A
Framework for Value, Risk, and Capability: The Project Balance Sheet
Over a number of years of working with project teams and executive
sponsors, this author has conceived and evolved the concept of the project
balance sheet. [12],
[13] The project balance
sheet is a conceptual and quantitative model suitable for relating business
value with project capability and risk. To this point, we have discussed three
well-known models of business value and customer expectation. Now it remains to couple these models to projects. Coupling to
projects also provides a means to relate the numerical expressions of business
value with the numerical measures of project capability and performance.
We begin with this premise: project sponsors and business
executives who charter projects and invest in their success have an expectation
of results, more often than not results that exceed the project investment, and
for these investment gains, they are willing to accept some risk. These expected
results support directly the goals and strategies that back up the value models
we have discussed.
Project managers, on the other hand, accept the charter as their
marching orders, developing a scope statement and an estimate of resources that
corresponds. Now it often comes to pass that the project manager discovers that
the available investment comes up short of the resources estimated, given that
the full scope is embraced. Negotiations begin, but in the final analysis there
usually remains a gap between capability and capacity on the project side and
the value imperatives on the business side. What to do? The answer is: take a
risk. How much risk? Only as much risk as is necessary to balance business needs
and values on the one side with project abilities and needs on the other side.
Who takes this risk? The project manager; the project manager is the ultimate
risk manager. [14]
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