Dealing with Performance Problems

Leaders can help their employees improve their performance by using a progressive discipline system.

To help an employee with a performance problem, you should:

• get to the heart of the problem
• respond to the problem by preparing an action plan
• use discipline to deal with the problem.

Get to the heart of the problem
When there is a problem with an employee's performance, you should get to the heart of the problem before you attempt to correct it. This is important because the cause of a performance problem is not always apparent.

To correct the problem, you need to address the cause. To determine what is causing a performance problem, you should ask the following questions:

• Does the employee understand the goals and standards of the job?
• Does the employee get timely feedback on his or her performance?
• Did the employee get adequate training for the job?
• Does the employee demonstrate competency in other tasks?
• Is the employee capable of doing the work?
• Does the employee have the resources to do a good job?

Respond to the problem by preparing an action plan
Once you have determined the cause of a performance problem, you should meet with the employee involved to discuss possible solutions.

When you do this, don't get personally involved in the problem or apologize for having to deal with it. You want to help the employee succeed. Find out what the employee would like to see as an outcome. Then set up a plan of action.

Begin with the assumption that any corrective action you take should first and foremost help improve an employee's performance.

The following gives more about preparing an action plan:

• Make sure that employees with performance problems have a clear understanding of their jobs.
• Present clear information about how the job should be done, clarify each step, and emphasize the major responsibilities.
• Provide training if necessary.
• Make your employees responsible for the outcome of this process. Ask them to check back with you frequently.
• Encourage your employees.

Use discipline to deal with the problem
When it becomes necessary to take disciplinary measures, you should use a four-step procedure. Because these steps sometimes lead to termination, you should ensure that you have all of the facts and use the same procedure for all employees.
It's also important that you do not allow your judgment to be clouded by prior, unrelated problems. There is more information on the steps below:

• In step one, verbally remind the employee about the problem, and state that the problem is now in the formal disciplinary stage.
• Go to step two if the problem continues. Give the employee formal written notification of the continuing problem.
• If these steps fail, move to step three, in which the employee is given one day of paid leave to decide whether to stay and improve or leave. This demonstrates the organization's desire to give the employee control over whether to stay or leave.
• Step four is termination. Having documented all the previous steps in the employee's file, set a specific time for an interview. Inform the employee of your decision. Keep the meeting simple and short. The employee had every opportunity to improve. There is no need for further discussion.

By following well-thought-out steps in correcting performance problems, a leader can keep employees motivated and effective. Do you have procedures in place that make discipline a progressive measure?

Identifying Performance Standards

Performance standards are target measurements for achieving quality in work. The guidelines for setting performance standards follow these three perspectives:

1. establishing criteria for quality-performance standards
2. clarifying quality-performance standard
3. providing positive reinforcement and recognition for quality-performance standards

Establishing criteria for quality-performance standards
Before you set performance standards, it's important to establish your criteria. You should consider quality, quantity, time, and customer requirements as criteria for establishing performance standards.

Clarifying quality-performance standard
You should clarify your performance standards once you have established your criteria for setting them. It's important to involve your employees in this process. The following provide more information on how to do this:

• Once you establish your criteria for setting performance standards, you should describe your criteria to your employees. You should work with your employees to prioritize the tasks according to the customer requirements, and the time, quantity and level of quality needed.
• You should meet with your employees to record all the tasks and standards that are required to meet your criteria. To make your standards meaningful, they should be measurable.
• You should develop a tracking system and hold regular one-on-one discussions with your employees about work in progress. Don't wait until you have problems to establish a tracking system.

Providing positive reinforcement and recognition for quality-performance standards
After you establish your criteria and clarify your performance standards, it's important to encourage your employees to follow them. You should:

• provide positive reinforcement for following standards
• recognize those who adhere to the standards.

Performance standards are target measurements for achieving quality in work. You can use them to help your organization.

Identifying Performance Problems

In most organizations, it's essential that employees maintain certain performance standards in order for the department to meet its quotas.

When quotas are not met, you must determine why. What are the reasons for poor performance that you must understand?

There are a number of reasons for poor performance. You'll approach these reasons from three different perspectives:

• the reasons for performance problems
• the elements of performance
• the attitude behind performance.

The reasons for performance problems
Most performance difficulties arise for four different reasons. These reasons are explained below:

• Employees' lack of knowledge prevents them from knowing what to do.
• Employees lack the aptitude to do what is required of them and therefore are not capable of completing tasks.
• Excessive interferences from processes, people, or technology can create a situation where employees are not allowed to do what is required of them.
• Finally, some performance problems are caused by employees refusing to do what's required of them. When there are no safety issues involved, this is usually a result of attitude problems.

The elements of performance
When you discover performance problems, what are you actually measuring these results against? There are seven elements of performance that help you target employees' achievements. These elements of performance are:

1. Goals: What do they need to achieve?
2. Standards: How are their achievements quantified?
3. Feedback: Do they have the guidance they need?
4. Competence: Have we properly trained them?
5. Opportunity: Do they have chances for advancement?
6. Means: Do they have the tools to do their job?
7. Motive: Do they have good reasons to want to do this?

A useful tool for analyzing performance is to chart the reasons for performance problems against the elements of performance. This can help you figure out how to specifically address each performance problem.

The attitude behind performance
Attitudes are often part of vicious cycles in which an attitude provides a mental excuse to behave in a certain way. Quite often, this behavior creates a result that reinforces the original attitude.

Attitudes are not always easy to change because they can come from so many different sources. Some are brought to work by employees, and some are formed as a result of things that happen in the work setting. The following provide more about the source of attitudes:

• personal background
• self-esteem
• prior experience
• unclear goals
• poor feedback
• lack of recognition
• nature of the work
• inadequate compensation.

Consider the principal causes for performance problems for addressing the problem areas in your workplace.

Using TPM Analysis to Identify Technical Risks

Marcus, a project manager at Playerz Gaming, Limited, is working on the development of a new search and destroy mission-oriented game. The game is projected to hit store shelves within the next nine months. There is still much work to be done before the project enters the final testing stages.

Recently, Marcus discovered that a technical component of the game is not yet functional. This upset Marcus because it could mean a project delay of up to six months. How could this risk have been monitored and controlled sooner?

Technical performance measurement (TPM) is an analysis and control technique that can help identify technical risks so that action can be taken sooner rather than later. TPM compares technical accomplishments during the project to the expected accomplishments in the project plan. TPMs provide an early warning of deviations from the project plan. For example, a deviation could be a technical parameter that does not demonstrate functionality as planned. Uncontrolled deviations can affect project success.

TPMs include a variety of performance measures depending on the project's content. Performance measurements that are common to all projects include cost and schedule variances and performance indices.

There are three basic steps involved in TPM analysis.

• Step 1: Choose technical performance parameters.
  The first step is to choose your technical performance parameters (TPP). You should choose TPPs to measure based on the risk areas of your project. More parameters should be chosen from project areas that are considered high risk than from other areas. This will ensure that these areas are being measured effectively.
  
  Choosing TPPs is not always an easy task. You must be careful to choose parameters that your project team can measure, but also monitor over a period. For example, the survivability of a product under adverse conditions may be a product requirement. Survivability itself is not particularly measurable, but there may be other TPPs—like product speed, weight, and power—that your team could measure to indicate the survivability of the product.
  
  
• Step 2: Record actual performance.
  The second step of TPM is to record actual performance. The actual performance of the TPPs will be measured at specific intervals over the life of the project and will be recorded in the form of a graph. TPPs are generally measured in units such as speed, weight, size, power, or number of units completed. The risk management plan will state when you should measure the parameters and how to record the measurements.
  
  
• Step 3: Compare actual versus expected performance.
  The third step for TPM is to compare actual versus expected performance. In order to monitor and control the technical risks, you must compare the results from the actual performance measurements to the expected results and graph the results for each TPP separately.
  
  To monitor the progress of TPPs, you should perform this comparison of actual versus expected performance periodically. This will allow you to take steps to control any TPPs that are deviating significantly from the expected performance.
  

How can you tell when a TPP is a risk? You must look at where the achieve-to-date line falls on the graph. Lines that are outside of the tolerance band are already considered risks. Lines that are inside of the tolerance band, but are moving away from the planned value line toward the outside of the tolerance band, are potential risks. Lines that are steadily within the tolerance band or are moving toward the planned value line are not considered risks.

Knowing how to interpret TPM results can help you monitor and control technical risks. This will allow you to be proactive and implement controls sooner rather than later.

Four Ways to Transfer Risk

As a project manager, it is important for you to understand that the act of sharing can play a valuable role in your project's risk response planning process. Sometimes, the most efficient and effective way of dealing with project risks is to share the responsibility for their response with others.

Transference is a risk response strategy that does just that. It shifts the responsibility of a risk, or part of a risk, to a third party. Transference does not eliminate a risk or its potential consequences. This risk response strategy simply gives another party responsibility for the management of that risk.

Although a project will encounter many different types of risks, transferring risk liability is usually most effective when dealing with financial risk exposure.

Transference often involves the payment of a risk premium to the party taking on the risk. For example, a company will pay a monthly premium to its insurance provider as payment for the provider taking on one or more of the project's risks.

During your project's risk response planning process, you may decide that transference is the most appropriate strategy to use in order to effectively respond to one of your identified project risks. Once you make this decision, you must choose the transference method that will best address that risk. There are four methods available for you to use when transferring the responsibility for an identified risk.

1. Insurance
   Insurance is a transference method that shifts the responsibility of specified risks to an insurance company. Typically, insurance companies provide monetary coverage for losses that result from such things as legal liability, fire damage, theft, or vandalism.
   
   One of the most common methods of transferring risk and its potential consequences is to purchase insurance. As a project manager, you can share the responsibility of some of your project's identified risks by having an insurance company provide financial coverage for potential risk losses. During your project's risk response planning process, you should set aside risks that can be insured and transfer the responsibility for those risks to your company's insurance provider.
   
   Some of the most common insurable project risks are:
   
   • Direct Property Damage - to project equipment, project materials or a contractors' property.
   • Indirect Losses - such as equipment replacement and business interruption.
   • Legal Liability - such as public employee bodily injury, design errors, public property damage, and the failure of a product to perform as specified.
   • Personnel Issues - such as employee replacement costs.
   
   For project managers to transfer a project risk through the method of insurance, two conditions must be met. The first condition is that the potential risk loss must be due to chance. Insurance companies do not want to provide monetary coverage for risks that result from human error or poor project planning.
   
   The second condition that must be met in order for a risk to be eligible for insurance is that the potential risk loss must be measurable. This means that the risk loss must have an assigned monetary value. A project risk cannot be insured if the potential loss is expected to be personal or emotional.
   
   
2. Performance bonds
   Performance bonds shift the financial responsibility for poor performance back to the contractor. These bonds are usually issued by a financial institution, such as a bank, and force contractors to pay out a specified sum of money if their performance is unacceptable.
   
   Project managers obtain performance bonds to guarantee the satisfactory completion of contracted work. These bonds provide monetary compensation to a company if its contractor fails to achieve the proposed project work.
   
   
3. Warranties
   Warranties are written guarantees that purchased project equipment will be of good quality. This transference method shifts the cost and responsibility for repair or replacement of defective parts to the manufacturer.
   
   
4. Contracts
   A contract is a binding and legally enforceable agreement between two or more persons or parties. During risk response planning, project managers can use contracts to help eliminate or minimize the impact of identified project risks.
   
   In most cases, contracts are established between an organization and its contractors at the onset of a project. These contracts contain numerous details and clearly outline the contractor's responsibilities throughout the project. This transference method helps shift the potential cost and consequences of incomplete, tardy, or unsatisfactory work back to the contractor. A contract also protects the contractor, ensuring the company meets its obligations as well. This helps reduce the overall risk impact on the project.
   
   Another benefit of a contract is that you may not have sufficient expert resources within your company to perform all of the various project activities in an efficient and effective manner. Contracting some of your project work out to someone with superior knowledge and expertise in a particular area can reduce the risk of poor performance or unsatisfactory project design.
   

It is important to keep the four transference methods in mind when formulating responses to your project's identified risks. If your project requires a contractor, it is good to obtain a performance bond to ensure that expected performance levels are maintained. In addition, if your project materials are purchased from an external source, it is wise to have a warranty in place to protect your company against material defect risks.

If you decide to respond to some of your identified risks by purchasing insurance, you will be able to protect your company from costly, unexpected, and unpredictable risks, such as legal liability and personnel injuries. If you choose to establish a contract at the onset of your project, you will reduce the risk of project plan deviations and miscommunication. You must carefully consider each transference method and determine which one will be most effective in minimizing the impact of an identified project risk.

Insurance, performance bonds, warranties, and contracts are the four primary methods for transference. During the risk response planning process, project managers can use transference to help them reduce the impact of potential risks to project objectives and overall project outcomes.

As a project manager, you should examine all of your project's identified risks and set aside those that will benefit from transference. This will minimize your project's overall risk impact and promote a successful project completion.

Using Work Results for Project Quality Control

Have you ever had a quality plan, but wondered how the plan provided quality control information that could be used for analysis? The quality plan has reporting procedures and feedback that provide this information. This information is called work results. The two most common work results are performance reports and change requests. Each will be examined in turn.

Performance reports
Performance reports provide data that can be turned into various visual charts for analysis. Three of the most useful activities that performance reports measure are:

• schedule adherence
• cost adherence
• quality standards adherence.

In performance reporting, the simpler the visual projection of the data, the better. This makes it easier to understand the requirement for action. Four of the most common performance reports are: Gantt charts, S-Curves, histograms, and tables.
In histograms, data is shown as a vertical bar graph. This illustrates major problem categories. It forms the basis for control charts and Pareto diagrams.

Tables are often used to convey more complex data in its raw data form. Tables can convey observational data.

Performance reports can have a direct impact on quality management. Simple visual images can easily emphasize the need for immediate change. They can also indicate the project plan is working well.

A project manager for a microchip project submitted a weekly performance report after a difficult week. The visual report showed that most of the department's problems were coding errors. This indicated that changes were needed to prevent errors from reaching the final product. The project manager will have to look into this problem in more detail.

Change requests
Almost every process or project encounters some difficulty that requires a change in the conditions of the project such as time, cost, or quality objectives. Project managers may request additional time or money to ensure the project meets its original definition and expectations for quality.

Change requests, another form of work results, ask for the alteration to the project's objectives or quality. This can occur if the product is urgently required or additional expenses for quality will not result in increased profits or sales.

Change requests can also require alterations to quality methodology. Changes in the handling of data used to measure the project, the measurement process and techniques of data collection, or the evaluation of data, can be requested.

The handling of data may change in its method of collection, depth of detail, or type of data. For example, a company introducing new machinery may need to develop new measurements to reflect the change in machinery or technology.

Changes to the process or techniques of data collection are meant to ensure reliability, consistency, standardization, review, timeliness and rapid access to data. For example, a company may adopt an advanced database to aid inputting and calculations.

Change requests can also require new methods of analysis and improvements to the quality of data. For example, a manufacturing company using new equipment may want more precise data and more sophisticated analysis.

The value of the work results in the form of performance reports and change requests lies in their identification of a potential problem. The data these results provide points the way for more in-depth analytical treatment.

Computerized Tools for Project Cost Control

Many software companies have produced computerized tools to aid in project cost control. Project management software that will run on your personal computer or network is available at many different levels of sophistication, with prices ranging from $25 to over $10,000.

Computerized tools could include anything from standalone spreadsheets and accounting packages to fully integrated cost management systems. They offer planning and tracking capabilities at varying levels of detail.

Computers and the appropriate software have helped many project managers cut down on time, costs, and effort involved in getting their work done. You can use these tools to collect information, make calculations, and produce reports. In terms of project cost control, computerized tools can help you to:

• track performance more easily and quickly
• track multiple projects at once
• design, simulate, analyze, and improve cost control processes
• conduct "What if?" analyses
• obtain organized and summarized reports
• catch potential problems early in the project that may cause damage later on.

When it comes time to choose the appropriate computerized tools, you will have to ask, "What kind of tool can I afford?" Most inexpensive applications will enable you to produce charts and basic reports. If your budget allows, you can buy software that will do just about anything you need for project management.

Bear in mind that when implementing new software, you not only have to consider the expense of the tool, but also the time you have to invest to learn how to use it properly. New software costs time as well as money.

You also must decide how "large" a tool you need. Make sure you don't invest in project management software that is not right for you. Before you go shopping, spend some time figuring out:

• the maximum level of complexity you can handle
• aspects of cost control that you need automated
• the level of analysis that stakeholders demand.

Computerized tools should be tailored to your needs. Perhaps the projects you manage are fairly simple with straightforward work breakdown structures and modest budgets. You would likely then benefit most from low-end software that is easy to use.

The larger and more complex your projects become, however, the more you will require a system that integrates schedules and the cost management plan, and one that controls change. There are mid-range and high-end products that meet increasingly complex needs.

Computerized tools are a big help to project management. However, the package your company chooses to invest in will be worthwhile only if it suits your needs and the needs of the projects' stakeholders. Provided below are details about project management software for three main categories of users.

• Low-end users. Packages that will simply automate the basics for a low-end user are simple to use and will produce pretty charts. Cost: $25 to $200.
• Mid-range project managers. Mid-range users include managers of large projects or multiple projects. Software for these projects would need a moderate level of sophistication. Cost: $200 to $500.
• High-end/multi-project users. High-end users are those with complex projects running concurrently, and whose team members work on more than one project at a time. Software would allow simulations and more complex analysis. Cost: $2,000 to $10,000.

Computer software can be a very effective tool for controlling project costs. Remember to purchase software that fits your budget, that you can quickly come up to speed on, and that will meet your needs.

Project Cost Performance Measurement Techniques

One of the most important aspects of project cost control is cost performance measurement. You can use a number of performance measurement techniques to measure cost performance, including cost variance, earned value management (EVM), and the cost performance index. Details about these three cost performance measurement techniques are provided below.

1. Cost variance
Cost variance (CV) is the most basic performance measure. Simply stated, cost variance is the difference between the earned value and actual costs. A positive variance indicates that the project is running under budget, while a negative variance means that costs are overrunning. For the purpose of tracking over- or underrun percentages, you may want to use tables, Gantt charts, or bar charts.

Cost variance is typically expressed as a ratio or percent. You can calculate CV by comparing the actual cost of the work (AC) to the earned value (EV). Follow the steps below to calculate cost variance.

• Calculate the difference between the earned value of the project and the actual costs.
• Divide this amount by the earned value.
• Multiply this figure by 100 to obtain a percentage.
• Keep the negative sign for cost overruns.

The project manager's goal in calculating variances is to provide the basis for earned value management. You must understand the problems behind variances and take action that will correct any problems.

2. Earned value management
Earned value management is perhaps the most useful activity in cost control because it combines costs and the schedule into one indicator. It tells you how much the project is physically accomplishing in terms of both cost and time, giving management a more accurate and timely report on project progress.

The concept of earned value management multiplies the project budget (planned value, or PV) and percent-complete figures to arrive at a budgeted dollar value of the work that has actually been completed so far. The main difficulty in using earned value data to measure cost performance is in determining work completion. How does one accurately measure how much of a task is complete, while avoiding subjectivity in measuring performance as much as possible?

There are five methods you can use to assess work completion. They are described below, from the most conservative and least accurate to the most accurate.

• The zero/100 rule. Many companies do not assess percent complete incrementally. This removes any subjectivity. A task is assessed as either not done (zero percent complete) or finished (100 percent complete). This method works well for activities with a short duration—less than a month, for example.
• The 20/80 rule. This method is almost as conservative as the zero/100 rule. When it is started, a task is considered to be 20 percent complete, and 20 percent of the PV is charged against its account. When the task is complete, the remaining 80 percent of the budget is applied to the task.
• The 50/50 rule. This is probably the most popular method. You assume that once a task has begun, 50 percent of its budget is used. When a task is complete, it has used the other half. For a project with a large number of tasks, this method provides a fairly accurate way to calculate earned value.
• The milestone method. This is used for long work packages that are broken down into distinct milestones. A budget is assigned to each milestone instead of to the task as a whole. Value is earned when each milestone is completed.
• The percent complete. This method is usually used for long-duration work packages (for example, ones that last three months or more). Your project may not have identifiable milestones, but you are still able to estimate the percentage of the task that has been completed.

3. The cost performance index
You can use the earned value figure to establish another important performance indicator. Calculate the ratio of earned value to the actual costs to find out how efficiently your team is accomplishing the work. This ratio is called the cost performance index (CPI). The formula for calculating CPI is as follows:

CPI = EV ÷ AC.

When the CPI is measured periodically, you can plot CPI figures in a line graph to see the trend over the life of the project. This is called a trend analysis.

You will usually see the cost performance index reported along with its "companion" indicator—the schedule performance index (SPI). The SPI is the ratio of earned value (EV) to the planned costs (PV).

Project managers use the CPI and SPI to rate the cost and schedule performance of their projects. A poor rating provides a warning signal, allowing for corrective action to be taken before it's too late. These indexes fall into three categories:

• If equal to 1.0, performance is exactly as planned.
• If greater than 1.0, performance is better than planned.
• If less than 1.0, performance is poor.

Evidence shows that without corrective action, most projects will continue to perform at their cumulative CPI rate. Once the project is about one-third complete, you will have difficulty recovering from a CPI of less than 1.0 without aggressively managing the remaining tasks.

Remember, it's important to measure the cost performance of your projects. By using the three techniques described above, you can control project costs and ensure the project comes in on-budget.

Performance Reports and Project Costs

Have you ever had that nagging feeling that something's not quite right with a project? Accurate and timely performance reports can help you control project costs, so you can calm that uneasiness.

The time you spend reviewing performance reports and analyzing the data they contain is never wasted. Written performance reports, which are inputs to project cost control, can actually save you the time it would otherwise take to meet face-to-face with team members and other stakeholders. Performance reports are an important input for cost control because they:

• provide a summary of how a project is progressing
• compare actual versus planned results
• provide feedback to management, planners, and team members
• contain the early warning signs of future problems.

You can use performance reports to analyze variances from the cost baseline, plot the trends that will help you to forecast your total costs, and watch for events that could increase expenses in later stages of the project.

Good project managers take corrective action early on to ensure their project costs hit the mark. However, you need sufficient and accurate information in order to forecast costs properly. There are four main types of charts that summarize and report project information.

• Histograms. A histogram is a simple graph that quickly shows the over- or underrun of project costs. It indicates both the budgeted and actual cost of performing each project task.
• Tables. Tables can display data clearly and concisely. Tables can also be used to show costs, activities, project milestones, actual versus planned results, and any other information about project status. Tables can provide summaries or they can contain specific details about a project.
• Gantt charts. A Gantt chart is the combination of a table and a bar chart. Gantts summarize cost- and schedule-related information. More elaborate charts can include the duration of each activity in hours or days, the estimated start and finish dates of each activity, critical time frames, and milestones.
• Cumulative cost curves. A cumulative cost curve is a commonly used report that shows project costs plotted against time. The line usually takes the form of an S-curve, since costs are typically low early in the project, increase during the peak production period, and then trail off in the closing phases. You can use a graph to plot the cost baseline and the actual cumulative costs together for comparison. The difference between the two curves represents a cost variance.

The performance reports discussed above are just a sample of those available to project management teams. There is not a set list of performance reports because no two projects have the same reporting requirements. Choose the performance reports that work best for you, and use them to better control costs for your project.

The Analogous Estimating Technique

One of the most common methods of estimating project costs enables you to take advantage of the similarities between a current project and projects that have been performed in the past. This technique is called analogous estimating.

An analogy is a set of comparisons you draw between two things with similar characteristics. Analogous estimating is also known as "top-down" estimating because you apply the total costs from a previous project in order to estimate the total costs of a new one. Just keep breaking the budget down according to the new work breakdown structure (WBS).

The main benefit of using the analogous estimating technique is that it is less costly than other estimating techniques. The down side of using this technique is that it is also generally less accurate.

You may be wondering, "If analogous estimating is not considered to be accurate, why would I use this technique?" However, before you disregard analogous estimating altogether, you should be aware of the circumstances under which it is most reliable. It is particularly beneficial when the following conditions are present.

1. The new and previous projects are similar
There are two situations in which analogous estimating is used. One is when your project is similar to other, previous projects. The more similar the projects are, the more accurate the estimates will be. You also can base estimates on a similar project when you don't have detailed information about a new project. More details are provided below.

• Are they similar? To determine the degree of similarity between the past and current projects, examine the scope and purpose of the former project to ensure the projects are alike in fact, and not just in appearance.
• Not enough detail. Sometimes important costing information becomes available only after a project has begun. A similar project's budget will provide a general baseline to go by.

2. The individuals preparing the estimates have the necessary expertise
Knowledge about, and experience with, the subject matter determines whether the individuals preparing the estimates have the needed expertise. You may want to hire one or more external experts to help with cost estimating.

3. The estimating team has access to adequate information about the previous project
If your current project lends itself to the analogous estimating technique, you'll want to furnish your cost estimating team with everything they will need to produce accurate results. Listed below are some types of information they should have on hand when they are developing cost estimates using analogous estimating.

• Scope statements. The team will not know whether two projects are in fact similar unless it can compare descriptions of the project and product scopes.
• Work breakdown structure. The work breakdown structure from the previous project is also necessary to ensure that similar processes and steps will be followed in the current project. Differences in the two projects could affect the accuracy of cost estimates.
• Performance reports. Actual costs are the most important information from the old project. Your team will use them to determine which of the previous estimates were accurate. It should use the actual costs to revise any inaccurate estimates before copying them into the new project.

Remember the analogous estimating technique as a less costly way of estimating project costs when your team has the needed information and expertise to effectively compare the current project to previous, similar projects.

Methods for Evaluating Project Performance

Author Thomas S. Monson said: "When performance is measured, performance improves. When performance is measured and reported back, the rate of improvement accelerates."

In the area of project management, performance measurement techniques are used to assess the magnitude of deviations from the original project plan. As such, they are an important aspect of project schedule control, allowing the project team to determine whether a schedule variance requires corrective action.

There are four basic performance measurement techniques: performance reviews, trend analysis, earned value analysis, and information distribution.

1. Performance reviews
   Performance reviews are meetings held to assess project status. Most project managers schedule weekly, bi-weekly, or monthly reviews to keep the management team abreast of the project's status. By conducting frequent performance reviews, variances are more readily detected and can be addressed sooner which prevents further deviation from the plan.
   
   
2. Trend analysis
   Trend analysis involves examining project results over several reporting periods to determine if performance is improving or deteriorating. By plotting report results on a graph, management can determine whether schedule performance is progressing or regressing.
   
   Companies use trend analysis for long-term projects, to compare status over several periods. Either a three-month, four-month, or six-month moving average is used to predict project trends. Trending provides management with advance warning of adverse trends, and allows for corrective action to be taken to rectify the situation. Companies also use trend analysis data to plan future projects that are similar in nature.
   
   
3. Earned value analysis
   Earned value analysis is the most commonly used method of performance measurement. It integrates scope, cost, and schedule measures to assist the management team in assessing project performance.
   
   Earned value analysis compares the amount of planned work to what was actually accomplished. This involves calculating three key values for each activity that is performed.
   

- The planned value in a project is the approved estimate of cost planned to be spent on an activity during a given time period. - The actual cost in a project is the total costs involved in completing the work for an activity in a given time period. - The earned value for a project is the value of the work actually completed during a period of time. These calculations allow project managers to see whether cost and schedule performance is proceeding as planned.

4. Information distribution tools and techniques
   Information distribution tools and techniques make necessary information available to project stakeholders in a timely manner.
   
   Information regarding a project's performance is essential to bring about project success. Too little or incorrect information could lead to misunderstandings and changes that are not really necessary.
   
   Clear communication and shared information retrieval and distribution methods are the basic tools and techniques for ensuring that important information is distributed.
   
   Communication skills are used to exchange information. Whether communication is written, oral, internal, external, formal, informal, vertical, or horizontal—the sender must ensure that the information is clear and complete while the receiver confirms that it is properly understood.
   
   Information retrieval systems allow information to be shared by project team members and stakeholders. Such systems may include project management software, electronic databases, and manual filing systems.
   
   Information distribution methods ensure that important project information is distributed to the stakeholders. Project meetings, voice mail, electronic mail, fax, videoconferencing, project intranet, hard-copy documentation, and shared databases are all effective distribution methods.
   

Performance reviews, trend analysis, earned value analysis, and information distribution tools and techniques are important in assessing the magnitude of any project variations. Using these techniques to determine whether a project is performing as planned will help you maintain a concise and controlled project schedule.

Reporting Project Progress and Performance

Project stakeholders often require information about how resources are being used to achieve project objectives. This information is provided through performance reports.

Performance reports summarize project activity progression by comparing your project's performance to its schedule baseline.

Performance reports come in many shapes and sizes. From a time management perspective, the obvious reporting format to use is a graphical representation of project performance. The four most frequently used graphical performance reporting formats are the: Gantt chart, S-curve, histogram, and table.

• Gantt chart - A Gantt chart displays schedule-related data. The dates are shown across the top of the chart to illustrate the time line.
• S-curve - An S-curve displays cumulative costs, labor hours, or other quantities plotted against time.
• Histogram - A histogram is a bar graph of a frequency distribution. The bar width represents the division of each variable into task duration. The height is relative to the number of resources required.
• Table - A table displays semi-processed numerical data for a minimum of two variables. Data is relevant to an individual project's needs.

Each company should determine which format works best for projects, in terms of time and information required. Therefore, the format one company uses may not be an appropriate format for another company.
A reliable reporting system helps to ensure that projects progress according to plan. It can help determine when corrective action is necessary. The reporting system provides:

• regular, accurate status updates
• concise, easily understandable information
• potential problem forecasts.

Performance reports can be presented in various ways, depending on the intended purpose, the content to be included, and the frequency required. Four types of reports that vary in detail and timelines are: current, cumulative, exception, and green-yellow-red reports.

Current reports
Current reports document progress solely on those activities scheduled for work during the reporting period. Reports show activity highlights and any variances from a project's plan. Follow-up on current reports should provide project details, including reasons for variances and a recommended corrective action plan.

Cumulative reports
Cumulative reports examine the project's history—from start-up to the end of the current reporting period. Cumulative reports display trends in project activities that, over several periods may exhibit improvements or chronic problems.

Exception reports
Exception reports are high-level summary reports submitted to senior management. Sometimes these reports are followed by an additional report if more detail is required.

Green-yellow-red reports
Green, yellow, and red reports are very simplified versions of performance reports. These reports get the intended point across with a minimum amount of reading required.

• Green reports - Say that everything is going according to project's plan.
• Yellow reports - reveal a schedule slippage with a corrective action plan.
• Red reports - indicate a project is out of control with no action plan in place.

AC Technology is a computer company that has just reached the half-way point in its newest project. It is designing an operating system that includes its own anti-virus component. Using a cumulative reporting system allows the team to look back and see that the first quarter showed a slight schedule slippage. A corrective action plan was set up to try to offset this problem. Now, the project has reached the end of the second quarter and the reports are showing that this trend has continued. AC Technology must look very seriously at its current corrective action plan and make adjustments to bring this project back on track.
Comparing project performance to the schedule baseline will be easier once your company selects the most appropriate performance reporting format and method of presentation to meet its needs.

Measuring the Impact of Approved Project Changes

If you are familiar with performance measurement techniques, you know that one of them—earned value—is used to forecast estimates before work is started. Did you know you could also use it to forecast the effect of a project change?

When a change is verified, the work must be incorporated into the project plan, which usually increases the cost and lengthens the schedule. As the work for the change progresses, earned value (EV) analysis can be used to forecast how the change will affect the project completion estimates for budget and schedule. This will allow the project manager to better control the change.

• Planned value (PV) - is the approved cost estimate for a change during a specific period of time. It answers the questions: "How much will the work for the change for this time period cost?" and "How much work should be done by now?"

• Actual cost (AC) - is the real amount it costs to perform the change in a given time period. It answers the question: "How much has it cost for the work on the change so far?"

• Earned value (EV) - is the value of the work actually completed on a change in a given time period. It answers the question: "How much work is done and what was the original budget to complete that work?"

To use EV analysis to measure the performance associated with the change and the project as a whole, you will need to calculate two performance indicators:

• schedule performance index (SPI)
• cost performance index (CPI)

The SPI is the ratio of earned value of the accepted change to the planned cost of the change at the present point in time. It indicates how the change is affecting the schedule right now. To calculate the SPI, divide the earned value by the planned value.
Project managers can use the information resulting from the SPI calculations to make changes to the final product delivery schedule.

• If SPI is equal to 1.0 - no changes to schedule are necessary.
• If SPI is greater than 1.0 - project will finish ahead of schedule.
• If SPI is less than 1.0 - additional days will be needed to complete the project.

The EV for Carla's textile project is $188,000 and the PV is $200,000. To calculate the schedule performance index for her project, Carla divides the EV of the change, $188,000, by the PV of the change, 200,000, to equal 0.94. Since the result is less than 1.0, Carla will need to add additional days to her project schedule because of the change.

Another factor that you must look at when a change has been accepted is how the change will affect the final cost, or cost upon completion, of the project. To do so, calculate the cost performance index (CPI). It divides the sum of all individual EV budgets by the sum of all AC budgets. When calculating CPI, round your answer to the first decimal place.

CPI = Total of EV/ Total of AC

The results of the SPI and CPI are then used to forecast the project completion estimates for the changed project.

Earned value analysis provides a way to measure project performance and determine where your project is heading after the approval of a change to the project. This helps project managers to determine if the finished project will be on time and within budget.

Two Other Important Inputs to Scope Change Control

Your project scope is a dynamic entity. If you don't keep an eye on it, it can spin out of control and wreak havoc on your project. Project scope verification and change control are the processes used to keep your project on target, on schedule, and within budget. The main inputs to these processes are the work results, product documentation, work breakdown structure (WBS), scope statement, and project plan. Two other inputs to scope change control are also invaluable in scope verification and change control. These "other" inputs are the scope management plan and performance reports.

• Scope management plan
  
  The scope management plan is a basic high-level plan for scope change control. Developed during the scope planning process, it is actually a part of the scope statement. It will help you rate how proposed changes will impact the project.
  
  High-impact changes are the most severe and affect the whole company. Scope changes of this type affect the revenue and schedule of a project. For example, a delay in supplies could be rated as a high-impact change if it will impede the project schedule.
  
  Medium-impact changes affect the project team members. These scope changes could alter how the team approaches the project, but shouldn't add time or money to the project.
  
  Low-impact changes affect individual members of the team. Team members may need to modify a particular task within a project phase. Low-impact changes should not affect project baselines.
  
  Another component of the scope management plan used as an input to scope change control is the description of roles and responsibilities in relation to scope changes. Clearly defined responsibilities make the change process smoother because the team members will know exactly what they are expected to do.
  
  The requester is any project stakeholder who submits a change request. It is his or her responsibility to fully complete the change request form and forward it to the change coordinator for the project.
  
  The change coordinator receives new change requests and ensures they are complete. The change coordinator is responsible for requesting clarification of any confusing information and forwarding the change request to the assessment team. This person may also lead the assessment team.
  
  The members of the assessment team are responsible for determining the impact of the proposed change on the scope of the project. They also provide an estimate of effort to implement the change.
  
  The project manager reviews the assessment information and determines the impact on project schedule and budget. It is the responsibility of the PM to approve or reject any change request that is within his threshold of acceptance. He passes any other changes to the project steering committee.
  
  The project steering committee reviews change requests only when asked by the project manager. The steering committee has the authority to approve or reject these changes.
  

• Performance reports
  
  Performance reports are also inputs to scope change control. One of the duties of the project manager is to provide stakeholders with periodic project updates. Performance reports provide the project manager with a means to provide accurate, periodic reports. The reports include values of planned, actual, and earned costs, which show project performance at the present time as compared to the baseline or objectives. You can use these values to measure performance after making a change.
  

"Other" inputs to scope change control help to ensure that changes to your project's scope are adequately controlled. Together, the scope management plan and performance reports provide additional information to help you manage scope changes and incorporate them more easily into your project.

Dealing with Performance Problems

Leaders can help their employees improve their performance by using a progressive discipline system.

To help an employee with a performance problem, you should:

• get to the heart of the problem
• respond to the problem by preparing an action plan
• use discipline to deal with the problem.

Get to the heart of the problem
When there is a problem with an employee's performance, you should get to the heart of the problem before you attempt to correct it. This is important because the cause of a performance problem is not always apparent.

To correct the problem, you need to address the cause. To determine what is causing a performance problem, you should ask the following questions:

• Does the employee understand the goals and standards of the job?
• Does the employee get timely feedback on his or her performance?
• Did the employee get adequate training for the job?
• Does the employee demonstrate competency in other tasks?
• Is the employee capable of doing the work?
• Does the employee have the resources to do a good job?

Respond to the problem by preparing an action plan
Once you have determined the cause of a performance problem, you should meet with the employee involved to discuss possible solutions.

When you do this, don't get personally involved in the problem or apologize for having to deal with it. You want to help the employee succeed. Find out what the employee would like to see as an outcome. Then set up a plan of action.

Begin with the assumption that any corrective action you take should first and foremost help improve an employee's performance.

The following gives more about preparing an action plan:

• Make sure that employees with performance problems have a clear understanding of their jobs.
• Present clear information about how the job should be done, clarify each step, and emphasize the major responsibilities.
• Provide training if necessary.
• Make your employees responsible for the outcome of this process. Ask them to check back with you frequently.
• Encourage your employees.

Use discipline to deal with the problem
When it becomes necessary to take disciplinary measures, you should use a four-step procedure. Because these steps sometimes lead to termination, you should ensure that you have all of the facts and use the same procedure for all employees.

It's also important that you do not allow your judgment to be clouded by prior, unrelated problems. There is more information on the steps below:

1. In step one, verbally remind the employee about the problem, and state that the problem is now in the formal disciplinary stage.
2. Go to step two if the problem continues. Give the employee formal written notification of the continuing problem.
3. If these steps fail, move to step three, in which the employee is given one day of paid leave to decide whether to stay and improve or leave. This demonstrates the organization's desire to give the employee control over whether to stay or leave.
4. Step four is termination. Having documented all the previous steps in the employee's file, set a specific time for an interview. Inform the employee of your decision. Keep the meeting simple and short. The employee had every opportunity to improve. There is no need for further discussion.

By following well-thought-out steps in correcting performance problems, a leader can keep employees motivated and effective. Do you have procedures in place that make discipline a progressive measure?

Identifying Performance Standards

Performance standards are target measurements for achieving quality in work. The guidelines for setting performance standards follow these three perspectives:

1. establishing criteria for quality-performance standards
2. clarifying quality-performance standard
3. providing positive reinforcement and recognition for quality-performance standards

Establishing criteria for quality-performance standards
Before you set performance standards, it's important to establish your criteria. You should consider quality, quantity, time, and customer requirements as criteria for establishing performance standards.

Clarifying quality-performance standard
You should clarify your performance standards once you have established your criteria for setting them. It's important to involve your employees in this process. The following provide more information on how to do this:

• Once you establish your criteria for setting performance standards, you should describe your criteria to your employees. You should work with your employees to prioritize the tasks according to the customer requirements, and the time, quantity and level of quality needed.
• You should meet with your employees to record all the tasks and standards that are required to meet your criteria. To make your standards meaningful, they should be measurable.
• You should develop a tracking system and hold regular one-on-one discussions with your employees about work in progress. Don't wait until you have problems to establish a tracking system.

Providing positive reinforcement and recognition for quality-performance standards
After you establish your criteria and clarify your performance standards, it's important to encourage your employees to follow them. You should:

• provide positive reinforcement for following standards
• recognize those who adhere to the standards.

Performance standards are target measurements for achieving quality in work. You can use them to help your organization.

Identifying Performance Problems

In most organizations, it's essential that employees maintain certain performance standards in order for the department to meet its quotas.

When quotas are not met, you must determine why. What are the reasons for poor performance that you must understand?

There are a number of reasons for poor performance. You'll approach these reasons from three different perspectives:

• the reasons for performance problems
• the elements of performance
• the attitude behind performance.

The reasons for performance problems
Most performance difficulties arise for four different reasons. These reasons are explained below:

• Employees' lack of knowledge prevents them from knowing what to do.
• Employees lack the aptitude to do what is required of them and therefore are not capable of completing tasks.
• Excessive interferences from processes, people, or technology can create a situation where employees are not allowed to do what is required of them.
• Finally, some performance problems are caused by employees refusing to do what's required of them. When there are no safety issues involved, this is usually a result of attitude problems.

The elements of performance
When you discover performance problems, what are you actually measuring these results against? There are seven elements of performance that help you target employees' achievements. These elements of performance are:

1. Goals: What do they need to achieve?
2. Standards: How are their achievements quantified?
3. Feedback: Do they have the guidance they need?
4. Competence: Have we properly trained them?
5. Opportunity: Do they have chances for advancement?
6. Means: Do they have the tools to do their job?
7. Motive: Do they have good reasons to want to do this?

A useful tool for analyzing performance is to chart the reasons for performance problems against the elements of performance. This can help you figure out how to specifically address each performance problem.

The attitude behind performance
Attitudes are often part of vicious cycles in which an attitude provides a mental excuse to behave in a certain way. Quite often, this behavior creates a result that reinforces the original attitude.

Attitudes are not always easy to change because they can come from so many different sources. Some are brought to work by employees, and some are formed as a result of things that happen in the work setting. The following provide more about the source of attitudes:

• personal background
• self-esteem
• prior experience
• unclear goals
• poor feedback
• lack of recognition
• nature of the work
• inadequate compensation.

Consider the principal causes for performance problems for addressing the problem areas in your workplace.

Evaluating an IT Project

To ensure your IT project is on track, and to prevent serious performance issues, you should evaluate the project at the end of each of the six project stages. Usually, the end of a stage is identified by the completion of a project deliverable. An evaluation process can help your team determine whether changes need to be made to the process or plan before moving to the next stage.

After working diligently to reach the end of each stage of the project, it is important for all team members to meet to discuss the negative and positive aspects encountered up to this point. The focus of this meeting is to evaluate the activities and variables for each particular stage in the current project's development.

For example, during the evaluation, the team may determine that the project scope has changed, the team has not been as productive as planned, or necessary tasks have been left out. These are all variables that can lead to missed deadlines.

During the evaluation of an IT project's development, it is essential to consider two main business activities. The two business activities that should be the focus of the project evaluation are described below.

1. Estimate schedule performance.
Processes that should work harmoniously together sometimes do not. Your team may find that these unforeseen circumstances can dramatically slow down development. You then have to stop and reevaluate the process. This can sometimes be very time consuming.

Your team can estimate schedule performance by comparing the schedule estimates with the actual work completed. A formula for measuring schedule efficiency is the schedule performance index (SPI).

SPI is the schedule efficiency ratio of earned value (EV) accomplished against planned value (PV). The formula is SPI = EV ÷ PV x 100. In this formula, EV answers the question, "How much work has actually been completed at this point?" PV answers the question, "How much work was scheduled to be completed by now?" To round the SPI, look at the digit to the right of the place to which you are rounding. If that digit is less than 5, round down (6.45 = 6). If that digit is equal to or more than 5, round up (6.51 = 7).

When analyzing SPI for a project, you must consider the results from the calculation. A result equal to 100 indicates that the project is performing as estimated. A result that is greater than 100 indicates that the project is performing ahead of estimates. A result of less than 100 indicates the project is behind estimates.

Managers prefer to see the schedule hit within an acceptable range, where 85 or 90 out of 100 is considered acceptable. When the result varies significantly below 100, risk analysis will be necessary.

2. Evaluate team member performance.
Another business activity to evaluate is team member performance. The wrap-up at each stage of the project is an ideal time to evaluate whether the team has met the goals of the project plan.
It's important to evaluate the performance of team members to ensure they meet completion dates for each task, as documented in the project plan. Valuable time can be lost when even one member of the team does not meet individual goals. With each task set up to flow smoothly into another, a deviance from the established plan can cause major problems.

How can you determine whether team members have met project goals? You can establish a performance expectation for each task prior to beginning the project. The completion time for each task is normally estimated using an average work week of an eight-hour day and 40 hours. The equation you can use to determine completion time for a task is: number of estimated hours for completion ÷ 8-hour day = time allowance in days.

For example, if the task is estimated at 20 hours, then it should be completed in 2.5 days (20 ÷ 8 = 2.5) to be on schedule. If a task is estimated to take 2.5 days and it actually takes three days to complete, then the task has missed the deadline. If the task is completed in less than 2.5 days, it is ahead of schedule.

Do not underestimate the importance of evaluating your project's development. An evaluation at the end of each stage of your project can prevent serious performance issues as the project progresses.

Project Objectives

Project objectives define target status at the end of the project, reaching of which is considered necessary for the achievement of planned benefits. They have to be formulated as S.M.A.R.T.

• Specific, with
• Measurable (or at least evaluable) achievement,
• Achievable (recently Acceptable is used regularly as well),
• Realistic and
• Time terminated(bounded).

The evaluation (measurement) occurs at the project closure. However a continuous guardance on the project progress should be kept by monitoring and evaluating.