Important Project Management Metrics and KPIs to Look Out For
It is important that project managers understand their team’s work progress as they lead them towards a long-term goal. A way of doing this is by setting and tracking key performance indicators (KPIs), project management metrics that allow leaders to get a complete overview of the project performance.
The metrics allow a project manager to see how different areas are performing and which may need improving. This can be accomplished by setting KPIs that suit the objective of each role. This could be related to cost, time, or service for example. Without them, it’s difficult to see and measure progress.
When completing a project, often there is a lot at stake. It is important that everybody working on the project is aware of their personal objective and that of the project. KPIs help to ensure that a project stays on track.
Before setting KPIs for your project, it is important to understand the benefits of project management metrics. Also, consider which key performance indicators to use and when.
Learn below more about this topic in this article created by our team at TMS.
So, why use project management metrics?
Timeliness, budget, quality, and effectiveness, are all critical factors to your project and should be measured along the way. If they are not measured, problems can arise too late to resolve or run out of resources to complete the project. This can be costly, stressful, and demotivating to the team.
A project manager can use project management KPIsas a motivational tool so they should be quantifiable and consistent. When a team is united towards a common goal, an individual’s performance on a KPI can make their contribution to the project stand out. This can then be recognized and rewarded fairly. A KPI could encourage team competition, be used as a motivator, and be grounds for incentives to keep the momentum.
Metrics prove value
There are project management metrics related to costs, which can prove the value of a team and the project. For example, a customer service provider can measure the amount of time a customer spends in a queue. This could help to understand the customer experience being provided.
Setting project management metrics is vital to improving how projects are managed and delivered. They can also be used to demonstrate and predict year-over-year improvements.
Metrics improve performance
By having project management metrics in place and communicated widely within a company, people will understand what is expected of them. They’ll also know how their progress is being measured. Setting metrics removes uncertainty and develops an understanding of the task at hand. This enables well-informed decisions to be made and can lead to an improvement in performance.
If a project appears to be behind schedule, then a project manager may track when a team member takes their breaks. They could then adjust schedules to ensure the project meets the completion date.
Setting effective KPIs
Important performance goals should be measured by using a key performance indicator.
An effective KPI should be agreed upon by all parties before the project begins. This will aid in understanding the project and the expectations. A strong KPI should empower an employee and provide the information they need to complete their job.
When setting a KPI, you should think about what matters the most and link this to your strategy. The KPI should provide the answers to the most important questions, in line with your organization’s culture. A KPI should also be realistic, cost-effective, and consider constraints and time frames.
They should be simple and make sense for the organization, which places the end goal clearly in sight. In addition, a KPI should be clearly measurable and fair to all. The KPI should be consistent and supported by/traceable to real data. You should regularly measure the KPI and adjust performance to meet the required outcome. The KPI should be used as a basis for critical decision-making throughout the project and aligned with objectives.
It is beneficial to make a KPI reflective of previous successes of the organization. The KPI should be aligned with the company’s project objectives.
The eight most important project management KPIs
As mentioned, there are different types of metrics that can be used to track your project and its progress. These will help you to understand where you are succeeding, and which areas may need improvement to ensure your project is completed to its full potential.
Here are some different types of metrics to consider setting for your project.
Planned Value (PV) project KPI
What is it?
The Planned Value is the estimated cost for your project, including planned and scheduled activities.
What does it measure?
The KPI measures how much of your budget has been used against what is left to purchase. You may use it with other KPIs for the project to compare the time schedule against the cost.
How do you measure it?
The PV can be calculated by using two formulas:
Planned Value = (the hours left scheduled on the project) X (project worker’s hourly rate)
Planned Value = (Planned % of tasks left to complete) X (project budget)
If you are working on a one year project with a total budget of $125,000 then you may measure the PV at the end of the first quarter. After three months, you should have completed 25% of the project activities, with 75% left to be completed. If on schedule, you may have spent one-quarter of the funds at this point. This is the project planned value. If you have actually spent more to date, it means that your Actual Cost has been higher than the Planned Value.
Otherwise known as:
This metric is also referred to as Budgeted Cost of Work Scheduled (BCWS).
Quality and Customer Satisfaction
What is it?
Quality assurance is a metric focused solely on customers. It can refer to the service provided, the customer’s experience, and their satisfaction.
What does it measure?
The Customer Satisfaction Index (CSI) is the most widely used system for measuring customer satisfaction. The Net Promoter Score (NPS) is another method to capture customer satisfaction. The NPS measures customer loyalty, by determining the likelihood of a customer recommending the company to another person.
How do you measure it?
Each company and project may choose different ways to measure quality and customer satisfaction, depending on the importance of each variable. This could include the number of complaints received, online recommendations, the results of feedback forms, and survey results.
Gross Profit Margin
What is it?
This metric speaks in numbers and is directly tied to the bottom line and can predict success or failure more quickly than other metrics.
What does it measure?
The higher the Gross Profit Margin, the better the business is doing. Every project undertaken within the business should be contributing to the profit of the business. The margin is the percentage of each dollar earned after costs have been subtracted.
How do you measure it?
Gross Profit Margin = (Total Profit-Total Costs)/100
Planned Hours vs. Worked Hours
What is it?
Before starting a project, it is important to plan how many work hours will be needed to complete it, and should include the number of hours from every team member. This number will be used as the metric for Planned Hours.
What does it measure?
Periodically, you should measure how many hours have been actually worked on the project. Upon completion, this figure will be the Worked Hours.
How do you measure it?
Planned Hours can be compared to the number of hours actually worked, allowing you to see how close your estimation was and whether alterations need to be made to the deadline of the project. You may also need to adjust costs to pay for the Worked Hours required.
Cost Performance Index (CPI)
What is it?
The CPI is used in project management as a KPI to better understand the actual costs associated with a project.
What does it measure?
It can be used to forecast performance and to allocate funds efficiently.
How do you measure it?
Calculation: CPI = Earned Value / Actual Costs
If your result is a number greater than one, your project is on track to finish under projected costs. However, if your result is less than one, at that rate your project is likely to overrun.
Earned Value
What is it?
This KPI is a reality check for the project manager. It uses strategy to provide guidance by showing how much value you have earned from the money spent to date.
What does it measure?
Earned Value uses specific dates to compare the value of the work completed in relation to the approved budget for the project.
How do you measure it?
Earned Value (EV) = % of Completed Work / Budget at Completion (BAC)
Otherwise known as:
Earned value is also called Budgeted Cost of Work Performed (BCWP).
Schedule Variance (SV)
What is it?
This metric can be used as an indicator of whether your project is ahead or behind schedule.
What does it measure?
SV measures your estimates of time and budget, and how they are being maintained.
How do you measure it?
Subtract your planned value (total budget divided by total planned hours) from your earned value (total spent so far divided by total hours worked so far). If your SV is positive, it means that your project is running over budget or time. If your SV is negative, then your project is running below budget or time.
Return on Investment (ROI)
What is it?
ROI helps a project manager to quantify the value of the project and understand the profitability of an investor. It is often used ahead of starting a project to determine what the return will be.
What does it measure?
ROI calculations measure the financial worth of the project in relation to its cost.
How do you measure it?
Calculation: ROI = (gain from investment minus the cost of investment) divided by the cost of investment
If you enjoyed reading this article on project management metrics, you should check out this one about project management framework.
We also wrote about a few related subjects like IT project manager, project management goals, project management principles, project management books, what is a war room, Kanban app, gap analysis, project management skills and project management methodologies.
