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Finding a Project's Intangible ROI

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If you're new to project management, you might be surprised to learn that some projects -- maybe some of yours -- do not generate any actual profits.

That can make it difficult to demonstrate how talented you are as project manager and how great your project delivery team is. So, how can you show you've created value if you cannot show revenue or profits as a direct result of your project?

Look at ROI in a different light. Instead of using profits as a benchmark, consider intangible benefits, such as cost-savings that will result from the project, or a positive swing in public relations or team dynamics

My team and I were working on a project that involved automating a conference room. A user could walk into the room, push a single button and the automation would do the rest. The project didn't generate any profit, but the feedback from stakeholders was 100 percent positive: My team had created an environment that worked as advertised and made users' work lives easier and less frustrating. And that translated to a huge upswing in stakeholder influence.

When we needed buy-in on the next project, the stakeholders were more than happy to offer support. They even understood if the project would affect them negatively (i.e. space being unavailable for use during project, or a feature being disabled for a short time). It may be hard to say that stakeholders' good graces (for example) increased by exactly 42 percent, but it's very obvious when your ability to influence them has increased. Things seem to just run more smoothly.

Have your projects generated intangible ROI? How have your project teams benefited from it?

PMBOK® Guide for the Trenches, Part 6: Quality

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We hear a lot about how quality can make a project management world full of butterflies and rainbows. But I have a bone to pick with quality.

C.F. Martin has making guitars since 1833. The company's quality is legendary -- and so is its price.

It was Martin that developed the Dreadnought body style, so called because its size was increased dramatically to boost volume and bass response. The resulting models, the D-18 and D-28, became the standard by which all other acoustic guitars are measured.

Sir Paul McCartney played a D-28 at his recent White House performance. Elvis Presley started off with a D-18 and moved up to the D-28 as soon as he could afford to. And from the time I started playing acoustic guitar, I wanted one.

I finally scraped together enough for a D-28, and my obsession started before I even left the store.

The custom cases are so precisely made that you can't leave the strap on the guitar. So, I bought a quick-disconnect device for it.

Then, my salesman informed me that Martin's lifetime guarantee doesn't cover cracks for guitars because of low humidity. In my home state of New Mexico, that's a problem. So, I bought an advanced humidifier and after-market insurance.

And, of course, I needed new strings. (One does not put medium-grade strings on a D-28.)

The beginning of my enslavement to this highest of high-quality musical instruments had begun.

The first time I used it in public, I was aware of a certain sense of dread. I realized that I was walking around with US$2,300 worth of fragile wood strapped to my torso. Microphone booms, chairs and other instruments loomed dangerously close by. My proximity bubble -- that area around your person where you're not comfortable with others -- had just grown significantly.

In past writings I've been a tad harsh on the quality fanatics, primarily because they can (and often do) place project managers in a position of being vulnerable to cost and schedule variances should high standards prove elusive. Those project managers should take heart: The ultimate consumers of your projects are held hostage to these same high standards, as I have come to realize.

I tried playing my other guitars, but it's too late. I have been spoiled. I have also reached the conclusion that quality has a distinct downside.

Practitioners Versus Accountants on Earned Value

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Most of my regular readers know I like to take accountants to task for pretending to be able to deliver cost performance or estimate-at-completion information to decision-makers based on generally accepted accounting principles. But that door swings both ways: Earned value practitioners are also guilty of trying to further their technical agenda using the resource managers' arguments and analysis, which, in my opinion, is profoundly flawed.

The most prominent of these tactics is to try to justify the cost--or even the existence--of the project management office by running some sort of ROI analysis. This is simply illogical if for no other reason than the ROI calculation pertains to assets, not capabilities.

Less notorious but every bit as pernicious is the tendency of earned value practitioners and accountants to compare the time-phased budget's basis of estimate document with its associated actual costs at the line-item level.

In the earned value world, comparing budgets to actuals is worse than useless: It's actually misleading.

And yet, some practitioners seem to think that if such an analysis were simply done at a very detailed level, it would suddenly become relevant. It doesn't.

Oh, they may try to make some lame argument about the need to benchmark the estimators' work, but this assertion lacks validity that can be demonstrated in the following scenario:

A US$100,000 task is estimated to require US$25,000 in heavy equipment and US$75,000 in labor. At task end, US$74,000 was spent in heavy equipment and US$25,000 was spent in labor. An earned value management system correctly--would not raise the red flag for cost performance, but the system that compares budgets to actuals would erroneously report a severe problem--never mind that the task came in under budget.

Any management information system that reports a phantom cost performance problem isn't good for very much.

Next up:  The absurdity of maintaining milestone lists in lieu of real schedules.

From Triple Constraint to Value

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When I started in project management many years ago the only measures we had for success were cost, time and quality--the famous (or infamous) triple constraint. Nobody was talking about scope or earned value.

Many variations of this triangle exist and today its basic concept is getting more and more muddled.

In the early 1990s, the concept of scope started to become more and more important and was seen as the area of the triangle, again varying against cost, time and quality. And value was still very much focused on quality. Good value was when the highest quality was achieved for the least expenditure of resources.

Today, stakeholder satisfaction, which can include quality, but also scope and other issues have replaced the concept of quality.

In project management, value could be represented as scope and quality (satisfaction) on one side of the scale and cost and time (resources) on the other side: the more scope and quality for the least cost and time yielding the most value.

Although this is an interesting concept, it is usually not the project manager's role to define these elements. They are usually imposed as parameters in the project charter.

It is the role of the sponsor to define the value that the project will generate by setting the scope and quality that will satisfy the stakeholders and define the cost and time that will be acceptable and achievable.

There is a simple equation that can be represented graphically to represent this:

value image.pngIf offered benefits are greater or equal than expected benefits, satisfaction is achieved. If available resources are greater or equal than required resources, value can be realized.

Typically projects are measured against their capability to fulfill strategic objectives and business benefits, including increased operational capabilities.

Estimated resources (time, cost and human resources) are measured against resources available at the time the project is scheduled to take place. If both ratios are positive, then value will be achieved. If many projects are competing against each other, those that provide the highest benefits to resource ratio will be chosen.

But is this truly the norm? Is this how things work at your organization?

Everyday Value

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I've been covering project management for nearly three years now. I've learned many things about scope creep and schedules and budgets. I know intimate details of some of the world's most extravagant projects (usually in Dubai, United Arab Emirates) as well as some of more mundane ones--both types equally important to their stakeholders, of course.

What I've also come to learn is the ways project management can be implemented into everyday life. Whether it's planning a party or publishing a magazine, life sure can be made easier with a project plan.

Here at PM Network, our project manager has the title of managing editor. He builds and monitors the schedules, prioritizes work and makes sure all members of the team are communicating any problems that may delay our final delivery. It's a role that takes patience, for sure, because in the world of publishing something inevitably always comes up.

You don't always have to have the title "project manager" to use project management to deliver value.

The New ROI, continued ...

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Roger Chou, Kaohsiung City, Taiwan-based CEO of Advanced Business Consulting, a PMI Registered Education Provider (R.E.P.), recently weighed in on project ROI and the project manager role in strategic direction:

"If executives want project managers to think about the organization's strategic direction, the best way is to include them in the discussion of long-term strategy planning and in the relevant processes that help form a consensus. Constant discussion between executives and project managers on how to achieve the organization's long-term objectives allows project managers to propose feasible solutions, projects or programs that addresses, and is beneficial to, the organization's strategic direction, forming a top-down mutual understanding."

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