PM business value - Henning Zeumer Projektmanagement

2015 Pulse of the Profession – actual PMI report is published

This year again the Project Management Institute (PMI), being a leading professional institutions in project management, continues its research series with the actual report “The Pulse of the Profession”.

This time the study’s and findings’ focus ist hat enterprises which consequently live the fundamental basics of project management achieve significantly better results in business as well.

PMI Pulse 2015 Those basics include:

Fully understanding the value of project management
Having actively engaged executive sponsors
Aligning projects to strategy
Developing and maintaining project management talent
Establishing a well-aligned and effective PMO (project management office)
Using standardized project management practices such as Risk Management, Knowledge Transfer, use of agile/incremental/iterative practices in project management and benefits realtzation maturity throughout the organization

Such companies, called “High Performers” in the report, have 2 1/2 times more projects fully meeting their original goals than less mature organizations, and they waste 13 times less money !

But besides this main result it needs to be noticed that the number of “High Performers” remains steady at only 12 percent. Laila MT Faridoon, Director of the Chairman’s Office at Roads and Transport Authority (RTA) therefore assumes: “I believe more focus on selling the concept of OPM (= Organizational Project Management) and its value to the C-suite is essential to cause a noticeable change.” Thus good project management and a mature PM organization keeps on being matter of the boss , and without acknowledgement of its value by the top management businesses will go on stagnating “low performing”.

But read it yourself. Find the actual PMI report “The Pulse of the Profession 2015” for download here or directly at PMI at http://www.pmi.org/learning/pulse.aspx

2014 Pulse of the Profession – new Research from PMI

In its this year’s study the Project Management Institute (PMI) again assesses the actual status of project management maturity of companies and its relation to their results.

It’s not astonishing the the report sub-titles this year again “The high Cost of low Performance“, because the statistic rate of projects that miss their schedule, cost or benefit objectives partly or totally, unfortunately has nearly remained at the same high level as last year.

In plain figures this means that from every 1 billion of project volume 109 Mio. is burned money, not yet counted the collateral at business benefits like missed market opportunities, bad efficiency, losses at the bottom line etc.. But the research also shows that companies with a “mature” project organisation manage to realise their project objectives and benefits at 78% on average, whereas such that work in a “do more with less” business environment only achieve in 38%.

Also interesting are the characteristics that differentiate mature “High Performers” from less successful companies: On one hand there are better developped processes for Talent Management with ongoing (project management) trainings, defined PM carreer paths, effective knowledge transfer process, etc. On another hand the engagement the management (C-level and functional executives) actively shows for their projects, e.g. in Change Management, is significantly higher there. But last not least success also lies in the process maturity, in the existence of a strong PMO, in standardized practices used throughout organization, and in the organization understanding the value of project management.

This actually is not a new insight, and it is not only promoted by PMI plausibly. Good project management definitively is an invest in a strategic business asset, not only a commodity or a part-time work ! And if the necessary know how is not (yet) available within the company it is eonomically reasonable to get some experts on board – for an important project, or for implementing an organisational structure, processes, and tools which enable for good project management. The price for good project managers can’t be by far as high as for burned money in insufficient projects !

In the final analysis this report is like a promotion for the initiative “Success and Growth in Project-driven Organizations”, in which I address exactly these factors and offer advise and help for the transformation. Learn more about it in my short video – and stay tuned !

Visit also the PMI Website about the topic.

Enjoy reading and receive lots of (new or well known) inspirations. To download the study please click here or press the PDF icon:

How much you may lose with insufficient Project Management

As a reaction to my recently published IT case study I received many mails which confirmed my experiences and asked for more examples. That doesn’t imply representativeness, but it shows that such cases are not the exception. Together with representative research about Project Management like the Standish Group Chaos Reports or PMI’s Pulse of Profession we can imagine how much money is burned repeatedly in badly managed projects. Totally unnecessary, as again shown in the following case from my practice:

The case:

An SME plant engineering company, after decades of uncontested market leadership, faced a growing low-price competition from foreign countries since some years. The order books were still well filled; the firm was comfortably equipped with private capital. Still customers increasingly discussed prices and didn’t accept delays at the contract fulfilment any more. The company had invested in several R&D projects for retaining technology leadership to differentiate from the price fight and to decrease product costs. Most of them were far behind schedule and over budget. In addition clearing and settlement of contracts were slowed down repeatedly in own plants, at suppliers and during installation.

The management already had engaged a number of consulting firms to perform rationalization and process optimization projects. But it took until a key product development project with a schedule delay of 1½ years was jeopardized to completely loose its time-to-market and therefore its ROI that management determined to conduct a project revision and recovery action.

My expert assessment’s findings:

After roughly four weeks my diagnosis was firm. This is the short version:

In product development top-class engineers were working in multiple projects at a time, led by chief engineers who had special expertise in the specific development field, but did the project management by the side and without explicit education. Their focus naturally was on the technique; problems seemed solvable as long as time and money did not matter. In the Steering Committee there was no agreement on priorities of the goals “unchallenged technology” vs. “product cost cuts”.

Instead of giving direction by decisions, they issued increasing caveats, and swallowed increasing surplus cost for a long time. In the projects development phases and prototypes frequently were delayed, personnel and machines for tests and dry runs were ordered, cancelled, and then were not available for the new dates, etc. “Lack of resources” was the prevalent opinion, but in fact there was a lack of leadership and of a reliable planning and control, spiced with overload and inefficient multitasking.

With a clear, unambiguous scope many tasks wouldn’t have led to conflicts, the majority of the tests could have been conducted in the laboratories prior to building expensive prototypes, and thus could have eliminated a lot of reservations and risks upfront. The Steering Committee could and should have intervened much earlier if they had had a proper reporting and a sense for their own project responsibility.

The complete lack at all levels of project management and understanding for project roles in R&D prompted similar deficits at the company’s delivery projects.

Root causes are in the corporate project management culture

The project leads there had the difficult task to coordinate the assembly in the P&L responsible plants, the shipping, and the installation audit - Project Management onsite at the customer without having real competences and access to resources. Sales, driven by commission interests, often threw badly cleared orders and unrealistic delivery promises over the fence at the projects. At the installation sites, in particular with international orders, regional sales interests, mentality or working habits frequently spoiled fulfilment to plan. Suppliers and customers often had a weak organizational maturity to achieve provisions as planned. Thus many projects were “deeply red” already at order confirmation; the involved units’ own lives prevented from targeted project management, and their individual striving for profit made an overall optimization of project margins impossible.

The conclusion was that in both areas not the project leads and teams were the root causes for the misery but insufficient sensibility and recognition for project work and management in the entire company. Besides recovering the R&D key project I therefore had to initiate a successive change in the organizational project culture, away from functional thinking in products towards a holistic customer focus in a project-driven business. (This btw. nicely shows the strategic business component in my professional work …)

The first could quite immediately be managed with some organizational measures, some fundamental decisions about the project’s targets, and a little grab in the project management processes and tools box. After roughly half a year the project was completed with a marketable result; a follow-up project was initiated to further improve the technology.

The project’s distress total balance:

Delay ca. 8 FTE x 1,5 man years = 650,000 Euro
Effort until completion another 8 x 0,5 man years = 200,000 Euro
Effort for revision and recovery ca. 30,000 Euro

or in other terms

Surplus cost in total ca. 880,000 Euro (planned budget 750,000 Euro)
Revenue loss ca. 200 units not built/sold in 1.5 years = 60 Mio. Euro

The company’s “cultural change” is still going on, after management had struggled hard to acknowledge its necessity. Culture is something that has grown and is established, habits of thinking and acting cannot be changed that easy. But if there is to be profit again in the corporate balance instead of a red Zero, if with customer orders (= projects) profits are to be made instead of only turnover, then this effort is a strategic imperative and economically reasonable. To wait would mean to further lose money and market share.

Learn more about the topc Project Recovery…

Why should you care for your projects?

Business affairs are going pleasantly, order books are well filled, and you could enjoy and work on shaping the future. But then there are again issues coming up at some nasty project – do you have to take care for everything yourself?!

The colateral of ignorance is alarming

Coincidentally researches report since years about on average more than 46% of all projects failing to meet their schedule, cost and/or scope/quality targets, 19% to be terminated early. 33% of budgets is spent for „repair“ of projects in distress. Just do the math for the amount of money which is burnt here …

Burn Money - Project Management If you look at the causes it’s not technical (6%) and resource (9%) issues holding the top ranks, but rather insufficient project management (16%) and lacking management and organization support (18%). Additionally in most cases there are unclear requirements and stakeholders‘ goals (12%), and bad communication (15%) among the involved parties incl. the management.

You think that should lead to considerations at those responsible for authorizing investments initiating projects. 60% of responsible executives know about the opportunity cost of bad projects, but only 20% support PM initiatives to improve the situation in their companies instead. Moreover project management is perceived as a commodity by many managers – and treated accordingly.

The classical management science leaves out projects

The classical study books of business administration and economics (Schumpeter over Keynes to Taylor and Drucker) confine themselves to the management of the running business of enterprises like production, financials, sales etc. But isn’t conducting projects to adapt the company to the market requirements and to shape it for the future an equally necessary daily business and a strategically important task?

To manage projects properly and professionally, to optimize processes and equipment, to pay an attention to them adequate to their strategic importance to achieve the enterprise’s business objectives – shouldn’t that be an imperative for everybody in charge of projects on the C level, just like it’s practiced in the operations area?! With the business you earn the money, in investments and the resulting projects you build for growth and future ! The capability to manage projects professionally should therefore be a strategic asset as well, shouldn’t it?

Where is the business value of proper project management then?

As to operative benefits there are significant improvements in PM process quality, often even costs neutral: TopBenefits - Project Management

Effective monitoring and control of the project’s situation
Faster and more efficient reaction
Process performance and efficiency control
Consistence and repeatability of results

In addition there is a considerable qualitative improvement at the project results, increasing adherence to planning and targets (CPI/SPI min. +20%) and cost savings, e.g. by avoiding unplanned long hours, expensive rework etc.

What management profits from

Management receives planning stability by „clean“ processes like more realistic estimates leading to practicable planning and as a result to stable calculations. Improved project control / governance provide better information for decisions, and pro-actively managed risks prevent losses and ensure higher returns on investment.

And last but not least there are the strategic advantages: Efforts prioritized by returned business benefits generates better resource efficiency, which makes for more throughput/capacity and therefore more revenue and/or flexibility. More reliable results increase customer satisfaction and retention, thus providing advantages at image and competition, and, and, and …

It seems to be worthwhile taking project management serious and valuable in companies, and supporting your projects more actively. Just start considering project management as a strategic asset – I’m happy to provide you many more good arguments for this !

Please read more about this topic in the latest research from PMI’s Pulse of the Profession „The high Cost of low Performance“

How much you could save with proper Project Management

Unfortunately there are only a few “before / after” researches available about the value of proper project management practices for the executing organizations, or what impact an undervaluing by the decision makers has. But a case from my practice (not a unique one !) may underline how much money often is burned by ignorance:

The case:

A software company had sold a fixed price project for implementation of a software system. They were now searching for an „execution“ project manager due to lacking own available capacities. On request I assessed the job’s requirements and complexity (Project Profiling) and suggested a qualified colleague from my network PM-Professionals.eu. The initial assessment meeting showed a “perfect fit”, only with the daily rate we could not come to an adequate agreement that would have made “economic sense” to the company. As a result a project leader was hired for 150 Euro per day less, well knowing that his qualification was lower.

Schleuder-Euro - Project Management I had the general manager consider that he had calculated the effort of project management too low, and I offered to conduct a Project Health Check for free after a half year of the project’s course.

Inventory review after six months:

My audit after six months discovered significant delays in project progress caused by underestimating the effort of program coding, breaks in resource planning and customer provisions, unforeseen issues with the interfaces, and latent, badly managed disputes about scope and deliveries. The atmosphere already was tending to withdrawal and safeguard positions. More trouble was ahead with the first testing milestone for the complete system as it was not yet ready.

The result:

In bare figures it looked like this:

Savings with the project lead 6 months x 20 work days x 150 Euro = 18,000 Euro
Project delay 6 weeks x 6 FTE, ca. 600 Euro/day each = 108,000 Euro
Penalty at missing the integration test milestone 100,000 Euro (probability without recovery ca. 80%) = risk value 80,000 Euro
Calculated surplus effort for recovery ca. 4 weeks additional 4 FTE = 48,000 Euro plus my salary 24,000 Euro.

The conclusion:

The decision to engage a cheaper, but not sufficiently qualified project manager therefore had set the company back 90,000 Euro already after half a year. To meet the hard milestone and avoid the penalty there were another 72,000 Euro. With respect to the risk value of 80,000 Euro and further delays to be expected without immediate recovery this was probably an economically reasonable option. In total surplus cost / margin loss of 162,000 Euro due to inappropriate saving on the wrong things at project start ! I did not ask how much project margin the software company had initially hoped for …

Very rarely there is a chance to conduct such an audit „on announcement“, because only very few executives want to show the weakness of making mistakes transparent. But the example shows – to my experience representatively – how low good practice in project management is still valued, and that a good project manager cannot cost as much as money is burned without him.

Learn more about the topic Project Recovery…

How long can enterprises afford to neglect the business value of their project management?

Assign scarce resources to multiple projects in the pipeline following priorities given by the company’s strategic objective framework. Adapt long runner projects to changing environments and requirements to achieve maximum benefit from resource allocation. Not primarily deliver products and services, but by these deliverables prepare and enable the organization for capturing sustainable and strategic benefits. That’s the added value that is behind competent Project Management,

Project Management is the matter of the Management

Where does project and multi project management end, and where does programme and portfolio management begin? Where is it appropriate for executives to delegate simple projects as a “commodity”, and where is mature project, programme and portfolio management in the very responsibility of the top management? There are still wide gaps between project handbooks, corporate project culture, and project and enterprise leadership.

AuditCMSq - added value, Project Management Science and management still need to realize and acknowledge that besides manageing the daily business there is another, meanwhile similarly important area of leadership which, by investments and initiatives (= projects and programmes) prepares and adapts the company to the market requirements and future. Then there is a chance that the added value deriving from this area is valued appropriately enough to be managed as professionally as the running business, and thus is able to achieve better success ratios and meet targets better than it is until now.

That similarly applies to crisis management

I’m also curious when it will be that the business value of organizational project management will be acknowledged by the C-level in a way that allows recovering troubled projects as consequently as it is done with companies in distress. It would mean million wins with ROI and time to market for companies if the management would set priorities right here as well and provide help to projects with wrong set up or staff early enough, instead of wasting and burning employees, resources, motivation, trust and a lot of money by waiting, pressure and hope for self-healing.

Learn more about the topic at the key word Project Management Business Value

2013 Pulse of the Profession – new Research from PMI

Also in its this year’s study the Project Management Institute (PMI) again assesses the actual trends that will influence our profession Profession Projektmanagement and its development now and in the near future.

Pulse of Profession It also shows that the success ratio of projects is decreasing again since 2008. Fewer than 2/3 of projects meet their goals and business intent, and about 17% fail outright. This means in plain figures that from every $1 billion of project volume $ 135 Mio. is burned money, not yet counted the collateral at business benefits like missed market opportunities, bad efficiency, losses at the bottom line etc.. But the research also shows that companies with a “mature” project organisation manage to realise their project objectives and benefits at 90% on average, whereas such that work in a “do more with less” business environment only achieve in 34%.

This actually is not a new insight, and it is not only promoted by PMI plausibly. Good project management definitively is an invest in a strategic business asset, not only a commodity or a part-time work ! And if the necessary know how is not (yet) available within the company it is eonomically reasonable to get some experts on board – for an important project, or for implementing an organisational structure, processes, and tools which enable for good project management. The price for good project managers can’t be by far as high as for burned money in insufficient projects !

Visit also the PMI Community Blog and the PMI Website about the topic.

Enjoy reading and receive lots of (new or well known) inspirations. To download the study please click on the PDF icon:

P.S.: In my article from last year you still can access the 2012 study. A comparison of the forecasts and the reality is always interesting 😉

2012 Pulse of the Profession – new Research from PMI

In its newest study the Project Management Institute (PMI) again assesses the actual trends that will influence our profession Profession Projektmanagement and its development now and in the near future:

To defend their competitive advantages enterprises will foster their talent development, i.e. in our case by introducing or improving career paths for project managers.
Projekt Portfolio Management becomes an increasing success factor in economically challenging times.
Agility remains to be a trend topic for companies to adapt flexibly to changing parameters. Therefore from classic project management the Risk and Change Management are increasingly weighted higher, but also iterative approaches such as Agile and Extreme.
From Programme Management the focus on business benefits of projects (re)gains momentum in the (so far) delivery oriented project management.

We of course are amazed that the study obviously confirms our presentations at the PMI Poland Congress 2010 in Warsaw and the Nordic Project Zone Congress 2011 in Stockholm. PMI also presents newest statistic figures that proove these trends and the advantages of a mature project management – as good as new feeds for our marketing !

We uploaded the study as a PDF to our website for you, and wish you an inspiring lecture. Please click here to download…