Benchmarking in Project Management

Benchmarking helps identify performance failures and increase project efficiency as part of a continuous improvements process.

Benchmarking provides an external view of the company strategy. It ensures the correctness of the current objectives and helps develop the internal actions required to achieve those objectives. Benchmarking is crucial for monitoring the current operational performance and establishing programs of continuous improvement.

The benefits of benchmarking are manifold. It provides continuous assessment of the company performance against that of its competitors, helps adopt world-class practices to gain competitive advantage as well as mitigate the risks associated with change by observing the factors which allowed other companies to succeed.

Good benchmarking is dependent on selecting the right set of metrics for useful and productive measurement. In order to maximize the value of benchmarking, the company management should define the areas for improvement and set priorities. Secondly, the company should support actions based on measurement data and organizational self-awareness. It is important to ensure the metrics are truly diagnostic of the critical processes and relevant to the value proposition of the operating units.

Benchmarking metrics can be divided in two major categories: empirical (for instance, "employee turnover") and subjective ("customer satisfaction") metrics. Empirical metrics are generally based on the data derived from project control, finance, human resources and other systems. Therefore such metrics are usually more reliable and easy to update. For subjective metrics, on the other hand, it is crucial to ensure that the measurements are described in sufficient detail and could be applied consistently every time.

The principal benchmarking metric is Return on Investment (ROI). It helps analyze the size of investment in the project, and determine whether the gains attributable to project management are appropriate. This metric includes a broad range of cost factors, such as salaries, wages and benefits of the project team, the production costs, as well as the amortized value of training, consulting, building rent, travel, etc.

Another useful benchmarking metric is the Schedule Performance Index (SPI). It is defined as the earned value divided by the planned value delivered by the project. This metric helps assess the accuracy of the project schedule and identify factors which cause delays.

Cycle time and productivity metrics are essential for the company's overall performance management. Productivity metric can be defined as "the output amount produced per unit of input". The key productivity metric is "revenue per employee". The average-per-employee ratio is used as the "Productivity Ratio" for the organization as a whole. Cycle time benchmarks are based on Standard Project Life-Cycle Time, allowing the company to compare similar projects. Cycle time metrics also include measurements of the time required to complete any of the processes that comprise the project life cycle.

Personnel metrics help ensure the project has an optimum number of staff as well as the appropriate personnel ratios in aspects of project management. Customer satisfaction metric helps the company command greater loyalty from its customers than its competitors.

The other important area of project management is risk identification and assessment. Risk metrics provide active monitoring of project risk factors throughout the project, as well as a periodic risk reviews during the execution of the project. Typically, risk management is one of the greatest indicators of overall project process maturity.

Although benchmarking should be an essential part of project management in any successful organization, the optimal set of metrics depends on the company's strategies, technology levels, the particular industry and its competitive environment.

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