A Balanced Scorecard Model For Project Management Information Technology Essay

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For a long time organizations are have been trying to use performance measurement methods in their system due to the fact that most time of managers is consumed by gathering, controlling, analyzing or reporting out data. Over time, it has been recognized that a valid performance measurement system can help organization to define its expectations and priorities, set strategies with goals and finally planning and decision making.

Project Management Office, managers, program managers and project managers, as well as other organizations can use performance measurement benefits to evaluate project team performance, process effectiveness, client perception, resource management and leveling in a single or multiple project organization. By adding performance measurement to the project managers’ skills, they can accurately evaluate project performance against the mission and vision of organizations. Moreover, it helps project managers to find and assess risks and determine the value level creating for stakeholders.

These papers will focus the issues of the performance of a project, and integrity of performance measurement and project management. The research objectives for this research study are identifying performance metrics for project management integrated to balances scorecard system; development of a balanced scorecard system with perspectives of project management; studying of use of created balanced scorecard system to evaluate projects.

Any previous work in the area of project and project management, and performance measurement will be illustrated in literature review. The approach of how the balanced scorecard and project management methodologies will be integrated is shown in methodology section.

Literature Review

Project and Project Management

Project

A project is a temporary endeavor undertaken to create a unique product or service with a definite start time and end (PMBOK @ 2004). This uniqueness is a consequence of the difference in some way from the “normal” product delivered by an organization. Furthermore, every project is constrained in different ways by scope, time and cost and is defined by discrete activities which are related to each other and linked together over the project lifecycle. Figure 1 shows the constraints of a typical project. Moreover, a project consumes limited resources such as human, time, money, machines, facilities, and materials and requires specific skills to manage and execute and finally produces tangible deliverables according to stakeholder’s requirements.

Figure 1 – Project Constrains

Source: James Norrie,  Derek H T Walker., “A Balanced Scorecard Approach to Project Management Leadership”,  Project Management Journal.  Sylva: Dec 2004.  Vol. 35,  Iss. 4,  p. 47-56 (10 pp.)

Project Stakeholders

The project stakeholders are the parties who have positive or negative impacts on project performance and outcomes. The major stakeholders have direct authority to change the elements of the triple constraint. The Figure 2 illustrates the major stakeholders of a typical project. The figure also shows that, an internal part of an organization can recognized as stakeholders.

Figure 2 – Project Main Stakeholders

Source: Adopted from: PMI, (2004), PMBOK @ 2004

Project Management

Keeping projects on-time, within budget and achieving a high level of quality of scope is difficult. Problems are due to poorly conducted analysis and design, but many also suffer from poor leadership and management. Project management is the planning, execution and controlling of project activities to achieve project objectives. Objectives include time, cost and scope or managing the triple constraints. Based on PMBOK @ 2004 definition, project management is the application of knowledge, skills, tools, and techniques to project activities in order to meet or exceed stakeholder needs or expectations from a project.

Project Management Knowledge Areas

Figure 3 – Project Management Nine Knowledge AreasBased on PMBOK @ 2004, there are nine knowledge areas for project management which take inputs from stakeholders including their needs and expectation and lead to project success by use of four core function including scope, time, cost and quality management and another four facilitating functions of human resource, communication, risk and procurement management with the direction of the last but not the least area, project management integration. This matter clearly is shown on Figure 3.

Source: PMI, (2004), PMBOK @ 2004Project Performance

Project performance systems measure planned value against actual value of project performance, considering time and cost distribution to develop alarming system for managers (T.R. Collins, E.J. Montes, M.G. Beruvides, T.C. Maku, 2004). After use of measurement system, a project may call “on track”, “critical” or “out of control” project depends on the benchmark values from its metric system. In “on track” project, all the activities are going based on the planned system and there is no significant difference in planned and actual values in field of time, cost, quality or organizational goals. But for a “out of control” project, there is a significant difference between planned and actual values and project needs a catch up plan and huge effort to direct it on the way. The several ways, traditionally, used to measure project performance such as earned value analysis. The other measures such quality, organizational goals and mission also along with time and cost distribution can be used in performance measurement system which we will consider them in balanced scorecard system.

Project Lifecycle

Figure 4 – Project LifecycleA project has a series of lifecycles. The simple model of lifecycle has four phases including initiation, planning, execution, and closing out phases. An approval of completion of each phase should be obtained before starting next phase. The Figure 4 illustrates the project lifecycle model and the level of organization involvement and consumption of resources over the lifecycle. The figure also shows ending gates of each phase and determines other approvals or measures that happen over the project lifecycle. This model can be so detailed but as a typical model, all detailed models have same concepts.

Source: Kevin Devine, Timothy J Kloppenborg,  Priscilla O’Clock., “Project Measurement and success”,  Journal of Health Care Finance.  New York: Summer 2010.  Vol. 36,  Iss. 4,  p. 38-50 (13 pp.)

Initiation phase is the first phase of project lifecycle which include feasibility studies and defining objectives, scope, deliverables, risks, and distribution of cost and time. By approving project charter the initiating phase would be end. The next phase is the planning phase which the objectives of project subject to constraints are identified. In this phase, execution plan, a planning document of all actions necessary to execute the project is prepared which get approved through kick-off meeting. After the planning phase, the project executing phase will start. The project will be monitored during execution phase based on the execution plan which comes from planning phase. There is a number of benefits in monitoring and controlling a project. First of all, it provides signals for the project manager and sponsor to be informed of the project’s progress and be able to take corrective or preventive actions to keep the project “on track” and avoid to get “out of control”. Second, it makes opportunities for project team and organization to learn and grow from lessons learned during executing phase. The final phase is closing out of project. During this phase, project managers often provide detailed summary reports of everything and how that information matches up with the original execution plan. Moreover, the sign-off is probably the single most important closing document. The process of monitoring and control along with evaluation of project success, and learning and growth can be facilitated by using balanced scorecard to measurement of project progress through its lifecycle.

Business Strategy and Project

As it is mentioned, a project is a temporary organization and process which has been set to gain specific goals under the certain constraints which are clearly defined on project plan. A project includes of goals, structures, processes, and resources. Moreover, a project is a part of organization structure which should carries the organizational goal and objective. Both the business level and corporate level strategies of organization should translate to project goals. But how exactly is these strategies translated into what project structure? The project strategy is a conceptual missing link between the business strategy and the project plan which carries the project goals and objective (A. Shenhar, M. Poli, T. Lechler, 2004). The balanced scorecard is a tool to cover this gap using the project strategy level on its structure. The Figure 5 shows the links of project strategy through project plan and business strategies.

Figure 5 – Links of Project Strategy

Source: Aaron Shenhar, Michael Poli, Thomas Lechler, “A New Framework for Strategic Project Management, 2004

Performance Measurement

Studies have rivaled the importance of performance measurement in improvement of productivity. However, traditionally, organizational performance measures were financial such as cost and time but during last decade, studies introduced non-financial measures to provide a larger scope for performance measurement systems. The best one is balanced scorecard system.

Balanced Scorecard

The Balanced Scorecard is a tool to transform strategy into organization operational and strategic plan which enable the organization to decide whether a project is going on strategy or not (J. Norrie, D.H.T. Walker, 2004). This system has developed, implemented, and tested in several organizations through past decade. It shows the system validity in various organizations. Balanced scorecard system is developed and introduced by Kaplan and Norton in 1992. They also incorporate the financial measures along with non financial measures into a balanced scorecard system. The financial measures represent the past performance and the non-financial measures represent the future performance.

Based on the Kaplan and Norton consideration, the balanced scorecard has four principal perspectives in performance area which are shown in Figure 6:

The customer perspective (market share, customer satisfaction, customer retention).

The internal business perspective (cycle time, cost of services, job safety).

The innovation and learning perspective (effectiveness of change to technology).

Figure 6 – Four Perspectives of Translation Vision and StrategyThe financial perspective (earnings per share, revenue growth, profit growth).

Source: Robert S. Kaplan, “Conceptual Foundation of the Balanced Scorecard”, Handbook of Management Accounting Research, 2009; 3

These four perspectives fulfill the four basic questions: What is the organization view on customers’ eyes? What are the organization advantages? What corrective decision should make to add value? How the organization satisfies its shareholders?

Strategy Map

All the objectives in four perspectives of balanced scorecard are linked in cause-and-effect relationships (R.S. Kaplan, 2009). The strategy map comes from the linkage between balanced scorecard objectives and measures. Figure 7 illustrates the structure of a typical strategy map and the linkages of objectives in all perspectives. For implementation of a balanced scorecard system a strategy map of objectives and measures should be built prior to selection of metrics for the objectives.

Figure 7 – A Typical Strategy Map and Objectives Cause-and-effect relationships

Source: Robert S. Kaplan, “Conceptual Foundation of the Balanced Scorecard”, Handbook of Management Accounting Research, 2009; 3

It is clear that the linkage of learning & growth perspective is the weakest link among strategy map which called “the black hole of the balanced scorecard” for many years.

Strategy Management System

The strategic planning should link to operational execution in a strategic management system. Figure 8 illustrates the structure of six stage closed-loop management system which represents the mentioned links. The six stages of a closed-loop management system are as below (R.S. Kaplan, 2009):

1. Develop the strategy 2. Translate the strategy 3. Align the organization

4. Plan operations 5. Monitor and learn 6. Test and adapt the strategy

Figure 8 – A Closed Loop Management System for Strategy Execution

Source: Robert S. Kaplan, “Conceptual Foundation of the Balanced Scorecard”, Handbook of Management Accounting Research, 2009; 3

By using this sixth stage, the strategy would be tested and updated by internal operational data and external environmental data. It leads to setup another loop around the integrated strategy and operational management system.

The strategy and operations would be integrated in such a balanced scorecard framework. The integrated closed-loop management system needs excellent coordination among all organization parts due to existing of several moving parts and inter-relationships in such an integrated and comprehensive system. Current processes which are run by various part of the organization like as budgeting by finance, personal goals and communications by human resources, and process management by operations should be adjusted to align in strategic objectives. All these processes must set and work as a unique and integrated system against working as separated subsystems.

Methodology

This exploratory research effort to development of balanced scorecard model for project management in three phases:

The project management balanced scorecard is structured in four steps: levels, cause-and-effect relationships, indicators, and final model.

Transferring business strategy to project (Levels)

Preparation of project strategy map (Cause-and-effect relationship)

Performance metric selection and categorization (Indicators)

Development of project management balanced scorecard model (Model)

Transferring Business Strategy to Project

Figure 9 – Three Levels of Balanced Scorecard in Project ManagementThe levels of balanced scorecard in project management are business strategies, strategic project goals, and project objectives including scope, quality, time, and costs (K. Niebecker, D. Eager, K. Kubitza, 2008). Figure 9 illustrates the hierarchical structure of these three levels.

Source: Adopted from: Klaus Niebecker, David Eager, Klaus Kubitza, “Improving cross-company project management performance with a collaborative project scorecard”, International Journal of Managing Projects in Business, Bingley: 2008.  Vol. 1,  Iss. 3,  p. 368-386 

Business strategic goals in various layers depending on the organization’s structure, such as departmental, program, or portfolio objectives can drive the project goals and strategies (S. Sirvannaboon, 2006). Figure 10 shows how a project balanced scorecard can be derived, either from the business strategies or the project goals.

Figure 10 – Derivation of Project Balanced Scorecard

Source: Klaus Niebecker, David Eager, Klaus Kubitza , “Improving cross-company project management performance with a collaborative project scorecard”, International Journal of Managing Projects in Business, Bingley: 2008.  Vol. 1,  Iss. 3,  p. 368-386 

Preparation of Project Strategy Map

To determine and illustrate the cause-and-effect relationships between business objectives, the concept of a strategy map can be used in the project. The project strategy map is an important element of the strategic management of both organizations and projects. It is the base of measuring the indicators of all functional fields in both historical performance and future perspectives areas. Figure 11 illustrates a typical strategy map for a project. To development of project strategy map, all project members should be involved due to its importance among project planning process (K. Niebecker, D. Eager, K. Kubitza, 2008). Performance metrics and measures can be designed after accurate designing of strategy map.

Figure 11 – A Typical Project Strategy Map

Source: Klaus Niebecker, David Eager, Klaus Kubitza , “Improving cross-company project management performance with a collaborative project scorecard”, International Journal of Managing Projects in Business, Bingley: 2008.  Vol. 1,  Iss. 3,  p. 368-386 

Performance Metric Selection and Categorization

There are a large number of sources for performance metrics by looking to the recent studies and researches in the field of project management balanced scorecard, but based on PMBOK @ 2004, the four pillars of measures of success for a project are as below:

Scope (strategies to meet objectives)

Time (project schedules’ issues)

Cost (project cost and budget’s issues)

Quality (project deliverables’ characteristics and specifications)

Figure 12 – Measures and Associated Metrics for Project Management Balanced Scorecard

Source: Terry R Collins,  Elliot J Montes Jr,  Mario G Beruvides,  Tosanwunmi C Maku., “A Performance Model for Multiple and Simultaneous Projects”,  IIE Annual Conference. Proceedings.  Norcross: 2004.  p. 1-6 (6 pp.)

As we see before, all the four categories in Figure 12 are parts of the nine knowledge areas of the PMBOK @ 2004. So, the selected categories represent the most important issues for project managers while tracking the performance measurement of a project.

Development of Project Management Balanced Scorecard Model

However, the original sequence of building a balances scorecard system for project management from Kaplan and Norton is clearly documented, but we should notice that in a project context, the balanced scorecard should measure specific result of project instead of measuring the organizational overall objectives (K. Devine, T.J. Kloppenborg, P. O’Clock , 2010). Therefore, our approach must be modified to measure specific project deliverables and related objectives which are appropriately linked to strategy.

Consequently, we modified the traditional balanced scorecard perspectives as follows to consider a realistic group of perspectives for project management:

Growth/innovation perspective: Are we prepared to meet any shifts in project technology and personnel skills required to provide exemplary project performance?

Internal project perspective: Is our internal procedures meet our needs?

Customer perspective: How do the clients rate our project performance?

Time & Cost Perspective: How well is the project performing with respect to schedule? Is the project conforming to set budget constraints?

Figure 13 – Basic Model for Balanced Scorecard Approach for Project ManagementThese dimensions are the most important aspects of a project management which enable a project-oriented organization to successfully implement its strategies while execution of projects. Therefore, these dimensions independent from their names and numbers are selected to develop a balanced scorecard system for project management. However, while designing balanced scorecard system, it is important that the dimensions which can monitor the organization business strategy should be considered.

Source: Kevin Devine, Timothy J Kloppenborg,  Priscilla O’Clock., “Project Measurement and Success: A Balanced Scorecard Approach”,  Journal of Health Care Finance.  New York:Summer 2010.  Vol. 36,  Iss. 4,  p. 38-50 (13 pp.).

Figure 13 shows a basic model for a balanced scorecard for project management. The model presents project assessment areas from the four modified scorecard perspectives: customer, internal project process, time & cost, and growth/innovation. The mentioned assessment areas are major criteria in Project Management Body of Knowledge (PMBOK) related to the project success or failures. In order to develop the final model of balanced scorecard framework for project management we should expand this assessment area.

For this purpose, all quantifiable measures in each phase of a project’s lifecycle should be considered in our balanced scorecard model as well as the qualitative measures from lessons learned (W. Steward, 2001). Figure 14 expands the basic model and illustrates the final model for balanced scorecard framework in project management. It shows the detail measurement areas during the each phase of project’s lifecycle. In each phase may one or more factors are key measurement which should be accurately determined and selected by project manager depends on the organization and project characteristic and strategic goals in project planning phase.

BSC Perspectives

Customer

Internal Project

Time & Cost

Growth/Innovation

Project Lifecycle

Initial Project Selection

Statement of Work

 

Business Case

Organization’s People and System

End of Initiation Phase

Scope Overview

High-level Risk

Milestone Schedule

Team-Pre-assignment

Business Case

Commitment

Summary Budget

Previous Lessons Learned

 

Stakeholder Acceptance Criteria

 

 

 

End of Planning Phase

Requirements Documentation

Human Resource Plan

Schedule Baseline with Resources

Team Ground Rules

Scope Baseline

Change Management Plan

Cost Performance Baseline

Improve Management of Project Meeting

Work Breakdown Structure

Risk Management Plan

Project Kick-off

Communications of Management Plan

Risk Register

Quality Management Plan with Metrics

Procurement Management Plan

 

 

Project Management Plan

 

 

During Executing

Quality Control Measurements

Contract Awards

Performance Measures through Earned Value Analysis

Team Performance Assessments

Stakeholder Notification and Feedback

Performance Information

Project Termination Decision

Process Improvement

Project Reports and Records

Change Request

ROI

Re-planning

Validated Deliverables

Risk Register Updates

Lessons Learned Application

 

 

Procurement Documentation

 

 

End of Executing Stage

Accepted Deliverables

Complete Project Deliverables

Project Termination Decision

Celebration

 

Initial Realization of Promised Benefits

 

ROI

Reward

End Closing

Ongoing Support

Final Transition of Project Deliverables

Contract Dossier

Capture Lessoned Learned

 

Customer Feedback

Closed Procurement

Final Project Accounting

Reassign Workers

During Leveraging

Full benefits Realized

Reuse

Auditable Result

Reapplication of Lessons

Source: Kevin Devine, Timothy J Kloppenborg,  Priscilla O’Clock., “Project Measurement and Success: A Balanced Scorecard Approach”,  Journal of Health Care Finance.  New York:Summer 2010.  Vol. 36,  Iss. 4,  p. 38-50 (13 pp.)Figure 14 – Expanded Balanced Scorecard Model for Project Management

As it is mentioned before, the expanded model shows key objectives and measures at each phase of project lifecycle and the importance of each objective and measures varies depend on the organizations and projects. Assessment can be done on project outset or alternatively at the end of each phase where an approval report is required to pass the gates and go to the next phase (please see the project lifecycle section).

Conclusions

This paper has developed a model for leading to project success by using balanced scorecard approach to monitor and control of project performance during its critical milestones on its lifecycle. Assessment of project through four perspectives of clients, internal project, time & cost, and growth & innovation in a balanced scorecard system would lead to project success ensuring that the project goals and outcomes are adjusted with organization’s strategies. However, the project success with use of the balanced scorecard system also depends on the carefully projects selection and meaningfully alignment with the organization goals and strategy at previous stages.

The balanced scorecard approach helps project managers and project teams to focus on the criteria and objectives which identified as most important to the project’s strategic success and shows the project alignment whit organizational goals. Benefits come from improvement of communication between project sponsors and project managers, focusing on client needs, and individual and organizational learning and growth.

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