Course Discount

Search

Career Opportunities for PMP® Certified Professionals

Are you a Project Manager with a PMP® certification? According to the talent gap analysis of Anderson Economic Group (AEG), the demand for Project Managers is growing faster than demand for workers in other occupations over the next 10 years. Further, the gap analysis points out that the project management-oriented labour force in seven project-oriented sectors is expected to grow by 33%.A PMP® certification will surely take your career to new heights. While working towards earning your PMP® certification, you need to attend webinars and conferences in order to earn certain PDUs to meet the requirements to maintain your certification credentials. These webinars and conferences is a great way to gain a lot of valuable information. The PMP® certification is not just a mere certification, but it is acknowledged as one of the best certifications to get across the board. Many professionals hope to achieve a PMP® certification in order to earn a high salary.How does a PMP® certification help you bag an amazing job?Having a PMP® certification under your belt surely opens the doors to new career opportunities. If you are managing large and complex projects, a PMP® certification helps you to learn how to plan, manage, and monitor progress leading towards meeting your goals with optimized utilization of time and resources. The role of PMP® certification in helping you to grow in your career can be explained as follows:1. PMP® adds more value to your resumeRecruiters tend to give preference to the profiles having a PMP® certification over their non-certified counterparts. If you are a beginner in the field of Project Management, you will add tremendous value to your resume by adding a PMP® certification to your collar. As a veteran, you can take your career to the next level with a PMP® certification.2. Networking opportunitiesGet introduced to the world of certified project managers by becoming a member of your local PMI® chapter. You get an opportunity to learn more about the Project Management industry and create a network with the existing Project Management Professionals (PMP)® by participating in professional meetings organised by PMI® in almost all the major metropolitan cities. These meetings help you to learn about various job opportunities available in the current market.3. Get equipped with the knowledge of a common global languageAcquire proficiency in the global standard language of Project Management by equipping yourself with a PMP® certification in addition to improving your job prospect. PMP® training provides you with a solid and time-tested framework which helps the promotion of effective communication. Adding the proven ability to identify and overcoming the problems within an organisation automatically makes you more preferable to an employer over your non-certified counterpart.4. Certified Project Managers are always in demandCompanies continuously try to identify professionals with the skills and knowledge to handle the projects in the current time, when the methods to handle projects constantly keep changing. It is for this reason that companies look for PMP® certified professionals, and this exactly leads to a high demand for this credential.5. PMP® certification validates your experienceThe employers hold high esteem for the prerequisites that you need to fulfill in order to sit for your PMP® certification exam. The candidates are required to meet a certain level of education and work experience.When a recruiter sees a PMP® certification in your resume, he gets to know that you have worked hard to attain this certification and you possess a substantial amount of quality work experience under your belt to validate your skill.Role of PMP® certification in your jobThere are numerous jobs which require managing large pieces of work as a project management professional who manages projects. Being a PMP® certified professional with the right set of knowledge and skills, you can plan, manage, and monitor the progress of the projects which results in meeting your goals at the right time.You can surely hit your deadlines at the right time by equipping yourself with the project management skills. Apart from it, you can prove to be a resource for an organisation by being a good fit for the team with your technical expertise and qualification.Career opportunities for a Project Management ProfessionalA Project Manager is responsible for the overall delivery of the project right from the execution to the end. He or she is responsible for planning, organising, securing, leading, and controlling the resources in order to achieve specific goals in a particular industry or organisation’s project.Project Managers usually work in the following industries:EngineeringConstructionArchitectureTelecommunicationsComputing.PMP® certification opens your doors to many different careers. Here are a few of the career choices made by PMP® certified professionals:Associate Project Manager: It is an entry-level position in which you work with other project managers in order to oversee a project.Assistant Project Manager: This is another entry-level position where you get the opportunity to work side-by-side with experienced project managers to help accomplish the tasks and learn the ropes of project management.Contract Project Manager: You would not have the same responsibilities as a full-time project manager when you work as a contract project manager. As a contract project manager, you are expected to apply your skills to new situations and work well with strangers.Business Project Manager: This is a corporate position which allows you to work with clients, consult with other business projects, or work with company infrastructure.Information Technology (IT) Project Manager: This position allows you to work with servers, computer, and entire networks, including maintaining and building computer systems.Construction Project Manager: While working as a Project Manager in the construction industry, you are expected to supervise the construction projects.Project Coordinator: This entry-level position focuses on doing lighter tasks like planning and organisation in order to assist the main project managers.Product Manager: This position focuses on a specific product including manufacturing, promotion, and pricing.Software Project Manager: This is a similar position to the IT project manager, but it deals specifically with updating software. You would need to oversee the development and improvement of existing and new software in this position.Tips to become a Project ManagerProject managers are acknowledged as great leaders to prefer diversity and an active lifestyle. Project Management as a career is a vast field of work and you will never get bored being a part of it. Here are a few tips for you to begin your career in Project Management:1. Know your skillsYou can pave the way for your professional growth as a Project Manager by developing the right set of skills. You need to develop your knowledge of project management techniques, processes, tools, frameworks, and get the right soft skills in order to complete a project successfully. You need to be more than a good communicator and leader in order to handle daily challenges in this field. You need to be decisive, accountable, risk taker, and a great multitasker in order to deal with the complex and unpredictable challenges in this field.2. Get certifiedA project management certification equips you with the knowledge in this area in order to explore the various parameters of career opportunities as well as increase your earnings. PMP® certification is acknowledged as the gold standard of all the project management certifications and is acknowledged across all the industries around the world.3. Talk to an expertGet a mentor to guide your career. You need to find a skilled project manager who has patience and time to teach you some tips and tricks to climb the ladder of your project management career.You will surely be able to master project management methods and processes from real-life situations by observing the work of the professional. You can also get the opportunity to work in real projects and get feedback on your contribution in order to improve yourself.4. Be prepared for anythingYou will be in charge of different tasks starting from developing project plans and schedules to conducting training and communicating with stakeholders depending on the project that you are assigned to. You might find yourself shifting from one industry to the other as a Project Manager. However, you can specialize in one field in order to avoid shifting fields.How much can you earn as a Project Manager?As we have already discussed the common career choices made by Project Managers around the world, let’s see how much they earn while working in these designations:DesignationsAverage income in USD (per annum)Associate Project Manager$58,775Assistant Project Manager$58,172Contract Project Manager$79,577Business Project Manager$83,140IT Project Manager$1,342,427Construction Project Manager$86,492Project Coordinator$48,319Product Manager$102,119Software Project Manager$90,152If you are a Project Manager in Informational Technology (IT) who is based in India, you can expect to earn an average annual salary of INR 13,42,427. The average salary of a project management professional might differ according to experience. You will get more clarity on the experience-wise salary of an IT Project Manager in India from the following chart:ExperienceSalary in INR (per annum)Entry-levelINR 5,78,112Mid-careerINR 11,52,937ExperiencedINR 15,10,039Late-careerINR 20,29,286Project Manager skill-wise salaryYour salary as a Project Manager also might vary based on the skills possessed by you. Having a certification won’t suffice to make an employer hire you. You further need to possess a few skills in order to get recruited by your desired employer. The following chart will provide you with a clear idea about the salary which you earn according to your skills:Skills possessed by Project ManagersSalary in USD (per annum)Project Management Skills$72,728Project Coordinating Skills$69,564Oral/Verbal Communication Skills$69,970Client Interaction Skills$70,097Microsoft Office Skills$70,115Budget Management Skills$73,476Strategic Project Management Skills$75,605Process Improvement Skills$72,758Microsoft Project Skills$79,684Quality Assurance/Quality Control Skills$67,368Project Manager - Company-wise salaryCompanies prefer to hire PMP® certified professionals over non-certified professionals. Also, certification helps you to earn more salary across various organisations across the globe. Here are few of the highest-paying companies around the globe:CompaniesSalary in USD (per annum)HCL Technologies$108,879Citi$112,342Cisco Systems$105,000Mahindra Satyam$101,002Cognizant$95,979Wipro$95,814Infosys$94,400Syntel$93,011To wrap it upIn the present market scenario, the demand for Project Management Professionals is still high in comparison to the other professions. In the US, it is predicted that the demand for Project Management Professionals will grow to nearly 700,000 jobs by the year 2020. So, it is good for you to equip yourself with a PMP® certification to be a part of the most demanded professional group.PMP® certification is acknowledged as the gold standard of all the project management certifications across various industries around the globe. Professionals take up this certification in order to add more value to their profiles leading to improvements in their earnings.
Rated 4.5/5 based on 12 customer reviews

Career Opportunities for PMP® Certified Professionals

10202
Career Opportunities for PMP® Certified Professionals

Are you a Project Manager with a PMP® certification? According to the talent gap analysis of Anderson Economic Group (AEG), the demand for Project Managers is growing faster than demand for workers in other occupations over the next 10 years. Further, the gap analysis points out that the project management-oriented labour force in seven project-oriented sectors is expected to grow by 33%.

A PMP® certification will surely take your career to new heights. While working towards earning your PMP® certification, you need to attend webinars and conferences in order to earn certain PDUs to meet the requirements to maintain your certification credentials. These webinars and conferences is a great way to gain a lot of valuable information. The PMP® certification is not just a mere certification, but it is acknowledged as one of the best certifications to get across the board. Many professionals hope to achieve a PMP® certification in order to earn a high salary.

How does a PMP® certification help you bag an amazing job?

Having a PMP® certification under your belt surely opens the doors to new career opportunities. If you are managing large and complex projects, a PMP® certification helps you to learn how to plan, manage, and monitor progress leading towards meeting your goals with optimized utilization of time and resources. The role of PMP® certification in helping you to grow in your career can be explained as follows:

1. PMP® adds more value to your resume

Recruiters tend to give preference to the profiles having a PMP® certification over their non-certified counterparts. If you are a beginner in the field of Project Management, you will add tremendous value to your resume by adding a PMP® certification to your collar. As a veteran, you can take your career to the next level with a PMP® certification.

2. Networking opportunities

Get introduced to the world of certified project managers by becoming a member of your local PMI® chapter. You get an opportunity to learn more about the Project Management industry and create a network with the existing Project Management Professionals (PMP)® by participating in professional meetings organised by PMI® in almost all the major metropolitan cities. These meetings help you to learn about various job opportunities available in the current market.

3. Get equipped with the knowledge of a common global language

Acquire proficiency in the global standard language of Project Management by equipping yourself with a PMP® certification in addition to improving your job prospect. PMP® training provides you with a solid and time-tested framework which helps the promotion of effective communication. Adding the proven ability to identify and overcoming the problems within an organisation automatically makes you more preferable to an employer over your non-certified counterpart.

4. Certified Project Managers are always in demand

Companies continuously try to identify professionals with the skills and knowledge to handle the projects in the current time, when the methods to handle projects constantly keep changing. It is for this reason that companies look for PMP® certified professionals, and this exactly leads to a high demand for this credential.

5. PMP® certification validates your experience

The employers hold high esteem for the prerequisites that you need to fulfill in order to sit for your PMP® certification exam. The candidates are required to meet a certain level of education and work experience.

When a recruiter sees a PMP® certification in your resume, he gets to know that you have worked hard to attain this certification and you possess a substantial amount of quality work experience under your belt to validate your skill.

Role of PMP® certification in your job

There are numerous jobs which require managing large pieces of work as a project management professional who manages projects. Being a PMP® certified professional with the right set of knowledge and skills, you can plan, manage, and monitor the progress of the projects which results in meeting your goals at the right time.

You can surely hit your deadlines at the right time by equipping yourself with the project management skills. Apart from it, you can prove to be a resource for an organisation by being a good fit for the team with your technical expertise and qualification.

Career opportunities for a Project Management Professional

Career opportunities for a Project Management Professional

A Project Manager is responsible for the overall delivery of the project right from the execution to the end. He or she is responsible for planning, organising, securing, leading, and controlling the resources in order to achieve specific goals in a particular industry or organisation’s project.

Project Managers usually work in the following industries:

  • Engineering
  • Construction
  • Architecture
  • Telecommunications
  • Computing.

PMP® certification opens your doors to many different careers. Here are a few of the career choices made by PMP® certified professionals:

  • Associate Project Manager: It is an entry-level position in which you work with other project managers in order to oversee a project.
  • Assistant Project Manager: This is another entry-level position where you get the opportunity to work side-by-side with experienced project managers to help accomplish the tasks and learn the ropes of project management.
  • Contract Project Manager: You would not have the same responsibilities as a full-time project manager when you work as a contract project manager. As a contract project manager, you are expected to apply your skills to new situations and work well with strangers.
  • Business Project Manager: This is a corporate position which allows you to work with clients, consult with other business projects, or work with company infrastructure.
  • Information Technology (IT) Project Manager: This position allows you to work with servers, computer, and entire networks, including maintaining and building computer systems.
  • Construction Project Manager: While working as a Project Manager in the construction industry, you are expected to supervise the construction projects.
  • Project Coordinator: This entry-level position focuses on doing lighter tasks like planning and organisation in order to assist the main project managers.
  • Product Manager: This position focuses on a specific product including manufacturing, promotion, and pricing.
  • Software Project Manager: This is a similar position to the IT project manager, but it deals specifically with updating software. You would need to oversee the development and improvement of existing and new software in this position.

Tips to become a Project Manager

Tips to become a Project Manager

Project managers are acknowledged as great leaders to prefer diversity and an active lifestyle. Project Management as a career is a vast field of work and you will never get bored being a part of it. Here are a few tips for you to begin your career in Project Management:

1. Know your skills

You can pave the way for your professional growth as a Project Manager by developing the right set of skills. You need to develop your knowledge of project management techniques, processes, tools, frameworks, and get the right soft skills in order to complete a project successfully. You need to be more than a good communicator and leader in order to handle daily challenges in this field. You need to be decisive, accountable, risk taker, and a great multitasker in order to deal with the complex and unpredictable challenges in this field.

2. Get certified

A project management certification equips you with the knowledge in this area in order to explore the various parameters of career opportunities as well as increase your earnings. PMP® certification is acknowledged as the gold standard of all the project management certifications and is acknowledged across all the industries around the world.

3. Talk to an expert

Get a mentor to guide your career. You need to find a skilled project manager who has patience and time to teach you some tips and tricks to climb the ladder of your project management career.

You will surely be able to master project management methods and processes from real-life situations by observing the work of the professional. You can also get the opportunity to work in real projects and get feedback on your contribution in order to improve yourself.

4. Be prepared for anything

You will be in charge of different tasks starting from developing project plans and schedules to conducting training and communicating with stakeholders depending on the project that you are assigned to. You might find yourself shifting from one industry to the other as a Project Manager. However, you can specialize in one field in order to avoid shifting fields.

How much can you earn as a Project Manager?

As we have already discussed the common career choices made by Project Managers around the world, let’s see how much they earn while working in these designations:

Designations
Average income in USD (per annum)
Associate Project Manager
$58,775
Assistant Project Manager
$58,172
Contract Project Manager
$79,577
Business Project Manager
$83,140
IT Project Manager
$1,342,427
Construction Project Manager
$86,492
Project Coordinator
$48,319
Product Manager
$102,119
Software Project Manager
$90,152

If you are a Project Manager in Informational Technology (IT) who is based in India, you can expect to earn an average annual salary of INR 13,42,427. The average salary of a project management professional might differ according to experience. You will get more clarity on the experience-wise salary of an IT Project Manager in India from the following chart:

Experience
Salary in INR (per annum)
Entry-level
INR 5,78,112
Mid-career
INR 11,52,937
Experienced
INR 15,10,039
Late-career
INR 20,29,286

Project Manager skill-wise salary

Your salary as a Project Manager also might vary based on the skills possessed by you. Having a certification won’t suffice to make an employer hire you. You further need to possess a few skills in order to get recruited by your desired employer. The following chart will provide you with a clear idea about the salary which you earn according to your skills:

Skills possessed by Project Managers
Salary in USD (per annum)
Project Management Skills
$72,728
Project Coordinating Skills
$69,564
Oral/Verbal Communication Skills
$69,970
Client Interaction Skills
$70,097
Microsoft Office Skills
$70,115
Budget Management Skills
$73,476
Strategic Project Management Skills
$75,605
Process Improvement Skills
$72,758
Microsoft Project Skills
$79,684
Quality Assurance/Quality Control Skills
$67,368

Project Manager - Company-wise salary

Companies prefer to hire PMP® certified professionals over non-certified professionals. Also, certification helps you to earn more salary across various organisations across the globe. Here are few of the highest-paying companies around the globe:

Companies
Salary in USD (per annum)
HCL Technologies
$108,879
Citi
$112,342
Cisco Systems
$105,000
Mahindra Satyam
$101,002
Cognizant
$95,979
Wipro
$95,814
Infosys
$94,400
Syntel
$93,011

To wrap it up

In the present market scenario, the demand for Project Management Professionals is still high in comparison to the other professions. In the US, it is predicted that the demand for Project Management Professionals will grow to nearly 700,000 jobs by the year 2020. So, it is good for you to equip yourself with a PMP® certification to be a part of the most demanded professional group.

PMP® certification is acknowledged as the gold standard of all the project management certifications across various industries around the globe. Professionals take up this certification in order to add more value to their profiles leading to improvements in their earnings.

KnowledgeHut

KnowledgeHut

Author

KnowledgeHut is an outcome-focused global ed-tech company. We help organizations and professionals unlock excellence through skills development. We offer training solutions under the people and process, data science, full-stack development, cybersecurity, future technologies and digital transformation verticals.
Website : https://www.knowledgehut.com

Join the Discussion

Your email address will not be published. Required fields are marked *

Suggested Blogs

All you need to know about the new PMP exam 2021

Project Management Professional® or PMP® is a professional certification for project managers offered by the Project Management Institute or PMI. This certification’s examination development processes are different from regular certification exam development practices. PMI has ensured that its certification process is aligned with the best practices of the industry. Also, the PMP certification is accredited with the internationally-recognized ISO 17024 standard. As a part of the examination process, all organizations that are offering reliable and valid professional credentialing examinations have to use a Job Task Analysis (JTA) or Role Delineation Study (RDS) to create the exam. During this process, they will be utilizing knowledge and task-driven guidelines for assessing the competence of the practitioner. Also, it helps in determining the levels of criticality, frequency, and salience of each knowledge, skill, and task that are needed for performing the role of a project manager.  The PMP New Exam 2021 For this year’s PMP exam new version, a market research study on the Global Practice Analysis was conducted by the PMI. It produced several professional trends that were not addressed in the previous PMP exam. PMI has used these trends as inputs into the Job Task Analysis for ensuring the relevance and validity of the PMP examination. The validation will assure that through the exam, the specific knowledge and skills of a project management practitioner are measured and evaluated appropriately. The Job Task Analysis will ensure that PMP examination measures every element of Project Management Professionals in terms of real cases. So, all PMP certification holders can remain confident that the PMP exam new pattern has been created as per the best standards of test development and based on the input from practitioners who have established these practices. When it comes to earning professional certification, the PMP examination is an important part. This is why it is vital that the PMP exam accurately reflects the project management practices. All the questions have been written and reviewed by qualified PMP certification holders. Also, the questions are tracked to 2 or more academic references. The questions are mapped against the exam outline of PMP for ensuring that there is an appropriate number of questions for a valid exam. PMI has developed the global examination content outline with the help of Alpine Testing solutions. Alpine Testing Solutions provide test development, credential management solutions, and psychometric to educational and credentialing programs. There are some differences between the guide to the Project Management Body of Knowledge (PMBOK Guide) – Sixth Edition and the PMP exam new version Content Outline. For example, the volunteer task force involved in the study mentioned above is not bound by the PMBOK Guide. The members of the task force had to outline critical job tasks of professionals who were leading and directing projects based on experience and related resources. Benefits of Project Management Professional (PMP) certification  1. Value to the resumePMP is one of the most valuable professional certification programs that you can pursue in your career. Interviewers who are looking to fill the position of a project manager will prioritize candidates with PMP certification over others. Many companies have made PMP certification mandatory, which means that you won’t be able to apply without these credentials.   2. Recognition PMP is a universally recognized certification unlike some other certification programs that focus only on special geography or domain. So, regardless of the industry you are working in or your professional background, you can add PMP to your resume.    3. Learn important skillsPMP certification will help you stand out from the crowd of project managers in the job market. With the high standards of thePMP exam, one cannot pass the exam easily without any extensive preparation. One also needs to master the practical applications to attain PMP certification. The program is built on the foundation of fundamental tools, technologies, and methodologies of project management processes. During the training, you will be exposed to the current trends and best practices in the field of project management.  4. Higher-incomeThis is one of the biggest advantages a PMP-certified professional can enjoy. PMP has been the highest-paid IT certification consistently and the income is only going to increase in the future. Another benefit of PMP certification is job security. Most companies value their core competencies with certifications.    5. Networking opportunitiesThere are about 773,840 PMP certification holders across the globe. By obtaining the PMP certification, you get to become part of the club. PMI is also known to arrange meetings in major cities where members can earn Professional Development Units (PDUs). These are requiredto renewthe certification. PMP® Certification Eligibility Requirements To be eligible for the PMI new exam, the Project Management Institute (PMI) has set some initial requirements:  Associate’s degree, high school diploma or global equivalent At least 5 years of unique and non-overlapping experience of professional project management. 7,500 hours of leading and directing projects. 35 contact hours of project management education. Bachelor’s degree or global equivalentAt least 3 years of unique and non-overlapping experience of professional project management. 4,500 hours of leading and directing projects. 35 contact hours of project management education. You must satisfy each of the above-mentioned eligibility requirements to sit for the PMP certification exam. You can meet the 35 contact hours of project management education requirement by PMA’s 4-day PMP training course.  Experience For the experience, it should include all the five processes mentioned in the PMBOK Guide. However, it does not have to be in a single project. Here is a list of acceptable knowledge, tasks, and skills for the PMP exam: Defining the high-level scope of the project on the basis of business requirements and compliance for meeting the project expectations of the customer. Presenting the plan of the project to the key stakeholders for getting approval to execute the project. Achieving the project deliverable within the specified budget and schedule by executing tasks as defined in the plan. Communicating the status of the project to the stakeholders for getting their feedback and ensuring that the needs of the business are aligned with the project. Working with the sponsors and customers for obtaining the final project deliverable and confirming that the scope and deliverables were met. Examination Content Outline Here is the proportion of questions for the PMI new exam content outline: Process - 50% People - 42% Business Environment - 8% As a project management practitioner, you will be working in different project environments and utilizing different project approaches. So, the PMP certification exam will be reflective of this and will include approaches from various value delivery systems. Half of the exam will represent predictive project management approaches, while the other half will represent hybrid or agile approaches. Predictive, hybrid, and agile approaches are used in all the three-domain areas mentioned above. Reference Materials Every candidate planning to give the PMP exam new version must know that it is not based on a single textbook or supported by any reference. PMI does not endorse any course, resource, or reference to prepare for the exam. The references mentioned below are not inclusive of all the resources that you can use. Also, you should not interpret them as a guaranteed way to pass the exam. PMP is a competency-based certification that tests the integrated set of knowledge, abilities, and skills gained from learned and practical experience. So, the references mentioned below are just an element of a broader set of resources: Agile Practice Guide Project Management: A Systems Approach to Planning, Scheduling, and Controlling A Guide to the Project Management Body of Knowledge (PMBOK Guide) 6th Edition Effective Project Management: Traditional, Agile, Extreme, Hybrid Project Managers Portable Handbook, 3rd Edition Fundamentals of Technology Project Management, 2nd Edition Essential Scrum: A Practical Guide to the Most Popular Agile Process Information Technology Project Management, 7th Edition The Project Management Tool Kit: 100 Tips and Techniques for Getting the Job Done Right Project Management: The Managerial Process  Important dates PMI has a designated Crisis Task Force for continuously monitoring the current situation arising from COVID-19 (Coronavirus). They are taking steps to make this hard time easier for their community. For this reason, they have extended access to the existing PMP exam until the 21st December 2020.  The launch of the PMI new exam has also been postponed until the 2nd January 2021. Candidates now have more time to access the training resources and prepare for the exam. If you have scheduled your exam or are planning to do so in the near future, consult the PMI’s COVID-19 page for guidance and update.  
Rated 4.0/5 based on 13 customer reviews
2656
All you need to know about the new PMP exam 2021

Project Management Professional® or PMP® is a pr... Read More

Cost Benefit Analysis for Projects: A step by step approach

Organizations, both for-profit and not-for-profit ones, often contemplate the need to take up new initiatives, develop new policies, bring about changes or create new capabilities to improve their current state of business-as-usual and create new benefits for the organization and stakeholders. All such new initiatives will be taken up as new projects by the organizations. These projects are expected to create new business value or in some cases social value. Every new project or initiative will require fresh investments of efforts and money to be made. Organizations will need to make such decisions prudently by creating a clear justification.  Cost Benefit Analysis (CBA): What is it? Understanding Cost Benefit Analysis Conducting a cost benefit analysis (CBA) or a Benefit-Cost analysis (as may be referred alternatively) is one of the most fundamental methods used to compare the financial cost to be incurred for such new initiatives and benefits to be generated from them.  Origins of Cost Benefit Analysis To undertake new initiatives is an integral part of the evolution of mankind, at a personal level, at a social level or at a business level. On the social front, it may involve initiatives like developing new townships, new buildings, new schools, new hospitals, new monuments, new social infrastructures, and new offices. On the business front, it may involve developing new products, new services or new production capabilities. There has always been a need to make sound and clear decisions. As the accountability of leaders on financial matters continues to rise, the need for doing a cost-benefit-analysis also becomes inevitable. CBA as a practice becomes part of policy matters in government projects in the US dating back in 1936, when Corps of Engineers started doing CBA for Federal Waterway Infrastructure projects. Approach to Cost Benefit Analysis A fundamental approach to do CBA includes estimating all the costs to be incurred in doing the project and carefully evaluating and estimating all the benefits to be garnered from the project. Benefits can include both quantifiable financial benefits and non-quantifiable benefits such improvement in quality of life, ease of living, ease of doing business etc. The purpose of Cost Benefit Analysis We already discussed that every new project needs investments to be made with the expectation of returns from the investments. There are two main applications of conducting a CBA: To determine if an investment decision is sound, calculating if its benefits outweigh its costs and by how much. To provide a basis for comparing alternative investment options, comparing the total expected cost of each option with its total expected benefits, thereby creating a basis for selecting the most desirable/viable option. Costs and Benefits Estimating costs Estimating all costs to be incurred in doing a project is the first important part of CBA. It will involve carefully estimating and listing the required quantity, quality and duration of material, labor, equipment and facilities to be used for completing all the activities of project work. Then we can estimate the costs for each of the above categories of resources. There will also be a need to include cost for contingency, inflation, cost of financing (if needed) and cost of any other services (such as training, liaison etc.) which may be required to complete the project activities. Cost estimation can be done with a considerable amount of accuracy level if all the activities of the project can be identified and all resource quantities can be estimated as stated above.  Estimating benefits Estimating all benefits to be garnered is the second important part of CBA. Every project or investment done is expected to deliver benefits in future. Benefits can include financial benefits by means of increase in profit margins and increase in efficiency of doing things. Benefits can also include non-financial benefits such as increased comfort and ease of doing things, improved moral of people, increased satisfaction levels, more peace, social benefits etc. Financial benefits can be estimated with considerable amount of accuracy, while it will be somewhat challenging to estimate and quantify the non-financial benefits. Comparing costs and benefits After careful and diligent estimation of costs and benefits as stated above, we need to compare the costs to be incurred with benefits to be garnered. If the benefits outweigh the costs considerably, such proposals will be taken up for further consideration by the organizations. Organizations may lay down clear guidelines regarding minimum expected difference between benefits to cost for the projects to be selected for implementation. Organizations may also lay down clear guidelines for evaluating the social benefits (mostly non-financial as explained above) for clear decision-making after doing a CBA. How to do a Cost Benefit Analysis  To conduct cost benefit analysis, we need to estimate and enumerate all costs to be incurred and all benefits to be generated. Then one needs to compare the costs with benefits for arriving at suitable decisions and recommendation about whether the project is worthy of taking up or not. There are two broad methods for doing cost benefit analysis: Non-discounted method (does not consider the effects of interest and time period). Discounted method (considers the time period, interest, inflation etc. while calculating the costs and benefits) We can take a simple example below to illustrate some of these methods.  Analyzing using non-discounted method These are very simple methods without considering the effects of interest and time period.The below illustration shows the costs incurred and benefits over a period of six years.  Yr. 0Yr. 1Yr. 2Yr. 3Yr. 4Yr. 5Yr. 6Discount rate at 10% (0.1)Cost100000000000Benefits250002500025000250002500025000Example of CBA using Non-Discounted MethodTotal Cost = 100000; Total Benefits = 150000 Benefit Cost Ration (BCR) = Total Benefits / Total Costs = 150000/100000 = 1.5 (> than 1) Profit = Total Benefits (Revenue) – Total Costs = 150000 – 100000 = 50000 Payback Period = Time taken to recover the total cost (investments) = 4 years ROI = Return on Investment = Profit/Investment = 50000/100000 = 50%  Using the above simple non-discounted methods we can see that this project looks good with benefits being more than the cost, with positive profits and lower payback period.  But these calculations are too simplistic, and do not account for the time-value of money based on interest rates, inflation. Analyzing using discounted method In the above example, the costs are incurred in the present time, while the benefits will be received in future. These values of money are in different timelines and hence their values cannot be compared directly as it is. We need to bring down all the future values of benefits and costs to their corresponding present values and then we can do a comparison of present values of benefits and costs. The below formula can be used to understand the relationship between present value (PV) and future value (FV) of money. PV = FV/(1+r)n(where r stands for rate of discount of money, n stands for time period) In the below example, the cost and benefits value mentioned are in specific period in time. We need to bring all costs as well as all benefits to their corresponding present values (PV) using the above equation and assuming an interest (discount) rate of 10% for ease of calculation.   Yr. 0Yr. 1Yr. 2Yr. 3Yr. 4Yr. 5Yr. 6Discount rate at 10% (0.1)Cost (FV)100000000000Benefits(FV)250002500025000250002500025000Cost (PV100000000000Benefits(PV)0227272066118782170751552714112Example of CBA using Discounted MethodPV of all costs = 100000 (as it is happening in year 0 only) PV of all revenue = 25000/(1.1) + 25000/(1.1)2 + 25000/(1.1)3+ 25000/(1.1)4+ 25000/(1.1)5 +  25000/(1.1)6 = 22727+20661+18782+17075+15527+14112 =108884 Net Present Value (NPV) = Sum of PV of all benefits – Sum of PV of all costs = 108884 – 100000 = 8884 (> 0)  Hence this project investment will lead to a profit after discounting the effect of interest and any other inflationary factors which are taken as 10%) If NPV is > 0, then the project investments will lead to profit. NPV is one of the most practical methods for doing cost benefit analysis by considering the time-value of money.  IRR (Internal Rate of Return) – IRR is the rate of discount at which the sums of PV of all benefits equals sums of PV of all costs. Or in other words IRR is the rate of discount at which NPV equals 0.  Calculating IRR is a more complex affair. In simpler term IRR denotes expected rate of return from the investments. According to a general guideline, higher the IRR from an investment, the better the opportunity.  How to establish a framework As we discussed above, there are various methods for undertaking cost benefit analysis. Different financial parameters such as Benefit Cost Ratio (BCR), ROI, Payback Period, NPV, IRR etc. need to be calculated for arriving at decisions and making necessary recommendations on whether a specific project should be taken up or not. Every organization is unique in their capabilities to invest and take risk. Organizations can define their specific guidelines or framework for project selection taking into account the above financial parameters, the risks involved in doing the project and most importantly specific nature of the investors. A framework for project selection will include all above factors.  Below are some basic guidelines which are used for decision making during cost benefit analysis (CBA) NPV should more than 0. Higher the NPV, the better is the project. BCR should be more than 1. Higher the BCR, the benefits outweigh the cost more. ROI should be high. Higher the ROI, the better is the investment opportunity. IRR should be high. Higher the IRR, the better is the opportunity. Payback period should be lower. Lower the payback period, the better seems the opportunity. Challenges and considerations while doing CBA How accurate is Cost Benefit Analysis? Cost benefit analysis can be reasonably accurate if these are done by technical and financial experts. Experience and availability of real data about costs and benefits of similar projects from past can greatly enhance the accuracy of cost benefit analysis.  Are there limitations to Cost Benefit Analysis? Since cost benefit analysis requires estimating costs and quantifying future benefits accurately, it requires solid maturity in terms of knowledge and availability of past data. In the absence of experience and data availability, CBA may fall short in its accuracy.  The risks and uncertainties in Cost Benefit Analysis While doing cost and benefit analysis, it will be important to understand risks and uncertainties involved in doing the project. It will also be equally important to understand the uncertainties involved in realizing the benefits once the project is done. Cost benefits analysis need to consider the implications of uncertainties to make it realistic. It may require doing statistical simulations and modeling as well.  Cost Benefit Analysis in the real world We saw that CBA became a formal and mandatory practice as early as 1930s in the US government departments, for numerically evaluating if the benefits will outweigh (and by how much) the costs of doing the project.  Organizations have become highly knowledgeable, experienced, and matured. Availability of past data coupled with ability to process the data using modern mathematical and statistical techniques and computerized tools exists in abundance within organizations.  In today’s world the need for doing CBA has become necessary. Businesses and governments are held more and more responsible and accountable to their citizens and investors for justifying their investment decisions. They can do this only by conducting a thorough cost benefit analysis.  
Rated 4.0/5 based on 6 customer reviews
7876
Cost Benefit Analysis for Projects: A step by step...

Organizations, both for-profit and not-for-profit ... Read More

How to Fill Project Management Application Form

It’s one of the most complicated application forms which I have filled so far.:) If you need to apply for PMP exam online you need to prove that you have 4500 hours of PM experience within last 5 years. So I selected 2 projects, One, the duration was 2 years and the other, the duration was 3 years. Then I calculated the number of hours based on following processes Initiating Process Planning Process Executing Process Controlling Process And Closing Process How I did the calculation is as follows: If I have a Project X which Started on 01/01/2001 and ended on 30/12/2004, Number of month experience of Pming = 4 x 12 = 48 Number of days = 48 x20 (Average 20 working days per month ) = 960 So the PM experience gained from Project X is 960 x 8 (assume that we work 8 hours per working day) = 7680 So with Project X I have already covered the required number of PM hours for the PMP exam I distributed my total hours of PM experience in 5 areas as follows: Initiation 10% Planning 30% Executing 25% Controlling 30% Closing 5% But this might vary based on nature of your project management course. The PMP course exam fee is $405.00 Its bad that members cannot get the discounted rate at the first time itself. Why do we have to send email and inform them to give us the discounted rate, when the system already knows that you are a PMI member?? I don’t understand that.
Rated 4.0/5 based on 20 customer reviews
How to Fill Project Management Application Form

It’s one of the most complicated application f... Read More