Six Benefits of Good Project Management

The good project management will provide many benefits, including:

• Happy customers. Whether a project is for outside customers or groups within your organization, customers like to get what they want when they want it. Because the first step in project management is finding out what your stakeholders and customers want to accomplish with the project, your customers are more likely to get the results they expect. And by keeping the project under control, you’re also more likely to deliver those results on time and at the right price.
• Objectives achieved. Without a plan, projects tend to cultivate their own agendas and people forget the point of their work. A project plan ties a project to specific objectives, so everyone stays focused on those goals. Documented objectives also help you rein in the renegades who try to expand the scope of the project.
• Timely completion. Finishing a project on time is important for more than just morale. As work goes on for a longer duration, costs increase and budgets blow to bits. In addition, you may lose the resources you need or prevent other projects from starting. Sometimes time is the ultimate objective, like when you’re trying to get a product to market before the competition.
• Flexibility. Contrary to many people’s beliefs, project management makes teams more flexible. Project management doesn’t prevent every problem, but it makes the problems that occur easier to resolve. When something goes wrong, you can evaluate your plan to quickly develop alternatives—now that’s flexibility! More importantly, keeping track of progress means you learn about bad news when you still have time to recover.
• Better financial performance. Most executives are obsessed with financial performance, so many projects have financial objectives - increasing sales, lowering costs, reducing expensive recalls, and so on. Project management is an executive crowd-pleaser because it can produce more satisfying financial results.
• More productive, happier workers. Skilled workers are hard to come by and usually cost a bundle. People get more done when they can work without drama, stress, and painfully long hours. Moreover, they don’t abandon ship, so you spend less on recruiting and training replacements.

Internal Rate of Return (IRR)

The internal rate of return (IRR) is the most difficult equation to calculate of all the cash flow techniques. It is a complicated formula and should be performed on a financial calculator or computer. IRR can be figured manually, but it’s a trial-and-error approach to get to the answer.

Technically speaking, IRR is the discount rate when the present value of the cash inflows equals the original investment. When choosing between projects or when choosing alternative methods of doing the project, projects with higher IRR values are generally considered better than projects with low IRR values.

Three facts concerning IRR:

• IRR is the discount r NN ate when NPV equals zero.
• IRR assumes that cash inflows are reinvested at the IRR value.
• You should choose projects with the highest IRR value.

Net Present Value (NPV)

The benefit measurement methods involve a variety of cash flow analysis techniques including net present value.

Projects might begin with a company investing some amount of money into the project to complete and accomplish its goals. In return, the company expects to receive revenues, or cash inflows, from the resulting project. Net present value (NPV) allows you to calculate an accurate value for the project in today’s dollars.


Net present value works like discounted cash flows in that you bring the value of future monies received into today’s dollars. With NPV, you evaluate the cash inflows using the discounted cash flow technique applied to each period the inflows are expected instead of in one sum. The total present value of the cash flows is then deducted from your initial investment to determine NPV. NPV assumes that cash inflows are reinvested at the cost of capital.

Here’s the rule: If the NPV calculation is greater than zero, accept the project. If the NPV calculation is less than zero, reject the project.

Look at the two project examples. Project A and Project B have total cash inflows that are the same at the end of the project, but the amount of inflows at each period differs for each project. We’ll stick with a 12 percent cost of capital. Note that the PV calculations were rounded to two decimal places. Project A has an NPV greater than zero and should be accepted. Project B has a NPV less than zero and should be rejected. When you get a positive value for NPV, it means that the project will earn a return at least equal to or greater than the cost of capital.

Another note on NPV calculations: projects with high returns early in the project are better projects than projects with lower returns early in the project. In the preceding examples, Project A fits this criterion also.