If it can't be expressed in figures, it is not science; it is opinion (Robert Heinlein). Concluding a project within the initial estimated budget and time frame does not necessarily guarantee that it has been a success. Nowadays, the success of a project is defined by more than the triple constraint; it encompasses other elements such as client acceptance, reputation of the company, alignment to the business strategy, ethical behavior, team cohesiveness, and so on. The business factor, correlated with the value that a project can add to the company, has become a key element for defining a project's success. This success, however, with all its multiple facets, should be proved to sponsor, client, management, or other influential stakeholders. This paper discusses how and when could we measure it, the indicators, and the tools.
Performance Management – Overview
Until recently, performance management has been associated with the human resources discipline focusing on individuals (Center for Business Performance, 2001). However, over the last two decades, it has been more prevalent that the idea in the organizational context, performance management is applied at three levels: strategic, operational, and individual (Acumen Integrat, 2012). In addition, it covers methodologies, metrics, processes, software tools, and systems that are responsible for managing performance in the organization (Cokins, 2004).
In the 1800s, when organizations were not very clearly defined, performance management at an individual level was based on the simple execution of tasks and the performance evaluation was made by the supervisor. Since the 1990s, two trends have emerged: on the one hand, individuals have the opportunity to self-assess their performance, and on the other hand their performance is integrated within the strategic performance of the organization, analyzing how their performance contributes to the overall performance of the organization (Individual Performance Management, n.d.). At this level, aspects such as performance objectives for each employee, knowledge, skills, work environment, coaching, and feedback provided to each employee are analyzed (Dudley, 2010). Therefore, we can differentiate between managing performance at an operational and at a strategic level. Managing performance at the operational level is focused on the objectives of departments or groups within the organization, and the most important tools for it are scorecards and dashboards. In the early period, financial data were the main input for performance management, but as the complexity of organizational environment increased also non-financial aspects were included, therefore performance management expanded to other functional areas within the organization (marketing, human resources, sales, project/program management etc.) (Brudan, 2010). At the strategic level, performance management focuses on organizational objectives and is the most comprehensive implementation of performance management. Processes are based on organizational strategy formulation and strategy implementation. At this level, organizational culture, policies, mission, objectives, and strategies are considered (Dudley, 2010) and the most used tools are balanced scorecard (BSC) and the performance prism (Brudan, 2010).
The “engine” of an organization is represented by its people, so the management of employee performance and structures that they form (departments, teams) is decisive for performance management at a strategic level. For this reason, it is understandable why, for a long time, performance management prerogative was under the human resources discipline. The human resources department is responsible for evaluating employee performance, and for ensuring that this performance contributes to organizational performance as a whole, and that employees are properly compensated for this contribution. Thus, performance management is “a systematic approach to improving and developing individuals and teams performances and capacities in order to increase efficiency throughout the organization (Armstrong, 1999).
From the perspective of the strategic management discipline, performance management process can be imagined as a wheel based on the following premise: employees can truly implement a strategy only when they fully understand it and discover how they can contribute to the end result (Cokins, 2004). In this model, performance management is seen as an iterative process that includes both a planning and execution part (Cokins, 2004). Thus, management establishes the objectives that are passed on to employees, from which, in return, it receives constant information on the state of financial or operational performance objectives. The information will be used for corrective actions that are necessary to maintain the organization on track.
Performance Management in Project-Oriented Organizations
According to Turner, Keegan, and Crawford (2000), a project-oriented organization can be described either as an organization whose business is conducted primarily through projects or as an organization which, although it is oriented mainly towards recurring activities (operational), projects are an important part of their work. The mission of a project-oriented organization is “to generate results in response to specific customer requirements by structuring projects around some temporary assemblies of inside specialized personnel and to do business in a given time period” (Kodama, 2007, p. 3). A particularity of project-oriented organizations is that many projects are initiated, conducted, or completed simultaneously, creating a dynamic and balanced flow that ensures the development and survival of the organization (Gareis, 2010). According to Thiry (2008), project-oriented organizations must be structured in such a way as to create synergy between strategy and project, program, and portfolio management and projects’ approach must generate value for stakeholders but at the same time, must be sustainable.
Performance management for the project-oriented organizations should therefore include the alignment of the objectives of the projects and programs to organizational goals, while considering also the individual and departmental goals. This paper introduces in this way the project performance management, which will continuously assess the efficiency and importance of a project for the organization. It may include the assessment of the performance of one individual or of the whole team working on a given project. This evaluation, when it comes to project-oriented organizations with a functional and matrix structure, must be correlated with the assessment of the work within the corresponding department.
A comparison between the different levels on which the performance management process could be performed is presented in Exhibit 1. The correlation between these levels was not illustrated here.
Project Performance Management
Similar to the different levels of performance management in organizations, the levels for project performance management could be defined. There will be an assessment of the performance of the individuals (team members and project manager), the assessment of the performance of the project team (as a whole), and the project evaluation (an assessment of the success of the project). The process is continuous during the project and it encompasses all the project phases (project scope) and the project management processes. If the project is described as in Exhibit 2, it could define the project performance management activities for each project phase and project management process.
This paper focuses on the first level listed, the assessment of the performance of individuals: project team members and project manager. Organizations assess their project managers’ performance from at least two perspectives:
- Product, service, or result perspective: economic outcomes measured by profit, contribution margin, return on investment, new contracts won, timely completion of a project, with all contractual requirements obtained and within budget
- Project management perspective: managerial performance, measured by overall effectiveness of project management, organizing, leading and coordinating, and team performance
According to Kerzner (2010), the first criterion is applicable only if the project manager is responsible for economic outcomes such as contractual performance or obtaining new contracts. The performance assessment for a project manager will be made by the functional superior and the performance data sources will be the functional superior, HR managers, and general managers.
Kerzner (2010) defined two categories of primary indicators that can be used in assessing the performance of the project managers (Exhibit 3) and two categories for the project personnel (Exhibit 4). The indicators listed by Kerzner are the most comprehensive for medium- and large-sized companies and they were used in a study designed to identify the extent to which performance management at individual and team level is applied in some of the project-oriented companies in Romania. The study focused on quantitative research, questionnaire-based, allowing the analysis of a larger number of companies. A part of this research was to identify whether or not and to what extent are the primary performance indicators set out by Harold Kerzner for a project manager and for a member of the project team evaluated. It was also aimed to identify the role of the project manager in the performance assessment of the project personnel.
The results presented (Exhibits 5, 6, and 7) are part of a larger study conducted by Grigoroiu in 2012, which was designed to identify the extent to which performance management at individual and team level is applied in some of the project-oriented companies in Romania. The study focused on quantitative questionnaire-based research, allowing the analysis of a larger number of companies. Part of this research was to identify whether or not and to what extent are the primary performance indicators established by Harold Kerzner for a project manager and for the project personnel evaluated. It was also aimed at identifying the role of the project manager in the performance assessment of the project personnel.
According to the Exhibit 5 , factors that are largely considered when assessing the performance of project managers are those directly related to quality, time, and cost constraints.
Surprising, however, is the score obtained for the indicator “objectives and customer requirements,” which suggests that this indicator is given relatively low attention compared to previous indicators pointing to the triple constraint.
On the other hand, relatively high interest is given to the profit obtained by implementing the project (3.78) and establishing the “rules of the game” in the project (“policies”) (3.70). The performance indicator that is given the least importance (2.85) is “performance measures and controls.” This can be an indication of the maturity level (relatively small) regarding project performance management of the analyzed companies.
For the project personnel, Kerzner (2010) defines two categories of primary indicators that can be used in assessing their performance.
As in the case of project managers, indicators that are given utmost importance in assessing the performance of the project team members are those related to time, cost, and quality constraints. In the analyzed companies, it is expected from a member of the project team not only to finish a project within the triple constraint, but to do so by innovating (3.94) and with a relatively high orientation toward change (3.97). These scores, combined with the relatively low results on the “technical implementation according to requirements” and “trade-offs” indicators, suggest that there is a high flexibility in defining the scope of the project, and this constraint is not given as much attention as in the case of time and cost.
The performance evaluator was also analyzed. Following the results, in most cases, the person evaluating the performance of the personnel involved in projects is the functional manager, but based on the information received from the project manager.
Although companies are interested in applying performance management and they understand the importance of having detailed performance indicators, these indicators are not measured and companies are heavily relying on the triple constraint. This is also a result of their low maturity level in project management and the limited understanding of the responsibilities of the project managers in accomplishing both the project and business objectives.