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Copyright by Daniel Stanton.

How Do You Measure the Value of Project Management?

October 31, 2016

 

At some point in their career, every project manager (PM) is going to confront the question: "what value are YOU adding to this project?"

 

It's a fair question, and one that every member of a project team (or a company, for that matter) should be able to answer. Understanding the value that you add is especially important in times of cost cutting and lean initiatives. But the challenge is often harder for PMs than it is for other team members because they aren't the ones getting their hands dirty assembling systems, programming interfaces, or moving boxes. Since they aren't the ones doing the "real work" some people view them as unnecessary (and perhaps unwanted) overhead.

 

 

Over the past 20 years, I've run into this question many times. What's interesting is that my answers have changed. It has really been an evolution from an operational view, to a tactical one, and finally to a strategic perspective. Here's what that journey has looked like:

 

Early in my career, I was offended when someone asked about the value that I was adding. It felt like an insult. "How dare you ask whether I am adding value to this project? Look at all of these cool Ghantt Charts and WBSs that I made. Who else on the team could do that?" Not surprisingly, I didn't really find that answer very satisfying, and neither did my colleagues and clients.

 

Later, I was able to step back and question my own beliefs about the value of project management by looking at it through the lens of a manager who is evaluating a business decision.  The question became: "what is the incremental value of the investment we are making in project management, and where else could I invest that time and money to obtain a higher return?" This was certainly a better perspective, but the answer was still not obvious. Since there isn't a good way to show a direct return on the investment in project management, any other investment alternative (that doesn't lose money!) is going to look like a better business decision.

 

In the last few years, however, I've had the opportunity to see a number of projects (that I was not involved in) fail in spectacular ways. Budget overruns. Missed deadlines. In extreme cases, emotional pressures that made people sick, and worse. And that has led me to my current belief about the value of project management: "Project management adds value by reducing risk." 

 

Certainly, the operational folks can do the work of installing the systems and moving the boxes without the help of the project manager. But how can you be sure, from the standpoint of the business, that they are really doing the right things in the best way? What happens if team members don't sync their schedules and work on their pieces of the project at the right time? How do you make sure, when something changes, that all of the right people find out about it and adjust their plans appropriately?

 

Without a good project management infrastructure, the risk of something going wrong becomes much greater. And it is much harder to respond to problems when they arise.

 

From this strategic perspective, project management is really a form of insurance. It contributes value to a project in two ways:

  1. It provides a higher level of assurance that the project team is working on the right things, at the right time, and that you'll find out about it quickly if anything goes wrong.

  2. It gives you options to respond quickly and effectively to changes.

The larger, and more complex, that a project is, the more risks it is likely to face. And therefore, the more valuable project management becomes. Here are some things to consider when determining the value of reducing your project risks:

  • How many people will need to contribute to this project? How many stakeholders do we have? Is there a high level of trust and transparency between these people?

  • How large is our investment in this project? What financial impacts (positive or negative) could this project have on the organization?

  • How complicated is the project? Is it something we have done before, or will this involve a lot of learning for some or all of the team members.

  • How stable are the team, the company, and the environment? The higher the probability of changes, the more important it is to have a way to respond to those changes efficiently.

  • How long will the project take? The longer the timeline, the higher the probability that things will change - from staff turnover, to changing market conditions, to the introduction (or retirement) of technologies.

At the end of the day, determining how much to invest in project management is a leadership decision. How much risk are you willing to accept? I suggest thinking about it in terms of the DIRECT Project Leadership Framework. What risks do we have in regard to defining, investigating, resolving, executing, changing and transitioning? (You can find more details in my Lynda.com course, Leading Projects) That's a good starting point to estimate the amount of time and money that you should be investing in project management, and the value that the PM is contributing to your project. 

 

Like any investment that you make, project management needs to pay back more than it costs. But unlike many of the direct costs that are budgeted in a project, the greatest value of project management actually comes from cost avoidance - money that you save by avoiding unnecessary work, rework, and delays. It's hard to measure the time and money that you save by having a good project management infrastructure, in the same way that is hard to measure the value of an insurance policy. But when paying a small premium can protect you from a significant loss, it is usually a smart investment.

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