Are These Factors Hurting Your Project ROI?

Projects often require a significant amount of capital to bring to fruition and achieving the expected rate of return on the company’s investment is a critical element in their ultimate success. But meeting an initiative’s forecasted ROI can be tricky, and project teams sometimes encounter challenges that stop them from realizing the maximum value.

If you’re struggling to achieve the optimal ROI, consider if (or how) these factors are working against you. 

Delays. Given the difficult environment project teams face in the current climate, problems caused by delays are more prevalent than ever. Extended hiring timeframes and supply chain disruptions continue to make staff, equipment, and materials difficult to procure (or at least to get on time). But the effects of these delays go beyond paying more for contract labor or forking over rush fees for high-demand supplies. When calculating ROI, you also need to factor in the downstream losses.

  • Will your production line use less-efficient processes longer than expected, pushing forecasted cost savings farther into the future?
  • Will the delay mean a competitor’s product might reach the market before yours?
  • Is a delay likely to trigger regulatory action or other penalties?

These scenarios could result in higher costs and/or diminished revenue that chip away at your ROI. And if a delay today creates the need to push dates back in a future project, then your losses may be compounded. Unfortunately, these are difficult to capture—without careful cost allocations and calculations, your organization might not even know how badly its project investments are performing.

Inefficient resource coordination. In the rush to launch new projects, teams may not feel they have time to orchestrate resources with anything other than expediency in mind. Inefficient resource management often leads to duplicative labor costs, increased site visit and travel fees, upcharges for off-hours work and rush fees to ship materials at the last minute. It’s not uncommon that businesses are unaware of the damage these extra expenditures do to their ROI, since the costs for poor resource planning are frequently buried in contingency line items or covered by a budget that was hastily prepared and padded from the beginning. Tracking down these wasted funds can be challenging, but you’ll achieve better ROI if you make the effort to assess how well your resource management strategy is working.

Improper specifications. Most projects include a long list of detailed requirements for various activities. A task may need to be executed by someone with a certain set of credentials, for example. Materials may need to meet safety standards or equipment might require particular connections to integrate with existing machinery. However, failing to understand when these specifications no longer apply—or when an equivalent is available at a better cost—can quickly increase project costs. To avoid losses, it’s crucial to review specifications with each new initiative. Consider a few scenarios where you may be able to use money more wisely when it comes to your project’s specs.

  • A new hire on your team holds industry-required certifications, meaning you no longer need to pay an external provider to carry out key activities.
  • Your current hardware underwent refurbishment recently and now supports a wider range of connection types, rendering the requirement for a specific connector obsolete.
  • Safety standards have evolved and current product offerings universally meet the minimum requirements, making it unnecessary to pay an upcharge for added features.

Specification mistakes can happen for a number of reasons, including haste and inexperience. By applying the right level of expertise and careful planning, you can protect your ROI and adopt specifications that better suit your needs.

PMAlliance uses a team of highly experienced and certified professionals to provide project management consultingproject management training and project office development services.

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