Do you know what the project you’re working on is worth to the organization? Do you know how much the organization can afford to spend to achieve the desired results? If you don’t, you’re operating without one of the key sets of information needed to ensure project success. Here’s some guidance on what worth or affordability means and how it can help you and your stakeholders improve project performance.
How often have you been in this situation? An executive calls you into a meeting, or corners you in the hall and proceeds to describe a major change initiative he or she has in mind or is about to launch. The dialogue goes like this:
Executive: “Sally, you did a great job managing that ABC project for us last year and I’d like you to be involved in a new initiative we’re planning.”
The executive goes on to describe the venture and the wonderful benefits it will deliver to the organization and then concludes with “Sally, you did a great job of estimating and controlling the delivery of the ABC project within budget and on schedule. You’re a pro! That’s why I’m involving you! I need a ballpark number for our new project. Don’t worry, we won’t hold you to it but we just need a rough cut of the costs and timeframe for our pitch to the Executive Committee.”
Sound familiar? What should you do? Give the executive a ballpark time and cost? Ask for more time to understand the change and come up with a reasonable estimate? Tell the executive that you’ll need n weeks or months to assemble a team and determine the requirements before you can develop a reasonable plan and costs? All of the above?
Here’s an alternative approach! When the executive asks for the ballpark numbers, take this approach:
Executive: “I need a ballpark number for our new project.”
PM/BA/Stakeholder: “Well, how much can you afford?”
Executive: “What do you mean ‘how much can I afford’? I’m just looking for a ballpark number here!”
PM/BA/Stakeholder: “Well, the amount you can afford to spend will influence the alternatives we consider and that will be a major contributor to time and cost. For example, if the change is worth $100K to the organization, we won’t even consider million dollar solutions.”
Executive: “So, how do I go about figuring out what the change is worth? We have the Executive Committee presentation in a week!”
PM/BA/Stakeholder: “There are three things you need to consider to arrive at a value for worth; what’s the projected bottom line impact that you’re hoping to achieve, how quickly do you need to reach the payback point and, are there other changes, planned or in progress, that you’re dependent upon or competing with. Once you’ve determined the worth, you can use that number as a proxy for the cost and indicate to the Executive Committee that you’ll be evaluating alternatives that can be delivered within that number.”
Executive: “Mmm! That’s an interesting approach. Can you give me some time to help come up with a figure for worth I can live with?”
PM/BA/Stakeholder: “Of course!”
What just happened here? A number of very positive forces have been set in motion:
- The executive is about to commit to a target figure and time frame for the project. That worth figure belongs to the executive, usually the initiating sponsor. It will be used for the duration of the project to influence and direct every stakeholder decision. The PM will still be on the hook for estimating and delivering his or her part of the change, but within the context of worth.
- Worth provides a framework for the identification and exploration of alternative solutions. There are many ways to solve a problem, from multi-million dollar schemes that serve hundreds of thousands or millions of clients daily to remedies that cost a few thousand dollars and solve a problem for a few clients in the short term. Without this statement of worth, or affordability, considerable time, effort and energy can be wasted exploring options that will not be viable or appropriate to the circumstances.
- Worth can also be expressed in more granular terms to give greater guidance to solution identification and assessment:
- Investment worth is the amount the organization is willing to spend to achieve the anticipated benefits,
- Operating worth is the maximum increase or decrease in annual operating costs (business, technology, resource costs, etc.) that the organization is willing to incur to deliver the anticipated benefits.
- Worth provides a vehicle for managing scope change requests. The nice part – the requesting stakeholders can no longer abuse the PM for escalating time and costs. With worth, the change requestor now has to convince the other stakeholders that the requested change delivers sufficient value to justify any change in costs or schedule.
The interesting thing is we use the concept of worth, or affordability, frequently in our personal lives. How much are we willing to spend on a new car, a new house? How much can we afford to send our kids to college? Can’t afford a Ferrari? Let’s check out a Ford. Can’t afford Harvard? Let’s look at a local college.
Anthony DeMarco, a recognized leader in cost forecasting and President of Price Systems, spoke about the findings reported in a Price study called A Cracked Foundation. The study found, among other things, that government IT executives believe that almost half of all failed projects could be avoided if project baselines were more realistic. What better way to deliver more realistic project baselines than to frame them with a fully supported statement of worth!
Remember to ask the question, “What is this change worth?” and make sure you get an answer that all stakeholders agree with. Also, remember to use Project Pre-Check’s three building blocks covering stakeholders, the engagement and collaboration process and Decision Area best practices right up front so you don’t overlook these key success factors. Worth is one of those Decision Areas you don’t want to forget!
Drew Davison is the owner and principal consultant at Davison Consulting and a former system development executive. He is the developer of Project Pre-Check, an innovative framework for launching projects and guiding successful project delivery, the author of Project Pre-Check – The Stakeholder Practice for Successful Business and Technology Change and Project Pre-Check FastPath – The Project Manager’s Guide to Stakeholder Management. He works with organizations that are undergoing major business and technology change to implement the empowered stakeholder groups critical to project success. Drew can be reached at email@example.com