A Method of Project Performance Evaluation - Term Paper Example

A Method of Project Performance Evaluation Introduction From project selection to project execution, senior managers monitor projects to determine if they are on the right track. They need to know how their projects are performing – whether they are failing or are successful. However, it is not success or failure that is difficult to evaluate. It is the relative success of one project in comparison to another that is difficult to measure (Manzoor, 2004). Also, it becomes critical to measure progress, not as the project nears its deadline, but throughout the project to see whether the project will finish on time and in budget (Verzuh, 2008). If it needs to finish on time and in budget, it needs to start out that way (Verzuh, 2008). Therefore, project performance evaluation is a continual process carried out throughout all the stages of the lifecycle of a project. This paper will discuss the various tools such as critical path method, earned value management and techniques such as risk management, scope identification and many others that help senior project managers track the success or failure of their projects, from project selection to project execution. The paper will highlight many tools and techniques and will discuss them one by one. Project Evaluation Tools and Techniques Milestones to Date One way of measuring project performance is to see whether milestones are being delivered on time. Milestones are any deliverables that mark the completion of an activity. If activities are being completed on time, this is an indication of the project being on track. To see how many milestones have been delivered to date and whether they are being delivered on time, a Gantt Chart could be useful. A well-developed Gantt Chart (using MS Project or another software) shows the various deliverables or milestones that need to be completed on certain dates. To see if milestones are in fact being delivered, the project schedule in the form of a Gantt Chart will need to be referred to. This will help the manager evaluate which milestones were delivered on time and which ones were not. If they deliverables were not met, a risk management approach will be useful for this project. Work Breakdown Structure Operation A Work Breakdown Structure, or a WBS, breaks down all the activities of a project into work tasks, in the form of a chart. This allows the PM as well as the team to see which tasks need to be carried out exactly. Therefore, the WBS is an important indicator of whether work is being completed. If the WBS is operating according to plan, the project is on track. If however, many of the work tasks in the WBS have not been performed, then it is a reason for concern for the PM as well as the software team. They then need to decide where the team is lacking and what needs to be done. Actual Costs versus Budgeted Costs (Cost Variance) Two of the most important areas of any project that need to be measures are cost and schedule, and hence are the focus of all progress measurement tools. Every measurement, at the end of the day, boils down to cost or schedule. On way to measure project performance is to see whether costs are in line with the budget projections. If they are not, there is a variance between the actual cost and the budgeted cost. Cost variance is the difference between the Budgeted Cost of Work Performed (BCWP) and the Actual Cost of Work Performed (ACWP). Therefore, CV = BCWP- ACWP. If the result is a positive answer, the work was performed under budget, if however, it comes as a negative answer, it means the work was over the budget (Verzuh, 2008). Calculating cost variances early in the project can be a useful for meeting cist constraints in the future since it assumes that current tends will continue (Verzuh, 2008). How the cost variance can be approved is by adopting risk management throughout the life of the project, and to keep going back to the requirements to see whether the project is being developed within scope. Cost variance can also be calculated as a percentage of the total planned cost. This will be shown under the section on ‘Earned Value Management’. Scope To identify the basic scope of the project – what the project will be doing and what it will not be doing – is done through requirements gathering and analysis. Eliciting requirements from the customer, at the start of the project, allows the project team to see what the scope of the project is. However, the scope tends to creep throughout the project when the customer keeps increasing or changing requirements. Therefore, one way to measure project success is whether any changes in the scope have been identified. The failure or success of the project will depend on whether the change in scope offers potential risk to the outcome of the project. For example, if a new customer requirement is such that it requires ordering additional hardware and will take three more weeks to build, the outcome of the project will be very adversely affected. It will not be able to meet its time as well as cost constraints, thereby, resulting in failure. Risk Identification and Management Another important measure of project evaluation is the number of risks identified. For this, it is important for the project team to adopt a risk management approach from the very beginning. Under this approach, the team would identify potential risks. The team would then prioritize these risks by giving them an impact and probability values and multiplying them. Finally, a contingency and mitigation plan will be made for these risks so that they can be dealt with. Risk Management is an important indicator of project success because it will allow the senior manager to see what risks they have actually identified against those jotted down in the risk management plan. The greater the number of risks identified, the more in danger the project is. Tapping the ‘Prudent Budget Reserve’ Most projects will have a budget reserve just in case the team fails to meet its planned costs. If more expenses come up, scope changes, bugs are identified or if something else goes wrong in the project, this reserve will need to be accesses. If, in fact, this ‘prudent budget reserve’ is tapped into, this indicates an important implication for the project manager as a measure of project performance. It means that the project is going over budget and needs extra cash to continue development. This indicates that the project is not on track and needs to be brought back by better risk and quality management and using tools such as Cost Variance and EVM since the very beginning of the project.. Critical Path Method Critical Path Method or Critical Path Analysis is an important project planning and evaluation tool that focuses on scheduling. It helps the PM monitor the project to see where it is not on track, and allows him to take remedial action. It does this by identifying those tasks that have no slack time and must be completed on time so that the whole project completes on time. It also shows those tasks that have the buffer to be postponed (Hiemstra, 2000). It is drawn as an activity diagram that shows the sequence of tasks, their interdependencies and which tasks take place at the same time. Therefore, it is important for evaluation because it helps the manager to see the basis of the problem, where the problem can be traced back to and how it can be corrected. Available resources or staff tasks with slack time might be reallocated to more critical activities that have no buffer, or additional resources may be needed to pace up specific activities (Hiemstra, 2000) Earned Value Management (EVM) The Earned Value Management (EVM) approach is regarded as an important tool that helps with the management of project scope, time, and cost. It allows the managers to assess and quantify project success. Using information from the EVM, future performance can also be predicted. It is not enough to view cost variances alone or delays in project schedule alone. EVM integrates these and puts them together so that the manager can see the bigger picture. This then becomes an important tool for assessment because it allows to see where exactly the project is not performing well by showing variances in costs as a function of time. As an example, suppose that the variance in cost is positive. This is apparently a good thing because the project is under budget. But is that really the entire picture? The missing information is whether this project that was under budget was completed on time. The earned value shows the managers this. It provides information about the planned value of the work that is scheduled, the actual value of the work that has been completed, and the actual costs of completing the scheduled work (Akins, 2008). This is illustrated in Figure 1. Figure 1 Earned Value Management - shoeing variances as a function of time (Source: Akins, 2008) Acceptable Quality Standards and Practices An important measure of the success of any project is whether it is meeting quality standards. For example, this could be IEEE 730 quality assurance plan standards or IEEE 1061 which is a software quality metrics and methodology standard. In any project, the team has a level of acceptable quality standards that it knows it has to meet. If it fails to meet those standards, then the project quality is in jeopardy and may offer potential risk to the project outcome. Therefore, an important performance evaluation measure is acceptable quality standards and practices. If standards are not being met, the team must adopt an aggressive quality management approach that will aim to decrease defects and bugs in a project and deliver a high quality project. References Verzuh, E. (2008) The Fast Forward MBA in Project Management, Third Edition. John Wiley and Sons. Akins, C. (2008). Earned Value versus Traditional Cost Management. Retrieved February 13, 2010, from Trident Consulting LLC http://trident-consulting.net/earned-value-versus-traditional-cost-management/ Hiemstra, R (2000). Critical Path Analysis: A Planning/Time Management Tool for Managing Research. Retrieved February 13, 2010, from http://www-distance.syr.edu/edu5900cpa.html Manzoor, K. (2004). Project Performance Evaluation Framework. Retrieved on February 13, 2010, from http://74.125.155.132/scholar?q=cache:Vg0k9AdM65oJ:scholar.google.com/&hl=en&as_sdt=2000 Read More