Project Management

Is project management a cost to be reduced or an enabler for cost reduction?

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A blog that looks at all aspects of project and program finances from budgets, estimating and accounting to getting a pay rise and managing contracts. Written by Elizabeth Harrin from GirlsGuideToPM.com.

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Categories: credit crunch, events


Image of banner at Lloyds RegisterIs 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.

Project management is likely to be seen as a cost to be reduced, he said, in organisations which do not have mature project management structures.  In this situation, project management is not linked to strategy and it is ineffective.  Projects delivered are not the right projects, and they don’t deliver appropriate benefits.

Project management is likely to be seen as an enabler for cost reduction in an organisation where project management as a discipline is understood and well-implemented.

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.

Culture has an impact on the PMO, which supports the organisation in achieving its strategy.  It also has an impact on how well this strategy is articulated.  Getting the strategy implemented isn’t something we can spend too much time on now, he explained.  We’re now in a position where we have to make large scale changes using a directive style – because we have to change things quickly.  In a time of austerity, organisations need to be responsive and flexible, and that means implementing and adopting change speedily.

He also explained that how we brand the project, programme and portfolio management internally has a big impact on its success.  “Do you understand your organisational culture and the impact it has?” he asked. 

The vote

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.

Project management is an enabler, but I think that those people who voted for it to be both an enabler and a cost to be reduced had it right.  It is both those things.  We need to be delivering projects in a cost-effective way.  We should be looking at the cost of project management and working out how we can best make savings to make the PMO (or P3O) as efficient as possible.  Only then can we really use project management as an enabler for cost reduction in the enterprise.
 

Posted on: December 10, 2010 05:08 PM | Permalink

Comments (8)

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Hi Elizabeth,

Would really really appreciate if you could PLEASE provide some industry-wide Facts and Figures substantiating that PM is cost to be reduced? and may be for the other side i.e. PM is enabler of cost reduction?

Your response would be immensely helpful in my study.

Thanks very much,
Best Regards,
Gagandeep Singh.

Gagandeep, in this article I was reporting on a presentation, so I can only tell you what was discussed there. However, if you want some figures about this here are some places you could start:

PM as a cost to be reduced i.e. companies feel PM is too expensive: look at the decrease in the take up of PMOs year on year as this is an area which is often cut in difficult economic times - PMOs tend to be cyclical. ESI has some good research on the global state of PMOs. See http://www.esi-intl.co.uk/resource_centre/white_papers/

You could also look at salary surveys (Arras People has one, as does PMI) and see if PM salaries are reducing as another sign that companies are cutting costs.

PM as an enabler of cost reduction: Look at PMIs Pulse of the Profession study which identifies the high cost of poor performance i.e. better PM produces better business results which in turn puts less money at risk and costs less: http://www.pmi.org/Knowledge-Center/Pulse.aspx
PMI also has a major study which has been out for a few years called The Value of PM and this may also include some useful statistics on how companies quantify the value that project management provides to their businesses although from what I remember not many companies quantify it in cost terms.

thanks VERY VERY VERY much elizabeth for your response to my query above - the ESI research articles are superb.

Would greatly appreciate if you could please share your thoughts on another topic am researching on "It is possible to be Project Manager and Business Analyst on the same project"

Can you help me first understand this topic? Are we talking that 1 person can perform both the roles OR both these two roles are required in one project OR something else?


Thanks very much,
God bless
Gagandeep Singh

Is this a university essay question? If so, I think you'd be better off asking your tutor. My interpretation of the question is that it is asking whether one person can perform both roles.

Yes - that is correct. It is asking whether it's a good proposition to be both serving as a PM and BA in one porject?

Can you please share your thoughts at the earliest - i am few hours away from my topic presentation? Would you like to share any facts / figures where this co-PM/BA model worked or NOT ?

Eagerly awaiting your response.
Cheers

I hope your presentation went well.

Great read

Great read, good thought.

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