Project management is a complex task where the participation of all entities, including the project team leader, team members, and other stakeholders, is equally important. A frequent list of changes can lead an ongoing project to an incident, such as scope creep, and the ultimate objective of the project may become encumbered. An effective project management seeks an in-depth understanding of the value delivered by the actions involving effective optimization of the resources and the ultimate satisfaction of the stakeholders. And to meet the conventional motives, KPIs are to be measured. KPIs or Key Performance Indicators are any measurable metrics that are used to compare and analyze the performance to meet the desired objectives. These quantifiable metrics’ trackings help the project team members to work smoothly on project progress, mitigate the risks related to the assigned project, and deliver the value as demanded by the project. Project management KPIs assist the project team members in carrying on with more clarity and steadfastness.
From establishing team synergy to monitoring the critical tasks, KPIs help in monitoring the project progress and development, identifying the risks in project management, elevating the decision-making process, uplifting team performance, improving communication, ensuring project success with greater accountability, clarifying the effectiveness of team members’ initiatives on achieving specified targets, and many more. According to the type of project management methodologies, such as Waterfall and Agile, Kanban and Scrum, or many others, project management KPIs should be selected. The project management KPIs must be selected according to:
1. Alignment with the project objectives
2. Stakeholder demands
3. SMART Framework (i.e, Specific, Measurable, Attainable, Realistic, Time-Based)
4. Simplicity and Action-Oriented
5. Demonstration of Tangible value
KPIs are of different types. Some of them are leading and lagging KPIs. Leading KPIs indicate the future trend, showcasing potential risks that may prevail in the future. For example, Customer Feedback Scores. The lagging KPIs indicate the past performance, showcasing the progress towards meeting the project goals. Examples of the lagging KPI include the Number of Customer Complaints. To track the effective KPIs, the following steps can be followed:
i) Define the SMART KPIs (performance indicators)
ii) Use the Project Management software with user-friendly dashboards
iii) Regular checking and analysis of data
iv) Practice frequent reporting and feedback
v) Make the strategies per project demands
According to various project management articles, the KPIs in practice fall mainly under 4 categories:
1. Timeliness
2. Budget
3. Quality
4. Effectiveness
Let’s dig into some of the popular KPIs that fall under these categories.
The KPIs under this topic help to track if the projects are completed on time, and if not, proper monitoring is to be done to complete them on a stipulated completion deadline.
Some of the KPIs under timeliness are as follows:
i) Cycle Time
It refers to the time required for the completion of assigned tasks. In a project, certain tasks are repetitive in nature. This KPI is helpful in such tasks.
Cycle Time = End Time - Start Time
ii) Time Spent
It refers to the time consumption by all the team members or individual team members on a project. It includes the sum of total hours spent by all the team members.
iii) One-Time Completion Percentage
It calculates if the given assignment is completed by a given deadline or not. Its formula goes like this:
(Number of One-time tasks/Total number of tasks) * 100
iv) Resource Conflict YOY
This KPI helps to compare the total number of projects with resource conflicts year over year (YOY). When resources are not available enough to complete the project, it results in lower efficiency.
No. of conflicts in the present year - No. Of the conflicts last year
The KPIs under this topic calculate if the project is being worked under or over the budget, or if it equals the estimated budget. The budget KPIs are enumerated below:
i) Budget Variance
As the name suggests, it calculates the difference between the actual budget and the projected budget. The expected value of revenue or expenses is to be calculated along with the baseline amount of revenue/expenses to track the budget variance.
ii) Line Items in Budget
This KPI involves the count of individual expenditure items that assist the managers to keep regular records of the individual expenditure, checking how the budget is being used.
iii) Cost Performance Index
This indicator compares the estimated procedure cost and the actual amount spent on the project, which measures the expense efficiency of the project.
CPI = Earned value/Actual costs
iv) Net Promoter Score
It is a one-question survey about brand loyalty that has been discussed on a previous blog, too.
NPS= %Promoters- %Detractors
The indicators under this topic assess if the project has succeeded in meeting the expectation that involves the satisfaction of all the stakeholders.
i) Customer Satisfaction
It indicates if a client is satisfied with the project aftermath and the chances of them being in the upcoming services as well. This metric is measured through the surveys with a survey score of 1 to 10.
ii) Number of Errors
It counts the number of errors and requires redoing the work, affecting both cost and time. It may include any works that have to be rectified and redone.
iii) Customer Complaints
This KPI calculates the number of customer complaints received from both clients and internal stakeholders. The dissatisfaction and dilemmas of customers are counted here, which indicates complaints in the project results.
iv) Employee Churn Rate
The churn rate measures the percentage of project team members who have left the organization during the operation of the project. High churn means dissatisfaction of employees towards the project, management, and work environment.
Churn Rate = (No. of Departing Employees/Total Employees) * 100
The KPIs measure if the projects are being managed effectively within the estimated time and budget. Some of the KPIs under effectiveness are as follows:
i) Average Cost per Hour
This KPI tracks the average cost of labour per hour that includes employee incentives, benefits, and other costs. The measurement helps to calculate whether there is effective utilization of resources or not.
Average Cost per hour = Total Labor Costs/Total hours Worked.
ii) Resource Profitability
This KPI helps to calculate the profitability of resources by comparing the revenue generated by the cost of the resources.
The formula goes like this: Revenue generated/Cost of Resources.
iii) Billable Utilization
This KPI calculates the percentage of billing hours of revenue-generating and administrative tasks of the project that are to be billed to the clients.
Formula: (Billable Hours/Total Hours Worked) * 100
iv) Risk Management Effectiveness
It involves the risk mitigation calculations, which measure how the team members identify, evaluate, and mitigate the risks by understanding them in a precise way.
(No. of mitigated risks/Total identified risks) * 100
Other several project management KPIs are not discussed above, such as:
1. Number of Adjustments to the Schedule
2. FTE Days vs. Calendar Days
3. Budget Creation (or Revision) Cycle Time
4. Number of Budget Iterations
5. Planned Value
6. Stakeholders’ Satisfaction
7. No. of Project Milestones Completed on Time with Sign Off
8. No. of Change Requests
9. No. of Cancelled Projects
10. ROI (Return on Investment)
With the use of effective reporting and visualization tools and software, the raw data can be converted into actionable insights. Per the project demands, the types of KPIs are to be selected, and necessary actions are to be taken with the available calculations for the ultimate project success and reaching the targeted goals and project objectives.