Top Five Project Management KPIs that you should know!

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Keeping the project on track both in terms of budget and the timeline is the essence of project management. Varied forms of metrics are used to assess and evaluate a project’s success/failure or to track the progress of an ongoing project. This article will help you identify the most popular and widely recognised Key Performance Indicators (KPIs) and metrics in project management.

What is a Key Performance Indicator (KPI)?

KPIs are a quantifiable metric to evaluate the overall performance of the project and its alignment with organizational objectives/goals.Using quantifiable and consistent KPIs can help project managers assess project goals objectively, fairly, and powerfully Project managers can use KPIs not only as a performance management tool but also as a motivational tool! When all teams are united with common goals, their contributions can shine! Team competition, incentives, and rewards can be powerful motivating tools to keep project momentum pushing forward. Harnessing the power of a strong key performance indicator strategy can help project managers lead their teams to higher standards, greater goals, and successful projects.

Using the below mentioned KPIs project managers can monitor and better manage the health of the projects they are leading.

Cost performance index (CPI)

One of most important KPI to measure the efficiency of the project is the cost performance index (CPI).  The following is the simple formula for calculating the CPI.

CPI = Earned value (EV) / Actual costs (AC) , where; EV = budgeted cost of work completed; AC = actual expenses incurred. CPI ratios implies the following:

  • The project is said to have underperformed when CPI was less than 1.
  • A CPI greater than one means that performance was better than expected.
  • Performance was on target if CPI was equal to 1.

Due to poor project planning and execution, the CPI fluctuates throughout a project’s lifespan due to escalation of variable costs such as input prices. The CPI metrics will help project managers make right decisions that influence the delivery of projects within the budget.

Budget variance (BV)

Another very popular measure is the Budget variance (BV). BV is calculated by the difference between the estimated expenses (earned value) and actual figures. This measure is also known as cost variance (CV), which helps to keep a track on expenses and enable project managers to efficiently utilise the available resources for optimal performance. Following is the way to summarise the BV outcome:

  • Positive = below budget
  • Zero = within budget
  • Negative = exceeds the budget

Profitability Index

Profitability metrics will let you know whether the project is viable and financially feasible based on the return. This measure will assist you in minimising the unproductive projects, and reduce the loss-making activities, and get more profitable clients. The profitability index can be measured from the below three levels:

  • Identify the tasks/activities that contribute to optimal profits and those tasks that are unprofitable ones, so that either these tasks can be eliminated or improved to increase profit performance.
  • Determine the profitability by clients/customers. This will help identify right project clients and focus on those customers which are more profitable ventures or negotiate with customers for higher deals.
  • Total profitability for the whole project which can be arrived from total revenue from the project minus project related entire expenses incurred.

Planned Value

The planned value is the projected cost for completing the milestones/activities which are part of different phases of the project. This planned value will help in understanding whether the project is running as per the schedule and the allotted budget. In this approach, as a first step, various project milestones are identified, and baseline monetary performance are set against each milestone. Measuring planned value can help in tracking any deviations, cost implications to control the project. The formula for calculating the PV is

Planned Value (PV)= (Expected Completion Percentage/100) x Project Budget

Schedule Performance Index

Schedule Performance Index (SPI) helps to identify and assess the ongoing performance of the project against the delivery schedule. The Earned Value and the Planned Value are used to determine the Schedule Performance Index. The formula is SPI= Earned Value / Planned Value. If the result of this formula is 1.0, then your project is running exactly on schedule. If it is lower than 1.0, then there is likelihood of project missing the deadline.

Programs such as MBA with Operations and Project Management offered by Westford Uni Online provide professionals with an opportunity to enhance skills such as analysing targets and setting KPIs, among other key skillsets that are integral to the growth of visionaries who aspire to acquire managerial and leadership positions within their realm of expertise.

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