You’ve got projects that are in-flight and everyone seems happy. But is happiness a good enough measure of project performance? How do you really know if a project is progressing the way it should be? In this article we’ll look at three ways to measure project performance.
Professional project managers will tell you if a project is going to plan and they’ll be drawing their conclusions from a range of project data. However, managers with less experience might need some guidance to help them understand how best to measure project performance, because gut feel isn’t enough.
The three ways to measure project performance are:
The technical element of project performance comprises measures that reflect design specifications, compliance to requirements and technical risk. You can prepare these measures from the project requirements.
The PMBOK® Guide – Sixth Edition gives these measures as examples:
- Transaction times
- Number of delivered defects
- Storage capacity.
In other words, the technical performance of the project is about what you are delivering and whether it is fit for purpose. As long as you’ve defined quality criteria for the product before you begin work, you can compare actual delivery against planned delivery. Are you delivering products that meet the requirements set out for them? Remember to use tangible measures and data, instead of the interpretation or gut feel of the team. You’ll also need a way to assess whether a product meets the technical performance requirements and that might include a program of quality assurance.
Where the actual deliverables deviate from what was expected, that could present a risk to the project. For each technical measure, consider what the associated risks would be. Technical performance metrics can also include risk. The riskier the item, the more monitoring and control you may want to apply to help the project conclude successfully.
Cost is considered by many sponsors as an important project measure, but because project spend can be so variable throughout the life of the project it can be hard to use to track performance. However, if you invest some time in project budget forecasting and assigning costs at the WBS level, you can track expected spend against actual budget.
Project management software makes this easy for you. As long as the tool has the data, all the number crunching can be done behind the scenes so you just have to look at and interpret the report.
You can use earned value to give you a comprehensive cost performance measurement. Set up and lower limits for control accounts so you can manage variance.
Earned value is also useful for creating reliable schedule performance measurements. At the most basic level, project performance can be measured by comparing actual delivery to expected delivery. Look back at the last schedule baseline and compare that to the current version of the schedule. You’ll be able to see whether or not milestones are being met. That’s your present schedule performance: either on track, ahead or behind where you expected to be at this point in the project.
Given that projects do suffer from changes and some small variations in the schedule are to be expected, you can set upper and lower limits on variance so you don’t have to worry about every task that’s a day late if it isn’t going to have an effect on the project overall.
The value of earned value
When most people think of project performance, they are thinking about schedule performance. Are we on track? Will we complete on time? This is an important measure, but as we’ve seen, it’s not the only one to consider when putting together a rounded view of how the project is performing.
For example, if cost is higher than expected, that could be because of spiralling supplier fees or simply because the project is delivering faster than expected or aspects of the project have been re-ordered and more costly elements are being completed first.
A single source of data rarely tells you the whole picture, so performance needs to be judged with input from various different sources. That’s why earned value data analysis and reporting is so widely considered a good standard for measuring performance, as it uses multiple aspects to provide a rounded picture of how things are going.
As with all systems, earned value is only as good as the data that goes into it and the interpretation the team is capable of doing. Once you’ve learned how to get the most out of your earned value management system and can competently interpret the data, you’ll gain deeper understanding of how your projects are performing.
The other benefit to using earned value is that it helps forecast future performance. It is obviously useful to assess how a project has performed and how it is doing right now, but more value comes from being able to predict what’s going to happen on the project. Then you can make informed decisions about how much extra budget, time or resources it may need and what you want do about that. Early warning of potential overspend can help you make changes today to stop the problems of tomorrow.
Tracking project progress and being able to report on performance is part of the monitoring and controlling processes. We teach those, and lots of other things, on our Project Management Fundamentals course. If your team needs a refresher of the basics, that’s a good place to start before you get into learning about earned value management.