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Imposing accountability when a project fails to deliver is a difficult issue in business. Consequently, some companies might award a cash bonus to employees even if they fail to achieve objectives. The motivation behind this bonus plan may not be altruism, but rather the lack of well-defined measurable organizational values that determine when goals are met and when they are not.
Measurable Organizational Value
Jack Marchewk, a professor of management information systems at Northern Illinois University, developed the measurable organizational value method primarily as an alternative to the use of return on investment. Unlike ROI, which evaluates a project's success by comparing its profit to its cost, the MOV measures a project’s success or failure in terms of the project's desired impact, which can be stated in financial or nonfinancial terms. Each MOV is an agreed-to and verifiable measure that reflects the value of a project’s outcome in light of an organizational goal. For example, a project's desired impact might be to penetrate new markets, provide more efficient customer service or increase product margins. Using an MOV, an organization can best assure a project maximizes the use of company resources to produce strategic, customer, operational, social or financial benefits.
Measurable Organizational Value Criteria
Each project decision should be made after considering its effect on verifiable and measurable organizational values. For example, if the addition of a new website feature is being considered, it should be added only if the feature increases the measurable organizational value. The decision maker might ask if the feature improves user experience. He might also consider if the feature enhances the efficient use of the site or reduces the cost of the update of the website’s catalog. Each project decision should make the end product better, faster, cheaper or more functional.
Unlike evaluating a project on the basis of an expected return on investment, a measurable organizational value is used to evaluate a project in terms of its business value. For example, a feature that enhances a product catalog that makes a customer’s purchase more efficient might lead to an increase in revenue. Also, if a feature leads to market growth or a greater number of customers, it might lead to an increase in sales.
Coming to Consensus
Stakeholders must agree to measurable organizational values during a project's planning process so they can focus on the needed outcomes throughout the project's life cycle. Each stakeholder will have a vested interest in setting one or more MOVs that best suit his purposes. For example, technical team members may prefer to set few MOVs, giving them the best opportunity to complete all end-product requirements. In turn, stakeholders representing business functions may prefer more MOVs to achieve as many business objectives as possible. For example, business stakeholders might want a project to increase profits, improve a supply chain and lower operational costs.
Any measurable organization value must be verifiable. If project activities contribute to the desired outcome, or the agreed-to benefits, the project is considered a success. The team verifies an MOV at project conclusion and, at that time, classifies the project as a success or failure.
Billie Nordmeyer works as a consultant advising small businesses and Fortune 500 companies on performance improvement initiatives, as well as SAP software selection and implementation. During her career, she has published business and technology-based articles and texts. Nordmeyer holds a Bachelor of Science in accounting, a Master of Arts in international management and a Master of Business Administration in finance.