Project management maturity is more than just an organizational buzzword. It’s the difference between success and failure, between profit and loss. Companies with low project management maturity experience explicit and hidden costs, hindering their ability to achieve strategic goals, maintain budgets, and meet deadlines. Focusing on these strategic goals is key to success. On the other hand, businesses that invest in improving their project management maturity see measurable financial benefits, increased efficiency, and overall better project outcomes.
This post will explore the explicit and hidden costs of low project management maturity, supported by real-world examples and calculations. We’ll also demonstrate that investing in project management maturity offers a strong return on investment (ROI) that can transform your business.
The Explicit Costs of Low Project Management Maturity
Explicit costs can be seen, measured, and quantified. In project management, these costs often manifest in failed projects, cost overruns, and missed deadlines. Let’s look at a couple of key examples.
1. Project Failures and Cost Overruns
One of the most visible signs of low project management maturity is the tendency for projects to fail or overrun their budgets. Poor planning, weak risk management, and insufficient oversight can result in projects going off the rails.
Example: A construction company embarks on a $10M project. Due to poor risk assessment and management, the project faces unforeseen challenges and budget overruns, costing an additional $2M, a 20% increase on the original budget.
Calculation:
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Initial Project Budget: $10M.
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Final Cost: $12M.
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Overrun: $2M (20%).
A 20% overrun in project costs could have been mitigated with better risk management processes, highlighting how low project management maturity results in substantial financial losses.
2. Scope Creep Leading to Budget Inflation
Scope creep occurs when the scope of a project expands without adequate control mechanisms, which is another hallmark of low PM maturity. This leads to budget increases and timeline extensions, straining resources and reducing profitability.
Example: A software company starts a project with a $500K budget. However, due to a lack of formal change control processes, the scope keeps expanding, and the final cost of the project balloons to $750K.
Calculation:
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Initial Budget: $500K.
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Final Cost: $750K.
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Additional Cost: $250K.
A $250K increase in costs is a direct result of ineffective project governance and poor scope management—key areas where PM maturity can have a direct impact.
The Hidden Costs of Low Project Management Maturity
While explicit costs are damaging, hidden costs—those that are harder to quantify—are often even more insidious. These costs can take a long-term toll on your organization, eroding productivity, morale, and growth.
1. Reduced Employee Productivity
Low project management maturity often leads to unclear roles, responsibilities, and priorities. As a result, team members spend unnecessary time resolving miscommunications and duplicating work.
Example: Imagine a 10-person team working on a 6-month project. Due to inefficient processes, each team member experiences a 10% drop in productivity, losing a total of 60 person-days.
Calculation:
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Team size: 10 people.
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Project duration: 6 months (approximately 120 workdays per person).
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Productivity loss: 10% (12 days per person).
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Total lost days: 10 x 12 = 120 days.
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At $500 per person-day, this equates to a $60,000 productivity loss.
ROI Opportunity:
By improving communication and clarifying roles through higher PM maturity, these productivity losses can be minimized, saving significant labor costs.
2. Missed Market Opportunities
Delays caused by poor project management can lead to missed market opportunities, which carry substantial hidden costs. When a product launch or service implementation is delayed, the company may lose its competitive advantage.
Example: A company developing a new product for an emerging market faces a 3-month delay due to poor risk and resource management. As a result, the company misses out on $1M in potential revenue.
Calculation:
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Potential revenue loss: $1M.
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Delays: 3 months.
ROI Opportunity:
With better resource and timeline management, the company could have delivered on time and captured that revenue.
3. Employee Turnover Due to Project Chaos
When projects consistently run into chaos—poor communication, frequent firefighting, and a lack of structure—it leads to employee burnout and turnover. Replacing employees is expensive, not just in terms of recruitment, but also the lost knowledge and training investments.
Example: A company loses 5 key employees earning $80,000/year each due to frustration with project management issues. It costs around 20% of their annual salary to recruit and train replacements.
Calculation:
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Cost per employee replacement: $80,000 x 20% = $16,000.
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Total cost for 5 employees: $16,000 x 5 = $80,000.
ROI Opportunity:
Investing in project management maturity can foster a healthier work environment, reducing turnover and saving recruitment costs.
The ROI of Investing in Project Management Maturity
The financial benefits of improving project management maturity are substantial. High-maturity organizations experience fewer project failures, lower cost overruns, and better alignment with strategic goals.
Improved Project Success Rates
According to PMI’s Pulse of the Profession report, organizations with high project management maturity achieve a 28% higher success rate on projects than those with low maturity.
Cost Savings
The same report reveals that high-maturity organizations waste 12 times less money on failed projects and inefficiencies than low-maturity organizations.
Let’s calculate the ROI of investing in project management maturity:
Scenario: A mid-sized company invests $200,000 to improve its project management maturity. Over the next 3 years, they complete 20 projects with an average budget of $1M each. By increasing their maturity, they reduce cost overruns by 10% per project, saving $2M in total.
Calculation:
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Initial investment: $200,000.
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Total savings: $2M.
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ROI = ($2M – $200,000) / $200,000 * 100 = 900%.
A 900% ROI demonstrates that even a relatively small investment in project management maturity can yield substantial returns over time.
How to Measure and Improve Your PM Maturity
How do you know if your organization is suffering from low project management maturity? Start by evaluating your processes against established frameworks like the P3M3 or OPM3 models. These tools can help you identify areas where your project management practices are falling short and where improvements can be made.
At JBF Consulting, we’ve developed the Vision2Value Framework to help businesses assess their current project management maturity and provide a roadmap for improvement. We’ve seen firsthand how organizations that invest in improving their maturity can dramatically reduce costs, increase efficiency, and achieve their strategic goals faster.
