3124126, 740 AM Balanced Scorecard for Projects rescore ARTICLE | Portola Management March 2001 Project Management Journal ‘Stowart, Wendy E How to cite this article: Stewart, W. E. (2001). Balanced scorecard for projects. Project Management Journal, 32(1), 38-53, Reprints and Permissions & 2000 Taternational Studeat Paper Award Winner v Abstract In order to better manage the ongoing project and provide an organizationwide response to Increasing pressures for excellence in project management, a "balanced scorecard” (BSC) ‘approach can be used to perform "health checks" throughout the project life cycle. In projects, there is alvays @ scorecard. Each organization has standards of suecess. When project ‘managers look atthe four business aspects (financial, organizational, customer relationship, and training and innovation), they will begin to understand the true impact of the project's success inthe entire organization and see the dependencies to success between the project the corporate project portfolio, and the organization. Keywords: customer; business; financial; innovation Bolman and Deal, 25 quoted in Shepko and Douglas (1998), stated the following observations about al oxganizations: Organizations are complex. The largest civer of this complexity is centered around people and the abilty o understand and predict their behavior. Additionally, the interaction between ‘and among individuals complicates the relationship. 1M Organizations are surprising, Outcomes are not predictable in any organization, Decisions: ‘made today wil have an impact on tomorrow's outcomes. W Organizations are deceptive. Once a decision is made, many times the outcomes are ‘covered aver’ because the results are not as expected. This deception creates another layer of complexty Organizations are ambiguous. With all ofthe complexity, surprise, and deception, itis hard to determine what is really going on in an organization. Performance measurement holds the greatest value in addressing this situation.” ‘Bolman and Deal cite the following sources of ambiguity in organizations identified by MeCaskey (1982): 1B WWe are not sure what the problem is. We ate not sure what is really happening We ate not sure what we want [Wie do not have the resources that we need We are not sure who is suppased to do what nips ihwww.pmi.orgileaminglioraryibalances.scorecard-projecs-2008?_gl=1™12t4d6g"_ge! aw’RONMLIESNDESNIMYMTHRUFJYUIRO2IDAEWeUL.. 1/233124126, 740 AM Balanced Scorecard fr Projects or OE rescore With a proper performance measurement tool, such as the balanced scorecard (BSC), ‘organizations can clarify thelr vision through measurable goals and outcomes (Shepko & Douglas, 1998). Ths vision drives the projects that take place within the organization, aligns them to the organization's overarching business strategy, and reveals their successes, Projects can be considered “mini-organizations,” requiring the same clarfication and benchmarks ofthe parent organization. Because projects are more structured and controlled than the organization as @ whole, they have accrued a reputation of a high fallure rate in one fr all ofthe ftical success factors. In order to better manage the project and the overall heath ‘of te organization providing the services, a BSC approach can be used to perform health checks throughout the project life cycle. In a 1999 Gartner Group report, Furonger stated that ‘a scorecard should contain financial, customer, projectintemal business and grow and innovation components." In this report, the BSC approach is directed atthe organization's project portfalio, ensuring that I Projects deliver value to the business 1H Projects deliver benefits that the organization needs IH The success of the organization's projects and areas for improvement I Project ‘lessons leamedibest practices" anticipate future requirements. (sunepe aa eteah alanod Soca Rah upe—Prferanco Divs Base Benchnas owes ee tates) Figure 4. Implementing the BSC Approach forthe Project Ponfolo “The BSC approach was frst proposed by Robert S. Kaplan in 1982 and espoused in the Harvard Business Review in 1998. Many business process reengineering consultants promote this approach to addressing changes in the organizations with which they work. It is a ‘methodical approach to revealing problem areas within the business and pointing out areas for improvement. It looks at four key business aspects, 2s identiied by Kaplan in the following lis 4. The financial perspective (earnings per share, revenue growth, profit growth, etc.) 2. The customer perspective (market share, customer satisfaction, referal rate, customer retention) 43. The intemal business process perspective (cycle time, cost of services, speed of services, job safety). 4. The learning and growing perspective (effectiveness of change to technology and processes, speed and frequency of changes—adaptabiliy, employee satisfaction, wilingness to share and gain knowledge). “The goal of every organization is to do more—better, faster, and with less. In order to be able to achieve this goal, organizations need to be able to measure what hey are doing and how Well they are achieving ther goals against an inital benchmark or baseline. One of the key hntps:ihwww.pmi.orgileaminglioraryibalances. scorecard projecs-2008?_gls1™12t4d6g"_ge! aw’RONMLIESNDESNIMYMTHRUFJYUIRO2IDAEWeUL.. 2/23,3124126, 740 AM Balanced Scorecard fr Projects eB OTTER Be THAT Te ATES, ONCE MOTE Have BoaT DUTT Use BS THe BoC rescore ‘a mailer of continuous evaluation against this benchmark and targeted plans to improve performance ‘The scorecard must be built on four pillars: communication, compliance, continuous Improvement, and cooperation that fites throughout the organization—trom the CEO to the ‘mail clerk, from those wn have been in the organization since it was formed to the newest recruit. These pillars must pervade the objectives (see Figure 1). Objectives {Al projects are built around standard business objectives for success: achieving high productivity, improving quality, dalivering at the appropriate time, decreasing cycle time (start to fnish of a process), growth of market share, utlizing resources effectvely and efficiently, and managing cosis, ‘The BSC measurements are chosen by the organization that is instituting them. Ituses the ‘measurements the organization establishes to support (see Figure 1) compliance to the ‘objectives, to reinforce communication of those objectives, to provide continuous improvernent toward the objectives through personal goals ofall staff, and to obtain the cooperation ofthe ‘community “There is no “out-of-the-box” solution possible at this time for managing projects withthe BSC. ‘Some examples, which have been put into place to give a general understanding ofthe ‘methods used, are provided in Appendix C. In the tial of the BSC approach to projects within & {government organization that is provided in Appendix C, the initiation phase ofthe project had strict benchmarks as to what was an acceptable submission in order to receive approval to proceed and for funding. The client was presented with a chart showing the deliverables as ‘either acceptable (green), neading slight improvement or warning of potential future problems (yellow), and omissions/major rework required (red). The visual review of the intiaton phase allowed stakeholders to concentrate their attention on areas for improvement in timely and Each BSC must be customized to fi the organization in which its used. By employing "best practices" within the projectintemal business industry, key success factors of project phases, land knowledge and process areas found in A Guide tothe Project Management Body of Knowledge (PMBOK® Guide), a starting point to the BSC for projects can be bul BSC models use the “stoplight color scheme of W Green (project performance agrees with project plans and stakeholder expectations) Yellow (deficiencies in project performance have been noted, are being monitored, and corrective action willbe implemented in the near future) Red (serious deficiencies have been noted: project isin jeopardy/ersis) ‘The “stoplight” approach is readily understood and visually draws the attention to the most needed areas for improvement. Yollow and red scorings are substantiated wih further dotal in ‘order to provide areas for improvement. “The information that is highlighted through the red, yellow, and green scoring is also ‘numerically transferred to the project graphical (statistical) summary report, showing & percentage of compliance/health ofthe project for executive reviews (see Appendix C) “The level of detail thatthe scorecard can measure can be as dolalled or high level as an organization needs or requires of is project teams. In government projects, for example, the project charter and business plan to be submitted for approval and funding could be benchmarked by the standards that the approving organization has put into place. The department submiting such & charter and business plan would match the established hnps:hwww.pmi.orgileaminglioraryibalances.scorecard-projecs-2008?_gl=1"12t4d69"_ge! aw’RONMLIESNDESNIMYMTHRUFJYUIRO2IDAEWeUL.. 3233124126, 740 AM Balanced Scorecard fr Projects rescore Critical Success Factors In baseball, the game scorecard is blacked into rine innings, each with @ top and bottom. The ‘objective of the game is to wir—with the best team taking the pennant. Team members are ‘observed for “errors,” which are marked forthe coach to work on with the player. A player that doesn't improve his batting average, abilty o get on base and to home plate, and ability to catch the ball and get a player “out from a wellthrown ball doesn't stay with the team very long. His “score” is tao low to cary the team ino the playoffs and to ultimate success. The players’ (project) successes and failures have a direct correlation to the team {organizalioniproject office) ‘On a baseball team, the player understands what denotes an error and what will gain positive recognition by the coaches and manager. Similarly, in a project, there is always a scorecard— whether or not openly acknowledged, Each organization has standards of success, ‘Sometimes, these standards are hidden from the project manager and reflect “dark-sige ‘management. In sitions like this, it may be the responsibly ofthe project manager to ‘bain the ctical success factors that mark the nonverbal corporate culture When project managers look atthe four business aspects—financial, organizational {ptojectinternal business phases and nine key knowledge areas) customer relationship, and training and innovation—they will begin to understand the tue impact ofthe project's success to their project and the entire organization. They will understand the correct focus ofthe project and spend appropriate time on issues that directly impact success. This wil also assist the project manager in successfully communicating the corporate and project-aigned vision to the project team. “The project manager establisnes representative benchmarks forthe ind vidual project reflecting te organiza-tionwide benchmarks in order to achieve recognition and success. ‘Once madels have been built as the benchmark, itis a matter of continuous evaluation against this benchmark to mark progress and pass project gate control points. ‘The objectives of the BSC are to: Ensure that measures support core values and practices of the organization Establish meaningful performance measures (benchmarks) to assess project health throughout the project life eycle Align the measures against the project's charter (terms of reference) Establish measures that are efficient as well as effective, consisting ofthe standard three types of measures: outcome, action (performance drivers), and diagnostic (why an outcome or action measure is at its current level) Approach In order to track a project rom start to finish, each project requires inputs and outputs to the phase. The phase outputs become the inputs of the folowing phase. The score may be taken when a milestone is met, a key deliverable is completed, or by a phased approach. Some of the processes, tools, and techniques remain the same throughout the project—only their inputs and outputs change, Phase 1: Initiation. Projects are usually a result ofa problem being identified within an ‘organization, This problem could be due to technological requirement, @ business reengineering need, an environmental issue, a financial woe, or any other host of issues that Impact a company. One or more of the BSC perspectives can be the focal point for the project's existence, but should not take precedence over the remaining three perspectives. hntps:ihwww.pmi.orgileaminglioraryibalances.scorecard-projecs-2008?_gl=1™12téd69"_ge! aw’RONMLIESNDESNMYMTIRUFJYUIRO2IDAEWeUL.. 4/233124126, 740 AM Balanced Scorecard fr Projects rescore Figure 2, Vision Drives the Project Normally, the project is generated in order to keep the organization economically alive, socially Involved, technologically in step with evolution, culturally attuned to its environment, or politically correct, or in order to grow the organization by expanding its market share. “The lnk between the organization's vision and the project's expected outcome(s) is ‘established during the initiation phase. The chief desire ofthe inition phase isto take the desired outcome (target) and plan the outputs (path). In order to achieve the desired outputs, the project sponsoriteam defines the "what," how," "who," ‘when," and “where.” The “why” should align with the corporate vision and with objectives that drive the project (see Figure 2). When assessing whether or not the initiation phase is “healthy” at the project approval gate, the project manager and executives must evaluate whether the outputs link tothe outcome, which in tum links tothe organization's vision. Many plans forget the projects desired outcome when immersed inthe daily routine of managing the project. This omission can resuitin short- term benefits being met, but long-term organizational goals being missed ‘One way to ensure thatthe vision driving the project is communicated throughout the project process phases is to clearly identify the assumptions on which the project is built by developing a comprehensive project charter. Within the charter, te folowing should be documented 1H Goal (Why—Outcome required that will resolve the problem) Critical success factors (What—Input) 'W Assumptions and constraints (Why—Limitations on inputs) Objectives (What outputs are required) Individuals and groups involved including contract details) (Who—Input) Who is responsibie (Who—Input) Actions by whom (How-—Process) IERisks (What Input) Resources (changes to current sittin) (What—Input) Dependencies (What—Input) Costs (What—Input) Start ime (When—input) Complete by time (When—Input) Depending on the organization, the gate (end of phase milestone) may be passed through & ‘successful business case andior a contractual agreement reached in addition to the project charter. The BSC example for the ination phase for the organization's project portfolio is, presented in Appendix C. ‘Table 81 in Appencix B identifies aroas that are normally addressed during the ination phase ‘of the project. In order for the project to be considered healthy, the input and output of the hnps:ihwww.pmi.orgileaminglioraryibalances.scorecard-projecs-2008?_gl=1"12t4d6g"_ge! aw’RONMLIESNDESNMYMTHRUFJYUIRD2IDAEWeUL., 5/233124126, 740 AM Balanced Scorecard fr Projects eB TRI oT phase aTows Tre project o be covststemy an Rrowedgeably Nancled fom Me vey rescore beginning and throughout al the project phases. [At this phase of the project, the inital BSC measurement is taken in order to establish a baseline forthe strategic plan. The intiation/conceptualzation phase of every project defines here you want to be when the project's completed. It also begins to outline the gap between Where you are today and where you want to be. This information is used in the project "health report’ that may be found in Appendix C. Phase 2: Planning, The project planning phase is considered by mast project organizations to be critical to the success ofthe project: “falling to plan is planning to fal" (PMBOK® Guide). ‘This phase develops the solution tothe problem identified during the initiation phase and ‘expands on the iil scope and specications outlined in the charter. A complete plan clearly slates what is to be done, why itis being done, who will doit, when it wil be done, what resources are needed, and what citeria must be met in order forthe project to be a success and completed. This information is used to extend the initial BSC benchmarks that were established during the initiation phase. In today's project environment, a static approach to planning does not normally work. With technological advancements, cultural upheavals, monetary fluctuations, and environmental Influences, the projact plan must be reeval-uated at each phase in order to adjust to changes that occurred during the previous phase, Fine-tuning of the BSC measurement criteria should bbe done at each phase start ‘The nine knowledge areas, as defined by the PMBOK® Guide, cover the key areas that require planning to improve overall success and ongoing project health. The planning phase ‘establishes a better understanding of project objectives forthe organization, team members, and stakeholders. It provides the basis for measuring the planned work against the work performed, For this reason, this phase is tantamount for developing, communicating, and aligning the project team with the framework ofthe BSC, (One ofthe hardest areas to grasp is customer's expectations. These expectations predetermine the outcome (not the output) ofthe projects. Clarification ofthe ctical success factors thatthe customer holds to be true improves project success. Established boundaries for the customer's expected project outcomes need to be set in order to control and manage the project as it moves into the execution phase. “There are inconsistencies in the various stakeholders’ expectations, depending on the level of Influence within the environment, The executives, sponsors, team members, and end users ll view the project citferenly. During the planning phase, strong risk, change, and ‘communication management plans can assist bath the organization delivering the project and those receiving the deliverables in managing the change— for all projects bring change to the project-influenced community (stakeholders), Iti important to idently areas that may be problematic in order to bulld contingencies into the project and measure the organization's billy to manage risk, “The successful signof of key deliverables should be part of the BSC measurements. Table B2 In Appendix B identfies the nine knowledge areas and the project inputs and outputs that may ‘occur during the planning phase, Not all the tools and techniques are used in every project everytime, but the use of the more commen tools and techniques assists project managers in better definition ofthe project's requirements, time frame, budget, communications, etc. to improve knowledge and management ofthe project. Phase 3: Execution. During the execution phase ofthe project, the planning phase output is implemented, Table 83 in Appencix B covers some ofthe key activities that occur during the ‘execution phase, Monitoring and control activities are more apparent during this phase (also ‘soe Table B4, Appendix B). During this phase, progress and improvements agains th inital benchmarks and cycle times {are used to compare and improve the BSC outcomes. Problems with financial, customer, hntps:ihwww.pmi.orgileaminglioraryibalances-scorecard-projecs-2008?_gl=1"12t4d6g"_ge! aw’RONMLIESNDESNIMYMTHRUFJYUIRO2IDAEWeUL.. 6/23.3124126, 740 AM Balanced Scorecard for Projects rescore “The quality-assurance/qualiy-control planning that was put into place during the planning phase is exerc'sad, and may necessitate a BSC measurement change at a lower level in order to identify areas of weakness within the planned activites and thelr outputs. ‘Sometimes the vision ofthe customer is short-lived, due to management changes. Executives read the newest management fad, institute a major reorganization around this fad, an then realize, upon further investigation, that it can never succeed in the organization. The project that was started is changed or eliminated mid-stide, “The project is impacted by changes the client makes to the scope, time, budget, andor quality ‘of te productservice, These changes could identify probleme with the inal scoping out of the product/service or an organizational change in key business needs. One of the areas that should be reflected in the BSC is the number and size of changes requested —with a root- cause analysis of why the change is requested. This provides management witn tne key to whether the project definition is at full, the productiservice contracted for, or the customer not Clearly identifying its strategic needs to the project team. ‘Ongoing During Execution: Monitor and Control. Quality and change management must permeate the entire project. Where these management areas are lacking, the ‘organization/project team is usually managing “by cisis'—in a reactive mode rather than a proactive approach. Managing software projects that have multiple developers working on the same cod at the ‘same time, targeting muttiple platforms, supporting multiple versions, and releasing various statuses of code can be challenging, but can be managed through “configuration ‘management. Traditional configuration management has the development shop performing compilations of the software with strict version controls. Source code is “checked in/checked ‘out in order to manage access to the code being generated. ‘Another approach is through process management, which controls the actual software development activites. Change requests are prepared and approved pror to any software being designed, fixed, or enhanced. The change request also identifies all the required ssupport’—training, documentation, testing, etc —for the “change prior to the software being released into @ production environment. A combination of bath traditional con‘iguration ‘management ang process management lends itself to a healthy project. Issue (problem) management algo assists in the monitor and control processes that drive successful projects. Most design teams ignore quality assurance requirements— usually attributing this avoidance to “lack of te." This results in poor quality and no continuous improvement ofthe produced products. When it results in a dissatisfied customer, the healt ofthe project is in jeopardy — ‘and potentially the remaining three areas of the BSC also are in jeopardy. Effective communications is also a requirement for quality to be attained, Because quality is a cooperative effort, everyone on the team must be aware of problems and needs, and support the solution, Decision-making should be pushed to the lowest level possible. This allows for project leaders to make timely and accurate decisions, When team members set their own personal objectives (Qo match the project and organizational BSC), decisions align to the organization's vision (see Figure 2). Table B4 in Appendix B provides a listing ofthe inputs, processes, and outputs of the knowledge areas generally used during the monitoring and controling activities of projects, Phase 4: Closing. During the final project phase (see Table BS, Appendix B), all the previous BSC measurements are reviewed and documented in the project closeout repor for “best practices,” “lessons leamed," and project outcomes. This information is also published to the ‘organization's knowledge base in order to communicate itt other project managers as part of ntps:hwww.pmi.orgileaminglioraryibalances.scorecard-projecs-2008?_gl=1™12t4d6g"_ge! aw’RONMLIESNDESNMYMTHRUFJYUIRO2IDAEWeUL.. 7/233124126, 740 AM Balanced Scorecard for Projects rescore Establishing the Balanced Scorecard ‘Some organizations are using the nine processes, as defined by the PMBOK® Guide, to ‘establish and perform scoring on projects. This is a different approach, based on the needs of ‘each phase. The processes continue throughout the project ife cycle, but each phase has its ‘own specific requirements forthe projects health. n either case, the same end product is produced—a scorecard for project heath, This overall score-card provides for strategic planning for future projectinternal business improvements Projectfintemal business is bull upon gosl setting—for cost, schedule, performance, and ‘scope. These goals can be measured (if appropriately stated), targe accurate measurement systems created. The measurements provide a baseline from which decision-making in ertical performance areas can be supported as chosen by the organization, the project sponsor, the project manager, and the project team, established, and When marking the scorecard, data must be collected consistently an atthe appropriate times in order to have accurate scores. Documenting these scores should also be done in such @ \way as to be easily understood and able to be interpreted correctly and appropriately. The ‘scores should assist the project manager and project office to: [Monitor critical tasks and capabilities that are required to complete the project successfully Assist in tracking factors that are ciitical to customer satisfaction (not necessarily related to product or services— more with relationship building) Observe trends across and within projects Sot tolerance levels 1 Provide boundaries within which projects may work 1H Roveal variances from these established controls 1 Provide measurements for analysis Provide early warning signals Assist in planing for continuous improvement in all BSC perspectives. “The orgarizationiproject office establishes the measurements that will be targeted for each project and the project portfolio together based on the four perspectives of customers, projectintemal business, finance, training, and innovation, Each perspective provides an interpretation ofthe overall corporate vision so thatthe perspectives are interrelated approaches to the organization's agenda and culture. The aim of the BSC is not to control projects, but to communicate and align the organization, its projects, and its people with its strategy and vision, ‘As the BSC is used and measures evaluated, solutions are applied tothe areas where crical ‘measurements are out of alignment withthe established goals. There Is continued refinement ‘of the measurements, as it takes tme to capture relevant and useful data that can be used to ‘measure success. This continuous improvement process is shown in Figure 3 ‘The Customer Perspective. The customer perspective of the BSC approach, as it relates to projects, looks atthe market value ofthe project deliverable as well as stakeholder satisfaction inthe project outcome (not output), The purpose ofthe project is nat to serve the project team ‘or sponsor, butts the organization's success ints international environment. The customer view reflects the responsiveness, timeliness, product service, qual, and cost. The question to ‘ask: "Are the organization and project effectwely and successfully providing value?” ‘The customer values the way she is treated as much as the product and services that the vendor provides. While time to market or lead-time, quality, performance, and cost are hntps:ihwww.pmi.orgileaminglioraryibalances-scorecard-projecs-2008?_gl=1™12t4d6g"_ge! aw’RONMLIESNDESNMYMTHRUFJYUIRO2IDAEWeUL.. 8/233124126, 740 AM Balanced Scorecard for Projects eB HTT SAT SERIES BT TETVOTEATS BE POEM, OF SOMETIMES NOPE MBER TaN WR What, when, where, and why they are delivered. According to a customer satisfaction survey by The Marketing Science Institute of Cambridge, Massachusetts (Smart Workplace Practices, 1998), customers want their products and services delivered withthe following four characteristics: Reabilty—Customers want dependable, accurate, and consistent project deliverables and milestones met, They want promises that are made to them to be kept BW Responsiveness—Prompt delivery and continuous communication are keys to cooperative projectinternal business. Assurance—The confidence level ofthe project team to deliver its project on time, with ualty, and within scope comes from concise knowledge and skil to meet the challenges of the product or services offered tothe customer. I Empathy—Project team members need to listen and understand the customer. Ths implies understanding beyone the contractual arrangements. When the project treats the customer as ‘a partner or team member, increased individual attention is given to those that will be receiving the project output \When customers are treated with indifference, 68% (Rockefeller Foundation, as quoted by ‘Smart Workplace Practices, 1996) find another vendor instead of continuing to purchase from that provider that hasn't taken care of them the way they expected. People who are unhappy withthe products or services tell an average of 12 people (Bizmonthy, 1997) why they stopped ‘buying from that particular vendor. Customers are an integral pat of project management and so have tobe focused on through the BSC. Alist of possible customer perspective ‘measurements are identified in Figure 4. Figure 3, BSC Continuous Improvement Process ‘The Project (Internal Business) Perspective. Anything that influences products and services offered by the organization needs to be examined and mapped to a continuous improvement process. These are the core competencies of the organization—what it's built upon. Employee skills, productivity factors affecting cycle time, and quality all impact the customer's expectations. rescore “The organization needs to ack itself, “At what do we need to excel?’ in order to target the areas that are to be included in the BSC for the projectinternal business perspective. Ifthe nips ihwww.pmi.orgileaminglioraryibalances.scorecard-projecs-2008?_gl=1"12téd69"_ge! aw’RONMLIESNDESNIMYMTIRUFJYUIRO2IDAEWeUL., 9233124126, 740 AM Balanced Scorecard for Projects rescore “The projectinternal business perspective incorporates the quality management plan that's developed during the planning phase of the project. It utlizes all the processes that take place within the project ite cycle in delivering the projec’s end product. It evaluates the scope, timeliness, performance, and cost from the level of excellence set to be measured against, and the outcomes. ‘The Financial Perspective. Financial perspectives examine how the organization looks to shareholdersikey stakeholders, Does the project outcome generate the expected revenue? Did it cost what was budgeted? Ave the maintenance costs what was expected? Past projects can establish the measurement adjectives forthe current project. “The project must bring value tothe organization in order to be rated as successful. The financial perspective of the BSC examines whether or nat the project is contributing to the ‘organization's bottom line. It should reflect profitably, growth, and value based on actual cash flow, and not activities and processes, ‘When the other three perspectives are successful, the nancial perspective is influenced positively. Two key financial benchmarks are payback period and return on investment. How Jong does it take to break even on the investment made by the project? How long before the ‘market share is increased because of the investment in the project? Did the organization gain repeat business? Do the shareholders value the investment as complementary to the organization? Figure 4, Examples of Tools for BSC Measurements ‘The Innovative and Learning Culture Perspective. The organization must continually evolve In the products and services it offers if itis to keep pace withthe evolutionary business environment. Ithas to be able to rapidly and reliably introduce new products at the right price, the right place, and the right time to improve penetration into new markets, ‘Sometimes this approach does not recive the level of influence en an organization that it should, because the organization has been success‘ul in ts current products and services, Just look athe car industry to see what innovation and learning can achieve as they keep pace with ever-changing customer expectations. Beauty and speed are replaced with ‘economy and safety as baby boomers become parents, Successful organizations track the customer culture and match the cultural evolution to its products, ‘The abilly ofthe organizationiproject to be innovative and continue to learn throughout the life cycle ofthe project reflects the organization's abilly to keep its vision as the focus. Were team ‘members provided the training they needed to perform their assigned tasks, develop their skill, use the technology required? Did they try new ways, which haven't been used before, of ‘approaching their tasks—developing "best practices”? Is the teamvproject success Continuously improving to match the changes demanded by the products and services offered hntps:ihwww.pmi.orgileaminglioraryibalances.scorecard-projecs-2008?_gl=1"12t4d6g"_ge! aw’RONMLIESNDESNIMYMTHRUFJYUIRD2IDAEWeU... 10/23,3124126, 740 AM Balanced Scorecard for Projects rescore Designing the Balanced Scorecard In the PMI® methodology, the inputs and outputs, as are the outcomes, are clearly defined This is @ requirement of BSC and any performance measurement system. What is not clearly fined cannot be measured. The organization also needs to know what it intends to improve within the projectinteral business system—to set goals for performance improvements. Once these goals have been set, the organization can then evaluate its postion today in relation to future goals. Measurements that are taken in any project-based organization should direct the executives, project managers, and team members to progress and improve. The statistics, when properly apolied, should show both strengths and weaknesses of the organization, and invoke strategic and tactical planning to encourage excellence. When measurements and diagnoses are correcly applied, eam members understand how they fitinto the overall corporate strategy. giving each person a sense of importance in the improvement process, whether atthe executive, management, or eam member level “The organization also needs to determine what kind of incentives will be provided for improvement and when these incentives will be awarded. The method of data collection should be simple enough to use, yet provide a level of detail and accuracy in order to be valid and Useful. Wherever possible, the project management tools currently in use should be used to provide some measurements without instituting new measurements. (Project schedule, budget, and rework are all measurement tools thal are normally used for projects today.) “The measurement process should belong to those people doing the work—the project team ‘members. The information should be useful, fsly, to the project team in order to know the health of the project and be able to correct any slippage early in the circumstance and, ‘secondly, to the organization's management team in order to evaluate/provide support where and when required When establishing project-specific BSCs, the following suggestions are usefUl Limit measurements to 20 or less. If more than 20 measurements are used, the data will be less usable, the effort involved to manage the measurements becomes too greal, and the team wil not believe that it is positively influencing its project outcomes, Base measurements on reviews of projects and the organization, not on arbitrary numbers. [Link organization's vision, mission, and goals, and adjust to changes within these high-level strategies, Look atthe past, present, and future tactical and strategic objectives and measurements. Baseline measurements in order to track improvements. As in any project scheduling ‘exercise, baseline when the previous baseline is no longer vald, due to scope changes, and reset targets, [Be consistent throughout the organization (top down) to all levels—incividuals within the team should have their own BSC and improvement as well @s each projec, the corporate project portfolio, and the organization | Roll up all the measurements taken within the BSC to a single measurement to indicate overall project, portfolio, and organization performance, Figure 4 provides a listing of measurements that may be chosen by the organization In its effort to create a BSC approach to projects. The choices that are made should be: clearly understood by all levels of the organization in order to be meaningful; ‘owned’ by al; and ‘encourage improvement, The representation ofthe project health status should also be easy to read and interpret so that everyone who reviews the BSC results reaches the same tps ihwww.pmi.orgileaminglioraryibalances.scorecard-projecs-2008?_gl=1™12téd6g"_ge! aw’RONMLIESNDESNMYMTHRUFJYUIRO2IDAEWeUL.. 11/233124126, 740 AM Balanced Scorecard for Projects Projects in most organizations are measured against the “on-time, on-budget” objectives. This, sa quantlative, not qualitative, measurement and doesn't really convey how well he projects are being managed. The BSC approach can improve: overall understanding of projects to reflect how valuable they are to the organization: the level of beneft provided by the project to meet business needs; how well the project is being managed: and how the management could ‘be improved upon, as well as how strategic the project isto the organization. ist visionary? “The BSC should be used fo measure an organization's project portfolio rather than an Individual project Aptojets minimum measurements should include: Fisantal on time (considering that "time is money") within budget [Variance from orginal baselined budget and final budget Project costs as compares to industry standards and organizational standards for similar, projects Eames value Customer [Project meeting intended objectives 1H Customer satisfaction (including account payment history) Economic value added (strategic benefits rather than financial benefits achieved— referencibilly, increased venture capital support, etc.) Prostata business Project resource requirements management Average management time of project manager related to otal effort 1 Project portato comparatives 1 Project cancelation rate 1 Project backlog—awaitng startup Risk management statistics, 1 Contingency time alittes and used Change management statistics (number of change records per designated period of time ‘can show whether proper project scope has been set, percent change to customerivendor environment impact to scope) 1H Quality management statistics (rework, Issues, mil ate, etc:) rescore 1H Project team member satisfaction Growth and innovation Average capabilites per team member and improvement over course of project Development or ongoing improvement of templates, procedures, tools, etc. [The rate that innovative ideas are developed (new ways of doing things) ps ihwww.pmi.orgileaminglioraryibalances.scorecard-projecs-2008?_gl=1™12t4d6g"_ge! aw’RONMLIESNDESNMYMTHRUFJYUIRO2IDAEWeU... 12/23,3124126, 740 AM Balanced Scorecard for Projects 1 Positive actievementsfimpacts to the organization (One ofthe axioms of the BSC is the need to ensure greater balance of cause-and-effect ‘lationship betwoen indicators. How the statistics aro used to improve the avorall projectlintemal business ar listed below: Evaluate quantitative statistics Examine true costs of operation, evaluating impact of project slippage and inadequate ‘support and nonsupport infrastructure costs cic pi hm Sma 2 ecient So ' Ssaimei cian a { coer ‘eesti =e reetranamte Figure 5. Project Stops Using BSC 1 Evaluate organizational change 1 Evaluate how the change has impacted organization's business 1H Rocce to lowest common denominator 1 Review support costs vs. costs of delay per person 1H Review actual project costs vs. plans (net present value) Roviow strategic objoctves achieved Review qualitative statistics 1 Identity unanticipated benefits accrued 1H Review attainment or contibution to organizational objectives vs. time convmitment 1 Review overall business value improvement Revenue ineweaseldecrease [Team retention and promotion Increased market share, roforonces Summary ‘The BSC approach to projects allows "decision-making that is faciitated through unification of, disparate information into a single management report’ and helps managers “to look beyond their internal departmental agendas and make decisions forthe good of the enterprise” (Shepko & Douglas, 1998). It establishes an objective framework for the continuous assessment of project effectiveness using real data rescore ‘Organizations that have incorporated a BSC approach to business have found that they have hhad to refocus the way that they do business. The author believes that a BSC approach will also refocus the way that projects are managed, fine-tuning an organization's projects ana hntps:ihwww.pmi.orgileaminglioraryibalances.scorecard-projecs-2008?_gl=1"12t4d6g"_ge! aw’RONMLIESNDESNIMYMTHRUFJYUIRO2IDAEWeU... 13/23.3124126, 740 AM Balanced Scorecard for Projects rescore References Barrett, Paul T. (1997, Apri). The high cost of losing customers. Bizmonthly. Available htto:iwww.biemonthly.cominews1997/aprilbarrett shtml @ Furlonger, J. (1999, Feb. 24) Using the Balanced Scorecard to Measure Project Success. Document #0F-07-1443. GarinerGroup Gartner Interactive Research Note, Decision Framework. Available: htp:i/gartner4.gartnerweb.com ‘Shepko, Robert, & Douglas, Brian, (1998, December). Retraming for ersis (Online). Available: \wuwnacubo.orgiwebsiteimembers/bomag/98 12/benchmarking, hm! & [Paragraph header: "Why Use a Model? ‘Smart Workplace Practices. (1998). 4 "must-have" elements of good service. Smart Workplace Practices (newsletter), Available: hitp:liwww.smartbiz,com/sbslarsiswp41 htm Additional References Belford, Charles. (1998, February). Overcoming the oversight challenge: The buck stops here. Executive Brief, Government Computer, Bensaou, M., & Earl, Michael, (1998, October). The right mindset for managing information technology. Harvard Business Review. Brown, Mark Graham. (1998). Keeping score: Using the right metrics to drve world-class performance. New York: Quality Resources. ‘Cooper, Kenneth G, (1994, March). The $2,000 hour: How managers influence project performance through the rework cycle. Project Management Journal, XXV (*). Dresner, H. (1997, March 28). Bl user methodology—Putting the pieces together. GarinerGroup Gartner Interactive Research Note, Strategic Planning, Available: hitpigarinerd.gartnerweb.com Drosner,H., & Kleinberg, K. (1998, Sept. 14). Balanced score card—A new BI buzzword. Commentary, GartnerGroup, Frick, V. (1998, Sept. 18). Measuring TCO and benefits during IT decision-making. Inside Gartner Group. GartnerGroup. Harbour, Jeny L. (1997). The basics of performance measurement. New York: Quality Resources (Kraus Organization Lt) Harrington, H. James, Esseling, ri K.C., & van Nimwegen, Harm. (1997). Business process improvement workbook: Documentation, analysis, design, and management of business process improvement. New York: McGraw-Hill Ibis, C. Willa, & Kwak, Young-Hoon. (1997). The Benelits of Project Management: Financial and Organizational Rewards to Corporations. Newtown Square, PA: Project Management Institute Inglis, Norm. (1988). Managing IT projects for success. Canadian Government Executive, 4 m. Kaplan, Robert S,, & Norton, David P, (1993, September-October), Putting the balanced ‘scorecard to work. Harvard Business Review on Measuring Corporate Performance. Boston Harvard Press. Kaplan, Robert S., & Norton, David P. (1992, January-February). The balanced scorecaré— Measures that drive performance. Harvard Business Review on Measuring Corporate Performance. Boston: Harvard Press, hntps:ihwww.pmi.orgileaminglioraryibalances-scorecard-projecs-2008?_gl=1"12t4d69"_ge! aw’RONMLIESNDESNIMYMTHRUFJYUIRO2IDAEWeU.. 14/23.3124126, 740 AM Balanced Scorecard fr Projects eB TES PORTS PRO TENE. BOR rescore Kerzner, Harold. (1998). In search of excellence in project management: Successful practices In high performance organizations. New York: John Wiley & Sons, Ine. Pendlebury, John, Grouard, Benoit, & Meston, Francis. (1998). The ten keys to successful ‘change management. New York: John Wiley & Sons, Inc. ‘Sparius, Ad, (1994, March). You can't manage what you don't understand, Project Management Journal, XXV (1). ‘Spendolin, Michael J. (1992). The benchmarking book. Now York: AMA. Spitzer, Quinn, & Evans, Ron. (1997). Heads you win: How the best companies think, New York: Simon & Schuster. ‘Tregoe, Benjamin B., & Zimmerman, John W. (1980). Top management strategy: What itis ‘and how to make it work. New York: Kepner-Tregoe. “Truax, Jean, (1997). Investing with benefits in mind: Curing investment myopia (White Paper) Montreal: OMR Montreal Websites Best Practices in Project Management at hitp:iwwau-4pm.com (2 Performance Improvement and Balanced Scorecard at hitp:Iwww.bma.com.au Performance Measurement in the Public Sector at hitoxiwww governor state utusiplanningiperform.htm “The Accountability Scorecard at hitp:/nome.atl.net™~nickols/scorecrd.him Balancing the Scorecard: Beyond the Bottom Line at hitp:Iwaw.cpaonline.com au From Gutter Balls to Strikes: UCSD’s Balanced Scorecard Program, and Reframing fr Crisis, at tipiliwww:nacubo.orgiwebsiteimembers/bomagiO0/t1 “The Making of a Marriage: The Balanced Scorecard at htp:www.outsourcing-journal.com Balanced Scorecard at http:diwwu.gentia.com & Developing the Now IT Scorecard at htto:llwwn.esi.es/Publications/Articles/At/O6AAAO1 Nil & Measuring and Improving Corporate Information Technology Through the Balanced Scorecard at https twitudelt.nl ‘Serving the American Publi: Best Practices in Performance Management at hitouiwww.nprgov Wendy E. Stewart, PMP, works inthe public and for-profit and not-for-profit private sectors in goneral management and project management, with a concentration in software development, hnps:hwww.pmi.orgileaminglioraryibalances-scorecard-projecs-2008?_gl=1™12t4d6g"_ge! aw’RONMLIESNDESNIMYMTHRUFJYUIRO2IDAEWeU... 15/23.3124126, 740 AM Balanced Scorecard fr Projects eB i (OSS Solutions, Inc. designing processes and implementing templates, reports, and tools to support the project managers and senior executives. She trains the organization's project ‘managers on MS Project 2000 and provides project auclts on customer projects for continuous improvement, She is a member of the PMI Ottawa Valley Outaouais Chapter ‘Appendix A Examples of Measurement Criteria Appendix B. Project Phase Tables (Selected Knowledge Areas) ‘The following tables idently possible measurements that may be established fr project benchmarks, based on the nine knowledge areas ofthe PMBOK® Gai, na phased approach, Each chosen output should be represented inthe BSC measurements to ensure that gating requements for phase completions ate met. es an ca ‘Table B1. Iniation Phase rescore hntps:hwww.pmi.orgileaminglioraryibalances.scorecard-projecs-2008?_gl=1™12t4d6g"_ge! aw’RONMLIESNDESNIMYMTHRUFJYUIRO2IDAEWeU... 16/23.3124/25, 740 AM Balanced Scorecard fr Projects == _——— ‘Table 82. Planning Phase Table B3. Execution Phase rosorey hnps:ihwww.pmi.orgileaminglioraryibalances-scorecard-projecs-2008?_gl=1™12t4d6g"_ge! aw’RONMLIESNDESNMYMTHRUFJYUIRO2IDAEWeU.. 17/23.13124125, 740 AM Balanced Scorecard fr Projects eB sa ee ‘Table B4, Ongoing Monitoring and Project Control Table BS, Project Close Appendix C. BSC Examples Project Gate requirements were above 80% compliance to standards for Business Case and Charter. Examples are taken from a government department’ IT project portfolio during the Initiation phase of the project. (Editor’s note: Red, Green, and Yellow are shown as Black, Gray, and White, respectively.) =: eg) ssieme Figure C1. Project Charter Standard rosorey hnps:hwww.pmi.orgileaminglioraryibalances.scorecard-projecs-2008?_gl=1"12t4d69"_ge! aw’RONMLIESNDESNMYMTHRUFJYUIRO2IDAEWeU... 18/233124/26, 740 AM Balanced Scorecard for Projects eB SE Ps a Figure 62. Project Business Case Project C Project parae Project A Compliance Project Name Figure C3. Project Business Case Compliance Become a member of the Project Management Journal's Editorial Review Board and help us Publish the highest-quality papers for the project management profession “The Project Managerent Joumal is socking volunteer reviewers to serve the profession by reviewing new literature in project management and providing their expert opinions. The Review Board will consist of volunteers from PM's membership and from the project ‘management community who wish to review papers anc provide evaluations for the' fellow academics, roseorey We are particularly Interested in those whe have expertise In the following areas: Communications Management Earned Value Project Life Cycle Construction Education & Training Quality Management hntps:ihwww.pmi.orgileaminglioraryibalances.scorecard-projecs-2008?_gl=1™12t4d69"_ge! aw’RONMLIESNDESNMYMTHRUFJYUIRO2IDAEWeU.. 19/233124126, 740 AM Balanced Scorecard for Projects eB Control Systems. 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For permission to reproduce this mater, please contact PML (©2001 by the Project Management institute 2001, Vol 82, No. 1, 38-53 {8756-8728/01/S5.00 per article + $0.50 per page ADVERTISEMENT PMiraining PMP*EXAM PREP Sry Semen) roseorey ADVERTISEMENT hntps:ihwww.pmi.orgileaminlioraryibalances.scorecard-projecs-2008?_gl=1™12t4d69"_ge! aw’RONMLIESNDESNIMYMTARUFJYUIRD2IDAEWeU... 20/23.3124126, 740 AM Balanced Scorecard fr Projects Related Content ARTICLE | Portfolio Managemen, PM In Ae Project Management Journal Seven Decades of Project Portfolio Management Research (1950-2019) and Perspectives for the Future % By Hansen, Lars Kristian | Svejvig, Per| We evaluate what has already happened in the field of project portfolio management (PPM) and what will most kely shape the future. PM Network China's Net Gain % ‘The 5G revolution has come to China, where the government views the technology as an essential way to boost its economy. 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