Project performance management

Your project controlling and project portfolio management software

Whenever you make an investment you take a risk. Does your business invest in the right projects? And are these projects going well? Do you manage your project portfolio in such a way that you can reduce costs or increase revenues in the long term?
Project performance management is a subset of corporate performance management. Companies basically use it to answer two questions:

  1. Are we doing the right projects? = Project portfolio management and project scoring for effective project management
  2. Are we doing the projects right? = Project planning and project controlling for efficient project management

Project controlling is the part of project performance management that primarily focuses on finances. Similar to cost center accounting, project cost planning revolves around money:

  • How much have we budgeted to spend on the project? Internal and external personnel costs, travel expenses, cost of materials, etc.
  • How much have we spent so far?
  • How much more do we expect to spend to complete the project (estimate at completion)?

 

For this, the actual budget is compared both with the target budget and the project goals during the course of the project. In an broader sense, status reporting in project controlling therefore also includes key performance indicators (KPIs) such as

  • Achieving project goals
  • Degree of completion
  • Achieved milestones
  • Meeting deadlines, etc.

 

In most project organizations, the project managers are responsible for these operational project KPIs. As they often have a technical R&D or IT background, they have a counterpart in controlling who looks after the monetary aspects. Project scoring reveals further important KPIs for project controlling.


The best project controlling software does not only track all these measures and perspectives for one single project, but also provides executives with visibility across all projects at the push of a button. Therefore, it is quite common in project controlling to talk about "projects" management in the plural or multi-project management.
 

What is project controlling? What is the project control cycle and what are the relevant performance indicators?

The goal of project controlling is to ensure that the project goals are achieved. For this, the project control cycle continuously:

  • Collects data on the project
  • Compares actuals with targets
  • Analyzes deviations
  • Designs, simulates and schedules potential corrective measures
  • And updates the project's forecast 

 

The control cycle is a familiar feature of corporate performance management (CPM) but differs with regard to the time horizon and contents. While the focus of CPM is on finances, the project context requires you to keep an eye on project status and deadlines. It is the job of the project manager to ensure reporting and forecasting.

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In the initial cash burn phase, you start with spending money. In case of success, the project will reach a point, where it begins to add value, either by generating revenue or saving costs. At the break-even point, the total revenue will start to exceed the costs. Beyond this point, the project becomes profitable. The project investment has paid off. Assumptions are not facts, but argumentatively stress-testing the business case helps focusing on the potential costs, benefits and risks as well as choosing projects with a high probability of success.

Assumptions turn into facts

With project controlling software, you can continuously fine-tune the assumptions from your business case during the course of the project and replace them with facts. Using a central database with historic data enables you to compare actuals with previous versions, to learn from experience and to make better assumptions in future. Ideally, every project is profitable. That doesn't always work out. Sometimes, the market has changed. A competitor has launched a higher quality product faster. You cannot achieve the assumed margins with a me-too product. Or you experience problems with execution. As not every investment risk pays off, you need a healthy portfolio mix.

No project without a business case

A project is an investment in the future and therefore risky. Your goal is to achieve a positive return on your investment (ROI) in the long term. To start with, the business case is based on qualitative and quantitative assumptions:

  • How well will our product perform in comparison to the competing product(s)?
  • How relevant will that be on the market? How important is our product to the market?
  • How much money do we need to spent? Are resources available for "opportunity projects"?
  • How much can we save by optimizing processes?
  • How much revenue can we generate?

What is project portfolio management?

The complete collection of all ongoing projects of a company is called the project portfolio. Every project ties up resources. And while they are tied up, these resources cannot be invested in other projects.
Portfolio management is the active management of the project portfolio with the goal to identify the most attractive course of action. Which projects shall we start, stop or put on hold?
 

Simulating and forecasting multiple if-then scenarios

Portfolio analysis provides the relevant facts as a basis for decision-making. You can simulate potential portfolios including all their project candidates and analyze their impact on future earnings, resource and investments requirements.

 

 

Resource management looks at the available human resources and how they can be best allocated to the various projects in view of headcount and skills. Capacity management, on the other hand, looks at the future. Its goal is to build up the capacity in the teams that is needed long-term to invest in opportunity projects and to meet strategic innovation objectives.


A common pitfall is that the capacity for project work differs from department to department. Digitalizing sales, including a new route planner app for external appointments, may essentially be an IT project, but it should not be developed without sales involvement. However, the stakeholders in the sales team are usually totally immersed in their day-to-day activities. Here, freeing up time for the IT project is key to be able to work across departments. A good project planning tool provides visibility into this dependency and enables predictability.

 

Project Scoring – objective criteria for project decisions

An objectified portfolio management requires comparability. Every project needs to be evaluated according to the same criteria and assessed for opportunities, risks and prospects - not only new and future projects but also already existing ones. It may be more profitable to accept sunk costs and write off a project that has started rather than completing it, if this frees up resources for projects that will help your company to get and stay ahead in the long run. However, you need complete visibility into the actual sunk costs and how they compare to the potential yield. This is what project scoring in a good project controlling software provides you with.

People and organizations often have difficulties admitting failure and pulling the plug. Instead, they turn a blind eye and see pointless projects through. Berlin's airport project (BER) is a textbook example of this. It is much easier to avoid the sunk cost fallacy when you have complete visibility and the costs and opportunities of all projects - new and old - are clearly spelt out for you in black and white. Controlling tools that monitor and track project success rates also help you to understand what types of projects are most likely to perform well in future.

 

Project scoring criteria – the most important KPIs of project performance

The criteria for comparing projects and finding the most suitable candidates for investment can vary depending on company, industry and market. A couple of examples:

  • Strategic fit – Does the project support your current corporate strategy? Is the focus on technology leadership or customer satisfaction? Do you want to build a brand or strengthen customer loyalty? Which project better fits your organization's direction?
  • Risk diversification – Milking the cash cow is less innovative, but safe in the short term. In contrast to that, innovation is always a risky business. Though, if done right, will yield dramatically higher results. While innovation can disrupt a previously successful business model, it can also ensure your company's sustainability. When looking at the complete portfolio of projects, finding the right mix of risks is key. If too many of your existing business activities are on the safe side, an innovation project will be more attractive. But if 70 percent of your investments are already in risky bets with an uncertain outcome, a more down-to-earth project with a reliable profit will be the better choice.
  • Market potential – Is the overall market growing in the product segment? And to what extend could your company's market share increase as a result of the project? These questions are particularly interesting for research and development organizations, i.e. in the R&D environment. You can compare projects for different markets in the same way as you would within the same segments. Which project promises a bigger market share?
  • Cost and resource requirements – Regarding funds, human resources, materials, and tools, how much do you presumably need to implement the project? What is the size of the investment and what are the financing needs? Which project costs less, assuming the other criteria are comparable?
  • Profitability– How probable is a positive return? Which project promises a higher return on investment (ROI)?
  • Net Present Value (NPV) – Positive interest rates assumed, the earlier a project generates prospective revenues the higher their value. According to the NPV rule, the value of future (uncertain) revenues must therefore significantly exceed the amount that needs to be invested in the project today. The NPV expresses the profitability of a project in an absolute number. It is also possible to calculate the project's annual rate of return as a percentage using the relative Internal Rate of Return (IRR).
  • Amortization, payback period, or period of return of capital – How long does it take to recoup the funds invested in the project? Supposing there are two projects: One will break even in six months, the other in three years. If the projects are strategically equal, management will always opt for the one with the earlier breakeven point. The longer the time horizon the higher the potential for risks. In addition, a short payback period frees up resources faster and makes them available for other attractive projects.
  • Breakeven point – Similar to the payback period, this can be the point in time at which your company has recovered the project costs via revenues or saved costs. The criteria are company-specific and the decision-makers should jointly establish them.
On a platform with a view on a forest and binoculars beside.

Project portfolio and project management are interconnected like the forest and the individual trees in forestry. In order for the forest to flourish you need a bird's eye view of all the trees. From that perspective you can easily see bald patches and where you need to plant additional trees. But if you detect vulnerable areas you need to see a tree in detail in order to decide whether you have to fertilize, prune, relocate or even cut it down.

Project performance management software allows you to switch between the overall project portfolio and the drill-down into an individual project.

Project management – steering projects towards success

When a company has identified the right projects, it can then focus on doing these projects right. The latter matches the project management of individual projects as such.
Projects are successful when they deliver the intended result within the specified timeframe using the designated resources thereby increasing the value of the company.
Before a project is set up, you have to clarify who will manage the project and what information this person needs to make decisions. To make large projects manageable you may have to divide them into smaller subprojects. However, do not forget: each subproject needs someone who is responsible and who pulls the strings.


What can the best project management software do for you?


Project controlling software does not only support executives in portfolio management and the scoring and controlling of projects. At the operational detail level of the individual projects it also provides project managers with all the information and features they need to lead projects to success.


Project planning and control include:

  • Cost plan and resource deployment,
  • Deadlines and time limits as well as
  • the planned deliverables, milestones or stage gates.

IT projects often use milestones to mark what was achieved at which point of the project timeline. In contrast, R&D departments often use gates (stage gate method) where resources for the next phase of the project will be released, if certain criteria are met.


Project management tools dramatically reduce the manual data maintenance effort


Project managers spend a lot of time and effort extracting status updates from mails and chats to keep umpteen Excel sheets up to date. A wide variety of sources and formatting collide. Every change in the plan has to be updated in x number of places and the dependent formulas return errors.


Eliminate these superfluous and annoying time wasters with a smart project performance software. All relevant information is loaded into the system and continuously processed in the appropriate context. Deviations from the plan become immediately visible, as the updated actuals are constantly compared with the plan. The forecast for the finalization of the project also updates automatically.

 

 

 

And the system instantly provides you with new insights for project management. Changes are reflected in all linked data points and a consistent 360 view is available at the push of a button.
Gantt charts are just one way of keeping track of status and deadlines in a project. They show the timeline and task sequence of the project: When does a project start, when does it end, which milestones are due when, etc.? In the case of multiple projects, Gantt charts also show overlaps.

 

Serviceware Performance user interface with gantt chart.

 

However, for successful project management, the timeline is only one factor. Project controlling also means that you are constantly aware of how the project status compares to the cost projections and the planned deliverables. You are halfway through the project and only 30 % of the costs have been incurred? This only sounds good if half of the deliverables are already completed.

 

Serviceware Performance user interface with cost overview.

 

A good project performance software like Serviceware Performance highlights progress using color-coding to make you aware of potential problem areas that demand attention and corrective action. 

What kind of projects can you manage with project performance management software?


Today, nearly every project is an IT project. You cannot embark on process automation or the digital transformation of entire industries without IT involvement. Even construction projects like production lines or a retail logistics and distribution center have to be connected to IT. Some are exclusively IT projects like replacing a server landscape or switching hardware or infrastructure. But in most cases the IT is an enabler for other stakeholders in the organization. Its teams support other departments in either saving costs or strengthening the business model and offering new services.


In banking and insurance, IT projects are the predominant factors of production. The sales reps out in the field can only sell contracts, conditions and policies if the system can include and process these offers. Even a digital signature is an IT project. By contrast, the cost structure of high-tech companies routinely contains a large R&D contingent to enable the development of new products. SaaS providers are at home in the digital world anyway. And mobile phone manufacturers and the automotive industry rely heavily on software and digital interfaces, too. Projects are always risky investments in the future that can only succeed with a smart project portfolio and innovation management. The right software for project performance management helps the business to ask the right questions and keep track of the key facts.

 

How build and run correlate – a holistic approach to IT projects


Traditional project performance management is about setting up and managing IT projects. Here, new projects are planned, designed, modeled and executed. They apply to the so-called build part of IT and have a dedicated project end.


But IT needs to be constantly operational, maintained and kept up to date. This run part of IT costs and adds value beyond the initial project. Tracking IT operational costs and allocating them to various services is exactly what IT Financial Management (ITFM) does.


There is a correlation between build and run. If certain aspects have already been considered in the build portion, you can save costs in the run phase of services for the entire organization. To achieve this, you need visibility into the interdependencies and ITFM information must become part of project performance management. If that has happened, you will be able predict any repercussions early on and plan the scenario promising the best long-term results. With Serviceware Performance and Serviceware Financial, Serviceware provides transparency into build and run and enables a holistic project lifecycle management.

Agile project management vs. Waterfall – the magic triangle

Project management always consists of three components - and you have to decide on two of these right at the beginning, depending on which project management methodology you want to use.

  • Result – Which deliverables are required to which extent and of what quality?
  • Time – What is the duration of the project? When is it expected to be complete?
  • Budget – How much money can you spend on the project? Are the right people available? In short: What resources and capacities do you require?
     

 

In traditional project management using the Waterfall methodology, the end result and budget are fixed while time is the resultant. Thus you define right at the beginning how many resources are required and what the outcome is going to be. The result is the planned duration of the project. Your team will then complete each project phase before moving on to the next. 


In contrast, agile project management works with a fixed time and budget while the end result is determined iteratively over the duration of the project. Therefore, metrics such as Degree of Completion, where the tasks already completed are expressed as a percentage of the planned total deliverables, cannot be measured with the agile methodology. Stakeholders including end users are part of the process and are frequently contacted for feedback on intermediate results (increments). The method is also open to changes of directions throughout the project and to the scheduling and reprioritization of new requirements. The result is the resultant. 


At the project manager level, your life changes completely depending on whether you use the agile or the Waterfall methodology. However, for project controlling at management level, the difference does not really matter. Projects cost money and require resources, regardless of the method you choose to manage them. And you have to plan them, too. Therefore, a flexible project controlling software must be able to cater for all projects, whether agile or Waterfall.
 

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Interested in seeing a powerful project controlling software in action?

Discover Serviceware Performance and book your free, no-obligation personal demo or consultation now!