Measuring Project Success Using Business KPIs

Measuring Project Success Using Business KPIs

measuresDelivering a project “on-time and on-budget” is no longer an adequate measure of project success. In today’s environment, the key question should be: “Did the project deliver value to the business?” For example, a project could be delivered on time and on budget, but does not guarantee:

  • Benefits outlined in business case were achieved
  • User adoption
  • Expected ROI was achieved
  • A satisfied customer
  • The solution addresses the customer need
  • Sales were in line with forecasts
  • There will be market demand for the product

As a project manager, you may think that delivering business results isn’t your concern and that it is the customer’s problem to solve.  However in today’s environment, project managers are expected to partner with the customer, understand the business drivers, and ensure that the project delivers the business results that were specified in the business case. That is how many organizations are beginning to view project success.

Delivering business value can be a tall order. Delivering business value requires gaining an understanding of the business drivers: the problem or opportunity that precipitated the project and defining a clear set of business objectives to address the problem. Measuring business value is best done through defining Key Performance Indicators (KPIs) and measuring actual performance using the KPIs. Key Performance Indicators are quantifiable measurements that are agreed to by stakeholders to reflect the critical success factors of an organization. KPIs are:

  • Established by the customer at the beginning of the project and listed in order of priority.
  • Directly related to and supported by business goals and objectives.
  • The basis for critical decision-making throughout the project.
  • The basis for acceptance of the solution by the customer at the end of the project.

Defining KPIs can be challenging. Good KPIs must have a target value and a way to be accurately measured and reported on.  Ideally, it would be best if the project sponsor simply handed you a list of project objectives, success criteria, and KPIs when you were brought on board as the project manager. However this rarely happens; you will usually need to work with the customer or project sponsor to define them.  Many sponsors are not trained on how to define good KPIs. This is a skill that you will want to have and to provide as a project manager. Good KPIs are:

  • Aligned—Agree with the specific organization’s vision, strategy, and objectives.
  • Optimized—The KPIs should be focused on providing organization-wide strategic value rather than on non-critical local business outcomes.  Selection of the wrong KPI can result in counterproductive behavior and sub-optimized results.
  • Measurable—Can be quantified/measured.
  • Realistic—Must be cost effective and fit into the organization’s culture and constraints and achievable within the given timeframe.
  • Attainable—Requires targets to be set that are observable, achievable, reasonable, and credible under expected conditions as well as independently validated.
  • Clear—Clear and focused to avoid misinterpretation or ambiguity.
  • Understood—Individuals and groups know how their behaviors and activities contribute to achieving the KPI.
  • Predictive—The KPI may be compared to historical data over a reasonably long time so that trends can be identified.
  • Agreed—All stakeholders should agree and share responsibility for achieving the KPI target.
  • Reported—Regular reports are made available to all stakeholders and contributors so they know the current status and take corrective action if needed.

Bernard Marr, a well-known performance management expert, has developed a list of 75 KPIs that every manager needs to know. Every business and every project will have different KPIs to measure performance, but Bernard’s list gives you a good starting point for conducting discussion with the business.  The set of 75 KPIs that Bernard Marr developed is listed below for your convenience.

Financial Performance:

1. Net Profit

2. Net Profit Margin

3. Gross Profit Margin

4. Operating Profit Margin

5. EBITDA

6. Revenue Growth Rate

7. Total Shareholder Return (TSR)

8. Economic Value Added (EVA)

9. Return on Investment (ROI)

10. Return on Capital Employed (ROCE)

11. Return on Assets (ROA)

12. Return on Equity (ROE)

13. Debt-to-Equity (D/E) Ratio

14. Cash Conversion Cycle (CCC)

15. Working Capital Ratio

16. Operating Expense Ratio (OER)

17. CAPEX to Sales Ratio

18. Price Earnings Ratio (P/E Ratio)

Customers:

19. Net Promoter Score (NPS)

20. Customer Retention Rate

21. Customer Satisfaction Index

22. Customer Profitability Score

23. Customer Lifetime Value

24. Customer Turnover Rate

25. Customer Engagement

26. Customer Complaints

Market and marketing efforts:

27. Market Growth Rate

28. Market Share

29. Brand Equity

30. Cost per Lead

31. Conversion Rate

32. Search Engine Rankings (by keyword) and click-through rate

33. Page Views and Bounce Rate

34. Customer Online Engagement Level

35. Online Share of Voice (OSOV)

36. Social Networking Footprint

37. Klout Score

Operational Performance:

38. Six Sigma Level

39. Capacity Utilisation Rate (CUR)

40. Process Waste Level

41. Order Fulfilment Cycle Time

42. Delivery In Full, On Time (DIFOT) Rate

43. Inventory Shrinkage Rate (ISR)

44. Project Schedule Variance (PSV)

45. Project Cost Variance (PCV)

46. Earned Value (EV) Metric

47. Innovation Pipeline Strength (IPS)

48. Return on Innovation Investment (ROI2)

49. Time to Market

50. First Pass Yield (FPY)

51. Rework Level

52. Quality Index

53. Overall Equipment Effectiveness (OEE)

54. Process or Machine Downtime Level

55. First Contact Resolution (FCR)

Employees and Their Performance:

56. Human Capital Value Added (HCVA)

57. Revenue Per Employee

58. Employee Satisfaction Index

59. Employee Engagement Level

60. Staff Advocacy Score

61. Employee Churn Rate

62. Average Employee Tenure

63. Absenteeism Bradford Factor

64. 360-Degree Feedback Score

65. Salary Competitiveness Ratio (SCR)

66. Time to Hire

67. Training Return on Investment

Environmental and Social Sustainability Performance:

68. Carbon Footprint

69. Water Footprint

70. Energy Consumption

71. Saving Levels Due to Conservation and Improvement Efforts

72. Supply Chain Miles

73. Waste Reduction Rate

74. Waste Recycling Rate

75. Product Recycling Rate

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