Essential KPIs to Measure Project Success
To gain insight into how successful your projects are, you need to measure their performance – but with what?
The most appropriate KPIs for your project will depend on your business’ top priorities and the goals and aims of your project.
The eight KPIs we detail below give insight into the most critical KPIs to track project health and business success. These give insight into budget and schedule adherence, resource use efficiency, and the overall profitability of your projects.
Here is a guide to the most important KPIs for project managers.
To measure how well you’re staying on budget…
The more closely you can stick to the project budget, the happier your clients will be. There are two major KPIs that track how well you’re adhering to the planned budget of the project.
- Budget variance
This measures the difference between the projected budget and the actual amount of the budget spent. Budget variance KPI can be measured in two ways:
Budget variance = Actual Budget Spent – Projected Budget
This will give you a value in dollars showing how over budget (if the result is a positive value) or under budget (if the result is a negative value) the project is.
OR
Budget Variance % = ((Actual Budget – Projected Budget)/Projected Budget) x 100
A percentage value can sometimes be easier to interpret, giving an impression of the proportional difference between the estimated cost of a project and how much actually ended up being spent.
This KPI provides insight into whether you need to change your budget estimates or identify areas – such as increasing resource utilization efficiency – which you can improve to better stick to your projected budget.
- Cost variance
Though budget variance and cost variance are often used interchangeably, cost variance is better used to target the budget of specific tasks.
While budget variance typically measures how effectively the whole project is sticking to budget, cost variance is often used to measure the cost performance of specific tasks or activities within the project.
Cost Variance = Earned Value of a Task/Deliverable – Actual Cost
A negative result indicates that the task/project is over budget, while a positive result indicates the task has been completed within budget.
Earned value – also known as the ‘budgeted cost of work performed’ is the monetary value of a particular task within the budget.
- Earned Value = Percentage of Work Completed x Total budget
Actual cost – the amount spent to complete the task.
To track how well you’re sticking to schedules and completing work on time….
- Schedule variance
Schedule variance compares the earned value of work performed against the planned value of the work to be completed by a specific point in time. This indicates whether the project is ahead or behind schedule.
Schedule variance = Earned Value – Planned Value
- Earned Value = value of work performed by a certain point in the project timeline.
- Planned Value = value of work planned to have been completed by a particular point in time.
If the result is negative, the project is behind schedule; if positive, the project is on track and ahead of schedule.
- Cycle time
Cycle time is a KPI that measures how long tasks take to complete from start to finish. It could be used to measure the time to complete a particular activity or to produce a certain deliverable.
By recording how long a certain task or process takes, you can more accurately schedule work in the future, identify areas for improving efficiency and track improvements to project efficiency over time.
To observe the efficiency of your resource usage…
- Resource capacity
Measuring resource capacity allows you to view how many resources you have available to assign to a task at any time.
This allows any scheduling conflicts to be identified early to prevent bottlenecks. Likewise, identifying free resources can allow you to assign resources to tasks to maximize billable utilization and improve project efficiency.
- Billable utilization
This KPI is used to determine the cost efficiency of resources. Billable hours are compared to the actual hours worked, to help identify which resources are being under-utilized and when, using this equation:
Billable Utilization = (Billable Hours / Actual Hours Worked) x 100%
This KPI helps to ensure that each hour paid for is an hour in which productive work is produced.
To get a picture of your overall financial performance…
- Cost performance
Cost performance is a measure of the cost efficiency of a project. To calculate the Cost Performance Index (CPI), you can use this equation:
CPI = Earned Value of Work Performed / Actual Cost Incurred to Complete the Work
If the CPI >1 the project is performing well in terms of cost efficiency. For example, a CPI of 1.31 would indicate that $1.31 dollars of value was being produced per $1 being spent.
If CPI <1, the project is underperforming financially, and the value of work being completed is less than the value spent to produce the work.
- Project profitability
Used interchangeably with Return on Investment (ROI), project profitability shows how much money a project makes, after subtracting the costs incurred to complete the project.
Project Profitability = Total Project Revenue – Costs Incurred
This KPI indicates whether your project management business is financially healthy and producing enough profit with the projects it completes.
Tracking this metric over time, across different projects, indicates whether your company is achieving healthy growth and can highlight the kinds of projects that deliver the highest ROI.