Managing Projects as Investments: Earned Value to Business Value, 1st Edition (Hardback) book cover

Managing Projects as Investments

Earned Value to Business Value, 1st Edition

By Stephen A. Devaux

CRC Press

255 pages | 79 B/W Illus.

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pub: 2014-09-18
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Description

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.

Reviews

"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

Table of Contents

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

About the Author

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.

About the Series

Systems Innovation Book Series

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Subject Categories

BISAC Subject Codes/Headings:
BUS101000
BUSINESS & ECONOMICS / Project Management
TEC009000
TECHNOLOGY & ENGINEERING / Engineering (General)
TEC029000
TECHNOLOGY & ENGINEERING / Operations Research