Measurement is key to successful project management. As the old adage says, “You can't manage what you don't measure.”
Collecting and measuring data is at the heart of any worthwhile endeavor. With a New Year’s resolution to lose weight, you may find yourself counting calories or—go you!—watching the pounds drop on the scale. Race car drivers track their miles to the second.
Download our free executive brief "Measuring and Analyzing Work: How to Prove Your Marketing Team’s Value" for more on measuring success.
Likewise, for project management success, you can use metrics or Key Performance Indicators (KPIs) to help you strategically meet your business goals.
Why should you measure?
Metrics Prove Value
Project management metrics related to costs can prove the value of a team. For example, an on-time delivery rate or the rate of meeting SLA. Return on Investment (ROI) is a widely used metric to show this value.
If a department does not produce or contribute to the measurable objectives of a company, a smart company would dissolve the department and move resources to another area that produces results.
Metrics Improve Performance
While proving value is important, forward-thinking management places more value on improving performance. As we’ve shared before, relevant performance metrics enable you to improve your understanding. This removes uncertainty so that all involved parties can make well informed decisions.
For example, if the allotted slack time is delaying subsequent task completion, you can make adjustments in slack time so the project completion date is not at risk.
What type of business goals can you measure?
Business goals influence the performance metrics managers choose to use. These goals need to be SMART goals—not just wishes or dreams. A SMART goal includes the following elements:
How do you choose metrics?
Each business or project requires unique metrics that align with its purpose or goal. Don Lowe, an expert in effective project management, explains three steps to choosing metrics:
- Understand the purpose or goal of the project or work.
- Determine what critical success factors need to be fulfilled in order for you to succeed and achieve the goal.
- Take each critical success factor for the project or program and identify how you will measure its fulfillment.
What are the project management critical success factors?
Here are six factors managers can measure to create metrics that determine project success:
- Benefits resulting from the capability delivered by a project
- Time/Schedule to deliver project output
- Cost to deliver project output
- Scope of work to deliver project output
- Quality of deliverables and quality of process (customer satisfaction)
- Risks including uncertainty or threats to project success
Where should you start with metrics?
Start here with 10 project management metrics to propel performance:
This metric looks at overall capabilities of a company—how well it uses its resources. Productivity shows the relationship between inputs and outputs. How much are you getting out after all that you put into a project? The ideal productivity outcome is creating more for less.
- Productivity = Units of Input/Units of Output
2. Gross Profit Margin
Numbers speak louder than words. Metrics directly tied to the bottom line communicate success or failure more quickly than other metrics. In fact, career resources company OBOlinx refers to gross profit margin as “the mother of all metrics and the best indicator of a business’s health.”
The higher the margin, the better the business is doing. Any program or work performed should contribute to the financial profit of a business. Margin is the percentage of each dollar earned after costs have been subtracted.
- Gross Profit Margin = (Total Profit-Total Costs)/100
3. Return on Investment (ROI)
Return on investment specifically looks at the dollar amount earned for the amount invested in a project. Like gross margin, this is a financial equation. Instead of looking at overall profit, it looks at the specific benefit from the project divided by the costs.
To use this metric, a dollar amount needs to be assigned to each unit of data to determine the net benefits—benefits may include contribution to profit, cost savings, increased output, and improvements. Costs may include resources, labor, training, and overhead.
- ROI = (Net Benefits/Costs) x 100
4. Earned Value
Earned value provides strategic guidance by showing how much value you have earned from the money spent to date on a project. It compares the value of the work completed by a specific date in relation to the approved budget for the project.
Earned value is also called Budgeted Cost of Work Performed (BCWP). This metric provides a reality check during the process of a project. Check out this example to calculate earned value.
- Earned Value (EV) = % of Completed Work / Budget at Completion (BAC)
5. Customer Satisfaction
A customer satisfaction score provides a measure of quality for your service or product. Customer survey data results guide this metric. The Center for Business Practices outlines this as a score on a scale from one to 100. The product or service should do what it was meant to do and satisfy real customer needs.
Each company can develop a score unique to its business by weighing each variable based on its importance. Variables may include customer survey results, revenue generated from clients, repeat or lost clients, and complaints.
The Customer Satisfaction Index (CSI) is the most widely used system for measuring customer satisfaction. The Net Promoter Score (NPS) is another method to capture customer satisfaction. NPS reveals customer loyalty by probing the likelihood of a customer recommending the product or service.
- Customer Satisfaction Score = (Total Survey Point Score / Total Questions) x 100
6. Employee Satisfaction Score
Similar to customer satisfaction, survey data determines the employee satisfaction score. Why look at employees in measuring project management? Employee morale is directly correlated to project success—here are four tips to measure morale.
A satisfied employee creates better work more efficiently. The high costs of employee turnover—totaling 50% to 200% of an employee’s salary—should be motive enough to pay attention to the people closest to the project.
- Employee Satisfaction Score = (Total Survey Point Score / Total Questions) x 100
7. Actual Cost
The Actual Cost is a simple number that shows how much money is spent on a project—not an estimate. This cost is determined by adding up all the expenses for a specific project over the timeline.
- Actual Cost (AC) = Total Costs per Time Period x Time Period
8. Cost Variance
Cost variance shows the difference between the planned budget and actual costs within a specific timeframe. Is the estimate above or below the actual costs? A project is over budget if the cost variance is negative. A positive cost variance shows a project is under budget.
- Cost Variance (CV) = Budgeted Cost of Work – Actual Cost of Work
9. Schedule Variance
Schedule variance looks at budgeted and scheduled work. Is the project running ahead or behind of the planned budget?
The schedule variance is the budgeted cost of work performed minus the budgeted cost of work scheduled—the difference between work scheduled and completed. A negative schedule variance means the project is behind schedule.
- Schedule Variance (SV) = Budgeted Cost of Work Performed – Budgeted Cost of Work Scheduled
10. Cost Performance
Cost performance is a cost efficiency metric. Divide the value of the work actually performed (earned value) by the actual costs it took to accomplish the earned value. Forecasting cost performance allows for accurate budget estimations.
- Cost Performance Index (CPI) = Earned Value / Actual Costs
To excel as a project manager, you need to do more than inspire and motivate. The proof is in the results—a manager needs to achieve (and exceed) business goals. Metrics propel performance by creating checkpoints during the process to continually improve.
When a measurable goal is not met, you need to make changes. When a goal is exceeded, you can repeat successful processes. So, step on the scale and take an inventory of your current status. Determine which project management metrics will best guide your business goals and then get to work.
See "Too Many Metrics? 5 KPIs Marketers Don't Need" for advice on how to simplify measurement.