PMO Metrics in a Portfolio World of Value

The second article this week from Harold Kerzner from The International Institute for Learning on the Changing Landscape for Project Management Life-Cycle Phases. In this, part two of three articles he takes a look at defining business values of projects and tackles the tricky subject of metrics – a must for anyone working as a project manager or within a PMO. If you missed the first article in the series, please read it here.

Projects can be selected as part of the portfolio based upon the type of value they are expected to deliver. The quadrants in Exhibit #1 are generic and each company can have their own categories of value based upon how they perform strategic planning.

image003

 

Exhibit #1 Portfolio Value Categories for Projects

Defining success on a project has never been an easy task. The focus has always been the triple constraint. Today we believe that there are four cornerstones for success, where success is defined in terms of value that is expected:

 

  • Internal value: These projects are designed to improve the efficiency and effectiveness of the firm. The value obtained from these projects could be lowering costs, reducing waste and shortening the time to market for new products. These projects can also be to improve the enterprise project management methodology, in which case people with process skills would be needed.
  • Financial value: Companies need cash flow to survive. These projects could be to find better ways to market and sell the firm’s products and services, in which case people with marketing and sales knowledge would be beneficial.
  • Customer-related value: The near-term value in these projects is that they improve customer relations. It is not uncommon for near-term projects to drain cash rather than generate cash. The long-term value comes from future contracts to support cash flow. Resources needed on these projects are generally people who know the customer or may have worked on projects for the customer previously.
  • Future value: These projects are designed to create future value through new products and services. In most companies, the best technically-oriented people are assigned to these projects based upon the subcategories. These projects may be heavily oriented around R&D. Typical subcategories might be radical breakthrough, next generation, addition to the family or add-ons and enhancements. Future value projects may require project managers with technical skills as well as business skills, and a good understanding of business risk management.

 

Exhibit 2 identifies the four broad categories from Exhibit 1 and the accompanying tracking metrics. There are numerous benefits and metrics that can be used for each category. Only a few appear here as examples.

 

Exhibit 2 Typical Categories of Value and Tracking Metrics

 

       Category Benefits/Value Value Tracking Metrics
Internal value
  • Adherence to constraints
  • Repetitive delivery
  • Control of scope changes
  • Control of action items
  • Reduction in waste
  • Efficiency
  • Time
  • Cost
  • Scope
  • Quality
  • Number of scope changes
  • Duration of open action items
  • Number of resources
  • Amount of waste
  • Efficiency
  • Time
  • Cost
  • Scope
  • Quality
  • Number of scope changes
  • Duration of open action items
  • Number of resources
  • Amount of waste
  • Efficiency
Financial value
  • Improvements in ROI, NPV, IRR and payback period
  • Cash flow
  • Improvements in operating margins
  • Financial metrics
  • ROI calculators
  • Operating margins
  • Financial metrics
  • ROI calculators
  • Operating margins
Future value
  • Reducing time-to-market
  • Image/reputation
  • Technical superiority
  • Creation of new technology or products
  • Time
  • Surveys on image and reputation
  • Number of new products
  • Number of patents
  • Number of retained customers
  • Number of new customers
  • Time
  • Surveys on image and reputation
  • Number of new products
  • Number of patents
  • Number of retained customers
  • Number of new customers
Customer-related value
  • Customer loyalty
  • Number of customers allowing you to use their name as a reference
  • Improvements in customer delivery
  • Customer satisfaction ratings
  • Loyalty/customer satisfaction surveys
  • Time-to-market
  • Quality
  • Loyalty/customer satisfaction surveys
  • Time-to-market
  • Quality

 

The value tracking metrics identified in Exhibit 2 are designed to track individual projects in each of the categories. These metrics are referred to as micro metrics. There are specific metrics that can be used to measure the overall effectiveness of a portfolio management PMO.

Exhibit 3 shows the metrics that can be used to measure the overall value of project management, a traditional PMO and a portfolio PMO. The metrics listed under project management and many of the metrics under the traditional PMO are considered as micro metrics focusing on tactical objectives. The metrics listed under the portfolio PMO are macro level metrics and measure the relationship between projects and strategic business objectives. Both the traditional and portfolio PMOs are generally considered as overhead and subject to possible downsizing unless the PMOs can show through metrics how the organization benefits by their existence.

 

Exhibit 3 Comparison of Project Management and PMO Metrics

Project Management(Micro Metrics) Traditional PMO(Macro Metrics) Portfolio PMO(Macro Metrics)
  • Adherence to schedule baselines
  • Adherence to cost baselines
  • Adherence to scope baselines
  • Adherence to quality requirements
  • Effective utilization of resources
  • Customer satisfaction levels
  • Project performance
  • Total number of deliverables produced
  • Growth in customer satisfaction
  • Number of projects at risk
  • Conformance to the methodology
  • Ways to reduce the number of scope changes
  • Growth in the yearly throughput of work
  • Validation of timing and funding
  • Ability to reduce project closure rates
  • Business portfolio profitability or ROI
  • Portfolio health
  • Percentage of successful portfolio projects
  • Percentage of projects that failed to deliver
  • Percentage of projects that were stopped
  • Percentage of benefits realized
  • Portfolio value achieved
  • Portfolio selection and mix of projects
  • Resource availability
  • Capacity available for the portfolio
  • Utilization of people for portfolio projects
  • Hours per portfolio project
  • Staff shortage
  • Percent with strategic alignment
  • Business performance enhancements
  • Business opportunities
  • Business outcomes
  • Portfolio budget versus actual
  • Portfolio deadline versus actual
  • ROI met and forecasted
  • Portfolio risk levels
  • Percent of projects to run the business
  • Percent of projects to grow the business
  • Percent of projects requiring innovation
  • Percent of projects that are long, medium, and short-term

 

In the next and final article Kerzner covers the new project management lifecycle – the investment lifecycle for projects. Subscribe to the blog today to receive the next article in your in-box.

[wysija_form id=”1″]

Share: Linkedin Logo Facebook Logo Twitter Logo

Comments

Leave your thoughts