Cents and Sensibility
A hard line on the bottom line means projects better show value. But ROI can be spelled many ways.
No business goes to market with a product or service that it isn't confident will justify the time and resources spent developing it. Should project selection be any different? Most organizations answer with a resounding "No!" Understandably, they want to focus on initiatives that promise a solid return on investment (ROI). Indeed, for executives and customers—the stakeholders who ultimately decide the fate of projects—it sometimes seems that R-O-I are the only letters in the alphabet.
But making ROI the “Holy Grail” of project valuation and selection can backfire. A project's value is driven by many factors, and many of them can't be measured, or even imagined, by ROI alone. The challenge is to take into account all the important value drivers for ongoing and future projects.
Generally stated as the benefit divided by the cost, ROI seems straightforward enough. But simplified formulas are part of a complicated problem. Project ROI equations should consider many factors, including overall impact on the organization. ROI viewed at the departmental level may look great or disastrous, but the impact on other departments may be just the opposite, depending on what the project delivers.
In some industries, companies that seek rapid paybacks may tend to avoid long-term projects with big budgets. But exclusive emphasis on quick ROI can be unhealthyin the long run. By focusing solely on an ROI percentage calculation and ignoring qualitative metrics, companies shy away from projects that can lead to significant business advantages down the road.
It can be said, some projects run the business, some projects extend the business, and some projects transform the business. Because the latter group of projects are strategic in nature, they are often the “fuzziest” to assess, and they don't stand up well in ROI comparisons to easily quantifiable projects with clear numeric results. Unfortunately, when taken at face value, these projects tend to fall down the project selection list at an organization's own peril.
At the team level, an overemphasis on ROI can often negatively impact project management behavior as much as it does decision-making at the executive level. During project execution, team members are often pushed, or take it upon themselves, to act to improve ROI. Lacking clear understanding of the project's alignment with business goals, they can often have the opposite effect.
For example, a team may cut corners in attempts to reduce costs or decrease implementation time. These actions, in turn, can cause project risks to escalate. And when ROI is held over the head of project teams without a clear explanation of how it relates to the big picture, projects may actually lose value as team members miss or ignore opportunities to improve quality.
Just as organizations need to take many factors into account when selecting projects, the question of value must be revisited and re-evaluated during project execution. Project management performed in an "ROI vacuum" can hurt team morale, productivity and creativity-all human factors that contribute directly to project value.
Perhaps the greatest attraction to ROI is also its greatest myth—that ROI is all about hard numbers and, thus, objectivity. But the fact is, how an ROI study is conducted will determine what it finds. Even more subjectively: Who conducts and presents a particular ROI analysis will often influence the ROI result.
Project sponsors, for example, will often "back into" an ROI figure to arrive at a number they believe management needs to see in order to approve the project. A savvy proponent of a project can show what appears to be an acceptable ROI, but under scrutiny, the score may lack sufficient validity.
On the other side of the coin, upper management may mandate the use of complex or unrealistic ROI equations in order to have a means to cancel or reject projects that may deliver value but do not have political support for whatever reason.
Management must consider more than ROI scores, starting with the data's relevance—from collection methods and sample size, to variables that were or weren't included. Otherwise, they won't understand what the ROI really means.
For the ROI equation to be reliable, estimated costs and benefits must be scrutinized through comparison studies and take into account all possible issues, be they changing market conditions, corporate cultures or cost of capital. These factors may help to defend or dispute the ROI results, but they certainly ensure more accuracy.
In addition, project managers and stakeholders should never forget or underestimate the effectiveness of applying common sense to support a project worth defending, or to throw water on an ROI figure arrived at by incomplete or insincere means.
And post-project reviews should be used to get a final word on the ROI of every project. It is extremely important to revisit a project and evaluate the actual costs and benefits associated with projects. In addition to identifying lessons learned and areas for improvement, reviews show the accuracy of project estimates, paving the way for better ROI forecasting in the future.
Would we ask the New York Philharmonic to play Beethoven’s Ninth Symphony faster, or to play the Ninth Symphony and the Seventh Symphony at the same time — you know, to be more productive? No, of course not.
But how often are project teams expected to juggle multiple roles and assignments, and to do so in unrealistic timeframes?
Doing things faster — and often at the same time — has become a way of life for working professionals (not to mention moms, students, and anyone else trying to cope with modern life). Project managers and their team members are no exception.
There you are, responding to dozens of emails before 8 a.m., simultaneously fielding random calls, updating information for three projects, and on your way to a status meeting, which you will leave early to attend another meeting about something else, while having a conversation in the hallway … deep breath, you are truly a mover and shaker. Or maybe you’re just moving and shaking?
In the digital age, we're taking productivity and efficiency to new levels, but it’s not always a badge of honor. At the least, we need to consider what productivity really means. It seems "faster" or "leaner" are the favored definition these days. I'm afraid that outlook is leading to a lot of high-speed crashes.
We’re losing touch with equally important factors like craft, care, culture and quality — never mind the value of finding pride in our work.
Tim Jackson, a professor at the University of Surrey and author of Prosperity Without Growth: Economics for a Finite Planet, says there are many work sectors where “chasing productivity doesn’t make sense at all,” and that “certain kinds of tasks rely inherently on the allocation of people’s time and attention.” Attention!
Jackson cites a number of examples: teachers teaching ever bigger classes at the expense of actually educating students ... nurses stretched to the breaking point who are losing empathy for their patients. To take his point further, he writes, “What would be gained by asking the New York Philharmonic to play Beethoven’s Ninth Symphony faster and faster each year?”
To that question, I’ll add: And what is to be gained by asking project teams to hurry up and deliver “results” that do not, in the end, deliver real value? "Fail fast" is one thing. Fail because you're rushing for no good reason is quite another.
More studies show plainly that this 24/7 full-throttle approach to work (and to life) is destructive and diminishing — to mental and physical well-being, and to our ability to be strategic and innovate.
In the sound and fury of this "faster, faster" management/economic model, we need to mix in a few “wait a minute” moments to question all this hyper-productivity. Because doing more with less, or doing it faster, is often just doing it worse. And who has time for that?
That's a great idea! Um ... how are we going to do it? Innovative thinking is a wonderful asset to any organization, one that should be encouraged and supported. But it's more wonderful when the great ideas get translated into tangible value.
The fact is, most cool concepts quickly go cold for want of the ways and means to execute them. All those dirty details that turn vision into reality, strategy into results — that's where project leadership comes in. But unfortunately, that's also where it often exits.
Yes, most organizations realize the importance of strong project management practices. And many have invested in project management offices, tools and training. Still, many of these same organizations see project after project continue to veer off track. Sure, some goals are achieved, but others aren't. Savings are realized here, but how much is wasted there? What's the problem, who's to blame? After all, the strategy was sound, the idea was great. It had to be poor execution that caused the project to come up short!
But time and again, it is not poor execution that is the cause of project failure. It’s not misguided strategy, either. It is the separation of strategy from execution that remains the great operational divide in the business world. This missing link leaves us spinning our competitive wheels, while frustrating the very people — the project managers and teams members — who are expected to deliver the results.
And barring extreme good fortune or superhuman efforts, projects will continue to fail until the strategic planning and the project managing are meaningfully integrated.
It isn't easy. Project teams — agile, traditional or hybrid — still operate in a vacuum all too often. Individuals focus on their own challenges and deadlines, not the big-picture vision or bold idea. And why would they if they don't participate in the development — or at the very least, the validation and refinement — of those ideas? No, if they're only asked to get things done, then only "things" will get done.
Project managers can't single-handedly bridge the disconnect caused by hierarchal power-hoarding; it’s embedded in many corporate cultures. But you don't have to be helpless victims. There are ways to get on the executive radar, and they don't all require becoming a radical outcast. In preparing your next progress report, take a second look to see if you are solely addressing your issues (however valid they may be), but not the issues keeping your bosses awake at night. Talk up customer value and financial metrics, then reframe them in terms that relate to your team's day-to-day reality.
Sure, project management is about getting things done on time, on budget and to scope. But it should be about one more thing: context. You and your team live that context as much as any executive does — often more so.
Companies will not succeed without engaged, motivated project teams — and that starts with the project leader — the living, breathing link between innovation and value, strategy and execution.