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How do you prevent your project from deviating or failing altogether?
The answer is to identify KPIs that will keep your projects on track.
KPIs, or key performance indicators, use data to measure the factors that make a project successful. They help pinpoint work progress and show areas of weakness in your process. They’re a great way to uncover areas that could lead to failure and to make corrections before it’s too late. Unlike subjective project indicators, a key performance indicator uses quantitative data to determine the health of your projects.
Before we discuss some common KPIs, let’s look at project success metrics and how they differ.
KPIs are clear-cut indicators of how a project is going that are set and agreed upon before the project starts. Metrics also measure progress, although they’re less essential indicators. So, while all KPIs are metrics, only the most critical metrics are KPIs.
To maintain focus, use a limited number of KPIs to help you meet the project objective and create accurate indicators of success.
Data is crucial in determining a project’s success, so you should look at the return on investment, productivity levels, cost performance, customer satisfaction, and more. Choosing KPIs you can measure with accurate data and not assumptions is essential.
Although there are countless potential KPIs, you want to choose only a handful to focus on during a project.
These will help your entire team get on the same page and know what they’re working toward.
To help you get started, check out these main types of KPIs in project management.
Budgets should be set at the beginning of your project. Unforeseen issues can arise throughout, so budgets may need to be modified or reallocated to support shifts within the project.
It’s also important to understand why, how, and where the budget shifts occurred, which is why cost-related KPIs are beneficial. Here are a few examples:
Cost Performance Index (CPI) - Ratio showing costs so far vs. the amount to be earned
Budget variance - How the actuals compare to estimated as the project advances
Budget adjustments - How often amounts have changed since the start
This will help you to budget more effectively for future projects.
Another valuable project management KPI looks at teams.
Using SMART goals covered in the next section, you should determine what roles you need before a project gets off the ground. However, once you get into a project, specific tasks may take longer than expected. Or that some team members need more training to complete certain aspects of the project.
KPIs can be set to understand why these changes occurred and how resources could be better planned and allocated in the future and might include metrics such as:
Resource capacity - Tally team members and their available hours to determine capacity
Time spent per person on a project - Compare actual hours tracked vs. budgeted or billable hours
Projects should be broken out into critical phases and organized using work breakdown schedules. When a complex project has several moving parts, milestones can be missed.
When this happens, it throws off the project flow and the team in the process. So, documenting KPIs around timelines is helpful. These might include:
Deadline adjustments - How often have milestones been pushed back or missed
Cycle time - How long it takes to complete a task
Sprint completion - How often are sprint items completed as planned
This will help get a derailed project back on track quickly.
While overall budget is essential, seeing how close you are to meeting your return on investment (ROI) goals is equally important.
Using ROI as a KPI, you’ll understand when costs are getting out of hand to the point of risking the entire project’s value. It also helps determine risk management for future projects.
Once you determine which KPIs will help you measure success, you’ll want to use some best practices when tracking them. This includes ensuring your KPIs are created as SMART goals: specific, measurable, attainable, realistic, and time-based.
Let’s look at these criteria and how to set yourself up for success. By applying these tips, you’ll ensure your KPIs are capturing the necessary data to make sound decisions.
Take a look at the KPIs you have identified. Are they clear?
If they are too vague, they can’t be appropriately measured. And if they can’t be measured, how will you determine your success?
And if you can’t determine your success, project management deliverables will be missed along the project lifecycle, and the objective won’t be met.
The success or failure of using project management KPIs relies on data. But, creating KPIs is pointless if you pull data from multiple sources or use a best guess to determine the outcome.
You won’t predict a current or future project outcome. So, ensure all your data is synced so your KPI is measurable and manageable to report on.
As a project manager, you need to determine KPIs that can be achievable by the project team you have assembled.
If your KPIs are too lofty, they will be missed, and team members won’t be engaged. If you assign multiple projects to a team without enough time to complete both, one of the projects will not be completed.
Teams will resent the fact that the goals are too high and, as a result, might not even try. In the long run, morale goes down, and nothing is measured. Project performance depends on your team’s ability to hit the strategic objectives you set for them.
KPIs need to be relevant to the project. This seems like a no-brainer, but irrelevant KPIs can start slipping in if multiple team members add KPIs.
So, periodically checking that your KPIs align with the project objective will keep your project on track.
A great way to keep yourself organized is by using Agile project management software. It acts as a dashboard in project management, giving you an overall view of your current projects, what has been accomplished, and what is coming up next.
f you are using Agile project management methodology, you know that projects are not always linear.
So, when creating KPIs, you want these to follow a similar pattern.
They should be actionable at any step within the entire project while still outlining clear deadlines for milestones.
Ask yourself, what are you learning from your KPIs along the way? If you know, for example, to go back and tweak something during the planning stage that will lead to a better outcome during the testing phase, then your KPIs should lead you to action.
Your KPIs should steer you in the right direction even if it deviates from what you set initially.
This section will explore various KPIs and provide examples to illustrate their practical application. From financial stability to sales and marketing effectiveness, operational efficiency, customer service quality, and human resources performance, these KPIs offer a panoramic view of an organization's health and achievements.
Measures the percentage increase in revenue over a specified period.
Example: Year-over-year revenue growth of 15%.
Evaluates the percentage of profit relative to total revenue.
Example: 20% profit margin.
Measures the gain or loss generated from investments relative to their cost.
Example: A marketing campaign yielded a 300% ROI.
Measures the percentage of leads that convert into customers.
Example: Website conversion rate of 5%.
Evaluates the cost of acquiring a new customer.
Example: The CAC is $200 per customer.
Assesses the total revenue a business expects to earn from a customer during their entire relationship.
Example: CLV of $2,000 per customer.
Measures the ratio of leads generated to customers acquired.
Example: 10% lead-to-customer conversion rate.
Evaluates how quickly a company sells and replaces its inventory.
Example: An inventory turnover rate of 6 times a year.
Measures the time taken to respond to customer queries or issues.
Example: Average response time of 2 hours.
Assesses the output or efficiency of employees.
Example: Each employee averages ten completed tasks per day.
Measures the level of customer satisfaction with products or services.
Example: A CSAT score of 4.5 out of 5.
Assesses customer loyalty and their likelihood to recommend the business to others.
Example: An NPS score of 45.
Measures the rate at which customers stop using a product or service.
Example: A monthly customer churn rate of 3%.
Evaluates the percentage of employees who leave the company within a given time frame.
Example: An annual employee turnover rate of 10%.
Measures employee happiness and engagement.
Example: An employee satisfaction score of 85%.
These KPIs can vary widely depending on the industry and specific goals of the organization. Choosing the right KPIs is essential for monitoring and improving performance in different aspects of a business.
KPIs are crucial for project managers to keep a project on track using concrete data. Organizational efforts are simple when a project manager uses data like actual time spent on a task, projects completed, and planned cost.
Remember to choose a handful of key success factors to benchmark and no more than seven.
Keeping your dashboard defined and task execution straightforward will allow you to concentrate fully, keep your budget in line, and focus on the high-level metrics critical to your success.
One way to easily track projects is with an Agile project management tool like Hubstaff Tasks. You can add due dates to tasks, create Epics, build Sprints, and see the number of tasks completed during each one. Data from Hubstaff makes it simple to track the actual cost of labor and hit your project goals on time.
With the Hubstaff Tasks add-on, you can access a deeper reporting dashboard for everything from budgets to invoices to schedules. Your project teams can track time spent on tasks, and everyone can see the project budget as they work on a particular project.
With both, you can see how often shifts are on time, how much of the budget has been used, and if deadlines are being met. Or, use Hubstaff Tasks' built-in project time tracker.
Hubstaff Tasks streamlines and visualizes work for project success.