Metrics in Portfolio management - Revision history

S220269: /* Limitations */

2023-05-09T21:55:27Z

Limitations

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	==Limitations==		==Limitations==

	It is relevant to note that advances in project metrics have been rapid, but advances in portfolio metrics have been slow because not all companies maintain a project management office (PMO) dedicated to portfolio management activities. This leads to changes in the role of the project manager, the metrics used, and the dashboard displays <ref name=Kerzner></ref>.		It is relevant to note that advances in project metrics have been rapid, but advances in portfolio metrics have been slow because not all companies maintain a project management office (PMO) dedicated to portfolio management activities. This leads to changes in the role of the project manager, the metrics used, and the dashboard displays <ref name=Kerzner></ref>.
	~~The benefits of a program are typically realized as each component project finishes. It is easier to measure it~~

			On the other hand, the intangibility of value-based metrics presents barrier when defining them:
			* Value is almost always based on subjective attributes of the person doing the measurement.
			* The perceived value may be more of an art than a science.
			* Limited models are available to perform measurement.

	==Annotated Bibliography==		==Annotated Bibliography==

S220269: /* Scorecards */

2023-05-09T21:47:41Z

Scorecards

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	Scorecards are used in strategically-oriented performance measurement systems to track progress towards achieving strategic goals and objectives by comparing performance against targets and thresholds. They are similar to performance charts used for tracking progress towards goals, but they are designed to provide monthly summaries of data for executives who track strategic and long-term objectives, or daily and weekly snapshots for managers overseeing the set of projects under the portfolio management.		Scorecards are used in strategically-oriented performance measurement systems to track progress towards achieving strategic goals and objectives by comparing performance against targets and thresholds. They are similar to performance charts used for tracking progress towards goals, but they are designed to provide monthly summaries of data for executives who track strategic and long-term objectives, or daily and weekly snapshots for managers overseeing the set of projects under the portfolio management.
	Summarized data is presented in a visually appealing way, using charts and graphs to indicate performance status, trends, and variance from goals. Visual representation is preferred by higher-level organizational users. However, scorecards should also include textual commentary to interpret performance results, describe actions taken, and forecast future results.		Summarized data is presented in a visually appealing way, using charts and graphs to indicate performance status, trends, and variance from goals. Visual representation is preferred by higher-level organizational users. However, scorecards should also include textual commentary to interpret performance results, describe actions taken, and forecast future results <ref name=Kerzner></ref>.

	<!-- Also consider EVA as metric since it provides an early warning system for schedule and cost overruns. The four basic measurements are BAC, PV, EV and AC and they are used to calculate the following metrics:		<!-- Also consider EVA as metric since it provides an early warning system for schedule and cost overruns. The four basic measurements are BAC, PV, EV and AC and they are used to calculate the following metrics:

S220269 at 21:46, 9 May 2023

2023-05-09T21:46:38Z

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	====Scorecards====		====Scorecards====

	Scorecards are used in strategically-oriented performance measurement systems to track progress towards achieving strategic goals and objectives by comparing performance against targets and thresholds.		Scorecards are used in strategically-oriented performance measurement systems to track progress towards achieving strategic goals and objectives by comparing performance against targets and thresholds. They are similar to performance charts used for tracking progress towards goals, but they are designed to provide monthly summaries of data for executives who track strategic and long-term objectives, or daily and weekly snapshots for managers overseeing the set of projects under the portfolio management.
			Summarized data is presented in a visually appealing way, using charts and graphs to indicate performance status, trends, and variance from goals. Visual representation is preferred by higher-level organizational users. However, scorecards should also include textual commentary to interpret performance results, describe actions taken, and forecast future results.

	<!-- Also consider EVA as metric since it provides an early warning system for schedule and cost overruns. The four basic measurements are BAC, PV, EV and AC and they are used to calculate the following metrics:		<!-- Also consider EVA as metric since it provides an early warning system for schedule and cost overruns. The four basic measurements are BAC, PV, EV and AC and they are used to calculate the following metrics:
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	'''Harold Kerzner (2017). Project Management Metrics, KPIs, and Dashboards. Wiley & Sons.'''		'''Harold Kerzner (2017). Project Management Metrics, KPIs, and Dashboards. Wiley & Sons.'''

	'''G. Levin & J. Wyzalek (2015). Portfolio Management - A strategic approach. Taylor & Francis Group''		'''G. Levin & J. Wyzalek (2015). Portfolio Management - A strategic approach. Taylor & Francis Group'''

	==References==		==References==

S220269 at 21:39, 9 May 2023

2023-05-09T21:39:12Z

Show changes

S220269: /* Percentage of projects that fit organizational strategy */

2023-05-09T20:43:35Z

Percentage of projects that fit organizational strategy

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	Undoubtedly, strategy alignment is a value metric par excellence. As a value metric, it is calculated as the result of different factor or attributes. Time, cost and profitability are generally attributes of every value metric and strategy alignment is not the exception <ref name=Kerzner> </ref>. Normally, other attributes included in this value metric are stakeholder satisfaction, level of innovation and market share growth.		Undoubtedly, strategy alignment is a value metric par excellence. As a value metric, it is calculated as the result of different factor or attributes. Time, cost and profitability are generally attributes of every value metric and strategy alignment is not the exception <ref name=Kerzner> </ref>. Normally, other attributes included in this value metric are stakeholder satisfaction, level of innovation and market share growth.
	The first step is to establish targets with thresholds for each attribute or component. Depending on how each component performs against its own target, it will receive specific value points. Then, each attribute is weighted according to its relevance to the metric being measured. ~~Finally~~, the weighting factors can be multiplied by the value points and added up to obtain the total value contribution of an specific project.		The first step is to establish targets with thresholds for each attribute or component. Depending on how each component performs against its own target, it will receive specific value points. Then, each attribute is weighted according to its relevance to the metric being measured. Following, the weighting factors can be multiplied by the value points and added up to obtain the total value contribution of an specific project. Finally, this final value contribution is compared with the value reference previously defined as the minimum value contribution to determine that a project is align with the organization strategy.

	An example is ~~described~~		The following table, show a brief example of results from this approach. If, for example, the value reference of strategy alignment is 2.0, the following project would meet and exceed its perfomance against this target.

	{\| class="wikitable"		{\| class="wikitable"
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	! VALUE CONTRIBUTION		! VALUE CONTRIBUTION
	\|- style="vertical-align:bottom;"		\|- style="vertical-align:bottom;"
	\| style="color:#242021;" \| ~~Quality~~		\| style="color:#242021;" \| Time
	\| 10%		\| 10%
	\| 3		\| 3
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	\| 0.4		\| 0.4
	\|- style="vertical-align:bottom;"		\|- style="vertical-align:bottom;"
	\| style="color:#242021;" \| ~~Safety~~		\| style="color:#242021;" \| Profitability
	\| 20%		\| 20%
	\| 4		\| 4
	\| 0.8		\| 0.8
	\|- style="vertical-align:bottom;"		\|- style="vertical-align:bottom;"
	\| style="color:#242021;" \| ~~Features~~		\| style="color:#242021;" \| Level of innovation
	\| 30%		\| 30%
	\| 2		\| 2
	\| 0.6		\| 0.6
	\|- style="vertical-align:bottom;"		\|- style="vertical-align:bottom;"
	\| style="color:#242021;" \| ~~Schedule~~		\| style="color:#242021;" \| Stakeholders' satisfaction
	\| 20%		\| 20%
	\| 3		\| 3
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	The aforementioned process can be repeated for every project in the portfolio. The percentage of projects that meet their target can then be calculated and reported as the ones algined with the organization strategy.		The aforementioned process can be repeated for every project in the portfolio. The percentage of projects that meet their target can then be calculated and reported as the ones algined with the organization strategy.


	====Other relevant metrics====		====Other relevant metrics====

S220269 at 20:30, 9 May 2023

2023-05-09T20:30:01Z

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 ====Percentage of projects that fit organizational strategy====
-Undoubtedly, strategy alignment is a value metric par excellence. As a value metric, it is calculated as the result of different factor or attributes. Time, cost and profitability are generally attributes of every value metric and strategy alignment is not the exception. Normally, other attributes included in this value metric are stakeholder satisfaction, level of innovation and market share growth.
+Undoubtedly, strategy alignment is a value metric par excellence. As a value metric, it is calculated as the result of different factor or attributes. Time, cost and profitability are generally attributes of every value metric and strategy alignment is not the exception <ref name=Kerzner> </ref>. Normally, other attributes included in this value metric are stakeholder satisfaction, level of innovation and market share growth.
 The first step is to establish targets with thresholds for each attribute or component. Depending on how each component performs against its own target, it will receive specific value points. Then, each attribute is weighted according to its relevance to the metric being measured. Finally, the weighting factors can be multiplied by the value points and added up to obtain the total value contribution of an specific project.
 An example is described
 The aforementioned process can be repeated for every project in the portfolio. The percentage of projects that meet their target can then be calculated and reported as the ones algined with the organization strategy.

S220269 at 20:24, 9 May 2023

2023-05-09T20:24:10Z

← Older revision		Revision as of 20:24, 9 May 2023
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	====Percentage of projects that fit organizational strategy====		====Percentage of projects that fit organizational strategy====

			Undoubtedly, strategy alignment is a value metric par excellence. As a value metric, it is calculated as the result of different factor or attributes. Time, cost and profitability are generally attributes of every value metric and strategy alignment is not the exception. Normally, other attributes included in this value metric are stakeholder satisfaction, level of innovation and market share growth.
			The first step is to establish targets with thresholds for each attribute or component. Depending on how each component performs against its own target, it will receive specific value points. Then, each attribute is weighted according to its relevance to the metric being measured. Finally, the weighting factors can be multiplied by the value points and added up to obtain the total value contribution of an specific project.

	====Other ~~possible~~ metrics====		An example is described

			The aforementioned process can be repeated for every project in the portfolio. The percentage of projects that meet their target can then be calculated and reported as the ones algined with the organization strategy.


			====Other relevant metrics====

	* Time spent approving projects <ref name=Kerzner> </ref>.		* Time spent approving projects <ref name=Kerzner> </ref>.
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	* Deviation of planned hours of work for projects <ref name=PMASA> </ref>.		* Deviation of planned hours of work for projects <ref name=PMASA> </ref>.
	* Average deviation of planned versus actual duration of components <ref name=PMASA> </ref>.		* Average deviation of planned versus actual duration of components <ref name=PMASA> </ref>.
	* ~~Escalated~~ risks and ~~issues—their status and impact~~ <ref name=PMASA> </ref>.		* Status of escalated risks and issues <ref name=PMASA> </ref>.
	* Number of new components in the pipeline with their attributes and information <ref name=PMASA> </ref>.		* Number of new components in the pipeline with their attributes and information <ref name=PMASA> </ref>.

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	Specifically, Kezner <ref name=Kerzner></ref>, defined four main value categories (internal, financial, customer-related and future value) and their associated tracking metrics. These four categorias have a strong relationship with the performance perspectives considered in the Balanced Scorecard (BSC) <ref name=BSC> Kaplan, R. S., & Norton, D. P. (1996) <<The balanced scorecard: Translating strategy into action>> Harvard Business School Press </ref>. -->		Specifically, Kezner <ref name=Kerzner></ref>, defined four main value categories (internal, financial, customer-related and future value) and their associated tracking metrics. These four categorias have a strong relationship with the performance perspectives considered in the Balanced Scorecard (BSC) <ref name=BSC> Kaplan, R. S., & Norton, D. P. (1996) <<The balanced scorecard: Translating strategy into action>> Harvard Business School Press </ref>. -->

	~~==Application==~~

	~~===Case of study: Portfolio management system at Crompton Corporation===~~




	==Limitations==		==Limitations==

	It is relevant to note that advances in project metrics have been rapid, but advances in portfolio metrics have been slow because not all companies maintain a project management office (PMO) dedicated to portfolio management activities. This leads to changes in the role of the project manager, the metrics used, and the dashboard displays <ref name=Kerzner></ref>.		It is relevant to note that advances in project metrics have been rapid, but advances in portfolio metrics have been slow because not all companies maintain a project management office (PMO) dedicated to portfolio management activities. This leads to changes in the role of the project manager, the metrics used, and the dashboard displays <ref name=Kerzner></ref>.
			The benefits of a program are typically realized as each component project finishes. It is easier to measure it

	TO BE COMPLETED		TO BE COMPLETED

S220269 at 18:50, 9 May 2023

2023-05-09T18:50:45Z

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	===Value based metrics vs. Traditional metrics===		===Value based metrics vs. Traditional metrics===

			[[File:PORTFOLIO metrics Kezner.png\|thumb\|500px\|right\|Figure 2: table comparing portfolio management metrics with project management metrics (own figure, based on Table 8-1 and Table 8-2 from "Project Management Metrics, KPIs, and Dashboards" <ref name=Kerzner> </ref>)]]

	In 1996, Norton and Kaplan introduced the Balanced Scorecard (BSC) <ref name=BSC> Kaplan, R. S., & Norton, D. P. (1996) <<The balanced scorecard: Translating strategy into action>> Harvard Business School Press </ref>, a tool that already expanded beyond the ''traditional'' financial metrics to include non-financial metrics. The Balanced Scorecard framework aims to achieve desired outcomes aligned with a business' strategy. This includes creating ''value'' for present and future stakeholders, as well as leveraging internal capabilities and investments in people, systems, and procedures to improve future performance		In 1996, Norton and Kaplan introduced the Balanced Scorecard (BSC) <ref name=BSC> Kaplan, R. S., & Norton, D. P. (1996) <<The balanced scorecard: Translating strategy into action>> Harvard Business School Press </ref>, a tool that already expanded beyond the ''traditional'' financial metrics to include non-financial metrics. The Balanced Scorecard framework aims to achieve desired outcomes aligned with a business' strategy. This includes creating ''value'' for present and future stakeholders, as well as leveraging internal capabilities and investments in people, systems, and procedures to improve future performance
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	==Portfolio Performance Measurement Tools and Metrics==		==Portfolio Performance Measurement Tools and Metrics==
	[[File:PORTFOLIO metrics Kezner.png\|thumb\|500px\|right\|Figure 2: table comparing portfolio management metrics with project management metrics (own figure, based on Table 8-1 and Table 8-2 from "Project Management Metrics, KPIs, and Dashboards" <ref name=Kerzner> </ref>)]]
	===Portfolio metrics===		===Portfolio metrics===

S220269: /* Portfolio Performance Measurement Tools and Metrics */

2023-05-09T18:49:45Z

Portfolio Performance Measurement Tools and Metrics

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	==Portfolio Performance Measurement Tools and Metrics==		==Portfolio Performance Measurement Tools and Metrics==

	[[File:PORTFOLIO metrics Kezner.png\|thumb\|500px\|right\|Figure 2: table comparing portfolio management metrics with project management metrics (own figure, based on Table 8-1 and Table 8-2 from "Project Management Metrics, KPIs, and Dashboards" <ref name=Kerzner> </ref>)]]		[[File:PORTFOLIO metrics Kezner.png\|thumb\|500px\|right\|Figure 2: table comparing portfolio management metrics with project management metrics (own figure, based on Table 8-1 and Table 8-2 from "Project Management Metrics, KPIs, and Dashboards" <ref name=Kerzner> </ref>)]]
			===Portfolio metrics===
	~~There are countless possible indicators for measuring the performance of portfolios and certainly, new~~ metrics are being created every day. This is because each enterprise, organization, and sector has different approaches to determining what is important to measure and how to measure progress toward short and long-term goals and objectives. With that said, the following section describes the objectives on which the portfolio management area relies to define its metrics and highlights some of the most popular and effective metrics according to the analyzed literature.

	According to Robert G. Cooper <ref name=PPMPG> </ref>, an effective portfolio management system should accomplish three primary goals that serve as a framework for defining metrics by determining the corresponding targets:		According to Robert G. Cooper <ref name=PPMPG> </ref>, an effective portfolio management system should accomplish three primary goals that serve as a framework for defining metrics by determining the corresponding targets:

	# ~~'''~~Ensure strategic alignment~~'''~~: the primary objective is to ensure that the final portfolio of projects accurately reflects the business's strategy by focusing on strategic alignment. This involves selecting and keeping those projects that are either in line with the strategy, support it, or are integral components of it. Additionally, the distribution of spending across various projects, areas, and markets must be directly linked to the business strategy.		# Ensure strategic alignment: the primary objective is to ensure that the final portfolio of projects accurately reflects the business's strategy by focusing on strategic alignment. This involves selecting and keeping those projects that are either in line with the strategy, support it, or are integral components of it. Additionally, the distribution of spending across various projects, areas, and markets must be directly linked to the business strategy.
	# ~~'''~~Maximize the value of the portfolio~~'''~~: here the goal is to optimize the financial value of the portfolio for a given spending level by strategically allocating resources. This requires selecting projects that maximize their commercial value in relation to a specific business objective.		# Maximize the value of the portfolio: here the goal is to optimize the financial value of the portfolio for a given spending level by strategically allocating resources. This requires selecting projects that maximize their commercial value in relation to a specific business objective.
	# ~~'''~~Seek the right balance of projects~~'''~~: it is important to achieve the desired balance of projects based on several factors, such as long-term vs. short-term projects or high-risk vs. low-risk projects across various markets, technologies, product categories, and project types.		# Seek the right balance of projects: it is important to achieve the desired balance of projects based on several factors, such as long-term vs. short-term projects or high-risk vs. low-risk projects across various markets, technologies, product categories, and project types.

	From the previous three goals, the easiest and most transparent to measure is the second one: the financial value of the portfolio. Historically, the measurement system of companies has been financial. In fact, accounting has been called the language of business. There is evidence of financial accounting records that date back thousands of years. Reportedly, the set of well-known metrics employed to measure economic performance are almost standardized towards different companies and, most of them, have an intrinsic relationship with NPV (Net Present Value), ROI (Return on Investment~~) and EVA (Earned Value Analysis~~). At the same time, financial metrics are usually the main drivers of a performance management system.		From the previous three goals, the easiest and most transparent to measure is the second one: the financial value of the portfolio. Historically, the measurement system of companies has been financial. In fact, accounting has been called the language of business. There is evidence of financial accounting records that date back thousands of years. Reportedly, the set of well-known metrics employed to measure economic performance are almost standardized towards different companies and, most of them, have an intrinsic relationship with NPV (Net Present Value) and ROI (Return on Investment). At the same time, financial metrics are usually the main drivers of a performance management system.

	~~===Portfolio metrics===~~

	There are countless possible indicators for measuring the performance of portfolios and certainly, new metrics are being created every day. This is because each enterprise, organization, and sector has different approaches to determining what is important to measure and how to measure progress toward short and long-term goals and objectives. With that said, the following section describes some of the most popular and effective metrics according to the analyzed literature.		There are countless possible indicators for measuring the performance of portfolios and certainly, new metrics are being created every day. This is because each enterprise, organization, and sector has different approaches to determining what is important to measure and how to measure progress toward short and long-term goals and objectives. With that said, the following section describes some of the most popular and effective metrics according to the analyzed literature.

S220269 at 18:45, 9 May 2023

2023-05-09T18:45:52Z

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	In the above equations, “0” indicates performance is on target. A negative value indicates poor performance. A positive value indicates good performance.		In the above equations, “0” indicates performance is on target. A negative value indicates poor performance. A positive value indicates good performance.

	The following equations are used to calculate the performance indices~~, generally based on cumulative data~~:		The following equations are used to calculate the performance indices:

	* The Cost Performance Index is a measure of the conformance of actual cost of work performed to the budget: ''CPI = EV / AC''		* The Cost Performance Index is a measure of the conformance of actual cost of work performed to the budget: ''CPI = EV / AC''