Abstract
At the PMI® Global Congress 2009—North America, project management guru Harold Kerzner, PhD, described a vision of the future of project management during his closing keynote address. This vision centered on the notion that project managers AND the organizations they work within will have to be considerably more “business-savvy” than they are today.
But what does that mean? And what will it take for us to get to this future place?
This paper offers a response to those questions (and many more) by describing what it means to be a business-savvy project manager and further describes how today's practicing project managers can become business-savvy. The paper goes one step further and suggests that the talents of business-savvy project managers will only be fully realized when their company understands how to look at projects from a business perspective. It outlines the types of organizational change that will have to occur for this to happen.
The paper further describes the benefits that can be realized when business-savvy project managers are able to demonstrate their business-savvy within a business-savvy organization. The key message in this presentation is that there is something to be gained by everyone in striving to fulfill Dr. Kerzner's vision.
Introduction
For several years, I have been pushing for “project management reform”—specifically for project managers to become more business-savvy. Thankfully, the lobbying has been successful, the word is finally getting around, and believers are lining up. In the form of newly developed training programs, newsletter articles, and even some changes in college curricula, the notion that project managers should be business-savvy has turned into a legitimate movement. However, to fulfill the promise embodied by this movement and to leverage its full potential, it has become clear that companies and organizations who execute projects must now “step up” and become a full-fledged player in this movement. Moreover, given the current project management environment, it is equally clear that significant changes are needed.
One critical clarification regarding simplicity in wording: While I will continually use the term, “project manager” throughout this paper, the term “project personnel” could just as well be applied, as I believe that these concepts can and should apply to all project practitioners.
The Value of Change
In the absence of a business-savvy environment (i.e., business-savvy project managers working in business-savvy organizations), some extremely bad situations can manifest themselves. These situations are costly, wasteful, and frustrating. Among the more notable ones are the following:
Too much work in process (too many active projects);
Comparative business value of projects not well understood;
No mediation or coordination of competing organizational interests;
No meaningful project prioritization (they're all “No. 1 priority”);
Resource overload (60–70-hour work weeks for practitioners);
Many problematic variations exist:
- the pressure to get a particular project moving jumps around;
- project types (new product, capital, infrastructure) not balanced; and
- project clients (Biz Unit A projects vs. Biz Unit B projects) are not balanced.
No regulation of new project proposals;
Go/kill decisions made in the absence of total information; and
Termination of undesirable projects is spotty and/or rare.
To reduce or eliminate these situations and their harmful effects requires two key change agents, as suggested by the title of this paper: business-savvy project managers and business-savvy organizations.
Change Agent #1: Business-Savvy Project Managers
The foundation of reform comes in the form of project managers who we often refer to as being “business-savvy.” However, what does the term business-savvy project manager actually mean, what is the implication of such a thing, and why would a project manager want to become biz-savvy? Let's examine these questions from a variety of different perspectives.
Becoming a Business-Savvy Project Manager: The Conceptual Perspective
In the course of managing projects, project managers are continually required to make decisions. These decisions guide the course of any project initiative. The key questions are then: What does any given project manager use as the core framework by which they make these decisions? What are their guiding principles in decision making? What do they choose as relevant and appropriate criteria when making decisions?
If we accept that fact that projects are, in fact, financial investments in support of organizational strategy, it follows that we would want the person making project decisions to be knowledgeable in these areas—hence, the concept of business-savvy project managers. Makes perfect sense, right? Then why are most project managers in today's environment more or less left to make decisions based upon their technical and functional knowledge? To me, that is one of the most perplexing questions facing the profession today.
The answer to this question can be found within the basic business-savvy concept: project managers who have an understanding of things such as their organization's strategic intent, key market drivers and influences, core product features and applications, and their client's priorities and needs will be well positioned to make the “right” decisions.
Business-savvy project managers are also well positioned to assist their organization in activities such as strategic planning, project financial analysis, project selection, and portfolio management. Allowing project management practitioners to play a role in such activities represents a significant and meaningful form of organizational support. Sadly, this support remains untapped by close-minded organizations who view the domain of the project manager as being restricted to the development of Gantt charts.
Becoming a Business-Savvy Project Manager: The Personal Gain Perspective
There are many excellent reasons why project managers should take the initiative to proactively learn about (and participate in) the wide variety of issues and activities related to the business and strategic aspects of the projects they manage. Here are just a few (Heerkens, 2009a, p. 26):
You are likely to make better project decisions…every day! Basing project decisions solely upon technical or functional considerations means that not all of the critical inputs required to make the best possible decision are being considered. Project managers who do not understand the business aspects of their project are destined to make suboptimal decisions from time-to-time.
You are likely to become involved in a broader—and perhaps more interesting—range of activities. Practicing business-based project management may include anything from helping to prepare project business cases to participating in strategic planning sessions. Many of today's intelligent, capable, and ambitious project managers would welcome such opportunities.
Respect for you—and your role as a project manager—will increase. In addition to giving you an immediate career boost, practicing business-based project management will help us all. It will demonstrate that project managers are able to contribute much, much more than many are being permitted to contribute today.
It reinforces the strong connection between projects and business. This is a key concept that simply cannot be overstressed. Organizations that do not recognize this connection are likely to waste considerable money and human resources. Project managers who practice a business-savvy approach can help organizations recognize this connection.
In addition, here are two more reasons why today's project managers should want to become business-savvy that were not mentioned in the above-referenced magazine column:
You will immediately differentiate yourself from your peers. Those who take the initiative to concern themselves with the business aspects of their projects—and thus establish themselves as business-savvy project managers—will immediately differentiate themselves from their peers who bring only technical and functional knowledge to their projects
You will be well positioned to help your organization evolve. Organizations that may be new to the formal practices of project management—or that do not yet have highly evolved project management systems—stand to benefit a great deal from project managers who understand how to treat projects from a business perspective.
Becoming a Business-Savvy Project Manager: The KSA (Knowledge-Skills-Acumen) Perspective
Business-savvy project managers understand how and why to apply a business perspective to every decision they make. They exploit every opportunity to optimize positive financial and strategic outcomes throughout the entire project investment life cycle (NOTE: “project investment life cycle” refers to the period before and after the project execution life cycle that we typically focus on). Specifically, business-savvy project managers possess competence with regard to (Heerkens, 2009b, p. 23):
Business knowledge. Knowing which business concepts and principles have relevance to projects and to the practice of project management. For example, a business-savvy project manager knows what the weighted average cost of capital is, and how it applies to the financial justification of projects.
Business skills. Skill refers to the ability to perform. The business-savvy project manager doesn't just know about things related to business and projects—they're able to actually do things. For example, this means they would be fully competent in leading the effort to prepare a clear, concise, and comprehensive project business case document, if asked.
Business acumen. This means knowing when and how to apply business knowledge and skill to a given project situation. For example, if a risk surfaced during their project, the business-savvy project manger would analyze the risk and base their response on many beyond just technical considerations, such as financial or economic impact; strategic impact; value optimization; cost vs. benefit; and so on.
The KSA model defines the forms that business-savvy competencies can assume. The critical question, of course, is to what specific pinpoints of job content are these competencies to be applied? While this is strictly opinion, I believe the following subdivision is a healthy mix of the three key components of business-savvy competencies:
- Pure business (10%): I would suggest that about one-tenth of the business-savvy project manager's knowledge should be “non-applied.” In other words, this category would include items of knowledge that may not be directly related to projects, but may serve to provide an individual with a sound basis of understanding of the world of business. One example I can think of might be the understanding of GDP (gross domestic product).
- Your business (30%): This component is intended to describe an individual's understanding of how their organization (or company) conducts business. Depending upon the firm, this might include product and service elements such as product knowledge or service offerings. It might include business function elements such as the strategic planning process or knowledge of “shop floor” operations .Or it could include procedural elements, such as knowledge of asset transfer or billing procedures.
- Project business (60%): The bulk of the project manager's business knowledge would naturally want to fall within the domain of elements that are directly related to project work.
Being a Business-Savvy Project Manager: The Self-Development Process Perspective
From a professional development standpoint, the five steps for becoming business-savvy are (Heerkens, 2010, p. 23):
- Understand the KSA requirements. This is the most critical step because it forms the foundation. With that in mind, I've prepared a “business-savvy project management learning map.” The map lists more than 125 knowledge, skill, and acumen (KSA) pinpoints, and these can be an excellent self-development tool. Some are obvious pinpoints: (can explain different contract types [fixed price, cost-plus, etc.] and when each would be used, or can explain the “cost of quality” concept and how it relates to their project); but some may surprise you (able to define weighted average cost of capital and how it affects project approvals, or able to construct a cash flow diagram for their project). If you would like to receive a copy of the map for non-commercial use, send me an e-mail at msginc@frontiernet.net.
- Acquire the foundational knowledge. You may be pleased to learn that you can make considerable headway in addressing this step by simply surfing the internet. Many excellent sites exist that are rich with manageable doses of education on topics that are tied to the learning map mentioned in step 1. In addition, similar to the learning map offer, I'd be happy to forward my list of favorite sites to readers who request a copy via e-mail.
- Start applying business-savvy techniques on an ad hoc basis. This is where you move from planning to doing. Try out your newfound knowledge and blossoming skills. Conduct a cost-benefit analysis or prepare a business case for your next project—even if you're not asked to! This step also serves as an opportunity to educate and enlighten those around you, particularly if your organization is not currently utilizing business-centric project methods. For example, show your business case document to your client, your project sponsor, or appropriate members of your organizational management team and suggest that they begin embracing the use of such a tool.
- Seek out new opportunities for involvement. If your organization already uses tools such as business cases, project financial analyses, and portfolio ranking studies, but the project management community is not invited to participate, then ask to be formally involved. Although it is true that this is not our primary focus, there is much to be gained by our involvement in these activities (consider this another opportunity to educate and enlighten). Note that some may become defensive in response to your involvement. If so, remind them that we're here to support, not to supplant.
- Lobby for formal changes to your organization. Once you have achieved success in executing steps 1–4 of this process, consider pushing for more permanent changes within your organizational environment. One great opportunity would be to follow the lead of some organizations that have identified a new role called business project manager (others use similar titles). This role is typically defined in a way that formally incorporates a number of business-based project activities (e.g., writing business cases, collaborating on ROI analyses, or strategic planning participation) into a project management position.
Change Agent #2: A Biz-Savvy Organizational Environment
Here, the mood of this paper must shift. It's time for some “tough love,” directed primarily at today's organizational managers. By far, the most frustrating aspect of advancing the business-savvy project management movement over the past few years has been the slow speed at which organizations have been moving in developing environments that can leverage the full potential of business-savvy project management. So let us move forward with the tough love.
Memo to All of You Organizational Managers Out There: Creating an entire planet of business-savvy project managers will have limited impact unless you institute supporting changes at the organizational level!
An Anecdotal Report Card on the Status of Business-Savvy Organizational Management Today
From the standpoint of developing business-savvy organizational management, a number of serious challenges remain that need to be addressed, given today's environment. The sad reality is that a substantial number of you (i.e., today's organizational managers) are doing a very poor job of creating organizational environments wherein business-savvy project managers can practice their craft. The evidence comes—in large quantities—from the project managers who work for you. While I will freely admit that the evidence is anecdotal, it is also overwhelming in its volume and pervasiveness. Many project managers are afraid to speak up and/or take a stand in opposition to your current practices, so you are unlikely to hear from them. Here is what they tell me about your organization:
That “Gee, this seems like a good idea!” is sufficient cause for launching a project;
…and the list goes on.
A Pathway to the Future
So what can be done? Well, here are some concrete thoughts…
If you are an organizational manager, consider that you have (at the very least) three overarching mandates related to the enablement of business-savvy projects and project management. They are listed below, along with suggestions on how to address each one.
Mandate 1: Ensure that you approve only the most worthy initiatives, recognizing that your project resources are both valuable and limited.
Key Drivers:
Conduct a rigorous and unbiased financial analysis on all projects;
Do not approve projects where positive cash flow has been confirmed through analysis;
Develop a formal, rigorous business case for every project;
Incorporate risk assessment (business risk) as part of the investment decision;
Develop a portfolio categorization process that makes sense for your business;
Develop a project prioritization process based on valid, business-based criteria; and
Begin evaluating post-project benefits; use the lessons learned to improve project evaluation and selection methods.
Mandate 2: Invest in the development of your project managers’ business knowledge in a way that enables them to develop a decision-making framework, which will transcend technical and functional considerations alone.
Key Drivers:
Consider training an investment, not an expense;
Invite the project management community to participate in a variety of “higher level” organizational functions, such as strategic planning, project evaluation and selection, project financial analysis, business case preparation, and portfolio management;
Set up a formalized, comprehensive professional development program for all key project personnel; and
Set up a program of rotational assignments to give project managers broad experience across the company.
Mandate 3: Discontinue practices that are counterproductive to “good project business.”
Ensure a reasonable match between your project volume and available resources;
Do not impose artificial deadlines, unless absolutely necessary (establish end dates through excellent planning methods) ;
Do not impose unrealistic project targets (cost, schedule, quality, etc.);
Avoid the temptation to elevate unqualified people to the role of project manager;
Eliminate bias and game-playing in project selection by instituting a cross-functional project selection committee; and
Ensure that all project personnel have a solid understanding of your business and how it functions.
Conclusion
More and more attention is being given to the need to develop more business-savvy project managers. This is clearly a positive movement, as it increases the quality of project decision making and provides an opportunity for project management practitioners to contribute to critical organizational functions rather than to simply “run projects.” However, this movement is likely to have limited efficacy for organizations that do not also adopt a business-savvy approach to the treatment of projects and project managers.
