Project management is a fast-paced industry where success depends on efficiency. Successful businesses rely on Key Performance Indicators (KPIs) to monitor the overall performance of a project and its alignment with organizational goals. Well-constructed KPIs ensure on-time project delivery within the predetermined scope, budgets, and quality levels. Besides, project managers can identify areas for improvement and make informed decisions to ensure project success. While most KPIs vary based on a company’s unique needs, there are 10 critical metrics that every business should monitor for successful projects. This article is a guide to help project managers learn how to track and improve project performance using these metrics.
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Budget Variance
Budget variance (BV) is a vital KPI that measures the difference between the estimated budget and the actual incurred expenses during a project. It helps project managers identify cost overruns and decide how to best allocate resources for optimal performance.
A positive BV means that the project is below the estimated budget, while a negative one means the project is above its budget. For a project that’s within its budget, the BV must be equal to zero. You can use this formula to calculate your BV.
BV= Projected value – Actual value
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Number of Budget Iterations
This metric identifies the number of times that a project’s budget was revised before the final approval. A higher number means more iterations before finalizing a budget. It also indicates that the project manager carefully examined the budget, making it more likely to succeed. Implementing this KPI in project management improves the budget proposal development and approval process.
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On-time Completion Percentage
This invaluable KPI tracks the number of projects completed on time. Project managers can use it to track efficiency and make the necessary improvements. A good completion metric helps businesses understand what makes finalizing each project difficult within the estimated time.
For instance, most projects run behind, and the team members underestimate the time needed to complete them. The goal of every project manager should be to achieve a 100% on-time completion percentage or a value very close to that.
(On-time project completion percentage equals the number of projects completed on time divided by the total projects number x 100)
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Billable Utilization
Billable utilization refers to the ratio of hours billable to clients against the overall available hours. It measures how much time your team spends working on activities the client pays for compared to the time spent on non-billable activities. High billable utilization indicates that your team effectively uses its time to generate revenue.
Nonetheless, too high utilization rates can lead to decreased work quality, burnout, stress, and a negative impact on the client’s satisfaction. It’s vital to strike a balance between maximizing billable utilization and offering enough time for non-billable activities such as administrative tasks, client relationship building, and professional development. You can calculate billable utilization with this formula.
Billable utilization = (Number of billable hours/Overall available hours) x 100
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Percentage of Cancelled Projects
Businesses that frequently take up new projects may cancel some due to inefficiencies or reasons best known to them. The number of canceled projects reflects a company’s sustainability of business decisions and capability to plan ahead.
If the percentage of canceled projects is higher than that of successfully completed ones, you should go back to the drawing board and find out where you’re going wrong.
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Schedule Performance Index (SPI)
SPI measures a project’s completion progress against the schedule. This KPI enables project managers to provide timely improvements to increase efficiency while eliminating guesswork. To calculate SPI, you need to divide the earned value by the planned value. If it’s greater than one, it means you are ahead of your project schedule. Similarly, a value less than one indicates that your project is running behind the planned schedule.
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Resource Capacity
Tracking a project’s resource capacity helps managers derive maximum value by allocating resources where they are most needed. It also aids in:
- Preventing double allocation of a single resource to different activities taking place at the same time
- Eliminating under skilled resources
- Allowing resource rotation in different activities for optimal input
- Identifying skill gaps, planning for recruitment, and upskilling ahead of time
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Return on Investment
Running profitable projects is the key to the long-term success of your business. Return on Investment (ROI) is the perfect KPI to monitor and measure the profits of your projects. To calculate ROI, you need to subtract the actual project costs from the earned value. A profitable project will have a higher earned value than the amount put in.
While this metric is essential at the end of a project, it doesn’t mean it can’t be measured along the way. Tracking ROI at the end of each project phase helps managers make worthwhile adjustments where some initiatives cost more than they should.
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Employee Churn Rate
This metric tracks the percentage of employees who have left the company during a project. A high employee churn rate can negatively affect the efficiency of a project. For example, if half of the team members leave, you will likely experience unexpected expenses, delays, and lower customer satisfaction. While having a 0% churn rate is close to impossible, your ideal target should be below 15%.
Employee Churn Rate = (Number of team members who left/ Total number of team members) x 100
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Stakeholder Satisfaction
Stakeholder satisfaction is a worthwhile KPI that tracks the satisfaction levels of stakeholders, including team members, sponsors, and clients. It reflects the project’s success in meeting stakeholders’ expectations and building strong relationships. A higher satisfaction rate is vital for project support, retention, and securing future opportunities.
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