You've probably got a good idea whether your project's on track or not. You know whether you're feeling calm about how it's progressing, or whether you're frantically chasing your team every five minutes trying to push things along. But how do you turn that feeling into strategic guidance that can move you towards your project goal?
Qualitative measures of success are always somewhat subjective, and that makes them unreliable. After all, how you feel about a situation could change completely depending on whether you had breakfast or not that morning. To get a true measure of how successful your project is, and where you need to focus your improvement efforts, you need to turn to project success metrics.
In this article, we'll look at how project metrics can help you measure progress, and the five key metrics that can guide your project planning.
Project success metrics are the key performance indicators of your project management team. They provide data-driven insight into the organization's progress. They typically include measures of:
The actual metrics you use to measure project success will depend on your project or business goals, and the success criteria you apply to those metrics will also vary.
The benefits of understanding your project's performance metrics goes beyond knowing your project's status and whether it'll get completed by the deadline. Here are some of the ways that measuring and monitoring crucial metrics can help in the current project life cycle, and future projects as well.
Armed with your performance metrics, you're in a better place to implement changes that will improve your project's success. Measure your baselines in each metric and set success indicators. As you produce your project reports, you'll see the metrics will continue to fluctuate, but you'll be able to monitor that the trends are moving in the right direction.
When you take a data-driven approach to managing projects, you can start to watch how your company is comparing to others in your niche of the business world. For example, at face value, your revenue generated may be slowing down. However, when taken in context of the current market for your industry, you may find you are outperforming your competitors.
Tracking financial metrics ensures the business is operating smoothly and within its means, and prevents projects from going over budget. As you work on improving a cost performance index, you will also ultimately improve the profit margins and business growth.
Project metrics help you understand how your business is operating. You can respond to small shifts, and get things back on track before they threaten your company's success.
There are numerous project success metrics, but not all of them will be necessary, or helpful, to your company. To choose the right metrics, here are a few factors to look into:
For a very straightforward project involving a few employees in a single team, you may want to simply monitor a cost efficiency metric alongside the monitoring you do on your project management tool.
However, for more complicated project spanning teams and divisions, there is more scope for gains – and losses! You may benefit from monitoring more complex metrics on these projects to capture and monitor exactly what's happening.
Different projects carry different weights in the company's financial equation. You may want to use more detailed metrics on your most important or recurring projects, while one-off projects may not warrant the same level of attention.
Every organization has its own objectives and priorities. For example, some businesses would prioritize a high profit margin over all other metrics, while others would want their financial metrics balanced with a good employee satisfaction score. You need to ensure the metrics you measure are in line with these goals.
If you're getting started in the world of project KPIs, here are the five top project management metrics you should focus on to ensure your project's success.
A company's ability to stay afloat depends on project profitability, and the gross profit margin is a good indicator of this. This metric accounts for how a business controls operational expenses while still generating revenue for the company.
You can calculate the gross profit margin by:
GPM (Gross profit margin) % = (Gross profit / revenue) x 100
Here's an example. Suppose a company earned a total revenue of $100k with a total cost of goods of $80k. Their Gross profit is $100k - $80k = $20k. The GPM would be 20k / 100k = 20%.
GPM margins vary from industry to industry. As a rule of thumb, GPMs of 20% and higher are profitable, which means the project can churn revenue even with the cost of goods factored in. A GPM between 10% and 20% is considered average.
So, what does this mean for you as a project manager? If your project has a low GPM, you need to keep an eye on the project costs. Look into the balance sheet and check where you're overspending, both in terms of inefficient use of material resources and ineffective use of human resources. You can also increase revenue by upselling or cross-selling services or products.
You can identify a business's success by how they handle their clients. For example, the customer satisfaction index will help project managers identify whether their launches are well-received by customers or need improvement. Customer service, quality of the product, price, and features are some of the elements you'd want to look into.
The standard customer satisfaction calculation is:
Customer Satisfaction Score = (Total point score from the survey sheet / Number of questions) X 100
Suppose you have accumulated a customer survey with ten questions. If a customer rates their satisfaction as 8 out of 10 for each survey sheet, the result is 80%.
Customer satisfaction is important because the goal is to provide a good client experience. This means the customer is happy with the project's services or product, which in turn means they will likely come back for further orders, and potentially refer other clients to you. Conversely, lower client satisfaction means the project couldn't deliver the expected results, and the client may look to change providers.
Schedule variance is a measure of how your work is progressing against the project schedule, and is an indicator of whether you can expect on-time completion. It's calculated as the difference between the planned and actual work completed.
Schedule variance = Work scheduled to have been completed to date - Work actually completed to date
To help quantify schedule progress accurately, financial metrics are often used in this calculation rather than measures of working time. Budgeted Cost of Work Scheduled can be used to represent the work scheduled to date, and Budgeted Cost of Work Performed relates to the work completed to date.
If the schedule variance is positive, you've achieved more than you anticipated by this point, and the project is ahead of schedule. However, a negative schedule variance means the team has not kept up with the initial schedule, resulting in missed deadlines and accumulated workload.
A negative schedule variance could be a symptom of unanticipated challenges in the workflow process, a lack of clarity in project scope, and unrealistic deadlines.
By monitoring cost variance, project managers can determine whether the project is on track to be completed within the budget. Here's how you can calculate the cost variance based on your project accounts:
Cost variance = Planned budget - Actual costs
Suppose you've completed phase one of a project, with a planned budget of $1,000. The total costs so far add up to $950. In this case, the project cost variance would be $1,000 - $950 = $50.
Positive cost variance means the team can complete the project within or under budget. A negative result means the project has exceeded the anticipated budget so far. This can occur when there is inefficient use of resources, or if the initial budget was unrealistic. Either way, it tells you the project needs intervention to ensure it is completed successfully.
Any organization's backbone is its human resources, and ensuring you use key resources effectively is central to the success of the project and the business. Resource utilization can be complicated to calculate. On a project-wide level, you can work it out as:
Resource utilization = (Number of staff working hours clocked for this project / Total number of working hours of staff assigned to the project) x 100
For example, if seven employees are assigned to a project for five days, and they each work 8 hours per day, the total number of working hours assigned to the project is 7 x 5 x 8 = 280 hours. If the total number of hours of work on the project during that time was 210 hours, then the resource utilization is 210 / 280 x 100 = 75%. This means the staff were productively working on the project for 75% of the time.
However, in reality those seven employees all have different skills, work at different rates, and take home different salaries. Project management software that offers easy-to-use resource management features can help you assess and optimize your resource utilization, whether at the level of an individual team member, or across the project or company.
Success metrics help you quantify how your projects are performing. They give you figures that you can use to monitor trends within your own company, and compare to other companies in your industry. With this information, you can make strategic decisions about where to concentrate your efforts to best improve your project performance.
Looking to create a project schedule, but don't know where to start? Here's a step-by-step guide.