project management and the stock market
DESCRIPTION
You're managing a critical project for your organization, you've gone through all the financial hoops when half-way through the project it is delayed a few months because other initiatives needed to continue are not complete. No harm, no foul, right? Stopping a project releases the resources so the 'cost' is suspended until the project starts again. In a publicly traded company, this is NOT true. Learn basic corporate finance and understand why stalled projects can directly impact the stock price of a large corporation and it's borrowing power. This explains you're sponsor's red face, doesn't it?TRANSCRIPT
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Projects and the Stock Market
“A billion here and a billion there, and pretty soon you're talking real money.” - Everett Dirksen
Presented by Lou Russell,
Russell Martin & Associateswww.russellmartin.com @nolecture 317.475.9311
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• Basic Financials for PMs
• Prediction is a Guess• Delays Aren’t Free
PM2 - 2
Agenda
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PM2 - 3
Different Kinds of Costs: Assets and Expenses
consumableinvestment
PROFIT = Revenue - Expense
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PM2 - 4
Assets and Expenses
New Development = investment (depreciated)
Maintenance = expense
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Stock Prices impact…
• Perceived worth of the company• Investment options available to the company• Credit Line interest rate• Bonuses for Executives
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Predictions Are a Guess: The Capital Plan
0
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1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
PM2 - 6
Business Strategy
BUSINESS OBJECTIVES: To meet our business strategies, our publically traded company will INVEST in the following:
• Ramp up new product offerings
• Improve call center efficiencies
• … your project?
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You are managing a new product development project. You will be ‘building the new products’ by solving as many Tripletts as possible.
Here’s how you solve the puzzle: find the ONE WORD that can be used before or after each of the three provided words to make a common word.
An example:
TRIPLETT: pack, feed, yard SOLUTION:
Predict how many you will solve after 1 minute and after 2 minutes by typing two numbers in the chat window like this:
3 4 (totals 7)
PMX - 7
Predicting Revenue
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1. SMOKE - COMPUTER – PLAY2. GUN - SLOT – TIME3. BURGLAR - CLOCK – FIRE4. WEED - WASH – TIME5. CRIER - DOWN - GHOST 6. PAN - MIX – CHEESE7. HERRING - CROSS – TAPE8. EVIL - GLASSES – WITNESS9. ORANGE - INSURANCE – SECRET10. BABY - SHOW – DOUBLE11. TREASURE - BARRIER – EASTER12. ACTIVE - MAIL – BOX13. BODY - CHANNEL - MUFFIN 14. LEADER - WESTERN – LABOR15. DOUGH - CHEST – CRACKER16. ROADS - DOUBLE – STITCH17. PUBLIC - SECOND – POLL18. TAG - DROPPING – MAIDEN19. DEATH - FORGE – GIRL20. MAIL - AMERICAN – LANE21. SILENT - MARE – CLUB22. FREE - MAGAZINE – CAPSULE23. RED - BOTTLE – BLOT24. NUMBER - JOB – COUPLE25. BAD - LETTER – LEAK26. FIRE - WRESTLING – CHAIR27. BASKET - DETERGENT - DIRTY PMX - 8
Tripletts
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PM2 - 9
Public Business Strategy
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Public Business Strategy
Projects (with due dates)
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PM2 - 11
Project Revenue – Project Cost) =
(Earnings Per Share) EPS/ Stock Price
1/4ly Profit
Public Business Strategy
Projects (with due dates)
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Delays Aren’t Free
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You have been assigned to be the project manager of a planned 9 month capital project that was scheduled to begin in March, but has been delayed three months. No one on the team has accumulated labor yet for this project. You and the team will now begin accumulating labor beginning 6/1.
What could be the financial impact on the company with the delay?
PMX - 13
The Financial Impact of Change
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Revenue predictions by Quarter based on Capital Projects (New Production Facility)
Delay of project Two Days into next Quarter
Cost ‘waits’ (does not increase or decrease)
Revenue projection is missed
Street notices: Stock price goes done
H E double toothpicks occurs
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PM2 - 15
Benefits and then Project Costs
BENEFIT (What is the RETURN on the investment?):• Increased sales• Increased productivity (lower cost of goods sold)• Increased quality (higher end products)• Increased service (higher customer loyalty)• Avoid fines / litigation (regulatory adherence, compliance)• Increased brand (market share / stock value)
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Seek first to generate revenue at the lowest cost.
PM2 - 16
Benefits and then Project Costs
COSTS (INVESTMENT):
IT: Software, hardware and IT People
Non IT: People, marketing, training…
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Potential changes to a project:$ Additional scope$ Under-estimated – needs more time$ Under-budgeted – needs more money$ Resource contention – understaffed
PM2 - 17
The Financial Impact of Change
Revisit the
numbersWhen BENEFITS OR COSTS CHANGE,
the project may no longer be a good capital investment
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