The Value Contribution of Professional Project Management

In challenging economic times, top management often reviews project management to determine whether it makes sense to invest in professional project management, a project management office (PMO), specific training measures, or appropriate software tools (Taylor, 2024). However, if there are no plausible answers in this situation, there is a significant risk that a PMO will be closed and necessary investments will not be made. It is usually not enough to simply put forward qualitative arguments for investments. There is no question that professional project management generally makes sense with the increasing complexity of projects. However, the question arises as to whether projects cannot be implemented by the specialist departments (the “line”) with existing processes, structures, and resources. This opinion is often voiced by line managers as opposed to a separate PMO or project management department. In critical situations for the company, these “opponents” of a project management/PMO then use the opportunity to eliminate an unwelcome “player” in the company.

It is, therefore, the responsibility of managers responsible for project management to think very carefully about the value contribution they are making to the company with professional project management and to align project management accordingly. In addition to qualitative arguments, this requires an argument focusing on a measurable return on investment (ROI) for professional project management. The ROI of project management results from the ratio of the (monetary) benefits to the costs (Lappe & Spang, 2014). The costs must be calculated on a very individual basis. These include (additional) costs for personnel deployment, which are incurred exclusively for specific project management tasks, expenses for infrastructure, further training and certification costs, consulting expenses in project management as well as overhead, process, and IT costs incurred for project management. It is important that all these costs are collected in a cost center for professional project management and can thus be made transparent. Only those costs that are incurred when professional project management is used that go beyond project processing by the specialist departments should be listed. Cost transparency not only helps to build an argument in terms of the ROI of project management but also to show over time how these costs or the cost ratio have been reduced compared to the project volume (Thomas & Mullaly, 2008).

Qualitative benefit arguments are often aimed at demonstrating the general added value of professional project management. These include the arguments that projects are implemented more systematically and transparently, that customers and employees are more satisfied, that projects are implemented more efficiently and effectively through professional project management, or that this could increase the company’s overall competitiveness. When company management asks how this can be measured, the managers responsible for project management often fail to provide a concrete answer, as usually only the achievement of objectives in terms of quality, cost, and time compliance is made transparent. In contrast, a quantitative measurement of professional project management’s benefits often fails due to a lack of key performance indicators (KPIs) (Kütz & Wagner, 2015). In order to determine the (quantitative) benefits of professional project management, it is essential to know which unplanned costs (“non-conformance costs”) and plannable costs are saved in the projects, especially for comparable project types. The ROI can only be calculated by comparing the effort invested in terms of cost savings. Efficiency indicators for project management make it transparent how more project work can be completed with the same effort (in terms of resources). To do this, the effort required for the projects must be precisely planned, and the earned value generated at a given time must be transparent.

Lean project management approaches (Hüsselmann, 2023) can also leverage rationalization potential in project work, for example, by minimizing waiting times and avoiding unnecessary work steps or risks in projects. Of course, the benefits side can also be addressed. Although most companies have a sophisticated project risk management system, the opportunities (“benefits”) in projects are rarely systematically converted into concrete benefits and thus wasted. This includes, among other things, the discovery of value-creating ideas in project execution, which can lead to innovation in products, processes, or technologies. Increasing the satisfaction of customers, employees, or suppliers can also lead to concrete economic benefits, which can be attributed to professional project management if there is a causal relationship.

The prerequisite for determining the value contribution of professional project management is a control logic that makes the relationships between costs and benefits transparent and provides a credible chain of argumentation for the company management. This varies from company to company. The company’s strategic orientation, the type of project business, the integration of project management into company processes, structures, and culture, as well as the managers’ view of the modern management of a company all play a role (Wagner & Erasmus, 2023). However, project management/PMO managers should have a coherent argument ready to avoid falling victim to the red pencil in difficult economic times.

References

Hüsselmann, C. (2023). Lean project management. Routledge.

Kütz, M., & Wagner, R. (eds.) (2015). Mit Kennzahlen zum Erfolg – Projekte, Programme und Portfolios systematisch steuern. Düsseldorf, Symposion Publishing.

Lappe, M., & Spang, K. (2014). Investments in project management are profitable: A case study-based analysis of the relationship between the costs and benefits of project management, International Journal of Project Management, 32(4), pp. 603-612.

Taylor, P. (2024). Projects: Methods: Outcomes. The new PMO model for true project and change success. Routledge.

Thomas, J., & Mullaly, M. (2008). Researching the value of project management. Project Management Institute.

Wagner, R. & Erasmus, J. (2023). Projektmanagement in der Automobilindustrie – Effizientes Management von Fahrzeugprojekten entlang der Wertschöpfungskette.  6. Ausgabe. Wiesbaden, Springer Gabler.