Don’t Ignore the Importance of Project Financials
Well, I am wrapping up an eight-week course on financial theories, and am using this as an excuse for my lack of blogging. But, my last assignment was just submitted, so I feel that I have a little breather to share with you my opinion on financial theories and how they relate to project management.
During this course, I found a great book, Finance and Accounting for Nonfinancial Managers. This book took the complex concepts of financial analysis (understanding balance sheets, ratios, etc.) and explained them in a way that I could understand. I used this book in conjunction with my assigned text books, and have come away from this class with a much better understanding of the underlying reasons for financial decisions made by companies.
So, exactly what did I learn? Well, as a project manager, I had a good idea of predicting and managing the budget at a project level, and even some understanding of the impact of projects at a program, or department, level, but never really thought about the financial impact at the organizational level. This understanding is crucial in the realm of portfolio project management and helps a program leader align project decisions with organizational strategy and decision-making. In fact, my final assignment for the financial theories class was to develop a research proposal, and my topic for this proposal was focused on how one theory, economic value-add, or EVA, can be used to improve the success rate in portfolio project management decision making. The hypothesis I am carrying forward assumes that applying EVA will have a positive impact on portfolio analysis, especially if a firm were to align project success using an EVA financial management system. It would be an interesting comparison to using traditional methods of portfolio analysis, which is based on priority and alignment with strategic goals. So, now to the literature search and collection of supporting information. I probably won’t turn this into a full dissertation, but if anyone does, please share your results with me (and pass a little credit for the hypothesis, please). Happy projects, everyone!
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© 2010, Juanita Woods, PgMP, PMP, MBA. All rights reserved.
