Eye on the prize
THE BUSINESS of Projects
BY GARY R. HEERKENS, MBA, CBM, PMP, CONTRIBUTING EDITOR
My current efforts—a training class called The Project Management MBA, and this column—focus almost exclusively on the periods of time before projects are approved and after they've been delivered. This addresses two critical aspects of project business: ensuring that only worthy projects are approved and guaranteeing that organizations leverage completed projects in ways that optimize their return on investment. But what about during the project?
Luckily, in his book Managing Projects as Investments, author Stephen Devaux makes solid points about what can be done to maximize ROI during project execution, and it reveals a large void in my perspective on the business of projects. The book describes how project managers often start with a simplistic directive like, “Provide X product on Y date at Z cost”—and nothing more. The factors driving project value are not shared with the project team, rendering teams incapable of generating ideas on how to optimize those factors during project execution. A critical opportunity is lost.
Mr. Devaux mentions how cost targets are typically handed down in an absolute, stringent way. He correctly points out that few project managers would be inclined to recommend an increase in project spending, even if that overspend might return many times that amount to the customer or management sponsor. He doesn't blame project managers for this, as they are simply avoiding the management punishment that could result from the suggestion of overspending. Sadly, this example of counterproductive project oversight is quite common.
One of the most insightful points that Mr. Devaux makes is tied to the adage, “time is money.” I totally understand that when a project is late, this delays cashing in on the benefits, which negatively impacts long-term project profitability. But what I haven't given sufficient thought to—and Mr. Devaux uses this as the basis for many excellent tips and techniques—is how that adage can work in reverse. Delivering a project ahead of schedule can often increase project profitability. This triggers an important question: Shouldn't schedule acceleration be analyzed from this cost vs. benefit perspective? But this question is rarely asked in firms today.
Mr. Devaux combines a cost vs. benefit mentality with resource management. Again, he describes how management behavior often flies in the face of sound project business. This time, the subject is the principle of sunk cost and late-stage management of projects. To paraphrase Mr. Devaux, as projects near completion, less and less needs to be spent in order to pocket financial return. While some might suggest that projects nearing completion should have top priority for resources, the opposite is often the case. Managers begin focusing on non-project, personal metrics, such as resource utilization rates, and key resources are diverted to other “busier” initiatives.
Mr. Devaux's strong points from his book clearly show that there is a wide variety of ways that sound, business-based decision-making can be brought to bear on the way we manage project implementations. One of many insightful passages that truly captures the spirit of the book is this: Even though their final value might not be revealed for a long time after the initial investment is made, projects always should be managed in such a way as to maximize their expected return. PM
Gary R. Heerkens, MBA, CBM, PMP, president of Management Solutions Group Inc., is a consultant, trainer, speaker and author with 25 years of project management experience. His latest book is The Business-Savvy Project Manager.
PM NETWORK JUNE 2015 WWW.PMI.ORG