Friday, December 7, 2007

The fourth project management constraint

Robert Graham, in an article titled ‘Beyond the Triple Constraints’ makes the case that project managers need to consider contribution to shareholder value as an additional variable. Anyone who has studied project management will be familiar with the triple constraints of time, quality and cost. Graham suggests that in the modern business environment focusing on these constraints alone is not enough.

He says that because project outcomes are increasingly vague (agile development methodologies and more fluid market place), costs are continually changing (caused by constantly changing outcomes) and schedules are more externally driven, an additional metric is needed.

A project manager who focuses exclusively on delivering a project in the quickest time to the highest quality and lowest cost may be doing a disservice to the organisation. Because the business environment is constantly changing, delivering on a plan that was agreed months or years before may not be the best outcome for the organisation now.

Suppose for example that a project manager was working on delivering a new product but during development some new technology emerged that made that project redundant. Continuing to work on that project would not be in the best interests of the organisation. Project managers need to consider more than just time, cost and quality. Graham suggests that an additional metric of shareholder value should be included. Increasing shareholder value is chosen of course because it should be the goal of any publically trading organisation (non-profit organisations aside). Project Managers need to constantly ask themselves, is my mix of projects maximising shareholder value given the way that the market is now; not the way it was a few months ago.

I agree with him that this should be the case but suggest that most project managers will be unable to ascertain which courses of action would best maximise shareholder value. Instead, project managers should focus on advancing strategic goals as communicated by senior management. It is the responsibility of senior management to communicate a small number of strategic goals that will lead to shareholder value maximisation, that all employees should be striving towards. This will result in a more coordinated, unified organisation and will avoid the danger where project managers take a course of action that increases shareholder value in the short term but damages its ability to do so in the long term.

Of course, for a project management office (PMO) to be able to take a real time look at its mix of projects requires a project and portfolio management tool. With such a tool, individuals within the organisation can take a holistic view of the PMO and ensure that it is constantly aligned with its strategic goals. If you would like to discuss how you can get that real time, holistic view of your PMO, please get in touch with us.

No comments: