The Project Balance Sheet

We now consider the insights about the business learned from the accounting balance sheet that will provide a quantitative framework for the project manager. First we direct our attention to the three elements that are necessary to form a balance sheet. To charter the project, business sponsors assign resources and state the required project returns needed for the business. Project returns are both functional and financial. Any one of the business value models we have discussed could be used to form the sponsor's view of the project. Sponsor-invested resources correspond roughly to the capital or equity investments on the accountant's balance sheet. As many companies are measured by the returns earned on the capital employed, so it is with projects. We will discuss in subsequent chapters that a project metric in wide use is the concept of economic value add (EVA). In effect, EVA demands positive returns on capital employed.

Second, the project manager is entrusted with resources owned by the business to carry out the project. These resources correspond roughly to the company-owned assets of the accountant's balance sheet. Like company managers who are often measured on their ability to create a return on the assets entrusted to them, so it is with project managers. Project managers are always judged on their ability to employ successfully the sponsor's resources to achieve the project objectives.