Calculating PM’s ROICalculating PM’s ROI

元智大學　資訊管理學系　第二組

941617　黃若靜　　　 941619　蔣榆君　　　941629　范文婷　　　 941649　游馥慈941656　鄭文雅　　　 941658　鄭詩樺941707　蘇峻德　　　 941725　劉得準

指導教授：吳思佩　老師

Abstract

• PM benchmarking procedure• 5-level Berkeley PM process maturity

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Research Methodology

• PM processes & PM Knowledge Areas

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Research Hypothesis

• Berkeley PM Process Maturity Model

變形蟲時期

計畫時期

管理時期

整合時期

持續時期

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Level 1 Ad-hoc Stage

• No formal procedures or plans to execute a project

• Processes are unpredictable and poorly controlled

• PM-related data collection and analysis are not conducted in a systematic manner

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Level 2 Planned Stage• Informal and incomplete processes are used

to manage a project

• Processes are partially recognized and controlled by project managers

• PM-related data collection and analysis are informally conducted but not documented

• Strength is in doing similar and repeatable work

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Level 3 Managed Stage• Processes become more robust and

demonstrate both systematic planning and control characteristic

• PM-related data are collected across the organization for project planning and control

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Level 4 Integrated Stage• Organization can plan ,manage ,integrate ,and control multiple projects efficiently

• Processes are formal, with information and processes being documented

• Data are standardized, collected, and stored in a database to evaluate and analyze the process effectively

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Level 5 Sustained Stage• Continuously improve their PM processes

using

• PM data are collected automatically to identify the weakest process elements

• Innovative ideas are also vigorously pursued, tested, and organized to improve processes

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Research Hypothesis

• Berkeley PM Process Maturity Model

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Benchmarking Tool

• Develop a rigorous and comprehensive PM benchmarking methodology

• Benchmarking questionnaire

• Benchmarking methodology (The three-part PM benchmarking tool )

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The three-part PM benchmarking tool• Part1:included organizational information

such as its size, product focus, and years of PM practice.

• Part2: consisted of 148 multiple-choice questions.

• Part3:Project cost and schedule data collected

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Example of Part 2 Multiple-Choice Process Maturity Questions

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Benchmarking Overall PM Maturity

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PM Maturity of the Six Processes

PM Processes E-C IMM IS HTM All Companies

Initiating Maturity

3.6 3.3 3.6 3.6 3.4

Planning Maturity

3.6 3.5 3.4 3.6 3.5

Executing Maturity

3.3 3.3 2.9 3.3 3.2

Controlling Maturity

3.6 3.3 3.0 3.3 3.3

Closing Maturity 3.3 3.4 2.9 3.1 3.2Project-driven Org Environment Maturity

3.1 3.0 2.7 3.3 3.0

Overall Average PM Processes Maturity

3.4 3.3 3.1 3.3 3.3941707　蘇峻德

Performance Definition

• Project cost is divided into two parts ： direct and indirect costs.– Direct

• cost of resources required to conduct a project

– Indirect• amortization of the overhead costs associated

with completing a project

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•Original budget and actual cost was used to calculate the cost index (CI)

•Note that!– CI≠CPI– SI≠SPI

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Performance Definition （ cont.）

• Not all 38 participating organizations provided useful project performance data– treat it confidential– do not collect and store schedule and cost

information in the form that was requested for this study

– do not maintain an archive for such information

• The small sample size impeded the data analysis

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Performance Definition （ cont.）

Bias

• Companies maybe select projects that reflect well on their performance

• Stressed to these companies that the study would only be as good as the data that they provided

• We believe that the data provided is good data

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Regression Analysis

• Best-fit line

• Functions linear, logarithmic, power, and exponential

• R2

　　　 0.00≦R2 1.00≦

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PM Maturity V.S. CI and V.S. SI

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PM Maturity V.S. CI and V.S. SI （ cont.）

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• There are some positive tendencies between higher PM maturity levels and better CI or better SI.

• Higher levels of PM maturity are associated with better cost and schedule performance on projects.

• The nonlinearity of the functions indicates that there are diminishing returns on higher levels of PM maturity.

• After exclude two outliers -Figure 4. still nonlinear and downward. -Figure 5. leads to regression fit that essentially

overlaps the horizontal axis of the figure. 941658　鄭詩樺

PM Maturity V.S. CI and V.S. SI （ cont.）

PM/ROI Calculation

• 1. First identifies CI current 、 P% current 、 PM

maturity.• 2. Select a target PM maturity level.• 3. Identify what CI forecast might be realized.• 4. Calculate a new estimated project profit

return.

P% predicted =

CI current x P% current

CI forecast

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PM/ROI Calculation （ cont.）

Figure.Figure. CI Versus Project Profit(%) CI Versus Project Profit(%)

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PM/ROI Calculation （ cont.）• 5. Forecast the annual PM/ROI.

• Time driven vs. Cost driven

PM/ROI =

(P% predicted – P% current) x Annual Project Revenues

Annualized PM Expenditures

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A Case Study for PM/ROI Calculations

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Case Study

•This section provides a step-by-step scenario for calculating an order-of-magnitude PM/ROI estimate

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•The PM/ROI realized by upgrading from PM current to PM desired is shown in Equation 6.

Equation 6

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Case Study （ cont.）

• As a starting point, the following checklist is suggested for the types of costs that might be included in such a computation:– Salaries and benefits of PM personnel– PM consultant expenses– PM systems, procedures, and tools on an

annualized basis– Computer hardware and software acquisition,

maintenance and upgrade costs on an annualized basis

– Support staff, such as clerical, administrative, and technical personnel

– PM training on an annualized basis, whether provided by in -house staff or consultants

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– Certification expenses, such as PMP® and ISO– Recruitment and hiring expenses– Travel, meeting, and coordination expenses

–Supplies and material costs – Rent and other facility management expenses – Telephone, fax, and networking expenses – Moving and storage costs and temporary office

expenses – Utility expenses

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Caveats

• Profit and profit margins are difficult to associate with project-related operations for many organizations.

• Annualized PM expenditures are difficult to calculate

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•Another caveat is what is meant by the definition of “profit.”

•Any PM/ROI computations should reflect that management may be just as concerned about cost savings as profit generation.

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Caveats （ cont.）

•A focus on the project’s CI use its budget, as was the case in this study may really be secondary

•Using the CI as a measure for the ROI on a project is not always the best measure, but there was no other option in the case of this research project

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Conclusions

• Insufficiencies with this study ：　　→ Small sample size　　→ Lack of statistically significant results

• View this study positively and as a step toward better understanding PM’s value.

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Research has found that：• The Quantitative PM Maturity Process Benchmarking

Model that was developed for this study works. 　 　 　 → provides a means for identifying and

measuring different PM maturity levels.

• An organization’s PM maturity level and actual project cost and schedule performance data were correlated based on the collected information from participating companies.

• These relationships can be used to predict a PM/ROI that is characteristic to the individual organization.

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Recommendations

• An impartial organization should conduct this benchmarking, so that the PM/ROI and other important data can be reported to the PM community at large.

• An “Excellence in Project Management Practices Award” should be established and awarded on an annual basis.

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Q&A

Thanks For Your Listening☺