Project Performance management

Project Performance management is used to track an organization’s progress against its strategic plan and specific performance goals. While Performance Measures can be applied to individual projects to ensure that deadlines are met and costs are controlled, etc., it is essential for the Project Manager to understand how the project itself supports the organization’s strategy, and how the project will impact or influence the organization’s key Performance Measures.
It’s happened to nearly every project manager sometime in their career. They’re given the requirement to provide detailed performance reporting on a project and end up spending most of their time entering hours worked into work packages in Microsoft Project and estimating percent complete on these packages – on a daily basis. Whether the requirement for that level of reporting was real or perceived, the project manager finds that he’s unable to manage the day to day activities of his project because he’s too busy trying to measure the project’s performance.

Performance measurement provides the project manager with visibility to make sure he is operating within the approved time and cost constraints and that the project is performing according to plan. It also alerts management if a project begins to run over budget or behind schedule so actions can quickly be taken to get the project back on track.

There are three common approaches to set standard for applying credit for work performed. 

First rule is to apply a percent complete to work packages; however, this is somewhat subjective and leads to percent completes of 99.5, then 99.6, then 99.7 – we’ve all either been in this situation or seen it.
A second rule is only giving credit when 100% of the work is completed on a work package, this is called the 0/100. The work package receives no credit even if it’s 3/4 complete.
This solves the problem with the previous rule; however, it leads to less accuracy when performing earned value calculations.
The third rule is to give 50% credit when work on a work package is started and 100% when the work is completed.

For most of projects we use to track the Schedule Variance (SV), Cost Variance (CV), Schedule Performance Index (SPI) and Cost Performance Index (CPI). These four values provide a reliable measurement of the project’s performance.
Schedule Variance (SV): If SV is zero, then the project is perfectly on schedule. If SV is greater than zero, the project is earning more value than planned thus it’s ahead of schedule. If SV is less than zero, the project is earning less value than planned thus it’s behind schedule.
Cost Variance (CV): If CV is zero, then the project is perfectly on budget. If CV is greater than zero, the project is earning more value than planned thus it’s under budget. If CV is less than zero, the project is earning less value than planned thus it’s over budget.
Schedule Performance Index (SPI): If SPI is one, then the project is perfectly on schedule. If SPI is less than 1 then the project is behind schedule. If SPI is greater than one then the project is ahead of schedule. A well performing project should have its SPI as close to one as possible.
Cost Performance Index (CPI): If CPI is one, then the project is perfectly on budget. If CPI is less than 1 then the project is over budget. If CPI is greater than one then the project is under budget. A well performing project should have its SPI as close to one as possible.
You should set thresholds for these values at which their status will change to an alert. For example, if the SPI falls below 0.9 then the project’s schedule should change to a yellow status. If the SPI falls further and dips below 0.8 then the project’s schedule should change to a red status. Additional earned value calculations can be performed if there is a problem with the project’s cost or schedule – this will give the project manager a better understanding of the problem and determining a path for correction.

Measuring project performance is an important part of project and program management. It allows the PMO and project manager to identify cost and schedule problems early and take steps for remediation quickly.

The project performance report contains the following sections:

Accomplishments for This Reporting Period: List all work packages or other accomplishments scheduled for completion this period.
Accomplishments Planned but Not Completed This Reporting Period: List all work packages or other accomplishments scheduled for this period but not completed.
Root Cause of Variances: For any work that was not accomplished as scheduled, identify cause of variance.
Impact to Upcoming Milestones or Project Due Date: For any work that was not accomplished as scheduled, identify any impact to upcoming milestones or overall project schedule.  Identify any work currently behind on the critical path or if the critical path has changed based on the variance.
Planned Corrective or Preventive Action: Identify any actions needed to make up schedule variances or prevent future schedule variances.
Funds Spent This Reporting Period: Record funds spent this period.
Root Cause of Variances: For any expenditures that were over or under plan, identify cause of the variance.  Include information on labor variance versus material variances.
Impact to Overall Budget or Contingency Funds: For cost variances, indicate impact to the overall project budget or whether contingency funds must be expended.
Planned Corrective or Preventive Action: Identify any actions needed to recover cost variances or prevent future schedule variances.
Accomplishments Planned for Next Reporting Period: List all work packages or accomplishments scheduled for completion next period.
Costs Planned for Next Reporting Period: Identify funds planned to be expended next period.
New Risks Identified: Identify any new risks that have arisen this period.  These risks should be recorded in the Risk Register as well.
Issues: Identify any new issues that have arisen this period.  These issues should be recorded in the Issue Log as well.
Comments: Record any comments that add relevance to the report.