Measuring Project Performance

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It is happened to practically each and every project manager sometime in their career. They are given the requirement to give detailed performance reporting on a project and end up spending most of their time entering hours worked into work packages in Microsoft Project and estimating percent total on these packages on a daily basis. Regardless of whether the requirement for that level of reporting was real or perceived, the project manager finds that he is unable to manage the day to day activities of his project simply because he is too busy trying to measure the project’s performance.

When a profitable company invests time, income, as well as other resources in a project, its primary concern is often what it really is obtaining in return for its investment. It’s the responsibility of the project manager to ensure these projects stay on schedule and within their approved budget. Performance measurement supplies the project manager with visibility to ensure he is operating within the approved time and cost constraints and that the project is performing according to plan. It also alerts management if a project begins to run over spending budget or behind schedule so actions can rapidly be taken to get the project back on track.

As the Project Management Office (PMO) manager it’s your responsibility to make sure that project performance is becoming captured and reported. It can be also your responsibility to guarantee that the level of reporting is achievable and doesn’t unnecessarily overburden or distract the project managers.

Your PMO should define the size of the work packages in your work breakdown structure (WBS). There are two typical standards; 4 to 40 hours and 8 to 80 hours. You need to decide which size best fits your organization based on typical project size and level of management detail. I personally prefer the 4 to 40 as a work package cannot exceed the work of one individual over a week.

Additionally your PMO should have a standard for applying credit for work performed. You’ll find 3 typical approaches to this. 1 rule is to apply a percent total to work packages; even so, this is somewhat subjective and leads to percent completes of 99.5, then 99.6, then 99.7. We’re all either been in this situation or seen it. A second rule is only giving credit when 100% of the work is completed on a work package, this is referred to as the 0/100. The work package receives no credit even if it’s 3/4 total. This solves the dilemma with the previous rule; nevertheless, it leads to less accuracy when performing earned value calculations. The third alternative is to give 50% credit when work on a work package is began and 100% when the work is completed. This will be the rule I generally follow as it gives credit for earned value management and is straightforward to apply within the field.

Next, you should figure out what earned value metrics you want to track and present to management. Although you are able to quickly calculate most all earned value metrics (i.e. PV, EV, AC, SV, CV, SPI, CPI, EAC, ETC, etc) you don’t necessarily want to track all these values and you certainly don’t need to present them all to management. Management just needs a quick view of the project’s performance employing only some of these values and would be overwhelmed if they had a complete list. For most projects I track the Schedule Variance (SV), Cost Variance (CV), Schedule Performance Index (SPI) and Cost Performance Index (CPI). These four values give a dependable measurement of the project’s performance.

Schedule Variance (SV): If SV is zero, then the project is perfectly on schedule. If SV is greater than zero, the project is earning much more value than planned thus it’s ahead of schedule. If SV is less than zero, the project is earning much less value than planned thus it’s behind schedule.

Cost Variance (CV): If CV is zero, then the project is perfectly on spending budget. If CV is greater than zero, the project is earning far more value than planned therefore it’s under budget. If CV is much less than zero, the project is earning much less value than planned therefore it’s over spending budget.

Schedule Performance Index (SPI): If SPI is one, then the project is perfectly on schedule. If SPI is less than 1 then the project is behind schedule. If SPI is greater than 1 then the project is ahead of schedule. A well performing project really should have its SPI as close to one as possible.

Cost Performance Index (CPI): If CPI is one, then the project is perfectly on spending budget. If CPI is much less than 1 then the project is over budget. If CPI is greater than 1 then the project is under spending budget. A well performing project really should have its SPI as close to 1 as achievable.

You ought to set thresholds for these values at which their status will alter to an alert. As an example, if the SPI falls below 0.9 then the project’s schedule should alter to a yellow status. If the SPI falls further and dips below 0.8 then the project’s schedule need to alter to a red status. Further earned value calculations can be performed if there’s a dilemma with the project’s price or schedule, this may give the project manager a better understanding of the issue and determining a path for correction.

Measuring project performance is an important component of project and program management. It makes it possible for the PMO and project manager to identify price and schedule troubles early and take steps for remediation quickly. It starts with setting the standards for the size of work packages, applying credit for work performed, and which earned value metrics to track, which should be included inside the project’s Price Management Program. Measuring project performance supplies the organization with a clear picture of the wellness of its projects and can instill confidence in the project teams. Additionally, these performance measures can assist the PMO establish continuous improvement initiatives in areas where projects commonly perform at lower levels. The usefulness of measuring project performance is evident and so long as organizations don’t become overwhelmed with them, these measures will remain essential contributors to organizational success.
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