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Balanced Scorecards and the PMO

 

Balanced Scorecards are used by organisations to help develop their strategies and measure how effective those strategies are. For an in-depth look, you can head over to the Balanced Scorecard Institute

In this article, we take a look at how a balanced scorecard approach was utilised by a PMO within the education sector and see what insights will be useful to other PMOs regardless of the sector that PMO can be found in.

The insights come from a research paper – Measuring PMO Performance – Application of the Balanced Scorecard in a Collaborative Research Context – from Philbin and Kaur (2020) available from the Journal of Modern Project Management.

 

What are Balanced Scorecards?

Every organisation wants to be successful at what it does and that means having strategies in place to ensure it can be successful. But how does an organisation know that it is on the right track? That’s where balanced scorecards come in.

Financial results are how a lot of businesses know they’re successful – they’ve hit a certain level of revenue and profit for example. But there are other areas that need to balance off against the finances – for example, success comes from having loyal customers; it can come from having efficient processes or very well trained staff; success can also come from having the ability to change and adapt – to have new strategies.

Balanced Scorecards ‘suggest we examine an organization from four different perspectives to help develop objectives, measures (KPIs), targets, and initiatives relative to those views.’

These four different perspectives are:

  • Financial (or Stewardship): views an organization’s financial performance and the use of financial resources
  • Customer/Stakeholder: views organizational performance from the perspective of the customer or key stakeholders the organization is designed to serve
  • Internal Process: views the quality and efficiency of an organization’s performance related to the product, services, or other key business processes
  • Organizational Capacity (or Learning & Growth): views human capital, infrastructure, technology, culture, and other capacities that are key to breakthrough performance

 

 

An Example of a Balanced Scorecard

To help understand it further, there are certain questions that should be answered for each of the four perspectives:

The idea is that the financial outcomes are the result of the other three – there’s a link between any investment being made to a positive financial outcome.

Here’s an excellent example that shows a completed balanced scorecard from Intrafocus – it shows how the different perspectives relate upwards from Learning Growth (called Organizational Capacity)  to the Internal Processes, to Customer and then, finally, the financial.

If an investment is made in improving the knowledge and skills of the people who work within the business – there has to be an improvement in the internal processes of the business as a result of this initial investment in the knowledge and skills. With internal processes being improved, there has to be some improvement that can be seen or felt by the customer – and then finally, there has to be a financial improvement – either making money or reducing costs.

The example below also shows a balanced scorecard with a completed vision and mission and also the measures (key performance indicators KPIs), the targets and also some top-level notes on the initiatives (projects, programmes) to achieve the objectives.

 

Balanced Scorecards in a PMO

Now we have an idea about what a balanced scorecard is, we look to the research paper to understand how it was used within the PMO.

The PMO within the research paper is focused on supporting academic research-based projects and they are responsible for the usual project-level support such as planning, risk management etc alongside centre of excellence type services such as systems, processes, tools in place to support project delivery.

The PMO put in place a balanced scorecard approach based on their strategic objectives of providing a high-quality project management support service which also includes some tender/proposal services too to win new education projects.

The PMO is responsible for ensuring that projects are delivered in accordance with the iron triangle of cost, time and scope with an additional quality management focus.

Take a look at how they approached the four different perspectives:

Learning and growth investment to develop skills and ensure the PMO team is fit for purpose leads to an improvement in project management capabilities – including the systems needed and the processes in place. The customers of the PMO will see more project opportunities identified and better communications from the PMO. This in turn means more projects coming online with increased success rates.

The research paper gives more detail behind each:

 

Key Performance Indicators (KPIs)

A key performance indicator is all about measurement, to see if the organisation is performing well or not. And as the term key suggests, it’s the most important measurement you want to capture.

In the research paper the following KPIs were identified against the four different perspectives:

The point was made that just because there are more KPIs in the areas of finance and customer it doesn’t mean there is less monitoring of performance in the other two areas. The concentration on finance and customer just means there are more areas to measure within these perspectives and therefore more KPIs are needed to do that.

 

Using the Balanced Scorecard Approach

The PMO provided reports on a monthly basis to summarise the performance of the team in the previous month – these were used by the division head to ensure effective oversight and governance of the PMO. The report was also used as a basis for monthly PMO meetings.

To operate this approach there is an overhead required – administrative time – to complete the report drawing on information provided by individuals within the business and the systems used to store dat
a.

 

Lessons Learnt from the Balanced Scorecard Approach

There were a number of insights that the PMO thought beneficial:

  • The balance of the four perspectives allowed a holistic view of the work the PMO does and gives consideration to people, processes and projects.
  • It is useful to capture KPIs other than those of a purely financial nature
  • It’s worth the administrative time to collate the findings when the report gives a good guide to operating the PMO and tracking the performance of the team (consideration was given to changing the frequency from a monthly basis to perhaps quarterly and still receiving the benefits)
  • There has to be an owner for the PMO Balanced Scorecard although responsibilities for individual areas and KPIs can be delegated.
  • The balanced scorecard is used as a team motivational tool so everyone in the PMO team can get behind the work and activities that are needed to hit the KPIs
  • It is also a useful tool to help work through underperformance issues within the team as well – everything the PMO is trying to achieve is transparent, shared and committed to.

 

To review the research paper – you can download it here.

For further reading and some excellent resources, check out Intrafocus

You can also read the Inside PMO report on KPIs, Metrics and Measures

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