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3. Management By Project vs. Management By Objectives

Management By Project vs. Management By Objectives

What is Management by Project (MBP)? In the marketplace of ideas, MBP is a direct competitor to Management by Objectives (MBO) - the prevailing style of organizational management for over 50 years. MBP is relatively new, but it is a very potent improvement over MBO. That's why I believe MBP is the next great frontier of organizational leadership and organizational management - if we can give MBP a strong foundation. This article defines MBP in a new way, so that it is more competitive with MBO. This article also shows how MBP can benefit from the "radically simple" implementation of Earned Value Management (EVM) that we explored in the previous two articles in this series [1][2]. 

What is MBO?

Management by Objectives is a "technique used to manage people based on documented work statements mutually agreed to by manager and worker. Progress is periodically reviewed, and in a proper implementation, the worker's remuneration is tied to performance."[3](p.339).

MBO "is the prevailing style of management in most organizations" and it "entails giving employees goals/targets, measuring their performance against these targets, and then ranking them against their peers or some other performance appraisal system."[4]

The Case Against MBO

In 2004, Joseph F. Castellano wrote a compelling paper that demonstrates how MBO can lead directly to unhealthy internal competition, unethical behavior, and a work environment of fear and greed. Castellano relates several MBO examples, including the story of one his graduate students who worked for a lending company where loan officers were given monthly targets:

These targets contributed to an environment of intense competition among the loan officers because awards were given to the topperforming employee. Fear for one's job was also a by-product of this process. If an employee did not make his/her numbers, it was viewed solely as the loan officer's fault. Usually one or two loan officers consistently came out on top. The student indicated this was probably the case because they were the most knowledgeable and best trained. But he also pointed out that they were not about to reveal their secrets to the other loan officers because of the competition among them. [4]

Leaders who cultivate a healthy management style, including knowledge sharing, coordinated teamwork and systems thinking, may find that MBO unravels their good work. Why? Employees working under MBO may resort to self-centered conduct that is not in the best interest of clients or the organization as a whole. Since MBO rewards or sanctions individuals, it tends to assume that performance is based on special causes (individual performance issues) instead of common causes that are beyond the control of individuals. Setting pre-defined targets also ignores a principle of the Knowledge Age - that knowledge workers with deep local knowledge are more qualified to decide "what is the task?" (i.e. knowledge-worker productivity). [5]

While Castellano's paper presents a persuasive argument regarding the flaws of MBO, the paper only scratched the surface with regard to MBO-alternatives:

Certainly organizations want good results. The question is now going to become: By what methods?...
CULTIVATE COOPERATION, NOT COMPETITION. Good people in a good environment do good work. If we accept this premise, then the real role of top management is to create an organizational climate where people can join together to accomplish some noble purpose. [4]

A Better Starting Line: What's Your Shared Purpose

I won't spend any time in this article describing the history and current state of MBP as a management approach. Instead, let's extend Castellano's line of thinking. By what methods will organizations achieve good results, if not through MBO? I believe the answer is MBP if -- and only if -- we give MBP a new improved definition that begins with a new MBP mindset. Figure 1 illustrates the new MBP mindset that I recommend. It begins with a deep understanding of what Castellano calls "joining together to accomplish some noble purpose." For simplicity, I am calling this your "shared purpose." Notice that this mindset does not require individual work statements with numerical performance targets like MBO.

Albert Einstein had a sign in his Princeton office that stated "Not everything that counts can be counted, and not everything that can be counted counts."[6] Your organization's shared purpose certainly counts, but it might not be countable. The shared purpose of the Walt Disney Company is "to make people happy."[7](p. 226) It isn't "to make people 5% happier this quarter." Pursuing a shared purpose is a delightful alternative for those who have struggled to create Specific, Measurable, Achievable, Realistic, and Time-specific (SMART) numerical targets for every employee. Too often, MBO morphs into internal gamesmanship. I'm not saying that SMART objectives are always bad. But MBO tends to focus attention on internal supervisor-subordinate relationships, instead of promoting an external view of who the organization serves, what the whole organization must accomplish, why and how. MBO is a numerical form of "management by org chart" - a relic of the Industrial Age. MBP focuses on shared performance, not individual performers. It is an approach suited for the Knowledge Age.

Outcomes and Actions Revisited

If you have read the first two articles in this series, you will recognize the words outcomes and actions. In the second article[2], I described outcome-thinking and action-thinking, and the importance of knowing the difference. A crucial difference between MBO and MBP is that objectives are defined in terms of project-focused outcomes, not by numerical targets for organizational functions and individuals. This crucial difference goes a long way toward replacing the internal competition and gamesmanship problems that Castellano identified, and replacing them with collaboration, cooperation, and coordination. In the New MBP Mindset illustration (Figure 1) the large blue arrow between Shared Purpose and Discrete Outcomes is a scope definition (decomposition) process. It is a PM skill. Talented project managers are good at translating a broad purpose into a hierarchical set of outcomes that are realistically scoped and suitably detailed to fulfill that purpose. In other words, scope decomposition process is a valuable PM skill that is needed at all levels of leadership, but I think it is largely unrecognized outside of the PM community. Exactly, what is this PM skill? As I described in the first article of this series [1], a set of outcomes (e.g., elements of work breakdown structure) should always be comprehensive and mutually-exclusive. In other words, there should be no gaps and no overlaps in the scope definition. A poorly-scoped operations group is as detrimental to the organization as a poorly-scoped project. So, scope definition is a valuable PM skill set that goes hand-in-glove with the New MBP Mindset illustrated in Figure 1.

The small blue arrow between Discrete Outcomes and Discrete Actions also represents an important skill set. However, the translation from discrete intended outcomes to front-line daily action is not just a project manager skill, it is a project team skill because ultimately the actions of all team members will achieve the discrete outcomes that fulfill the shared purpose.

So the two blue arrows are the "project analysis" processes that I mentioned in a previous article[2]. Analysis means scope is elaborated (decomposed) into progressively more granular parts. The two green arrows are "project synthesis" processes, where the whole endeavor becomes greater than the sum of the project's discrete parts. With MBP, these complementary but opposite processes provide a very direct link between a shared purpose to daily front-line actions. This direct line-ofsight is one reason that MBP is an excellent competitor to MBO. With MBO, the line-of-sight between the organization's purpose and each individual's targets is usually not as direct or as clear.

What is MBP?

With this mindset in place, we can now define Management by Project (MBP) in a new way:

MBP is "fulfilling a shared purpose by completing discrete actions that are focused on discrete outcomes."

Figure 1: A New MBP Mindset

I believe this is better than the definition that can be found in the PMBOK Guide® because it is more directly competitive with MBO. This new definition has nothing to do with redefining operations activities as "temporary and unique" projects. At best that approach isn't helpful. At its worst, it can take you down the wrong path. Tell an operations group that their work is now considered temporary and listen to their reaction. The right path is to develop a deep understanding of the purpose of the work, and then use PM knowledge and skill to help fulfill that purpose.

Before moving on, I want to point out that this definition of MBP is not necessarily an organizational or enterprise-wide management approach. It is very common these days for writers to implore you to secure senior management support or to effect culture change before implementing the writers' management ideas. It is also common for writers to say that achieving a return on investment may take several years. This is certainly common among writers in the EVM field. I am not one of those writers, and this is not one of those articles. Why? Because MBP can be applied to your current circle of influence, no matter how large or how small. If you are the leader of a small group, you can use the New MBP Mindset (Figure 1) to create a direct line-of-sight from your group's shared purpose to daily actions of your team. If you are an entrylevel employee and your circle of influence is currently no larger than your cubicle, you can still employ the New MBP Mindset to improve your own project focus, and to expand your circle of influence. Don't start at the top; start within your current circle of influence.

MBP Skill Set: A New Role for EVM

We can now return to the topic that ties these three EVM articles together. That topic is called "radically simple" Earned Value Management (EVM). Recall that our radically simple approach to EVM requires only two simple acronyms out of a traditional lexicon containing dozens of EVM terms and formulas. These two simple acronyms are planned value (PV) and earned value (EV)[1]. These two terms can be applied to any project or any discrete element of work, no matter the size. Recall that many small projects (including micro projects) do not have budgets and do not have traceable actual costs. For this reason, PV and EV can be assigned and tracked in an appropriate point system, instead of currency. For example, many Agile projects use "story points" to quantify software features. Story points are a special unit of measure for PV and EV. Many volunteer organizations have labor costs at or near zero dollars, but they can still use PV and EV points to define important work and measure progress accordingly.

I believe that simplified EVM is an excellent skill set for implementing MBP. I'm aware that this runs against the grain of classic EVM textbooks that declare EVM is only for project work and not for operations activities[8](p. 11) However, we're not talking about employing classic EVM. We're talking about simple assignments of PV and simple earnings of EV for one purpose: to plan your work and work your plan. More advanced EVM topics, such as forecasting cost and schedule performance, can be reserved for larger (classic) projects that have disciplined budgeting and accounting processes.
To manage discrete outcomes, we assign PV to clearly delineate inscope work from out-of-scope work. If work priorities must change (which is common in knowledge work), then the allocation of PV must be changed accordingly. That's part of the change control process of MBP, and another classic PM skill. The workforce can and should learn to trust PV assignments and EV earnings to focus their actions on top priorities. This is a largely ignored but valuable benefit of EVM.
To manage discrete actions, I strongly recommend implementing a separate (independent) level of PV assignments. This action layer should not be related numerically to PV assignments at the outcome layer. Action-level EVM is an experimental concept, but I believe it holds great promise in providing greater focus and awareness among team members.[2]

Finally, let me suggest ways to sharpen your MBP skills. You will need sharp MBP skills if you want to drive out Industrial Age practices (e.g., MBO) from your Knowledge Age work.

(1) Stop managing "activities!"
Ban the word "activity" from your day-to-day vocabulary. The word is ambiguous about whether we're defining a discrete intended outcome, or defining an action that supports a discrete intended outcome. Outcomes define the intended destination; actions define the journey. Outcomes require change control; actions do not.
Start replacing the word "activity" (a word that is used 841 times in the PMBOK Guide!) with the words "outcome" or "action." This may be a significant change in your day-to-day language, but it will help you and your team to develop outcome- thinking and action-thinking, and the crucial difference between the two. With practice, communication with and between team members will improve remarkably.

(2) Quantify discrete outcomes
If you simply make a list of your discrete outcomes, it isn't nearly as effective as assigning a numerical quantity to each discrete outcome. The numerical quantity is called PV, and it can be in any appropriate units (dollars, hours, percentage points, story points, jelly beans, etc.) Think of it this way: If you simply list the rooms in your house, you will have a pretty good list, but probably not an excellent list. Now, list every room with its square footage so that the list adds up to the total square footage of your house. This approach helps us remember your pantry, hallways, many closets and that little room under the stairs - perhaps as much as 10-20% of the "scope" of your own home. When you think numerically, you are more likely to have a comprehensive and mutually-exclusive list. This PM skill helps us understand the comprehensive and mutually-exclusive scope of all kinds of work, including projects and beyond.

(3) Quantify discrete actions
If you make a simple list of "to do" items you'll have a pretty good list, but if decide up front how much of your valuable attention you will allocate for each item, you will have an excellent list. Your attention is your most important and valuable resource. Pay attention to your attention. Go the extra mile of quantifying your discrete actions with PV, and measuring your weekly progress with EV. It really works, but it is a skill that needs to be practiced and developed.

(4) Drop MBO targets in favor of quantified outcomes and quantified actions
Does MBO drive the kind of front-line behaviors that serve clients and improve the organization? Sometimes it does, but other times the punishment-and-reward methods subvert good intentions. Do well-scoped discrete outcomes drive front-line actions that serve clients and improve the organization? If you can implement the New MBP Mindset, then yes they do. So I recommend dropping MBO targets. Instead, start implementing PV-assigned outcomes and PV-assigned actions. Start small and look for opportunities to expand MBP.

MBP Tool Sets: The Missing Element of MBP

Imagine that you are learning to be a pilot. In Ground School, you can learn an aviation mindset and an aviation skill set (at least in part). At some point, however, you must climb into an actual aircraft and take control. Without the physical "tools" in your hands, your aviation mindset and skill set will never be complete. Sadly, this analogy describes the field of MBP today. Essentially, no MBP tools exist. While it is possible to use some PM tools for MBP, I believe PM tools have significant shortcomings:

(1) An MBP tool needs to track and manage discrete outcomes separately and distinctly from discrete actions. No PM tools do this without extraordinary effort by users.
(2) An MBP tool must provide a direct line-of-sight between your discrete outcomes and your teams' discrete actions. Actions and outcomes must be distinct yet linked. PM tools are not designed to do this.
(3) An MBP tool should encourage and enforce change control over the set of discrete outcomes, but it should discourage and prevent change control over discrete actions. No PM tools do this.
(4) No commercially-available tools employ "radically simple EVM" (e.g., using a PV and EV point system) that can be scaled up to classic EVM for larger more formal efforts. Today, PM tools implement classic EVM or they implement no EVM. Most collaborative PM tools ignore EVM.
(5) PM tools can improve team awareness, but often it is at the expense of team attention. This is a significant design challenge for PM software. It is an even bigger design challenge for MBP software because there is significantly more data with MBP than a single project. Data presentation must be highly visual and contextually relevant to all team members (not just project managers and analysts).
(6) No PM tools are designed explicitly as a replacement for MBO methods. MBO practices will persist until they are confronted directly with a better alternative. MBO can be implemented with pencil and paper, but MBP requires networked collaboration - a very unique challenge.

Home-grown spreadsheets can accomplish some of these things (to some degree) but definitely not all of them. In the previous two articles, I showed examples of spreadsheets to track outcomes and actions. These were prototypes, for illustrating these experimental concepts. There are many operational problems with spreadsheets for PM and MBP. They are difficult to use and share, especially in large teams. Spreadsheets have unsatisfactory version control and traceability. Spreadsheet errors are difficult to detect and tend to proliferate. Spreadsheets are not suitable for very large data sets. In practice, spreadsheets require a lot of focused attention.

Happily, the State of Oklahoma through its Oklahoma Center for the Advancement of Science and Technology has agreed with me on the shortcomings of MBP tools, so it has funded an Applied Research contract to create an MBP tool set from the ground up. The tool set is not ready for a public demo, but I hope to be invited back in the future to share our progress. In the meantime, please keep MBP in mind. MBP has a bright future if we give it a strong foundation to compete with MBO.

References
[1] {Booker2007b} Garry L. Booker, "Mind Your Busyness," http:// http://www.pmitulsa.org/files/PmiTulsaNewsletter2007.04.pdf, InFocus: PMI Tulsa Chapter Newsletter, April 2007, (originally published as "Are You Busy?" in SIGnal, 1st Quarter 2007, p. 8).
[2] {Booker2007c} Garry L. Booker, "What is a ‘Project?' A Better Definition," http://www.pmitulsa.org/files/ PmiTulsaNewsletter.2007.07.pdf InFocus: PMI Tulsa Chapter Newsletter, July 2007, (originally published in SIGnal, 2nd Quarter 2007, p. 12.
[3] {Forsberg2000} Kevin Forsberg, Hal Mooz, Howard Cotterman, Visualizing Project Management: A model for business and technical success, Second Edition, 2000, John Wiley & Sons, Inc.
[4] {Castellano2004} Joseph Castellano, Kenneth Rosenzweig, Harper A. Roehm, "How corporate culture impacts unethical distortion of financial numbers: managing by Objectives and Results could be counterproductive and contribute to a climate that may lead to distortion of the system, manipulation of accounting figures, and, ultimately, unethical behavior," Management Accounting Quarterly (Summer, 2004).
[5] {Drucker 1999} Peter F. Drucker, P.F. "Knowledge-Worker Productivity: The Biggest Challenge", California Management Review, 41 (2). Winter 1999, 79-94.
[6] http://en.wikiquote.org/wiki/Einstein (Retrieved August 2007)
[7] {Collins1994} James C. Collins and Jerry I. Porras, Built to Last: Successful Habits of Visionary Companies, Harper-Collins Publishers.
[8] {Fleming2005} Quentin Fleming and Joel Koppelman, Earned Value Project Management, Third Edition, Project Management Institute, Newtown Square, PA, ISBN 1-930699-89-1.

Garry L. Booker

Garry Booker's career covers software engineering, project management for missile defense systems testing, development of infrared surveillance aircraft, and corporate leadership. He has a M.S. degree (Computer Science) from the University of Kansas and a B.S. degree (Computer Science) from the University of Tulsa. He is the President of Project Frontier, LLC, which is currently receiving support from the Oklahoma Center for the Advancement of Science and Technology (OCAST), for the development of a next-generation EVM application. The EVM application combines the concepts presented in this article with web-enabled visualization and animation technology. 

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