The ability to measure data is the key to PMO’s success
Collecting, evaluating, and reporting project-related data are integral functions of a project management office (PMO). Your PMO has to collect and synthesize a wide gamut of data to glean the right insights and comprehend the impact your project has on your business.
Post-project evaluation holds the utmost importance in your project cycle and it’s extremely crucial for your PMO to improve continuously and create value for all stakeholders by aligning performance with key evaluation criteria. Below are some project evaluation methods that your PMO should know:
1. Benefit-cost ratio
The benefit-cost method measures and evaluates the ratio between how much return you got from the project to the total cost incurred on it. Given that there is no budgetary constraint, project portfolios with a higher benefit to cost ratio are preferred. Since the ratio gives a basis for clear cost-benefit analysis, most PMOs tend to prefer this method of post-project evaluation.
2. Economic Value Added (EVA)
Another popular method of evaluating project portfolio management efforts is the Economic Value Added (EVA) method. With this method, PMOs can calculate the net profit and the return on capital. It differs from the benefit-cost ratio in the sense that it is expressed as a monetary value, and not as a percentage. A project portfolio with a higher EVA is preferred because it adds more economic value.
3. Net Present Value (NPV)
Perhaps one of the simplest and easiest methods of evaluating project portfolios is the net present value method. This method calculates the difference between the current cash inflow and outflow of a project. If the inflow is more than outflow, then the project is suitable. A savvy PMO should aim at achieving a positive NPV because that it would indicate that the project portfolio is generating more cash inflow compared to outflows.
4. Non-financial methods
There’s also an evaluation method that is non-financial in nature but has a significant impact on the overall objectives of your business—improvement of customer services. Such an initiative may not contribute towards your revenues in monetarily quantifiable terms, but it can increase the profitability of your business by satisfying all stakeholders involved in your project portfolio management.
You should prioritize your project portfolio management by following a well-defined ranking model. Make sure your ranking model is efficient, flexible, manageable, and sustainable, and help you attain your project objectives in the best way.
