Maximizing the Impact of Your Projects

MAXIMIZING THE IMPACT OF YOUR

PROJECTSProject Management Workshop

Brandon Olson, PhD

Purpose

•Define projects and project management

•Determine business value of projects

•Conceptualize projects as part of a portfolio

•Evaluate the portfolio approach to projects

•Develop strategies to measure and assess project value

Agenda

•Project Management Overview

•Introduction to Business Value

•Selecting Projects

•Portfolio Approach

•PPM Process

•Migrating to PPM

•Application to the PM

Definitions of Project Management

•"...a complex, non-routine, one-time effort limited by time, budget, resources, and performance specifications designed to meet customer needs(Gray & Larson, 2008)

•"...a temporary endeavor undertaken to create a unique product, service, or result.“ (PMI, 2008)

UniqueTemporary

One-Time

Project Characteristics

Kerzner, 2009

PROJECT

Specific Objective withDefined Specifications

Defined Startand End Dates

Funding Limitations

Consume Human andNonhuman Resources

Multiple Disciplines

Purpose of Project Management

Project ManagementA B

Change

Project Sources

Increase Revenue(expand services)

Reduce Expenses

Directive

New product/servicesMarket ExpansionIncreased Scalability

Process ImprovementDecision Making

Government ComplianceSelf-ImposedCompetitive Standards

Why Projects?

Operational Islands

Project Management

Scope

TimeCost

ProjectManager

Project Success Rates

Successful Challenged Failed0%

10%

20%

30%

40%

50%

60%

199419961998200420092011

Gale, S. (2011). Failure rates finally drop. PM Network, 25(8), 10-11.

Sources of Project Failures

1. Project Champion

2. Process Shortcuts

3. Expectations Management

4. Variable Lock-In

5. Estimating Techniques

6. Optimism

7. Resource Assumptions

8. People Management

9. Adapting to Change

10.Insufficient Resources

Adapted from Whitten & Bentley, 2007

Project Success?

•How do you define project success?

Example – New Project

•Purpose: Deploy a new information system to manage product inventory

•Scope:•Track product inventory as it is used•Real-time inventory reporting•“Wouldn’t it be cool if we could also keep track of the different types of inventory we used”

•Budget:•1 pen/pencil, 1 sheet of paper, 1 developer

•Schedule:•45 seconds

Project Charter

•Purpose: Deploy a new information system to manage product inventory

•Goal: Reduce production time by 25%

Business Value

Agenda





•PPM Process

•Migrating to PPM


Project Value

Business Value?

•What organizational benefits are created and realized from the project?

•Operational•New or improved functionality

•Strategic•Quantifiable organizational-level benefits

Evaluating Business Value

•Return on Investment (ROI)

•Net Present Value

•Payback Analysis

Return on InvestmentImplementation Costs

Programmer $87,000.00 Return on Investment 10 yrsDatabase Specialist $21,000.00 Implementation Costs $219,000.00

System Architect $28,000.00 Operating Costs (10yrs) $520,000.00

Database Server $15,000.00 Total Costs $739,000.00Application Server $12,000.00Desktop Devices $25,000.00 Benefits (10 yrs) $1,955,500.00Project Management $31,000.00

$219,000.00Operating Costs ROI: (Total Benefits - Total Costs)

Technical Support $25,000.00 Total CostsProgrammer $16,500.00Client Licenses $6,000.00 ROI: 164.61%Training $4,500.00

$52,000.00

Annual BenefitsIncreased capacity $56,400.00Increased satisfaction $63,550.00Reduced costs $75,600.00

$195,550.00

Net Present ValueYear 0 Year 1 Year 2 Year 3 Year 4 Year 5 Total

Implementation -$219,000.00

Operations -$52,000.00 -$52,000.00 -$52,000.00 -$52,000.00 -$52,000.00

Discout Factor (12%) 1.000 0.893 0.797 0.712 0.636 0.567

Present Value -$219,000.00 -$46,428.57 -$41,454.08 -$37,012.57 -$33,046.94 -$29,506.20

5 Year Costs -$406,448.36

Annual Benefits $195,550.00 $195,550.00 $195,550.00 $195,550.00 $195,550.00 $195,550.00

Discout Factor (12%) 1.000 0.893 0.797 0.712 0.636 0.567

Present Value $195,550.00 $174,598.21 $155,891.26 $139,188.63 $124,275.56 $110,960.32

5 Year Benefits $900,463.99

Net Present Value $494,015.62

PVn = 1/(1+i)n

PVn = 1/(1+.12)n 1 0.892857143 0.79719388 0.71178025 0.63551808 0.56742686

Payback AnalysisYear 0 Year 1 Year 2 Year 3 Year 4 Year 5

Implementation -$219,000.00Operations -$52,000.00 -$52,000.00 -$52,000.00 -$52,000.00 -$52,000.00Discout Factor (12%) 1.000 0.893 0.797 0.712 0.636 0.567Present Value -$219,000.00 -$46,428.57 -$41,454.08 -$37,012.57 -$33,046.94 -$29,506.20Cumuliative Costs -$219,000.00 -$265,428.57 -$306,882.65 -$343,895.23 -$376,942.17 -$406,448.36

Annual Benefits $195,550.00 $195,550.00 $195,550.00 $195,550.00 $195,550.00 $195,550.00Discout Factor (12%) 1.000 0.893 0.797 0.712 0.636 0.567Present Value $195,550.00 $174,598.21 $155,891.26 $139,188.63 $124,275.56 $110,960.32Cumulative Benefits $195,550.00 $370,148.21 $526,039.48 $665,228.10 $789,503.66 $900,463.99

0 1 2 3 4 5Cumulative Profit -$23,450.00 $104,719.64 $219,156.82 $321,332.88 $412,561.50 $494,015.62

Net Present ValuePVn = 1/(1+.12)n 1 0.892857143 0.797193878 0.711780248 0.635518078 0.567426856

rise/run $103,493.12m = $103,493.12b = -23,450.00Y = 0

Y = mX + bx 0.23years

Evaluating Business Value

•Alignment with Business Strategy

Objective

Objective

Objective

Objective

Business Value

Benefits Alignment Value

Agenda





•PPM Process

•Migrating to PPM


ProjectV

Project Selection:Resource Limitations

ProjectW

ProjectN

ProjectR Project

S

ProjectY

Productivity

TimeFunds

Personnel

Project Selection:Common Practices•Political Influence

•Squeaky Wheel

•FIFO

•LIFO

•Financial Attributes(ROI/NPV/Payback)

Agenda





•PPM Process

•Migrating to PPM


Challenging Project Environment

PM

PM

PM

PM

PM

PM

PM

PM

PMPM

PM

PM

PM

PM

PM

PM

Portfolio ApproachProject Portfolio

Operational Scope Strategic Scope

Governance Governance

Schedule Business Value

Budget Portfolio / Project Risk

Functionality Schedule & Budget

Project Risk Functionality

Distributed Management Centralized Management

Project Portfolio Management

•Goal:•Determine and deliver the mix of potential projects that will result in the best utilization of human and cash resources and maximize long-range growth and return on investment for the firm.

Levine, 2005

AB

Y

S

AH

JW

B

Align = 9

Value = 8

Align = 3

Value = 10

Project B

Project Governance

Project I

Project M

Project R

Project X

Project T

Project L

Project Q

Project P

Project Y

Project D

Project A

Project N

Project J

PMO

Project Portfolio Governance

Executive ManagementPortfolio

Project Y

Program

Project R

Project X

Project C

Project G

Portfolio

Program

Project A

Project Q

Project H

Project J

Program

Project K

Project B

Project S

2 Phases of PPMPortfolio Selection

• Propose Projects• Align Projects• Evaluate Projects• Identify Risks/Value• Rank Projects• Select Projects

ProjectPipeline

Portfolio Maintenance

• Project Objectives• Portfolio Objectives• Forecast Impacts• Reevaluate Projects

• Value• Performance

• Determine Funding• Cancel• Continue

Agenda





•PPM Process

•Migrating to PPM


PPM Process

Align Value Distribute Risk Select Monitor

Strategic Alignment

Organization Strategy and Objectives

Operations Planning Strategic Planning

Initiatives

Project Portfolio

Operational Resources

PMI, 2008b


What is Value?

•Return on Investment (ROI)

Estimated Lifetime Benefits – Estimated Lifetime Costs

Estimated Lifetime Costs

Example: $310,000 - $160,000

$160,000= 0.94 = 94%


Project Selection18%

46%

25%

11%

Infor-ma-tionalInfra-structure

Common IT Portfolio

CostAgilityMIT Sloan Center, 2007

InnovationIntegration


Risk EvaluationPrimar

y Fundin

g

Selective

Funding

Selective

Funding

Not Funded

RISK

VA

LU

E

Financial Measure

RiskMeasure


Quasi-Quantitative Risk Evaluation

Scale Value Probability Value Schedule Cost

Very

High

1.0 90% - 100% > 10% > 10% > 10%

High 0.7 70% - 90% 5% - 10% 5% - 10% 5% - 10%

Medium 0.5 50% - 70% 2% - 5% 2% - 5% 2% - 5%

Low 0.3 30% - 50% 1% - 2% 1% - 2% 1% - 2%

Very

Low

0.1 10% - 30% 0% - 1% 0% - 1% 0% - 1% Risk

Levels

Very Low Low Medium High Very High

Very Low .01 .03 .05 .07 .10

Low .03 .09 .15 .21 .30

Medium .05 .15 .25 .35 .50

High .07 .21 .35 .49 .70

Very High .10 .30 .50 .70 1.00

Probability

Risk

Impact Score =Average (Value, Schedule, Cost)

Adapted from Brewer & Dittman, 2010 and Lovelady &Anderson, 2006

Probability Score = Probability

Risk Score = Impact X Probability

or color


Project Selection

Primary

Funding

Selective

Funding

Selective

Funding

Not Funded

RISK

VA

LU

E

18%

46%

25%

11%


Project Evaluation•Alignment

•Value

•Distribution

•Risk Assessment

•Balance Resources ($ and people)

•Intangible Benefits

Consistency


Monitor Portfolio

Project

Project

Project

Project

Program

Program

Distribution Risk

Alignment Value


Agenda





•PPM Process

•Migrating to PPM


Steps to PPM

Define Portfolio

Gather Projects

Begin Weeding

Begin Evaluati

ng

The PPM Starter Kit, ganntthead.com

Tips for PPM

1. Start at the Top

2. Avoid the Big Bang

3. Develop a Governance Process

4. Use a Proven PPM Tool

5. Forgive Human Errors but not Process Errors

6. Use the Tool in your

Operations Reviews

7. Use Executive Dashboards

8. Be Open to Project Failures

9. Anticipate Business Opportunities & Constraints

10.Remember Who the Boss is ganntthead.com

Key Drivers of PPM

•78% - Senior Management Receptivity

•66% - Competent Portfolio Governance

•62% - Standardized Metrics and Criteria

•59% - Consistency & Logic of Objectives

•58% - Mature Project Management Office

PM Network Survey, 2012

Formalized PM & PPM Practices

• Organizations with stable PPM practices see 64% of projects meet targeted ROI (17% more than highly variable PPM practices)

• Formalization at both the project and portfolio levels results in higher performance than formalization at just one level

• Formalization provides transparency that leads to improved allocation of resources and an overall cooperation between projects

PM Network Survey, 2012 & Teller, Unger, Kock & Gemunden, 2012

64%

Why PPM?

Improved Prod. Dev. Costs

Improved ROI

Revenue Growth

Cost Reduction

Customer Satisfaction

0% 10% 20% 30% 40% 50% 60% 70% 80%

40%

45%

58%

59%

73%

PM Network Survey, 2012

Agenda





•PPM Process

•Migrating to PPM


What does this mean to me?

PPM

MyProject

Business Strategies

What does this mean to me?

PPM

MyProject

ProjectJ

ProjectC

ProjectQ

ProjectX

ProjectP

ProjectN

MyProject

ProjectG

Value

Functionality BudgetSchedule

Business Strategies

Ensuring Value

•Develop a Project Value Chain(Think Critical Path)

•Include Value in Risk Management Strategy•Evaluate Value Performance Frequently•Target Metric for Change Management

Suggested Readings

July, 2012Volume 30

Issue 5

References• Brewer, J. L., & Dittman, K. C. (2010). Methods of IT project management. Boston, MA: Prentice

Hall.

• Gale, S. (2011). Failure rates finally drop. PM Network, 25(8), 10-11.

• Gray, C.F., & Larson, E.W. (2008). Project management: The managerial process (4th ed.). Boston, MA: McGraw Hill.

• Lovelady, R., & Anderson, A. (2006). Psst: Want to take a risk? In G. Richardson & C. Butler (Eds.), Readings in information technology project management (pp. 166-171). Boston, MA: Thomson/Course Technology.

• Pearlson, K.E. & Saunders, C.S. (2010). Managing and using information systems: A strategic approach (4th ed.). Hoboken, NJ: Wiley.

• Project Management Institute (2008). A guide to the project management body of knowledge (4th ed.). Newtown Square: PA: Author.

• Project Management Institute (2012). The power of portfolio management. PM Network, 26(6), 14-15.

• Teller, J., Unger, B.N., Kock, A., & Gemunden, H.G. (2012). Formalization of project portfolio management: The moderating role of project portfolio complexity. The International Journal of Project Management, 30(5), 596-607. doi:10.1016/j.ijproman.2012.01.020.

• Whitten, J.L., & Bentley, L.D. (2007). Systems analysis and design methods (7th ed.). Boston, MA: McGrawHill /Irwin.

Posted Presentations

•My Presentations•http://faculty.css.edu/bolson1/presentations.html

•Topic 1: The Value of Project Management•http://faculty.css.edu/bolson1/presentations/ValueofPM.pdf

•Topic 2: 10 Ways to Increase Your Project’s Success•http://faculty.css.edu/bolson1/presentations/ProjectSuccess.pdf•http://faculty.css.edu/bolson1/presentations/ProjectSuccess2.pdf

•Topic 3: Maximizing the Impact of Your Projects•http://faculty.css.edu/bolson1/presentations/ProjectImpact.pdf

Maximizing the Impact of Your Projects

Business

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