Evaluating Benefits: Getting Statistical (Part 3)
William lives and works as an IT project manager in South Florida, and is a member of the South Florida chapter of PMI. He created StatisticalPERT.com.
Suppose you are a project sponsor, and you are evaluating three project proposals. You only have enough funding to choose just one of the three projects. Moreover, suppose that each project costs the same, requires the same resources, will have the same schedule and will create equivalent business value for your organization.
As you read over the benefits register for each project, you learn one important difference about the potential value they offer:
- Project A is expected to increase revenue by $1M, but it could potentially increase revenue up to $1.15M
- Project B is expected to increase revenue by $1M, but it could potentially increase revenue up to $2M
- Project C is expected to increase revenue by $1M, but it could potentially increase revenue up to $3M
So, all three projects cost the same, have the same schedule, and all have an expected benefit of increasing revenue by $1M, but they differ in their potential to increase revenue beyond $1M.
Think for a moment: Which project will you sponsor?
Irrespective of your choice, now suppose you and your organization make a safe, conservative, planning estimate that revenue must increase by at least $900K, even though each project’s expected benefit is $1M (with the potential to bring in even more than that).
You make other planning choices, too: you hire new staff members, hire a consultant or two …
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"It is best to keep your mouth shut and be presumed ignorant than to open it and remove all doubt." - Mark Twain |
