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December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
1
THE IMPORTANCE AND VALUE OF
PROJECT MANAGEMENT
Russell D. ArchibaldFellow, PMI & APM/IPMA,
PMP, MSc
For Enterprises and Institutions
Bogotá, 12/5-6/03
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
2
Presentation Outline
1. Project Management in Industry and Government
2. Advantages and Importance of Modern Project Management
3. Cost versus Value of Project Management4. Requirements to Achieve the Benefits5. Is PM a Profession? PM in the Next 5 Years6. Conclusions
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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1. PM in Industry & Government
Projects Exist in all organizations Are vehicles for strategic growth Produce a wide variety of results:
New products, systems, and services New facilities (buildings, plants,
hospitals, other) New organizations, events, & other
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Project Characteristics
Start and end points Complex effort, many diverse tasks Produce specified results within an
established schedule and budget Require the efforts of diverse
specialists Demand modern project management
practices for successful execution
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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A Project is a Process The difference between a project and its
product A project is the process of creating a
new end result: the product Principles of project management apply
to all categories of projects Major differences exist in their life cycle
models and detailed management methods
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Why Such Rapid Spread of PM?
Current wide understanding that Projects exist in all human organizations Great benefits are derived from
applying modern project management: Systematically conceiving, selecting,
defining, planning, authorizing and executing projects
Linking strategic growth to projects through project portfolio management
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Rapid Spread of Project Management
PMI: 1990: 8,500 members, mostly in U.S.A. 2003: 115,000 members in 39 countries
Others: IPMA: 30 national PM associations Numerous other engineering &
professional associations around the world
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Diversity of Projects: 23 PMI Specific Interest Groups/SIGS Aerospace/Defense Automation Automotive E-business Environmental Financial Services Government Healthcare Hospitality Events Information Systems
Info Tech’n’gy/Telecom
Int’n’l Development Manufacturing New Product Develop. Oil/Gas/Petrochemical Pharmaceutical Retail Service & Outsourcing Utility Industry Plus 4 others
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Recommended Major Categories
1. Aerospace/Defense
2. Business & Organizational Change Projects
3. Communication Systems Projects
4. Event Projects5. Facilities Projects
6. Information Systems
7. International Development
8. Media & Entertainment
9. Product/Service Development
10. Research & Dev.
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Sub-Categories Are Required
One example:2. Business & Organization Change
Projects:1. Acquisition/merger2. Management process improvement3. New business venture4. Organization re-structuring5. Legal proceeding6. Other: ?
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Example:Category 5. Facilities Projects
Subcategories:1. Facility decommissioning2. Facility demolition3. Facility maintenance & modification4. Facility design/procure/construct
1.Civil 2.Energy 3.Environmental 4.Industrial 5.Commercial 6.Residential 7.Ships 8.Other:
5. Other: ?
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Current Global Survey Will Test This Approach Global survey of project categories
& life cycles in progress Please go to:
http://ipmaglobalsurvey.com Download 11 page paper (Spanish &
English) and complete the online survey prior to Dec. 30
Results will be reported to respondents
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Effective Project Management is Important to All Organizations
Failures in project selection, risk analysis, & conceptual planning:
Expenditure of scarce resources on projects doomed to failure
Exposure to unacceptable financial, technological, and competitive risks
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Failures in Project Planning & Execution Expected profits become losses New products too late Capital facilities completed too late Information systems projects
exceeding their planned cost and schedule 5 out of 6 IS projects failed to meet targets Nearly 50% were canceled before
completion
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Project-Driven & Project-Dependent Organizations
Project-Driven: Primary business is delivering projects Examples: Design/construction, software
development, telecommunication systems, consultants & professional services
Project-Dependent: All others – projects support their primary
lines of business
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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2.Advantages & Importance of Modern Project Management
Substantial increase in success of every project:
Strategically valid projects are selected
Selected projects are completed on schedule and within budget
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Basic Reasons for Success Projects selected only when they
support organization’s strategic goals Commitments are made only to
achievable technical, cost & time goals Responsibilities are well defined Every project is planned and controlled Project teams work together with
commitment to goals
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Triad of Project Management Practices
1. Assignment of integrative project responsibilities
2. Application of integrative and predictive project planning and control methods and systems
3. Effective team working
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Advantages of Assigning Integrative Responsibilities Accountability in one person: the Project
Manager Other key integrative responsibilities as
well Decisions made for the good of the overall
organization Every project is well planned and controlled Teams work together with commitment
with leadership of the Project Manager
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Advantages of Project Integrated Planning & Control
All functional tasks planned & controlled to meet overall needs of the project
Resources are allocated properly, effects of priorities are known
Early identification of potential problems (delays, overruns, etc.) enables timely corrective actions
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Advantages of Effective Team-Working Creative collaboration of diverse
skills needed for each project Strong team commitment to each
project and its objectives Developing as a team agreed
plans, schedules and budgets Achieving outstanding team
performance on each project
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Goals of Project Portfolio Management
1. Maximization of value
2. Balance
3. Strategic alignment
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Benefits of Project Portfolio Management
One company (SmithKline Beechman):
New portfolio 30% more valuable Marginal return on additional
project investment tripled: From 5:1 to 15:1
Led to 50% increase in development spending
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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3. Cost Versus Value of Project Management
Sources of PM costs Magnitude of PM costs Measuring PM return on
investment/ROI Value of PM: Beyond ROI
Sources of PM CostsPeople
(salary plus overhead)
PM Software Applications(Acquisition and
maintenance)
PM Planning, Computing and
Communications(PCs & ISP*)
PM Travel, Training & Consultants
Project Portfolio Management
1. Portfolio Steering Group.
2. Support staff (if required.)
Supported by PMO. Supported by PMO. Minimal PM travel.Consultant (?)
Project Management Office (PMO)
1. PMO Director.2. Support staff.
Acquire & maintain PM software for total organization.
Acquire/administer Intranet/Internet/Web server and support for PM discipline.
Acquire PCs.
TrainingConsultant for PMO
startup
Program/Project Office (PO) (for each program or project).
Costs are included in direct project budget.
1. Program or Project Manager.
2. Planning & control staff.
Tailor & use PM SW for each project’s needs.
Use PCs.Use Intranet/Internet/Web
as required. Enter data as required for
project planning and control.
Project start-upTrainingTravelConsultant (?)
All affected functions
1. Managers.2. Functional project
leaders.3. Work package
leaders.
Supported by PMO and all project offices & project managers.
Provide > planning inputs> progress info
> time sheets.
PM Training as required.
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Magnitude of PM Costs 80% of 20 companies spend less
than 10% of project cost on PM Range: 0.3% to 15% of total
project cost Salaries and burden are largest
single item Others: SW licensing, consulting,
training costs
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Measuring PM Return on Investment
Knutson’s 4 measurement plateaus:1. Comprehension & Acceptance2. Application: Frequency, accuracy3. Influence on the Business: Results4. Return on Investment/ROI: Return
on direct costs
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Measuring Results of PM
1. PM exists & is being applied2. Customer more satisfied3. Planning accuracy improved4. Project monitoring improved5. Collecting and using lessons
learned6. Documenting change of scope and
receiving payment for changes
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Value of PM: Beyond ROI
“ROI not a good indication of PM value”
Broader view needed, i.e. ‘balanced scorecard’ approach
100 PM practitioners surveyed: 94% say PM adds value 5%: little value 1%: ‘not valuable’
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Areas of Significant Improvement from PM Application
Financial measures Customer measures Project/process measures Learning and growth measures
All size organizations in all industries reported such improvements
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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What Should Organizations Expect from Implementing PM?
50% improvement in project/process execution
54% improvement in financial performance
36% in customer satisfaction 30% in employee satisfaction
-- as noted by companies surveyed
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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4. Requirements to Achieve the Benefits
Create organizational culture for PM
Introduce and improve PM practices, systems and tools
Train involved persons at all levels
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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PM Organizational Culture
PM roles and responsibilities Project responsibilities overlay
traditional functional ones Project versus functional direction Open communication Share information, anticipate
problems
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Introduce PM Practices, Systems & Tools
Management projects Need careful planning Need assistance from qualified
practitioners/consultants Evolutionary process PM maturity models are useful
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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PM Training Requirements
Extensive training needed At all levels
Top level: general principles Program and project managers PM planning and control specialists
Many qualified trainers available Many university courses available
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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PM Training is Big Business
PMI: 900 Registered Education Providers
60,000 students per year 18 graduate & undergraduate
certification programs in the U. S. Many on-line courses
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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PM Certification Programs PMI: Two levels
PMP CAPM
IPMA: Four levels A: Certified Programme Director/CPD B: Certificated Project Manager/CPM C: Registered PM Professional/RPMP D: PM Fachman/Fachfrau/PMF
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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5. Is PM a Profession? Many references to the PM ‘profession’ No legal licensing exists in any country Not a ‘profession’ but rather a
management discipline A required ‘core competency’ for every
executive today Similar to financial management
competency
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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PM As a Core Competency
“Project management is a way of life for all professionals”
Roberto MoralesDean, National University of
Engineering,Peru
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
40
PM in Next Five Years
Little change in the basicsMajor trends: Greater linkage to strategic management
through project portfolio management Total life cycle PM: creation through to
realization of final benefits Continued discovery of new areas of
application
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
41
PM in Next Five Years (Cont’d)
PM will merge with other management disciplines
3 PM maturity models in broad use PM certification will be:
More focused on proven capabilities More focused on specific areas of
application and specific project types Awarded at 3 or 4 levels
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
42
PM in Next Five Years (Cont’d)
PM capabilities will be a requirement for senior executive positions
Government licensing in PM will not exist
Project portfolio management will be widespread
Project classification system will be widely used
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
43
PM in Next Five Years (Cont’d)
Catalog of project life cycles will: Be widely used Enable total life cycle PM Will include final “realization of
project benefits” PM will be used in essentially all
areas of human endeavor
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
44
PM in Next Five Years (Cont’d)
Project planning & control systems: Fully integrated with corporate systems More specialized by project type Web enabled Use wireless connections to central
servers PM software vendors will consolidate
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
45
PM in Next Five Years (Cont’d)
Project teams: Virtual teams will regularly meet
via Internet with video Most project managers will be
trained in team building and leadership
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
46
PM in Next Five Years (Cont’d)
Applicability of PM around the world There will still be countries,
regions, and cultures where the PM discipline is not appropriate or practical
Central Africa, for example
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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6. Conclusions All enterprises realize growth strategies
through execution of projects Managing growth prudently requires
managing projects effectively Application of PM principles, practices
systems and tools is of great importance to every enterprise & institution in today’s competitive world
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Conclusions (Cont’d)
When properly applied, project management will produce great benefits and value
These benefits include improved financial returns, customer & employee satisfaction, and project selection and execution
December 5-6, 2003 Bogotá, Colombia
PM Conference, Escuela Colombiana de Ingeniería
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Conclusions (Cont’d)
PM discipline is not a separate management profession
PM is a core competency required for all executives
The art and science of PM will continue to evolve with close linkage to strategic management
Recommended