A project is said to be successful if it successfully attains the project goals. These project goals may differ from organization to organization spanning various industries. For most organizations, project goals revolve around the budget, schedule, and scope of the project. Project Managers take care of these factors and achieve project success for their organizations. But how can project managers quantify the performance of a project and measure its success? The answer to the question is KPIs or Key Performance Indicators. KPIs in project management are essential units of measurement to quantify the progress as well as the success of a project.
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Project Management KPIs
Every industry uses KPIs (Key Performance Indicators) or KSIs (Key Success Indicators) to gauge and compare their actual performance with their objectives. In project management, KPIs are used to measure the performance of the project against the objectives of the organization. Lengthy information charts and a huge number of files or documents describing the real progression of the project with respect to the desired project or organizational goals are not ideal. So, project managers use KPIs to track and measure the performance of the project to achieve the desired results.
KPIs effectively represent the actual performance of the project and provide transparency. These measuring units can be used to effectively address the requirements of the organization and its stakeholders. Project risks like scope creep, budget constraints, timeline delays, and similar unforeseen threats can slow down the progression of a project. Tracking the project health through KPIs will efficiently minimize project risks and help project managers attain project success. Thus, KPIs in project management is very important for measuring project success.
Four Categories of Project KPIs
Project managers and all other stakeholders need to be on the same page when it comes to measuring the factors responsible for project success. Therefore, project KPIs are usually agreed upon in advance. KPIs will act as performance indexes and every member of the project management team will perform according to them. There are four categories of KPIs in project management. They are as follows:
These KPIs monitor the performance of the project management team based on the schedule of the project. Deviation of the actual work hours of the team from the planned work hours is noted and compared. Project managers can manage the schedule accordingly using the data provided and eliminate obstacles that are delaying the project delivery.
Budget or Cost KPIs are related to the estimated budget of the project and are also referred to as Planned Value (PV). Thus, project managers can find the approximate amount of money spent on the project in contrast to the allotted budget. This will help them adjust the project budget and distribute the resources where it is needed most.
Return on Investment (ROI) is a key aspect of every organization irrespective of its size or domain. However, ROI may be different in projects depending on their nature and objectives. Income KPIs can be measured to observe that the investment in the project is good and that they are generating some revenue for the organization.
This KPI is also known as Schedule Variance (SV). It helps project managers reach the correct estimates for the budget and schedule of a project. Whether a project is over the budget or under, or ahead of schedule or behind can be estimated by subtracting PV or planned value (total budget divided by total planned hours) from your earned value (total money spent so far divided by total work hours so far). A positive SV score means that the project is exceeding the budget or time and a negative SV means budget or time are under.
Importance of KPIs in Project Management
Successfully estimating the budget and time allows project managers to achieve project management success. And KPIs help project managers attain project delivery success by accurately estimating the budget and time. These are agreed upon by the project stakeholders before the project begins and are used throughout the project development cycle as a measuring tool. KPIs promote critical decision-making and are directed towards attaining the desired project as well as organizational objectives.
To achieve project success, project managers can use KPIs as measuring units. Therefore, aspiring project managers should have a thorough understanding of the various formulas to measure project management KPIs. The PMP (Project Management Professional) Certification proves the qualification of a project manager by validating their knowledge of the project management methodology along with their skills in using project management KPIs to attain project success for their organizations. Registering for our PMP Certification Training Course will help aspiring PMPs increase their promotability and improve their credibility by earning this valuable and prestigious credential.