Managing Projects as Investments Earned Value to Business Value

Every project is an investment; however, traditional project management methodologies do not support assessment of the business value that enables senior management to maximize decision making. The next evolution in project management, therefore, will be to manage projects as investments. Managing Projects as Investments: Earned Value to Business Value provides tools and metrics to enable planning, measuring, evaluating, and optimizing projects. This book shifts the paradigm. It builds on traditional scope-cost-schedule tools, adding a critical new focus on the expected value of projects and programs. The enhancements in processes and metrics allow senior management and PMOs to guide the entire organization on the basis of business benefits, and to ensure that decisions ranging from project selection to resource assignment facilitate those goals. The author shows how framing projects as investments enables significant improvement in project performance. He provides metrics that allow you and your team to track and maximize performance based on ROI. Demonstrating the importance of recognizing an enabler project in a program, and why its value and cost of time are so great, the book provides the tools to determine right-sized staffing levels for project-driven organizations. It includes a comprehensive but easy-to-understand explanation of both basic and advanced earned value metrics, their shortcomings, and how they can be improved and shows you how to optimize contract terms on projects in a way that can avoid misaligned customer/contractor goals.

Redefining projects Value drivers Planning and tracking projects as investments Traditional project tracking Project success and failure Of deadlines and budgets Procrustean bed of deadlines Quantifying the triple constraint model COST side of the project investment triangle Finance departments and overhead burdens SCOPE side of the project investment triangle Product scope: Main generator of project value Project scope: A secondary generator of the project value Customer value and internal value Implications of various contract types Project investment metrics Expected project profit planning formula Expected project profit at completion formula Examples of expected project profit calculation Summary points Endnotes Of time and timing Simple example of the complexities of managing time Examples of impact of time on projects Impact of time on emergency response projects Impact of time on enabler projects Impact of time on contractual enabler projects Ignoring the cost of time Time as an externality Summary points Endnotes Tracking projects by investment value Expected value versus actual value DIPP: A formula to analyze termination of a project investment Simple DIPP: Setting the baseline for expected projectprofitability DIPP Progress Index (DPI): Tracking project value againstbaseline DIPP Case for this new approach to planning projects Summary points Endnotes Managing project time Critical path is—uh—critical! Activity identification and duration estimating Hard and soft dependencies Basics of the CPM algorithm Critical path drag Managing change Riding a changing schedule Answers and explanations A tragic example from history Summary points Endnotes Optimizing the schedule with drag and drag cost Drag cost True cost of project activities Resource elasticity and the DRED Using the DRED with true cost Cautionary note on using the DRED Assessing optimization of the CPM schedule Three-point estimating Monte Carlo systems Summary points Endnotes Combining project investment tools Step : Determine expected monetary value of the project Kindb // : PMContents ixStep : Develop a value breakdown structure (VBS) Estimating the value-added of the training project to theimmunization programEstimating the value-added of activities in the training projectStep : Determine value/cost of time on the projectStep : Computing drag cost of optional activitiesStep : Calculating net value-added of optional activities Uncertainty principle in schedule optimization Final word on the schedule optimization process Using critical path drag to recover a schedule Computing critical path drag on a schedule subset Summary points Endnotes Of resources and rightsizing How we got to this point Resource availability and project CPM schedule Resource unavailability and activity duration estimates Role of the functional manager Utilization rate metric Maintaining the resource library Working around lack of a resource library Resource leveling Time-limited resource leveling Resource-limited resource leveling The cost of leveling with unresolved bottlenecks (the CLUB) Elusive goal: Stable staffing levels for a project-driven organization Rightsizing staffing levels for a project-driven organization Summary points Fundamentals of earned value What earned value is and isn’t Just what is earned value? Fundamental basis of earned value tracking Basic earned value cost tracking formulas Basic earned value schedule tracking Flaws in earned value schedule tracking Gaming the SPIFixing the SPI Earned schedule tracking Tracking the DIPP through earned value How to use the DIPP to redeem projects Summary pointsAdvanced earned value Earned value based on milestones Tracking CPI based on labor To complete performance index (TCPI) Critical ratio cost index Earned value based on milestones Combining earned value metrics with the DIPP Summary points Conclusion Appendix Glossary Index K

Stephen A. Devaux, PMP, MSPM, is president of Analytic Project Management (APM), a training and consulting company he founded in 1992. APM is a Global R.E.P. of the Project Management Institute (PMI). Their clients include BAE Systems, Siemens, Wells Fargo, Texas Instruments, Wyeth Pharmaceuticals, iRobot, L-3 Communications, American Power Conversion, Irving Oil, and Respironics.Devaux is the author of the book, Total Project Control: A Manager’s Guide to Integrated Project Planning, Measuring, and Tracking (1999, Wiley). He has worked to develop and use new approaches and metrics in project management with clients in a wide range of industries. “When the DIPP Dips” was published in the Project Management Journal in 1992 (an article that was reprinted in PMI’s Essentials of Project Control in 1999). He has contributed chapters on his new scheduling metric, critical path drag, in two 2013 books: Project Management in the Oil and Gas Industries and Handbook of Emergency Response. He has authored numerous articles and PMI webinars, and is a frequent speaker at PMI chapter meetings throughout the United States.He began his career at Fidelity Investments, Citicorp, and the Federal Reserve Bank of Boston and then taught and consulted in project management at Project Software and Development, Inc. (PSDI). He has taught graduate project management courses at Suffolk University, Brandeis University, and The University of the West Indies/Barbados and in executive education programs at Bentley University and University of Massachusetts/Lowell. Born in Barbados, he has been living in the United States since 1964. He is a Vietnam veteran and a naturalized US citizen. He lives with his wife, Deborah, in Swampscott, Massachusetts.