Implementing and Measuring Project Management Practices; a High Level Overview

Implementing and Measuring Project Management Practices; A High Level Overview

By Charles Ludwig

Abstract

As technology advances and the business climate becomes more competitive, standard processes must be implemented to manage projects successfully. This article provides a high level overview of how to obtain corporate goals by implementing and evaluating best practices project management. The companies that can successfully implement best practice project management techniques will be the outstanding leaders of tomorrow.

Where does it all begin?

The corporate mission statement provides a high level description of the goals of the company. Every person working for the company should know what the mission statement means and how their position helps accomplish the mission.

The corporate mission should be reflected in the mission statements of each division or department. Usually these mission statements are more specific to the product or service the particular department provides.

Once this structure is established, the next step is to define the corporate level goals. Again, these are usually very high level and could include such things as increase revenue, improve employee retention, reduce outstanding receivables, improve business processes, and add new products or services. The goals must also be Specific, Measurable, Accurate, Realistic, and Time bound. This approach is commonly known as creating “SMART” goals.

Corporate goals used to focus primarily on financial performance. A relatively new technique, the balanced scorecard, is now employed at many companies. In a nutshell, this approach “balances” the financial measures with three other areas; employee learning and growth, business process improvement, and customer focus. Financial-related information is based on the past and does not accurately predict the future. The leading indicators of your future financial performance should be based on the other three perspectives. When employees are motivated, processes become effective and efficient, and customers are satisfied, the corporation will prosper financially.

Based on the corporate goals, each department should define what they believe their goals are. These goals should be shared with management in all other departments. This exchange of ideas will identify overlaps, conflicts, and cross-functional efforts that are required. For example, the Accounts Receivable department may have a goal to reduce receivables above 60 days and also implement policies that will prevent long term outstanding receivables from recurring in the future. The Sales department may have a goal to increase customer retention.

Suppose you have a customer that generates a significant amount of revenue. Unfortunately, they generally don’t pay most of the bills until they are 90+ days delinquent. When you contact them, they question the invoices and cause your company additional time and effort to research and prove the charges are valid. Most would agree that you probably don’t want to retain customers that don’t pay their bills, regardless of the amount of “revenue” they generate for you. Based on this scenario, there is a conflict between the goals of the Accounts Receivable department and Sales department. Only through sharing goals will the departments identify the conflict and work to resolve it.

Project Prioritization

Once the “SMART” goals are created for all initiatives across all departments, senior management will prioritize them based on their return on investment (ROI), payback period, net present value (NPV), internal rate of return (IRR), or economic value added (EVA). Senior members from the Information Technology department should be intimately familiar with all the departmental goals. They will be able to identify possible technical synergies across multiple projects. Senior IT leaders should also be participants in setting priorities for the projects.

The projects with the biggest “bang for the buck” that fit the long-term strategy of the company will generally be approved and prioritized at the top of the list. However, there will be other projects that may be a lower priority but, if not implemented, may have a negative impact on the business. These projects are generally considered tactical in nature. They support the long-term strategy, but take a short-term view of resolving the problem. They are generally lower in overall cost, complexity, and time to implement. For example, there may be an off the shelf software package that doesn’t meet all of the functionality that the department wants, but does address the significant risks that are currently present.

You now have a prioritized listing of all the projects along with high level cost estimates and return expected from each project. The next step is to define who will manage the portfolio of projects across the company. The best method to manage the portfolio is to implement a Project Management Office (PMO).

Project Management Office

The Project Management Office (PMO) is ultimately responsible for initiating, planning, executing, controlling, and closing all projects across the company. The PMO establishes and provides oversight for policies, procedures, standards, templates and software for project managers to use. With the proper measurement metrics, the project process will continually improve and ultimately deliver consistent results on time, on budget, and with quality results.

A high level plan of all corporate projects should be maintained by the PMO. Initially, this plan will list each project with very rough budget estimates, man-hours, skill sets, and departments that need to be involved.

The larger, long-term strategic projects should be assigned a dedicated Project Manager. Given the nature of these projects and their criticality, the project manager and the team should be allocated 100%. Tactical projects will also need support from the PMO. However, these projects may not require a full time project manager given the assumption that the risks and returns are not as high as the strategic projects. If you are fortunate enough to have the necessary human resources to dedicate to these initiatives, allocate the project team full time to tactical projects.

You now have created a list of prioritized projects, established standard practices through a PMO, and assigned and allocated resources as necessary. As the projects are executed, standard reporting and communication to stakeholders, sponsors, and project teams is absolutely essential. There should also be milestones established and check points to determine which projects should proceed and which ones should be terminated.

As projects are closed (either through completion or cancellation), a lessons-learned session must be scheduled and executed for each project. These sessions include everyone involved with the project. They are facilitated in such a way to allow everyone to speak freely about what worked, what didn’t, and what areas could be improved on. These are not finger pointing and blaming meetings. The lessons learned are extremely valuable in improving the project management processes, which leads us to the next section, the Capability Maturity Model.

Capability Maturity Model

A significant amount of information is available regarding the Software Capability Maturity Model (SW-CMM) from the Software Engineering Institute at Carnegie Mellon University. This model was initially designed to measure the effectiveness of software development in IT organizations. It has since been expanded into other disciplines, including Project Management.

The CMM model was modified for project management, and is referred to as (PM)2. Similar to CMM, there are five levels in the (PM)2 model. As project management in a company becomes a standardized repeatable process, the level increases from the lowest (one) to the highest (five). Each level builds on all of the previous levels. At level five, standard repeatable processes are in place. The focus at level five changes from implementing the processes to continuous process improvement. Most project management processes in companies today operate at level 1 or 2. Very few companies have achieved level five to date.

Level one is characterized by ad-hoc projects. An initiative is approved and someone is assigned to manage the project. The person assigned may have little or no formal education or background in project management. What do you think the chances are for a successful completion? Even if the project is successful, there is not a process in place to share what was learned from the project. These initiatives are not integrated in approach or technique. Each initiative is a new adventure with little or no sharing of information, tools, or techniques from prior projects.

Level two recognizes the limitations discussed in level one. Ideally, senior management realizes that there should be a focus on learning from prior projects. A process to share information begins to emerge. This generally takes the form of informal discussions between a project manager on a new project with a project manager on a prior, similar project. Little or no information is documented.

Level three is really beginning to establish best practices that are repeatable. Standard methodology, software, and guidelines are established. Some training is provided for those that will be managing the projects. There may be dedicated project managers in functional departments. In some cases, functional managers may take on the additional role of project manager within their specific area of expertise. A PMO may be started as part of this level.

Level four is characterized by the realization that project management is truly a professional skill, much like that of an accountant or attorney. Projects are integrated and actively measured against standard performance criteria. Formal lessons learned are documented and available to all project managers and team members. Project management training is offered and sometimes required for project managers. The companies at this level fully realize that to be successful, there needs to be a focused effort on project management. The PMO is also established and fully operational at this level.

Level five represents the highest level attainable. All project management processes, standards, policies, and procedures are in place and applied consistently. Standard metrics are used for individual projects as well as integrated program management. The focus of this level changes from implementing the project management discipline to a process of continuous improvement.

Summary

Many companies are rated by how well they can implement what they promise to deliver. Without specific goals and sound project management practices, the projects will most likely be delivered late, over budget, and with limited functionality. For companies to be successful, more emphasis must be placed on the balanced scorecard approach, establishing SMART goals, building solid and repeatable project management best practices and processes, and measuring their progress by using the (PM)2 model.

Charles Ludwig is President of Master Plan IT, a consulting firm specializing in Project Management Best Practices. He may be reached at .