Tying Performance Metrics to Business Strategy

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no2id_elephant_big1In the previous article, ?Close the Gap between Projects and Strategy?, Johnson discusses drawing the gap closer between projects and strategy. Now we explore an article by Breakthrough Performance Management, which is about tying performance metrics to business strategy.

Executive managers ask for reports that show performance measures. Technical or key performance indicators are often displayed using dashboards and scorecards as a means to evaluate the health of the strategic plan. The problem presented in this article is that most organizations have a disconnect between corporate strategy and day-to-day activities. Therefore, organizations can measure performance, but they can?t manage it.

Breakthrough Business Performance indicates that some attributes that lead to the failure of executing strategy are poor definition, non-tangible, not clearly communicated, and measurement not focused on key drivers. Organizations are invited to adopt a discipline that links strategy execution with key business processes through the management of 1) objectives, 2) initiatives, 3) resources, 4) risks, and 5) incentives. The theory is that organizations can manage performance by tying performance metrics, initiatives, resources, and risks to strategic objectives.

Some projects are required to use Earned Value Management (EVM) to manage performance on large scale high risk endeavors. EVM is a methodology used to integrate scope, schedule, and budget and uses objective performance measures to monitor progress. There are two types of effort that are measured, level of effort and discrete. Level of effort is often the administrative support such as general project management and other overhead type functions. Discrete effort involves the more tangible key drivers or objectives required for delivery at the end of the endeavor. A well designed earned value management system requires the responsible control account managers to clearly define the initiatives by depicting the particular objectives in a work breakdown structure dictionary. The dictionary will also house some of the high level risks or assumptions that may impact the outcome. The resources are presented in a basis of estimate artifact that explains the rationale behind the costs related to the initiatives. All of the appropriate scope, schedule, and cost artifacts are captured into one project management plan and performance measurement baseline as the basis for performance.

Using project management software tools such as Primavera P6, Deltek Cobra, and other enterprise systems have proven useful to organizations to obtain a more formal method of achieving best practices for measuring and managing performance. One caveat is that investing in a specialty tool sets also means that organizations must invest in specialty experts to operate and maintain the system. The trick is striking the right balance between measurements vs. management. Integration management just happens to be one of many hats that project managers wear throughout the life of a project

References

Breakthrough Performance Management: Tying Performance Metrics To Business Strategy.

(2005, January). Business Credit, Retrieved October 12, 2008, from EBSCO MegaFILE
database.

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