PMI® and BSC marriage! Where can PMI standards meet balanced scorecard?
Tarek Fatehy, PMP, PMOC, AVS, PM Consultant
Omar Othman, PM Consultant
THIQAH – Management and Engineering Solutions
This paper aims to discuss the possibility and the logic of merging Balanced Scorecard (BSC) as strategic management approach and project management as an execution management method. If Balanced Scorecard links strategic objectives to a comprehensive range of key performance indicators (KPI), to provide a balanced view, while project, program, and portfolio management needs different levels of measurement to follow up the current status and direct the coming actions, then where can both of them meet?
Linking BSC to Project Management Institute (PMI®) standards can’t be on a surface aspect. There should be a deep linkage because they tackle different stages of organizational activities. This paper (also the presentation) first presents some basics regarding BSC; second, it will go through PMI standards history in order to help readers capture/review the hierarchy and progress of standards publishing; and third, it discusses the linkage from both sides to let the audience decide if their organization should think of this connection and get benefits of a PMI standards and BSC marriage.
BSC, From Performance Measurement to Strategic Management Framework
In 1992, Robert S. Kaplan and David P. Norton from the Harvard School of Business started a journey to convince organizations to not think imbalance of revenue as a sole aim to be reached. They built a balanced view for top management to drive different organizational aspects forward and guarantee this growth in the future.
Think Big, Act Small is a title of Jason Jennings’ famous book, but also these words speak the purpose and meaning of the balanced scorecard: thinking big by having the strategic plan built, understood, and adopted by everyone; translating the long-term objectives into operational terms and tactical items shows how to act small.
The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation. (The Balanced Scorecard Institute, 2008)
Exhibit 1: BSC perspectives
Beginning in 1992, Kaplan and Norton published five books when they introduced BSC as a performance measurement system, ending with “the execution premium” book, where they introduced a complete framework for linking strategy to operations so that employees’ everyday operational activities will support strategic objectives.
They also introduced in this book the concept of two different review meetings: first, for operational, which solves short-term problems and monitors the improvement of key operational processes, and the second meeting is for reviewing and improving strategy execution.
Context of organization from BSC view starts at the top of the corporate where vision, mission, and values should be defined, at this point of formulating there should be strategic analysis be done using one of the famous methods (PESTEL, SWOT… etc.). Next level comes after the vision, values and mission is the strategy map where organization’s strategic perspectives categorize objectives together basically in financial, customer, processes, and learning and growth. A group of objectives could be grouped together under a themes label. For each objective there should be a clear description, target, measure, and the initiative which will address this objective. Executing initiatives done by department and employees that is why their objectives should be mapped to the corporate strategy.
Project Management institute’ standards, doing things right and the right thing
When five forward thinking project management (PM) specialists formed the Project Management Institute (PMI®) in 1969. Their main purpose was “to provide a means for project managers to associate, share information and discuss common problems.” The Five Founders of PMI are Gordon Davis, “Ned” Engman, Susan Gallagher, Eric Jenett, and James Snyder.
Since it was established, PMI® has helped the expansion of project management into various industries. It is no longer for just construction projects. All project managers in different fields are try to do things right according to the most recognized best practices mentioned in A Guide to the Project Management Body of Knowledge (PMBOK® Guide) first published standards by PMI®.
After PMI helped to expand project management into different industries, it started to fill other gaps by different standards in order to maximize benefits of adopting project management as management approach. Those standards generally could be categorized into two types;
1- Standards tend to help to “Do Things Right” which includes:
a. PMBOK® Guide
b. Different Extensions to the PMBOK® Guide
c. Practice Standard for Earned Value Management
d. Practice Standard for Scheduling
e. Practice Standard for Work Breakdown Structure – Second Edition
f. Practice Standard for Project Configuration Management
g. Project Manager Competency Development Framework – Second Edition
h. The Standard for Program Management – Second Edition
2- Standards tend to help to “Do the right thing”
a. The Standard for Portfolio Management – Second Edition
b. Organizational Project Management Maturity Model (OPM3®) – Second Edition
Although The Standard for Portfolio Management standards mentioned as doing the right thing, it could be considered doing things right category if we are talking about top management practices, since driving organization directions is their main job. On the other hand The Standard for Program Management could be viewed as doing the right thing if we focused on the benefits and themes of it.
Nowadays, Project Management is not what it used to be for developing schedules and tracking progress. Coverage scope became wider to target all organization levels; it helps employees, middle level managers and management at the top to get where they want to go on in time and under budget. This is what appears from current PMI slogan “Making Project Management indispensable for business results,” PMI is now assisting the whole business not only projects level.
During organizations life there should be improvement, corrective, and preventive actions otherwise this organization disappear in a short time. These different actions are needed on all organization’s work and management levels. Organization actions should work aligned and integrated together starting from the highest level goals and beneath objectives described through portfolios and managed as programs and projects.
PMI standards after its evolution journey arrived to a point to serve the whole business; meanwhile BSC is presenting their framework to link organization strategy to operations. We recommend seeking for an integrated approach combine PMI management way and BSC concepts.
BSC as capsulated in last book by Kaplan & Norton can be used as a starting point for developing organization strategy, in coordination with PMI recent Standard for Portfolio Management they can plan and translate the strategy into as strategy map include specific strategic portfolios/theme. PMI Standard for Program Management can help middle level managers to handle group of projects. BSC addressed the KPI as the main way of feedback reporting which could be used by project manager to direct his project and report necessary results. For process improvement; adopting the importance BSC showed about process will help organization to eliminate wasted time and effort, and using OPM3® to assess the level of PM maturity and developing improvement will complete the improvement cycle.
At the end we would recommend a joint project/initiative between PMI and BSC where they can bring to management practitioners the most valuable benefits they have together and maximized.
Kaplan, R. S., & Norton, D. P. (1996). Translating strategy into action: The balanced scorecard. Boston: Harvard Business School Press.
Project Management Institute. (2008). A guide to the project management body of knowledge (PMBOK® guide). Newtown Square, PA: Project Management Institute.
Project Management Institute. (2008). Standard for Portfolio Management – second edition. Newtown Square, PA: Project Management Institute.
Project Management Institute. (2008). Standard for Program Management – Second Edition. Newtown Square, PA: Project Management Institute.
The Balanced Scorecard Institute (no date) What is the Balanced Scorecard? Retrieved on March 12, 2008 from http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default.aspx
George Mason University: (no date) History of Project Management. Retrieved on January 13, 2008 from http://gunston.gmu.edu/healthscience/ProjectManagementInIT/Slides/HistoryOfProjectManagementPartTwo.ppt
© 2009, Thiqah Team
Originally published as a part of 2009 PMI Global Congress Proceedings – Amsterdam, Netherlands