Posted by George Huhn on Mon, Jan 25, 2010 @ 12:54 PM
The Gantt chart was introduced to the world by Henry Laurence Gantt between 1910 and 1915. He described his invention quite simply in his book Organizing for Work published in 1919:
"…the following principles upon which this chart system is founded are easily comprehended:
First: The fact that all activities can be measured by the amount of time needed to perform them.
Second: The space representing the time unit on the chart can be made to represent the amount of activity which should have taken place in that time."
In addition to inventing this staple of project management, Organizing for Work shows that Gantt was a strong proponent of social responsibility for engineers and industry and the idea of an honest and democratic workplace:
"Industrial control is too often based on favoritism or privilege, rather than on ability. This hampers the healthy, normal development of industrialism, which can reach its highest development only when equal opportunity is secured to all, and when all reward is equitably proportioned to service rendered. In other words, when industry becomes democratic." (Organizing for Work, 1919)
"The business system must accept its social responsibility and devote itself primarily to service, or the community will ultimately make the attempt to take it over in order to operate it in its own interest. (Organizing for Work, 1919)
Doesn't that last quote sound a little bit like it came from the current healthcare reform debate?
I also thought that it would be great if these words from Gantt were hung in a prominent place in every project and project portfolio management office:
"First: We have no right morally to decide as a matter of opinion that which can be determined as a matter of fact.
Second: If we allow ourselves to be governed by opinion where it is possible to obtain facts, we shall lose in our competition with those who base their actions on facts.
The substitution of fact for opinion is the basis of modern industrial progress, and the rate of this progress is controlled by the extent to which the methods of scientific investigation supplant the debating society methods in determining a basis for action." (Organizing for Work, 1919)
The Henry Laurence Gantt Medal was established in 1929 by the American Society Of Mechanical Engineers is given for "distinguished achievement in management and for service to the community."
Mr. Gantt is one of those people that I like to imagine what more he might have done had computers been around when he was!
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Posted by George Huhn on Wed, Jan 13, 2010 @ 02:56 PM
If you're trying to sell a big cost-saving project to senior managers, then you are likely to be competing against a lot of other big projects, including sales and marketing and new product development projects. Chances are that you're going to need to sell your project to people who don't necessarily have the background to understand the technical details and the benefits of your project. And if they don't understand it then you are going to have a difficult time selling it.
So it can help to present your project's cost-saving numbers in terms of the equivalent increase in sales that your company would need to achieve the same bottom-line result.
Why?
Because increasing sales is hard and expensive – and every manager knows it. Framing your cost-saving project in terms of sales numbers that everybody understands can help you sell it across technical and non-technical departments and get it included in the
project portfolio.
There are three basic strategies to increase profits in a company: increasing the number of units sold, increasing the marginal profit from each unit sold, or cutting costs. Allocating resources to maximize profits from these three often-competing strategies is one of a manager's greatest challenges. By stating your cost-savings in terms of sales numbers, you're helping your management make a direct comparison between investing in your cost-saving project and investing in projects for increasing sales.
Therefore, you'll want to know both the equivalent increase in the number of units and the percentage that increase represents. For example, instead of just saying "this project will save us $5 - $7 million over the next five years," you should say "this project will save us $5 – 7 million over the next 5 years, which is equivalent to a 5 - 7% increase in sales above forecast or 1 million additional units of our best selling widget."
If investing in your cost-cutting project can add more cash to your company's bottom-line than investing the same amount to increase sales, then you have a very strong case for your project. If it doesn't add more cash, all other things being equal, then the money would probably be better invested in increasing sales.
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Posted by George Huhn on Mon, Jan 04, 2010 @ 02:08 PM
If you don't know the values and costs of not executing your projects then you're probably not maximizing the value of your project portfolio and you may be working on the wrong projects.
When project portfolio managers meet to decide which projects that their businesses are going to execute and which they are going to reject, they often have a summary business case for each project that includes the business value and attributes. Business attributes can include selection criteria such as
net present value (NPV),
return on investment (ROI), costs, resource requirements, and risks.
Thus, when the managers select a project to execute, the value and associated costs of the project are added to the total portfolio value and costs, respectively. When they reject a project, usually the identical "if-executed" values and costs are subtracted from the total portfolio because there is no separate evaluation of the value and costs of not executing the project. Therefore, the value of a rejected project is essentially set to zero by default and the total portfolio loses value.
When they reject a project in this way, any intrinsic positive or negative values and costs derived from not executing the project are not factored-in to the final portfolio. And when these values and costs are not factored-in, the total portfolio value and cost can be dramatically over- or under- estimated.
There are many ways a project can add or subtract value from a portfolio. Even projects that have negative individual ROIs can add value, such as a project that adds revenue to a product line because of its strategic fit. Analogously, there are many ways that not executing a project can add or subtract value from a portfolio. For example, positive value can come from increased revenue streams if the rejected project would have cannibalized revenues from other products; and negative value can come from a loss of revenue from a product line that could have been enhanced by the executing the project. Costs that can be incurred from not executing a project might include costs associated with contract terminations, closing facilities, and reassigning resources.
So, perhaps counter-intuitively, you can see that rejecting (not executing) a particular project may actually add more real value to a project portfolio than selecting another project!
How can you ensure that you're capturing the value and costs of not executing a project?
For each potential project in your portfolio, you could create an associated "Not" project that includes the overall value for not executing the project calculated using the identical attribute categories (rewards, costs, risk, etc.). Then, before
optimizing the portfolio against constraints, you could set up a mandatory dependency between these two projects such that either the actual project is selected
or its corresponding "Not" project is selected. In this way, either the value and costs of executing the project OR the value and costs of not executing the project are included in the portfolio totals.
Of course, if the value and costs of not executing a project are truly "0" and do not impact the total portfolio value and costs, then you don't need to create an associated "Not" project.
In our
project portfolio management tool Optsee®, you can perform rigorous
project portfolio optimizations against multiple constraints (such as limited money and resources) while maintaining four different types of project dependency relationships, including an "Or" relationship. When you select the "Or" dependency relationship between two projects, either one project or the other (but not both) are included in the optimized portfolio. This way it is easy to set up and accurately analyze the real value and costs of your portfolios under different constraint combinations because you're factoring-in the values and attributes of both selected and rejected projects.
Do you currently assign values and costs to not executing projects in your project portfolios? What other suggestions do you have for capturing these values?
What are the best uses of your company's dollars and resources? Optsee
® can tell you. Optsee
® is a project portfolio management and budgeting optimization tool unlike any that you've ever seen.
Click here to find out more.