What is Return on Investment?

Return on investment (ROI) is a performance measurement expressed as a ratio of the net profit to the cost of an investment. Let’s take a look at Example Co, a manufacturing company currently investing $1,500,000 to construct a new facility. Over the course of the first year the facility is in service, it generates a net profit of $5,250,000. The ROI on the original investment is the net profit (5,250,000) / the facility cost (1,500,000) x (100) = 350%. Well done, Example Co.!

Four Steps to Track Portfolio and Project ROI with Primavera P6

1. Create a project;
2. Create a portfolio;
3. Define spending plan and benefit plan, and;
4. Analyze ROI.

Key Elements and Formulas

• Total spending plan. Sum of months in spending plan column
• Total benefit plan. Sum of months in benefit plan column
• Annual discount rate. Users enter this value
• Payback period. Calculated by P6
• Net present value. (total benefit plan) – (total spending plan)
• ROI. (net present value) / (total spending plan) x (100)

Oracle Primavera P6 enables ROI tracking per project with different user-managed time frames. Users can define a spending plan vs benefit plan for a project on a monthly, quarterly, or yearly basis.

Step 1. Create a Project

The figure below shows a list of sample projects created to demonstrate tracking ROI in Primavera P6.

Step 2. Create a Portfolio

The figure below shows a list of sample projects (created in the previous step) inside a sample portfolio.

Step 3. Define Spending Plan and Benefit Plan

• Click on the project name

• Select time scale
• Click edit spending and benefit plans

Update spending plan and benefit plan values (by month)

• Update spending plan values by month
• Update benefit plan values by month
• Update annual discount rate
• Select discount period (optional)

P6 will automatically calculate:

• Net-present value;
• ROI, and;
• Payback period.

Step 4. ROI Analysis

P6 users can perform ROI analysis at the portfolio and project levels. The figure below displays the information discussed at the beginning of this post.

• Total benefit plan
• Payback period
• Total spending plan
• Net-present value
• ROI %
• ROI graph

To view the ROI graph for a specific project, click the corresponding view chart link.

To view the ROI graph for a specific portfolio, click the corresponding view chart link.

Notes on Tracking ROI in Primavera P6

• Java is required to view ROI analysis pages.
• No option exists for bulk updating of the spending plan and benefit plan for multiple projects. Users must manually update these items for each project.
• The spending plan must be manually updated. The system is unable to calculate the amount from project planned costs from activities.

Gaea provides Primavera P6 scheduling and project portfolio management services for organizations in every industry. Contact us today to learn how we can help you implement an Oracle Primavera P6 solution that matches your unique enterprise needs.

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For success on a software implementation project, you’ll need two kinds of “change champions.” Pre-implementation change champions put project infrastructure in place, obtain funding, and get the project rolling. Post-implementation change champions focus on end-user adoption and enhanced change management.

The article includes a list of attributes that must be understood for change champions to be successful. While you’ll rarely find all this knowledge within one individual, it’s important that the collective wisdom of your team of change agents includes proficiency in:

• The business processes they will implement;
• The skills required to drive change;
• Political savviness;
• How to incorporate user feedback into your plans and the delivered solution;
• How to sell the value of the implementation to your organization, and;
• Organized project planning and solution configuration to alleviate learning curve pains.

A key takeaway from the article is that effective communication is a vital skill that change agents must develop, and knowing your audience is the first step. Research must be conducted before you’ll be able to deliver on-target answers when you’re asked, “what’s in it for me?” Before you begin outbound communication about planned changes, utilize inbound communication. Ask your stakeholders what’s important to them and listen attentively, then map their existing pain points to your proposed solution. That’s how you’ll convince your organization that change is worth the cost and effort required.

Another takeaway is that fear can be overcome by presenting evidence of success. References from other firms in a similar industry, or that are similar in size or other details, will help convince your decision makers that the proposed solution will yield desired results. Beginning with a pilot project within one division or business unit will minimize disruption across the enterprise, provide helpful lessons learned, and deliver tangible ROI measurements that show the value of expanding change across the entire organization.

Contact Gaea today to learn how we can help you become a change champion in your industry.

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