Financial Analysis: Gain Support for Your Projects
27 June 2008
Topics: financial
analysis, capital investment, project management, stakeholder
management, communications, business writing
Clear financial metrics can align resources and drive action. If you want to see support come together for your project, communicate its benefits.
Do you find it difficult enlisting support for your work? Do the competing demands of the larger organization sap strength from your projects? Do others rob you of resources?
This video outlines one of the most important techniques for securing and ensuring cooperation and assistance.
Again, I cannot overstate the importance of financial analysis and stakeholder communications. Sharing a project’s economic value can create alignment and drive action.
Script
One of the concerns I hear from managers and engineers is their frustration aligning support for their projects. They find it difficult to win support. The competing demands of the organization sap strength from their projects. Resources do not come forth as promised. Schedules slide, and results are postponed.
I understand this issue and I have helped managers and engineers respond to this challenge. I believe you can apply these principles and win more support for you projects.
A situation occurred several years ago that drives this point home. Our organization was attempting to implement a project budgeted at less than $600,000. Due to an inadequate scope planning and lack of project controls, the cost mushroomed to more than $1,500,000. Even more serious than the cost overrun, schedule had seriously slippage. It seemed that we would never get the equipment into production. I felt I had communicated the benefits of the project clearly to all stakeholders. However, I was mistaken. I learned this, because, in my frustration, I reissued and actively communicated a financial analysis for the project. It showed a very high IRR and a large net present value. My communication finally dislodged the project from its stalled state.
When the high financial value finally reached the consciousness of the manager controlling the resources for commissioning and operation of the equipment, the project began to fly.
I thought this person understood the project’s benefits, but this was not the case. However, once he fully understood the huge value this project would yield, he applied the resources the project desperately needed, and the project made rapid progress.
In conclusion, the system went on to provide $18,000,000 net savings in its first 12 months of operation. And it generated more than $100,000,000 over the next few years. The magical key which finally aligning the resources was a very simple memo, which stated the project’s financial benefits.
This incident reinforced my understanding of the importance of shareholder communication and the power of financial analysis to align commitment.