Chapter 9: Measuring Project Management s Value - New Directions for Quantifying PMROISM

C. William Ibbs, Ph.D., P.E. University of California, Berkeley
Justin Reginato, P.E. University of California, Berkeley

Introduction

Previous research investigated the quantitative value of project management; that is, project management's return on investment (PM/ROI^SM). The results, while encouraging, were not statistically significant. A second study is under way that will address that previous study's shortcomings: insufficient sample size (only thirty-eight companies and seventeen projects); an outdated version of the Project Management Body of Knowledge (PMBOK ) (eight knowledge areas rather than the current nine); project data selection by the benchmarked companies (which may interject bias and unreliability into the source data); and variability of project performance metrics.

This chapter outlines some of the issues that have set the foundation for that second study.

Today's Successful Organization

Increasingly the successful business organizational model is taking the form of a loosely coupled confederation of business units. Examples of the loose confederation model include Microsoft (software), Fidelity and Vanguard (financial services), Genentech and Millennium Pharmaceuticals (bio-engineering and life sciences), and General Electric (in various industries). They are successful because they have grown exponential revenues and profits during the past decade and have achieved remarkable stock market capitalization.

These firms share common characteristics such as devolved power, strong emphasis on intellectual property, powerful brand identification, and a premium on project-driven services. They are all more bottom-line (net profit) focused, as well; whereas many companies in the past had more diffuse goals such as revenue growth, market share, technology leadership, and so on. Companies that have historically attended to "softer measures" such as social responsibility and public welfare, charitable donations, and a satisfied workforce (Ben & Jerry's Ice Cream, various dot-coms, the "old IBM", and universities) are definitely out of vogue these days. Strong, centralized, command-and-control companies (General Motors, the United States [US] Federal Government) are decidedly lagging in today's hyper-competitive environment, as well.

The most important characteristic in the eyes of this readership is that these companies depend on projects for much of their success. Benefits of a project-centric focus and sophisticated project management processes include improving organizational effectiveness, meeting quality standards, and fulfilling customer satisfaction (Al-Sedairy 1994; Boznak 1988; Bu-Bushait 1989; Construction Industry Institute 1990; Deutsch 1991; Gross 1990; Ziomek 1984). However, the senior management of these companies is very demanding in terms of proof in more quantitative terms.

The progress of our research in this area is presented in this chapter.