Performance Measurement Framework: History
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Contributor:
Kristina Galjanić
,
Ivan Marović
,
Tomaš Hanak

Projects often fail due to a lack of understanding of the project requirements and constraints necessary for overall success. Five selected projects were analyzed in detail through the multiple case study method followed by semi-structured interviews with 56 experts to develop a pattern for the future prediction of project success.

  • performance measurement
  • project management
  • multiple case study

1. Introduction

Despite good ideas, great efforts, and high investments, many projects do not end with success. Although there could be several reasons for such, a pivotal task in the study of project management remains the same, as Chen [1] stated, “to identify the critical determinants of project management performance”. Therefore, over the years, many researchers and practitioners have examined and identified a wide variety of approaches, tools, and techniques to describe and measure project management performance focusing on input characteristics that affect project outcomes [1][2][3][4]. Those studies often focus on the overall project life cycle [2][3][5], with relatively few focused on the perspective level of the project phases [1], especially how various stakeholders will perceive project success [6][7][8]. The paradigm of focusing solely on technical and economic aspects and areas over the years has shifted towards the integration of social and behavioral areas as well, thus focusing on the interaction between project stakeholders and the project team [8][9][10][11]. Both practitioners and academics have difficulties coping with such problems, clearly showing that there is still room to investigate and contribute.
The complex surroundings and the goal for overall betterment, often viewed as sustainability, have a specific imperative that project performance is recognized and measured on long-term strategic objectives instead of short-term tactical performance [12][13][14][15]. While the authors, in general, often focus on achieving short-term project targets as long-term benefits management, especially in public projects [14], there are “significant variations in the levels of success”, as Flyvbjerg reported [16]. The PMI’s report [17] claimed “only 70% of projects successfully met their original goals and business intent”, so, there is still much room for improving performance.
Another aspect is the multi-dimensionality of success, as the interests of different stakeholders imply that they will sometimes have quite different perceptions of the project’s success [18][19][20][21][22]. Therefore, project failure is often seen as a lack of understanding of the project requirements and the constraints necessary for overall success, emphasizing the early stages of the project. Such is most evident in the architecture, engineering, and construction (AEC) industry as construction costs are one of the main criteria for decision making in the early stages and of interest to all project participants, i.e., stakeholders [23][24]. Very often, there are discrepancies between the estimated (e.g., planned or contracted) costs concerning the realized (e.g., actual) costs of the construction project [25]. Usually, discrepancies occur due to a lack of data and information in the conceptual phase [26][27][28][29][30][31]. Therefore, monitoring performance and reward depending on outcomes is increasingly common.

2. Project Management, Success, and Performance of the Project

Project management theory initially defines project success based on three core criteria: delivery on time, within budget, and to an agreed quality [32]. Such an approach gained popularity thanks to the good measurability of the criteria. However, later studies have greatly criticized this concept as these three criteria are insufficient to capture the project’s success from a broader point of view [33]. Accordingly, the required level of performance can only be achieved if other aspects are observed [34]. The project’s success is affected, among others, also by its complexity, which may increase the level of cost and time risks [35]. In this context, a breakdown of project success criteria into 29 categories was proposed [36] supplementing traditional criteria (time, cost, and quality) with other macro-level categories covering stakeholders-, deliverables-, and project organization- and management-related criteria.
The theory recognizes project complexity as the number and heterogeneity of different inter-related elements [37]. Vidal and Marle [38] highlighted that complexity renders the project difficult to understand, foresee, and keep under control. The multi-dimensionality of project complexity is seen in the literature from technological and organizational views, while, researchers mostly focus on the organizational complexity relating to both in terms of the complexity of project objectives and related tasks as well as to interactions between a high number of people and stakeholders involved [39]. It is also believed that a higher number of inter-related elements that have to be co-ordinated causes greater exposure to delays and cost overruns [35]. In addition, it is argued that when the scope and complexity of the project increases, the need for a more comprehensive portfolio of criteria increases as well [40].
The later studies have further conceptualized performance management on a project level in a wide range of areas, such as supply chain management [41][42][43], risk considerations [44][45][46][47], safety [48][49], and sustainability aspects [50][51][52]. In such a way, it is possible to capture a broader range of data necessary for effectively managing the project and evaluating its performance. Such an approach becomes pivotal, especially in an unstable business environment characterized by changes in competition, technologies, and customer preferences and requirements [53]. As ascertained by Ward and Chapman [54], stakeholders represent the main source of uncertainty in the project due to the multiplicity of their objectives, which can be conflicting. From this perspective and in line with performance management efforts, analyzing various stakeholders’ POVs on the project’s success becomes pivotal.
Many root causes of cost and time overruns have already been identified in the literature, including project complexity, price increases, slow decision making, rework, or shortage of equipment [55]. Many scholars have incorporated risk aspect into their performance management approaches in terms of particular KPIs, such as overtime work rate and rework rate [56] or time–cost predictability [27][57][58][59][60]. Accordingly, risk performance indexes and measurement systems have been developed [45], mainly covering cost and schedule over-run-related risk.
Available literature suggests numerous models, systems, and frameworks developing performance management issues. As Lin and Shen [61] discussed, the need for so many models arises from the fact that they look at the various facets of performance from different points of view. Furthermore, they argue that multi-perspective indicators are essential for performance measurement and applying the balance scorecard approach [62][63][64][65] should help improve overall performance. However, these models are often criticized for grouping causes and effects together as an overall performance indicator [66].
Hence, researchers have generally focused on providing advances (1) for the overall performance measurement and (2) by developing fragmentized forecasting models and models addressing specific aspects of the performance. In relation to (1), several approaches have been built, e.g., to predict project failure at completion by considering seven variables (communication, team, creativity, technology, risk, quality, and materials; as suggested by [1]), in terms of the total performance score that has been developed in order to quantify project performance indicator system based on 18 KPIs covering eight PAs [56], or by a system dynamics approach to predict construction project performance [67]. Regarding (2), the following models can be noted: the operational research model has been developed to predict contractor performance [68], the decision support model for construction supply chain performance management was introduced by Yildiz and Ahi [41], while Kim [45] presented a risk performance management model based on cost and schedule risk considerations.
Stakeholder perspectives and their POVs have been widely studied. Prior analyses have shown that the perception of specific KPIs differs across stakeholders [34], similar to the perception of particular attributes that influence cost performance [22]. That is why engaging stakeholders already at the early stages of the project is of high importance [69][70][71] in as much as many projects disagree on the priority of particular criteria across individual stakeholders [40]. Previous research also revealed performance objectives and indicators of stakeholder management [69][72][73] and pinpointed collaborative management, which could produce positive effects such as increased cost performance of the project [74]. Considering the various concepts raised, it is desirable to reflect on how much uncertainty exists in managers’ predictive models [75], which can adversely affect achieving project success. Therefore, the choice of PAs to be monitored and measured is crucial.

3. Stakeholders Management

As ascertained by Ward and Chapman [54], stakeholders represent the main source of uncertainty in the project due to the multiplicity of their objectives, which can be conflicting. From this perspective and in line with performance management efforts, it becomes pivotal to analyze various stakeholders’ POVs on the project’s success. Stakeholders are defined usually as “groups or individuals who have a stake in, or expectation of, the project’s performance”. The origins of the stakeholder concept have been described by Freeman [76], highlighting its dynamic aspect as every stakeholder role is temporary and issue-specific. The further development of stakeholder theory has included, among others, the approach of Mitchell et al. [77] regarding the identification (normative theory), salience (descriptive theory), and establishing the typology of stakeholders. It should be mentioned that stakeholder identification belongs to the main challenges of project managers [69][72]. Once stakeholders are identified, Mitchell’s theory [77] further facilitates the determination of stakeholders’ salience based on three main elements of typology: power, legitimacy, and urgency, and their assignment to one of the nine classes. Accordingly, managers can decide on the priority they give to competing stakeholders’ claims. One of the prime project management goals is to support a balance between the needs and expectations of individual stakeholders [73].
A high number of stakeholders raises the need for careful strategic considerations in buyer–supplier relationships. Previous theoretical findings pointed out that there is no single and ideal way to manage these relationships ([78] Kim and Choi, 2015). Deep and long-term relations might benefit from the mutual trust of the parties involved, which is important as trust can influence the success of the project ([79] Cerić et al., 2021). Since the buyer has to control the relationship with its suppliers and is in line with the effort to avoid poor performance, an incentive/disincentive mechanism might be considered as a suitable managerial approach [42][80]. From the construction industry’s point of view, private and public projects have to be differentiated. As for public projects, relationships are often limited to a single contract [42]. In this context, supply chain management in construction becomes more complicated. Additionally, available literature recognizes, e.g., in the supply chain operations reference model, its metrics were used to manage the performance of the construction supply chain [41].
While the spectrum of construction project stakeholders is broad, e.g., clients, project managers, designers, subcontractors, supplies, funding bodies, users, community, local authorities, environmentalists [81], project management as well as construction management, the literature recognizes three key stakeholders, namely, clients, contractors, and consultants [69][82]. Especially, as the stakeholders being seen [80] as “one of the underestimated factors of project success”.

This entry is adapted from the peer-reviewed paper 10.3390/su151813617

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