Managing Projects as Investments

xi

Preface

Every project needs management for two reasons. The rst is to plan and

manage the tasks of a project and to coordinate getting the work done.

The other is to optimize the value of a project as an investment. Managing

projects as investments is the new frontier of project management. This

book is focused on introducing the tools and methods for optimiz-

ing projects as investments. Texts such as my 1999 Total Project Control:

A Manager’s Guide to Integrated Project Planning, Measuring, and Tracking

(Wiley) are aimed primarily at the rst function of project management—

managing the work—and are written for the “practitioners” of project

management: project managers, cost account managers, activity leaders,

and all project team members. This book is for both the practitioners and

for anyone in a project-driven organization who has responsibility for or

is affected by projects.

This includes, but may not be limited to

• Executives in project-driven organizations, who sense that programs

and projects are investments and want to shift their focus to under-

standing them as investments

• Sponsors/senior managers, whose limited budgets must fund projects

• Business area directors, whose portfolios may include multiple projects

• Program managers, whose responsibilities usually include generat-

ing value from a coordinated implementation of related project and

nonproject efforts

• Customers of projects, especially those projects performed on a con-

tractual basis

• Professionals in contracts departments, responsible for writing

or amending requests for quotes (RFQs), requests for proposals

(RFPs), and performance contracts for project and subproject ven-

dors and customers

• Business analysis, nance, and accounting professionals, who

should be responsible for quantifying and tracking both project

cost and project expected and generated value, as well as revenue

recognition

xii Preface

• Acquisition professionals, who must understand the signicance to

project teams of delays in obtaining resources needed on the criti-

cal path

• Human resources, who must understand both the urgency of

timely recruitment efforts as well as the need for corporate staff-

ing levels, procedures, and incentives that recognize and facilitate

critical path progress

The current edition of the Project Management Institute’s Guide to the

Project Management Body of Knowledge (PMBOK

®

Guide) has a new section,

not included in previous editions, on what it terms business value, and links

it to portfolio, program, and project management. This is recognition, in

the most important and widely used project management book, of this

new central concept in project management. The major focus of this book

is to explain how to use this concept and apply it to plan, measure, track,

and optimize the business value of a project. I do that using methods that

I have been developing and testing in consulting to project-driven organi-

zations in many industries for more than 25 years.

This book addresses the needs of project managers and team mem-

bers by providing specic methods that allow them to manifest their

value by seeking and nding opportunities to improve project results.

But, as important, it shows the executives and all senior managers how to

change current processes and metrics that generate inertia and a lack of

initiative. Instead, they must encourage processes where projects are mea-

sured on the basis of the value they contribute, and where team members

have the incentive to seek and recognize value-adding opportunities that

increase the strength of the organization.

Because Total Project Control was intended for the practitioner, it not

only introduced a new approach supported by new techniques, but it

delved deeply into each. It explored the different techniques for develop-

ing a value breakdown structure (VBS) and for computing critical path

drag in network schedules with complex dependencies and lags. Indeed,

what was then the brand-new concept of drag and how to compute it is

probably the topic that gained that book the most attention and it remains

the metric with which I am most identied. In this book, we mention the

VBS and discuss critical path drag, but only explore it in simple networks,

sufcient to show the importance of the concept and explain its crucial

investment corollaries of drag cost and true cost. Anyone with questions

about computing drag in complex networks should refer to the previous

book, Total Project Control.

This book focuses on the why and the how: why we need to start

managing projects in the same terms that we use for all other investments

and how the unique qualities of a project (work identication, schedule,