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.
When times are tough, senior management look to reduce costs and that sometimes means cutting projects and project management. So how much does project management cost? Murray explained that there several ways to look at this question.
The cost of managing a project
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.
The cost of failure
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.
The cost of managing projects
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.
Reducing these costs is possible, Murray explained. He presented several options that senior managers could consider:
- Reducing the number of projects
- Reducing the cost of managing a project – giving each project manager more projects to run, for example
- Reducing the cost of managing projects but minimising the central overheads
- Reducing the cost of failure
- Improving performance with better targets and delivering more benefits.
Murray said that the contribution project management offers is a mix of the value of increased performance, plus a reduced cost of failure and a lower cost projects, less the cost of project management itself. I’ve represented this as a sum in the picture here.
In the last decade the focus has been on methods, training and techniques, Murray said. There’s been no focus on behaviour, although he admitted that things have been looking up over the past three years. There’s been a bit of development in the organisational space around P3O and strategic planning, but he believes we can do better.
What do you think?