Introduction: Why do Project Managers Need to Become Business-focused?
Project management is no longer siloed within an organization. Organizations need project managers to align their projects to the overall strategic goals and desired business performance. What are some key tools to help modify a project manager's mode of communication, leadership, and perspective of success? This paper will present three areas of focus to develop more business-driven project managers. Research from the recent State of the PMO 2012 (PM Solutions Research, 2012) will validate the need and integration of business drivers into the project manager's new way of thinking.
This paper will also help you shift from a narrow, strong, technical focus of project management to a broader, more business-driven focus. The business reason for initiating a project is now paramount. Organizations need to deliver new products and services to stay competitive. The selection of these projects usually is (or should be) the result of the organization's strategy and should have a business case.
Traditional project management used to focus on the process of managing a project to successful completion. No more. If projects managers need to deliver business objectives, and not just complete a project, a broader project management approach is needed. As Paul Dinsmore noted in his article “Toward Corporate Project Management,” “the aggregate result of an organization's projects becomes the company's bottom line” (Dinsmore, 1996, p. 10).
Project management hasn't historically been a discipline used in service improvement, business redesign, or change-type projects. These projects were perceived to require a more flexible approach. But today, organizations' strategies are filled with these types of projects, which must be integrated into the business.
A business-driven project management approach will bridge the gap between company strategies and project plans. For this to happen, an organization must link its projects to its strategic initiatives. Combining a strategic focus with a business process for selecting and prioritizing projects is an important step in creating an environment for successful projects.
According to Rezak (2011), “In too many organizations today, business acumen is a missing leadership competency. Managers without business acumen lack an in-depth understanding of how their actions impact the company's profitability; they struggle to articulate and execute on strategy.”
High-performing project management offices (PMOs) are seeing an unmistakable trend, according to the most recent research. They are not only “impacting project management performance, but are boosting organizational performance as a whole.... More specifically, they are scoring significantly higher on addressing issues that matter most to executives, including alignment with business objectives and strategy execution” (PM Solutions Research, 2012, p. 3). Project managers in all PMOs, not just the high-performing ones, must concentrate on three areas where a business-focused leader must shift from traditional thinking:
- Communicating to DRIVE results
- Managing for business impact
- Demonstrating project value to the C-suite
Project Communication that Drives Business Results
You've just been told that you have been named the project manager on a critical project for the organization. How do you start to transition from your traditional approach to a more business-focused approach? The first thing you need to do is stop thinking of yourself as “just a project manager.” You are not. In this role, you are a consultant, a trusted advisor, and a change agent. This will affect how you communicate, to whom, and how often. Your communication style will change with your audience and its impact can't be overstated.
In your “business consultant” role, you are constantly reinforcing the strategic reasons for the project and identifying the business impact of any changes. You'll need to make the tough calls, sometimes be “intelligently disobedient,” and deliver bad news immediately. In a consultative way, you may even need to recommend killing a project.
Project leaders need to earn the right to be a “trusted advisor.” You need to demonstrate that you care about your project and your customer and HOW the project impacts them and the overall organization. A project leader who gives advice effectively, honestly, and genuinely are the ones who build trust with their teams and stakeholders. By doing so, you develop a more collaborative relationship, which fosters better communications and more successful projects.
As the project manager of a project that is driving business innovation and change, you act as a “change agent.” You need to engage leaders to play an active leadership role in the change and help those involved with the project understand the project vision. You facilitate involvement of high-level stakeholders to manage resistance to change, and build plans to ensure that people are motivated and have the skills to meet the demands of the change.
Once you are assigned your project, you'll want to ask a lot of questions to understand the business purpose of the project. What is the business value of the project? Some of the considerations for business value can be:
- Cost reduction - How will this project specifically cut or reduce costs out of the operating budget for the overall organization?
- Business growth - If this is a new product or service, or even an internal project, how will it help the business grow?
- Maintaining operations - Since most of these types of projects are basically “to keep the lights on,” you'll still need to consider what the cost of NOT doing this project is. Lost profits? Loss of compliance?
- Speed and efficiency - A project that improves either productivity, speed to market, or overall operational efficiencies will generally impact the bottom line.
Business value can be identified in a number of ways, but inevitably, it all comes down to improved outcomes for the organization in one way or another.
Once you know what the business purpose and the business value of the project, you'll need to align your communication style to each of your audiences, and remember to use business terminology to help others shift their mindset from traditional to business-focused project management. Your role as a project manager is actually not changing; what's different is how you THINK about your project and how you COMMUNICATE with others around the business benefits. The role of the project manager is to ensure that they keep their project sponsor, their project team, and those interfacing with this project in alignment with the project and business goals.
Traditionally, project managers talk about cost, schedule, scope, and quality. You'll still need to talk in those terms. However, in shifting to a business mindset, you'll want to communicate about the project in both project terms and in business terms:
- “Cost” translates to “financial impact”
- “Schedule” translates to “time to market”
- “Scope” translates to “parameters for success”
- “Quality” translates to “service integrity”
Another transition to be undertaken is in how you talk about your project, and it can be a tough one. One of the competencies of a strong project manager is “detail oriented.” With your expanded role as a project leader, you need to shift from your natural tendency to give project detail to giving more of an “elevator pitch” about your project. An “elevator pitch” just sums up the unique aspects of your project in a way that excites others. It should take no more than two minutes (the span of an elevator ride.) To give a good elevator pitch you need to really understand the business reason behind your project and how it is strategically aligned with the business goals of the company. An elevator pitch helps you move away from speaking about the details and to focus on the overall value of your project, and of project management in general.
A project manager is already aware that clear communication is critical to project and business success. HOW you communicate about your project to others outside of the elevator pitch will set the tone for the business impact and the overall project value to the organization.
There are some fatal assumptions that a project leader wants to avoid. Don't assume that your project team and stakeholders:
- Understand what has been communicated
- Agree with what has been communicated
- Care about what has been communicated
- Know how to act in relation to what has been communicated
These assumptions are the root of most miscommunications, continuing disagreements, inaction or alternative action, and rework (Cossland, 2009).
So you'll want to insure that before you start a project, you:
- Seek first to understand the business purpose and value
- Alter your communication style to include business terminology
- Engage all stakeholders, especially the difficult ones
- Communicate throughout the project lifecycle
- Communicate not just project status, but project results, and how they impact the bottom line
The next area of focus for the business-focused leader is to shift from “managing the project to be completed on time and on budget” to “managing the project to realize the desired business impact.”
Managing Project Outcomes for Business Impact
The project management business environment has changed. The project manager is becoming more of an organizational leader. The traditional drivers for projects have changed. No longer can a project manager focus solely on closing out the project, but must be more focused on how the results of this project will help move the company forward financially.
Some of the business drivers in organizations today that project manager s are focusing on:
- Competitive advantage
- Increased profits
- Best utilization of resource management
- Business growth
How an organization looks at its business drivers affects every project that is undertaken.
To truly manage the project outcome of a project for business impact, four steps are necessary, as shown in Exhibit 1.
Each step is critically important in relaying HOW to make this shift as successful as possible.
Let's start with Step 1. Linking organization goals to project goals is the first step for getting to business-focused project management. Organizations must transform goals into company-wide programs that translate corporate goals into action. These programs are broken into projects and managed by project managers who look at corporate objectives and execute accordingly. A business-focused project manager learns to think more strategically and become more responsible for project business results, and not just closing out the project.
Exhibit 2 helps illustrate how a project should link to the objectives and overall vision of the organization. The organization's strategic plans cascade down from corporate strategy to business unit strategy to portfolio, program, and project strategy. As strategy cascades down the organization, performance measures are established at each level to link up with the strategic performance expectations of the entire company (Crawford, 2011, p. 12).
Below is an example that makes this more applicable and helps demonstrate how a specific (fictitious) project can and should be linked to the company's strategic objectives and ultimate vision:
To become the premier innovative company in athletic manufacturing
Help our customers achieve their optimum athletic performance
To introduce three new innovative products per year
To release the New Running Shoe Project six months before the Olympics
To manage the New Running Shoe Project
As you can see from the example, if one of the organization's strategies is to drive a new product to market, a business-focused project manager will think through how he can impact achieving (or not achieving) the strategy. In this case, managing the Running Shoe Project on time impacts the organizational objective of having it released before the Olympics, which will affect its success in the marketplace, and ultimately bottom-line sales. Knowing this, he will make decisions understanding the criticality of releasing a quality product on time.
The second step in getting to business-focused project management is getting clarity from your project sponsor. As the project manager, it is imperative that you understand WHY your project is more important than others, and what the expectations are regarding project outcomes. If this project is to drive the business forward and provide a competitive advantage, what do you need to know from your project sponsor to ensure that your project is viewed a success?
Business-focused project managers will thrive in organizations that:
- Are strategically driven
- Are strong at prioritizing projects
- Actively manage and monitor the project portfolio
- Are good at ensuring that project sponsors act as project owners
- Are change ready
- Hold stakeholders accountable
The third step in getting to business-focused project management is using business-driven project language. This has already been discussed briefly. You need to begin talking about your project in both project and business terms. There should also be a shift in how you view the success criteria. It will no longer be “close on time within budget.” Yes, that will still be important; but as a business-focused project manager, you broaden your criteria to include such things as: Did it have the economic impact we were expecting? What was the return on investment? What were the customer impacts? How you speak about your project to others will set the tone for the business impact and the overall project value to the organization.
In addition to using business terminology, there needs to be a shift in the purpose and use of some of the common tools used in project management. For instance, a project charter or a project initiation document are routine documents that outline project justification, high-level requirements, budget summary, initial risks, project objectives, success criteria, acceptance criteria, project manager authority level, and sign-off! These documents must be used to the best advantage by collecting the business issues, risks, and rewards of this project. Learn to ask questions. Why was this project chosen? What is the business impact? How does it tie to strategic objectives? These documents have official sign-off, so it is the best time to get answers to those questions that will help you manage the project from both a project and a business perspective.
The fourth and final step in getting to business-focused project management is building a business case. Before I started doing research and holding focus groups, I thought all project managers built or received a business case for their projects. I was wrong. Building a business case helps you think strategically about your project and how it aligns to the organization's strategies. Every project may not need a business case. However, I do recommend that you at a minimum use the concept to think about and map out how your project aligns to organizational goals.
A good business case starts with a comprehensive and clear understanding of the customer's expectations. This is typically completed in conjunction with the project initiation document or project charter. However, projects that are handed down after the portfolio prioritization process should have already been determined to be critical to the business, so the project manager may want to use the project business case before the actual initiation to clarify the reasons for the project and how it ties into the overall strategy. This document will also help you to build a better business-aligned project charter, project initiation document, scope statement, and so forth, and it can be used at project closeout to help determine if the benefits and value were achieved.
One might ask, “Doesn't a project charter accomplish the same goals as a business case?” The project charter tends to be one-dimensional and much more focused on the triple constraint, whereas the project business case is multidimensional and places the project in the business world. It strategically aligns the project with the overall organizational goals.
Thus, in developing a business focus for projects, organizations must consider a wide range of issues and follow a process that enables the right projects to be chosen to support the company's strategy. Upper management needs to support project management and encourage cross-functional interface with projects. Portfolio management must be in place and proactively managed. Project selection and prioritization are critical factors of success. If an organization doesn't create a process to link projects to strategies, projects will surface across the organization in an uncontrolled manner, resulting in confusion and a higher project failure rate.
Demonstrating Project Value to the C-Suite
As noted above, the business case can help to outline the project value. It should include:
- Identified and quantified benefits
- Identified risks to achieving benefits and associated risk management plan
- Estimated cost to deliver benefits
- Anticipated timeframe for delivery of benefits
It's important to remember that the project value may not align with the project completion dates. Full project value may not be realized until “X” happens or is realized. Some projects are not viewed as a success upon their completion. There is a difference between project success and business success. For instance, when the Ford Taurus was introduced in 1986, it became one of the best-selling cars in America and one of the most successful cars in Ford's history. It had a revolutionary design and exceeded expectations on quality, which created a new standard in the car industry. Customers loved the car and bought it in record numbers. Still today, in 2012, it is rated #1 in the affordable large car category for performance, design, safety, and reliability. Yet when the original project was completed, the project manager was demoted because the project was completed three months behind schedule (Shenhar, 2004, p. 570).
This example shows how traditional project management was viewed. This perspective has changed in companies that have transitioned to business-driven project management as “benefits realization” has become a huge factor in today's project management, and you can see why!
Project managers are typically part of a PMO. Research shows that the percentage of organizations with PMOs has nearly doubled to 87% over the past decade (PM Solutions Research, 2012, p. 3). The greater the capability of the PMO, the greater the value the PMO contributes and the greater the overall performance of the organization. A highly capable PMO engages in more functions, particularly project portfolio management and resource optimization, and is far less likely to have its value questioned by others in the organization (Ibid, p. 6). If PMOs are going to continue this positive trend of increased value, then we need to continue to train their project managers to be more and more business-focused.
Thus, when communicating with the C-level executives, you need to shift to a more consultative personality. This means making the tough calls and pushing back on issues in conflict with organizational goals. It means taking a stand for the integrity of the project. Your communications should constantly be reinforcing the strategic reasons for the project, and identifying the business impact of any changes that occur. There may be times when you need to be “intelligently disobedient” and reinforce to them how your project will impact the bottom line of the business.
Executives tend to focus on business goals, results, and outcomes of projects. Practitioners tend to focus on tactics, tools, techniques, and finish lines. Both need to understand there is a difference between project success and business success. Thirty percent of the business benefits will actually be achieved from the implementation of the project; 70% will come from putting in place a process for making people accountable for the change and having a system in place for realizing the project benefits long after the project has been implemented (Berman, 2007, p. 3).
Throughout your reporting process, understand and communicate the direct business impact your project is having and will have on the organization. You should baseline where you start and measure the impact your project is having, which means you need to develop a measurement program in parallel to initiating the project. Some samples of measures that executives would be interested in are:
- Cost reductions
- Customer retention
- Market share
In your communications, recognize that executives have limited time to spend on a single issue, and their focus is always going to be on the value of the project to the organization. The project managers who are the most successful in getting the C-suite executive's support are those who frame their project communications around business results.
In summary, Exhibit 3 highlights the major differences between business-focused and traditional project management.
Start your transition to a business-focused project management leader today. Embrace the four steps of strategically linking, getting clarity, shifting to business terminology, and doing the business case. Then drive the business results and demonstrate the value to your executives. If you do, you will bridge the gap of traditional and business-driven project management, and will emerge with a new required competency of project management—leadership. You will become a business-focused project management leader.