Lecture04 slides

Mgt 610 Strategic Perspectives on Project Management
(c) 2013, Thomas Lechler. All rights reserved.For academic use only. 1
MGT610
Lecture 4
Elements of the Project Value Scorecard
Dr. Thomas Lechler Phone: (201) 216-8174
Babbio Center 636 FAX: (201) 216-5385
email: tlechler@stevens.edu

Lecture 4: Topics and Objectives
Implementing a Project Value Strategy by Applying
Project Value Scorecard
– Defining project objectives with the SMART principle
– Applying the Principles of the Balanced Scorecard
– Translating Project Value Strategy™ into a Project Value
Scorecard™
– Defining the four project value perspectives
– Evaluating the strategic points of leverage to achieve the
project’s comparative advantage

Definition of Project Strategy
The project perspective, direction, and guidelines on what to do
and how to do it, to achieve the highest competitive advantage
with the project results.
It is the creation and the management of the degrees of freedom in
a project to maximize the competitive advantage of a project.
A strategy stipulates what resources are required, why they are
required, when they are required, where they are required, and
how they will be used to accomplish ends. (Cleland, King, 1988,
p.168)

Defining Project Value Strategy
The Three Strategy-Making Tasks
1. Vision/Mission,
2. Objectives,
3. Strategic Choice

Project Value Strategy: Elements

Mission Statement: Functions
Functions of a Mission Statement (what is our project?)
– To establish a sense of direction within the project and to guide the
project management process by providing a basis for objectives and
strategies
– To influence decisions about resource allocation
– To help build and communicate
among team members a sense of
shared purpose
– To communicate an attractive and
compelling image to external
stakeholders
– To support the core values
of the organization
Key Questions
– What is our project?
– What do we want to become?
– Who are our stakeholders?
– What do our stakeholders
value?

Defining the Project Value Mission
A MISSION STATEMENT should
• Set project apart from others
• Arouse strong sense of organizational identity &
business purpose of the project
A well-crafted mission statement
• Must be narrow enough to specify real arena of interest
• Serves as boundary for what to do & not do
• Serves as beacon of where project manager intends to
take project
A MISSION STATEMENT includes
• Business Need
• Business Justification

Business Need
• Expressed as a goal or as a problem
derived from the corporate strategy.
– A goal is a measurable outcome that is desirable to
achieve.
• I want to travel to Denver.
• I want to become a Project Management Professional.
– A problem is stated as the gap between “the desired
state” and “the current state.”
• I will travel from Newark to Denver.
• I will obtain 4,500 hours of project-related work experience
and pass the certification exam to qualify for the Project
Management Professional credential.

Project Justification
• States the reason for undertaking the
project. Explains why business need
described in previous header should be solved.
– I want to visit my family in Denver.
– I plan to seek new employment opportunities.
– I plan to relocate to the Denver area.
– I plan to sightsee while in Denver.
• The justification should influence future
decisions about what to do in the project.

Mission Statement: Examples
• Mission Statements
– Otis Elevator: Our mission is to
provide any customer a means
of moving people and things
up, down, and sideways over
short distances with higher
reliability than any similar
enterprise in the world.
– American Red Cross: To
improve the quality of human
life; to enhance self-reliance
and concern for others; and to
help people avoid, prepare for,
and cope with emergencies.
Key Questions
value?

Project Vision
A Project Value Vision
• Identifies activities project intends
to pursue
• Sets fourth long-term project direction
• Provides big picture perspective of
Who WE are, what WE do, where WE are
headed
• Expressed by highlighting the most important
value perspective to be achieved to maximize
the project value

Vision Statement: Functions
• Functions of a Vision Statement (what do we want to become?)
– To articulate where the project hopes to be in the future. Can be
3-5 years out or beyond.
– Vision statements are intended to challenge and energize people
to achieve. They do not necessarily
have to be 100% realistic.
– Vision statements should also
be memorable so that people
keep it in mind when creating
and implementing strategy.
Strategic Key Questions
value?

Vision Statement: Examples
• Vision Statements
– McDonald’s Corporation: McDonald’s vision is to dominate the
global foodservice industry. Global dominance means setting
the performance standard for customer satisfaction while
increasing market share and profitability through our
Convenience, Value, and Execution Strategies.
– Microsoft Corp: One vision drives
everything we do: A computer on
every desk in every home using
great software as an empowering
tool.
Strategic Key Questions
value?

Outcome: Description
• Provides a brief narrative description of
the solution to the identified business need .
• If the product scope has already been defined, then an
appropriate reference to supporting details such as the
operational definition and/or contract should also be
indicated.
– Fly roundtrip to Denver and make arrangements to
stay for two weeks. Visit family. Refer to travel
itinerary for details.
– Fly roundtrip to Denver and make arrangements to
stay for two weeks. Meet with potential employers.
Refer to travel itinerary and meeting schedule for
details

Project Value Statement: Elements
Elements of Project Value Statement:
• Mission: Project justification and its business need
• Outcome: Description and project deliverables
• Vision: Value Focus
• Project Value Scorecard: Objectives to implement project value
strategy
• Shareholder Value
• Stakeholder Value
• Outcome Value
• Effort Value
• Constraints
• Assumptions
Shareholder
Value
Outcome
Value
Stakeholder
Value
Effort
Value

Outcome: Deliverables
• List the major, tangible components of the
solution (the major outputs) that must be
provided in order for project to be considered complete.
• Use bullet points to indicate each discrete deliverable.
– Roundtrip air transportation tickets
– Hotel reservation confirmation number
– Hotel room
– Rental car
– Three meals per day
• Listed deliverables will vary based upon product
description and the project’s justification.

The Elements of a Project Strategy
Project Mission
– Why is this project undertaken, why does it exist?
– What is the major contribution of the project to the company?
Project Vision
– What is the competitive advantage the project should achieve?
– Clear picture of the project overall goal in a measurable statement.
Project Strategy
– How to achieve the project mission and vision?
– It is the decision framework guiding the implementation.

Strategy Implementation Problems
What you measure is what you get!
• Measurement affects the behavior of employees and
• managers.
Traditional project performance measurements …
like Earned value status reports, critical path etc.
.. give misleading signals
No single measure can provide a clear performance target or
focus attention on the critical areas of the business.

Project Value Scorecard Functions
 Project Value Scorecard forces managers to focus on the
handful of measures that are most critical to maximize project
value.
 Project Value Scorecard forces managers to develop SMART
objectives.
 Project Value Scorecard guards against sub optimization.
 Project value scorecards measure the core competencies to
innovate, to efficiently deliver a specific value to the market,
which will lead to higher shareholder value.

Project Value Scorecard Functions
The Project Value Scorecard is a framework to define S.M.A.R.T
objectives:
– Specific – The objective tells exactly what, where, and how the
problem or need is to be addressed.
– Measurable – The objective tells exactly how much, how many,
and how well the problem/need will be resolved.
– Actionable - The objectives can be translated into a specific gap
that can be eliminated .
– Realistic – The objective can be achieved with the available
resources.
– Time – The objective includes a specific date for it's achievement.

Project Value Scorecard
Stakeholders Effort“To satisfy our
shareholders
and stakeholders,
what project
processes must
we excel at?”
Outcome
“To achieve our
vision, how
should we
develop the
outcome?”
Shareholder“To succeed, how
could we
maximize the
project value for
our
shareholders?”
Vision
and
Strategy
“To achieve our
project vision,
which needs of
the stakeholders
are to be
satisfied?”

Project Value Scorecard: Basic Structure
Stakeholder Value
“To achieve our project vision, how should we appear to our
stakeholders?”
Objectives Measures Targets Initiatives
During the
project
Project
Close Out
Long term

Project Scorecard Element: Objectives
Definition:
An objective is a statement, derived from a project goal, that
describes a short-term, specific, verifiable condition that must
exist to fulfill the affiliated goal. It is a need expressed as a want or
as a gap.
Examples:
1. Business Shareholder: Positive ROI (Return on
Investment)
2. Project Stakeholder: High satisfaction of end users and/or
customers
3. Project Outcome: High product/ process functionality
4. Project Effort: Fast-to-market

Project Value Scorecard: Measures
Definition:
A project related measure or metrics is a count or a measurement
that can be economically observed and captured. It is a basis for
comparison; a reference point against which other things can be
evaluated; or units to quantify project performance.
Examples:
1. Business Shareholder: ROI
2. Project Stakeholder: #Complaints
3. Project Outcome: #Defects
4. Project Effort: Schedule, budget

Project Value Scorecard: Targets
Definition:
A project target is a reference point and is expressed in units of
the measurement or metrics. It is a specific indicator value to be
accomplished.
Acceptable uncertainty expressed as USL – LSL.
(Upper Specification Limit – Lower Specification Limit)
Target = (USL – LSL) / 2
Examples:
1. Business Shareholder: ROI of 10%
2. Project Stakeholder: 10 complaints
3. Project Outcome: 0 Defects
4. Project Effort: 10% Schedule or budget overrun

Project Value Scorecard: Initiatives
Definition:
A project specific strategic initiative is not visible in the
project network and expresses an exceptional not
standard activity which has to take place in a specific
project to maximize project value.
Examples:
1. Business Shareholder: Top-management presentations
2. Project Stakeholder: Customer relations
3. Project Outcome: Creativity processes
4. Project Effort: Communication structure

Project Value Scorecard: Shareholder Perspective
A shareholder is a person (individual or corporation) who owns
shares in the corporation.
Goal: Create the “right” values!
How could we maximize the shareholder value?
– All project activities are related and lead to financial results.
– Return on capital employed improves
– Share price increases
Two Basic Strategies
1. Revenue Growth Strategy
– Revenue from new sources
– Customer profitability increases
2. Productivity Strategy
– Reduce operating cost per unit produced
– Improve asset utilization

Generic Shareholder Measures
• Return of Investment (ROI)
• Profitability Index
• Pay back period
• Net Present Value (NPV)
• Free cash flow
• Economic Value added (Profit-Opportunity
costs)

Project Value Scorecard: Stakeholder Perspective
Any party that has an interest ("stake") in a project.
Goal: Satisfy the “right” needs!
Four Categories of Stakeholder (Customer) Concerns:
Time – Quality – Performance and Service – Cost
1. Cost – Product Price, TCOO
2. Time – Lead Time from order to delivery (existing products)
Time to market of new products
3. Quality – Defect level of returned products
On time delivery
4. Performance and Service – % new products
% proprietary products, on time delivery

Generic Stakeholder Measures
Overall stakeholder satisfaction with deliverables in terms of:
• Reliability, Defects, Usability, Response time, Ease of use
• Availability, Flexibility, Intuitiveness, Security
• Easy to understand user documentation
• Application response time (calculated by the system)
• Number of approved business requirements satisfied by the
project
Overall client satisfaction with the project team in terms of:
• Responsiveness, Competence, Accessibility, Courteous,
Communication
• Credibility, Business knowledge, Reliability/follow through,
Professionalism, Training,
• Turnaround time required to respond to client queries and
problems, Average time required to resolve issues

Project Value Scorecard: Outcome Perspective
Any tangible or intangible asset a project generates: Process,
product, system, etc.
Goal: Doing the “right” things
Innovativeness and technical performance of outcome is critical.
Can we continue to improve and create value?
How are the TCO affected?
Does the installed or followed process create an acceptable
outcome quality?

Generic Outcome Measures
• Total support costs for x months after solution is complete
• Cost associated with building components for reuse
• Total cost per transaction
• Percentage of deliverables going through quality reviews
• Percentage of deliverable reviews resulting in acceptance the first time
• Number of defects discovered after initial acceptance
• Percentage of deliverables that comply with organization standards
• Number of hours or dollars saved from process improvements
• Number of hours of rework to previously completed deliverables
• Number of client change requests to revise scope

Project Value Scorecard: Effort Perspective
Goal: Doing the things “right”
What must the project do internally to meet its stakeholders’ and
shareholders’ expectation?
• Excellent performance for customers derived from processes,
decisions and actions occurring throughout an organization.
• Focus on those critical activities that enable them to satisfy
customer needs.
• Measures for those processes which have the greatest impact
on stakeholder and shareholder satisfaction.
• Identify and measure project core competencies
• Measures to develop and introduce the next generation of
existing products rapidly

Generic Effort Measures
– Total labor costs vs. non-labor (vs. budget)
– Total cost of employees vs. contract vs. consultant (vs. budget)
– Ideas for cost reductions implemented and cost savings realized
– Actual effort vs. budget (variance)
– Amount of project manager time vs. overall effort hours
– Actual duration vs. budget (variance)
– Effort hours per unit of work/function point
– Work units/function points produced per effort hour
– Effort hours reduced from standard project processes
– Effort hours saved through reuse of previous deliverables, models,
components
– Number of process improvement ideas implemented
– Number of best practices identified and applied on the project

Project Value Scorecard: Strategic Framework for Action
Clarifying and Translating
The Vision and Strategy
•Clarifying the vision
•Gaining Consensus
Communicating and
Linking
•Communicating and
Educating
•Setting Goals
•Linking rewards to
performance measures
Strategic Feedback and Learning
•Articulating the shared vision
•Supplying Strategic feedback
•Facilitating strategy review and
learning
Planning and Target Setting
•Setting Targets
•Aligning strategic initiatives
•Allocating resources
•Establishing milestones
Project Value
Scorecard

Planning a Project Strategy – Step 1
• Define your project and its objectives in support of:
• 1. What are the value propositions of the business?
Are they the same like the customer?
• 2. Who are the customers?
• What are the value propositions of the customer?
• 3. How should the products/ processes look like?
What technologies are needed? What are the specifications?
• 4. What resources are needed? What knowledge has to be
• developed? How will this contribute to future value?

Planning a Project Strategy – Step 2
Start with a status analysis of the project definition
What is the project mission, does it need clarification?
Define the project vision, what are the core values?
Assign the objectives to the four value perspectives
Which objectives are missing?
Which measures are missing?
What are the environmental issues?
Activate People

Project Value
Network
Perspective
Objective Measure Target Initiative
Effort On-time SV, SPI SV = 0d +/-
10ed
SPI = 1.0 +/-
0.05
Create bottom-
up schedule
using CPM
techniques
Outcome Authorized
work is fully
completed
Count of
deliverables
formally
accepted by
customer
Promised
deliverables =
formally
accepted
deliverables
Formal
acceptance
criteria
established in
scope
management
plan
Project Scorecard Basic Structure

Project Value
Network
Perspective
Objective Measure Target Initiative
Stakeholders Increase
satisfaction by
creating
quality
# Defects,
Response
time
Acceptable
quality
expressed as
USL – LSL.
Target = (USL –
LSL) / 2
Name of specific
quality activity
performed in the
project
Shareholders Increase
wealth by
receiving
stock
dividends
Free cash
flow
generated
from the
project
Payback
achieved in 12
months +/- 2
months
Establish PMIS
to track project
cashflows from
initiation until 6
months after
project
termination
Basic Scorecard Structure

Summary
• The Project Scorecard is a Planning Tool
• to implement a project strategy
• in form of a project metrics
• which covers all project value areas

Project Value Statement: Constraints
• Significant limitations to alternatives
that can be considered by the project
team in providing the solution to the
business need.
– Identifies the high-level limits (boundaries) that cannot be
crossed by the project team when providing the project’s
solution.
• Use bullet points to indicate each constraint.
– Relocation to Denver is not financially possible unless hiring
employer pays for relocation expenses.
– Interview appointments cannot be missed (due to late arrival at
the interview site).

Project Value Statement: Assumptions
• Identify significant factors that for
planning purposes have been assumed to
be real and/or true.
– These high-level assumptions will be useful in making future
decisions about work being performed by the project.
• If one of these assumptions turns out to be false, then
– the business need would no longer be relevant, and/or
– the product description would no longer provide a feasible
solution to the business need.
• Use bullet points to indicate each assumption.
– Employers in Denver will pay relocation expenses for the type of
job I am seeking.
– Interviewers will comply with EOE/AA guidelines and not
discriminate against a protected class of potential applicants.

Project Value Statement: Process
1. Define Project Mission
• Assumption is mission is
somewhat given
• Assumption of project value is
often not clearly defined
2. Define Project Vision
3. Describe Project Outcome
– Outcome
– Deliverables
4. Quantify Project Value
– Stakeholder Value
– Shareholder Value
– Outcome Value
– Effort Value
5. Document Key Assumptions
and Constraints
1
2
3
4
5
Minimum of 2
review loops

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