Project Management Institute

What the Fortune 500 know about PM best practices ... and how you can share their knowledge

Project management groups have been implemented in some of the world's largest, most prestigious companies. The Fortune 500 Project Management Benchmarking Forum has spent a year exploring the success factors and best practices for project management in the context of a functional organization.

by Frank Toney, PMP
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THE FORTUNE 500 Project Management Benchmarking Forum is comprised of project management executives from approximately 40 large, for-profit and governmental organizations. The objective of the forum is to benchmark the various approaches taken to implementing project management groups and concepts in large functional organizations. Membership is open to any company that wishes to contribute information and share results on an equal basis with other participants.

The forums are administered by the non-profit Executive Initiative Institute. Participants cover the direct forum costs by paying $500 when they attend each forum. In addition, analysis, compilation, and distribution of the benchmark proceedings, findings, and results is partially funded by a research grant from PMI. Findings will be published in book form during the second quarter of 1997.

A Scientific Benchmarking Approach. Prior to the first forum, a telephone survey of participants was conducted. The purpose of the survey was to develop a listing and categorization of subjects to be benchmarked. The question was asked, “What is the most important project management problem you feel should be addressed by a benchmarking forum?” From these responses a ranking of subjects was developed. The participant responses were predominately in four areas of concern: (1) Promotion of project management benefits. How the benefits of project management groups can be promoted to senior management and other functional areas. (2) Personnel-related issues such as fitting project manager skill sets into existing pay strata, predicting project manager performance, measuring training results, and finding good project managers. (3) Measuring the results of project management. (4) Methodology issues.

Each of the subjects is benchmarked at meetings held approximately every four to six months. Roundtable discussions (a) define, compare, and contrast how each participant's organization addresses the specific problems, (b) identify and agree upon key success factors and core best practices to resolve the problems, and then (c) discuss ways of applying the findings to one's own workplace. Participants also present ways their specific organizations excel at project management-related processes and functions. Findings from each of the forums are compiled and distributed to participants. At the conclusion of its first year in operation, the Fortune 500 Project Management Benchmarking Forum has identified numerous best practices that have been of direct benefit to its participants.

Participants used a roundtable discussion format to benchmark the approaches being taken. From this discussion, key success factors (KSF) and core best practices (CBP) that result in project goal achievement were developed.

A key success factor is a rough counterpart of the research hypothesis. It is a statement upon which participants generally agree results in superior organizational goal achievement. For example, a key success factor might be “Best-practice project management groups actively promote the benefits of the group to senior management and the other organizational areas.”

Core best practices describe the specific manner in which participants work to achieve the KSFs. For example, a CBP necessary to achieve the preceding KSF might be “Best-practice companies develop and distribute promotional devices such as business cases, formal presentations, and videos that describe the benefits of project management.” The core best practices represent the specific things that participants can apply to their work situations. Note that core best practices will not necessarily have universal appeal and agreement by all participants. Nevertheless, their value is that they represent specific ideas that attendees can evaluate and possibly apply to their own work situations.

The overarching key success factor for the entire benchmarking exercise is: Organizations maximize the probability of project success, as a primary element in achieving corporate goals, by applying key success factors and core best practices.

Benchmark: Promoting the Benefits of Project Management

A critical problem described by interviewees related to the difficulty of communicating the value of professional project management as a discipline to senior management and other areas in the corporation. Participants agreed that a compelling reason for senior management support of project management is an improved bottom line. Comments were also made that managers sometimes perceive the project management movement as just another fad and that the growth of project management groups is often perceived as being in direct conflict with the current downsizing trends. It is sometimes difficult for management to see the uniqueness and value of a project-based approach.

KSF: Organizational Structure. The ideal structure to maximize corporate goals is to have the project management function report to an executive, or executive committee, whose authority extends across multifunctional business units.

KSF: Strategic Position. Best-practice project management groups enhance their strategic alliances and general awareness of their competitive benefits through promotion and public relations. In order to achieve this, best-practice project management groups use the following CBPs: they identify and nurture senior officers who are champions of project management; conduct training exercises for stakeholders; participate in benchmarking forums; and partner with educational and professional organizations.

KSF: Promotion to Senior Management. Best-practice project management groups communicate the value of the project management function to senior management and other stakeholders. To achieve this, the best-practice project management groups use promotional tools (CBPs) such as videos (e.g., Disney's “We Make the Magic”); internal and external brochures; a business plan, white paper, goals paper, or other similar formal written document; presentations and internal training programs; internal and external articles; strategies to diffuse negativity and ignorance; and alliances with key stakeholders.

Benchmark: Personnel Issues

A second, equally critical problem concerns project manager professionalism and compensation-related issues such as pay versus level of responsibility, competency, performance evaluation, training, selection, promotion, and differentiation of professional project managers from thousands of others who are arbitrarily assigned the project manager title. one of the most common dilemmas discussed by the group was that the skills required of a project manager are the same as those required by an entrepreneurial, micro-business manager. Training, certification, responsibility, and experience are often not followed by commensurate salary increases. As a result, the most valuable and highly trained project managers are enticed by other companies or corporate internal groups.

KSF: Optimizing Pay and Other Incentives to Reward Self-Development, Experience, and Performance. Several CBPs were identified for this success factor.

Straight pay as a foundation and for high-risk projects. In some cases, straight pay is generally agreed to be the most appropriate form of remuneration. For example, Carl Isenberg, director of project management consulting for Electronic Data Systems (EDS), and Jeff Koroknay, program manager for Honeywell, addressed the dilemma of paying project managers in “bail out,” “smoke jumper,” and other high-risk situations where project success is uncertain. In some cases project managers have the primary object of simply trying to reduce losses. About the best solution is to provide the individual sufficient pay to compensate for the risk involved.

A Partial List of Fortune 500 Benchmarking Forum Participants

Aeroquip
Allied Signal
Boeing
Computer Science Corp.
Dade Pharmaceuticals
Disneyland
Federal Express
American Airlines
Dupont Agricultural Products
Eaton Corp.
General Motors
Arizona Dept. of Transportation
EDS
General Services Administration
Bank of America
Honeywell
IBM
BellSouth
Hughes Aircraft
Fujitsu
Intel
ITT Hartford
Kelley Services
Lear Automotive
Miller Brewing Co.
National Cash Register
San Diego Gas
Seattle Water
Motorola
Nissan Motor Corp.
Northwestern Mutual
NYNEX
Rust Environmental
Sprint
US West

Competency- and skill-based pay. About one-quarter of companies responding to national pay surveys indicate they are using pay systems that reward the individual for skill development as well as paying them for the job performed.

Bonuses as an incentive for project managers are widely used by forum attendees. Bonus plans vary from conventional bonuses paid for good performance to more complex bonus arrangements. A program described by Carl Isenberg of EDS staggers bonuses over a three-year period. The objective is to provide incentives for employees to remain with the company.

Other benefits such as stock options, pleasant work environment, educational opportunities, individualized rewards and incentives are important motivational tools. Ray Powers (director of corporate project management at US West at the time of this forum; currently, vice-president of Technology Management at Dade International) described these kind of perquisites as excellent incentives. Jeff Korok-nay said, “At Honeywell we ask employees what they want in the way of rewards—travel, bonus days, education? Then we try to tailor benefits to the individual's needs.” Bob Teel of Disneyland added that Disney's excellent benefits and “having fun” as part of the job contribute greatly to employee satisfaction.

Expanded project performance-based pay. Despite today's tremendous emphasis on the team approach, most pay systems continue to solely reward individual performance. Several companies are working to correct this shortcoming. Specifically, EDS‘s Carl Isenberg and Kathy Kuzmin of NYNEX report that their organizations are using project-based pay to foster and reward project performance as well as individual efforts.

Combinations of pay systems. Several of the companies represented at the forum combine several pay elements to maximize return, among them, NYNEX and EDS. Isenberg summarized the EDS system as including components of base salary; at-risk pay (up to 20 percent of pay) resulting from employee and manager established expectations, goals and self-improvement; and project-related bonus. To receive the bonus the project must be successful. The specific amount of the bonus is determined by the project manager in combination with the project team.

The NYNEX program, as described by Kuzmin, is a combination of at-risk pay as determined by overall corporate performance, customer service performance within the group's geographical area, and achievement of corporate strategic goals.

Team-based pay? A few companies are beginning to pay project managers and their team members as a common unit. According to Kathy Kuzmin, NYNEX is in the first year of using a more quantitative approach to measuring performance for key strategic projects. This approach is based upon earned value concepts. Kuzmin said that one of the major benefits of the program is, “It appears to be motivating all team members to become more professional.” She also voiced a common problem that occasionally new pay systems generate culture shock.

KSF: A Proactive Stance in Attracting, Selecting, Retaining, and Rewarding Top-Performing Project Managers. Participants identified the following CBPs as important to this success factor.

Specific job descriptions and career path for project managers. The need for clear job descriptions and statements of career progression was summed up by Carl Isenberg: “It is made clear to everyone how they can progress, what skills need to be developed, and how the skills can be acquired.” To accomplish this, Isenberg stressed that there must be descriptions and a career progression guide. For example, at EDS, project managers have four clearly defined job levels. BellSouth uses five distinct levels of project management job descriptions. The job descriptions are used in conjunction with a career development program that encourages development and retention of project managers.

A checklist of competencies for selection, evaluation, comparison, performance prediction, and self-development. Forum participants place emphasis on the identification of project manager competencies and skills and the matching of those skills with specific project manager positions. As Michael Lavach, manager of San Diego Gas and Electric's Construction Service Group, stated, “The key to project success is to pick the right project manager.” The question is, how does one do this? For example, does it take a technical person to lead a project? In particular, there is need for better information regarding candidate interviewing and testing.

In response, Ray Powers stated that his group at US West is actively researching project manager competencies and skills with the goal of producing a checklist of competencies that can be used for hiring, performance evaluations, and the development of individualized training programs.

Forum participants all reported high qualification standards. Degrees, training, certification, cognitive skills, and experience were prerequisites commonly mentioned. There are also various forms of testing in place. Bob Teel mentioned that Disney tests applicants thoroughly through a series of verbal questions. The objective is to evaluate an applicant's ability to apply project management knowledge. They ask such questions as, “What are the three most important things you do in running a project?" or “What would you do in the following situation…?" Disney also evaluates project management computer skills and places emphasis on leadership skills in preference to technical skills. It is Teel's feeling that it is easier to teach the required technical skills than leadership skills.

Personal development programs. Based on the identification of skills and competencies needed on a case-by-case basis, personal development programs can be individualized.

Recognition that project managers often have responsibilities similar to CEOs and should be rewarded accordingly. Ray Powers described the research conducted by himself and the author that indicates that project managers share many of the same basic competencies as chief executive officers. The inference is that reward and motivational systems need to be cognizant of this parallel.

Retention programs. Participants are in the initial stages of formalized programs to retain project managers. There was general agreement that the issue of project manager retention is becoming a bigger concern.

KSF: Using Training to Achieve Corporate Goals. Participants agreed upon the value of training for project managers—as long as it produces results. All attending companies have formal training programs. Northwestern Mutual Life has an online project tutoring system. Ed Prieto of BellSouth stated that they have sent over 1,000 project managers through training, using both outside and internal training as well as encouraging PMP certification. Don Colvin described Fed Ex's Quality Academy, at which teaching project management is a key element. other CBPs discussed included:

Measurable training results. Despite the intuitive understanding of the need for and value of training, participants agreed that there must be a cost/benefit relationship. Marge Combe mirrored the general consensus by stating that Northwestern Mutual's training focuses on producing immediate bottom-line results.

A value statement that supports training. The corporate value statement should define the organizational benefits of well-trained project managers.

Maintenance of competencies through continuing education. Several forum attendees professed the need for continuing education. As one example, Dick Gale indicated that Motorola requires 40 hours of training each year.

KSF: Evaluating Project Manager Success on a Broad Basis. The evaluation of job performance is typically a thorny area, especially for complex, high-level tasks. Some of the CBPs that were identified for this success factor were:

Evaluation of skill in managing the project. Several companies evaluate the project manager's basic skills in managing the project. Don Colvin of Federal Express indicated that they have a standard evaluation form that is used to evaluate the project as well the leadership of the project manager.

Measurement of customer satisfaction. Just as in the world of Total Quality Management, Don Colvin emphasized the need to measure the degree of customer satisfaction. overall, it is the strongest performance motivator as well as measure of performance.

Evaluation of project manager performance compared to project characteristics. Obviously, some projects are tougher than others to manage. Performance evaluation must take into consideration such project-specific factors as risk, complexity, scope, criticality, and impact.

Benchmark: Measuring the Results of Project Management

Participants agreed that before project management as a discipline will be fully accepted by industry there must be a clear linkage between its application and improved organizational profitability and goal achievement. To accomplish this, it will be necessary to clearly measure project results and performance. The group desires to benchmark different methods of measuring project performance and costs.

KSF: Performance Measurement. Best-practice project management groups measure the performance of projects and the impact of project outcome on the organization's bottom line and ability to achieve goals. Best-practice project management groups use a number of measurement methods (CBPs) to achieve this success factor. They measure accuracy in achieving time and budget goals; determine if the group performs the same or greater work output with fewer resources; compare current costs with prior costs; measure reduction in lead time to market; measure the reduction in time to identify marginal and failing projects; measure the cost of quality (getting it right the first time, rework, scrap, cost of nonconformance); have a measurement manual or set of standard performance measurements to evaluate project performance; make cost estimates to milestones; and identify customer requirements, measuring project performance against those requirements and customer satisfaction.

KSF: Value Measurement. Best-practice project management groups build value measurement models to prioritize project essentials and “desirables.”

KSF: Risk Evaluation. Best-practice project management groups have risk evaluation and management processes in place.

KSF: Lessons Learned. The final step in tracking project performance is to evaluate the project's successes and failures. Best-practice project management groups use the following CBPs to achieving this success factor: they record and communicate lessons learned; maintain and communicate project journals; conduct periodic reviews; and use outside auditors.

Benchmark: Methodology Issues

Every company involved in the Benchmarking Forum has developed unique sets of standardized procedures, approaches and templates. Questions were raised regarding the methods used, the value of the methodology, and the potential for developing a generic methodology that would serve as a common device for comparison of methodologies in different companies.

KSF: Standardized Methodologies. Best-practice project management groups use methodologies for conducting projects consisting of standardized approaches, templates and procedures.

KSF: Overarching Process. Best-practice project management groups have a methodology that covers the entire project management process through the organization and is integrated into the entire value-added chain.

To satisfy the requirements of these two KSFs, best-practice project management groups use the following CBPs: they have a flexible methodology; use a generic methodology that provides common terminology and frame of reference for all users; integrate the project group in developing organizational strategy as compared to being a tactical organization; and build project management methodology into the sales process.

KSF: Project Management as a Core Competency. Best-practice project management groups integrate project management disciplines into all other core competencies in the company and recognize that projects are the basic building blocks of the business. One CBP identified as related to this success factor was involving project managers in the project process at the origin of strategy, project selection, and/or at the sales stage.

KSF: Change Management. Best-practice project management groups measure and control the impact of project changes.

KSF: Conflict Management. Best-practice project management groups use formal conflict management techniques. As a CBP,s it helps to require that conflicts that affect the probability of project goal achievement be submitted in writing.

THE ATTITUDES, opinions, and actions of all the forum members are being evaluated via the medium of detailed questionnaires, and the results of the forum proceedings as well as the questionnaires are being compiled and analyzed. They will be available for distribution in the next few months. We invite comments and suggestions from PMI members regarding the appropriateness of the key success factors and core best practices addressed in this article. Send your input to the author at ftoney@getnet.com.

Note

The next Fortune 500 Project Management Benchmarking Forum will be held May 15-16 in Dallas, Texas, and will be hosted by Electronic Data Systems. Forum participants will discuss specific key success factors and core best practices and their practical value in the project management environment. For information, call Ray Powers at 847/267-5429. ■

Frank Toney, PMP, is on the faculty of the University of Phoenix. Within PMI, he is chair of the Research Committee and a member of the Standards Committee. He has published several articles on project management's impact on organizational efficiency.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM Network • February 1997

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