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The Project Manager’s MBA

by Dennis J. Cohen and Robert J. Graham

Project Manager's MBAWhile you don’t need an MBA to manage a project successfully, you do need to be able to “speak the language of business” to executive sponsors, according to Cohen and Graham. The authors treat projects as businesses in themselves. As such, the project manager would be well advised to learn to speak about her project as any entrepreneur would: in terms of financial measures such as net present value, internal rate of return, etc. Just as important is the need to assess how the project supports the overall business strategy. A good introduction to the business of projects for non-business project managers. Download Chapter 1: An Entrepreneurial Approach to Managing Projects (PDF, 120kB) Excerpt: “Make it fast. Make it good. Make it cheap.” So goes the project management folklore about what senior management always asks for. “Pick two,” is the traditional project manager reply. Almost always, “make it cheap” is one of the two project goals upper management chooses. However, only when upper managers and project managers understand the wider business implications of their decisions do they realize that “make it cheap” may not contribute to successful business results as often as they think. This is because the cost of the project, or the cost of producing the product, is only one factor in determining the economic success of the project. In this book we develop a framework for thinking about projects based on business concepts such as increasing economic value, or Economic Value Added (EVA); this framework can contribute to better decision making throughout the project lifecycle and ultimately result in more successful projects. In addition we show that the old success criteria of meeting outcome, cost, and schedule constraints are no longer adequate and that increasing economic value will become an important, if not the most important, criterion for success in the future of project management. The use of economic value as a decision criterion indicates a change in the way project success is determined. In the past, project managers were assessed primarily on project performance up to the point of project completion. This resulted in evaluations based on outcomes that met the project specifications, a fixed budget, and a given deadline. The ensuing economic success of the product produced was normally someone else’s concern. However, in the future project managers must think more broadly about what a successful outcome really means. To for-profit businesses it means a level of customer satisfaction high enough to produce sales that result in enough cash flow to cover project and operating expenses, make a profit, and pay back the cost of the capital used to produce the product. At this point the project begins to produce the economic value known as shareholder value. Shareholder value is a term that has become familiar in the world of business. Those who work for publicly owned corporations are likely to have some idea of its increasing influence on upper-management behavior in those companies. Those who work for not-for-profit or governmental organizations may have to do a little translation to relate the idea of shareholder value to their projects.We suggest mentally substituting the term stakeholder, taxpayer, or voter value for the terms shareholder value and economic value (which we use interchangeably throughout). At first glance, shareholder value, or economic value, seems to be a purely financial term. Besides its financial element, however, it contains a dynamic balancing of competing values. In order for a business to maximize shareholder value, it must balance customer satisfaction and competitive market forces with internal cost and outcome considerations. Shareholders of a for-profit company want a return on their investment. Stakeholders of a not-for-profit organization want its desired outcomes achieved within the economic constraints necessary to ensure the survival of the organization so that it can continue to do good in the world. Stakeholder value may not involve a profit, but it must necessarily involve an outcome that somehow recoups any actual or implied cost of the capital used by the project. In addition, many not-for-profit organizations are finding themselves in competition with for-profit businesses and thus subject to similar competitive and economic forces (Ryan, 1999). Taxpayers, for example, want the highest quality outcome from a governmental project for the lowest relative cost. This outcome must also include considerations of cost of capital, which is lower for governments than for businesses but still not inconsequential.We believe that the dynamic new approach to projects we are describing here will serve you well whether your project is in a business, a not-for-profit organization, or a governmental agency. In any of these organizations, the criteria for economic value are now or soon will be your responsibility, because management will measure your performance by them. This, then, is the future of project management. As a project manager, you must recognize it as your future as well. Welcome to the world of business systems. The only way that you will attain success given the new project management paradigm will be as a business systems thinker. In more direct terms this means of thinking of your project as if it were a business and you were the chief executive officer, the CEO. This chapter out lines the change in thinking managers must undertake to work within the new project management paradigm. In any sociotechnical system the people in the system work better when they understand how they fit into the system as a whole. This understanding is developed when people share the perspective of the CEO, the person who is responsible for the whole business and whose results are measured by an increase in value for the stakeholders of the organization. The board of directors represents the stakeholders, and the CEO works for the board. He or she must manage the whole company from the top. Therefore, the entrepreneurial approach to project management requires the project manager to manage the project as if it were an independent business venture. But like the CEO, the project manager must also manage with the larger organizational system in mind, even though the project manager will be influencing the system from the project standpoint rather than from the top. He or she will need to understand how the elements of the project affect the business as a whole and how elements of the business influence the project. By thinking in business terms project managers will better understand the interaction between the project and the overall organization. In addition, they will be better able to explain the business implications of upper-management decisions about a project. That is, they will be able to speak to upper managers in a language that those managers understand. Managing this interaction between the project and the larger organization is fast defining the role of the project manager. The new project managers will act like entrepreneurs as they treat their projects as businesses and think like CEOs as they view each project as part of the wider organization. Excerpt from Chapter 1 of The Project Manager’s MBA. Reprinted with permission from the publisher. Download Chapter 1: An Entrepreneurial Approach to Managing Projects (PDF, 120kB)

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