Project-based firms with little room for error today in managing projects for profitability. Aberdeen conducted a survey of over 290 companies to understand the best practices in project management. Aberdeen finds that as the number of moving parts increases, so does the difficulty in maintaining visibility and control.
Project-based firms with little room for error today in managing projects for profitability. Aberdeen conducted a survey of over 290 companies to understand the best practices in project management. Aberdeen finds that as the number of moving parts increases, so does the difficulty in maintaining visibility and control.
Project-based firms with little room for error today in managing projects for profitability. Aberdeen conducted a survey of over 290 companies to understand the best practices in project management. Aberdeen finds that as the number of moving parts increases, so does the difficulty in maintaining visibility and control.
Project-based firms with little room for error today in managing projects for profitability. Aberdeen conducted a survey of over 290 companies to understand the best practices in project management. Aberdeen finds that as the number of moving parts increases, so does the difficulty in maintaining visibility and control.
This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.
March 2012 Project Management: Putting the Pieces Together A volatile economy and global competition leave project-based firms with little room for error today in managing projects for profitability. The key to project profitability is delivering projects and milestones on time and under budget. Between January and February 2012, Aberdeen conducted a survey of over 290 companies to understand the best practices in project management. From this research, Aberdeen finds that as the number of moving parts increases, so does the difficulty in maintaining visibility and control. This Analyst Insight explores the extent to which the added visibility and control afforded by technology solutions, such as enterprise level project management tools, can directly impact the profitability of projects and the businesses that rely their success. Particular attention will also be paid to the impact that organizational structure and business capabilities have on the delivery of projects on-time and under budget. Business Context In project-based business, there is a unique set of challenges when it comes to managing both customer-facing requirements and operational processes. Many projects are complex and have a large number of milestones and process checks. The wide range of tasks may include bidding and estimating project costs, working collaboratively across distributed teams, and managing multiple resources (whether people or assets). These processes must be managed effectively in order to deliver projects successfully on- time and under budget to increase customer satisfaction in a highly competitive environment. Based on the feedback of over 290 respondents, Aberdeen finds that compared to its 2010 study, Executing the Project Plan: When Projects are your Business, not much has changed (Figure 1). Today's high unemployment rates do not guarantee that skilled resources are available for projects. In fact, companies are still finding it extremely difficult to acquire the right skills for their projects, followed by increased competition and increasing risk exposure across their project portfolios. It is important to note that compared to 2010, more companies are pressured by increased competition (33% versus 27%). This is a reflection that even in a difficult economy; competition is still fierce, whether it's from local or international markets. Indeed, organizations are asked to work smarter, deliver the same high quality of work, and with fewer resources. All of these pressures create a business climate that forces project-based businesses to focus their attention on managing costs for all projects. Analyst Insight Aberdeens Insights provide the analyst's perspective on the research as drawn from an aggregated view of research surveys, interviews, and data analysis Project Management: Putting the Pieces Together Page 2
2012 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897 Figure 1: Top Business Drivers
Source: Aberdeen Group, February 2012 These external business pressures also combine with very specific project pressures (Figure 2). Indeed, the top project specific pressure directly correlates with the top business driver. Lack of available skilled resources leaves many project-based businesses challenged with managing these resources properly. Additionally, in many instances, customers and senior management add to the pressure on project-based companies by frequently changing their minds mid-project. Combined with this is the fact that many companies are still delivering too many late projects. In today's market, companies are often asked to do more with less, and the consequence of not having the right resources and changing priorities often leads to delivering projects that are late and over budget. Figure 2: Top Project Specific Pressures
Source: Aberdeen Group, February 2012
21% 29% 33% 27% 37% 20% 29% 30% 33% 36% 0% 10% 20% 30% 40% Volatile business conditions Global / distributed teams create the need for collaboration Increasing risk exposure across project portfolios Increased competition forces us to lower or freeze prices Lack of available skilled resources needed for projects Percentage of Respondents,n=297 2012 2010 20% 29% 31% 34% 34% 0% 10% 20% 30% 40% Senior management frequently change priorities mid-project Contention for specific limited resources Too many late projects Customers frequently change their mind mid-project Need to use project resources more effectively Percentage of Respondents, n=297 All Respondents "The most beneficial thing our organization has done when it comes to project management has been migrating from a shared file server for documents to a collaborative platform environment tailored for project management. In doing so, we have been able to ensure that everyone is working on the latest version of the data and it enables greater collaboration across the organization." ~Project Manager Industrial Product Manufacturer
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The Maturity Class Framework Aberdeen used four key performance criteria to distinguish the Best-in- Class from Industry Average and Laggard organizations. These KPIs were selected because of their influence on an organization's ability to deliver projects on time and under budget. Table 1: Top Performers Earn Best-in-Class Status Definition of Maturity Class Mean Class Performance Best-in-Class: Top 20% of aggregate performance scorers 94% of projects delivered early or on time 94%of projects delivered within budget If projects are late, on average how late: 3.5 weeks 19% improvement in project profitability year over year Industry Average: Middle 50% of aggregate performance scorers 70% of projects delivered early or on time 86% of projects delivered within budget If projects are late, on average how late: 2.5 months 3% improvement in project profitability year over year Laggard: Bottom 30% of aggregate performance scorers 36% of projects delivered early or on time 52% of projects delivered within budget If projects are late, on average how late: 4.5 months 8% decline in project profitability year over year Source: Aberdeen Group, February 2012 Strategic Actions In order to combat these pressures, the Best-in-Class are differentiating themselves from their competitors in three distinct ways (Figure 3). First, they understand the importance of identifying the various risks within their projects at all stages, and are building contingency plans in case of the event occurring. By knowing the probably of an adverse event occurring, as well as the impact that these events may have on the project, project managers can more effectively plan and budget, as well as react accordingly if those events do occur. Project Management: Putting the Pieces Together Page 4
2012 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897 Figure 3: Strategic Actions of the Best-in-Class
Source: Aberdeen Group, February 2012 Secondly, Best-in-Class companies understand the importance of customer relationships. This involves soliciting customer input as well as informing them of project timelines (and sticking to them). In project-based businesses, customer interaction is crucial because the ultimate result of the project is tied to the customer's specific needs. The Best-in-Class have built strategies to ensure happy customers to induce repeat business. Finally, Best-in-Class organizations also understand the role that partners play when it comes to delivering high quality projects, and therefore have built standardized processes for gaining the best value from their partner network. Standardized processes ensure that all employees are following organizationally-defined best practices when carrying out tasks, in hopes of leading to improved results. In the next section, we will see what the top performers are doing to achieve these gains. Key Business and Technology Capabilities The success of an overall business or even individual project requires people, tools and technology to work together. A highly effective project management execution requires a combination of strategic business capabilities and technologies to effectively achieve Best-in-Class performance.
12% 18% 23% 7% 23% 27% 21% 29% 34% 0% 10% 20% 30% 40% Standardize procurement and supplier contracting processes Develop client relationships to foster repeat work Build assessment of risks into various stages of the project Percentage of Respondents, n=297 Best-in-Class Industry Average Laggard "Before we accept new clients, we go through a rigorous process of identifying all the potential risks and problems that may arise from delivering the project on time and under budget. With this information we make decisions as to whether to accept new clients. Going through this process has enabled us to effectively bid for projects that would not bring us over budget." ~Consultant Small Legal Services Boutique
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2012 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897 Table 2: Differentiating Business Capabilities Business Capabilities Best-in- Class Industry Average Laggard Project management best practices are implemented and standardized across the enterprise 62% 39% 40% Ability to embed risk information into project plans 68% 40% 30% Social networking practices are incorporated into project processes 30% 22% 14% Project management operations are integrated and coordinated with customer service and delivery organization 79% 60% 33% Customer satisfaction is monitored and measured 84% 71% 54% Monitoring of social media to solicit customer feedback 47% 19% 13% From summary project data, decision- makers can drill down to transactions that form the fiscal and operational audit trail 81% 36% 25% Central visibility to resource workload across projects 59% 41% 31% Central visibility to skill sets of available resources 65% 43% 30% Source: Aberdeen Group, February 2012 In the previous section, it was identified that one of the ways that the Best- in-Class differentiated themselves from their competitors was their ability to build risk within their project execution plans. The Best-in-Class are accomplishing this by defining and executing standardized processes across the enterprise. In addition, they also have the ability to embed risk information within project plans. Embedding risk information will enable all personnel visibility into all risks and thus defer from them. In a volatile market, where there is a substantial element of risk, organizations that are not embedding risk into plans are setting themselves up for failure. A lot has been written about social media, and the role that it can play in marketing and sales, but in the case of project management, its benefits have not been nearly as publicized. Interestingly, the adoption is relatively low, with 21% of all respondents identified as using it. This does not tell the whole story, however. Best-in-Class organizations are 58% more likely than all others to be using social networking practices in project management. Additionally, in order to keep a constant pulse on their customer satisfaction, the Best-in-Class are monitoring social media to solicit customer experience. While still nascent, Aberdeen suspects that in the years to come, social media will play a bigger role in project management and enable greater collaboration across the organization. Project Management: Putting the Pieces Together Page 6
2012 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897 Organizationally, the Best-in-Class understand the importance of keeping customers happy and have put in place business capabilities to ensure proper delivery of projects. First, they have integrated their project management operations with the service and delivery organizations to not only guarantee that any problems are properly addressed but also to capture the voice of the customer to ensure greater service for future projects. Additionally, the Best-in-Class are also measuring and monitoring customer satisfaction and using this valuable information to improve internal processes. Making effective project decisions requires project managers to gain central insight into project status. The Best-in-Class are providing their decision makers real-time visibility into fiscal and operational costs. By providing summary level inquiries that allow executives to selectively and successively drill into more detail, culminating in seeing the transactional detail that forms the operational system of record for a business, you remove the barriers to a full understanding of status and profitability. As a result of this improved visibility, decision-makers are better equipped to more proactively manage possible exceptions, therefore containing schedule and budget overruns. One of the top project specific pressures was the need to use project resources more effectively. The Best-in-Class overcome this challenge by providing project managers with visibility into not only the resource workload across all projects in the enterprise, but also the proper skill sets of the resources available. Half the battle of resourcing a project is getting the right skills sets to work on the project and ensuring that these resources have the time to work on the project. Overcoming this battle could partially explain how the Best-in-Class are able to deliver projects almost three months earlier than Laggard organizations. Technology Enablers Investment in technology to gain access to project status and details is one of the major differentiators for Best-in-Class performance. These top performers use a project management solution to bring all the different moving parts of their projects together, whether in scheduling resources, reporting against the project plan or project costing. The majority of Best- in-Class performers use a combination of these solutions: Project scheduling (85%) Project management and reporting (82%) Project costing (87%) In addition, the Best-in-Class are also supplementing these applications with other technology enablers such as: collaboration tools, workflow automation, procurement tools, and applications for quoting and estimating. While every project-based business may not require each and every one of these solutions, most will definitely benefit from many; tools such as document management, change management and resource/workforce We have improved the discipline of execution. Plans and intentions are great, but the real difference is made in execution. The challenge there of course is to get everybody - that is: including (senior) managers - to behave in a disciplined manner, even when operational pressures mount. ~Project Manager Consulting Services
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2012 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897 scheduling have universal application across any industry. Again, all these applications are being used by Best-in-Class companies. Where the Best-in-Class are truly differentiating themselves is their ability to take their applications off the desktop and implement enterprise level tools (Figure 4). The alternatives to enterprise applications are desktop tools, spreadsheets, and manual processes, none of which support making decisions from a single source of data, a characteristic of Best-in-Class performance. An enterprise project management solution enables organizations to gain central insight, control, and accountability into project management processes. Indeed, this level of control contributes to the ability of these organizations to accurately quote, source, and deliver their work, generating greater consistency and predictability in how they do business. The added visibility and control afforded by enterprise level project management tools can directly impact the profitability of projects and the businesses that rely on them for growth and profit. Figure 4: Enterprise Level Tools
Source: Aberdeen Group, February 2012 To go along with the wide variety of tools available to project managers is the wide variety of delivery methods for those tools. It is interesting to note that the most favorable method of deployment is still on-premise (Figure 5). Many project-based businesses work on sensitive subject matter and companies feel more secure if the data is hosted in-house. 42% 37% 37% 40% 46% 34% 56% 60% 64% 0% 20% 40% 60% 80% Project Costing Project Management and Reporting Project Scheduling Percentage of Respondents, n=297 Best-in-Class Industry Average Laggard Over the years, we have placed emphasis in changing internal processes in order to benefit from adoption of new software (as opposed to adopt software to speed up/support traditional processes). We have gained better control of project execution processes and enabled better decision making. One of the challenges of implementing this change was convincing people of the benefits and to factually cooperate in their own interest, at all levels of the organization." ~Consultant Engineering Services
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Source: Aberdeen Group, February 2012 What's interesting to note is that when it comes to the latest technology, such as cloud, enabling mobile access and integrating project management with other enterprise-level applications such as ERP and CRM, the Best-in- Class are more likely than their competitors to leverage these capabilities. As the vendors within this space are able to ensure the same level of security and data availability as hosting the solution in house, more companies will be likely to invest in these solutions. These delivery methods allow for constant connectivity for decision-makers. In today's 24x7 business world this is essential in order to make agile decisions while taking advantage of opportunities and mitigating disasters. The quicker reaction times may just be what these organizations need to get ahead of their competitors. Theoretically, investing in these latest solutions will lower the total cost of ownership for the technology solution, however, only time will time if they will, and if companies feel secure in doing that. Key Takeaways The key to project profitability is delivering projects and milestones on time and under budget. While that sounds simple enough, with so many inter- connected moving parts, this is very difficult to do without the necessary organization and tools to schedule resources, manage and report against project delivery and control costs. As shown throughout this analysis, Best- in-Class companies are using a combination of business capabilities and technology to successfully deliver projects to meet customer expectations. For companies looking to improve their project management initiatives, Aberdeen suggests the following: Standardize and implement best practices across the enterprise. This capability will enable organizations to ensure that 13% 10% 12% 26% 52% 23% 26% 22% 35% 58% 26% 30% 38% 49% 68% 0% 20% 40% 60% 80% Off-Premise Software-as-a-Service (SaaS) / Cloud / On- Demand Mobile access to project management applications Embedded Project Management as a module or extension within other enterprise applications (e.g. ERP, CRM) On-Premise Percentage of Respondents, n=297 Best-in-Class Industry Average Laggard Definitions: On-Premise - Software is installed on-site or centrally at a company office location, and is deployed to users through your internal network infrastructure Off-Premise - Software is installed off-site or at a rented data center, and is deployed to users through your internal network infrastructure Software-as-a-Service- software is hosted and accessed via a third-party web-based service Project Management: Putting the Pieces Together Page 9
2012 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897 their employees have a clear understanding of the project management best practices and how these processes are connected to timely delivery of projects. Collaborate across the enterprise. From a strategic perspective, cross-functional collaboration is critical. Enabling collaboration will ensure that project decisions are made intelligently to prevent adverse events that can result in poor project performance. Leveraging applications such as collaboration tools for electronic communication, conferencing and management will also help with the collaboration. Leverage social media to capture the voice of the customer. To get a better pulse on customer satisfaction, tools such as social media applications will enable greater visibility into gathering customer intelligence to improve the delivery of projects. Take full advantage of implemented solutions to provide better visibility. Limiting access to project data to only select project members and project managers also limits the ability of the business to respond cohesively to challenges in managing projects for profitability. Providing access to project data to all project stake holders at all levels in the organization, will enable better project decision making needed to contain project costs. Expose the project to the enterprise, invest in enterprise- level solutions. For companies that still use desktop-bound project management solutions, elevate these solutions beyond the confines of the desktop. Some solution providers will provide both desktop and enterprise level solutions. For those working with solutions that are only available at the desktop level, it may be necessary to replace these and/or supplement them with tools such as workflow automation, document management, and collaboration tools. The added visibility and control afforded by enterprise level project management tools can directly impact the profitability of projects and the businesses that rely on them for growth and profit. For more information on this or other research topics, please visit www.aberdeen.com. To take part in Aberdeen's 2012 Project Management and Portfolio Management research, click here.
We implemented an operation reporting system, which consolidated all of our desperate systems into a centralized platform. Our new system shows real time status of on-going and in-coming projects and stock inventory status. In addition, we implemented a regular program for soliciting customer feedback regarding project and service satisfaction levels, which provides us valuable insight into how to improve our business." ~CEO Engineering Services Company
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Related Research Project Portfolio Management: Selecting the Right Projects for Optimal Investment Opportunity; March 2011 Executing the Project Plan: When Projects are your Business; December 2010 The Impact of Project Management Technology in the AEC Industry; March 2010 Delivering Project Profitability: On Time and Under Budget; January 2010 Author: Nuris Ismail, Research Analyst, Manufacturing (nuris.ismail@aberdeen.com); Nick Castellina, Research Analyst, Enterprise Applications (nick.castellina@aberdeen.com) For more than two decades, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Having benchmarked the performance of more than 644,000 companies, Aberdeen is uniquely positioned to provide organizations with the facts that matter the facts that enable companies to get ahead and drive results. That's why our research is relied on by more than 2.5 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% of the Technology 500. As a Harte-Hanks Company, Aberdeens research provides insight and analysis to the Harte-Hanks community of local, regional, national and international marketing executives. Combined, we help our customers leverage the power of insight to deliver innovative multichannel marketing programs that drive business-changing results. For additional information, visit Aberdeen http://www.aberdeen.com or call (617) 854-5200, or to learn more about Harte-Hanks, call (800) 456-9748 or go to http://www.harte-hanks.com. This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc. (2012a)