The Value of Project Management
and a Simple Tool to Start
Reaping Its Benefits
Kathy Schwalbe, Ph.D., PMP
May 19, 2005
Presentation Outline
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What is project management?
Recent statistics
Ways to measure the value of
project management
Using templates to improve
project management
Lots of resources
What Is Project Management?
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Project management is “the
application of knowledge, skills,
tools and techniques to project
activities to meet project
requirements” (PMBOK ® Guide
2004, p. 8)
Project Management
Framework*
*This figure and others are from my book, Information
Technology Project Management, Fourth Edition
Standish Group Statistics*
Measure
Successful projects
Failed projects
Money wasted on
challenged and
failed projects
1994 Data
16%
31%
$140 B out
of $250 B
2002 Data
34%
15%
$55 B out of
$255 B
Result
Doubled
Halved
More than
halved
*The Standish Group, “Latest Standish Group
CHAOS Report Shows Project Success Rates Have
Improved by 50%,” (March 25, 2003)
Some Interesting Statistics
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The U.S. spends $2.3 trillion on
projects every year, or one-quarter of
its gross domestic product, and the
global percentage is similar (PMI
Project Management Fact Book, 2001)

In 2003, the average senior project
manager in the U.S. earned almost
$90,000 per year, and the average
Project Manage Office (PMO) Director
earned more than the average Chief
Information Officer ($118,633 vs.
$103,925) (PMI Project Management
Salary Survey, 2003)
Top Information Technology Skills
70%
60%
60%
Percentage of
Respondents
58%
50%
42%
41%
Database
management
Networking
40%
30%
20%
10%
0%
Application
development
Project management
Information Technology (IT) Skill
Cosgrove, Lorraine. “January 2004 IT Staffing Update,” CIO Research
Reports, (February 3, 2004).
Growth in PMP Certification,
1993-2004
102,047
100,000
# PMPs
80,000
76,550
60,000
52,443
40,343
40,000
27,052
20,000
-
18,184
1,000
1993
1,900
1994
2,800
1995
4,400
1996
6,415
1997
10,086
1998
1999
Year
2000
2001
2002
2003
2004
Ways to Measure Project
Management Value
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Agreement on general benefits
Improved project
performance/results
ROI of project management
PM maturity levels
Competitive advantage
What the winners do/best
practices
General Benefits of Project
Management
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Better control of financial,
physical, and human resources
Improved customer relations
Shorter development times
Lower costs
Higher quality and increased
reliability
Improved productivity
Better internal coordination
Higher worker morale (less stress)
Improved Project Performance*
Project success is often based on meeting
project scope, time, and cost goals
Measure
Successful projects
Failed projects
Money wasted on
challenged and
failed projects
1994 Data
16%
31%
$140 B out
of $250 B
2002 Data
34%
15%
$55 B out of
$255 B
Result
Doubled
Halved
More than
halved
*The Standish Group, “Latest Standish Group
CHAOS Report Shows Project Success Rates Have
Improved by 50%,” (March 25, 2003)
Why the Improvements?
"The reasons for the increase in
successful projects vary. First, the
average cost of a project has been
more than cut in half. Better tools
have been created to monitor and
control progress and better skilled
project managers with better
management processes are being
used. The fact that there are
processes is significant in itself.“*
*The Standish Group, "CHAOS 2001: A Recipe for
Success" (2001)
What Helps Projects
Succeed?*
1.
2.
3.
4.
5.
6.
7.
8.
9.
Executive support
User involvement
Experienced project manager
Clear business objectives
Minimized scope
Standard software infrastructure
Firm basic requirements
Formal methodology
Reliable estimates
*The Standish Group, "CHAOS 2001: A Recipe
for Success" (2001)
Improvements to Key IT Project Metrics
Due to Project Management*
C
Sc
he
du
St
u
ra
st l e
o
e
te
gi me stim
c
bu r sa at
si
tis ing
n
f
C
os ess act
t/h
al ion
or ign
s
es me
T
S c im
tim nt
e
he
a
du and tin
g
le
b
pe ud
La
rfo ge
bo
rm t
rh
an
ou
ce
rs
Q
pe
ua
C
r
os fo lity
t p rm
er an
f
R orm ce
es
a
St pon nce
af
f p se t
ro im
e
d
Ti
m uct
e
i
to v ity
m
ar
ke
t
% Improvement
45
38.6 37.6 37
40
32.8 32.5 32.1 31.9
35
30
25.6 23.8
23 22.8 21.7
25
20
15
10
5
0
*Value of Project Management in IT Organizations survey,Center for Business
Practices, 2002, cited in PM Network, July 2003, p. 16
Findings From 5-Year Study on
Quantifying the Value of PM*
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Companies with more mature project
management practices have better
project performance (on time and
budget vs. 40% over time and 20%
over cost targets)
PM maturity is strongly correlated with
more predictable project schedule
and cost performance (i.e. .08
schedule performance index variation
vs. .16)
Good PM companies have lower
direct costs than poor PM companies
(6-7% vs. 11-20%)
*Ibbs, William and Justin Reginato, Quantifying the Value of
Project Management, PMI (2002)
Project Management ROI*
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Over 94% of senior PM professionals
say that implementing PM added value
to their organizations
Formula to predict increased company
ROI based on increased PMM level
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Determine cost to improve PMM level,
improvement in cost performance index
(CPI), then calculate PM ROI using profit
margins and projected annual revenues
*Ibbs, William, “The $$$ Value of Project Management: Continuing the
Search for PM’s ROI,” PDS ’02 Conference Proceedings, PMI-ISSIG
http://www.ce.berkeley.edu/pmroi/PMROI%20PMI%20Presentation%20
Feb2001.pdf
PM ROI Example*
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Company initially has PMM of 2.3,
CPI of .71, profit margin of 5% ,
$10 M projected annual revenues
Company improves PMM to 3.1,
CPI to .94, profit margin to 6.6% at
a cost of $400,000
PM ROI = (6.6%-5.0%)X$10,000,000 = 40%
$400,000
*Ibbs, William, “Managing Chaotic Projects: Improving your
PM/ROI” (http://www.ce.berkeley.edu/pmroi/
PMROI%20PMI%20Presentation%20Feb2001.pdf)
Project Management Maturity
Models
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Similar to maturity models for
improving software like the Capability
Maturity Model (CMM or now CMMI)
Several PM firms have their own
maturity models, most using levels 1-5
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The International Institute for Learning,
Inc. calls the five levels common
language, common processes, singular
methodology, benchmarking, and
continuous improvement
PMI’s Organizational Project Management
Maturity Model (OPM3) released their
model in 2004
Berkeley Project Management
Process Maturity Model
Sample PMM Assessment Questions*
*www.ibbsconsulting.com
Project Management Maturity
by Knowledge Area and
Industry
Feedback from Bill Ibbs*
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We've benchmarked a couple
healthcare organizations…what I can
say is that the IT PM capability of those
organizations was poor, especially in
terms of initiating projects. We helped
one of those companies save
several million dollars over a 2 year
period by helping them focus better on
the projects they launched.”
Wall Street reports that the healthcare
industry in general is gearing up to
spend even more $$$ on IT in the next
couple years than they have in the
past. So there's a lot at stake.”
* From e-mail correspondence Feb. 2, 2004
Other Research Suggests That PM
Maturity Models Only Measure Explicit
Knowledge*
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Explicit knowledge: “know what,” can
be put into IT, a digital or discrete
process that can be codified and
transmitted in formal, systematic
language (Nonaka 1994)
Tacit knowledge: “know how”, in one’s
experience; hard to replicate and can
be transferred indirectly though time
consuming socialization processes
(Kaplan et al 2001)
*Jugdev and Thomas, “Blueprint for Value Creation: Developing and Sustaining a
Project Management Competitive Advantage Through the Resource Based View,”
Proceedings of PMI Research Conference, 2002
Need to Make PM a Strategic
Asset (Just Like IT)
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Many executives view project
management as having worth at
the operational and tactical rather
than strategic level
Resource Based View (RBV)
frameworks emphasize how firms
create value and profits from their
internal resources and focus on
strategic assets
RBV is relevant to project
management because it
emphasizes intellectual capital
Research Based View Model*
high
Social
Capital
Strategic
Assets
Know How
PM
Maturity
low
Know What
low
high
Need to combine know what with know
how to make PM a strategic asset!
*Jugdev, Kam, presented at PMI Research Conference, July 2002
Successful Examples of Applying
PM in Healthcare Organizations
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Theory of Constraints aids in
scheduling
Good project managers are
critical to successful drug
launches
Applying the Theory of Constraints
(TOC) in Health Care*
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TOC is a form of systems thinking that suggests that
any complex system at any point in time often has
only one aspect or constraint that limits its ability to
achieve more of its goal. Need to exploit constraint
and adjust scheduling and resource usage
 A USAF base decreased waiting time for primary
care appointments from 17 days to 4.5 at no
additional cost
 Radcliff Infirmary in Oxford, England improved
waiting times for neurosurgery and ophthalmology
(noted a 100% reduction in elective cancellations
and increases in throughput of over 16% at no
additional cost)
*Breen,
Anne, Tracey Burton-Houle, and David C. Aron, “Applying the Theory of Constraints in HealthCare: Part 1 – The Philosophy,” Quality Management in Health Care,
(Vol 10, Number 3), Spring 2002, www.goldratt.com/for-cause/applyingtocinhcpt1fco.htm
Pharmaceutical Project
Managers Are a Breed Apart*
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Significant investments in drug
development projects (12 years and
$800M on average), the magnitude
of risks in the development cycle,
and extensive involvement of senor
management makes it especially
tough being a PM in this industry
“I know of no pharmaceutical
company today attempting drug
development without a project
manager to oversee it” (Luis
Cabassa, PMP, Genetech Inc.)
Pappas, Lorna, “The Right Prescription,” PM Network, October 2002
“What the Winners Do”*
Companies that excel in project delivery
capability:
 Build an integrated project
management toolbox (use standard
and advanced PM tools, lots of
templates)
 Grow competent project leaders,
emphasizing business and soft skills
 Develop streamlined, consistent
project delivery processes
 Install a sound but comprehensive set
of project performance metrics
*Milosevic, Dragan, Portland State University, “Delivering Projects:
What the Winners Do,” PMI Conference Proceedings, November 2001
Using a Standardized Project
Management Approach*
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Research found that a consistent
(one-size-fits-all) managerial
approach may be essential to the
successful standardization of certain
aspects of project management, and
a contingency approach is needed
for certain aspects, too
Low standardization with a
sufficient amount of variation is the
more appropriate approach
*Milosevic and Pantanakul, “The Impact of Standardized Project
Management: New Product Development Projects versus Software
Development Projects,” Proceedings of PMI Research Conference 2002
What Are Templates?
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Templates are documents or files
that provide an outline or format for
creating documentation
Many professionals don’t like to
write or ask others how to do
“simple” things, and no one likes to
reinvent the wheel
Templates make it easier to prepare
common project documents and
use standard tools and techniques
It’s important to tailor templates to
unique project and organizational
needs
Sample Templates
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Information Technology Project
Management, Fourth Edition,
includes
38 templates used in the book
 information for accessing 333 free
templates from other sources
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You can access all of these
template files for free from
www.kathyschwalbe.com
www.kathyschwalbe.com
Template Files
Breakeven Template
Business Case Financials Template
Financial Analysis for Project Name
Created by:
Date:
Note: Change the inputs, such as interest rate, number of years, costs, and benefits. Formulas
are entered in the Excel file used to create this template. Be sure to double-check the formulas
Discount rate
8%
Assume the project is completed in Year 0
Year
Costs
Discount factor
Discounted costs
0
100
1.00
100
1
100
0.93
93
2
100
0.86
86
3 Total
100
0.79
79
358
Benefits
Discount factor
Discounted benefits
0
1.00
0
200
0.93
185
200
0.86
171
200
0.79
159
Discounted benefits - costs
Cumulative benefits - costs
(100)
(100)
93
(7)
86
78
79
158
ROI
Assumptions
Enter assumptions here
44%
Payback before Year X
515
158
NPV
Project Charter
Project Title:
Project Start Date:
Budget Information:
Projected Finish Date:
Project Manager: Name, phone, e-mail
Project Objectives:
Approach:
Roles and Responsibilities
Role
Name
Organization/
Position
Contact
Information
Sign-off: (Signatures of all above stakeholders. Can sign by their names in table above.)
Comments: (Handwritten or typed comments from above stakeholders, if applicable)
Gantt Chart Template
Weighted Decision Matrix for Project Name
Created by:
Criteria
A
B
C
D
E
F
G
Weighted Project Scores
Date:
Weight Project 1 Project 2 Project 3 Project 4
25%
90
90
50
20
15%
70
90
50
20
15%
50
90
50
20
10%
25
90
50
70
5%
20
20
50
90
20%
50
70
50
50
10%
20
50
50
90
100%
56
78.5
50
41.5
Weighted Score by Project
Project 4
Project 3
Project 2
Project 1
0
20
40
60
80
100
Student Project Results: Free
Template Distribution by
Process Group and Knowledge Area
Knowledge
Area
Project Process Groups
Initiating
Executing
Controlling
15
7
30
52
23
12
70
Time
10
8
18
Cost
14
4
18
Quality
11
14
5
30
Human Resources
13
4
Communications
12
11
Risk
38
Procurement
4
1
140
37
Integration
Scope
Total
35
35
Closing
Total
Planning
17
35
15
12
106
73
50
0
5
15
333
Students’ Top Ten
Free Template Sites
Number of Free
Templates
22
28
Resource Name and URL
Michigan Department of Information Technology:
http://www.michigan.gov/dit/0,1607,7-139-7321_18457-45013--,00.html
Minnesota Office of Technology:
http://www.state.mn.us/cgi-bin/portal/mn/jsp/content.do?subchannel=-536879888&id=-8484&agency=OT
23
New York State Office for Technology:
12
Tasmanian State Government:
28
U.S. Department of Energy:
52
http://www.oft.state.ny.us/pmmp/templates/index.htm
http://www.projectmanagement.tas.gov.au/index.htm
http://cio.doe.gov/ITReform/sqse/pm_main.htm
University of Waterloo Information Systems & Technology:
http://ist.uwaterloo.ca/projects/templates.html
12
Method 123: http://www.method123.com
19
ProjectWare: http://www.projectware.com.au/pw030.html
14
8
State of Texas Department of Information Resources:
http://www.dir.state.tx.us/eod/qa/template.htm
U.S. Defense Logistics Agency: http://www.dsioj.dla.mil/spi/template/pm-tmp.htm
Complete details are available from the Tempting Templates web site:
http://webpages.charter.net/hafox/pm/docs/TemptingTemplatesPreliminaryReport.htm
Kathy’s Observations on Templates
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In early 2003 I added templates to my
Web site for project proposals, team
contracts, and scope statements, and
the quality of student projects improved
tremendously
People like to have more guidance on
expectations and formats for various
project documents, and they want the
actual files to make their jobs easier
Be sure the templates are useful and
not just bureaucratic paperwork, and be
sure people use them properly
Resources
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The text book Web site for my
third edition is available for free at
www.course.com/mis/schwalbe
Fourth edition Web site is
password protected (need to buy
the book!) – includes guide to
using Project 2002 and 2003,
interactive test questions, updated
lecture slides, links to hundreds of
references, etc.
Lots of info from my site
Questions?
Feel free to use templates, teaching ideas, etc.
from my Web site at www.kathyschwalbe.com.
Contact me at schwalbe@augsburg.edu.