Bridging the Gap Between Project Management and Profitability

Why Project Managers Need to Think Like CFOs

Project managers are excellent at tracking milestones, controlling costs, and ensuring deliverables are met. But when was the last time you considered how your project impacts the company’s bottom line?

For years, businesses have relied on Earned Value Management (EVM) to track project performance. While EVM is effective in measuring cost efficiency and schedule adherence, it has one critical weakness: it does not provide insights into project profitability. In today’s competitive business environment, that is a significant gap.

The Missing Piece: Profitability in Project Management

A recent study published in PLOS ONE by Rudy Setyopurnomo, Sudarso Kaderi Wiryono, Yuliani Dwi Lestari, and Subiakto Sukarno highlights this challenge. Traditionally, EVM focuses on metrics such as Planned Value (PV), Earned Value (EV), and Actual Costs (AC). These indicators assess whether a project is on time and within budget, but they fail to answer a fundamental question: Is this project financially successful?

To address this issue, the study proposes an innovative approach: integrating EVM with income statements and incorporating EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) as a profitability indicator.

This integration allows project managers to have real-time financial visibility, ensuring that their projects not only stay on schedule but also contribute positively to the company’s bottom line.

Proven Financial Impact: The Numbers Behind the Strategy

The research findings from shipbuilding and aerospace manufacturing industries provide compelling evidence of the financial benefits of integrating EVM with income statements. Companies that applied this method experienced:

• A 33% increase in revenue after integrating financial tracking into project management.
• A 300% surge in EBITDA, demonstrating improved cost control and operational efficiency.
• A 250% increase in EBITDA margin, reflecting enhanced profitability through strategic project execution.

These numbers provide strong proof that bridging the gap between project execution and financial performance can lead to substantial business gains.

What This Means for Project Managers

This approach fundamentally changes how project managers evaluate success. By integrating EBITDA tracking into Work Breakdown Structures (WBS), managers can gain real-time visibility into project profitability, allowing for proactive decision-making.

With this method, project managers can:

• Identify profitability bottlenecks early—before they become costly mistakes.
• Align project goals with business objectives—ensuring every effort contributes to financial success.
• Make data-driven decisions in real-time—optimizing resources to improve efficiency and profit margins.

Lessons from Shipbuilding and Aerospace

The study, conducted by Setyopurnomo and his colleagues, examined shipbuilding and aerospace manufacturing projects, industries where long project cycles and high capital investment make financial visibility critical. When companies integrated EVM with real-time EBITDA tracking, they observed:

• Improved stakeholder communication—clear financial insights reduced conflicts.
• Better cost control—managers could adjust strategies mid-project to improve efficiency.
• Higher profitability—optimizing daily EBITDA allowed for continuous financial improvement.

These findings demonstrate that financial integration in project management is not just theoretical—it drives real business outcomes.

The integration of EVM into income statements and EBITDA into WBS aligns project management and financial systems. This common language enables leaders to cultivate a robust corporate culture, enhance efficiency, and improve productivity for superior performance and profitability.

What This Means for Business Strategy

The key takeaway is that project success is not only about meeting deadlines and staying within budget—it is about profitability. Whether managing an IT implementation, a construction project, or a large-scale supply chain operation, integrating financial metrics into project management ensures that work directly contributes to the company's financial health.

How to Apply This to Project Execution

1. Track profitability alongside performance. Move beyond cost control and begin measuring EBITDA at the project level.
2. Leverage financial data for better decision-making. Use real-time insights to adjust strategies before financial issues arise.
3. Bridge the gap between finance and operations. Work closely with finance teams to align project execution with company-wide financial goals.

Final Thoughts

Project managers are not just responsible for execution—they play a critical role in financial oversight. As businesses seek to improve profitability and optimize operations, integrating profitability tracking into project management will be essential.

With clear real-world financial impact, the evidence is strong: companies that align project execution with financial visibility can drive growth, reduce inefficiencies, and maximize profitability.

Would this approach change how you manage projects? How do you currently measure project profitability?

Learn more and read the full article here:

https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0312956