The Value of Project Management

1. The Value of Project Management Presented February 25, 2004 by Kathy Schwalbe, Ph.D, PMP

2. Presentation Outline Background information on project management Ways to measure the value of project management Examples of project management in health care organizations Question and answer session

3. What is a Project? A project is �a temporary endeavor undertaken to accomplish a unique product or service� (PMBOK� Guide 2000, p. 4) Attributes of projects unique purpose temporary require resources, often from various areas should have a primary sponsor and/or customer involve uncertainty

4. Recent Project Statistics The U.S. spends $2.3 trillion on projects every year, an amount equal to one-quarter of the nation�s gross domestic product* More than sixteen million people regard project management as their profession; on average, a project manager earns more than $82,000 per year* IT Project Managers are still in great demand and earn over $95,000/year on average (Ziv, 2002)

5. What is Project Management? Project management is �the application of knowledge, skills, tools, and techniques to project activities in order to meet project requirements� (PMI*, Project Management Body of Knowledge (PMBOK� Guide), 2000, p. 6) In addition to meeting project requirements, it�s also important to satisfy key stakeholders and make sure the results of the project benefit the organization Project management should be a strategic as well as a tactical tool

6. Project Management Framework*

7. Project Management Tools and Techniques Project management tools and techniques assist project managers and their teams in various aspects of project management Some specific ones include Business cases, project charters, scope statements, and work breakdown structures (scope management) Gantt charts, network diagrams, critical path analysis, critical chain scheduling (time management) Cost estimates, project portfolio management, and earned value management (cost management) See following charts for many more examples (all from Schwalbe text, 2004)

8. Sample Gantt Chart

9. Sample Network Diagram

10. Sample Earned Value Chart

11. Sample Enterprise PM Tool

14. Common PM Tools and Techniques by Knowledge Area

15. Common PM Tools and Techniques by Knowledge Area

16. Hard Part About PM� �Because every project is unique, project managers and their teams must have a good understanding of what tools and techniques are available before they can make the more difficult decisions of which ones to use on their projects and how to implement them.�

17. Ways to Measure Value Agreement on general benefits Improved project performance/results ROI of project management PM maturity levels Competitive advantage

18. General Benefits of Project Management Better control of financial, physical, and human resources Improved customer relations Shorter development times Lower costs Higher quality and increased reliability Improved productivity Better internal coordination Higher worker morale (less stress)

19. Improved Project Performance Project success is often based on meeting project scope, time, and cost goals The Standish Group�s CHAOS studies are well known for documenting IT project success rates and cost of failures*

20. Why the Improvements? "The reasons for the increase in successful projects vary. First, the average cost of a project has been more than cut in half. Better tools have been created to monitor and control progress and better skilled project managers with better management processes are being used. The fact that there are processes is significant in itself.�* *The Standish Group, "CHAOS 2001: A Recipe for Success" (2001)

21. Improvements to Key IT Project Metrics Due to Project Management*

22. �What the Winners Do�* Recent research findings show that companies that excel in project delivery capability: Build an integrated project management toolbox (use standard/advanced PM tools, lots of templates) Grow competent project leaders, emphasizing business and soft skills Develop streamlined, consistent project delivery processes Install a sound but comprehensive set of project performance metrics

23. Using a Standardized Project Management Approach* Research found that a consistent (one-size-fits-all) managerial approach may be essential to the successful standardization of certain aspects of project management, and a contingency approach is needed for certain aspects, too Low standardization with a sufficient amount of variation is the more appropriate approach

24. Findings From 5-Year Study on Quantifying the Value of PM* Companies with more mature project management practices have better project performance (on time and budget vs. 40% over time and 20% over cost targets) Project management maturity is strongly correlated with more predictable project schedule and cost performance (i.e. .08 schedule performance index variation vs. .16) Good project management companies have lower direct costs than poor project management companies (6-7% vs. 11-20%)

25. Project Management ROI* Over 94% of senior project management professionals say that implementing PM added value to their organizations Formula to predict increased company ROI based on increased PMM level Determine cost to improve PMM level, improvement in cost performance index (CPI), then calculate PM ROI using profit margins and projected annual revenues

26. PM ROI Example* Company initially has PMM of 2.3, CPI of .71, profit margin of 5% , $10 M projected annual revenues Company improves PMM to 3.1, CPI to .94, profit margin to 6.6% at a cost of $400,000 PM ROI = (6.6%-5.0%)X$10,000,000 = 40% $400,000

27. Project Management Maturity Models Similar to maturity models for improving software like the Capability Maturity Model (CMM) Several PM firms have their own maturity models, most using levels 1-5 The International Institute for Learning, Inc. calls the five levels common language, common processes, singular methodology, benchmarking, and continuous improvement ESI�s five levels are called ad hoc, consistent, integrated, comprehensive, and optimizing PMI�s Organizational Project Management Maturity Model (OPM3) released their model in 2004

28. Berkeley Project Management Process Maturity Model

29. Sample PMM Assessment Questions*

30. Project Management Maturity by Knowledge Area and Industry

31. Feedback from Bill Ibbs* We've benchmarked a couple healthcare organizations�what I can say is that the IT PM capability of those organizations was poor, especially in terms of initiating projects. �We helped one of those companies save several million dollars over a 2 year period by helping them focus better on the projects they launched.� Wall Street reports that the healthcare industry in general is gearing up to spend even more $$$ on IT in the next couple years than they have in the past. �So there's a lot at stake.�

32. Other Research Suggests That PM Maturity Models Only Measure Explicit Knowledge* Explicit knowledge: �know what,� can be put into IT, a digital or discrete process that can be codified and transmitted in formal, systematic language (Nonaka 1994) Tacit knowledge: �know how�, in one�s experience; hard to replicate and can be transferred indirectly though time consuming socialization processes (Kaplan et al 2001)

33. Need to Make PM a Strategic Asset (Just Like IT) Many executives view project management as having worth at the operational and tactical rather than strategic level Resource Based View (RBV) frameworks emphasize how firms create value and profits from their internal resources and focus on strategic assets RBV is relevant to project management because it emphasizes intellectual capital

34. Research Based View Model*

35. Successful Examples of Applying PM in Healthcare Organizations Theory of Constraints aids in scheduling Focusing on meeting goals with good PM helps organizations meet demands under budget constraints Good project managers are critical to successful drug launches

36. Applying the Theory of Constraints (TOC) in Health Care* TOC is a form of systems thinking that suggests that any complex system at any point in time often has only one aspect or constraint that limits its ability to achieve more of its goal. Need to exploit constraint and adjust scheduling and resource usage A USAF base decreased waiting time for primary care appointments from 17 days to 4.5 at no additional cost Radcliff Infirmary in Oxford, England used TOC to improve waiting times for neurosurgery and ophthalmology (noted a 100% reduction in elective cancellations and increases in throughput of over 16% at no additional cost

37. Meeting Goals With Good Project Management* St. Mary�s National Health Service (NHS) in London was facing a huge deficit, problems in staffing, and long outpatient waiting times They focused on meeting specific goals by getting the right resources in the right places at the right times (basic PM concepts) and went from a one star to a three star rating by their trust

38. Pharmaceutical Project Managers Are a Breed Apart* Significant investments in drug development projects (12 years and $800M on average), the magnitude of risks in the development cycle, and extensive involvement of senor management makes it especially tough being a PM in this industry �I know of no pharmaceutical company today attempting drug development without a project manager to oversee it� (Luis Cabassa, PMP, Genetech Inc.)

39. Examples of How Good Project Management Adds Value at Your Organization?Question & Answer Session