How do you prevent projects from straying, going off track, or failing? The answer is with KPIs. KPIs keep projects on track and are an invaluable measure of success, especially for technology-based businesses.
When it comes to achieving success by planning, Abraham Lincoln said: "Give me six hours to chop down a tree, and I will spend the first four hours sharpening the axe."
Planning is one of the primary keys to achieving success. But how is success defined? As a project manager or product manager, you’ll have different answers. Even within a company, the parameters of success are continually growing.
Imagine you are ready to start the project. You have everything a project needs, such as a solid team, stakeholder support, a reasonable budget and clear project goals. Even with perfect planning, problems can arise throughout the project cycle. KPIs are all you need to make sure your project is not falling off the crack. Let’s dig deeper into KPI.
The definition of KPI
KPI stands for Key Performance Indicator. KPIs keep the team focused on making strategic improvements by showing progress and desired results.
KPIs use data to measure the factors that make projects successful. They help pinpoint how work is progressing and show areas of weakness in your project. They are the best way to uncover potential failure sites and make corrections before it's too late. KPIs use quantitative data as a determinant of project health.
When using KPIs to measure success, targets serve as desired performance. Project progress is measured using key indicators and lagging indicators.
Every organisation or business has a unique KPI and follows the agreed outcomes. Surprisingly, coming up with a set of company-relevant KPIs doesn't have to be complicated.
Metrics vs. KPIs
Some companies still use the term metrics to see the project progress. So what is the difference between Metrics and KPIs?
KPIs become clear indicators of how the project is progressing. Setting KPIs is set at the start of the project and is agreed upon by team members. Metrics also measure progress but are sometimes mixed with less essential indicators. So it can be defined as KPIs are metrics, but only the most critical metrics are KPIs.
Types of KPIs in Project Management
Data are essential candidates in a project. This is why you must look at productivity levels, costs, customer satisfaction etc. The critical point is to have KPIs that you can measure with actual data, not just assumptions.
To maintain focus, use a limited number of KPIs to help you and your team meet project goals and create valid indicators of success. So to help you start determining KPIs, here are the four main KPIs in project management.
1. Shifts in budget
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At the beginning of a project, you always set a budget. But, unexpected problems can arise, so the budget may need to be modified or reallocated to support shifts in the project.
As a PM, you must understand how cost shifts can occur. Because this is the KPI of cost-benefit. For example,
- CPI (Cost Performance Index) is a ratio that shows current costs vs amounts to be earned.
- Budget adjustments include how often the budget amount changes since the start of the project.
2. Timing
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You should break out the project into phases. Use project management methods to break down tasks. When a project is complex, milestones along the way can get missed.
This results in wasted project flow. For anticipation, document the timeline KPIs. These points can help your project slip on the right track quickly.
- Deadline adjustments: how often achievements are delayed or missed.
- Cycles: include how long it takes to complete a to-do list.
- Sprint event timing: includes how often sprint items are completed as planned from the timeline.
3. Changes in team structure
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A good KPI certainly pays attention to human resources, such as teams. You need to determine the required roles before the project starts. Once inside a project, you may find that specific tasks take longer to complete.
Try setting up KPIs that pay attention to the following:
- Resource capacity: Count team members and their working hours to determine the appropriate capacity.
- Duration spent per person on a project: Comparing the actual hours (duration of work) with the budgeted hours would be best.
4. Return on Investment (ROI)
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The entire budget is essential. But as a PM, you need to see how closely the project meets the ROI. You will understand when costs get out of control using ROI as a KPI. This process also helps determine risk management for future projects.
5 Steps to set KPIs
The primary process in developing KPIs is setting goals and identifying the questions that most need to be answered. Here are five steps to set KPIs in Project Management:
1. Establish the context of your KPIs
Clarity is a must in business. This is why it is essential to identify the company's circumstances to establish KPIs. You can use the business model canvas to define the KPI context.
The business model canvas summarises the business's performance according to the best available information.
Source: Neoschronos
2. Identify your short-term and long-term goals
Keep your goals qualitative at the moment. Plan to brainstorm KPIs as a team with a focus on how to measure performance. You will need to answer these questions:
- What is the ideal outcome for a product launch?
- What points make these results important to the organisation?
- How is the project progressing towards the target?
- What actions affect the achievement of results?
- How often do we adjust and review the progress of this project?
Everyone will have an idea for setting their long and short-term goals. These ideas will help sort by category. Categories can reflect the stage at which the objectives fit into the project cycle.
3. Define the key metrics
Identify the most critical KPI metrics for the sales, marketing and finance departments. Take advantage of standard business performance the team is already familiar with:
- Monthly recurring revenue
- Net revenue retention
- Cost per acquisition
- Net promoter score
- Revenue growth
Choose the metrics most relevant to your products, services and solutions so they can provide actionable insights.
4. Add KPIs to the project/product roadmap
To increase visibility and transparency, attach KPIs to project or product roadmaps. The roadmap will help the team visualise targets and bring progress to the project. Try making roadmaps online to be interactive and easily accessible to team members.
5. Reference KPIs during team meetings
KPIs actively participate in project planning sessions or meetings in a data-based and performance-oriented workplace. When employees set annual goals, KPIs should be referred to as tools for measuring personal improvement. This is to ensure that individual tasks work towards KPIs.
In Summary,
By using Key Performance Indicators, companies can measure their success and progress. KPI metrics can help make the right business decisions, improve performance, and understand performance in an industry. Create wise KPIs so you can make smart decisions, meet goals and improve performance to foster the growth of your business.
