Calculating the Return on Investment of the PMO - Part 2/2

In this podcast, Ricardo continues to talk about his study to create a mathematical model to calculate the Return on Investment (ROI) of a Project Management Office (PMO). Remember to first download the reference material, the Processes Flow and the Report, in the website's downloads area.

Download (5 MB)

Episode transcript

The transcript is generated automatically by Podscribe, Sonix, Otter and other electronic transcription services.

Hello everybody welcome to the five minutes PMO podcast today. I like to discuss with you the second part of the Podcast about the return on investment of the project management office. If you remember last week, I started discussing about the portfolio to see the Valley of a PMO of a project management process. We need to see what are the products? Are they big? Are these small, what does on the game, what we'll need to handle through the PMO.

And one of the most important topics that we cover here is the return on investment is to make sure that every single Project show's the profit, even if the product is not tangible project, we need to find a way of transform this into a tangible results. And we can do this through Bayesean estimating. We can do this through AHP. Of course, it's not perfect, but it's much better than doing nothing in the same.

One thing that I discussed it last time I discuss a lot about the data distribution profile. This will create the worst scenario and the best scenario. So I own this paper that you can download. I was very, very conservative. I sat that the results of implementing a project management or not so good, So the worst scenario without project management. It's not so bad. And the best scenario of using project management is not so good.

So just trying, because one thing that concerned with, to prove to you that it's always good, and this is not the case, this was a steady that I'm using to help companies to understand if it's valuable or not for Dem to use and implement project management Processes and the similar, I did improve things in three areas, a results of reduction of a scandal. So a scalpel savings in time, Sachen savings in cost and turd, one increases in profit.

So I did this three and what I did, I look at for that 10% and I market the 10% each of those, this bow shape, but of course, and I said, OK, the minimum will be 10%. So there is a chance of 90%, nine zero, that the value is bigger than that one that I found in 10%. So with this, I have 90% of confidence that the number of the results we'll be better than the number that I'm finding.

So I was very conservative here. If you want to, can use 5%, 10%, 15%. I decided to use 10%. So with this, I took the numbers show the 10%, it's a lot million in savings in cost a million in an increase in revenues in a minute. So this is 2 million. So I'm telling you that there is a chance of 90% of having that least two millions profits coming from the project management approach in your heart, your hand, I started to calculate Investment in the PMO show the costs to create the process, to create process consulting, training people, whatever.

So let's suppose that I spent a million. So I'm spending the million to give a result of 2 million, but I'm not only doing this, our shul calculate in the influence of the PMO on the results. Why? Because maybe people can tell me that the 2 million using that as an example here, that the 2 million it's OK, but this 2 million could be capital gang's or could be market changes.

And not because we have a PMO the projects are running very well. Not because we have a PMO or maybe it's because we are lucky. So what we did on this study, I compare project management with all their areas and I deed a moody criteria comparison to see what is real, the most relevant thing. And on that case, on the paper, I found that 52% of the results you came from the project management process, otters came from other things.

So what I did, I applied at 52% on the 2 million. So then I will tell you, okay, just a little bit more than a million change of the results came from a good project management, but to create this, I spent that amount of money with this. I can find the profit in the return on investment after that, the last step is to analyze and decide. So of course I'd like just to highlight that this all mathematical process is a simplification of the real environment.

But one thing that I can assure with you that using this process, that you can download on the downloads area of my website, that you can download there is great, is great. Is all the companies that are use this, they say good, because now I have something more tangible. It's not perfect. Of course, nothing is perfect, but it's much better than dive in the blind environment. So there's will help you to see may be the cost of the PMO is too high.

Maybe I need to put more projects in this environment because we are more projects. I have the ability of having more. So look, this will help you in a very healthy discussion about the value of project management in a very mathematical and very tangible way. You can download there, use it and enjoy it. We'll be great. And we'll be adding one topic in your discussions about the Valley of project management. I hope you enjoyed.

I'd like to apologize first from my English and second day, this is not an easy, fast to do to explain this only. I'm trying to draw here in the paper while I'm talking, and it's really hard, but the, I strongly suggest read the paper and read the report and you will understand this much better after reading this. I hope you enjoy and see you next week in the, not for five minutes PM. Podcast.

Menu

Resources & Insights

Products & Services

More Resources & Insights

Ricardo Vargas

Podcasts

Calculating the Return on Investment of the PMO - Part 2/2

Search in Podcasts

Latest podcast episodes

Book recommendations