Harold Kerzner: Project Managers Must Understand Business

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Categories: Career Help, PMI

Project managers are in for some big changes. Coming in on schedule and within budget is all well and good--but it's not enough.

That's been the running mantra for a while now, but it seems to be gaining even more traction as Harold Kerzner, PhD, explained in the first-ever closing session at a PMI global congress in North America.

"Time and cost used to drive all decisions," said Dr. Kerzner, senior executive director, project management at the International Institute for Learning Inc. "Now we're saying, 'Wait a minute, are we providing value?'"

Without that, the project will be axed.

"If management doesn't see how a project will deliver a value, that project will be canceled even if it's meeting time and budget constraints," he said.

Not all constraints have equal value, Dr. Kerzner said.

That's quite a mind shift for project managers--and it's going to take a whole new skill set.

Indeed, Dr. Kerzner boldly predicted earned value management will be "obsolete very shortly," upstaged by value measurement methodologies that consider intangibles such as goodwill or reputation.

And while a mastery of technical knowledge use to suffice, that's now considered "old school."

"Project managers must understand business," he told the crowd.

They will also need an understanding of politics, culture/religion, stakeholders and people. And Dr. Kerzner predicted a new wave of certifications in complex projects, virtual teams, cultural differences and morality and ethics.

Project managers who go in armed with those skills will find a receptive audience in the executive crowd.

"The biggest change in the last several years has been in senior management support of project management," he said. "Senior management no longer views project management as a career path. It is now viewed as a strategic competence necessary for survival of the company."

Do you agree with Dr. Kerzner? Are you seeing increased demand for business understanding--or should project managers stick to what they do best?
Posted by Cyndee Miller on: October 15, 2009 02:52 PM | Permalink

Comments (19)

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Ginger Levin
Dr. Kerzner is the leading thought leader in project management and has been so for some time. He is correct; we are no longer dominated by the familiar triple constraint -- we must consider other factors as he outlined. Are our projects and programs contributing to our organization's strategic goals and objectives? Are we doing more than just meeting ROI? What are the benefits of our work? Are we promoting innovation and transformation not only for our own organizations but also for our customers? We need to change the existing paradigms as to how we measure success in projects. I commend Dr. Kerzner as always for causing each of us to think in new directions in this exciting field. Dr. Ginger Levin, PMP, PgMP

Shaey Carter
I would like to say in response to what Dr. Kerzner is speaking of here in this article is of great importance and interest to me. I am currently attaining my degree in project management and I see where the need for business and its structure is very significant to project management.

I realize that in my classes the students are being taught that cost effectiveness and time is what will make it happen on a projects success. I have never agreed with this concept entirely. Mainly because I am a people person and I believe that you have to value what, who, where and all other sorts of entity in which you will be working with. If project managers are not taught these skills then they are truly limiting their selves and resources.

We should understand that we are managing regardless of what is given to us to manage. In management we have to be taught how to manage effectively. In business management course a person will learn traint, have insight and other addition concepts that will attribute to the success of business relating to people, politics and the economy. Project management should not be undermined it its clear understanding of what "business" is for their career.

This is very relevant now. "Project Managers must understand the business" Didn't it depends on what kind matrix organisation you are in? For eg: in a week-matrix organisation, the PM will not have much of power and control.

curt finch
Anyone know where to get his slide deck from the PMI congress closing speech that he gave? I didn't know i had to take notes and it doesn't appear to be on the congress website when I'm logged in.

Robert Higgins
Earned Value Management Obsolete? That is a bold statement. I must respectfully disagree with this. Time and cost are the simplest tangibles to measure performance. Keep it simple will never be obsolete.

At the same time I agree with Dr. Kerzner that the "weight" of EVM will be diminished by intangibles. The problem with measuring intangibles is complexity. The convergence of culture, computers and creativity will increase our ability to approximate "Intangible Value Management." I think that EVM can be useful to measure "Intangible Value Management."

For example in October 2009 on the social network Twitter the meme #beatcancer was the fastest spreading social idea according to Guinness. Donors gave 1 cent for every mention of #beatcancer in 24 hours on the social network Twitter. They raised $70,000 in 24 hours.

So Time and Cost provided incentive and validation of an Intangible Concept "support to Cure Cancer." EVM won't become obsolete, we just need to use it as the great tool that it is.

Tammo Wilkens
I think we may be drifting a bit away from "project" management here. With all due respect to Dr. Kerzner (and I use his text in my class instructions, just btw), but to me, project management is just that: managing the project objectives for successful completion. The reason that "within schedule and budget" have become such a mantra is that those have traditionally been defined as the prime objectives of successful project completion. Perhaps other issues should be considered as important, such as social responsibility, environmental care, etc. But that is not a project management issue, in my humble opinion.

What I think Dr. Kerzner is describing is a shift in company goals, which should be reflected through portfolio and program management, but not project management. His question of whether we are providing value: That is already answered by the project charter. Once the goals and objectives are established, one doesn't need to ask, within the project management arena, whether we are providing value. If the market, corporate or customer's needs change, possibly putting the value of the project into question, that is not a project management issue, but one of portfolio or program management.

I think a project manager needs to understand business, politics, economics, ecology, etc., only in so far as the project manager is involved in establishing or managing the company's programs & portfolio or helps in establishing company goals. Within the boundaries of a project, these kinds of skills (except for politics) are of limited benefit or need UNLESS those skills are required to meet the project goals because they are part of the project charter.

The project charter has already made the business decisions. Recurring review of project completion should be done within the boundaries of the project charter and company goals.

Now, don't get me wrong, I think any of that knowledge is useful for a project manager, as well as the rest of the project team. I just suggest that we keep the issue in the proper perspective.

P. S. Perhaps what we have here is a pointer for career development for project managers as they progress from managing projects to managing programs and then rising to corporate strategic management, lol.

Paul Mallows
Whilst in agreement with the broad direction of Dr. Kerzner's thinking—too many projects trundle on merrily with no real regard for the purpose of their being, their "Why?"—my concern would be the intangible nature of business value.

A focus on delivering business value at the expense of the "traditional" metrics of time and cost could be a mandate for poor project controls. Couldn't it be said that the discipline of project controls—such as earned value management—are exactly the things that have given project management the credibility to talk at executive level? To abandon these, however noble the ambition, may be to the overall detriment of project management.

A thought-provoking article. Thank you!

Arnold Clark
What Dr. Kerzner is referring to in my opinion is the need for proper IT governance/ project portfolio management. As project managers we do not want to do a great job of delivering a project that has negligible or zero business value. That is where establishing operational necessity and/or ROI is a prerequisite in the form of a business case.

Marshall King
There are compelling arguments both for and against the PM shift from cold, hard data (EVM)/triple constraint) to intangibles (goodwill, value). Can a project manager assume that throughout their project life cycle, the political, social, financial, and competitive landscape remains static? Do organizations provide ways to capture and measure these variables, or do project managers possess or know how to obtain this information to facilitate measuring project success or failure? Are organizations structured sufficiently to enable a project manager to be successful? Should the business and project decision process be inseparable? At initiation only or throughout the project life cycle? Would a project manager find it advantageous to understand both? Would it help or hinder their own value as a project manager and their viability?

Peter M. Lang
Some of the ideas presented against totally embracing what Dr. Kerzner has provided can be gently rebutted in that although PM is indeed neither program nor portfolio management, project management can and should reach out to these disciplines to proactively mitigate risks. This thus necessarily entails adding value beyond the typical EVM framework through socio-psychological "intangibles" which can make or break teams, projects, organizations, and societies at large. Adding value through cultural and thus business alignment addresses savvy project management transcending limitations of traditional linear PM contexts. Thus, optimally PM should more closely integrate with BI and vice-versa to synergistically utilize frameworks of classical Baldrige and other systemic-wide balanced strategic alignment integration models. This would enable organizational sustainability through balanced strategic/operational PM alignment within the host organizations' values/vision/mission/purpose/goals/objectives/...framework (akin to ASQ and PMI getting hitched). The quants and the quals need to figure out how to embrace each other's strengths and perspectives while generating support and understanding of projects as highly complex socio-technical systems (hint: look again at Soft Systems Methodologies' hidden/unidentified ownership (Checkland/Scholes), Cognitive Sciences dealing in Reversal Theory pertaining to motivation and expectation management (Apter), and re-read all of PMI's 2010 March Progress issue in conjunction with latest releases from Cohn, Highsmith and Wysocki re: Agile PM. Another good resource would be "Strategy Maps" (Kaplan and Norton) which discusses these aspects of alignment in greater precision. The shift away from the MBA-driven bottom line and purely embracing quant traditional methodologies to one embracing a more holistic approach for defining "value" and "customer experience" both within and outside of an organization is almost Zen-like in its attempts to create understanding of mutual partnerships at various levels within and outside of a project's immediate scope. The classical stakeholder analysis and management being the pivotal area around which risk management and other areas can create a deeper understanding and greater chance of success for preparing for and thus leveraging inevitable changing conditions.

Peter M. Lang, M.S.S.M.,
Apex /Baldrige Examiner,
Alaska PMI / ASQ Officer

After reading the of the great comments all I can say is that everything we do can be considered projects and that there is a true difference in leadership in project management, where you must understand the business, politics etc., and the details of project management. Those of us who lead understand how to achieve the goals/outcome of the intended project.

Phil Manville
I don't understand the reasons behind what Dr. Kerzner is arguing? While it is nice to know that we are working on a project that is providing value, it's not within the power of the project manager to change if our project is not providing value.

Perhaps the project manager does not see the longer term view, perhaps they do not see the strategy of the executive/sponsor or maybe the sponsor doesn't know what they are doing. Whatever the reasons, as long as the sponsor is putting up the money, the project manager should be delivering to the triple constraints.

Maureen Gan
At some extremes, there are parallels to be drawn on this subject. I had worked for an organisation, which had both IT project managers and business project managers working alongside each other in the same project. While the IT project manager focuses on the technical and IT aspects, the business project manager addresses the business concerns and ensures users acceptance. In another scenario, both IT and business project management is done by the same person. Nevertheless, these two situations increasingly placed importance on the business as well as the technical side of project management. It makes logical sense as ultimately a project is conceived to solve a business problem. The business case and the benefits of the IT project was accepted and needs to be delivered by the IT project.

With these set of common understandings, business-IT strategic alignment becomes more and more important so that ultimately the value is delivered for each investment. - Maureen Gan, PMP

I agree with Dr. Kerzner that PM need to see beyond cost and schedule constraints. More and more organizations expect their PMs to have a good understanding of Business that they are working for. If it is not there, how can I take correct decisions when I don't realize the impact of my actions on value that this project is going to bring. And to motivate team also we need to have in-depth understanding of value that this project is going to create for Business and by having that we can help team understand and work efficiently for project. Just talking plain cost and schedule no longer commands respect for PMs by Management and Team.

Thato Matsio
It is therefore important for project managers to be involved in the project proposal, business case or selection phase. In this way project managers can understand the value that the project is supposed to deliver at the end of the day.

They would also be in a position to plan how to gauge all business stakeholders in an integrated way to achieve value in terms of user acceptance and the bottom line. It is for that reason, that project managers are not only supposed to be project managers but also business people who understand the strategic importance of the projects that they are delivering.

Thato M
I would like to differ from Phil Manville. As a professional in business, i would like to think it is also your responsibility to some extent to ask about the benefits that the project is supposed to deliver and also find out the drivers behind the project. This is particular done in the feasibility assessment of the project, where a project manager is supposed to be involved.

It will indicate whether a project is financially, strategically and environmentally feasible before you as the project manager decide to take on the project or not. It is for that reason, why a project managers is supposed to be a business person as well. I don't think a project manager is supposed to take any project and not worry about whether its going to fail or add value to the organisation.

Sekhar Ryali, MBA, PMP
We are being presented with the question of how project managers are being perceived in the current environment where usable work-products are being expected in shorter time-frames. This is a fundamental shift in what is being perceived as success in a project. Understanding the customer's business is critical to being able to deliver a usable end-product. Numbers are good to report progress and not enough to measure value-add.

Project managers are in the business of creating value for the customer (client). If customers are changing their focus to intangible value-add measures in addition to the traditional EVM approach, this calls for adaptation to meet the customer's needs.

Dr.Ahmad Al-Ani, MD, PMP, CPHIMS
I do agree with Dr. Kerzner. In fact this was one of my arguments in a PM Network edition where the editor talked about PM as if it was pure financial hardcore business methodology.

Many of project managers, including myself, have this passion for PM because it's about adding value to what we do, to the team, to the organization, and even on very personal levels.It's not always about time and cost, and you can see great projects around the world who had failed in that limited sense but proved to be very valuable projects that exceeded their main objectives.

Raiana Golden PMP
I absolutely agree with Dr. Kerzner's stand on value with regards to projects. In fact, I find it fundamental and should be a first consideration when initiating a project and a continued evaluation as the project progresses.

We are in a business world where, due to all manner of things like economics, technology, etc., an organization's priorities and strategies are shifting and changing much more quickly. If a project is not going to contribute positively to the company's strategic goals - why bother? In addition - a project value may have been clear at the project inception but is it still clear when a new market opens or a merger has taken place? Can the project morph to continue to add value in the face of business change or is it better to kill/table it in favor of another project.

These and a host of other related questions are things that project managers should be keeping on the forefront. In addition, we should be evaluated on our ability to proactively track, measure, report and offer recommendations with regards to a project's continued value and quality as well as the old standards of bringing a project in on time - on budget.

Raiana Golden, PMP
Seattle WA

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