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Cost of change curve (examining)
Determining Your Project's True Value
May 5, 2003
By George Spafford
George Spafford Before starting a project, it is very important to understand the value a potential project brings to an organization. There are numerous, if not limitless, means to quantify project value. However, one of the key elements of a strong project foundation is to understand how value is perceived and align both the project and metrics accordingly.
What is Value?
This seemingly innocuous question is both the root of the problem and the foundation of opportunity. All people and organizations make investments of scarce resources such as time, people and money. In return for these investments, they expect certain outcomes which they view as beneficial. Some outcomes are quantifiable and are commonly known as "hard benefits." In contrast, there are also outcomes that are difficult to quantify due to the subjective nature of what is being observed and are termed "soft" benefits.
For example, to improve net income by 10% is a hard value as it can be clearly measured. In contrast, to improve employee satisfaction can be difficult to measure and is often viewed as a soft benefit.
Regardless of the name used, the key stakeholders of an organization, be they investors, employees, etc. all have vested interests in seeing that outcomes benefit each of them. Thus, a project leader needs to clearly understand value expectations both before embarking on a project and throughout the life of the project. Values can, and do, change over time.
Who Defines Value?
Essentially, we have three interest groups that define value: the organization overall, the sponsor(s) and the stakeholders. In order to consider how they interact, we must need to understand a bit more about each.
- The Organization
Organizations have both formal and informal value drivers. Formal value drivers can be viewed as tasks that are undertaken in order to create beneficial outcomes that are aligned with the organizations stated direction. In other words, they are activities that are performed with the direct expectation of positive outcomes.
For example, a task aimed at providing customers with cost-effective solutions that exceed expectations is a value driver with the desired outcome of increased sales and thus, improved return on equity.
Informal value drivers are the unwritten expectations that organizations engrain in their culture. These value drivers are often the more difficult to identify and often require a coach to help identify and explain. For example, tasks involved with cross training of employees may be very important, but not formalized.
Regardless of whether the drivers are formal or informal, the project manager and the core team needs to take the time to document and track organizational value drivers. The drivers will likely evolve with the project, especially when projects run over a protracted period of time. These values can then serve as a check and balance against sponsor and stakeholder expectations.
- Sponsor Expectations
A sponsor is the party, or parties, involved with commissioning the project. Depending on the nature of the organization, the sponsor may range from an operations level person all the way to senior management. While one may hope the values of the sponsor align with those of the organization, this may not always be the case.
Project managers encountering significant misalignment between organizational values and sponsor values must stop and question why there is a disparity and if the risk level is too high for the parties involved including the project manager.
- Stakeholders
Stakeholders are the various parties with vested interests in the outcomes of a project. They may be employees, customers, vendors, the local community, etc. Regardless of whom they are, they will have their own concerns and agendas that may, or may not, align with the project. As a result, their support of a project hinges on the degree of alignment and the ability of the sponsor and project manager and team to help sell the need for the project both at the start and throughout the course of the project.
Again, the project manager needs to pay attention to the degree of disparity for each of the various stakeholder groups. As the disparity grows, the risk grows, and mitigation strategies up to and including cancellation of the project must be considered.
Balanced Understanding
The point of all of this is that there are various communities of interest involved with projects and they all likely have different values that they view as important or in contrast, unimportant. Project managers need to be aware of how the various parties perceive value and craft the project tasks, deliverables and metrics accordingly.
This balanced understanding of the various parties is the key. It is folly to dream that a project can make everyone happy, but it is a disaster waiting to happen to proceed with a project unaware of how the various parties perceive value and how those values mesh, or don't mesh, together. The following diagram is meant to illustrate the value domains and how at times they overlap and sometimes can be completely distinct:
To apply this, list the values down for each group along with the goals of the project and use the various value systems as a check and balance. If they do not tie out, view this new information as a warning flag that there may be a misunderstanding, either on your part or theirs, and that there are issues to be further investigated and addressed.
Trying to get alignment can be one of the hardest parts of a project and this is where skilled negotiators are worth their weight in gold!
Personal Values
Two value domains left off the chart are those of the project manager and the project team. It is simplistic to think that their needs are not reflected somewhere in the project.
However, there is a difference -- these variables can be managed. It is very important to ensure that the appropriate project manager and team are selected such that their values align with the projects objectives. This task falls on the sponsor and the various parties tasked with assembling the team.
Summary
Project managers and their team need to be aware of what their various constituents view as valuable. With this in mind, careful attention must be given to how the various values align with the stated objectives of the project. If values are not assessed and differences reconciled at the start, then the organization risks allowing a flawed project to proceed or a potentially beneficial project to be burdened with misconceptions and risk failure.
George Spafford is an IT consultant and a long-time IT professional. He focuses on compliance, management and process improvement. More information is available here.
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