Where Did The Money Go? — Making Project Benefits Happen

OK, you saved your receipts. You may be able to show what you spent it on. But can you really show what you got for it? Not just some shiny new SAP modules, or a fancy app, but what higher margins, market share, or tangible benefits can you prove?

Benefits realization has been a theme of mine for years: here, here, and here. In fact, I’d move it to #1 in the list I gave to Michael Krigsman about the threat marketing IT poses to the CIO. If your PMO or function can’t show that it delivers value, then how can you expect it to be a strategic player? PM College just created a new course on benefits realization and the subtitle says it all: how to create tangible value against your business case.

The biggest misconception about benefit and value management is that the process happens after the project. That approach simply does not work. You can’t decide after the project: “gee, we need to show the boss the benefits…let’s figure out how to collect, measure, and present them.” As the course description says:

Benefits are not just another dimension of portfolio management, but are the basic rationale for any investment of funds.  As such, benefits should drive those investment or change decisions from initiation through implementation and beyond.

In other words, benefits realization has to embedded in the project plan from its very start…or you too will find yourself asking Hoyt Axton’s question: “Where did the money go?”

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Is there any “science” in project management?

“Project management as profession” remains a fraught subject (initial post here, survey here, survey results here).  I doubt it ever will, at least not fully like law, medicine, or academia.   Furthermore, I believe that because project management is essentially a social science — i.e., a discipline about human action — we will have persistent trouble in trying to settle debates with evidence and experimentation.

To that end, Jim Manzi provides a useful summary of the epistemic challenge faced by social sciences — what they do, don’t, and could (eventually) know.   He sets up the problem in this excerpt below:

[W]e have no reliable way to measure counterfactuals—that is, to know what would have happened had we not executed some policy—because so many other factors influence the outcome. This seemingly narrow problem is central to our continuing inability to transform social sciences into actual sciences. Unlike physics or biology, the social sciences have not demonstrated the capacity to produce a substantial body of useful, nonobvious, and reliable predictive rules about what they study—that is, human social behavior….

As they say, read the whole thing.

Is forensic science isn’t a science, can PM be a profession?

I enjoyed this Popular Mechanics piece on the problematic foundations that underpin forensic science — CSI Myths: The Shaky Science Behind Forensics.   Per the piece’s header:

Forensic science was not developed by scientists. It was mostly created by cops, who were guided by little more than common sense.

In fact, I was reminded of the debate that we’ve had about project management as a profession (here, survey here, survey results here).  The article reinforced just how far we have to go to true professionalization.

While we have many common sense PM practices, how many of them are demonstrably linked to project success?  Which are the most important and why?  The Value of PM is still pretty fuzzy…

More on the Value of PM Study… why no ROI numbers?

Last week’s PMI GCC executive forum featured a presentation from Janice Thomas, a co-author of the Value of Project Management study (the study’s preview PDF is here and a 90 minute presentation by the lead authors is embedded here).

Janice elaborated on one of the findings — that ROI calculations were almost never done (my earlier post here).  It turned out that only one of the 64 organizations studied could put together rock-solid ROI numbers.  A number of others could have put some numbers, but didn’t.  These organizations found generating figures on returns onerous — and not worth the effort — because of a three-fold problem:

• ROI had not been considered closely enough at the beginning of the PM initiative.  In other words, little benefits realization work had been done — few if any KPIs were envisioned or no baseline was established for those KPIs. 
• PM initiative costs weren’t tracked closely enough.  Amazingly enough, it appears that few of these project management improvement efforts weren’t managed as projects or programs.  Oops.
• Organizations that didn’t perform projects for a living were more concerned with fixing the basics of PM.  Improving customer satisfaction or project delivery measures was good enough for these organizations.

Social Media ROI and Strategy Alignment

I’m not sure that there are many answers — at least for our line of business — but these posts got me thinking about the value of some Enterprise 2.0 initiatives we’ll be kicking off shortly. 

Fluent Simplicity lays out the basic value/return problems here.  Social media initiatives often happen because everyone is doing them, and focusing on fads and fashion doesn’t make for long-term thinking (see my take on Tom Davenport’s pessimistic take on Web 2.0 here).  However, Enterprise 2.0 can’t be treated the same way.  Firms are reluctant to go “all-in” on social media because…

[f]or most organizations, this activity is not tied to strategic goals and is not adequately measured in a meaningful way. 

Frogloop has a ROI calculator (here) that got me thinking about how to build the business case for my initiatives.  I’m not sure how well I’ve thought through the intangible benefits (e.g., retention), which probably will have the biggest strategic impact.  I’ve been focused on the productivity and publicity gains only, which were simple.  A little more Excel modeling may be in order!

Hat tip: Mary Adams at IC Knowledge Center

Executive Support: Demonstrating the Value of PM

Executive buy-in and support: more comments on the first results of the PMI Value of PM study, earlier posts (here , here, here, here, and here).

Value measures should first focus on the tangible (e.g., ROI, better margin) or making the intangible more tangible (e.g., tying customer satisfaction to revenue or reduced escalation costs).  In addition, I would also suggest that one should also look at how much value one’s executives attribute to project management.  Of course, the initiative has to have delivered results.  But many PMOs forget to ensure that senior leadership understands exactly how PM improvement translates to the firm’s bottom-line, top-line, brand value, etc.

One of the most powerful endorsements of SAP’s project management efforts came from the current CEO of SAP America, Greg Tomb.  During our global services leadership summit, each regional leader presents a short presentation on the “whats and whys” of his/her unit’s performance.  When Greg was discussing the excellent revenue, margin, and customer satisfaction results in the Americas, he explicitly credited project management as the foundation for all three.

“Public” and vocal executive references are some of the best intangible value proof points.  Not only was the recognition appreciated by the Americas PMO leadership, it also reinforced the global PMO message to the rest of the global leadership team: project management works.

Why DID we need the value of PM study?

Per a recent comment by Dr. Paul Gianmalvo (URL here, post and comment here), the results of the value of PM study do sound like they simply confirm the value of motherhood, apple pie, and clean living.  As Paul notes:

Yes, project management adds value. Of course it does!!! What alternatives are there?

I agree that the answer is obvious: competent project management is indispensable.  In fact, I believe that outstanding project management is a competitive advantage.  But that fact hasn’t always been obvious to the folks who approve project management: senior executives.  When pitching PMO and other project performance improvement initiatives, too many project management professionals launch into assertions of the value of PM.  I know… I’ve done it and see it again and again.

To me, the stunning results from the study are not that PM has value, but how poorly we still calculate and communicate the returns on our organizations’ investments.  Only 50 percent of PM organizations bother to calculate ROI?  Those must be some confident, complacent, or perhaps foolish PMOs.

When it comes time to show benefits from a PM improvement program’s outcomes, silence is death.

Increased Customer Satisfaction: Demonstrating the Value of PM

SAP PM-specific success stories: 2004-2006

Showing customer value: more comments on the first results of the PMI Value of PM study, earlier posts (here , here, and here).

SAP customer satisfaction scores have shown strong improvement over the last few years, but project management satisfaction is rising faster than the overall SAP Consulting customer satisfaction. While we have surveys that demonstrate this result, an even more tangible measure of this satisfaction is the huge increase in project management success stories.

The field loves success stories, because they highlight the role of SAP Project Management in ensuring customer success during implementation projects.  Customers go “on the record” to make powerful statements about exactly how SAP Project Management supported their projects and programs.  For examples in a number of industries, click here for a list of SAP Project Management success stories (or search here using the search string “SAP Project Management” success stories).

Demonstrating the ROI of project management

Guess which color is the maturity rating and which is cost/revenue...

Re: demonstrating tangible value — comments on the first results of the Value of PM study — earlier posts (here and here), the study’s preview PDF (here) and a 90 minute presentation by the lead authors (embedded here).

Only half of the case study organizations could demonstrate tangible value from their project management efforts and initiatives. The study had several observations about these two groups, the first applies directly to our PMO: “Organizations That Could Calculate ROI… those that deliver projects for customers”

The fact that we support units responsible for customers, revenues, and profit made a huge difference in our ability to measure ROI.  In no small measure, SAP’s increased margins over the past four years have come from our ability to better bid, monitor, and control projects.