A very serious disconnect
The future impact of projects is rarely tied to resource planning systems.
BY GARY R. HEERKENS, MBA, CBM, PMP
As I have mentioned in previous columns, a project's financial analysis is a vital component of the overall project approval process. You may know this procedure by either of its common names: cost-benefit analysis (CBA) or return on investment (ROI) study.
The foundation of any project financial analysis is a cash flow chart. As the name suggests, a cash flow chart displays all of the economic impacts associated with a proposed project through some future span of time—typically somewhere between three and eight years, depending upon the nature of the project and the assets it delivers. These economic impacts can be either positive (benefits) or negative (costs). The review of cash flow charts is an informative, insightful and necessary element of the project approval process.
ABOUT THE DISCONNECT
Many projects carry with them some sort of post-project cost obligation related to headcount and staffing. For example, the introduction of a new product may require an increase in the quantity of product support personnel. Or the installation of a new piece of equipment may require an incremental increase in the maintenance staff.
If properly constructed, cash flow charts will clearly define the future headcount and staffing requirements associated with any proposed project. But at many organizations—even those that do an excellent job of developing cash flow charts—there is no meaningful connection between the downstream headcount and staffing obligation introduced by approved projects and enterprise-wide resource planning processes.
Please note that I am not referring specifically to having a formal, computerized enterprise resource planning (ERP) software product in place. I am simply referring to the act of recognizing that figures on project cash flow charts may represent actual people who must exist somewhere in the future if the full benefit of a project is to be realized. I am also referring to the fact that if this connection is not made, there can be adverse consequences.
A REAL-LIFE EXAMPLE
Some time ago, one of my training clients—an IT project management office (PMO) director—told me a story that characterizes this dilemma. The project managers had reached a point where they found themselves spending 60 percent of their time supporting software systems they had installed over the past few years. This, of course, meant that his PMO was not doing what it had been created to do: implement new project opportunities. So while the approval of projects at his company should have prompted an increase in system support personnel, no one actually hired these people.
Some might argue that this specific scenario does not necessarily qualify as having a severe business consequence. Agreed.
But consider that this disconnect is truly a widespread issue. And consider that the approval of countless projects with additional staffing requirements is colliding with a future where downsizing is occurring. In its own way, the disconnect is contributing to an environment where people are working a ridiculous number of hours and getting further behind. I put this disconnect—and its effects—in the category of a “silent epidemic.”
While there is no simple fix, promoting awareness of this disconnect is the first and most critical step toward improving the dire situation. I hope I have done that here. PM
Gary R. Heerkens, president of Management Solutions Group Inc., is a consultant, trainer, speaker and author. His latest book is The Business-Savvy Project Manager.
PM NETWORK JANUARY 2012 WWW.PMI.ORG