Adaptive Enterprises
Performance Management in a
Volatile Environment
MTCA
© Canberra 2002
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
MTCA
© Canberra 2002
Overview
• Causal Factors
• Adaptive Enterprise Performance
Management
• A Performance Management Paradigm
• EVM as a possible solution
MTCA
© Canberra 2002
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
MTCA
– Japan, US, placing more demand on efficient
accomplishment of project expenditures with better
predictive capability
© Canberra 2002
Causal Factors-Continued
• Proj Mgmt/Work Teams are emerging in
traditional organisation where only functional
management was previously recognised-iethe “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
MTCA
© Canberra 2002
Causal FactorsTelephone 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
MTCA
© Canberra 2002
Causal FactorsTHE 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
MTCA
© Canberra 2002
Causal Factors
New-Space Project Imperatives
• Speed-First to market
• Payback-Business Benefits
MTCA
© Canberra 2002
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
1 1 3
• Exponential increases in knowledge and
technological advances
• Cooperative atmosphere within organisations
is most conducive to gains in knowledge
MTCA
© Canberra 2002
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
MTCA
© Canberra 2002
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
MTCA
• Adaptive Performance Management
Infrastructures Based on Changing
Objectives
© Canberra 2002
Common Language-Definitions
• Enterprise Performance Management?:
– The endeavours associated with the systematic provision of information
to management in order to make programmatic decisions
MTCA
© Canberra 2002
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
MTCA
© Canberra 2002
Common Language- The Domain Of Performance Management
LeadershipDecision
Knowledge Rqmts
Leadership
Implementation Technology
Leadership Leadership
Technology Software
Technology
TPM
Forecast & Feedback
PSM
FPA
CPM
Process Management
(Progress)
PERT
Six
Sigma
PM3
Product
EVM
CMMs Risk Balanced
MgmtScorecard
Perceived Need
MTCA
Acceptability
Process Disciplines
&
Information
Infrastructures
Cultural Change
User
Mgmt
Friendly
Involvement
Training
& Support
Change
Value Added
Mgmt
© Canberra 2002
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
MTCA
© Canberra 2002
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
MTCA
© Canberra 2002
New Management Roles
• Project Team Management
• Functional Resource Management
MTCA
© Canberra 2002
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
MTCA
© Canberra 2002
Functional Managers
• Provide functional specialists for Project
Work Teams
• Provide Human Resource infrastructure
– Hiring/firing
– Training
– Individual Performance Management
• Strategic planning of labour resources
MTCA
© Canberra 2002
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
MTCA
© Canberra 2002
Earned Value Management
Systems
• EVMS is Project Management with an
Attitude!!!!!!
MTCA
© Canberra 2002
Tailored Performance
Management System
MASTER SCHEDULE
START
COMPLETE
W E A PO N S YS T E M
2
A IR V E HIC L E
DATA
4
8
6
T RA INING
12
10
14
16
18
INTERMEDIATE SCHEDULE
ENG'G
PROCUREMENT
PRO PUL S IO N
A IRF RA M E
COM M S
SITE WORK
F IRE C O NT RO L
CONSTRUCT STRUCTURE
W ING
F US E L A G E
DETAILED SCHEDULE
EXCAVATE
FILL &
COMPAC
T
GRADE
$24
{
20
16
12
8
4
2
MTCA
4
6
8
10
YEARS
12
TIME
NOW
14
16
18
20
© Canberra 2002
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
MTCA
© Canberra 2002
Control System Characters
• 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
MTCA
© Canberra 2002
Corporate Work Breakdown
Structure
• 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
MTCA
– Upper levels can readily change as objectives change
– Reduce need for reorganising
– Relationship between levels ensures projectcorporate objective compatibility
© Canberra 2002
Corporate WBS Example
•
MTCA
1.0 Corporate structure
– 1.1 Projects
» 1.1.1 Development project
» 1.1.2 Commercial project
» 1.1.3 Production project
– 1.2 Tendering
» 1.2.1 Commercial tender
» 1.1.2 Government tender
– 1.3 Business development
» 1.3.1 Marketing
• 1.3.1.1 Name change
• 1.3.1.2 Trade show
• 1.3.1.3 Expo’S
» 1.3.2 Product development
• 1.3.2.1 New product A
• 1.3.2.2 New product B
– 1.4 Business processes
» 1.4.1 EVPMS
» 1.4.2 MIS
» 1.4.3 MRP
– 1.5 Human factors
– 1.6 Facilities
– 1.7 Expansions
– 1.8 Operations
© Canberra 2002
RAM=CWBS/OBS
Integration
BUS
DEV’L
PROD
DEV’L
PRODUCT A
FUNCTIONAL
ORGANISATION
QUALITY
ASSURANCE
COMPANY
ENGINEERING
Project
TEAM
MECHANICAL
DESIGN
DESIGN
ANALYTICAL
DESIGN
²
²
²
²
²
²
²
WORK
²
²
OPERATIONS
TECHNOLOGY
²
DRAFTING
AND
CHECKING
PACKAGES
²
²
²
²
PLANNING
BCWS,BCWP,
PACKAGES
²
²
²
WBS DATA
SUMMARISATION
²
²
²
ACWP,BAC,EAC
OBS DATA SUMMARISATION
MTCA
© Canberra 2002
Schedule Structure
CORPORATE
WBS
Project Master
Schedule
Project xyz
Cost Account
A
Cost Account
B
A1
B1
A2
B2
B3
A3
UPPER WBS LEVELS MAY NOT BE SCHEDULE ORIENTED
A1
A3
LOWER LEVEL PROJECT SCHEDULES NOT INTEGRATED
C1
B1
B2
RELIANCE ON EV SCHEDULE REPORTING AT UPPER LEVELS
MTCA
© Canberra 2002
Budget Distribution
•
Presents challenges
due to accounting
conventions
–
–
–
Tax Categories
Overhead
Reconciliation with
General Ledger
Corporate Budget
Project Budgets
(Capital Investment)
Corporate Objective 1 Budget
Project 1.1
MTCA
Operational Budgets
(Operational Expenses)
Corporate Objective 2 Budget
Project 1.2
Project 2.1
Project 2.2
© Canberra 2002
WORK AUTHORISATION CYCLE
FUNCTIONAL
ORGANISATION
PROGRAM ORGANISATION
PROJECT
MANAGER
CUSTOMER
FUNDING
AUTHORISATION
PROJECT
OFFICE
BUSINESS CASE
PROGRAM MANAGER
CONTROL PKG/
PROJECT WORK
AUTHORISATION
PROJECT/FUNCTIONAL
MANAGEMENT
COST ACCT
MANAGER A
FUNCTIONAL
LEVEL
MTCA
COST ACCT
MANAGER B
COST ACCT
MANAGER C
WORK BEGINS
© Canberra 2002
Performing Versus Responsible Organisation
FUNCTIONAL ORGANISATION
WBS
ELEMENT
MTCA
PROJECT TEAM
L
E
A
D
E
R
TEAM MEMBER
ORGANISATION
WORK
PACKAGE
TEAM MEMBER
ORGANISATION
WORK
PACKAGE
TEAM MEMBER
ORGANISATION
WORK
PACKAGE
PROJECT TEAM
L
E
A
D
E
R
TEAM MEMBER
ORGANISATION
WORK
PACKAGE
TEAM MEMBER
ORGANISATION
WORK
PACKAGE
TEAM MEMBER
ORGANISATION
WORK
PACKAGE
© Canberra 2002
Summarising Performance
WBS
$
$
$
ORG
$
$
$
MTCA
© Canberra 2002
The Performance Report
(Project Oriented)
Project Management Information System
Summary Performance Measurement Report
Project: New Product Development
Report Date: 20 February 200X
As of Date: 31 January 200X
BUD.
Current Month
EV
ACT
SV
148
4,669
0
0
0
4,669
34
1,078
0
0
0
1,078
88
(114)
(54)
327
2,621 (3,591) (1,543) 10,313
0
0
0
0
0
0
0
0
0
0
0
100
2,621 (3,591) (1,543) 10,413
270
(114)
(57)
1,798
1,798
8,364 (3,566) (1,617) 58,126 58,126
0
0
0
0
0
0
0
0
0
0
51
0
49
100
100
8,415 (3,566) (1,568) 58,226 58,226
0
0
0
0
0
0
Lab Ovhd $ 5,649
Non Lab Ovhd
0
G&A$
2,363
MR $
0
UB $
0
Total Cost $ 12,681
1,304
3,250 (4,345) (1,946) 12,478 8,163 10,372 (4,315) (2,209) 69,316 69,316
0
0
0
0
0
0
1,345 (1,818) (800) 5,241 3,436 4,302 (1,805) (866) 29,203 29,203
0
0
0
0
0
0
0
0
0
0
0
0
7,216 (9,754) (4,289) 28,132 18,446 23,089 (9,686) (4,643) 156,745 156,745
0
0
0
0
0
0
Lab. Hrs
Lab Dir $
Material $
S/Contract
ODC $
Total Direct
Variance %
MTCA
545
2,927
(77)
CV
(147)
BUD
Cumulative to date
EV
ACT
SV
213
6,747
0
0
100
6,847
(34)
CV
At Completion
BAC
EAC VAC
(25)
0
© Canberra 2002
Functional Performance Report
Project Management Information System
DEPARTMENT LABOUR SUMMARY PERFORMANCE REPORT
Department: 3600
BUD.
Report Date: 20 February 200X
As of Date: 31 January 200X
EV
Current Month
ACT.
SV
New Prod Dev 148
34
88
P-3N
243
260
275
P.R.I.D.E.
168
168
100
STAR-4T
50
45
57
DEF COM
32
32
43
Total Proj hrs
641
539
563
Proj Lab $
32,050 26,950 28,150
Variance %
MTCA
CV
BUD.
Cumulative to date
EV
ACT
SV
(114)
(54)
327
213
270
17
(15)
486
520
545
0
68
540
540
500
(5)
(12)
200
190
210
0
(11)
100
100
51
(102)
(24) 1,653 1,563 1,576
(5,100) (1,200) 82,650 78,150 78,800
(16)
(4)
(114)
34
0
(10)
0
(90)
(4,500)
(5)
CV
At Completion
BAC
EAC
VAC
(57)
1,798
1,798
0
(25)
1,500
1,600 (100)
40
1,900
1,900
0
(20)
220
240
(20)
49
300
250
50
(13)
3,920
3,990
(70)
(650) 196,000 199,500 (3,500)
(1)
(2)
© Canberra 2002
Labour Utilisation Report
Project Management Information System
Weekly Labour Utilisation Report
Department: 3600
Report Date:2 February 200X
As of Date: 31 January 200X
Current Week
Cumulative to Date
Annual Budget
Budget Actual
CV Budget Actual
CV
BAC
EAC
VAC
J. SMITH
New 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
63
STAR-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
361
Total
40
45
(5)
160
192
(32)
2,080
2,080
0
Variance %
(13)
(20)
0
N. COLE…
XX… XX… XX… XX… XX… XX…
XX…
XX…
XX…
MTCA
B. PRIESTLY…
XX…
XX…
XX…
XX…
XX…
XX…
XX…
XX…
XX…
TOTAL
XX…
XX…
XX…
XX…
XX…
XX…
XX…
XX…
XX…
© Canberra 2002
Project Baseline Changes
Baseline must be flexible but relationship between scope,
schedule and budget must be retained
PROJECT BUDGET BASE
$24
WORK DEFINED AND ASSIGNED
MANAGEMENT RESERVE
{
20
16
WORK SCHEDULED
12
PERFORMANCE
MEASUREMENT
BASELINE
8
WORKBUDGETED
4
100
40
60
2
25
15
30
MTCA
30
4
6
8
10
12
14
16
18
20
YEARS
© Canberra 2002
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.
MTCA
© Canberra 2002
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Adaptive Enterprises - Niwot Ridge Consulting