Performance measures are relatively common in outsourcing arrangements where project management services are included.
Whether you manage projects internally or use third party project management, you can manage results with a good performance management framework, just like you would apply to other outsourcing company, subcontractor, service providers or internal staff.
Whether performance management is effective or not depends on the specific conditions, since measures can sometimes drive the wrong behavior and cause unintended issues.
For instance, when I was on the supplier side, we had a client who measured each project based on the % deviation of the actual from the budget after completion. For some reason, the measure was +/- the budget, so if we were under budget by more than the required %, it counted against us. It was thought up by someone wanting to measure performance without understanding their goals or understanding the nature of the business they were trying to measure.In any case, the performance is usually based on a % of measures met over a number of projects, typically over a 1 year period, for instance. You typically measure projects based on meeting budget and schedule for each project, but could add in things like project deficiencies, satisfaction, etc. See further below about financial penalty/reward issues.
For the budget and schedule measures, they are set and agreed to in advance. Depending on the level of detail for the budget, the target would be within a % of budget (including contingency) Remember, a preliminary budget is going to be wrong anyway, since it’s an estimate, versus a fully designed project that is then costed just before it’s tendered. To complicate matters even more, market conditions will prevail and the final bid cost may still be quite different from the estimate. So, you have to be very careful about what you are measuring and why it matters to you. Like any measurement, make sure it drives the results that really matter and isn’t simply a process measurement with little overall impact on the final results.
The reason it’s difficult to simply say ‘do it this way’ when establishing measurements for project management services is that it depends on your situation, how you manage your projects, what kind of project agreement you use, what kind of projects they are, how big they are, how many there are, etc. as well as your objectives.
For this type of measures, you also need to make allowances for things outside of their control. For instance, if there is client sign-off during the schedule and the client drags their feet, the project manager shouldn’t be penalized for delays. Same with client driven change orders that increase the budget (unless it was something the PM missed during the design process) or market conditions beyond their control. What I always like to consider is what would you have been able to do in their situation?
Satisfaction surveys are always a good idea as part of the performance management process. A simple transaction survey provided to the client representative (such as the move coordinator or senior department manager) is best, but for a large move, surveying all the occupants involved may be worthwhile. Develop the questions based on the type and nature of project, as well as the level of responsibility of the project manager. Keep the number of questions to a minimum and focus on things you can actually control or change. The reason for asking questions is to identify things you can change to make it better. If there are some issues which you drive, for instance, like limiting their finishes choices, space standards, etc, don’t hold the project manager accountable if the client wasn’t happy about those things.
When it comes to performance pay, be very careful. It’s powerful incentive that causes normal people to do things that are on the margins and may be contrary to your goals.
I personally feel that it’s better to manage performance by measuring it and using it as a discussion tool for performance (i.e. manage performance, don’t just measure it) and possibly as a decision maker about re-engaging them instead of a reward/punishment mechanism. You should have contract language that gives you tools to manage significant non-performance in any case.
By implementing a strong management process that includes measures, communications, supplier meetings and action plans from suppliers to correct trending problems instead of waiting for failure, you will manage results and be more successful in your own goals and objectives.
My new book, tentatively titled Managing Facilities & Real Estate : 47 Strategies, Approaches and Leading Practices, will be published later in 2010.
One section is on managing performance and will provide processes, forms and checklists you can use to manage performance with any supplier or even internal resources.
Sign-up to our newsletter on our main website and we will email you when the book is available. In the mean time, you can get some additional information at WoodStone Press
