Tracking Key Performance Indicators (KPIs) is critical to the success of your project. Without project management metrics, it’s nearly impossible to measure your progress towards strategic goals. When you measure KPIs, your project stays on tracks.
Project management metrics and indicators provide a benchmark for success. Your business can record its performance without using KPIs, but there is no way to measure progress without these important project management metrics.
How to Use Project Management Metrics and Indicators Effectively
Project management metrics or KPIs are often decided at the start of a project. Apart from being able to measure success, these indicators also reflect a company’s approach towards the project.
Irrespective of roles and tasks of each team in a project, KPIs build a framework for project success. That’s the reason every team needs to understand KPIs and support project management metrics.
A project manager can use Key Performance Indicators (KPIs) as a motivational tool apart from using it to measure and management performance. Since KPIs unite all teams with a common goal, they feel motivated and add momentum to the project.
When project managers use strong KPIs, they are able to lead their teams to greater goals with higher ambitions. They are useful for;
- Measuring performance
- Accurate measurement outcome of the process
- Measuring the effects of a change
- Motivating teams and moving them towards a common goal
How to identify KPIs for your organization
Before we probe further into the effectiveness of KPIs, it’s important to learn how to design powerful and effective KPIs.
There are three important rules when it comes to designing KPIs for success. Follow these simple rules irrespective of your industry and the nature of the project.
- Make sure that the KPIs are closely linked to your overall strategy
- Do KPIs provide definitive answers to the important questions during progress assessment?
- Do they help your employees by giving them relevant information?
To identify whether certain project management metrics would prove useful for your organization, you need to understand the role KPIs play. For example, powerful indicators will be related to overall strategic aims of your organization and they will identify the factors that determine the success or failure of your strategy.
Similarly, KPIs could be long term and short term, depending on the nature of your goals. They can be controllable and accountable and qualitative and quantities. Based on your goals, you can make the choice to use certain project management metrics while ignoring the others.
KPIs that will help your team stay on track and measure success will consider stakeholder needs in addition to focusing entirely on the employee performance metrics. These KPIs will naturally align with the corporate goals and change only when objectives are met.
It’s a company’s management that decides project management metrics and KPIs. A good performance metric and indicator should be easy to understand, specific, and measurable. It should be achievable and time-bound as suggested by George T. Doran in Management Review, 1981.
Actionable KPIs for Every Project Manager ~ How to Measure Performance Using Indicators
When using KPIs to measure performance, it’s important to measure trends over time using a similar set of metrics for several projects.
Apart from studying metrics and analyzing indicators in several similar projects over time, organizations will also need to tie these indicators to strategic goals.
Selecting performance indicators using these suggestions will leave organizations with three to five indicators. These key indicators should provide an accurate measure of progress towards a common strategic goal and cohesive analysis of team performance.
Although organizations in different industries will reach different set of KPIs, they will always fall under these four categories.
|KPI Category||Example Indicators|
|Timeliness||Cycle Time, Task Completion, Time Spent, Adjustments to Schedule|
|Budget||Budget Variance, Budget Creation, Items in Budget, Budget Iterations, Planned Value|
|Quality||Customer Loyalty, Customer Complaints, Errors|
|Effectiveness||Milestones Completed on Time, Returns, Training, and Research Requirements|
Here are 10 most important KPIs that can help every project manager. These actionable project KPIs will reflect on the actual performance and progress of your teams.
1 – Planned Value (PV)
Planned Value (PV) indicator can help project managers track the progress of their project in accordance with budget and schedule by comparing it to other KPIs.
PV is the estimated cost of your project activities planned/scheduled as of reporting date.
How to calculate PV?
To find out planned value, use any of the following formulae.
PV = (number of hours left scheduled on the project) X (project worker’s hourly rate)
PV = (Planned % of tasks left to complete) X (project budget)
2 – Actual Cost (AC)
Actual Cost (AC) indicator is the actual cost of work performed. It gives you an accurate measurement of money spent on a project to a certain point.
Actual Cost for a project would include all project-related expenses such as billed hours, cost of resources etc.
How to calculate AC?
You don’t need the formula to find out the value of this KPI. Simply add all project expenses to date.
AC = Sum of all project-related expenses
3 – Earned Value (EV)
Earned Value (EV) is an important indicator for project managers as it helps them determine the budgeted cost of work performed. In other words, it provides accurate measurement of the approved budget for various project-related activities at any given point of time.
How to calculate EV?
Measuring Earned Value is easy. Simply use the formula below.
EV = Budgeted cost of work performed
4 – Cost Performance Index (CPI)
Also known as Cost Efficiency, Cost Performance Index (CPI) helps project managers determine the pace of overall progress towards common strategic goals.
Using this KPI, one can measure project’s current progress in relation to the approved schedule.
How to calculate CPI?
Use the following simple formula to calculate CPI accurately.
CPI = Actual money spent vs. Approved budget ratio
5 – Return on Investment (ROI)
Return on Investment (ROI) is one of the most useful KPIs among various project management metrics. It reflects on a project’s profitability.
Using ROI indicator, project managers can easily measure benefits of the project in relation to its cost.
It’s important to note that achieving positive ROI might not be the right indication of project success, especially when the organization has long-term goals.
ROI = Measurable components such as AC and EV
6 – Cost Variance (CV)
Cost Variance (CV) gives an accurate measure of a project’s expenses. It reflects on the estimated cost and actual cost and shows whether the estimated cost is above or below the planned budget.
How to calculate CV?
To calculate Cost Variance, use this simple formula.
CV = Planned budget vs. Actual budget (at any given time)
7 – Schedule Variance (SV)
Schedule Variance (SV) is one of the most important project management metric for managers. It helps them to measure a project’s current status in relation to scheduled work and planned budget.
How to calculate SV?
To compute SV, use the following formula.
SV = Planned Value (PV) – Earned Value (EV)
8 – Schedule Performance Index (SPI)
Schedule Performance Index (SPI) allows managers to see whether they are ahead or behind the planned project schedule.
How to calculate SPI?
Like other KPIs, you can use a simple formula to compute the value of this index.
SPI = Earned Value (EV) / Planned Value (PV)
9 – Cost of Managing Process (CMP)
Cost of Managing Process (CMP) is a vital KPI for measuring the cost and time spent on project management. Higher values indicate inefficiency on the part of project manager while lower values indicate poor team and work organization.
How to calculate CMP?
You can compute this KPI by adding up all the costs related to project supervision and management.
CMP = Cost of project supervision + Cost of project management
10 – Resource Utilization
Resource Utilization indicates how your team has been spending its time while on work. This KPI is useful when project managers want to compare time spent on non-billable activities such as scheduling, assigning tasks, and meetings compared to time spent on billable activities.
Project management metrics change from project to project, depending on the type of data that an organization finds useful for benchmarking. However, important project management metrics such as ROI, cost performance, and productivity remain the same across different projects and help project managers in every industry.