A metric, by definition, is any type of measurement used to gauge some quantifiable element of performance. Measurement is the vital to successful project management. As the old saying goes, “You can’t manage what you don’t measure.” Project management metrics may not be the most glamorous subject, but the success of the project management office (PMO) you work in, and perhaps your job as a project manager, will always be reliant on whether you have a metrics program in place.
Without measuring, we can’t tell an object’s length or speed. We can’t determine how far we’ve come since we started a project. It’s difficult to know whether a project was a success or failure without measuring its effectiveness. Project management metrics allow companies and organizations to determine the success of a project, and help project managers evaluate a project’s standing, predict risks and assess team productivity and quality of work. As a tool, metrics can provide many good reasons to implement them.
Why Project Management Metrics Are Important
Metrics prove value and metrics improve performance. Project management metrics identified with expenses can demonstrate the estimation of a group. For instance, an on-time delivery rate or the rate of meeting SLA. The rate of profitability (ROI) is a generally utilized measurement to demonstrate this value. In the event that a division does not create or add to the quantifiable goals of an organization, a smart organization would close or abolish the office and move assets to another area that produces results.
It also improves performance. Applicable performance metrics allow you to improve your understanding. This removes improbability so that all involved parties can make well-informed choices or decisions.
Goals of any business or organization influence the performance metrics each manager chooses to use. It should be smart goals. Here are the elements of a SMART GOAL:
Six factors managers can measure to create metrics that will determine project success:
- Cost to deliver project output
- Scope of work to deliver project output
- Benefits resulting from the capability delivered by a project
- Time/Schedule to deliver project output
- Risks including uncertainty or threats to project success
- Quality of deliverables and quality of process (customer satisfaction)
11 Project Management Metrics to Propel Performance
This metric looks at overall capabilities of a company or organization, how well it uses all its resources. Productivity shows the link between inputs and outputs. How much are you getting out after all that you put into a project? Creating more from less is the ideal productivity outcome.
Productivity = Units of Input/Units of Output
2. Gross Profit Margin
Numbers will always speak louder than any words. Metrics directly tied to the bottom line communicate success or failure more quickly than other metrics. In fact, career resources company OBOlinx refers to gross profit margin as “the mother of all metrics and the best indicator of a business’s health.”
The greater the margin, the better the business is doing. Any program or work accomplished should contribute to the financial profit of a business. Margin is the percentage of each dollar earned after costs have been subtracted.
Gross Profit Margin = (Total Profit-Total Costs)/100
3. Return on Investment (ROI)
Return on investment is all about the dollar amount earned for the amount invested in a project. Like gross margin, this is a financial equation. Instead of looking at overall profit, it looks at the specific benefit from the project divided by the costs.
To use this metric, a dollar amount needs to be assigned to each unit of data to define the net benefits—benefits may include contribution to profit, cost savings, increased output, and improvements. Costs may include resources, labor, training, and overhead.
ROI = (Net Benefits/Costs) x 100
4. Earned Value
Earned value provides calculated guidance by showing how much value you have earned from the money spent to date on a project. It compares the value of the work completed by a specific date in relative to the agreed budget for the project.
Earned value is also called Budgeted Cost of Work Performed (BCWP). This metric offers a reality check during the process of a project. Check out this example to calculate earned value.
Earned Value (EV) = % of Completed Work / Budget at Completion (BAC)
5. Customer Satisfaction
A customer satisfaction score provides a measure of quality for your service or product. Customer survey data results guide this metric. The Center for Business Practices outlines this as a score on a scale from one to 100. The product or service should do what it was meant to do and satisfy real customer needs. You may not think this is part of key project management metrics, but it is – stakeholders are your customers!
Each company or organization can create a score unique to its business by weighing each variable based on its importance. Variables may include customer survey results; revenue generated from clients, repeat or lost clients, and complaints.
The Customer Satisfaction Index (CSI) is the most widely used system for measuring customer satisfaction. The Net Promoter Score (NPS) is another method to capture customer satisfaction. NPS exposes customer loyalty by examining the likelihood of a customer recommending the product or service.
Customer Satisfaction Score = (Total Survey Point Score / Total Questions) x 100
6. Employee Satisfaction Score
Similar to customer satisfaction, survey data determines the employee satisfaction score. Why is it important to look at employees in measuring project management? Employee morale is directly correlated to project success. Here are four tips to measure morale.
A satisfied employee creates better work more efficiently. The high costs of employee turnover—totaling 50% to 200% of an employee’s salary—should be motive enough to pay attention to the people closest to the project.
The Gallup Q12 Employee Engagement Survey is a popular tool to collect employee data. An Employee Satisfaction Index (ESI) processes results into an index score. Employee Satisfaction Score = (Total Survey Point Score / Total Questions) x 100
7. Actual Cost
The Actual Cost is a simple number that shows how much money is spent on a project—not an estimate. This cost is determined by adding up all the expenses for a specific project over the timeline.
Actual Cost (AC) = Total Costs per Time Period x Time Period
8. Cost Variance
Cost variance shows the difference between the planned budget and actual costs within a specific timeframe. This is one of the key project management metrics. Is the estimate above or below the actual costs? A project is over budget if the cost variance is negative. A positive cost variance shows a project is under budget.
Cost Variance (CV) = Budgeted Cost of Work – Actual Cost of Work
9. Schedule Variance
Schedule variance looks at budgeted and scheduled work. Is the project running ahead or behind of the planned budget?
The schedule variance is the budgeted cost of work performed minus the budgeted cost of work scheduled—the difference between work scheduled and completed. A negative schedule variance means the project is behind schedule.
Schedule Variance (SV) = Budgeted Cost of Work Performed – Budgeted Cost of Work Scheduled
10. Cost Performance
Cost performance is cost efficiency metric. Divide the value of the work actually performed (earned value) by the actual costs it took to accomplish the earned value. Forecasting cost performance allows for accurate budget estimations.
Cost Performance Index (CPI) = Earned Value / Actual Costs
11. Change of Scope
Change of Scope keeps track of the size of the project. Every or any change request clients submit requires you to modify your overall budget (both time and money). Change of Scope helps you stay on top of this, so that you can prevent the most dreaded thing to avoid and that is Scope Creep.