Introduction

Project management has become a critical resource for all 21^st Century organizations, whether they are for-profit companies, not-for-profit organizations, or government agencies. Yet precious little is known about project management. For example, what project factors lead to successful projects, which project management processes are most important, even what is project success? Speculation and anecdotal experience abound, but little reliable, scientifically-developed, factual information is available to guide senior executives through the project management minefield.

To help answer these and other questions in a more credible and reliable manner, the Project Management Institute (PMI®) provided seed funding for research at the University of California at Berkeley. The result has been a five-year, two-phase research study that has the purpose of quantifying the value of project management.

From this research, three important quantitative findings about project management emerge:

Finding 1: Companies with more mature project management practices have better project performance. For example, companies with more mature practices deliver projects on time and on budget, whereas less mature companies may miss their schedule targets by 40 percent and their cost targets by 20 percent. (See Figures 3-2 and 3-3.)

Finding 2: Project management maturity is strongly correlated with more predictable project management schedule and cost performance. More mature companies, for instance, have a Schedule Performance Index variation of 0.08 and Cost Performance Index variation of 0.11, whereas less mature companies can have corresponding values of 0.16 for both indices.

Finding 3: Good project management companies have lower direct costs than poor project management companies. High maturity companies have project management costs in the 6–7 percent range, while their low maturity counterparts average 11 percent (and in some cases reach 20 percent). Note this percent range is just the cost expended on project management. Organizations with low project management maturity (PMM) jeopardize the likelihood of project success. This impact, in turn, may lead to increased indirect costs, such as late deliveries, missed market opportunities, and dissatisfied customers. The “Project Management Cost Hump” and “The Virtuous Cycle of Project Management” are introduced and discussed in this report; they contend that the ratio of project management costs to project value will actually rise as a company goes from low maturity to somewhat higher maturity. But then that cost ratio will decline as the company reaches higher levels of PMM, principally because it is getting more “project throughput.”

These three findings, taken together, are important findings because they are quantitative. They are also important because they prompt other questions that demand further research. For instance:

• What are the detailed cost components of project management? And is project management success affected more by expenditures on project personnel or systems? This research did develop and apply a cost accounting structure with thirteen components but more details should be captured and analyzed to understand fully how companies spend their project management dollars.

• What metrics are available to measure parameters such as project scope, customer satisfaction, and quality? This Phase 2 study focused on project cost and schedule, but of course all such performance indicators are interdependent and better methods of measuring project success are needed.

• How can we better measure the value of project management for internal projects? About one-half of the projects examined in this Phase 2 study were for situations where the project actually has a marketable value; for instance, there is an external relationship between a client who pays a contractor for project services and delivery. Internal projects—for instance, deployment of a new software system developed by and for a company’s own personnel—are more difficult to quantify and value. For the purposes of this study we assumed that findings from “external” projects were fairly representative of “internal” projects.

The companies that participated in both studies were promised confidentiality, so there is a limit to how much detail can be reported in this manuscript. Research into the quantified value of project management is an area of ongoing interest to the authors, so these and other, related questions will be the subject of future research. Readers interested in learning more about this continuing work and how their organizations might participate in ongoing studies are invited to contact the authors.