Portfolio metrics need to advance beyond on time and on budget

statistical_liarsWhile simply meeting the triple constraint is not the best method of evaluating project success, on time or on budget statistics continue to be used by Project Management Offices (PMO) as proof that project delivery capabilities are improving. After all, if the department was formed when on time or on budget rates were very low, it can be very gratifying for the PMO leader to publish a steadily increasing trend for these metrics over time.

But do these improving percentages demonstrate that the organization is experiencing improved returns on its portfolio investments?

Lets consider a project portfolio which is composed of a large number of small projects and a few large, strategic ones which were all planned to complete this year. Lets assume that all of the small projects were completed on time and on budget, but the two strategic projects were completed significantly behind schedule and vastly over budget. The cumulative metrics would look quite good as over 90% of projects would have completed on time and on budget, but the impact of the delivery issues experienced by the large projects could still be detrimental to the organization.

Even if there was no corresponding increase in cost, when delays occur to one or more strategic projects, the benefits realized from those projects are likely to be less than what had been originally expected. For example, if the company is launching a new, innovative product and the delay in launch date means that one of their competitors wins first to market advantage, it will take much longer to recoup the development costs than had been originally pitched as part of its business case.

So in addition to calculating the usual metrics, we should also consider normalizing cost and benefits across the portfolio based on the relative contribution of each project.

For example, when looking at cost data, we could express the ratio of the total approved investment for projects completed within the year to the actual spend on those projects as a percentage. Similarly, we could compare the cumulative baseline approved benefits for projects completed in a year against the aggregate recalculated expected benefits (taking into account changes in forecast returns based on delays).

Jean Baudrillard said “Like dreams, statistics are a form of wish fulfillment“.

Incorporate normalized performance metrics into your PMO’s annual report card and your dreams of improved portfolio delivery capability might get one step closer to reality.

 

 

 

Categories: Project Management, Project Portfolio Management | Tags: , , | Leave a comment

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