Good project management should always involve clarity of direction for your team as well as transparency of progress for other stakeholders. One of the most important ways of achieving both of these is by using key performance indicators (KPIs) to monitor project progress.
There are many different kinds of KPIs for project management, and they can either be industry specific or generally applied to all projects. You can also break down your key performance indicators into various sections to allow you to get a broader view of how work is progressing. These may include:
Each of these fields can determine how a project is going, though to make sure you have as broad a view as possible, it is best to use a combination of KPIs for project management. These should be clearly communicated and adhered to for the duration of the project, except in extreme circumstances.
The Value of KPIs
Sometimes, it’s obvious when a project is going well. Often it’s even more obvious when a project isn’t going well. So why use KPIs?
Since the success or failure of a project depends largely on its efficient use of resources like time and money, KPI’s are crucial because they ensure that your method of monitoring progress is:
- Quantifiable – “Well” and “not well” are fine responses when your barista asks you how your morning is going. In project management, however, monitoring progress depends on more concrete data. KPIs let you examine your project’s progress in real dollars, hours, or whatever unit is necessary to paint a picture of where your resources are actually going.
- Objective – Every project has a host of internal and external stakeholders who all have varying interests in the outcome of the project. Monitoring and communicating progress through measurable KPIs ensures that results are free of any personal biases so that all stakeholders can focus on what’s most important: the success of the project.
- Communicable – Unlike qualifiers such as “well” and “not well,” objective, quantifiable data leaves no room for ambiguity. KPIs enable project managers to communicate progress in messages that will be understood no matter your interests or biases.
Here are some key performance indicators that you can consider using in your projects, to keep an effective eye on progress and ensure that potential risks are flagged up early.
Budgeted Cost of Work Scheduled (BCWS)
Also known as Planned Value (PV), this metric lays out the estimated costs for your project and lets you identify where your project is in relation to how much it has spent vs. how much should have been spent.
One formula for identifying BCWS is: (% of project completed) x (total budget)
So, for example, if your total budget is $1 million and you have finished 60% of the project, the equation will be: (0.6) x (1,000,000) = $600,000. If you have spent more than that you will know that you have overshot your budget and should take steps to rectify the situation and notify stakeholders.
Planned Hours vs. Worked Hours
At the beginning of each project phase it is important to make out a plan of planned work hours. That is, the number of hours, from each team member, that it is estimated will be required to complete the project phase.
This outline of planned hours can then be compared with the number of hours actually worked at the end of the phase. In terms of key performance indicators, the results will show you how close you are to correctly estimating task duration and if there are major discrepancies it will be necessary to investigate and alter your processes.
Return on Investment (ROI)
Depending on the type of project, revenue may or may not be one of the project’s key objectives. If it is, however, then Return on Investment is one of the most important KPIs for project management. Measuring your ROI is quite simple, simple divide your income earned by your costs. This metric will let you know how well the money you are investing is performing.
Schedule Variance (SV)
To get a clear idea of how well your estimates of time and budget are being kept to, you can use Schedule Variance as a KPI. To do this, 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). A positive result means that your project is running over budget or time and a negative one the opposite.
Whatever key performance indicators you decide to use, the important thing is to stick to them and know how to use the results properly. They can be vital signs about how healthy your project is and allow you to identify issues before they become major and alter the project accordingly. For more information on how to decide on the right KPIs for your projects, read our blog on the subject.
Increase Visibility with Clarizen
Though each team and project will require its own unique KPIs, using a project management software designed for visibility can make monitoring those markers that much easier. To learn how Clarizen can help, schedule a live demo today.