Learn how to track and improve the effectiveness of project management with KPIs. Use performance metrics to demonstrate the value of the project to the stakeholders.
- “Projects” and “Initiatives” – what’s the difference?
- Project management: why measure, and who are the stakeholders?
- KPIs for project management: Scope, Cost, Time, Risk, Quality, Resources
Project vs. Initiative: The Position of Projects in Strategic Planning
What is the role of projects in strategic planning? Before, we talked about different levels of abstraction in strategic planning.
We started with the highest level (mission, vision, core values), moved on to the level of strategic priorities, business goals, performance metrics, and finally, to the action level (Level 5 on the diagram).
In strategic planning, the actionable items are normally called “initiatives.” Why don’t we call them “projects?”
What’s the difference between an initiative and a project?
- A definition of the initiative that we can find in the dictionaries underlines the novelty or the difficulty of the activity.
- In contrast, the term project is explained as a method worked out in advance or some planned work with a deadline.
I like to use a trip as an analogy to explain the difference:
- When a family plans their first car trip from Paris to Barcelona, it sounds a lot like an initiative. The nuances of the road are not well-known, the road fees are estimated very roughly, finding a good restaurant along the way is a matter of chance.
- Now, imagine a different situation, a truck driver who covers the same route. The timing, road fees, fuel and accommodation costs are calculated with high accuracy. For the logistic center, in charge of this truck, this is a small project.
What are the attributes of a project? Let’s take a classical project management triangle:
What about an initiative? It can have exactly the same attributes! For example, here is an initiative dialog from the strategic planning software, it looks very similar to what we have in a project management tool.
With an initiative, we are testing the waters. And to test the waters, we need budget and time.
What does an organization need? An initiative or a project? While we will be talking mostly about the initiatives in strategic planning, those initiatives need to be executed in some way. That’s where we will need projects.
We need both – initiatives and projects!
In the context of software automation, there is a difference as well. The project management software comes with Gantt charts and heavy resource planning, while strategy execution software is focused on strategy maps and KPIs.
Why Measuring Project Management
In the KPI system, we agreed that before measuring things, it is important to understand the context of measurement:
- Why do we want to measure project management?
Here are some typical reasons:
- To improve the efficiency and effectiveness
- To improve existing processes and their performance
- To improve management style, communications, infrastructure
- To demonstrate the value of the project to the stakeholders
All these answers fit well the idea of the gap analysis applied to project management.
The Stakeholders of Project Management
Another question that a KPI system suggests to ask is:
- Who are the stakeholders of project management?
The list of stakeholders will certainly include:
- The project manager
- The team that work on the project
- The project sponsor
- The external and internal clients
- The external regulators and internal compliance team
- The quality assurance team
The list of stakeholders will help us to focus on the performance measurement efforts.
Some stakeholders will be interested in knowing the KPIs to measure the success of the project, while other stakeholders will be interested in measuring the success of the project management.
KPIs for Project Management
Now, we have the list of the stakeholders, and we know what answer we are interested in. Let’s define some KPIs (Key Performance Indicators) for project management.
We can group the KPIs around one of the project management models:
- The classical triangle model: Scope, Cost, Time -> Quality
Or the evolutionized model according to the PMBOK standards:
- Scope, Cost, Time + Risk, Quality, Resources
The concept of the scope in project management is focused mainly on the requirements for the future product according to the needs of the stakeholders.
One of the most important criteria of the requirements is:
- Unambiguity of the requirements, %
How to quantify an unambiguity?
We could ask several experts to read the requirements and count statements qualified as ambiguous. A less formal, still effective approach is to quantify this KPI with a popular:
- WTF/page metric
Strategy / Project Alignment
Another thing to look at in the context of the requirements is the existence of alignment between the organization’s strategy and its projects.
- If we are working with internal projects, then having a good strategy map is an excellent way to explain the business context (constraints and priorities) of the project to the team.
Why does the business context matter? To answer this question, think about the difference between:
- Doing things right, and
- Doing the right things
“Doing things right” is what project management is all about. The best managers can make the whole project really efficient, but will it move the organization towards desired goals?
The KPI, in this case, can be formulated as:
- Strategy/project alignment, %
The best way to achieve this alignment is to start with strategy and build new initiatives and projects around its goals.
The metrics for the cost are typically easy to find. Classical KPIs in this case are:
- Planned budget
- Actual budget
- Budget variance – the difference between planned and actual budgets
If you are using BSC Designer for strategic planning, you will find these properties for the initiatives, as well as in the KPI tree:
The financial derivatives of successful project management:
- Cost saving
- Cost avoidance
- ROI – Return of Investment
- Dollar equivalent of value created (earned value) – the estimation of the value created by the project
The mentioned Earned Value can be calculated as:
- Earned Value (EV) = Total_Budget * Progress, %
Another metric compares earned value with actual budget used:
- Cost Variance (CV) = Earned_Value – Budget_Actual
A negative value of CV might be an indication of the over budget situation.
BSC Designer will calculate the Earned Value and Cost Variance if the initiative has progress indicator assigned and the total budget specified.
Classical metrics for project management are:
- Cycle time
- Schedule variance, % (planned hours vs. actual hours)
- On-time completion, %
- Missed milestones, %
While these metrics are easy to calculate using project management software, we need to be careful with interpreting their results.
Do Root-Cause Analysis
Was a deadline missed because of the poor management, or because the requirements have changed unexpectedly, or the scope of the project needs to be revised because of some new inputs?
Know Your Benchmarks
What does it mean that your team missed 15% of the milestones this month? Is it something typical for them?
How does this rate compare to the previous month or to another team? The data makes sense only in a certain context, so be sure to understand this context before making the conclusions.
What Behaviour Do The KPIs Induce?
Think twice before linking project management KPIs to the reward calculation. 100% on-time completion sounds great on paper, but there should be no trade-offs with the quality of final delivery. Bad KPIs are those that make your team think about how to manipulate the system rather than making the product better.
Before, we discussed the concept of risk and Key Risk Indicators. One of the ideas articulated in that article was that KRIs (Key Risk Indicators) are not that different from KPIs (Key Performance Indicators).
For example, if we want to mitigate the risk of having ambiguous requirements, we would track the Unambiguity of the requirements, % KPI (or KRI, if you want).
In other words, any risk with a risk mitigation plan can be tracked by a KPI.
Another important idea is that risk management itself can be tracked with KPIs:
- Number of risks identified
- % of identified risks with mitigation plan
- Number of occurred risks without mitigation plan
- Recurring risks, %
- Risk management costs, $
How can we estimate the quality of project management? It depends on what aspect of quality we are interested in. As discussed in the quality KPIs article, quality is perceived differently by different stakeholders.
We can start with:
- Quality of management (see some ideas about how to quantify it)
- Quality of leadership
- Quality of communications, % (see the complexity article for some ideas)
Quality of the Results
Then we can look at the quality of the produced results:
- % of rework, or
- Number of returns
High % of rework might indicate a problem with the requirements of the project, inappropriate initial estimation, or insufficient planning.
More general quality metrics include:
- Internal customer satisfaction, %
- External customer satisfaction, %
The quality concept includes the quality of the internal artefacts created as a result of the project. For example, if you need a graphic designer for your project, then the final materials need to be delivered according to certain internal standards, using specific templates and best practices. The KPI, in this case, is:
- Internal standards compliance, %
What about innovations?
A good side effect of well-organized project management can be the ideas for the innovation pipeline. The indicator to track is:
- Number of qualified innovation ideas generated
When looking at the quality aspect of any project, we should also take into account the sustainability aspects.
Not only classical environmental sustainability but also the social and economic pillars. Check out the sustainability scorecard for some specific KPIs like:
- % of recycled materials used
- Workplace safety, %
In the context of project management, a starting KPI for the resources are:
- Productive time or Time spent on billable activities, %
- Planned resources vs. used resources
Basically, we want to know if your team spends more time on internal meetings or on doing their job.
If your project involves complex sourcing, logistics, and managing relationships with several vendors, then check out the procurement scorecard for more KPIs.
Finally, your main ¨capital¨ is your team:
- Start with basic HR turnover metric. Take more ideas from the HR Scorecard.
- Use basic training and mentorship hours metric. If you are serious about developing the skills of your team, build a comprehensive training scorecard using Kirkpatrick´s model.
A Final Word
After a few minutes of searching on the Internet, you can have a long list of KPIs for project management.
It’s a good idea to mention some best practices about short-listing those KPIs:
- Start with a business context, a good strategy map will be really helpful
- Define KPIs properly – see the template in this article
- Understand the difference between leading and lagging indicators as well as the difference between success factors and success criteria
- Keep list short – a pair of leading and lagging indicator for each goal will work much better than a list of 100+ metrics
- Access templates. Sign-up with a free plan at BSC Designer for immediate access to 31 scorecard templates, including Project Management KPIs discussed in this article.
- Master skills. Learn how to break down ambiguous goals like "improve quality" and "increase resilience" into specific strategies.
- Automate. Learn what Balanced Scorecard software is and how it can make your life easier by automating strategy execution, KPIs, and strategy maps.