Strategic Project Management Transformation: Delivering Maximum ROI & Sustainable Business Value

by Marc Resch

Overview

In today's changing and competitive economic environment, CEOs, corporate executives, and shareholders are no longer strictly concerned with how well a project was executed even if it was finished on time and on budget. Most projects are now being viewed as strategic investments with the primary concern being the value that a project contributed to the company's bottom line. Project benefit attainment usually occurs after the project team has disbanded and handed over the project deliverables to the operational teams. It is in this transition and subsequent operation where much value is lost and the truly important business benefits that could have been achieved are not. Strategic Project Management Transformation demonstrates how to transform this trend of project management failure and sub-optimization into strategic and financial project management success. It shows project managers and business professionals how to establish processes that extend beyond closeout and enable stakeholders and operational teams to continue measuring and optimizing business value until all of a project's objectives have been achieved or exceeded, thereby maximizing financial returns, beneficial change and competitive advantage for their organizations.

Product Details

ISBN-13:	9781604270648
Publisher:	Ross, J. Publishing, Incorporated
Publication date:	06/01/2011
Edition description:	New Edition
Pages:	272
Product dimensions:	6.00(w) x 9.00(h) x 0.80(d)

About the Author

Marc Resch is a business and technology strategy professional with more than 20 years of proven success in designing and implementing business strategies; developing and deploying business-wide program management office and governance processes; and managing world-class business operations. He was previously a management consultant for the firm Booz & Company. Mr. Resch is a certified Project Management Professional (PMP) and also maintains a certification in the process-oriented IT Infrastructure Library (ITIL). Marc is a graduate of the U.S. Military Academy at West Point, received a Masters in Business Administration (MBA) from the University of North Carolina and received a Masters in Science (MS) from Stevens Institute of Technology in New Jersey. Mr. Resch is currently an adjunct professor at Centenary College in New Jersey and President of Resch Consulting Group (www.reschgroup.com), a firm that specializes in helping organizations generate optimal and sustainable business results from their project investments.

Read an Excerpt

CHAPTER 1

Projects Are Strategic Investments

In the state of nature profit is the measure of right.

— Thomas Hobbes

Value Still Matters

Take a second and think about the key success criteria of any project. What are your thoughts? Did you say, "On-time and within budget, hit the deliverables, or even obtain stakeholder sign-off"? Are you surprised when I tell you that the CEO, corporate executives, and shareholders would say that you're wrong? If you said, "Business value," you're on the right track, and if you said, "Profit," you're thinking like an executive. In today's competitive environment, every dollar spent needs to be tightly tied to the bottom line: a company's overall profitability. Every project needs to be viewed as a strategic investment that demands a return. How much money did the project make the company? If the project didn't drive profit or cost savings, then why spend valuable and finite resources on it? It's become abundantly clear that projects are strategic investments, and a project that makes money for the company or ensures value continuity is a good investment; if it doesn't make the company money or provide value continuity, it is a bad one.

With shareholders' insatiable quest for profitability and returns on their investments, corporate leaders are accountable for demonstrating these returns in all areas of the business. At any given moment within an organization, the portfolio of projects can be immense, consuming invaluable corporate resources; namely time and money. It is imperative, therefore, that the utilization of time and money is well spent and that project efforts directly contribute to the overall benefit of the company. This book describes the processes, techniques, and tools that project professionals can use to forecast accurately the quantifiable benefits, to guide project execution toward those benefits, to hand-off a solid value attainment plan to business operations, and, ultimately, to attain — and even exceed — the targeted business benefits.

Project professionals are now on the front lines of delivering profitability. They must view their projects as investments and treat them as such. Much like an investor expects an investment company to perform a proper and thorough analysis of its portfolio of stocks, project stakeholders expect their project teams to perform similar analyses on their portfolio of projects. Investment companies produce periodic performance reports with detailed metrics for their investors. Similarly, project teams must produce project performance reports for their stakeholders showing the business value that their projects are delivering to the company.

A paradigm shift needs to take place at the corporate and project level. How do we make the jump from project management to project value management? By the end of this book you'll have all of the tools you need to be the catalyst in this transformation.

Managers, stakeholders, project sponsors, project managers, business owners, and anyone else involved in selecting and delivering projects must now think in terms of strategic investments. Projects must have a business focus with quantifiable value metrics identified, monitored, and reported throughout the project lifecycle — and even beyond — to truly capture business value from them. This strategic approach will greatly enhance a project team's ability to guide the project decision making process and fine-tune project execution for peak performance and results.

Questions that project professionals need to ask include:

Project predeployment

• Should we invest in the project?

• How do we differentiate between competing projects?

• How do we calculate return on investment (ROI) and other business metrics?

• What can we expect to achieve, in hard numbers, if we invest in this project?

• In which projects should we invest?

• What are the important non-ROI contributing benefits?

• What are the success criteria for this project?

• How do we account for risk and uncertainty?

• How can we build an accurate business case with so much uncertainty?

Project execution and operations

• Is the project achieving its intended business objectives?

• Is the project making us money or is it on track to make us money?

• How can management help guide the execution to achieve and optimize business objectives?

• Are the key metrics being monitored and reported?

• Does management understand the metrics that are being reported?

• Are the metrics useful?

• Should we continue, modify, or even terminate the project?

Post-project

• Was the project successful? Was it a wise investment?

• Did the project contribute to the company's bottom line?

• Did the project achieve its intended benefits?

• Are we done monitoring and reporting on the key project metrics?

• What lessons learned can be garnered from this project?

• Now what?

The Fundamentals of Business Haven't Changed

The purpose of any for-profit organization, simply put, is to increase shareholder wealth. Everything that a business does should contribute to that overarching objective. Even not-for-profit organizations need to tighten their belts these days and demonstrate value in order to receive funding and keep their doors open. Certainly there are ancillary purposes of business relating to employees, customers, and the communities in which they serve, but the underlying reason that businesses operate is to make money for the shareholders.

Today's environment demands the scrutiny of every dollar spent on projects and the close evaluation of the value delivered. The executives and project teams are under ever-growing pressure to quantify and validate business benefits for their project investments. If business professionals are unable to forecast the business value of possible investments, these initiatives may not be approved, even though they may indeed be beneficial to the company. Business professionals must possess the knowledge and skills necessary to quantify the projected returns on all of their potential investments. Project professionals must be able to measure and report on the progress of their projects using quantifiable metrics in order to make informed decisions that lead to increased business value.

The need to articulate the business value of projects is not limited to companies of a certain size or vertical industry. Nearly all companies are now requiring that business metrics are clearly identified and presented to project stakeholders on a regular basis. Quantifying business value and driving a project toward attaining clearly defined business benefits require strategic skills and a solid understanding of the company's vision and objectives. Project professionals must possess a combination of business, leadership, project management, and financial skills to effectively manage their projects, optimize business value, and make money for their companies. The good news is that these skills can be acquired, and project professionals equipped with these skill sets will be able to effectively drive their projects to create business value for their companies.

All companies are faced with finite resources that must be shared throughout their organizations. Money, personnel, and equipment are resources that managers must fight for to support their projects. If managers can't forecast quantifiable business returns, they may lose out altogether or only get a portion of what they require. So how do we fight for and receive these resources? Resources will be granted to those managers who can project and articulate quantifiable business returns in a data-supported and logical manner. These managers, in turn, will not only get approval for their current projects, but will more than likely continue to receive project approval for their future projects because of their abilities to articulate business value more effectively than their peers.

The business world has seen many changes over the past century with regard to management styles, workforce procedures, quality control, and organizational theory. Figure 1.1 presents a timeline with some of these business concepts and initiatives over the past century.

There have been numerous and diverse management theories and approaches over the years that have altered the business landscape. Some of these theories have come and gone, and some have resurfaced decades after their inception. I've recently conducted time-motion studies on a Lean methodology project that incorporated Frederick Taylor's 19th-century time study principles. Even with the introduction and re-introduction of management philosophies and approaches, one aspect has always remained constant. Businesses need to make money, regardless of their approach, to be competitive in the marketplace and increase shareholder wealth.

The Need to Quantify Business Results

Executives, shareholders, and even regulatory agencies are carefully examining the minute details of financial statements now more than ever. The Enron, Arthur Anderson, WorldCom, and Lehman Brothers scandals — to name a few — have highlighted the devastating effects that creative accounting can have on a company, its shareholders, and even the communities in which they serve. New regulatory requirements, such as Sarbanes-Oxley, Graham-Leach, HIPAA, Basel II, and others, have been imposed on corporations, requiring even more diligence with their record keeping and financial reporting. Most recently, the institutional banking crisis of 2009, where the government intervened and bailed out numerous banks, is leading to even more scrutiny of the accounting methods and financial reporting of corporations. With the financials under the microscope and the constant push for profitability, it's no wonder that corporate leaders are demanding to know where every penny is spent and what the returns are for each and every one of their project investments.

Many corporate leaders have adopted the mantra no project approval without a positive ROI. I've personally witnessed managers dismissing project ideas because project teams could not articulate the value of their proposals in business terms. That is not to say the projects were bad ideas, merely that the project teams lacked the business acumen to present their ideas using appropriate business language and metrics. This is unfortunate because some of these projects were excellent ideas and the project outputs would have been beneficial for their organizations.

Even when projects do get approved, companies struggle with effectively measuring and reporting the business benefits derived from these projects. There are many reasons why companies fail to enforce business-value measurement techniques. The most common reasons are:

• Lack of concern once the project receives funding

• Too much focus on getting the project done on-time and within budget

• Project personnel lack the skill sets to quantify business benefits

• Confusion over the benefits that contribute directly or indirectly to the ROI

• Project stakeholders are too busy

• Project planning documents and business cases rarely revisited once they are approved

• Minimal interdepartmental collaboration

• Tactical thinking with short-term focus

• Management doesn't provide top-down support

Companies that proactively identify, track, and manage key business metrics, on the other hand, are able to show positive results for their project efforts expressed in financial, business, and quantitative terms. These companies are able to make informed decisions about their projects and can guide them in the direction that yields the greatest business value. With this value-focused approach, project teams can demonstrate quantitative results expressed in business terms that stakeholders understand. Examples of quantitative business results derived from project investments include:

• Generated a net present value of $3.2 million by upgrading workflow management systems and software

• Achieved 85% ROI with the implementation of an employee resource planning system

• Reduced inventory by 75% to an all-time low

• Achieved 15% cost savings with a business process re-design project

• Cut procurement cost by 70%

• Increased labor efficiency by 65%

• Reached the payback period in only 14 months by accelerating project efforts

• Produced a single interface for managing all customer-facing activities, resulting in a 32% increase in export sales

• Achieved a 22% internal rate of return for the business transformation project

• Deployed SAP software and achieved total savings of $430 million

• Consolidated data centers and reduced information technology costs by 60%

• Increased cash flow by 13% with improved planning and production cycle times

• Deployed an automated replenishment system, resulting in a 95% forecasting accuracy with business partners

Modern Day Challenges

Most companies do an adequate job of managing their projects via the triple-constraints of time, cost, and scope. These measurements are still important and are valid measures of project success, but they are not the ultimate measurements of success. In addition to the triple constraints, project professionals need to focus on positive and negative cash flows, various ROI measurements, financial and nonfinancial benefits, and other key performance measurements. No, you won't need advanced degrees in mathematics, statistics, or even business to be able to generate optimal value from your project investments. You will need to implement strategic business processes and techniques to accurately forecast, measure, and manage key business metrics to effectively guide your project and business decisions to achieve optimized business value.

Whether at the organizational or individual level, a transformation is required to make this kind of shift, and along with change comes resistance. Long established behaviors die hard, but to implement a business-focused value management approach the shift from tactical to strategic thinking must take place. The area in which this will become most apparent is how we deal with business data. Relevant business data must be captured and analyzed to guide project decisions to create business value. There are challenges to capturing performance data as it typically is not centralized, and individuals are sometimes not as forthcoming as they should be with some of this information. While soliciting workers throughout organizations for project support, or while obtaining required business data, some of the responses that project professionals may encounter are:

• Takes too much time to gather such information.

• Too costly to get the data.

• Not my job to assist with other department initiatives.

• Who wants to know and why?

• This information is not pertinent.

• We've been doing just fine.

• I don't have the information.

• I'll get to it when I can.

Securing reliable business data for analysis is not simple. Project professionals may make valiant efforts to obtain critical project data only to end up frustrated and empty-handed because the need for such information hasn't been communicated to the various data sources. This is where executive sponsorship is paramount. When there is minimal support from the higher echelons of management for projects, little support will be given to project teams from the various departments. If a project is not a priority for members at the top, it certainly won't be a priority for the lower levels of the organizational pyramid.

Project professionals will continue to face these challenges as their roles evolve into even more strategic ones. All of these challenges, however, are not insurmountable and can be overcome with strategic leadership, diplomacy, and sound value management processes. As readers of this book, you are undoubtedly involved in some manner with the selection and delivery of projects, and you realize (or are being encouraged by your bosses to realize) the importance of showing measurable business value for your projects.

I will show you how you can incorporate strategic and quantitative business processes in your project management approach to give you an extra advantage in the competitive business world by teaching you to:

• Think strategically about projects

• Determine the business value of projects both in a quantitative and qualitative manner

• Get projects consistently approved

• Manage projects strategically throughout an enhanced project lifecycle using value-focused processes and techniques

• Implement sound stakeholder management processes to ensure project support and accountability

• Incorporate effective quantitative methods into the project management framework

• Identify, quantify, and report on key business and project metrics

• Make informed decisions and provide timely recommendations to senior management

• Develop value attainment programs to achieve optimal business value

• Use project data in lessons learned sessions to promote efficiencies for future projects

• Deploy continuous improvement processes that extend beyond project closure

• Get promoted!

(Continues…)

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Excerpted from "Strategic Project Management Transformation"
by .
Copyright © 2011 Marc Resch.
Excerpted by permission of J. Ross Publishing, Inc..
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

Acknowledgments,
Preface,
Foreword,
About the Author,
Chapter 1: Projects Are Strategic Investments,
Chapter 2: Strategic Planning: The Foundation for Success,
Chapter 3: Re-defining the Project Management Lifecycle Approach,
Chapter 4: Value Attainment Begins and Ends with the Business Case,
Chapter 5: Effective Stakeholder Management Drives Value,
Chapter 6: Value Metrics: You Can't Manage What You Can't Measure,
Chapter 7: Untapping the Full Value Potential of Your Projects,
Chapter 8: You Need to Know All the Costs to Accurately Determine the Benefits,
Chapter 9: Project Benefits: ROI Contributors and Value Enablers,
Chapter 10: Building Cash Flow Models to Set Up the ROI Measurements,
Chapter 11: ROI Financial Measurements,
Chapter 12: Achieving Optimal Results in the Value Attainment Phase,
Chapter 13: From Project Closure to Continuous Value Improvement,
APPENDIX Business Plan Template,