Quantifying the benefits of consistent project management practices

loadeddiceI’d written previously that an “elevator pitch” for selling project management should focus on improving predictability, but how can you go about proving afterwards that the effort invested was worth it?

To make this process objective, you’d want to translate predictability into financial measures.  These can then be compared against the costs of sustaining and evolving your practices.  I’m not suggesting that you include the cost of project managers or basic project management tools on the cost side as your company would likely incur those costs even if the practices followed by project managers are inconsistent.

Increased customer satisfaction and improved transparency and awareness are expected outcomes of improved project management maturity but it can be challenging to objectively evaluate such measures and harder still to convert them into financial metrics.

An alternative would be to focus on the benefits in reducing negative variances relative to approved baselines and the two most obvious candidates for this are cost & schedule.

Calculating the difference between actual cost at completion and approved budget at completion relative to the approved budget at completion will provide you with a variance percentage.  If this percentage is calculated on a per project basis and then consolidated across the projects completed within a given timeframe, it provides a means of comparing before and after performance.  While budgets for project work are likely to vary from year-to-year, the difference in consolidated percentage can be applied against the current portfolio budget to provide some idea as to the financial benefits achieved.  Another way to illustrate this is to present a table of the number of projects as a function of the total number completed which were completed on or under budget, within a 5% cost overrun, within a 10% cost overrun, and so on.

The same approach could be utilized to understand whether schedule variances are being progressively reduced, but the financial impact of delays varies based on the nature of each project.  The revenue gained by launching a new product into a highly competitive market might be critically reduced if the launch date is pushed back whereas there might be no direct financial impact if the upgrade of staff PCs to the latest version of Microsoft Office is delayed by a few weeks.

Given this, it might be better to evaluate the opportunity cost resulting from increased utilization of staff who were expected to move on to other projects.  Although an individual project’s net benefits might not be reduced because of delays, the benefits achieved across the project portfolio might be due to the ripple affect of delays in starting other projects.  The planned benefits which were expected to be achieved based on approved completion dates could be compared with the planned benefits based on actual completion dates and this could be aggregated over a given time period.  As project predictability increases, benefits should get realized closer to when they had been originally expected, and the magnitude of delayed benefits should be reduced.

Although you might be able to convince your leadership team that moving to consistent project management practices will benefit the organization, identifying and quantifying appropriate benefits will help to sustain this support.

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Categories: Facilitating Organization Change, Project Management, Project Portfolio Management | Tags: , , , | 2 Comments

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2 thoughts on “Quantifying the benefits of consistent project management practices

  1. Mark Moore, PMP

    Interesting – so often we document the qualitative results because the quantitative are “too hard to determine”. You point out some of the simple ways we can do that and show persistent value. It reminds me of one I cite where applying some lessons learned allowed us to shorten the QA cycle for releases by about 30%. No matter how you slice that, it meant actual time savings.

  2. kbondale

    Thanks for the feedback, Mark! We expect senior stakeholders to buy into the benefits of consistent PM, so we should never be afraid to require the same degree of quantitative evidence to justify continued funding as we would for any other discretionary initiative.

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