Balanced Scorecard Conference Glen B.

Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Using Balanced Scorecard to Build a

Project Focused IT Organization
Driving high performance teams
with Balanced Scorecard and a
Program Management Office

© 2002 CH2M HILL Communications Group

Thank you for the invitation to speak today on Balanced Scorecard and
project management. I’m Glen Alleman from CH2M HILL. CH’s primary focus
is on technology and services to safeguard the environment.
I work in the communications group. Our Information and Communications
Technology organization provides IT services primarily to the Department of
Energy.

1
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

© 2002 CH2M HILL Communications Group

The communications group works in conjunction with the nuclear group for
the Department of Energy. DOE owns and operates the Nuclear Weapons
Complex in many locations across the US. Rocky Flats is one of those sites.
The locations described in this slide represent the current Complex sites
involved in some aspect of weapons production, research, or cleanup. We’re
on the cleanup end of the process.
The National Environmental Policy Act (NEPA) was signed into law on
January 1, 1970, to address the need for an environmental policy to guide the
growing consciousness and shape the national response to the legacy of the
nuclear weapons complex. From this basis most of the environmental law
regarding cleanup and disposal of nuclear waste has been derived.
A good history of the NWC can be found in Building the Bombs: A History of
the Nuclear Weapons Complex, Charles R. Loeber, Sandia National
Laboratories, SAND2002-0307P, United States Government Printing Office,
ISBN: 0-16-067187-6

2
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

© 2002 CH2M HILL Communications Group

Our site is located at the base of the Rocky Mountains, along the Front
Range just north west of Denver. This site is being restored to its original
pristine environment in late 2005.

3
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Our Customer Is Not Your Normal Commercial Business Producing

Household Items, Consumer Products Of Business Items

O The Nuclear Weapons Complex (NWC) is a nationwide group of

government-owned and contractor operated laboratories and
production plants managed by the National Nuclear Security
Administration under the U.S. Department of Energy.
O Rocky Flats Environmental Technology Sites (RFETS) was one of
those plants.
It was shut down in 1989 in order to bring it in line with environment
regulations.
It never restarted
Clean up and closure has been its mission since then
O This effort has been managed by Kaiser-Hill Company LLC
O Closure is scheduled for late 2005

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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The closure of the former nuclear weapons sites, is a half trillion dollar
enterprise. DOE’s Environmental Management budget for 2004 is $7.2
Billion. The National Nuclear Security Administration's budget for FY 2004 is
$8.835 billion, for a combined total of $16 billion.
Managing the IT portion of these projects is our core competency. IT in the
past was not a critical success factor for safe site closure. Our experiences at
Rocky Flats have shown that IT can now been seen as an integral
component of the cleanup process. Although we are still a second order
impact on cleanup, the safe, effective, and efficient closure can no longer
proceed without modern IT processes.

4
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

A Quick Background Of Our Business Environment, Clients And

Business Model

O CH2M HILL is a $2.2B project completion services firm

O Our current engagement is a $12M annual IT services contract with
the Department of Energy
O We provide information and communication technology (ICT) services
to Rocky Flats Environmental Technology Site
The closure mission supports D&D efforts for all waste clean up
All activities are mission critical
O Steady reduction in budget and staff in support of
closure is our “normal” business environment
 Closure projects have accelerated cost
reduction budgets until they reach ZERO
 Our goal is to turn Rocky Flats into dirt, prairie
dogs, and 10TB of data

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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I come to Balanced Scorecard not as a business executive but as a Program

Management Office leader. My role in our IT organization is to turn our
strategy into actionable outcomes. I participate in the development of strategy
as a member of the executive management team. In the end though the
PMO is on the delivery end of the objectives, portfolios and projects that
make up the portfolios.
Our work environment is unique from the experience of most of you here. Our
business is to go out of business – we manage the IT processes for DOE
weapons plant closure projects. There 114 of these sites in the continental
US, ranging from 650 square miles to small rooms in the basements of
university physics departments.
These projects are like construction projects but in reverse. All the buildings,
nuclear and chemical wastes, all the infrastructure, and any remnants of the
site are removed, shipped to various sites or disposed of in some way. For
our site at Rocky Flats all that will be left in 2005 is 6,500 acres of clean dirt,
prairie dogs, and 10 TB of data.

5
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Information and Communication Technology (ICT), Balanced

Scorecard, and Program Management

O ICT provides
Server and network operations
Applications
Desktop support
Telecommunications
Program Management Office
IT Governance
O Core ICT strategies
Use technology in place of labor
Never be an impediment to progress toward site closure
Withdraw services that follow closure processes
On Time / On Budget / On Scope

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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The connection between our ICT operations at Rocky Flats and other closure
sites and Balanced Scorecard involves our mission – close the site with the
least cost, fastest schedule, without injuring or killing anyone, and without
being on the critical path for any other project task.
This goal could easily be met with simple seat of the pants project
management and maintenance and operations IT processes. The problems
arise when our customers – those doing the physical removal of the site
materials – come into the picture.
Like any real construction project, changing requirements is an everyday
occurrence. Adapting to change is the mantra of any IT organization. But in
order to adapt to change a foundation from which to make change is needed.
This is usually called “governance.” But governance alone is not enough. A
strategy for adapting to change is required. This strategy needs to consider
not only technologies and customers, but also the broader mission of the ICT
function – which asks “why are we here?” and “what have you done for us
lately?”

6
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Inverting the Balanced Scorecard pushes strategy down into the

organization to the project management level

O Many speakers here will be talking about using Balanced

Scorecard to implement strategy up and down the organization
O Our approach includes the above, but also the use of BSC to
improve the performance of a project based organization
O This is a Program Management Office view of BSC rather than a
CXO view
 This closes the gap between “vision” and
“execution”
 Where should dollars be invested to achieve
value?
 How can this delivered be measured?
 How can investments be connected to strategy
as well as the tactical side of PM?

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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Our approach to balanced Scorecard may be different than others. We did

not start with some broad business goal – grow this company to a larger size.
Ours started with the question “how can we provide more with less?”
Since we live in a project based operation, the second question was “how
can we better deliver our projects to meet the strategic needs of our
customers?”
This was an inside out view of Balanced Scorecard.

7
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Program Management View of Balanced Scorecard Involves More

Than The Original Four Perspectives
9 Performance metrics
9 Actual cost
Earned 9
EarnedValue
Delivered value
Value 9 Resource utilization

Performance
Performance Project
Project Risk
Risk
Management
Management Management
Management Management
Management

9 Balanced Scorecard 9 Risk related project data

9 Direction 9 Strategic data
9 Strategic metrics
Lessons
Lessons 9 Continuous risk management
Learned
Learned

9 Strategy is a hypothesis
9 Metrics are the data for
testing the hypothesis

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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The forces on project management are show here. Let’s take a quick tour for
those not familiar with government contracting performance management
practices. By the way these practices are applicable to any project
management environment not just DOE and DoD. Especially in the software
development world, where the question “when will we be done and how much
will it cost” is asked everyday.
•Performance management is our balanced scorecard. I’ll show one version
later in the presentation.
•Earned value management is the core processes for managing projects. It
asks and answers the question what is the cost at completion, when will we
be done, and what have you delivered in terms of value for the money you’ve
spent.
•Risk management is how adults do project management.
•Lessons learned is a core process improvement process. With looking back
and asking free and frank questions about improvements, moving forward is
difficult.

8
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Talking About Project Driven Organizations Means Walking The Walk

As Well, Which Means Full Engagement With Project Execution
The Project Driven Organization
Strategy Stakeholders
Balanced
Scorecard

Objectives Requirements

Governance
Methods

Business Scope
Organization
Processes Deliverables

Teams Portfolios
Activities
Milestones Risks

Techniques

Roles
Responsibilities
Projects
Resources

Skills Models
Budget

Data
Costs
Locations
Applications Earned Value

Databases
Hardware

Tools One Up Reviews

Exec Standards
Servers Desktops
Entr
PMO
Telecomm Networks Security
Apps
All

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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When someone uses the term “project management” they usually mean the
planning of cost and schedule for the activities to deliver a product or service.
But there are many other connections between projects and strategy. But first
let’s look at the connections between the process of managing a project.
Many activities are taking place besides cost and schedule. All influencing
the outcome of the project and its support of a strategy

9
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

One Critical Understanding Missing From Many Strategy Discussions Is

– “What Is Strategy In The Context Of IT Deliverable Projects?”

O Strategy creates fit among a firms activities

O The success of strategy depends on doing many things well, not
just a few
O All things that are done well must operate within a close knit
system
O If there is no fit, there is no strategy
O Without fit management becomes the
search for operational excellence
O Improving operational excellence is
necessary but it is not the same as strategy
O Managing fit is “strategic management”

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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The approach to strategy usually starts with the Mickey Rooney school of
management from “Babes on Broadway” in 1941 where Mickey says to Judy
Garland, “Hey gang let’s put on a show.” The CXO comes to the business team and
says “Let’s go get a strategy.” This is clearly not the right approach, but it happens
more than you think.
First the definition of “strategy” is not well understood in the IT domain. People talk
about architectural strategy, network deployment strategy, business development
strategy, and shared services strategy.
Defining strategy in terms of hardware, software, and processes is not strategy – it’s
operational effectiveness. Confusing these two is a common practice.
Next comes the simple minded belief that making strategy is a linear one step
process. This is obviously not true, but many strategic process developments do not
incorporate the “testing” parts of strategy making found in Balanced Scorecard. The
participants make a strategy without the means to test their hypothesis. What they
have done is simply created an experiment without any feedback from the
laboratory. This is usually the start of a failed strategy process, leading to
disappointment for all.
Strategy making must have hypothesis testing metrics. These metrics are used to
“test” the strategy to determine if it is working. When the tests come in, the owner of
the strategy can ask and answer one of two questions:
•Do I have the right strategy?
•Do I have the right tests to verify the strategy?
Both questions need to be asked and answered

10
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

So What Is Strategy And How Can It Be Deployed In A Project

Management Context?

O Operational effectiveness involves continual improvement that

have no trade off opportunities
O The operational effectiveness agenda is the proper place for
constant change, flexibility, and relentless efforts to achieve best
practices
O The strategic agenda in the place for making clear tradeoffs and
strengthening the fit between the business components
O Strategy involves the continual search for ways to reinforce and
extend a firms position and the delivery of value
This includes the IT “firm” within the business firm
As well as a department within the IT organization

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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The difference between strategy and operational effectiveness is critical to

the deployment of Balanced Scorecard and the management of projects that
fulfill the strategy.
Keeping these differences in mind at all times is as critical as discovering the
various strategies.

11
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Strategy Is About Creating Fit Among The Various Components,

Participants, And Forces Driving Of An IT Organization

O Fit creates incentives and the

pressure to improve
O Poor fit means poor performance
O Poor performance exposed
Weaknesses
O Increasing fit improves
performance in other areas as
well as target area of the
improvement
O Strategy is making a hypothesis about a desired outcome,
constructing the measures to test the hypothesis, deploying the
experiment to test the hypothesis, then making adjustments
based on the metrics

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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The concept of strategy as a hypothesis and the experiments to test the

hypothesis may be new to many. But this approach puts strategy in a
different light.
Strategy is not something you do then go off to execute the plan. It is a
continuous feedback process. Always testing the strategy with metrics
derived from projects.

12
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

A Framework For IT Strategy In The Absence Of Balanced

Scorecard Fails To Answer Many Questions Needed For Success

O
O
What
What––isisthe
thesystem
systemmade
madeof? of? O
O
Who
Who––does
doeswhat
whatrelative
relativetotothese
these
How system
systemcomponents?
components?
O
O How––does
doesthethesystem
systemwork?
work?
Where When
When––dodothings
thingshappen
happenininthethe
Where––arearethe
thecomponents
componentsofof
O
O O
O
the system?
system?
the system locatedrelative
system located relativetotoone
one
another?
another? O
O
Why
Why––are
arevarious
varioussystem
system
choices
choicesbeing
beingmade?
made?

O
O
What
Whatisisthe
theinformation
informationsystems
systemsstrategy?
strategy?
O
O
How
How is the information technologystrategy?
is the information technology strategy?
O Who is the information management strategy?
O Who is the information management strategy?
O Why is the organizational strategy?
O Why is the organizational strategy?

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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One place to start building an IT strategy framework is with the following

structure.
Asking questions about what, how, where, who, when, and why is critical to
focusing the discussion on strategy and away from technology – at least in
the beginning.

13
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

There Are Four Elements Of IT Strategy That Must Be Present To

Fully Assess The Connection Between Objectives And Projects

Organizational Strategy – WHY Information Technology Strategy – HOW

The wherefore and rational for the strategy The mechanism of the strategy
Organizational components – chose the structure or Scope – which technologies are to be formally
design, management control systems and formal included in the information strategy
policies. Architecture – the technology framework which
Business Components – the corporate strategy drives, shapes, and control the Information
concerned with mission. Strategic business unit technology strategy.
strategy concerned with competitive advantage

Information Systems Strategy – WHAT Information Management Strategy – WHO

The components of the strategy The participants in the strategy
Alignment – identify the applications required to Roles – who has what responsibility for information
support the business strategy resources and policies and actions
Opportunity – search for innovative uses of IT to Relationships – how are relationships built between
enable business to perform better the CIO and others to assure success over time

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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There are four elements of IT strategy shown here.

Why
How
What
Who

Answering these questions is the starting point for building a strategy

14
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

The BIG Question of Searching for Strategic Fit Becomes The

Outcome of the Alignment Process

O If strategy and structure must fit each other, then what is not
stated is:
Which aspects are to fit other aspects?
Business / Information relationships?
Information / Business relationships?
O The answer to these should be obvious, but the consequences of
the answer needs to be understood:
The business strategy “drives” the IT Strategy
The IT Strategy drives the Technology Strategy
A loop is created which must be created between the technology
strategy and the business strategy before any measurable value
can be created.

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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The real question though is how to define “fit” in terms of strategy.

How does the IT strategy “fit” with other business strategies?
What if the other business units don’t have a strategy?
What if other business units don’t really know what you’re talking about when
you speak of strategy?

15
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Balanced Scorecard And Project Management Are Natural “Soul

Mates” In An IT Organization, But Connecting Them Is Difficult
O BSC provides a strategy focused view of the IT operation.
O Projects and Project Management provides a tactical view of the
IT operation.
O Putting these two views together creates a synergy not found in
the individual views
Tactics enable the fulfillment of strategy
Strategy validates tactical decisions
O Deploying these activities require a top-to-bottom rethinking of the
IT organization
Projects must have meaningful measures
Ruthless pursuit of value must be a core management process
Viewing strategy as “hypothesis making” turns the organization
toward “goal seeking” behaviors

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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By connecting BSC directly with project management, a bridge can be built

for top to bottom execution. BSC without project execution leaves the details
open. Project management with a strategy leaves open the “why” for each
project.
In the end the work force needs to answer the question – “why are we here?
What is the direct strategic purpose of the project I’m working on?”

16
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Project Management Is More Than Managing Projects, It’s About

Managing The Right Projects, And Dropping The Wrong Projects

O Traditional view of a “project”

 Defined start and end
 Defined resources, cost, and delivered value
 Customer, technology,
O Balanced Scorecard view of a “project”
 What objective of the strategy does this project support?
 If the project were implemented, what goals would be fulfilled?
 When will the cost of the project be earned back by a specific
objective in the strategy.
O These questions and their answers are also found in project
portfolio management.

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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Once project management concepts are connected with Balanced Scorecard,

the answers to the previous questions can be provided.

17
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Project Portfolio Management is a continuous process of

assessment, corrections to plans, and reassessment

Identification
Identification
• Needs
• Needs
• Source of ideas
• Source of ideas

Timing
Timing Project
Project Evaluation
Evaluation
• Competitiveness
• Competitiveness Portfolio
Portfolio
• •Feasibility
Feasibility
• Resource Availability • •Benefits
• Resource Availability
• Logical sequence Management
Management
Benefits
• •Evaluation
• Logical sequence EvaluationCriteria
Criteria

Selection
Selection
• Performance Metrics
• Performance Metrics
• Strategy connection
• Strategy connection

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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Once projects are seen as the means to fulfilling strategy and strategy as the
guiding force for projects, the project portfolio framework makes more sense.
Assembling projects into portfolios without an overarching strategy adds little
value.
The project portfolio approach many times starts with the desire to collect
projects and provide a justification for the expenses. The real question to ask
though is “why does this project exist?” The answer is “this project supports
the following strategic initiatives.”
This seems so simple looking back through the Balanced Scorecard lens. But
it is amazing how hard it is to come to the viewpoint without first starting with
balanced scorecard. The purveyors of Balanced Scorecard and Project
Portfolio Management software sometimes miss the simplest value –
identifying the reason for a project’s existence by asking (yet again) “why are
you here?”

18
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Project Portfolio Management Is An “Implementation Process,” But

Alone It Is Not Sufficient To Answer The Strategy Questions

O PPM has many of the tools to answer the previous questions.

O PPM alone is not sufficient to assure success.
 Project selection criteria are typically financial and technical.
 Strategic impact analysis is needed as well.
O What are the units of measure of the “strategic impact?”
 Economic value added?
 “Real options” exercisable value?
 Market opportunities?
O The business situation defines the units of measure
O But most importantly connecting strategy and tactics can be done
through projects.

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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Project Portfolio Management (PPM) is an implementation process not a

strategic process. PPM provides information (performance) about projects.

19
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Leading Indicators of Project Performance Are Needed Before

Project Portfolio Management Can Be Deployed Successfully

O Portfolios can be “managed” through their performance

metrics. Cost and Schedule variances as well as Estimate At
Completion are “leading” indicators of project performance
O Static and dynamic
trends show where the
projects are headed
O The Bulls Eye chart
provides an overview in
a single picture how the
portfolio is performing
O This chart and the BSC
chart connects both
ends of the problem.

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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Success of project portfolio management depends on “leading indicators.”

Without these, managing projects is like “driving in the rear view mirror.” It
can be done, but when you run over something you don’t know it until its too
late.
Earned Value Management Systems provide leading and well as trailing
indicators for projects. Connecting these leading indicators to BSC satisfies
½ of the equation for developing metrics to test the strategic hypothesis.

20
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Projectizing IT Organizations Is Harder Than It Looks, Everyone

Has “Enlightened Self Interest” For The Use Of Their Budget
O The curse of the “level of effort” project
 “Train watching” is a common term
 As time passes resources are consumed, services delivered, but
delivered value is not always measured.
O How to measure “value” of a project
 Expected Monetary Value (EMV)
 Project “profit,” ROI, IRR, etc.
 Opportunity costs
O These all have static monetary units of measure with little or no
connection to strategy
 It’s the interaction between “value” and ”strategy” that must be
evaluated
 Real Options is an approach to this connection

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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Project Management and Projects have “enlighten self interest” as a core

value. It is unlikely any project manager is willing to give up resources,
funding, or scope for the higher good of the organization.
By focusing on the “strategic” view of projects, the project owners and
managers are put in a position where they need to answer the question “what
strategic value does your project bring to the table?”

21
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

What Is The “Value” Of Fulfilling A Specific Strategy And How Can

This Value Be Monetized In The Same Units As Development Costs?

O There are many ways of measuring “value”

Expected Monetary Value Return on Assets
Earned Value Payback Period
Real Options  Return on Investment
Internal rate of return  Economic Value Added
O All these methods are useful, but care needs to be taken not to
put too much “faith” in the absolute numbers
O The “value” aspects need to not only fit the strategic needs, they
need to be acceptable to both the finance team as well as the
customers

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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The term “value” keeps coming up. The definition of value is usually vague
and many times conflicting from various organizations. Establishing a
common and agreed upon definition of the “value of a project” is critical.
One place to look for a definition is in the “real options” domain. Here the
value of the option is necessary prior to the exercise decision.

22
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Our Method Of Measuring “Value” Involves Discovering The Expected

Cost Of The Project With A High Degree Of Certainty: Earned Value

$1,000K Authorized Budget = $1,000K

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Thisisisaasimple
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Extreme
Programming
Programmingand andSCRUM
SCRUMcan canbe belaid
laid
Actual Costs = $300K Plan = ($0K) over
overthetheEarned
EarnedValue
Valuesystem.
system.Adding
Adding
Testable
Testablerequirements
requirementsto tothese
thesemethods
methods
re
-- connects
re connectsEV EVwith
withsoftware
software
Earned
Earned Value
Value Project
Project Management
Management development,
development,closingclosingthe theloop
loopbetween
between
traditional
traditionalandandagile
agilemanagement
management
processes.
processes.
Planned Cost = $300K
SV = BCWP – BCWS: Schedule variance from Plan = (–$100K)
Earned Value = $200K
CV = BCWP – ACWP: The true cost variance = (–$100K)
Actual Cost = $300K

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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The value measuring method we use is Earned Value. We saw a bit of EV in

a previous slide. Here’s some more details. For IT projects EV is a powerful
tool worth the initial effort to integrate into the portfolio management process.

23
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Our Balanced Scorecard, Based On A Strategy Of “Going Out Of

Business” On December 15th, 2005

O Getting all participants accountable for the outcome is critical

 Strategy is developed both top down and bottom up
 Matrixed approach to projects, portfolios, and metrics – not
dictated by management but collaborative development
O Projectizing all activities with specific measurements creates a
focused team, but metrics must match the underlying behavior of
the process
 Bottom up cost and schedule estimates
 Deliverables management continuous rather than stages

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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Our balanced scorecard based on a closure strategy is an easy to

understand set of objectives and metrics to guide and measure progress to
plan.

24
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Turning Strategy Into Tactics Connects The Strategic Planning

Process With The Delivery On That Strategy Using the PMO
The Strategy Focused
IT Organization

Mobilization Phase
Initiate the Process of Change – Gain Consensus and Momentum from Participants

Migration Phase
Create Focus – Create Focus and Establish New Performance Culture

Management Phase
Institutionalize Change – Deploy Changes and New Management Processes
BALANCED PROJECT
MANAGEMENT CYCLE
Strategies Objectives Measures Targets Initiatives
Business Case

Strategic Critical Success Performance Performance

Objectives Factors Drivers Indicators
Project Objectives

Balanced Scorecard PMO

Business Project Process Growth Critical Success Factors
EVMS
Outcome Needs Improvement Training

Performance Metrics
Balanced Scorecard Database Proj Srvr (Drivers and Indicators)
Budget Customer CSS SQA SNO Skill Project
Measures Measures Measures Measures Measures Measures Portfolio(s) PROJECT PLANNING
Targets and Budgets AND BUDGETING
Project Managers

Participants
Project Implementation
IT Functional Project PERFORMANCE AND
CRMs Supervisors APPRAISAL PROCESS
Directors Managers Managers Internal and
External Performance Evaluation
Communications

Dec 15, 2002 Jan 30, 2003 Mar 31, 2003

Value Delivery

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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Embedding Balanced Scorecard in the organization is a better approach than

starting at the top and working down. What the people who do the work want
to know is – “how is this going to help me do my job better?”
The introduction of Balanced Scorecard MUST show these benefits early in
the process, or the end users will see this as just another gimmick cooked up
by the MBA types.

25
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Assembling The Components Of Strategy And Tactics

O Turning the strategy into projects requires a project oriented

organization
O Project organizations start with changing the role of the functional
managers
Self directed teams
Project Manager led teams
Functional manager led teams = level of effort teams
O Cascading strategy to the functional managers
Ownership of objectives now a a low level
Roll up the objectives from the bottom
Combine top down and bottom up

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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Combining Balanced Scorecard and project management takes work. But the
pay off is worth the effort

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Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Organizing Around “Project Driven” Processes Means A Matrix Structure

With Teams, Functional Managers, And Project Management

Balanced Score Card + Portfolios + Teams = High Performance Organization

Business Domain
Operations
Manager
(Caterham)

IT Management
Business Units Portfolio Architecture Business Policy & Purchasing
Project
Administration
IT Leadership Development Administration Governance Accounting
Management Controls (Murray) (Bontempo)
Customer (Ploughman)

Communications

Stewardship
Enterprise
Advisory

Services
Shared
Data
Group Hittelman
(CAG) Caterham Oshinski
Martin Alleman Guthner Alleman
Alleman Guthner Oshinski
Radley Guthner Bontempo Oshinski
Barefield Hittelman Alleman
Henderson Oshinski Gwin Barefield
Radley Martin Guthner
Conan Barefield Teegarden Henderson
Conan Swanson Caterham
Barefield Martin Ploughman Guthner
Teegarden Henderson
Swanson

Senior Management PMO Enterprise

Managing Dir Applications
Architecture &
Management Manager CTO Manager
Governance (Alleman) (Guthner) (Oshinski)
Business Dev
Customer & Stakeholder Community

CTO Project &

Infrastructure
Portfolio
Management
Program Mgmnt Management Safety Telecommunications Administration Deputy CTO Applications Business Customer
(Lewis) (Conan) (Gwinn) (Barefield) Solutions Solutions Relationship
Enterprise (Henderson) (Martin) Managers

Network Cyber Server

SQA CM CSS Telecommunications
PMO Operations Security Operations
(Trivett) (Simon) (3) (Lindsey)
(Goldberg) (Weber) (Russo)
Vision Mission Culture

Network Cyber Server Applications Business

SQA/SV&V CM CSS Telecommunications
Operations Security Operations Solutions Solutions
Staff Staff Staff Staff
Staff Staff Staff Staff Staff

Project Delivery Team

Initiatives Portfolio(s)
Project Delivery Team
Measures
Initiative(s)
Project Delivery Team
Portfolio(s)
Strategies Objectives Project Delivery Team

Initiative(s)
Project Delivery Team

Targets Portfolio(s)
Project Delivery Team

Individual Business Units

Balanced Scorecard

Individual Business Units

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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Here’s our high level organization chart with BSC, traditional hierarchical line
managers, and self directed teams.

27
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Balanced Scorecard And Project Management Can Be Blended

Together To Build A Powerful Tool For Managing IT Projects

O The Balanced Scorecard components are necessary but not

always sufficient for success
O Matrix of components
Strategy map – tells the strategy story in one page
Objectives – describes the deliverables from the strategy
Measures – indicators of success
Targets – goals
Initiatives – collections of work efforts
Projects – tactical work packages

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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The components of the Balanced Scorecard and Project Management

approach include core processes and components. These components are
ALL needed to make Balanced Scorecard and Project Management work.

28
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

The Hard Part Is When We’re Asked To Manage Projects That

Don’t Fulfill A Strategy

O Connecting project costs with strategic value is critical

 Two different units of measure
 Two different spheres of influence – one looks outward, one looks
inward
O Making visible the project’s “value” to the strategy.
O Making the “value” of a project visible beyond cost and schedule.
O One approach is to use “earned value” to manage IT projects
O EV is commonly found in construction, aerospace and
government contracting environments.
 But in IT development?
O The Balanced Scorecard is the place to start as well as end

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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Once Balanced Scorecard and Project Management have started down the
path together it is important to unify the units of measure as well.
In Balanced Scorecard many of the units of measure will have business type
attributes. The projects will be restricted to cost and schedule variances.
These can be tied together by associating cost and schedule variance to the
specific business attributes. For example:
•What is the cost and schedule impact of not achieving the planned service
turnaround rate for a customer support help desk? Can the business unit of
measure be “dollarized” or shown to have specific schedule impact?
•What is the dollarized savings of moving from a fat client technology to a thin
client technology for the desktop? The project that manages the rollout of thin
client has cost and schedule variances produced from the earned value
reports. Along with estimates at completion, probabilities of completion on
schedule, etc. these metrics can be used in parallel with the Balanced
Scorecard metrics of the benefits of the cost reduction strategy for desktop
computing.

29
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Alignment Means “Actions Have Consequences”

Alignment Actions Alignment Consequences
Full engagement with the Servicing the customer is a
Î
“customers” at the detailed level “strategy”
Aligning in “stages” by sorting Identifying the value of each
out “going forward” applications Î application.

Shared strategic objectives that Capturing needs is a continuous

start with the “customers” needs Î process.
Short–term tactical success Continuous building on success is
means long–term strategic Î a difficult and fulltime job
success.
Knowing about the business, Having the customer “inside” the
but not making the business
Î process, rather than as an
decisions, this belongs to the external source of information.
“customers”

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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Like all good process improvement processes, understanding how actions

create consequences is important. Without this understanding the actions will
be taken – by following the instructions of the prescribed method. But those
directing the actions will be surprised by the outcomes or consequences.
With this surprise comes disappointment as well.

30
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Our Balanced Scorecard Follows

O This is a “traditional” BSC

Four levels
Bubbles, but no connecting lines of a map (too confusing)
Some partitioning of functions on a horizontal scale
O There are other way to represent the BSC
Simple lists with metrics and goals
Quadrants with everything on one page
O A current way is to list the objectives in a table, with metrics
Assign portfolios of projects
Cascade the Scorecard down to the functional manager level
Tie “every thing” to an objective even the level of effort projects

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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The Balanced Scorecard currently in place at Rocky Flats is based on a

traditional approach of decomposing the objectives into the four layers. This
is a perfectly good approach, but we’ve learned more about cascading the
scorecard since we made this one.

31
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

“Do the right things, do them well, do them with less, to…”

Business
Results
……reduce
……reduce overall
overall …enable
…enable profitable
profitable …enable
…enable firm
firm to
to accelerate
accelerate
operating
operating costs
costs -- R2
R2 operations
operations -- R1
R1 market
market deployment
deployment -- R3R3

Competency Contribution
Expectations

Competency Credibility Contribution

Project

“Keep
“Keep mymy “Manage
“Manage toto “Understand
“Understand my my “Implement
“Implement timely
timely and
and cost-
cost-
systems
systems running”
running” corporate
corporate goals”
goals” operation”
operation” -- E3
E3 effective
effective solutions”
solutions” -- E4
E4
-- E1
E1 -- E2
E2

Operational
Operational Excellence
Excellence Project
Project // IT
IT Alignment
Alignment Solutions
Solutions Leadership
Leadership
Reduce
Reduce the
the cost
cost of
of Provide
Provide appropriate
appropriate technology
technology to
to Provide
Provide innovative
innovative
providing
providing services
services -- P1
P1 enable
enable success
success -- P2
P2 solutions
solutions -- P3
P3
Internal Processes

Deliver
Deliver solutions
solutions Manage
Manage Leverage
Leverage
Improve
Improve requirements
on
on schedule
schedule -- P6
P6 requirements -- P7
P7 knowledge
knowledge andand
processes
processes for
for
efficiency best
best practices
practices -- P10
P10
efficiency
and
and quality
quality -- Centralize
Centralize IT
IT Enhance
Enhance customer
customer
P4
P4 resources
resources -- P5
P5 relationships
relationships -- P9
P9

Strategically
Strategically deploy
deploy services
services -- P8
P8
People and

Develop
Develop and and Recognize
Recognize team
team Provide
Provide employees
employees with
with
Tools

Build
Build aa high
high performance
performance
retain
retain critical
critical and
and individual
individual the
the tools
tools and
and knowledge
knowledge
culture
culture -- S2
S2
skills
skills -- S1
S1 performance
performance -- S3
S3 they
they need
need -- S4
S4

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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Here’s our current scorecard

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Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

Lessons Learned From A “Fresh” Assessment Of Our Current

Balanced Scorecard – Continued Training And Consulting Is Needed

O Some of the goals are hard to create metrics for

“Manage requirements?”
Who get to say we’re managing requirements?
O The customer wording is too soft at times, since the metrics for
satisfaction are hard to come by in our environment
O “Strategically deploy services”
This is a tautology
O “Deliver solutions on schedule”
This is easy, and having a program office makes it easier
O “Keep my systems running”
This can be measured everyday

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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After attending some more training, working with the scorecard, talking
through all our objectives, defending the not so obvious ones, and doing lots
of reading, there are things we’d change.

33
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

The Risks To This Approach Are Numerous,

Our Experience Includes …

O Lack of time for the decision makers to focus on strategy

Having strategy sessions on a continuous basis is difficult
Running the business seems to come first
O Confusion between operational efficiency and strategy
This is a continual problem
Always ask “do I have options?” if so then it’s strategy
O Difficulty in creating well defined metrics and connecting them to
deliverables
Scalar metrics with defined “units of measure”
O Cascading the objectives down to the staff that can deliver the
results
This is the hardest and where there is the most resistance

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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Along the way we also encountered problems with Balanced Scorecard.

Nothing that would prevent us from using the approach or recommending it to
others. Just that now we’ve got more experience – many times learned the
hard way.

34
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

The Risks To This Approach Are Numerous,

Our Experience Includes …

O Once the strategy has been defined, loosing the picture focus and
delving into the details
 Continuous re-visiting of the strategy to test the hypothesis
 Adjusting metrics and measures to increase the confidence in the
hypothesis tests
O Becoming enamored with the “pretty pictures, charts and graphs”
 The real measure is the improvement in the operational
effectiveness of the organization.
 This is the other half of strategy that needs to be delivered as well
if not better
O Facing the reality that this is much harder than it looks
 Strong convictions are needed to overcome objections
 In the end delivery of the results MUST be done
© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused
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Staying focused in an IT environment is difficult. Doing it in a closure

environment where budgets are being reduced, systems withdrawn and
customers being put under continuous pressure to accelerate their work –
creates further opportunities for mistakes and mis-steps.

35
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

The Balanced Scorecard School Of Management Is Not For The

Faint Of Heart

O The individuals and teams should:

Be committed to making the scorecard process work across all
levels of the organization
By-in has to be gained up and down the organization
Keeping the commitment is a full time job
Seek to close any gaps that open in the process in the same way
they manage their daily activities
Make BSC a “project” like any other
Plans, budget, and deliverables
Understand that without the commitment and dedication, not only
will Balanced Scorecard fail, the underlying business process will
suffer as well.

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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If you’re going to start with Balanced Scorecard, take a deep and long look at
your commitment. Although the benefits are certainly there the effort to bring
them forward is greater than many think.
This is true of any change agent process. If it was easy then anyone could
improve a firms performance.

36
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

The Balanced Scorecard School Of Management Is Not For The

Faint Of Heart

O The scorecard should:

Measure performance against goals
Determine if the goals are appropriate
Determine if the strategy or measures should be changed
Provide direct measurable outcomes traceable to the actions of
individuals and teams
O These measures and metrics should
Have scalar units of measure: dollars, defects/1000, percentiles,
etc.
Have metrics that are first order derivatives from the work process:
quality, response time, budget compliance
Have independent variables that can be controlled which are
connected to the dependent variables

© 2003 CH2M HILL Communications Group Strategy Driven … Customer Focused

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Having a clear goal of what you expect from the Balanced Scorecard is
important. Continually reminding yourself of these goals and benefits is just
as critical.

37
Balanced Scorecard Conference Glen B. Alleman
IQPC, San Francisco, Oct 28,29,30 2003 VP, Program Management Office
CH2M HILL

A Final Thought

“One of the most dangerous forms of

human error is forgetting what one is
trying to achieve.”
Glen B. Alleman
VP, Program Management Office
– Paul Nitze
CH2M HILL
303 966 5865
[email protected]
© 2002 CH2M HILL Communications Group

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