Benchmarking in project management is a way to use data to determine if a project is meeting its goals. This article explores the benefits of project management benchmarking and metrics to use to measure success. Plus, you’ll find resources to help you pick the right approach.
In this article:
- When is benchmarking applied in project management?
- Different approaches to project management benchmarking
- Top project management benchmarking metrics
- Best practices for project management benchmarking
What Is Benchmarking in Project Management?
Benchmarking in project management is a strategic planning and research process. The goal is to identify and measure data and compare results to improve project management.
Benchmarking a project helps assess whether it’s reached its performance goals based on internal results, competitors’ performance or industry standards. The exercise also helps project management professionals (PMP) identify where to make improvements by using a standard, objective set of criteria from external and internal sources.
When Is Benchmarking Applied in Project Management?
Benchmarking in project management is applicable at any stage of the project. It is a continuous improvement process practiced throughout the project lifecycle.
PMPs use project management benchmarking tools to monitor projects in real time using integrated reporting dashboards that empower continuous improvement. Conducting a benchmark analysis of project key performance indicators (KPIs) and other metrics with a cloud-based project management solution provides valuable insights at all stages of a project.
- Project management benchmarking adds value by helping align project management with business outcomes.
- The use of benchmarking in project management is prevalent across industries. Consortiums and third-party consultants specialize in providing external benchmarking services.
- Benchmarking helps to optimize project management and empower continuous project improvement initiatives.
- There are multiple approaches to benchmarking in project management that use popular performance metrics.
What Are the Reasons for Project Benchmarking?
Companies do project management benchmarking to see how a project stacks up against competitors. The process can also show if a project team or overall project performance is improving or declining. It can also allow organizations and project teams to measure the impact of initiatives like planning, training, performance of the project team itself.
Benefits of Benchmarking in Project Management
The benefits of tracking the performance of a team or project against competitive metrics in project management are clear.
Assessment: Project managers and team members get the performance feedback necessary to succeed in their role and make the right decisions.
Accountability: Using benchmarking improves collaboration with stakeholders and holds project teams accountable to results.
Identify process gaps: The practice sheds light on potential risks and problems with the process. Businesses can address these issues, so they aren’t a hurdle in future projects.
Continuous improvement: Benchmarking ensures that decision-makers are aware of what’s working and what’s not so that they can make improvements.
Meet business goals: Identifying and tracking the right metrics to measure performance helps organizations progress toward larger objectives.
Approaches to Project Management Benchmarking
Your approach to project management benchmarking should be routine, systematic and accessible to all stakeholders. There are various approaches you can use. Decide what you want to measure before picking a method.
Internal Project Management Benchmarking
Internal project management benchmarking establishes standards for comparing and evaluating internal project types based on size and scope. The company will use the results to make recommendations for future projects.
When performing internal project benchmarking, you’ll need to select the right metrics that align with company goals before gathering data. Decision-makers need to use the right tools and techniques to improve project management performance.
External Project Management Benchmarking
External project management benchmarking is a methodology for collecting and analyzing performance metrics based on external data sources. You’ll need to use third-party consultants or partner consortiums to facilitate benchmarking data collection and distribution.
Companies use this information to gain an objective, transparent metric for decision-making and continuously improving performance.
Project Management Maturity Model (PMMM)
The project management maturity model is a set of benchmarking tools or framework that measures a project's maturity and the maturity levels of individual project components.
Use this method to evaluate progress towards maturity levels and specific accomplishments at each level. The idea behind PMMM is that you can judge project maturity by measuring how a business has matured from previous projects.
Process benchmarking is a proven analysis method used to evaluate and improve internal business processes. The technique uses KPIs of critical business processes to determine what's working and what's not, whether for the project team or the project itself.
For example, you would use process benchmarking to improve software development cycles, product design iterations or marketing campaign projects. Use this approach to find ways to uncover and improve the efficiency of specific internal business processes or external client processes.
Competitive benchmarking helps companies set performance goals based on competitor or industry performance standards. This approach uses external criteria from competitors or market trends to determine if a project meets its goals. It helps improve performance by understanding how other organizations manage projects.
You can find competitive benchmarks such as pricing, quality, service, profit and market share by using market surveys or hiring third-party consultants.
Focused studies involve forming a systematic, step-by-step process for testing and analyzing new methods of project management. The goal is to determine the ideal project management approach and guide decision-making based on past project performances. Use this option to track the effectiveness of business strategies and project management.
This approach divides a project by activity or task to conduct a focused study of each component. Focus studies are mainstays of performance management. They help organizations understand the impact that different business functions have on projects with a thorough evaluation of efficiency, effectiveness and quality metrics.
Web-based benchmarking uses a subscription-based system to access third-party websites and databases to identify and compare industry norms and performance metrics. This approach is a way for organizations to judge how well they are doing compared to competitors.
This approach compares internal project benchmarking data against a set of common standards which a third-party tracks, gathers, reports and manages. Web-based benchmarking is popular in the construction industry, where members use an online portal to contribute engineering and construction project data from different sectors for broader industry analysis.
Performance benchmarking is a method of analyzing and understanding an organization's operations, capabilities and project results. A company uses this information to identify areas for improvement and to help guide leadership and decision-making.
Performance benchmarks in project management encompass specific activities or tasks to compare project milestones to similar internal projects.
Project managers value this methodology because it uses objective criteria to measure the relative effectiveness of individual employees, project-related activities or project management processes close to their industry.
A benchmarking consortium is an association of member organizations that agree to use a third-party entity to manage and administer benchmarking data. It is an open-source approach to comparing a broad range of metrics and industry indicators.
The consortium's role is to aggregate relevant data from different sources, manage the database, provide analysis, maintain data security and confidentiality and administer benchmarking information as an independent party. For example, the Industry Benchmarking Consortium (IBC), facilitated by Independent Project Analysis (IPA), Inc., meets annually to discuss industry benchmarking trends and performance issues facing member organizations. IBC members receive exclusive insights into how their project management systems and outcomes measure up to industry peers. In return, they agree to support the continuous improvement of their processes through measuring and comparing performance metrics.
What to Benchmark in Project Management
Generally, there are three types of performance metrics important for project management benchmarking: quality, cost and time. A standard set of criteria for benchmarking project management may include project cost, project schedule, project complexity, project risk, project reward and project confidence.
Top Project Management Benchmarking Metrics
There are several project management benchmarking metrics businesses can track and use to compare projects. Select benchmarks specific to your strategy and project management capabilities.
Use the following project management benchmarking metrics to monitor your organization's performance against these metrics over time, identify areas for improvement and act on them.
There are several ways to measure project productivity, including total projects completed, how long it takes to finish projects and total project hours. Choose productivity benchmarking metrics that focus on overall capabilities. The generic formula:
Project productivity = Designated units of input / Designated units of output
The goal for these metrics is to reveal how to get more out of your project management process based on the relationship between designated inputs and outputs.
This straightforward performance metric measures the total number of completed projects. Use this metric to help with strategic planning and resource allocation budgets.
Project Cycle Time
This metric comes from Agile project management, an approach that breaks projects into smaller pieces that can be finished more quickly, and measures how long it takes to complete a project task. An Agile approach empowers teams to quickly shift their focus and reset long-term goals. The metric is the total amount of time that elapses from the time a task starts to the time it’s finished. The formula:
Project cycle time = Task completion date – Task start date
Use this metric to identify the remaining work and discern what adjustments to make or issues to resolve to keep a project on schedule. The benchmarking goal is to have a consistent cycle time.
Number of Project Scope Changes
This metric keeps track of project value and size (measured in hours or days). It helps identify and prevent scope creep from excessive change requests that impact the project budget. The formula:
Project scope changes = Current project size / Original project size
Project cost, or actual cost, is simply the actual costs of the project based on all existing project expenses across the timeline. The formula:
Project cost = Total expenses per time period x Time period
Project Cost Variance
The project cost variance metric measures if a project is on, over or under budget. Use this metric to keep track of budget overruns and to get a quick snapshot of a project’s status. The formula:
Project cost variance = Project budget – Actual project cost
Learn more about project accounting costs in our in-depth guide.
Project Schedule Performance
The schedule performance index (SPI) measures if projects are on schedule (= 1), ahead of schedule (> 1), or behind schedule (< 1). This metric is useful for estimating project expenses and determining the accuracy of project schedules. The formula is expressed as a ratio:
Project schedule performance = Cost of work performed / Planned project value
Return on Investment (ROI)
ROI is a widely used financial metric that accounts for the specific value of a project, or net benefits, divided by project cost. You need to assign a dollar value to data to determine the net benefits and include all relevant project costs. The formula:
ROI = (Net benefits / Project cost) x 100
The cost performance index (CPI) determines how a project performs against its budget and requires calculating the earned project value metric (Percent of tasks complete x Project budget). This metric helps you create accurate budget estimates using actual cost.
Cost performance = Earned project value / Actual project costs
Customer Satisfaction Score
The customer satisfaction score measures the customer experience. You calculate this metric by using customer's responses to surveys designed to determine if you are meeting or exceeding your customers' objectives on a scale of one to 100. The formula:
Customer satisfaction score = (Survey score / Total survey questions) x 100
This metric helps you determine corrective action and set project agendas for continued improvement based on customer expectations.
The project quality metric measures the perceived quality of a project. After completing initial project tasks in progress, assess and collect data periodically to determine quality changes over time.
The metric is closely related to organizational effectiveness and stakeholder satisfaction — factors that can influence project success and stakeholder satisfaction. Benchmarking in project quality management helps you evaluate performance and manage project resources efficiently to limit non-value-added activities.
Time to Market
Time to market (TTM) measures the time between when you design a product and when it’s ready for production and distribution. You measure TTM in months or years in most industries, but it can vary by product or service type.
TTM measures different aspects of a company's project cycle, including pre-launch activities, support/service development, product-market fit analysis and refinement and full-scale launch following customer traction. The metric is commonly used to measure performance and denotes the time required to develop, launch and successfully refine a new product or service.
Download Project Management Benchmarking Metrics Cheat Sheet
This cheat sheet will help you monitor your organization’s performance against project management benchmarking metrics over time and identify areas for improvement.
Project Management Benchmarking Example
Benchmarking is a key practice in construction project management. Companies compare construction activities and project results to lower costs, increase productivity, build faster and reduce project risk.
Internal construction project management benchmarking includes a careful review of previous projects in which you compare construction KPIs such as the number of change orders, cost of materials, worker productivity, profit margin and build time. Benchmarking is a construction project management activity that determines how well your processes work to complete tasks in the most cost-effective manner.
External construction project management benchmarking is the practice of comparing the performance data from competitors or industry standards set by professional organizations and consultants for projects similar in scope and cost.
Best Practices for Project Management Benchmarking
There are several best practices that you can use to decide if your current benchmarking efforts are sufficient. You’ll want to look at how you’re using benchmarking, sharing information with stakeholders and working toward continuous improvement.
Project management best practices include:
Incremental implementation. Conduct small project management benchmarking exercises to incorporate best practices. Start with one project using simple project benchmarks to measure project time, quality and cost, and slowly add more complexity to your efforts. As you identify areas for process improvement, project management benchmarking will become more involved.
Continuous collaboration. As your benchmarking evolves from an individual activity to an ongoing organizational process, ensure that everyone is working toward the same targets within time and budget constraints by sharing benchmarking results frequently.
Transparent communication. Ensure that all project stakeholders are on track and in step with the performance metrics you’re using. Benchmarking efforts should be evident and accessible to all stakeholders so they can monitor progress across different business units. For example, cloud-based project management solutions feature user-friendly dashboards to communicate benchmarking efforts regardless of the user’s technical proficiency or project management experience.
Project oversight. Assign key stakeholders or project teams to review adopted best practices. Empower these overseers to implement continuous improvements as you complete and review projects to maximize the ROI of project management benchmarking on business objectives. Consider short-, medium- and long-term performance metrics and goals when determining benchmark targets.
Challenges of Benchmarking in Project Management
There are plenty of roadblocks to realizing the benefits of benchmarking in project management. Two common challenges revolve around using the right approach and deciding what to measure.
Project management benchmarking challenges include:
- Limitations to using external benchmarking criteria in project management. Additionally, managing the internal benchmarking process requires time and resources.
- A lack of internal data gathering and analysis capabilities.
- A lack of technical expertise and infrastructure to determine accurate performance metrics.
- Struggling to gain buy-in for the advantages of project management benchmarking for those without the proper expertise and business processes.
- Obtaining valuable competitive data, which may require a third-party firm specializing in providing this service and can be expensive.
- Misuse of data, especially if it’s not transparent or biased. That can lead to inaccurate comparisons and assumptions in favor of specific outcomes rather than actual performance.
- Projects that vary by scope and process, meaning what you learn from benchmarking one project might not apply to future endeavors.
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Project Management Benchmarking Tools
Project management would not be what it is today without integrated software solutions that handle large, complex datasets. Finding the proper tool can be tricky, but the right benchmarking software provides a substantial competitive advantage.
When deciding on which benchmarking tools to use, ask the following questions to help determine what’s right for you:
- Do you need to combine multiple project management tools or are you looking for an integrated solution to manage all project details, including benchmarking?
- Should you use internally-developed applications and databases, a paid license to a third-party solution, free, open-source benchmarking tools or a hybrid solution?
- What advanced analytics expertise and infrastructure do I need to capture, organize and analyze benchmarking data successfully?
- How often does the solution need to be updated and what are the technical training and support requirements?
- Does the tool offer cloud-based collaboration and reporting features like benchmarking dashboards?
- Which platforms perform best for my business and industry based on surveys, reviews and industry adoption?
How to Do Project Management Benchmarking Efficiently
Regardless of project size, scope or budget, there is no better way to provide context and optimize ROI of project management benchmarking than using an integrated project management system. The key is having good data available that's easy to access. Integrated project management solutions provide a single comprehensive platform of tools to help you get cross-functional stakeholders engaged in project management benchmarking and helps align how each interacts at different stages of the project lifecycle.
Streamline Benchmarking Efforts With NetSuite’s Integrated Project Management System
A project management system can make project management benchmarking work by providing clarity and context. Use a tool that eliminates the gap between business intelligence and project management strategy with real-time KPI reporting and customizable dashboards. Integrated project management solutions help you improve operational oversight, maintain control of project accounting, automate project creation and improve the efficiency of projects — and help your business conduct internal and external benchmarking for project management.