Value of Project Management

Some companies view project management as a waste of time, money, and energy. When project management is done incorrectly, it is worse than that. If a company sees the value of project management, it will bring significant benefits to all areas of the company. If you work for a company that does not see the benefits of project management, you should educate your team, costumers, stakeholders, and your management. If you do not educate them, you will have a constant battle over deadlines, details, and information requested. When you start to educate your company, you should look at what is important, since all companies are different, and stress those points. For example, some companies value cost above everything else. In that case, build an example where mismanagement has cost the company much money and show where project management would have saved the company a lot of money and this should get the point across about project management being good for the company.

There are many benefits and project management is a valued skill for many reasons. Better management of cost occurs with tight control of the budget. Reduced expenses can occur when resources are shared for additional projects. Organizational learning opportunities can be captured through better documentation, opportunities for reflection, and learning through project reviews. Focused group managers can concentrate on the problems to be solved rather than the activities and deliverables to solve them. They can give clear direction to the team, and actively manage satisfied project teams will be filled with the right people, and the team members receive the leadership they need to deliver the projects results. They will have clear expectations, helpful communications and knowledge sharing, consistent management, and an improved work environment.

With more and more companies using project management techniques, project management is becoming a unique career path to take. “Project Management is rapidly becoming one of the most important processes within a company. The number of PMs has risen considerably as companies have begun to realize the valuable benefits they bring to the business (Kneram, 2007).” Companies who use PMs have an advantage over their competition without PMs and they pay off for the cost. “Statistics show there is a higher risk of failure without a PM, and oftentimes there can be more cost overrun and repeated projects. This is why PMs are important when resources are scarce and time is limited, and they cut down on the waste and conflict because they “provide good planning up front and improved communications between different groups” (Kneram, 2007).” All types of jobs are improved by PMs from construction, building cars, software development, to product development. Taylor and Associates can provide your organization with a project manager to help ensure a successful project.

J. Taylor
Taylor and Associates

Project Management Tools

There are various methods that can be used to control the schedule and cost of a project. The inflation of a project based on PERT estimating and incorporating risk has several pros and cons. In this discussion, we are going to discuss PERT estimating, risk analysis, and building a management reserve to help control the cost and progress of a project.

Program evaluation and review technique (PERT) is an estimating method which allows the incorporation of risk variables into the work effort, and uses a weighted average to estimate task effort. With the use of PERT, extensive planning is required to determine the critical path analysis. Some of the advantages of using PERT include the following: were the greatest effort should be made to keep the project on schedule, probability of meeting deadlines be the development of alternative plans, the ability to determine the effect of changes to the project, and accurate data is provided so critical decisions can be made by team members. Some of the disadvantages of PERT include high cost of capital, time and labor intensive, ability to make decisions is reduced, limited historical data for time-cost estimates, lacks functional ownership in estimates, assumes unlimited resources, and requires too much detail. PERT is very useful on many projects and is calculated using the following formula: “Te = to + 4tm + tp / 6, where to = most optimistic, tm = most likely, tp = most pessimistic.

Risk is a measure of the probability and the consequence of not achieving a defined project goal. All projects have a certain degree of risk associated with the ability to complete the proposed task on time and within budget. When you consider the various risk associated with different projects, the possible consequences of the damage caused by the risk should by considered. The two primary components of risk for most events are the probability of the event and the impact of the event if it occurs. The two ways that risk can by measured for project management are through Quantitative and Qualitative Risk Analysis.

Qualitative Risk Analysis includes methods for prioritizing the identified risk for further action and assesses the priority of identified risk using their probability of occurring, the corresponding impact on the objectives if the risks do occur, as well as other factors such as the time frame and risk tolerance of the project constraints of cost, schedule, scope, and quality. Qualitative Risk Analysis is a quick method with little expense that is used to help identify the priorities of the various risk associated with a project, to aid in the development of Risk Response Planning, and establishes the foundation for Quantitative Risk Analysis.

Quantitative Risk Analysis is performed on risks that have been prioritized by the Qualitative Risk Analysis process as potentially and substantially impacting the project’s competing demands. The Quantitative Risk Analysis process analyzes the effect of those risk events and assigns a numerical rating to those risks and presents a quantitative approach to making decisions. Quantitative Risk Analysis is usually completed after the Qualitative Risk Analysis and some projects do not require this type of risk analysis to develop an effective risk management plan, depending on the time requirements, budget concerns, and the type of project.

Management reserves are the contingency funds established by the program manager to counteract unavoidable delays that can affect the project’s critical path. Management reserves cover unforeseen events within a defined project scope, but are not used for unlikely major events or changes in scope. Management reserves are funds that are built into the project budget. If a major change in scope is required to complete a project, the funding comes from contingency funds, which are created by the management team and come from external sources. The advantage of having management reserves and contingency funds is to cover unforeseen expenses as the project progresses such as increase cost, delays, inflation, escalation, and change of scope. The disadvantages of management reserves include the following: the work at hand expands to fill the time available and expenditures rise to meet budget.

Earned Value is a method for measuring project performance. It compares the amount of work that was planned with what was actually accomplished to determine if cost and schedule performance is as planned. Many project managers use earned value to determine if costs and schedules are not being achieved as planned so they may address the problems as soon as possible to make appropriate corrective action. The Earned Value concept works with three parameters:

1. Planned costs or Budgeted Cost of Work Scheduled (BCWS)
2. Actual Costs or Actual Cost of Work Performed (ACWP)
3. Value of work performed or Budgeted Cost of Work Performed (BCWP).

These metrics are converted into cost and schedule performance indices (CPI and SPI) to assist in forecasting the expected completion date and the total cost for the project. The proper use of PERT estimating, Qualitative Risk Analysis, Quantitative Risk Analysis, management reserves, and earned value help projects run as planned, on time, and within budget. Taylor and Associates will be glad to provide Project Management Services which are unique to your organization which will ensure projects are completed successful, on time, and within your budget.

J. Taylor