Is project management a cost to be reduced or an enabler for cost reduction?
Is project management a cost to be reduced or an enabler for cost reduction? This was the question asked at the Austerity Debate in London last month. Donnie MacNicol, Director, Team Animation, presented his view.
The role of organisational culture
Organisational culture is a key driver for how project management is perceived in the business. “Project management typically requires people to have a certain level of openness,” he said. How does this work across an organisation where other departments are not like that? It certainly makes it harder, he explained.
Attendees at the austerity debate were asked to vote on whether project management is a cost to be reduced or an enable for cost reduction. Some people put their hands up to show they thought it was a cost to be reduced. However, many of them also put their hands up to show it was an enabler for cost reduction too. Overall, the ‘enabler’ opinion won out, with the majority of people thinking that project management facilitates cost saving in companies.
The Austerity Debate: What’s the cost of project management?
Andy Murray, Director of Outperform, and lead author of PRINCE2:2009, spoke at the Austerity Debate at Lloyd’s Register in London recently about the role project management plays in this difficult economy.
Each project has an overhead, including the cost of the project manager, the sponsor, a risk budget, the project board and any project support services.
What does it cost if you don’t do projects well? There’s rework, the cost of overruns, poor outputs, under-delivery, consequential loss, and benefits that remain unrealised.
This is the infrastructure related to managing projects and includes any Centre of Excellence overheads, the PMO, support, monitoring, tools, evaluation, assurance, the Portfolio Office and audits.
I’ve been asked a couple of times now about why understanding your project’s finances is important. If your company doesn’t ask you to track your hours or what is being spent on the project, why should you care about the numbers? Your role is to deliver the project according to the scope and quality criteria set but the sponsor, right?
Your role is to deliver a project that is fit for purpose and adds some value to the organisation. Whatever you are working on should have a benefit. As we saw last week, benefits don’t have to be financial. But there should be a purpose to what you are doing – someone who cares about the outcome enough to sponsor the project, and a business case that justifies why you and your organisation are bothering to work on this project at all. And that requires you to know a little about the finances of the project.
You don’t have to do sums. You don’t need to have complicated spreadsheets or do lots of financial reporting. All you need to do is work out roughly whether the effort you are spending on this is worth the perceived benefit. Use your judgement. If the sponsor is asking you to work on a project that will take eight months of your time to complete, with no other costs, but it will deliver pretty much no benefit, is it really worth it?
This is such an important question right now as project teams are pared back to the bear minimum to reduce costs. Ideally, the programme office should have done this thinking for you, and be giving you the confidence that you are working on something important and of business value. But in the absence of someone doing that, you need to. And frankly, even if they are doing it, you should sanity check it yourself.
Put your project in the overall context of the organisation’s operating environment. With whatever ‘efficiency measures’ your company is implementing, is this project a good use of your time or could your time be better spent working on something else?
You know the hair care advert: ‘Because we’re worth it.’ Well, project managers need to work out if their projects are worth it. Are yours? Which projects will you recommend closing when your sponsor is back from holiday?
IT and the Credit Crunch
This video looks at the impacts of the recession on budgets and covers the benefits of home working as well as the green elements of saving money. There's a white paper here (.pdf) with more information.