My core business is to help improve the performance of internal teams carrying out complex projects. In discussions with executives concerning input from my side I am often asked to define the business case for using my services. From speaking to other people dealing with project management, I understand that they are also receiving similar questions.
The direct value of project management is difficult to quantify as the value is secondary. Therefore, the initial reply to such a question should focus on helping the executive understand the business case for the project he thinks is in trouble. If this is non-existent, or very difficult to quantify, the advice should be to stop the project. For some projects, such quantification is fairly easy. If the project in question is a cost reduction project, the value of the project is driven by the size and timing of the savings to be implemented. If the project focuses on product development, the value of the project is driven by the revenues and profits expected to result from the new product.
For other types of projects, such quantification is more difficult, but can usually be carried out. For a strategy project, the value can be very high, but the quantification needs to take into account follow-up projects required for implementation, etc. For a reorganization project, the value should come from improved decisions, better use of resources, etc. This is all fairly indirect, but clearly has value.
If the overall project has value, it is then critical to understand that this value can be radically reduced by a number of issues related to how the project is carried out. Any of the “8 deadly sins of complex projects” will lead to such a loss of value, but I will focus on a few concrete examples.
If a project is delayed because it is not meeting its deadlines, then this has a direct effect on the value of the project. Let us assume that the project will increase annual profits by USD 1 million. This can be the result of a cost reduction program with a USD 1 million bottom line effect, or a new product launch with annual sales of USD 4 million, 25% margins, and negligible “fixed” costs. In this case, a one-month delay in the project means that your company will have a one-off (but permanent) loss of USD 0.1 million in profits.
Lower quality results from the projects will also have direct consequences on the value. Let us assume that the cost reduction project mentioned earlier does not identify all the cost saving opportunities that were available and/or expected. If the project only identifies USD 0.9 million bottom-line effects instead of the USD 1 million that is believed to be available, then the annual loss is USD 0.1 million. In the product development example used earlier, then a fairly minor mistake in the product definition and/or pricing that leads to 3% less revenues will lead the same ongoing annual loss of USD 0.1 million.
A project team that does not communicate optimally can lead to the same type of value-loss. If the work carried out is good, but the results are not accepted and therefore not implemented, then the loss of value is 100%. If the unsuccessful communication leads to lower buy-in resulting in either delays or only partial implementation then the consequences will be the same as in the previous example (i.e. ongoing annual losses).
My experience is that using a methodology to provide structured help to project teams (including the executive sponsor) in a) defining and setting up the project, b) carrying out the project, and c) developing and carrying out a communication process can easily help avoid the type of value-loss given in these examples. Given the fairly focused and limited project management input that is required to help the internal teams, the business case for such an intervention can almost always be made.