Baseline

What is the baseline?

Teams will agree upon certain criteria for the baseline based on historical data, then use this foundation as a reference point by which costs, sales, and other variables will be measured over time.

In business, baselining is a valuable tool for assessing the performance of a product or service, and also serves as a way to identify “scope creep” for long-term development projects.

How business performance is evaluated with a baseline

While the function of a baseline always remains the same — to serve as a point of comparison — businesses can use them in a few different ways.

Here are a few of the most common uses of the baseline:

• Sales projections are well-suited to the use of a baseline, as last year’s figures can be used as the benchmark by which this year’s performance will be judged. Then, when next year rolls around, this year’s figures will become the new baseline, and so on.

• Financial baselining is used by many businesses to evaluate the financial requirements for the coming year. In most cases, a business will use its Q1 results as the baseline for the rest of the year, with future results being expressed as a percentage of the baseline.

• Requirements baselines are used in product management to establish realistic goals for the development process. These requirements are agreed upon and signed off by product owners and key stakeholders, then used as the baseline to judge progress as the development goes on.

What are the baseline components in product management?

Product management has always had lots of moving parts. The development of a product can easily veer off course with new features being added by different stakeholders — all of which can impact delivery milestones. This is where an established baseline can come in very useful.  

In product management, setting a baseline at the outset will ensure that all team members have a clear goal in mind when it comes to duration, cost, and requirements of the development.

Broadly speaking, baselines in the context of product management are broken down into three components:

• Cost refers to how (and where) the budget for the development is assigned.

• Schedule defines how long certain items on the roadmap will take to complete, and how they’ll fit into the overall timeline of the project.

• Scope describes the specific milestones of the development, defines the deliverables, and summarizes the desired outcome of the project.

The benefits of the baseline

Now that you’re familiar with what baselining is, let’s get more specific about why you might want to use it with your next large-scale project.

Here are the main benefits of using a baseline:

• It provides a clear, specific vision of how a project will progress over time.

• It gives teams the opportunity to explain and contextualize delays, changes, and the dreaded “scope creep”.

• Key stakeholders, even non-technical ones, will be able to grasp the end goals and expected timelines of a development project.

• A baseline provides a simple way to evaluate business performance over time, especially compared to previous results.