Maximize Shareholder Value with Value-Based Project Management

  Governance   Knowledge Shelf  

Misalignments  between employee rewards and shareholder value are pervasive throughout industry. In a typical organization, sales personnel incentives are based on revenue rather than profitability, and back-office personnel incentives are based on expense reductions rather than increased long-term shareholder value. However, it may surprise you to learn that most project management governance processes are also misaligned to shareholder value; additionally, advances in business intelligence amplify the need for better alignment of project management governance and shareholder value.

Most companies, particularly financial services organizations, establish project management governance based on required investments. Typically, if a project’s planned expenditure is greater than a pre-established threshold (for example, $250,000), the project requires approval by a capital spending committee and, depending on the size of the expenditure, board of directors notification. Large projects are prioritized based on value and managed by a central project management office (PMO) using a pre-established, corporate-wide project management methodology. Because large projects are prioritized based on their value, the process appears to be aligned with shareholder value, but what happens to projects requiring little investment and with relatively large benefits?

In many cases, …

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