Transcript No Slide Title

Analytic Project Management
A
6 Hayden Lane
P
Bedford, MA 01730
M
(781) 275-3425
www.totalprojectcontrol.com
Managing the Project
Investment with MS Project
Stephen A. Devaux, President
Analytic Project Management, LLC
&
John Riopel, President
Sponsored by PM Providers, LLC
April 23, 2007
This seminar is presented solely for the attendees of MPA’s April 2007 meeting in Waltham, MA.
No duplication, use or dissemination of this material or these concepts may be made without the express written permission of APM.
The right to incorporate any of the techniques described herein in software is the exclusive right of Analytic Project Management.
Moneyball. . .
A management book about changing a culture.
Copyright, 2007, Analytic Project Management, Bedford, MA
What Should Be Most Important?
Wins.
Losses.
What increases wins?
What decreases losses?
The difference between.
Scoring more runs.
Conceding fewer runs.
Is there a precise and measurable
relationship among all these goals?
Copyright 2007, Analytic Project
Management, Bedford, MA
3
Bill James’ Pythagorean Formula
(Runs)2
Won-Loss % =
(
(Runs)2 + (Opponents’ Runs)2
(Runs)1.83
Won-Loss % =
(Runs)1.83 +
(Oppnts.’ Runs)1.83
Copyright 2007, Analytic Project
Management, Bedford, MA
)
4
PM Software Misses the Point!
“It’s got a ten month duration.”
“It’s got a two million dollar budget.”
“Great! But why are you doing the project?”
Copyright, 2007, Analytic Project Management, Bedford, MA
2004 Boston Red Sox
(949) 2
Projected Red Sox W-L % =
(949)2 + (768) 2
900601
=
1490425
=
.60426
Actual Red Sox W-L % =
98-64
=
.60494
Copyright 2007, Analytic Project
Management, Bedford, MA
6
So What Does Baseball...
…have to do with project management?
1. It’s important to measure the right things.
2. In baseball, the right thing is winning games.
What is it on a project?
3. To win at baseball, we need to know how much
each player contributes to winning.
What do we need to know about projects?
Copyright 2007, Analytic Project
Management, Bedford, MA
7
What is a Project?
The PMBOK Guide Definition:
1. A temporary endeavor...
2. …undertaken to create a
unique product, service, or outcome.
Surely something is missing?
Why do we do projects?
Copyright 2007, Analytic Project
Management, Bedford, MA
8
How Big Is Your Project?
“It’s got a ten month duration.”
“It’s got a million dollar budget.”
Great! But why are you doing the project?
Copyright 2007, Analytic Project
Management, Bedford, MA
9
“I’m Funding a $1Million Project…”
“…that’s gonna generate revenues of $800,000!”
Would funding such a project ever make sense?
How about a project that saves $1.2 million?
How about one that generates $800,000
and saves $500,000?
Which one is best (all else being equal)?
Copyright 2007, Analytic Project
Management, Bedford, MA
10
“Every Project Is An Investment!..”
“…in work to create a product,
service, or outcome.”
Why do we make investments?
To create greater value.
How do we measure and judge an investment?
How much profit did it make?
Why do we measure and judge projects
differently from ALL OTHER investments?
Copyright 2007, Analytic Project
Management, Bedford, MA
11
How Big Is Your Project?
“It’s got a ten month duration.”
“It’s got a million dollar budget.”
Great! But why are you doing the project?
Copyright 2007, Analytic Project
Management, Bedford, MA
12
The Essence of all Projects!
1. Every project is an investment, designed to
generate more value than its cost.
2. The greater the value generation per invested
dollar, the better the project.
3. Most projects take place within and for
organizations that are concerned with
maximizing value generation per invested
dollar.
Copyright, 2007, Analytic Project Management, Bedford, MA
The Tools Are There…
…We just have to learn the right ways to use them!
The Triple Constraint Triangle
TIME
COST
PROJECT SCOPE
Do we really understand it? And use it?
Copyright 2007, Analytic Project
Management, Bedford, MA
14
The Factors that Impact the Project
Investment
1. The value of the product and work (product
and project SCOPE), as presented in the WBS.
2. The amount of the investment (COST).
3. The duration of the project (the acceleration
or delay in TIME before the value is
generated.
4. Risk (which can affect the value/cost of any
of the above).
Copyright, 2007, Analytic Project Management, Bedford, MA
Investment Goals As Project
Metrics!
COST
($ for
resource
usage)
TIME
($ + or - for
acceleration/delay)
PROJECT SCOPE
($ in EMV)
EMV = expected monetary value
PROJECT PROFIT =
$EMV + or - $Acceleration/Delay - $Resource Usage
Copyright 2007, Analytic Project
Management, Bedford, MA
16
Indexing Project Profitability
TIME
($ + or - for
acceleration/delay)
COST
($ for
resource
usage)
PROJECT SCOPE
($ in EMV)
The job of project management is to use resources as profitably
as possible. The index for measuring this is the DIPP*.
DIPP =
($EMV + or - $Acceleration/Delay)
$Estimate-to-complete
*See “When the DIPP Dips,” Project Management Journal, Sep 1992
Copyright 2007, Analytic Project
Management, Bedford, MA
17
Statement of Investment Goals
(MANDATORY SCREEN)
1. Expected Monetary Value of Product Scope
If completed on ( date ), the expected revenue/savings of the product will be:
$
.00 for 100% of occasions, $
.00 for 0% of occasions
2. Follow-on Value
If all project goals are met, there is potential follow-on value due to: (scrollable)
of: $
.00 for 100% of occasions, $
.00 for 0% of occasions
$
.00 for 00% of occasions, $
.00 for 0% of occasions
3. “Intangible” Value
If project is successful, there is potential value of “intangibles” due to: (scrollable)
of: $
.00 for 100% of occasions, $
.00 for 0% of occasions
$
.00 for 00% of occasions, $
.00 for 0% of occasions
If completed on (date above), the total project EMV will be: (computed field)
Copyright, 2002, Analytic Project Management, Bedford, MA
Value of Acceleration/Delay
(MANDATORY SCREEN)
If date above is advanced by (# of time units), the project’s expected value will:
increase/decrease by
% or $
compounded/noncompounded.
If date above is advanced by (# of time units), the project’s expected value will:
increase/decrease by
% or $
compounded/noncompounded.
If date above is delayed by (# of time units), the project’s expected value will:
increase/decrease by
% or $
compounded/noncompounded.
If date above is delayed by (# of time units), the project’s expected value will:
increase/decrease by
% or $
compounded/noncompounded.
Copyright, 2002, Analytic Project Management, Bedford, MA
The DIPP Threshold
39.0
.
36.73
36.0
(35.58)
33.0
30.0
27.0
24.0
21.0
.
17.53
18.0
15.0
(16.98)
12.0
.
.
(7.88)
. (5.84)
.
2.71 2.78 2.87 3.01 3.16
.
.
.
.
(4.64)
.
.
(3.83)
(2.63) (2.69) (2.78) (2.92) (3.06) (3.25)
9.0
6.0
3.35 3.95
3.0
2.65
(2.57)
.
11.11
WEEK
4
WEEK
8
WEEK
12
4.79 6.03
WEEK
16
8.13 (10.76)
WEEK
20
WEEK
24
WEEK
28
PLANNED DIPP IN BOLD.
(DIPP for 95% of projected profit margin in parentheses.)
A “threshold” can be built in on the DIPP if it falls below, say, 95% of its
forecast level. Such a fall should trigger an escalation to senior management.
Copyright 2007, Analytic Project
Management, Bedford, MA
20
The DIPP Barometer Index
At Week 10
Planned DIPP = 3.16
Actual DIPP = 2.86
DBI =
Actual DIPP
Planned DIPP
=
2.88
3.16
=
0.91
Copyright 2007, Analytic Project
Management, Bedford, MA
21
Optimizing at the Activity Level
But what is an activity’s triple constraint triangle?
TIME
COST
SCOPE
What is its impact on project value?
1. Scope = Activity Value-added
2. Cost = Activity $ ETC
True cost of an activity!
3. Time = DRAG Cost $
Copyright 2007, Analytic Project
Management, Bedford, MA
22
Critical Path Method of Scheduling
1. Project management’s greatest tool!
2. The Only Way to Schedule Project Work
TF=3.5M
TF=2M
TF=3M
Traditional project management computes:
 Project duration (11M).  Critical path (B).  Float.
Copyright 2007, Analytic Project
Management, Bedford, MA
23
The Wrong Focus!
But float is always off the critical path! And
the quantification of how much an
activity can be delayed puts all the focus
on the wrong things!
“Wow! Activity D has a month of float,
so it’s okay if it takes three weeks longer!”
Copyright 2007, Analytic Project
Management, Bedford, MA
24
Quantify the Critical Path!
Time is money!
And the critical path adds time to the project!
TPC CPM also computes:
On the critical path
DRAG
(Devaux’s Removed Activity Gauge)
Copyright 2007, Analytic Project
Management, Bedford, MA
25
What is an Activity’s DRAG?
D=2M
DRAG=2M
DRAG=2M
DRAG=2M
Q: How much time is each activity adding to the project duration?
Q: How much time could potentially be saved
by reducing an activity’s duration to zero?
Copyright 2007, Analytic Project
Management, Bedford, MA
26
It’s Difficult to Compute
DRAG…
…even in a VERY small network diagram!
30
16
21
15
1
1
A
15
15
45
50
20
SS12
20
SS6
B
7
7
C
SS4
26
26 FS2
15
33
33
E
52
52
43
29
D
29
43
= critical path
If each unit of time results in a delay penalty of $10,000, what is
the DRAG Cost of each critical path activity?
Copyright 2007, Analytic Project
Management, Bedford, MA
27
But Computing DRAG is Important!
1. DRAG shows which activities will benefit the project most
by being shortened – both up front and when things slip!
2. Decreased project profit due to critical path delay
(DRAG Cost) justifies resources -- if an activity has a
DRAG Cost of $10,000 per week, that justifies
$30,000 to lessen its DRAG by three weeks.
3. Each good decision displays its worth by increasing
the project profit and its barometer, the DIPP.
(Note: Software that calculates DRAG is available at www.sumatra.com
[an add-on to MS Project] and at www.PlanontheNet.com )
Copyright 2007, Analytic Project
Management, Bedford, MA
28
The Portfolio DIPP
Senior management of a project-driven organization should
receive reports on the DIPP of each project, as well as the
multiproject portfolio DIPP, the barometer of organizational
profitability.
Proj.
Name
EMV
(000)
As
Of
Current
% Loss per % Gain per
Comp. Date Week Late Week Early
Cost
ETC
Simple
DIPP
A
$1,000
Aug 1
Aug 1
5%
5%
$200
5.0
B
$2,000
Oct 1
Oct 1
10%
5%
$1,000
2.0
C
$5,000
Nov 25
Nov 25
20%
2%
$2,000
2.5
D
$10,000
Jan 30
Jan 30
10%
5%
$3,000
3.3
TOTAL PORTFOLIO: Expected Monetary Value:
Cost ETC:
Expected Net:
Simple DIPP:
$18,000
$6,200
$11,800
2.9
For the moment, everything may seem copacetic, but...
Copyright 2007, Analytic Project
Management, Bedford, MA
29
Adding New Projects to the Portfolio
What happens when a new project gets proposed? Like a
new, profitable, nine million dollar project?
Proj.
Name
E
EMV
(000)
$12,000
As
Of
Feb 10
Current
% Loss per
Comp. Date Week Late
---
20%
% Gain per Cost
Week Early ETC
5%
$3,000
Simple
DIPP
4.0
Such a project is undoubtedly very attractive. But without
access to the complete range of TPC data across the
portfolio, adding such a new project is not only unjustified,
it’s dangerous!
Copyright 2007, Analytic Project
Management, Bedford, MA
30
After Multiproject Leveling. . .
Even a highly profitable new project can result in lower
profits, if it sucks resources away from other projects!
Proj.
EMV
Name
(000)
As
Of
Current
Comp. Date
% Loss per % Gain per
Week Late Week Early
20%
E
$12,000
Feb 10
Feb 10
A
$1,000
Aug 1
Aug 29
5%
B
$2,000
Oct 1
Oct 29
C
$5,000
Nov 25
D
$10,000
Jan 30
TOTAL PORTFOLIO:
5%
New
EMV
Cost Simple
ETC DIPP
$12,000
$3,000
5%
$800
$200
4.0
10%
5%
$1,200
$1,000
1.2
Dec 16
20%
2%
$2,000
$2,000
1.0
Mar 13
10%
5%
$4,000
$3,000
1.3
Expected Value: $20,000
Total Cost ETC: $9,200
(+ $2,000)
(+ $3,000)
Expected Net: $10,800
Simple DIPP: 2.2
(- $1,000)
(- 0.7)
4.0
Remember, this is what would have happened anyway, only
invisibly! The TPC data provide the portfolio with a
barometer, that can be used to adjust individual projects
and resources for maximum profitability.
Copyright 2007, Analytic Project
Management, Bedford, MA
31
The Optimized Portfolio Report
Proj.
Name
EMV
(000)
As
Of
Current
% Loss per % Gain per New Exp.
Comp. Date Week Late Week Early
Value
Cost
ETC
E
$12,000
Feb 10
Jan 13
20%
5%
$14,400
A
$1,000
Aug 1
Sep 12
5%
5%
$700
$200
3.5
B
$2,000
Oct 1
Oct 15
10%
5%
$1,600
$1,000
1.6
C
$5,000
Nov 25
Nov 25
20%
2%
$5,000
$2,000
2.5
D
$10,000
Jan 30
Feb 27
10%
5%
$8,000
$4,000
2.0
$3,500
Simple
DIPP
4.1
TOTAL PORTFOLIO: Expected Value: $29,700 (+ $9,700)
Cost ETC: $10,700 (+ $1,500)
Expected Net: $19,000 (+ $8,200)
Simple DIPP : 2.8
(+ 0.6)
Thus TPC provides quantified justification not
only for the additional resources that the project
needs, but for project management itself!
Copyright 2007, Analytic Project
Management, Bedford, MA
32
Value breakdown structure
WBS Data
Responsible Dept. or Organization_______________________________
____
Activity Manager_________________________________ Title_________
____
Estimates
Entrance Criteria ______________________________________________
________________________________________________________________
Completion Criteria ____________________________________________
________________________________________________________________
Mandatory/Optional_________Value
-added if optional _____ % or $ _______
__
_
___
_
Estimates for Detail -level Activities ONLY!
Duration: __________________ DRED: _________________
Assigned human resources (from resource library):
Resource: __________________ Hours: ____________ $
(computed)
Resource: __________________ Hours: ____________ $
(computed)
Resource: __________________ Hours: ____________ $
(computed)
Resource: __________________ Hours: ____________ $
(computed)
Total work hours_______________ Total labor cost ______________
Assigned equipment resources (from resource library):
Resource: ________________ Amount: ____________ $
(computed)
Resource: ________________ Amount: ____________ $
(computed)
Resource: ________________ Amount: ____________ $
(computed)
Resource: ________________ Amount: ____________ $
(computed)
Total equipment cost ______________
Assigned materials resources (from resource library):
Resource: ________________ Amount: ____________ $
Resource: ________________ Amount: ____________ $
Resource: ________________ Amount: ____________ $
Resource: ________________ Amount: ____________ $
(computed)
(computed)
(computed)
(computed)
Total materials cost ______________
Estimator's Name________________Signature_______________Date____
___
Copyright, 2002, Analytic Project Management, Bedford, MA
To create
a VBS
Negative Value-added Flags
1. The software should immediately flag, and
issue an Exception Report on, any optional
activity whose combined DRAG Cost and
resource cost exceeds its value-added (from
the value breakdown structure).
2. It should also be possible to pre-set a
threshold (e.g., 120% of combined cost) for
such a flag.
Copyright, 2002, Analytic Project Management, Bedford, MA
DIPP Baseline
1. As the BCWS baseline is saved, so too is the
Cost ETC baseline. By dividing the baseline
EMV by the Cost ETC at any reporting
period, a DIPP baseline can saved.
2. Progressing should update both project
profit and Actual DIPP data, with the DIPP
changing as Cost ETC, project duration-atcompletion and EMV change.
Copyright, 2002, Analytic Project Management, Bedford, MA
Tracking the DIPP
39.0
.
36.73
36.0
(35.58)
33.0
30.0
27.0
24.0
21.0
.
18.0
17.53
15.0
(16.98)
.
11.11
12.0
.
.
.
.
.
.
.
.
.
.
8.13 (10.76)
9.0
6.03
4.79
(7.88)
3.95
3.35
2.71 2.78 2.87 3.01 3.16
(5.84)
(4.64)
(3.83)
(2.63) (2.69) (2.78) (2.92) (3.06) (3.25)
6.0
3.0
2.65
(2.57)
WEEK
4
WEEK
8
WEEK
12
WEEK
16
WEEK
20
WEEK
24
WEEK
28
PLANNED DIPP IN BOLD.
(DIPP for 95% of projected profit margin in parentheses.)
3. Actual DIPP should be divided by Planned
DIPP to provide a “normalized” DIPP (the
DBI or DIPP Barometer Index).
Copyright, 2002, Analytic Project Management, Bedford, MA