m t ca © canberra 2002 adaptive enterprises performance management in a volatile environment

MTCA © Canberra 2002

Adaptive EnterprisesPerformance Management in a

Volatile Environment


Premise

• A Performance Management revolution is occurring in management organisations caused by:

– S-11– Corporate Collapses– Economic Decay– Growth of Project Management/Work Teams– Rapidly Changing Market Conditions

• Adaptive Information Infrastructures are required

• A Paradigm for Performance Management is Required to Advance the State of the Art


Overview

• Causal Factors• Adaptive Enterprise Performance

Management• A Performance Management Paradigm• EVM as a possible solution


Causal Factors

• S-11– FBI problems-information was there but not surfaced to

decision leadership– Increasing demand for real time on line information– Increased demand for efficient and effective defence spending

• Corporate disasters-Enron, Worldcom, HIH, OneTel

– Decision leadership claim no knowledge of impending disasters (corruption aside)

– Increased focus on Governance and Independent review

• Economic Stagnation– Japan, US, placing more demand on efficient accomplishment

of project expenditures with better predictive capability


Causal Factors-Continued

• Proj Mgmt/Work Teams are emerging in traditional organisation where only functional management was previously recognised-ie- the “Phone Company”

• Causes– Dynamic markets– Complexity– Rapidly changing technologies– Competitive environments– Information Explosion– Shortage of time and resources

• Proj Mgmt concept is replacing line management and operation


Causal Factors-Telephone Company Projects

• Fibre optic cables• Itemised billing• Timed Calls• 10 digit numbering• Message Bank• Faxstream• Cable television• Virtual network• ……and 30,000 other projects per year


Causal Factors-THE NEW AGE PROJECT MANAGEMENT SPACE:

“In any given year, I have 200 ongoing projects, most with turnaround of less than 90 days.

I learn about changing requirements from the evening news as often as from line sponsors.

About 85 percent of these projects will fail or be terminated, but the 15 percent that make it will be

$10 million revenue streams.

None of the project management philosophies I learned in my 20 years in IT seem appropriate.

It’s like Einsteinian physics—the old rules don’t apply when things approach the speed of light.”*

*Built for Speed, Working Council for Chief Information Officers, Corporate Executive Board 2000


New-Space Project Imperatives

• Speed-First to market• Payback-Business Benefits

Causal Factors


Management of Knowledge

• Evolution from traditional economies based on manufacturing and extraction of raw materials to post industrial economies based on knowledge

• Remaining jobs are becoming more and more complex and multi-disciplinary

• Exponential increases in knowledge and technological advances

• Cooperative atmosphere within organisations is most conducive to gains in knowledge

1 1 3


Challenge for Traditional Organisations

• “Traditionally structured organisations were inherently designed to maintain the status quo rather than respond to the changing demands of the market” Melvin Ashin, Harvard Business Review, 1970

• “When the work that needs doing changes constantly, we can not afford the inflexibility that (bureaucratically defined job positions) brings with it.” William Bridges, “The end of the Job”, Fortune, Sept 19, 1994

• Nor can we continue to build static performance management infrastructures


Directions for Performance Management

• A common language-development of a Performance Management Paradigm

• New Management Roles– Involved Decision Leadership

• Development of Performance Management Culture

– Internal & External

• Technology Infrastructure – From proprietary approachs to set of standards-based services

• Adaptive Performance Management Infrastructures Based on Changing Objectives


Common Language-Definitions

• Enterprise Performance Management?:– The endeavours associated with the systematic provision of information

to management in order to make programmatic decisions


Common Language-Definitions

• Enterprise?:– Large or small organisation in a Multi-Project Environment

• Systematic?– Disciplined processes rather than Tools

• Management?– Any involved decision maker

• What information does management need?– That which changes their behavior


Perceived Need

Technology Software

Common Language- The Domain Of Performance Management

Technology

Leadership

Cultural Change

Product

Process Management(Progress)

TPMPSM

CMMsEVM

CPMPERT

BalancedScorecard

SixSigma FPA

RiskMgmt

ImplementationLeadership

DecisionLeadership

TechnologyLeadership

User Friendly

Training& Support

Change Mgmt Value Added

Mgmt Involvement

PM3

Acceptability

Forecast & Feedback

Knowledge Rqmts

Process Disciplines&

Information Infrastructures


An Earned Value Approach to Adaptive Enterprises

• Earned Value Management Technology focused on data integrity rather than system discipline

• Supported by – Enterprise Capability Models with Performance Indicators

unique to the organisation– Individual Competency/Proficiency Program


New Management Roles

• Yesterday’s ambitious managers were easily recognised as the ones who grabbed for power, tomorrow’s ambitious managers will be those who give it away skilfully”David Casey,

• “Managing Learning in Organisations” Open University Press, 1993


New Management Roles

• Project Team Management • Functional Resource Management


Project Management

• Create Corporate and Project WBS– Long range strategic plans known to the work force– Short term plans become basis for Project Team

• Outlines of capabilities/resources needed to staff both short term and long term programs

• Tactical planning of project resource requirements• Manage work team performance at a macro level

leaving implementation to Teams to the maximum extent possible

• Project Managers are cross-functional liaison, bringing team members across as required


Functional Managers

• Provide functional specialists for Project Work Teams

• Provide Human Resource infrastructure– Hiring/firing– Training– Individual Performance Management

• Strategic planning of labour resources


Management Systems

• Inspite of the growth of proj mgmt-the management systems have remained static

• Most organisations do not know cost of projects due to the inability of the old line “accounting system” to track project costs or performance


Earned Value Management Systems

• EVMS is Project Management with an Attitude!!!!!!


Tailored Performance Management System

PRO PUL SIO N

W ING F US EL A G E

A IR F RA M E C OM M S F IRE C ONT RO L

A IR V EHIC L E D A T A T RA INING

W E A PON SYST EM

2 4 6 8 10 12 14 16 18

START COMPLETE MASTER SCHEDULE

ENG'G

PROCUREMENT

SITE WORK

CONSTRUCT STRUCTURE

DETAILED SCHEDULE

EXCAVATE

FILL & COMPACT GRADE

INTERMEDIATE SCHEDULE

1212

1616

2020

$24$24{

22 44 66 88 1010 1212 1414 1616 1818

44

88

YEARSYEARS2020

TIME TIME NOWNOW


Monitoring Project Team Performance

• Corporate management has an obligation and a right to know just what is going on

• Hierarchical control and monitoring of company activities must be in place

• Comprehensive plans must be developed by management

• Performance measurement of teams must be derived from cost, schedule and technical events reporting

• Measurement systems must include a “menu” of control techniques from which to select and appropriate set

• Managers develop a “trust” attitude to teams, engendered by comprehensive measurement information


• Corporate WBS is very critical• The accounting systems must be capable of

tracking expenditures of project teams both in terms of labour and material

• Earned Value methods could be employed to assure achievement of objectives.

• Use of these methods must become second nature to the work team members.

• Baseline maintenance must be employed but balanced with the dynamic nature of project teams

Control System Characters


• Upper level focus on organisational objectives

• Lower level focus on project scope• Objectives

– Performance management– Funds tracking– Historical cost data base

• Eliminates the need for continual reorganising

– Upper levels can readily change as objectives change– Reduce need for reorganising– Relationship between levels ensures project-corporate

objective compatibility

Corporate Work Breakdown Structure


Corporate WBS Example• 1.0 Corporate structure1.0 Corporate structure

– 1.1 Projects1.1 Projects» 1.1.1 Development project1.1.1 Development project» 1.1.2 Commercial project1.1.2 Commercial project» 1.1.3 Production project1.1.3 Production project

– 1.2 Tendering1.2 Tendering» 1.2.1 Commercial tender1.2.1 Commercial tender» 1.1.2 Government tender1.1.2 Government tender

– 1.3 Business development1.3 Business development» 1.3.1 Marketing1.3.1 Marketing

• 1.3.1.1 Name change1.3.1.1 Name change• 1.3.1.2 Trade show1.3.1.2 Trade show• 1.3.1.3 Expo’S1.3.1.3 Expo’S

» 1.3.2 Product development1.3.2 Product development• 1.3.2.1 New product A1.3.2.1 New product A• 1.3.2.2 New product B1.3.2.2 New product B

– 1.4 Business processes1.4 Business processes» 1.4.1 EVPMS1.4.1 EVPMS» 1.4.2 MIS1.4.2 MIS» 1.4.3 MRP1.4.3 MRP

– 1.5 Human factors1.5 Human factors– 1.6 Facilities1.6 Facilities– 1.7 Expansions1.7 Expansions– 1.8 Operations1.8 Operations


RAM=CWBS/OBS Integration

BUSBUSDEV’LDEV’L

PRODPRODDEV’LDEV’L

PRODUCT APRODUCT A

ProjectProjectTEAMTEAM

²

²

² ²²

² ²²

²

²

²

²²²

²²²²

²²

WORK WORK PACKAGESPACKAGES

PLANNING PLANNING PACKAGESPACKAGES

WBS DATA WBS DATA SUMMARISATIONSUMMARISATION

OBS DATA SUMMARISATIONOBS DATA SUMMARISATION

MECHANICAL MECHANICAL DESIGNDESIGN

ANALYTICAL ANALYTICAL DESIGNDESIGN

DRAFTING DRAFTING AND

CHECKINGCHECKING

QUALITY ASSURANCE

COMPANY

BCWS,BCWP, BCWS,BCWP,

ACWP,BAC,EACACWP,BAC,EAC

FUNCTIONAL ORGANISATIONORGANISATION

DESIGNDESIGN

TECHNOLOGYTECHNOLOGY

ENGINEERING

OPERATIONS


A1

B1

A3

B2

C1

CORPORATECORPORATEWBSWBS

Project xyzProject xyz

Cost AccountCost AccountAA

Cost AccountCost AccountBB

B1B1B2B2

B3B3

A1A1A2A2

A3A3

Project Master Project Master ScheduleSchedule

Schedule Structure

UPPER WBS LEVELS MAY NOT BE SCHEDULE ORIENTEDUPPER WBS LEVELS MAY NOT BE SCHEDULE ORIENTED

LOWER LEVEL PROJECT SCHEDULES NOT INTEGRATEDLOWER LEVEL PROJECT SCHEDULES NOT INTEGRATED

RELIANCE ON EV SCHEDULE REPORTING AT UPPER LEVELSRELIANCE ON EV SCHEDULE REPORTING AT UPPER LEVELS


Corporate Budget

Operational Budgets(Operational Expenses)Project Budgets

(Capital Investment)

Corporate Objective 2 BudgetCorporate Objective 1 Budget

Project 2.1Project 1.2Project 1.1 Project 2.2

• Presents challenges due to accounting conventions

– Tax Categories– Overhead– Reconciliation with

General Ledger

Budget Distribution


WORK AUTHORISATION CYCLE

CUSTOMERFUNCTIONAL

ORGANISATION BUSINESS CASE

FUNDING AUTHORISATION

PROGRAM ORGANISATIONPROGRAM MANAGER

PROJECTMANAGER PROJECT

OFFICE

COST ACCTMANAGER A

COST ACCTMANAGER B

COST ACCTMANAGER C

PROJECT/FUNCTIONALMANAGEMENT

FUNCTIONALLEVEL WORK BEGINS

CONTROL PKG/PROJECT WORKAUTHORISATION


Performing Versus Responsible Organisation

WBS ELEMENT

LEADER TEAM MEMBER

ORGANISATION

TEAM MEMBERORGANISATION


PROJECT TEAM

WORK PACKAGE

WORK PACKAGE

WORK PACKAGE

LEADER TEAM MEMBER

ORGANISATION



WORK PACKAGE

WORK PACKAGE

WORK PACKAGE

PROJECT TEAM

FUN

CTI

ON

AL

OR

GA

NIS

ATI

ON


Summarising Performance

$$

$$

$$

$$

$$

$$

WBS

ORG


The Performance Report(Project Oriented)

Project Management Information SystemSummary Performance Measurement Report

Project: New Product Development Report Date: 20 February 200XAs of Date: 31 January 200X

Current Month Cumulative to date At CompletionBUD. EV ACT SV CV BUD EV ACT SV CV BAC EAC VAC

Lab. Hrs 148 34 88 (114) (54) 327 213 270 (114) (57) 1,798 1,798 0Lab Dir $ 4,669 1,078 2,621 (3,591)(1,543)10,313 6,747 8,364 (3,566)(1,617) 58,126 58,126 0Material $ 0 0 0 0 0 0 0 0 0 0 0 0 0S/Contract 0 0 0 0 0 0 0 0 0 0 0 0 0ODC $ 0 0 0 0 0 100 100 51 0 49 100 100 0Total Direct 4,669 1,078 2,621 (3,591)(1,543)10,413 6,847 8,415 (3,566)(1,568) 58,226 58,226 0

Lab Ovhd $ 5,649 1,304 3,250 (4,345)(1,946)12,478 8,163 10,372 (4,315)(2,209) 69,316 69,316 0Non Lab Ovhd 0 0 0 0 0 0 0 0

G&A$ 2,363 545 1,345 (1,818) (800) 5,241 3,436 4,302 (1,805) (866) 29,203 29,203 0MR $ 0 0 0 0 0 0 0 0UB $ 0 0 0 0 0 0 0 0Total Cost $12,681 2,927 7,216 (9,754)(4,289)28,13218,44623,089 (9,686)(4,643)156,745156,745 0

Variance % (77) (147) (34) (25) 0


Functional Performance ReportProject Management Information System

DEPARTMENT LABOUR SUMMARY PERFORMANCE REPORT

Department: 3600 Report Date: 20 February 200XAs of Date: 31 January 200X

Current Month Cumulative to date At CompletionBUD. EV ACT. SV CV BUD. EV ACT SV CV BAC EAC VAC

New Prod Dev 148 34 88 (114) (54) 327 213 270 (114) (57) 1,798 1,798 0P-3N 243 260 275 17 (15) 486 520 545 34 (25) 1,500 1,600 (100)P.R.I.D.E. 168 168 100 0 68 540 540 500 0 40 1,900 1,900 0STAR-4T 50 45 57 (5) (12) 200 190 210 (10) (20) 220 240 (20)DEF COM 32 32 43 0 (11) 100 100 51 0 49 300 250 50

Total Proj hrs 641 539 563 (102) (24) 1,653 1,563 1,576 (90) (13) 3,920 3,990 (70)Proj Lab $ 32,050 26,950 28,150 (5,100) (1,200)82,650 78,150 78,800 (4,500) (650) 196,000 199,500 (3,500)

Variance % (16) (4) (5) (1) (2)


Labour Utilisation Report

Project Management Information System Weekly Labour Utilisation Report

Department: 3600 Report Date:2 February 200XAs of Date: 31 January 200X

Current Week Cumulative to Date Annual BudgetBudget Actual CV Budget Actual CV BAC EAC VAC

J. SMITHNew Prod Dev 10 8 2 32 30 2 50 47 3

P-3N 5 15 (10) 25 45 (20) 200 360 (160)P.R.I.D.E. 10 7 3 20 15 5 250 188 63STAR-4T 5 4 1 12 20 (8) 260 433 (173)DEF COM 5 8 (3) 10 22 (12) 75 165 (90)

Proj hrs 35 42 (7) 99 132 (33) 785 1,146 (361)Non Proj Hrs 5 3 2 61 60 1 1,295 934 361Total 40 45 (5) 160 192 (32) 2,080 2,080 0Variance % (13) (20) 0

N. COLE… XX… XX… XX… XX… XX… XX… XX… XX… XX…

B. PRIESTLY… XX… XX… XX… XX… XX… XX… XX… XX… XX…

TOTAL XX… XX… XX… XX… XX… XX… XX… XX… XX…


WORK DEFINED AND ASSIGNED

12

16

20

$24

{PROJECT BUDGET BASE

PERFORMANCEMEASUREMENT

BASELINE

MANAGEMENT RESERVE

2 4 6 8 10 12 14 16 18 20

4

8

YEARS

WORK SCHEDULED

WORKBUDGETED

100

4060

2515

3030

Project Baseline ChangesBaseline must be flexible but relationship between scope, schedule

and budget must be retained


Challenges of the Future

• Development of adaptable performance management systems dependent upon:

– Increased involvement of Decision Leaders in Performance Management Activities

– Instilling Project Management/Performance Measurement disciplines in Project Team organisations

– Re-training bureaucratic managers from traditional management concepts to strategic/tactical planning and control concepts (Project Management)

– Innovation in accounting practices.

m t ca © canberra 2002 adaptive enterprises performance management in a volatile environment

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