SOFTW ARE PRODUCTIVITY CONSORTIUM
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1 SOFTW ARE PRODUCTIVITY CONSORTIUM Integrating PSM and the Balanced Scorecard David N. Card March 26, 2002
2 Agenda Problem Statement Balanced Scorecard Mapping PSM and BSC Implementing BSC with PSM Summary 2
3 Problem Statement PSM explicitly addresses only projectmanagement-level measurement Increasing interest in gaining an enterprise perspective Balanced scorecard widely accepted as basis for enterprise measurement, especially in IT organizations Can the two approaches be integrated? 3
4 The Balanced Scorecard* Executives need a balanced view more than financial information Executives need feedback on achievement of goals Executives need a simple easy to understand presentation of results a scorecard 4 * Source: Robert S. Kaplan, and David P. Norton. The Balanced Scorecard Measures that Drive Performance, Harvard Business Review, January 1992.
5 Balanced Views Four classes of goals (information needs) are balanced: Business Perspectives Customer demand and satisfaction Financial performance Operations Perspectives Learning and innovation Internal process performance Does not directly address project oversight 5
6 Project Oversight Typically, Outside the Scope of the Balanced Scorecard Health of large projects critical to business success Executive responsibility to ensure effective management Key dimensions of oversight Risk exposure Status Operations Three Managerial Perspectives Business EPM Projects 6 6
7 Causes of Overruns Rank by General Managers Project Managers Problem 1 10 Insufficient front-end planning 2 3 Unrealistic project plan 3 8 Project scope underestimated 4 1 Customer / management changes 5 14 Insufficient contingency planning 6 13 Inability to track progress 7 5 Inability to track problems early 8 9 Insufficient number of checkpoints 9 4 Staffing problems 10 2 Technical complexity 11 6 Priority shifts No commitment by personnel to plan Uncooperative support groups 14 7 Sinking team spirit Unqualified project personnel 7 Source: H. J. Thambain, and D. C. Wileman. Criteria For Controlling Projects According To Plan. Project Management Journal, June 1986.
8 Key Elements of PSM Information Categories Analysis Model Information Model Process Model Focused on Measurement for Project Management 8
9 Information Categories Project-specific information needs can be grouped into categories mapped to measurable concepts and constructs PSM defines seven categories Schedule and progress Resources and cost Product size and stability Product quality Process performance Technology effectiveness Customer satisfaction BSC perspectives are like PSM information categories 9
10 Balanced Scorecard Perspective Measurable Concepts Prospective Measures Financial Market Growth Revenue Market Share Profit Growth Price Earnings per Share before Interest and Taxes Unit Price BSC-Based Information Categories Customer Internal Processes Learning and Growth Project Oversight Satisfaction Perception Time to Market Cost Quality Innovation Competence Risk Survey Results Engineering Cycle Time Unit Cost Productivity Delivered Defect Rate Publications Patents Years of Education Risk Exposure 10 Progress Cost Performance Index Schedule Performance Index
11 Balanced Scorecard Perspective Financial Measurable Concept Market Growth Profit Growth Price PSM Information Category Directly Mapped Customer Satisfaction Customer Satisfaction Expectation PSM Information Category Influenced by Perspective BSC Mapped to PSM Internal Processes Time to Market Process Performance Schedule/Progress Cost Process Performance Resources and Cost Quality Process Performance Product Quality Learning and Growth Innovation Technology Effectiveness Project Oversight Competence Risk Personnel Experience Resources and Cost Technology Competence Progress Schedule/Progress Product Quality Product Size/Stability Resources and Cost 11 None Technology Effectiveness
12 Analysis Model Shows the relationship among information categories and measurable concepts Helps interpret multiple indicators to understand causes and effects Enterprise relationships often described in a value network 12
13 Enterprise Value Relationships Profitability Market Share Customer Satisfaction Price Expectation Market Discriminators Learning & Growth Operational Performance 13 Project Status and Risk
14 Market Discriminators Linked to Project Performance CONSUMERS IN MARKET Many TIME TO MARKET QUALITY Operational Performance Few INNOVATION PRICE COST Few Many PRODUCERS IN MARKET 14 Adapted from D.N. Card, Is Timing Really Everything? IEEE Software, September 1995
15 Measurement Information Model Generic model (ISO/IEC 15939) applies unchanged Many of the same base measures can be used for project and enterprise measurement Different analysis techniques, decision criteria, etc., required to address enterprise level information needs 15
16 Measurement Construct Information Product Combination of Indicators and Interpretations Level of Analysis and Flexibility Indicator Base or Derived Measure With Decision Criteria Derived Measure Function of Two or More Base Measures Level of Data Collection and Standardization Base Measure Quantification of a Single Attribute Attribute Characteristic of a Process or Product 16
17 Example Analysis Techniques 1. UNDERSTAND 2. ANALYZE 3. PLAN 4. DEVELOP 5. EXECUTE E XAMPLE A PPROACHES/TECHNIQUES U SAGE 17 X X X Environmental scanning X X X Five Force analysis X X X Seven-S Framework analysis X X X Value Chain analysis X X X Scenario writing X X X Normative Forecasting X X X CSF analysis X X ABC X X Process Benchmarking X X Customer Satisfaction analysis X X X EVA analysis X X Balanced Scorecard development X X Project management Source: D. Card, et al, Techniques for Enterprise Management, Technical Report, Software Productivity Consortium, Aids industry and marketplace understanding through watching and research. Aids strategic repositioning through analysis of suppliers, customers, and competition. Aids strategic realignment through assessment of the organization s internal constitution. Aids operational assessment through analysis of functional relationships and value added. Aids strategic visioning through prediction and critical success factor identification. Aids strategic planning through determination of prerequisites for desired outcomes. Aids strategy operationalization through identification of information needed for executive decision making. Aids operational improvement through analysis of cost allocation by function. Aids operational improvement through study of acclaimed best practices. Aids operational improvement through assessment of responsiveness to customers. Aids investment decision making through ROI and other financial analyses. Aids management of organizational improvement through the monitoring of key vital signs. Aids project alignment and successfulness through planning, allocating, and controlling.
18 Measurement Process Model Generic (ISO/IEC 15939) model applies unchanged Detailed PSM implementation guidance requires modification to incorporate enterprise information needs 18
19 Measurement Process Model INFORMATION NEEDS Technical & Management Processes USER FEEDBACK ANALYSIS RESULTS Establish Core Measurement Process Commitment Plan Perform Evaluate IMPROVEMENT ACTIONS MEAS UREMENT PLAN Experience Base Database ANALYSIS RESULTS AND PERFORMANCE MEASURES 19 Adapted from ISO/IEC CD 15939, Information Technology Software Measurement Process
20 Plan Measurement Business Goals Critical Success Factors Strategic Plans Risk Management Information New Information Categories Objectives, Issues Project Environment Improvement Actions Identify and Prioritize Information Needs New Information Needs New Analysis Techniques Select and Specify Measures Proposed Changes Proposed Changes Integrate Into the Project Processes Measurement Plan 20 Executive Decision-Making Process Source: J. McGarry, D. Card, et al, Practical Software Measurement, Addison Wesley, 2002.
21 Perform Measurement Non-Project Data Sources Measurement Plan Collect and Process Data Data Measurement Performance Measures New Analysis Model New Information Needs Project Context Analyze Data Information New Analysis Techniques Questions Make Recommendations Analysis Results Balanced Scorecard Format 21 Source: J. McGarry, D. Card, et al, Practical Software Measurement, Addison Wesley, 2002.
22 Summary PSM and BSC approaches are compatible Major differences involve information categories, analysis model, and analysis techniques Coordinating enterprise and project measurement can Reduce measurement cost Increase measurement effectiveness Facilitate objective communication between executives and project managers 22
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