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THE IMPORTANCE AND VALUE OF PROJECT MANAGEMENT

THE IMPORTANCE AND VALUE OF PROJECT MANAGEMENT. For Enterprises and Institutions Bogotá, 12/5-6/03. Russell D. Archibald Fellow, PMI & APM/IPMA, PMP, MSc. Presentation Outline. Project Management in Industry and Government Advantages and Importance of Modern Project Management

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THE IMPORTANCE AND VALUE OF PROJECT MANAGEMENT

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  1. THE IMPORTANCE AND VALUE OF PROJECT MANAGEMENT For Enterprises and Institutions Bogotá, 12/5-6/03 Russell D. Archibald Fellow, PMI & APM/IPMA, PMP, MSc PM Conference, Escuela Colombiana de Ingeniería

  2. Presentation Outline • Project Management in Industry and Government • Advantages and Importance of Modern Project Management • Cost versus Value of Project Management • Requirements to Achieve the Benefits • Is PM a Profession? PM in the Next 5 Years • Conclusions PM Conference, Escuela Colombiana de Ingeniería

  3. 1. PM in Industry & Government Projects • Exist in all organizations • Are vehicles for strategic growth • Produce a wide variety of results: • New products, systems, and services • New facilities (buildings, plants, hospitals, other) • New organizations, events, & other PM Conference, Escuela Colombiana de Ingeniería

  4. Project Characteristics • Start and end points • Complex effort, many diverse tasks • Produce specified results within an established schedule and budget • Require the efforts of diverse specialists • Demand modern project management practices for successful execution PM Conference, Escuela Colombiana de Ingeniería

  5. A Project is a Process • The difference between a project and its product • A project is the process of creating a new end result: the product • Principles of project management apply to all categories of projects • Major differences exist in their life cycle models and detailed management methods PM Conference, Escuela Colombiana de Ingeniería

  6. Why Such Rapid Spread of PM? Current wide understanding that • Projects exist in all human organizations • Great benefits are derived from applying modern project management: • Systematically conceiving, selecting, defining, planning, authorizing and executing projects • Linking strategic growth to projects through project portfolio management PM Conference, Escuela Colombiana de Ingeniería

  7. Rapid Spread of Project Management • PMI: • 1990: 8,500 members, mostly in U.S.A. • 2003: 115,000 members in 39 countries • Others: • IPMA: 30 national PM associations • Numerous other engineering & professional associations around the world PM Conference, Escuela Colombiana de Ingeniería

  8. Aerospace/Defense Automation Automotive E-business Environmental Financial Services Government Healthcare Hospitality Events Information Systems Info Tech’n’gy/Telecom Int’n’l Development Manufacturing New Product Develop. Oil/Gas/Petrochemical Pharmaceutical Retail Service & Outsourcing Utility Industry Plus 4 others Diversity of Projects: 23 PMI Specific Interest Groups/SIGS PM Conference, Escuela Colombiana de Ingeniería

  9. Aerospace/Defense Business & Organizational Change Projects Communication Systems Projects Event Projects Facilities Projects Information Systems International Development Media & Entertainment Product/Service Development Research & Dev. Recommended Major Categories PM Conference, Escuela Colombiana de Ingeniería

  10. Sub-Categories Are Required One example: • Business & Organization Change Projects: • Acquisition/merger • Management process improvement • New business venture • Organization re-structuring • Legal proceeding • Other: ? PM Conference, Escuela Colombiana de Ingeniería

  11. Example:Category 5. Facilities Projects Subcategories: • Facility decommissioning • Facility demolition • Facility maintenance & modification • Facility design/procure/construct1.Civil 2.Energy 3.Environmental 4.Industrial 5.Commercial 6.Residential 7.Ships 8.Other: • Other: ? PM Conference, Escuela Colombiana de Ingeniería

  12. Current Global Survey Will Test This Approach • Global survey of project categories & life cycles in progress • Please go to: http://ipmaglobalsurvey.com • Download 11 page paper (Spanish & English) and complete the online survey prior to Dec. 30 • Results will be reported to respondents PM Conference, Escuela Colombiana de Ingeniería

  13. Effective Project Management is Important to All Organizations Failures in project selection, risk analysis, & conceptual planning: • Expenditure of scarce resources on projects doomed to failure • Exposure to unacceptable financial, technological, and competitive risks PM Conference, Escuela Colombiana de Ingeniería

  14. Failures in Project Planning & Execution • Expected profits become losses • New products too late • Capital facilities completed too late • Information systems projects exceeding their planned cost and schedule • 5 out of 6 IS projects failed to meet targets • Nearly 50% were canceled before completion PM Conference, Escuela Colombiana de Ingeniería

  15. Project-Driven & Project-Dependent Organizations • Project-Driven: • Primary business is delivering projects • Examples: Design/construction, software development, telecommunication systems, consultants & professional services • Project-Dependent: • All others – projects support their primary lines of business PM Conference, Escuela Colombiana de Ingeniería

  16. 2.Advantages & Importance of Modern Project Management Substantial increase in success of every project: • Strategically valid projects are selected • Selected projects are completed on schedule and within budget PM Conference, Escuela Colombiana de Ingeniería

  17. Basic Reasons for Success • Projects selected only when they support organization’s strategic goals • Commitments are made only to achievable technical, cost & time goals • Responsibilities are well defined • Every project is planned and controlled • Project teams work together with commitment to goals PM Conference, Escuela Colombiana de Ingeniería

  18. Triad of Project Management Practices • Assignment of integrative project responsibilities • Application of integrative and predictive project planning and control methods and systems • Effective team working PM Conference, Escuela Colombiana de Ingeniería

  19. Advantages of Assigning Integrative Responsibilities • Accountability in one person: the Project Manager • Other key integrative responsibilities as well • Decisions made for the good of the overall organization • Every project is well planned and controlled • Teams work together with commitment with leadership of the Project Manager PM Conference, Escuela Colombiana de Ingeniería

  20. Advantages of Project Integrated Planning & Control • All functional tasks planned & controlled to meet overall needs of the project • Resources are allocated properly, effects of priorities are known • Early identification of potential problems (delays, overruns, etc.) enables timely corrective actions PM Conference, Escuela Colombiana de Ingeniería

  21. Advantages of Effective Team-Working • Creative collaboration of diverse skills needed for each project • Strong team commitment to each project and its objectives • Developing as a team agreed plans, schedules and budgets • Achieving outstanding team performance on each project PM Conference, Escuela Colombiana de Ingeniería

  22. Goals of Project Portfolio Management • Maximization of value • Balance • Strategic alignment PM Conference, Escuela Colombiana de Ingeniería

  23. Benefits of Project Portfolio Management One company (SmithKline Beechman): • New portfolio 30% more valuable • Marginal return on additional project investment tripled: • From 5:1 to 15:1 • Led to 50% increase in development spending PM Conference, Escuela Colombiana de Ingeniería

  24. 3. Cost Versus Value of Project Management • Sources of PM costs • Magnitude of PM costs • Measuring PM return on investment/ROI • Value of PM: Beyond ROI PM Conference, Escuela Colombiana de Ingeniería

  25. Sources of PM Costs

  26. Magnitude of PM Costs • 80% of 20 companies spend less than 10% of project cost on PM • Range: 0.3% to 15% of total project cost • Salaries and burden are largest single item • Others: SW licensing, consulting, training costs PM Conference, Escuela Colombiana de Ingeniería

  27. Measuring PM Return on Investment Knutson’s 4 measurement plateaus: • Comprehension & Acceptance • Application: Frequency, accuracy • Influence on the Business: Results • Return on Investment/ROI: Return on direct costs PM Conference, Escuela Colombiana de Ingeniería

  28. Measuring Results of PM • PM exists & is being applied • Customer more satisfied • Planning accuracy improved • Project monitoring improved • Collecting and using lessons learned • Documenting change of scope and receiving payment for changes PM Conference, Escuela Colombiana de Ingeniería

  29. Value of PM: Beyond ROI • “ROI not a good indication of PM value” • Broader view needed, i.e. ‘balanced scorecard’ approach • 100 PM practitioners surveyed: • 94% say PM adds value • 5%: little value • 1%: ‘not valuable’ PM Conference, Escuela Colombiana de Ingeniería

  30. Areas of Significant Improvement from PM Application • Financial measures • Customer measures • Project/process measures • Learning and growth measures • All size organizations in all industries reported such improvements PM Conference, Escuela Colombiana de Ingeniería

  31. What Should Organizations Expect from Implementing PM? • 50% improvement in project/process execution • 54% improvement in financial performance • 36% in customer satisfaction • 30% in employee satisfaction -- as noted by companies surveyed PM Conference, Escuela Colombiana de Ingeniería

  32. 4. Requirements to Achieve the Benefits • Create organizational culture for PM • Introduce and improve PM practices, systems and tools • Train involved persons at all levels PM Conference, Escuela Colombiana de Ingeniería

  33. PM Organizational Culture • PM roles and responsibilities • Project responsibilities overlay traditional functional ones • Project versus functional direction • Open communication • Share information, anticipate problems PM Conference, Escuela Colombiana de Ingeniería

  34. Introduce PM Practices, Systems & Tools • Management projects • Need careful planning • Need assistance from qualified practitioners/consultants • Evolutionary process • PM maturity models are useful PM Conference, Escuela Colombiana de Ingeniería

  35. PM Training Requirements • Extensive training needed • At all levels • Top level: general principles • Program and project managers • PM planning and control specialists • Many qualified trainers available • Many university courses available PM Conference, Escuela Colombiana de Ingeniería

  36. PM Training is Big Business • PMI: 900 Registered Education Providers • 60,000 students per year • 18 graduate & undergraduate certification programs in the U. S. • Many on-line courses PM Conference, Escuela Colombiana de Ingeniería

  37. PM Certification Programs • PMI: Two levels • PMP • CAPM • IPMA: Four levels • A: Certified Programme Director/CPD • B: Certificated Project Manager/CPM • C: Registered PM Professional/RPMP • D: PM Fachman/Fachfrau/PMF PM Conference, Escuela Colombiana de Ingeniería

  38. 5. Is PM a Profession? • Many references to the PM ‘profession’ • No legal licensing exists in any country • Not a ‘profession’ but rather a management discipline • A required ‘core competency’ for every executive today • Similar to financial management competency PM Conference, Escuela Colombiana de Ingeniería

  39. PM As a Core Competency “Project management is a way of life for all professionals” Roberto Morales Dean, National University of Engineering, Peru PM Conference, Escuela Colombiana de Ingeniería

  40. PM in Next Five Years Little change in the basics Major trends: • Greater linkage to strategic management through project portfolio management • Total life cycle PM: creation through to realization of final benefits • Continued discovery of new areas of application PM Conference, Escuela Colombiana de Ingeniería

  41. PM in Next Five Years (Cont’d) • PM will merge with other management disciplines • 3 PM maturity models in broad use • PM certification will be: • More focused on proven capabilities • More focused on specific areas of application and specific project types • Awarded at 3 or 4 levels PM Conference, Escuela Colombiana de Ingeniería

  42. PM in Next Five Years (Cont’d) • PM capabilities will be a requirement for senior executive positions • Government licensing in PM will not exist • Project portfolio management will be widespread • Project classification system will be widely used PM Conference, Escuela Colombiana de Ingeniería

  43. PM in Next Five Years (Cont’d) • Catalog of project life cycles will: • Be widely used • Enable total life cycle PM • Will include final “realization of project benefits” • PM will be used in essentially all areas of human endeavor PM Conference, Escuela Colombiana de Ingeniería

  44. PM in Next Five Years (Cont’d) • Project planning & control systems: • Fully integrated with corporate systems • More specialized by project type • Web enabled • Use wireless connections to central servers • PM software vendors will consolidate PM Conference, Escuela Colombiana de Ingeniería

  45. PM in Next Five Years (Cont’d) Project teams: • Virtual teams will regularly meet via Internet with video • Most project managers will be trained in team building and leadership PM Conference, Escuela Colombiana de Ingeniería

  46. PM in Next Five Years (Cont’d) Applicability of PM around the world • There will still be countries, regions, and cultures where the PM discipline is not appropriate or practical • Central Africa, for example PM Conference, Escuela Colombiana de Ingeniería

  47. 6. Conclusions • All enterprises realize growth strategies through execution of projects • Managing growth prudently requires managing projects effectively • Application of PM principles, practices systems and tools is of great importance to every enterprise & institution in today’s competitive world PM Conference, Escuela Colombiana de Ingeniería

  48. Conclusions (Cont’d) • When properly applied, project management will produce great benefits and value • These benefits include improved financial returns, customer & employee satisfaction, and project selection and execution PM Conference, Escuela Colombiana de Ingeniería

  49. Conclusions (Cont’d) • PM discipline is not a separate management profession • PM is a core competency required for all executives • The art and science of PM will continue to evolve with close linkage to strategic management PM Conference, Escuela Colombiana de Ingeniería

  50. Thank You for Listening • Questions? • Comments? • Contact me: archie@unisono.net.mx www.russarchibald.com PM Conference, Escuela Colombiana de Ingeniería

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