Creating executive value awareness

Overview

There are three prominent practices usually found in a business organization: technical management, business management, and project management. Often, project management has been viewed as a representation of technical management, and this is accurate when the fundamentals of project management are applied to deploy the technical competencies of the organization. However, as the broader discipline of project management is considered, project management also serves well as the interface between technical management and business management, as is demonstrated through functions of the project management office and processes of portfolio management. When it can be shown that project management practices serve the business needs and interests of the organization, the value of project management is elevated at the executive level and throughout the organization. This paper will argue the premise that project management is business management—as much if not more than it is technical management.

Three perspectives that organizations can examine to create executive value awareness and organizational support for project management are presented below.

The Executive Frame of Reference

The executive frame of reference is concerned with achieving strategic business objectives. The link between project and business management converges in the domain of business performance, and has bearing on four universal business goals that warrant executive attention:

  • Revenue generation
  • Operational efficiency
  • Customer satisfaction
  • New product development

Executives need to understand how project management can be used to assist them in achieving business goals, and how it can be applied to ongoing business performance management.

Revenue Generation

When executives have interest in the revenue generation element of business performance, and projects (by any name) are the means by which that revenue is generated, it naturally follows that they would have a keen interest in monitoring project performance from a business perspective. Executives need to know which types of projects are major revenue generators, what is the incurred cost or investment impact on profit for various types of projects, how well are current projects fulfilling business revenue objectives, and how well will future projects perform. This strategic information is readily available in organizations that have implemented effective practices in modern project management.

Operational Efficiency

When executives have interest in the operational efficiency element of business performance, they should endorse a consistent approach to product and service delivery, which is often characterized by deployment of an effective project management methodology. They would rely on this methodology to provide a business advantage that reduces cycle time, decreases need for project and technical rework, and produces reliable business performance forecasts. Executives can even develop a personal advantage by learning and applying the concepts of modern project management in their day-to-day business deliberation and decision-making.

Customer Satisfaction

When executives have interest in the customer satisfaction element of business performance, they should examine use of project management activities to manage customer satisfaction, and also to oversee the broader customer business relationships. Customer satisfaction is a business indicator that represents the ability to attract customers, expand the customer base, and achieve repeat customer business. Effective project management processes, particularly those integrated with business processes, can contribute to customer satisfaction through prescriptions for customer involvement in project planning, meticulous steps for scope management and customer acceptance of deliverables, and the ongoing activities that manage customer issues and receive crucial customer feedback.

New Product Development

When executives have interest in the new product development element of business performance, they are looking to distinguish their organization in the marketplace, and they should review how project management could provide a competitive edge. As issues such as time-to-market, product development and maintenance costs, and product performance and quality are considered in the course of business, project management processes and practices should become discussion points for executives since new product development relies heavily on project performance results produced by current project management capability. Executives and senior managers need to know how project management capability contributes to success in new product development and in the marketplace.

Project Management Capability Indicators

Project management trends and indicators provide a means to examine project management capabilities across companies and across industries. It allows executives and senior managers to learn about how project management tools and practices are being used to support business performance. In this abbreviated paper, the following are considered:

  • Industry project management practice trends
  • Business environment indicators in the organization
  • Project management environment indicators in the organization

Executives should routinely review project management trends and indicators for relevance to business performance. Senior managers and staff in the project management environment should track such trends and indicators, and compile them for executive level review and consideration.

Industry Project Management Practice Trends

Research studies and surveys are conducted within and across industries, and provide insight to project management practice trends. From the results of industry studies, executives can ascertain the direction a particular industry is taking in applying project management as a business solution; and they can likewise see where competitors are heading in efforts to use project management to gain strategic advantage in the marketplace. An understanding and appreciation for what initiatives the surrounding business community is pursuing does not inherently guarantee executive value awareness for project management, but it does serve to prompt consideration of what is possible through implementation of modern project management practices in alignment with current business efforts.

A prominent result of trend examination is the added awareness of the extent to which project management-based business solutions are already being applied to improve, enhance, or simply complement business performance. Trend examinations can consider reviews of surveys and analyses from sources such as:

  • The Standish Group—Chaos Study (and updates)
  • Gartner—Studies and analyses with an IT focus
  • META Group—A variety of studies and analyses
  • KPMG—project office surveys and analyses
  • PriceWaterhouseCoopers—project management surveys and analyses

Other sources for trends include some project management product and service vendors and other smaller research groups who regularly perform surveys relative to their vested product and service interests, or relative to specific industries. As well, routinely scan published articles and reports that cite research and survey findings in support of particular trends.

Just as important, examine what researchers and writers are finding out or inferring about project management practices across organizations. While trend analyses may not necessarily identify best practices, they do identify prevalent practices (or lack thereof), and usually provide some indication of the business benefits derived from adoption of specific practices.

Business Environment Indicators in the Organization

Reviews of business management indicators in the project management environment can help identify conditions in the organization that warrant executive level attention. This can be a simple review of several key indicators, or a more formal review of business capability. The results are compiled and presented for examination by executives and senior managers, who will presumably recognize the business impacts of the findings—in terms of revenue generation, operational efficiency, customer satisfaction and new product development.

In some organizations it will be found that project management is treated as a technical solution rather than a business solution, and therefore may not thus far warrant examination at the executive level. When the business impacts of project management become more discernable within the organization, more attention will be given to project management performance in the business environment. In turn, this should elicit sufficient executive awareness to recognize that the use of project management as a business solution requires special competencies and capabilities that expands upon its previous relevance as a technical solution. In fact, with new awareness and support at the executive and senior management levels in the organization, project management can become the viable interfacing process between business management and technical management that is needed in most organizations.

A primary consideration in this examination of indicators is to reveal how well current business practices and business managers support project management activities, and to identify what benefits could be achieved through better alignment of business objectives and project management processes and practices. In particular, the organization reviews the relationship between project management performance and business performance, and determines how well project efforts are aligned with strategic business objectives and interests. This prompts reiteration of the earlier assertion that if it can be shown that project management performance contributes to the effectiveness of business performance, it will inherently increase executive value awareness.

Project Management Environment Indicators in the Organization

Ideally, project management practices are integrated with business practices, but that usually requires some advanced level of project management maturity in the organization. The road to project management maturity begins with establishing project management capabilities in areas that are most vital to the organization's business success—processes, practices and tools that will promote if not ensure project success. In turn, the foundation for successful project performance rests on the skills and competency of project managers, project team members, and, project executives who are charged with effectively managing the project effort. Finally, the organizational culture and management must create and demonstrate vested interest in the pursuit of professional project management as a core competency of the organization, and not as a sideline to routine business activities. Creating executive value awareness involves demonstrating the business benefits of a professional project management environment.

The fundamental inquiry here is one that asks what does the project management environment of this organization look like, and further examines the extent to which that depiction serves this organization's business interests. An organization that has (or claims to have) project management as a core competency should also have a clear depiction of its professional project management environment. This alludes to professionalism in the competency of its people, the capability of its processes and tools, and the maturity of the organization to conduct project management oversight, control and support in an effective and efficient manner.

A starting place for examining indicators is conducting a project management capability or maturity assessment. The less mature organization can probably do this by simply looking around the project management environment and identifying strengths and weaknesses in capability. The improving organization will likely want to document assessment findings by performing a more formal capability or maturity assessment. To that end, it is important to distinguish the difference in an assessment of project management capability/maturity and one of technical management capability/maturity. Technical management capability will ensure that the technical product or service is good; project management capability will ensure successful project performance that supports business interests and objectives. The more formal and documented assessment provides a mechanism to convey findings to executives and senior management for their increased value awareness.

Project Management and Business Practice Integration

Executives, directly or indirectly, should monitor and approve the ongoing project work that is pursued within the organization, and validate it as being consistent with strategic business objectives and interests. This includes actions to convey business strategies, policies and decisions to the project management environment for implementation. It also includes actions to receive and interpret information and indicators of project performance that have bearing on business pursuits.

There are three prominent organizational capabilities that can enable project management practices to add value to business performance:

  • Project management methodology deployment
  • Project management office (PMO) implementation
  • Project portfolio management

Executives should recognize that refining these capabilities in the project management environment and integrating them with business practices would provide opportunities for improved business performance. The following presents a few ways in which that value can be demonstrated to draw executive attention.

Project Management Methodology Deployment

Project management methodologies are deployed to assist organizations achieve strategic business objectives. The methodology selected for use can be as simple or as rigorous as is necessary to achieve project success and to conduct business effectively.

A project management methodology provides the standard, repeatable process needed to guide project performance from concept to completion. It introduces and applies generally accepted project management techniques and practices that fit within the culture and business needs of the organization. It includes identification of the roles and responsibilities associated with each process step, as well as specification of the input and output for the desired sequence of project management events. A project management methodology conveys to project managers and project team members what to do and how to do it. It also helps other project stakeholders, including executives, understand project management processes and project status. The organization can begin this deployment effort by introducing a simple series of key project management processes. It should ultimately aim for a complete and comprehensive process that specifies all essential project management activities that are performed throughout the entire project management life cycle.

In general, the business benefits to be derived from methodology deployment are dependent on the effectiveness of deployment and extent of use, among other things. Some of the more prominent results of methodology deployment can include:

Establishes a standard approach to the practice of project management—

  • Use of consistent, repeatable processes and documentation
  • Reduction of “reinvention” of project management tools and techniques
  • Access to shared project management history, experience and best practices
  • Ensured accomplishment of critical project management actions
  • Creation of a common frame of reference among project team members
  • Creation of a common understanding of project responsibilities in the organization

Provides a common communication and reporting mechanism—

  • Establishes standard project management terminology
  • Enables consistent information processing across all projects
  • Facilitates roll-up (summarization/aggregation) of project reporting to the executive level
  • Incorporates concepts for effective project team interaction and client relationships

Improves project management practices and project success—

  • Increased customer satisfaction
  • Conformance to requirements and objectives
  • Ability to meet schedules
  • Effective cost control
  • Shortened development and implementation cycles
  • More predictable performance
  • Increased profitability/reduced cost
  • Better resource planning, allocation, and monitoring
  • Use of tools that provide a “competitive edge

Contributes to business success—

  • Quicker realization of profit or payback on investment
  • Quicker availability to market or for internal implementation
  • Clearer business case evaluation and ongoing, timely business case validation
  • Better, more knowledgeable business decisions

Project Management Office (PMO) Implementation

The PMO provides a more formal interface between the business and project management environments. As needed, it will also bridge technical processes. It holds responsibility for oversight, support, and control of project management practices and project performance. It serves as the central “clearinghouse” that can represent executive interests in the project management environment. In turn, it also represents project manager interests to business managers, governance and control boards, and executives and senior management.

There is no single PMO solution applicable to all organizations and industries. Therefore, an organization can structure the PMO and develop its functionality according to the business, technical, and project management benefits it desires to achieve. The following are a few representative PMO capabilities that could prompt executive consideration of PMO implementation:

  • Tracking, analyzing and reporting aggregate project performance across the organization
  • Establishing standard practices and tools in the project management environment
  • Developing and implementing practices that integrate business and technical processes
  • Collaborating customer and vendor participation in the project management environment
  • Overseeing the recruitment, training, certification, and assignment of project professionals
  • Managing the project portfolio management system
  • Collaborating cross business unit participation in project activities
  • Providing technical expertise for project team development and project planning
  • Conducting project and program audits and performance reviews
  • Leading organizational project management capability and maturity assessments

The ability to deliver these types of solutions necessitates that the PMO be staffed and managed by the most qualified and experienced project professionals in the organization.

Project Portfolio Management

An organization's project portfolio is the collection of all projects under the purview of the senior managers of that designated organization. The project portfolio identifies all of the organization's current and pending projects, and allows each project to be viewed and examined individually and relative to all other projects in the portfolio collection.

Project portfolio management is inherently a responsibility of executive and senior managers. Establishing a project portfolio management capability enables the PMO (or other senior management group) to facilitate executive and senior manager involvement in project oversight. An effective project portfolio management system allows management and coordination of ongoing executive and senior manager guidance and participation in processes, deliberations and business decisions related to:

  • Alignment of projects to business strategy
  • Examination of business and project risks
  • Approval of the project “business plan” and funding
  • Allocation of organization resources for project work
  • Prioritization of projects in the portfolio collection
  • Review of ongoing project and portfolio performance

Project information that is generated simply from management's perception of the project and not from factual data is often just speculation and conjecture. Rather, project information needs to be generated at the project team level, tracked at the project manager level, compiled across all projects and analyzed ideally at PMO level, and then presented for executive review and deliberation in conjunction with specific project portfolio management activities. Project portfolio management is a business solution that adapts project information for use by executives, and facilitates timely and accurate business decisions.

Similarly, executives need to have an ongoing awareness of project resource utilization, which is likely the largest expense in the project management environment. They need to ensure that necessary resources are available to conduct each project that is selected in conjunction with the prescribed business strategy, and they need to understand the implications and impacts of their resource allocation decisions. The processes created for resource management on projects can well serve the business needs of the organization by ensuring executives are distinctly involved at key decision points—i.e., project selection, prioritization, and continuation or termination. These decision points, of course, are associated with project portfolio management.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2004, Gerard M. Hill, ESI International
Originally published as a part of 2004 PMI Global Congress Proceedings—Anaheim, California

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