Tools for managing projects

adding earned value metrics to digital dashboards to report performance of active projects

Introduction

For many firms front and back office systems integration projects will prove to be a dominant strategic issue for many years to come. Other firms, for example in the construction industry, are feeling the pressure to improve their project management processes for projects that represent, for the most part, their total revenue stream. There's little question that the pressure is on for firms to revamp business processes to enhance their commerce functionality and update and integrate their projects quicker than ever before.

Integrating projects means that firms need to take a portfolio approach to management of projects and that means consolidating performance reporting, to streamline the process and minimize the time commitment for executive oversight. Two significant components of project integration lie in the areas of project management collaboration and project management metrics and reporting, both across projects and upward/downward from project managers to executive management of the firm.

It seems to many firms that all that is preventing the next sea change in project performance, is simply a concise and timely method for sharing project and portfolio metrics, without the need to congregate project teams in the same room, or to schedule executives and project managers to meet, either around a video conference or the same conference table.

Need for Earned Value in Project Metrics

Projects in organizations are expected to grow at a compound annual growth rate of 24%, intensifying the challenge for firms managing portfolios of projects. For many organizations this means change or die. This coming sea change will involve examining business and change management issues,, flexible architectures, portals, and a myriad of other technologies and tools, looking for “best fit” solution. Additionally, the customer, bottom line revenues and cost containment or management are at the core of the need to modernize the way projects are managed.

The speed of change in business drives the need to modernize the way project information is collected, organized, disseminated and used in day-to-day operations. The ability to manage large projects that affect every area of an organization is typically understated, poorly supported, resource limited and under the control of the wrong people. The most effective project managers may be the ones who are able to adopt, employ, and successfully help others use high-impact, low-cost collaboration tools, such as digital dashboards.

The concept of utilizing “digital dashboards” as a tool for reporting performance metrics and collaborating on project decision making, has begun to appear more frequently in business and project management literature. Additionally, project planning and management, which includes comprehensive planning and control for all of project phases, has been assisted with the introduction and use of digital dashboards.

Using Digital Dashboards as a Project Tool

Digital dashboards are based on the metaphor of an automobile instrument panel and are a new project management tool that can be used to get a bird's eye view of a projects health and performance. They are simple and powerful data-driven software solutions that are used to visually ascertain the status and key performance indicators of a project, or a portfolio of projects. Digital dashboards can be constructed on top of low-cost spread sheet programs or they can be “shrink-wrapped” pre-defined solutions and easily adapted to fit different projects. Dashboards provide digital at-a-glance displays of critical data pulled from different databases to provide warnings, action notices, and summaries of project conditions.

Digital dashboards can be set up to track the information flows inherent in projects that they monitor. Graphically, users can monitor high level processes and if necessary drill down into low level data. The success of digital dashboards depends mostly on the correct selection of project metrics (key performance indicators) to monitor. Digital dashboards can be tailored to provide key information and metrics required by CEO's, CFO's COO's, project managers, and other users in the firm. In the past, this information was typically unavailable to senior managers, outside of attending a slide presentation, thumbing through massive financial reports, or scrolling endlessly through screen-formatted reports.

Usefulness of Digital Dashboards as a Project Tool

The benefits of digital dashboards are numerous. The key is to have all activities contributing to the overall project success be connected so that all project functions can be monitored and management is able to access the progress of each activity. This is a type of executive information system that allows managers to gauge how well the project organization is performing. It allows the organization to capture and report specific data points from each activity within the project so as to provide a “snapshot “of performance.

Managers can see key changes in their operations almost immediately and can take quick corrective action.

Earned Value Analysis for Projects

Evaluation and control are part of every project manager's job. This requires an information system that measures project progress and performance against a project plan that supports the delivery of a product or service, on time, on budget, and in a form requested by the customer. A digital dashboard can be a key component of such a project control systems and may constitute the primary human interface between the project and the firm's management team.

The discipline of project control is not performed well in most organizations. It is one of the most neglected areas of project management because it holds people accountable, allows traceability and keeps a project in focus. A good control system should provide managers with the ability to answer the following questions:

  • What is the current status of the project and terms of schedule and cost?
  • How much will it cost to complete the project?
  • When will the project be completed?
  • Are their potential problems that need to be addressed now?
  • What and where are the causes for cost or schedule overruns?
  • What have we gotten for the dollars spent?
  • If there is a cost overrun midway in the project, can we forecast the overall and at completion?
  • Can potential problems be identified before it is too late to correct them?

EV analysis should be a key component of a capable project control system. EV is a technique that enables managers to determine more than whether a project is ahead or behind schedule and whether a project is over or under budget. EV is particularly useful on large projects to identify those activities that need to be investigated further for potential problems. Merely comparing the total actual project spend-to-date, with planned spend, won't reveal whether the project has used those expenditures to accomplish an equal value of completed work. EV analysis is an adjunct to financial accounting, and the concepts, although simple, are not part of the vocabulary of most accountants or CFO's.

The basis of EV analysis consists of placing a value on completed work and measuring completed work using two key computations: 1. Comparing the project EV with the actual cost incurred for the project (AC). 2. Comparing EV with the planned Value (PV) to date. The comparison can be at the project level or a more detailed cost account level. The terms used in practice, while intimidating for non-project managers at first, soon become familiar and very useful for managing projects. Exhibit 1 presents a glossary of terms used in the analysis which is outlined in Exhibit 2.

Glossary of Earned Value Terms

Ehxibit 1- Glossary of Earned Value Terms

Earned Value Calculations

Exhibit 2 - Earned Value Calculations

Exhibit 3 presents a cost/schedule graph with variances identified for a project at a given report date. The graph focuses on what remains to be accomplished and reveals any unfavorable and favorable trends. The “assessment date” marks the report date (month 4) on where the project has been and where it is going. The top line represents the actual cost (AC) incurred on the project to date, the middle line is the baseline budgeted cost and the bottom line is the budgeted value of the work accomplished (PV) to date. The dotted line is the forecast of AC from the report date to the new estimated completion date with revised estimates of the AC. This shows that the costs at completion will likely be different from what was planned.

Cost-Schedule Graph

Exhibit 3 - Cost-Schedule Graph

Exhibit 2 shows the relationship between how much more the project is expected to cost (Estimate to Complete or ETC) from the assessment date (Today) and the total amount that the project is expected to cost (EAC).

Differentiating between EAC and ETC Value Analysis Terms

Exhibit 4 - Differentiating between EAC and ETC Value Analysis Terms

Too many project managers manage their project performance by simply comparing planned versus actual results. Using this simplistic approach, the project could appear to be on-budget, while significantly under-accomplished, and heading for being significantly overspent at completion.. A better approach is to use EV because EV addresses the “iron triangle” of cost, time, and scope which, when analyzed together, the results can be used to reliably forecast future performance and project completion metrics. EV analysis more realistically reports cost and schedule variances and realistically forecasts estimated cost and finish date of project if the current project performance patterns continue until the project is completed.

Defining Requirements and Building a Digital Dashboard

The Requirement

Digital Dashboards can be simple or complex. Following the metaphor of an automobile dashboard, the dashboard needs to be configured to serve an operator who requires a real-time “feed” of current, updated information, while he/she is very busy performing other important tasks. This single statement summarizes the complete set of performance requirements for a digital dashboard.

The Challenge

Businesses are using sophisticated and complex Enterprise Resource Planning (ERP) systems, custom line-of-business (LOB) software applications, to collect and record more business information than ever before. Project performance information is usually embedded in several enterprise data systems. For example, resource hours expended will be in Human Resource's time reporting system; material and subcontractor cost data will be in the ERP payables; labor cost will be in the company's custom-built payroll system.

Mining all of this data in disparate systems can be complex. Some data is accessible only through database queries, the execution of which generally require help from IT departments. Some project performance data may reside in ERP systems with standard query interfaces, and yet other data may reside in custom legacy databases without an accessible query interface or be available only in standardized reports, which might not answer all of a project manager's or enterprise executives questions. Combining reports or merging data from multiple databases could produce the needed information at the required level of detail, but that process is usually an expensive, one-off solution for a single project, which cannot be easily replicated for the other projects or accomplished by project team members on their own without extensive assistance from IT department resources.

One solution is to enable project managers and team members to obtain the data themselves, analyze and consolidate it and then publish it to a web portal for the use of enterprise portfolio managers, executives and other stakeholders. However, exposing live financial “system of record” databases to untrained users is a security risk most companies might be unwilling to take. Furthermore, the training necessary to enable users to work with LOB applications and databases could be prohibitively expensive.

A digital dashboard solution based on the Microsoft® Office System, including Microsoft Office Groove®, can give project managers the ability to share performance information in near real-time with project stakeholders and enterprise executives, to review the project performance data they need, easily and with very low risk to the live data. Projects using this solution can retrieve the needed data without having to leave the familiar applications they prefer, such as Microsoft Office Excel®. They can combine, analyze, and manipulate data to provide timely forecasts, performance metrics, and securely publish and frequently update important information to all authorized dashboard subscribers.

Building the Dashboard

Microsoft Excel comprises one of the easiest platforms on which to construct a project information digital dashboard. Almost everyone involved in project work and most enterprise stakeholders and executives routinely use Excel to perform basic analytical and accounting functions. Since Excel 2000, it has had the capability to fetch data from various enterprise database platforms, through an ODBC-supported connection. Excel also contains a business graphics “engine” with an extensive collection of pre-formatted graphs, pie charts, histograms, and other graphical presentations, all of which are data-driven by the variables information contained in the addressable cells of the spread sheet.

Many project managers use Microsoft Project to plan and manage their projects. Key project metrics that need to be collected, analyzed and displayed on a digital dashboard can be exported from Project directly into an Excel-based digital dashboard. Performance data for projects or portfolios of project being managed using Project EPM, can just as easily be exported to Excel through the ODBC-supported connection to SQL Server, which forms the database platform for Project EPM. Once the project key performance data is in Excel, it is immediately displayed on the digital dashboard. Digital dashboards, such as the example shown in Exhibit 5 below, based on Excel 2003 can become fairly sophisticated, providing multidimensional analysis from the pivot table capability that is also available in Excel 2003.

Project Digital Dashboard built on Microsoft Excel<sup>®</sup>

Exhibit 5. Project Digital Dashboard built on Microsoft Excel®

Sharing the Dashboard Information with Stakeholders and Executives

The premise of this paper is that adoption of digital dashboards is the solution for timely dissemination of key project metrics to a wide audience of stakeholders, executives and other project collaborators. Now that the dashboard design and construction has been described, the dashboard needs to be published to the required audience. The IT industry has developed a large number of collaboration system solutions, most server-based and a few that exist only on client PC platforms. Server-based solutions typically require hosting in a data center or require a server administrator, adding cost and a layer of complexity to setting up the subscription and publication of project performance data.

Client PC-based collaboration solutions eliminate the need for a database administrator and the complexity of describing requirements and service level agreements with IT professionals and data center operations. However, these client-based collaboration solutions often are unreliable, rarely provide the security required for key project performance information, and rarely integrate well with office suite products. An exception to the pitfalls of using a client-server-based collaboration solution is Microsoft's Groove. Developed by Groove Networks, a company recently acquired by Microsoft, Groove first became available in 1998 and was the brainchild of Lotus Notes' architect and Lotus Development's founder, Ray Ozzie.

Combining the Excel-based dashboard with the collaboration capabilities of Groove, key project performance metrics can be stored, instantaneously published, and backed up, all in one application. Groove has the look and feel of Windows Explorer, an application the use of which is virtually second nature to all PC users today. The sequence of updating and publishing project performance metrics goes like this:

  1. Project administrator or controller updates information in Microsoft Project EPM.
  2. Project administrator opens an Excel spread sheet containing the digital dashboard platform, previously saved in a Windows file folder linked to a Groove workspace and clicks on “update.”
  3. Through an ODBC connection to the Project EPM database, key metrics are read, necessary calculations are performed in the spread sheet, and the graphics and numerical fields of the dashboard are updated.
  4. Project administrator saves the updated spread sheet in the file folder linked to the Groove 3. 1 workspace.
  5. From the administrator's PC, Groove 3.1 immediately broadcasts the update to all authorized subscribers of this Groove workspace, using a secure internet connection.
  6. Subscribers to the project's Groove workspace are notified that new information is available in their copies of the project workspace and they open or refresh their copies of the spread sheet hosting the project's digital dashboard and see current metrics.

It is not difficult to automate the above process of updating key project performance metrics, to take the project administrator “out of the loop” after the process is initially established. Groove will continue to disseminate the updates and digital dashboard subscribers will then receive a periodic “feed” of new information.

Is this the end of tedious, monthly project review preparations? Are we seeing the end to excessive hours spent cutting and pasting project metrics and graphics into monthly PowerPoint presentations for enterprise executives? Will project managers see an end to the cross-country red-eye flights to present their monthly status reviews to corporate execs on the opposite coast?

Benefits of Using Digital Dashboards

The adoption of digital dashboards for reporting key project metrics will certainly accelerate the process of sharing project performance information with stakeholders and executives located anywhere in the world. Hopefully, this will become the catalyst for a new wave of project decision making where time zones and time delays will no longer be significant factors in resolving project issues, making decisions and collaborating to achieve a new level of project success.

EV performance reporting has always manifested itself in the form of concise metrics and graphics, which strongly support presentation in a digital dashboard format. Measures such as CPI, SPI, CPCI and the traditional “S” curve graphs communicate an immense amount of information in a dense format and, thus, deserve a place in the new Digital Dashboards being developed for this decade's corporate executives.

Conclusion

Coincident with the adoption of EV performance measurements, many organizations are developing and adopting digital “dashboards” that provide their executives and senior managers concise, condensed and compact views of primary performance information. These digital dashboards are being extolled in current management literature and periodicals as the next tidal wave of management decision support.

The challenge becomes twofold: first, educating the executive users about EV's message(s), and second, successfully “weaving” the right EV metrics and graphs into each Digital Dashboard.

To address these two challenges, this paper provided an executive-level working understanding of EV metrics and what they mean. Then it provided examples of metrics and graphics that can easily be incorporated into Digital Dashboards that are useful to executives and that are in tune with the Sarbanes-Oxley (Sarbox) compliance and reporting requirements. Examples are illustrated using Microsoft Excel and Microsoft Groove Networks (team/collaboration software) that extracts data from MS Project and other readily available PC tools used in many projects.

Ante, S. E. (2006, February 13) Giving the Boss The Big Picture: A”dashboard” pulls up everything the CEO needs to run the show. Business Week, (No. 3971), 48-51

Gray, C. F. & Larson, E. K. (2003) Project Management: The Managerial Process. Boston: McGraw-Hill Higher Education

Project Management Institute. (2000) A Guide to the Project Management Body of Knowledge (PMBOK® Guide) (2000 ed.). Newtown Square, PA: Project Management Institute.

Schwalbe, K. (2006) Information Technology: Project Management. Boston: Thompson Course Technology

Standish Group International. (2004) Chaos: Project Failure and Success Research Report (www.standishgroup.com). Dennis, MA: Standish Group International

Microsoft, Building Financial Reporting Dashboards Using the Microsoft Office System, Technical Discussion Guide, 2005, (www.microsoft.com/office/showcase/findashboard/tdmguide.mspx)

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 or any listed author.

©2006, James B. Forman, Richard Discenza
Originally published as a part of 2006 PMI Global Congress Proceedings – Seattle Washington

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