Establishing the Performance Measurement Baseline

Establishing the Performance
Measurement Baseline (PMB)
The Performance Measurement Baseline is a time–
phased schedule of all the work to be performed, the
budgeted cost for this work, and the organizational
elements that produce the deliverables from this work.
Glen B. Alleman
Vice President, Strategy and Performance Management
Lewis & Fowler
8310 South Valley Highway
Suite 300
Englewood, Colorado 80112
www.lewisandfowler.com
galleman@lewisandfowler.com
PMB for COS 2008.pptx

The Processes Surrounding the
Performance Measurement Baseline
PMI College of Scheduling
“PMI” is a registered trade and service markof the Project Management Institute, Inc.
2
Identify Needed
Business
Capabilities
Establish a
Performance
Measurement
Baseline
Execute the
Performance
Measurement
Baseline
Capabilities
Based Plan
Business Value
Stream
Earned Value
Performance
Technical
Performance
Measures
Business Value
Stream
Technical
Requirements
Establish a
Requirements
Baseline
Technical
Performance
Measures
PMB

There are 3 PMBs on Every Project
 Technical, Schedule, and Cost Baselines are
needed for success
 Building these requires an integrated effort
3
Establish Cost Baseline
Establish Schedule Baseline
Establish Technical Baseline
Perform
Functional
Analysis
Determine
Scope and
Approach
Develop
Technical Logic
Develop
Technical
Baseline
Develop WBS
Define
Activities
Estimate Time
Durations
Sequence
Activities
Finalize
Schedule
Identify
Apportioned
Milestones
Determine
Resource
Requirements
Prepare Cost
Estimate
Resource Load
Schedule
Finalize
Apportioned
Milestones
Determine
Funding
Constraints
Approve PMB

The Six Steps to Build the Performance
Measurement Baseline
4
Decompose the Project Scope into a product based Work
Breakdown Structure and then into Work Packages which
describe the production of all deliverables
Decompose
Scope
Assign Responsibility for Work Packages to named owners who
are accountable for the management of resource allocation and
cost baseline, and technical performance
Assign
Responsibility
Arrange the Work Packages in a well formed network with
explicitly defined deliverables, milestones and internal and
external dependencies
Arrange Work
Packages
Develop Time–Phased Budget (BCWS) from labor spreads in each
Work Package and balance these BCWS spreads across the
Project.
Develop
BCWS
Assign Objective Performance Measures for each Work Package
and summarize these for the Project as a whole. Use the
0%/100% measurement of complete whenever possible.
Assign
Performance
Measures
Establish a Performance Measurement Baseline to be used
forecasting Work Package and Project ongoing and completion
metrics.
Set
Performance
Baseline

These Definitions Will Help Clarify What
We’re Talking About
 Deliverables Based Planning – focused on
tangible outcomes
 Work Package – a unique collection of
deliverables with resources and deliverables
 Performance Measurement Baseline – forecasts
of future performance come from past
performance
 Performance Based Earned Value® – a means of
measuring progress using cost, schedule and
technical performance
5

Critical Success Factors For The
Performance Measurement Baseline
 Deliverables represent the required business
capabilities and its value as defined by the business
and shared by the development team.
 When all deliverables and their Work Packages are
completed, they are not revisited or reopened
– They are 100% done
 The progression of Work Packages defines the
increasing maturity of the project
– The business value of the deliverables to the customer
increases as Work Packages are completed
 Completion of Work Packages is represented by the
Physical Percent Completion of the project
– Either 0%/100% or Apportioned Milestones are used to
state the completion of each Work Package
6

Success Of The PMB Depends On
Identifying Measureable Results
7
What gets measured gets done1
If you don’t measure results, you can’t tell success from failure2
If you can’t see success, you can’t reward it3
If you can’t reward success, you’re probably rewarding failure4
If you can demonstrate results, you can remain credible7
If you can’t see success, you can’t learn from it5
If you can’t see failure, you can’t correct it6

Decompose The Scope Into A Proper “Tree”
8
Business Capability
Process Invoices for
Top Tier Suppliers
1st Level
Electronic Invoice
Submittal
1st Level
Routing to Payables
Department
2nd Level
Payables Account
Verification
2nd Level
Payment Scheduling
2nd Level
Material receipt
verification
2nd Level
“On hand” balance
Updates

Use This “Tree” To Decompose The
Project Scope Into Work Packages
 The lowest level of the Work Breakdown
Structure defines the Work Packages which
contain named deliverables
 The parents of these Work Packages collect the
business capabilities described in the baseline
requirements
 The narrative of each Work Package is the WBS
Dictionary
9

What Does A Good Work Package
“NOT” Look Like?
10
What NOT to do Instead Think About
It’s NOT a laundry list of work to be
done
It’s a decomposition of the
products, services, and data
generated by those
It’s NOT a functional decomposition That’s the role of the Organizational
Breakdown Structure (OBS)
It’s NOT a direct map of the
requirements
Requirements produce products and
services, but are not one for one
with the WBS
It’s NOT a reflection of the
underlying product or service
partitioning
This is done later in the program
strategy
It’s NOT the first structure you might
think of…
Build the WBS several times, assess
its usefulness in describing the
products and services

What Is “NOT” In A Work Package?
 Elements that are not products
 Project phases
 Rework, retesting, and refurbishing are not
separate elements in the WBS
 Non–recurring and recurring are not classes of
work
 Cost saving efforts like TQM and Lean are part of
the Level of Effort Workstream
 Cost for meetings, travel, computer support are
part of the level of effort Workstream
11

Some Attributes Of A Good Work Package
 All terminal nodes describe some end item in the
project – a product or a service
 Each physical deliverable is testable in some
manner to demonstrate it is working
 The WBS is an increasing fidelity description of
the deliverables produced by the project
 The WBS articulates what the customer wants in
terms of deliverables – the products or services
produced by the project
12

A Deliverables Focused Work
Breakdown Structure (WBS)
 From the requirements Tree construct a list of
Capabilities needed to satisfy the customer
needs
 From this list of Capabilities construct a list of
Deliverables that will fulfill the customer needs
 Arrange these deliverables into major systems
 This has likely already been done…so let’s have a
hands on exercise to draw this out
13

The Work Breakdown Structure
Connections With The Work Packages
 Product or services oriented
 Includes all work in the project
 Each element logically aggregates those
elements below it
 Reflects the manner in which the work will be
done
14
The WBS becomes the framework for Cost,
Schedule, and Technical Performance Measurement.
The WBS is the organizational structure for the Work
Packages

Connect The WBS To Work Packages And Then
Define The Tasks To Produce The Deliverables
15
Deliverables
WBS
Tasks and Schedule
Business Need
Process Invoices for Top Tier
Suppliers
1st Level
Electronic Invoice Submittal
1st Level
Routing to Payables Department
2nd Level
Payables Account Verification
2nd Level
Payment Scheduling
2nd Level
Material receipt verification
2nd Level
“On hand” balance Updates
Work
Package
1 2
3
4
6
5 A
B
Deliverables defined in WP
Terminal Node in the WBS
defines the products or
services of the project
Terminal node of the
WBS defined by a Work
Package
Tasks within the Work
Package produce the
Deliverables
100% Completion of deliverables is
the measure of performance for the
Work Package
Management of the
Work Package Tasks is
the responsibility of
the WP Manager.
These are not held in
the master plan
A decomposition of the work
needed to fulfill the business
requirements

Steps In Building The Work Packages
 Step 1 – define what is going to be delivered to
produce business value
– One or more Deliverables produced within a Work
Package
 Step 2 – define the effort and duration along with
the confidence levels
– Only effort and total duration
– Level of confidence for effort and duration
16

Decompose Business Capabilities Into
Deliverables, Then Work Packages, Then
Measurable Outcomes
17
Business
Capabilities
Capability
Number 1
Capability
Number 2
Deliverable
Number 1.1
Deliverable
Number 1.2
Deliverable
Number 1.3
Deliverable
Number 1.4
Work Package
Number 1
Work Package
Number 2
Work Package
Number 3
50% Milestone
50% Milestone
100% Milestone
100% Milestone
Deliverable
Number 2.1
Work Package
Number 4
100% Milestone
Deliverable
Number 2.1
Deliverable
Number 2.1
Work Package
Number 5
25% Milestone
75% Milestone
Increasing Detail of the Planning Outcomes
Increasing Value to the Customer

Step 1: Define The Deliverables And Their
Apportioned Value
18
Description Deliverable(s) Apportioned Milestones
Transaction processing
integration test
complete
Test plan compete and
approved
Author – 50%
Approval – 50%
Define integration
testing environment
Integration Test Plan complete
Test platform equipment
defined
Test environment defined
Test Plan – 25%
Equipment List – 50%
Environment – 25%
Business processes
defined and approved
Business process flow diagram 100%
User acceptance testing
defined
User Acceptance Plan
Developed
100%
User Acceptance Testing
Conducted
Test environment operational
User Acceptance Testing
performed with 90% success
UAT errors documented and
allocated for repair in next
release
Environment – 20%
UAT Conducted – 70%
Errors documented –
10%

Step 2: Define The Effort, Duration, And
Confidence Intervals
19
Description
Duration
Duration
Confidence
Effort
Effort
Confidence
Transaction processing integration test
complete
10w 1 2680h 2
Define integration testing environment 4w 1 480h 1
Business processes defined and
approved
6w 2 1200h 1
User acceptance testing defined 3w 2 800h 2
User acceptance testing conducted 4w 1 200h 1

Baseline Contents of a Work Package
 Description
 Assumptions
 Earned Value Method
 Basis of Estimate
 Predecessors and
successors
 Strategy for delivery
 Completion criteria
 Contents of the
deliverables
 Responsibilities
 Estimated duration
 Estimated effort
 Confidence intervals
 Resources
20
In theory there is no
difference between
theory and practice. In
practice there is.

Use Word Or Excel, It Doesn’t Matter
Just Capture The Contents In One Place
21
No matter what form is used, the function of the Work Package must
communicate to the participants the baseline information described in
the Table of Contents of the previous page.

Naming Work Packages May Seem
Simple – But What’s In A Name?
 The name should convey not only the work activities but
also the delivered result of these activities
 The project plan and the list of Work Packages is the
concise statement of the work for the project – all held in a
single place – the Project Plan
22
Maturity Action Product Product State
Adjective Verb Noun Verb
Demonstrates
Maturity
A step in the
process
End Item Final Status
Preliminary Design Processes Complete
Preliminary design of transaction processes complete

Work Package Description
 A clear and concise description of what the Work
Package produces in terms of deliverables
 This is your elevator pitch when someone asks
“what does the Work Package you’re working on
do when its all done?”
 Deliverables are meaning to the customer –
speak in deliverables terms
23
If you can’t tell the story
between the lobby and the
9th floor, then you haven't
got a clear picture of what
“done” looks like.

Assumptions
 Make it clear (and concise) what you expect to be
in place before the Work Package starts
 State these in terms of deliverables themselves
– What they are
– Who you’re getting them from
– A little bit of why you need them
 Have a mitigation plan when the assumption
isn’t true
24
Assumptions
are repulsive,
especially to
gravity.

Earned Value Method
 Think about how you would measure 100% done.
– Done, done
– Not, almost done
– Not, “I’ll be done soon”
 If the Work Package is self contained and 100%
done occurs at the end of the WP then use that
 If the Work Package has more than one
deliverable or the deliverable has incremental
functionality then Apportioned Milestones can be
used
25
Earned Value is how physical progress is measured
in the Performance Measurement Baseline.
Only delivered value to the customer is important.

Responsibilities
 Each Work Package has one and only one person
Accountable for the successful delivery of the
Work Package
– Put that person’s name on the Work Package
26
WBS
OBS
The Work
Packages are
where the work
and the people
come together

Assign The Responsibilities And Make A
Single Person Accountable
27

Arrange The Work Packages Into A “Well
Formed” Network
28
2nd Level
Payables Account
Verification
2nd Level
Payment
Scheduling
2nd Level
Material receipt
verification
2nd Level
Updates

A “Well Formed” Network Has Specific
Attributes
 Arrange Work Packages in a “Finish to Start”
network
 No Leads or Lags
 No Constraints – only “As Soon As Possible”
(ASAP)
 This network of Work Packages is the flow on
increasing maturity of the deliverables from the
project
29

“Arranging” the Work Packages Is
Iterative And Incremental
30
In the example above, the Work Package Managers collectively come to an agreement on
how the sequence of how the work will be performed.
The result is a collective ownership of the outcome. This ownership comes from the
collective development of the project plan.
This process is a Product Development Kaizen (PDK)

Develop A Time–Phased Budget
31
2nd Level System
Payables Account
Verification
2nd Level System
Payment
Scheduling
2nd Level System
Material receipt
verification
2nd Level System
Updates Duration of the Work Package
BCWS
Duration of the Work Package
BCWS
BCWS
BCWS

Balance All The Work Across The Project
Before Setting The Baseline
32
Activity
ID
Activity
Description
Orig
Dur
Rem
Dur
Actual/
Expected
Start
Actual/
Expected
Finish
Budgeted
Cost
M S
Type
EVM
%
Cm p
1.2 VACUUM SYSTEM
1.2.3 StandardDrifts& Transitions
S traight SectionTransitions (14) & Gap Rings
1.2.3.1 E D& I
S2 0 1 2 1 T ra n s ., Co n c e p tu a l De s i g n 6 0 0 1 4 OCT 9 9 A 1 8 J AN0 0 A 4 3 , 1 1 3 .6 0
S2 0 1 2 2 T ra n s ., F i n a li z e De s ig n 8 0 2 8 1 9 J AN0 0 A 0 8 J UN0 0 4 0 , 2 4 0 .0 0
S2 0 1 2 3 T ra n s , F in a l De s ig n Re v ie w 0 0 0 8 J UN0 0 0 . 0 0 EVM 5 0
S2 0 1 2 4 T ra n s ., Dra win g s 1 0 0 5 8 0 2 F EB0 0 A 2 1 J UL 0 0 3 7 , 3 6 6 .4 0
S2 0 1 2 5 T ra n s ., Dra win g s Co m p le t e 0 0 2 1 J UL 0 0 0 . 0 0 EVM
S2 0 1 2 6 T ra n s , Su s ta i n i n g En g i n e e ri n g 1 4 0 1 4 0 2 4 J UL 0 0 1 6 F EB0 1 1 8 , 1 0 7 .0 4
S2 0 1 2 6 A T ra n s , Su s ta i n i n g En g i n e e ri n g Co m p l e te 0 0 1 6 F EB0 1 0 . 0 0 EVM
1.2.3.2 MS& L
S2 0 1 2 8 T ra n s , Ord e r Pa rt s & M a t e ri a l 4 0 4 0 2 4 J UL 0 0 1 8 SEP0 0 0 . 0 0
S2 0 1 2 9 T ra n s , Re c e iv e Pa rts & M a te ri a l 0 0 1 8 SEP0 0 2 9 , 0 0 0 .0 0EVM
S2 0 1 3 1 T ra n s ., M a c h in e Pa rts 1 s t L o t 1 0 0 1 0 0 1 9 SEP0 0 1 6 F EB0 1 1 0 3 , 0 0 0 .0 0
S2 0 1 3 2 T ra n s , Re c e iv e Ba l a n c e 0 0 1 8 SEP0 0 0 . 0 0 EVM
S2 0 1 3 3 T ra n s , As s e m b le Bra z e 7 0 7 0 1 9 SEP0 0 0 4 J AN0 1 6 5 , 9 2 0 .0 0
S2 0 1 3 4 T ra n s , Va c u u m Pro c e s s 4 0 4 0 3 0 NOV0 0 0 2 F EB0 1 3 7 , 0 8 0 .0 0
S2 0 1 3 5 T ra n s , RF I 0 0 0 2 F EB0 1 0 . 0 0 EVM
1999 2000 2001
AUGSEPOCTNOVDECJANFEBM ARAPRM AYJUNJULAUGSEPOCTNOVDECJANFEBM ARAPRM AYJUNJULAUGSEPOCT
R e s o u rc e /C o s t P ro f il e L e g e n d
T o t a l e a rl y c o s t p e r M o n t h ( C u rre n t E s t im a t e )
T o t a l o f A ll R e s o u rc e s D e t a il s c a l e ( le ft ): X 1 0 0 0
AUGSEPOCTNOVDECJANFEBM ARAPRM AYJUNJULAUGSEPOCTNOVDECJANFEBM ARAPRM AYJUNJULAUGSEPOCT
1999 2000 2001
10
20
30
40
50
x 10 00
© P rimavera S ystems, Inc.
St a rt Da t e 0 1 J UN9 9
F i n is h Da te 0 5 M AR0 2
Da t a Da t e 0 1 M AY0 0
Ru n Da te 3 1 M AY0 0 1 3 : 2 9
E arly B ar
P rogress B ar
C ritical Activity
S PR3 - V ACM
1.2 V acuum S ystem
S heet 1 of 1

Identify Objective Measures Of
Performance For Each Work Package
 Define the Planned Value for each Work Package
completion or apportioned milestone within a
Work Package
 Only Physical Percent Complete should be used
to measure progress – there can be no personal
“opinions” of progress
33
Physical Percent Complete CummBCWP BCWS 

Set The Performance Baseline
 Baselining the Performance Measurement
Baseline is the beginning of Executing the
project plan
 Without the baseline and the change control over
this baseline, the performance predictions will
be difficult
34
There are two phases of any complex project …
Too early to tell and too late to stop

Build The Apportioned Milestones And
Assign Physical Percent Complete
 Identify each incremental deliverable in the
Work Package
 Assign an apportioned value to that deliverable
 Document the evidentiary materials for the
incremental deliverable and its assigned
percentage value
 Identify the delivery date for the apportioned
milestone in the schedule
35
1 mile = 1,000 (mille) paces
= 1,640 yards .
Introduced to Britain by the Romans
The passage of a milestone meant progress to the destination.
But it is critical to pre-assign value to each milestone and record
this value as the milestone is passed

Assemble The Work Packages Into A
Credible Schedule
 Start with Work Packages and their total BCWS
spreads
– Total WP duration – in the Duration field
– Total WP work effort – in the Work field
– Start dates aligned with the project start date defined
in the Project menu
– The result is a Gantt–style picture of the flow of WP
value
36
Henry Laurence Gantt, A.B., M.E
1861–1919

Project Maturity Flow Is The Incremental
Delivery Of Business Capabilities
37
Pilot
Data
Enrollment
Integrators
Quality Monitor
Internal
Router
External Interfaces
Finance Loss
Data Store Lookup
Data Warehouse
Data Marts
Data Marts
Portals and others
Billing
Resale's
Emulations
Demo conversion process, member reconciliation
Shared group matrix reports and interfaces
Shared member crosswalk and members to ERP
Integrators in ERP converted to inventory
Status and trigger conversions
Data in Marts for ERP
Material Master
Converted from legacy
External Vendors
converted to ERP
TBD
Vendors from legacy
Material converted end–
to–end

Analyzing And Assessing The Network Of
Work Packages Requires Understanding
 Critical path
 Accuracy
 Integration
 Realism
 Performance
 Variances
 Forecasting
 What–If Analysis
 Risk
 Resources
38
A credible schedule cannot
be just a list of activities. It
must be an accurate model
of the project strategy and
execution that can be
analyzed, assessed, and
used to answer risk based
questions.

A “Very” Simple Risk Management Process Is
Needed To Establish Credibility
39
Planning Identification Analysis Handling
Communication
and
Tracking
 Build the process for managing risk
 Allocate responsibilities at the project level
 Determine What is to be Risk–Managed
 Do a comparative analysis of the risks
 Assign risk attributes
 Assign risk ownership
 Evaluate the impact of each risk
 “A” Risk
 “All” Risks
 Prepare risk decision–packages
 Define the Decision–Making Process
 Iterate the analysis to select mitigation
 Keep everyone aware of decisions made
 Track progress
 Evaluate effectiveness of the risk management processes
“Risk Analysis Techniques, Schedule, Cost and Other Aspects, INCOSE Heartland
Chapter October 24, 2001, Futon Corporation

Integrating Cost, Schedule, And
Technical Performance
40
Cost, Schedule, Technical Model†
WBS
Task 100
Task 101
Task 102
Task 103
Task 104
Task 105
Task 106 † This is a Key concept. This is the part of the process that
integrates the cost and schedule risk impacts to provide the
basis of a credible schedule.
Probability
Density
Function
 Research the Project
 Find Analogies
 Ask Endless Questions
 Analyze the Results
 What can go wrong?
 How likely is it to go wrong?
 What is the cause?
 What is the consequence?
Monte Carlo Simulation
Tool is Mandatory
1.0
.8
.6
.4
.2
0 Days, Facilities, Parts, People
Cumulative Distribution Function
Days, Facilities,
Parts and People

There Is Technical And Programmatic
Risk – Both Must Be Addressed
• There are two types of “uncertainty”
on any sufficiently complex project:
– Technical – uncertainty about the
functional and performance
aspects of the project's technology
that impacts the produceability of
the product or creates delays in the
schedule
– Programmatic – uncertainty about
the duration and cost of the
activities that deliver the functional
and performance elements of the
project, independent of the
technical risk
41
So much for our strategy of winning
through technical dominance

Wrap Up
42
A good plan, violently executed
now is better than a perfect plan
executed next week
– General George S. Patton

In The End Its All About The Schedule
• A slipping schedule is simply unacceptable
• “Attack” the schedule as soon as possible and
never stop attacking
• Update schedules monthly or more frequently,
look at it everyday
• Earned Value really works if – and this is a big if –
you are ruthless about following the EV process.
This can’t be said strong enough – use EV in the
way it was designed to be used.
• Keep all the data “clean” and use it to make
management decisions
43

Troubled Projects Always Have A
Common Set Of Attributes
 Inattention to budgetary responsibilities
 Work authorization not always followed
 Budget and data reconciliation issues
 Lack of an integrated management system
 Baseline fluctuations &frequent replanning
 Current period and retroactive changes
 Improper use of management reserve
 Earned Value techniques not reflecting actual accomplishments
 Untimely and unrealistic Latest Revised Estimates (LRE)
 Progress not monitored in a regular and consistent manner
 Lack of vertical and horizontal traceability (critical path)
 Not capturing and using cost and schedule data for corrective action
 Lack of predictive variance analysis
 Lack of internal surveillance and controls
 Managerial actions not demonstrated using Earned Value
44
A ship on the beach is a lighthouse
to the sea – Dutch Proverb

Establishing the Performance Measurement Baseline

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