On February 16, we went live with the website project I have been working on for the last 2.5 years. The deployment was successful, and our post-deployment support and stabilization period has so far gone well.
On March 5, I will present at the PMI Asia Pacific Global Congress in Sydney, Australia. I'll post the paper and presentation slides here soon.
Wednesday, February 20, 2008
Thursday, February 14, 2008
An Unpopular Position?
In recent posts on gantthead.com and in ongoing discussions with colleagues in the business of project management education, I've engaged in many discussions with a common theme: The idea that project managers should be taught how to develop, and (more to the point of this post) expect to be involved with the development of business cases, and know how and be involved with cost justification and financial analysis of projects. For a few years, I bought into this position. It had to do with my then-current job duties perhaps, as well as the fact that I was (and continue to) evolving my understanding of the role of the project manager. Plus, the concept of developing project managers as business leaders was and is compelling and seductive - PMs are business leaders and should be running their projects with business objectives in mind.
Recently, though, I've determined to say "no - not the case." Now, it's doubtless valuable for project managers to know as much as possible about financial management for a variety of reasons. The more a PM knows about the financial aspects of business and the projects one is leading, the better job one can do. A PM's understanding of the project's business case will help the PM more effectively manage the project and the budget. And, PMs interested in career advancement would do well to add financial management and accounting knowledge to their personal portfolio.
However, the role of the project manager is not business case development, project justification, portfolio analysis, or calculating payback periods. Note I said "project manager." If your role specifically involves portfolio management, program management, business unit or department management, then I am not talking to you. I'm talking about PMs who manage projects. It's not your/our job to do business case analysis and justification of projects. It is our job to develop and provide the information that is used to perform this work: Estimates, risk analysis, resource requirements, schedules, etc.
But business case development and project justification is the job of other business people. For example - In my particular company, I work in the IS department. We have a portfolio of potential projects that have been requested but not funded. They are in future budgets as placeholders but have not been formally approved. In our project management methodology, we have a process through which we will go all the way through Design before providing a final and definitive estimate to the sponsor.
At that point, the sponsor can make the final decision: He/She has costs, a schedule, a design - everything needed to decide whether to fund the project. Has the project manager done any financial work? Yes - estimating of costs. The PM has not, and will not, do any work related to justification of the project, ROI, rate of return, payback period, etc.
It is the responsibility of the sponsor to explain why the project is needed and how it will benefit the company. The sponsor uses various information, including information from initial, high-level project estimates developed by a project manager, to do this.
Now - as a PM, I have done this type of work. It's been delegated to me by my boss, because I know how, and so I do it, then collaborate with him to fine-tune its presentation. Then he presents it to the corporate leadership and the project gets approved... or not. Once the project is underway, I am not accountable for reviewing whether the project will still achieve its expected ROI or payback period. I am accountable for providing accurate metrics and budget reporting, on which decisions about the project may be made by others.
So - Do we advocate that project managers should be taught how to develop business cases, do financial analysis of projects, calculate NPV, payback periods, ROI, IRR, etc? Maybe. It depends on what your career goals are. You do not need to know this to be an effective project manager. You might need to know this to be an effective manager of project managers. You should probably know something about this to be a progam manager and you definitely need to know this if you are running a project-based consulting firm, a business unit, or want to do this in the future.
Project managers who want to be good project managers don't need to worry too much about this. Projects don't fail because the PM did not know how to calculate Net Present Value. Projects fail because sponsors demanded detailed and unchanging estimates too early in the lifecycle, because stakeholders withheld information, because eager vendors underestimated the project's scope and cost and then tried to weasel out of delivering.
So - work on communications. Practice negotiating and communicating with sponsors and stakeholders. Work on managing vendors and developing air-tight statements of project scope and deliverables. Leave the financial analysis to those who need to justify the projects - but learn it if your career plans require it.
Recently, though, I've determined to say "no - not the case." Now, it's doubtless valuable for project managers to know as much as possible about financial management for a variety of reasons. The more a PM knows about the financial aspects of business and the projects one is leading, the better job one can do. A PM's understanding of the project's business case will help the PM more effectively manage the project and the budget. And, PMs interested in career advancement would do well to add financial management and accounting knowledge to their personal portfolio.
However, the role of the project manager is not business case development, project justification, portfolio analysis, or calculating payback periods. Note I said "project manager." If your role specifically involves portfolio management, program management, business unit or department management, then I am not talking to you. I'm talking about PMs who manage projects. It's not your/our job to do business case analysis and justification of projects. It is our job to develop and provide the information that is used to perform this work: Estimates, risk analysis, resource requirements, schedules, etc.
But business case development and project justification is the job of other business people. For example - In my particular company, I work in the IS department. We have a portfolio of potential projects that have been requested but not funded. They are in future budgets as placeholders but have not been formally approved. In our project management methodology, we have a process through which we will go all the way through Design before providing a final and definitive estimate to the sponsor.
At that point, the sponsor can make the final decision: He/She has costs, a schedule, a design - everything needed to decide whether to fund the project. Has the project manager done any financial work? Yes - estimating of costs. The PM has not, and will not, do any work related to justification of the project, ROI, rate of return, payback period, etc.
It is the responsibility of the sponsor to explain why the project is needed and how it will benefit the company. The sponsor uses various information, including information from initial, high-level project estimates developed by a project manager, to do this.
Now - as a PM, I have done this type of work. It's been delegated to me by my boss, because I know how, and so I do it, then collaborate with him to fine-tune its presentation. Then he presents it to the corporate leadership and the project gets approved... or not. Once the project is underway, I am not accountable for reviewing whether the project will still achieve its expected ROI or payback period. I am accountable for providing accurate metrics and budget reporting, on which decisions about the project may be made by others.
So - Do we advocate that project managers should be taught how to develop business cases, do financial analysis of projects, calculate NPV, payback periods, ROI, IRR, etc? Maybe. It depends on what your career goals are. You do not need to know this to be an effective project manager. You might need to know this to be an effective manager of project managers. You should probably know something about this to be a progam manager and you definitely need to know this if you are running a project-based consulting firm, a business unit, or want to do this in the future.
Project managers who want to be good project managers don't need to worry too much about this. Projects don't fail because the PM did not know how to calculate Net Present Value. Projects fail because sponsors demanded detailed and unchanging estimates too early in the lifecycle, because stakeholders withheld information, because eager vendors underestimated the project's scope and cost and then tried to weasel out of delivering.
So - work on communications. Practice negotiating and communicating with sponsors and stakeholders. Work on managing vendors and developing air-tight statements of project scope and deliverables. Leave the financial analysis to those who need to justify the projects - but learn it if your career plans require it.
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