Calculating the Value of a
Project Management Methodology
Measuring the Value of Project Management
There are two definitive ways to calculate the value of project management to the organization - cost avoidance and
? Revenue enhancement refers to additional cases or gallons of company product being sold as a result of the project
management deployment. We don’t anticipate value coming directly in the form of additional revenue from this
Cost avoidance refers to a dollar savings associated with using project management. That is, can I/S deliver an
equivalent number of function points of work for less effort (dollars) that we can deliver it today? We will not be
able to capture this type of hard cost savings either, for the following reasons.
1. We do not have the metrics in place to determine the function points delivered by the worldwide
organization on a yearly basis, nor do we necessarily want to try to calculate them at this time.
2. Any direct labor hours saved as a result of using project management will probably immediately be
reallocated to other high-priority projects.
3. Because the I/S environment is so dynamic, it will be almost impossible to determine the specific impact of
even a large project like the project management deployment program, as compared with other large
Fortunately, there are some softer numbers we can apply to help us calculate the value of deploying project
management. Industry research has shown that there are definite productivity increases and cost savings, over time,
associated with using a standard methodology. For the purposes of the project management Global Deployment
Program, we are assuming this value to be up to a maximum of 20% of the cost of the project. This is reasonably
conservative based on Gartner Group recommendations of a 30% savings, and the Software Engineering Institute
estimate of a 35% savings. A Gartner Group resource that specializes in measuring the value of a methodology has
reviewed these metrics and is comfortable with the approach we are proposing.
We will track three general value measures.
? Metric #1 - The incremental value that project management provides on each project team where it is first applied,
versus how the team would have been performed without project management.
? Metric #2 - The reuse and reduced startup time associated with Project Management and Solution Delivery
processes and deliverables on a project where project management has been used before.
? Metric #3 - The value associated with stopping or placing projects on-hold, because proper project management or
workplans were not in place.
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In addition to the value of project management, as measured in dollars, there are other benefits relating to quality. We
will be measuring two of these in the project management Scorecard - the quality of the estimating process and an
overall quality rating given to IT by the business client.
? Metric #4 - Track how close we delivered the solution to our original estimates. These metrics capture actuals vs.
estimates in terms of the cost of the project, the duration (days) and the effort (hours) required. In some ways, being
too far under budget is as bad as being too far overbudget. Our goal, over time, is for these variances to trend
? Metric #5 - Contains a survey which we will ask our business clients to complete. The survey asks a number of
questions regarding the business client’s level of satisfaction with the deliverable I/S produced, as well as the
process we used to deliver it. Our goal, over time, is for this satisfaction number to get higher and higher, with a five
being the highest possible rating.
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PM is Project Unit of Management Client Expectation Measure Example Data Needed Data Collection Feedback
What data do we need? SD is system development What is the specific What must we do well to How will the metric be How are we going to What is our method &
calculated? format for sharing client expectation? meet the expectation? collect data? By
data? How often? What will we graph on our whom & how often?
We expect that we will For all projects using project A - Without project Collect information on Data will be captured Data will be consolidated Performance Excellence
provide incremental management management, the PM state of project first after the setup of monthly and reported on value to project teams processes would have deliverables before project management the Program Status A - Determine how the first time they utilize been a 2. project management (if deliverables. The initial Report. What value are we comprehensive their PM project management, project already started), project cost is assumed providing to the processes would have been B - With project versus what their or what they would have to be the project budget. organization? without project management, the PM performance might have been without project management (Scales are practices are a 6. been without the management. defined below.) introduction of project Project budget is The project cost is Initial Project Value of management. B - determine how $200,000. updated to reflect the project management comprehensive their This information is used actual amount spent at 1) processes are with project to gain agreement the end of the project.
(This metric is used if the management (using the between project Value = (6 - 2) / 100 * Project Manager is same scales) management coach and 200,000 = $8,000 utilizing project Project Manager on a Data is captured by the management processes rating describing their project management for the first time.) processes without and Value of project coach and sent to the A - Without project with project management = Performance management, the management. Management processes would have (B - A) / 100 * (project Coordinator. been a 2. (2 numbers for PM, 2 budget) numbers for SD) B - With project management, the Maximum initial value for is practices are a 4. Project budget / actuals 10% of project cost. Project budget is
Value = (5 - 3) / 100 *
200,000 = $4,000
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We expect that a project Determine the familiarity of The Project Manager and Agreement from the Data will be initially Data will be consolidated Performance Excellence
team will require less the project team to project the project management Project Manager and the captured at project monthly and reported on startup time, and will management, based on the Coach agree that the project management startup. Project cost is the Program Status work more effectively scales defined below. team rating for PM Coach on the scale rating assumed to be the Report. What value are we and efficiently, If they familiarity is an 8, and which best represents the budget. providing to the have used project SD familiarity is a 5. project team’s familiarity organization? management on other with project Value of project projects in the past, management. management = The project cost and because of familiarity Current project budget is team familiarity may be Subsequent Project Value with the process and $200,000 updated at the end of the reuse of templates, Project Budget. project, to reflect the (rating scale value) / 100 * practices, etc. actual amount spent and (project budget) 2) any changes to the Value = (8 + 5) * 200,000 project team makeup. = $26,000 This metric is used if the There are separate scales for Project Manager has SD and PM. utilized project Data is captured by the management PM or SD project management processes at least once coach and sent to the Maximum total value is 20% before. Performance of the project cost. Management
Coordinator. We expect that the If a project is placed on A project is placed on If the project is shut Data will be captured Data will be consolidated Performance Excellence
company will save hold, there is no value right hold because of a lack of down, determine the after the setup of project monthly and reported on additional money if we away. PM practices and control. remaining project budget management the Program Status hold or shut down before shutdown. deliverables, if the Report. What value are we projects that do not have project is restarted. providing to the proper PM or SD organization? However, if the project is The project is restarted practices in place. restarted, then Metric #1 is after proper project If project is restarted, applied. Total value to the management PM determine new estimate If the project is not
company is twice the value practices are put into to complete, and the restarted, a savings of Value of Holding / calculated by metric #1. effect. The estimate to incremental value using 50% is based on the last Stopping Projects. (20% maximum). complete is $500,000. the ratings from metric estimate-to-complete #1. dollar amount. 3) If project is shut down Based on using the
completely, then overall formula in metric #1, the Data is captured by the
company savings is equal to incremental value of project management
50% of the remaining dollars adding project coach and sent to the
on the original project. management is a 7. Performance
Value = 2 *(7/100 *
500,000) = $70,000.
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We expect that project Budgeted dollars versus the Project A was estimated Budgeted dollars, hours Data will be collected at Data will be consolidated Performance Excellence
management will allow actual dollars spent. (include to need 1000 labor hours, and cycle time. the end of project by the monthly and reported on the I/S organization to labor and non-labor $) $50,000 and 100 days to project manager, using the Program Status estimate effort, cost and deliver. the end-of-project Report. What is the Variance cycle time more metrics form. Actual dollars, hours and Between Actual Effort, Cost accurately, resulting in Budgeted labor hours versus cycle time. and Duration versus our less variance between the actual hours used. When the solution was Estimates what was estimated finally delivered, the The project management versus what actually was actual totals were 1000 coach will be responsible required to deliver the labor hours, $52,000 and for ensuring the data is Budgeted duration (days) (Stewardship, Speed) solution. 98 days. reported. versus the actual duration (days) 4) Variances are as follows:
Overall formula is effort = |(1000 - 1000) /
1000 / 100| = 0% (|(actual - budget) / budget) /
100 cost = |(52,000 - 50,000)
/ 50,000 / 100| = 4%
duration = |(98 - 100) / (The absolute value is
100 / 100| = 2% reported, so that over and
under do not cancel out.)
We expect that project Client satisfaction survey When project A was Results for the end-of-Data will be collected at Data will be consolidated Delivering Results
management will allow results. completed, the survey project survey are the end of project by the monthly and reported on IT to better meet and was sent to six of the required. project manager, using the Program Status
exceed the client’s major business clients. the end-of-project Report. How Satisfied are the expectations, in terms of Their scores were metrics form. This Business Clients with the the value they received consolidated and contains a short survey Solution I/S Delivered and for their investment, and averaged. The result was which should be sent to the Delivery Process. the process we used to an overall average of 3.44 all the major business deliver the solution. out of 5. clients.
(Price Relative to Value)
The 3.44 overall average The project management
is collected. coach will be responsible 5) for ensuring the data is
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Metric #1 - State of Project Management and Solution Delivery Deliverables
A) Before project management coaching.
? To be used if deliverables are already in place, or if project has already started.
? If project has not started, estimate where the project would be if project management was not there. Reviewing completeness of the first charter
and workplan drafts will help gauge where the rating would be.
B) After project management coaching, the PM rating is assumed to be a 6, and the SD rating is assumed to be 4, unless special circumstances exist. For project management PM, the following scale is used.
0 No charter or other formal PM deliverables in place.
1 No formal charter, but some startup documents in place. Not enough information documented to create a charter. No or few other PM deliverables
/ practices in place.
2 No formal charter, but enough information documented to understand goals, objectives, scope, etc. Large effort required to create project
management charter. Other PM deliverables / practices are weak or missing.
3 Charter created, but weak. PM practices being applied based on Project Manager experience, but not formally managed in logs, reports, etc. 4 Good charter created. Some PM deliverables in place, but not followed consistently.
5 Solid charter created, and most other PM deliverables in place and being utilized consistently. Minor project management coaching effort required. 6 Solid, formal charter created, and other PM deliverables in place and being followed consistently. Minimal project management coaching effort
IF project management SD is being applied, the following scale is used.
0 No workplan is in place. Scheduling done in Project Managers head or not at all.
1 Workplan in place, but weak or high level. Workplan is not being kept up-to-date. Cannot tell whether project is on schedule or not. 2 Workplan in place, and being updated, but at a high level, or not consistently.
3 Workplan in place and being updated consistently. Plan is still at too high a level, with much of the work activity buried in large work assignments
(over 80 hours).
4 Solid workplan in place and being consistently managed to - at least at an activity level. No current or near-term assignment is over 80 hours.
Team knows what their deliverables are and when they are due.
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Metric #2 - State of Previous Project Management and Solution Delivery Team Experience
PM experience (Use in-between numbers, if necessary, to show slightly different experience than the description indicates.)
0 Project Manager has no prior project management PM experience. (Should be using metric #1).
4 Project Manager has used once before, but on less complex project.
6 Project Manager has used once before, on a similarly complex project.
7 Project Manager has used multiple times, but on less complex projects. Few team members have used at least once before. 8 Project Manager has used multiple times, but on less complex projects. Some / most team members have used at least once before. 10 Project Manager has used multiple times on at least one similarly complex project. Few team members have used before. 12 Project Manager has used multiple times on at least one similarly complex project. Some / most members have used before. Development experience (Use in-between numbers, if necessary, to show slightly different experience than the description indicates.) 0 Project Manager has no prior project management SD experience. (Should be using metric #1).
2 Project Manager has used once before, but on less complex project.
4 Project Manager has used once before, on a similarly complex project.
5 Project Manager has used multiple times, but on less complex projects. Few team members have used at least once before. 6 Project Manager has used multiple times, but on less complex projects. Some / most team members have used at least once before. 7 Project Manager has used multiple times on at least one similarly complex project. Few team members have used before. 8 Project Manager has used multiple times on at least one similarly complex project. Some / most members have used before.
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