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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.

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:

If 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?

In this age of hyper attention on ROI, it's no surprise organizations are worried about sustaining value--or not sustaining it, I suppose, in the case of some organizations. According to the preliminary results of PMI's Researching the Value of Project Management, organizations that stop focusing on the value of project management can, in fact, destroy any value they ever had.
    Seems simple, right? To remain competitive, continuous improvement is necessary. Look through job descriptions related to project management and you almost always see the words "continuous improvement" in the list of duties.
    But continuous improvement doesn't just happen. Project managers get in ruts. And it's easy to just do things the way they've always been done. It takes a leader to keep things moving--and to ensure project management continues to support the organization's strategic direction.
    Because with the loss of value comes expanded scopes, extended schedules and exploding budgets. And nobody wants that.

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.

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."

The Researching the Value of Project Management study raised some serious questions about ROI. It may even cause project professionals and executives alike to re-evaluate their definition of what ROI actually is. According to the study, organizations are looking for more than just the usual "on schedule and on budget" demands from project management.

So what satisfies organizations now in terms of ROI? My theory--and granted, it's not a groundbreaking one--is that organizations now expect project management to contribute to the overall business strategy and results of the organization.

I checked in with Sheilina Somani, PMP, owner of the U.K.-based Positively Project Management consulting firm, and a PM Network columnist. And here's what she had to say:

"I'm experiencing more management commitment to meeting performance indicators and creating organizational value--such as optimizing a process, increasing efficiency, streamlining business efforts and, of course, cost saving, which in the current economic climate is critical."

But that raises another important question: How can executives get project managers to consider the overall business strategy of an organization when they launch a project? Ms. Somani had some thoughts on this as well.

"I believe this is the responsibility of the project manager. For me, working as a [project manager] for a client, I expect to have to know the business, ask questions about strategy and understand where the project fits for the organization. To have executives encourage/direct project managers to think this way--first of all make it part of the job role--an explicit responsibility to know the business, the marketplace of the organization and the corporate strategy. Thereafter, it's by asking questions of the [project manager] regarding the organizational value of the project, the perceived benefits to the organization and of the course the strategic fit."

I have interviewed countless project managers, program managers, team members and executives for PM Network, PMP Passport and other PMI publications and there was often a common theme: Good project management practices equal a single vocabulary, increased transparency, and better teamwork across cultures and time zones. So when the preliminary results of Researching the Value of Project Management were presented a couple of weeks ago at PMI's Research Conference was it really any surprise the sources interviewed said basically the exact same thing? No.

Just because these benefits are often described as "intangible," it doesn't mean they are any less important than "tangible" benefits. In fact, these intangibles are often what make the tangibles--such as on budget and on schedule--possible.

What was surprising, however, was that many companies in the study--probably even ones that have been investing in project management for long periods of time--don't track their ROI. Why not? It's not as if this is some small investment or time commitment. If an organization was investing in the latest piece of technology that promised to save money or reduce the time spent working on a single task wouldn't they track that? Wouldn't they want to know they invested wisely?