Projects are undertaken to produce benefits and add value. The outcome should result in benefits that outweigh the investment. Later chapters will consider how to describe and quantify benefits, but first it is important to understand how the comparison of benefits and costs can help to define the scope of the project.
Figure 1.1 illustrates a company's plan to develop operating procedures that its offices will be required to implement to gain savings from consistent and improved working practices. There are clear dependencies. For example, none of the implementations can happen until the operating procedures have been developed.
the components of effective project management
How many projects are needed to deliver this outcome? It could be four, one for each area of work. Or it could be two, one to develop the procedures and one to implement them in the offices. Or perhaps there would be economies from treating the whole endeavour as one project.
The decision is made easier when taking into account the value that must result. None of the implementations can take place if the operating procedures are not developed. But would the initiative be viable if it was not implemented in the Tokyo office? This is not clear. The critical question is whether the exclusion of Tokyo would so significantly reduce the benefits of the initiative that the investment could no longer be justified.
In any project there will be a point at which the investment being made is outweighed by the expected return on that investment. In this way, a project and a commercial business are no different. The question about how many projects there are can be addressed by taking a commercial perspective, as illustrated in Figure 1.2 overleaf.
The development work on the left-hand side of Figure 1.2 will contribute to the costs of the project, while the implementation activities, although requiring some investment, will principally contribute to the generation of value. Whether the investment can be justified depends on knowing what value each implementation will generate. One may be insufficient, two may be enough and perhaps the third would be needed to make the case indisputable. Therefore, all four areas of work should fall under the same governance to ensure that the intended positive difference between
Cost versus income generation
costs and benefits is protected. This balance, with cost on one side and income (or benefit) on the other, is the foundation of any individual project. It answers the crucial question, why do we want to undertake this project?
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What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.