What are performance metrics for project management?
Project management metrics are vital to implementing practical and sustainable project management practices and processes in any organization. The key is to keep the metrics simple, practical, and relevant to the organization.
Project management metrics are key to improving how projects are managed and delivered, as well as demonstrating year-over-year improvements in project management maturity.
This metric measures project management performance by PMs compared to their approved budget and committed delivery date. The goal for PMs is to deliver projects within 10% of their budgeted work effort and 10 calendar days of the agreed-upon delivery date. The metrics are rolled up to the various management levels to measure project management performance at each level.
The key requirements for this metric are that projects are baselined at the appropriate time, and that finding the true reason for any baseline change is. The performance baseline work effort and go-live date are captured by the PMO, and the actual hours are captured using timesheets in the project management system. This metric is communicated to managers and above once a quarter.
The challenges include getting managers to baseline their projects at the right time (after requirements are defined, design work is completed and a project plan has been developed), assigning appropriate reasons for any baseline change, and the sensitivity of the metric since it is tied to the annual performance appraisal.
Metrics for project management assist us in:
- Calculate and comprehend the IS organization’s maturity
- More efficiently manage projects and resources
- Show a performance improvement from the previous year.
All measurements must be:
- Straightforward and appropriate for the company
- Measurable without ambiguity, with transparency, and justice to everyone
- backed by genuine data and traceable to it
Essential Conditions
The following are important prerequisites and recommendations for the application and reliable measurement of project management metrics:
- Project management techniques that are repeatable and long-lasting
- Mmonitoring process compliance
- Using a project management tool to collect data
- A performance baseline may require some time to ensure process compliance and data accuracy.
- Communication of metrics, baseline, and any ensuing adjustments to metrics or the data-gathering procedure in a timely and unambiguous manner
- Limit the number of metrics you use, especially if they are similar.
- Don’t make too many exceptions to the rules governing the collection of data and the computation of metrics.
Challenges
The following difficulties will need to be overcome with the help of appropriate procedures and controls during the adoption of project management metrics:
- Initial estimates may decrease as compliance increases (i.e., metrics may not show improvement)
- The results from prior years would need to be adjusted if the metrics definition or measurement process changed.
- The measurements must be updated if the basis data changes.
- People might not pay much attention to measurements unless they affect them (e.g., when personnel review was tied to the metrics, the compliance improved significantly)
- The metrics process is suspicious if the trend does not appear to be positive (have data to explain metrics and trends clearly)
- To avoid missing them, project managers (PMs) either avoid establishing baselines or do it as late in the project as possible.
- People don’t want to establish baselines when there are several deliverables involved until all the requirements are specified.
- Projects like requirements/analysis projects, as-time-permits projects, and internal maintenance projects all present unique issues.
Examples of performance metrics for project management
1. Efficiency
This indicator examines a company’s overall capabilities, or how effectively it utilizes its resources. The link between inputs and outcomes is demonstrated by productivity. After all your work on a project, how much are you getting back? Being able to produce more with less is the optimal productivity result.
Units of Input/Units of Output = Productivity
2. Margin of Gross Profit
Numbers are more persuasive than words. Success or failure is communicated more promptly by measures that are directly related to the bottom line than by other metrics.
The better the business is going, the larger the margin. Any project or activity carried out ought to increase a business’s bottom line. The percentage of each dollar earned after expenditures have been deducted is known as the margin.
Total Profit – Total Costs / 100 equals the gross profit margin.
3. Return on Assets (ROI)
Return on investment analyzes how much money was invested in a project relative to how much was made. This also is a financial equation, like gross margin. It looks at the specific gain from the project divided by the costs rather than the total profit.
To apply this statistic, a monetary value must be ascribed to each unit of data to calculate the net benefits, which could include:
- Profit-related contribution
- Money saved
- Higher output
Possible costs are resources, labor, overhead, and training
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 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.
Earned Value (EV) = % of Completed Work / Budget at Completion (BAC)
5. Customer Contentment
A customer satisfaction rating gives you a way to gauge how good your service or product is. The findings of a customer survey inform this metric. According to the Center for Business Practices, this is represented as a score between one and one hundred. The good or service must fulfill its purpose and meet genuine consumer wants.
By weighing each criterion according to its significance, each company can create a score that is specific to its industry. Customer survey results, client income, repeat or lost business, and complaints are just a few examples of variables.
The most popular system for gauging customer happiness is the Customer Satisfaction Index (CSI). Another tool for measuring customer happiness is the Net Promoter Score (NPS). By examining the likelihood that a customer will promote the good or service, NPS gauges customer loyalty.
(Total Survey Point Score / Total Questions) x 100 = Customer Satisfaction Score
6. Employee Contentment Rating
Employee satisfaction is rated using survey data, just like consumer happiness. Why should you consider the workforce while evaluating project management? Here are four ways to gauge employee morale. The answer is quite straightforward and obvious: project success is directly connected with staff morale.
The bottom line is that an employee who is happy works better and more productively. Paying attention to the individuals closest to the project should be motivation enough given the significant expenses of staff turnover for a firm, which can range from 50% to 200% of an employee’s wage.
A common technique for gathering information about employees is the Gallup Q12 Employee Engagement Survey. Results are converted into an index score via an Employee Satisfaction Index (ESI).
Employee Satisfaction Score = (Total Survey Point Score / Total Questions) x 100
7. Real Price
The Actual Cost is a straightforward figure that represents the actual amount of money spent on a project as opposed to just an estimate. This price is calculated by totaling all the costs incurred throughout the project’s timeline.
Total Costs per Period x period = Actual Cost (AC)
8. Cost Variation
Cost variation displays the discrepancy between the actual expenses incurred over a certain period and the budgeted expenditures. Does the estimate differ from the actual costs in any way?
If the cost variance is negative, the project has exceeded its budget.
If there is a positive cost variance, the project is under budget (a typical measure of success).
Cost variation (CV) = Budgeted labor costs – actual labor costs
9. Change in Schedule
Budgeted and scheduled tasks are examined in schedule variance. Is the project coming in ahead of or behind schedule?
The budgeted cost of work completed minus the budgeted cost of work scheduled, or the difference between work scheduled and accomplished, is the schedule variance. The project is running behind schedule if the schedule variance is negative.
Schedule Variance (SV) = Budgeted Cost of Work Performed – Budgeted Cost of Work Scheduled
10. Cost-Effectiveness
A cost efficiency metric is cost performance. Subtract the real expenditures incurred to complete the earned value from the value of the work that was completed (earned value). Budget estimates can be made with accuracy by forecasting cost performance.
Cost Performance Index (CPI) = Earned Value / Actual Costs