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Project ScorecardSenior executives use Project Scorecards, also known as Balanced Scorecards, to ensure project activity aligns with the strategies and visions of the organization. The scorecard is a little like putting the reader in the driver’s seat of a car. They need a view through a clear windshield to determine the direction the project is headed in and instrumentation such as the speedometer, tachometer, oil pressure gauge, and water temperature gauge to ensure the car is performing correctly and not in danger of breaking down or crashing. By the way, the reason these scorecards are often referred to as "balanced scorecards”? Previous to their introduction, executives had only a view of the financial performance of operations or projects. A need was identified for a more "balanced” view of activities, one that would include measurements of other aspects of performance. Project Scorecards should satisfy 2 project requirements: the need for a vehicle to communicate project performance and health to busy executives and the need to compare performance across multiple projects. Organizations that have Project Management Offices (PMOs), or Project Management Centres (PMCs) may already have templates for the scorecard. Organizations that don’t still need to communicate performance to senior executives and a standard means of measuring that performance. A carefully crafted project scorecard will meet these needs. No two project scorecards will be the same, nor should they. The organizations that they serve aren’t the same so their needs for project information won’t be the same. The objective of this article is to provide some tips and techniques for defining the information to be captured in the scorecard, and the best format for presenting that information. The tips and tricks described in this article will draw upon the project management best practices described in the PMBOK (Project Management Body of Knowledge). You can acquire these best practices by taking a quality PMP course, or PMP exam preparation training. Balanced Scorecard (BSC)Balanced Scorecards, or BSC, were devised and introduced by David P. Norton and Robert S. Kaplan in 1992 to correct the one-dimensional view of organizational performance provided by measurement instruments of the past. Performance was measured in terms of finances up to that point and the downside of measuring financial performance was that it lagged behind other elements of performance. For example, an organization that undertook a $5M project to capture a 10% increase in market share worth $4M per year would look great if it were completed for just $4.5M, but ROI could not be measured until at least the first year after project completion. Norton and Kaplan proposed measuring organizational performance in 3 additional areas: Customer, Internal Business Processes, and Learning and Growth to gain a more balanced view of organizational performance. Norton and Kaplan believed that an organization performing well in these areas could expect to perform well financially as well. Performance measurement in these areas would also allow executives to be pro-active in correcting problems that would lead to poor financial performance, rather than reacting once the organization experienced the poor performance. Balanced Scorecards were meant to measure performance in all areas of the organization, not just project performance. A project could fall under any one of the 4 areas of performance, or even under several, but will only count for one facet of organizational performance. The use of BSC by the organizational will definitely influence the design of the project scorecard, but the project scorecard cannot duplicate the format of the BSC because the information available does not satisfy the requirements of the BSC. Key Performance Indicators (KPI)Key Performance Indicators, or KPIs, is an acronym frequently used in conjunction with Balanced Scorecards. Balanced Scorecards use 5 or 6 metrics in each of the 4 areas of organizational performance as measurements. The 5 or 6 metrics could be any one of thousands which have been measured, but choice is constrained by the nature of the area (financial, customer, business processes, learning and growth), the nature of the organization, and the nature of the processes and tools in place to capture the metrics. These metrics are called Key Performance Indicators, or KPIs. This article is more concerned with giving you practical advice on composing your project scorecard, and choosing the metrics to support it, than in the theory of balanced scorecards and KPIs and for that reason I will avoid the use of these acronyms as they don’t directly help you build your scorecard. Choosing MetricsGoals and ObjectivesKeep the quality tenet "quality is a product’s ability to meet customer requirements” in mind when selecting the metrics to base your scorecard on. The first question a senior executive might ask regarding your project is "What strategic goal or objective will this project help me meet?” The answer to this question should be found in your Business Case and/or Project Charter. There should be one or two over arching objectives described in those documents which answers that question. Strategic objectives will be those targets or goals that your organization will be able to meet as a result of your project delivering its goals and objectives. Your project objectives might be to produce an engineering order and configuration system that will store up to 100,000 historical software orders and up to 10,000 configurable software packages, process a customer order and produce a software operating system for the customer’s central office telephone switch. Your organization’s strategic objective might be to increase market share 10% by offering customers the ability to perform configuration management of their software using your new software system. Note that it is not the project manager’s responsibility to achieve a 10% increase in market share, simply to produce the software order and configuration management system that senior executives believe will enable them to achieve that goal. Choose the high level project goals and objectives which support the organization’s strategic objective and identify them with that objective. For example, you could make the strategic objective the main bullet and the project objectives sub-bullets:
The main bullet should be a strategic objective and no more than one page/slide worth of supporting project goals and objectives should accompany it. Overall Project PerformanceThe overall project performance indicator should be derived from 3 or 4 indicators of the project’s health. These are: performance to budget, performance to schedule, performance to scope, and quality. The overall project performance indicator is a subjective evaluation of project health; there is no single metric which can be used. Red, yellow, and green are commonly used to indicate overall project health with red being used to indicate a project that is performing poorly and in need of intervention from sponsors, or steering committee to put it back on the rails. Yellow is used to indicate a project that is not performing to established standards but which can be recovered using resources currently available to the project. Green indicates that the project is performing well. Regardless of which means you use to indicate overall project performance, you should use performance indicator of the project area which is performing the most poorly to indicate overall project health. If performance to schedule is yellow then overall performance cannot be green. Performance to BudgetEarned Value Management (EVM) provides valuable and universally accepted metrics for measuring a project’s performance to budget. The objective is to determine whether you have accomplished the project worked you planned for the budget you planned. Budget will include the cost of all goods, services, resources (human and non-human), and administrative services consumed by the project. There are several different ways of mining the metrics needed to perform these measurements. The simplest is the MS Project file for the project, which can track all these. MS Project shows money being spent at exactly the same rate as activity completion. The budget for the C++ programming is exactly 72% consumed when the C++ programming is 72% complete. This may not be what your audience is looking for. Check for financial reports being issued by your finance organization that measure budget consumption for your project. These reports are likely to be ones read by senior executives and issuing a financial report of your own which does not align with the one from the finance department could lead to hours spent reconciling the 2 reports. Some things to consider when you gather your metrics:
Use reports from the finance organization to base your reports on and explain how you used them, if possible. If financial reports based on the project are not available to you, learn the methods used by finance for their reports and make your metrics conform to your organization’s financial reporting methods. There are several different EVM performance indicators which use financial metrics. The Cost Variance is the simplest. It simply compares the Actual Cost of Work Performed to the Budgeted Cost of the Work Performed (CV = BCWP – ACWP). A negative amount indicates a project that is over budget, a positive amount indicates a project that is under budget. Earned Value is actually the EVM term for the Budgeted Cost of Work Performed (CV = EV – ACWP). The Cost Performance Index, or CPI, is another indicator of a project’s financial health. The CP is an absolute value in currency while the CPI is a comparator and can be used to compare a project’s performance to budget in one period against another period, or against another project. The CPI is calculated by comparing the variance to 1, with 1 being exactly on budget. The formula for calculating the CPI is BCWP/ACWP. A CPI greater than 1 indicates a project that is under budget, a CPI less than 1 indicates a project that is over budget. Burn rate is a third indicator used to indicate project performance to budget. The burn rate of the project is simply the rate at which the project budget is being spent. Faster than the plan? Slower than the plan? Or exactly to plan? The burn rate is the inverse of the CPI so the formula for calculating the burn rate becomes: Burn Rate = 1/CPI. A burn rate of greater than one means your project is consuming budget faster than planned and will exhaust the budget before all the work is completed. A burn rate of less than one indicates your project is consuming budget slower than planned and will complete before the budget is exhausted.
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