Business performance and project success

Performance measurement plays an important role in ensuring project success and its further usefulness to the sponsoring organisation. The performance is known to be sensitive to the metrics of measurement (Pillai, Joshi & Rao 2002, 165).

It is necessary to make a difference between project performance and project management performance. Project management success is measured against traditional measures of performance like cost, time and quality. Project success is measured against the overall objectives of the project (Cooke-Davies 2002, 185; de Wit 1988, 164). These two are interlinked, but different. A project that is considered to be a success by the customer, might be considered a failure by the top management, if the project outcome does not meet the top management’s specifications, even though it might satisfy the customer (Belassi & Tukel 1996, 141). A project can be viewed as successful despite poor project management and vice versa. A good project management can contribute towards the project success, but is unlikely to be able to prevent project failure (de Wit 1988, 165). The project management might focus on delivering the project within the budget, even if the overriding success criterion or the key performance indicator for the project is to deliver future benefit to the organisation (Bryde 2003, 229). Shenhar et al. (2001, 701) continue that most projects are conceived with the business perspective in the mind, focusing on achieving better results and business performance. If the organisation is planning to achieve better business performance as a result of the project, it should incorporate these expectations as the predetermined measures to assess the project success. The project success is strongly linked to the organisation’s effectiveness and its success in a long run. The project success or failure must be assessed on the basis of several criteria (Pinto & Mantel Jr. 1990, 274).

Guimaraes (1997, 201) defines the Business Process Reengineering (BPR) –project success in three different ways: the extent to which the project reached its goals and objectives, provided specific benefits, and improved the specific dimensions of the performance. Pillai et al. (2002, 165 - 168) highlight the importance of integrated performance measurement during the project lifecycle. The project performance measurement needs to be done not only during the project execution phase, but also during the project selection and the project implementation phases.

The performance in each phase is essential, but not a sufficient condition for the project success.

Pillai et al. (2002, 168) have summarised their requirements for performance measurement systems in R&D-projects to three categories as follows:

1. Reflect the needs and expectations of all stakeholders

2. Continuously revalidate the assumptions made during the past, in the light of the knowledge gained about the course of its execution and consider the requirements for the future success. This means an integrated approach linking the various phases of the project lifecycle.

3. Predict the project success/failure well in advance to prevent further drain of the resources.

de Wit (1988, 167) emphasises that the project objectives need to have linkage to the organisation’s objectives and strategy. Cooke-Davies (2002) and Turner (1999) highlight the need to develop metrics for project performance to have a clear link between project success and corporate success. Stewart (2001, 38 - 39) emphasises that the company vision drives the projects that take place within the organisation, aligns them to the organisation’s overarching business strategy and reveals their success. The projects can be considered as “mini-organisations”

requiring the same clarification and benchmarks of the parent organisation. Also Pillai et al. (2002, 165) emphasise the importance of devising an appropriate performance measurement system to suite the project and the organisational environment. The balanced scorecard approach helps to target the success criteria at the front end of the project and ensure that the projects deliver value for the business and the benefits needed in the organisation.

Stewart (2001, 43 - 45) has designed an example of the BSC-concept for a project, consisting of four perspectives:

The customer perspective looks at the market value of the project deliverable as well as the stakeholder satisfaction in the project outcome.

The project internal business perspective incorporates the quality management plan that is developed during the planning phase, and it utilises all the processes that take place within the project life cycle in delivering the project’s end product. It evaluates the scope, the timelines, the performance and the cost.

The financial perspective examines whether or not the project is contributing to the organisation’s bottom line. Does the project outcome generate expected revenue or are the costs what were expected?

The innovative and learning culture perspective reflects the ability of the organisation/project to be innovative and to learn throughout the life cycle of the project. This reflects the organisation’s ability to keep its vision in the focus.

Bryde (2003, 232 - 233) has modified the EFQM model to the Project Management Performance Assessment Model (PMPA). He considers the PMPA-model to be possible to use as a framework for identifying the characteristics of high performing and low performing project management performance. The basic differences between the EFQM and PMPA models are introduced in Table 4.3.

Table 4.3 The EFQM and PMPA models

EFQM Model PMPA Model

Enabling criteria Enabling criteria

Leadership Project management and leadership

People Project management staff

Policy and strategy Project management policy and strategy Partnerships and resources Project management partnerships and

resources

Processes Project life cycle management processes

Result criteria Result criteria

Key performance results People results

Customer results Society results

Project management key performance indicators

The BSC approach to projects allows decision-making based on standardised information familiar to the managers and it establishes an objective framework for continuous assessment (Stewart 2001, 47). The same advantages can be realised by utilising the EFQM model as the project performance measurement.