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Project Mgmt Value

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Project Mgmt Value

  1. 1. The monetary value of Project Management Can Good Project Management Cost Less? Orlando A. Moreno, PMP omoreno@hotmail.com 408.656.2498
  2. 2. Orlando Moreno, “Quantifying the Value of Project Management” A new PMI Publication!
  3. 3. Agenda PM/ROI Phase 1 Research Findings PM/ROI Phase 2 Process  Good PM doesn’t need to be expensive!  Because PM can add value, it can be a core competence 408.656.2498 omoreno@hotmail.com 3
  4. 4. Benefits of Project Management  Increased PM Maturity Leads to:  Better Cost and Schedule Management  Less expensive PM  Improved PM/ROI $(Labor, IT, Consultants, etc.) PM Cost % = $(Value of Projects Delivered) 408.656.2498 omoreno@hotmail.com 4
  5. 5. Our Work We assess PM Maturity using …  PM Process Maturity Model  Proprietary Assessment Tool  PM/ROI 408.656.2498 omoreno@hotmail.com 5
  6. 6. PM Process Maturity Model Sustained level 5 Continuous PM Integrated Process Improvement level 4 Managed Integrated Multi-Project level 3 Planning and Control Systematic Project Planned Planning and Control level 2 Individual Project Ad-hoc Planning level 1 Basic PM Process 408.656.2498 omoreno@hotmail.com 6
  7. 7. Comprehensive Assessment Tool  General Company Information: PM Cost, staffing ratios, organizational structure, etc.  162 detailed Maturity questions regarding PM processes  Project Cost, Schedule, Quality, Scope Results (Key Performance Indicators) 408.656.2498 omoreno@hotmail.com 7
  8. 8. Assessment Tool to evaluate your Company’s PM Maturity in terms of… Six Project Lifecycle Phases Nine PMBOK Functional Areas Project-Driven Define & Track & Initiate Plan Close Out Organization Organize Manage Environment PMBOK Human Communi- Scope Time Cost Quality Risk Procurement Resource cation Integration Management Management Management Management Management Management Management Management 408.656.2498 omoreno@hotmail.com 8
  9. 9. Analyze Integrated Project Schedule Critical path identified. – No critical path calculation done. Each sub-project identifies critical tasks independently and sets work priorities – Critical path based on committed milestone dates. No CPM calculation performed, or CPM used on individual sub-projects – Key critical tasks identified through non-quantifiable means, and used to drive the critical path calculation – Critical path calculated through integrated schedule, but only key milestone dates communicated back to sub-projects – All critical tasks identified and indicated in each individual sub- project schedule. Critical path determined through integrated schedule 408.656.2498 omoreno@hotmail.com 9
  10. 10. Results project management as an Insurance policy
  11. 11. Higher PM Maturity Yields … Better Project Schedule Performance 1.2 Schedule Performance 1 Index 0.8 (Plan/Actual) 0.6 0.4 Where you want to be Where you 0.2 are today 0 1 2 3 4 5 PM Maturity SPI = 0.568 ln (PMM) + 0.224 R2 = 0.62 408.656.2498 omoreno@hotmail.com 11
  12. 12. Higher PM Maturity also … Yields Better Project Cost Performance 1.6 1.4 Cost Performance 1.2 1 0.8 0.6 Tomorrow! 0.4 Today 0.2 0 1 2 3 4 5 CPI = 0.691 ln (PMM) + 0.119 R2 = 0.49 PM Maturity 408.656.2498 omoreno@hotmail.com 12
  13. 13. Higher PM Maturity Levels …result in Lower PM Costs PM Cost = -0.0147PMM2 + 0.0869PMM - 0.0195 PM Cost R2 = 0.371 25% 20% 15% 10% 5% 0% 1 2 3 4 5 PM Maturity 408.656.2498 omoreno@hotmail.com 13
  14. 14. Higher PM Maturity leads to More Predictable CPI Performance CPIv = 1.0411PMM -1.7514 CPI Variation R2 = 0.8654 0.20 0.16 0.12 0.08 0.04 0.00 N =1 55 2 3 4 5 PM Maturity 408.656.2498 omoreno@hotmail.com 14
  15. 15. Higher PM Maturity leads to More Predictable SPI Performance SPIV = 0.0604PMM 2 - 0.5087PMM + 1.1404 R2 = 0.8003 0.20 SPI Variation 0.16 0.12 0.08 0.04 0.00 1 2 3 4 5 N = 57 PM Maturity 408.656.2498 omoreno@hotmail.com 15
  16. 16. Virtuous Cycle of Project Management PM Cost (%) Q II Q III High Cost, High Cost, Low Return High Return 9% Low Cost, Low Return Low Cost, High Return Quadrant I Q IV PM/R OI 28% 408.656.2498 omoreno@hotmail.com 16
  17. 17. Definition of a Core Competency 1. Provide Benefit to Customers 2. Advantage Must be Sustainable 3. Continuously Improved 408.656.2498 omoreno@hotmail.com 17
  18. 18. 1. Provide Benefit to Customers 408.656.2498 omoreno@hotmail.com 18
  19. 19. 1. Customer Benefit Perceivable Benefit or Value Proposition  Reduced PM Cost Ratios (Quadrant IV)  Reduced Project Duration (Early Mover or Fast Follower Advantage)  Smoother and/or Greater Project Throughput  Conformance with Project Scope 408.656.2498 omoreno@hotmail.com 19
  20. 20. 1. Customer Benefit IT Project Management Company A B C PM Cost 4.0% 4.3% 22% (%) PM/ROI 32% 18% 32% Quadrant LC-HR LC-LR HC-HR Company A Has the Highest PM/ROI at the Lowest Cost to the Customer 408.656.2498 omoreno@hotmail.com 20
  21. 21. 1. Customer Benefit Company A D Customer Performance 99% 88% Requirements Customer- Directed 81% 72% Changes Product 1% 20% Defect Rate Quadrant LC-HR HC-HR Company A Higher Level of Quality 408.656.2498 omoreno@hotmail.com 21
  22. 22. 2. Advantage Must Be Sustainable 408.656.2498 omoreno@hotmail.com 22
  23. 23. 2. Sustainability Increased PMM:  Better Cost and Schedule Performance (CPI and SPI). Planned Budget Cost Performance Index = CPI = Actual Cost Planned Duration Schedule Performance Index = SPI = Actual Duration  Decreased Variation on CPI and SPI Performance (σCPI and σSPI). Increased PMM Leads to More Repeatable Results 408.656.2498 omoreno@hotmail.com 23
  24. 24. 2. Sustainability σCPI: 8 Companies σCPI & 51 Projects σSPI As PM Maturity Increases… y = 0.1443x2- Variability Decreases 0.7095x-0.9274 r2 = 0.1939 0.32 σSPI: 9 Companies 0.16 54 Projects y = 0.3027x2- 2.1675x-3.9532 r2 = 0.7718 0.00 1 2 3 4 5 PM Maturity 408.656.2498 omoreno@hotmail.com 24
  25. 25. 3. Continuous Improvement 408.656.2498 omoreno@hotmail.com 25
  26. 26. 3. Continuous Improvement Not Just Continuous Improvement…  …but improvement ahead of the Competition  Improvements that Customers Desire  Ubiquitous skills are not core competencies  Competencies need nurturing  The Good News: For Best Companies (Quadrant IV), Subsequent Improvements in PM are less expensive 408.656.2498 omoreno@hotmail.com 26
  27. 27. 3. Continuous Improvement Incremental Cost of PM Improvement $ High Maturity $$$ Low Maturity 1 2 3 4 5 PM Maturity 408.656.2498 omoreno@hotmail.com 27
  28. 28. 3. Continuous Improvement Company E  Improved PM Maturity by 6% While Increasing PM Cost by Only 0.1%  In the Past 6 Years: – Improved Both Cost and Schedule Performance by 10% – Overall Project Delivery Saving of $150M+ 408.656.2498 omoreno@hotmail.com 28
  29. 29. Summary  Good PM can cost less (< 10%)  Good PM can give higher CPI, SPI on average  Good PM can give more predictable CPI, SPI 408.656.2498 omoreno@hotmail.com 29
  30. 30. Summary Project Management can be a Core Competency: 1. Provide Benefit to Customers. 2. Advantage Must be Sustainable. 3. Continuously Improved. 408.656.2498 omoreno@hotmail.com 30
  31. 31. Summary And project management ROI Assessments can evaluate and document those benefits! 408.656.2498 omoreno@hotmail.com 31
  32. 32. Orlando Moreno, PMP “Quantifying the Value of Project Management” 408.656.2498 omoreno@hotmail.com 408.656.2498 omoreno@hotmail.com 32

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