Jun 22, 2016

Still Justifying Project Management in Your Organization? This Will Help!

Posted by Deborah Bigelow Crawford in Culture & Change Management, Project & Program Management, Governance, Performance Measurement, Project Management Research, Strategy Execution | 0 Comments

A balanced family of measures can evolve into a powerful system for executing strategy.

Companies are demanding to know the long-range benefits of building and implementing a project management culture. Simple financial measurements are not enough; a balanced family of measures is needed to get an overall picture of the health of your organization and its project management practices. A balanced family of measures can evolve into a powerful system for executing strategy. The measures help to define the strategy, communicate it to the organization, and direct its implementation at every rung of the hierarchy, from the corporate level to the individual. They also keep everyone's efforts aligned, because they link strategy to budgets, to resource-allocation systems, and to pay programs. Demonstrating how project management initiatives measure up using this balanced family of measures is critical to any business justification for a project management investment.

The kinds of measures that make up a balanced family of measures include a mix of financial, operational, and social measures that show value to stakeholders. Measures in these categories should also be a balanced mix of inputs (money and people put into a process), outputs (results achieved), and processes (performance of the systems that deliver the output). For example, a project management input measure could be R&D spending, the output measure could be the number of new products, and the process measure could be the number of change orders per product during development. The ultimate output measure is the contribution of these new products to corporate profitability.

A balanced family of measures might include the following, derived from the work of Kotter and Heskett  (the exact measures would vary with each organization, depending on its strategy):

  • For Shareholders: economic value added, earnings-per-share growth, cash flow per share, economic profit, total factor productivity, percentage of new-product sales, return on management
  • For Customers: customer satisfaction, product quality index, repair incidence, customer loyalty
  • For Employees: employee satisfaction, employee turnover, productivity, diversity in management, training time per year
  • For Community: index of environmental impacts, safety record, community satisfaction, charitable and community contributions

A subset of measures that focus on operational issues only would include the following:

• For Shareholders: productivity, cost reductions, defect level, cycle time, customer retention, employee turnover, percentage of new product sales, process errors

• For Customers: project success (time, cost, quality), repair incidence, product quality index, on-time shipping, customer satisfaction, customer retention, customer loyalty, new product inventions, share of wallet, market share

• For Employees: OSHA recordables, employee satisfaction, absenteeism, employee turnover, empowerment index, grievances, training time per year, competence levels, salary levels, benefit levels, family-support services, percentage of flexible schedules

• For Community: safety record, salary levels, community satisfaction, legal actions

Effective metrics are leading indicators; they forecast future trends inside and outside the organization. They're objective and unbiased, and they're normalized so they can be benchmarked against other companies. They need to be inexpensive to collect as well as unobtrusive -- they shouldn't disrupt work or the trust of your employees. And they need to discriminate meaningful small changes. They should be appropriate (measure the right things) and efficient (so you can draw many conclusions out of your data set). They need to be comprehensive, showing all the significant features of the organization's status. And of course they need to be quantifiable and statistically reliable. A balanced set of measures that follow these criteria would be the perfect measurement system to judge your project management effectiveness.

How do you justify the value of project management in your organization?  Do you measure … and what do you measure?  Help others by sharing your experiences!


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