On Project Management

In my line of work I manage, interact with, am dependent on, or otherwise am involved with "projects" on a regular basis. By "regular" I mean at any point in time over the last several years I probably have at least a couple dozen projects I am either responsible for or depend on directly. And I am by no means unique - most of the working world deals with projects.

For some reason, as time goes on it bothers me more and more that the measure of a project's success is whether it's "on-time and under budget." Seems so outdated and uneducated.

In The Power of Product Platforms they quote a statistic that, paraphrased, states that:

Projects that deliver the most value (ROI) are the most late and the most over budget.

You can rephrase in a number of ways, but I always boil it down to: "if it's worth doing, it's going to be hard."

There are a few reasons I hate the "on-time, under budget" mentality, mainly that it rewards the wrong behavior (as happens any time metrics/rewards are not aligned with desired outcomes).

Instead, all projects should always have a Net Present Value associated with them that's calculated on an ongoing basis, updated as new data (costs or project revenue/benefit) is uncovered. Guess what, when a project's NPV goes below $0, the project is canned.


Reverend0 said...

Ok, I have a question on that. When you are talking Net Present Value what are basing that measurement on. I can only assume that you are talking about the seed money that a project is given to be complete. But a project won't make money till it is complete and working. Or at the very least, in a beta level.

Looking back the manufacturing world, beta's are unacceptable and folks won't pay for that. Sell the research that are related to the project? Be prepared to license IP?

This seems like a simple statement that makes sense and the older way of measuring Project success ARE totally bunk, but I am confused as to the simpler new measurement...

Do you have a mathematical formula?

Jay Heuer said...

Welcome to the camp of "Show me the money, leave the plan at home"... :-)