What are KPIs in project management (key performance indicators)? This article will provide an overview to this important question.
KPIs in Project Management
If we want to be able to exert control over the project that moves the project results in the direction of the objectives of the customer, we are going to need KPIs.
To do that, it will require we select key attributes of the work and keep track of these key performance indicators over the life of the project.
What is a Key Performance Indicator or KPI In Project Management?
Key performance indicators or KPIs in project management are metrics or a set of indicators that, if achieved, will demonstrate the success of the project or PMO.
These measurements/indicators provide the project manager, the PMO (Project Management Office), the company’s executive body, and customer with the state of the project. In addition, the KPIs will provide status that will enable controlling actions to be determined and executed as needed.
Key Performance Indicator’s name makes an appearance around the 1980s.
Measurement tools, such as Value-Based Management, Balanced Scorecard, and KPIs become part of the management framework for financial and non-financial activities.
Over time, the PMO will aggregate the reports of the projects that have been and are presently under way.
This data is used to develop the project organization performance metrics. By understanding the present performance of the organization, we can make better estimates, and more importantly,it makes it possible to improve the organization’s performance.
Predictions, Metrics, Control
For KPIs to be useful, the initial state must be documented. The project plan is a prediction of the execution and delivery of a project.
Projects are not static. Projects are constrained and have expectations upon the project outcome.
The project manager and team members will need to take actions to keep the project on target. To do this requires measurements of current status versus initial state/plan or previous status.
What is important for this project delivery? This will be connected to the project objectives.
What are Project Objectives in Project Management
Project objectives or key results should not be confused to project KPIs, as through them we can learn the goal of the project and set measures for its success.
Project objectives are often perceived as the most important steps needed to take to reach the end of the project. The project objectives provide directions, focus and must be measurable and within hold KPIs or metrics that help define the project progress or state during project delivery.
A project goal, on the other hand is a statement that tells us the desired outcome, what the project should achieve, and what is the expected results upon completion.
Different projects may have different metrics as projects have differing objectives, though there are often common elements.
For example, budgets and schedule elements are common to all projects, that is, if a project has a specific budget allocated, and will have a schedule of delivery expected. More on those specific metrics later.
Where are we in the project presently (at any given time during the project)?
We learn this by gathering data (key metrics) and through continuous monitoring of those key metrics.
Developing Project KPIs
There are some important things we should be aware when determining the things to measure. Measurements or metrics drive behavior. This is good and bad behavior. Perhaps you have seen examples in your work life where the drive of metrics has introduced some dysfunctional behaviors. If there is interest, we can write more on this, but it is good to read some of the works from W. Edwards Deming.
Start with the end in mind,
- What does success look like?
- What does failure look like?
- What do we need to measure?
- How do we set about measuring?
- When do we measure?
- Who performs the measurements and in what way?
These questions should be answered once we have determined any deleterious impacts. These can arise due to organization’s culture and other different factors .
Another failure mode is when we hear “we could not have predicted this outcome from our measurement diktat.” From experience this is a result from a top-down approach, or a lack of systems level thinking and the subsequent consequences.
Connection to Project objectives
The elements that matter to the project should have metrics defined, to prove or disprove that we are on the path to delivering the objectives of the project. What performance objectives of the product or end result of the project?
Project Management KPIs connection to organization performance objectives
he PMO will have performance targets, if the PMO is focused on understanding present performance, and developing actions to improve that performance. PMOs decide on training and develop and deploy processes that will improve performance of the project organization at large.
These changes are built upon the analysis of the aggregate project performance. There may be processes associated with schedule development based upon reported schedule performance over the numerous projects the PMO is undertaking.
The PMO and the members of the project management office can also manage several projects or even multiple programs at a time.
Maximum of 10 per project
Too many things to measure and turn into data, does not help our project. If everything is important, nothing is important. This is not focus, this is a distraction. Prioritizing the most important things to measure and how to measure to ensure the veracity of the data, is far more important than to metaphorically dog pile the measurements.
Minimum 5 KPIs for all in-house projects
From experience, most companies have a maximum of 10 project KPIs. A few have had success with only monitoring 5 KPIs. For monitoring and controlling a project or PMO, more is not better. Unless of course the project budget includes funds for measuring and collecting KPI data. Our recommendations of the five are:
- CPI – Cost Performance Index
- SPI – Schedule Performance Index
- Number of Change Requests
- Number of Errors
- Customer Satisfaction
- Estimate at completion
Examples of Other KPIs (applicable to individual projects and PMO)
We provide a few examples of project metrics below. This is not a definitive or exhaustive list. That which we measure should be close to the attributes of the project that matter most for this specific projects.
- Project Metrics
- On-Time Completion Percentage
- Number Of Adjustments to The Schedule
- Planned Hours Vs. Time Spent
- Budget Variance
- Schedule Variance
- Number Of Budget Iterations
- Number Of Errors
- Customer Complaints: Average Cost Per Hour
- Number Of Change Requests and the time to respond to change requests
- Return On Investment (ROI)
Product and Manufacturing Objective Examples
KPIs can also be industry specific. Below we provide a list of other metrics that are connected to projects that are creating and delivering a manufacturing line to produce those products.
- Defects found in testing
- Severity of defects
- Defect arrival rate
- Manufacturing line part first pass yield
- Percent completion of testing
- Product cost to target variance
- Suppliers needed to suppliers selected
Project KPI Monthly Reports
You may have experience with projects that go before review board or steering committee, typically associated with a stage gate approach to the project. These reviews are associated with the key project objectives associated with the sequence of events defined by the organization. Each project will be reviewed at these key transitions from one phase to another.
Example of stages in stage gate
These reviews look over the work performed. Are we accomplishing those things required for this project?
Does our performance thus far predict success? What should we change in this project strategy or tactics?
What area looks weakest that we must buttress?
The metrics gathered during the execution of the project are displayed and reviewed (examples below).
From this input, the project manager, project sponsors, and likely the project customer make judgements on how, or even if the project should proceed?
Using S-Curves during execution to report KPI checks/inputs
We have written on the building of the cumulative project performance curve, also referred to as an S-Curve.
The following are associated with Earned Value Management (EVM):
- PI – Cost Performance Index
- V – Cost Variance
- SPI – Schedule Performance Index
- SV – Schedule Varianced
- Estimate to completion
- Estimate at completion
The importance of KPIs in Project Management
A successful project, one that meets the objectives, requires the project manager and the team to adapt. Metrics provide the project manager and team with information to develop actions to meet the project objectives, or communicate with the project sponsors and customers that the objective is at risk.
That might be the project scope, or the expected project cost and anticipated delivery date. In this way we can evoke other actions to help bring the outcome in line with expectations, or we can alter the expectations. To control something, one must know what you want and what it should be, and then develop actions to remediate.