Many organizations seem obsessed with gathering metrics and, for the front-line staff, these often make no sense at all. Even at the Project Manager-level, it is often difficult to appreciate why certain things have to be measured. How many times have you presented project status to your stakeholders, only to find them forensically examining one particular metric? What are these people looking for?
On this page:
- The Importance of Measurement
- Challenges and Unintended Consequences of Metrics
- Understanding What to Measure
- The Balanced Scorecard
- Internal Processes and Learning
The Importance of Measurement
Every Project Manager should appreciate the need for measurement. If a project is a change agent, then it is important to know how well (or otherwise) the existing situation is working. Then, after the project’s product, service or result is launched, we can see if the change has improved matters. There is nothing like hard data to convince cynical stakeholders that the project has indeed achieved its goals.
Challenges and Unintended Consequences of Metrics
However, measurements are tricky things to identify. When you set out to measure something, you are sending a message to your staff that this aspect of the operation is important. If you measure it, you will get more of it. The most famous example of this unintended consequence was the practice of paying the legal profession by the word – simple statements now became obfuscated with “wherefores” and “parties of the first part”. Similarly, software companies decided to measure lines of code, causing simple algorithms to become outrageously complicated just to improve the measure.
Metrics can also damage morale. Other software companies thought it would be a good idea to measure bugs. This changed the role of the computer programmer from a software designer to a bug generator. Going back to our original point, if metrics are difficult to gather – requiring extensive paperwork to record, for instance – the front-line staff are going wonder why they are wasting so much time in what appears to be a futile exercise in bureaucracy.
Understanding What to Measure
For Project Managers, understanding what the directors of the company are trying to measure helps both in terms of reporting and in explaining to the project team why particular measures are needed. If the Project Manager shows some initiative, it is likely that s/he will be introduced to the organization’s Balanced Scorecard. Here, the directors have laid down their strategic targets for the organization and a Project Manager can gain useful insights by simply understanding what the scorecard reveals.
The Balanced Scorecard
The Balanced Scorecard comprises four sets of measures and they should be studied in a specific order. The first set the Project Manager needs to visit is the “Financial” quadrant. Here are the financial targets for the organization. You will expect to see SMART (Specific, Measureable, Attainable, Realistic, Time-Bound) goals that set the overall approach the company plans to take. So look out for statements like: “Grow revenues by 20% during fiscal 2015” or “Cut operating costs by 10% by Q4, 2015”. There will always be a financial target because, unless the organization is making money, it will not be able to take any initiatives (and that means projects) to grow the company.
The second quadrant focuses on “Customers”. This will relate the financial goals to how they will affect the customer. So, if we want to grow revenue, we might decide to advertise extensively in order to win new customers. Alternatively, or complementarily, we might determine the need to generate further revenue from previous customers – have we further product or service offerings that satisfied customers will be interested in?
Internal Processes and Learning
If our focus is on cutting costs, there might be plans to increase efficiencies in order to lower our fixed and / or variable costs. The important goal in any cost-cutting initiative is to lower costs without affecting the services provided to the customers. For instance, the financial people in a supermarket chain might reduce the number of checkout staff to one, but the consequence of that decision is a massive increase in customer queuing time, leading to dissatisfaction and customers who will visit a rival outlet next week. The Balanced Scorecard seeks to ensure that something that looks good from one perspective does not damage the operation from another.
The “financial” and “customer” aspects of the Balanced Scorecard reflect what the organization wants to achieve. The remaining two sections detail what we, as an organization, need to put in place to make the strategic goals happen. The first of these is called “Internal”. For a Project Manager reviewing a Balanced Scorecard for the first time, this is not a very intuitive title. It relates to the organization’s internal processes. What systems do we need to put in place in order to achieve our customer and financial goals? For instance, by investing in automated checkout positions, we can reduce our long-term labour costs. Here metrics become very important – by how much will we reduce our labour costs and how much will the purchase and maintenance of the automated positions set us back? It is at this level that the directors need to decide on what projects to charter. As a Project Manager, you need to know how your project fits into the bigger picture and then you will be able to devise metrics that provide the ammunition the Project Sponsor needs to defend the project.
The final Balanced Scorecard section is “Learning”. Intuitively, a Project Manager will guess that this is about what knowledge, skills and abilities we will have to have in order to develop our internal processes to support our financial and customer goals. However, it also involves mining our information capital – customer databases for instance and experiences from previous projects – and maybe setting up better ways to exploit what we know already. A final part of the learning section is how the strategy is conveyed to the front-line staff. Most organizations are poor at doing this – hence this article – and initiatives need to be put in place to ensure that everyone understands what the organization is trying to achieve.
Velopi has developed two program management courses: Program Management Essentials and Program Management Professional (PgMP)® Exam Preparation. A major part of both these courses is strategy mapping which explains how to create your own Balanced Scorecard. Even if you are not currently a Program Manager, these courses will provide practicing Project Managers with vital insights into what is going on at the higher levels and will help the Project Manager to present the project’s status in a way that resonates with the Project Sponsor and other senior managers. To learn more about these courses, please contact us directly.