Ever wonder how to steer a project toward success? Well, the answer is simpler than you may have thought—it’s the project management KPIs. These little data gems are here to tell you if your project’s on track or veering off course.
Projects are like intricate puzzles, and the pieces of the said puzzle are the real people doing real work. How they handle their tasks determines whether the project will be successful or not.
In this text, we will go through the significance of project management KPIs for each project segment and walk you through creating and using them effortlessly. Let’s begin!
What Are Project Management KPIs?
Project management KPIs (Key Performance Indicators) are metrics that determine whether a project is progressing in line with set goals. Although it may initially seem like a simple operation, it is actually quite complex.
An organization (company/team) or a specific part within the organization (department) has a series of tasks and activities to carry out during the project. All of these tasks and activities should be directed toward achieving the project goal, which is the successful and efficient execution of the project.
This entails meeting standards regarding project timeline, individual work performance, budget, and effectiveness. Companies must approach the analysis and improvement of these segments on time.
How to Track KPIs?
Tracking Key Performance Indicators (KPIs) requires various tools and programs, depending on the indicators you are monitoring. One effective method for KPI tracking is through the analysis of statistical data.
This involves collecting data and analyzing performance periods, specifically comparing results during different strategies. By examining the data, you can conclude when, why, and how performance was improved.
For instance, tracking customer satisfaction data over various time frames in which you implemented different product models or ingredients allows you to determine when customer satisfaction was highest, and sales peaked. This information helps you focus on those specific products or work methods.
Apply the same approach to productivity programs to determine which enhances your employees’ productivity the most.
Utilizing tools like Google Analytics or Asana provides statistical insights into your business operations in particular. By leveraging these, you can make informed decisions, increase sales, and boost employee productivity in the future.
Project Budget KPIs
Budget Performance Indicators are crucial in assessing the status and success of a project, as the budget is a critical resource management component during the decision-making, organization, and execution phases of any project.
Here are some of the most significant budget project performance indicators for measuring success:
#1. Cost Performance Index (CPI)
The Cost Performance Index (CPI) compares the worth of work done to the actual costs spent to indicate a project’s cost-effectiveness. It helps find out if the project is on or over budget.
By dividing the actual costs by the planned expenses, you can assess whether you are on track or if there is a necessity for adjustments to stay within the budget. A CPI of 1 means that you have spent exactly what you planned.
More than 1 indicates that you have paid less than planned, while a CPI of less than 1 means you have exceeded the budget.
The formula for calculating CPI is:
|CPI = Earned Value (EV) / Actual Cost (AC)|
#2. Cost Variance
Cost Variance (CV) measures the difference between actual and planned costs for a specific activity. It calculates the deviation from the initial budgeted cost.
To calculate cost variance, subtract the actual cost from the earned value:
|CV = Earned Value (EV) – Actual Costs (AC)|
A negative result indicates that the expenses exceed the budget, while a positive value indicates that you are operating within the planned budget.
#3. Planned Value
Planned Value (PV), also known as the Budgeted Cost of Work Scheduled (BCWS), has close ties to the timeline for scheduling the completion of a specific activity or group of tasks. It represents the approved budget allocated for that activity and is a reference point for comparing actual costs and earned value.
The formula to determine planned value involves multiplying the budget allocated to the activity by the scheduled completion percentage.
#4. Estimate at Completion
You can use this indicator if you are deviating from the project plan or are unsure if you will have enough budget to complete all the necessary activities. EAC helps estimate the final project cost based on current performance and assumptions.
It considers both actual expenses incurred and the remaining budget. This information allows you to allocate the remaining budget or devise plans to reduce costs.
There are different formulas to calculate EAC, such as:
|EAC = Budget at Completion (BAC) / CPI or EAC = Actual Cost (AC) + (BAC – Earned Value (EV))|
Time-Related Project KPIs
As the name suggests, time-related project KPIs show whether activities/tasks are being executed according to the project schedule.
Based on the obtained results, it opens up the possibility of taking necessary actions to get the project back on track or, if everything is on schedule, to keep it that way.
Let’s see what the following three time-related project KPIs indicate:
#1. Resource Capacity
Resource capacity (RC) and its utilization indicate whether the available resources are efficiently utilized, which ultimately enables the completion of project tasks within the project timeframe.
To calculate whether there is efficient resource allocation, do not include time spent on other projects involving shared resources or breaks. Once you have excluded these factors, you should multiply the available work hours per day by the number of workdays allocated to the project.
|RC = Available work hours per day x number of workdays allocated to the project.|
#2. Schedule Variance
Schedule variance (SV) indicates whether the project advances according to the estimated progress. To obtain this valuable indicator, subtract the Planned Value from the project’s Earned Value.
|SV = EV – PV|
If SV is 0, then the project is on track.
SV below 0 indicates that the project is behind schedule.
If SV is higher than 0, then the project is ahead of schedule.
#3. Cycle Time
Cycle time refers to the time it takes to complete a single iteration or task. It is typically measured from the start of the process to its completion and does not include any idle time.
To calculate cycle time, compare a specific task’s beginning and end times with its predefined deadline. This easy-to-calculate metric is commonly used in Agile methodology as one of the benefits is improved delivery speed.
Project Management Quality KPIs
While meeting a project’s budget and schedule criteria is essential, it doesn’t always guarantee the desired level of quality. Quality can be influenced by various factors, and simply adhering to budget and schedule constraints may not necessarily lead to an increase or decrease in project quality.
It’s crucial to consider other parameters and factors that directly impact the overall quality of the project. Here is a list of three project management KPIs that can help you measure and maintain the quality of your projects:
#1. Net Promoter Score (NPS)
NPS entails collecting data through surveys that later serve as a valuable parameter for assessing the quality of a product or service. In the survey, respondents indicate their likelihood of recommending the product or service to others on a scale of 0 to 10.
Based on the obtained results, respondents are categorized into the following three groups:
- Promoters: These individuals highly value your product or service and are likely to share it with others. Their average survey rating is 9 or 10.
- Neutrals: This group consists of those who rate their liking of your product/service 7 or 8. They are generally satisfied with your products or services, but you cannot consider them loyal customers.
- Detractors: The third group comprises individuals who rate between 0 and 6. They are dissatisfied customers to some extent and will not actively recommend your product or service.
To calculate the NPS, use the following formula:
|NPS = promoter% – detractor%|
#2. Employee Churn Rate
Employee churn rate is a metric that indicates the quality of work and the work environment, which affects the employees’ commitment to their responsibilities and the quality of processes and hiring criteria.
It is expressed through the number of employees who have left the company, regardless of the reason, within a specified time frame, often quarterly.
To calculate the churn rate, you first need to calculate the average number of employees, which is done by adding up the number of employees at the beginning and end of a specific period and dividing it by two.
Once you have the average number of employees, you can use the following formula:
|Churn rate = (employees who left / average number of employees) x 100|
If the percentage is high, it indicates a high employee turnover, which suggests the presence of issues in management and the work environment.
#3. Number of Errors and Returns
The number of product returns (in the case of selling physical items) has two components:
- The first one includes products that customers return to the company and indicates a certain level of customer dissatisfaction. Customers decide to return items for various reasons, so each return reason needs to be separately classified.
- The second component relates to situations where the company returns products (raw materials) to suppliers. If the number of returned products is high, it indicates certain shortcomings in project planning and estimating requirements for raw materials.
The analysis of errors in products, delivery, and the production process helps prevent these two scenarios. Errors must be rectified, affecting the project timeline and budget; thus, it is clear why allocating time for error analysis and finding ways to reduce them is necessary.
Project Management Effectiveness KPIs
Effectiveness KPIs show how efficiently a company invests time, money, and human resources to complete specific tasks and achieve project objectives.
#1. Average Cost Per Hour
The average cost per hour spent indicates how much engagement on project costs, which is then compared to project results to determine if resource allocation is efficient.
This indicator is obtained by dividing all parameters, such as employee salaries, office space rent, raw materials costs, office supplies, utility bills, and other similar costs, by the number of working hours.
The resulting value is compared to the value of the achieved project objectives to assess whether resources were efficiently utilized and whether a profit was realized.
#2. Billable Utilization
Billable utilization measures the amount of time spent on activities that a company invoices to clients. Not all activities are directly billable to clients, as some may represent internal project deliverables that indirectly contribute to the costs of services or products.
So, this KPI considers only the working hours delivered to the client for billing, indicating the profitability and efficiency of employees’ work. The billable utilization is calculated using the following formula:
|Billable utilization = (Number of billable hours / Number of non-billable hours) x 100|
#3. Percentage of Canceled Projects and On-Time Completion Tasks
These are straightforward metrics that show whether you canceled a project or task or finished it on time.
How many projects have you canceled? Why? What did that bring you? The answers to these questions will help companies obtain measurable data that they can later use to avoid repeating mistakes or improve business processes.
On the other hand, let’s say an old-fashioned indicator—the number of tasks completed on time or even those completed before the deadline—indicates work efficiency.
Other Project Management KPIs
The project management KPIs consist of four project components: budget, schedule, quality, and efficiency. However, numerous other data points provide a broader picture of the project’s status and whether the company is moving closer to its set objectives.
Let’s see what the following indicators can tell us about project strategy and operations:
#1. Strategic KPIs
Strategy is a crucial part of a project and its progress. In fact, every project is strategic, and each has a strategy aimed at the project’s successful execution. Strategic KPIs indicate whether the project is moving in line with its strategic objectives.
Suppose part of the project is to open a hotel to accommodate employees due to business relocation to another city. In that case, it is necessary to measure whether such an investment will serve the project’s primary goal, to what extent, and how it will impact the budget and, later, the team’s efficiency.
Based on the obtained parameters, the company’s board can make further decisions regarding business relocation.
#2. Operational KPIs
Operational KPIs indicate day-to-day, week-to-week, or month-to-month project progress. They serve the function of indicating whether all project components are being met within shorter intervals.
They closely relate to the main KPIs and support the measurement of budget, time, effectiveness, and quality KPIs. In simple terms, the collection and comparison of all metrics every quarter rely on daily data.
Types of Project Management KPIs
- Output KPIs are crucial indicators that demonstrate the achieved results. They become evident through the successful execution of activities and tasks, the attainment of project milestones, and the production of goods, among other contributing factors. This indicator can help you measure efficiency.
For example, when implementing change management processes, such as automation, you can overlook and compare efficiency by comparing the results achieved through automation to those of previous periods.
- Input KPIs indicate the progress of a process by focusing on internal elements within an organization. They encompass the resources consumed during project implementation, ensuring adherence to the planned usage, and identifying potential opportunities for saving their utilization in future projects. This indicator also encompasses the workforce invested in project execution and their performance.
- Quantitative KPIs are numerical measurements of specific values, such as project duration or costs incurred, which can be, for example, valuable for project stakeholders. Knowing these facts can facilitate decision-making for them.
- Qualitative KPIs cannot be expressed in material terms, unlike quantitative KPIs. Instead, they are indicators expressed through feelings, opinions, etc. A typical example includes teams, customers, and stakeholders who express their views, opinions, and needs, reflecting their stance toward the organization’s operations and vision.
- Leading KPIs relate to long-term company performance forecasts. Depending on the nature of the company’s business, its operations, and other indicators, they can predict future productivity and identify trends to which the organization can adapt and stay ahead in the industry.
- Lagging KPIs depict a company’s current performance, usually based on data from past operations. By comparing this data with previous results, one can identify areas where differences have occurred.
- Risk KPIs indicate potential risks that can be expected during a process. When considering various methodologies, strategies, or approaches to work, the selection and application of risk indicators that can arise along the way and indicate the probability of their occurrence always play a significant role.
- Customer Satisfaction KPIs are an essential performance indicator for a company, as customers have objective eyes to assess the quality of outcomes and pricing. Using this indicator, a company can analyze how different strategies and changes in work processes or outcome design affect customer satisfaction and adjust and improve its business accordingly.
How to Define Project Management KPIs
Defining project management KPIs can be done with the help of the SMART technique. The SMART technique includes setting the following five goals: specific, measurable, achievable, relevant, and time-bound.
By employing the SMART goals, you can easily guide and monitor the tasks and the entire project process, gaining the necessary information to make informed decisions. Now, let’s see how else we can define the project management KPIs.
#1. Clearly Define KPIs
To avoid spreading yourself too thin across all aspects of the business, start by clearly defining the key performance indicators that are most important to your project. Begin by identifying the project’s objective and key results and what you aim to achieve through its implementation.
Based on that, concretize the key indicator that will demonstrate whether the project is progressing in the right direction (sales volume, customer growth, customer satisfaction).
#2. Make Them Measurable
Once you have defined the key performance indicators for your project, specify them further by making them measurable. Express the KPIs using specific units (e.g., the number of products sold or the number of acquired new customers in a quarter).
This step is vital to track progress. With the obtained data, you can do a comparison and apply the appropriate methodology accordingly.
#3. Make Them Realistic
To maintain motivation and efficiency, be realistic when setting measurable KPIs. Making them unrealistic or difficult to achieve can demoralize employees and be counterproductive. Therefore, consider all factors influencing the outcome (e.g., available resources) and set realistic KPIs.
#4. Make Them Actionable
When implementing the defined KPIs, ensure that they are feasible goals, meaning specific activities and tasks are in place to achieve the set objectives. The results of these activities/tasks are a basis for analyzation and evaluation of your progress.
By evaluating the outcomes, you can assess whether there is potential for enhancement or if the existing approach is deemed satisfactory.
How to Use KPIs to Successfully Complete a Project
Once you have established key performance indicators (KPIs), utilizing them effectively throughout the project implementation process is vital. Here are some ways to make the most out of KPIs and complete your project successfully:
- Regular Monitoring. Continuously track the identified KPIs during the project, collecting relevant data and analyzing it to assess performance. That allows you to make informed decisions based on real-time information.
- Performance Evaluation. Regularly evaluate project performance using the established KPIs to identify deviations and take timely corrective actions. In this way, you can ensure that the project stays on track and meets its objectives.
- Communication and Transparency. Foster open communication and transparency throughout the project. Share KPIs and their progress with the project team, clients, customers, and other stakeholders. Collaborate and maintain strong relationships, contributing to project success and laying the ground for future projects.
- Informed Decision Making. Use the KPIs to make informed decisions. Analyze the data and insights derived from the KPIs to guide your decision-making process, ensuring that actions align with project goals and objectives.
Project management KPIs undoubtedly help make necessary decisions to bring the project back on track if it has deviated or to elevate it to a higher level when needed.
We’ve provided a range of project management KPIs you can use to your benefit, so don’t shy away from utilizing them. Focus on defining realistic and measurable indicators and carefully monitoring them.
With the results you obtain, all that’s left is to observe how your decisions positively impact efficiency, budget, time, and overall project quality!