Previous posts on Project Management Insight have looked at project ‘failures’ and learning from mistakes. This post considers the use of performance measurement to establish where projects and programmes lie on the continuum between failure and success and the application of metrics, targets and benchmarking to achieve continuous improvement in your organisation, department or business.
Performance measurement is increasingly in vogue, has application across all industries and processes, and can be applied to delivery of projects and programmes. Successful introduction of performance measurement helps organisations and teams to: evaluate their current and past performance; learn and improve; and, achieve their strategic objectives.
Benefits of Performance Management
Eight reasons for measuring performance in the public and non-profit sector are set out in a paper by Robert Behn (2003). The reasons seem to me to be equally applicable to organisations delivering projects:
How is my [organisation] performing?
How can I ensure that my subordinates are doing the right thing?
On what programs, people, or projects should my [organisation] spend the [public’s/shareholders’/owner’s] money?
How can I motivate line staff, middle managers, … collaborators, [and] stakeholders, … to do the things necessary to improve performance?
How can I convince … superiors, … [and] stakeholders … that my [organisation] is doing a good job?
What accomplishments are worthy of the important organizational ritual of celebrating success?
Why is what working or not working?
What exactly should who do differently to improve performance?
Introducing Performance Measurement to your Organisation
In introducing performance measurement to your organisation you need to have:
- Clear and Understandable Strategic Objectives
Why is performance measurement being introduced and what are the expected benefits? The rationale for introducing performance measurement will vary according to the organisation’s strategic objectives (see example set out in the form of a strategy map). The performance measurement system should be designed to suit the organisation’s goals.
- Management Commitment
Not only do you need senior management commitment preferably with a champion at the highest level of the organisation, but also the buy-in of the project delivery team, who will gather much of the data. In order to gain the commitment of the project delivery team, the rationale for performance measurement needs to be understood and the benefits clear for the organisation and the individuals.
- Integration of performance measurement in the project processes and procedures
Performance measurement should be viewed as a routine, integral part of the project management process rather than a separate function. Measurement and benchmarking should emphasize the continuous and consistent application of the system and the resultant identification and implementation of improved project management procedures through lessons learned and feedback systems.
- Meaningful KPI’s (Key Performance Indicators) and Targets
Select ‘SMART’ KPI’s to suit your business objectives: Specific; Measurable; Achievable; Realistic; and, Time based.
- Objective KPI’s
Metrics should so far as possible be capable of objective rather than subjective measurement in order to be able to consistently apply measurement across projects and programmes.
For a performance measurement system to achieve benefits it is necessary to agree performance targets which are achievable and realistic and which can be applied to projects individually and to the organisation’s portfolio of projects as a whole. As improvement feeds into the project management processes then the organisation should raise the performance bar and always strive to achieve the highest practicable performance.
Improvement can only be achieved if the organisation is honest about its current performance and is culturally ready to aim for improvement.
Choosing your Key Performance Indicators (KPI)
If you’ve decided to introduce performance measurement to your organisation we now come to the difficult part – choosing a suitable set of KPI’s. Unfortunately it’s generally not possible to trawl the Internet and come up with a ready list of KPI’s and targets to suit your specific requirements, although you may find many good ideas for adaptation to your specific needs.
One source of ideas with hundreds of KPI’s is the KPI Library. Although they may have something to suit your needs, I didn’t find them to be particularly strong in my personal areas of interest, real estate and construction projects, and the KPI’s were not always described in enough detail to enable them to be reliably computed. They offer additionally a number of paid services such as ‘KPI Benchmark’. However, as users are able to submit guesses to KPI surveys it’s not clear that paid up users will always be benchmarking against real measured data.
In the construction and real estate sector, the “KPI Report for the Minister for Construction” (2000) provides a fairly comprehensive set of KPI’s and descriptions of how they are measured with worked examples, covering:
- Client Satisfaction;
- Change Orders;
- Business Performance; and,
- Health and Safety.
I found these KPI’s to be a suitable basis for developing a project and programme based performance measurement system for my business with some adjustments and additions (Employee satisfaction and the Environment) to suit our particular requirements. If your interests are in the construction sector, you too may find them to be a useful starting point.
If you participate in a benchmarking scheme (see below), then your KPI’s are likely to be chosen from a list provided by the benchmarking organisation.
Just as it’s difficult to find ready-made KPI’s, it is also difficult to find suitable targets for your chosen KPI’s. If you’re not able to find suitable published data, you’ll need to set some targets based on previous personal or corporate experience with initial targets being largely subjective unless you’ve a good set of documentation from previous projects and the time and inclination to go through the documentation and evaluate the projects.
Remember that targets must be realistic and achievable. Targets for each individual project may differ from the targets for the programme as a whole. As performance improves, you can raise the bar.
Where an organisation has a programme of projects, then benchmarking of projects within the organisation is clearly useful.
Benchmarking against other businesses can provide a helpful comparison of performance and potential. The challenge here is finding external data for comparisons. However, there is a growing body of suppliers of benchmarking services – for example, in the UK:
- the Association for Consulting and Engineering (ACE) in the UK has established a benchmarking programme for its members.
- Annual Construction Industry Performance Reports with a wide range of KPI’s have been published by Constructing Excellence Ltd. since 2007.
While the ACE benchmarking programme seems generally more concerned with overall business performance, the Annual Construction Industry Performance Reports may be useful to benchmark projects and programmes for organisations operating in the construction sector. Internet searches may reveal other benchmarking schemes which will meet your requirements.
The Last Word
Performance measurement has application to project and programme management. To apply it successfully:
- Have a clear understanding of the rationale for and benefits in introducing performance measurement to your organisation;
- Create the conditions necessary to introduce it to the organisation;
- Design performance measurement systems to achieve defined strategic goals;
- Select or design suitable objective and measurable KPI’s;
- Set realistic and achievable time based targets; and,
- Ensure that lessons learned are translated into continuous improvement.
Finally, the last word in this post goes to management writer Peter Drucker (1909 – 2005):
‘Management’ means, in the last analysis, the substitution of thought for brawn and muscle, of knowledge for folklore and superstition, and of cooperation for force. . .
(from “People and Performance”)
- “Why Measure Performance? Different Purposes Require Different Measures”, Robert D Behn, 2003
- Stacey Barr – ‘the Performance Measure Specialist’
- “Measure Performance and Set Targets”, Business Link
- KPI Library
- “KPI Report for the Minister for Construction” by the KPI Working Group, January 2000
- ACE Benchmarking
- ‘Construction Industry Performance Reports’, Constructing Excellence in the Built Environment