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  • 1. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 1MGT610Lecture 4Elements of the Project Value ScorecardDr. Thomas Lechler Phone: (201) 216-8174Babbio Center 636 FAX: (201) 216-5385email: tlechler@stevens.edu
  • 2. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 2Lecture 4: Topics and ObjectivesImplementing a Project Value Strategy by ApplyingProject Value Scorecard– Defining project objectives with the SMART principle– Applying the Principles of the Balanced Scorecard– Translating Project Value Strategy™ into a Project ValueScorecard™– Defining the four project value perspectives– Evaluating the strategic points of leverage to achieve theproject’s comparative advantage
  • 3. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 3Definition of Project StrategyThe project perspective, direction, and guidelines on what to doand how to do it, to achieve the highest competitive advantagewith the project results.It is the creation and the management of the degrees of freedom ina project to maximize the competitive advantage of a project.A strategy stipulates what resources are required, why they arerequired, when they are required, where they are required, andhow they will be used to accomplish ends. (Cleland, King, 1988,p.168)
  • 4. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 4Defining Project Value StrategyThe Three Strategy-Making Tasks1. Vision/Mission,2. Objectives,3. Strategic Choice
  • 5. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 5Project Value Strategy: Elements
  • 6. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 6Mission Statement: FunctionsFunctions of a Mission Statement (what is our project?)– To establish a sense of direction within the project and to guide theproject management process by providing a basis for objectives andstrategies– To influence decisions about resource allocation– To help build and communicateamong team members a sense ofshared purpose– To communicate an attractive andcompelling image to externalstakeholders– To support the core valuesof the organizationKey Questions– What is our project?– What do we want to become?– Who are our stakeholders?– What do our stakeholdersvalue?
  • 7. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 7Defining the Project Value MissionA MISSION STATEMENT should• Set project apart from others• Arouse strong sense of organizational identity &business purpose of the projectA well-crafted mission statement• Must be narrow enough to specify real arena of interest• Serves as boundary for what to do & not do• Serves as beacon of where project manager intends totake projectA MISSION STATEMENT includes• Business Need• Business Justification
  • 8. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 8Business Need• Expressed as a goal or as a problemderived from the corporate strategy.– A goal is a measurable outcome that is desirable toachieve.• I want to travel to Denver.• I want to become a Project Management Professional.– A problem is stated as the gap between “the desiredstate” and “the current state.”• I will travel from Newark to Denver.• I will obtain 4,500 hours of project-related work experienceand pass the certification exam to qualify for the ProjectManagement Professional credential.
  • 9. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 9Project Justification• States the reason for undertaking theproject. Explains why business needdescribed in previous header should be solved.– I want to visit my family in Denver.– I plan to seek new employment opportunities.– I plan to relocate to the Denver area.– I plan to sightsee while in Denver.• The justification should influence futuredecisions about what to do in the project.
  • 10. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 10Mission Statement: Examples• Mission Statements– Otis Elevator: Our mission is toprovide any customer a meansof moving people and thingsup, down, and sideways overshort distances with higherreliability than any similarenterprise in the world.– American Red Cross: Toimprove the quality of humanlife; to enhance self-relianceand concern for others; and tohelp people avoid, prepare for,and cope with emergencies.Key Questions– What is our project?– What do we want to become?– Who are our stakeholders?– What do our stakeholdersvalue?
  • 11. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 11Project VisionA Project Value Vision• Identifies activities project intendsto pursue• Sets fourth long-term project direction• Provides big picture perspective ofWho WE are, what WE do, where WE areheaded• Expressed by highlighting the most importantvalue perspective to be achieved to maximizethe project value
  • 12. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 12Vision Statement: Functions• Functions of a Vision Statement (what do we want to become?)– To articulate where the project hopes to be in the future. Can be3-5 years out or beyond.– Vision statements are intended to challenge and energize peopleto achieve. They do not necessarilyhave to be 100% realistic.– Vision statements should alsobe memorable so that peoplekeep it in mind when creatingand implementing strategy.Strategic Key Questions– What is our project?– What do we want to become?– Who are our stakeholders?– What do our stakeholdersvalue?
  • 13. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 13Vision Statement: Examples• Vision Statements– McDonald’s Corporation: McDonald’s vision is to dominate theglobal foodservice industry. Global dominance means settingthe performance standard for customer satisfaction whileincreasing market share and profitability through ourConvenience, Value, and Execution Strategies.– Microsoft Corp: One vision driveseverything we do: A computer onevery desk in every home usinggreat software as an empoweringtool.Strategic Key Questions– What is our project?– What do we want to become?– Who are our stakeholders?– What do our stakeholdersvalue?
  • 14. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 14Outcome: Description• Provides a brief narrative description ofthe solution to the identified business need .• If the product scope has already been defined, then anappropriate reference to supporting details such as theoperational definition and/or contract should also beindicated.– Fly roundtrip to Denver and make arrangements tostay for two weeks. Visit family. Refer to travelitinerary for details.– Fly roundtrip to Denver and make arrangements tostay for two weeks. Meet with potential employers.Refer to travel itinerary and meeting schedule fordetails
  • 15. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 15Project Value Statement: ElementsElements of Project Value Statement:• Mission: Project justification and its business need• Outcome: Description and project deliverables• Vision: Value Focus• Project Value Scorecard: Objectives to implement project valuestrategy• Shareholder Value• Stakeholder Value• Outcome Value• Effort Value• Constraints• AssumptionsShareholderValueOutcomeValueStakeholderValueEffortValue
  • 16. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 16Outcome: Deliverables• List the major, tangible components of thesolution (the major outputs) that must beprovided in order for project to be considered complete.• Use bullet points to indicate each discrete deliverable.– Roundtrip air transportation tickets– Hotel reservation confirmation number– Hotel room– Rental car– Three meals per day• Listed deliverables will vary based upon productdescription and the project’s justification.
  • 17. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 17The Elements of a Project StrategyProject Mission– Why is this project undertaken, why does it exist?– What is the major contribution of the project to the company?Project Vision– What is the competitive advantage the project should achieve?– Clear picture of the project overall goal in a measurable statement.Project Strategy– How to achieve the project mission and vision?– It is the decision framework guiding the implementation.
  • 18. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 18Strategy Implementation ProblemsWhat you measure is what you get!• Measurement affects the behavior of employees and• managers.Traditional project performance measurements …like Earned value status reports, critical path etc... give misleading signalsNo single measure can provide a clear performance target orfocus attention on the critical areas of the business.
  • 19. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 19Project Value Scorecard Functions Project Value Scorecard forces managers to focus on thehandful of measures that are most critical to maximize projectvalue. Project Value Scorecard forces managers to develop SMARTobjectives. Project Value Scorecard guards against sub optimization. Project value scorecards measure the core competencies toinnovate, to efficiently deliver a specific value to the market,which will lead to higher shareholder value.
  • 20. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 20Project Value Scorecard FunctionsThe Project Value Scorecard is a framework to define S.M.A.R.Tobjectives:– Specific – The objective tells exactly what, where, and how theproblem or need is to be addressed.– Measurable – The objective tells exactly how much, how many,and how well the problem/need will be resolved.– Actionable - The objectives can be translated into a specific gapthat can be eliminated .– Realistic – The objective can be achieved with the availableresources.– Time – The objective includes a specific date for its achievement.
  • 21. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 21Project Value ScorecardStakeholders Effort“To satisfy ourshareholdersand stakeholders,what projectprocesses mustwe excel at?”Outcome“To achieve ourvision, howshould wedevelop theoutcome?”Shareholder“To succeed, howcould wemaximize theproject value forourshareholders?”VisionandStrategy“To achieve ourproject vision,which needs ofthe stakeholdersare to besatisfied?”
  • 22. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 22Project Value Scorecard: Basic StructureStakeholder Value“To achieve our project vision, how should we appear to ourstakeholders?”Objectives Measures Targets InitiativesDuring theprojectProjectClose OutLong term
  • 23. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 23Project Scorecard Element: ObjectivesDefinition:An objective is a statement, derived from a project goal, thatdescribes a short-term, specific, verifiable condition that mustexist to fulfill the affiliated goal. It is a need expressed as a want oras a gap.Examples:1. Business Shareholder: Positive ROI (Return onInvestment)2. Project Stakeholder: High satisfaction of end users and/orcustomers3. Project Outcome: High product/ process functionality4. Project Effort: Fast-to-market
  • 24. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 24Project Value Scorecard: MeasuresDefinition:A project related measure or metrics is a count or a measurementthat can be economically observed and captured. It is a basis forcomparison; a reference point against which other things can beevaluated; or units to quantify project performance.Examples:1. Business Shareholder: ROI2. Project Stakeholder: #Complaints3. Project Outcome: #Defects4. Project Effort: Schedule, budget
  • 25. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 25Project Value Scorecard: TargetsDefinition:A project target is a reference point and is expressed in units ofthe measurement or metrics. It is a specific indicator value to beaccomplished.Acceptable uncertainty expressed as USL – LSL.(Upper Specification Limit – Lower Specification Limit)Target = (USL – LSL) / 2Examples:1. Business Shareholder: ROI of 10%2. Project Stakeholder: 10 complaints3. Project Outcome: 0 Defects4. Project Effort: 10% Schedule or budget overrun
  • 26. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 26Project Value Scorecard: InitiativesDefinition:A project specific strategic initiative is not visible in theproject network and expresses an exceptional notstandard activity which has to take place in a specificproject to maximize project value.Examples:1. Business Shareholder: Top-management presentations2. Project Stakeholder: Customer relations3. Project Outcome: Creativity processes4. Project Effort: Communication structure
  • 27. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 27Project Value Scorecard: Shareholder PerspectiveA shareholder is a person (individual or corporation) who ownsshares in the corporation.Goal: Create the “right” values!How could we maximize the shareholder value?– All project activities are related and lead to financial results.– Return on capital employed improves– Share price increasesTwo Basic Strategies1. Revenue Growth Strategy– Revenue from new sources– Customer profitability increases2. Productivity Strategy– Reduce operating cost per unit produced– Improve asset utilization
  • 28. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 28Generic Shareholder Measures• Return of Investment (ROI)• Profitability Index• Pay back period• Net Present Value (NPV)• Free cash flow• Economic Value added (Profit-Opportunitycosts)
  • 29. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 29Project Value Scorecard: Stakeholder PerspectiveAny party that has an interest ("stake") in a project.Goal: Satisfy the “right” needs!Four Categories of Stakeholder (Customer) Concerns:Time – Quality – Performance and Service – Cost1. Cost – Product Price, TCOO2. Time – Lead Time from order to delivery (existing products)Time to market of new products3. Quality – Defect level of returned productsOn time delivery4. Performance and Service – % new products% proprietary products, on time delivery
  • 30. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 30Generic Stakeholder MeasuresOverall stakeholder satisfaction with deliverables in terms of:• Reliability, Defects, Usability, Response time, Ease of use• Availability, Flexibility, Intuitiveness, Security• Easy to understand user documentation• Application response time (calculated by the system)• Number of approved business requirements satisfied by theprojectOverall client satisfaction with the project team in terms of:• Responsiveness, Competence, Accessibility, Courteous,Communication• Credibility, Business knowledge, Reliability/follow through,Professionalism, Training,• Turnaround time required to respond to client queries andproblems, Average time required to resolve issues
  • 31. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 31Project Value Scorecard: Outcome PerspectiveAny tangible or intangible asset a project generates: Process,product, system, etc.Goal: Doing the “right” thingsInnovativeness and technical performance of outcome is critical.Can we continue to improve and create value?How are the TCO affected?Does the installed or followed process create an acceptableoutcome quality?
  • 32. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 32Generic Outcome Measures• Total support costs for x months after solution is complete• Cost associated with building components for reuse• Total cost per transaction• Percentage of deliverables going through quality reviews• Percentage of deliverable reviews resulting in acceptance the first time• Number of defects discovered after initial acceptance• Percentage of deliverables that comply with organization standards• Number of hours or dollars saved from process improvements• Number of hours of rework to previously completed deliverables• Number of client change requests to revise scope
  • 33. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 33Project Value Scorecard: Effort PerspectiveGoal: Doing the things “right”What must the project do internally to meet its stakeholders’ andshareholders’ expectation?• Excellent performance for customers derived from processes,decisions and actions occurring throughout an organization.• Focus on those critical activities that enable them to satisfycustomer needs.• Measures for those processes which have the greatest impacton stakeholder and shareholder satisfaction.• Identify and measure project core competencies• Measures to develop and introduce the next generation ofexisting products rapidly
  • 34. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 34Generic Effort Measures– Total labor costs vs. non-labor (vs. budget)– Total cost of employees vs. contract vs. consultant (vs. budget)– Ideas for cost reductions implemented and cost savings realized– Actual effort vs. budget (variance)– Amount of project manager time vs. overall effort hours– Actual duration vs. budget (variance)– Effort hours per unit of work/function point– Work units/function points produced per effort hour– Effort hours reduced from standard project processes– Effort hours saved through reuse of previous deliverables, models,components– Number of process improvement ideas implemented– Number of best practices identified and applied on the project
  • 35. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 35Project Value Scorecard: Strategic Framework for ActionClarifying and TranslatingThe Vision and Strategy•Clarifying the vision•Gaining ConsensusCommunicating andLinking•Communicating andEducating•Setting Goals•Linking rewards toperformance measuresStrategic Feedback and Learning•Articulating the shared vision•Supplying Strategic feedback•Facilitating strategy review andlearningPlanning and Target Setting•Setting Targets•Aligning strategic initiatives•Allocating resources•Establishing milestonesProject ValueScorecard
  • 36. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 36Planning a Project Strategy – Step 1• Define your project and its objectives in support of:• 1. What are the value propositions of the business?Are they the same like the customer?• 2. Who are the customers?• What are the value propositions of the customer?• 3. How should the products/ processes look like?What technologies are needed? What are the specifications?• 4. What resources are needed? What knowledge has to be• developed? How will this contribute to future value?
  • 37. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 37Planning a Project Strategy – Step 2Start with a status analysis of the project definitionWhat is the project mission, does it need clarification?Define the project vision, what are the core values?Assign the objectives to the four value perspectivesWhich objectives are missing?Which measures are missing?What are the environmental issues?Activate People
  • 38. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 38Project ValueNetworkPerspectiveObjective Measure Target InitiativeEffort On-time SV, SPI SV = 0d +/-10edSPI = 1.0 +/-0.05Create bottom-up scheduleusing CPMtechniquesOutcome Authorizedwork is fullycompletedCount ofdeliverablesformallyaccepted bycustomerPromiseddeliverables =formallyaccepteddeliverablesFormalacceptancecriteriaestablished inscopemanagementplanProject Scorecard Basic Structure
  • 39. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 39Project ValueNetworkPerspectiveObjective Measure Target InitiativeStakeholders Increasesatisfaction bycreatingquality# Defects,ResponsetimeAcceptablequalityexpressed asUSL – LSL.Target = (USL –LSL) / 2Name of specificquality activityperformed in theprojectShareholders Increasewealth byreceivingstockdividendsFree cashflowgeneratedfrom theprojectPaybackachieved in 12months +/- 2monthsEstablish PMISto track projectcashflows frominitiation until 6months afterprojectterminationBasic Scorecard Structure
  • 40. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 40Summary• The Project Scorecard is a Planning Tool• to implement a project strategy• in form of a project metrics• which covers all project value areas
  • 41. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 41Project Value Statement: Constraints• Significant limitations to alternativesthat can be considered by the projectteam in providing the solution to thebusiness need.– Identifies the high-level limits (boundaries) that cannot becrossed by the project team when providing the project’ssolution.• Use bullet points to indicate each constraint.– Relocation to Denver is not financially possible unless hiringemployer pays for relocation expenses.– Interview appointments cannot be missed (due to late arrival atthe interview site).
  • 42. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 42Project Value Statement: Assumptions• Identify significant factors that forplanning purposes have been assumed tobe real and/or true.– These high-level assumptions will be useful in making futuredecisions about work being performed by the project.• If one of these assumptions turns out to be false, then– the business need would no longer be relevant, and/or– the product description would no longer provide a feasiblesolution to the business need.• Use bullet points to indicate each assumption.– Employers in Denver will pay relocation expenses for the type ofjob I am seeking.– Interviewers will comply with EOE/AA guidelines and notdiscriminate against a protected class of potential applicants.
  • 43. Mgt 610 Strategic Perspectives on Project Management(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 43Project Value Statement: Process1. Define Project Mission• Assumption is mission issomewhat given• Assumption of project value isoften not clearly defined2. Define Project Vision3. Describe Project Outcome– Outcome– Deliverables4. Quantify Project Value– Stakeholder Value– Shareholder Value– Outcome Value– Effort Value5. Document Key Assumptionsand Constraints12345Minimum of 2review loops

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