Key performance indicator (KPI) is a measurable value that indicate how well an individual, department or organisation or an entity is achieving its important business objectives or goals. KPIs can be of different types, applicable to different goals such as strategic goals or operational goals. There are different KPIs for different industries and even they differ from one company to another or one department to another.
Tracking key performance indicators (KPIs) is very important for a defined period of a project for a an individual, department or organisation. Tracking KPI numbers tells you whether you are making progress or not by how much. Without KPI you wouldn’t know whether you are progressing towards your goals or not. Knowing KPIs numbers, you can correct the course and align your efforts to meet the goal.
44 percent of project managers do not use project management software; interestingly though top consulting firm PWC has found out that using PM software increases performance .
High-performing organisations successfully complete 89% of their projects, while low performers complete only 36% .
77% of companies use project management software, and 87% of high-performing companies use project management software .
Did you notice the key phrase in above statistics? It is the performing organisation (high performer, low performer). But how does one decide whether your organisation is high performer or low performer? High performer in what?
There are performance indicators which helps business owners, leaders understand how their business is performing. If your business is driven by delivering projects, obviously how each project is performing will decide how organisation will perform. Let’s look at the what research says about key performance indicators in project management.
The research has conclusively found that Management of project management KPIs, especially the ones applicable to project managers are the most significant individual variable contributing towards the success of any project. It also means, if an organisation has metrics to evaluate performance of project managers, it can significantly impact the project success.
The results from another research suggest metrics linked to customer’s needs and requirements, have the strongest linkage with the overall success of projects. It further highlights significance of critical success factors (CSFs), and how the key performance indicators (KPIs) are used to identify problem areas in surveyed projects.
Missing KPI or Incorrect KPIs == Suboptimal Result | Even Failure
Today the single biggest challenge a typical business faces is, there is too much of data floating around and management is struggling to make sense of this data for sustainable business growth. ‘Getting the real value from all data reports, dashboard and analytical output’ is still a guess work. That’s why there has to be correctly defined KPIs for management to be able to track trends, performance, results, etc. And defining right KPIs requires you to follow a well-guided process of designing and tracking key performance indicators (KPIs).
Firstly, organisations struggle to gather data in a reliable, consistent manner; many are manually generating reports and presentations. Generating reports is not really an impossible task, but data inconsistency, incorrect data input/aggregation pose challenges. For a moment, let’s assume that error-free data is collected; next challenge is to make sense of all of these data points, how to interpret data, related-data, how to put things in right perspective and thirdly, based on available, reported information how to make right decisions that will have meaningful impact or drive intended result.
We are trying to set a context for having right KPIs for business, department, team or individual. One need to design right KPIs that help decision makers
Essentially, right KPIs gives management the quick and clear picture of how its business, department, teams or initiatives are doing and enable them to act on right aspects or pain areas.
There are certain thumb rule to identify and define KPIs. Let’s look at those.
So there are goals and there are KPIs linked to specific goals. One should not confuse achieving KPIs vs meeting goals. Goals are met as a result of achieving set of desired KPIs. If you are scoring high in KPIs but goals are nowhere near or if goals are falling apart then, you are getting your KPIs wrong. It calls for how to design KPIs, especially, right KPIs or in today’s language, we call them as SMART KPIs. It starts from having S.M.A.R.T. goals and boils down to defining S.M.A.R.T. KPIs.
Where S.M.A.R.T. is
S – Specific
M – Measurable
A – Achievable
R – Relevant
T – Time bound
KRA is Key Result Area. People get confused between KPI and KRA. Though KPI and KRAs can be linked but they are different. To know the difference let’s try to understand each one with examples and a table below.
|Stands for?||Key Performance Indicator||Key Result Area|
|Meaning?||KPI is a mechanism to define and track how well/bad a given business unit (or whole) is performing||KRA is aspect or area of the business that needs special focus to attain certain business goals|
|Usage||KPIs are important to tracks specific points or range of success/failure towards defined goals/objectives of a business||KRAs are important for the business/department to focus on those aspects of business or functions which are strategically important and needs more attention|
|Examples||Percentage of projects successfully delivered in a given portfolio or % of sales lead converted using LinkedIn advertisement||Online sales lead, offline sales channels, recruitment, customer onboarding and after-sales engagement|
Let’s look at KPI used in general business practices from marketing, sales, finance, human resources perspectives.
Human Resources KPIs
We know the basics of project management KPIs, its importance, examples, different types of KPIs applicable to different roles, etc. Having said all of these, it is all the more important to understand what does it take to implement and make use of project management KPIs in practice – how to identify useful KPIs, implementing project management KPIs in an organisation, challenges in tracking KPIs, how managers use tracked KPI information to influence people/process, etc. Let’s look at these aspects.
Business owners and leaders define SMART (abbreviation for Specific, Measurable, Achievable, Relevant, Time Bound) goals and SMART objectives for their businesses. SMART goals do not automatically translate into SMART KPIs. It is usually, project management office (PMO) who needs to put in serious thoughts and hard work to define SMART KPIs to manage & deliver projects better. I come across the debate whether organisation should have SMART KPIs or effective KPIs, in my opinion, they are not really different. If one defines KPIs to be Specific, Measurable, Achievable, and Relevant and time bound (which is what SMART practice is all about); it covers almost everything a project KPIs need to be effective. The only debatable point is ‘time-bound’. After all, project is a temporary endeavour so it has to have time-boundaries. Once KPIs are defined, communicated and tracked by managers, their effectiveness is also decided how stakeholders embrace it, how data is reported, collected, presented and how actions are taken based on presented KPI information.
Let’s look at following steps to create the most effective project management KPIs
Irrespective of your company size or type of industry, deciding right KPIs, target levels of those KPIs and effective coaching & tracking around KPIs help all involved stakeholders stay focused, stay on target to achieve business goals.
There are certainly challenges associated with project management KPIs/ metrics. There are different ways to tackle these challenges but let’s first understand these challenges and subsequently see how to overcome these difficulties.
Once a manager has project KPI dashboard or report in front of him/her, there three possible scenarios:
- Project progress is lagging or below desired level of project KPIs (e.g. schedule is lagging by 20% than planned)
- Project progress is at the desired level of project KPIs (e.g. project CPI is 1.10, which is just as what is expected)
- Project progress is more/ahead of desired level of project KPIs (e.g. project resource utilisation is 95% which is higher than desired KPI as 85%)
As a manager, you can look at these numbers & following tactics
Finding out if underlying numbers of KPIs are reported right or If there is any miscommunication concerning tracking KPIs or (Now, this is where prudent manager’s skill come into play) If team members /leaders need support or clarification or encouragement/pat on the back
If your KPIs are defined right, if you are collecting project information correctly, then tracking KPIs is a very useful and effective in driving projects successfully. Why?
Essentially, prudent managers use reported project management KPIs information to influence people/process to drive projects for greater success.
Project Issues KPIs for Team Member
Project Risk KPIs for Team Member
Project Change Request KPIs for Team Members
Project Timesheet KPIs
Project Expenses KPIs
High Level Indicators (Project KPIs)
Projects Status KPIs
Project Schedule KPIs
Project Budget, Cost KPIs
Project Resources KPIs
Project Issues KPIs
Project Risks KPIs
Project Change Requests KPIs
Portfolio Health KPIs
Portfolio Financials KPIs
Portfolio Schedule KPIs
Portfolio Issues KPIs
Portfolio Risks KPIs
Portfolio Change Requests KPIs
Portfolio Earned Value KPIs
Portfolio Miscellaneous KPIs
So there are two popular ways professionals and business managers track KPIs.
Who Uses KPI Dashboard and Reports?
Usually, project KPI dashboard are used by executive management to quickly check and understand current progress, benefits/risks associated with project portfolio.
Project KPI reports are typically used by team members, project managers, PMO team members to better understand trends, knowing precisely what’s going wrong, what needs attention, etc. Reports provide more information than visual dashboard, typically using tables. Now a days, the line between dashboard and reports are blurring and they are even interactive (click-through)
Which Tools Are Popular As Project KPI Dashboard and Report Tools?
Many businesses seems who track project management KPIs use MS Excel or MS Powerpoint to present KPI dashboard and reports. This approach work fine as long as
There could be reasons why these organisations have to use MS Word, MS Excel or MS Powerpoint for tracking and presenting KPIs. But the reasons most likely are attributed to resistance to change, lack of budget, inability to understand loss of productivity or just happy-to-be-here attitude. There can also be ignorance to search & try better tools and to be fair, possibly there isn’t that IDEAL & PERFECT KPI tool which has all the bells and whistles.
So what is the alternative?
You are better off switching to project management software that also offers project KPIs dashboard software allowing you to easily track project portfolio performance at a click, where data is automatically gathered, if team members have missed updating project activities, they are automatically reminded without you having to keep a track.
Agree, you may not get that perfect tool matching your exact requirement but what managers need to understand, there is no perfect tool for everyone in this world. The project KPI tool that is easy to use for team members, project manager, easy to update status/progress gets adopted well. As long as you have project information updated in the system, the system will be able to present it in some way (usually standard reports or dashboard which can be customised further). But at least you will not be looking at data entry errors because of copy paste, data collation, etc. If a given project KPI dashboard and reporting tool does not provide exact visualisation or reports that you require, just ask vendor for such report/dashboard. Yet, you will still have the ability to project information out of the system and present data in your own way (like you do it today through PPT and Excels).
Here are few project management KPIs template that you can use for your project organisation.
[A] Project Portfolio KPIs Template
[B] Project KPIs Template
. Design project research Report (https://www.irbnet.de/daten/iconda/CIB9795.pdf)
. Toor S, Ogulana O. Beyond the ‘Iron Triangle’: Stakeholder perception of key performance indicators (KPIs) for large- scale public sector development projects. 2009
. Journal for operational research issue#68, 2017 (https://www.tandfonline.com/doi/full/10.1057/jors.2016.1)
. PWC Global Project Management Report (http://www.pwc.com/en_US/us/public-sector/assets/pwc-global-project-management-report-2012.pdf)
. PMI Pulse Report (http://www.pmi.org/~/media/PDF/Business-Solutions/PMI_Pulse_2014.ashx)
. Enterprise Project Management Survey – InfoWeek (http://reports.informationweek.com/abstract/83/12175/IT-Business-Strategy/research-2014-enterprise-project-management-survey.html)
. PMI Pulse Report (https://www.tandfonline.com/doi/full/10.1057/jors.2016.1)
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