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PROJECT MANAGEMENT BENCHMARKING, an excellence enabling instrument

By Dr. Harold Kerzner and Dr. Al Zeitoun

Continuous Improvement!

All companies desire to remain competitive and continuously improve their project management performance by becoming more efficient and more effective in the execution of their project management processes. Continuous improvement efforts are most often based upon the capturing of best practices. Best practices can be captured either within your organization or external to your organization through benchmarking efforts. Internally, companies can create specific organizational units dedicated to finding ways of performing work more efficiently or effectively. These organizational units are called project management offices (PMOs), centers of excellence in project management, or the project management community of practice. These organizational units, among having other responsibilities, perform internal benchmarking by evaluating both ongoing and completed projects and looking for opportunities for improvements. The objective is to find better ways of doing things.

The internal organizational units can also be responsible for evaluating external literature related to project management. This can include:

  • Project Management Institute (PMI®) publications
  • Forms, guidelines, templates, and checklists from published textbooks and journal articles that can affect the execution of projects
  • Proceedings from seminars and symposiums on general project management concepts
  • Proceedings from seminars and symposiums specializing in project management best practices
  • Relationships with other professional societies
  • Graduate-level theses

With more universities offering master’s and doctorate-level work in project management, graduate-level theses can provide up-to-date research on current best practices as well as future trends.

Benchmarking Fundamentals

Benchmarking is an outward looking process of continuously measuring and comparing your company’s processes against an organization anywhere in the world to gain information that will help your organization improve its performance and competitive position. However, it is important to understand that benchmarking is a two-way street in that you must be willing to share your company’s information with other companies. Benchmarking is an excellent method to capture external best practices, possibly by using the project management office (PMO) or other internal organizations as the lead for external benchmarking activities.

Each author and researcher tend to look at the steps included in benchmarking differently. The steps can range from four to ten steps. In this paper, benchmarking is described as a five-step process that includes:

  • Step 1: Understand in detail your organization’s project management and business processes
  • Step 2: Identify companies/organizations that you can benchmark against
  • Step 3: Be able to analyze the business and project management processes of other companies/organizations
  • Step 4: Be able to compare your processes against their processes for areas of improvement
  • Step 5: Be able to implement the steps necessary to close the performance gap between your company and other companies/organizations

Step 1: Know Your Own Processes

The person performing the external benchmarking study must possess an excellent understanding of his/her organization’s current project management and business processes. This knowledge must include an understanding of the current strengths and especially weaknesses needing improvement.

Benchmarking requires that the organization adopt a humble posture and be willing to admit that unfavorable gaps may exist between current and needed performance levels.  Gaps may exist requiring the need for additional forms, guidelines, processes, checklists, and templates. Gap can also exist for performance improvement expectations such as:

  • Reduction in risk by a certain percentage, cost, or time
  • Improvement in estimating accuracy by a certain percentage or dollar value
  • Cost savings of a certain percentage or dollar value
  • Efficiency increases by a certain percentage
  • Reduction in waste, paperwork, or time by a certain percentage

It may be necessary to identify the gaps to the companies you are benchmarking against to make sure that the right information is exchanged.

Step 2: Identify Benchmarking Target Companies

Deciding who to benchmark against is difficult. Not all companies will freely participate in benchmarking activities and share their best practices. Some companies that believe that they have a competitive advantage in the marketplace resulting from the use of their best practices may not participate in benchmarking and, even if they do participate, may have limitations imposed by corporate legal on the information that can be exchanged.

Students often ask why textbooks do not include more information on detailed best practices, such as forms and templates. One company spokesperson commented:

“We must have spent at least $1 million over the last several years developing an extensive template on how to evaluate the risks associated with transitioning a project from engineering to manufacturing. We consider this as an important best practice. Our company would not be happy giving this template to everyone who wants to purchase a book for $85. Some best practices templates are common knowledge, and we would certainly share this information. But we view the transitioning risk template as proprietary knowledge not to be shared.”

There are several types of benchmarking. The types are usually complementary rather than mutually exclusive. The information gap that the company intends to fill determines the strategic intent, the type of benchmarking, and who to benchmark against.

Internal project management benchmarking is the easiest form of benchmarking because the information is usually readily available, including proprietary information, and less time is needed. There are also fewer barriers that must be overcome, especially in accessing information even from world-wide divisions. Internal benchmarking focuses on capturing best practices and then having the ability to implement the changes necessary quickly.

Most companies perform some type of external project management benchmarking in addition to capturing internal best practices. External benchmarking allows us to learn from the best-in-class companies provided they are willing to share the information. Also, external benchmarking requires significantly more time and resources.

Competitive project management benchmarking, which is a form of external benchmarking, is used when a firm wishes to evaluate their organizational performance in relation to the performance of their competitors. It can include a comparison of the types of products and services provided as well as the ways that the products and services are advertised, sold, and introduced to the clients. Most companies may be reluctant to provide this information directly to competitors, thus requiring third parties to protect confidentiality of proprietary information.

Competitive benchmarking focuses more so on a comparison on the deliverables created and the financial results rather than the project management processes used. Also, competitive benchmarking can create the wrong impression on how good a firm’s project management processes really are. As an example, the aerospace division of a Fortune 500 company benchmarked against their competitors. At the end of the benchmarking period, everyone in the aerospace group were hugging and congratulating each other after the results appeared showing how good they thought they were in project management. Then, they decided to benchmark against best-in-class companies in project management, all of which were in different industries other than aerospace. This time, the results showed that they were poor in project management. The company realized that they were benchmarking previously against the wrong organizations. Today, they are benchmarking against best-in-class firms.

Strategic project management benchmarking is one of the newest forms of benchmarking because of the growth in the implementation of strategic projects. It looks for ways to compress the gaps related to the long-term strategies of highly successful companies in developing new products and services and your company. The focus is on high level core competencies. This includes comparisons of the processes used to select and prioritize projects, align projects to strategic business objectives, and tracking the creation of strategic business benefits and value. This also includes how business model decisions are made related to strategic projects. Results identified from strategic project management benchmarking may require significant changes to an organization’s business model and thus take quite a bit of time to implement.

Process project management benchmarking is the most common form of benchmarking. The focus is on mapping all the project management processes including comparisons with the forms, guidelines, templates, and checklists used. The best results often occur if the organization can find companies that have similar products and services and are willing to exchange information.

International project management benchmarking occurs when a company wishes to obtain world-class status or there are limited benchmarking partners within the same country to obtain meaningful results. The results must be carefully analyzed to account for cultural differences, political factors, and possibly the influence of local religions.

Step 3: Analyses of Results

The problem with most types of external benchmarking efforts is that best practices discovered in one company may not be transferable to another company. Most of the best practices discovered from external benchmarking companies are usually specifically related to the company’s use of its project management methodology and accompanying customized organizational processes. Unfortunately, there are often hidden issues that can lead to a formulation of the wrong or incomplete conclusion.

Most companies have core values which help define their firm’s identity and how decisions will be made. The core values are the drivers for designing the project management methodology and accompanying processes. Core values are items or actions that are important to the company and, if the core values are acceptable to the employees, they act as a motivational force. Examples of core values might include meaningful collaboration with all stakeholders, supporting ethical and honest practices, trust, being innovative, and teamwork. These core values can determine how employees will interact with each other as well as interfacing with customers. Core values act as the drivers for establishing the corporate culture.

The methodology that a company designs is most often predicated upon the organization’s core values and culture. Good corporate cultures support effective project management practices and include the following:

  • Strategic business information is shared with the project teams
  • Employees have the freedom of expressing their opinions without fear of punishment
  • Executives understand that not all projects will be successful and team members should not be punished if a project fails.

Therefore, given the influence that core values and culture may have on the benchmarking results, it is imperative that cultures and core values be benchmarked, if possible, to better understand the foundation for the information collected.

Step 4: Comparison with Your Organization

An important issue when comparing external benchmarking information with your company’s practices is the impact that a targeted company’s organizational culture can have on the analyses. There is a mistaken belief that project management can be easily benchmarked from one company to another. Comparing benchmarking data is often difficult to do if the two companies have very different project management cultures. Since a project management culture is a behavioral culture, benchmarking works best if during the comparison we have benchmarking best practices that include topics such as leadership, management, governance, or operational methods that lead to superior performance. Because of the strong behavioral influence, it is almost impossible to transpose a project management culture from one company to another. As mentioned earlier, what works well in one company may not be appropriate or cost-effective in another company especially if the companies have different core values and cultures.

Despite the existence of obstacles and issues, there should still exist direct and indirect project management benefits after comparing your firm to the targeted organizations. Benefits can include:

  • Direct benefits:
    • Size of the favorable or unfavorable gaps that may exist
    • Identification of alternatives for unfavorable gap compression
    • Comparison of products and services
    • Comparison of performance of companies or business units
    • Identification of areas for continuous improvement
    • Identification of new forms, guidelines, templates, and checklists
  • Indirect benefits:
    • An understanding of your competitive position in the marketplace
    • Better understanding of your products and services as well as those of your competitors
    • Better understanding of your customers’ needs
    • Validation of your organization’s strategy and corporate objectives
    • Identification of business opportunities
    • Identification of governance and leadership effectiveness

Step 5: Implementation of Changes

The intent of project management benchmarking is to compare your organization against others. If discovery indicates that some organizational or process changes are necessary, someone must take the responsibility for identifying and implementing the changes.

The role of the benchmarking team is the identification of opportunities. Internal organizations, such as the PMO or the project management center of excellence usually have the responsibility for evaluating and implementing the changes as they would with the identification of internal best practices.

Changes to project management processes, forms, guidelines, templates, and checklists are usually easy and quick. Changes that may be necessary in the organization’s business model may be difficult to implement and there may be significant resistance if the change requires that people be removed from their comfort zone.

Project Management Benchmarking Challenges

There are several challenges associated with project management benchmarking. First, the definition of a project, as stated in PMI®’s PMBOK® Guide, is:

Project: A temporary endeavor undertaken to create a unique product or service.

Because of the uniqueness characteristic of a project, it may be difficult to get people to agree on the definition of a project for comparison purposes. As such, companies are challenged at the onset of project management benchmarking to determine:

  • What areas of project management should be benchmarked?
  • How will the areas be measured? (i.e., What metrics will be used?)

Some organizations perform project management benchmarking by focusing on the project management domain areas of scope management, time management, cost management, procurement management, human resource management, quality management, stakeholder management, risk management, communications management, and integration management. However, every company can believe that each of the domain areas carries with it a different degree of importance, thus adding complexity to benchmarking what factors are critical for how decisions are made. Not all companies utilize the same processes.

Second, even if two companies appear to have similar projects, the life cycle phases, gates, governance, and leadership can be applied differently for each project. This can make it difficult to compare the decisions made and the timing of the decisions.

Third, there is no uniform definition of success on a project. In traditional project management, success was often measured using the metrics associated with time, cost, and scope. Today, because of advancements in metric measurement techniques, projects can have 10-20 metrics, all contributing is some manner to the firm’s definition of success.

The decisions that many companies make on their projects are most often related to their company’s definition of success. Therefore, it will be necessary to benchmark the metrics use as part of performance measurement.

Fourth, we must examine the environment in which the projects are executed. The environment can include the corporate culture, the project culture, the interaction with the organization’s business model, the impact of executive command and control from the top floor of the building, and political factors. Most of these environmental factors are outside of the control of the project manager but can have a significant impact on how projects are managed.

Conclusion

Project and program management benchmarking should not be considered as an activity that is done once or sporadically. Rather, it should be considered as a necessary ongoing activity to support the need for continuous improvements in the way that projects are managed.

In the days of D-VUCAD, where the classic VUCA (Volatility, Uncertainty, Complexity, and Ambiguity) are no longer sufficient or relevant enough to our current markets, programs, and projects, Benchmarking provides the right instrument to deal with the additional 2 Ds. 

The disruption “D” could very well be served with benchmarking and the close and timely ongoing sensing of other organizations and competitors.  The diversity “D” is tightly aligned with how the views, analyses, and results of benchmarking are best implemented to create the right anticipated changes for program and project critical outcomes.

Harold Kerzner, Ph.D.
Senior Executive Director, International Institute for Learning, Inc.
Harold Kerzner is an American engineer, management consultant, Emeritus Professor of Systems Management at Baldwin Wallace University, and Sr. Executive Director for Project Management at International Institute for Learning, known world-wide for his work in the field of project management. 


Al Zeitoun, Ph.D.
Consultant and Trainer, International Institute for Learning, Inc.

In his current role with Siemens DISW, Dr. Zeitoun is responsible for driving the global program management practices, master plan governance, and enable strategy transformation priorities.

Dr. Zeitoun’s prior roles include Executive Director for Emirates Nuclear Energy Corporation in Abu Dhabi where he led the transformation of capabilities to support the operational readiness of their $40 billion nuclear power plant across four facilities. He was Senior Transformation Executive & Strategic Portfolio Solutions expert at Booz Allen Hamilton in the U.S, where he envisioned and customized a digitally enabled EPMO to support their billion-dollar strategic initiatives. He also led the firm’s Middle East and North Africa Portfolio Management and Agile Governance Solutions. 

Disclaimer: The ideas, views, and opinions expressed in this article are those of the author and do not necessarily reflect the views of International Institute for Learning or any entities they represent.

 

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