1st Edition

Managing Projects as Investments Earned Value to Business Value

By Stephen A. Devaux Copyright 2015
    256 Pages 79 B/W Illustrations
    by CRC Press

    Every project is an investment; however, traditional project management methodologies do not support assessment of the business value that enables senior management to maximize decision making. The next evolution in project management, therefore, will be to manage projects as investments. Managing Projects as Investments: Earned Value to Business Value provides tools and metrics to enable planning, measuring, evaluating, and optimizing projects.

    This book shifts the paradigm. It builds on traditional scope-cost-schedule tools, adding a critical new focus on the expected value of projects and programs. The enhancements in processes and metrics allow senior management and PMOs to guide the entire organization on the basis of business benefits, and to ensure that decisions ranging from project selection to resource assignment facilitate those goals. The author shows how framing projects as investments enables significant improvement in project performance. He provides metrics that allow you and your team to track and maximize performance based on ROI.

    Demonstrating the importance of recognizing an enabler project in a program, and why its value and cost of time are so great, the book provides the tools to determine right-sized staffing levels for project-driven organizations. It includes a comprehensive but easy-to-understand explanation of both basic and advanced earned value metrics, their shortcomings, and how they can be improved and shows you how to optimize contract terms on projects in a way that can avoid misaligned customer/contractor goals.

    Redefining projects
    Value drivers
    Planning and tracking projects as investments
    Traditional project tracking
    Project success and failure
    Of deadlines and budgets
    Procrustean bed of deadlines

    Quantifying the triple constraint model
    COST side of the project investment triangle
    Finance departments and overhead burdens
    SCOPE side of the project investment triangle
    Product scope: Main generator of project value
    Project scope: A secondary generator of the project value
    Customer value and internal value
    Implications of various contract types
    Project investment metrics
    Expected project profit planning formula
    Expected project profit at completion formula

    Examples of expected project profit calculation
    Summary points
    Endnotes

    Of time and timing
    Simple example of the complexities of managing time
    Examples of impact of time on projects
    Impact of time on emergency response projects
    Impact of time on enabler projects
    Impact of time on contractual enabler projects

    Ignoring the cost of time
    Time as an externality
    Summary points
    Endnotes

    Tracking projects by investment value
    Expected value versus actual value
    DIPP: A formula to analyze termination of a project investment
    Simple DIPP: Setting the baseline for expected project
    profitability
    DIPP Progress Index (DPI): Tracking project value against
    baseline DIPP
    Case for this new approach to planning projects
    Summary points
    Endnotes

    Managing project time
    Critical path is—uh—critical!
    Activity identification and duration estimating
    Hard and soft dependencies
    Basics of the CPM algorithm
    Critical path drag
    Managing change
    Riding a changing schedule
    Answers and explanations

    A tragic example from history
    Summary points
    Endnotes

    Optimizing the schedule with drag and drag cost
    Drag cost
    True cost of project activities
    Resource elasticity and the DRED
    Using the DRED with true cost
    Cautionary note on using the DRED
    Assessing optimization of the CPM schedule

    Three-point estimating
    Monte Carlo systems
    Summary points
    Endnotes

    Combining project investment tools
    Step : Determine expected monetary value of the project
    Kindb // : PM
    Contents ix
    Step : Develop a value breakdown structure (VBS)
    Estimating the value-added of the training project to the
    immunization program
    Estimating the value-added of activities in the training project

    Step : Determine value/cost of time on the project
    Step : Computing drag cost of optional activities
    Step : Calculating net value-added of optional activities
    Uncertainty principle in schedule optimization
    Final word on the schedule optimization process
    Using critical path drag to recover a schedule
    Computing critical path drag on a schedule subset
    Summary points
    Endnotes

    Of resources and rightsizing
    How we got to this point
    Resource availability and project CPM schedule
    Resource unavailability and activity duration estimates
    Role of the functional manager

    Utilization rate metric
    Maintaining the resource library
    Working around lack of a resource library
    Resource leveling
    Time-limited resource leveling
    Resource-limited resource leveling
    The cost of leveling with unresolved bottlenecks (the CLUB)

    Elusive goal: Stable staffing levels for a project-driven organization
    Rightsizing staffing levels for a project-driven organization
    Summary points

    Fundamentals of earned value
    What earned value is and isn’t
    Just what is earned value?
    Fundamental basis of earned value tracking

    Basic earned value cost tracking formulas
    Basic earned value schedule tracking
    Flaws in earned value schedule tracking
    Gaming the SPI
    Fixing the SPI
    Earned schedule tracking
    Tracking the DIPP through earned value
    How to use the DIPP to redeem projects
    Summary points

    Advanced earned value
    Earned value based on milestones
    Tracking CPI based on labor
    To complete performance index (TCPI)
    Critical ratio cost index
    Earned value based on milestones
    Combining earned value metrics with the DIPP
    Summary points

    Conclusion
    Appendix
    Glossary
    Index
    K

    Biography

    Stephen A. Devaux, PMP, MSPM, is president of Analytic Project Management (APM), a training and consulting company he founded in 1992. APM is a Global R.E.P. of the Project Management Institute (PMI). Their clients include BAE Systems, Siemens, Wells Fargo, Texas Instruments, Wyeth Pharmaceuticals, iRobot, L-3 Communications, American Power Conversion, Irving Oil, and Respironics.
    Devaux is the author of the book, Total Project Control: A Manager’s Guide to Integrated Project Planning, Measuring, and Tracking (1999, Wiley). He has worked to develop and use new approaches and metrics in project management with clients in a wide range of industries. “When the DIPP Dips” was published in the Project Management Journal in 1992 (an article that was reprinted in PMI’s Essentials of Project Control in 1999). He has contributed chapters on his new scheduling metric, critical path drag, in two 2013 books: Project Management in the Oil and Gas Industries and Handbook of Emergency Response. He has authored numerous articles and PMI webinars, and is a frequent speaker at PMI chapter meetings throughout the United States.
    He began his career at Fidelity Investments, Citicorp, and the Federal Reserve Bank of Boston and then taught and consulted in project management at Project Software and Development, Inc. (PSDI). He has taught graduate project management courses at Suffolk University, Brandeis University, and The University of the West Indies/Barbados and in executive education programs at Bentley University and University of Massachusetts/Lowell. Born in Barbados, he has been living in the United States since 1964. He is a Vietnam veteran and a naturalized US citizen. He lives with his wife, Deborah, in Swampscott, Massachusetts.

    "For first time users, this book is a valuable contribution to the project management industry. Simple, clear, concise examples ensure the understanding of the reader. … Good, clear, concise descriptions of the theory certainly make the case for project managers to use the methodology presented. [It] should help prevent cost and time overruns, which too often occur. … very chatty style! The summary points are very useful and time saving."
    —Raphael M. Dua, Micro Planning International Asia Pacific Pty. Ltd., Melbourne, Australia

    "… easy to follow and clearly explains current project management methods and concepts in order to introduce the, now seemly obvious, benefits of new ones. … an eye opener and a career enhancer. This book challenges the project manager to step out of his comfort zone and to start thinking like a business manager who invests in value. Extremely well written with no fluff, this book should not only be on every project managers and senior managers bookshelf, but well-thumbed and ‘dog eared’ from repeated reading.
    —Emily Foster, Ten Six Consulting

    "I am delighted to see an author address project management from this innovative perspective. An investment is the keystone to organizational success. If a project is viewed as such, more resources and efforts will be directed at this, thereby increasing the chances for success. Project management is an investment, not an overhead. This book brings this fact to the forefront."
    —Adedeji Badiru, Air Force Institute of Technology

    "… approachable, clear and thought provoking. Mr. Devaux presents the reader with the tools to improve their project management maturity - tools essential to replacing intuition based decision making with quantifiable and justifiable analysis."
    —Bernard Ertl, Vice President, InterPlan Systems

    "… is very useful to practitioners seeking to expand their understanding on managing projects and project portfolios. The new concepts may help even the experienced project managers. The layout of the author’s rationales in driving towards the implications contained in the chapters should also allow anyone new to project management to follow and to understand the challenges and the best practices in managing projects."
    —Kuo-Ting Hung, Suffolk University

    "In his book Stephen Devaux promotes innovative approach to project management when project management goal is not just meeting triple constraint but maximizing project business value. He suggested new project metrics that is very useful for informed management decisions and being properly used may save a fortune to project owners."
    —Vladimir Liberzon, Spider Project

    "Steve Devaux identifies and illuminates the secret sauce that has been at the root of many successful projects across multiple industries. Outsiders looking in may attribute project success as being at the right place at the right time or having a unique team of superstars. However, successful project teams know the four important ingredients: having a clear vision of product value, executing the project to meet a market window, creating project methodologies to deliver the project, and assembling the team with the right skill diversity."
    —Edward R Equi, Massachusetts Institute of Technology

    "… sets a foundation for the value of project delivery reliability and it’s affect on the program/portfolio business case. In a greater sense, it enlightens organizations regarding the value and importance of improving their organizational project management maturity. … takes a value driven approach to organizational project management and is an enabler for Lean thinking with regards to program or portfolio management."
    —Joseph A. Sopko, Joseph A. Sopko Consulting, LLC

    "This new book by Mr. Stephen A. Devaux explains detailed methodology for enhancing project value with his original tools and metrics which he has been developing these years. These ingenious methodologies would surely be helpful for professionals in managing projects and programs, I do believe."
    —Tomoichi Sato, JGC Corporation/Tokyo University

    "The book is easy to follow and clearly explains current project management methods and concepts in order to introduce the, now seemly obvious, benefits of new ones. Everything is very well presented with great examples and anecdotes used to reinforce key points. All project managers regardless of experience should read this book. It accurately captures project management and its use today and offers a great new perspective and methods to manage projects as investments and track performance based on ROI. For most in our industry, this book should be an eye opener and a career enhancer. This book challenges the reader to step out of their comfort zone and to start thinking like a business manager who invests in value. Extremely well written with no fluff, this book should not only be on every project managers and senior managers bookshelf, but well thumbed and ‘dog eared’ from repeated reading."
    —Book Review by Ten Six Consulting