I am currently in the process of establishing key performance metrics for project management, a project management value survey and maturity scorecard for our PMO. My challenge is determining a formula for calculating (in hard $) the value being realized by the organization and associated projects through the use of project management. We are primarily a projectized organization and are fortunate to be relatively mature in our PM practices. I have looked at the ROI/Maturity Model Study developed by Ibbs & Kwak but have been unable to extract the results I'm looking for or find other relevant examples. If anyone has any suggestions or examples, it would be greatly appreciated. Saving Changes...
Michael WoodProject Manager / Business Analyst / Business Process Improvement Guru| Independent ContractorGig Harbor, Wa, United States
Todd, I am confused. Are you seeking to establish ROI for projects or ROI for the project management process itself. If the later is the case, ROI can only be understood in context to the alternatives associated to not using a project management process or alternative project management processes. The real value of the PM process is to deliver projects on time and on budget. The ROI of your method is grounded in the efficiency and consistancy in which it delivers success. What is management after with this ROI on PM request? Are the company's PM processes suspect? Are they seen as too complex and over weight? If so, I suggest a process improvement effort be pursued with the goal of streamlining the pm process, developing performance metrics and maximizing stakeholder value. Saving Changes...
Michael, Thanks for the inquiry. Actually we are looking to illustrate, in $ terms, the positive impact project management, and the PMO has had on project success and overall $ improvement. As I indicated in my original posting, we are approximately 3.4 on a 5.0 maturity scale. Processes are lean and effective, and used by all. The best outcome so far in reaching our goal is to use a combination of project revenue/margin, and maturity level and associate those figures with the opportunity losses due to schedule overruns which delay our revenue stream. This seems to give a measurable number that can be shown in terms of $ and allows for various scenarios based on changes to estimated margins, maturity levels, cost & schedule indexes. Just wanted to see if anyone else is doing something similar, and if so, what approach they are taking. Thanks again. Saving Changes...
Todd, I'm also a little confused. It sounds to me like you are being asked to evaluate if a (relatively) mature, (apparently) effective organization should continue to exist. Maybe I'm missing something here, but what is this ROI calculation supposed to determine? Saving Changes...
Gordon et al, Sorry for the confusing message. Actually have been able (since my first posting) to devise a quantifiable ROI calculation for our project management office using Ibbs & Kwak's ROI formula, PM maturity, and a few customized inputs from our historical project data. Initially, I was attempting to take project performance data and calculate a result that could be tied back to project management performance. Since we are basically a projectized organization, projects are the interim step to our realization of revenue. Therefore, the more mature we become, the better project performance we have and, in our case, relates to retained margin, lower start-up costs, earlier realization of revenue stream, better resource management... etc.
So, by using our data and concepts from Ibbs & Kwak we've accomplished our goal. Thanks for the inquiry. Any further suggestions you may have would be appreciated. Saving Changes...
Hi Todd, actually I am looking for information on the same topic: calculate ROI for the PMO Can you help me with some docs? Thanks Gertrud Huberty ([email protected]) Saving Changes...
I am also trying to measure ROI for senior management on the implmentation of a PMO. We are currently at a lower level on the maturity scale but any documentation that you could provide would be greatly appreciated
Are we trying to do something like calculating ROI for having a leader for a team? Isnt having a PMO or implementing PM processes something similar? After much headbreaking, a sensible model may evolve, which would draw considerably from $ value to PM results, which will probably be similar to other arguments supporting PM initiatives. Am I missing something? Saving Changes...
Gee -- since Todd first posed this question more than a year and a half ago, I hope he would have found an answer by now.
That said, PMOs probabaly only have an ROI if they have a positive influnce on the throughput of projects through the system. The incremental cost of a PMO is probably trivial compared to a 100%, 50%, 20%, 10%, or even 5% increase in throughput. If the top line -- the numerator -- the return -- can be clearly understood and quantified, the denominator -- the investment -- should be a slam-dunk.
The trick is to design a PMO or have the PMO drive a process that can deliver that top line performance.
This is a fascinating subject...It can get deeply philosophical.
You can link the quality of machine coffee to client satisfaction if you want to.
I agree with some earlier comments - "why are these questions being posed in the first place?" needs to be answered.
The causal links between a PMO and bottom-line or strategic success can be as diverse or mundane as you choose them to be, the only caveat is "does Senior Management believe them to be relevant?".
Only simple and tangible things like "the PMO invoice review process picked up USD30,000 this month that would have not been billed to the client if that review process didn't exist" have that direct and indisputable cause/effect link.
"If they have moving sidewalks in the future, when you get on them, I think you should have to assume sort of a walking shape so as not to frighten the dogs."
