This week we cover a series of articles from Harold Kerzner from The International Institute for Learning on the Changing Landscape for Project Management Life-Cycle Phases. In this, part one of three articles he takes a look at business value and its place in the new definition of what a project lifecycle is. We ask the question; are project managers ready to track the business value of their projects?

For the past two decades, companies have embarked upon continuous improvement efforts in all areas of project management. Most of the changes were small, even just cosmetic, and usually involved the forms, guidelines, templates and checklists we use for project management execution. The projects in most companies were regarded as operational rather than strategic projects. All of this is about to change.

Project management has now spread to the senior-most levels of management and even to the corporate boardroom. Project managers are expected to make both project-related and business-related decisions whereas in the past it was only a project-based decision. Today’s project managers are viewed as managing part of a business instead of merely a project.

The marriage of project management with business analyst activities has elevated project management to the corporate level. Project management is now seen as a strategic competency. Project managers no longer report to just a project sponsor. Instead, they report to a senior governance committee, an oversight committee or the senior-most levels of management. Project sponsorship is now committee governance rather than oversight by a single individual. This is because of the risks and complexities of today’s projects

Project management has undergone numerous changes. However, perhaps the most significant change is that the traditional project life-cycle may become obsolete and replaced with an investment life-cycle.

THE NEED FOR A PORTFOLIO PMO

Not all companies maintain a PMO dedicated to portfolio management activities. Some companies may have a single PMO that includes the activities that might be assigned to specialized activities. Even if just one PMO exists, there can be dashboard displays that are unique to specific activities assigned to the PMO. Today, it is becoming more common to have a PMO dedicated to the management of the portfolio of projects. This can lead to changes in the role of the project manager, the metrics used, the dashboard displays and stakeholder relations management.

There are three important questions that must be addressed by the portfolio PMO:

Are we working on the right projects? (i.e., Do the projects support strategic initiatives and are they aligned with strategic objectives?)

Are we working on enough of the right projects? (i.e., Does the portfolio have the right mix of projects to maximize investment value? Shareholder value?)

Are we doing the right projects right? (i.e., When will we finish and at what cost?)

In all three questions, we address the word “right.” Today, this word has a value meaning or at least implies value. Simply stated, why select a project as part of the portfolio if the intent is not to create business value? And if the project is completed within time and cost, is it a success if business value was not created? In the future, you can expect “value” to become increasingly important.

Consider the following definitions which illustrate this. The first two are the present and future definitions of a project:

PMBOK ® Guide definition of a project: A temporary endeavor undertaken to create a unique product, service or result. (PMBOK ® Guide – 5th edition glossary)

Guide definition of a project: A temporary endeavor undertaken to create a unique product, service or result. (PMBOK Guide – 5th edition glossary) Future definition: A collection of sustainable business value scheduled for realization.

The next two are the present and future definitions of project success:

Traditional definition: Completion of the project within the triple constraints of time, cost and scope or within the competing constraints.

Future definition: Achieving the desired business value within the competing constraints.

The importance of value should now be clear. Success must be defined in terms of the value that was expected to be delivered. Business cases define the benefits to be achieved. Value is what the benefits are actually worth to the business at the completion of the project. Metrics must be designed to reflect this value. Project managers must now track business value and report the results to the PMO and possibly the board room.

In the next article Kerzner starts the difficult task of defining the different types of business value and how metrics can be applied. Subscribe to the blog today to receive the next article in your in-box.