Free Webcast: Using Data and Design to Create a Knockout Email Nurture Program – Learn More ›
Popular Today in Business: All Popular Articles

The Case for a Performance Management Knowledge Area

Strategy

Introduction

The Guide to the Project Management Body of Knowledge (PMBOK® Guide) has been built around the same set of Knowledge Areas for most of its existence, but this reticence to change has been overcome and the current edition has added a Stakeholder Management area. Given this breakthrough and the current advances in project management concepts and techniques, it is time to review whether the set of Knowledge Areas is still well-suited to modern practice in general and the needs of PMOs in particular.

The Needs of a PMO

1.1 The triple constraint

Although it is recognized that the PMBOK® Guide is a framework on which to build services and methodologies, it does need to be well-aligned to the requirements of the organizational entities that will apply it. In particular, all types of PMO have the need to ensure the validity of project plans and the effectiveness of their execution.

One area in which there appears to be a mismatch is for the Scope Management, Time Management and Cost Management Knowledge Areas, since a number of concepts and techniques need to address the three areas simultaneously. In addition, the latest version of the PMBOK® Guide does not explicitly mention the “triple constraint” of time, cost and scope. I propose that this concept should be reincarnated into a knowledge area in its own right.

The trigger is to realize that the PMBOK® Guide entirely overlooks the fact that the starting-point for most valid project estimates is the estimate of effort. This has probably been overlooked or omitted because the authors could not decide in which knowledge area to put it! The creation of a Performance Management Knowledge Area will provide the basis for correcting this omission. So what is “performance management”?

1.2 Performance management

The definition of “performance management” in this context is developed as follows:

Related Resources from B2C
» Free Webcast: Using Data and Design to Create a Knockout Email Nurture Program

  • Project Performance: a measure of the efficiency of the creation and provision of the project and product deliverables from a point of view integrating time, cost and scope.
  • Project Performance Management: the planning and delivery, along with the monitoring and related control of project performance across the full project life cycle.

These concepts of performance and performance management as defined above provide a clear basis for the areas in which a PMO can provide considerable value to any organization. Even when it was more obviously described in the PMBOK® Guide, the triple constraint had the disadvantage of separating rather than fully integrating its three components, time, cost and scope, and omitted to link them directly to the project objectives. The role of a PMO is to ensure that they are combined in such a way as to deliver the optimal performance in the interests of the organization in a predictable and traceable manner from the beginning to the end of the project.

The way in which these ideas should be applied in planning as well as for monitoring, is explained below.

Planning

The Scope Management Knowledge Area delivers a key artefact for project management: the Work Breakdown Structure. This has to be developed based on the requirements, objectives and solution approach for the project. Once this is available, it is applied by most of the other Knowledge Areas – in particular Resource Management, Time Management and Cost Management. However, the fundamental step of estimating the effort involved in each of the WBS components is required by all three of: Resource Management, Time Management and Cost Management. Once the effort is known, the resources for the activities need to be assigned (by category of resource, or by named resources). This then provides the basis for: evaluating the corresponding durations, followed by the related cost. This information will then be used in the development of the schedule which, after optimization (progressive elaboration is the order of the day!), will lead to fixing the performance management baseline showing the evolution of scope and cost over time, which will be used for tracking performance (time, cost and scope).

This set of performance management planning steps are shown in Figure 1, and then explained in more detail below.

The Case for a Performance Management Knowledge Area image piney1

Figure 1: Performance Planning Steps

1.3 Estimating Effort

The units to be used for measuring effort depend on the type of component – e.g. man-days, CPU cycles, etc. In addition, for some components, the estimate of effort is irrelevant to duration calculations – e.g. hardware purchases.

Where effort can be estimated, this should be carried out prior to determining the resource, time and cost implications, since quantifying these amounts – and even selecting the characteristics of the resource – normally depends directly on the total effort required. Unless the calculations are carried out in this way, there is a risk that the link between resource loading, time and cost for each component will be lost, leading to faulty plans and making change management untrustworthy. More details on estimating are given in another entry that is dedicated to the subject.

1.4 Allocating Resources

Once the effort has been estimated, the resources to be allocated to the work should be decided; this requires deciding on:

  • The category of resource
  • The number of each category
  • The performance characteristics (e.g. capability relative to the effort estimating assumptions)
  • The availability of the resources
  • The unit cost of each category

The planning processes within this knowledge area therefore need to provide the following:
1. The effort estimates for each work package
2. The resource details (number, performance characteristics, etc.) to be applied for each work package

There will of course be iterations between these processes and the resource, time and cost planning processes in order to develop or adjust the plans to satisfy time, cost and resource objectives and constraints.

The following paragraphs explain how the output of the effort planning process is used for planning in the Time Management and Cost Management Knowledge Areas.

1.5 Determining Durations

Once the output of the estimations of effort and resource are available, the corresponding duration for each category of resource for each work package can be determined as follows:

Where (note: the units are given in square brackets after each parameter):
Di: duration for resource from category i [measured for example in days]
Ei: effort for the resource [resource-days]
Ni: number of those resources [resources]
Pi: average productivity of the resource (as a percentage) relative to estimating assumptions
Ai: average availability (as a percentage) relative to estimating assumptions

The estimated duration for a work package is therefore the maximum of the duration values (relative to the different resources) for that work package. Under-used resources will either need to be shared with other activities or paid for even if not fully occupied. The cost estimates will depend on these decisions.

1.6 Determining costs

The cost per work package is simply the sum, for each resource category, of

Which, using the duration equation above, can also be written as

Where:
Ci: total cost of all resources in category i [cost units]
Ui: unit cost per unit time of resources in category i [cost units/unit time/resource]

1.7 Uncertainty evaluation

Knowledge about the uncertainty in the performance planning is required as a basis for risk assessment. The proposed approach shows how uncertainty in the areas of effort, productivity, resource availability and unit cost interact to generate the uncertainty at the level of performance – and it is this uncertainty that the PMO is responsible for reporting to management, and managing by use of the relevant risk management techniques.

1.8 Baselining

Once the iterations between resource loadings, time and cost planning are complete (and, of course, all of the risk assessment and corresponding planned actions integrated), the plan can be baselined. Tools are then required in order to track the project performance accordingly.

Monitoring

1.9 Tracking Performance

The PMBOK® Guide mentions the Earned Value tool in both the Time Management and the Cost Management chapters. This is confusing to the reader and technically unsound, since one major strength of Earned Value is that it provides an integrated view of progress with respect to time, cost and scope – i.e. with respect to the baselined performance target. There should therefore be a Monitoring process in the Project Performance Management Knowledge Area that implements at least the Earned Value technique for tracking and forecasting progress. This is what the PMO needs to apply in order to support objective progress reports and project forecasts – and as a basis for any additional control actions required to bring the performance back on track with respect to the baseline.

This process will take inputs from time and cost monitoring processes – and possibly others – and provide performance information (status, forecasts, etc.) back at least to processes in the Time, Cost, Scope, Risk, Human Resources and Communication Knowledge Areas.

Conclusion

There is a clear need by PMOs for a Performance Management Knowledge Area within the PMBOK® Guide, in order to ensure coordinated planning, monitoring and change management of scope, resources, time and cost. There may be a case for extending this idea to Program and to Portfolio Management if integrated time and cost tracking tools are available in these domains.

Comments on this Article: 0

Add a Comment

Add a Comment:


Thank you for adding to the conversation!

Our comments are moderated. Your comment may not appear immediately.