December 5-6, 2003 Bogotá, Colombia

December 5-6, 2003 Bogotá, Colombia

PM Conference, Escuela Colombiana de Ingeniería

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THE IMPORTANCE AND VALUE OF

PROJECT MANAGEMENT

Russell D. ArchibaldFellow, PMI & APM/IPMA,

PMP, MSc

For Enterprises and Institutions

Bogotá, 12/5-6/03



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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



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1. PM in Industry & Government

Projects Exist in all organizations Are vehicles for strategic growth Produce a wide variety of results:

New products, systems, and services New facilities (buildings, plants,

hospitals, other) New organizations, events, & other



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Project Characteristics

Start and end points Complex effort, many diverse tasks Produce specified results within an

established schedule and budget Require the efforts of diverse

specialists Demand modern project management

practices for successful execution



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A Project is a Process The difference between a project and its

product A project is the process of creating a

new end result: the product Principles of project management apply

to all categories of projects Major differences exist in their life cycle

models and detailed management methods



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Why Such Rapid Spread of PM?

Current wide understanding that Projects exist in all human organizations Great benefits are derived from

applying modern project management: Systematically conceiving, selecting,

defining, planning, authorizing and executing projects

Linking strategic growth to projects through project portfolio management



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Rapid Spread of Project Management

PMI: 1990: 8,500 members, mostly in U.S.A. 2003: 115,000 members in 39 countries

Others: IPMA: 30 national PM associations Numerous other engineering &

professional associations around the world



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Diversity of Projects: 23 PMI Specific Interest Groups/SIGS Aerospace/Defense Automation Automotive E-business Environmental Financial Services Government Healthcare Hospitality Events Information Systems

Info Tech’n’gy/Telecom

Int’n’l Development Manufacturing New Product Develop. Oil/Gas/Petrochemical Pharmaceutical Retail Service & Outsourcing Utility Industry Plus 4 others



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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.



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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: ?



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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: ?



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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

http://ipmaglobalsurvey.com/



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Effective Project Management is Important to All Organizations

Failures in project selection, risk analysis, & conceptual planning:

Expenditure of scarce resources on projects doomed to failure

Exposure to unacceptable financial, technological, and competitive risks



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Failures in Project Planning & Execution Expected profits become losses New products too late Capital facilities completed too late Information systems projects

exceeding their planned cost and schedule 5 out of 6 IS projects failed to meet targets Nearly 50% were canceled before

completion



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Project-Driven & Project-Dependent Organizations

Project-Driven: Primary business is delivering projects Examples: Design/construction, software

development, telecommunication systems, consultants & professional services

Project-Dependent: All others – projects support their primary

lines of business



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2.Advantages & Importance of Modern Project Management

Substantial increase in success of every project:

Strategically valid projects are selected

Selected projects are completed on schedule and within budget



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Basic Reasons for Success Projects selected only when they

support 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



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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



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Advantages of Assigning Integrative Responsibilities Accountability in one person: the Project

Manager Other key integrative responsibilities as

well Decisions made for the good of the overall

organization Every project is well planned and controlled Teams work together with commitment

with leadership of the Project Manager



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Advantages of Project Integrated Planning & Control

All functional tasks planned & controlled to meet overall needs of the project

Resources are allocated properly, effects of priorities are known

Early identification of potential problems (delays, overruns, etc.) enables timely corrective actions



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Advantages of Effective Team-Working Creative collaboration of diverse

skills needed for each project Strong team commitment to each

project and its objectives Developing as a team agreed

plans, schedules and budgets Achieving outstanding team

performance on each project



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Goals of Project Portfolio Management

1. Maximization of value

2. Balance

3. Strategic alignment



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Benefits of Project Portfolio Management

One company (SmithKline Beechman):

New portfolio 30% more valuable Marginal return on additional

project investment tripled: From 5:1 to 15:1

Led to 50% increase in development spending



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3. Cost Versus Value of Project Management

Sources of PM costs Magnitude of PM costs Measuring PM return on

investment/ROI Value of PM: Beyond ROI

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.



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Magnitude of PM Costs 80% of 20 companies spend less

than 10% of project cost on PM Range: 0.3% to 15% of total

project cost Salaries and burden are largest

single item Others: SW licensing, consulting,

training costs



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Measuring PM Return on Investment

Knutson’s 4 measurement plateaus:1. Comprehension & Acceptance2. Application: Frequency, accuracy3. Influence on the Business: Results4. Return on Investment/ROI: Return

on direct costs



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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



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Value of PM: Beyond ROI

“ROI not a good indication of PM value”

Broader view needed, i.e. ‘balanced scorecard’ approach

100 PM practitioners surveyed: 94% say PM adds value 5%: little value 1%: ‘not valuable’



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Areas of Significant Improvement from PM Application

Financial measures Customer measures Project/process measures Learning and growth measures

All size organizations in all industries reported such improvements



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What Should Organizations Expect from Implementing PM?

50% improvement in project/process execution

54% improvement in financial performance

36% in customer satisfaction 30% in employee satisfaction

-- as noted by companies surveyed



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4. Requirements to Achieve the Benefits

Create organizational culture for PM

Introduce and improve PM practices, systems and tools

Train involved persons at all levels



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PM Organizational Culture

PM roles and responsibilities Project responsibilities overlay

traditional functional ones Project versus functional direction Open communication Share information, anticipate

problems



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Introduce PM Practices, Systems & Tools

Management projects Need careful planning Need assistance from qualified

practitioners/consultants Evolutionary process PM maturity models are useful



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PM Training Requirements

Extensive training needed At all levels

Top level: general principles Program and project managers PM planning and control specialists

Many qualified trainers available Many university courses available



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PM Training is Big Business

PMI: 900 Registered Education Providers

60,000 students per year 18 graduate & undergraduate

certification programs in the U. S. Many on-line courses



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PM Certification Programs PMI: Two levels

PMP CAPM

IPMA: Four levels A: Certified Programme Director/CPD B: Certificated Project Manager/CPM C: Registered PM Professional/RPMP D: PM Fachman/Fachfrau/PMF



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5. Is PM a Profession? Many references to the PM ‘profession’ No legal licensing exists in any country Not a ‘profession’ but rather a

management discipline A required ‘core competency’ for every

executive today Similar to financial management

competency



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PM As a Core Competency

“Project management is a way of life for all professionals”

Roberto MoralesDean, National University of

Engineering,Peru



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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



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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



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PM capabilities will be a requirement for senior executive positions

Government licensing in PM will not exist

Project portfolio management will be widespread

Project classification system will be widely used



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Catalog of project life cycles will: Be widely used Enable total life cycle PM Will include final “realization of

project benefits” PM will be used in essentially all

areas of human endeavor



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Project planning & control systems: Fully integrated with corporate systems More specialized by project type Web enabled Use wireless connections to central

servers PM software vendors will consolidate



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Project teams: Virtual teams will regularly meet

via Internet with video Most project managers will be

trained in team building and leadership



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Applicability of PM around the world There will still be countries,

regions, and cultures where the PM discipline is not appropriate or practical

Central Africa, for example



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6. Conclusions All enterprises realize growth strategies

through execution of projects Managing growth prudently requires

managing projects effectively Application of PM principles, practices

systems and tools is of great importance to every enterprise & institution in today’s competitive world



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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



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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



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Thank You for Listening

Questions? Comments?

Contact me:[email protected]