How to Realize the Full Project ROI for Your Organization
R-O-I. Return on (project) investments. That is what it’s all about for project and project portfolio leaders, right?
Without revenue and profit for your organization, why even begin to run projects? And the project portfolio management system, or PPM solution, needs to be at the forefront of that project management process. It acts as an indicator for the gatekeeper, which every organization should have, making it helpfully obvious about which projects to run, reject, or put on hold. If a project does not help meet company goals, and/or is not going to be delivered on time and provide the minimum ROI, it’s not worthy of investment.
What does it mean, exactly, to receive the full project ROI for your organization? Your senior leadership is expecting a certain level of project ROI from the projects that all project managers are leading in the PM infrastructure. What’s your goal? Perhaps it’s something around 25% – 28%? And how do you plan to get there? How will you set you and your organization up for the likelihood of your success? What things do you need to be looking out for on the way there to ensure that you will be an impactful PMO leader? Let’s consider a few careful project management strategies that will help you realize that proper project ROI and make you and your team successful heroes to your Chief Financial Officer (CFO) more often than not because his job is all about project ROI and he probably doesn’t really care about much more than that.
Watch the project charges
These resources you are utilizing, including yourself, aren’t charging out for pennies. Most are being charged to your project customer at $100-$150 per hour, including the project manager who is often the most expensive resource on the project… often billing out at $150-$200 per hour. Watching what time and materials get charged to your individual projects on a weekly basis may be the single best way to ensure profitability and on target revenue and costs… and thus, project ROI. A budget left to its own will surprise you down the road – the smallest things can throw it off and cause huge overruns that you never knew were possible. And suddenly you’re back in college with your checking account overdrawn and you’re wondering how that could possibly happen because you only hit the ATM a couple of times and there are still checks left in your checkbook. In the end, that won’t fly with senior management or your project customer, will it?
Invest in the right project management tool
Many project management tools that are available now can do a lot more than just help you manage the project schedule and resources and show a Gantt chart to impress your leadership and customer. What is needed is a good project portfolio management tool that can provide an entire slew of innovative features. And when it comes to setting yourself up for making sure that you’re focused on the right projects within your portfolio, choose a tool that will allow you to manage your projects and utilize a project prioritizing module so that all of the data is in one place.
By investing in a good PPM tool that’s right for your needs, keeps the organization running in the right direction. It will also help manage your overall project team member resource pool to keep resources on projects when needed and help keep them 100% utilized. Win-win in the end. Select the one that best works for your size organization, for your industry, and for your customer base.
In the past, it would often be a detailed budget and analysis spreadsheet that also serves as the project resource staffing plan throughout the engagement, which is very helpful because our project resources are by far the biggest costs for the project. But today’s PPM tools are very sophisticated, scalable, and customizable and can be very powerful and relatively inexpensive PM software tools for managing all the projects across the organization and reporting on them, to your project team, to your project stakeholders, to senior management, and to your project clients. These PPM solution choices are available to do this and much more like team collaboration, project trouble tickets, requirements tracking, etc. Figure out what your needs are based on your budget and the complexity of your project as well as the project reporting demands of your client and other stakeholders…and then decide.
Continuously revisit forecasting
For the most part, you’re managing someone else’s money. Sure, you’re accountable to your senior management…probably even the CFO of your company…for the profitability of the project. But the funding comes from the customer and a project budget that goes crazy could cause a project to get canceled in mid-stream. That could end up being a complete waste of the customer’s dollars…but at any rate, it will not end in high client satisfaction or a retained customer. Manage the budget closely. Get new actual charges against the project every week from accounting, revise the project budget forecast and analyze what the budget health looks like every week.
Make your team aware
Your project team members are charging every week for all the projects they are working on. Yes, they should be documenting this daily, but who really does that? We all tend to enter our project charges right at the next Monday deadline, making it nearly impossible to charge daily accurate hours to each project. And everyone wants to be at or above 100% utilization, right? That’s the goal – especially in a professional services project-centric organization. It usually is a factor in our own performance evaluations with our team leads and immediate supervisors. So there will almost always be “grey” hours on a weekly basis – those hours that you know you worked but you can’t remember which project you owe them to and exactly what you did. All you remember is that it was a 12 hour day and you go home very late – or even continued to work from home. Don’t let those “grey” hours hit your project. If your team knows you are tracking project ROI closely, then they won’t put those unknown hours on your project and throw it off-budget and profit margin goals. Keep them informed and keep checking the financials closely on a weekly basis.
Stay within 10% of the budget. No matter what.
Certainly, this just sounds very logical anyway – best practices usually do. Pure logic says that a 10% budget overrun is much easier to deal with and correct than a 50% overrun. So catch it early! How? By managing the budget weekly, applying actuals to it weekly, and forecasting it weekly. If you do that, you will always know every single week where you stand and the project budget and project ROI will never get so out of hand. Proactive and corrective action can then be administered to fix the situation.
No matter what, stay within 10% of the original budget target. It’s not as difficult as you may think. It basically means watching the budget every week. Time gets charged to projects, correct? Be well connected in your organization. Know the right person in accounting to get your numbers in a timely fashion each week. Manage the budget. Take corrective action, but whatever you do try to never overrun the budget by more than 10%. 10% is fixable. A 50% budget overrun is not fixable. You will never reach your target project ROI with a 50% budget overrun on costs.
Conclusion
It’s all about making the project profit you planned to make. You’ll need to watch the budget and scope along the way to make it to that successful project financial end game, and choosing the right project portfolio management (PPM) solution is crucial. Keep in mind that you aren’t looking at the project ROI for just one project. You should be concerned about the ROI across the entire portfolio of projects. By keeping them all in line with these better practices, you set your organization up to realize the ROI of the entire portfolio of projects.
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