesResources The text book Web site for my The text book Web site for my

third edition is available for free at third edition is available for free at www.course.com/mis/schwalbewww.course.com/mis/schwalbe

Fourth edition Web site is Fourth edition Web site is password protected (need to buy password protected (need to buy the book!) – includes guide to the book!) – includes guide to using Project 2002 and 2003, using Project 2002 and 2003, interactive test questions, updated interactive test questions, updated lecture slides, links to hundreds of lecture slides, links to hundreds of references, etc.references, etc.

Lots of info from my siteLots of info from my site

Questions?Questions?

Feel free to use templates, teaching ideas, etc.from my Web site at www.kathyschwalbe.com.Contact me at schwalbe@augsburg.edu.