Slides from the white paper which objective is to present, discuss and apply a mathematical model based on the use of Monte Carlo simulation in conjunction with researches on project success/failure rates of projects to develop a 10 step model to calculate the mathematical return on investment (ROI) for the Project Office implementation.
4. ROI - Key benefits of a numerical calculation
• Price is a proxy for value.
• Makes it easier to align and integrate with financial
systems performance.
• Supports the identification of critical sources of value.
• Promotes communication and makes results
quantitatively tangible.
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4
5. What about the Challenges?
• It is a simplification of the possible scenarios.
• Plenty of cultural, social and moral aspects.
• Benefits can be questionable since the perceptions of
value can be different.
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5
8. Step by Step Process:
Tiger Screws Case
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8
9. Tiger Screws Company
S DA EMPRESA
• Founded in 1961
• Third largest screw
A Tiger Screws foi fundada em 1961 e é
manufacturer in the country
a terceira maior fabricante de parafusos
do país.Produces 4200 tons per month
•
Tem capacidade para produzir 4,2 mil
• 12,000 products comprising
toneladas/mês e um portfólio de 12 mil
produtos em 280 diferentes linhas. 280 different lines
Com faturamento de R$48.000.000.00 no último ano, a Tiger Screws
• Revenues of $48,000,000.00
tem crescido em média 21% ao ano. Outra empresa, a líder nesse
last year
segmento, tem faturamento de R$79.000.000.00 e uma média de
crescimento de 15% ao ano.
70% das vendas da Tiger Screws são feitas no mercado nacional e
30% em outros 6 países dos continentes americano at http://rvarg.as/roipmo
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9
13. Medium
nology
Medium
Low
es
Medium
Modernization of the Instrumentation System
Medium
E-commerce
Tiger Screws’ Project List
Low
PROJECT
High
Corporate Office Projects
High
Review of Low Mix Low
Product
Zero
elopmentAccidents
High
High
New Markets
es Internationalization of Production Units
Very High
High
Modernization of the Instrumentation System
High
High
Import Finished Products
es E-commerce Low
Very
None
Corporate High Projects High
Office
nology
New Markets
Medium
Medium
University Tiger Screws
New Line for the Oil Industry
Opening of Capital
Social Media
ERP System
New Maintenance Policy
University Tiger Screws
New Line for the Oil Industry
Import Finished Products
Opening of Capital
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13
21. Example: Corporate University
• Q: Why is there interest in the implementation of the
Corporate University?
– A: So that we can prepare new talents
• Q: Why is there interest in preparing new talents?
– A: To have in the future a greater allegiance in our
executive level professionals.
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21
22. Example: Corporate University
• Q: Why do you want higher allegiance in the future?
– A: To lessen the turnover that generates additional
costs
Then it can be concluded that one of the main objectives of
the Corporate University is to reduce additional costs of
hiring.
Imagine that the Tiger Screws’ cost of hiring is $8,716,704
over the next 5 years and that there is a likelihood that they
are reduced in the coming years because of the corporate
university.
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22
23. AHP and Bayesian Estimate: University Tiger Screws
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23
24. Example of Results
University Tiger Screws
• Result: $608,110.28
• Investment: $350,000.00
• Benefit: 258,110.28
• Project ROI: 74%
NOTE: Assuming the values are already brought to their present values.
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24
25. Tiger Screws Portfolio Consolidated Information
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25
26. Tiger Screws Portfolio Consolidated Information
The Total duration is used only to determine the approximate total workload in projects.
The term may be replaced by man/hour or other measures of effort.
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26
27. Tiger Screws Portfolio Consolidated Information
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27
58. Key Points and Conclusions
• The model is a "master line” of the value calculation
and can thus be customized.
• The entire process is to be performed in teams.
• Any mathematical model is a simplification of the real
process.
• The result of the PMO is achieved by simulating
imagined future scenarios (a risk inherent to the
process).
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58
59. Ace in the hole
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59
60. Conclusions
• It is impossible to determine ROI without knowing which
projects are selected and the strategy that goes behind
them.
• If the PMO will manage projects with no calculable
benefits (mathematically intangible), it is essential that
the calculation process (step 2) is carried out with great
care and attention.
• This is a laborious process but much more effective to
determine/prove the value of the PMO.
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61. Contact Information
Ricardo Viana Vargas
ricardov@unops.org / ricardo@ricardo-vargas.com
www.unops.org
Twitter: @rvvargas
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