One of our recent blogs discussed strategic leadership and how operational KPIs monitor the health of your operation and provide key insights into opportunities and risks. When operational KPIs are paired with performance data (how a campaign or asset performed), you have the knowledge you need to manage by fact rather than basing your choices on guesswork.
Why Are Project Management Metrics Important?
You have the opportunity to learn from every project you undertake, but using project management metrics is a step that many of us don’t take. Aside from using them to measure the success of a project against its forecasted results, you can discover ways to work more efficiently and streamline your processes which can continuously enhance results.
When you and your team evaluate how a project is performing, you have the opportunity to course correct and make the necessary changes in real time instead of after the fact. You can identify and remove bottlenecks in the process which will help improve future project performance and make your team look like the A team they are! Use metrics to prove the effectiveness of your project planning as well as the value your team adds.
How to Identify the Right Metrics for Your Team
To be certain you understand what metrics will help you reach your goals and objectives, you need to identify what your specific goals and objectives are.
What are you trying to achieve with this project?
What is the impact you hope to see?
How do you define success?
For example, if you are implementing a project management solution for your marketing team, your goal is not simply to “implement a PM tool for marketing”. You likely want to improve the efficiency of the team, help them capture and track the work being done, and have transparency into the status of the work.
You must also understand what the critical success factors of your project are and determine how you will measure that those are met.
10 Project Management Metrics
Gross Profit Margin (GPM)
Return on Investment (ROI)
Measuring satisfaction using the Net Promoter Score (NPS)
Earned Value (EV)
Cost Performance Index (CPI)
1. On-Time Delivery
An obvious measure of success for any project is on-time delivery. Did you complete the project tasks and milestones on time, based on your planned dates? Using a project management tool like Wrike, Asana or Workfront can help you easily track your task completion dates. These tools also enable you to report on actual vs. planned outcomes so that you can improve your timeline estimates going forward. If your team continually misses deadlines, your partners (whether internal or external) will lose faith in your ability to deliver, so it’s important to have accurate estimates.
2. Gross Profit Margin (GPM)
Showing how your work contributes to the bottom line is a sure way to communicate the value of your team! The GPM is calculated by taking the difference between your profit and costs (including labor cost), and then dividing by 100. You want to show how the work your team undertakes is contributing to the overall profit of the business.
GPM = (Profit – Cost) / 100
Ensuring your project is delivered within its planned budget is a critical measure of success. Take steps to evaluate how well you are staying within budget as your project progresses and make necessary adjustments. By demonstrating your team’s ability to deliver work within the planned budget, you’re also demonstrating your team’s value to the organization.
4. Return on Investment (ROI)
ROI is measuring how your project’s costs compare to the net benefits obtained from completing it. Did the amount earned exceed the amount invested to complete the work? Benefits can include factors such as contribution to profit, cost savings, increased output or other indicators that are important to your organization’s goals. Costs can include categories like resources, training, overhead and third-party expenses.
ROI = (Net Benefits/Costs) * 100
5. Measuring Satisfaction Using the Net Promoter Score (NPS)
A standard way to measure customer satisfaction is by using the Net Promoter Score (NPS), which measures the quality of your overall customer experience based on how likely your customers are to recommend your product or services to others. Ask your customers a simple question: “On a scale of 0-to-10, how likely are you to recommend our product/service to others?”
Customers then fall into one of three categories:
Promoters: Customers who respond with a score between 9 – 10. These are your loyal and enthusiastic customers.
Passives: Customers who respond with a score between 7 - 8. They are satisfied with your service but not thrilled enough to be considered promoters.
Detractors: Those are customers who respond with a score that falls between 0 - 6. These are unsatisfied customers who are unlikely to buy from you again and may even go as far as dissuading others from using your services.
NPS = Total % of Promoters – Total % of Detractors
For example, if 70% of respondents are promoters, 10% are passives and 20% are detractors, you would calculate the NPS score like this: 70-20 = 50. The ideal score would be 100, based on 100% of customers being promoters.
Productivity determines how well you are using your resources at hand, and it measures what you get out of a project vs. what you put into it. The goal is to create more with less!
Productivity = Total Input / Total Output (typically measured in units)
7. Earned Value (EV)
The Project Management Body of Knowledge Guide (PMBOK Guide) defines Earned Value (EV) “as the value of work performed expressed in terms of the approved budget assigned to that work for an activity or WBS Component.”
In other words, Earned Value is the value of the work actually completed to date. If your project is terminated today, the EV will show you the value that it has produced. EV is also referred to as the Budgeted Cost of Work Performed (BCWP) and is commonly thought of as the most important metric.
In work management tools, EV ignores the due date for the task and just looks at the percentage that is complete. In other words, if a task has 10 planned hours and the task is 40% complete, you've earned four hours.
EV for a task = Planned Hours x % Complete
Another way of stating the formula is: the sum of planned hours for completed tasks + planned hours for completed portions of open tasks.
See my next blog for more on Earned Value Management and associated metrics.
8. Cost Performance Index (CPI)
The Cost Performance Index (CPI) informs how efficient your project is in converting costs incurred to the value obtained. It’s the ratio of cost of work performed (EV) to actual cost of the work performed (AC) and measures the value of the work completed compared to the actual cost spent on the project.
CPI = Earned Value / Actual Costs
9. Cost Variance
Cost variance calculates the difference between the planned budget and actual costs within a specific timeframe. Is your project running above or below the actual costs? How does your project’s planned budget compare to what has been spent to date? If the variance is positive, your project is under budget – congratulations! If it is negative, your project is over budget, and it’s time to realign your process.
Cost Variance (CV) = Budgeted Cost of Work = Actual Cost of Work
10. Burn Rate
The burn rate is a metric used to assess the performance of a project with respect to the original schedule or budget. In short, burn rate is the rate at which the project is spending its original budget. The budget can represent $ or hours.
Depending on what’s most important to your organization, the burn rate can be calculated using either EV or PV:
= Actual Hours/Earned Value
= Actual Hours/Planned Value
These metrics are the most common ones that can help you get started and provide your project managers with more control over common project constraints such as scope, cost and schedule. Using metrics enables you to both identify problems in the early stages of the project and manage them proactively. Further, they provide your customers with a better view on the project which can instill confidence about the success of the project.
Contact Cella Consulting for insights to help you determine which project management metrics will help you achieve your goals.